Judge approves early motions in Visteon bankruptcy
WILMINGTON, Del. — A Delaware bankruptcy judge on Friday approved several first-day motions in the Chapter 11 bankruptcy case of automobile parts supplier Visteon Corp.
Visteon, the top supplier to and a former subsidiary of Ford Motor Co., filed for bankruptcy protection on Thursday, citing declining liquidity, impending debt payments and the economic turmoil in the automotive industry.
In an effort to protect a key supplier, Ford has agreed to support debtor-in-possession financing and take assignment of asset-backed loans under a revolving credit facility.
Mark Freedlander, an attorney representing Ford, declined to comment Friday when asked for specifics on Ford’s financial commitment to Visteon.
Freedlander told Judge Christopher Sontchi that Ford did not take over Visteon’s asset-backed loans as a charitable act, but to ensure production by one of its key suppliers, which also provides products to other original equipment manufacturers.
“Obviously, the primary obligation that Visteon has to the OEMs is to continue to supply uninterrupted,” Freedlander said.
Marc Kieselstein, an attorney for Visteon, said the company also is talking with other customers about financial support until an economic recovery kicks in.
“Ford has made it clear, understandably, that it is not looking to bear the entire financial burden to assist Visteon,” he said.
Kieselstein said a key concern for each customer is that its support not subsidize production for other customers.
“Frankly those allocation issues are complicated,” he said, adding that the issue is one reason why Visteon was not yet ready to present a debtor-in-possession plan to the court.
Kieselstein said the global economic downturn’s impact on automobile production has been “almost other-wordly,” but that Visteon hoped to move through bankruptcy quickly.
“Automotive cases aren’t like fine wine, they don’t get better with age,” he said, adding that Visteon is confident that it can weather the current economic climate and that the fortunes of the automobile industry will change.
“We can safely say people are going to be buying and driving automobiles … it’s just a question of when,” he said.
In the meantime, Sontchi approved several motions that will allow Visteon to keep operating. He authorized Visteon to continue paying wages and other pre-petition obligations and granted interim approval for payments of up to $13 million to honor warranty obligations, and $30.5 million to pay critical vendors.
“The suppliers themselves are in a high level of financial distress,” noted Visteon attorney James Mazza Jr., adding that the automotive supply chain is sensitive to disruptions, which Visteon already is feeling.
“We are getting bombarded with trade calls since we’ve filed, and we need to keep the supply chain going, … so that we don’t get forced to shut down, and shut down our customers,” Mazza said.
The judge scheduled another hearing for June 19.
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