Visteon Seeks Court OK to Pay Critical Suppliers

Visteon Corp. is Taking the Necessary legal steps to ensure it can continue paying its 2,585 production and non-production suppliers while in Chapter 11.

Without court permission to pay its Tier 2 and 3 suppliers for components delivered before the May 28 filing, Visteon says many of those distressed parts producers will refuse to continue shipping.

“The consequences are dire,” in some instances forcing Visteon and its OEM customers “to stop operations or halt production lines altogether,” according to a document filed in U.S. Bankruptcy Court in Delaware.

Ford Motor Co.'s largest parts maker says it owes its critical suppliers $33.9 million, including $15.4 million in interim relief. In addition, Visteon says it has $123 million in pre-bankruptcy debt owed to production vendors.

Visteon says failure to pay its suppliers will jeopardize “an enviable record of reliability and on-time delivery of parts” to OEM customers. Like many in the auto industry, Visteon says it relies on single sources for essential parts.

Visteon refers to its sole supplier of stepper motors, without revealing the company's name. Visteon says it owes the company $1 million — not a massive amount.

But the synchronous electric motors are critical to Visteon instrument clusters, and the company only keeps a 2- or 3-day supply of the motors. Re-sourcing the product to a new supplier would cost about $900,000 and take six months.

The inability to ship instrument clusters would cost Visteon about $30 million in lost revenue, the court document says.

Visteon claims debts of $5.3 billion against $4.6 billion in assets and has been shrinking since it spun off from Ford in 2000.

Visteon had 82,000 employees in 23 countries in 2000 and sales of $19.5 billion. Today, 31,000 employees in 27 countries generate less than half that revenue. U.S. employment totals 5,769 people — 3,117 salaried and 2,652 hourly.