Finance & Business World

Federal aviation regulators slapped American Airlines on Thursday with the largest fine in history, charging that the carrier made thousands of unsafe flights.

The Federal Aviation Administration said it has "proposed" a $24.2 million civil penalty for American Airlines’ failure to properly inspect wire bundles in the wheel wells of its MD-80 aircraft. The incident snarled thousands of flights in 2008.

The airline, owned by AMR Corp., (AMR, Fortune 500) did not follow the guidelines in the so-called 2006 Airworthiness Directive, which was intended to prevent wires from shorting, which could cause a loss of power and possibly a fire, the FAA said.

The airline’s stock price is down 1.7%.

The FAA inspections resulted in the grounding of about 1,000 American Airlines flights in early April, 2008, after the FAA found that the airline did not properly inspect two of its airplanes.

As part of that inspection, the FAA determined that the airline operated 286 of its MD-80s on a total of 14,278 flights "while the aircraft were not in compliance with federal regulations cheap business cards."

FAA spokesman Lynn Lunsford said the fine is considered a proposal as a legal formality, because the airline has 30 days to respond and has the option of negotiating a smaller fine.

"There was never a flight safety issue," American Airlines spokesman Tim Smith told CNNMoney.com in an email.

"These events happened more than two years ago and we believe this action is unwarranted," he said. "We will challenge any proposed civil penalty. We are confident we have a strong case and the facts will bear this out."

Lunsford said that Southwest Airlines (LUV, Fortune 500) had previously been the recipient of the biggest FAA fine — of $10.2 million — which it was able to negotiate down to $7.5 million. 

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A Virginia real estate investment group has paid $4.4 million for the troubled River Haven Apartments complex in north Raleigh.

TGM Realty Investors, a subsidiary of Richmond, Va.-based Thalhimer Real Estate, purchased the property in early June after the property had gone into foreclosure January. The Community Investment Corporation of the Carolinas had taken over the property for $4 million in January. CICCAR is a consortium of 115 bank members that provide debt financing for affordable housing properties. It is a subsidiary of the North Carolina Bankers Association.

River Haven was built in 2000 with 112 two- and three-bedroom apartment units on 10.5 acres. It is located at 9310 River Haven Place off of Capital Boulevard in Raleigh. The property had a tax value of $6 million, according to Wake County records.

It is the third apartment complex TGM Realty has purchased in North Carolina. It also owns the Stonewood Apartments and Crystal Village Apartments in Durham.

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Tesla Motors Inc. said Tuesday it expects its stock will sell in the $14 to $16 a share price range.

The Palo Alto-based electric car company said that it expects to raise up to $230 million between the 10 million shares it will sell in its initial public offering, the 3.3 million shares that Toyota Motor Corp. has agreed to buy and 1.1 million in additional shares its underwriters have the option to buy payday advance.

The company's market cap at the high end of the price range would be about $1.5 billion.

It has applied for the ticker symbol "TSLA" to trade on the Nasdaq exchange.

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Faced with uncertain winds in U.S. defense spending, Boeing’s Hazelwood-based defense unit is venturing into far less traditional markets like the power grid and cybersecurity.

The aerospace company will continue to build fighter jets and other military aircraft. Boeing learned in May that it had secured another multi-year order of locally built F/A-18 fighter jets.

But earlier this year, Defense Secretary Robert Gates said he would urge President Barack Obama to veto any legislation that continues production of the "unnecessary" C-17 Globemaster transport plane. Last year, the Pentagon scaled back Army modernization and missile-defense programs in which Boeing was a major player.

"We absolutely want to stay in those platform businesses if you want to call it that," said Chris Raymond, Boeing Defense, Space & Security’s vice president of business development. "We want to stay in the rotorcraft, airborne battle management, fighters and strike. Those are obviously core business for us. We are always trying to extend that and refresh the products in that."

But the nation’s second-largest military contractor also wants to "diversify and expand" into other realms that include energy and cybersecurity, he said.

Last fall, Boeing won an $8.6 million grant from the U.S. Department of Energy to help develop an advanced "smart grid" prototype for optimizing regional power transmission. Boeing also was subrecipient on two other Department of Energy grants with partners Consolidated Edison of New York and Southern California Edison.

In all, the Department of Energy awarded $620 million in federal stimulus to 32 demonstration projects aimed at modernizing and fortifying the nation’s electrical grid.

