Ford Agrees to Take Over Visteon Plants

Wednesday, May 25th 2005, 9:34 am

By: News On 6

DETROIT (AP) _ Ford Motor Co. has agreed to help struggling auto parts supplier Visteon Corp., a former Ford subsidiary, by temporarily taking over 24 of its facilities in the United States and Mexico, the companies said Wednesday.

Visteon shares jumped 29 percent on the news while Ford shares slipped.

The nation's second biggest automaker said it had agreed to manage a total of 20 plants in the United States and four in Mexico through a temporary business entity. Ford chief financial officer Don LeClair said Ford will try to sell those plants by 2008 or 2009, adding that several companies have already expressed interest.

``Our first objective was to maintain the flow of parts and components,'' LeClair said. ``Our second objective was to provide some finality here. Our goal is to approach a true arms-length relationship with Visteon.''

Ford spun off Visteon in 2000 and still makes up 70 percent of the supplier's business. Visteon is based outside Detroit in Wayne County's Van Buren Township. Ford is based in nearby Dearborn.

The new holding company will lease salaried employees from Visteon and all hourly United Auto Workers employees currently working in Visteon facilities. Ford said it will meet its salary obligations to UAW employees through the end of its contract with the UAW, which expires in 2007.

Ford said it expects the agreement to save it $600 million to $700 million by the end of the decade. But it expects to incur charges of $450 million to $650 million in 2005, and charges of $300 million to $500 million between 2005 and 2009 connected to the buyouts of about 5,000 Ford-UAW workers.

The deal includes relief of Visteon's remaining liability related to Ford-UAW post-retirement obligations for former assigned employees and retirees and certain salaried retirees totaling about $2 billion.

The agreement also calls for Ford to reimburse up to $550 million of further restructuring by Visteon.

``I would say this is not a good thing, clearly. It's a tough situation that we're in and that our largest supplier is in,'' LeClair said. ``What we have here is a plan, and we think it's a good plan. We intend to move ahead and prosper on this.''

Visteon shares jumped $1.82 to $8.09 in morning trading Wednesday on the New York Stock Exchange. Ford shares fell 10 cents, or 1 percent, to $9.88. Visteon shares have been trading in a 52-week range of $3.14 to $12.46, while Ford shares have been trading in a range of $9.07 to $16.48.

The announcement came a day after UAW leaders gave their approval to the Visteon restructuring plan for the 13 UAW-represented plants that will be put in the holding company. They include seven plants in Michigan, two in Tennessee and one plant each in Ohio, Indiana, Missouri and Oklahoma. Nearly 18,000 hourly workers are employed at the UAW-represented plants.

The plan approved by union leaders needs the approval of local membership to go into effect. UAW members at the plants are expected to vote on the plan between May 31 and June 5, UAW spokesman Paul Krell said.

Ford and Visteon began talks in September aimed at allowing Visteon to shed some parts of its business to improve efficiency while still meeting its obligations to Ford.

Like other suppliers, Visteon has been hammered by the high cost of steel and other raw materials as well as production cuts at Ford. Visteon reported a loss of $188 million for the January-March period, compared with net income of $20 million a year ago. Sales edged up to $4.99 billion from $4.97 billion last year.