Ford Repurchasing $5 Billion in Debt, Tapping Into ESG & Green Bonds

Matt Posky
by Matt Posky
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ford repurchasing 5 billion in debt tapping into esg green bonds

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.]

Matt Posky
Matt Posky

Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.

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  • SoCalMikester SoCalMikester on Nov 04, 2021

    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

  • EBFlex EBFlex on Nov 05, 2021

    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?

    • See 2 previous
    • FreedMike FreedMike on Nov 05, 2021

      @SCE to AUX “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?

  • Stuki Moi "How do you take a small crossover and make it better?Slap the AMG badge on it and give it the AMG treatment."No, you don't.In fact, that is specifically what you do NOT do.Huge, frail wheels, and postage stamp sidewalls, do nothing but make overly tall cuvs tramline and judder. And render them even less useful across the few surfaces where they could conceivably have an advantage over more properly dimensioned cars. And: Small cuvs have pitiful enough fuel range as it is, even with more sensible engines.Instead, to make a small CUV better, you 1)make it a lower slung wagon. And only then give it the AMG treatment. AMG'ing, makes sense for the E class. And these days with larger cars, even the C class. For the S class, it never made sense, aside from the sheer aural visceralness of the last NA V8. The E-class is the center of AMG. Even the C-class, rarely touches the M3.Or 2) You give it the Raptor/Baja treatment. Massive, hypersophisticated suspension travel allowing landing meaningful jumps. As well as driving up and down wide enough stairs if desired. That's a kind of driving for which a taller stance, and IFS/IRS, makes sense.Attempting to turn a CUV into some sort of a laptime wonder, makes about as much sense as putting an America's Cup rig atop a ten deck cruiseship.
  • TomCat1967 Seems a bit steep, but a nice-looking example. Used to see low milage examples at dealers at well over $20K in the last year or so. Too bad Honda decided to pull the Fit/Jazz for US/Canada as I see several around almost daily.
  • Real Talk USA got Japanese made fits for this generation. Canada gets slave-labour made in china Fits after 2012
  • Ajla Tough crowd here when it comes to expensive cars.
  • Alouisis Stellantis can blame California all day long, but they seem to be the only company that is having difficulty coping. They have no BEV in the market and apparently no strategy to be in the first world, future car business. The EU has similar rules, so Stellantis is positioning themselves as suitable for only 3rd world markets.