FOMOCO'S EQUITY-FOR-DEBT PROPOSAL

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Ford Motor Company's advertising once said "Ford Has a Better Idea."

Ford's latest "better idea" has involved turning debt into equity. In other words, talking the folks FoMoCo owes money to (i.e. the UAW VEBA, bondholders) into turning that pesky debt into an ownership stake.

All of the Detroit 3 want to convert some of their creditors into stockholders.

But the "Going Thing" about FoMoCo's equity-for-debt proposals is that Ford is the lone "Maverick" among the "Beg 3" because it doesn't want to sign up for taxpayer/deficit/printing-press-funded loans at the First National Bank of OBAMAnomics.

The details of Ford's latest debt swap proposal are truly staggering -- printing up 500 million new shares of "F" and paying out up $2.2 billion cash from Ford Motor Credit to lure holders of up to $10.4billion of bonds and secured-term debt

The 500.0 million new shares is more than a fifth of the current outstanding total of 2.4 billion, while the $2.2 billion is about 10.0% of the $22.0 billion cash Ford held at the end of last year and amounts to roughly 91 cents per outstanding share.

Note that at current share prices, you'd have to swap over 25,000 shares of "F" to pry a single Shelby GT500 out of the greedy hands of a Ford dealer. If the new shares of stock were GT500s instead, it would be equivalent to nearly 11,000 of them (assuming they're valued at the M.S.R.P.)

(By the way, Ford COULD profitably sell 11,000 more GT500s at the right price (which is not the ridiculous $17,000+ mark-up (exclusive of dealer gouging) over the piddly, prosaic 315-horsepower Mustang GT) if the anti-free-market Corporate Average Fuel Economy monkey were taken off its back . . . but that's another issue for another day)

Those who decry the "Detroit Bailout" as evil incarnate and want the not-so-free market to kill off the weak automakers so that Team Japan will be able to rule the World auto markets unfettered when the current "automotive depression" abates, should applaud Ford's wholly private-sector attempts to cut debt and improve its balance sheet the old-fashioned way. (Remember, Billy C. Durant actually built General Motors with stock instead of cash. But then it didn't really work out so well for him)

To Ford's long-suffering shareholders, the Glass House Gang's recent proclivity to divide the shrinking equity pie in ever-smaller slices probably smells like stock dilution.

On the other hand, does FoMoCo really have much choice?

The alternatives are worse.

In one ditch lies handing virtual control over to Obama's "Car Czar" "Central Committee" of automotive know-nothings. It's bad enough that Ford will be forced to run the regulatory gauntlet of a World gone mad over the Climate Change Religion and endure at least four years of unrepentent Naderites, green idealists, trial lawyer patsies, and "appliance motorist" bureaucrats controlling the regulatory structures and the courts that set the parameters of the [un]free market for new light vehicles. But letting Obama's unqualified and inexperienced band of automotive-freedom-hating "comrades" actually have direct veto power over Ford's product and investment decisions would be far worse.

The other ditch would be bankruptcy (which is generally really bad for stockholders and non-secured creditors as well as consumer perceptions of a brand's longevity).

The long term effects of these latest "bold moves" on the market value of "F" bear watching. "Truth With Speedzzter" doesn't give investment advice of any kind -- ever -- so you are all on your own to determine whether this scheme makes Ford's stock more or less attractive to own.

Debtholders, "is there a [share] of Ford in your future?"