Ford Motor Co. (NYSE: F) shocked most analysts with a first quarter profit of $100 million compared to a loss of $282 million for the same period last year.

CEO Alan Mulally’s turnaround plan for the company is based on heavy cost reductions – such as cutting expensive North American jobs – combined with new vehicle models. In the face of $15.3 billion in cumulative  losses in the last two years, this modest profit may show that Mulally’s plan is working.

Of course profitability is very important but Ford still faces an uphill battle against domestic competitor General Motors Corp. (NYSE: GM) and the world’s top car company (by the only measure that matters – profits) Toyota Motor Corp. (NYSE: TM). Making matters worse with its dependence on trucks, Ford’s vehicle lineup is ill positioned for record-high fuel prices. On the company’s home turf, a soft economy will only worsen demand in the U.S., a market that Detroit-based Ford has lost market share in every year for more than a decade.

Making matters worse, despite recent improvements in initial vehicle quality according to studies commissioned by Ford, the company admits that about half of vehicle shoppers no longer even consider its models.

This surprise profit is certainly good news for Ford – up more than 15% at midday today – but is it too little too late?

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United Parcel Service Inc. (NYSE: UPS) has seen only a slight increase in their first quarter profit of 7.5%. This lead the company to lower their 2008 earnings forecast.  This is due to the US economic recession that will not make a turn for the better any time soon. The slow retail sales are causing a slow period for UPS and their delivery services, particularly domestic deliveries.  When the US economy is hurting, UPS takes the hurt two-fold.

United Parcel Service Inc. handles an average of 15 million shipments a day world-wide, or roughly 2 to 3% of the U.S. gross-domestic product. With the US economic slump, people are spending less on retail products as they are forced to spend more on inflated gas and food prices.

UPS is not alone.  Major US have tightened spending and taken other cost-cutting measures to withstand the economic slowdown. This has lead to a restraint among US demands for freight deliveries for more than a year with rising fuel costs remaining the unpredictable variable that is squeezing profits. UPS spent $950 million in the quarter for their vehicles, up 54% from the year earlier. The company said its overall fuel costs drove down profit by at least 2 cents to 3 cents a share, or by $30 million to $50 million.

The first quarter reflected write-downs and severance charges in the year-earlier period and strong growth in business outside the U.S. Net income for UPS was $906 million, or 87 cents a share, up from $843 million, or 78 cents a share, from the year earlier.  Revenue climbed 6.5% to $12.68 billion.

The Atlanta-based UPS delivery service is the largest in the world.  International sales have protected UPS from being packed away into the US closet. Revenue from overseas packages jumped nearly 16%. UPS said US export volume growth was "strong, leading to a balanced global performance with Asia, Europe and the U.S. each experiencing a double-digit increase."

Like FedEx, UPS is considered to be a barometer for the U.S. economy as a whole. Fewer deliveries by transport companies are seen as a sign that domestic business is slowing down, while the factors behind the declines provide the supporting thesis. In this case, higher fuel costs are prompting a rise in delivery costs while consumers are likely spending less money.  

Mr. Kuehn, CFO for UPS, said, "At this point we see no immediate signs of economic improvement. We expect the U.S. package market to be flat to down this year. … Domestic margins will be under pressure for rest of year."

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Liberty Mutual Group Inc., a property and casualty insurer, announced it is buying Safeco Corp. (NYSE: SAF) for about $6.2 billion. The sale is the biggest U.S. property and casualty insurance deal since St. Paul Cos. and Travelers Property Casualty Corp. completed a $17.9 billion merger four years ago.

Industry analysts expect more deals to come as a soft economy has created attractive pricing and more willingness to deal. The property and casualty insurers that are cash-rich often take such opportunities to make attractive acquisitions.

"The addition of Safeco significantly expands and strengthens [Liberty Mutual]", CEO Ted Kelly said in a statement. The deal will create the fifth-largest U.S. property and casualty insurer according to the press release for the news.

More than strengthening Liberty Mutual, the deal strengthens the pocketbooks of Safeco shareholders. Liberty Mutual will pay $68.25 a share in cash for Safeco, a 51 percent premium over yesterday's $45 closing price.

