Debt reduction pushes Ford to $2.3B profit

DEARBORN, Michigan -- Helped by a lightened debt load, Ford Motor posted a surprise second-quarter profit of $2.3 billion Thursday, following the worst loss in company history a year earlier.

However, excluding its debt reduction and other items, Ford would have reported a quarterly loss, though smaller than Wall Street expected.

Chief Financial Officer Lewis Booth said the improved second-quarter results are a sign that the company's cost cuts and emphasis on new products are paying off. He stuck to Ford's earlier prediction that it would return to annual profitability in 2011.

"We're 18 months away, I guess," he said Thursday, adding that a full year of profitability hinges on improved auto sales in the U.S. and Europe.

Unlike GM and Chrysler, Ford avoided bankruptcy and government loans, mainly by borrowing or setting up credit lines totaling $23.5 billion in 2006 and 2007 to prepare for an economic downturn. Since then the company has cut costs and rolled out new vehicles, mitigating its sales decline in the worst auto sales market in more than a quarter-century.

Ford reported second-quarter net income of 69 cents a share, compared with a loss of $8.7 billion, or $3.89 a share, for the same quarter a year ago.

The profit came from a $3.4 billion accounting gain due to debt reduction. Earlier this year the company swapped stock and cash to reduce its loan and bond debt by $10.1 billion, cutting its interest payments by more than $500 million.

Ford also raised $1.6 billion by selling 345 million more shares during the quarter, and said it is likely to take further steps this year to lower debt and raise cash.