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Ford, which expects to be solidly profitable this year, said it repaid $2 billion of debt in the third quarter, expects to pay off a debt to a union retiree healthcare trust fund on Friday and has launched an offer to encourage holders of two issues of its convertible notes to exchange them for shares, in an effort to further reduce its debt.

Ford shares, which touched a six-month high on Monday, were up 1.8 percent in afternoon trading after the release of the earnings results and debt-reduction plans, as the Dow Jones Industrial Average was essentially flat.

The automaker said it now expects cash on hand in its automotive business to at least match its debt by the end of 2010 -- a year ahead of a forecast it gave in July.

"Overall, we are moving from fixing the fundamentals of our business and weathering the downturn to growing the business profitably around the world," said Alan Mulally, who became Ford chief executive officer four years ago.

Ford, which posted losses totaling $30 billion from 2006 through 2008, borrowed $23.5 billion in late 2006 to support its turnaround, leaving it with much heavier debt loads than rivals General Motors Co and Chrysler Group LLC.

Dearborn, Michigan-based Ford last had an investment-grade credit rating in May 2005. Ratings agencies have raised Ford in recent months with its reporting of continued profits, and now have it overall two notches below investment grade.

Morningstar analyst David Whiston said Ford's debt reduction, elimination of non-profitable brands such as Volvo and Jaguar to concentrate on its mass-market Ford brand, and higher-quality vehicles have made a difference in results.

"They are making better vehicles that people want to pay up for, even in the small-car segment," Whiston said.

Ford introduced a Fiesta subcompact to the U.S. market earlier this year and plans to begin broad sales of a redesigned Focus compact car in early 2011 in a major upgrade of its lineup with smaller, better-equipped cars than in the past.

Mulally said this change toward more profitable sales at Ford is a key move in the past few years.

"Not too long ago, we were a discounted brand in the smaller- and medium-sized vehicles," said Mulally in a conference call with analysts.

Ford Chief Financial Officer Lewis Booth said sales remain strong and profit margins high for F-series pickup trucks, led by the F-150, which remains the best-selling vehicle in the United States.

Ford completed the sale of Volvo to China's Geely Automobile Holdings Ltd in August and has announced plans to phase out the Mercury brand, leaving it with additional resources to focus on the restoration of its Lincoln luxury brand.

The introduction of vehicles such as the redesigned Taurus and the Fiesta have allowed Ford to increase its average sale price significantly, contributing to profits and helping it increase its U.S. market share.