Ford plans 50 percent production jump by 2015
DETROIT — Ford Motor Co. said Tuesday it would kick up production by 50 percent by 2015, while quickly reducing debt to regain a quality credit rating within the next year.
Chief financial officer Lewis Booth said he expected the still-recovering industry to produce 95-100 million vehicles by around 2015, compared to 74 million last year.
Ford expects to be producing eight million of those vehicles, up from 5.3 million today, as it targets sales growth and a bigger market share in places like Asia.
“I think we expect our business to grow pro-actively around the world,” added Booth.
The company expects Asian markets to account for up one third of its total sales by 2015.
Booth said Ford was also focused on restoring its credit rating to borrow more cheaply and to pay a dividend as it recovers from one of the most devastating downturns to hit the US car industry.
Speaking on the US auto giant’s annual investor day, Booth said Ford also hoped to ease through contract talks with the United Auto Workers Union which begin in July. Ford’s current contract with the UAW expires in mid-September.
“We’re expecting to get through the negotiations with the UAW with a good tone,” he said.
Ford managed to get its books in order ahead of the 2008 financial crash and was able to survive the worst economic downturn in decades without resorting to government help.
Rivals General Motors and Chrysler had to turn to the government for bailouts.
But Ford still bears the legacy of a heavy debt burden, which peaked at more than $33 billion.
It said it plans to cut its debt from its core automotive operations from $16.6 billion at the end of the first quarter to $10 billion, though it did not give a time frame.
It said it had already paid down $800 million in revolving credit, and would repay during the current second quarter $2.3 billion more in loans.
That should cut costs for the company and allow it to gain better terms for borrowing, according to Booth.
The firm expects that will bring it an “investment grade” rating on its debt “in the near-term,” and be able to resume paying dividends to shareholders.
“Maintaining adequate cash to support and grow the business and reducing our debt are essential steps we are taking to achieve and solidify a world-class balance sheet,” said Booth.
Standard & Poor’s now rates Ford three notches below investment grade and both Fitch and Moody’s, the other two major ratings agencies, have Ford pegged at two notches below.
All three have placed a “positive” outlook — showing they expect improvement — on their ratings for the company.
“We’ve already seen our spread improve so we are getting some of the benefits of a low investment grade rating,” Booth said.
Booth also said Ford has set some aggressive growth targets in its forward looking plans for the next half-decade.
But the prospect of rapid growth, a dividend payment and cheaper financing did little to excite investors.
The company’s shares traded up 0.29 percent on Tuesday.