Visteon Turns the Page to Chapter 11

Oddly enough, Visteon is primarily a Ford supplier (not a bailout recipient...yet). Amazingly, the UAW jobs at Visteon seem less systemically important than UAW jobs at Chrysler. I'm sure Czar Ratner was even handed in his approach to these two companies.

As an aside, I suppose if Delphi could re-file for bankruptcy while it's already in bk, that's what it would do. As bad as life is (was?) for Visteon, it's worse for Delphi.

MAY 28, 2009

Auto Supplier Visteon Plans Chapter 11 Filing in U.S.
By JEFFREY MCCRACKEN and ANDREW GROSSMAN
www.wsj.com

Visteon Corp., a former division of Ford Motor Co. and one of the country's largest auto suppliers, is planning to put its U.S. operations into Chapter 11 bankruptcy protection Thursday morning, say people familiar with the matter.

Visteon's bankruptcy is the latest casualty in the U.S. auto industry, which has been hit by the Chrysler LLC bankruptcy and awaits an imminent filing by General Motors Corp. Though expected for months, a Visteon filing could complicate matters for Ford, the one Detroit auto maker to so far avoid government aid. Visteon doesn't have any financing lined up from banks, and will have to lean heavily on Ford and other auto companies for cash to get it through a restructuring.

As of Dec. 31, Visteon employed 11,000 salaried workers and 22,500 hourly workers world-wide. It also had $893 million in unfunded pension obligations.

Auto-supplier bankruptcies have frequently caused unforeseen and expensive problems for auto makers, as suppliers can use the courts to reject contracts and demand higher pay for much-needed parts. Some suppliers are unable to line up enough financing from lenders, forcing auto makers to inject money to keep the companies afloat.

Visteon is by far Ford's largest parts supplier, and the auto maker accounts for one-third of Visteon's $9 billion of annual sales. Korean-based auto maker Hyundai Motor Co. is the next biggest customer, with 30% of Visteon's sales.

Parts from the Van Buren Township, Mich.-based firm lie at the heart of many Ford vehicles, making the radios for the Fusion sedan, instrument clusters on the F-150 pickups and climate-control parts on the new Flex crossover.

Ford is expected to provide some bankruptcy financing to Visteon, though specific details and the exact amount were unclear, said people familiar with the matter. It has been in talks with its secured lenders, but hasn't worked out prebankruptcy deals with lenders or bondholders, said those people. The filing is expected to be made in a Wilmington, Del., federal bankruptcy court.

Visteon received waivers from its lenders after if violated the provisions of its loans in March, after independent accountants said they doubted the company's ability to remain a going concern. One of those waivers expires on May 30.

Whether Visteon is able to restructure or is forced to liquidate depends largely on how much support Ford is willing to give, said Doug Bernstein, managing partner of the bankruptcy group at law firm Plunkett Cooney P.C.

"How dependent is Ford?" he said. "If Ford's not there to support, it could very well end up in a liquidation because I don't know who's going to finance it then."

Ford assumed $167 million in Visteon secured loans this month. Visteon hopes Ford will let it borrow against that loan for bankruptcy financing and also provide other lending as well, said people familiar with the matter.

Visteon has hired law firm Kirkland & Ellis as bankruptcy counsel and financial advisers Rothschild LLC and Alvarez & Marsal.

Visteon's bankruptcy comes at the beginning of what is likely to be a painful global contraction among companies that supply auto parts. With auto makers building fewer cars and taking longer to pay their bills, suppliers are burning through cash and finding banks reluctant to lend to an industry beset by uncertainty.

"Basically put, it's a high level of chaos right now," said Van Conway, president of turnaround firm Conway, MacKenzie and Dunleavy.

Visteon has failed to turn an annual profit since it was spun off by Ford in 2000. In 2005, the auto maker took back the majority of Visteon's plants. Since then, Ford has whittled those 17 plants to six.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com

An uncontrolled liquidation would sure be fun!