Safeco shares are up over 46% as of morning trading to over $66 a share.

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UAL Corporation (NDAQ: UAUA) shares dropped nearly 40 percent after the carrier was slammed with skyrocketing fuel costs. As a result, the United Airlines parent was forced to reduce its domestic business to maintain adequate liquidity. Analysts also expressed doubts on a conference call that debt covenants may experience problems, although this was quickly dismissed by the airline's Chief Financial Officer.

The quarterly decline also prompted the troubled airline to revise its five-year plan that it was forced to make when it emerged from bankruptcy. Now, UAL plans to reduce its domestic capacity by 9% by the end of the year; eliminate 30 older aircraft from its operations; target another $200 million in nonfuel cost savings; cut another 1,100 jobs; and reduce planned capital spending in 2008 by about $200 million.

The trouble airline carrier also commented that it would participate in mergers and acquisitions when and if the right deals became available and it made sense for employees, customers and shareholders. However, UAL did not comment on reports that it is involved in a potential combination with Continental Airlines. Although, investors already know that the two parties have held advanced talks in the past!

The argument for consolidation in the industry lies on the fact that a larger entity will be able to collectively bargain for more favorable terms for fuel and other expenses. Meanwhile, the larger capital base will give it the ability to raise more financing on better terms and remain better capitalized. Combined, these factors have convinced many analysts that mergers like the proposed one between Delta and Northwest may give them a shot at sustainable profitability.

In the end, UAL Corporation still has a long way to go before it gets out of this mess. Any consolidation may be welcomed by shareholders who are now sitting on substantially greater losses. However, absent of any such deals, the airline may have to continue cutting while it waits for fuel prices to lower in the future to relieve pressure on its margins.

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AT&T Inc. (NYSE: T) announced a 22% increase in first quarter net income due to strong growth in wireless operations.

The country's largest telecommunications company had net income of $3.46 billion up from $2.85 billion last year. The highlight was earnings of nearly $3 billion by AT&T's wireless unit - double the unit's profit first quarter last year - on an 18% increase in revenue. Strong subscriber growth and increased revenue per subscriber, due to more expensive plans that feature Apple Inc.'s (NDAQ: AAPL) iPhone for instance, are driving AT&T's wireless resurgence.

The wireless unit added 1.3 million new subscribers to reach over 71 million total subscribers as of the end of March, all while increasing average revenue per user by 2% to over $50. Nearly half of this increase in subscribers were prepaid customers that are generally not as desirable because they use less expensive plans and are prone to switch carriers more often.

This wireless strength is needed to balance the continued decline of the company's landline business. The so-called "wireline" business unit posted a 2% drop in earnings and revenue. In a sign of the shifting business environment, the company recently announced plans to lay off 4,600 employees in an attempt to streamline its wireline business - approximately the same number of employees the company plans to hire back for its other units.

The real question moving forward is whether AT%T wireless, in a cutthroat sector, can continue to buttress the wireline business as it fades to obsolescence.

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Caterpillar Inc. (NYSE: CAT) who produces heavy industrial equipment reported last Friday the company’s record first-quarter sales and profit. The Peoria, Illinois-based company had seen a 13% rise this past March in its net income.  As well, the company’s overall business is doing very well abroad, despite rising material costs and currency issues with the ever so weak dollar.  The company today has seen an increase around 6% among its share value, which nowadays is a rare feat in the US market.
 
However, as Caterpillar, Inc. is doing very well for itself outside of the US, it has seen a slight trim in both it US and global forecast.  Caterpillar is still bulldozing through the rubble as Caterpillar’s Chief Executive Jim Owens wrote that there is a "robust demand for products used in the global mining and energy industries and for machines used by our customers to build infrastructure, particularly in emerging markets."

"Even though North America, our largest geographic market, is depressed, we are investing for growth," Owens said, adding that the company is "significantly" increasing capital expenditures.  The company, however, has trimmed its forecast for global economic growth to below 3% for 2008.
 
Caterpillar is playing in the sandboxes of Russia, China, and India to benefit their long-term strategies.  Despite the company did see a 3% rise in machinery and engine sales in North America in the first quarter, Caterpillar’s European revenues climbed 30% and Asian business was 37% higher.  Sales outside of North America accounted for 58% of total revenue, versus 53% of the total a year ago.

