Ford Motor Co., the second-largest U.S. automaker, today declared a 5-cent quarterly dividend, its first payout to shareholders since September 2006.

The move comes after Ford earned $1.65 billion in the three months ended in September, its 10th consecutive profitable quarter, and negotiated a new four-year contract with the United Auto Workers covering its 40,600 U.S. hourly workers. The dividend will be paid March 1 to shareholders of record on Jan. 31, the Dearborn, Michigan-based automaker said in a statement.

“The board believes it is important to share the benefits of our improved financial performance with our shareholders,” Executive Chairman Bill Ford said in the statement. “It is an important sign of our progress in building a profitably growing company and our confidence in the future.”

Chief Executive Officer Alan Mulally revived Ford by focusing on quality and fuel economy in new models such as the Fiesta subcompact and redesigned Explorer sport-utility vehicle. Ford earned $9.28 billion in the past two years after losing $30.1 billion from 2006 through 2008 as a collapse in SUV sales was followed by the worst recession since the Great Depression.

Ford slipped 3 percent to $10.75 at the close in New York. The shares tumbled 36 percent this year after rising 68 percent in 2010.

The payout will cost Ford about $200 million a quarter, Chief Financial Officer Lewis Booth said in a conference call today. The automaker hopes to avoid cutting the dividend if the economy turns down, as it has in the past, Booth said.

“Compared to the past, we’ve substantially restructured the company; our break-even is lower than it was,” he said. “We would expect this to be a sustainable dividend.”

If the automaker’s financial results keep improving, “we’ll continue to look to see if we can increase the dividend,” Booth said.

Bloomberg analysts predicted in July 2010 that a 5-cent quarterly dividend would resume as soon as 2012. The Bloomberg dividend estimates are based on seven criteria, including a company’s guidance, dividend history, regression analysis and put-call parity. The dividend may increase to 10 cents quarterly in a year, the analysts estimate.

“A dividend is definitely a catalyst,” said Brian Johnson, a Chicago-based analyst at Barclays Capital who rates Ford “overweight.” “This is putting Ford back on the radar screen of portfolio managers.”

Recovering an investment-grade credit rating will also attract investors, Johnson said.

“I think the investment rating agencies are not going to view this as inconsistent with our track back to investment grade,” Booth said.

Standard & Poor’s raised Ford’s credit rating two levels to BB+, the highest non-investment grade, on Oct. 21, saying the new contract will not impede profitability or cash generation.

“We don’t see a big chance of an upgrade in the next year,” Robert Schulz, a New York-based analyst for S&P, said today in a phone interview. “The prospects for cash-flow generation outside of North America are probably looking weaker.”

Fitch Ratings upgraded Ford to BB+ from BB on Oct. 20, and assigned a positive outlook.

Moody’s Investors Service raised Ford’s corporate rating to Ba1, one step below investment grade, on Oct. 27 and said the new UAW contract reinforces the automaker’s “strong position in North America.” Moody’s said then Ford was likely to restore a dividend and still assigned the automaker a “positive outlook.”

“This dividend is consistent with what we expected,” Bruce Clark, a New York-based analyst for Moody’s Investors Service, said today in a phone interview.

“In terms of having any real impact on the likelihood or time frame of getting to investment grade, it’s really not going to be a driver,” he said. “The big drivers are executing their existing operating plan, maintaining strong liquidity and balance sheet and addressing challenges in Europe.”

Ford had said it wouldn’t pay a dividend until it returned to investment-grade ratings. That position changed in October.

“Our shareholders have been very patient,” Booth said Oct. 20 on a conference call about the labor agreement.

That change in strategy and the cost of the dividend may delay Ford’s return to investment grade, said Jody Lurie, a credit analyst at Janney Montgomery Scott LLC in Philadelphia.

“The fact that Ford changed its plans last quarter begs the question as to how quickly it will achieve its investment- grade rating,” Lurie said today in an e-mail. “The jump from high yield to investment grade is a big one, and the company needs to prove to the agencies that it has bondholders’ best interest in mind.”

S&P and Moody’s assigned Ford a non-investment grade rating in 2005.

The Ford family, which has 40 percent voting power through a special class of stock known as Class B, didn’t influence reinstatement of the dividend, Booth said.

“This was a management decision and recommendation to the board that the board approved,” Booth said. “It wasn’t linked to any particular part of our shareholders.”

Executive Chairman Bill Ford, great-grandson of founder Henry Ford, holds 14.7 million Ford common shares and 4.86 million shares of Class B stock, according to the company’s 2011 proxy statement. His cousin, Edsel Ford II, also a director of the company, holds 3.77 million common shares and 4.84 million Class B shares, as of Feb. 1.

The 70.9 million Class B shares will receive dividend payments of about $3.54 million a quarter.

