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Ford Drops Debt, Boosts Stock, Buys Breathing Room

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Remember when Ford shares touched $1.01 a few months back and people were speculating about when the troubled automaker was "forced" into bankruptcy?

Those days seem like a distant memory.

Especially now that Ford shares are surging towards $4.00 and people from Dearborn and Wall Street are hailing the Ford as the one Big 3 auto maker that will come out of this economic mess smelling pretty good.

The latest piece of good news for Ford is the completion of a better than expected debt exchange.

When Ford announced this debt exchange a few weeks back, folks noticed Ford wasn't waiting for Washington to dictate the need to de-leverage. A few weeks later, Ford has bought $9.9 Billion in debt for $2.25 in cash and Ford stock. The company has dropped it's debt by 39%, going from $25.8 Billion to $15.9 Billion.

That reduction means Ford has cut it's interest payments by a half BILLION dollars.

It's also bought the company more breathing room.

That's the reason shares of Ford are surging. Investors are increasingly seeing a company with the financial flexibility to survive this economic storm without taking a government bailout.

Is Ford out of the woods? Heck no.

If sales remain as weak as they are, or if GM and Chrysler bankruptcies cause major suppliers to falter, Fords future would become a little murkier.

I remember when Alan Mulally first took over as CEO, he sent a letter to employees. In it, he was straight forward in telling Ford employees the road down would be painful, but the ride back up would be incredible.

Those who have stood by the blue oval are finding out it's been worth sticking around.

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