Ford to reduce its debt by $4 billion

DETROIT - Ford Motor Co., the only Detroit automaker to avoid bankruptcy protection, said Wednesday that it will reduce its huge debt by another $4 billion as it continues to show signs of financial strength.

The Dearborn, Mich., automaker will pay $3.8 billion in cash to a United Auto Workers trust fund that pays retiree health care bills, and it will pay out $255 million in dividends on preferred securities that had been deferred as the automaker worked its way through financial troubles. The company now will make quarterly payments on the securities, which are a combination of preferred stock and bonds.

Ford chief executive Alan Mulally said in a statement that the payments are another sign of confidence that the company's restructuring plan is working.

After the payment, Ford will still owe the UAW trust about $3.6 billion due by 2022, with an option to pay it over three years. The company said it intends to repay the note early but wouldn't say when.

The automaker said the actions combined with a $3 billion debt payment in April will reduce its total debt to around $27 billion from $34 billion at the end of the first quarter. The payments will save Ford roughly $470 million in annual interest costs.

Ford was forced to mortgage its factories and even its blue oval logo to borrow more than $23 billion in 2006 and 2007. But the move helped it avoid bankruptcy protection, unlike Chrysler Group Llc and General Motors Corp.

Recently Ford has reported sales gains and four straight quarterly profits. It earned $2.1 billion in the first quarter, and its sales are up more than 30 percent through May, almost double the 17 percent increase in total U.S. car sales.

Analysts for Barclay's Capital and Moody's Investors Service said the announcement is a sign of confidence that Ford can generate cash to repay debt.