UPDATE 1-RESEARCH ALERT-Bear Stearns raises Ford to outperform

Mon Sep 17, 2007 9:57am EDT

(Changes source, adds details)

Sept 17 (Reuters) - Bear Stearns upgraded Ford Motor Co (F.N) to "outperform," saying Ford looked more appealing despite overall softening auto sales.

The brokerage, which has a $10.50 price target on Ford's stock, noted that the company's cash flow has exceeded expectations in the last three quarters, leading management to improve its 2007-08 cash burn outlook.

The brokerage added that earnings per share benefit from a Voluntary Employee Beneficiary Association (VEBA) means as much, if not more, to Ford than General Motors (GM.N).

To date, most attention has been focused on the benefit to GM partly because the United Auto Workers chose GM as the lead negotiator in the labor talks with Detroit's three automakers, the brokerage said.

"However, we think Ford is more interesting here," the brokerage added.

Ford has nearly $40 billion of automotive cash, with additional asset sales still to come, which should facilitate a VEBA funding, Bear Stearns said.

It is not clear whether GM has sufficient liquidity to fund VEBA without a meaningful capital raise, the brokerage added. (Reporting by Nachiket Kelkar in Bangalore)

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