Visteon Corp. is demanding large checks that could amount to millions from sub-suppliers who want new contracts with the giant parts maker.
The "pay to play" demand is part of a plan to reduce Visteon's supplier roster from 1,800 to 500 in five years. Visteon is promising to give more business to the survivors.
The mandate underlines Visteon's strained finances. And it shows that cost-cutting pressures on suppliers show no sign of ending.
In documents circulating among suppliers, Visteon says it will choose only two or three companies per business segment. Current and future business will go only to the selected companies.
To injection molding suppliers, Visteon's demands look like this: The company wants large price cuts for new contracts, a minimum of 6 percent annually for five years. Visteon wants an upfront check for the first-year's reduction and portions of future years' reductions. The total prepayment will be a least 10 percent of the first year's contract.
So if an injection molder agrees to supply $25 million worth of parts annually, Visteon wants a check in advance for at least $2.5 million.
Similar demands are being made in other component segments, suppliers report.