Toby Talbot  /  AP
In this April 21, 2010 file photo, customers are seen in the showroom at the Formula Ford dealership in Montpelier, Vt.
updated 4/27/2010 5:32:36 PM ET 2010-04-27T21:32:36

Ford Motor Co. earned $2.1 billion in the first quarter as the economic clouds parted and consumers grew confident enough to buy cars again. But the confidence didn't extend to investors, who pushed Ford's shares down Tuesday on concerns that the automaker's recovery isn't sustainable.

The profit of 50 cents per share was Ford's fourth straight positive quarter. It's an about-face from the same period last year, when Ford lost $1.4 billion, or 60 cents per share, at the height of the recession. Ford said it expects to be solidly profitable this year, a year earlier than its previous guidance.

But investors worried that the company can't maintain its strong gains in the second half of the year. Ford's first-quarter U.S. market share made its biggest jump in 33 years, for example, and is unlikely to keep growing at that pace. Ford also faces higher prices for steel and other raw materials, rising interest rates and expected weaker European demand.

Ford shares fell 89 cents, or more than 6 percent, to close at $13.57.

Gimme Credit analyst Shelly Lombard said Ford was dragged down with the rest of the market after Standard and Poor's downgraded debt held by Portugal and Greece. But Lombard said Wall Street also is concerned that Ford can't keep up the pace of its recovery.

For example, Ford relied heavily on a $528 million profit from its finance division this quarter, but Ford Credit's revenues are expected to dip later this year because fewer cars were sold during the recession so there will be fewer payments to collect. Ford Credit's annual profit will likely be flat at $2 billion, the company said.

"I wouldn't say it's a mirage. I think it's real. But the amount of progress they've made may not be sustainable," said Shelly Lombard, an analyst with Gimme Credit.

Ford Chief Financial Officer Lewis Booth acknowledged that the company's performance might not be duplicated in subsequent quarters. But he predicted Ford will end the year with even stronger full-year earnings than its first-quarter results.

"We would not have improved our guidance if we thought this was just a wild quarter," Booth told The Associated Press in an interview.

Ford's first-quarter revenue rose 15 percent to $28.1 billion. Analysts polled by Thomson Reuters had expected $30.5 billion. Booth said revenues would have been higher but the company excluded $3.5 billion in income from Volvo, which it is selling to Chinese automaker Geely Holding Group. That sale will officially close in the third quarter.

Ford saw $1 billion in gains from vehicle pricing. That's because prices for some models rose, demand for more profitable vehicles like the top-selling F-150 pickup grew, and Ford limited incentive spending. The $18,540 recommended retail price on a 2010 Ford Ranger pickup, for example, is 8 percent higher than the 2009 model, while Ford raised the prices of the 2010 Ford Focus and Mustang by 5 percent each, according to Jesse Toprak, an economist with car pricing site TrueCar.com.

But it will be hard for Ford to make as much money from its vehicles as commodity costs rise and the company spends more on upcoming product launches.

Automakers are also competing to offer the best incentives. Ford's incentive spending was flat for the quarter in the U.S., despite big incentives from Toyota Motor Corp. But incentives rose in Europe, where Booth said some automakers were offering deals to make up for the end of government cash-for-clunkers programs.

Ford, the only Detroit-area automaker to shun government aid and stay out of bankruptcy protection last year, gained market share from crosstown rivals General Motors Co. and Chrysler Group LLC. It also benefited from Toyota's safety recalls of millions of vehicles. Ford was one of the top brands considered by Toyota owners who were shopping for a new car, Kelley Blue Book said.

Ford's profit was the latest sign that the battered U.S. auto industry is getting back on its feet. GM last week announced it was repaying $8.1 billion in U.S. and Canadian government loans ahead of schedule, and on Tuesday said it's investing $890 million at five factories to make its V-8 engines more fuel efficient. Chrysler said last week that it's loss narrowed to $197 million for the first quarter.

In a sign of its confidence in the economic recovery, Ford is boosting North American production in the second quarter to 625,000 vehicles, a 9 percent increase over first-quarter levels and a 39 percent rise from the same quarter last year. Booth said it's too early to say if the company will add workers. In fact, Ford offered buyout packages to its U.S. hourly workers in December and cut 1,000 workers worldwide in the first quarter.

The company was profitable in its key North American market, but it also made money in Asia, South America and Europe. In the U.S., sales climbed 37 percent, in part because of an 80 percent rise in corporate, government and daily-rental sales as companies began buying fleet cars again.

Ford saw strong U.S. sales of the F-150 pickup and Ford Fusion sedan. It's also seeing brisk sales of the new Fiesta small car in Asia and the Figo compact in India.

Booth said the company is seeing some economic recovery, especially in the U.S., but it's not exceeding Ford's earlier prediction of 11.5 million to 12.5 million in total U.S. sales for the year. That would be up from 10.4 million in 2009 but far below sales of more than 16 million five years ago.

"It's not running ahead of our expectations, but it is coming along roughly with our expectations," Booth said.

Excluding one-time items, including Volvo's $49 million profit for the quarter, Ford reported a pretax operating profit of 46 cents a share, beating expectations of 31 cents per share.

The company made $1.2 billion in North America, which had been draining cash in prior years.

Ford has gradually cut costs and improved sales since the depths of the recession a year ago, and it ended 2009 with a $2.7 billion profit, its first annual profit in four years. But the company remains saddled with significant debt. Ford said its debt increased by $700 million to $34.3 billion in the quarter.

"While we are pleased with our results, we do not underestimate the challenges ahead," Ford President and CEO Alan Mulally said.

Ford paid off $3 billion in debt at the beginning of this month.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Mulally on Ford's huge turnaround

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