Ford expects its sales in Britain and the rest of Europe to fall by 10 per cent next year and it gave warning on Monday that it might cut back European production.

The remarks came as Ford, the only big American carmaker to have avoided bankruptcy in the economic crisis, reported third-quarter net profits of $997 million (£608 million).

Alan Mulally, president and chief executive, said that the expected decline in European sales next year could more than offset hoped-for gains in North American markets.

Scrappage schemes had helped to keep the European car market buoyant in 2009, but the underlying market remained weak and the phasing out of scrappage programmes, particularly in Britain and Germany, was likely to hit demand, Ford said. “For the 19 European main markets, we forecast in 2010 industry sales will be down about 10 per cent, to 13 million to 14.5 million units,” a spokesman said. “We will continue to take decisive measures to sustain a viable business for the future, including bringing our production capacity in line with demand and reducing structural costs.”

Smaller-capacity Ford engines and the Ford Transit commercial vehicle are assembled in Britain, but other vehicles and component parts are imported from the Continent.

The company raised its prices in the UK by 4 per cent this summer because of “the sustained and severe weakness of sterling against the euro”. Yesterday it would not rule out further increases, saying that the value of the pound was continuing to be an issue.

“Any future price increases will be driven by the need to maintain a viable business and to recover relative cost increases caused by the weakness of the pound over an extended period,” the spokesman said.

Pre-tax operating profits for the third quarter of $1.1 billion, or 26 cents a share, represented Ford’s first operating profit since the first quarter of 2008. This marks an improvement from a loss of $3 billion, or $1.32 a share last year, and was significantly ahead of Wall Street expectations.

Revenue for the quarter was $30.9 billion, down $800 million from the same period a year ago. Ford’s North American operations made a pre-tax operating profit of $357 million, its first quarterly profit since the first quarter of 2005. Sales have been helped by the US Government’s month-long cash-for-clunkers programme in the summer, which offered subsidies of up to $4,500 on new fuel-efficient cars. Mr Mulally said that Ford had removed $4.6 billion from structural costs so far this year as part of an aggressive cost-cutting drive. The company expected to be “solidly profitable” again in 2011.

In the United States, Ford hopes to replicate the success it has had in Britain and Europe with its new fuel-efficient Ford Fiesta, which has been a key factor in its market share gains. More than half a million customers have bought the Fiesta in Europe since its launch a year ago, making it the second-bestselling car in Europe and the leader among small cars.

Plans to cut labour costs further in America may be hampered by a failure to reach agreement with the United Automobile Workers union, which was expected to reject a deal that would have matched concessions approved this year by workers at Chrysler and General Motors.

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