As part of a broad restructuring, auto parts maker Visteon and former parent Ford Motor Co. are considering the formation of a new holding company comprising Visteon“s weaker operations
The new com…
As part of a broad restructuring, auto parts maker Visteon and former parent Ford Motor Co. are considering the formation of a new holding company comprising Visteon“s weaker operations The new company managed and controlled by Ford would take over Visteon operations including glass and chassis components, freeing the parts maker to concentrate on profitable lines such as climate control and interiors, according to those close to the negotiations. While Ford and Visteon work out the details of the restructuring, the companies announced a financial arrangement on 10 March 2005 to keep Visteon afloat. The struggling auto parts maker has lost USD 2.7 billion in the past two years and has not posted an annual profit since it was divested from Ford in 2000. Under the agreement outlined in a filing with the U.S. Securities and Exchange Commission, Ford will provide Visteon with at least USD 400 million in financial relief over several years. Visteon currently reimburses Ford for the cost of the 17,700 hourly workers who are still technically on Ford“s payroll. But the automaker agreed to reduce Visteon“s monthly payments for the workers by USD 25 million a month “at least through the end of 2005.” Nor will Visteon be obliged to reimburse Ford for any profit-sharing payments to UAW hourly workers earned in 2005 and payable in 2006. The automaker also agreed to purchase about USD 150 million worth of new plant equipment to allow Visteon to make parts for Ford. In addition, Ford will reduce the time it takes to pay Visteon for parts to within 26 days from around 33. Ford said the financial aid package “is in the best interests” of the automaker and “designed to ensure Visteon will be able to maintain a constant flow of components” to the automaker. “We are working with Visteon to ensure that commitments between us, our customers, our employees, our suppliers, and unions continue to be satisfied. While there are numerous details left to be worked out, we are making progress,” the company said in a statement. Visteon CEO Michael Johnston called the agreement “the right step forward” and said it “will improve Visteon“s operating results and cash flow.” The financial moves are seen as an interim solution to Visteon“s problems: the possible formation of the new corporation comprising its most troubled operations is seen as a longer-term remedy. The negotiations mark the third time since December 2004 that Visteon has turned to Ford, its largest customer, for financial aid. To date, Ford has spent about USD 1.6 billion to help Visteon. “Ford still depends on Visteon for a lot of critical parts and they had to bail them out,” David Healy, an analyst with Burnham Securities in Sierra Vista, Arizona, said in an interview.