As two of the Big Three U.S. auto makers slip closer to oblivion after months on government life-support, Ford Motor Co. is conspicuously chugging along on its own. A treasury that bet heavily on liquidity and was willing to pay dearly for it played no small part of Ford's relative success. By stockpiling cash, the treasury bought Ford both staying power and room to maneuver in the current crisis. This spring Ford tapped its cash hoard and the equity value that the strong cash position was supporting to wipe $10 billion in debt off its balance sheet.

"Basically, we spent $3.5 billion in cash and stock to buy back $10 billion in debt," explains David Brandi, Ford's assistant treasurer. "Obviously, our debt load was pretty heavy and we needed to strengthen our balance sheet, which we had been doing incrementally with transactions in 2007 and 2008. As the credit markets got increasingly stressed and the price of our securities fell, it was a real opportunity for us to use a mix of cash and equity to take out a sizable chunk of our debt." The debt erased included unsecured convertible debt ($4.3 billion), public unsecured bonds ($3.6 billion) and a secured term loan ($2.2 billion), he adds.

Ford mixed shrewd cocktails of cash and equity to match the tastes of its various creditors. In buying back debt at a premium to its trading value but at a deep discount to par, Ford offered bondholders primarily cash, rather than stock they likely would have sold, says Paul Efron, advisory director at Goldman Sachs and one of Ford's senior investment bankers. Convertible holders got mostly stock. "The natural equity takers got equity, which suited them and allowed many to close out short positions. The natural cash takers got mostly cash," Efron says. "Instead of carving up the company in a confrontational restructuring, this was an orderly capital markets transaction."