Ford Motor Co. is to help auto parts maker Visteon Corp. with a recently negotiated USD 1.7 billion package on pensions, allowing Visteon to deal with the short-term problem of cash-flow and give more…
Ford Motor Co. is to help auto parts maker Visteon Corp. with a recently negotiated USD 1.7 billion package on pensions, allowing Visteon to deal with the short-term problem of cash-flow and give more attention to its long-term problems. Visteon Corp was spun off from Ford in 2000 but has been in difficulties ever since and still depends on the auto giant for 75% of its revenue, despite efforts to expand its customer base. The next challenges for Visteon under its turnaround plan plan are a two-tier wage deal with labor union the UAW and entry into more profitable product segments. In late December 2003 Ford agreed to take back some of its hourly workers who have been on Visteon“s payroll, pay part of Visteon“s retiree benefits and subsidize some of Visteon“s hourly wages. Some Ford employees on Visteon“s payroll will return to Ford starting in 2004. Visteon pays 20,000 hourly workers under Ford“s contract with the UAW. Visteon would replace some of those workers with new employees on lower rates of pay. Ford will assume USD 1.7 billion of Visteon“s estimated USD 3 billion in retirement benefit costs and Visteon has until 2049 to pay the balance. Ford will also pay Visteon the difference between UAW wages and “competitive““ Tier 1 supplier wages for future programs. The concessions will make it easier for Visteon to gain the UAW“s cooperation. The UAW has already agreed in principle to allow Visteon to pay lower wages to newly hired workers. Visteon“s hourly workers earn about USD 25 an hour, not including benefits. Rival suppliers generally pay less than USD 16 an hour. Visteon hopes to complete a wage agreement by March 2004. However, credit rating agency Standard & Poor“s responded to the deal by downgrading Visteon“s corporate credit rating to BB+, or junk status, on the basis that the amount of aid being given indicated that Visteon“s credit was weaker than previously thought. While an agreement on pay would make Visteon more competitive, the company is also looking to concentrate on profitable segments such as instrument panels and eliminate “certain unprofitable product lines” which were to blame for a recently announced write-off of up to USD 500 million before taxes. Although Visteon is not saying precisely which products it may dump, the glass business is said to be at risk on account of its low profitability.