How Ford Made Money

(Update includes UAW's rejection of proposed changes to contract)

DETROIT (TheStreet) -- For Ford(F Quote), getting to a $997 million third quarter profit involved beating expectations on two fronts.

Revenue came in $31 billion, which was 9% higher than analysts had estimated. Meanwhile, the pace of cost reductions beat Ford's own projections. The automaker reduced automotive costs by $1 billion in the quarter, bringing the nine-month total to $4.9 billion, ahead of the full-year 2009 target of $4 billion.

"What you're seeing here today is a tremendous proof point, CEO Alan Mulally said on the conference call.

"The most important thing we continue to do, and what is so neat about today for everybody, is that we have a plan to profitably grow Ford over the long term," Mulally said, adding that the plan was put in place three years ago and the profits are "absolutely the results of focused attention on that plan." The plan was implemented soon after Mulally arrived in 2006; it included making better vehicles, raising capital, sizing the company for the market and establishing a global manufacturing platform.

Ford's successful quarter was unveiled hours before the company announced the UAW did not modify changes to a national labor agreement.

The cost reductions were not easy, said CFO Louis Booth. "We've had record levels of productivity improvements around (the world); we've had some pretty painful personnel reductions (and) we're also beginning to reap the benefit of global product development," improving products while moving to the global platform.

Sharp improvements came at Ford North America, which posted a pre-tax operating profit of $357 million -- its first profitable quarter since the first quarter of 2005. "The key elements of their performance are led by the industry and the economy," Mulally said. Everybody benefited from an improved economy, but Ford benefitted more than others.