Ford Profit Surges to 2-Year High : Automobiles: Most of the gain is from record high earnings at the company’s financial services units.

Ford Motor Co., reported second-quarter earnings of $502 million Wednesday, the best in two years, but more than half the money came from a record performance by the No. 2 auto maker’s financial services business.

The profit improvement, generally in line with Wall Street estimates but slightly hampered by a higher tax rate, came a day after Chrysler Corp. reported earnings that far exceeded analysts’ expectations.

Ford’s automotive operations in the United States and Europe were profitable, contributing $213 million. But Ford Motor Credit and The Associates, a banking subsidiary, accounted for $289 million.

The main reason for the strong results by the financial operation was the same that many banks had for a sharp rise in their quarterly earnings: a drop in bad loans and a big decline in interest rates. That has widened the spread between what banks charge to lend and what they pay to borrow.

But Ford’s First Nationwide Financial Corp. subsidiary said it lost $16 million in the second quarter, more than doubling a loss of $7 million in the same period a year ago.

The thrift said its results continued to reflect higher-than-normal credit losses and non-performing assets.

On a per-share basis, Ford earned 93 cents in this year’s second quarter, contrasted with a loss of $324 million, or 68 cents a share, a year ago during the depths of an industry recession.

Second-quarter revenue rose 12.6% to $26.8 billion from $23.8 billion a year earlier.

The auto maker’s earnings were the best since the $771-million profit reported in the second quarter of 1990. Company officials were cautious about predicting continued gains, however.

“The U.S. economy, while improving, is still fragile, as are the economies in many of Ford’s key overseas markets,” Ford Chairman Harold Poling said. “It will continue to be difficult to achieve healthy results in today’s environment.”

David McCammon, vice president of finance, said third-quarter earnings would be less than either the second or the first quarter, when Ford earned $338 million. He would not offer any predictions for the fourth quarter.

“The third quarter is always a down quarter,” McCammon said. “Assembly plants are down for a couple of weeks for vacation and model changeover and that automatically means lower production.”

But Ford thinks it can run plants at or near 100% capacity the rest of the time, partly because inventory levels as of July 20 were at 52 days for cars and 62 days for trucks. Normal inventories are 65 days.

Third-quarter production is 5% ahead of last year’s July-September period. Ford’s second-quarter unit sales improved 6% to 1.64 million from 1.545 million on 9% higher production.

McCammon said Ford is sticking with its projection of 13 million to 13.5 million total U.S. car and truck sales this year.

In trading Wednesday on the New York Stock Exchange, Ford closed down $1.375 at $44.375

Ford’s U.S. automotive operations earned $148 million in the April-June period, contrasted with a loss of $565 million a year ago. Outside the United States, automotive operations earned $65 million in contrast with a $2-million loss a year ago.