Visteon Strengthens Competitive Position With New Ford Commercial Agreements
22 December 2003 - 11:40PM
PR Newswire (US)
Visteon Strengthens Competitive Position With New Ford Commercial
Agreements DEARBORN, Michigan, December 22 /PRNewswire/ -- Visteon
Corporation (NYSE: VC) has approved new commercial agreements with
Ford Motor Company which improve the competitiveness of both
companies. Visteon's competitive position is strengthened through
the elimination of a significant structural challenge. Visteon also
announces fourth quarter 2003 estimated fixed asset and deferred
tax asset write-downs. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO ) "These
cooperative agreements with Ford provide a framework that allows
both companies to improve operating performance, clarify our
relationship and re-energise our employees," said Peter J.
Pestillo, Visteon chairman and chief executive officer. "Combined
with our diligent restructuring actions over the last three years,
the Ford agreements strengthen our vitality as a global Tier I
supplier with a promising future. We are well positioned to enhance
our profitability beginning in 2004." The commercial agreements
culminate discussions that began in mid-2003 between Ford and
Visteon, its former automotive components subsidiary that was spun
off from Ford in 2000. The agreements include changes to a number
of structural and commercial elements established between the two
companies as part of the spin. Key aspects of the structural
elements include: - Visteon is no longer obligated to fund about
$1.7 billion of an estimated $3 billion in post-retirement health
care and life insurance benefit obligations (OPEB) related to
Visteon-assigned United Auto Workers (UAW)-Ford hourly employees -
Funding of the remaining OPEB obligations for assigned employees
will be extended over an additional 29 years, reducing Visteon's
cash funding requirement substantially starting in 2006 - Visteon
and Ford will share equally the cost related to Information
Technology (IT) separation of up to a combined total of $200
million - Visteon's exposure to UAW profit sharing for Ford
assigned employees will continue to be capped Key aspects of the
commercial elements include: - Visteon will make lump-sum payments
totaling $150 million for 2003 North American price reductions on
sales to Ford and has agreed with Ford on a schedule of North
American price reductions annually for the next four years - Ford
has agreed to revised payment terms over the next three years which
will result in accelerated payments to Visteon for components
supplied to Ford - Visteon has the opportunity to receive labor
differential relief, defined as the difference between UAW Master
Agreement fully-fringed wages and competitive Tier I wages, on new
model programs won from Ford In addition, Visteon and Ford will
establish a Governance Council to ensure the intent of the
agreements is achieved. TERMS OF THE STRUCTURAL ELEMENTS
Post-Retirement Health Care and Life Insurance Obligations (OPEB)
Visteon is no longer obligated to fund about $1.7 billion of an
estimated $3 billion in post-retirement health care and life
insurance obligations resulting in a deferred accounting benefit of
$1.7 billion. The funding of the remaining obligation for
Visteon-assigned hourly employees covered by Ford plans has been
extended from 2020 to 2049. Certain salaried employees are also
covered in this extended plan. Cash payments required in 2006 are
now expected to be about $400 million lower than previously
disclosed estimates under the original spin agreement. Visteon's
2004 OPEB expenses are expected to be about $75 million lower than
2003 expenses and modestly higher than 2002 expenses. Information
Technology Separation Costs Ford has agreed to share equally the
funding, up to a combined total of $200 million, of separation
related IT expenses incurred by Visteon. Profit Sharing Visteon's
exposure to potential UAW profit sharing payments arising from
Ford's profitability will be capped at $2,040 per UAW-Ford employee
assigned to Visteon. Under the terms of the 2000 spin agreement,
Visteon's total liability was capped at $50 million per year
through 2004 and unlimited in subsequent years. TERMS OF THE
COMMERCIAL ELEMENTS Pricing Visteon has agreed to pay Ford lump sum
payments totaling $150 million for 2003 North American price
reductions on sales to Ford. This amount will not result in a piece
price reduction. A schedule of cumulative North American price
downs has been agreed upon for 2004 through 2007. In addition,
Visteon will work with Ford to close competitive price gaps over
time that may exist on components presently provided to Ford
through design improvements and other cost saving measures.
