Amazon's Best Investment Book Reviews: Have You Been Brainwashed?

Most popular investment books are published for the already rich and famous, by an industry that has become just too good at the business of selling books. Rarely will a publisher take a chance with the work of an unknown author. Certainly, it's a no brainer to sell a Jim Cramer, Peter Lynch, Robert Kiyosaki, or Maria Bartiromo effort while a uniquely new approach to solving the puzzles of Wall Street, presented by an unknown writer or commentator, requires some major financial risk.

Big publishers want to sell already big names; discovering new ones is not in their wheelhouse. Are they responsible for the problems in the financial markets? Of course not, but they do have a perverse, if indirect, impact. By constantly publishing the same Wall Street friendly message, they contribute to the brainwashing.

Without a wider distribution of new ideas based on old wisdom, Wall Street as usual remains Wall Street as usual and the average investor remains uninformed and ill advised about the dangers of the financial markets. The biggest investment mistake generators are cleverly ignored by most of the books I've read about investing--- even compounded.

The new generation focus on calendar year instead of market cycle performance; the worship of portfolio market value alone, for all securities, even those purchased solely for income production; the use of gimmicks and products instead of securities for portfolio development; the acceptance of speculations as acceptable, "alternative" investments.

Appreciating the differences between investing and speculating, and learning what to expect from your securities in cyclical markets are things that investors must learn about. Have you been brainwashed? These 15 Amazon members are learning to think outside the Wall Street box, without any help (or investment) from publishers:

1) Super Investing Book: I've read a bunch of books on investing and money management, and this is the best, BY FAR!!!!! It's so good, and refreshing, that I've read it twice. (R. Q. A., Bryan, Texas)

2) Back to Basics: This is an eye-opening and intelligent book, which at once offers an analysis of the investment industry and a practical guide for non-professional investors--- a clear set of economic principles mixed with clear commonsensical advice. The author--- describes how to benefit from the ups and downs. Great book. (Professor P. W., Jerusalem, Israel)

3) The Best Investment Book I Have Ever Read: For skittish investors such as me, [the] unique Working Capital Model reduces the emotional factor by taking the emphasis off market value and focusing on growth of working capital. I implemented and followed the trading strategy myself. You would do well to buy this book and read it two or three times. It will save you [from] a lifetime of mistakes that come from following conventional wisdom. (D. J. F., Peoria, IL)

4) Easy to Understand, Even for Non-Investors: This book seems to be much easier to understand than the stock market trading systems advertised on TV. (P. L., Manchester, CT)

5) Happy User: You can take this system to heart--- and to the bank. It works for me. (L. J., Phoenix, AZ)

6) Unique Advice that Stands Out From the Crowd: This is one of two [books] that stand out. Besides being written in an entertaining and irreverent style, it has immensely practical advice. Focus on making money on the market's inherent volatility vs. trying to guess what's next. Saves a lot of time and appears to work. (C. M. Rakes, Annandale, VA)

7) An Enlightened Self-Managed Investor: Not only did I identify many many mistakes that I had made thru the years, but the logical approach outlined [in the book] has to make sense to anybody who has tried to get meaningful portfolio guidelines for future investments tailored to individual needs. Great Book! (A. C., West Palm Beach, FL)

8) Right on the Money: I didn't want to put the book down until I was through. [The] trading strategy is refreshing information that should make a lot of people a lot of money with less risk. (D. M., SC)

9) Investing Made Successful: I heard [the Author] on a talk-radio program and was intrigued by the premise of the book. After reading it, I'm convinced. I'm migrating from mutual funds to individual, high quality equities. [The book] was a slap in the face to make me stop my destructive investing habits. (G. P., Colorado Springs, CO)

10) What a Great Read: This is really an incredible book--- [it] has incorporated very creative insight with some highly original thinking to produce one of the best "investing manuals" ever written. I wholeheartedly endorse this book! ("Jointhefreedom", NM)

11) Courage To Go Against the Pack: The [book] is written in an exciting, enthusiastic, fast moving, style that reads like a novel. Should I ever venture into the stock market, it will be with this book. (S. M., Virginia Beach, VA)

12) L-O-N-G Overdue Investment Strategy Advice: I've long been skeptical of the generic advice handed down to me by advisors over the past--- I don't know any wealthy people who do this. Well now I have a frame of reference for my doubts about the system and a simple plan to take control of my investments. (B. S., Vancouver, BC, Canada)

13) A Must Read To Save Your Money From the Sharks: Written in a conversational style with plenty of humor, this book gives you the questions and answers you need to keep and increase monies that are being put away for retirement. I have purchased three books already and am purchasing five more to give to friends and relatives--- (R. M., San Jose, CA)

14) Brainwashing of the American Investor: Finally the truth! What an eye-opener to see how the markets, and the people behind the markets, have manipulated the average investor over the years. I highly recommend [this] book for your next financial read. (A. J. L., Ft. Pierce, FL)

15) Profit Like a Trader; Sleep Like an Investor: The technique or strategy presented is almost a "why didn't I think of that?" The idea is to run your portfolio the same way you would run a business---not a get-rich-quick kind of plan. You just focus on the essential measures of quality. The key is to maintain your plan during the slow times and reign in your greed during the boom times. (P. G., Moon Township, PA)

Today's publishing industry has a no-risk attitude, and those that are brave enough to deal with new authors are intimidated by the full-return guarantee demands of the bookstores. Stuck in the middle with no choice, most new authors must turn to self-publishing.

The reviews above describe a book that Wall Street wants to keep in the closet, an educational and strategic breakthrough that would have allowed most investors to avoid the bubbles and derivatives that caused our current financial woes. There are probably others--- below the 200-level in all Amazon's best categories.

Last Bank Standing - The Wall Street Mega-Crash

Dateline Washington, October 19th (get it?) 2010: the Peoples Bank & Trust of America has now established itself as the only bank of any kind in the USA, totally owned and managed by the US House of Representatives. A 2/3 majority must now approve all investment banking transactions; your district representative's staff reviews individual mortgage applications; and all 401(k), IRA, and remaining employer pension assets have been rolled into the Social Security Slush Fund.

Only federal and state elected officials are exempt from the 45% all purpose Income Tax. The estimated time to bring new companies public is 4.5 years; all individual account dividends and interest are paid directly into your IRS "grabber" account; CEO's salaries are limited to 50% of the amount paid to a first year congressman, and any government budget shortfalls are withdrawn from corporate earnings before any corporate obligations can be dealt with.

All employees receive the federal mandated minimum wage, except senior executives who are limited as mentioned above. Scary? This is a scenario that could play out if Congress (or the SEC) does not come to the rescue of the credit markets. You missed your opportunity to help stop it, but chances are a fix is on its way.

How many more businesses, jobs, and hopes will be killed by this irresponsible Congress? When will the average blogger realize that when a corporation fails, we all suffer? One would think that the informed and enlightened could take time out from their texting for a little research and education. Instead, they show their power by influencing public opinion numbers and the marshmallow politicians who worship them. As economist Irwin Kellner and I have pointed out, this is no bailout and we are not nearly approaching a recession.

Kellner's September 28th Market Watch article points out ten major differences between now and then: (1) In 1929, the DJIA plunged 40% in two months vs. around 30% in about a year. (2) In 1933, the jobless rate was 33% vs. 6% today. (3) The GDP shrank 25% then, but has increased 6% now. (4) Consumer prices actually fell 30% then but haven't ever since.

(5) Home prices dropped 30% then, but only 16% from the recent bubbly highs. (6) 40% of all mortgages were in default then vs. only 4% now. (7) 9,000 banks failed in the 1930s compared with just 25 or so (bigger and broader based ones) recently. (8) The Federal Reserve reduced the money supply, (9) raised interest rates, and (10) raised taxes on foreign imports.

Further, Kellner points out, we now have automatic stabilizers, deposit insurances, and market trading restrictions as protective elements. Today's Congress however, has never been good at connecting dots, has accomplished nothing under an unpopular president, and is ignoring its role as the primary creative force in today's problems. This transfusion is needed because: bad laws have obscured the values on financial institution balance sheets, and have created a clot in the credit arteries that keep the economy alive.

