Visteon Bankruptcy Puts More Pressure on Ford

(MoneyWatch)  The U.S. operations of auto parts maker Visteon Corp., which is closely allied with Ford, today filed for Chapter 11 bankruptcy protection from creditors.

The move could prove costly to Ford, which has agreed to support Visteon financially through bankruptcy, to insure uninterrupted delivery of parts.

Visteon Chairman and CEO Donald J. Stebbins said in a written statement today that while it is in bankruptcy, Visteon will finance its operations with its own cash, with cash from ongoing sales, and with financing from Ford and other customers.

"During the reorganization period, we will seek to address our capital structure and legacy costs that are not sustainable given the current economic environment," he said.

The company's plan is to reorganize and stay in business, as opposed to a Chapter 7 liquidation, where the company would sell all its assets and distribute the proceeds to creditors.

Unlike Chrysler and GM, Ford has so far managed to avoid accepting direct loans from the U.S. Treasury to stay in operation. Chrysler has been bankrupt since May 1, and GM is well on the way to declaring bankruptcy by June 1.

Earlier this week, as expected, GM bondholders rejected an offer to swap their GM debt for equity in GM. GM said earlier that if bondholders rejected the offer, its next step would be bankruptcy.

Visteon was originally Ford's in-house parts operations. Ford spun off Visteon to Ford shareholders in 2000. Since then, both Ford and Visteon have struggled to become less dependent on each other, with mixed success. The same could be said for GM and its former parts operations, which were spun off in 1998 as Delphi Corp. Delphi has been in bankruptcy since 2005.

According to Visteon's first-quarter 2009 report, automakers other than Ford now account for about two-thirds of Visteon's sales, but Ford is still its No. 1 customer, with about 31 percent of its first-quarter sales. The Hyundai Group, Renault-Nissan and Peugeot-Citroen together account for most of the rest, the company said.

Visteon had net income of $2 million in the first quarter, on revenues of $1.35 billion. That included a one-time gain of $95 million. Otherwise, the company would have suffered a net loss, as revenues fell 53 percent. In the year-ago quarter, Visteon lost $105 million on $2.86 billion in revenues.

For all of 2008, Ford accounted for 34 percent of Visteon sales, according to Visteon's annual report. Visteon has about 31,000 employees worldwide, the company said.