The Illinois-based group reported net income of $922 million, or $1.45 a share, up from $816 million, or $1.23 a share, a year earlier. Net sales rose 18% to $11.8 billion. The latest mean estimates of analysts polled by Thomson Financial were for earnings of $1.33 a share on revenue of $10.77 billion.  Currently, the company’s shares are trading just under 8% and trading at $84.80, nearing its 52-week high of $87.

Caterpillar still foresees its earnings for 2008 to grow 5% to 15% on revenue increasing 5% to 10%. It lowered its outlook for North America sales, but the company strongly believes that the demands and business abroad are going to hold the company above water, as the rest of the US economy seems to have slowed immensely due to construction zones.

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Both Continental Airlines (NYSE: CAL) and Southwest Airlines (NYSE: LUV), the two most financially-secured airlines have hit turbulence in the wake of the rising gas prices.  The basic equation shows that as fuel prices sky-rocket, the airlines hit turbulence and will have to ground themselves, if you will.  Southwest has been one of the only airlines to see profits for the last several quarters.  However, the company has finally seen the same turbulence that has been giving other major airline carriers financial problems due to such high fuel costs.

Continental and Southwest Airlines will both attempt to fight the fuel battle by raising prices.  Southwest Airlines Co. which always has deals for travelers for its select domestic locations had to raise its summer prices last week, only then to raise them an additional $10  for flights each way from mid-June through mid-August.  In addition to raising prices, Southwest will have to postpone their plans for fleet expansion.  

The leading low-cost carrier Southwest Airlines Co., headquartered out of Dallas, Texas, has been the only airline company to see a profit this first quarter.  The company’s revenue rose 15.1% to $2.53 billion.  Although the company had reported a profit, they still saw a decline in their numbers as they earned only $34 million, or 5 cents per share, in the first quarter compared with $93 million, or 12 cents per share, a year earlier.

Continental Airlines, the fourth-largest airline carrier by passenger volume, has reported a first-quarter net loss of $80 million, or 81 cents a share, compared with net income of $22 million, or 21 cents a share, a year ago.  Due to the Houston-based company’s large international traffic, Continental’s revenue rose 12% to $3.57 billion.

Continental claims that they will take 14 older, less fuel-efficient aircrafts out of service.

Continental, in addition, will remove 34 of its older fleet of Boeing 737-300’s. Continental’s reduction of their older fleet will reduce the U.S. mainline capacity by 5% this upcoming Fall. “In this fuel environment, we must reduce our domestic capacity to help reduce our losses in the domestic system," said President Jeff Smisek.  Continental and Southwest Airlines will be cutting seat capacity to reduce routes that aren’t providing the airline companies with sufficient funds.  This is a first among U.S. airlines this year to trim domestic capacity even if it cuts their share of the market.

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Google Inc. (NDAQ: GOOG) announced high-than-expected net income of $1.55 billion on $5.19 billion in revenues. The search giant saw a 42% increase in revenue growth compared to the first quarter of 2007 and a 7% increase compared to the fourth quarter of 2007. The strongest growth was seen in international revenues, which finally increased to more than half of its total revenues.

"Our ongoing innovation in search, ads, and apps helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said Eric Schmidt, CEO of Google. "As we integrate DoubleClick into our advertising platform, we see exciting new ways to improve the user experience and increase value for our advertisers and partners. Also, while exercising operational discipline, we continue to explore opportunities that add value to users everywhere and to Google in the long term."

Google reported that 66% of its revenues were derived from websites that it owns compared to 33% from its content partners. This marks a continued shift towards creating its own revenues, which is much more profitable in the long-run. The search giant also noted that its acquisition of DoubleClick was immaterial to revenue and only slightly dilutive to both GAAP and non-GAAP operating income, net income and earnings per share for the first quarter.

The stock jumped 10% after hours on the news as investors breathed a collective sigh of relief. Many were concerned that the company would post a loss following weakness in pay-per-click advertising predicted by research firm comScore. The huge surprise to the upside has many investors newly bullish on the stock and confident that it will be able to overcome any difficulties in the U.S. economy.

