Ford has wrapped up some much-needed financial wrangling today, as it struggles with with its monstrous pile of debt. According to Automotive News [sub], Ford transferred $13.2b in debt and about $4b in cash to the UAW-run health care trust fund, completing a long-awaited liability consolidation. $1.4b of the transfer was a scheduled payment on a $6.7b note, while $500m more was a prepayment on that note. Ford paid $610m (cash) on another $6.5 billion note, transferred $620m from a temporary account and $3.5b from an internal VEBA fund and handed over warrants to purchase 362 million shares of Ford common stock at $9.20 per share. All together, the move reportedly adds $7b in debt to Ford’s balance sheet.
Ford’s CFO hailed the move, which culminates a process began with the 2007 UAW contract, saying it “will significantly improve our competitiveness in the US.” If nothing else, the move does show that Ford is less worried about its liquidity than we may have thought: both the pre-payment and the use of cash rather than stock to pay the scheduled VEBA payment indicate confidence in the balance sheet. And unlike the huge amounts of “equity” in GM and Chrysler owned by VEBA, Ford’s stock is actually worth money. In fact, Ford’s stock is currently worth about a dollar more per share than VEBA’s $9.20 option price, meaning VEBA will probably convert them soon for a quick profit. After all, they’ll be waiting quite a bit longer for their GM and Chrysler stock to be worth more than the paper it’s printed on.