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.)

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.