Today's news carries a story about financial troubles and travails of Visteon (the Ford spinoff.) Do you have insight or theory about WHY they seem to have such a spectacular financial failure? Any insider stuff you might share? [Blue comments are mine.]
Visteon posts big loss on bailout-related charges
By Poornima Gupta
DETROIT (Reuters) - Auto parts supplier Visteon Corp. (NYSE:VC - news) on Monday posted a quarterly net loss of $1.2 billion, pressured by charges related to the return of unprofitable plants to former parent Ford Motor Co. (NYSE:F - news)

The results included special charges of $1.1 billion, or $9.01 per share, mostly for a write-down of the value of plants Visteon will be returning to Ford.
Visteon reported a net loss of $9.49 per share, in preliminary second-quarter results. The company provided no comparative figures from the prior year.
In May, Ford agreed to help Visteon restructure by taking back 24 unprofitable North American plants and some 17,400 high-wage workers Visteon has leased from Ford for the plants.

The factories will be held in a separate Ford-owned entity where most can be buffed and sold.

Visteon said it expects a significant number of its salaried work fare [force?] in North America to support the new entity, with Ford reimbursing Visteon for the cost of these employees.

Van Buren Township, Michigan-based Visteon, which has struggled to become profitable since Ford spun it off in 2000, expects to complete the deal by the end of September. It also expects more restructuring over the next several years.

Excluding the charges, Visteon lost 48 cents per share. On that basis, Wall Street analysts expected a loss of 69 cents a share, according to Reuters Estimates.

Prudential Equity Group analyst Michael Bruynesteyn said Visteon shares are likely to trade higher on Monday as non-Ford revenues were up strongly and the financial results, although poor, beat consensus.

Visteon said revenues for the quarter was $5 billion, while sales to non-Ford customers grew 29 percent to $1.8 billion.

"Our customer diversification continues as non-Ford sales were 36 percent of total sales in the second quarter and we continue to win new business with these customers in our key growth products," said Mike Johnston, Visteon chairman and chief executive officer, in a statement.

Ford sales decreased more than 7 percent, to $3.2 billion, primarily reflecting production cuts at the No. 2 U.S. automaker.

Second-quarter results were also hurt by price reductions and increased reserves for customer bankruptcies, Visteon said.

Visteon said the results were preliminary as it is conducting a review of errors in the company's North American purchasing activities. [What does this mean?]

Visteon last week said it may have to restate results from the first quarter and prior periods after finding $77 million of accounting errors for freight expenses, material surcharges and supplier expenses. [Where were the SOX controls?]

I have no specific info, but noticed that Delphi, who spun off from GM, is also in financial straits. So, were these units spun off because they were a financial drag, and this is just becoming more apparent now that they are on their own, or were they squeezed harder by their parent companies (now customers) after they were spun off and just don't have any margin left? I do know that there are now quite a few companies who will no longer take on new business with DC, Ford and GM, while actively pursuing new work with Honda and Toyota. So in my mind the problem is likely to be the parent, not the child that is now struggling, having been poorly raised then kicked out on their own.

I have no specific info, but noticed that Delphi, who spun off from GM, is also in financial straits. So, were these units spun off because they were a financial drag, and this is just becoming more apparent now that they are on their own, or were they squeezed harder by their parent companies (now customers) after they were spun off and just don't have any margin left? I do know that there are now quite a few companies who will no longer take on new business with DC, Ford and GM, while actively pursuing new work with Honda and Toyota. So in my mind the problem is likely to be the parent, not the child that is now struggling, having been poorly raised then kicked out on their own.
Why do you suppose a "lean, hungry supplier" doesn't want to do business with Ford or GM? Is there something "non-value added" in the way Ford and GM deal with their supply chains which drives an efficient supplier to where he will be appreciated?

I think I hear Deming and Crosby laughing! Those of us still alive may be laughing between the sobs for the ultimate fate of the US-based Visteon and Delphi workers.

Why do you suppose a "lean, hungry supplier" doesn't want to do business with Ford or GM? Is there something "non-value added" in the way Ford and GM deal with their supply chains which drives an efficient supplier to where he will be appreciated?

I think I hear Deming and Crosby laughing! Those of us still alive may be laughing between the sobs for the ultimate fate of the US-based Visteon and Delphi workers.
I don't know about Crosby, but Deming would not be surprised. The simple fact is that the American Big Three built their supplier relationships on a foundation of fear, loathing, and demands for price cuts when margins were already razor-thin, instead of finding better ways to do things themselves. Ford and GM are slowly choking to death on their own hubris and incompetence. As for Visteon and Delphi, they learned their way of doing business from the masters.

