Ford is on target to reduce net debt to zero by the end of the year, chief financial officer Lewis Booth said.
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He said the company was able to firm up its balance sheet by retiring old debt while improving sales and cutting costs to pile up cash.
“We expect our automotive cash to be about equal to our debt by year-end 2010, earlier than expected,” Booth said, adding “this has been a magic year.”
Ford currently has US$25.9bn of cash on hand, Booth said, giving the company the ability to weather the sluggish economic rebound. Moody’s Investors Service said in a report this week that Ford had the fifth-largest cash reserves of any US company as of the middle of the year.
Ford was working toward increasing it liquidity even before the credit crisis began, giving it a small cushion because otherwise, it would have been shut out of the markets, Booth said. “We have to assume that when you really need liquidity, it won’t be there,” Booth said at Treasury & Risk’s 15th annual Alexander Hamilton Awards ceremony in New York City, according to Dow Jones.
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By GlobalDataBooth noted the automaker faced a shortfall of liquidity by the end of 2008. Despite this, the company decided not to take government loans. The company negotiated a “competitive labour agreement” and, by the second quarter of 2009, shifted the focus to rebuilding liquidity.
The company qualified for funding under the Department of Energy’s advanced technology vehicles manufacturing programme, which helped. It also drew down on its revolving loans.
Nonetheless, Ford’s debt increased in 2009 despite its debt reduction actions, Booth said. By the third quarter of 2010, however, the company’s debt had been reduced and this reduction is to continue for the rest of the year.
To continue on the path of profitability, the company is aiming for greater commonality of parts in new cars across the globe, Booth told his audience. For instance, the new Ford Fiesta will have 65% of common parts and the new Focus will have 85% of common parts.
Using common parts in different vehicles makes more economic sense, Booth said, noting though that some basic differences between Europe and the US are unlikely to change, like the preference for manual transmission and diesel cars across the Atlantic.
“Engineers like designing new parts, but we are trying to stop that,” Booth said, generating laughter in the audience.
Ford has identified the Asia-Pacific region as its largest for the global sales mix at 44%, and the company is accelerating its growth plans in China and India.
