Visteon (NASDAQ:VC)
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Visteon, Ford Sign Memorandum of Understanding for New Business
Arrangement
Plan would streamline Visteon's North American operations, improve Visteon's
cost-competitiveness and balance its customer and geographic footprint
VAN BUREN TOWNSHIP, Mich., May 25 /PRNewswire-FirstCall/ -- Visteon
Corporation (NYSE:VC) has signed a memorandum of understanding with Ford Motor
Company that provides for significant structural changes to Visteon's North
American manufacturing operations. When finalized, the transaction is expected
to increase Visteon's competitiveness by streamlining and improving the cost
structure of its North American operations.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO )
"This is a milestone agreement which, upon completion, will create a more
competitive business structure for Visteon in the United States and remove a
number of structural barriers to the company's long-term sustainable success,"
said Mike Johnston, Visteon's chairman-elect and chief executive officer.
"Visteon will have a more competitive North American structure, a more balanced
global customer portfolio and a healthy regional mix. We will be able to
accelerate our focus on products most valued by our customers and be
well-positioned for growth."
Going forward, a smaller, leaner Visteon will focus its engineering and capital
resources on products that have been generating significant new business with
major vehicle manufacturers -- interiors, climate control and electronics,
including lighting. Visteon has significant global scale in these products and
intends to strengthen its position through a more focused investment in
capital, people and technology.
"The completion of this transaction will be a significant step forward for
Visteon. We will now have the opportunity to appropriately size our operations
on a global basis," said Johnston. "This positions us to achieve our vision of
being a world-class automotive supplier. In every aspect of our business, we're
strengthening Visteon as a global competitor. However, we will need to take
significant additional restructuring actions over the next several years to
bring our vision to full fruition."
Key aspects of the proposed agreement include:
* Transfer of manufacturing facilities and other locations listed below
and certain associated assets, including machinery, equipment, tooling,
inventory, purchase and supply contracts, and prepaid assets to a
separate entity that will be acquired by Ford. Following the closing of
the transaction, Visteon will not have any ownership of this new
entity.
* Termination of the current leasing arrangements for approximately
17,400 Ford-UAW employees.
* Relief of Visteon's remaining liability, including about $1.5 billion
of previously deferred gains, related to Ford-UAW post-retirement
health care and life insurance benefit obligations (OPEB) for former
assigned employees and retirees and certain salaried retirees, totaling
about $2 billion.
* Transfer of all assets in the Visteon Corporation UAW Voluntary
Employee Beneficiary Association (VEBA) to the Ford-UAW VEBA.
* Ford would agree to reimburse up to $550 million of further
restructuring actions by Visteon.
* Payment of transferred inventory based on net book value at the time of
closing.
* Upon the signing of the definitive agreement, Ford will provide a
secured loan of $250 million to refinance Visteon's public notes due
August, 1, 2005. Visteon will repay the loan when the transaction is
closed.
* Visteon will issue to Ford warrants to purchase 25 million shares of
Visteon stock at an exercise price of $6.90 per share.
Under the proposed arrangement, Visteon will also provide transition services,
such as information technology, human resources and accounting support to
facilitate the operations of the Ford-managed legal entity. These services will
be available to the Ford-managed legal entity at cost for up to 39 months after
closing the transaction, and for a period thereafter at an agreed upon mark-up.
In addition, certain salaried and hourly employees will be leased from Visteon
and will be directly assigned to support the operations of the Ford-managed
legal entity. These resources will be leased at cost from Visteon until
transitioned to a subsequent buyer.
The non-binding memorandum of understanding is subject to certain customary
conditions, regulatory approvals and the ratification of the affected Ford-UAW
members assigned to Visteon. Visteon and Ford expect to sign a definitive
agreement on or before August 1, 2005 and close the transaction by the end of
the third quarter of 2005.
Transferred Plants and Facilities
At closing, Visteon will transfer the following plants and facilities, in
alphabetical order by location:
Plant / Facility Location Primary Operation
Bellevue Bellevue, Ohio Service Parts
Autovidrio Chihuahua, Mexico Glass
El Jarudo Chihuahua, Mexico Powertrain
Chesterfield Chesterfield, Michigan Interior
Commerce Park South Dearborn, Michigan Engineering/Support
Glass Labs Dearborn, Michigan Glass
Product Assurance Center Dearborn, Michigan Engineering
Visteon Technical
Center Product Dearborn, Michigan Engineering/Support
Indianapolis Indianapolis, Indiana Chassis
Kansas City VRAP Kansas City, Missouri Interior
Carlite Automotive Lebanon, Tennessee Glass
Milan Milan, Michigan Powertrain / Exterior
Monroe Monroe, Michigan Chassis
Nashville Nashville, Tennessee Glass
Lamosa I, II, III Nuevo Laredo, Mexico Chassis / Powertrain
Vitro Flex Nuevo Leon, Mexico Glass
Sheldon Road Plymouth, Michigan Climate Control
Saline Saline, Michigan Interior
Sandusky Sandusky, Ohio Powertrain / Exterior
Sterling Sterling Heights, Michigan Chassis
Tulsa Tulsa, Oklahoma Glass
Utica Utica, Michigan Interior / Exterior
Rawsonville Ypsilanti, Michigan Powertrain
Ypsilanti Ypsilanti, Michigan Powertrain
A Leaner, More Competitive Visteon
The agreement will reshape Visteon from a company that had $18.7 billion in
revenue in 2004 to a leaner, more competitive $11.4 billion organization, based
on estimated 2005 pro forma revenue.
