Ford

(F) - Get Report

impressed Wall Street on Thursday with a surprise first-quarter profit that sent its shares rallying as much as 17%.

The No. 2 U.S. automaker continued to struggle in North America during the quarter, but its cost-cutting efforts went a long way toward narrowing its losses in the region, and strong results from Europe, Asia and South America picked up the slack.

Ford reported earnings for the period of $100 million, or 5 cents a share, compared with a loss of $282 million, or 15 cents a share, in the year-earlier quarter. Its first-quarter revenue declined to $39.4 billion from $43 billion, partly reflecting the absence of luxury brands Jaguar and Land Rover units, which are in the process of being sold.

Excluding one-time items, Ford said it earned 20 cents a share for the quarter, blowing away Wall Street's expectations, where analysts were predicting a loss of 16 cents a share, according to consensus estimates reported by Thomson Financial.

The performance marked the company's first profitable quarter since the second quarter of 2007, when it earned $750 million. Back then, its profit was quickly wiped out by an annual loss of $2.7 billion, and the company acknowledged that the rest of 2008 looks challenging as the U.S. housing downturn looks poised to bring on an economic malaise amid a slowdown in consumer spending.

Ford cut its full-year U.S. auto industry sales outlook, and it cut its second-quarter North American production plan, saying it would offer more targeted buyouts to union-represented employees after getting about 4,200 workers to accept recent offers to leave the company.

Nevertheless, the Dearborn, Mich.-based auto maker said it remains on track to achieve its goal of returning North American and global automotive operations to profitability in 2009, and the quarter's results marked a victory for its new CEO Alan Mulally.

"Our plan is working," Mulally said. "The restructuring in North America is taking hold and we will continue to take actions to stay on our plan. The remainder of 2008 will be a challenge, but we are cautiously optimistic despite the external challenges."

Ford's North American automotive business posted a pre-tax loss of $45 million, marking an improvement from last year's loss of $613 million. Revenue in North America fell 7.6% to $17.1 billion in a reminder of the challenges that Ford still faces in rejuvenating its fortunes in its key market. Like its Detroit counterpart,

General Motors

(GM) - Get Report

, Ford has steadily lost market share in North America to foreign-based, lower-cost competitors, like

Toyota

(TM) - Get Report

and

Honda Motor

(HMC) - Get Report

.

Until U.S. automakers are able to reverse, or even halt, this trend, their long-term prospects will remain a question mark for investors. With fuel prices soaring, consumers are beginning to show a shift toward more fuel-efficient alternatives, and product mixes at Ford and GM are weighted towards less fuel efficient and more profitable trucks and SUVs.

Another source of concern for Ford is its finance arm, where Wall Street's ongoing credit crisis is weighing heavily on profits. Ford Motor Credit reported a net income of $24 million in the first quarter, an 88% decline from the previous year. The company attributed the decline to higher provision for credit losses, a trend that has weighed on many Wall Street financial institutions, like

Citigroup

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,

Merrill Lynch

( MER) and

Bank of America

(BAC) - Get Report

.

Meanwhile, Ford's results also reflected a positive trend that has been reflected almost across the board in first-quarter earnings reports on Wall Street: Its foreign operations are showing strength.

Ford's earnings in Europe more than tripled in the quarter to $739 million. Its Asia-Pacific operations swung to a profit of $1 million form last year's loss of $26 million. In South America, the automaker's profits more than doubled to $257 million.

Shares of Ford were recently up 13% to $8.50 in recent trading.