Ford Motor Co is expected on Tuesday to post a first-quarter profit with North American production picking up amid a gradual recovery in U.S. auto industry sales overall.

After losses totaling $30 billion from 2006 through 2008, Ford surprised analysts with a profit last year and expects a profit in 2010 as well -- leaving investors focused on the sustainability and strength of its turnaround.

It's progress and it's a long term job, Standard & Poor's equity analyst Efraim Levy said. The main thing is the trajectory is in the right direction.

The automaker no doubt has benefited from the 2009 U.S. government bailouts of rivals General Motors and Chrysler, and Toyota Motor Corp's <7203.T> massive recalls that led to congressional hearings this year, analysts say.

However, that edge may begin to fade with Toyota offering company record incentives to rebuild U.S. sales, Chrysler reporting a first-quarter operating profit and GM repaying government loans and calling a 2010 profit a possibility.

Consistency will be critical as Ford looks to generate positive cash flow, reduce a massive debt load and eventually return to an investment grade credit rating, analysts say.

Ford needs to show six to eight quarters of solid results consecutively to show it is really turning the corner, said Mirko Mikelic, a senior portfolio manager at Fifth Third Bank.

Should Ford continue to provide solid results for several more quarters and maintain U.S. market share, then its bonds and equity will do well and eventually the automaker will regain its investment grade rating, Mikelic said.

Ford borrowed more than $23 billion in late 2006 to support a turnaround led by Chief Executive Alan Mulally, mortgaging most of its remaining assets including the blue oval logo.

Ford executives have been quick to describe the rebuilding as a work in progress in its early days with the economy remaining an unpredictable headwind.

The automaker ended 2009 with automotive debt totaling about $34.4 billion and Ford has made speeding up debt reduction a priority executives believe will be more easily achieved as the financial results improve.

Ford's stock has risen sharply in the past year, more than tripling from $4.49 to close Friday at $14.21 on the New York Stock Exchange, not far from a five-year high at $14.54 set in mid March.

ECONOMY, COMPETITORS KEY

Analysts on average expect Ford to earn 31 cents per share from continuing operations in the first quarter excluding one-time items, according to Thomson Reuters I/B/E/S.

Beyond the expected profit, investors will look for any adjustments to Ford's expectations for a profit in 2010 and solid profit in 2011 and its production forecasts.

It should be a good quarter because production was up sharply from a year ago but investors always ask 'what's next', S&P's Levy said.

Ford, the No. 2 U.S. automaker, had expected to build 570,000 vehicles in North America during the first quarter up 63 percent from the severely depressed output a year earlier.

Ford plans second-quarter North American production of 595,000 vehicles, a 32 percent increase from a year earlier.

The speed of Ford's turnaround in part remains tied to the strength of the U.S. economy and the pace of the recovery in U.S. auto sales, which last year sank to 10.4 million vehicles, the lowest level since the early 1980s.

Influential forecaster J.D. Power and Associates expects U.S. auto industry sales of 11.7 million vehicles in 2010, a more than 12 percent increase over last year, but still well below the consistent 16 million or more sales four years ago.

Ford expects 2010 U.S. auto industry sales of 11.5 million to 12.5 million vehicles including medium and heavy trucks.

Through March, Ford's U.S. sales were up 37 percent while the industry was up 15.5 percent. Ford gained more than 1 percentage point of U.S. market share last year, not including the Volvo car unit it is selling, to 15.5 percent.

Ford's quality and sales improvements and avoidance of bankruptcy give it an edge over rivals, said Logan Robinson, a professor at the University of Detroit Mercy School of Law and former industry executive.

With Chrysler and GM still owned by the government and the unions and with Toyota's present difficulties, I see a pretty good year ahead for Ford, Robinson said, adding that Chrysler's sales remain quite weak.

(Reporting by David Bailey and Soyoung Kim; editing by Carol Bishopric)

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