A V-Business Vision - Pete Pestillo, chairman and chief executive officer of Visteon Automotive Systems - Interview

Automotive Industries, Dec, 2000 by Gerry Kobe

Visteon Chairman and CEO Pete Pestillo thinks his company has the technology to turn the telematics and e-business booms into his business.

When it split from Ford Motor Co. earlier this year, Visteon was born as the 85th largest corporation in America. The split was so amicable that from the outside it was almost a non-event. Chairman Pete Pestillo is credited with making the separation so seamless. He says it was done deliberately to protect the company's sizeable Ford contracts. But now that Visteon is independent and healthy, Pestillo plans to use its technologies and systems strategies to grow the company into a global juggernaut.

Automotive Industries spoke with Pestillo recently about the growth potential of Visteon and the supplier market as a whole. He was interviewed at his Dearborn, Mich., office.

Q. In terms of stock price, 2000 was a tough year to break away from Ford. How are you doing in that regard?

A. Nobody is happy with their stock price and nobody ever will be. When you reach your 52-week high, you look at it and say, "they're still not appreciating us." But at the time we were coming out, we reviewed a chart that showed nine industries. One of those was strictly high-tech and the other eight were old-line, manufacturing, retail and things like that. The growth bar for high-tech was the equivalent of the other eight put together. Subsequently, there was a distortion in the financial market because they said we are not going to play in these prosaic areas because we can't get 200-percent returns. There was too little money around for us, so it did affect us. We had to get out of the old-tech and into the high-tech.

Q. Even high-tech companies have struggled on Wall Street lately. Is that good or bad for you long term?

A. I said at the time it would take a couple of collapses of these seemingly foolproof deals to get the public to come to its senses and recognize that 6 percent to 10 percent a year, with stable prices, is the place to be. A correction is coming, but there is a fear that if we are battered at 19 million units of auto production, how will we be at 16 or 17 million? At Ford we always used to say we need a downturn to show that the stock is really a good investment. But don't give us that right now to prove it -- we'll do it later. We'll be OK; I think we'll attract some investment

Q. What are your objectives for Visteon in its first year of independence?

A. Let me take 2000 and distinguish it a little if I may, because the thing we had to look at that really dominated our activity this year was accomplishing a successful separation. And that meant working out an agreement with Ford that made us a viable organization, including things like cash, legal, stock and supply agreements. We absolutely had to establish that, with 88 percent of our business with Ford Motor Co. As a result, we have a viable business and a successfully traded stock, and now we have to go forward and prove ourselves in a world marketplace. That will be our challenge going forward.

Q. How much of your business do you project to be non-Ford business?

A. We said that in a couple years we'd like to go from 88 percent to 85 percent Ford. And we want to get down to about 80 percent by 2002. And then the answer is getting some customer dispersion. But the reason I don't really have a set standard for it is we are not going to give up the dollars in the Ford business if we can help it. We've written more than a billion dollars with Ford this year. So if I keep changing numerators and denominators, I can't tell you what the fraction is going to be.

Q. As long as you have solid Ford business, how important is it to get contracts on the outside?

A. I want to have Visteon recognized as a credible player for the future of this industry. We just got here and we are still seen as "little Ford." I think it will be one of the measures of Visteon's excellence if we get more GM business and DaimlerChrysler business, because it's not natural. If I get a billion-dollar order at Ford people will say, "Well you're just doing them a favor." That's clearly not the case, but it will be seen as less compelling than if I get a big telematics order from GM or maybe Renault. We need to have a presence in Europe -- it's critical. We have to be seen as a global player and were not quite there yet.

Q. Won't sheer size give you global recognition?

A. That's not enough. We are the second largest supplier to Delphi. I think the very presence of Delphi and Visteon, $30 billion and $20 billion respectively, has changed the definition of functional size in supply. So I think you are seeing more consolidation in suppliers as people defend themselves against a Delphi and Visteon with a broader range of products and international sphere and sheer size and capability. I think the OEMs will one day be content to be responsible for design and manufacturing, because design gives the car its character and manufacturing gives the car its quality. And the supplying of the systems and the like will be for the giants in the supplier community who can take on greater and greater risk.