Boeing Chairman Jim McNerney told shareholders last month that while the company plans to "maintain a large and stable business" providing programs and services to the U.S. military, the defense contractor also is actively pursuing other opportunities for growth.

In January, Boeing formally changed the name of its defense unit from Integrated Defense Systems to Boeing Defense, Space & Security. The move was part of a realignment aimed at capturing business in adjacent markets within the United States and abroad, officials said.

Boeing and other defense contractors are making a push into the emerging homeland security market as well.

Raymond said the line is going to blur between classic defense and homeland security functions.

"I think you’ll see the big defense companies kind of morphing to defense and security, or global security," he said . "And that covers more than just what we’ve thought of as defense."

Last month, for instance, a Lockheed Martin-led team began development of a Next Generation Identification system capability to help law enforcement agencies better search the FBI database of wanted criminals and terror suspects. Lockheed Martin has opened a NexGen Cyber Innovation and Technology Center in Gaithersburg, Md.

In addition to energy and cybersecurity, those markets include intelligence and logistics, company officials said.

Philip Finnegan, director of corporate analysis at Teal Group, said Boeing and Lockheed reflect a trend among defense contractors that are focusing on adjacencies. It makes all the more sense with defense budgets reaching a plateau, he added.

"This fits within an overall drive we have seen in Boeing to really work to broaden itself beyond its defense core," Finnegan said.

James Carafano, a military and homeland security expert at the Heritage Foundation, said Boeing’s moves also reflect a realistic response to the cyclical nature of U.S. defense spending. But it also reflects the expertise the company has developed managing sophisticated manufacturing efforts with far-flung supply chains.

"When you put together a modern airplane, it is an incredibly large, complex system," Carafano said. "I think Boeing thinks it is in the business of systems integration, and systems integration is something that cuts across a lot of sectors."

Raymond agreed.

"We always want to be a large-scale systems integrator," he said. "That is one of our core DNA."

Boeing’s capabilities to handle complex systems engineering jobs and to manage complex supply chains, he said, are largely why the company was awarded such major contracts as the Future Combat Systems, missile defense and the country’s secure border initiative.

Nonetheless, Future Combat Systems — a major Army modernization effort — was another major Boeing contract that was scaled back. Last June, the Pentagon ordered a major restructuring of the $160 billion Future Combat Systems program to a series of acquisition programs extending high-tech battlefield equipment to all combat brigades.

Boeing was the lead contractor for the modernization program along with Science Applications International Corp. of San Diego.

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The developers of Salpare Bay, the failed luxury condominium project on Hayden Island, expect to file for bankruptcy by June 4.

The bankruptcy plan, disclosed in a federal lawsuit against the lenders on the $100 million project, would occur in time to stop a sheriff’s auction of the property to satisfy a $4.4 million judgment won by builder J.E. Dunn Northwest Inc. for its work on the project in 2007.

Attorney Christine Kosydar, who has represented majority owner Michael DeFrees and minority owner George Killian, revealed plans to file for bankruptcy on or before June 4 in papers disclosing a conflict between the pair. Kosydar sought court permission to withdraw as Killian’s legal counsel because of the dispute.

The document did not disclose whether the bankruptcy petition would be filed under Chapter 7 (liquidation) or Chapter 11 (reorganization) of the U.S. Bankruptcy code.

DeFrees and Killian are seeking $390 million from 40 lenders who brought the project to a halt when they declined to fund a $63.6 million loan.

A bankruptcy petition would add another legal wrinkle to a vast case that already has spawned what’s thought to be the largest legal negligence case ever filed in Oregon. The 40 lenders have sued law firm Sussman Shank LLP in Multnomah County Circuit Court for $447 million, saying its counsel led them to decline to fund the loan and exposed them to liability to DeFrees and Killian.

Sussman Shank counters that it represented the one bank that is not part of the case.

The Multnomah County Sheriff’s Department auction, which covers both the condominium property and associated marina, is currently scheduled for 10 a.m. June 4 on the courthouse steps.

Also pending on the Salpare Bay calendar: U.S. District Court Judge Michael Hogan has scheduled a mediation session in the developer-lender cases for 9 a.m. June 2 in his chambers.

Salpare Bay, 449 N.E. Tomahawk Island Drive, offered buyers the chance to live next to the Columbia River in luxurious condominiums and first-class marina accommodations. The 204-unit project has languished since mid-2007.

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Student loans offer an invaluable avenue to help cover the cost of higher education. But they can also impose a financial burden on graduates.