Educate yourselves on the Accounting Rule's that require institutions to book paying assets at pennies on the dollar. Find out why institutions are afraid to loan money to one another--- over night, at any rate of interest--- strangling the credit markets.

Doing nothing is killing jobs, killing companies, and deferring retirements for those who were counting on 401(k) and IRA dollars to provide them with income. Congress, of course has an old-fashioned pension plan, so it is unaffected by such financial realities.

Investigate the relaxation of lending standards that Congress orchestrated over the past few administrations, before blaming the companies that then extended credit to many speculators and other buyers who falsified application papers. Learn how the SEC was prohibited from regulating the CDOs and other multiple-leveraged credit market speculations. There are as many culprits outside the corporate executive suite as in it.

Congress is bursting with pride over bringing some of the Rich and Famous to their knees, and capping some of their obscene compensation arrangements at still shareholder pillaging levels. I've spoken often about how these salaries need to be controlled. But the multi-level-mortgage-marketing schemes that Congress encouraged must be unbundled somehow, and a buy out is the proper vehicle.

Congress has punished the entire world with its attack on Wall Street, and both parties are to blame. Representatives of the states listed below voted "no" to the credit transfusion, causing death and destruction that, in many instances, cannot be recouped. We have to replace them with better decision makers, representatives who can think in economic terms when they have to.

The number and letter code after the state designation indicates the number of representatives and their party: AL-1R, AK-1R, AZ-4D4R, CA-15D9R, CO-2D2R, CT-1D, FL-1D13R, GA-4D7R, HI-2D, ID-1R, IL-4D5R, IN-3D3R, IA-1D2R, KS-1D2R, KY-2D2R, LA-2D3R, ME-1D, MD-2D1R, MA-3D, MI-3D6R, MN-2D2R, MS-3D, MO-2D3R, MT-1R, NE-3R, NV-1D1R, NH-2D, NJ-3D4R, NM-1D1R, NY-3D1R, NC-3D5R, OH-3D7R, OK-3R, OR-3D, PA-3D7R, SC-1R, SD-1D, TN-1D4R, TX-8D14R, UT-1D1R, VT-1D, VA-1D5R, WA-1D3R, WV-1R, WI-1D2R (Names withheld, but available from the author.)

On Friday evening, candidates Obama and McCain gave their support to the Capital infusion, but neither bothered to explain why--- a huge audience was ready to soak up the information. Over the weekend, both attended meetings to support the plan and to generate support from their respective parties.

Is there enough time left to find a hero?

Citigroup tops forecasts, but caution lingers

For big banks like Citigroup, the first quarter of 2009 may turn out to be the best of the year.

Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. all impressed investors over the past week with earnings reports that were better than Wall Street analysts anticipated.

Citigroup posted a first-quarter loss to common shareholders of $966 million, or 18 cents per share, narrower than the 34 cent forecast of analysts surveyed by Thomson Reuters. But before paying dividends to preferred stockholders tied to a private stock offering in January 2008, the bank earned $1.6 billion, while revenue doubled from a year ago to $24.8 billion.

The banks' results showed Wall Street that its five-week-old rally was not in vain. Six weeks ago, Citigroup's chief executive Vikram Pandit and other bank CEOs ignited the rally by telling investors that January and February were profitable.

But the recent batch of reports did not change the widespread opinion that this year is going to be one of the toughest ever for the banking industry.

"There's life in this sector," said Gary Townsend, chief executive officer of Hill-Townsend Capital LLC, but also "plenty of questions related to the sustainability of the results."

So after bank stocks' strong bounce in March and April, "they're probably due for a breather," said Fox Pitt Kelton banking analyst David Trone.

Loan losses are only going to get worse as unemployment rises. Citigroup saw some moderation in 30-day delinquencies in cards and mortgages, but its chief financial officer Ned Kelly warned: "One swallow does not make a spring."

When it comes to loan losses, "the elephant hasn't made its way through the python," Kelly said.

And the two biggest drivers offsetting loan losses at these banks were strong bond trading results and low borrowing rates. Borrowing rates are likely to stay low for a while, but they can't get much lower. And bank executives are not confident about keeping up trading revenues.

The first quarter saw a surge in corporate bond issuance as the credit markets started thawing from their frozen fourth quarter. JPMorgan Chase CEO Jamie Dimon said that it wasn't reasonable to expect record results to continue at its investment bank.

Citigroup's chief financial officer said the first quarter is historically the strongest for investment banking, and Goldman's chief financial officer, David Viniar, said the market is "still a dangerous environment."

Investors will get a better sense of how sick banks are in May, after the government finishes its "stress tests" designed to determined whether the companies would need more federal bailouts under various economic scenarios. Citigroup said Friday it is delaying the government's exchange of billions of dollars worth of preferred shares into common shares until the government completes its test.

Citigroup stock slipped 36 cents, or 9 percent, to $3.65.

Citigroup's results compared with a year-earlier loss of more than $5 billion, or $1.03 a share.

Its credit costs were high at $10 billion, due to $7.3 billion in loan losses and a $2.7 billion increase in reserves for future loan losses. The credit costs stemmed mainly from consumers; the rate at which Citigroup had to write off their loans as unrecoverable more than doubled over the past year to 5 percent.

Also offsetting weakness was a $2.7 billion mark-up caused indirectly by investors growing more worried about the bank's creditworthiness. Those worries decreased the value of Citigroup debt on the market. So the credit derivatives on Citi's books �� complex assets based on the value of debt �� actually gained in value because technically, Citigroup owed other parties less.

To be sure, mark-downs are not hitting Citigroup as hard because the bank has reduced the investment bank's portfolio of risky assets to $101 billion from $227 billion over the past year.

But another reason is accounting. Citigroup has moved more of those risky assets into an "accrual" account. Accrual accounting measures assets as if the loans underlying them will be held to maturity, while fair-value accounting values assets based on their current market price.

Citigroup has been the weakest of the large U.S. banks, posting quarterly losses since the fourth quarter of 2007.

In early March, Citigroup stock hit an all-time low of 97 cents per share. It has since quadrupled, but remains down 40 percent for 2009 and down more than 93 percent from its late 2006 peak.

Since late 2007, Citigroup has gotten a new CEO, a new chairman, and a new structure that splits its traditional retail and investment banking business from its consumer finance units, asset management, and risky mortgage-related assets. It has also been downsizing by selling off businesses and laying off a fifth of its employees. And it has gotten $45 billion in government funding and a federal backstop on roughly $300 billion in assets.

Two more big banks report first-quarter earnings next week: Bank of America Corp. on Monday, and Morgan Stanley on Wednesday.

Stocks edge higher after Citi, GE earnings beat

Wall Street found enough in the latest earnings reports to keep its six-week rally alive.

Stocks ended another winning week with a slender advance Friday as earnings from Citigroup Inc. and General Electric Co. came in ahead of the market's meager expectations.

The numbers weren't great by normal standards but were good enough to extend a rally that began in early March on signs that the economy might be finding some stability. Citigroup was the fourth bank in a week with news that pointed toward a budding recovery in the industry. But the company, echoing comments from JPMorgan Chase & Co. on Thursday, also said loan losses are expected to continue in the months ahead.

GE, meanwhile, said its first-quarter earnings dropped 36 percent as sales and profits shrank at its GE Capital financial division. The stock edged up 1 percent.

Kent Engelke, chief economic strategist at Capitol Securities Management, said the results placated investors. "If these companies didn't meet or exceed these expectations, we would have gotten killed," he said.

Wall Street showed resilience in the first big week of first-quarter earnings reports, weathering disappointments from chip maker Intel Corp. and Google Inc. While investors weren't happy with Friday's news, they weren't caving to uncertainty as they did the first two months of the year, when heavy selling brought the major indexes to 12-year lows.

"I think most people realize there are still causes for concern, but maybe not causes for panic," said Carl Beck, a partner at Harris Financial Group, a Colonial Heights, Va.-based investment advisory firm.

Stocks fluctuated for much of Friday to end with slight gains. The Dow Jones industrial average rose 5.90, or 0.1 percent, to 8,131.33.

The Standard & Poor's 500 index added 4.30, or 0.5 percent, to 869.60, while the Nasdaq composite index rose 2.63, or 0.2 percent, to 1,673.07.