Concerns about Europe’s debt crisis and slow economic growth have weighed on the automaker’s shares.

Restoring the dividend is “a pleasant surprise in light of recent macro turmoil in Europe and general global uncertainties,” Itay Michaeli, an analyst with Citigroup Inc., wrote today in a research note. He forecasts a return to investment grade credit ratings by the middle of next year.

“I want the stock to double over the next two or three years,” said Gary Bradshaw, a fund manager at Hodges Capital Management in Dallas, which owns about 250,000 Ford shares. “That’s how we’ll make our money on Ford. The dividend is secondary.”

Ford Motor Co. is denying a Wall Street Journal report suggesting a search has been authorized to find a replacement for CEO Alan Mulally, who is expected to step down in the next couple of years.

“The story is false,” said Ford spokeswoman Karen Hampton, confirming the board has not sanctioned any external searches for candidates, nor has any outside agency been hired to seek candidates, reported The Detroit News.

Mulally, as a guest on the “Fox and Friends” morning show Tuesday, said, “There’s always going to be speculation about succession plans but it’s absolutely not true.”

The company continues to groom a list of internal candidates for succession when the time comes, which could be in the next two years. Mulally has consistently ducked questions on the timing of his retirement. He is 66 years old.

“As Bill Ford has consistently said, we will always consider both internal and external candidates for any succession plan, but we do not have a search under way for an external CEO successor,” Hampton said.

Internal candidates include frontrunner Mark Fields, president of The Americas; Lewis Booth, chief financial officer; Joe Hinrichs who oversees Asian operations; Jim Farley, head of global marketing, sales and service; and Stephen Odell, who heads Ford of Europe.

“Any report of discussions with external candidates is false,” Hampton said.

As for suggestions that Ford could hire a chief operating officer at some point in the future to work closely with Mulally and eventually succeed him, Hampton said she cannot rule out board actions in the future, but said the automaker has no current plans to create a COO position.

Ford Motor Co. has begun a broad search for candidates to replace current Chief Executive Officer Alan Mulally, who is expected to leave the company within two years, people familiar with the matter said.

Candidates for the position include at least two former Ford executives as well as two internal candidates, those people said. The internal candidates are Americas President Mark Fields, 50, and Joe Hinrichs, 45, the chief of Asian operations, reported The Wall Street Journal.

External candidates include John Krafcik, CEO of Hyundai Motor Co.’s North American arm and Phil Martens, CEO of Novelis Inc., an aluminum products company. Mr. Krafcik, 50, declined to comment; Mr. Martens, 51, declined to say if he had been contacted, adding: “I’m sure the board will make the right decision.”

A Ford spokeswoman said there is no search underway. Mr. Fields said in an interview last month that he wants the job but is satisfied with his current role. Mr. Hinrichs could not be reached for comment.

Chairman Bill Ford Jr. has repeatedly said the company would like to fill the position from within. Mr. Mulally and Mr. Ford declined to be interviewed on the matter, but Mr. Ford said in a written response to questions: “At Ford, we are fortunate to have a strong list of internal candidates and the Board is pleased to support their further development. While our preference always will be to develop talent internally, we also survey the external environment for potential candidates as a regular course of action.”

The search for a replacement for Mr. Mulally is the biggest question looming over Ford because his influence on the company has been so profound. Mr. Mulally has never hinted at when he wants to leave, but he is 66 years old and maintains his permanent home in Seattle, where he lived as the chief of the commercial business for Boeing Inc. before joining Ford five years ago.

“Having a viable succession plan to ensure business continuity is perhaps the most important duty of the Board and something we take very seriously,” Mr. Ford wrote.

Mr. Martens led product development for Ford until 2005, when he left the company. He was at former auto supplier ArvinMeritor Inc. before joining Novelis. Mr. Krafcik worked in product development for Ford for 14 years before leaving in 2004 to join Hyundai.

Mr. Fields runs Ford’s North and South American operations, the company’s principal profit center. He led the recent turnaround of North America and overcame early troubles to become one of Mr. Mulally’s top lieutenants. Mr. Hinrichs worked at General Motors Co. before joining Ford. He was in charge of manufacturing before being put in charge of Asia two years ago.

Ford Motor Co. is suing a former executive who was hired to become president of one of the nation’s largest Toyota distributors.

Ford filed suit Nov. 10 against Martin E. Collins, an executive who was general sales manager for Ford and Lincoln at the company’s world headquarters in Dearborn. The lawsuit says he can’t take the new job because of a non-compete agreement he signed, according to The Detroit News.

Collins told Ford on Oct. 13 that he plans to go to work for Gulf States Toyota — a Houston-based distributor of Toyota vehicles in five states — as president.

