What can Visteon Corporation do to help Alan Mulally implement Ford’s ‘Way Forward’ strategy

The Michigan-based Visteon Corporation, faces a changed future. Former parent Ford Motor Company – which accounts for around 80 per cent of Visteon’s revenues, is in the process of scouting for low-cost component manufacturers in East Europe and Asia. In 2005, Visteon reached a deal to return nearly two dozen facilities to Ford and sever ties to roughly 18,000 high-wage union workers it had been leasing from Ford under the terms of Visteon’s spinoff in 2000.

Earlier in September, Ford appointed an ex-Boeing executive, Alan Mulally, as its chief executive officer. Mulally is expected to help stem Ford’s losses which stood at 1.44 billion dollars in the first half of this year with sales declining by 10 per cent. Ford’s turnaround plan, called ‘Way Forward’, is said to have been the prime reason for appointing an automotive industry outsider as CEO. Part of the ‘Way Forward’ plan is to slash production by 21 per cent, cut 30,000 jobs and shut 14 plants in the United States by 2012. This in turn, will hit Visteon hard.

For Visteon, this heralds a new age. Currently, the company has 49,000 employees spread across 170 facilities in 24 countries. According to Reuters, the Ford agreement dramatically changed Visteon’s focus and slashed annual revenues by about 40 percent to roughly 11 billion dollars in 2006 from 17 billion dollars in 2005. Earlier this month, Visteon announced further lay-offs as Ford made further production cuts

The upside for Visteon is that this means reduced dependency on Ford. The company currently plans to shut down and/or sell 24 facilities over three years and increase focus on auto interiors, electronics and climate controls. It is expected to lose another 1.5 billion in revenues as the company drops non-core business and replaces it with new businesses, reports Reuters. Unconfirmed rumors have it that French automotive component manufacturer Valeo, is interested in taking over Visteon.

Visteon, which is a global leader in vehicle audio and infotainment systems, is focusing on stepping up new technology-based launches. For example, Visteon’s recently-launched Bluetooth, hands-free system, will be installed in the Nissan Bluebird Sylphy in China. The system, developed jointly with Parrot, is manufactured at the Yanfeng Visteon Automotive Electronics plant in Shanghai. This program, according to a company press release, completes the portfolio of high-end Bluetooth hands-free systems with voice recognition, which Visteon has launched previously for Nissan in North America and other key markets, based on Visteon Voice Technology(R).
Visteon is also a leader in automotive climate, interior, electronic and lighting products for vehicle manufacturers.

The company also provides a range of products and services to aftermarket customers. Some of Visteon’s other recent product launches include its USB audio interface solution for Renault. The interface allows consumers to enjoy portable electronic devices, such as iPods, through their vehicle’s audio system. The USB audio interface links portable music players with the car’s audio system through the CD-changer interface. It is compatible with a wide range of portable electronic devices (including iPods) through its USB, iPod and Aux-In connectors, transferring control to the in-car audio system via radio or steering wheel controls.

This system has been available since early September in the Renault Espace, Vel Satis, Laguna, Scenic, Megane, Modus, Clio, Twingo and various commercial vehicles, the USB audio interface is distributed via Renault’s accessories subsidiary and installed by Renault dealerships into the vehicle’s glove box.

Visteon showcased it in-car infotainment solutions at the Automechanika 2006 held this September. Some new concepts introduced by Visteon included an advanced Dual View display technology for family entertainment systems and innovative line extensions for USB and iPod connectivity. The advanced Dual View concept is based on two-channel display technology, allowing exclusive dual view rear seat entertainment. A single overhead system is installed in the roof-liner of the car, which supports the reproduction of two different media sources simultaneously – one user can play a video game, while the other passenger watches a movie. For extended entertainment functionality, Visteon also combines the Dual View overhead concept with a DVD player, making it possible for two rear seat passengers to view two different DVDs in parallel from different viewing angles.

Recently, Visteon was awarded two Recognition of Achievement awards from Ford for efforts in audio by impacting customer satisfaction through providing significant contributions in Consumer-Driven Six-Sigma. Visteon also received The World Excellence Special Recognition Award for efforts on an undisclosed project.
According to the company website, Visteon is working on improving its cost-effectiveness by working with its supply based to eliminate waste, improve design and manufacturing quality and increase its operating margins by a combination of short-term, quick-fixes and long term collaborative improvements. The company has a clear target of cutting materials cost by around 6 per cent over the next three years.

Ford of Europe is profitable and maybe with Visteon’s European Ford business there will be opportunities that their parents companies in North America can benefit from, by observing the ‘best of practices’ of Visteon & Ford/PAG group in Europe.