Unlike its fellow counterparts GM and Chrysler, Ford Motor Company stated on Monday that they have been able to lower automotive debt by $9.9 billion, down to $15.9 billion from almost $26 billion at the end of last year. With this announcement today, Ford stock rose to 3.77 (up 16%). This announcement has greatly improved my confidence in Ford Motor Company.Ford was able to achieve this milestone because of several different reasons. Ford made an agreement with the United Automobile Workers Union that would cut payments on health care for retired workers, a main factor in their present debt. In addition, Ford has bought out many of their higher-paid hourly workers and halted payments to executives.
Ford's platform should be a model for GM and Chrysler, who have yet to make an agreement with the United Automobile Workers Union. Ford's effort to reduce automotive debt during poor economic times is a step in the right direction for the American automobile manufacturer. It is unfortunate that cuts in retiree benefits were initiated, but steps like this must be taken to survive poor car sales during the current recession.
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