Collins was hired in March by Ford, and went to work for the carmaker May 2. He managed the entire dealer distribution network for Ford and Lincoln, and provided “ongoing feedback to senior Ford management regarding sales performance, sales trends and progress toward program and budget goals,” the lawsuit says. He also approved major market representation packages, including dealer replacements according to the suit, filed in Wayne Circuit Court and since moved to U.S. District Court in Detroit.

Collins agreed to a confidential information/non-compete agreement when he went to work for Ford, according to the lawsuit. The agreement stipulated that he not work for a competitor for two years.

Collins was paid an annual salary of $400,000 by Ford with a signing bonus of $900,000. He also received an initial restricted stock grant of shares valued at $1.5 million that was to vest over three years. He had a guaranteed bonus of $123,000 for the first year of work, and a guaranteed $127,000 stock award for the first year.

Collins told Ford he had not acquired any confidential information during his tenure at the company, something Ford described as “incredible” and “patently false.”

Ford executives told Collins if he stayed at Ford he would be assigned to a new but fully comparable position at his current pay.

Gulf States Toyota told Ford on Oct. 19 that it still planned to hire Collins and would “take as long as it takes” to do so.

On Oct. 24, Collins met with his new supervisor, Jim Farley, who is Ford’s group vice president for global marketing, sales and service. Collins told Farley he would give the new position of director of global market representation “150 percent” effort, according to the lawsuit. He began working in the new job and then resigned Nov. 1.

On Nov. 2, Ford told Gulf States Toyota that it planned to enforce its non-compete agreement. A lawyer for Gulf States Toyota, William John Bux, responded Nov. 3 by telling Ford it would not violate the non-compete agreement.

Gulf States Toyota is a wholly owned subsidiary of Friedkin Group Inc. On Nov. 7, Bux told Ford that Collins was being hired as a vice president at Friedkin Group.

Ford questions the move, and notes that the chairman and CEO of Friedkin Group, T. Dan Friedkin, also is chairman and CEO of Gulf States Toyota. “Ford believes that Collins’ purported employment as vice president of Friedkin is a sham and is in fact the equivalent executive-level employment with GST,” the lawsuit says.

Gulf States Toyota works with more than 150 Toyota dealers in Texas, Louisiana, Mississippi, Arkansas and Oklahoma.

Ford spokeswoman Karen Hampton said the company’s suit was aimed at preventing Collins from working at Gulf States Toyota and Friedkin until May 2013.

Collins’ lawyer, David Hardesty, could not immediately be reached for comment Monday. Gulf States Toyota and Friedkin also weren’t immediately available for comment.

Ford Motor Co. said 68 percent of U.S. consumers don’t believe the automaker’s cars and trucks are fuel efficient.

“There are 240 million people driving vehicles in America and only 32 percent have a good opinion of Ford on fuel economy,” Jim Farley, the company’s global marketing chief, said today at the Barclays Capital 2011 Global Automotive Conference in New York. “That means 68 percent don’t.”

Improving Ford’s fuel economy image will enable it to raise prices, Farley said. Consumers who view automakers as having good fuel economy also believe they have good quality and safety attributes, he said.

“Fuel economy is ground zero in pricing power in the U.S. for Ford,” Farley said. “If you can change perceptions on fuel economy, you can change pricing power across your whole lineup.”

Car buyers are changing their view of Ford as the company introduces technologies such as “EcoBoost” engines that use direct-fuel injection and turbochargers to improve mileage by as much as 20 percent, Farley said.

“But we have a long way to go,” Farley said. “Those that own fuel economy in the U.S. own pricing.”

The second-largest U.S. automaker earned $6.6 billion in the first nine months of the year, as fuel-efficient models like the Fiesta subcompact and Explorer sport-utility vehicle attracted buyers, reported Bloomberg. Ford’s U.S. sales are up 11 percent this year through October, ahead of the market’s overall gain of 10 percent.

Ford fell 1.1 percent to $11.02 at the close in New York. The shares have fallen 34 percent this year after gaining 68 percent in 2010.

Ford earned $9.28 billion the past two calendar years following $30.1 billion in losses from 2006 through 2008. The Dearborn, Michigan-based automaker borrowed $23.4 billion in late 2006, putting up all major assets, including its blue oval logo, as collateral. That helped Ford avoid the bankruptcies and bailouts that befell the predecessors of General Motors Co. and Chrysler Group LLC.

Ford’s Lincoln luxury line can be revived like Burberry clothing or the Gucci brand, Farley said. Ford is redesigning Lincoln so that each model has a unique body style that is different from the Ford vehicle upon which they are based. Lincoln’s U.S. sales fell 11 percent in October from a year earlier and are off 63 percent to 85,828 vehicles last year since peaking in 1990 at 231,660.

