Ford's debt trap. (Market Horizons).

Bonds that pay as much as six percentage points more than U.S. Treasuries are generally not considered the most solid investments. Such was the case with the junk bonds of 1980s fame, as with the current debt offerings of emerging markets in Latin America.

That is why the latest addition to the club, the Ford Motor Co. -- an icon of U.S. industry--is rather amazing. Recently, Ford's bonds carried a premium of 5.8 percentage points above equivalent U.S. government securities, down from 6.8 in October. By comparison, bonds issued by Mexico, hardly a symbol of stability, paid only 5.2 percentage points over Treasuries.

True, Ford isn't quite in the same category as headline-makers Argentina, Venezuela and Brazil. But the decisions that led to Ford's problems are remarkably similar to those made in many emerging-market capitals.

How did the automaker get into all this trouble? Evidently, Ford was using its financial arm to keep afloat. It is a well-known fact that U.S. auto companies used to make much of their profit from the financing rather than from the actual sale of cars.

More recently, those handsome profits have been shaved by strong competition, which led to low-interest rate and zero-interest loans. In the past few years, the resulting auto loans were securitized--and the proceeds from these sales used to keep the company's dividends up. Essentially, Ford was selling off its "china," the loans that represented an important part of its assets, to pay current expenses.

That is a financial no-no. While the investment community should have caught on to the practice sooner, it eventually realized what was going on.

Once it did so, Ford's financial ratings dropped. Ford is essentially frozen out of the market for normal corporate bonds: Nobody wants to take a chance on new issues from the U.S. bond market's largest corporate debtor. And the company did not even sell securitized debt between August and December, when it issued $5 billion in asset-backed

That leaves Ford in a difficult position. How will it finance the future development necessary to remain competitive? And that is precisely what makes Ford's predicament reminiscent of the financing problems of many emerging-market countries.

On a regular basis, those governments get into trouble for doing something quite similar: They sell bonds, and use the proceeds to pay ... well, not exactly corporate dividends. Dole-outs for taxpayers, however, are pretty much the same thing.

In the worst cases, money is essentially given away (through an overvalued exchange rate) to wealthy citizens who speculate on the devaluation of their own nation's currency. Regardless of how the money is spent, the important point is that the emerging-market government is left with debt--and no assets to show for all its spending.

That is very much like what appears to have happened to Ford's balance sheet.

Of course, as the story goes, there is always an outside element to blame. Emerging-market countries like to point to the global business cycle -- or perhaps to price declines in the market for their particular commodity -- as the primary reason for their troubles. Similarly, Ford can cite its huge losses from the Firestone problem and other liability cases.

Ford's product mix may also be contributing to its troubles, although that is hardly beyond the company's control. And, of course, that brutal price war, launched by crosstown rival General Motors over the past year and a half, has stripped away the company's remaining profits. The resolution of the Ford problem is likely to be quite a bit different than the resolution of Argentina's problems, though. It's not inconceivable that ultimately Ford may need help in the form of a takeover by another major automaker.

What this demonstrates, quite conclusively, is that it is not just economic managers in emerging markets that get into trouble. Even the best-known and supposedly most prestigious corporations in the developed world can fall into the same trap. Perhaps Ford's troubles are some small consolation for the embattled finance ministers of Argentina and Brazil.

Stephan Richter ([e-mail]) is publisher of TheGlobalist.com.