For the week, the Dow is up 48 points, or 0.6 percent, giving the average six straight up weeks. That's the longest streak since it rose for seven straight weeks in the period ended May 18, 2007.

The S&P 500 index posted a gain for the week of 1.5 percent. The Nasdaq is up 1.2 percent for the week and 6 percent for the year.

Wall Street's rally began in early March after Citigroup reported it had operated at a profit during the first two months of the year. A string of more upbeat economic and earnings data gave the rally momentum, but, as often happens during earnings season, the market has stumbled when companies have unsettling news.

With the bulk of first-quarter reports still to come in the next two weeks, the market is likely to see some turbulence as investors try to assess company by company how the overall economy is doing. While that tends to be Wall Street's pattern during any earnings period, the anxiety is particularly heightened right now as investors hope for an end to the recession.

While Wells Fargo & Co., Goldman Sachs Group Inc. and JPMorgan Chase have all reported profits that surpassed expectations, some of those gains came on trading activity that's not expected to continue. And companies that depend heavily on lending are still seeing borrowers default because of the recession.

"I think the response is guarded," said Joseph Tatusko, chief investment officer at Westport Resources Management. "There are waves of defaults and credit issues that have yet to come on shore."

Citigroup reported a quarterly loss of just under $1 billion, less than analysts expected. A year ago, the bank suffered a loss of more than $5 billion. Its shares lost 9 percent, falling 36 cents to $3.65.

Two other major banks, Bank of America Corp. and Morgan Stanley, will report results next week. Other big reports due next week include Boeing Co., Coca-Cola Co., IBM Corp. and McDonald's Corp.

Mattel Inc., the largest U.S. toymaker, said Friday that weak overseas sales and cautious orders from retailers led to a wider loss than expected. But the stock jumped $1.98, or 15.2 percent, to $15.01 after the company said sales of Barbie rose 18 percent in the U.S.

Mobile phone maker Sony Ericsson posted a $387 million loss and said it would cut an additional 2,000 jobs, while Toshiba Corp., Japan's top chipmaker, warned that its loss for the last fiscal year will be bigger than expected.

Investors were cautious during the week, mindful that poor earnings reports could easily send the market reeling. Stocks dipped earlier this week on poor retail sales and an unexpected drop in wholesale prices, but better-than-expected earnings reports from JPMorgan and Nokia Corp. helped the market snap back. The Dow and the S&P 500 index are at their highest levels in more than two months and the Nasdaq is at its highest level of the year.

Jim Herrick, director of equity trading at Baird & Co. attributed some of the buying to short-covering. This occurs when investors who earlier sold borrowed stock on expectations of a market drop are forced to buy back those shares. The pattern of stocks fluctuating in early trading only to move higher late in the day has been a recurring theme in the past few days.

In other trading, the Russell 2000 index of smaller companies rose 5.49, or 1.2 percent, to 479.37.

About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 7.1 billion shares, compared with 6.43 billion Thursday.

Bond prices dipped, sending the yield on the 10-year Treasury note up to 2.95 percent from 2.83 percent.

Light, sweet crude added 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 rose 1.0 percent, Germany's DAX index gained 1.5 percent, and France's CAC-40 rose 1.8 percent. Japan's Nikkei stock average rose 1.7 percent.

____

The Dow Jones industrial average closed the week up 47.95, or 0.6 percent, at 8,131.33. The Standard & Poor's 500 index rose 13.04, or 1.5 percent, to 869.60. The Nasdaq composite index rose 20.53, or 1.2 percent, to 1,673.07.

The Russell 2000 index, which tracks the performance of small company stocks, rose 11.17, or 2.4 percent, for the week to 479.37.

The Dow Jones U.S. Total Stock Market Index �� which measures nearly all U.S.-based companies �� ended at 8,889.64, up 145.08, or 1.7 percent, for the week. A year ago, the index was at 14,910.93.

IBM stumbles on 1Q sales dip; profit beats Street

IBM Corp.'s first-quarter results slipped as all its major business units suffered declines, but the company backed its bullish outlook for 2009 on Monday, reflecting its belief that a broad mix of services and software will help it weather the recession.

The Armonk, N.Y.-based company's profit beat Wall Street's forecast, but sales fell short. The stock was down 1.5 percent in after-hours trading Monday.

IBM reported after the market closed that that its profit was $2.30 billion, or $1.70 per share. That was higher than the $1.66 per share analysts were expecting.

In the same period last year, IBM earned $2.32 billion, or $1.64 per share.

Sales fell 11 percent to $21.7 billion, $800 million short of the $22.5 billion analysts polled by Thomson Reuters were expecting. IBM said the revenue drop would have been 4 percent were it not for the effects of a strengthening dollar.

The earnings report came on the same day that longtime rival Sun Microsystems Inc., which had recently been in talks to be bought by IBM, announced a $7.4 billion deal instead with Oracle Corp. IBM appears unlikely to try to outbid Oracle.

IBM used the earnings release to reiterate its previous guidance for earnings of $9.20 per share in 2009. The company pointed to its better profit margins in services and software, which together contribute more than 80 percent of IBM's revenue and can be successful in a downturn by helping corporate customers save money.

However, the downturn still showed up in the first-quarter numbers. Services revenue was $13.2 billion, down 10 percent. Software sales were $4.5 billion, a 6 percent decline.

Hardware sales took a bigger hit, falling 24 percent to $3.2 billion. Sales of both high-end mainframe computers and industry-standard servers showed double-digit declines.

In another closely watched indicator for IBM, it signed new services contracts worth $12.5 billion in the first quarter, a decrease of 1 percent from last year. Were it not for currency fluctuations, the value would risen 10 percent, IBM said. These contracts represent revenue that will be booked in the coming years.

Peter Misek, an analyst with Canaccord Adams, said IBM had "really, really solid execution" in the first quarter with "awesome" long-term services signings �� up 14 percent to $7 billion. He said investors likely were disappointed to see short-term contract signings fall 14 percent to $5.5 billion and the ongoing struggles of the hardware division.

"They need to do something there," Misek said.

Bank of America posts 1Q profit but stocks fall

Bank of America Corp. warned of worsening loan default problems Monday even as it posted a first-quarter profit of $2.81 billion. Investors concerned about the banking industry's health sent financial stocks and the overall market sharply lower.

Although Bank of America said higher revenue from the purchase of Merrill Lynch & Co. helped offset a surge in credit costs, it took a $13.4 billion provision for credit losses during the first three months of the year. The amount of its problem loans more than tripled to $25.7 billion and CEO Ken Lewis said he couldn't predict when the bank's credit morass would end.

The bank's stock fell $2.58, or 24.3 percent, to $8.02 as the overall stock market plunged. Last week Wall Street was happy with better-than-expected results from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., but investors have been rethinking that initial upbeat response. Banking companies generally benefited during the quarter from unusually strong bond trading, a trend not expected to continue, while recession-driven loan problems persist and are expected to worsen this year.

Also weighing on investors is uncertainty about the government's "stress tests," analyses of bank finances to determine if they'll need more bailout funds if the economy worsens.

Over the weekend there were statements from administration officials that banks may need more government capital," and "the markets are reacting," said Gary Townsend, chief executive officer of Hill-Townsend Capital LLC.

Stress test results are due in the coming weeks.

"The economy hasn't hit bottom, the credit cycle hasn't run its course," said banking industry consultant Bert Ely. "We have a few more quarters of touch and go on profitability because of all the credit losses that are being taken."

Charlotte, N.C.-based Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

Bank of America, as other banks have done, attributed its profit to trading activities on markets including bonds.

"Like it or not, capital markets is now a core business for Bank of America, and that has more volatile returns than other businesses," said Celent banking analyst Bart Narter. "Bank of America is no longer exclusively a retail bank and there can be more fluctuations."

But troubled loans, also known as nonperforming assets, increased to $25.7 billion from $7.8 billion a year ago. The bank also lost $1.8 billion on credit card services, after posting a profit a year ago.

"Credit is bad and we believe credit is going to get worse before it will eventually stabilize and improve," Lewis said during a conference call with analysts. "Whether that turn is later this year or in the first half of 2010, I'm not going to hazard a guess."

