Cramer Calls Visteon (VC) "A Real Automotive Turnaround Story"

May 12, 2008 8:19 AM EDT

On Friday's Mad Money, host Jim Cramer changed his mind on a company he has been rather bearish on lately: Visteon (NYSE: VC). Cramer caleld Visteon "a real automotive turnaround story" that investors should check out if they are looking for a speculative play in their portfolios.

One of Cramer's favorite aspects of Visteon is its aggressive cost-cutting measures. The company has already sold about 23 unprofitable plants, in turn trimming about 18,000 union employees from its payroll. Furthermore, Visteon has recently transferred a good portion of its healthcare costs to its former parent Ford (NYSE: F).

Cramer also pointed out that evidence of Visteon's turnaround can be seen in its rapidly improving gross margins, which moved from 4.2% last year to 7.1% this year. At the same time, Cramer mentions that most analysts still have a Neutral or Hold rating on Visteon, making it an under-appreciated over-performer.

Finally, Cramer notes that Visteon appears to have successfully started diversifying its portfolio: sales to Ford are down to about 40% of Visteon's revenues, compared to 70% of sales in 2004. Looking forward, Visteon expects sales to Ford to make up only about 25% of its revs.

While American automotive company's have certainly had a tough time with their turnarounds, Cramer said this one appears to be going smoothly and would be a buyer of Visteon stock. [BCS]

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