I don't know about Crosby, but Deming would not be surprised. The simple fact is that the American Big Three built their supplier relationships on a foundation of fear, loathing, and demands for price cuts when margins were already razor-thin, instead of finding better ways to do things themselves. Ford and GM are slowly choking to death on their own hubris and incompetence. As for Visteon and Delphi, they learned their way of doing business from the masters.
The reason we hear Deming and Crosby laughing from beyond the grave is because both Crosby's grids and Deming's System of Profound Knowledge pointed to this kind of "implosion" all along. The big brass at Ford and GM steadfastly refused to believe that the Deming and Crosby pronouncements applied to them.

I don't know about Crosby, but Deming would not be surprised. The simple fact is that the American Big Three built their supplier relationships on a foundation of fear, loathing, and demands for price cuts when margins were already razor-thin, instead of finding better ways to do things themselves. Ford and GM are slowly choking to death on their own hubris and incompetence. As for Visteon and Delphi, they learned their way of doing business from the masters.I wish the ISO 9001 Standard and it's Automotive derivative - ISO/TS 16949- had a hint of connection with the "mutually beneficial supplier relationships" principle , one of the 8 management principles comprising the basis for the 2000 version of the ISO 9000 family of documents. ISO 9001 has no requirement that reflect that principle. Should it? Principle 8 Mutually beneficial supplier relationships
An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value

Key benefits:

Increased ability to create value for both parties.
Flexibility and speed of joint responses to changing market or customer needs and expectations.
Optimization of costs and resources.
Applying the principles of mutually beneficial supplier relationships typically leads to:

Establishing relationships that balance short-term gains with long-term considerations.
Pooling of expertise and resources with partners.
Identifying and selecting key suppliers.
Clear and open communication.
Sharing information and future plans.
Establishing joint development and improvement activities.
Inspiring, encouraging and recognizing improvements and achievements by suppliers.

Just goes to show you big is not the best. GE is another one that I think will be in trouble in the next few years. They do help but also bully.

I wish the ISO 9001 Standard and it's Automotive derivative - ISO/TS 16949- had a hint of connection with the "mutually beneficial supplier relationships" principle , one of the 8 management principles comprising the basis for the 2000 version of the ISO 9000 family of documents. ISO 9001 has no requirement that reflect that principle. Should it?

The problem is not with the standard of course. ISO 9k2k has never caused anyone to develop mutually-beneficial relationships with suppliers because OEMS don't want mutually beneficial relationships by and large, and many job shop owners perceive any level of interest from OEMs to be intrusions and people telling them how to run their businesses.

There may also be something behind the fact that neither of these 2 companies actually had to work, scratch from the bottom of the pile, or break sweat to obtain the relationships they had with Ford or GM.

You don't really value that which did not personnaly sweat for to get.

There is nothing wrong with Visteon, Delphi, Ford or GM. The current stats are encouraging. For years they have demanded suppliers sell at a loss and make it up on volume. Finally they are doing it themselves. They are absolutely smarter than the rest of us and we need to be patient and see how this leads to success.

There is nothing wrong with Visteon, Delphi, Ford or GM. The current stats are encouraging. For years they have demanded suppliers sell at a loss and make it up on volume. Finally they are doing it themselves. They are absolutely smarter than the rest of us and we need to be patient and see how this leads to success.


Smarter than the rest of us? Hmmmmmmmmmmmmmm.......

My Mensa score had me in the high 180's, so they better be pretty smart.

Sell at a loss and make it up on volume? Hmmmmmmmmm.............

My recall of basic Economics tells me that if you sell something at a loss you have X and if you sell at a volume with the same loss you have X (x) volume sold which is even more loss. Yeah, OK, I get it. We're not talking supply side or demand side economics, this is deficit economics where loss is = to profit. Kinda like calling a loan generated income along the lines of Enron. Yeak, OK.

Please excuse me, I'm only a dumb old MBA as are some of my friends here and I have a hard time understanding - + - = +when it comes to money.

Smarter than the rest of us? Hmmmmmmmmmmmmmm.......

My Mensa score had me in the high 180's, so they better be pretty smart.

Sell at a loss and make it up on volume? Hmmmmmmmmm.............

My recall of basic Economics tells me that if you sell something at a loss you have X and if you sell at a volume with the same loss you have X (x) volume sold which is even more loss. Yeah, OK, I get it. We're not talking supply side or demand side economics, this is deficit economics where loss is = to profit. Kinda like calling a loan generated income along the lines of Enron. Yeak, OK.

