Ford zips to a profit of $1 billion

DEARBORN, Mich. - Ford Motor Co., the only Detroit automaker to dodge direct government aid and bankruptcy court, surprised investors with net income of nearly $1 billion in the third quarter and forecast a "solidly profitable" 2011.

The automaker reported yesterday that earnings had been fueled by gains in U.S. market share, cost cuts, and the federal Cash for Clunkers program, which drew flocks of buyers to showrooms during the summer. Ford's shares rose 58 cents, or 8.29 percent, to close at $7.58.

The latest results signal that Ford's turnaround is on firmer ground. The company lost more than $14.6 billion last year and has not posted a full-year profit since 2005. Though it made a profit in the second quarter, that was mainly because of debt reductions that cut interest payments.

Ford reported third-quarter net income of $997 million, or 29 cents per share. Its profit forecast for 2011 was a step above previous guidance of break-even or better for the year.

The company's key North American car and truck division posted a pretax profit of $357 million, the division's first quarter in the black since early 2005. Ford cited higher pricing, lower material costs, and increased market share.

The fuel-efficient Ford Focus sedan and the Ford Escape, a small SUV, were among the top five sellers under Cash for Clunkers. Ford sales climbed 17 percent in August thanks to the program.

Excluding one-time items, Ford earned 26 cents per share, blowing away analysts' expectations of a loss of 12 cents.

The earnings came despite an $800 million drop in revenue. But Ford said it had cut costs by $1 billion during the quarter through layoffs in North America and Europe, reduced pension and retiree health-care costs, and improvements in productivity and product development.

Chief financial officer Lewis Booth said the company took in $1.3 billion more than it spent in the quarter. "That's a huge deal," he said.

A plan to create demand and get better prices for Ford products, coupled with cost cuts, gave the company confidence that it would make money in 2011, Booth said.

But Ford still faces obstacles. Yesterday, the United Auto Workers said its members had overwhelmingly rejected a deal that would have brought Ford's labor costs in line with those of rivals General Motors Corp. and Chrysler L.L.C.

Seventy percent of production workers and 75 percent of skilled-trades workers, such as electricians and pipe fitters, voted against the plan. The UAW said it would not return to the bargaining table.

In a statement, Ford said it would keep working with the union to make sure the company remained competitive and could keep making commitments to invest in U.S. factories.

Workers objected to clauses limiting their right to strike and freezing entry-level wages, believing the company was healthy enough and did not need further concessions.

The deal's rejection is not likely to place Ford at an immediate cost disadvantage to its crosstown rivals because savings from the concessions would be longer-term, said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass.