Starting in 2007, Visteon Won't Pay for Health Care

From Detroit Free Press

VAN BUREN TOWNSHIP, MI — Visteon Corp. is warning thousands of salaried employees that their health care in retirement will be their own responsibility, as the money-losing auto-parts giant becomes the latest large employer to shift the burden of rising costs onto employees, as reported in the Detroit Free Press.

The move will save Visteon an undisclosed amount of money and could open the door to similar moves at rival Delphi Corp. and other big companies, especially in Michigan’s auto-parts industry, which is suffering under high prices for raw materials and falling demand from Ford Motor Co. and General Motors Corp.

According to the new policy, that was outlined in a report obtained by the Free Press, the company is trying to reshape itself after losing more than $3.2 billion since it was spun off from Ford five years ago this week. It plans to give several plants and thousands of highly paid UAW members back to Ford, and announced that salaried employees’pay would be frozen this year. Visteon Chairman and Chief Executive Officer Michael Johnston and new President Donald Stebbins are trying to determine how many salaried engineers, sales people and administrators the company will need when sales are about $11 billion a year, instead of the $19 billion or so that has been the norm.

“This is part of an overall effort to transform Visteon into a competitive, profitable business,” spokesman Jim Fisher said Wednesday.

Visteon’s new plan, which will take effect June 1, 2007, will not affect about 1,300 salaried employees who had spent enough years with Ford prior to the spinoff to qualify for retirement benefits. They will retire under Ford’s plan. The other 6,700 U.S.-based salaried employees will have to pay for their own health insurance in retirement, although those who are 45 or older as of Friday will get money in special accounts to help.

Visteon will credit those 45 and older with $250 each month, plus interest, in what it is calling a Retiree Medical Cash Balance Account, which experts say is like a health reimbursement account. That account will be supplemented upon retirement by a onetime credit worth $70 multiplied by the employee’s combined age and years of service.

Younger salaried workers will be able to buy insurance at Visteon’s group rate when they retire, but they will have to pay the full premium themselves. IThey are being given advance notice, Fisher said, so they can adjust their savings plans accordingly.

HumanIresources experts “see this as a boon to a younger work force…who is likely to hop from job to job several times before settling into a place,” he said.

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