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Ford puts debt before dividend payments

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Ford puts debt before dividend payments

'We expect to be solidly profitably for the ... year'

Bryce G. Hoffman and David Shepardson / The Detroit News

Wilmington, Del. -- Ford Motor Co. Executive Chairman Bill Ford Jr. told Ford shareholders here Thursday that restoring dividend payments would have to wait until the automaker pays down more of its debt.

But he said shareholders had little cause for complaint, given that the price of Ford shares has soared in the past year as the automaker ended a 15-year slide in market share and returned to profitability after years of record losses.

"This is one of the greatest financial turnarounds in our 106-year history, and I believe a historic turning point for our company -- the beginning of a sustained period of profitable growth and product excellence," Bill Ford told about 100 shareholders at the Hotel DuPont. "You, the shareholders, have benefited from this resurgence after some decidedly lean years."

A year ago, Ford stock was trading at $4.71 a share; Thursday it lost 26 cents but closed at $12.42, and has traded much higher in recent weeks.

"We are more convinced than ever that Ford has the right plan," CEO Alan Mulally told shareholders. "We expect to be solidly profitable for the full year ... In addition, we expect to see continuing improvement in 2011."

Ford reported profits in the last four quarters, including $2.1 billion in the first three months of this year. The automaker has been able to leverage its status as the only Detroit automaker not to take government loans, plus strong products, to attract buyers through a historic decline in U.S. auto sales that is beginning to abate.

Demand for Ford products rose 33 percent through April, compared to 17 percent for the industry overall, according to Autodata Corp., which tracks vehicle sales.

Shareholder Frank Giamboy, a financial planner from Wilmington, said he had advised many clients to buy Ford stock, and he thanked Bill Ford Thursday for "making me look smarter than I probably am." But he also asked when the company would resume dividend payments, which were suspended in 2006.

"The majority of the people here invested in the Ford stock to make money," Giamboy said. "Do you see in the future a possible return of the dividend? I think that's on a lot of people's minds sitting in this room today."

"It's also on a lot of my family's minds," quipped Bill Ford. "But it's very early days in our recovery, and we still have a lot of debt, as you know. And I think the most important thing we can do as a company is to get our balance sheet strengthened and in order."

He said a timetable for resuming dividend payments would be determined once debt reduction goals are reached.

Despite its return to profitability, Ford faces a competitive disadvantage against U.S. rivals General Motors Co. and Chrysler Group LLC, which were able to eliminate billions of dollars in debt when they filed for Chapter 11 bankruptcy last year.

Even after recent debt-reduction moves, Ford still owes about $34 billion. The cost of servicing that debt adds more than $1,000 to the cost of every car and truck Ford sells, according to the Center for Automotive Research.

A decade ago, the heirs of Henry Ford earned $130 million annually in dividend payments, only to see them cut and then curtailed as the company struggled to restructure in the face of growing foreign competition and mounting costs, particularly for retiree health care. On Thursday, Bill Ford acknowledged that he is under pressure from some family members to resume payments.

But he thanked his family "their unwavering support and dedication."

"The events of the past few years have shown that my family's continued involvement in Ford has provided stability and a long-term perspective that's been an important asset to the company," Bill Ford said.

More than 70 percent of shareholders voted against a perennial resolution to strip the Ford family of the super-voting shares that guarantee their continued control of the company.

Still, 29.2 percent of shareholders voted in favor of the proposal, up from 19 percent last year. Ford issued more shares of stock, most of which were purchased by large financial institutions, and they largely voted in favor of the resolution.

Bill Ford also praised Mulally for his leadership and for formulating the plan that restored Ford to profitability.

One shareholder asked if Mulally, now 64, would have to step down when he turns 65. Bill Ford said the company has no rule on that and said he hopes Mulally will remain CEO for many years.

"His unwavering belief in our people and our plan has been validated by our outstanding results," Ford said. "The best part is, he's just getting started."

From The Detroit News: http://detnews.com/article/20100514/AUTO01/5140347/1148/auto01/Ford-puts-debt-before-dividend-payments#ixzz0nw9QMAGa

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Good to see so many back the Ford family maintaining control over the company.

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