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Ford Slashes Debt Another $2.9 Billion

Move could help it get out of "junk" territory.

by on Feb.11, 2011

CEO Alan Mulally continues chipping away at debt.

Ford Motor Co.’s heavy debt load has become a significant drag on the company competitiveness in the minds of many pundits and Wall  Street analysts, tarnishing Ford’s market share gains, quality gains and the success of its new product offensive.

Thus, it wasn’t exactly a surprise Ford elected to dip into its cash reserves this week and announce plans to pay off another $3 billion worth of debt. The move followed similar steps, late in 2010 that let the maker close the year with more cash than debt for the first time in a number of years.

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The latest reduction in debt, scheduled for March 15th, will see Ford redeem for cash trust preferred securities held by Ford Motor Company Capital Trust II, company officials said.

The redemption will result in a $60 million charge against Ford’s first quarter earnings but it will save $190 million in interest expense annually, the maker stressed.