Family-controlled Ford has moved to strengthen its balance sheet by finalising a debt restructuring package that reduces its automotive debt by $9.9 billion and lowers its annual cash interest expense by more than $500 million.
To finance the move, Ford will use $2.4 billion in cash plus 468 million shares of Ford common stock. As at 31 December 2008, the Detroit-based business's debt stood at $25.8 billion.
"By substantially reducing our debt, Ford is taking another step toward creating an exciting, viable enterprise," said non-family president and CEO Alan Mulally. "Ford continues to lead the industry in taking the decisive actions necessary to weather the current downturn and deliver long-term profitable growth."
However, the substantial cash injection will yet again mean family members will take a short-term hit on their dividend and likely sacrifice shares in a bid to ensure the long-term success of the business. The company's share price increased by 14% on the news, but is still down 42% on the same time last year.
Ford remains in much better shape than rivals Chrysler and GM, for whom the prospect of bankruptcy remains a real possibility, but analysts are still predicting that car sales will be down this year.