Lewis has been under intense pressure this year over the Merrill purchase, which closed Jan. 1. Shareholders approved the deal before learning of big losses at the New York-based investment bank and reports surfaced that Merrill paid billions of dollars in bonuses to employees before the deal was completed, even as Bank of America was begging the government for aid to complete the acquisition.

With the company's acquisition last year of mortgage lender Countrywide Financial Corp. and its expansion into credit cards after buying MBNA Corp. in 2005, Bank of America is mired in two businesses that are suffering. Consumers are spending less and defaulting more often as they worry over declining home values and rising unemployment.

"Bank of America is more exposed than their competitors in these areas, and it hurts them on the consumer side of the business," Narter said.

Bank of America recorded a $13.4 billion provision for credit losses in the first quarter and set aside $6.4 billion as additional reserves to cover future losses.

The first-quarter results include revenue from the company's acquisitions of Merrill and Countrywide. Revenue more than doubled to $35.76 billion, mainly from the addition of Merrill. It was also helped by a $1.9 billion pre-tax gain from selling shares Bank of America owned in China Construction Bank. Bank of America continues to own about 17 percent of the common shares of the Chinese bank, it said. Analysts expected revenue of $27.13 billion.

Bank of America has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package. Lewis has made remarks of his intentions to repay the government as soon as possible.

Townsend said he isn't certain that Bank of America is able to come up with the money, unlike Goldman Sachs, which has already raised capital.

"Bank of America is not yet positioned to repay the TARP (Troubled Asset Relief Program) and move itself away from the rather uncomfortable embrace of the United States government," he said.

In the investor conference call, Lewis said his bank won't need more capital from the government, reiterating a theme he's touched on often in recent weeks. Asked about the government converting its preferred shares in the bank into common, Lewis replied, "We think we're fine but it's out of our hands ... This is in the hands of the regulators at the moment."

An analyst at Standard & Poor's equity research division, however, said Monday that "a capital raise can't be ruled out."

While Bank of America benefited from stronger-than-expected trading and refinancing revenue, "we don't think revenue is sustainable," wrote Stuart Plesser in a research note. Plesser maintained a "hold" rating on Bank of America's shares.

After IBM dalliance, Sun goes to Oracle for $7.4B

Sun Microsystems Inc.'s scramble to find a suitor landed the slumping server and software maker in the arms of Oracle Corp., which agreed to pay $7.4 billion in cash for Sun in a startling marriage that would transform Silicon Valley and the computing industry.

The acquisition announced Monday illustrates how some of the biggest and richest technology companies are racing to become one-stop shops for corporate and government customers. By picking up Sun and expanding heavily into hardware, Oracle would look much more like the company it beat out for Sun �� IBM Corp., which appears unlikely to re-enter the bidding.

Heavyweights like IBM, Hewlett-Packard Co., Cisco Systems Inc. and now Oracle all want to offer a richer mix of technology products. The companies hope to find more hooks into customers and use those relationships to sell other kinds of stuff.

That setup, with a broad mix of services, software and hardware, helped Armonk, N.Y.-based IBM escape financial ruin in the 1990s and become one of the industry's most profitable companies. IBM has forked out nearly $13 billion on 40 acquisitions since 2006 to expand its offerings. HP has followed suit, spending $13.9 billion for services provider Electronic Data Systems last year.

Santa Clara, Calif.-based Sun lacked that kind of scale, especially after the tech meltdown of 2001 knocked the company off balance and led to a decade of financial pummeling.

Sun's best sellers are computer servers and machines that store data on tape. But Oracle and IBM mainly had their eyes on Sun's software.

The deal would give Oracle ownership of the Java programming language, which is a key element of the Internet and runs on more than 1 billion mobile devices worldwide. Oracle would get the Solaris operating system, which already has been a platform for Oracle's products. And Oracle would get Sun's MySQL database software, which has undercut Oracle and siphoned some sales away.

All these products are open-source, which means their underlying code is distributed freely on the Internet. To make money from the software, Sun sells support contracts alongside those programs. Like IBM before it, Oracle believes it can make money off those properties better than Sun can, partly by selling other products in package deals.

Forrester Research analyst Ray Wang thinks Oracle could keep MySQL to put pricing pressure on Microsoft, a longtime Oracle nemesis that sells a less expensive database product.

"With the acquisition of Sun, Oracle is now able to make all of the pieces of the technology stack fit together and work well," Oracle Chief Executive Larry Ellison said during a Monday conference call.

But unlike IBM, Oracle is a surprising suitor because it doesn't make hardware. Although Sun wouldn't be Oracle's biggest acquisition during a four-year shopping spree that has cost about $40 billion, it may be the boldest.

Some analysts suspect Oracle might try to sell Sun's hardware divisions if they turn out to be a drag.

"This is a really strange deal to me �� Oracle buying all this hardware, I wonder what they're going to do with it all," said Jane Snorek, an analyst with First American Funds. "I don't know what to think, frankly. It seems everyone wants to be IBM and have a mix. If it wasn't the for the fact that Oracle is such a good acquirer, I'd be negative" about the deal.

Oracle shares sank 24 cents, 1.3 percent, to close at $18.82 in trading Monday. Sun shares jumped $2.46, 37 percent, to $9.15.

Oracle's offer �� which is valued at $5.6 billion when Sun's cash and debt are taken into account �� amounts to $9.50 per share. That represents a 42 percent premium to Sun's closing stock price of $6.69 on Friday, and is about twice what Sun was trading for in March, before word leaked that IBM and Sun were in negotiations.

While Sun wouldn't be Oracle's most expensive acquisition, it will be the largest in terms of the people involved. Sun employs about 33,500 workers, far more than the roughly 12,000 that PeopleSoft had when Oracle bought that company in 2005 for $11.1 billion �� the biggest outlay during Oracle's expansion.

Oracle, which already has roughly 86,000 workers, didn't specify how many people will lose their jobs after it takes control of Sun. The cuts might not be as dramatic as they would have been in an IBM acquisition because Sun and Oracle have fewer overlapping products.

The smaller overlap also could keep Oracle from facing the antitrust objections that IBM likely would have prompted with Sun. Indeed, one of the sticking points in the IBM-Sun negotiations was the level of assurance Sun sought that IBM would see the deal through a regulatory review. Regulators figured to look closely at the way that swallowing Sun would expand IBM's lead over Hewlett-Packard in certain markets for servers and data storage.

Oracle already says the Sun acquisition, which it expects to close this summer, will add at least 15 cents per share to its adjusted earnings in the first year after the deal closes. The company estimated Sun will contribute more than $1.5 billion to Oracle's adjusted profit in the first year and more than $2 billion in the second year.

With former investment bankers Charles Phillips and Safra Catz steering things as the company's co-presidents, Oracle has been able to hit its financial targets in all its acquisitions during the past four years.

That helped enable Oracle to earn $5.5 billion on revenue of $22.4 billion in its last fiscal year. Investors have enjoyed some of that prosperity too, with Oracle's stock rising about 35 percent since the PeopleSoft takeover was completed in 2005. Oracle recently decided to pay a dividend for the first time.

But Oracle's emphasis on increasing profits will likely raise concerns in its new role as the steward of Sun's open-source software.

"This gives Oracle the keys to the crown jewels of the open-source movement," said Wang, the Forrester analyst.

Ellison said Oracle intends to invest more heavily in Java than Sun has been able to afford as its fortunes waned. While Sun still has big sales �� $13.9 billion last year �� its profitability has been hit and miss. Earnings last year were $403 million, but from 2002 through 2006 Sun lost more than $5 billion.

The Sun-backed free OpenOffice software for word processing and spreadsheets also could be used to weaken Microsoft's franchise �� an objective that would delight Ellison, who, like Sun co-founder and Chairman Scott McNealy, has long sought to undermine Microsoft's dominance of the computing industry.

Microsoft said it didn't have specific comments on the Oracle-Sun deal, though Neil Charney, general manager of a software-development unit at Microsoft, suggested that customers "ask themselves if this will add more complexity and cost" to Oracle and Sun's products.

Oracle's takeover came together in just days. Sun and CEO Jonathan Schwartz needed a deal fast after IBM withdrew its offer this month in a dispute over the terms of a buyout, and on Thursday, Sun reached out to Oracle, according to people familiar with the negotiations. That prompted IBM to put its previous offer of $9.40 per share back on the table, but Oracle swooped in with the higher price, these people said. They spoke on condition of anonymity because the details of the talks were considered confidential.

