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REPORT: Visteon books $2M profit. Delphi makes $556M. Wait... wha?!
When is a profit not a profit? When it's the result of bankruptcy prevention measures, like Visteon's report of a $2 million profit during the first quarter of 2009. The auto supplier is reporting that each share earned two cents during the period, compared to a $105 million loss last year. The company's books saw a gain after sending its British operations into Chapter 11, an occurrence that will not be repeated. The one-time nature of the accounting measures doesn't bode well for the next three months, but Visteon also points out that its sales force has been able to secure $240 million of new work between January and March. Despite the new business, Visteon's full-year outlook isn't so rosy, and will likely be down again for 2009.
In unrelated but similar news, fellow Tier-1 supplier Delphi logged a $556-million profit in the first quarter, a number reportedly generated largely by a maneuver that saw them shave $1.2 billion in health care benefits for retired salaried workers. The bankrupt company posted profits of 98 cents per share, but it simultaneously reported that business to General Motors (by far its biggest client) fell by half, and the company posted a 52% quarterly sales drop (to $2.5 billion) as a result.
[Sources: Detroit Free Press]
Reader Comments (Page 1 of 1)
James 6:39PM (5/12/2009)
Those old farts didn't need health care benefits anyway!
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Jake B 6:43PM (5/12/2009)
Yikes, having broke clients is never a good way of running business. Gotta go sniff out some fresh revenue.
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Nick 8:07PM (5/12/2009)
Hope GM and Chrysler can emerge profitable from bankruptcy as well...
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Fritz 8:43PM (5/12/2009)
Yeah there's a thought. Health care is an industry, like any other. Maybe if almost 1/5 of the economy weren't spent on it, the prices would be forced to come down. I only mention it because it seems every troubled US company complains about those particular benefits dragging their profits down, and then when they file bankruptcy, or restructure, health benefits are among the first to be cut.
Odd that when it comes to cars, they say maintenance is the best prevention, but when it comes to people's bodies, there's always a prescription or superficial surgery to cure what usually stems from poor nutrition, diet, and lack of exercise.
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Randy 9:01PM (5/12/2009)
The profits may be due to the stock-piling of parts by first and third parties globally!
I wouldn't run to a broker buy the stock!
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RockStoneSteel 11:01PM (5/12/2009)
Their stock prices are very depressed, significantly more than the general economy or stock indexes. So their stock may actually be a good buy at this time since whoever picks up any business lost by GM and Chrysler still needs to buy parts. But the fact is, GM and Chrysler will continue to build vehicles and the market will undoubtedly rebound somewhat in the next year or so. The only question is, will these distressed suppliers be able to ride out the storm? Chances are good the US government will aid certain small suppliers for this very purpose. So the purchase of stock is a calculated risk, with a potentially huge payoff.
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jamie 11:01AM (5/13/2009)
I rather suspect some insiders will be cashing in their chips much like B of A did when it climbed from $2.53 a share to about $14 thanks to the bailout loot supplied by the American taxpayer.
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