Ford Deal to Save Visteon $390 Million - aftermarketNews

Ford Deal to Save Visteon $390 Million

After more than six months of negotiations, Visteon Corp. has reached a partial agreement with former parent Ford Motor Co. that will save the struggling parts-maker at least $390 million in 2005. Ford agreed to buy some equipment for Visteon, pick up almost one-fourth of the cost of UAW members' wages and pay for parts more quickly. Visteon agreed to "continue uninterrupted supply to Ford and to comply with contractual agreements with Ford and the UAW," according to a company statement. The deal took effect Thursday, Ford said.

From Detroit Free Press

VAN BUREN TOWNSHIP, MI — After more than six months of negotiations, Visteon Corp. has reached a partial agreement with former parent Ford Motor Co. that will save the struggling parts-maker at least $390 million in 2005.

Ford agreed to buy some equipment for Visteon, pick up almost one-fourth of the cost of UAW members’ wages and pay for parts more quickly. Visteon agreed to “continue uninterrupted supply to Ford and to comply with contractual agreements with Ford and the UAW,” according to a company statement. The deal took effect Thursday, Ford said.

“This financial agreement is the right step forward with Ford and supports the operations that directly serve our largest customer,” Mike Johnston, Visteon’s president and CEO, said in a statement. “The commitments made by Ford and Visteon under this agreement will improve Visteon’s operating results and cash flow. It’s a mutually beneficial agreement that is in the best interest of both companies.”

Based in Van Buren Township, Mich., Visteon has lost $3.2 billion in the 4 1/2 years since the former unit of Ford became a separate company with its own stock traded on the New York Stock Exchange.

On Sept. 9, Visteon said that it was exploring structural changes to make the business more competitive, and that the changes would involve Ford and Visteon’s so-called legacy businesses — units that used to belong to Ford, are staffed by UAW members who have contracts with Ford and primarily or exclusively supply Ford.

Visteon said the continuing talks are “progressing positively.”

“We are spending a great deal of time working with Ford to reach a conclusion,” said Johnston. “For some time now, we have had a concept that both parties are working toward achieving. We are spending our time working out the details of that concept. Other than our conversations with Ford, we are not in active discussions with anyone else.”

Johnston has said he hopes the negotiations with Ford are wrapped up this month.

The two companies separately described the financial details in reports filed with the U.S. Securities and Exchange Commission:

•Ford will forgive about $25 million a month that Visteon would typically pay as reimbursement for the wages of the roughly 17,700 Ford-UAW employees leased to Visteon. That reduces the amount Visteon pays by 23.75 percent, according to Visteon.

•Visteon will not have to reimburse Ford for profit sharing checks earned by Ford hourly employees leased to Visteon in 2005.

•Ford will buy about $150 million of new machinery and equipment for plants that supply Ford.

•Ford agreed to speed up payments for materials and components by one-fourth, from 33 days down to 26 days. Specifically, Ford will pay $120 million this month that it previously wouldn’t have paid until April.

These arrangements will all stand through at least the end of 2005, Ford said in its filing.

“This financial assistance to Visteon for 2005 is in the best interests of Ford Motor Co.,” spokesman Glenn Ray said in an e-mail.

The two companies continue to work toward a “permanent arrangement,” he said.

Ford does not expect to take a charge against earnings related to Thursday’s announcements, Ray said.

On the other side of the deal, Visteon agreed to:

•Not ask Ford to reimburse it for rising material prices at certain unidentified plants. This is important because the price of steel has risen rapidly, as has the price of oil, which affects materials such as plastics and textiles.

•Not sell or close any assets at certain plants in North America without Ford’s consent.

•Continue uninterrupted supply of parts and honor current contracts with Ford and the UAW.

This last item suggests that Visteon agreed not to file for bankruptcy court protection, but Visteon spokeswoman Kim Welch flatly denied bankruptcy was even considered.

“We never even discussed it,” she said.

When asked about recent reports of plans to shed business units, Welch dismissed them as “misinformed speculation.”

This is not the first time in Visteon’s short, money-losing history that Ford has bailed it out.

In late 2003, Ford agreed to pay $1.65 billion to cover future retiree benefits for leased Ford employees who work at Visteon plants. It also agreed to speed up payments to Visteon and subsidize its new computer system.

Then in January, Ford took a charge of $600 million — worth $399 million after taxes — effectively acknowledging the likelihood that Visteon would not be able to pay much of the $835 million needed by 2049 to cover retirement benefits for UAW employees leased from Ford.

Jeff Skoglund, a high-yield bond analyst with UBS Inc. who covers auto suppliers, said Thursday’s announcement provides only a short-term solution.

“It sounds like a one-year, temporary fix to the problem that should put Visteon closer to break-even in free cash flow,” he said. “The measures are temporary, but maybe it gives both Visteon and Ford time for a more permanent solution.”

Copyright 2005 Detroit Free Press. All Rights Reserved.

_______________________________________

Click here to view the rest of today’s headlines.

You May Also Like

Dana Participating in Easter Jeep Safari

The event will take place in Moab, Utah, March 23-31.

Dana to Participate in Easter Jeep Safari 2024

Dana Incorporated will participate in Easter Jeep Safari 2024, held March 23-31 in Moab, Utah. Dana products will be on site and available for demonstrations.

“At Dana, we are committed to rigorously testing and validating our products in the most challenging conditions to guarantee superior quality, durability, and performance,” said Bill Nunnery, senior director, sales and marketing, global aftermarket for Dana. “Easter Jeep Safari features rugged trails that offer us an ideal terrain for product trials. The event also gives us the opportunity to engage with Jeep enthusiasts and understand how we can enhance their off-road experiences through vehicle customizations.”

ZF Aftermarket Releases 80 New Parts

The latest additions expand coverage to more than 5 million vehicles in operation.

ZF Aftermarket Releases 80 New Parts
Schaeffler Highlights ESG Progress in 2023 Sustainability Report

Schaeffler is currently focusing on seven key ESG goals in the implementation of its sustainability strategy.

Schaeffler 2023 Sustainability Report
CMA, DoubleCoin to Showcase Long-Haul Steer Tires at MATS

Company reps will be on-site to answer questions, schedule meetings and coordinate a raffle of outdoor sporting equipment in booth #11140.

tire-distribution-outlook-tire-rack
GB Reman to Host Jackpot Giveaway Winner at Long Beach Grand Prix

Jon Hetzel, owner of Hesski ServiCenter in Levittown, Pennsylvania, will join GB Reman in the company’s hometown next month

GB Reman to Host Jackpot Giveaway Winner at Grand Prix of Long Beach

Other Posts

Bendix Surpasses Worker Safety Goals

Bendix says its Total Case Improvement Rate improved since 2022.

Bendix Announces Worker Safety Statistics
New Rislone ‘DEF Crystal Clean’ Clears P20EE Codes

The product scrubs away crystal contaminants from the selective catalytic reduction systems of diesel cars, trucks and SUVs.

New Rislone DEF Crystal Clean Diesel DEF & SCR Emissions System Cleaner Announced
SMP Announces New Oil Filter Housing Kits

The kits feature multiple design improvements to prevent leaks, according to SMP.

SMP Announces New Oil Filter Housing Kits
NTK Technologies Announces Merger into Niterra North America

The merger will take effect on April 1, and NTK Technologies will begin operating under Niterra North America Inc.

Niterra Merger