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, the American carmaker most likely to survive the auto implosion without going bankrupt or taking government aid, deserves credit for making prescient decisions before the meltdown.

Before last fall's

stock market

crash, which sent the auto industry into a tailspin,


took steps to increase its cash reserves and eliminate weaker brands and dealerships. Those efforts enabled the company to shun federal bailout funds taken by

General Motors

(GM) - Get Free Report



, which are continuing to flounder. Yesterday, Ford flexed its financial muscles by announcing the sale of 300 million shares to help fund its retiree health care trust.

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Shrewd moves by Ford Chief Executive Alan Mulally have helped Ford gain an advantage over its American competitors. Bankruptcy is looking more likely for GM, which has until June 1 to restructure debt or seek protection. Chrysler filed for Chapter 11 on April 30 at the behest of the U.S. government, which helped broker a partnership with Italian automaker



Shares of Ford have more than doubled this year to about $6 while GM's dropped 55%. In the past year, Ford shares have fallen 25%, less than the 33% drop of the

S&P 500 Index

and the 93% loss of GM shares. Chrysler is privately held.

Mulally joined Ford in 2006 after helping


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as the top commercial aircraft maker. Under his leadership, Ford has expanded its market share even as it trimmed its dealership network.

Ford passed



to become the No. 2 car seller in the U.S. in April, helped by sales of its popular fuel-efficient Fusion sedan, according to Autodata. The gain came even though the company has cut the number of Ford, Lincoln and Mercury dealerships 14% between 2005 and 2008.

The company jettisoned its Jaguar, Aston Martin and Land Rover brands in 2007 and 2008, when the getting was good, and disposed of most of its stake in Mazda. GM, on the other hand, finds itself stuck with a litter of hard-to-sell legacy nameplates.

In March, Ford became the first automaker to secure contract concessions from the United Auto Workers, which lowered its labor costs and helped it shore up cash. Although the company reported a $1.4 billion first-quarter loss, it used less cash in the first quarter than in previous periods. The company had $21 billion in cash at the end of the quarter, while GM had $11.4 billion.

Ford Credit remains a viable lender after resisting the temptation to dip into subprime mortgages and other troubled loans that have crippled GMAC, GM's lending arm.

Instead of breaking into mortgage lending when credit was easy a few years ago, Ford took advantage of the situation and mortgaged much of its asset base. The move allowed it to stockpile enough cash to prevent it from having to beg Uncle Sam for a bailout.

Its cash levels have helped it stay on top of its debt obligations. The company's debt stood at $111.4 billion on March 31, down 21% from a year earlier.

To be sure, Ford faces several major challenges. Production capacity of the worldwide auto industry is expected to outstrip demand by 30.5 million cars between 2009 and 2011. Sales in key developing markets, such as China, have been sluggish. The company might also struggle to borrow given its debt load and interest payments. Ford is rated "sell" by Ratings with a grade of E-plus.

While auto sales in the United States are not expected to recover soon, pent-up demand as old cars retire to the scrap yard will translate into brisk sales down the line. Ford executives expect the company to break even or generate a pretax profit in 2011.

Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.