Ford Motor Co said on Thursday it was increasing production after a surge in sales ignited by the U.S. Cash for Clunkers program.

The No. 2 U.S. carmaker said it would build another 6,000 Focus sedans in the current quarter by adding overtime and a Saturday shift at an assembly plant in Wayne, Michigan.

A second plant in Kansas City, Missouri, will increase output of the Escape, a small SUV, by another 3,500 vehicles, reversing plans to shut down for two days this month.

The actions take Ford's third-quarter output in North America to 495,000 vehicles, up 18 percent over a year ago.

Ford also set a fourth-quarter production target of 570,000 vehicles, which represents a 33 percent gain over last year.

I think we were surprised by the speed and the urgency with which consumers went to dealers, Ford sales analyst George Pipas said.

GETTING MILEAGE OUT OF CLUNKERS

Ford is one of the big beneficiaries of the $3 billion auto sales stimulus program, which offers payments of up to $4,500 to people who trade in older, less fuel-efficient vehicles for new, more efficient ones.

Ford took 16 percent of the deals made under the clunkers program, compared with a retail market share of 13 percent this year to date. The company had a sales increase in July, for July, its first since late 2007, and it has been gaining U.S. market share.

Standard & Poor's equity analyst Efraim Levy told clients in a note that Ford and some Asian brands had been the biggest gainers from the vehicle trade-in program.

Ford did not ask for government bailout money and is the only U.S. automaker to have avoided bankruptcy.

The company had previously planned to announce detailed production plans in early September but said it had been forced to act earlier because sales were still strong in early August. Like other automakers, Ford was caught off guard by the success of the program, which began in July.

Ford executives said funding for the clunkers program could be exhausted by late August or early September.

PRODUCTION LINES HUMMING

Other automakers have also raised production. General Motors Co said that by the end of August it would provide plans for stepped-up production for the rest of 2009.

Inventories of the Escape dropped to 21 days of supply at the end of July and inventories of the Focus to 25 days. Inventories generally have about 60 days of sales.

In an attempt to keep dealers stocked, Ford sales chief Ken Czubay said shipping companies had been told to load Focus, Escape and Fusion models first. Ford's hottest sellers under the program have been its smaller, more fuel-efficient vehicles.

Pipas said Ford expected U.S. auto sales to slow once funding for the clunkers program had been spent. He said the company did not expect to end the year with surplus inventory.

We're proceeding very carefully, Pipas said. When we get to the end of the year I believe our inventory levels will still be viewed as lean.

By late July, the clunkers program, inspired by similar programs in Europe, had been drained of the $1 billion in its original budget. Congress authorized another $2 billion to extend the program, which has been like a shot of adrenalin for the U.S. auto market.

As of Thursday, the program had funded 338,659 trade-ins and spent $1.4 billion, according to the U.S. Department of Transportation.

Ford estimated that by the time the program's coffers are empty, Cash for Clunkers will have been responsible for more than 700,000 trade-ins.

Acting on a request by Michigan Representatives Candice Miller and Fred Upton, the Obama administration is allowing consumers to buy vehicles under the program that are not yet in showrooms, but the vehicles must already on the production pipeline.

Pipas said it was too early to estimate U.S. auto sales for August, but, he said, early results from dealers indicate that sales are trending well above the 13.6 million annualized rate of a year ago.

Pipas said the stronger sales would likely push 2009 industry-wide sales to the high end of Ford's existing full-year forecast of between 10.3 million and 10.8 million vehicles.

Ford's shares rose to $7.92 after hours after closing up 2.6 percent at $7.90 on the New York Stock Exchange on Thursday.

(Reporting by Kevin Krolicki; Editing by Toni Reinhold)

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