Sourcing Ford has committed to "look to Visteon first" when making
sourcing decisions affecting Visteon's UAW-represented facilities
providing Visteon is competitive. While the agreement contains no
specific commitment to sourcing levels, the companies have
expressed their shared intent to handle sourcing decisions in a
manner consistent with the business objectives of both companies.
Labour Differential Relief Ford will pay Visteon competitive market
prices plus a labour differential on new model programs for Master
Agreement UAW plants. This labour relief would be based on
efficient manning levels. Accelerated Payment Schedule and Capital
Investment Ford and Visteon have agreed to a revised payment
schedule that will result in accelerated payments of receivables to
Visteon. This will improve Visteon's operating cash flow for the
next three years. Ford has agreed to share equally with Visteon any
future capital investments Visteon may require in certain commodity
products in order to meet Ford's production requirements. Such
payments will be made over a seven year period. OTHER FOURTH
QUARTER MATTERS Fixed Asset and Deferred Tax Asset Write-Downs As
disclosed in Visteon's third quarter 2003 10-Q filing, Visteon
initiated a review of the recoverability of the company's fixed
assets and deferred tax assets during the fourth quarter of 2003.
Based on these reviews, Visteon expects to record a non-cash fixed
asset write-down of $400-$500 million before taxes for certain
under-performing product lines to reflect their estimated fair
value. In addition, Visteon expects to record additional tax
expense of $400-$450 million to reduce the company's deferred tax
assets where recovery of these assets is uncertain. Supplemental
UAW Labour Agreement As previously announced, the 2003 UAW-Ford
negotiations produced a Memorandum of Understanding that provides a
framework to significantly improve Visteon's competitive position
in the Tier I automotive supplier industry. The new contract allows
for a one-way flow of UAW-Ford employees from Visteon facilities to
Ford facilities. Visteon has approximately 20,000 UAW-Ford
employees working in its facilities. As the "flowback" progresses
over time, Visteon intends to replace a portion of these positions
with UAW-represented workers who will be covered by a Supplemental
Agreement currently being negotiated between the UAW and Visteon.
The intent of this new agreement is to provide competitive
compensation and working patterns. Discussions regarding the
Supplemental Labour agreement began in early December 2003. Visteon
is confident the discussions will be completed in the first quarter
2004. CONFERENCE CALL SCHEDULED Visteon will hold a conference call
regarding today's announcements at 11:00 a.m. EST, December 22. In
the U.S., dial 888-452-7086; outside the U.S. dial +1 706-643-3752.
Please dial in approximately 10 minutes prior to the start of the
conference. The conference call, along with the release,
presentation material and other supplemental information, can be
accessed through Visteon's web site at
www.visteon.com/presentations. For a replay of the conference, in
the U.S. dial 800-642-1687, and outside the U.S. dial +1
706-645-9291. The passcode to access the replay is 4571562. The
replay is available for one week. Visteon Corporation is a leading
full-service supplier that delivers consumer-driven technology
solutions to automotive manufacturers worldwide and through
multiple channels within the global automotive aftermarket. Visteon
has approximately 75,000 employees and a global delivery system of
more than 180 technical, manufacturing, sales and service
facilities located in 25 countries. This press release contains
forward-looking statements made pursuant to the Private Securities
Litigation Reform Act of 1995. Words such as "anticipate,"
"estimate," "expect," and "projects" signify forward-looking
statements. Forward-looking statements are not guarantees of future
results and conditions but rather are subject to various risks and
uncertainties. Some of these risks and uncertainties are identified
in our periodic filings with the Securities and Exchange
Commission. Should any risks or uncertainties develop into actual
events, these developments could have material adverse effects on
Visteon's business, financial condition, and results of operations.
We assume no obligation to update these forward-looking statements.
NOTE TO EDITORS: Visteon news releases, photographs and product
specification details are available at www.visteon.com. Web site:
http://www.visteon.com DATASOURCE: Visteon Corp Media - Kimberly A.
Welch, +1-313-755-3537, kwelch5@visteon.com, or Jim Fisher,
+1-313-755-0635, jfishe89@visteon.com, or Investors - Derek Fiebig,
+1-313-755-3699, dfiebig@visteon.com, all of Visteon Corporation;
Photo: NewsCom:
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO; PRN Photo
Desk, photodesk@prnewswire.com
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