By on November 4, 2021

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Ford Motor Co. has announced a cash tender offer to repurchase up to $5 billion of the company’s high-yield debt in the hopes of rebalancing its budget after needing to borrow so much during the back-to-back-to-back production shutdowns incurred since the start of 2020. The automaker is retiring as much of the $8 billion in bonds the company issued at the start the coronavirus pandemic as it can and will be doing the same for some older bonds issued at similarly high rates (over 8 percent annually).

However this will be used to make room for environmental, social and corporate governance (ESG) initiatives and establish a “sustainable financing framework” the automaker said would be a first for North America. Ford clearly believes social governance investments will become increasingly routine and is attempting to showcase itself as one of the kinder, more forward thinking, and environmentally responsible multinational industrial concerns. Sort of like a fully armed M1 Abrams tank painted with peace symbols and hippie daises.

“Winning businesses are financially healthy and lead in sustainability – it’s not a choice, they rely on each other,” said Ford CFO John Lawler. “We’re again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford.”

ESG investing is growing in popularity, with financial backers increasingly prioritizing strategies that take into account a company’s environmental, social, and governance factors. However critics have pointed out that ESG strategies are often more about the perception of doing good than any genuine altruism and run the risk of setting up corporations  as ethical arbitrators. It’s also encouraging investors to pour real money into a corporation’s perceived moral values, rather than focusing on what it’s bringing to the table in terms of legitimate business. This is one reason we’ve seen so many EV startups awash with cash long before they even have a working prototype.

Social Capital founder and CEO Chamath Palihapitiya has called the ESG trend fraudulent, suggesting whatever merit it previously had has been undermined by the way in which environmental jargon has been weaponized to benefit the largest corporations in the world. The venture capitalist/engineer now believes people should be weary of being scammed by business entities and government agencies championing ESG investments because they’re being used to game the system and give certain players an unfair advantage. At their worst, they can even encourage businesses to become overt political actors.

“These are useful statements. It’s great marketing. But again it’s a lot of sizzle, no steak,” Palihapitiya told CNBC early in 2020.

While your author is inclined to agree, let’s test those claims against Blue Oval’s plan to rejigger Ford Credit into a more “inclusive, equitable, and sustainable” business model.

From Ford:

Today’s announcement was made on the fifth anniversary of the Paris Climate Agreement, as Ford executives joined world leaders, environmental advocates and other forward-looking companies at the United Nations Climate Change Conference (COP26) in Glasgow, Scotland.

Among other expected benefits, initiatives outlined in Ford’s sustainable financing framework are intended to help the company become carbon neutral no later than 2050, in line with its commitment to the Paris Agreement. Ford was one of the first full-line U.S. automakers to pledge to reduce greenhouse gas emissions from its vehicles, operations and supply chain in alignment with goals of the accord. This pledge is backed by science-based interim targets the automaker intends to achieve by 2035.

The potential positive environmental and social influence of projects described in Ford’s sustainable financing framework earned an “advanced” rating – the highest possible – from Vigeo Eiris. Vigeo Eiris, an arm of Moody’s Corp., makes independent assessments of organizations’ goals and performance against environmental, social and governance matters.

Guided by aggressive environmental and social goals, a significant portion of related financing will go toward accelerating Ford’s leadership in electric vehicles. Objectives include expanding EV technology and charging infrastructure to remove obstacles to adoption and improve the customer experience, and EV and battery manufacturing to reduce emissions.

The automaker then goes onto explain how new green bonds should enable Ford Credit to extend financing to customers with lower credit scores. Everything else was vague promises about how it would be putting some of the money back into electric vehicles, cleaner manufacturing protocols, community revitalization projects, and “advancing economic opportunity and equity for underrepresented and/or disadvantaged populations” via programs that help scale up Ford’s dealer diversity networks. That pertains specifically to the advancement of “businesses owned by minorities, women, military veterans and disabled people, and for women-focused community ventures and social enterprises that promote better health, develop critical skills, and support child and maternal health, education and disability support services.”

It’s all incredibly broad. But Ford will also be creating a new “sustainable financing committee” to assure that the funded projects comply with Blue Oval’s corporate social responsibility plan and otherwise meet eligibility criteria. It will be comprised of senior representatives from the automaker’s treasury, sustainability, corporate finance, investor relations, Ford Credit and legal teams.

Considering the report we published outlining the massive amount of automotive debt currently being carried by Americans and the increasingly predatory nature of lenders, Ford creating a kinder, gentler credit arm should be a blessing. But its getting difficult to take any ESG chatter seriously anymore. My guess is that Blue Oval simply wants to upgrade its credit rating after it lost its investment-grade status in March 2020 and thinks ESG can help it avoid future scrutiny.

[Image: Ford Motor Co.]

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20 Comments on “Ford Repurchasing $5 Billion in Debt, Tapping Into ESG & Green Bonds...”


  • avatar
    FreedMike

    I’m sure this will leave everyone suitably triggered.

    • 0 avatar
      Rick T.

      Personally, I’m trying to recover from someone in this space complaining about “no steak.”

    • 0 avatar
      SCE to AUX

      I’m triggered.

      “Guided by aggressive environmental and social goals, a significant portion of related financing will go toward accelerating Ford’s leadership in electric vehicles.”

      Note to Ford: You’re not a leader in EVs, and social action goals aren’t the way to become one.

    • 0 avatar
      Lou_BC

      #triggered… LOL

      Yes, worker safety, becoming more socially and environmentally conscious is a trigger to some.

