Riding out the storm: Ford applies for $18 billion restructuring package
Ford announced today that it plans to acquire a financing package worth a heady $18 billion. The extra money will ensure that Ford survives the next couple of years while Alan Mulally and company attempt to turn the automaker around and bring profits back to the Blue Oval. Automotive News reports that Ford will spend $8 billion in cash by year's end, leaving it with $20 billion in the bank, so to speak. The new financing package that should be completed by December 31 will then boost Ford's liquidity to $38 billion. Ford says the added cushion will allow it to weather a recession or other unanticipated events that may come its way. Analysts note that while the automaker has bought itself a few years of secured operations, the mere fact the company went for the financing package means that it's going through money faster than originally anticipated, which is a bad sign. Either way, Ford will finish out the decade come hell or high water now, which is news we like to hear. With that monkey off its back, hopefully the automaker can now get down to the business of building better cars.
If you're interested in financial legalese, check out Ford's full press release after the jump.
[Source: Ford and Automotive News]
PRESS RELEASE:
FORD ANNOUNCES PLANS FOR DEBT FINANCING
DEARBORN, Mich., Nov. 27 – Ford Motor Company [NYSE: F] today announced that it plans to obtain financing totaling approximately $18 billion in order to address near- and medium-term negative operating-related cash flow, to fund its restructuring, and to provide added liquidity to protect against a recession or other unanticipated events.
The financing transactions consist of:
- new five-year senior secured revolving credit facility of approximately $8 billion that is intended to replace Ford's existing unsecured credit facilities of $6.3 billion; senior secured term loan of approximately $7 billion; and
- unsecured capital market transactions of approximately $3 billion, which may include unsecured notes convertible into Ford common stock.
- The size of the individual components of the financing may vary depending on market conditions.
- Borrowings under the senior secured revolving and term loan credit facilities will be secured on an equal basis by first-priority liens on principal domestic manufacturing facilities (subject to public debt indenture limitations) and substantially all of the Company's other domestic automotive assets, certain intellectual property, certain real property, all or a portion of the stock of certain subsidiaries (including Ford Motor Credit Company and Volvo), certain intercompany payables and notes, and up to $4 billion of domestic cash without restriction on its use.
Ford expects these transactions to close prior to December 31, 2006.
Upon completion of the transactions, Ford expects to have Automotive liquidity of approximately $38 billion at year end 2006, consisting of gross cash (i.e., cash, cash equivalents, loaned and marketable securities and short-term Voluntary Employee Beneficiary Association assets) and available credit facilities.
Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles in 200 markets across six continents. With about 300,000 employees and more than 100 plants worldwide, the company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Motor Credit Company.
Forward-Looking Statements: Forward-looking statements herein regarding our financial plans are based on expectations and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation, market conditions and the other factors described under the heading "Management's Discussion and Analysis of Financial Condition and Result of Operations – Risk Factors" in our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.
Reader Comments (Page 1 of 1)
Bonita 2:38PM (11/27/2006)
Sounds like the $1 billion deal Chrysler borrowed years ago when it was bankrupt, only they had Lee Iacocca genius to bail them out. Ford ain't got no savior(s), and other than the Mustang, they ain't got no cars worth a *&^%$
Reply
Daniel 2:40PM (11/27/2006)
There is one thing that FoMoCo leadership needs more than anything - that is PASSION FOR GREAT CARS!!!!!
If your products reflect that passion - they will sell. Come on guys, build some great stuff.
If you build them - they will sell!
How about some 80 MPG to 100 MPG BioDiesel Full Plug-in Hybrids? How about some Lincolns that bring back the glory of that once proud Marque? How about bringing the European Mondeo to the U.S. as a Mercury. Build the Ford 427 and a Mercury Marauder off the same RWD platform. Build a retro Mercury Cougar off the Mustang RWD platform - and make it kick some G35 and BMW 3 series behind.
Just build some in-your-face great American cars and trucks that show your PASSION for cars as a work of art instead of a unit of production.
As a life long Ford fan - I widh you the best.
