April 24 (Bloomberg) -- Ford Motor Co., working to avoid a federal bailout, posted a first-quarter loss that beat analysts’ estimates as it cut cash use almost in half. The shares soared to the highest since September.

Excluding items the second-largest U.S. automaker considers one-time costs, the loss was $1.8 billion, or 75 cents a share, narrower than the $1.24 average of 11 analyst estimates compiled by Bloomberg.

“This is a fantastic performance,” John Wolkonowicz, an IHS Global Insight Inc. analyst in Lexington, Massachusetts, said today. “They’re burning cash at a much lower rate. They’re going to come out of this OK. I now believe they won’t need a government handout.”

Ford chopped cash consumption 49 percent to $3.7 billion from the previous three months. It cited $1.9 billion in savings, including more-efficient manufacturing and engineering, and $700 million in price improvements in part because it offered fewer sales incentives.

Ford jumped 51 cents, or 11 percent, to $5 at 4 p.m. in New York Stock Exchange composite trading, more than doubling its price this year. The shares closed at their highest level since Sept. 30.

Savings, Sales

While General Motors Corp. and Chrysler LLC drew on emergency U.S. loans to try to avert bankruptcy, Dearborn, Michigan-based Ford reached deals to slash labor costs by $500 million a year and debt by 38 percent.

Ford will “not be a victim” of a Chapter 11 filing at either of its U.S. rivals, and plans to match any cost reductions GM and Chrysler receive from unions or lenders in or out of bankruptcy, Chief Financial Officer Lewis Booth said.

“Under any circumstances, we’re aiming to be competitive,” he said in an interview.

Ford’s net loss was $1.4 billion, or 60 cents a share, the largest first-quarter deficit since 1992. A year earlier, Ford earned $70 million, or 3 cents a share.

Revenue declined to $24.8 billion from $39.2 billion, excluding special items, as Ford slashed North American production by half. The average analyst estimate was for $23.2 billion. The company’s U.S. vehicle sales fell 43 percent.

“We’re not quite sure where the bottom is,” Chief Executive Officer Alan Mulally said in a Bloomberg Television interview. “But we believe with the stabilization of the banks, freeing up the credit, and the stimulus packages we have, both monetary and fiscal, that we’re going to see an uptick in the third and fourth quarter.”

‘Meet or Beat’

Ford, whose last annual profit came in 2005, will “meet or beat” a goal to be “break even or better” in 2011, Mulally told analysts in a conference call. Ford lost a record $14.7 billion in 2008, and analysts expect deficits this year and next.

“We believe we’re on track, on a great glide path, to get back to profitability in 2011,” Mulally said on Bloomberg TV.

Ford emphasized a different benchmark today for measuring improvement in cash consumption, saying automotive operations had used $7.2 billion in the fourth quarter.

In releasing results on Jan. 29, the automaker reported that figure while also saying that “automotive gross cash was reduced by $5.5 billion in the fourth quarter,” and executives at the time focused on the latter number.

The first-quarter cash consumption will be Ford’s largest for the year, Booth said, estimating that the automaker’s total usage for the year would be “lower than” $14 billion.

Ford drew down a $10.1 billion credit line and cut its debt by $9.9 billion. Ford reported that it had $21.3 billion in automotive cash at the end of the quarter, up from $13.4 billion at the end of 2008.

Avoiding Aid

“Cash flow appears OK in early 2009, making it more apparent that Ford will make it through 2009 and beyond with a low risk of bankruptcy and no government support,” John Murphy, a Bank of America Corp. analyst in New York, wrote in a note today. He raised his rating to “buy” from “neutral.”

The manufacturing and engineering savings accounted for the largest piece of Ford’s first-quarter cost reductions. The cuts included $300 million from advertising and $300 million in pension expense, Ford said. First-quarter vehicle sales also involved more higher-priced autos, buoying results, Ford said.

Second-quarter North American production will be 435,000 units, 25 percent more than in the first quarter, Booth told reporters.

GM, Chrysler

GM and Chrysler, operating with $17.4 billion in federal aid, are working against government-mandated deadlines to gain additional support. GM has until June 1 to come up with a long- term viability plan, while Chrysler must form an alliance with Italy’s Fiat SpA by the end of this month. Each automaker has said it might have to declare bankruptcy.

Ford has been able to forgo U.S. aid because it borrowed $23 billion in 2006 before credit markets froze. As collateral for financing that Mulally dubbed “the world’s largest home- equity loan,” Ford put up all major assets, including its headquarters and blue oval logo.

The automaker’s 7.45 percent bonds due July 2031 climbed 6.5 cents to 47 cents on the dollar, yielding 16.4 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Credit-default swaps tied to Ford declined 5.6 percentage points to 60.3 percent upfront, according to CMA DataVision. That’s in addition to 5 percent a year, meaning it would cost $6.03 million initially and $500,000 annually to protect $10 million of debt from default.

Booth said Ford’s better-than-expected financial results won’t lead to an improvement in its non-investment grade credit ratings in the near future.

“We shouldn’t get carried away,” Booth said. “We’re still losing money and the economy is still in poor shape. We probably need to see both improve before we convince credit rating agencies to take a look at that.”

To contact the reporter on this story: Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

Last Updated: April 24, 2009 17:26 EDT