Ford reduces automotive debt by $14.5 billion in 2010; gross cash exceeds debt at year-end

By Jennifer Lanning Drey

Savannah, Ga., Jan. 28 - Ford Motor Co. reduced automotive debt by $14.5 billion in 2010 and ended the year with automotive gross cash exceeding debt by $1.4 billion, Lewis Booth, Ford's chief financial officer, reported Friday during a company conference call held to discuss fourth-quarter and year-end results.

Ford reduced debt by $7.3 billion in the fourth quarter.

"We continued to maintain our focus on strengthening the balance sheet with additional debt repayments in the fourth quarter," Alan Mulally, chief executive officer of Ford, said during the call.

Debt-reduction actions taken during the fourth quarter included the full payment in cash of the remaining $3.6 billion of debt the company owed its VEBA retiree health care trust, the completion of conversion offers on senior convertible debt securities, a $1.7 billion repayment of its revolving credit line and an $800 million payment made to the term loan.

Ford had total automotive liquidity of $27.9 billion at Dec. 31. The figure included $20.5 billion of automotive gross cash, which was down $3.3 billion from automotive gross cash at the end of the third quarter as a result of the debt-reduction actions, Booth said.

Automotive operating-related cash flow was $1.0 billion in the fourth quarter, bringing total automotive operating-related cash flow to $4.4 billion for the full year. The full-year 2010 automotive operating-related cash flow figure represented a $5.2 billion improvement from 2009.

Automotive debt was $19.1 billion at Dec. 31.

Revenue improvements

Ford reported $32.5 billion of revenues for the fourth quarter, an increase of $1.6 billion compared with the same period a year ago, excluding Volvo from 2009. Full-year revenues were $120.9 billion, representing an increase of $17 billion from full-year 2009 excluding Volvo from 2009.

Fourth-quarter net income was $190 million, a decrease of $696 million from a year ago. The company said net income was negatively impacted by a previously disclosed $960 million charge for completion of debt conversion offers in the quarter.

Full-year net income was $6.6 billion, a $3.8 billion increase from the prior year.

"Throughout 2010, we continued our transition from fixing the fundamentals of our business to delivering profitable growth," Mulally said.

"We are investing aggressively in new products, technology and growth in all regions of the world," he said.

Ford Credit liquidity 'strong'

Regarding its financial services sector, Ford Motor Credit Co., Booth reported that liquidity available for use at the end of 2010 was about $23 billion.

Ford Motor Credit completed $25 billion of funding in 2010, which included $3 billion in the fourth quarter.

For the year, the company completed $17 billion of funding in the public markets and $8 billion of private securitizations globally.

"Our funding strategy remains focused on access of public and private securitizations, asset-backed commercial paper and unsecured debt," Booth said.

"Our liquidity remains strong, and we will continue to maintain cash balances, funding programs and committed capacity to ensure liquidity adequately meets our business and funding requirements."

Ford Motor Credit's managed leverage was 6.7 to 1 at the end of the fourth quarter.

Ford Motor Credit reported a pre-tax operating profit of $572 million, compared with a profit of $714 million a year ago. The company said the decrease reflected lower volume and the non-recurrence of lower lease depreciation expense related to lower gains as fewer leases terminated and the vehicles were sold.

For the full-year, Ford Motor Credit reported a pre-tax operating profit of $3.1 billion, compared with a profit of $2 billion a year ago. The company said the increase reflected primarily a lower provision for credit losses and lower depreciation expense for leased vehicles related to higher auction values.

Ford said it expects solid profitability at Ford Motor Credit in 2011, although at a lower level than 2010.

Ford is a Dearborn, Mich.-based domestic carmaker.

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