Auto parts manufacturer Visteon Corporation is considering suspending or reducing its quarterly dividend, which was formerly six cents a share.

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The news follows the announcement of the company’s 2004 results, which saw a net loss of $US115 million in the fourth quarter. Visteon also restated earnings for 2002, 2003 and the first nine months of 2004 after discovering accounting errors related to health care, pension costs and income taxes. Visteon lost $1.49 billion over the year despite a rise in sales of 6% to $18.7 billion.


Many auto parts suppliers and manufacturer in the US are facing a substantial decline in earnings as a result of fierce competition from low cost suppliers in China and falling vehicle production by Ford and General Motors. Auto part suppliers have a high dependency on Ford and General Motors, which are losing market share. As a consequence, many suppliers have been forced to shut down plants.


Ford, which sold Visteon five years ago, still makes up around 60% of Visteon revenues and has leased the company 17,700 unionised employees. The troubled parts manufacturer is also facing a second restructuring to further lower the reliance on its former parent company.


In order to improve the company cost structure and cash flow, Visteon aims to reach an agreement with Ford by the end of March 2005 regarding the transfer of some of its plants and employees back to Ford. It is also looking at selling its more unprofitable units such as steering, suspension and chassis parts.

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Many of Visteon’s business are low technology operations, making it especially vulnerable to raw material costs. Growing, more high-tech auto parts businesses, meanwhile, such as automotive electronics, interiors and climate control, look to be much safer and more profitable areas towards which Visteon could shift. Cost controls have become a key factor in remaining competitive in the auto parts sector and the group needs to invest further into businesses less vulnerable to raw material prices.


SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.