(Recasts to incorporate expected bankruptcy exit)

By Chelsea Emery and Jonathan Stempel

NEW YORK (Reuters) - Visteon CorpTuesday said it expects to emerge from bankruptcy protection inearly October, after the auto parts maker settled nearly allits disputes with former owner Ford Motor Co.

The settlement assures that Ford will generate about $600million in annual sales for Visteon, according to documentsfiled late last week in the U.S. bankruptcy court inWilmington, Delaware.

It would also end Visteon's obligation to reimburse Fordfor about $105 million in pension and retiree benefit costs,the documents show.

Visteon said the accord avoids the potential for years ofpotential litigation, and "represents the final piece of thepuzzle in Visteon's Chapter 11 reorganization and therestructuring of its commercial relationship with Ford."

A hearing on the accord is set for Sept. 29.

Separately, Visteon said that in connection with itsbankruptcy exit it plans to raise $1.25 billion of equitycapital through a rights offering, and borrow up to $700million in secured debt financings.

Visteon said if the rights offering takes place, it expectsalso to privately issue 45.15 million new common shares.

The Van Buren Township, Michigan-based company discussedits capital-raising plans in a U.S. Securities and ExchangeCommission filing.

Visteon makes air conditioning and electronics systems. Itfiled for Chapter 11 protection in May 2009 after the recessionslashed U.S. demand for cars, trucks and other vehicles.

The company will emerge under the control of bondholdersincluding Goldman Sachs Group Inc and hedge funds OakHill Advisors and Silver Point Capital.

Many other companies in the auto industry also have slidinto bankruptcy in recent years, including Chrysler LLC,General Motors Co, Delphi Corp and Lear Corp.

Ford had spun off Visteon in 2000.

The case is In re Visteon Corp, U.S. Bankruptcy Court,District of Delaware, No. 09-11786. (Reporting by Chelsea Emery and Jonathan Stempel, editing byDave Zimmerman; editing by Carol Bishopric)