TEXT OF STORY
Kai Ryssdal: While General Motors and Chrysler were noisily going broke last year, Ford kept mostly to itself. It didn’t need a government bailout, because it had piles of cash, borrowed money that it got by mortgaging virtually everything it had even the famous blue oval. That all helped Ford get through one of the worst auto markets ever. But too much debt is never a good thing for a company or its investors. So, today, Ford announced it’s putting more than $4 billion toward paying what it owes.
Marketplace’s Alisa Roth reports.
Alisa Roth: Not only is Ford paying down its debt, it’s paying most of it ahead of schedule. That’ll save the company millions in interest payments. But more important, it’s a way for management to show how confident it is.
Bill Selesky follows Ford at Argus Research. He says all that debt was making investors nervous.
Bill Selesky: There was such a hefty debt load the company was covering that if things should go bad or basically if car sales slowed down, the company was going to be overburdened.
Selesky says it’s also significant that Ford is making the payments in cash, not stock, because it suggests the company thinks the share price will keep going up. During the financial crisis, all the money Ford borrowed helped it. Now the debt may put it at a disadvantage, especially when you compare it to GM and Chrysler, whose debts were mostly erased by their bankruptcies. But on other fronts, Ford’s doing very well.
Kirk Ludtke follows Ford at CRT Capital Group. He says Ford’s making cars people want to buy.
Kirk Ludtke: They’ve launched a number of vehicles recently, very high volume vehicles that are turning out to be well-received in the marketplace. And that’s probably the single biggest driver of an auto makers profits.
Ford will still owe almost $30 billion. But the company is expected to report strong second quarter earnings. And it’s projecting “solid profitability” for the rest of the year.
I’m Alisa Roth for Marketplace.