A person familiar with IBM's position said the company isn't likely to rebid for Sun. IBM's chief financial officer, Mark Loughridge, even threw some competitive dirt on the deal during IBM's earnings conference call Monday.

"Oracle and Sun have been partnering for two decades �� and what's the result?" Loughridge said. "As I look at this and ask myself, `What's really changed,' I think, `nothing.'"

PepsiCo offers to buy 2 bottlers for $6 billion

PepsiCo Inc.'s $6 billion bid to buy its two largest bottlers should make the owner of the Gatorade, Naked juices and Aquafina brands more nimble in a landscape where soft drinks have declined in popularity in favor of healthier options like water and juices.

The deals for Pepsi Bottling Group and PepsiAmericas would let PepsiCo control about 80 percent of its total North American beverage volume �� something the company and analysts said would streamline the process of getting newer or smaller products to stores.

Consumers could see products such as Izze sparkling juice and Naked fruit juices at more places, Chief Financial Officer Richard Goodman said, since the company would be able to negotiate with retailers directly rather than persuading the bottlers that now control most distribution to include smaller products in their network.

"There is a need to be more nimble given the increasing role of (non-carbonated beverages), retailer consolidation and the changing competitive landscape," PepsiCo Chairman and Chief Executive Indra Nooyi said.

The move shows how much the landscape has changed since 1999, when PepsiCo spun off Pepsi Bottling Group. At the time, the spinoff was a way for Pepsi to have a stake in a company that focused solely on making the soft drinks that dominated the market and were growing strongly.

Since then, though, soft drink sales have slowed, Pepsi added more non-carbonated beverages like Tropicana and Gatorade, and a different model is needed, Nooyi said.

"A move this big changes the entire landscape of the industry," said John Sicher, editor of the trade publication Beverage Digest. "Today the beverage business consists of a greater diversity of products, and PepsiCo needs more control and flexibility over the route to market for its brands."

Although ultimately the decision of what goes on store shelves lies with retailers, the move gives Pepsi more direction over its products by eliminating negotiations with independent bottlers and consolidating distribution.

The new system should improve the "speed of decision-making across the company and eliminate friction points resulting from competing manufacturing and distribution systems," Nooyi said. She said new products that start out small in one system could be switched to another with little trouble.

Pepsi now has three beverage businesses: a bottler-distributed soft drink business, a warehouse-delivered sports drink business and a warehouse-delivered juice business, said Deutsche Bank North America analyst Marc Greenberg. Consolidating them offers Pepsi cost savings, control over pricing and a more competitive system than its rivals, Greenberg said.

However, it also gives the company a larger stake in the more volatile bottler business, which is affected by packaging and other costs.

PepsiCo, which had been trying to cut costs, expects the deals to boost earnings by 15 cents per share when the cost savings are fully realized and save $200 million per year before taxes. Analysts say the savings could even be as much as $400 million.

Goodman, the CFO, said job cuts are probable in the consolidation but did not give an estimate. PepsiCo has laid off 3,500 employees and closed six plants as part of an effort to cut $1.2 billion in costs by 2011.

PepsiCo said it still expects earnings and revenue in 2009 to grow in the mid- to high-single digit range, excluding the stronger dollar and any impact of proposed deal.

Analysts speculated that Coca-Cola Co., the world's largest soft drink maker, may make similar moves with its bottlers since it faces the same challenges as Pepsi. It owns 35 percent of its largest bottler, Coca-Cola Enterprises Inc.

"We would expect Coke to follow," said Greenberg. "But the longer it waits ... the more it may cost: Advantage Pepsi."

Coca-Cola declined to comment.

PepsiCo currently owns 33 percent of Somers, N.Y.-based Pepsi Bottling group and 43 percent of PepsiAmericas, which is based in Minneapolis. It offered cash and stock worth 17 percent more than each stock's closing price on Friday for the stakes it doesn't own.

That equates to $29.50 per for share for Pepsi Bottling Group and $23.27 per share for PepsiAmericas. Both are evaluating the offer.

Bottlers have been raising prices, restructuring and cutting expenses to cope with weaker sales volumes and higher raw material costs. Last year, Pepsi Bottling Group's profit fell 70 percent, mainly due to a restructuring charge, as sales rose 2 percent. PepsiAmericas earnings rose 7 percent last year as revenue rose 10 percent.

PepsiCo Americas Beverages revenue fell 12 percent in the first quarter, as volume of carbonated soft drinks fell in the mid-single digit percentage range and sports drinks volume fell in the double-digit percentage range.

For the quarter that ended March 21, PepsiCo earned $1.14 billion, or 72 cents per share, down from $1.15 billion, or 70 cents per share, a year ago. That beat the 67 cents per share analysts were expecting.

Revenue slipped almost 1 percent to $8.26 billion. Excluding the stronger dollar's effect on international results, net revenue grew 6 percent.

Shares in Purchase, N.Y.-based PepsiCo fell $2.27, or 4.4 percent, to close at $49.86. Pepsi Bottling Group shares jumped $5.53, or 21.9 percent, to $30.73, while PepsiAmericas shares rose $5.16, or 26 percent, to $25.04.

AP Exclusive: Fed tests harder on regional banks

The government is giving Wall Street banks a helping hand. But this time it's not a handout.

The federal bank "stress tests" rate the individual loans held by big regional banks as riskier than the complex troubled assets held by the industry titans, according to a Federal Reserve document obtained by The Associated Press.

That approach could threaten some major regional banks while making the national banks appear in better shape when the government releases the results of the tests next month.

Regulators are administering the tests to 19 large financial firms to determine which banks are healthy, which need more help and which might fail if the recession worsens.

Under one scenario, the tests assume banks will see "no further losses" on the complex securities, according to the document obtained by AP. By contrast, it estimates that individual loans will lose up to 20 percent of their value.

Regional banks are holding more individual loans and fewer of the securities Wall Street giants specialize in �� complex derivatives backed by huge pools of mortgage-backed loans and other debt.

Analysts say regulators are probably favoring the largest banks because if even one failed, it would pose a grave financial risk. Banks that deal in securities are more connected to other corners of the global financial system.

Regulators also face pressure to highlight the weaknesses of some banks. Otherwise, critics will dismiss the tests as a whitewash. That could undermine one aim of the tests �� restoring confidence in the banking system.

The approach spelled out in the Fed document "certainly penalizes those banks that are more involved in traditional banking, which frankly have been performing better in recent months," said Wayne Abernathy, a former Treasury Department official now with the American Bankers Association.

He said banks' loan portfolios have lost only about 5 percent of their value so far, while the values of complex securities are down 30 to 40 percent.

The securities are held mostly by banking titans like Citigroup, JP Morgan Chase, Bank of America and Goldman Sachs. Their value is based on the performance of vast pools of underlying loans.

As defaults on the underlying loans spiked last year, investors lost confidence in the value of the assets. Individual loans have lost less value because their prices are tied more closely to actual defaults.

A Treasury Department spokesman referred questions to the Fed. A spokesman for the Federal Reserve declined comment.

Scott Talbott, a banking industry lobbyist with Financial Services Roundtable, said it's hard to conclude that the method discriminates because there are vast differences among all the companies on the list, regardless of size.

Regulators are administering the tests to all financial institutions with assets of at least $100 billion. The 19 institutions on the list include an insurer, Wall Street brokerages and regional banks, such as Cincinnati-based Fifth Third Bancorp and Cleveland-based Keycorp.

A spokeswoman for Fifth Third Bancorp said the bank would not comment. Keycorp did not respond to requests for comment. The bank said Tuesday it lost $488 million in the first quarter, partly from a large increase in what it sets aside to cover loan losses.

Some other regional banks on the test list also reported disappointing quarterly earnings Tuesday, reflecting steeper losses as people fell behind on loan payments. U.S. Bancorp's profit fell 61 percent, Regions Financial's 92 percent.

The Fed document obtained by AP doesn't mention any bank by name. And no sources or regulators would discuss any bank's performance on the tests. But some analysts have said a poor showing on the test could hammer a bank's stock or the broader market.

