Ford Motor Co has reduced its automotive debt by 38 percent, or $9.9 billion, part of a series of moves to bolster its finances amid a deep industry downturn, sending its shares up more than 11 percent.

The debt reduction, which Ford estimates will trim its annual cash interest expense by more than $500 million, is the latest evidence that Ford is powering ahead of domestic rivals General Motors Corp and Chrysler in restructuring to survive the lowest U.S. auto sales in three decades.

Ford, the only U.S. automaker that has not sought emergency U.S. government loans, is using $2.4 billion in cash and 468 million shares of its common stock to reduce its outstanding automotive debt by $9.9 billion from $25.8 billion at the end of 2008.

Ford was also the first to reach an agreement with the United Auto Workers union that would slash cash payments for its retiree health care. GM and Chrysler remain in discussions with the UAW to restructure their remaining obligations into a retiree health-care fund.

As with our recent agreements with the UAW, Ford continues to lead the industry in taking the decisive actions necessary to weather the current downturn and deliver long-term profitable growth, Ford Chief Executive Alan Mulally said in a statement.

Ford, through its finance arm Ford Motor Credit, used $1 billion in cash to buy back $2.2 billion of debt at 47 cents on the dollar, and $1.1 billion in cash to purchase $3.4 billion of unsecured notes.

In addition, $4.3 billion of Ford's 4.25 percent senior convertible notes were tendered by April 3, when a debt restructuring offer closed. Ford will use $344 million to pay a cash premium to noteholders who tendered.

Ford, which borrowed $23 billion in late 2006 secured with most of its remaining assets including the familiar blue oval logo, has tried to restructure its debt to slash financing costs at a time of plunging sales and tight credit.

GM, which has been operating with $13.4 billion of government loans since the start of the year, is under pressure to reach sweeping concessions with bondholders and the UAW by June 1. The Obama administration has said the alternative would be a government-controlled bankruptcy.

Ford's shares were up more than 11 percent at $3.62 on the New York Stock Exchange.

(Reporting by Soyoung Kim; editing by John Wallace and Maureen Bavdek)