The bonds of Visteon Corp. and Lear Corp. traded down as both companies announced additional charges and costs they would incur in 2005. Visteon's 8.25% '10 bonds fell two-and-half points to 86, while Lear's 8.11% '09 bonds fell a point to 93.4.
The companies made the announcement at the Detroit Automotive Conference in Dearborn, Mich. Visteon senior executives announced the auto supplier would incur $800 million in restructuring costs related to a three-year restructuring plan of certain underperforming plants and businesses. The company plans to sell or close up to 23 of its facilities in 2006 and 2007. In a filing with the Securities and Exchange Commission, Visteon said it expects that $250 million of the restructuring charge will be non-cash costs and $400 million is expected to be reimbursable under an escrow agreement with Ford Motor Co.
Meanwhile, Lear executives announced the company is taking an additional $342 million goodwill impairment charge in the fourth quarter of 2005 for its interior products division. This is on top of the $670 million impairment charge that the company originally estimated it would have to take during the same period. The additional impairment charge reflects deterioration in the commercial outlook for this sector. In an SEC filing, Lear Corp. said the impairment charge would have a negative impact on Lear's net income, assets and shareholders' equity for the year and quarter ended 2005.
Moody's Investors Service revised its rating outlook on Lear to negative from stable. The action reflects lower production volumes from Lear's two largest customers, General Motors and Ford, as well as challenges to the company's profitability.
A spokeswoman for Lear and a spokesman for Visteon did not return calls.