CHICAGO (Reuters) -- Auto parts maker Visteon Corp. on Tuesday posted a bigger-than-expected third-quarter loss of $200 million, pressured by cuts at former parent and largest customer Ford Motor Co., and shares dropped 15 percent.
Visteon also forecast a fourth-quarter operating loss and negative cash flow because of pricing pressures and high wage and labor costs, and expects revenue in the last three months of 2005 to be below the average Wall Street forecast.
Visteon completed a massive deal on Oct. 1 to transfer unprofitable plants and high-wage workers back to Ford and investors may have expected a more immediate payoff in terms of profitability, Argus Research analyst Kevin Tynan said.
"There is still a lot of work to do beyond the Ford agreement," Tynan said. "The scale of restructuring in the industry is just enormous. It is going to take time, take some aggressive actions, and it is going to be expensive."
The third-quarter net loss narrowed to $200 million, or $1.58 per share, from $1.44 billion, or $11.48 per share, a year earlier, when Visteon took $1.3 billion in charges, mainly for deferred tax asset valuation allowances and asset impairments.
Excluding charges for non-U.S. actions, Visteon's latest loss was $1.49 per share, while analysts on average were expecting $1.33, according to Reuters Estimates.
Sales dipped by $15 million to $4.12 billion. Ford accounted for about 64 percent of total sales.
Results are preliminary pending the completion of an accounting review. Visteon expects to file restated results from 2002 through 2004 in the fourth quarter. It does not expect to file a third-quarter report by the Nov. 9 deadline.
Visteon Corp. ranks No. 6 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $17.7 billion in 2004.
Most large U.S. auto parts makers have suffered under North American market share losses by Ford and General Motors, and rising raw materials costs. Industry leader Delphi Corp. declared bankruptcy in October.
MORE RESTRUCTURING EXPECTED
On Oct. 1, Visteon returned 23 facilities to Ford under a massive bailout to avoid bankruptcy. The move slashed annual revenue by about 40 percent to $11.4 billion but reduced the company's reliance on Ford business. It expects significant restructuring over the next several years.
The transfer of those facilities significantly reduced Visteon's exposure to commodity cost pressures, particularly for steel, executives said on a conference call. Resins remain a factor and the company still has some unrecoverable costs.
After the transition, Visteon has about 50,000 employees and 170 facilities in 24 countries. It plans to focus on products that have generated the most new business: interiors, climate control and electronics, including lighting.
Visteon returned some 18,000 high-wage union employees to Ford and is providing 5,000 salaried employees to support the divested facilities, which Ford arranged in a holding company.
"Clearly the restructuring of Visteon over the coming years is one of our top priorities," Chief Executive Mike Johnston said in a statement.
The Van Buren Township, Michigan-based company expects a fourth-quarter gain of up to $1.8 billion from the Ford deal, which follows a $900 million second-quarter charge in anticipation of the transaction.
The Ford deal also gave Visteon a pool of $550 million for qualified restructuring and employee separation costs. Visteon said it continues to evaluate its cost structure.
The company said it is pursuing cost cuts with its suppliers and service providers and has identified more than 20 underperforming or nonstrategic facilities, mainly in North America and Western Europe, that require significant focus.
Visteon still has about $2 billion of annual revenue from noncore businesses around the world.
Following the Ford deal, Visteon expects fourth-quarter sales to fall about 40 percent, to roughly $2.82 billion, with non-Ford customers accounting for more than half of the total. Analysts expect sales of $3.08 billion.
Shares of Visteon were off $1.38, or 15.37 percent, at $7.60 midday Tuesday on the New York Stock Exchange. Through Monday, the stock had fallen 8 percent so far this year, while the Dow Jones U.S. Automobiles & Parts Index was down nearly 25 percent.