UPDATE 4-Ford profit tops Street view; shares climb

* Q2 operating EPS 68 cents vs Street view 40 cents

* Sees second-half profit lower than first half

* Says on track to be solidly profitable in 2010

* Shares up 4 pct
(Adds analyst comment, details on market share, executive
remarks, updates share price, adds links)

By David Bailey and Bernie Woodall

DETROIT, July 23 (BestGrowthStock) – Ford Motor Co (F.N: ) posted a
stronger-than-expected quarterly profit of $2.6 billion and
said it was on track for higher earnings and lower debt in
2011, sending its shares up 4 percent.

The No. 2 U.S. automaker lowered the top end of its range
for U.S. auto industry sales for 2010, citing in part the slow
recovery in the U.S. economy. But it said the recovery was
sustainable.

Ford has now posted five consecutive quarterly net profits
after recording net losses totaling $30 billion from 2006
through 2008 as it cut jobs, sold brands and began to rebuild a
product lineup overly reliant on large SUVs and pickup trucks.

“It was a solid quarter, they are definitely back on
track,” said Mirko Mikelic, a fixed income portfolio manager at
Fifth Third Asset Management in Grand Rapids, Michigan.

The only major headwind for the company would be the “weak
to tepid” outlook for the economy, and Ford is positioned to do
“real well” if the economy improves, he said.

“I don’t think many people are predicting a double-dip
recession, but that would be the only thing that would really
slow them down,” Mikelic said.

Ford’s top-selling vehicle remains the F-Series pickup
truck, and the automaker has made deep investments in its car
lineup in recent years, including the Fusion mid-size sedan,
the Taurus full-size sedan and Fiesta small car.

Ford unveils the next version of its Explorer SUV on Monday
at events with Chief Executive Alan Mulally in New York and
Executive Chairman Bill Ford in Chicago. Sales in the large SUV
segment have sunk since the Explorer drove Ford’s profits a
decade ago. [ID:nN16177048]

Ford shares were up 49 cents at $12.58 in early-afternoon
trade.

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Earnings graphic http://link.reuters.com/pag39m

Breakingviews [ID:nN23116175]

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AUTOMOTIVE DEBT CUT

Ford trimmed automotive debt by $7 billion in the second
quarter and expects to further reduce its debt. It ended the
quarter with $27.3 billion of automotive debt.

Ford, the only large U.S. automaker to avoid bankruptcy in
2009, borrowed more than $23 billion in 2006 to fund its
turnaround, leaving it with a heavier debt load than rivals
General Motors Co [GM.UL] and Chrysler.

Ford’s balance sheet has been the major investor concern
for an automaker that has gained market share and largely
eliminated the gap in quality and vehicle resale values against
competitors led by Toyota Motor Corp (7203.T: ).

Bernie McGinn, president of McGinn Investment Management,
who holds Ford shares, expects the automaker to sell more stock
to shore up its cash position.

“That would initially be seen as negative, but it would be
done to repair the balance sheet,” said McGinn. He believes
Ford is still in the early stages of its recovery. “Who would
have thought even a year ago that U.S. automakers would be cash
generators?”

Analysts have said that with IPOs expected from GM,
Chrysler and auto parts maker Delphi in the coming months, and
a possible secondary offering from Ford, there is a risk of
overloading investor demand, despite signs of a slow recovery
in auto demand.

Ford Chief Financial Officer Lewis Booth said working down
automotive debt was still “very urgent,” but declined to say
whether Ford had near-term plans for additional actions.

Asked if Ford planned a secondary share offering, possibly
in the second half of the year, as part of its debt-reduction
efforts, Booth said it was “not in our plans,” but also said he
would not disclose it if it were.

‘STILL A BIT SKITTISH’

Second-quarter net profit rose to $2.6 billion from $2.26
billion a year earlier. Earnings per share fell to 61 cents
from 69 cents due to an increase in outstanding shares. Revenue
rose $4.5 billion to $31.3 billion.

Earnings from operations, excluding one-time items, were 68
cents a share. On that basis, analysts on average expected 40
cents, according to Thomson Reuters I/B/E/S.

Ford cut the top of its U.S. auto industry sales forecast
for 2010. It expects industrywide sales of 11.5 million to 12
million vehicles, including medium and heavy trucks, down from
a prior forecast of 11.5 million to 12.5 million.

“I’d say the consumer is still a little bit skittish, but
I’d say July is off to a better start,” Booth said.

The automaker’s share of the U.S. market jumped to 17
percent in the first half of 2010, up 1.5 percentage points
from a year earlier, and Ford expects to increase its share in
2010.

One sign of that momentum: Ford was No. 2 in sales in
California through the first half of the year, behind Toyota
and ahead of Honda Motor Co Ltd (7267.T: ), according to
statistics released Friday by the state’s auto dealers
association.

Ford reported operating profits on autos in every region in
the second quarter, and Ford Motor Credit posted an $888
million pre-tax operating profit.

The automaker plans to discontinue its Mercury brand and
expects to complete the sale of Volvo to China’s Geely
(0175.HK: ) in the third quarter. It intends to focus on its mass
market Ford and luxury Lincoln brands.

Ford said negotiations with the roughly 1,700 Mercury
dealers had been fruitful and the automaker had signed
agreements with about 700 so far. More than 1,400 of the
Mercury dealers are connected to Ford dealers.

Cash flow from its automotive operations was $2.6 billion
in the second quarter, and Ford ended the quarter with gross
cash in the automotive business of $21.9 billion after
executing debt-reduction plans.

Ford expects to move from a net automotive debt position to
a net cash position by the end of 2011, eliminating the $5.4
billion deficit between cash and debt. That would be one of
several steps toward restoring an investment grade credit
rating.

Stock Market Report

(Reporting by David Bailey; Additional reporting by Bernie
Woodall; Editing by Derek Caney and John Wallace)

UPDATE 4-Ford profit tops Street view; shares climb