Visteon Corp. posted $4.7 billion in sales for the first quarter of this year, up 5.3 percent from the year-ago quarter, and reported a net loss of $15 million for the quarter, improved from a $338 million loss in the first quarter of 2002.
"Although it represents an improvement, we are not satisfied with these results," CEO Peter Pestillo said. "2003 will continue to be a tough year. We'll concentrate on things in our control: getting costs down, winning new business, improving margins."
Visteon says it had a record number of launches this year, with 70 so far and 127 in the second quarter. Visteon is targeting $1 billion in non-Ford Motor Co. new business this year. More than 90 percent of the supplier's new business is non-Ford, and 40 percent is outside North America. Ford, which spun off Visteon in January 2000, makes up 79 percent of the supplier's business.
Pestillo declined to predict the supplier's second-quarter performance. Given the flood of incentives on new vehicles, Pestillo says, he's not convinced Ford will cut second-quarter production as much as it has announced, by 15.4 percent. Ford's North American production was down 20,000 units from last year's first quarter.
Exit steering next
To help improve margins, Visteon dumped its seating business in the first quarter. It expects to record pretax charges of about $225 million in the second quarter.
The supplier's next focus will be to exit steering column production at its Indianapolis plant. Discussions with Ford and the UAW are under way. The business has annual revenue of $175 million to $200 million and basically breaks even, CFO Dan Coulson said.
"The issue is the investment required to maintain a competitive position over time," he said, referring to steering column requirements that will change in 2006. "Because of the profitability equation, it didn't make sense to continue putting money in."
Visteon continues efforts to restructure its operations.
"In the European Plan for Growth, we've rearranged products in plants, and we'll continue to do that," Pestillo said. "Our objective is to get geographic dispersion, which will get us customer dispersion."
Visteon expects the European restructuring to be completed by early 2004. At that point, it will realize a pretax benefit of $100 million annually, Coulson says. North American restructuring is ongoing.
But Visteon expects to spend up to $200 million this year related to startup of a 10-year information technology agreement with IBM. And the supplier's ailing pension fund looms.
Pension and other post-retirement benefits cost $50 million annually, Coulson said. The pension fund declined 2 percent in the first quarter compared with the year-ago period, he says, but is up 3 percent from Sept. 30, the end of the plan's fiscal year.
The supplier reported earnings per share of 4 cents for the first quarter, down a penny from most expectations.
Rod Lache, an analyst with Deutsche Bank Securities' Global Auto Team, said: "Given Visteon's anemic profitability, its high reliance on Ford, which must dramatically reduce its product-based costs to improve profitability, and significant social liabilities, we continue to see more downside risk to the stock."