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New CEO Finds Visteon Well-Positioned to ‘Create Value’

Executive Summary

Tim Leuliette discusses profitability, regional concerns and the future of Visteon’s interiors, electronics and climate-control businesses. “I get up in the morning thinking great things about Visteon,” he says.

This is part of a series of executive interviews on the state of the North American auto industry.

Tim Leuliette has faced many extreme hurdles throughout a long automotive career, most of it on the component side of the business. But his latest post, as president and CEO of Visteon, challenges him to achieve profitability where his three predecessors failed.

Based in Van Buren Township, MI, the parts maker was spun off from Ford in 2000 as one of the world’s largest Tier 1 suppliers serving multiple product sectors, with 82,000 employees.

But, along with other large U.S. suppliers, Visteon suffered as North American vehicle production declined and global sources became increasingly popular among Detroit auto makers.

In an attempt to achieve profitability, Visteon in 2005 handed back to Ford 24 uncompetitive facilities in the U.S., most of them manufacturing sites.

It wasn’t enough. Visteon landed in bankruptcy court in 2009 and emerged in October 2010 as a shadow of its former self, with nearly every one of its U.S. facilities closed or sold. Visteon had 63 North American plants at the time of the 2000 spin-off. Employment globally now stands at 22,000.

Where to now for Visteon? The supplier generates most of its revenue overseas, particularly in the Asia/Pacific region, and Ford no longer is its No.1 customer.

WardsAuto speaks via email with Leuliette, who took the helm Oct. 1, about his plan to take Visteon into the future.

WardsAuto:You’ve had a long career in automotive. How do the challenges at Visteon compare with those you faced at Dura, Metaldyne, Penske, Siemens, ITT or in the world of private equity?

Leuliette:A long career has allowed me to become more energized about the auto industry every year. This is a great space to be in. It is a growth industry, and the global nature of the automotive sector is increasingly interesting and challenging.  This is no longer an industry defined by success on any given continent. Success is now defined by global achievement.

Yes, I’ve moved around a bit, but each step along the way has been exciting and has represented a meaningful opportunity to make a difference for the company and most importantly, its customers. Visteon is a supplier that has not yet delivered the full value that I think we can for our customers and, it must be said, shareholders. The strategy we now have in place will sharpen our focus on the customer at the same time we create improved total shareholder return, which is overdue.

WardsAuto:The Original Equipment Suppliers Assn. says its Automotive Supplier Sentiment index finds suppliers “significantly more pessimistic” now than in July. Do you agree with that assessment? And what’s the state of Visteon’s supply base?

Leuliette:Visteon is cautiously optimistic in the short term. Are we more pessimistic than we were six months ago? No. Europe is a concern. But, we’ve been realists toward what’s happening there. Many noted with great fanfare that we didn’t take our guidance for Wall Street down at the end of the third quarter. We didn’t have to. The course corrections we made earlier in the year are proving to be spot-on.

The U.S. has issues, and we are not blind to them. Yes, we are concerned about the domestic and European debt crisis and its impact on consumer confidence; we are concerned about the pending tax issues in the U.S. and increased regulation that could make us less competitive. We are not the only company feeling these pressures. The entire supply base is impacted.

That said, these are far from the challenges and problems seen in 2008 and 2009. We will work our way through this. The strong and well-managed companies will survive and ultimately thrive when the global market comes back to us. Visteon will be well-positioned.
WardsAuto: Overall profitability has been elusive for three previous CEOs at Visteon. How will you succeed where others failed?

Leuliette:We believe we have a lean entrepreneurial plan for Visteon that is consistent with our strengths. In mid-September, we shared that strategy with our customers, our shareholders and our employees. Our approach will be to stay on that course, making adjustments as required to stay on track. We will meet and exceed our customers’ expectations. This is all about creating value – for customers and shareholders, alike. 

WardsAuto:Does Visteon have sufficient capacity in place to meet expected North American automotive market growth in 2013? With most of your manufacturing operations overseas, what sort of flexibility/creativity is at Visteon’s disposal to accommodate potential upside demand in 2013 and 2014 in North America?

Leuliette:Our capacity positioning is not something that just happens. We are always planning and working with our customers to ensure that we are where we need to be, where they want us to be. We have ample capacity to meet their needs, and we will be nimble and flexible with a changing marketplace. We have and will continue to reinvest and optimize our assets and improve capacity where and when necessary.

WardsAuto:Visteon has at least 31 manufacturing plants in the Asia/Pacific region and at least 26 in Europe. In North America, the website identifies only three in Mexico, one in Canada and two in the U.S. Do you have any hope of expanding manufacturing operations in the U.S.? How about Mexico or Canada?

Leuliette:Look, it is no secret. We have to be one step ahead of our customers and position our capacity to meet the needs of today and tomorrow’s demand. Where there’s a market, we need to participate. Sure, I can foresee the day where and when we may need to exceed our capacity in certain locations around the world, including the U.S., but that will only be done in a way consistent with new business awards.

