2nd UPDATE: Visteon May Violate Debt Agreements
26 February 2009 - 4:18AM
Dow Jones News
Visteon Corp.'s (VC) bankruptcy risk intensified Wednesday after
the auto-parts maker said it may violate its debt agreements as the
deepening downturn in the global automotive further erodes its
financial stability.
The company is preparing to do whatever is necessary including
eliminating or disposing of substantial assets or operations, and
other significant restructuring measures. 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," Stebbins said.
"Nearly every auto maker in every region experienced significant
sales and production declines during the last three months of
2008." The willingness of Visteon to dispose of pieces of its
company shows how dire the situation has now become for the former
Ford Motor Co. (F) unit that hasn't turned a profit since it was
spunoff in 2000.
Visteon has already undertaken massive restructuring over the
past five years including slashing its work force and giving back
some of its underperforming plants to Ford. 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.
The company 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.
On average, analysts surveyed by Thomson Reuters projected a
loss of $1.70 a share on revenue of $1.93 billion.
The company's cash was $1.18 billion at the end of 2008 compared
with $1.76 billion a year earlier. The company drew down $30
million in January under a credit agreement. It has borrowed a
total of $105 million.
For the year, Visteon's net loss widened to $663 million, or
$5.12 a share, compared with $372 million, or $2.69 a share for
2007.
No Help From Ford
Ford, which is dealing with its own financial problems after
posting a historic $14.6 billion annual loss for 2008, said in
January it will not provide any special treatment for the parts
unit. "We're not contemplating any dramatic action," Ford Chief
Financial Officer Lewis Booth said at the time.
Auto-parts makers of all stripes have been pressured as auto
production slumps because of sales dipping to the lowest levels in
decades. Visteon has continued to diversify away from Ford for the
brunt of its sales. Ford made up nearly 30% of product sales in the
quarter, while Hyundai Motor Co. (005380.SE) and subsidiary Kia
Motors Corp. (000270.SE) made up 28%. Europe and the Asia Pacific
region each made up nearly 35% of product sales.
Visteon's stock has fallen more than 95% during the past five
months and traded at 13 cents, down 11.7% or 2 cents Wednesday.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542;
jeff.bennett@dowjones.com