Ford Motor Co. reached a deal May 25 to bail out its former parts subsidiary Visteon by taking over 24 factories and providing more than one billion dollars in cash and debt relief. The deal provides Visteon with up to $550 million for restructuring, and wipes out Visteon's pension obligations to former Ford employees of some $800 million. It also calls for a $250 million loan from Ford to help Visteon repay some debts.
While Ford, the number two U.S. automaker, 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.
The agreement "highlights Ford's need to protect a crucial portion of its supply of parts and components while these operations are being significantly restructured and to protect its United Autoworkers (UAW) employees who have been leased to Visteon," credit rating firm Standard and Poor's said in a statement.
The deal would leave Visteon a smaller company with 60% in total sales coming from outside the U.S. and annual revenue dropping to about $11.4 billion from $18.7 billion. Visteon would have no stake in a new entity consisting of 24 factories in the U.S. and Mexico that supply auto parts from glass to chassis and power-train components. Customers other than Ford would make up 50% of sales, up from the current 30%. Ford also will receive warrants to buy 25 million Visteon shares for $6.90 each.
Frank Macher, most recently chief executive of Federal-Mogul Corp. and ITT Automotive, will serve as CEO of the new entity.
Copyright Agence France-Presse, 2005