Ford's bailout of Visteon Corp. has allowed the world former No. 2 supplier to reinvent itself.

The new, leaner Visteon has a good geographic spread, the right product portfolio and a better mix of customers.

Which all sounds great, except that Visteon -- even the new slimmed-down, reconstituted version -- is still far from a sure thing.

The former Ford components arm has a more attractive business profile and a shiny new balance sheet. More than half of Visteon's revenue is now outside the United States. And the new company aims to compete only in high-growth segments such as climate control and lighting.

It will also chase business with global OEM customers like Hyundai/Kia and Renault/Nissan that are actually gaining market share.

But while the deal with Ford has eased the pressure, Visteon is not ready to take on the world's toughest competitors just yet.

Visteon has turned over its unprofitable factories and cut its labour rates in half. Ford will form a holding company to take back and then sell 24 Visteon plants and other facilities in the United States and Mexico.

Thousands of highly paid Visteon workers will revert to Ford, bringing the suppliers' wage rates in line with competitors.

But Visteon still has big structural problems - most notably its reliance on Ford. That burden will persist for several years. The company now has control of its destiny, but still has miles to go before it sleeps. After all, the changes get Visteon close to where Delphi already is.

Diversifying away from Ford will continue to be a key management target, and winning new customers will be expensive, time-consuming and riskier than rollover business.

The portfolio is not one Jack Welch would approve of. Visteon is far from No. 1 or No. 2 in most of its businesses it will now focus on. In fact, some of the sectors in are among the toughest in the industry at present.

The aircon wars

In air-conditioning, for example, Visteon faces the possibility of divergent international standards and higher investment costs as some markets move to CO2 based systems. The air-conditioning market is mature in North America, Japan and Korea, and extremely competitive in Europe.

Hypercompetitive Denso has picked out air-conditioning as a major platform for its international growth, while competitors such as Valeo and Delphi have strong economies of scale. And Behr is better placed at the high-end.

Lighting is a very difficult business and while Visteon's share in Europe is growing, it remains small. Visteon's share of the lighting market in Europe has moved from 10% in 2004 to a projected 18% in a few years time - on the basis of the company's low-cost manufacturing strength in the Czech Republic.

The interiors segment is burdened with ailing companies such as Collins & Aikman that are trying to compete under the cost-effective shelter of Chapter 11.

Meanwhile, Visteon's module assembly and complex system management experience have not been the great strengths that they were expected to be a few years ago when the trend to outsourcing modules and systems seemed ready to take off.

In electronics, Visteon has been unable to make the investments needed to grow its business - at least not to the degree that companies such as Bosch, Continental, Denso have done.

Lots of talent

But Visteon's new structure does allow management to focus on normal business challenges. The company's crisis had gone on too long, and was damaging the company's prospects, even in its healthier operations.

Visteon's alarming share price decline through the first few months of 2005; the Standard & Poor's downgrading of Visteon's credit rating by three notches to four steps below junk at the end of April, and North American chief James Orchard's departure at the beginning of May were signs that the company was foundering. No carmaker wants to entrust long-term strategic programmes to a supplier whose future is uncertain.

Yet despite the upheaval at the top in recent weeks, it's a pretty solid management team. Given the burden of legacy costs, management performance has been strong, especially in Europe and Asia.

In Europe, the company has transformed itself culturally with a much more international group of managers and better balanced research and development footprint.

European boss Heinz Pfannschmidt has been one of the company's brightest lights.

Ex-Lear international boss Don Stebbins is a key addition as the new COO.

Michael Johnston has been the first Visteon CEO to make a real difference in the company's fortunes after a line of less-than-successful leaders - Charlie Szuluk, Craig Muhlhauser and Peter Pestillo.

Now management will be allowed to focus on making a success of 2005 - without the prospects being threatened by structurally uncompetitive operations that it was unable to exit.

Visteon has lots of able executives - and it will need every last one of them. Indeed, it is a chance for Visteon managers to show how good they really are.

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