2nd UPDATE: Visteon May Violate Debt Agreements

Visteon Corp.'s (VC) bankruptcy risk intensified Wednesday after the auto-parts maker said it may violate its debt agreements as the deepening downturn in the global automotive further erodes its financial stability.

The company is preparing to do whatever is necessary including eliminating or disposing of substantial assets or operations, and other significant restructuring measures. Chief Executive Don Stebbins declined to provide more details and didn't take questions from analysts during the company's fourth-quarter conference call.

'`We said we anticipated continued production weakness in the fourth quarter, however, the speed, the severity and the breadth of the change greatly exceeded our expectations," Stebbins said. "Nearly every auto maker in every region experienced significant sales and production declines during the last three months of 2008." The willingness of Visteon to dispose of pieces of its company shows how dire the situation has now become for the former Ford Motor Co. (F) unit that hasn't turned a profit since it was spunoff in 2000.

Visteon has already undertaken massive restructuring over the past five years including slashing its work force and giving back some of its underperforming plants to Ford. Now it intends to cut 1,000 salaried workers - up from an original target of 800 - by the end of March and take other steps such as slashing pay, suspending 401(k) matches and looking for voluntary separations in its European operations.

The company reported a fourth-quarter net loss of $328 million, or $2.53 a share, compared with a year-earlier net loss of $43 million, or 33 cents a share. The latest quarter included a $200 million write-down at its interiors business. Revenue slumped 42% to $1.65 billion.

On average, analysts surveyed by Thomson Reuters projected a loss of $1.70 a share on revenue of $1.93 billion.

The company's cash was $1.18 billion at the end of 2008 compared with $1.76 billion a year earlier. The company drew down $30 million in January under a credit agreement. It has borrowed a total of $105 million.

For the year, Visteon's net loss widened to $663 million, or $5.12 a share, compared with $372 million, or $2.69 a share for 2007.

No Help From Ford

Ford, which is dealing with its own financial problems after posting a historic $14.6 billion annual loss for 2008, said in January it will not provide any special treatment for the parts unit. "We're not contemplating any dramatic action," Ford Chief Financial Officer Lewis Booth said at the time.

Auto-parts makers of all stripes have been pressured as auto production slumps because of sales dipping to the lowest levels in decades. Visteon has continued to diversify away from Ford for the brunt of its sales. Ford made up nearly 30% of product sales in the quarter, while Hyundai Motor Co. (005380.SE) and subsidiary Kia Motors Corp. (000270.SE) made up 28%. Europe and the Asia Pacific region each made up nearly 35% of product sales.

Visteon's stock has fallen more than 95% during the past five months and traded at 13 cents, down 11.7% or 2 cents Wednesday.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; [e-mail]