NEW YORK (TheStreet) -- Ford (F) - Get Report CFO Lewis Booth said during his keynote address at a Treasury and finance awards conference here Thursday that Ford's less appealing balance sheet when compared with competitors' hasn't been a disadvantage to the company.
As the only one of the "big three" U.S. automakers not to take bailout money from the government at the height of the recent auto industry crisis, Ford has more debt than competitors
-- both of which were able to cleanse their balance sheets after undergoing Chapter 11 bankruptcy protection.
Ford CFO Lewis Booth
Booth said during his keynote speech that Ford didn't think Chapter 11 was a good business strategy for the company.
"I think it's really easy to focus just on our debt position vs. GM and Chrysler," Booth later told
on the sidelines of the conference. But "all the other advantages of not seeking bankruptcy protection far exceed the issues we still have, to clean up the balance sheet."
"We've been selling cars and trucks because of the strength of our product portfolio. But I think people have
also given Ford a chance because we didn't take their money." Booth added that Ford's showrooms have improved massively over the last two to three years. "I think
car buyers like what they see. Right through the difficult periods, we continued to invest heavily in products, and you can see we're getting a payback for that."
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As Ford continues to pay down debt -- the company expects to be cash neutral by the end of the year -- its relationships with suppliers and dealers, who are becoming increasingly profitable, continue to grow, said Booth. Booth said according to a survey, Ford is now viewed as one of the best car companies in North America to do business with both domestically and internationally.
On Tuesday, in a third-quarter earnings report, Ford said it paid down its revolving credit line by $2 billion in the third quarter and would use cash to fully repay a remaining $3.6 billion of debt owed to the VEBA retiree health care trust by the end of October. By year-end, Ford would have paid down $10.8 billion of debt this year, saving the company $700 million to $800 million in annualized interest payments.
"Overall, I'd rather be in our position than anybody else's," Booth said.
"Strong products, momentum in North America and continued success at Ford Credit fueled growth amid still-challenging business conditions," the company said. Ford posted profits at nearly all its global divisions but reported a loss in Europe. Industry sales were weighed down by tough economic times.
Booth said by the fourth quarter, there's no question that "we will make money in Europe" and that its operations there will be profitable in 2011. Although auto overcapacity in Europe has compelled many automakers to carry out aggressive incentive programs to sell their vehicles, Booth said Ford will continue to refuse participation in these types of programs. "We're not going to participate in marginal deals," Booth said. "We're going to run our businesses to be profitable."
He went on to say that he believes these incentive programs aren't sustainable, given the damage it has brought on the entire industry's profit margins. "We believe at some stage, the market will calm down."
Currently, Ford has about a 2.5% share of the Asia-Pacific region, which is much lower than its share elsewhere in the global market. As it moves out of survival mode in North America into international expansion mode, Ford continues to raise production capacity in India and China. "Over time, we would expect ourselves to grow, and not just because the industry is growing so fast. We would expect to achieve market share gains, but we're not giving any indication of exactly what our target is."
While many investors continue to worry about the outcome of Ford's labor negotiations with the United Auto Workers union -- the next round of negotiations is expected to occur in the third quarter of next year -- Booth said he believes Ford and the UAW share the ambition of staying competitive.
"It's clearly on people's minds," Booth said of its talks with the UAW.
"I think you know we have an extremely good relationship with the UAW. We've got major improvement in competitiveness in the 2007 negotiations. In 2009, they further improved our competitiveness in negotiations between Ford and UAW, and there's no misunderstanding between ourselves and the UAW that we have to stay competitive."
Last year, Ford and UAW members reached an agreement to lower hourly wages to $55 from about $60 vs. the $50 hourly wages at so-called "transplant" automakers such as
. The agreement was expected to help Ford save at least $500 million a year.
Booth said Ford will continue to manage down labor costs, noting that the company has the capacity to negotiate the addition of second-tier workers as it continues to grow, further narrowing the gap between Ford's employment costs and those of "transplant" automakers.
-- Written by Andrea Tse in New York.
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