DEARBORN, Mich. -- Ford Motor Co. is on a roll. Its popular new cars and trucks are grabbing a bigger share of the U.S. market. It's about to erase a big portion of its health care debts. And Ford is adding a significant number of jobs for the first time in years.
The news puts Ford, which has now turned profits for a year and a half, even further ahead of its Detroit rivals as the American auto industry slowly turns around.
Ford said Tuesday its third-quarter net income rose 68 percent to $1.7 billion, or 43 cents per share, partly because buyers paid more for its highly rated cars and trucks.
CEO Alan Mulally said popular new cars, such as the Ford Fiesta subcompact and Ford Edge wagon, and aggressive cost-cutting helped the company make money despite lower global sales. Through September, Ford's U.S. market share has jumped to 16.7 percent from 15.2 percent in the same period a year earlier, according to AutoData Corp.
The amount customers pay for Ford vehicles has climbed 10 percent in the last five years, to an average of more than $30,500, according to auto web site Edmunds.com. The company also has reduced the amount of incentives it's offering, which lets it make more profit per vehicle, said Lewis Booth, Ford's chief financial officer.
"The strength of the product is propelling our business results," Booth said in a conference call with media and analysts.
Ford has also gotten its financial house in order after mortgaging its factories, blue oval logo and other assets four year ago to fund a huge restructuring. Ford paid off $2 billion in debt in the third quarter. It also expects to pay off an additional $3.6 billion for retiree health care later this week.
That will put Ford's debt at $22.8 billion and cash at $20.3 billion. The company expects to end the year with as much cash as debt, a year earlier than it had forecast.
When Ford pays its debt to the United Auto Workers health care trust, it will no longer owe the trust any money. The UAW agreed to the trust in 2007, and it began paying health care benefits for 195,000 retirees and spouses in January. The automaker was paying a 9 percent annual interest rate on its obligation.
Also Tuesday, the Dearborn, Mich., automaker offered to convert $3.5 billion in bonds that pay 4.25 percent interest to shares of common stock. The notes, held mainly by hedge funds and other institutional investors, were due in 2016 and 2036. The offer closes Nov. 23.
Even without that offering, Ford expects to reduce the annual interest expenses on its debt by $800 million by the end of this year. Put in context, Ford recently announced an $850 million plan to revamp factories and hire 1,200 workers in Michigan by 2013.
Ford shares gained 25 cents to $14.40 in midday trading. They have ranged between $6.81 and $14.57 in the past year. Ford shares fell as low as $1.43 in November 2008, when Ford as well as General Motors and Chrysler were threatened with bankruptcy.
Despite the repayments, the company must continue paying down debt as it generates operating cash, Booth said. GM and Chrysler were able to shed billions of dollars in debt in bankruptcy protection, but Ford didn't seek bankruptcy protection or government aid.
"We've some way to go before we're comfortable with the debt levels we've got," Booth said.
Despite the strong performance, Ford still faces challenges.
A Credit Suisse analyst wrote last month that the automaker's global pension funds were $12 billion underfunded at the end of last year, and that could worsen to $17.5 billion by the end of this year.
Analyst Chris Ceraso said that if tax discount rates expire and asset returns don't improve, Ford could be facing a $900 million increase in pension expenses in 2011, shaving 15 to 20 cents off the automaker's earnings per share.
Ford has said it will make around $1.5 billion in pension payments this year and next, and it doesn't expect the payments to significantly affect earnings. Booth wouldn't discuss further actions to fund its pensions Tuesday.
Booth also said costs for raw materials such as steel have risen $1 billion this year over last, about what the company expected.
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