Ford Motor Co. will offer 300 million common shares in a public offering designed to shore up the car maker's cash reserves and keep the company out of bankruptcy as its crosstown rivals struggle to restructure.
Ford's move — which could raise $1.7 billion to $2 billion — indicates the company believes investors will pin their hopes on it as General Motors Corp. and Chrysler LLC are consumed by uncertain reorganizations. Ford believes raising the cash is worthwhile despite any backlash from current stockholders who fear their shares will be diluted.
The auto maker's stock sale "will make people more confident about its future and raise confidence that Ford can avoid bankruptcy," said John Casesa, an auto analyst with Casesa Shapiro Group in New York.
Unlike GM, Ford has been able to secure an agreement with the United Auto Workers union to lower labor costs by $500 million annually. Ford also cut its debt by $9.9 billion to $25.8 billion as of April 8, and lowered annual cash interest payments by more than $500 million through agreements with debtholders.
"We continue to make strong progress on our transformation plan — gaining retail market share with great new products, improving quality, reducing costs and positioning Ford for a return to profitability," Ford Chief Executive Alan Mulally said in a statement.
Ford, facing nearly $10 billion in health costs for retired union workers, now may make up to half its contributions to a trust for such payments in stock rather than cash. But the new terms, worked out with the UAW, also could dilute the company's shares, though they are based on a stock price no higher than $2.20.