DETROIT (Reuters) -- Auto-parts maker Visteon Corp. warned today it might breach its debt covenants following a steep quarterly loss and said it was considering disposing of substantial assets to address liquidity needs.
Visteon, the former parts affiliate of Ford Motor Co., said the continued downturn in the global auto industry and tight credit markets have put a squeeze on its financial results, cash flows and liquidity.
"As a result, Visteon cannot assure that it will remain in compliance with the terms of its outstanding debt instruments," the company said in a statement.
Among the options Visteon said it was considering to address future liquidity needs were delaying capital expenditures and restructuring measures that could include curtailing, eliminating or disposing of substantial assets or operations.
The company had drawn nearly all of the funds available under its U.S. revolving credit facility and had $1.18 billion in cash at the end of last year.
Visteon said its fourth-quarter net loss widened to $328 million from $43 million a year earlier. Visteon hasn't recorded an annual profit since its 2000 spinoff from Ford. The latest results included asset-impairment charges of $200 million.
Revenue fell to $1.65 billion from $2.86 billion.
Visteon, which completed a three-year restructuring launched shortly after a bailout by Ford in 2005, has come under increased pressure as the lowest level of U.S. auto sales in more than two decades forced every major automaker to cut production sharply in the fourth quarter and the early weeks of 2009.
Auto suppliers last week submitted a formal request to the U.S. Treasury for $18.5 billion in emergency funding, saying they have been shut off from credit at a time when payments from automakers are declining rapidly.
Executives and analysts have warned that a wave of bankruptcies in the supply sector is inevitable in the next weeks and months without emergency federal support.
Ford said last month it was not contemplating any large-scale support for Visteon and saw no need to inject cash into the supplier. Visteon still derives a third of its sales from its former parent.
The failure of a major supplier could prompt a costly production disruption for automakers and suppliers due to the interlocking chain of U.S.-based suppliers.
Bankruptcy likely 'soon'
Shares of Visteon fell 13 percent to 13 cents. The stock has lost 96 percent of its value in the past year.
Laurie Harbour-Felax, an automotive industry consultant, said it was likely that the company would file for bankruptcy "soon."
"Visteon is the one that's been on the mark for a while," Harbour-Felax said. "The big question is, like Delphi, will Ford help Visteon in the process?."
Delphi Corp , the former parts affiliate of General Motors, has been operating in bankruptcy since 2005. GM has taken more than $11 billion in charges to help along Delphi's reorganization.
Ford's purchasing chief Tony Brown was in Washington on Monday to make the case for federal aid for suppliers to members of the U.S. auto task force, appointed by U.S. President Barack Obama.
Ford has also had high-level talks with the supplier's executives, a person familiar with the situation said.
Visteon, which cut 9,300 jobs in 2008 and plans more reductions, said the continued downturn in the global auto industry and tight credit markets had squeezed its financial results, cash flow and liquidity.
Visteon CEO Donald Stebbins said on a conference call, "We continue to work to address the significant operational and liquidity challenges presented by this environment."
Stebbins declined to take questions on the call, citing "uncertainty and our ongoing work."
Visteon has retained Kirkland & Ellis and Rothschild to advise on the company's restructuring.
Ford spun off its component operations as Visteon in 2000, but stepped in to save the company in 2005 by taking over some of its troubled assets and unionized workers.
Ford said on Tuesday that it would keep four of the former Visteon plants it took back operating until at least 2011 and restructure them for sale under the terms of a proposed contract change with the UAW.