Ford, the only large U.S. automaker to avoid bankruptcy in 2009, said the third-quarter results were supported by cost cuts, improved credit results and increased market share in North America and other key areas.

Ford burned through $4.7 billion of cash in the first half of 2009 but reported $1.3 billion of positive cash flow in the third quarter. It said it expects positive cash flow in the fourth quarter as well.

The positive cash flow was Ford’s first since the second quarter of 2007. The company also reported its first quarterly operating profit in its key home market of North America since the first quarter of 2005.

“Our third-quarter results clearly show that Ford is making tremendous progress despite the prolonged slump in the global economy,” Chief Executive Alan Mulally said in a statement.

Ford, which raised its 2011 outlook from a previous forecast for at least break-even, said it was confident the global economy would be improving by 2011, but the near-term growth outlook “remains rather uncertain.”

Ford reported a net profit of $997 million, or 29 cents per share, for the third quarter, compared with a net loss of $161 million, or a 7 cents per share, a year earlier.

Operating profit was 26 cents per share excluding one-time items. On that basis, analysts on average expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell by $800 million to $30.9 billion.

From its automotive business, Ford reported a $446 million pre-tax operating profit worldwide, including positive results in all four of its regions — North America, South America, Europe and Asia Pacific.

It was Ford’s first quarterly operating profit in its key home market of North America since the first quarter of 2005.

Ford posted losses totaling $30 billion from 2006 through 2008. The company remains saddled with a much heavier debt load than General Motorsor Chrysler following their bankruptcy reorganizations.

Still, Ford has been seen as in much better shape than its U.S. rivals in its finances and product lineup. Ford has cut thousands of salaried and hourly workers in restructuring over the past four years, but has maintained its product cycle.

Its shares rose 40 cents to $7.40 in premarket trading.

(Reporting by David Bailey and Soyoung Kim; Editing by Derek Caney and John Wallace)

But he cautioned in his weekly radio address to Americans that “we have a long way to go before we return to prosperity” and more job losses were likely in coming days.

Democrats and Republicans agree the economy will be the top issue for the 2010 congressional elections, although the White House has disputed suggestions that they will be a judgment on Obama and his policies.

Voting in next week’s Virginia and New Jersey governors’ races will render a first judgment on Obama, who was sworn into office just over nine months ago in the midst of the worst recession since World War Two.

The U.S. unemployment rate remains stubbornly high at 9.8 percent, despite a $787 billion economic stimulus that Obama and his fellow Democrats, who control Congress, pushed through in February.

New unemployment numbers due out next Friday are expected to show U.S. employers cut 175,000 jobs in October, according to economists polled by Reuters. The unemployment rate is forecast to rise to 9.9 percent for October.

But new data this week showing the U.S. economy growing in the third quarter for the first time in more than a year, signaling the end of the worst recession in 70 years, was good news for the Obama administration.

“Now, economic growth is no substitute for job growth,” Obama stressed in his radio address. “But we will not create the jobs we need unless the economy is growing.”

REPUBLICANS QUESTION FIGURES

Obama said steps taken by his administration to jump-start the economy, including the stimulus package of spending and tax cuts, had helped “blunt the worst of this recession.”

The White House said on Friday the stimulus had directly saved or created more than 640,000 jobs so far, based on data about who had received loans or grants through the American Recovery and Reinvestment Act.

Obama said overall the stimulus had created or saved more than one million jobs.

“It took years to dig our way into the crisis we’ve faced. It will take more than a few months to dig our way out,” said Obama, who blames Republicans for the economic crisis he inherited.

Republicans, who favor tax cuts, say the stimulus has failed to halt rising joblessness and they also questioned the White House’s figures on jobs saved or created.

“It’s bewildering to see the same administration that sold its trillion-dollar spending plan this spring as a guarantee against 8 percent unemployment — today it’s nearly 10 percent claiming it created 1 million jobs, especially since it is a sad fact 3 million jobs have been lost since the stimulus was signed into law,” Senate Republican leader Mitch McConnell said in a statement.

The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

Visibly worried employees lined up to file into Cal National’s head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers’ fate explained to them, regulators said.

“We’re getting ready to turn everything over to U.S. Bank,” said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP’s assets. “They will continue to operate as normal in the interim,” she added, referring to lenders acquired from FBOP.

U.S. Bancorp — which has been buying up distressed assets this year — is picking up the lenders once owned by FBOP, a private Illinois group with over $18 billion in assets that owned banks in Texas, Illinois, Arizona and California.

Cal National is FBOP’s largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.

“This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions,” said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.

“This transaction adds scale to our current California, Illinois and Arizona footprints.”

NEXT BIG HEADACHE

In the “near future,” all nine lenders’ branches will be re-branded U.S. Bank, which is the California-focused unit of U.S. Bancorp’s that operates a network of more than 770 branches across Illinois, Arizona and California.

U.S. Bancorp did not specify what would happen to the new employees it inherits.

Cal National operates 68 branches across Southern California with more than $7 billion in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover on Friday.

Cal National lost about $500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year.

According to FDIC data, Cal National was the fourth biggest bank failure this year in terms of assets, just edging out Corus Bank, seized Sept 11 with a flat $7 billion of assets.

A bank official who answered the main number at Cal National’s headquarters said they could not talk at the time.

Banks are still cleaning up their balance sheets from the recent credit boom that fueled banks’ appetite to extend loans, many with poor underwriting and triggers that caused borrowers’ payments to spike to unaffordable levels.

More lenders are expected to go under this year as the industry tries to get a handle on commercial real estate loans that will continue to worsen, as more strip malls go vacant and residential developments stall.

Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks were better diversified.

Banks that analysts say could risk big losses include Salt Lake City’s Zions Bancorp, Columbus, Georgia’s Synovus Financial Corp and Dallas-based Comerica Inc.

Before FBOP, U.S. Bancorp bought Downey Savings of Newport Beach and PFF Bank & Trust of Pomona when those thrifts failed last November, the newspaper said. Just this month, U.S. Bancorp bought 20 Nevada branches from BB&T Corp, which had acquired them as part of its deal to buy Colonial BancGroup Inc, it added.