Keep It on Ice
Calpine's cold trading hand

1. Safety Net

Calpine

(CPN)

crashed and burned again this week.

The cash-strapped San Jose, Calif., power generator lost more than a third of its value over two days after bondholders prevailed in a dispute over borrowing practices. Calpine creditors had argued that the debt-heavy company broke a bond indenture by using money from a July asset sale to buy fuel for its plants. Calpine believed its actions were in accordance with the debt indenture, but Delaware Chancery Court Judge Leo Strine ruled otherwise.

The $313 million decision was deeply damaging to Calpine, whose stock has now lost two-thirds of its value this year. "Calpine, which needs natural gas to fire its plants and make a profit on its power sales, has been on the wrong end of one of the worst natural gas trades in history," RealMoney.com's Will Gabrielski pointed out. "It sold its natural gas assets in July when natural gas prices were in the $7's. Calpine now has to go out and buy natural gas assets with prices in the $11 range."

Buying at $11 and selling at $7 isn't exactly a winning strategy. In a press release acknowledging the setback, Calpine clung to the thinnest of reeds, pointing out that "Vice Chancellor Strine has not ruled on the appropriate timing to implement the remedy for his decision."

Speaking of appropriate timing, the latest setback came just a day after the company reported that it won recognition from

Occupational Hazards

magazine. "The magazine cited Calpine's outstanding demonstration of senior management commitment to safety as the primary reason" for the award, Calpine said. "Putting safety first is a matter of integrity and ethics, and is fundamental to our corporate social responsibility to our employees, contractors and to the communities in which they live and work," added CEO Peter Cartwright.

That's certainly laudable. For shareholders, though, Calpine remains unsafe at any speed.

Image placeholder title

Dumb-o-Meter score: 93. Remember, Calpine investors, money isn't everything.

To view Colin Barr's humorous video take on Calpine's crunch, click here

.

Piling On
Ford responds to trouble by reaching out

2. Way Backward

Ford

(F) - Get Report

continues to drive people crazy.

In the latest chapter of Detroit's giant slalom, Ford and General Motors (GM) - Get Report are saying they'll eliminate more jobs. Previewing its so-called Way Forward program, Ford told employees in an email that it would winnow its white-collar ranks by 10% in the first quarter of 2006. GM said it would close more plants and boost its job-cut target to 30,000 from 25,000.

The cutbacks are the carmakers' way of trying to control their runaway costs. They also face significant pension problems and dropping demand, a point highlighted by October's 23% sales slide at both companies. The United Auto Workers were quick to seize on that fact in Monday's response to the stepped-up GM firings.

"GM's return to prosperity depends on it offering products that consumers find attractive, exciting and want to buy," the big union said. "Only then will GM's market share stabilize and grow, only then will revenues increase, and only then will General Motors return to prosperity."

The same might well be said about Ford. But while Detroit burns, CEO Bill Ford is busy painting on a bigger canvas. Where Ford's workers are wondering about their future and Wall Street is puzzling over when its stock might stop falling, Ford was sketching out his vision of the nation's manufacturing base.

"Now, more than ever, with the competitive pressures of globalization, America needs to respond to the economic challenges of our time," Ford

roared at Washington's National Press Club. "This is not the moment to stop investing and concede our competitive edge in vital parts of the economy. Just the opposite, we must take the lead and show the world that there is only one, true innovative manufacturing giant. And it has three distinct initials: U.S.A."

Inspiring. And how does Ford suggest we translate these stirring words into action? Why, with tax cuts and job training. According to the auto exec, Congress must:


  • "Dramatically increase the R&D tax credit"

  • "Consider tax incentives to help American manufacturers convert existing but outmoded plants into high-tech facilities"

  • Expand "the infrastructure for ethanol fuels," and

  • Convene a "group of automakers, suppliers, fuel providers and government agencies to address America's energy challenges."

No word, aside from some praise of its Ford Escape hybrid SUV, of what Ford itself is planning on contributing.

Terrific. Ford has solutions to all kinds of problems -- just not the ones it faces.

Image placeholder title

Dumb-o-Meter score: 88. Since when does the "Way Forward" lead through Washington?

Changing the Picture
The new Ma Bell tries again with wireless

3. Globetrotting

A brassier Ma Bell is ringing out.

Ending a dismal decade in retreat, AT&T( SBC) was back on the offensive this week. The shift came as SBC Communications completed its $16 billion acquisition of the staggering old AT&T. SBC said last month that the combined company would keep its headquarters in San Antonio, Texas, but take the AT&T name.

Of course, the old AT&T was but a shell of its former self by merger time. Last month, when AT&T posted its last earnings report as a New Jersey-based independent telco, it tepidly claimed "solid third-quarter results" even as business revenue dropped 10% and consumer revenue plunged 24%.

But in the City of the Alamo, CEO Ed Whitacre & Co. have big plans. In the name of making the new company "a new standard-bearer in communications, entertainment and service for the 21st century," they intend to sell wireless service under the AT&T brand. This despite the fact that AT&T's previous claim to cell-phone fame, AT&T Wireless, wilted after

tech snafus and

customer-service debacles sent subscribers

fleeing in record numbers.