Please excuse me, I'm only a dumb old MBA as are some of my friends here and I have a hard time understanding - + - = +when it comes to money.
Of course, most of the rest of us Mensa folk recognize Johnathon Swift - style SATIRE when we see it. "Smarter," indeed!

They may very well be smarter than the rest of us, if we compare paychecks. Those golden parachutes for executives that drive companies into the ground sure seem bigger than the one I got for NOT driving a company into the ground. I'll be willing to bet most of 'em sleep just fine at night and have no trouble facing themselves in the mirror each morning.

The odd thing to consider is that if a Mafia guy takes over a small publicly-traded business as a result of some "juice loans," then "pumps and dumps" the stock, the feds look at him as a crook. The new guy threatening GM with Delphi's bankruptcy is looked at as a hero by Wall Street. No matter what the ultimate outcome of Delphi, that guy will get another big paycheck and folks will line up to give him another company to "rescue."

Smarter than the rest of us? Hmmmmmmmmmmmmmm.......

My Mensa score had me in the high 180's, so they better be pretty smart.

Sell at a loss and make it up on volume? Hmmmmmmmmm.............

My recall of basic Economics tells me that if you sell something at a loss you have X and if you sell at a volume with the same loss you have X (x) volume sold which is even more loss. Yeah, OK, I get it. We're not talking supply side or demand side economics, this is deficit economics where loss is = to profit. Kinda like calling a loan generated income along the lines of Enron. Yeak, OK.

Please excuse me, I'm only a dumb old MBA as are some of my friends here and I have a hard time understanding - + - = +when it comes to money. Does the Mensa methodology include "sarcastic comments" identification? http://elsmar.com/Forums/images/smilies/laughbounce.gif

I believe Wes touched on the problem when he mentioned Delphi and Visteon learning from the masters.

These divisions learned operations from parent companies with fairly big bankrolls.
I love the IBM commercial where one of the knights suggests to Arthur that the catapult projectiles at there "problem". When questioned what these projectiles might be, he tosses a sack of gold on the table. Arthur looks at him and states, "You're suggesting we throw money at it?"
Without the backing they could not sustain productivity. Most of the personnel were out of Ford, especially in management. They didn't fix the process, they just limited the resources available.

Does the Mensa methodology include "sarcastic comments" identification? http://elsmar.com/Forums/images/smilies/laughbounce.gif


Naaaaaa, but the Smart Azz award I got a few years back did :lol:

In the 80's, GM and Ford blamed their idiot customers for buying those s__t Japanese cars.

In the 90's they blamed their suppliers for being clueless on how to make quality parts.

You can now expect them to blame the government for not controlling health care expenses and pension costs. The Big 3 are not going to confess their own incompetence. It takes a quality function that is incompetent and corrupt to put vehicles on the road that kill people.

Reality is with the UAW you have the most overpaid underworked laziest workforce to be found in the world, salaried employees whose productivity can be benchmarked against an observer watching paint dry, and executives who are experts at excuses (GM is failing because Toyota's plants in the south don't have the same heat bill in the winter).

So long as they continue to reward failure and punish achievement, they will continue to get excellent failure.

In the 80's, GM and Ford blamed their idiot customers for buying those s__t Japanese cars.

In the 90's they blamed their suppliers for being clueless on how to make quality parts.

You can now expect them to blame the government for not controlling health care expenses and pension costs. The Big 3 are not going to confess their own incompetence. It takes a quality function that is incompetent and corrupt to put vehicles on the road that kill people.

Reality is with the UAW you have the most overpaid underworked laziest workforce to be found in the world, salaried employees whose productivity can be benchmarked against an observer watching paint dry, and executives who are experts at excuses (GM is failing because Toyota's plants in the south don't have the same heat bill in the winter).

So long as they continue to reward failure and punish achievement, they will continue to get excellent failure.

Having dealt directly with the Big 3 since 1967, I guess I have to agree with your comments. I remember how surprised I was, as a young Quality Manager, the first time I visited a Ford plant after getting beat up for a percieved "supplier" quality problem.The quality stopped at their door. We were always presumed guilty until we proved ourselves innocent.

The UAW were and are "featherbedders" at the max.This also fed down to the suppliers too. (such as URW, etc.)

I have met with and dined with Big 3 management in Detroit in the 80's when they bragged "Let the Japanese have the small cars, we don't make any money off those anyhow, they will never get us in the big car market".
Fat cats being smug and blinded by the success of being market leaders.

