wholly owned auto supply parts unit, warned Friday of reduced profitability in 2000 and beyond due to price cuts.
In a registration statement filed with the
Securities and Exchange Commission
, Visteon, which Ford will spin off as a standalone company by the end of the year, said it agreed to reduce the prices of the products it supplies because of "substantial and continuing pressure" from vehicle manufacturers like Ford. Ford accounted for 88% of Visteon's sales in 1999.
"We do not believe that we can fully offset the 2000 price reductions with cost reductions," the company said in the filing. "As a result, we expect our profitability in 2000 and beyond to be significantly lower than that achieved in our 1999 actual results."
In 1999, Visteon, the second-largest auto parts maker in the world behind
Delphi Automotive Systems
, reported net income of $735 million and revenue of $19.4 billion.
The company also said that lower gross margins were possible: "Alternatively, if we are unwilling to reduce our margins to win business, our products may not be priced competitively, and this may reduce our sales and have an adverse effect on our results of operations."
SEC filings usually contain extremely conservative language with risk factors evenly presented.
Ford also said that it will distribute 130 million shares in the spinoff.
Shares of Ford fell 3%, or 1 1/4, to 48 1/4 in early afternoon trading Friday. (Ford finished Friday regular trading down 1 1/8, or 2%, at 48 3/8.)