"The market is now pricing in an expectation that these reports are going to be pretty good," said Lawrence Brown, an accounting professor at Georgia State University. "So I think the downside risk is bigger than the upside potential."

Douglas Elliott, a former investment banker at JPMorgan now at the Brookings Institution, said only test results that reveal "substantial capital needs" will have credibility.

Once the results are announced May 4, regulators are expected to put the firms into three groups: those that are healthy, those that need more money to stay healthy and those at risk of failure.

The approach in the Fed document could help keep the largest banks out of the weakest category. That would avert the risk that bad news about the biggest banks could set off a market panic.

But it won't help the banks lower on the list. They could face pressure from speculators using share prices, futures and options to set off a wave of selling. Investors "already are preparing their strategies," Abernathy said.

Treasury Secretary Timothy Geithner told a congressional panel overseeing the federal bailouts that "the vast majority" of banks have more capital than they need. He said regulators would decide when banks will be allowed to pay the government back.

In the stress tests, regulators are putting banks through two scenarios. One reflects forecasters' expectations about the recession. The other assumes a more severe recession than expected.

Both tests measure losses that banks could face over the next two years against the cash cushions they hold to protect against those losses.

For the test that uses current expectations for the recession, banks can value securities as they have in recent filings. But losses for loans are estimated to range between 5 and 12 percent for mortgages and as high as 17 percent for credit cards.

Under the test that assumes a more severe recession, loan losses are projected at 7 to 20 percent. Securities in that test would be marked down based on market disruptions during the second half of 2008.

Yahoo Domains to cut nearly 700 jobs after 1Q results fall

Yahoo Inc. will lay off nearly 700 workers after getting off to a bumpy start under a tough-talking new boss who has promised to engineer a long-awaited turnaround at one of the Internet's best-known franchises.

Neither the lackluster first-quarter results nor the job cuts announced Tuesday came as a surprise.

Analysts had already predicted Yahoo's three-year slump would worsen during the first three months of the year, and hints about the payroll purge were leaked to the media last week.

Investors drove up Yahoo's stock, extending a recent rally propelled largely by media reports that the company is getting closer to forging an Internet advertising partnership with Microsoft Corp. as the two rivals try to counter online search leader Google Inc.'s domination of the advertising market.

In a Tuesday conference call with analysts, Yahoo Chief Executive Carol Bartz declined to comment on the status of the Microsoft discussions.

This marks Yahoo's third round of mass layoffs in little over a year, but the first batch since the Sunnyvale-based company hired Bartz in January. The cuts will affect about 5 percent of Yahoo's 13,500 workers. The estimated 675 people people losing their jobs will be notified during the next two weeks.

Yahoo dumped about 1,000 jobs in February 2008 and another 1,500 or so late last year while co-founder Jerry Yang was still running the company. Yang stepped down, largely because he wasn't able to snap the company out of its financial funk during his 18-month tenure as CEO.

Although it remains one of the most popular destinations on the Internet, Yahoo's fortunes have been declining since 2005 as Internet search leader Google Inc. sucked up more advertising revenue and trendy new online hangouts like Facebook and MySpace lured away younger Web surfers.

Yahoo earned $118 million, or 8 cents per share, during the first three months of the year. That represents a 78 percent drop from net income of $537 million, or 37 cents per share, in the year-ago period.

Last year's results included a non-cash gain of $401 million. But Yahoo's profit this year still would have been lower even after subtracting last year's one-time boost.

The latest earnings matched the modest expectations among analysts surveyed by Thomson Reuters.

Revenue fell 13 percent to $1.58 billion. If not for the stronger dollar, the sale of an e-commerce site in Europe and the loss of some fees, Yahoo said its revenue would have been down by just 3 percent.

After subtracting commissions paid to its ad partners, Yahoo's revenue stood at $1.16 billion �� about $50 million below analyst estimates.

Management indicated that Yahoo's results will erode again the second quarter, with total revenue expected to range from $1.42 billion and $1.63 billion. Yahoo's revenue totaled $1.8 billion in last year's second quarter.

Yahoo shares still surged 79 cents, or 5.5 percent, in Tuesday's extended trading after rising 72 cents to finish the regular session at $14.38.

In remarks elaborating on the layoffs, Bartz indicated she is trying to focus Yahoo more on its strengths in online news, finance, sports, e-mail and Internet search, where it ranks a distant second to Google.

In the process, she thinks Yahoo can free up more money to expand those products around the world and possibly hire more workers in those areas.

Yahoo product managers, in particular, appear to be among the most likely to receive pink slips, based on Bartz's blunt comments.

"We sort of had one product management person for every three engineers, so we had a lot of people running around and telling people what to do, but nobody was doing anything," Bartz said.

Microsoft feels more recession fallout, sales drop

Microsoft Corp. said Thursday its quarterly revenue fell from the previous year for the first time in its 23-year history as a public company, while its profit dived 32 percent.

The shortfall illustrated the toll the recession has taken on the world's largest software maker, even though Microsoft remains one of the richest and most profitable companies. In January, Microsoft said it needed to resort to its first mass layoffs, cutting 5,000 jobs, and on Thursday it announced it would do away with merit pay increases for employees in the next fiscal year.

Microsoft did not issue earnings guidance for the rest of the year, and it offered no hope for a rebound in the current quarter.

"I didn't see any improvement at the end of the quarter that gives me encouragement that we're at the bottom and coming out of it," said Chris Liddell, Microsoft's chief financial officer.

Even so, Microsoft shares gained 2.6 percent in extended trading after the earnings report, having closed earlier at $18.92, up 14 cents.

Redmond-based Microsoft said that in its fiscal third-quarter, which ended March 31, profit was $2.98 billion, or 33 cents per share. In the same quarter of 2008, Microsoft earned $4.39 billion, or 47 cents per share.

Microsoft's profit included a $290 million charge for severance from some of the layoffs announced in January. The software maker also wrote down $420 million related to investments that lost value.

Excluding such items, Microsoft said it would have earned 39 cents per share, matching the estimate of analysts surveyed by Thomson Reuters.

Microsoft avoided a steeper drop in profit by slashing costs in several areas, such as sales and marketing, which it cut by 9 percent to $3 billion.

Revenue in the last quarter slipped 6 percent to $13.6 billion, missing analysts' expectations for $14.1 billion.

"I think it was a good quarter in a tough environment," said Taunya Sell, an analyst for Ragen MacKenzie, a division of Wells Fargo. They did "the two things you can do in a tough environment �� try to keep costs down, and make sure customers still want to buy your products."

Microsoft makes most of its profit selling the Windows operating system and business software such as Office, and those divisions have been hammered over the last six months as consumers and businesses sharply cut their technology spending. The holiday quarter, which ended in December, was the PC industry's worst in six years, according to research groups IDC and Gartner Inc. In the following quarter, computer shipments sank about 7 percent.

Even the brightest spot in the PC market �� tiny, recession-friendly laptops known as netbooks �� had a downside for Microsoft because those inexpensive computers run a cheaper version of Windows XP, Microsoft's last-generation operating system.

The Windows division's profit fell 19 percent to $2.5 billion, and its sales sank 16 percent to $3.4 billion in the last quarter.

The division that makes Office saw its profit drop 8 percent to $2.9 billion on revenue that declined 5 percent to $4.5 billion.

Both divisions were cushioned to some extent by businesses that renewed bulk software licenses at about the same pace as usual.

Microsoft's online advertising business widened its quarterly loss, and its entertainment and devices division, which makes the Xbox 360 game console and the Zune media player, swung to a loss from the prior year.

Microsoft said the current quarter would probably still be weak in the markets for PCs and computer servers. Other technology companies have offered mixed assessments about whether a recovery is in sight.

Last week, Intel Corp. Chief Executive Paul Otellini raised some hopes when he said the PC market had bottomed out in the first quarter.

And on Thursday, EMC Corp. CEO Joe Tucci predicted that spending on information technology "has reached or is very near the bottom" and should rebound in the second half of this year. He made those comments even as EMC reported that its first-quarter profit dropped 23 percent and the company planned more cost cuts.

Other executives have been more cautious.

