Despite having been spun off five years ago in the vain hope that it would become a profitable supplier to Ford
While competitor Delphi still needs an oracle to clearly see its future with General Motors, Visteon made its case to Ford that without assistance from its former parent, it would be heading for the junk heap. Realizing that a ready and stable supply of parts was key to its own future, Ford agreed to step in and bail out its once and future supplier.
This weekend, Ford gathered again under its hood 23 Visteon plants consisting of 25,000 employees and $7 billion in annual sales. It placed the assets in a holding company and plans to reduce the workforce by 20% through buyouts and then sell off the rest of the assets. Ford reports that at least 65 companies and private equity groups have expressed interest in buying the facilities.
While the carmaker hopes to save $600 million to $700 million by the end of the decade by reabsorbing Visteon, it will still incur charges of between $450 million and $650 million this year and $300 million to $500 million by 2009. It will also give its parts supplier $550 million to assist with restructuring. All of that money will create quite a drag on Ford's performance for several years to come.
For its part, Visteon hopes to be able to change the focus of parts that it has been supplying. Since it was spun off in 2000, the auto-parts maker has been manufacturing chassis, glass, and fuel tanks -- not particularly profitable areas for the company -- and now wants to produce climate systems, electronics, and interiors.
Ford buys about $90 billion worth of parts, goods, and services from a variety of suppliers other than Visteon, including Autoliv
As it continues to struggle to reduce costs, Ford has taken to paring down its list of suppliers by half. Making the short list thus far, in addition to Visteon (and Delphi, too) has been Johnson Controls
As the list tightens up and Ford cuts costs, Visteon will see its portion of Ford's business drop from 70% down to 50%, and revenues from $18 billion down to $11 billion. It will still continue to operate 182 other plants around the world, providing parts to other carmakers, including Hyundai and Toyota.
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