      The China haters need to realize that China has become the economic powerhouse that it currently is primarily because companies claimed to be amoral and therefore set up shop there to avoid the added costs of worker safety, social and environmental stewardship.

      I’m surprised that the usually suspects haven’t jumped all over this since it’s Ford and left wing commie socialist “ruin the world” to save the gay polar bears virtue signaling.

      • 0 avatar
        28-Cars-Later

        “The China haters need to realize that China has become the economic powerhouse that it currently is primarily because companies claimed to be amoral and therefore set up shop there to avoid the added costs of worker safety, social and environmental stewardship.”

        I partially agree, however a company becoming more socially and environmentally conscious actually reinforces the desire to be offshore.

        • 0 avatar
          Lou_BC

          @28-Cars-Later – that is true since it gives other companies an advantage as they race to the bottom.
          I thought I’d give the “outrage pulpit” a shot. How hard can it be? LOL

        • 0 avatar
          FreedMike

          @28:

          What, Ford Credit is going to outsource itself to China? Yeah….no. People have no idea the s**t you have to deal with when you try to outsource white-collar finance functions overseas.

          Mortgage companies have been trying to outsource operations to India for a good 15 years now, and that’s a country that doesn’t stand ready to nuke L.A. in 10 minutes flat, and where people actually speak English (well, sort of, anyway). Aside from basic data entry, the folks over there are 100% clueless about how to originate a mortgage loan because they don’t understand how things work here. Example: an underwriter there once argued with me for about a week straight about how we needed to get the company tax returns for…Exxon. Why? Because the applicant was a “director” of the company. He figured the guy owned Exxon because in India, “director” means “owner.” Like someone owns Exxon and that person would really need a $150,000 mortgage for a tract house in Houston? Okey dokey. In reality, the guy was some middle manager who just needed to give us a paystub and a W2, which we had. The underwriter was fully ready to die on this hill until I just cleared the condition and told him I’d take “responsibility.” The guy actually accused me of being incompetent and threatened to turn me in to the fraud department over that. Sure thing.

          Derrrrrpp. And crap like that happened all the time. Eventually the Derpity gang in India was wasting so much of our time that the company gave up on it, which I’m sure disappointed them as Head Derpity Derp Underwriter over there was probably making a buck fifty an hour.

          Bottom line? Good luck trying to outsource credit operations to China.

      • 0 avatar
        el scotto

        @Lou_BC Sir, I think my favorite zero-sum riposte is “Nuke the Gay Baby Whales”.

  • avatar
    Art Vandelay

    Stupid Ford. Why pay off debt. They should have rolled the debt into some other entity and left the taxpayer on the hook for it or just pawned it all off on some Italian/French company.

  • avatar
    Bondtrade

    Each rating agency states what it will take for Ford to return to IG ratings: lower total leverage below X-amount or lower and raise debt service protection above Y-amount and keep them there. Period. ESG “green” scores are subjective and cannot be calculated. They are nothing more than a socialistic sunk-cost for which there is no ROI and, thus, must be ‘monitored’ indefinitely to make sure management keeps its word.

  • avatar
    SoCalMikester

    whatever brings their stock price up. i got in at $12, and theyre going to pay off my mortgage when i decide to cash out

  • avatar
    EBFlex

    Imaging spending $5 billion just to show how woke you are.

    They got all the woke buzzwords in there too. “Science based” which means it isn’t. “Green” which means it isn’t. “PARIS Climate Accord” which is the biggest steaming pile of garbage the world has ever seen. The USA does all the work while China and Russia do nothing. Makes sense. “Social initiatives” which means…..absolutely nothing. “Green” which is code for wealth redistribution and really has not a single thing to do with the environment.

    “We’re again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford.”

    Someone forgot to tell Ford that EVs are amazingly bad for the planet. But if Ford keeps telling themselves people want these poor replacements for proper vehicles, they will believe it reality be damned.

    “Objectives include expanding EV technology and charging infrastructure to remove obstacles to adoption and improve the customer experience”

    You can improve the customer experience by giving them vehicles that use an energy source that’s easily obtained, wonderfully cheap, and is extremely power dense.

    You need EVs with a minimum 700 mile range. With charging stations few and far between and very slow when you finally find one, the range needs to be double (or so) what an average ICE vehicle is. Until then, they are nothing more than compliance vehicles that require an entire other vehicle because of there severe shortcomings. Not very “green”

    Thanks for the laugh Ford. That was good. Haven’t laughed that long in a while. What do they say about inmates running the asylum?

    • 0 avatar
      SCE to AUX

      “The USA does all the work while China and Russia do nothing.”

      That’s what burns me about every ‘climate’ treaty. And nobody considers what the so-called pollution buys: economic output. China’s per-capita pollution is multiples of the US in the context of per-capita GDP, but the US is always the bad guy.

      • 0 avatar
        Matt Posky

        China has surpassed 1/4 of the world’s total greenhouse emissions per year. But so many of these green proposals benefit it’s manufacturing base that one cannot help but be frustrated whenever they’re discussed.

      • 0 avatar
        FreedMike

        “The USA does all the work while China and Russia do nothing.”

        Translated: they’re not doing the right thing so we shouldn’t either.

        Same logic:
        “The projects are full of people who live off the government, so I should be able too.”

        “China jails people for making up stuff about politicians, and so should we.”

        Clearly climate change is a huge issue, and it’s not something that’s out of our control. Whatever happened to doing the right thing even if other people aren’t?

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