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Ford surprises with $1B profit

(Agencies)
Updated: 2009-11-02 22:12

DEARBORN: Ford Motor Co. earned $1 billion in the third quarter, fueled by US market share gains, cost cuts and the government's Cash for Clunkers rebates.

The Ford Motor Co's logo is seen on top of the Ford Motor Company World Headquarters in Dearborn, Michigan, October 26, 2009. [Agencies]

The Dearborn, Mich.-based automaker on Monday reported net income of $997 million, or 29 cents per share. Ford says it now expects to be "solidly profitable" in 2011. Previously the automaker said it would be break-even or better.

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Shares of Ford, the only Detroit automaker to dodge government aid and bankruptcy protection, rose 50 cents, or 7.1 percent, to $7.50 in pre-market trading.

The latest results signal that Ford's turnaround is on more solid ground. The company lost more than $14.6 billion in 2008 and hasn't posted a full-year profit since 2005. While it made a profit in the second quarter, that was mainly due to debt reductions that cut its interest payments.

Its North American car and truck division - a key business - posted a pretax profit of $357 million, its first quarter in the black since early 2005. Ford cited higher pricing, lower material costs and increased market share for the improvement.

The earnings came despite an $800 million revenue drop. But Ford said it cut costs by $1 billion during the quarter.

Ford still faces obstacles in its turnaround. Last week, workers overwhelmingly rejected an agreement with the United Auto Workers that would have brought Ford's labor costs in line with rivals General Motors Corp. and Chrysler LLC. Workers objected to clauses limiting their right to strike and freezing entry-level wages, and felt the company was healthy enough and didn't need further concessions.

Ford also has $26.9 billion in debt, up $800 million from the second quarter.

Ford didn't quantify the impact of Cash for Clunkers, which offered buyers payments to trade in their vehicles. The program helped Ford cut costly incentives and raise production. It also won buyers; the Ford Focus and Ford Escape were among the top five sellers in the program. Ford sales were up 17 percent in August thanks to the program.

Ford also has benefited from consumer goodwill after it declined government bailout money and didn't go into bankruptcy over the summer as GM and Chrysler did. Ford grabbed sales from its rivals, posting the largest increase in market share of any automaker in September. Ford expects an overall gain in US market share in 2009, a feat it hasn't accomplished since 1995.