Ford is struggling to keep pace with Japanese firms such as Toyota

The US carmaker reported profits of $946m (�543.9m), down from $1.17bn in the same quarter last year.

Sales of sports utility vehicles, such as the Expedition and Explorer, fell in the quarter, although sales of Ford's passenger cars rose.

Despite the decline in profits, the carmaker's results were better than analysts had been expecting.

Despite profitability in most regions, our global automotive results were disappointing Bill Ford, Ford chairman and chief executive

Its earnings of 47 cents a share, beat analysts' forecasts of 33 cents a share. Revenue also rose to $44.54bn from $42.87bn.

Ford warned in April this year that it would not meet its 2005 profit target.

Tough climate

Ford is facing tough competition from Asian rivals, and General Motors' discount scheme - which has seen customers offered the same discounts on GM models as to employees - has also had an impact.

"Continued weakness in their product line combined with GM's employee price campaign hurt them," said Brian Bruce of PanAgora Asset Management in Boston.

Bill Ford, Ford's chairman and chief executive, said: "Despite profitability in most regions, our global automotive results were disappointing, reflecting the fiercely competitive environment in which we continue to operate, particularly in North America."