NEW YORK (CNNMoney.com) -- Ford Motor reported record third-quarter net income Tuesday, far exceeding analyst expectations and continuing a surge in momentum for the recovering automaker.
Dearborn, Mich.-based Ford (F, Fortune 500) posted net income of $1.7 billion, or 43 cents per share, up from $997 million, or 29 cents a share, a year earlier. Analysts surveyed by Thomson Reuters expected Ford to report a 38-cent-a-share profit.
Ford's previous best third-quarter net income was $1.1 billion reported in 1997.
The automaker cited a strong product line, momentum in North America and continued success at Ford Credit as areas of growth.
"It's been the same story all year long," said David Whiston, an automotive analyst at Morningstar. "Better pricing in North America, and that offsets the small losses in Europe. The North American market is a real earnings driver."
Ford also announced plans to further strengthen its balance sheet by paying down its revolving credit line by $2 billion and prepay the remaining $3.6 billion in debt owed to a retiree health care trust.
"Ford sales continue to surge due to a stronger product lineup and improved consumer image," said Jesse Toprak, vice president of auto trends at TrueCar.com, in a statement. "Their retail sales are strong and transaction prices have been increasing this year, contributing to an improved bottom-line for the automaker."
Shares of Ford were flat in Tuesday trading, rebounding from a loss of about 1% earlier in the session. The automaker's stock has soared seven fold since February 2009 when it fell below $2 a share.
At the time, there were serious fears that it could follow General Motors and Chrysler down the road to bankruptcy and restructuring.
Ford avoided that fate, but its success left it with far more debt on its balance sheet than either GM or Chrysler, which used their bankruptcies and bailout billions to shed debt.
Now that Ford is once again turning a profit, it is using the surplus cash to pay down its debt, which will result in lower interest payments and eventually an improved credit rating.
"We are clearly ahead of where we thought we could be on improving our balance sheet, repaying our loans, and it's a very positive development," CEO Alan Mulally said during a conference call for investors.
Ford's debt will be reduced by $10.8 billion this year, Mulally said, which should result in savings of $800 million in annualized interest payments.
Ford's profitability has been accompanied by gains in market share. In the third quarter, Ford gained 1.4% in U.S. sales market share, while GM lost ground. And for the year, Ford is ahead of rival Toyota in U.S. sales.
That success is due in large part to Mulally's restructuring of the company that resulted in strong sales and reduced costs in North America.
"Because of our cost structure, we could not make small and medium-sized cars in the United States, and actually make them profitably," Mulally told CNN's Ali Velshi. "So we went to work with all of the stakeholders, including the UAW [United Auto Workers], and we have a transformation agreement now where we can make cars in the United States and compete with the best in the world."
The third quarter is typically weak for automakers as they discount and clear old inventory to make room for new models.
Ford expressed belief that the winning streak will continue, expecting increases in both cash flow and profitability in 2011.
"The key drivers for improvement in 2011 will be our growing product strength, a gradually strengthening economy and an unrelenting focus on improving the competitiveness of all our operations," Mulally said in a statement.
But the automaker noted that fourth-quarter profit expectations are lower than previous quarters due to depreciation expenses on leased vehicles and smaller improvements in the provision for credit losses.
On Monday, Ford said it will create up to 1,200 jobs in the distressed state of Michigan as it ramps up engineering and manufacturing operations to produce more fuel-efficient cars.