The automaker said Monday that earnings were fuelled by US market share gains, cost cuts and the 'Cash for Clunkers' programme, which drew flocks of buyers to showrooms this summer.

The latest results signal that Ford's turnaround is on more solid ground.

The company lost more than US$14.6 billion last year 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.

Net income

Ford, based in Dearborn, Michigan, reported third-quarter net income of US$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.

Ford's key North American car and truck division posted a pre-tax profit of US$357 million, the division's first quarter in the black since early 2005.

Ford cited higher pricing, lower material costs and increased market share for the improvement.

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

The earnings came despite a US$800 million revenue drop.

But Ford said it cut costs by US$1 billion during the quarter, accomplished through layoffs in North America and Europe, reduced pension and retiree health-care costs and improvements in productivity and product development.

Improvement

Chief financial officer Lewis Booth said the company took in US$1.3 billion more than it spent in the quarter, an improvement over its US$1 billion cash burn in the second quarter.

"That's a huge deal," Booth said.

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

But 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.

The rejected deal also would have changed rules so skilled tradesmen such as electricians and pipefitters work in teams and perform more than one task.

Rejection of the deal isn't likely to place Ford at an immediate cost disadvantage to its crosstown rivals because savings from the concessions are longer-term, said Gary Chaison, a professor of labor relations at Clark University in Worcester, Massachusetts.

Neither the company nor the UAW has released any cost savings numbers.

The third-quarter profit makes it extremely unlikely that the company will push to head back to the bargaining table before the current UAW contract expires in the fall of 2011, and union leaders also are unlikely to take another deal to the membership, Chaison said.

No credibility

"I think the company has no credibility asking for concessions now, and I think the leadership is quite embarrased for making a case for concessions," he said.

Chaison said Ford could make some noise about moving new vehicle production to Canada, where unionised workers on Sunday approved a package of concessions, but it's more likely that Ford will live with the current contract until 2011.

The other area where Ford has a cost disadvantage is debt. Ford reported US$26.9 billion in debt, up US$800 million from the second quarter.

The company avoided the same fate as rivals Chrysler and GM by mortgaging its factories and even the familiar blue oval logo to borrow US$23.5 billion before credit markets froze last year.

- AP