Justice Sirikah

Insolvent Visteon Corporation (PINK: VSTN) Works Up A Potentially Cost-Efficient Way To Resize

by Justice Sirikah September 22, 2009
4vstn_logo.jpgIn an attempt to negotiate its way out of the Chapter 11 cul-de-sac in which it went down in May, Visteon Corporation (PinkSheets: VSTN) said it has come to an understanding with General Motors Company whereby it will relinquish its less profitable supply contracts for fuel tanks, climate controls and lighting systems to the automaker, while it pockets an excess of $23 million by year-end. Since the breaking of this news, the auto-parts supplier’s stock has beefed up by more than 50 percent, to a price that it last saw three months ago.

  Under the bilateral settlement which is awaiting authorization by the U.S Bankruptcy Court, Visteon could be set on track to get paid 15 days after shipment in its continued supply contracts with GM. The traditional payment timetable is 45 days subsequent to delivery.

  The company which has a history of annual losses since its spin-off from Ford Motor Company (NYSE: F) at the turn of the millennium, will cease production at its fuel tank and interiors facilities in Eureka, Missouri and Springfield, Ohio, by the end of the month, according to the documents filed with the Bankruptcy Court late last week. This should result in the sharing of severance expenses by the two firms, for both employees at the affected plants and fuel tank product assembly outside the plants.

  With that being done, GM is then expected to re-source the manufacturing of climate control parts at Coclisa plant in Mexico, as Visteon closes its InterAmerican plant and consolidates the remaining production of lighting components into its Carplastic plant in Monterrey, Mexico.

  On May 28, the supplier of automotive technologies, modules and components had filed a voluntary petition for bankruptcy protection, listing assets of about $4.6 billion and nearly $5.3 billion in arrears. In a recent quarterly report, the company announced a net loss of $99 million, on revenues of $1.57 billion. These figures for the three months to June, reflects a wide decline from $23 million reportedly lost in the same period of the year earlier, on higher revenues of $2.91 billion.

  VSTN shares were trading at $0.17, up from $0.15, Monday’s closing price. While inching higher from its 52 week low of $0.02, there’s still a disappointing disparity between the current share value and its 52 week high of $3.50. 

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