April 24 (Bloomberg) -- Ford Motor Co. reported an unexpected first-quarter profit as Chief Executive Officer Alan Mulally tripled earnings in Europe and extended cuts that have eliminated 46,300 jobs in the past two years, a sign his turnaround plan may be working.

Ford shares gained 12 percent, the most since 2002. The world's third-largest automaker said it earned $100 million, or 5 cents a share, compared with a deficit of $282 million, or 15 cents, a year earlier. Analysts had forecast a loss in large part because of sales declines in North America, where Ford deepened planned production cuts today.

With more expense reductions about to kick in and Dearborn, Michigan-based Ford stepping up new-vehicle introductions, Mulally may be poised to deliver on his promise to stop losses that totaled $15.3 billion in 2006 and 2007.

``In the face of strong headwinds, it looks like the turnaround is taking hold,'' said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which holds Ford bonds among $22 billion in assets.

Mulally still confronts a slowing economy, record high gasoline prices and shrinking demand in the U.S., where Ford has yielded market share for 13 straight years.

The automaker today cut its forecast for 2008 industrywide sales and lowered its planned North America production in the current quarter to 710,000 vehicles from 730,000 planned previously, or 101,000 fewer than the year-earlier output.

Ford climbed 88 cents to $8.40 at 4:15 p.m. in New York Stock Exchange composite trading, for the biggest advance since Nov. 21, 2002. The shares rose 17 percent earlier.

Europe Improves

The $520 million improvement in European pretax profit was the biggest surprise, said Argus Research analyst Kevin Tynan in New York, who had predicted a loss of 10 cents a share.

``In the greater scheme of things they are moving in the right direction, but there are still a lot of concerns,'' said Tynan, who is maintaining his ``sell'' recommendation on the stock. He said that Ford's $1.2 billion reduction in structural costs in North America was exceeded by a $1.4 billion revenue decline in the region.

Excluding costs the company considers one-time expenses, the profit was $525 million, or 20 cents a share. On that basis, Ford was expected to report a loss of 15 cents, the average estimate of 13 analysts surveyed by Bloomberg. Revenue increased 1.2 percent to $43.5 billion.

One Previous Profit

Before today, the automaker had just one profit under Mulally, when it earned $750 million in last year's second quarter.

The 62-year-old chief executive was hired 20 months ago after helping lay the groundwork for record orders at Boeing Co. The world's second-largest planemaker yesterday said first- quarter profit rose 38 percent and that it has $346 billion in unfilled commercial and military orders on its books.

Ford's pretax loss in its North America region narrowed to $45 million from $613 million a year earlier. Pretax profit climbed $257 million in South America from $113 million. It increased to $739 million for Ford of Europe from $219 million. The company's operations in Asia Pacific and Africa posted a pretax profit of $1 million after a $26 million deficit a year earlier.

``The international results really helped,'' Mikelic said.

The reduction in North American structural costs stemmed primarily from cuts in manufacturing and engineering.

`Significant Surprise'

``This comes as a significant surprise to us as we expected these savings to accrue in later quarters when Ford would begin benefiting from its buyout program,'' said Patrick Archambault, a Goldman Sachs Group Inc. analyst in New York, in a report today. He had forecast a loss of 26 cents per share.

Ford also said it still expects to report a pretax loss for 2008 that will be lower than last year's and maintained its goal of a 2009 profit. The company posted a $2.7 billion net loss last year.

Ford Motor Credit, the automaker's consumer-finance unit, said net income fell to $24 million in the first quarter from $193 million a year earlier.

In 2007 Ford negotiated a new labor contract to reduce U.S. labor expenses. Most of the cost savings from the accord with the United Auto Workers haven't kicked in.

Health Trust

That agreement calls for Ford to shed retiree health-care obligations to a union-run fund that will be formed in 2010. Ford said today an additional 4,200 UAW-represented employees in the U.S. accepted buyouts during the first quarter, in addition to the 46,300 North American workers who left in 2006 and 2007.

The first-quarter results included $416 million in costs Ford considered one-time items. The automaker had $223 million in job-cutting expenses and spent $108 million to reduce the number of U.S. dealers.

Ford's U.S. sales of cars and light trucks fell 9 percent during the quarter compared with an industrywide decline of 8 percent.

In the second half of this year, Ford is coming out with the new seven-passenger Flex wagon, the Lincoln MKS sedan and a redesigned F-150 pickup truck. Ford also is developing a new version of its Taurus sedan. A new Fiesta small car will arrive later this year in Europe and Asia and is scheduled for North American introduction in 2010.

The company today cut its forecast for total U.S. sales of light vehicles to 15 million to 15.3 million. Its previous forecast was 15.7 million.

Ford's 7.45 percent note due July 2031 gained 1.06 cents to 74.56 cents on the dollar, yielding 10.36 percent according to Trace, the NASD's bond-price reporting system of the Financial Industry Regulatory Agency.

Credit-default swaps on Ford's debt fell 5 basis points to 912 basis points, according to CMA Datavision in London.

``They've had a history of positive surprises, but this one clearly takes the cake,'' Dan Poole, senior vice president of equity research at National City Corp. in Cleveland, said in an interview on Bloomberg Television. ``This was all on the cost side, and that's where we needed it.''

To contact the reporter on this story: Bill Koenig in Dearborn, Michigan, at wkoenig@bloomberg.net

Last Updated: April 24, 2008 16:28 EDT