We are not just in the business of making car parts. We are in the business of making money making car parts and delivering value. The exciting part of the opportunity we see is to further expand our presence in faster-growing markets and emerging markets while still being nicely positioned to serve mature markets. In today’s automotive sector, we have to be close to our customers in so many ways; it’s table stakes.

WardsAuto:The third-quarter financial results were in the black, reflecting net income of $15 million in the quarter and $61 million for the first nine months. Can you point to other parts of the company that are ripe for rationalization, to boost the bottom line further?

Leuliette:I think we’ve been very clear, very transparent about our strategy and how we intend to manage our assets. Interiors is no longer a core business for us, but I believe it has a place in this industry. Electronics is a great business but one that lacks scale. For both businesses, we are maintaining a sharp focus on the customer while considering some options that should position everyone to win. We talk with these customers often; we will seek their point of view; and listen.

Our climate business is rock solid – the No.2 player in the world. I’m pleased with the course we’re on. The single-most important thing I can say is that we will not let our customers down. Customers will be part of these solutions, either directly or indirectly. We have an obligation to them and in all circumstances we will deliver on that.

Yanfeng Visteon in China is a remarkable company, a critical part of the Chinese automotive industry, and will soon exceed Visteon in size. This will allow Visteon to be a major force in the largest automotive market in the world. This is a critical part of our strategy going forward.  
WardsAuto: Visteon had 82,000 employees when it spun off from Ford in 2000 and today has 22,000. Is it unwise for a supplier to attempt to be all things to all customers?

Leuliette:It is essential that we focus on our strengths. It’s business school 101. It is the underlying basis for industrial logic that creates value. We can’t and won’t be all things to all people. We will not dilute the value of Visteon by trying to be something we aren’t.

Today we are a group of hard-working employees around the world who are doing their level best to stay one step ahead of our automotive-sector customers to help them build and sell vehicles that create value across the chain. There is value in being No.1 or No.2 in everything we do.

WardsAuto:After significant downsizing already, Visteon is selling the climate control business to a joint venture and has said it is considering options for the electronics business. Can you see a time in the future when Visteon can count on significant growth?

Leuliette:We are selling the climate business to ourselves as we own most, 70% in fact, of the Korea-based Halla Climate Control joint venture. Joining the two allows us to see favorable synergies and value creation in bringing them together. The climate order book is solid and improving.  And that order book will continue to grow.

In climate, we believe that we will grow faster than the overall market. It’s really nice to be able to say that. Credit goes to those who came before me – people who built a darn good climate business – and those running the business who have helped it grow. We are proud of it and excited by its future.

WardsAuto:Visteon completed a massive headquarters campus in Van Buren Twp., MI, just before enduring deep downsizing. Much of the space sat vacant for years, or was leased to others, and in April the property was sold to Sovereign Partners. In retrospect, how should Visteon have handled its facilities needs after leaving Dearborn?

Leuliette:That’s yesterday’s news. It’s not relevant today. It doesn’t make any sense for me to comment on that bit of history. What I do know is that our current facility is adequate for today’s needs. However, if you sense a bit of a hedge in my words, it is because the hallmark of Visteon going forward is to be lean and profitably doing what we do best. If that means reducing our size at the corporate headquarters, I will do that in a heartbeat.

We want to deploy our assets in ways that further our business objectives. We don’t define ourselves by the size of our headquarters building or the size of our corporate staff. Visteon will be defined by the value of its products, by the level of customer satisfaction, by the talented, achievement-oriented work of our employees – wherever they may be around the world – and by our returns to shareholders.

WardsAuto:Do you see a role for component suppliers such as Visteon in helping auto makers or dealers sell and create demand for electrified and other high-tech, fuel-efficient vehicles in the U.S.? Do you think the responsibility to market these next-generation vehicles extends well beyond the auto maker?

Leuliette:The responsibility of the supply community is to provide leading-edge, reliable technology that allows our customers to create products that are attractive and meaningful in the marketplace. We are not marketers. We provide technology, innovation and leadership. We help our customers define the market of tomorrow based on seeing beyond today.

Do we want the technology we create and deliver to drive the market and to be the customers’ first choice? You bet; there is little more flattering.

The latest vehicle concept we’ve just started showcasing to customers is a great example: It demonstrates a host of technologies related to intelligent mobility, fully compatible with electric-vehicle and hybrid platforms. It challenges conventional vehicle architecture by re-thinking, for example, the position of the climate system, reducing weight and substantially increasing cabin space.

WardsAuto:How critical is it for your company to hire outside the auto industry to keep pace with rapid industry changes, such as infotainment technology and non-traditional marketing?

Leuliette:Many of our software engineers worked outside the auto industry before they became part of Visteon. We continue to look for the best and the brightest. Yes, that often takes us outside the industry.

WardsAuto:What makes you most optimistic about 2013?

Leuliette:I get up in the morning thinking great things about Visteon. But, as you’d expect, it’s my job to be the company’s No.1 cheerleader. That said, I also have to deliver on the field of play. I like Visteon’s order book, market position in key regions, our technology base and the enthusiasm of our employees for customer success.


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