One method for recent graduates to deal with student loans is through loan consolidation. Several college and university financial aid offices offer information about student loan consolidation. But you might find quicker answers regarding loan consolidation on the Web.

Here are a few websites that provide useful general and specific information on the subject:

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Three former football players who made their marks at Triangle universities headline the 2010 class of North Carolina Sports Hall of Fame inductees.

The hall will add a total of seven new members this year, including Jim Donnan, Mike Quick and Don McCauley.

Donnan is a former North Carolina State University quarterback who went on to have a standout coaching career at the University of Georgia. Fellow Wolfpacker Quick starred as a receiver at NCSU before playing for the Philadelphia Eagles in the NFL.

McCauley played for the University of North Carolina at Chapel Hill Tar Heels. He was an All-America running back there before going on to become a pro bowler with the Baltimore Colts.

The class will be enshrined at an induction ceremony held in the North Raleigh Hilton on May 13. The hall, which was established in 1963, has 266 members. The museum is located on the third floor of the North Carolina Museum of History in Raleigh.

The other inductees this year are:

• Karen Shelton, whose UNC-CH field hockey teams have won seven national titles;

•Paul Simson, one of the state’s most accomplished amateur golfers with two British Amateur Senior Open championships among his victories;

• Carla Overbeck, a three-time All America soccer star at UNC-CH who now coaches at Duke University;

• Herb Appenzeller, a Wake Forest Football player in the 1940s and longtime athletic director at Guilford College.

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Morgan Stanley said it swung to a $1.8 billion profit in the first quarter Wednesday, as strong trading revenues boosted the Wall Street firm’s latest results.

The New York City-based investment bank said it earned $1.03 a share during the quarter. Including earnings from discontinued operations, Morgan Stanley posted a profit of $1.4 billion, or 99 cents a share during the quarter. A year ago, Morgan Stanley lost $578 million, or 57 cents a share on that basis.

The results were far better than what analysts were anticipating. Expectations were for the company to report a profit — including discontinued operations — of $938 million, or 57 cents a share, according to Thomson Reuters.

Morgan Stanley CEO James Gorman, who succeeded current chairman John Mack as CEO at the start of the year, praised the firm’s efforts, particularly that of its growing sales and trading division.

Revenue from the company’s debt and currency trading business in particular, more than doubled from a year ago to $2.7 billion in the quarter.

Profits were higher across all three of the company’s divisions — its securities business, long-suffering asset management unit and wealth management division.

The latter unit grew dramatically after announcing plans last year to merge with Citigroup’s Smith Barney business. Client assets grew, while expenses showed signs of moderating from the previous quarter.

"This may be the beginning of the savings that were first promised when it integrated with Citi’s business," said Brad Hintz, senior analyst at Bernstein Research.

Ruth Porat, Morgan Stanley’s chief financial officer, attributed at least part of the company’s results to improvement in the economy, but echoed comments by Gorman, saying the firm still had "more work to do."

Morgan’s investment advisory business has been sluggish as of late due to weakened dealmaking activity. At the same time, real estate funds operated by the company have endured a series of bruising losses on commercial loans recently.

Morgan Stanley’s results however, may signal the firm’s return to consistent profitability. Last year’s performance was uneven, with the company reporting a net loss of $907 million for fiscal year 2009.

All of the nation’s top banks have come roaring back in the latest quarter, not only turning a profit, but also blowing analysts’ estimates out of the water.

Citigroup (C, Fortune 500), which was among the hardest hit banks during the credit crisis, reported a first-quarter profit of $4.4 billion earlier this week, while California-based lender Wells Fargo (WFC, Fortune 500) also scored Wednesday as it reported a first-quarter profit of $2.5 billion. Both banks beat Wall Street’s earnings estimates.

Goldman Sachs (GS, Fortune 500) also recorded an impressive $3.5 billion in profits Tuesday, even as its results were overshadowed by the SEC’s fraud case against the investment bank.

Porat disclosed to analysts Wednesday that Morgan Stanley was not facing any potential federal legal action related to mortgage securities it helped create.

Morgan Stanley (MS, Fortune 500) shares rose nearly 6% in afternoon trading on the news.  

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General Motors reported $3.4 billion loss in the fourth quarter of 2009, but is on track to possibly return to profitability in 2010, the company said Wednesday.

Chief Financial Officer Chris Liddell, who joined the company earlier this year, stopped short of forecasting a profit this year, but said that results in the recently-completed first quarter, which will be reported in May, and the outlook for sales the rest of the year gives the company hope that it is close to returning to the black for the first time since early 2007.

