Ford Motor Co and parts supplier Visteon Inc on Tuesday announced a definitive agreement in preparation to sell off some Visteon facilities by transferring 23 to a temporary company managed by Ford.
The agreement cuts Visteon's revenue by one-third to $11.4 billion and helps the struggling parts maker avoid bankruptcy. It finalises a deal the two companies reached in May with the approval of the United Auto Workers union.
Van Buren Township, Michigan-based Visteon has struggled since its spin-off from Ford in 2000, most recently under US light vehicle production cuts, rising materials costs and high wage and labour costs inherited from Ford. It has said it expects its restructuring to take several years.
The facilities transfer is targeted for October 1. Ford, the No 2 US automaker and formerly Visteon's parent, had agreed to help with the restructuring by taking back loss-making plants.
Delphi Corp, the largest US parts supplier, is also seeking a deal with its former parent, automaker General Motors Corp, and its unions, to cut high wage and labour costs in its money-losing US operations.
On Tuesday, Delphi Chief Executive Steve Miller said the parts maker needs a clear framework of an agreement with GM and the UAW by October 17 to avoid filing for bankruptcy protection.
Under the Visteon agreement announced on Tuesday, 17 Visteon plants and six offices and other facilities will be transferred to Automotive Components Holdings, a new company managed by Ford.
Most of the facilities will be prepared for sale under the arrangement, which Ford said was key to its own cost-cutting strategy.
About 18,000 Ford employees working at Visteon facilities will be assigned to the new company, along with 5,000 salaried employees. Ford said it expects to offer 5,000 buyouts to Ford workers who are members of the UAW.
Visteon said it expects to recognise a significant gain related to the closing of the transaction, "well in excess of" the $1.1 billion non-cash related charge reported for the second quarter of 2005.
Shares of Visteon rose 13 cents at $10.82, while Ford shares eased a penny at $9.91, both on the New York Stock Exchange.
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