Reply
Rory 2:45PM (11/27/2006)
They still do not have any products that I will buy. The Fusion shape looks good from a distance but up close the details are tacky. All the chrome is a bit much for me. If I could combine the tail lights from the Mercury and the truck lid from the Ford I would like the rear. At the front give me a body colored grill and add the Mercury headlights. If I were in the market for a coupe the Mustang is very nice but again small things would have to change before I bought. That is about the only two they have that even cause a blip on my interest meter.
Reply
David1974 3:22PM (11/27/2006)
Some one should just pull the plug on Ford and let it die already.
They have nothing that people will miss or cant be substituted.
Reply
That One Person 3:41PM (11/27/2006)
YEAH! Lets kill Ford! Lets put hundreds of thousands of employees out of work! And that doesnt even count supplier companie...woooo!!!! And on top of that, lets kill our economy while we're at it!!
/sarcasm
Idiot.
Anyways, I am giving Mullaly a chance. He seems to have a brain between those ears of his...unlike Billy Boy...
Reply
Ryan 4:19PM (11/27/2006)
I wonder when Ford will pull out of the US market?
Reply
A. Kerr 11:11AM (11/28/2006)
For the first time in 50 years, Ford finally is serious about fixing its business. The arogence of the Big 3 is over - its has to be, their very survival demands it. One big trend that no one is mentioning - American cars are very close to world class now, in terms of quality and desirability. The US companies also understand their US branding in face of global competition. That is the real story. I will take the GT40 and Ford Fusion, please.
Reply
cl2 6:36PM (11/27/2006)
Truly amazing how some people wish American car companies the worst. I'v ehad my problems with the UAW in the past, but I don't wish these companies to go out of existence. And the simple fact is that many of the foreign (Japan, etc) do have government subsidies that help them out. Quite frankly, there are quite a few boring cars made by all the manufacturers throughout the world. I do wish that Ford would produce more of their European cars, but I definitely do like some of their current lineup.
Reply
Andy 4:50PM (11/27/2006)
No surprise Ford is in this kind of shape. How the mighty have fallen. But I disagree about complaints regarding the Fusion--I think it is a good sedan. Not great, but good.
Reply
akatsuki 11:15PM (11/27/2006)
Protecting companies to just keep people employed is pretty retarded. You might as well just put them on old-style welfare, because that is what it is in the end. One of the main reasons that Ford is in so much trouble is that they still don't know how to compete effectively in the car market, they just use a lottery approach of jumping on whichever bandwagon is hot.
The best thing that could happen would be Ford to file for bankruptcy, have the lenders take it over and really do a top to bottom cleanup.
Reply
David1974 3:06PM (11/28/2006)
if ford left the market, jobs would not be lost to the extend you say.
The market would have a shortage of about 3 million cars with ford of the picture. everybody else would boost output. So dont worry. America will still sell 17 million cars a year and the suppliers will be fine.
Reply
doglet 7:44PM (11/27/2006)
sounds like they are doing what needs to be done to guarantee that the company survives the decade. hopefully we have seen the worst and the new models coming in the next few years will be competative offerings.
Reply
Rob 7:58PM (11/27/2006)
This is certainly a bold move.
Reply
Rastus 9:04PM (11/27/2006)
Classic Economics 101 states this is a good move. And yes...it's a Doozy of a Bold Movement (BM).
A company which has existed on welfare for the past decade+ is now waking up to those "tough choices" each and every other working American deals with on a daily basis.
For example: "How do I best position myself for gainful employment...such that I can put bread on my table and a roof over my head?". For 90+% of Americans, the answer is "Through hard work and wise decisions".
Well, Ford and their workforce has had a free ride for so long I can't recall when the DIDN'T have a free ride!
2006 PEOPLE!! The year Delphi announces 11 plant closures, GM announces 12 plant closures...and Ford announces 16 plant closures!!! Has ANY OF THIS HIT HOME YET?!?!?!
ABSOLUTELY PHENOMENAL!!!
As Alice in Chains once sang so eloquently: "Here come the rooster!!!".
