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Ford has been trying to drastically reduce its debt by paying off its loans ahead of schedule. It's not too surprising, then, to learn that Ford will pay off the remaining $4 billion it owes to the United Auto Workers' Retiree Medical Benefits Trust early.
Though Ford had previously deferred several payments, it's making good on those payments today. Ford is paying off the total debt due on Notes A and B, $1.85 billion. Ford is writing the UAW a check for an additional $2.9 billion to pay off the remaining balance of Note A altogether. Ford still owes $3.6 billion on Note B.
"We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the Trust for their health care benefits," said Alan Mulally, Ford president and CEO.
In addition to pleasing the Ford-UAW retirees, the payments should please Ford's finance division as well. Combined with a debt repayment of $3 billion earlier this year, this $4 billion will help Ford to reduce its debt by more than $7 billion this year. According to the company, this will save in excess of $470 million per year in interest expenses.
"Our One Ford plan to profitability to grow our business is working, and we are increasingly confident about the future," Mulally said. "We expect to continue to improve our balance sheet as we deliver on our plan. Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks."
We think it's a good move for Ford to begin to pay off its debt early. Although Ford didn't use government bailout money, its financial plan and current product lineup are impressively building strength.
This latest debt reduction brings Ford's total debt down to somewhere around $28 billion. Will Ford be able to pay it off in time?
Source: Ford
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