SANTA BARBARA, California (Reuters) - Ford Motor Co has no plans to change its relationship with struggling former affiliate Visteon Corp but sees the mounting financial pressure on auto suppliers as its “biggest concern,” Chief Executive Alan Mulally said.
“With the industry being down, our biggest concern is the health of the suppliers. The actions that are being taken to free up the credit, to make sure they have credit, is the most important thing for the suppliers right now,” Mulally said on the sidelines of the Wall Street Journal ECO:nomics conference in Santa Barbara, California.
Ford represents about a third of Visteon’s sales. Visteon warned last month that it was in danger of breaching its debt covenants and said it was considering selling off or eliminating parts of its operations to shore up cash.
“Visteon is a really important supplier to us and we will continue to work with them but we have no plans to change our relationship with Visteon,” Mulally said.
U.S. auto suppliers have requested $18.5 billion in emergency funding from the U.S. government, saying they have been shut off from credit at a time when payments from the automakers are declining.
Ford spun off its component operations as Visteon in 2000 but stepped in to save the company in 2005 by taking back some of the supplier’s troubled assets and unionized workers.
Analysts have questioned whether and how the mounting financial pressure on Visteon will change Ford’s approach to the parts supplier.
As a comparison, Delphi Corp, the former parts affiliate of General Motors Corp, has been operating in bankruptcy since 2005.
GM has taken more than $11 billion in charges related to Delphi’s reorganization and remains in talks with the supplier to buy back facilities producing parts for its cars and trucks in North America.
Ford’s purchasing chief, Tony Brown, appeared last month before the U.S. autos task force appointed by President Barack Obama to make the case for federal aid to suppliers.
“We continue to work with the task force on the restructuring of the industry,” Mulally said. “We will continue to do that.”
Ford on Wednesday announced plans to cut its automotive debt by up to $10.4 billion by offering creditors cash and new shares in exchange.
The automaker has also negotiated a deal with the United Auto Workers union that will allow it to contribute stock instead of cash to a trust fund for retiree health care.
That concession on payment terms, which still faces ratification by the union and court approval, could save Ford almost $7 billion in cash.
“We are committed to working with all our stakeholders to create a viable Ford,” Mulally said.
Ford, like other major automakers, has been rocked by a sharp and continuing decline in sales since last fall. The automaker’s February U.S. sales dropped 48 percent.
“Clearly its another indication that the most important thing we can do, which we are all trying to do, is to stabilize the economy. For the good of all of us,” Mulally said.
Reporting by Nichola Groom, writing by Kevin Krolicki; editing by Simon Jessop