Fitch Ratings has upgraded Ford Motor Company’s (F) and Ford Motor Credit’s issuer default ratings to speculative grade of “B-“ –- viewed as “may default” –- from “CCC.” The upgrade was based on improved market conditions as well as on Ford’s enhanced product competitiveness and better financials.

Ford returned to profitability in the third quarter of the year by posting a net income 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 an improved product line, inviolable structural cost reduction efforts and improved results at Ford Credit.

Although revenue was down 2.5% to $30.9 billion, Ford’s Automotive revenue rose $100 million to $27.9 billion from the year-ago level. This was attributable to favorable net pricing and higher volumes, primarily in North America, offset partially by an unfavorable exchange. Total wholesale vehicles advanced 5% to 1,232,000 units.

Ford’s Automotive gross cash increased to $23.8 billion at the quarter-end from $21 billion at the end of the last quarter. Automotive operating-related cash flow improved by $2.3 billion to $1.3 billion compared to the prior quarter.

Ford was able to reduce its Automotive structural costs by $1 billion during the quarter, thanks to lower manufacturing and engineering costs that included benefits from improved productivity, personnel reduction actions (primarily in North America and Europe), and progress on implementing its common global platforms and product development processes. The company expects to achieve Automotive structural cost reduction of $5 billion for 2009.

December proved to be Ford’s best month since May 2008, with a sales gain of 33% to 184,655 cars and trucks. This was attributable to a surge in sales to corporate customers and a huge customer enthusiasm received for vehicles including the redesigned Taurus, Fusion and Escape.

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