"I don't know how someone could say we've hit bottom in the current economic climate," Dirk Meyer, the CEO of Intel's main rival, Advanced Micro Devices Inc., said Tuesday.

Even as Microsoft and EMC reported profit and revenue declines Thursday, two e-commerce companies fared better.

Leading online retailer Amazon.com Inc. said profit rose 24 percent and revenue jumped 18 percent. And Netflix Inc. posted a 68 percent leap in profit, as more people turned to its DVD-by-mail service as an affordable entertainment option during the recession.

Ford shows it may be able to avoid federal bailout

Better-than-expected earnings from Ford raised hopes Friday that the automaker's restructuring and new products may be enough to spare it from a federal bailout, while General Motors received more government help and Chrysler raced to avoid bankruptcy.

Ford still lost $1.4 billion from January through March, but that was less than expected, and executives said the outlook for future sales was good enough to increase production of its most popular vehicles.

Ford Motor Co. has taken steps over the last few years to avoid government intervention: cutting costs, focusing on its core brands, and introducing new vehicles and advanced features.

"Ford is building the best stuff it's ever made in terms of quality rankings and critical reviews," said Aaron Bragman, an auto analyst at IHS Global Insight. "The vehicles are sufficiently improved and people are starting to realize that."

While Ford tries to go it alone, federal officials are questioning every penny spent by General Motors Corp. and Chrysler LLC, which are both subsisting on government loans.

On Friday, the Treasury Department said it loaned $2 billion to GM, bringing the automaker's total to $15.4 billion. Chrysler has borrowed $4 billion and could get $500 million more so it can keep running while it restructures.

But Ford, under the leadership of former Boeing Corp. CEO Alan Mulally, mortgaged all of the automaker's assets including the trademark blue logo a few years ago, when loans were easier to get from the private sector.

As of March 31, Ford had $21.3 billion in cash to help it survive the worst market for U.S. auto sales in 27 years.

The company said Friday it had spent just $3.7 billion of its cash during the first three months of this year, far less than the $7.2 billion it burned in the fourth quarter of 2008. Investors sent Ford's shares up 11 percent.

"I think the important comparison for us is 'Are we improving versus the fourth quarter?'" said Chief Financial Officer Lewis Booth. "Because the fourth quarter, things were really dreadful.

He said cost cuts and better pricing for its vehicles helped the company narrow its losses from $5.9 billion in the fourth quarter, and he expects continued improvement for the remainder of the year.

Ford said it was able to charge more for its vehicles, which are now coming loaded with features such as electronic blind-spot detection and technology that links drivers' cell phones and MP3 players to a voice-activated command center.

Chrysler, on the other hand, spent more on sales incentives than any other automaker, averaging about $5,000 per vehicle in March, according to Edmunds.com.

With a government-imposed deadline for massive restructuring less than a week away, Chrysler and federal officials held out hope that they could keep the automaker out of bankruptcy court, according to two people briefed on the talks.

Chrysler and the Treasury Department are preparing paperwork for bankruptcy filings one as a reorganization in Chapter 11 with government funding and the other as a liquidation if no government money is available, both people said, speaking on condition of anonymity because the fast-moving negotiations are private.

Chrysler has until Thursday to work out a joint venture with Italian automaker Fiat SpA. GM has until June 1 to make dramatic cuts.

Ford jumped ahead of both competitors in February with a new labor agreement that saved $300 million in the first quarter. A debt-for-equity swap shed $10 billion in debt.

Ford's overall work force in North America shrank 41 percent since December 2006, when it employed 122,400 salaried and hourly workers and began restructuring.

Ford wants to trim its work force even more. Of the 72,300 employees it had in March, 51,000 were union workers who have until May 22 to accept or reject a buyout.

"We started on this transformation of Ford two to three years ago," Mulally said last week in an interview with The Associated Press. "We were very clear with the government that we believed we had sufficient liquidity to make it through this, and we were not asking them for money."

President Obama has dismissed GM and Chrysler's viability plans as overly optimistic, given the current sales climate and the company's sluggish pace of restructuring.

While not discounting Ford's problems, analysts said the company has been more aggressive in key areas where the administration found fault with GM and Chrysler.

For instance, GM was faulted for its unwieldy size, with eight different brands. Ford sold its Aston Martin, Land Rover and Jaguar lines in 2008. It also reduced its stake in Mazda and is currently looking to sell Volvo. That will let Ford focus on Ford, Lincoln and Mercury.

Chrysler was also faulted for focusing on SUVs and minivans, leaving it ill-prepared for high gas prices. Ford is rolling out a mix of fuel-efficient vehicles that have been well-received by consumers who may be concerned about the uncertainty surrounding GM and Chrysler.

Ford's midsize Fusion model is a viable competitor against Toyota Motor Corp.'s popular Camry, with the 2010 models getting praise for quality, safety and fuel economy. More than 40 percent of the 2010 Fusions sold have been hybrids that get 41 mpg on the highway.

Ford is also bringing the Fiesta, its small European car, stateside next summer, and its compact Focus is selling well.

Ford's assembly plants will be churning out more of those products in the second quarter.

One day after GM said it would temporarily close 13 North American plants for up to 11 weeks this summer to slash inventories, Ford said it expects its production to increase 19.5 percent from the first quarter.

"We believe, with the decisive actions we have taken over the last few quarters, we have the dealer stocks well in line," Mulally said. "And with what we see with the reception of the new products, we believe we can go up a little bit more to support the real demand."

Ford said it's on track to break even or turn a profit in 2011. But the company isn't squeaky clean. It still has debt, an underfunded pension plan and a primary market the U.S. where consumers are skittish about buying a new car amid mounting job losses in a recession.

Should GM or Chrysler, or even a key supplier file for bankruptcy, Ford's production is likely to be affected. Mulally said the company has met with the government's auto task force to help it "understand the importance" and "interdependencies" of the supply base.

"The health of the supply base is probably the most critical issue as the government helps GM and Chrysler restructure," he said. "I think they will continue to pay the highest priority as they restructure to the supply base to make sure it stays intact for all of us."

Fiat eyes new company with GM Europe, Chrysler

Fiat Group SpA confirmed Sunday that it is in talks to buy most of General Motors Corp.'s European operations, taking another step toward creating a global automotive powerhouse.

Fiat also said it is evaluating the possible spinoff of its auto business to form the core of a new company.

Fiat Group Automobiles includes the Fiat, Alfa Romeo and Ferrari brands. In addition, Fiat is in the process of acquiring U.S. automaker Chrysler LLC without putting up any cash.

The new auto company, which according to Fiat would have $105 billion in annual revenue, would put the Italian automaker in markets where it has little or no presence, including North America, traditionally the largest market in the world.

"They're going to be a global powerhouse, I guess. Who would have thought?" asked Erich Merkle, an independent auto industry analyst in Grand Rapids, Mich. "They seem to be on a buying binge right now, looking for cheap and distressed assets like Chrysler and Opel."

The Chrysler deal, which must still be approved by a U.S. bankruptcy court, would be in exchange for giving Chrysler access to Fiat's small-car and engine technology. Chrysler cars and trucks also would be sold by Fiat through its global distribution network.

The deals would make Fiat a big global player, but that might not be the best thing for the Italian automaker, which might be overreaching with the acquisitions, said Merkle.

"This is a lot to take on, quite honestly," Merkle said. "When you start looking at Chrysler, it'll make them a very large automaker, but we've seen that large isn't necessarily indicative of success."

It will take years, Merkle said, for Fiat to gain any synergies by globalizing design, engineering and manufacturing operations with Chrysler and the GM units.

The Fiat statement was issued on the eve of a meeting in Berlin between Fiat CEO Sergio Marchionne and the German economy and foreign ministers to discuss Fiat's offer for GM's German unit, Opel.

GM Europe also includes the British company Vauxhall and the Swedish carmaker Saab. Saab may not be included in the deal, however. The company is being reorganized under Swedish law and is likely to be separated from the rest of GM's European operations.

GM Europe spokesman Frank Klaas said the company has several possible investors, which he wouldn't identify, but said, "we are in very good negotiations with them."

GM also makes and sells small Chevrolet-badged cars in Europe that are designed in South Korea by the company's Daewoo unit, and it's unlikely to sell that because that would be GM's only remaining foothold in Europe, Merkle said.

