Ford Motor Co posted a smaller-than-expected first-quarter loss and said it was on track to at least break even in 2011 and did not expect to seek U.S. government loans, sending its shares up as much as 20 percent.

The company also said on Friday that it had burned through $3.7 billion of automotive sector cash in the first quarter, a sharp drop from the second half of last year, and ended March with $21.3 billion in gross cash.

Investors have been more focused on Ford's liquidity and its ability to navigate the economic downturn, as well as on the financial struggles of rivals General Motors Corp and Chrysler, than on the quarterly results.

Ford has not sought U.S. government aid, setting it apart from GM and Chrysler, which are operating on $17.4 billion of federal loans and have sought more to stave off bankruptcy.

We think that Ford is successfully differentiating itself from its wounded domestic competitors in operating performance and with consumers, Standard & Poor's equity analyst Efraim Levy said in a note. However, profitability remains challenged and we still see risks.

Ford posted a net loss of $1.43 billion, or 60 cents per share, for the first quarter, compared with net income of $70 million, or 3 cents per share, a year earlier.

The loss from continuing operations and excluding one-time items came to 75 cents per share. Analysts on average expected a loss of $1.23 on that basis, according to Reuters Estimates.

The results reflected the weak demand for autos around the world, with losses in each region. Revenue fell to $24.8 billion in the quarter, from $39.2 billion a year earlier.

Still, Chief Financial Officer Lewis Booth called the results encouraging and said the automaker expected the first quarter to have the worst cash burn of the year.

Booth said Ford risked being at a disadvantage if GM or Chrysler should file for bankruptcy, but the automaker has been preparing contingency plans should such a filing lead to disruptions in its parts supply base.

SOLID RESULT, CONSIDERING

Ford had burned through $21 billion of automotive cash in 2008, including more than $7 billion in both the third and fourth quarters of last year.

JP Morgan analyst Himanshu Patel said Ford's first-quarter results were solid on balance given the current climate.

We expect a positive reaction, and continue to believe Ford's recent rally is not unjustified but see only modest incremental upside potential in the equity at these levels, Patel said in a note to clients.

Merrill Lynch raised its rating on Ford to buy and set a $7.50 price target on Friday, saying that the easing of the automaker's cash burn rate made it more likely that it would make it through 2009 without need of government support, and with little risk of bankruptcy.

Ford posted a 2008 net loss of $14.7 billion, a company record, and has reported losses of about $30 billion over the past three years. The turnaround plan would have it at least break even in its pretax automotive operations in 2011.

The automaker borrowed more than $23 billion in late 2006 to support the restructuring in case of an industry downturn, using most of its remaining assets, including the familiar blue oval logo, as collateral.

In the first quarter, special items increased Ford's pretax profit by 15 cents per share, with a $1.32 billion gain from a debt restructuring more than offsetting a $664 million impairment charge for the Volvo car unit.

Ford classified the Swedish Volvo brand as held for sale, which implies that there is a probability of a sale in the next year. The charge pushes the book value of the business down to what Ford believes is the estimated fair market value.

Ford has been in discussions with potential buyers for the brand, the last one left from its former premier auto group. It previously sold Aston Martin, Jaguar and Land Rover.

The automaker also said it was raising its second-quarter production forecast by 10,000 units in North America to 435,000 vehicles. However, that is still down some 250,000 vehicles from its production a year earlier.

Ford shares were up 74 cents, or 16.5 percent, at $5.23 in early afternoon on the New York Stock Exchange, off an earlier high at $5.40. They have risen from a 27-year-low of $1.02 in November, when automakers were in the process of appealing for emergency loans.

(Reporting by David Bailey, Poornima Gupta and Ryan Vlastelica; Editing by Lisa Von Ahn and Matthew Lewis.)

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