WASHINGTON - Ford Motor Co. reached a deal Wednesday to bail out its former parts subsidiary Visteon by taking over 24 factories and providing over one billion dollars in cash and debt relief.
The deal provides Visteon with up to 550 million dollars for restructuring, and wipes out Visteon`s pension obligations to former Ford employees of some 800 million dollars. It also calls for a 250 million dollar loan from Ford to help Visteon repay some debts.
"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."
While Ford is going through its own crisis, parts makers like Visteon are being squeezed even harder by cost-cutting pressures. Last week, one major parts manufacturer, Collins and Aikman, filed for bankruptcy protection.
Visteon, which was spun off by Ford as an independent company in 2000, will hand back 24 Visteon plants in the US and Mexico to "a new, temporary business entity to be managed by Ford," a Ford statement said.
"Over time, Ford would prepare most of these transferred Visteon operations for sale to companies with the expertise and capital to supply Ford with parts, systems and technologies that are competitive in price and quality."
"This agreement brings us closer to a true `arms length` relationship with our largest supplier," said Don Leclair, Ford`s chief financial officer.
"We`ve accomplished this while also creating opportunities to accelerate the improvement of our business results. Over time, this agreement will allow us to diversify our supply base and enhance our access to parts, systems and technologies that are competitive in price and quality."
05/25/2005 14:14 GMT