Editor's note: This Stocks Under $10 alert was originally sent to subscribers Oct. 25 at 2:03 p.m. EDT. It's being republished as a bonus for TheStreet.com and RealMoney.com readers. Frank Curzio heads TheStreet.com Stocks Under $10 Investment Team.

It's headline news that

Ford Motor

(F) - Get Report

is losing market share to its competitors, bleeding money and carrying an enormous amount of debt. A huge revamping of the automaker's operations is taking place, similar to that undertaken by

General Motors

(GM) - Get Report

. As GM's recent

earnings report shows, its efforts are paying off. But will Ford's turnaround plan be enough to return it to profitability or -- more importantly -- help the company's share price go up?

We believe so, but a better entry point could present itself after investors digest the $5.8 billion third-quarter loss that Ford posted Monday morning. Shares were recently trading at $8.48.

Ford manufactures and distributes automobiles in 200 markets across six continents. The company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. However, most of these lines are experiencing operational problems, and competition from foreign companies is cutting into profits.

Management tried to address the problems by increasing consumer incentives -- such as offering zero interest rate loans and rebates -- in an effort to sell more cars. But this temporary solution to a long-term problem only exacerbated Ford's troubles. Because of the huge discounts, the automaker lost even greater amounts. And because most consumers are not in the market for a new car every year, sales declined considerably after the big promotional drive ended.

This situation forced Ford to create one of the largest restructuring plans in the history of the U.S. automotive industry. The six-year plan, known as "Way Forward," was introduced Jan. 23 and called for job cuts and plant closures to reduce operational costs. In addition, debt was to be restructured, and health care and legacy costs -- which include pensions and health benefits for retirees -- were slated to be scaled back.

However, after the beginning stages of the restructuring plan were implemented, more still needed to be done, and on Sept. 5, Ford announced that it had hired Alan Mulally as chief executive. Mulally is credited with turning around


(BA) - Get Report

commercial plane unit.

Following the hiring of Mulally, Ford announced additional cuts, including slashing white-collar employee costs by 30%. The markets cheered the news, sending the stock up to a 52-week high of $9.48 Sept. 13, but since then shares have retreated to about $8. We expect Mulally, who inherited the restructuring plan, to announce further reductions in health care and legacy costs to help return Ford to profitability.

Despite the stock's recent decline, we believe that bringing Mulally onboard, along with the restructuring plan, will lead to rewards longer term once investors begin to see evidence of a turnaround. Short term, however, Ford has to do more than simply restructure its operations; it must find a way to make its cars more appealing to consumers. Most Ford models, including the Mercury-Lincoln and Mazda lines as well as SUVs, are being outsold by competitors.

On a fundamental basis, Ford has a market capitalization of $15 billion, with $125 billion in long-term debt, giving it an astounding debt-to-capital ratio of 90%. In comparison, Toyota's debt-to-capital ratio is 36%. As for earnings, Ford reported a loss of $5.8 billion in the third quarter and warned that fourth-quarter operating losses could be worse. The company does not expect to achieve full-year profitability in its North American business until 2009.

Based on the above history and data, Ford is by no means a valuation play but rather a turnaround story. Given the company's aggressive restructuring program, its new management and commitment to finding ways to improve sales, we believe shares could move higher long term. Nevertheless, we are waiting on the sidelines as we believe a better entry point will likely present itself given Ford's huge third-quarter loss and disappointing guidance.

As originally published, this story contained an error. Please see

Corrections and Clarifications.

In keeping with TSC's editorial policy, Frank Curzio doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Frank X. Curzio is a research associate at TheStreet.com, where he works closely with Jim Cramer and and writes

TheStreet.com Stocks Under $10

. Previously, he was the editor of The FXC Newsletter and senior research analyst for Greentree Financial, and passed his Series 7, 63 and 65. He appreciates your feedback;

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