“Lincoln wasn’t an abused brand, it was a neglected brand,” Farley said. “We have to get people to wake up and even notice the brand.”

U.S. car and truck sales were up 7.5 percent in October, making it the industry’s best month since February.

But the results still fell short of analysts’ estimates, and experts warned that gains would be more modest in the months ahead.

Chrysler Group LLC saw the biggest sales gain, up 27 percent year-over-year on the strength of its new and refreshed vehicles. The Auburn Hills automaker sold 114,512 cars and trucks in October, compared to 90,137 for October 2010. That was enough to push Chrysler’s market share to 11.2 percent — a gain of nearly two percentage points, according to The Detroit News.

“It was another great month for Chrysler, much of it again on the strength of Jeep,” said analyst Michelle Krebs of Edmunds.com, though she noted that Chrysler’s Fiat brand continues to struggle. “(The) Fiat 500 still looks to be underperforming expectations, with sales of under 2,000 units last month.”

Ford Motor Co. sales were up 6.2 percent, climbing to 167,502 from 157,650 in October 2010. Ford’s market share, however, slipped slightly to 16.4 percent from 16.6 percent a year ago.

“The best way October sales could be characterized is solid,” said Ford sales analyst Erich Merkle, adding that the company still expects to finish the year strong.

“Ford reported a strong year-over-year growth in pickup trucks,” said analyst Himanshu Patel of JPMorgan. “(But) total car sales were down.”

October traditionally is a strong truck month for all manufacturers.

General Motors Co. posted the weakest increase of the Detroit Three. Its sales increased from 183,543 to 186,895, a gain of 1.8 percent. GM lost a full point of market share, dropping to 18.3 percent from 19.3 percent a year ago.

More promising was the fact that more than 80 percent of GM’s car sales and about 50 percent of its truck and crossover sales were 2012 models.

On the strength of these new models, the automaker was able to cut its average incentive by more $300.

Chrysler, Ford and Nissan Motors Co. all increased their incentives more than the industry average, according to data from the Power Information Network obtained by The Detroit News.

Still, Don Johnson, GM’s vice president of U.S. sales, called October a “lumpy month” that saw some products gain ground, while others ceded it to foreign competitors.

“We did see some of the Japanese manufacturers start to regain their footing,” he acknowledged during a conference call Tuesday.

The Chevrolet Cruze, which has been the best-selling compact car in the United States since May, returned its crown to Toyota’s Corolla.

The über-popular compact has been in short supply — along with other Toyota, Honda and Nissan models — since the March earthquake and tsunami delivered a one-two punch to the Japanese automobile industry. Now, just as the Japanese manufacturers say their inventories are returning to normal, they have been dealt another blow as devastating floods crippled key suppliers in Thailand.

Toyota Motor Corp.’s sales rebounded sharply from September, but they were still off from a year ago. Toyota sold 134,046 cars and trucks last month, compared to 145,474 in October 2010, a decline of 7.9 percent that left it with 13.1 percent of the market.

Toyota executives said they are confident they will be able to reclaim some of that lost share now that vehicle shortages are becoming a thing of the past. To help do that, the automaker is pulling forward its holiday promotions.

“We’ve gone through a tough six months,” said Bob Carter, general manager of Toyota Motor Sales, U.S.A. “The shortages are really behind us.”

At least that is the hope. Toyota said flooding has impacted many of its suppliers in Thailand, and the company is curtailing overtime at U.S. factories to conserve parts.

But the impact of the floods is being felt more acutely at Honda Motor Co., which has seen one of its own assembly plants shut down by the disaster.

Honda’s sales slipped by half a percent in October, dipping to 98,333 units from 98,811 a year ago. Honda’s market share fell from 10.4 percent to 9.6 percent.

Analyst Jessica Caldwell, also of Edmunds, called the Thai floods “a second blow” to Japanese automakers.

“I don’t fully think that they’re back,” she said. “It’s still going to be tough for them.”

Caldwell said American automakers could soon be impacted, too. GM said it has seen no impact to date, but is surveying its supply base to assess its exposure.

Ford said it does not anticipate any impact on its U.S. production.

Nissan was the only one of the major Japanese automakers to post a sales gain last month. Its October sales were up 18 percent, climbing from 69,773 units to 82,346 to claim 8.1 percent of the market.

South Korea’s Hyundai Motor Co. posted a 22.8 percent sales increase, while Germany’s Volkswagen AG topped the chart with a 35.6 percent gain. Hyundai’s market share increased from 4.5 percent to 5.1 percent, while VW’s climbed to 3.8 percent from 3 percent a year earlier.

Caldwell said she expects overall sales to continue to rise, but at a slower pace than the industry has seen since the end of summer.

“It seems like things are normalizing a bit,” she said, adding that pent-up demand is trumping consumers’ fear about the economy.