DEARBORN, Mich. -
Giving credit to strong results from its recent conversion offers, Ford announced it will be cutting more than $1.9 billion off its automotive debt and plans to become “clearly net cash positive” before the year ends.
Moreover, Ford said the conversion offers will help lead an approximate $180 million reduction in annualized interest costs.
Ford officials pointed out that their debt dropped $12.8 billion in 2010, which had led to almost $1 billion in annualized interest costs.
The $12.8 billion figure includes the conversion offer, the $3.6 billion prepayment on VEBA Note B and the net reductions through September.
“These successful conversion offers represent another significant step toward our goal of reducing our automotive debt and improving our balance sheet,” explained Ford executive vice president and chief financial officer Lewis Booth. 
“We had previously said that even without the conversion offers, we expected our automotive cash to be about equal to automotive debt by the end of this year, well ahead of our earlier expectations,” Booth added. “With the conversion offers, we will be clearly net cash positive by year-end 2010.”

The conversion offers were rolled out Oct. 26 and expired Nov. 23 at midnight (EST).  

Ford offered holders of outstanding 4.25-percent Senior Convertible Notes due Dec. 15, 2036, or 4.25-percent Senior Convertible Notes due Nov. 15, 2016, a cash premium to convert their notes into Ford common stock shares.
Citing data from Computershare — which is the exchange agent for the offerings — Ford said that when the offer expired, $554 million principal amount of the 2036 Convertible Notes had been validly tendered and accepted for purchase. Meanwhile, $1.992 billion principal amount off 2016 Convertible Notes had been validly tendered and accepted for purchase.
The 2036 Convertible Notes had a carrying value on Sept. 30 of $399 million. For the 2016 Convertible Notes, it was $1.544 billion.
The expected settlement date is Tuesday and at that time, there will be 274 million shares of Ford common stock issued. Ford will pay out cash premiums totaling $534 million
“The cash premiums reflect in large part the present value of the interest payments that would have been made on the tendered 2036 and 2016 Convertible Notes to the first date (Dec. 20, 2013, and Nov. 20, 2014, respectively) on which Ford could have terminated holders’ conversion rights under the Convertible Notes,” officials explained. “The shares of Ford common stock to be issued on the settlement date with respect to the conversion offers have been included in Ford’s calculation of diluted earnings per share since the beginning of the year.
They added: “In addition to the shares of Ford common stock and cash premiums, Ford will pay accrued and unpaid interest on tendered Convertible Notes for the period from the last interest payment date to (but excluding) the settlement date, which will total $14 million.”
Once the conversion offers are settled, the principal amount outstanding on the 2036 Convertible Notes will be $25 million. For the 2016 Convertible Notes, it will be $883 million.
Also, when the settlement is final, the 2036 Convertible Notes will have a carrying value of $18 million. For the 2016 Convertible Notes, it will be $688 million.
Explaining what the noteholders received in more detail, Ford stated that those who held 2036 Convertible Notes and validly tendered and did not withdraw by the deadline will be given the following for every $1,000 principal amount of the notes converted:
—108.6957 shares of Ford common stock
—Cash amount of $190
—Applicable accrued and unpaid interest
Meanwhile, those who held 20166 Convertible Notes and validly tendered and did not withdraw by the deadline will be given the following for every $1,000 principal amount of the notes converted:
—107.5269 shares of Ford common stock
—Cash amount of $215
—Applicable accrued and unpaid interest
Ford further explained that the fourth quarter results will include a special item charge total roughly $960 million. This accounts for the cash premiums and non-cash losses (which corresponds to the difference in the debt’s carrying values versus its fair values) for the tendered 2036 and 2016 Convertible Notes
Ford to Expand in China
In other news from the automaker, Ford said it will bring 66 more dealerships to China before the year closes. This would make the total number of Ford stores added in the country this year to 100. The latest additions mean Ford will have 340 dealerships in the country.
The automaker said most of the newest dealers have been announced in  two- and three-tier cities throughout the Western and Northern parts of the country.
“Following the call to ‘go West,’ we are expanding West and in developing cities in China where most of the future growth will come from,” stated Joe Hinrichs, president of Ford for Asia Pacific and Africa, and chairman and chief executive officer of Ford China.
“By expanding our retail footprint in western China, we are continuing to realize the vision of Henry Ford to make personal transportation more accessible and efficient,” he added. “We are thankful that with the support of our JV partners in China we are on track to have a record sales year in China. We will also have a record year for sales in the Asia Pacific and Africa region as a whole.”
As far as the new stores, these will be scattered all over the company’s Chinese sales regions. They will be located in such areas as Liyang, Shijiazhuang, Harbin, Wanzhou in Chongqing and Anyang, Ford said.
While the aforementioned cities might not be widely known beyond China’s borders, the populations of several of them exceed 1 million each, also suggesting these cities are key to economic growth in China.
“It’s all about growth — for Ford, for our partners and most importantly, growth for our customers,” explained Nigel Harris, general manager of Changan Ford Sales Co.
“With the additional 66 dealers we are opening, we will be on track to have more than 340 operational dealerships in China by the end of the year. Sixty-six is an auspicious number in China, and we think it bodes well for our future success,” Harris noted.
“We are very thankful to have some of the best sales and service colleagues in the automotive business working at Changan Ford.  As ambassadors of the Ford brand as it expands, they work hard to make sure our new and existing customers ‘feel the difference’ in the products we offer and the services we provide,” added Harris.
In fact, Harris oversaw a dealership grand opening last week in Nanning, Guanxi Province, and was joined by officials, media and dealer personnel in the celebration. There were several of these opening celebrations throughout the nation honoring new stores, Ford noted.
Moreover, Ford and the Changan Ford Mazda Automotive Ltd joint venture are teaming up for the construction of a Chongqing assembly plant. Also, the companies have officially agreed to construct a new engine plant in that same town.
The automaker is expected to debut its new Ford Edge in China the middle of next month.