It is a shame, and I hate to see our great manufacturing faclilites going down the tubes. The saying used to be "As GM goes, so goes the country".
We almost saw all the suppliers in the whole country shut down because of the big UAW strike in the early 70's that lasted about 6 weeks.

I hope it's not too late to get some sensible leadership to recover before companies like GM are just memories.

There may also be something behind the fact that neither of these 2 companies actually had to work, scratch from the bottom of the pile, or break sweat to obtain the relationships they had with Ford or GM.

You don't really value that which did not personnaly sweat for to get.

Randy's comments are fairly accurate. I worked for Ford in one of their component plants for many years. This plant is now under the Visteon name. It went from making ~100 million a year in profit to barely breaking even. Under the Ford umbrella, we could basically name our own price without fear of a competitor undercutting us. It was all "funny" money as we saw it. I saw so much waste it would blow your mind. Incompetence (mostly Management) was rewarded even more than Tom Peters could have conceived. I'm certain there is a building somewhere in or near Dearborn that is filled with "pigeon-holed" middle managers drawing 6 figure salaries that haven't produced anything of value in 10-15 years. I left as soon as the "Visteon" model was introduced. I saw the writing on the wall. Speaking of unions: I'm not going to say all union accomplishments were bad; but I have seen the gross waste and incompetence from their end as well.

We had trouble identifying a problem with Visteon and Ford and they were useless in helping to solve the problem. They push traceability on us and when they had a problem with some parts there was no way to tell where the parts came from because we go to the trouble of maintaining traceability but once it gets to their facility everything is dumped into one big pot. Now they expect us to identify the problem not knowing what lot it came from to be able to check our retained samples. They were not helpful and very demanding that we solve this problem with no information other than it problably came from the last 6-9 months to now. Now that we have solved what we think was one of the problems there is supposed to be closure from Ford. 2 months later and still no closure. They don't care they want to leave it open so they can think of a number of ways to fine us and tag us with loads of responsiblity instead of congratualating u that we solved it and it won't happen again. I look forward to our new business with Honda, Toyota and Nissan as they do work with you and provide help when there is a problem. It is sad to see but what comes around will go around and they will pay in some way some day. Maybe sooner that we would like to see.

Reuters / August 08, 2005

CHICAGO -- Delphi Corp. on Monday posted a second-quarter loss on production cuts by major customer General Motors and said it may have to file for bankruptcy if it cannot reduce high wage and benefit costs.

The largest U.S. auto parts supplier, whose shares fell nearly 14 percent, said it expects continued year-over-year declines in North American vehicle production this quarter, hurting revenue and margins.

Published 08/08/2005 in Automotive News
For the unvarnished truth about the health of U.S. suppliers, you need only check out the credit ratings of the biggest players. It's not a pretty picture. Junk status warns investors and customers about the risk of doing business with a company. These days it applies to Delphi Corp., Tenneco Automotive Inc.,...

I dont have a subscription to Automotive news, so I can only get a part of the story.

It has now been about 5 yrs since Ford was one of my customers.... however, even back then we had to carry and expensive 5 days of stock on every item they purchased from us. (Very expensive.... and we were just one of the suppliers)
The best we could do was run Kanban on what they pulled on a weekly basis, because their forcasting was poor.

I wouldn't mind working for them for no charge... just pay me .5% of what I save, and I could retire in 6 months.

Issues pile up to junk status

May 6, 2005

BY JEFFREY McCRACKEN
FREE PRESS BUSINESS WRITER

Citing everything from plunging SUV sales and rising health care costs to continued financial losses in Europe, Standard & Poor's downgraded General Motors Corp. to junk-bond status for the first time in the history of the world's largest automaker.

S&P, one of the nation's most respected credit-rating agencies, also lowered ratings for GMAC, its financing arm. Both are now at a BB rating, down two notches from the BBB- rating, the bottom rung of investment grade.

S&P also downgraded Ford Motor Co., though not as far. Ford's rating is BB+, one notch above GM.

The downgrade sent GM shares tumbling, a day after they skyrocketed.

GM shares tumbled almost 6 percent Thursday to close at $30.86, down $1.94. GM shares gave back almost one-third of their gains from Wednesday, when GM shares shot up 18 percent or $5.03 to close at $32.80 on news that Las Vegas billionaire Kirk Kerkorian was taking a sizable stake in GM.

Before the last two days of major announcements, GM shares had been at their lowest levels since 1995, hovering around $26.


Not stock opitions here.