Ford Motor Company (F) revealed an impressive 12.8% rise in sales for October in its 19 European markets, outperforming the 6.8% gain in sales for the overall industry. In fact, the sales rise was considered as the best monthly performance in more than a decade.

Several incentive programs by the European governments to trade old vehicles for newer cars backed the sales gain. The scrappage programs across several European countries are similar to the U.S. Government’s “Cash for Clunkers” program that ran between July and August, through which the automaker generated tremendous response.

Nevertheless, Ford has asked the European countries and the EU to take further action, similar to the incentive programs, to boost auto demand in 2010. The company has estimated industry sales in its main 19 European markets to lie in the range of 13 million and 14.5 million vehicles, down about 2 million from the current year. The automaker has forecasted sales of 15.7 million vehicles for 2009.

Ford returned to profitability in the third quarter of the year by posting an operating profit of $873 million or 26 cents per share, easily clearing the Zacks Consensus Estimate loss of 15 cents per share as well as the year-ago loss of 6 cents per share.

This was, in fact, Ford’s first operating profit since the first quarter of 2008. The company, which was on the verge of bankruptcy in the middle of the year, accredited its rebound to improved product line, inviolable structural cost reduction efforts and improved results at Ford Credit.

The Automotive division reported a pre-tax operating profit of $446 million versus a pre-tax loss of $2.9 billion a year ago. This reflected favorable net pricing, structural cost reductions, lower material costs and improved market share due to the federal Clunkers program, offset partially by unfavorable exchange and lower industry volumes. Ford Credit recorded a pre-tax operating profit of $677 million, a staggering rise from $161 million a year ago.

We recommend the shares of Ford as Neutral.

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