DEARBORN, Mich. — Strong sales performances and execution of other company strategies evidently are doing plenty to help Ford's balance sheet. The automaker revealed on Wednesday that it's reducing its debt by more than $4 billion.

Management explained much of this newest reduction stems from retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule. Executives highlighted the action not only further strengthens Ford's balance sheet, but they can remain on track to deliver solid profits and positive automotive operating-related cash flow this year.

Ford noted that it's making scheduled payments in cash totaling about $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust — including about $250 million due under Note A and $610 million due under Note B. The company mentioned it had the option to pay Note B with cash or Ford stock but agreed to pay with cash.

In addition, officials revealed Ford and its subsidiary, Ford Motor Credit, are paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2 percent.

In a separate transaction, Ford also indicated the company is making another cash payment; this time for $255 million. Executives said this transaction brings current the previously deferred quarterly distributions on the 6.50-percent Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.

Ford emphasized how Wednesday's announcements coupled with other payments made back in April have improved its financial standing. In April, the automaker made a $3 billion on its 2013 revolving credit facility. Now all told, Ford reduced its debt by more than $7 billion in the second quarter, saving the company more than $470 million in annual interest expense.

Ford president and chief executive officer Alan Mulally cheered all of the debt-reduction progress the company has made so far.

"Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future," Mulally insisted.

"We expect to continue to improve our balance sheet as we deliver on our plan. 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," he continued.

"We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the Trust for their health care benefits," Mulally went on to say.

The actions taken this year prompted Ford to reiterate its debt-reduction measures since early 2009. The automaker recounted the completion of transactions during the spring of last year that reduced its automotive debt obligations by $10.1 billion. Furthermore, the OEM recalled how it also raised more than $5.7 billion since the second quarter of 2009 through several equity and equity-linked offerings.

Background About Trust Note Obligations

Pursuant to a March 2008 settlement agreement, Ford stressed the UAW Retiree Medical Benefits Trust was created to assume responsibility for providing retiree health care benefits to eligible Ford-UAW employees and their dependents. Executives noted the cost would be funded with assets contributed by Ford.

The company pointed out the settlement was amended in March of last year to create Notes A and B. Officials described the process as a way to smooth Ford's payment obligations while giving the automaker the option to use Ford stock to make payments under Note B.

On Dec. 31, Ford said it completed the transfer of assets, including Notes A and B, to the UAW Retiree Medical Benefits Trust. The process resulted in the trust assuming the retiree health care liabilities.

Breakdown of Trust Between Ford, UAW

OEM officials explained the payments made Wednesday resulted from an agreement recently reached between Ford and the UAW Retiree Medical Benefits Trust. Elements of that agreement include:

—Ford making the scheduled payments on Notes A and B in cash totaling about $860 million.

—Ford and Ford Motor Credit purchasing for cash the remaining $2.96 billion outstanding principal amount of Note A at a price of 98 percent, or $2.9 billion, of which $1.6 billion is being paid by Ford and $1.3 billion is being paid by Ford Credit. Ford Credit intends to deliver to Ford the portion of Note A that it is purchasing from the UAW Retiree Medical Benefits Trust to satisfy existing intercompany tax liabilities it owes to Ford.

—Subject to regulatory approval, the UAW Retiree Medical Benefits Trust is providing Ford a three-year right beginning in July 2010 whereby Ford has the flexibility to pre-pay for cash, periodically during each year, all or a portion of the remaining $3.6 billion outstanding principal amount of Note B at a 5-percent discount for purchases made prior to 2012 and at a 4-percent discount for purchases made after 2011. Previously, Ford could pre-pay Note B once a year at par.

"We are very pleased with this transaction, which continues the process of diversifying the trust's assets at very attractive values and assists the thousands of Ford retired employees, their families and survivors and others who look to the trust to fund their retiree health benefits," stated Samuel Halpern, president of Independent Fiduciary Services, the independent fiduciary and investment manager for the UAW Retiree Medical Benefits Trust.

Repayment Reinstatement of Distributions on Trust Preferred Securities

As mentioned, Ford also announced a cash payment totaling $255 million to the Trust Preferred Securities. The company indicated the cash payment is for all accrued distributions previously deferred.

Officials also asserted they intend to resume making quarterly distribution payments starting with the payment due on July 15 They explained the accrued distributions will be paid by the trustee on July 15 to the holders of record of the Trust Preferred Securities on June 30.

The automaker also stated distributions on the Trust Preferred Securities had been deferred in accordance with their terms since April 15, 2009.

Ford wrapped up all of its announcements by mentioning its liquidity and ability to generate positive cash flow are sufficient to warrant reinstatement of the distributions on the Trust Preferred Securities.