Visteon Bankruptcy: Chapter 11 Not Surprising

Visteon bankruptcy was not a surprise for those who followed the auto parts supplier closely. However, we will just mention two reasons here.

First, Visteon has not made profit from the date it started nine years ago. The company operated without profit for the last 9 years since its 2000 spinoff from Ford Motor Co.

The second is that when there is bankruptcy fever in the air in Detroit it's hard to imagine for a auto parts supplier who has not made profit to stay strong and continue business successfully.

"Visteon's filing and another late Wednesday by supplier Metaldyne Inc. bring the Automotive News tally of 2009 supplier bankruptcies to eight. More than 60 have filed over the past decade. The count doesn't include many smaller suppliers that have sought protection. Visteon, which makes interiors, climate control systems and electronics, has struggled financially along with the rest of the supply chain as North American car and truck production in the first quarter dropped to the lowest levels in 18 years."

In a new information released by Visteon about the bankruptcy protection filing the company says that Visteon expects to fund its operations with its U.S. cash balance, cash flows from operations and a debtor-in-possession facility. Ford Motor Company has executed a commitment letter to support debtor-in-possession financing for Visteon’s restructuring efforts and to ensure long-term continuity of supply. Other global customers have also expressed their support.

Concurrent with its Chapter 11 filing, Visteon has filed certain customary “first day motions” with the court to ensure a smooth transition into Chapter 11. The first day motions request, among other things, the authority to continue serving customers and honoring customer programs, paying critical suppliers and honoring employee obligations.

Visteon’s legal advisor is Kirkland & Ellis LLP; its restructuring advisor is Alvarez & Marsal and its financial advisor is Rothschild Inc.