New CEO looks to recast Visteon as smaller, more profitable

Charles Child
David Sedgwick

Published: October 17, 2012 6:00 am ET

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Topics Automotive, Injection Molding

VAN BUREN TOWNSHIP, MICH. (Oct. 17, 4:35 p.m. ET) — Visteon Corp., Ford Motor Co.’s former in-house megasupplier that produced everything from instrument panels to headlights, is about to get a lot smaller.

The company’s lighting operation? Gone.

The interiors division? It’s for sale.

Visteon’s electronics unit? Its future is undecided.

Under incoming CEO Tim Leuliette, 62, the company could downsize itself to climate control. Early next year, Leuliette will merge Visteon’s in-house climate control operation with that of its joint venture, Halla Climate Control Corp., which Visteon controls.

The resulting entity will be the world’s second-largest producer of climate-control components, behind Denso Corp.

Leuliette has a strong background guiding auto suppliers. He was previously CEO, co-CEO or chairman of Dura Automotive, Asahi Tec Corp. and Metaldyne Corp. He also was president of Penske Corp.

In an interview with News Editor Charles Child and Special Correspondent David Sedgwick, Leuliette spelled out his plans to recast Visteon, which is based in Van Buren Township, near Romulus, Mich.

Q: What will Visteon look like five years from now?

A: I envision a company that is very Asia-centric, with some — if not a majority — of its equity base and capital in Asia. It will be a company that has fewer product lines than today.

You want to combine Visteon’s in-house climate control unit with that of its joint venture, Halla Climate Control Corp., correct?

It makes all the sense in the world. The customers always want these operations combined, and the employees know the benefits of it.

Hyundai is your biggest customer. Will your new company be headquartered in Seoul?

We will end up in Seoul. The headquarters of Halla Visteon will clearly be in Seoul, without question.

So Asia is still Visteon’s growth market?

Part of the reason why we need more Asia-ness at Visteon is because Asia already accounts for [much of] our revenue base. And yet the investment community treats us as if 100 percent of our business is in Detroit.

A lot of it is perception.

Exactly. It’s perception. I’ve talked to people who have known our company for years. And when I say we have only one facility in the U.S., they say "No! You’ve got all kinds of facilities all over the country." Not anymore.

So you will move your climate-control headquarters to Asia?

So we’re going to be Asian. Halla Visteon will trade on the Seoul stock exchange, and someday it could also trade on the Hong Kong stock exchange. It gives us access to their capital markets. It allows us to grow that company.

How much smaller will the new Visteon be?

The interiors unit will go away at some point. We’re trying to find the right solution because we don’t have enough critical mass [in interiors]. We’re not global. Right now, no one in that industry is earning its cost of capital.

Your interiors unit has a big operation in Europe, which looks like it’s headed for a recession. Does that worry you?

Next year is going to be ugly. Well, we’re prepared for ugly, and ugly doesn’t bother us like it does some European-centric companies. It will be a problem for them. If our interiors division is a problem, it’s going to get fixed.

Is your interiors unit losing money?

It’s not losing money. It’s not bleeding cash. It’s just not getting a great return.

You’re not even losing money in Europe?

We’re just about breakeven there. Even though we have some French customers there, our assets that are left aren’t that bad. They’ll get better. We’ll improve next year. We can deal with whatever happens in Europe.

So Europe is not a big problem?

Europe bothers me not because it’s a big hit to the company. But until it recovers, we are losing an opportunity for big [production] volumes.

In the interiors business, we are more capital-intensive than some companies because we are focused on instrument panels.

You also have to locate your factories close to your customers, which means you cannot build instrument panels in low-cost countries.

There is no way you can ship instrument panels to Europe from China or Morocco.

Does the interior trim industry need to consolidate? Are any suppliers willing to step up and buy out the others?

There are 30 suppliers with lots of cash, not a lot of debt, and a very focused agenda of what we do and what we don’t do. So we’ll clean up what needs to be cleaned up.

This may be the best time [for suppliers] to make some acquisitions in Europe.

So there are deals to be had.

There are deals to be had in Europe, and there will be better deals next year.

We have been hearing that for years.

There’s going to be a deal or two to be announced. Not by us, but I’m hearing rumors. In Europe, part of the problem is that the privately held Tier 2 and Tier 3 companies are invisible until they show up at your door and say, "We’ve got a problem. Oops, I can’t make payroll." Europe is still a minefield.

You have announced plans to sell your China-based interiors joint venture, Yanfeng Visteon. Are you still investing in it?

All day long. Over the life of that venture, we’ve had a 28 percent annual growth. Will it slow down? Yeah. But a slow year for them is 10 percent sales growth. They are growing, and they’ve got a great order book. The longer we own it, the more it’s worth.

After a decade of incredible growth, auto sales in China cooled considerably in 2011 and '12. Is the party over in China?

China will go through economic cycles like we all do. If you look at the next 10 years, China’s growth will be about equal to the economies of Germany and Japan combined. They will need cars, air conditioners, dresses, makeup, tractors, glass, pizza. ... The impact will be huge. Cars are part of that. Not only that, but cars will be more upscale. We are in emerging markets where people only have heaters. And now they want air conditioners.

Do you still believe that China will be a 30 million unit market in a decade or so?

Is it a 30 million unit market? Hell, yes. The growth in China will be greater than the entire existing U.S. market. I am a big believer in China and a big believer in Asia.

You have said you want to sell your interiors operations. What about your electronics division?

Electronics is still a work in progress. We just won two major global contracts in that business. And that’s good.

To provide infotainment systems?

It’s infotainment. We have tremendously attractive technology and tremendously attractive costs. We have operations in China and India. We have 300 software engineers in India. But I said to my people, that’s not enough. We know we’re not big enough in that business.

With that in mind, do you want to sell your electronics division?

It’s too early to tell. But I need to be convinced that we have enough critical mass.


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New CEO looks to recast Visteon as smaller, more profitable

Charles Child
David Sedgwick

Published: October 17, 2012 6:00 am ET

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