General Motors has been trying to find investors for its noncore and unprofitable assets as part of a restructuring in which it has received $15.4 billion in aid from the U.S. government to avert collapse.

Opel has said it needs $4.3 billion to get through the economic crisis. The German government has said it doesn't foresee giving direct state aid. Chancellor Angela Merkel has suggested the government could help an Opel investor with loan guarantees.

Fiat said that over the next few weeks, Marchionne will be looking "to assess the viability of a merger of the activities of Fiat Group Automobiles (including the interest in Chrysler) and General Motors Europe into a new company."

"As part of this process, the group would evaluate several corporate structures, including the potential spinoff of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe."

In an interview Sunday with Corriere della Sera, Fiat Chairman Luca Cordero di Montezemolo called GM's Opel an "ideal partner" and a possible takeover by Fiat an "extraordinary opportunity."

Fiat is not the only suitor for Opel, however. Last week, Canadian car parts maker Magna International Inc. presented German Economy Minister Karl-Theodor zu Guttenberg with what the minister called a "rough concept for a commitment with Opel."

Guttenberg has said the German government would wait to determine its role in any full or partial Opel sale until after the U.S. government had weighed in.

Fiat, meanwhile, has pressed ahead with a takeover of Chrysler. Chrysler is seeking to sell substantially all of its assets to Fiat, but must gain approval from a New York bankruptcy court.

In addition to Fiat Group Automobiles, the Fiat Group also includes its agricultural vehicles branch CNH and its Iveco trucking unit, as well as a media arm.

Lenders group objects to sale to Fiat

A dissident group of Chrysler LLC lenders objected Tuesday to the sale of the bulk of the automaker's assets to Italian automaker Fiat, saying that the proposed sale process is designed to prevent competitive bidding.

In an objection filed Tuesday, the lenders group said the proposed sale's bidding procedures only give the appearance of legitimacy and don't maximize the sale price of the assets. Michigan's state attorney general also filed an objection over concerns that if the sale goes through the new company formed wouldn't meet obligations to a state workers' compensation fund.

Lawyers packed the hot and stuffy New York City courtroom for a third-straight business day of testimony in the case, which the Auburn Hills, Mich.-based automaker hopes will end in a swift exit from court oversight.

As the hearing stretched into the evening, Chrysler turnaround officials and executives testified about the events of the months leading up to the company's bankruptcy protection filing.

Scott Garberding, Chrysler's executive vice president for procurement, described efforts to form alliances with automakers other than Fiat, including General Motors Corp. and Russia's GAZ, in recent years.

In addition, Robert Manzo, an executive director with Capstone Advisory Group LLC and one of Chrysler's top restructuring advisers, described how the automaker found itself with few options in the month leading up to Chrysler's government-imposed April 30 restructuring deadline.

"Given the options available over the past 30 days and the lack of liquidity, we could choose a transaction along the lines of the Fiat deal with the help of the U.S. Treasury or face immediate liquidation," Manzo said.

Judge Arthur Gonzales was set to issue a decision on the bidding procedures later in Tuesday's hearing.

On Monday, the same group of lenders objected to a Chrysler motion to allow the company to access $4.5 billion in bankruptcy financing, saying that it was too closely tied to the proposed sale.

The group of holdout lenders had refused a deal that would amount to 29 cents on the dollar to dissolve what they're owed and go along with the government's restructuring plan for Chrysler. President Barack Obama said Thursday that the lenders were seeking an "unjustified taxpayer-funded bailout" after Chrysler and his auto task force cleared the company's other hurdles, including the Fiat deal and a cost-cutting pact that the United Auto Workers ratified last week.

Early on in Tuesday's hearing, Gonzales ruled that the identities of the group's members do not need to be sealed, despite arguments from the group's lead attorney that death threats were made against some of them.

Thomas Lauria, an attorney for the lenders group, said the names should be sealed by the court because some of the members had received threats of violence after been singled out by President Obama as the cause of Chrysler's bankruptcy filing.

But Robert Hamilton, an attorney for Chrysler, said those threats only amounted to four or five "rants" on a newspaper Web site.

"Anyone who has an understanding of the kind of rants on these kinds of message boards would never take them seriously," Hamilton said.

Gonzales gave the lenders group until 10 a.m. Wednesday to file their list of members with the court.

Fiat is out to create automotive powerhouse

Fiat is trying to build a global automaking powerhouse out of parts scavenged from broken-down General Motors and Chrysler.

The Italian automaker struck a deal last week that could eventually give it a controlling interest in Chrysler, but its ambitions are bigger than that: Now it is negotiating to buy GM's main European unit, which includes the Opel and Vauxhall brands.

Fiat Group CEO Sergio Marchionne's grand plan is for Fiat to spin off the resulting automaker, which he said would be big enough to compete with the mightiest of car companies, with capacity to turn out some 5.5 million vehicles a year.

Fiat could become the fifth- or sixth-largest automaker in the world if it can complete its deals with Chrysler and GM, said Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide, an industry consulting firm in Northville, Mich.

Currently, Fiat is considered a smaller, regional player, ranking 10th worldwide in cars and trucks produced.

Fiat's aim eventually is become the world's No. 2 automaker, behind Japan's Toyota, according to Germany's economics minister, who met with Marchionne on Monday in Berlin.

But there are lots of questions about whether Marchionne can pull it off.

The plan is audacious, not the least because Marchionne is hoping to execute it without putting down a cent. Fiat is hoping to take advantage of the crisis in the auto industry by obtaining billions in loan guarantees from the U.S., Canada and various European governments.

"We're in the middle of an automotive yard sale," Robinet said. Marchionne has "gone to a yard sale and picked up the really good stuff."

Fiat's deal to take a big piece of Chrysler could not only save Chrysler, it would give Fiat access to the huge North American market.

And by buying GM's main European operations, Fiat could cut its production and development costs through economies of scale and gain expertise in building midsize and larger cars. Fiat, the maker of Fiats, Alfa Romeos and Ferraris, specializes in small cars.

Marchionne made the rounds in Berlin on Monday, seeking to persuade German Chancellor Angela Merkel and her economics and finance ministers that Fiat can save many of the 25,000 jobs at Germany's Opel, not to mention its supplier network. GM employs some 54,000 in Europe, including at Sweden Saab and Britain's Vauxhall. It is not clear whether Saab would be part of a deal with Fiat.

Max Warburton, a Sanford C. Bernstein auto analyst, questioned whether a collection of loss-making auto companies can generate cash, noting that Fiat's auto business posts a profit only because of its Brazil operations. But the really big question is: Where will the capital come from for the new company?

Warburton suggested that Fiat will need to sell off its "jewel assets," CNH agricultural and construction vehicles and Iveco trucks. Marchionne has ruled that out.

In Germany, Economy Minister Karl-Theodor zu Guttenberg said Fiat estimated its short-term financing needs in Europe �� stemming from GM's debts and pension obligations �� at $6.6 billion to $9.3 billion, which could be covered by loan guarantees from various governments.

"Fiat wants to get into this deal without debts of its own," Guttenberg said.

GM, for its part, has been trying to find investors to help stave off collapse.

"We are talking to them, amongst other parties. Not solely Fiat, but several parties who have an interest in making investment in our European business," GM CEO Fritz Henderson said in an interview Monday with The Associated Press.

While analysts see advantages in a Fiat-Chrysler combination, there is much more skepticism among industry experts and unions in Italy and Germany about the wisdom of a play for Opel. German unions are worried about jobs, and sour about the $2 billion that Fiat walked away with when a previous partnership with GM was dissolved.

Asked what the plan might mean in terms of job losses or plant closings, Guttenberg said Marchionne "hasn't offered any specific numbers yet, but he described them as not being too dramatic."

In a note to investors, Warburton, the industry analyst, said an Opel deal "makes sense if it can be made to function."

"We remain unconvinced that Fiat has the management depth to pull off this very ambitious task," Warburton said, "although we acknowledge that the company clearly keeps its talent obscured."

But Adam Jonas, auto analyst with Morgan Stanley, said if anyone can pull off such a spectacular gambit, it is Marchionne. Jonas said Marchionne is known for putting in long hours and cultivating talented management teams.