Visteon (NASDAQ:VC)
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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