Ford agrees to take control of 24 Visteon plants

Ford agrees to take control of 24 Visteon plants

Ford Motor Company signed a memorandum of understanding with its struggling primary parts supplier, Visteon Corp., on May 25, 2005. The agreement includes the creation of a temporary Ford-controlled business entity that would manage a company that lost $1.5 billion in 2004 and oversee 24 plants in the US and Mexico. Ford’s management strategy includes preparing the Visteon plants for sale by 2008 or 2009. "This agreement brings us closer to a true 'arms length' relationship with our largest supplier," said Don Leclair, Ford's chief financial officer and executive vice president, in a press release. Frank E. Macher, formerly the CEO and chairman of Federal-Mogul Corp. will lead the new holding company. The new business entity will not have its own employees but will lease salaried employees and all hourly UAW-Ford employees currently working in the Visteon plants. Ford plans to gradually buy out 5’000 UAW-Ford employees. The agreement also relieves Visteon’s remaining liability, which includes approximately $1.5 billion of previously deferred gains that are related to post-retirement insurance benefits for Ford-UAW. Grouped with certain salaried retirees, the liability totals nearly $2 billion. In a related move, Visteon froze the cost-of-living and merit pay raises for about 8’000 salaried US employees that were expected to occur June 1. Earlier this year Visteon eliminated 850 salaried positions.