By David Bailey and Soyoung Kim

DETROIT (Reuters) - Ford Motor Co (F.N: Quote, Profile, Research) posted a $1 billion quarterly profit on Monday, defying Wall Street forecasts of a loss, as it cut costs and gained market share, leading it to raise its 2011 outlook to "solidly profitable" from break-even.

Ford's shares surged 8 percent as the surprising profit and increased outlook overshadowed news that the United Auto Workers union rejected a tentative cost-cutting deal with the automaker that would have brought its labor costs in line with U.S. rivals.

The only large U.S. automaker not to file for bankruptcy in 2009, Ford also said later on Monday it is seeking to extend its revolving credit facility from 2011 to 2013 and raise another $3 billion of capital through convertible debt and equity offerings.

The quarterly results provided more evidence that Ford has distanced itself from U.S. rivals General Motors Co GM.UL and Chrysler, which have struggled to complete restructurings after emerging from government-funded bankruptcies earlier in 2009.

Ford seized North American market share from GM and Chrysler when they halted most production to prepare and execute their bankruptcy cases.

"We're creating a very strong business and we are not taking taxpayer money," Mulally said on a conference call with analysts. "So the advantages clearly outweigh any potential disadvantage."

Ford reported $1.3 billion of positive cash flow in the third quarter, its first positive quarter since the second quarter of 2007, and forecast positive cash flow in the fourth quarter. It burned through $4.7 billion of cash in the first half of 2009.

The company also reported its first quarterly operating profit in North America since the first quarter of 2005.