In the end, these factors make GOOG a stock worth watching going into the future. Many are hoping that this news will provide a boost to the technology sector that is already fresh off of good news from IBM.

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Bill Ackman's Pershing Square offered to purchase Borders Group's (NYSE: BGP) businesses in Australia, New Zealand and Singapore for $135 million in a Schedule 13D/A filing with the SEC. The expected offer comes after the activist hedge fund recently completed a financing agreement with the bookseller that gave it a much-needed capital infusion.

Borders insists that the international units are worth substantially more than the $135 million offer and is looking at strategic alternatives other than the offer from Pershing Square. So far, the bookseller has not made any public announcements of a higher bidder but there is still a lot of time remaining.

Pershing Square also valued Borders' UK and Singapore businesses at $67.5 million in the event that it could not acquire the other businesses or the company wished to keep or sell them separately. Many of these international businesses remain strong despite a slowdown in the United States and could make a great acquisition for other booksellers.

Borders has found itself under pressure from lower discretionary spending by consumers and increased competition from online retailers like Amazon.com (NDAQ: AMZN). The bookseller is hoping that this latest capital infusion will give it the capital necessary to implement a series of strategic initiatives designed to improve sales and increase profits.

Shares dropp $0.02, or 0.31%, to $6.43 on the day.

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With the rising costs of fuels, many airline companies seem to be grounded, some literally.  However, one merger has brought on not only a way to battle the ever so large economic struggle of the airline industry, but will have created the world’s largest airline.  Delta Airlines (NYSE: DAL) and Northwest Airlines (NYSE: NWA) have officially joined together in a union that will parent 75,000 employees with revenues of $35 billion.  

The $17.7 billion Delta Air Lines Inc. merger with Northwest Airlines Corp. is done.  However, as it may seem that this much anticipated deal would be good for both companies, Delta shares have undergone quite the drop in share prices today with over a 13% decline.  Northwest shares also fell, but just under 9%.  The companies, that jointly announced their merger last night at 8 PM EST, will keep Delta’s headquarters out of Atlanta and foresee no hub closures.  Collectively, the two airlines will oversee a fleet of 800 airplanes with flights to more than 390 destinations in 67 countries.

The deal will grant that each Northwest share will be exchanged for $1.25 Delta shares, a 16.8%  premium based on today's closing price.  With this merger, it is predicted a one-time cash costs of no more than $1 billion to integrate the two airlines. However, the deal is expected to generate more than $1 billion in annual revenue and cost cuts from more effective aircraft utilization, a more comprehensive and diversified route system, reduced overhead and improved operations.  Delta CEO Richard Anderson, who had also served as a former CEO of the Eagan-based Northwest Airlines, will remain CEO of the new Delta.  Delta Chairman of the Board Daniel Carp will become chairman of the new board, Northwest Chairman Roy Bostock will become vice chairman and Delta's Ed Bastian will be president and CFO.  

This new merger between Northwest and Delta Airlines will Delta will maintain executive offices in Atlanta (as the company’s headquarters), Minneapolis/St. Paul and New York, and international executive offices in Amsterdam, Paris and Tokyo.

The airlines said small U.S. communities will now have better access to more destinations across the globe and will benefit from the combined carriers' complementary route networks.  However, there are many concerns, especially in  a time of tight budgets and strict government regulations.  Northwest and the state of Minnesota are to maintain current hubs and headquarters, and if Northwest fails to abide by this, the company would owe the state $240 million and lose a package worth $200 million. After the merger was announced Monday evening, Minnesota’s Gov. Tim Pawlenty issued a statement claiming that "We will be closely scrutinizing the impact of the merger and will strongly stand up for Minnesota's interests during the review process."

With such a merger as this,  there are some issues to be dealt with concerning the unions of the two airlines who were unable to come to an agreement on combining seniority lists. Seniority determines pay and flight assignments, and Delta's pilots (generally younger than Northwest's) had worried that they would receive the short-end of the stick.  Officials had wanted the pilots to agree prior to a deal, but faced with ever-rising operating costs ultimately decided to move ahead with the merger without an agreement.

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