Visteon's Risk for Bankruptcy Deepens

As Originally Posted in The Wall Street Journal

Visteon Corp.'s bankruptcy risk intensified Wednesday after the auto-parts maker posted a wider fourth-quarter loss and said it might violate its debt covenants as the economic downturn slams automotive companies.

The former Ford Motor Co. subsidiary said it is prepared to do whatever is necessary to shore up its capital base, including eliminating or selling "substantial assets or operations." Chief Executive Don Stebbins declined to provide more details and didn't take questions from analysts during the company's fourth-quarter conference call.

"We said we anticipated continued production weakness in the fourth quarter, however, the speed, the severity and the breadth of the change greatly exceeded our expectations," Mr. Stebbins said.

Auto-parts makers are struggling as vehicle makers cut production with sales tumbling to the lowest levels in decades.

Visteon's willingness to shed operations shows how dire the situation has now become for the company, which hasn't turned a profit since it was spun off in 2000.

Visteon, whose products include satellite radios, instrument displays and climate-control equipment, has already undertaken a massive restructuring in the past several years, including shrinking its work force and giving back some of its underperforming plants to Ford. At the end of 2008, its work force stood at 25,550, compared with 39,300 at the end of 2006.

Now it intends to cut 1,000 salaried workers -- up from an original target of 800 -- by the end of March and take other steps such as slashing pay, suspending 401(k) matches and looking for voluntary separations in its European operations.

Visteon, based in Van Buren Township, Mich., reported a fourth-quarter net loss of $328 million, or $2.53 a share, compared with a year-earlier net loss of $43 million, or 33 cents a share. The latest quarter included a $200 million write-down at its interiors business. Revenue slumped 42% to $1.65 billion.

For the year, Visteon's net loss widened to $663 million.

The company had cash of $1.18 billion at the end of 2008, compared with $1.76 billion a year earlier. It drew down $30 million in January under a credit agreement and has borrowed a total of $105 million.

Ford, which posted a $14.6 billion loss for 2008, said in January that it won't provide any special treatment for its former parts unit.

Visteon has continued to diversify away from Ford for the brunt of its sales. Ford accounted for nearly 30% of product sales in the quarter, while Hyundai Motor Co. and subsidiary Kia Motors Corp. made up 28%. Europe and the Asian-Pacific region each made up nearly 35% of product sales.