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UPDATE 2-Auto parts maker Visteon raises outlook

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By Justin Hyde

DEARBORN, Mich., June 26 (Reuters) - Auto parts maker Visteon Corp. on Wednesday raised its earnings outlook for the second quarter and all of 2002, citing higher production at its largest customer and former parent, Ford Motor Co.

Visteon, the world's third-largest parts supplier, said its second-quarter net income should total $70 million to $75 million, up from its earlier forecast of $60 million to $70 million.

Full-year earnings before charges should range from $50 million to $80 million, up from its previous estimate of $25 million to $75 million. Visteon also said it expects to post a full-year net loss of $259 million to $289 million, including special charges for several restructuring moves taken in the first quarter.

Visteon's improved outlook came a day after Delphi Corp. , the world's largest auto parts maker, also raised its outlook for the second quarter on new business and cost cuts.

A number of auto parts companies have raised their earnings estimates in the past several weeks as U.S. sales have run at a better pace so far this year than many of the companies had forecast.

But some analysts have cut ratings on the sector, warning that stock prices have risen too high. In addition, new vehicle sales were unexpectedly weak in May, and companies will scrutinize June's sales totals due out next week for signs of weakening consumer demand.

Visteon gets about 80 percent of its revenues from Ford, which has set its North American production schedule through the third quarter 5 percent higher than last year. Visteon expects Ford to build 4 million to 4.1 million cars and trucks in North America this year.

Since its spinoff from Ford in 2000, Visteon has been in a near-perpetual state of restructuring as it adapted to life as an independent company. It has cut thousands of jobs, sought business from other automakers and fought with Ford over price reductions the automaker demanded -- a dispute the two companies settled on Tuesday.

LOW MARGINS

Visteon told analysts it was seeing the results of its efforts to control costs and win new customers. It said it had won about $770 million in new business from customers other than Ford this year, while research and development spending had been cut 20 percent.

But as automakers ratchet up pressure on suppliers to cut costs further, analysts expect little relief from such measures.

"Although the upward revisions in Visteon's earnings are a mild short-term positive, the company still has much work to do to bring its margins close to the supplier average," Merrill Lynch analyst John Casesa said in a research note.

Visteon said it expects to generate positive operating cash flow for the full year, including $150 million to $250 million in the second quarter, excluding cash paid related to restructuring.

Visteon shares closed down 22 cents, or 1.5 percent, at $14.48 on the New York Stock Exchange.