F-350's, Suburbans, Silverados, and craptastic "token" automobiles (Monte Carlos, Ford 500s, ...etc.).
Is it any WONDER this BM stinks to high hell???
My reply: NO!
Sure, a whopping 39 Plant Closures all due to arrogance, greed, misplaced patriotism, ...all the stuff suckers are made of.
Hard work??? Now THERE'S a concept!!!
Here come the rooster, INDEED!!
Reply
Galley 8:55AM (11/28/2006)
The UAW is the root of all evil.
Reply
C. McFeeny 9:14AM (11/28/2006)
I'm convinced that none of you live in Detroit or have jobs in or are related to the automotive industry. By no means do I think that automotive CEO's operate benevolently, but I do not think that Ford or GM's management intended for things to go the way that they have here. You ask "Has ANY OF THIS HIT HOME YET?!?!?!" I say "YES IT HAS!!". My wife was laid off form her job in construction/design because no one in the metro area is spending any money to build houses. There's 10 houses for sale on my block of 20 houses. I'm on pins and needles waiting to hear whether or not my job may be outsourced to India in a few months. Yeah, it's it home alright.
Reply
Richard Warren 10:58AM (11/28/2006)
Did any of you actually read the article? Ford, just
like any other company, at the moment needs more liqudity to make some of the changes it needs to make, that a lot of folks harp about here. Read how they intend to do it. If you're going to bring new product out of course you're going to burn through cash faster than you thought.For those seeking the demise of Ford (or any maker) what gets lost is the number of people in addition to the regular Ford employees that take a hit. Consider just to start with the number of people employeed by the following:
Total dealerships,say 20 employees each (it's larger)Ford 3,777
Lincoln 1,361
Mercury
1,968
Then consider all the associated companies that supply Fordwith parts.All the sub suppliers that live of the main parts suppliers. The associated surrounding businesses. You assume that some import company will pick up that slack, perhaps, perhaps not.
While you can express glee with all this the fact is there is going to be a cost to all this. Ford will survive this and this is a step in the right direction.
For those that cheer the downfall of any American business I say this. Call us back when it happens to you. Think it won't? Think again.
Then again, how many of you "Captains of Industry" who say let it die actually own or have owned your own businesses?
Reply
Rastus 11:23AM (11/28/2006)
Please, Richard, tell us ALL how you own your own business again...and how you pay your employees more than everyone else does for comparable labor!
It's the Holidays...you'll feel GOOD about yourself once again. Share it with EVERYONE, there Mr. Dudly Do-Right.
And btw, Richard, it HAS happened to EVERYONE ELSE...so what's your point? GM and Ford are only Catching UP!. They've been living in the woods for the past 30 years, in their own little Private "Detroit"...while the entire FREAKIN' World has passed them by!
HERE COME THE ROOSTER!!!
Anyone want to buy a slightly used pos GM vehicle??? You'd be doing the economy (and myself) a blessing!
I just wish they would have made it an even 40 (it just sound SO much better :)
Reply
Paul 3:49PM (11/28/2006)
bye bye shareholder equity
the shareholders would have been better served if the company liquidated a year ago.
Reply
Richard Warren 8:06AM (11/29/2006)
Rastus,Same old rant, different day.My comment is
directed at financing arrangements, if you ever owned a business a cash transfusion for liquidity is nothing to get excited about to turn it around or expand.
A simplistic let them die answer is just that simplistic, without any thought of the total picture.
This does not mean that you can get buy selling
substandard product, if an infusion of liquidity helps you do a better job of keeping business it's a good decision, if you continue to do the same old thing, well, nothing will save you.
It's also an assumption that while the American market is about 17 million new cars that if, say Ford, closed that someone else would jump into to America and take their place or that they would use the same suppliers.
There is a much larger picture here #14 has seen it. We are not talking about one maker here, we are talking an American industry. It takes years for areas to recover.
Does this mean we buy or support substandard product? Of course not.
Hopefully Ford will use this money wisely, that remains to be seen.
Reply