(By Salman - iStockAnalyst Writer)

The market has been abuzz with speculation that auto parts supplier Visteon Corp. (NYSE: VC) is headed for bankruptcy amid sinking US auto sales.

On Wednesday, the New York Stock Exchange said that trading in the common stocks of Van Buren Township, Michigan based company would be suspended before the opening of Friday's session because of low trading levels. The company informed the exchange that it would not challenge the decision.

In a statement, NYSE said that the company's stock has been lingering at “abnormally low trading levels.”

Last month, Visteon posted a wider fourth-quarter net loss of $328.0 million, or $2.53 a share, compared to a loss of $43.0 million, or 33 cents a share in the prior year quarter. Sales tumbled 42.3% to $1.7 billion from $2.9 billion. For full fiscal year 2008, the company reported a loss of $663 million loss.

"The continued downturn in the global automotive industry, combined with restrictive credit markets, has had and is expected to have adverse impact on the company's financial results, cash flows and liquidity," the company said during the earnings release. Visteon also warned that it may miss a March 10 bond payment. "Visteon cannot assure that it will remain in compliance with the terms of its outstanding debt instruments."

Earlier analysts were surprised when Visteon made its Feb. 1 payment due for the coupon on its 8.25 percent notes. “We were somewhat surprised that Visteon paid the 2/1/09 coupon on its 8.25 percent notes," he said. "We speculate that the company had yet to negotiate adequate DIP financing and needed more time to attempt to assemble a lending group.” said KDP Investments Advisors Inc.'s Kip Penniman. He added "The next trigger date is March 10, when the coupon on the 7 percent senior notes is due. We expect Visteon to file for bankruptcy protection sometime between now and early April, after the 30-day grace period expires following the missed coupon payment."

The company which has retained the services of two bankruptcy advisers, Kirkland & Ellis and Rothschild since 2003, has so far refused to comment on the bankruptcy rumors. In a statement Visteon said that it "continues to explore options to address future liquidity needs, including administrative reductions, delaying capital expenditures, curtailing, eliminating or disposing of substantial assets or operations, or undertaking other significant restructuring measures."

The company has stepped up cost cutting measures and has resorted to layoffs, hiring freeze and suspension of its 401(k) match.

Meanwhile, Ford (NYSE: F), the largest customer of Visteon, has ruled out any bail out its former affiliate. In 2005, Ford had taken back 17 of the less-profitable Visteon plants and 6 offices in order to ensure viability of the auto parts maker. "Visteon maintains regular contact with us and we continue to work with them as appropriate," said Ford spokesman Todd Nissen. Ford accounts for 34 percent of company's business

At the end of 2008, Visteon had $1.18 billion in cash and about $2.76 billion in debt. The auto parts supplier has been hit hard by a prolonged slump in auto industry and worsening recession. Ford Motor Co., Visteon's former parent, on Tuesday reported that the US sales of its light vehicles plunged 48% in February. Visteon was spun off from the Ford Motor Company in 2000.

Shares of Visteon tumbled 3 cents or 42.86% to 4 cents in afternoon session on Thursday.

Disclosure: Author does not own any of the stocks discussed here.