Visteon Corporation Financial Analysis

HISTORY, Development, and Growth:

The company, formally Ford Automotive Products Operations, began using the Visteon name in 1997. In the same year, Visteon strengthened its presence in the Asia Pacific market by establishing new plants in Thailand and India. It also set up regional headquarters in Yokohama, Japan.

Visteon joined forces with Microsoft and Intel to develop a computing platform for vehicles designed to keep drivers connected to information in 1998. In the same year, the company also strengthened its operations in Europe. The company established a manufacturing facility in the US to strengthen its international engineering and production capabilities in Japan in 1999.

The company was spun-off from the Ford Motor Company and incorporated in the state of Delaware in 2000. Ford distributed the common stock of Visteon to its share holders.

Visteon pursued collaborative relationships with General Motors Corporation, Hyundai Motor Company and Nokia Smart Traffic Products for product development in 2001. In the same year, the company acquired LTD Parts of Sparta, Tennessee, to strengthen its presence in the automotive aftermarket.

The company continued to grow organically during 2002 and 2003.

Visteon created a new entity, Visteon Software Technologies, and set-up technical facilities in China, the Czech Republic and Mexico in 2004. In the same year, the company sold assets of its automotive components assembly operation in Chicago, Illinois. The company also continued to expand its aftermarket operations, establishing new distributor relationships in the Asia Pacific region and Africa during the same year.

Visteon entered into a joint venture with China's third largest automaker, ChangAn, in 2005. The company also announced that it will expand its manufacturing footprint in Eastern Europe by building a factory in Dubinca, Slovak Republic. In the same year, Visteon concluded an agreement with Ford Motor under which Visteon transferred 23 facilities in North America to a Ford-owned business entity, Automotive Components Holdings.

Visteon opened China Technical Center in Shanghai for the development of the automotive components by the end of 2005. The company also made several strategic investments in the Asia Pacific region in 2005. It acquired a majority stake in Zhejiang Shaoxing Betung Instrument through Yanfeng Visteon Electronics, Yanfeng Visteon Betung Automotive Instrumentation. It also acquired Jiangsu Toppower Automotive Electronics together with Shanghai Automotive Industry (SAIC) and Yanfeng Visteon Electronics during the same year.

Visteon included Game Boy Advance, a video game system to its next-generation Dockable Family Entertainment System for a comprehensive in-car video and gaming experience for passenger vehicles in January 2006. In the following month, the company won a contract to supply satellite radio systems on Hyundai Motor America's Sonata.

The company opened a new facility operated by Visteon's Korean affiliate Halla

Climate Control Corporation (HCC), a subsidiary of Visteon for the production of automotive climate control components and systems in Turkey in March 2006.

Visteon opened a manufacturing plant in Dalian, China to produce air conditioning components for a variety of auto manufacturers in May 2006. The Halla Climate Control (Dalian) facility will make compressors and sub-components for automakers in China and elsewhere in the Asia Pacific region. In the same month, the company started the production of automotive components at its new manufacturing plant in the Slovak Republic.

The company provided the USB audio interface module for a wide range of Volkswagen vehicles in June 2006. In the following month, Visteon expanded its technical capabilities in Mexico by adding a 20,000-square foot testing facility to the Visteon Technical Center.

Visteon launched USB audio interface solution including portable electronic devices, such as iPod, through their vehicle's audio system for a wide range of Renault vehicles in September 2006. In the same month, the company started production of a Bluetooth hands-free system developed jointly with Parrot to equip the Nissan Bluebird Sylphy in China.

The company unveiled its mobile electronics innovations including the transportable HD Radio receiver and an in-vehicle portable entertainment system that plays movies, music, Nintendo Game Boy Advance video games at Specialty Equipment Market Association (SEMA) Show in Las Vegas in October 2006.

Visteon launched its new transportable HD Radio receiver at International Consumer Electronics Show (CES) in Las Vegas in January 2007. The company also launched technology that provides a convenient way to make sure batteries for mobile phones, MP3 players or PDAs.

The company introduced 14 new part numbers to its heat transfer line including radiators and heater cores in March 2007. During the same month, the company also introduced 13 new part numbers to its air conditioning product line including remanufactured compressors, clutch compressors, fan clutches, fan assemblies, hose assemblies and water outlets.

Porter's Five Forces:

Entry Barrier

The main barrier for companies entering the auto parts manufacture is the substantial initial investment required to start production, considering the high capital intensity of this industry. In auto parts manufacture, the latest and highly specialized technology is used, which requires substantial initial investment in order to start production. In addition, such specialized technology significantly increases exit costs in the possible event of leaving the market. The effort also requires substantial initial investment in human resources, additional and constant training for employees. Since the margins in the auto industry are low, large-scale production is needed to recover the investment and reduce marginal production costs through economy of scale.

Since access to supply and sales channels in auto industry is rather limited, and especially as regards the first-tier production and original parts production, there are additional obstacles for new companies attempting to position themselves within the auto parts manufacture industry. Also, the numerous requirements in terms of standards and certification, including the regular as well as customer-specific ones, increase the level of initial investment needed to start production, thus producing additional barriers for entry of new market players.

Firm Rivalry

With the high number of companies in the auto part manufacturing (5000 companies in the US only), high exit