2nd UPDATE:PBGC Negotiates $55 Million In Pension Protection With Visteon
06 January 2009 - 8:01AM
Dow Jones News
The Pension Benefit Guaranty Corp. Monday announced a $55
million negotiated deal with Visteon Corp. (VC) that provides the
agency with additional protection against the company's pension
plan.
"Today's agreement significantly strengthens the financial
health of this plan. We commend Visteon's willingness to work with
us to achieve an outcome that is favorable to its employees and
retirees," PBGC's Director Charles Millard said.
The negotiated protection for the plan calls for Visteon to
accelerate a $10.5 million cash contribution to the plan, provide a
$15 million letter of credit, and have Visteon and its affiliates
be responsible for up to $30 million in contingent pension
obligations.
In an effort to curtail millions in pension liabilities from
being added to the PBGC's books, the agency negotiated the
agreement under federal pension law provisions that allow PBGC to
seek protection when a plant closing causes more than 20% of
covered employees to lose their jobs.
Visteon spokesman Jim Fisher said his company is comfortable
with the terms.
"The only real direct effect of the terms is the $10.5 million
acceleration of cash contribution that we would have paid in over
the next few years anyway," Fisher said. "The other items in there
essentially offer further security on the pension plan."
The pension plan and negotiated terms covers more than 5,300
former employees of the automotive systems and components supplier
at two closed facilities in Indiana.
Visteon plans to inject that $10.5 million "virtually
immediately, this month," Fisher said.
With regards to the $15 million letter of credit, a PBGC
official said certain "draw events" would allow the agency to make
withdrawals on the letter of credit.
There are several possible "draw events" that could take place,
of which the PBGC official could not go into details on. However,
one certain draw event would be if Visteon moved to terminate the
pension plan that pertains to this agreement.
The largest protection - Visteon and its affiliates being
responsible for up to $30 million in contingent pension obligations
- is set in place because the pension plan for the former employees
in Connersville, Ind., and Bedford, Ind., remains ongoing and under
the company's control, which is unlike pension plans that terminate
and are taken over by the PBGC.
The arrangement with PBGC also does not impact Visteon's
revenue, Fisher said, noting that the terms only pertains to one
Visteon pension plan, the plan covering former employees at the
Indiana plants.
"Visteon has other pension plans not impacted by this," he said,
also adding that Visteon is not filing for Chapter 11 bankruptcy
protection.
Visteon, Ford Motor Co.'s (F) former parts unit, and other
automotive suppliers have been scrambling to realign their work
forces and production as U.S. auto makers slash production of
sport-utility vehicles and pickup trucks in response to plunging
sales. This has resulted in layoffs and the closure of some
supplier plants.
In June, analysts predicted that Visteon, among several auto
suppliers, would take severe financial blows because of declines in
auto sales and reductions in manufacturing output. Other companies
included American Axle & Manufacturing Holdings Inc. (AXL),
Lear Corp. (LEA) and Canada's Magna International Inc. (MGA).
Visteon closed its plants in Connersville in December 2007, and
in Bedford in June 2008.
Meanwhile, PBGC spokesman Marc Hopkins said the agency continues
to monitor corporate "transactions that may affect the financial
health of retirement plans."
"This, of course, would include the auto sector, and other lines
of business that employ large numbers of workers in factory-type
settings," Hopkins said. "As companies downsize to cope with
current economic conditions, the agency will work to ensure that
the retirement benefits of workers and retirees are protected."
-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684;
darrell.hughes@dowjones.com
(Jeff Bennett contributed to this report.)
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