He points out that much of the fourth-quarter loss was due to one-time items, such as a $2.6 billion settlement loss related to the UAW retiree medical plan. Without those one-time items, the loss would have been closer to $600 million in the quarter.

"The underlying profitability is not as bad as it would seem," he said. "We don’t need to make that much of an improvement to get to profitability."

Still, even without those one-time items, the results at GM were far worse than rivals Ford Motor (F, Fortune 500) and Toyota Motor (TM), which both reported profits in the period due to the improving auto sales.

Mike Boudreau, a director at Michigan-based turnaround firm O’Keefe & Associates, said though the loss might seem disappointing, he chalks it up to closing the books on a very difficult year of transition.

"I’m not too focused on 2009; even if they had posted a profit in the quarter, I don’t know if it would have meant much," he said.

He agreed with Liddell’s assessment that making money at some point in 2010 should be in reach.

"They’re going to get a lift from the improvement in the U.S. economy," he said. "I don’t know if they’ll make money for the entire year, but I think they’ll be able to break through and turn a profit for at least a couple of quarters."

The fourth-quarter loss came despite a 15% jump in the number of vehicles sold in the quarter compared to a year earlier, and a 10% cut in the number of worldwide employees. The improved sales and lower labor costs allowed it to trim its losses, though. In the fourth quarter of 2008, the pre-bankruptcy GM lost $9.6 billion.

Technically, GM’s financial results were not comparable to earlier periods as they were reported under what is known as "fresh start accounting" associated with the company emerging from bankruptcy in July of last year.

The accounting process is seen as an important first step to GM’s plans to put its bankruptcy behind it and once again offer shares to the public. Taxpayers own about a 60% stake in GM and will not be able to get back most of the $50 billion given to the company to see it through bankruptcy until that sale of shares.

Liddell said that a return to profitability will be the key to the timing of GM offering shares to the public. Boudreau estimated GM will probably need at least two or three profitable quarters in a row before its IPO.

"They have a shot at at doing it by the end of the year," he said.

Most of the losses continued to be concentrated in GM’s home North American market, where it rang up $3.4 billion of losses, while GM Europe lost $814 million in the period. But European losses were largely offset by a $738 million profit from GM International, which represents its operations outside of North America and Europe. That led to a wordwide total loss of about $3.4 billion.

Driven by strong sales gains in China, GM International sold almost as many cars as GM North America and Europe combined during the quarter. 

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Revamped pizza and a frank advertising campaign helped Domino’s Pizza Inc. more than double its fourth-quarter profit as curious customers tried out its new recipe, the chain said Tuesday.

Executives have said the chain decided to start overhauling its recipes more than 18 months ago after mounting criticism from focus groups and on social media sites.

And it boldly admitted in a series of documentary-style spots that under its old recipe, customers complained its crust tasted like cardboard and its sauce was reminiscent of ketchup.

The company began promoting its new pizza in December. That helped profit climb to $23.6 million, or 41 cents per share, compared with $11 million, or 19 cents, a year earlier.

Removing one-time items, the company’s profit was 30 cents per share — well ahead of forecasts.

Sales improved to $462.9 million from $428.2 million. Analysts expected a profit of 25 cents per share with sales of $437.5 million.

In the U.S., sales at stores open at least a year grew 1.4 percent, while overseas — which comprises nearly half of global retail sales — climbed 3.9 percent. This figure is a key measure of a retailer’s performance since it measures results at existing stores rather than newly opened ones free credit score online.

Meanwhile, Chairman and Chief Executive David Brandon said traffic increased all of last year and has continued to grow in 2010.

The question remains, though, whether Domino’s can keep the momentum going, or whether the novelty of the new recipe will wane.

"When a restaurant company radically changes their menu, usually there’s a curiosity bump involved in the results," said Morningstar analyst R.J. Hottovy.

"But it’s too early to tell if that’s going to be sustainable for a long time."

Full-year profit surged 48 percent to $79.7 million, or $1.38 per share, from $54 million, or 93 cents, a year ago. Adjusted earnings were 87 cents per share. Annual revenue fell 2 percent to $1.4 billion from $1.43 billion.

Domino’s does not give quarterly or full-year profit outlooks, but did provide some long-term same-store sales forecasts. The pizza chain predicts domestic sales at stores open at least a year will rise 1 percent to 3 percent, with international sales at stores open at least a year up 3 percent to 5 percent.

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