Visteon Loss Larger Than Expected

CHICAGO – Auto parts maker Visteon Corp. (VC) on Tuesday posted a bigger-than-expected third-quarter loss, pressured by cuts in North American vehicle production and high prices for raw materials.

The company said it expects to recognize a gain of up to $1.8 billion in the fourth quarter from its bailout by former parent Ford Motor Co. (F), but forecast an operating loss and negative cash flow because of commodity and customer pricing pressures.

The third-quarter net loss narrowed to $200 million, or $1.58 per share, from $1.44 billion, or $11.48 per share, a year earlier, when Visteon took $1.3 billion in charges, mainly for deferred tax asset valuation allowances and asset impairments.

Excluding charges for non-U.S. actions, Visteon's latest loss was $1.49 per share, while analysts on average were expecting $1.33, according to Reuters Estimates.

Sales dipped by $15 million to $4.12 billion. Ford accounted for about 64 percent of total sales.

Results are preliminary pending the completion of an accounting review. Visteon expects to restate annual results from 2002 through 2004 and the first two quarters of 2005. It does not expect to file its third-quarter report before the Nov. 9 deadline.

Most large U.S. auto parts makers have suffered under North American market share losses by Ford and General Motors Corp. (GM) and rising raw materials costs in 2005. Industry leader Delphi Corp. declared bankruptcy in October.

Visteon on October 1 returned 23 facilities to Ford under a massive bailout to avoid bankruptcy. The move slashed annual revenue by about 40 percent to $11.4 billion, but reduced the company's reliance on Ford business. It expects significant restructuring over the next several years.

After the transition, Visteon has about 50,000 employees and 170 facilities in 24 countries. It plans to focus on products that have generated the most new business: interiors, climate control and electronics, including lighting.

Visteon has provided 5,000 salaried employees to support the divested facilities, which were arranged in a holding company.

"Clearly the restructuring of Visteon over the coming years is one of our top priorities," Chief Executive Mike Johnston said in a statement.

The Van Buren Township, Michigan-based company's expected fourth-quarter gain from the Ford deal follows a $900 million second-quarter charge in anticipation of the transaction.

The Ford deal also gave Visteon a pool of $550 million for qualified restructuring and employee separation costs. Visteon said it continues to evaluate its cost structure.

The company said it is pursuing cost cuts with its suppliers and service providers and has identified more than 20 underperforming or nonstrategic facilities, mainly in North America and Western Europe, that require significant focus.

Largely as a result of the Ford deal, the company said it expects fourth-quarter sales to fall about 40 percent, to roughly $2.82 billion, with non-Ford customers accounting for more than half of the total. Analysts expect sales of $3.08 billion.

Shares of Visteon closed at $8.98 Monday on the New York Stock Exchange. The stock has fallen 8 percent so far this year, while the Dow Jones U.S. Automobiles & Parts Index is down nearly 25 percent.