Archive for June, 2010

Correction: General Mills Earnings story (AP)

Wednesday, June 30th, 2010 | Finance News

PORTLAND, Ore. – In a story June 29 about General Mills, The Associated Press misspelled the surname of the company's CEO. His correct name is Ken Powell, not Bowell.

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Ford pays down $4 billion in debt (Reuters)

Wednesday, June 30th, 2010 | Finance News

DETROIT (Reuters) –
Ford Motor Co (F.N) said it was paying $3.8 billion in cash to settle a debt to a health care trust in a signal of its confidence it remains on track to deliver "solid profits" this year.

In addition, Ford said on Wednesday it was making a $255 million payment on preferred stock dividends that had been deferred when the automaker was trying to conserve cash.

The moves sent Ford shares up 5 percent and removed more than $4 billion in debt from its balance sheet, addressing one of the major remaining investor concerns about the automaker's turnaround plan.

"This sends a strong signal around management's positive view on cash generation at Ford Motor, credit quality at Ford Motor Credit and their likely view that the stock is undervalued," said Barclays analyst Brian Johnson.

Ford said it had opted not to use stock to pay $610 million to a health-care trust aligned with the United Auto Workers union. Analysts had said the prospect of a stock payment to the UAW had weighed on Ford shares in recent weeks.

Paying the UAW-aligned trust fund in Ford shares would have diluted equity for investors and could have been read as a sign that management viewed the stock as near a peak.

Ford stock dipped below $10 on Tuesday for the first in five months, partly on speculation that the company would meet debt payments by issuing more stock.

"Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future," Ford Chief Executive Alan Mulally said in a statement.

Ford said it intended to resume making quarterly dividend payments on preferred stock starting on July 15.

The biggest chunk of three separate payments announced on Wednesday was $2.9 billion to pay off a note owed to the UAW-aligned retiree medical benefits trust at 98 cents on the dollar.

The UAW agreed to that discount in exchange for the early payment, Ford said.

Ford also made scheduled payments of $860 million on notes owed to the UAW fund, established under a 2007 contract with the union.

Barclays' Johnson called the prepayment of debt "a bold move" that came as a surprise given recent market speculation that the automaker would make part of its payment to the health-care fund in stock.

In afternoon trading, Ford shares were up 5 percent at $10.40 on the New York Stock Exchange.

The stock is down about 28 percent from its highs in late April. It remains up more than 70 percent from a year ago, when the U.S. auto industry was mired in the deepest sales downturn since the early 1980s.

Ford ended the first quarter with automotive debt of $34.3 billion, but paid down $3 billion of debt in April that will be reflected in second-quarter results.

The April payment and the debt cut announced today, which together total $7 billion, leave $27 billion of debt remaining, Ford said. The $7 billion debt reduction will save more than $470 million in annual interest payments, it said.

Ford was the only U.S. automaker to avoid bankruptcy last year. It borrowed more than $23 billion in late 2006, putting up nearly all of its remaining assets, including the familiar blue oval logo, to maintain a cash cushion for its turnaround.

By contrast, Ford's larger rival, General Motors (GM.UL), ended the first quarter with about $14 billion in debt.

The question of how quickly Ford can pay down its debt has been widely seen as one of the remaining risks for the second-largest U.S. automaker, despite strong gains in quality and sales in recent months.

"We expect to continue to improve our balance sheet as we deliver on our plan," Mulally said. "Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks."

Ford, which surprised Wall Street with its first annual profit in four years in 2009, despite a severe downturn, has forecast a "solid profit" in 2010.

(Reporting by Bernie Woodall and Soyoung Kim; Editing by John Wallace and Maureen Bavdek)

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WTO rules out some EU state aid for Airbus (AFP)

Wednesday, June 30th, 2010 | Finance News

GENEVA (AFP) –
The WTO on Wednesday dealt the European Union a blow in a transatlantic trade dispute over multibillion dollar subsidies for US and European aircraft, ruling some state support for Airbus illegal.

In a 1,200 page ruling made public for the first time, the WTO disputes panel upheld parts of a US complaint, recommending the removal of some state aid by the European Union for the development and export of Airbus airliners.

It notably accepted three out of seven claims by Washington that key launch aid for the amounted to export subsidies, which are illegal under WTO rules.

"Taking into account the nature of the prohibited subsidies we have found in this dispute, we recommend that the subsidizing member... withdraw (them) without delay," the complex ruling said.

Boeing claimed a "sweeping legal victory" and said it would require Airbus to repay four billion dollars in illegal subsidies, a claim disputed by the European aerospace giant.

"This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus," said Boeing chief executive Jim McNerney.

When it first launched the complaint in 2004, the United States charged that the European Union had provided unfair subsidies worth up to 200 billion dollars (139 billion euros) to Airbus.

Airbus retorted on Wednesday that 70 percent of the US claims "were rejected and wild allegations have been proven wrong."

"Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus," the European aircraft giant said in a statement.

The WTO ruling went against German, Spanish and British state finance for the A380 superjumbo airliner.

However, contested French support for the A380, as well as French and Spanish support for other types of Airbus airliners, were cleared.

The global trade arbitrators also rejected a crucial part of the US case, against alleged launch aid package for the future Airbus A350 airliner, which is due to compete head on with the Boeing 787, as well as allegations of an "unwritten" European launch aid programme.

In the complaint Washington filed in May 2005 after talks with Brussels failed to settle the issue, the United States claimed state support in Europe cut prices significantly and harmed US industry.

Wednesday's step marks only the first salvo in the multibillion dollar clash between the aerospace giants.

The World Trade Organisation's preliminary ruling on the counter claim by Brussels against Washington over allegedly illicit state financing for Boeing is due to be released to both sides on July 16th, trade sources said.

The battle between the trading powers at the Geneva-based trade watchdog broke out other six years ago after a 1992 'no feud' agreement over the world's two biggest aircraft makers unravelled.

The rivalry emerged with Airbus's growth since it was set up as a joint venture in 1970 by aircraft makers in Europe with strong government funding.

By the 1990s the company was challenging Boeing's dominance, growing to number one in the market for airliners about a decade later.

Both sides have had Wednesday's landmark ruling in their hands since March, but it has been kept confidential for three months under WTO rules.

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