Visteon, the top supplier to and a former subsidiary of Ford, filed for bankruptcy protection on Thursday, citing liquidity and debt problems, and turmoil in the automotive industry.
In an effort to protect a key supplier, Ford has agreed to support debtor-in-possession financing and take assignment of its asset-backed loans under a revolving credit facility.
On Friday, the judge authorized Visteon to continue paying wages and other pre-petition obligations, including up to $13 million to honor warranty obligations and $30.5 million to pay critical vendors. The judge scheduled another hearing for June 19.
The filing comes at a time when Ford, the only U.S. automaker operating without emergency government loans, is struggling to survive the worst auto sales in nearly three decades which has sent Chrysler into bankruptcy and pushed General Motors to the brink of failure.
Ford, still Visteon's biggest customer and which accounted for about 31 percent of its $1.35 billion of sales last quarter, did not detail the size of its bankruptcy financing for Visteon. Ford spun off Visteon in 2000.
The health of the U.S. auto parts supply base has been a priority for Ford with Chrysler in bankruptcy and GM close to a government-imposed deadline of June 1 to restructure or follow Chrysler down that road.