"Visteon is extremely well-positioned around the world, with strong systems and
engineering expertise and manufacturing capabilities serving our customers on a
24 / 7 schedule," Johnston said. "This agreement begins to place our North
American structural issues behind us and we are preparing to restructure to be
a more efficient, productive and competitive Tier I supplier."
Upon completion of the transactions, Visteon will have a more balanced regional
sales mix. Based on 2005 estimated pro forma revenue, regions outside North
America would represent about 60 percent of Visteon's total sales -- up from 30
percent in 2004. Global revenue would be more equally distributed between North
America and Europe with Asia Pacific accounting for the remaining 20 percent of
sales. Including unconsolidated sales from joint ventures in the Asia Pacific
region, Visteon's geographic sales mix would become more balanced across all
regions.
Visteon's customer portfolio would also gain balance as sales to customers
other than Ford would increase to nearly 50 percent of the company's total
global revenue, up from the 2004 level of 30 percent.
"Through the proposed Ford agreement and additional restructuring activities
that will need to be implemented, Visteon has defined a path to profitability
that builds on its previous operational improvements and restructuring
actions", said Jim Palmer, executive vice president and chief financial
officer. "While this agreement places the company on track for sustainable
long-term success, we will continue efforts to improve our operational and
financial performance," he said.
The completion of the transaction contemplated by the memorandum of
understanding with Ford will allow Visteon to strengthen its global competitive
position in interiors, climate, electronics and lighting. On a limited basis in
Europe, Visteon will continue to serve customers in certain chassis and
powertrain products lines. Visteon's Aftermarket operations in North America
and Europe will continue to offer mobile electronics and underhood parts. The
transfer of operations to the new entity will remove glass products from
Visteon's aftermarket product portfolio.
Visteon expects that the transaction will result in a net gain in the range of
about $450 -- $650 million depending upon the actual amount of assets
transferred. It is expected that Visteon would recognize a non-cash charge of
approximately $1.3 billion in the second quarter offset by the gains primarily
associated with the relief of liabilities associated with the transaction upon
closing of the transaction at the end of the third quarter.
Cash and Liquidity
Visteon and Ford also amended their March 10 Funding Agreement to further
change the payment terms for certain components supplied by Visteon in the
United States and received from and after June 1, 2005 to an average 18 days
through July 31, 2005, then 22 days from August 1, 2005 to December 31, 2005.
If the transaction is completed, payment terms would continue at 22 days
through December 31, 2006. Payment terms would be 26 days in 2007. Effective
January 1, 2008, the payment terms would be increased to 34.5 days and
effective Jan. 1, 2009, normal payment terms would apply.
On Friday, May 20, 2005, Visteon received amendments from its lenders under its
major credit facilities that will permit it to delay delivery of its first
quarter 2005 financials until July 29, 2005. Further, Visteon is currently in
discussions with its global credit line banks regarding its financing
alternatives, including the renewal or replacement of its 364 day facility.
Conference Call Scheduled at 11 a.m. EDT Today
Mike Johnston and Jim Palmer, executive vice president and chief financial
officer, will host a conference call today, Wednesday, May 25 at 11 a.m. EDT to
review today's announcement. To participate in the call, callers in the U.S.
should dial 888-452-7086 and callers outside of the U.S. should dial
706-643-3752. Please call approximately 10 minutes before the start of the
conference. For a replay of the conference, those in the U.S. should dial
800-642-1687; outside the U.S., callers should dial 706-645-9291. The pass code
to access the replay is 6636927 (domestic and international). The replay will
be available until June 2, 2005.
The conference call, along with the press release, presentation material and
other supplemental information, can be accessed through the investor relations
section of Visteon's web site at http://www.visteon.com/ .
Visteon Corporation is a leading full-service supplier that delivers
consumer-driven technology solutions to automotive manufacturers worldwide and
through multiple channels including the global automotive aftermarket. Visteon
has about 70,000 employees and a global delivery system of more than 200
technical, manufacturing, sales and service facilities located in 24 countries.
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are not guarantees of future results and conditions but rather are
subject to various factors, risks and uncertainties that could cause our actual
results to differ materially from those expressed in these forward-looking
statements, including the automotive vehicle production volumes and schedules
of our customers, and in particular Ford's North American vehicle production
volumes; our ability to enter into definitive agreements that reflect the terms
of the Memorandum of Understanding with Ford and close the transactions that
are contemplated in the Memorandum of Understanding; implementing structural
changes that result from the closing of the transactions contemplated by the
Memorandum of Understanding in order to achieve a competitive and sustained
business; our ability to satisfy our future capital and liquidity requirements
and comply with the terms of our credit agreements; the results of the
investigation being conducted by Visteon's Audit Committee; the financial
distress of our suppliers; our successful execution of internal performance
plans and other cost-reduction and productivity efforts; charges resulting from
restructurings, employee reductions, acquisitions or dispositions; our ability
to offset or recover significant material surcharges; the effect of pension and
other post-employment benefit obligations; as well as those factors identified
in our filings with the SEC (including our Annual Report on Form 10-K for the
year-ended December 31, 2004). We assume no obligation to update these
forward-looking statements.
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO
DATASOURCE: Visteon Corporation
CONTACT: Kim Welch, +1-734-710-5593, , or Jim Fisher,
+1-734-710-5557, , both of Visteon Corporation
Web site: http://www.visteon.com/