Editor's note: Some earlier versions of this story inadvertently dropped the decimal point from Ford's $2.8 billion cash increase in the third quarter.
DETROIT -- Ford Motor Co. posted a surprise $997 million net profit in the third quarter and boosted cash reserves while saying it will be “solidly profitable” in 2011.
Ford's pre-tax operating profit of $1.1 billion marked its first quarter in the black on that basis since early 2008. Ford finished the quarter with $23.8 billion in automotive cash, up $2.8 billion from the end of June.
The automaker's shares rose as it attributed the performance to new products, reduced structural costs and higher profits at the Ford Credit finance arm. Ford recorded U.S. sales increases in July and August, aided by the cash-for-clunkers program, and lifted its market share for the quarter.
"Our third-quarter results clearly show that Ford is making tremendous progress despite the prolonged slump in the global economy," said CEO Alan Mulally.
Ford shares rose 8.3 percent, or 58 cents, to $7.58 as of 4:02 p.m. in heavy trading.
The results included a pre-tax operating profit of $677 million at Ford Credit, up $516 million from a year earlier.
The hard-hit North American unit posted a pre-tax operating profit of $357 million, its first positive quarter since the beginning of 2005.
Revenue in the third quarter fell to $30.9 billion from $31.7 billion a year earlier.
In the second quarter, Ford had narrowed its pretax operating loss to $424 million. Its net profit of $2.3 billion for that quarter stemmed from gains related to debt-reduction actions.
Analysts surveyed by Reuters had expected Ford to post a third-quarter loss of 12 cents a share from continuing operations and excluding one-time items. The adjusted per-share profit posted today was 26 cents.
Ford, which had said it would hit "break-even or better" in 2011, now predicts it will be "solidly profitable" that year on a pre-tax basis, not including special items. Ford also forecast positive automotive operations-related cash flow that year.
"That's a huge deal," CFO Lewis Booth told reporters, referring to the positive cash flow in the third quarter.
More uncertain about 2010
Ford said it was more uncertain about the 2010 economic outlook and plans to give more guidance about its 2010 assumptions when it releases its full-year 2009 results.
The company said it predicted European auto sales will decline substantially as scrappage incentive programs end, while U.S. sales volumes industrywide may improve somewhat from this year's levels.
Ford is predicting U.S. total sales of 10.6 million vehicles this year, including a couple hundred thousand medium- and heavy-duty trucks. Ford has forecast 2010 total U.S. sales of 12.5 million units.
That 2010 figure is more optimistic than the forecasts delivered by U.S. dealer groups last week.
The biggest swing in operating results came from North American automotive operations, but nearly all automotive units contributed.
The $357 million pre-tax operating profit last quarter was a massive $2.9 billion improvement from the year-earlier period, Booth said.
Almost half of the North American gain came from better net pricing led by the Ford F-150 pickup, Taurus and Focus. Lower raw-material prices and Ford's internal cost-cutting efforts added another $1.1 billion. Increased Ford market share offset lower industry volume, and Ford also benefited from a richer mix of vehicles and by cutting dealer inventory, Booth said.
In Europe, Ford more than doubled operating profit to $193 million, up from $69 million in the third quarter of 2008. Similarly, Ford Asian Pacific/Africa turned a $27 million pre-tax profit, up from $4 million a year earlier.
South America was the only region with a reduced operating profit, off $233 million to $247 million.
Ford managed to reduce losses in two other automotive areas. Volvo lost $135 million, a $343 million improvement from a year earlier. Ford lost $243 million on automotive interest costs and adjustments to fair-market valuations, but that was $201 million better than the third quarter of 2008, Booth said.
The ability to avoid the bankruptcies that engulfed General Motors Co. and Chrysler has given Ford a leg up, but now may be working against it. The UAW is expected to announce later today that workers have rejected proposed changes to their contract.
Votes tallied at union locals over the weekend left no doubt that the concessions would be turned down. If the vote fails, Ford's long-term labor costs would not be in line with rivals.
Case for concessions
In February, Ford completed a revised labor agreement with the UAW that cut costs by about $500 million per year. The automaker has said it needs additional concessions to keep it cost competitive with GM and Chrysler over the long term.
The proposed agreement workers are chafing at includes a "no-strike" clause on wages and benefits and a reduction in job classifications for skilled trades workers, as well as some production commitments and a $1,000 one-time bonus.
The Canadian Auto Workers union, meanwhile, voted 83 percent over the weekend in favor of an agreement that freezes wages for some 7,000 workers into September 2012 in exchange for protecting most factory jobs in Canada.
Morningstar analyst David Whiston said the automaker's touting of increased U.S. market share and improved quality may be working against it in the UAW vote.
"Ford has a lot of good things going," Whiston said before today's results were released.
Ford posted net losses totaling $30 billion from 2006 through 2008.
Turning automotive cash flow positive is one of the most heartening aspects of today's results. In this deep recession, Ford has been burning through the cash reserves it needs to complete its restructuring.
Ford burned through $4.7 billion of automotive operating cash in the first half of the year, including $1 billion in the second quarter. The automaker said today it expected positive automotive operating cash flow in the fourth quarter.
Amy Wilson and Reuters contributed to this report.