NEW YORK (CNN/Money) - Ford Motor Co. reported its first profitable quarter in more than a year Wednesday as it topped Wall Street expectations for the second quarter.

The world's No. 2 automaker behind General Motors Corp. earned $610 million, or 31 cents a share, excluding special items. That tops the consensus forecast of 26 cents a share from analysts surveyed by earnings tracker First Call, and is a large improvement from the loss of $551 million, or 31 cents a share, excluding special items, a year earlier.

The result ended a string of four straight money-losing quarters for Ford, although the company warned that it expects a "small loss" in the third quarter.

"Second-quarter results were a step forward, but returning Ford to sustained profitability requires more work," said Chief Financial Officer Allan Gilmour.

Shares of Ford (F: up $0.39 to $12.89, Research, Estimates) gained about 5 percent in early trading Wednesday.

The company still expects a "modest profit" for the year, but called that result unacceptable and said it will continue its restructuring efforts to reduce costs. Analysts surveyed by First Call expect the company to post a third quarter loss of 12 cents a share, an improvement from the year-ago loss of 28 cents a share. But First Call sees a profitable fourth quarter to bring full-year earnings to 23 cents a share, compared with a 44-cent-a-share loss in 2001.

Including special items, Ford had net income of $570 million, or 29 cents a share, in the latest period.

The company said its core North American automotive operations earned $45 million in the quarter, compared with a $1 billion loss a year earlier, when it was hit with the cost of replacing Firestone tires on many of its vehicles. Gilmour said that excluding the tire replacement costs, Ford's North American automotive operations saw profit decline from year-earlier levels.

It actually did better in Europe than in North America, earning $155 million there. Its loss in South America widened to $96 million, but earnings elsewhere in the world rose to $101 million, due greatly to improvement at Mazda, the Japanese automaker in which Ford owns a controlling stake.

Ford Credit was a major profit driver, earning $343 million, while Hertz car rental had a $53 million profit, citing a rebound in business due to the summer travel season.

Ford revenue edged up to $42.33 billion from $42.31 billion a year earlier, though the number of vehicles sold worldwide slipped to 1.85 million from 1.86 million.

The company's U.S. market share fell to 21.3 percent in the quarter, down from 23.2 percent a year ago, although Gilmour emphasized that market share has improved from the 20.7 percent in the first quarter.

"We are not where we need to be on market share," he conceded. "But clearly the encouragement is going from first to second quarter with the help of new brands."

Ford has struggled to match expensive incentives offers, such as zero percent interest financing debuted by GM in September and re-introduced this month. The company's marketing costs, including incentives, equaled 15.6 percent of U.S. auto sales revenue in the quarter, just lower than the 15.7 percent level in the first quarter, and up from 14.1 percent level a year ago. Gilmour said he believes incentives will remain high this year.

Gilmour said the company has completed about 40 percent of the targeted sales of $1 billion of non-core assets so far this year. He called success in other parts of the company's revitalization plans "uneven." He said he believes the company was perhaps naive in its estimate on savings that could be quickly achieved from working with suppliers, but said the company remains committed to a $3 billion annual cost savings target.

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He said that the company is on track to cut $2 billion in compensation expenses this year, with the previously announced cut of 5,000 salaried positions to be completed by August. Gilmour said he believes that target can be reached with voluntary separation programs. The planned elimination of some plant shifts are also on target, although plans to slow some line speeds to cut production have been deferred due to better than expected vehicle demand.

The decline in U.S. stocks has raised concerns by some analysts that Ford and GM will both need to make contributions to pension funds. Ford said that its U.S. pension funds have seen fund assets decline by 6.7 percent through the first half of the year, taking U.S. pension funds from a $600 million overfunding at the end of last year to an estimated $3.2 billion decline if there are no further market declines in the second half of the year.

But Gilmour said that despite underfunding in the pension funds, the company does not expect to have to make contributions through 2006, and that there will be no cash contribution needed in 2002. He said that about 70 percent of plan assets are in stocks, and he doesn't anticipate changing the mix despite market declines.