Supporting auto parts maker Visteon through Chapter 11 bankruptcy could cost former parent company Ford $500 million to $700 million, according to Brian Johnson, auto industry analyst for Barclays Capital.
Even so, Ford should be able to sustain that cost without having to seek government assistance, he said. Johnson said that in return for its assistance, Ford could take back some Visteon factories. Visteon filed for Chapter 11 bankruptcy protection for its U.S. operations earlier today.
Ford formed Visteon in 2000 out of its in-house parts operations, and spun the new company off to Ford shareholders. Rival General Motors spun off its parts operations in 1998 to form Delphi Corp., which has been in bankruptcy since 2005.
The car companies have been squeezing the margins at the parts suppliers for years, as the car companies fought to protect their own bottom lines.
The Washington-based Motor & Equipment Manufacturers Association said earlier this year that more than 40 major auto suppliers filed for Chapter 11 bankruptcy protection in 2008 alone.