Michigan-based auto parts supplier Visteon filed for Chapter 11 bankruptcy today. The Wall Street Journal reports:
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.
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.
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.
The Truth About Cars reports that the Visteon bankruptcy has been in the cards for a while:
In the nine years since FoMoCo spun off its vehicle climate systems, interior parts, lighting and electronic systems maker, Visteon has never posted an annual profit.
None of its overseas subsidiaries or joint ventures outside the US are part of the filing. Not that they need any help with it: In March Visteon’s main UK subsidiary filed for reorganization.
Automotive News reports that the company’s creators will be there for their progeny. “Visteon said Ford has committed to ensure long-term continuity of supply and to support debtor-in-possession (DIP) financing for the restructuring efforts. Ford is still Visteon’s biggest customer and accounted for about 31 percent of its $1.35 billion of sales last quarter.”
Ford, taking inspiration from Delphi–a similar GM experiment intended to cut labor costs–spun off Visteon to increase shareholder value. Visteon, whose business model turned out to be a loser, tried outsourcing and constant reorganizing to save itself, to no avail. The company never made money. Yet its failure could trigger a domino effect resulting in a government bailout of Ford.
Ford, all of a sudden, isn’t looking so solid anymore.