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Visteon lays out roadmap away from Ford towards Asia

February 2, 2006

3 Min Read
Visteon lays out roadmap away from Ford towards Asia

Citing its Oct. 1 agreement with Ford as a key factor for future growth, struggling Tier One automotive supplier Visteon presented a three-year "Roadmap for Success" in early January to investors that calls for greater overseas production, less reliance on Ford as a customer, and a 10% increase by 2008 in business with Asian OEMs.

The Jan. 11 presentation by Chairman and COO Mike Johnston, President and COO Don Stebbins, and Executive VP and CFO Jim Palmer highlighted moves in 2005 that they say put Visteon back on the road to growth, including trimming factories and payrolls through the deal with former parent, Ford; and expanding global production in China, Mexico, and Eastern Europe.

On Oct. 1, Visteon was able to transfer 23 facilities and 18,000 United Auto Worker employees back to Ford and received $300 million for the transferred assets as well as $550 million in cash for restructuring. This reduced Visteon''s North American (including Mexico) workforce from 30,900 to 11,000, with the average hourly wage falling from $38 to $17. The average plant now has 500 hourly employees instead of 680 with the average square footage of those facilities down to 300,000 from 600,000. Visteon only has one plant larger than 1 million sq ft in North America now, compared to 14 prior to the arrangement with Ford. Those cuts may continue, with Visteon reporting that it plans to "address" this year and next 23 facilities that it''s deemed under performing or non-strategic. In 2006, that includes closing its Puerto Rico; Aeropuerto, Mexico; and Buffalo, NY operations. Five other plants have a priority focus to fix performance, and six other non-strategic operations are up for sale.

Visteon lists Ford, Hyundai/Kia, Nissan, PSA/Peugeot, General Motors, Renault, Volkswagen, and DaimlerChrysler as its top customers, but going forward, it plans to reduce Ford North America from 24% of its annual sales to 14%, while Asian OEMs, which accounted for 26% of 2005 pro forma sales, would rise to 36% in 2008, taking up the largest portion of Visteon''s estimated $12 billion in sales at that time.

In terms of its manufacturing footprint, Visteon officials said they''re planning to continue a shift to "competitive-cost" locations. In 2005, the company''s manufacturing footprint in terms of the number of hourly employees has 36% in what Visteon calls "high-cost" locales, with 64% in "competitive-cost" areas. By 2008, Visteon plans for 25% to be in higher cost areas, with 75% in low-cost regions.

That shift is evident with an increased presence, including joint ventures, in China (10 plants), India (five plants), Czech Republic (eight plants), and Mexico (12 plants). The transition isn''t entirely in blue-collar jobs, with the goal to take the number of engineers in high-cost vs. low-cost locales from the current ratio of 70:30, to 52:48, with nearly half of Visteon''s engineers in "competitive-cost" areas.

Ultimately, Visteon would also like to see a shift in sales as well, with the goal to make Asia its largest region in terms of sales (38%) by 2008, followed by Europe and South America (32%), and, finally, North America (30%).-Tony Deligio; [email protected]

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