GM, Delphi, other auto paper up, including Ford, Visteon; Foamex extends gain; Winn-Dixie higher

By Ronda Fears

Memphis, April 20 - The well received first-quarter results of General Motors Corp. lifted members of the battered auto group as much as 2 points amid a robust distressed debt session Thursday, traders said. Not just those closely linked to GM rose, either. Ford Motor Co. and its former unit, Visteon Corp. were better ahead of Ford's quarter results on Friday.

"Just about everything was feeling better today, at least on the day," a bond trader said. "It's like a breath of fresh air."

Foamex International Inc. saw most of its big gain Wednesday but the subordinated bonds, the 9 7/8% issue due 2007, extended the 20 to 25 point move Thursday by another 3 points as players anticipated earnings sometime soon. The news, though, has yet to show up on the wires.

Winn-Dixie Stores Inc. bonds extended gains from the day before, as well, also sans any news on the tape during market hours. The Jacksonville, Fla.-based bankrupt grocery chain last week reported it had received tentative bids to buy 15 of the 35 stores, but because some overlap it has established stalking horse bids on eight properties by four bidders as the standard going into the auction set for May 9.

Late Thursday, Winn-Dixie won a 70-day extension to its exclusivity period to file a reorganization plan. The Winn-Dixie 8 7/8% bonds due 2008 gained 2 points in the session to 83 bid, 85 offered from 81 bid, 83 offered, traders said.

Dana has its own party

While GM's numbers boosted virtually the entire pack of auto paper Thursday, a bond trader said Dana Corp. was gaining on its own merits after averting the creation of a committee devoted to asbestos claims in its bankruptcy case.

"GM came out today with better than expected earnings. Since Dana is affected by this, it's great news. You can look and see it as extra cash flow to come," the trader said.

"But there also was a big sigh of relief that there is not going to be an asbestos committee [in the bankruptcy]. That would have bogged down a process that already is very cumbersome."

The bankruptcy judge in Dana's case on Wednesday denied a motion that would have created a separate creditors' committee for asbestos-injury claimants.

Dana's 6½% bonds rose 3 points Thursday to 80 bid, 82 offered from 77 bid, 79 offered the previous day, a trader said. He pegged the Dana 7% bonds up 2 points to 75 bid, 77 offered from 73 bid, 75 offered.

"Don't forget the more favorable DIP financing terms that Dana announced last week," the trader added. "But the asbestos issue is key. In my opinion, if the judge didn't reject this, Dana would be history."

Ford, Visteon bonds better

Ford Motor will be reporting first-quarter results early Friday and ahead of that Ford bonds were better along with Visteon, carrying over some ebullience from GM's showing. Ford's bonds were pegged about 1 point higher and Visteon's about 2 to 3 points better by one bond trader.

"Don't get too excited over this small rise. There is a bigger wave coming," the trader said.

The trader said Ford's first-quarter results probably had already been priced into the bonds. He expects the big boost to the paper will come from resolving union wage talks, and he expects the United Auto Workers will give Ford the same terms as GM.

"It's just a matter of time, Ford and GM will be back. The UAW has finally got it, that if they are to survive they will have to lower their wages as well as their benefits. If they do not then Japan and China will be selling us trucks and cars in the future," he said.

In a Securities and Exchange Commission filing Wednesday, Ford said it will be taking charges in 2006 of $2.4 billion for previously announced plant closings designed to boost its performance, with the majority of the new charges in addition to $1 billion in charges Ford announced in March. Ford has said it will shut 14 plants and cut up to 30,000 workers in order to trim costs.

GM drives auto sector higher

GM bonds were better as it narrowed losses sharply, and the steam helped others in the auto group, like its former unit Delphi Corp., but its finance arm, General Motors Acceptance Corp. was just treading water as net income at the unit - which once carried the automotive operations - declined.

GM's 8 3/8% bonds due 2033 gained about 1 point to 73 bid, 74 offered while GMAC bonds were unchanged, traders said. GM shares (NYSE: GM) rocketed up by $2.07, or 10%, to $22.64.

GMAC on a stand-alone basis posted net income of $605 million for first quarter, down from $728 million in the year-ago period. On the other hand, GM showed a significantly narrower loss on a 14% spike in sales, and without savings yet from the UAW wage and benefits concessions.

GM's first-quarter net loss improved to $323 million, or 57 cents a share, from $1.3 billion, or $2.22, a year previous. The 2006 results included a charge of $681 million, or $1.20 a share, for a healthcare settlement for retirees and a special gain of $206 million, or 37 cents, on the sale of its 20% stake in Suzuki. Total revenue, including that from GMAC, climbed to $52.2 billion from $45.8 billion.

The agreement with UAW provides that, beginning July 1, the pretax savings from that deal will be about $750 million per quarter through 2011.

Delphi still a GM wildcard

Delphi is still a monkey on GM's back, however. But Delphi bonds improved by 2.5 points Thursday on the former parent's results.

"While we are encouraged by the speed and scale of the changes we're implementing, there is clearly more work to be done," GM chief executive Rick Wagoner said. "Our next key priority is to reach a consensual agreement with Delphi and its unions that makes sense for all of the parties."

GM said the uncertainty of the Delphi situation would prevent it from providing an earnings forecast.

Delphi's benchmark 6.55% bonds gained to 68.5 bid, 69.5 offered from 66 bid, 67 offered, a trader said.

The market has been expected Delphi will get a similar deal with the UAW as GM. GM, Delphi and the UAW have reached a deal on incentives for early retirement by union workers, but the union is in continuing talks with the parts supplier over its demand for wage concessions.

"Everything is moving according to expectations, I think. We're not hearing anything wild," a trader said, noting that there seems to be more threat of a strike at Delphi operations than maybe other parts suppliers. But, he added, "No one thinks GM will let that happen."

A strike at Delphi is considered a major risk for GM that could effectively shut down the automaker's production and cost billions of dollars in cash outlays if it has to make alternative arrangements. GM reportedly has already begun making contingent plans in that event, however.

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