"The AT&T name is a strong one," a spokesman says, pointing to months of branding research leading up to the deal's completion. "That's why we decided to go with it."

And go with it they did. On Monday, the combined company rolled out the obligatory rebranding literature, featuring a bold new logo. The updated image reworks AT&T's well-known blue globe and replaces the classic block lettering with a tech-savvy all-lowercase scheme. None of this represents mere change for the sake of change, mind you.

"Transparency was added to the globe to represent clarity and vision," AT&T said. "Lowercase type is now used for the 'AT&T' characters because it projects a more welcoming and accessible image."

What's more, "The new globe is three-dimensional," AT&T notes, in a nod to "the expanding breadth and depth of services that the new AT&T family of companies provides to customers, as well as its global presence."

If you're bent on ruling the telecommunications world, a nice picture can't hurt.

Image placeholder title

Dumb-o-Meter score: 82. Somehow, we can believe the old AT&T thought the world was flat.

4. The Reign in Spain

Sovereign Bancorp

( SOV) is finally getting the royal treatment.

The embattled Philadelphia bank appears to have

survived a challenge from activist investors. Sovereign agreed Wednesday to revise its pact to

sell a $2.4 billion stake to Spain's

Banco Santander

( STD).

Sovereign

raised shareholder ire when it agreed last month to sell 19.8% of itself to Santander without a vote, and to make a $3.6 billion purchase of

Independence Community Bancorp

( ICBC). Dissidents led by San Diego-based asset manager Relational Investors claim the transactions entrench management and the board at the expense of shareholders. Relational embarked on a vigorous public relations campaign, winning the backing of big investors Calpers and Franklin Templeton. The effort culminated in a

plea to the New York Stock Exchange to force a shareholder vote.

"In the post-Enron world with a global focus on corporate governance, this is a defining test of whether we will backslide from the reforms and initiatives designed to correct the abuses of the past," Relational chief Ralph V. Whitworth said Nov. 8. "We look forward to working with the NYSE as they consider our request."

But it seems Sovereign was the one that ended up working with the NYSE. On Wednesday the bank dropped the most heavily criticized provisions of the Santander pact: the ones effectively guaranteeing CEO Jay Sidhu and directors their jobs. The changes will allow the deal to move forward, Sovereign said, adding, "Sovereign acknowledges the effort and governance expertise that NYSE Regulation brought to bear in this matter."

Though going to the NYSE always seemed like an odd choice -- after all, the exchange has just been through the legal wringer on its own

merger dispute -- Relational was predictably peeved. "It is unfortunate that the New York Stock Exchange has seen fit to provide a roadmap for disenfranchising shareholders," Whitworth said in a statement late Wednesday. "Regardless of how Sovereign and Santander attempt to disguise it, this is a transformational transaction on which shareholders should have a right to vote. The exchange has made it clear that form trumps substance when it comes to its listing standards. This is a sad day for the American capital markets."

Indeed, Relational was so aggrieved by this decision that it's looking for solace from a higher authority. Its next step: a possible appeal to the

Securities and Exchange Commission

.

Image placeholder title

Dumb-o-Meter score: 79. A judge reviewing the NYSE-Archipelago (AX) - Get Report case said "somebody missed the boat" in assigning a value to the Big Board. You might say the same of Relational.

In the Chips
Harrah's gives it away

5. Turkey Shoot

Beating the house just got a lot easier in suburban Chicago.

Some 11,000 Harrah's( HET) Joliet Casino customers opened their mail last week to find coupons redeemable for $525 in cash. The mailings came courtesy of a mistake by the casino's marketing vendor, which routinely sends out vouchers worth $15 or $20 in a bid to boost traffic.

Harrah's initially balked, but it was forced to honor the coupons after "the Illinois Gaming Board was deluged by complaints from people who said they were told by casino workers the coupons were no good," the Chicago Sun-Times reports.

The marketing mixup leaves Harrah's stuffing down a $5.8 million loss. Even if coupon holders dutifully troop down to Harrah's and gamble away their prizes, the casino could end up holding the bag, the Sun-Times notes. "If customers were to lose all $5.8 million back to the casino, risking no money of their own, Harrah's would be stuck with a $2.9 million tax bill," the paper noted Tuesday. It detected "a touch of irony" in the fact that a state agency's ruling could end up padding Illinois' tax receipts so handsomely.

Well, at least

some

people around Joliet are having a happy Thanksgiving.

Image placeholder title

Dumb-o-Meter score: 75. Harrah's doesn't seem to be gobbling this story up.

In our ongoing effort to enrich the reader experience, the Five Dumbest Things Lab now scores each item using our proprietary Dumb-o-Meter. This cutting-edge technology employs a finely calibrated, 100-point scale measuring sheer Dumbness, as calculated via a closely guarded secret formula.

Got your own idea for the dumbest thing of the week?

Let us know.

Want to get your Five Dumbest in the mail? It's easy. Just become a TSC member -- it's free -- and you'll receive the Five Dumbest in our Before the Bell email newsletter every Friday. The rest of the week, before each trading day, Before the Bell gives you a comprehensive look at the stocks expected to move the market, plus access to a sampling of our premium content from RealMoney. Click here to sign up for Before the Bell!