Ford said on Thursday that it is in talks to alter its spin-off agreement with former unit Visteon Corporation, including the parts supplier’s obligations to former Ford hourly workers, Reuters reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
In a filing with the US Securities and Exchange Commission cited by the news agency, Ford reportedly said the goal of the talks was to “improve the overall competitiveness” of Visteon, which has struggled since it was separated from Ford in 2000.
For the first time, Ford also noted that its earnings estimates for 2003 exclude any possible charges in the fourth quarter from changes in its agreements with Visteon, Reuters said.
The news agency noted that. as part of the agreement made to win union approval for the spin-off, some 20,000 hourly workers employed in Visteon plants were deemed Ford workers, with guaranteed lifetime employment.
Under the spin-off, Visteon reimburses Ford for the workers’ wages and benefits but faces a $465 million payment for retiree health care benefits in 2006 with similar amounts due annually over the next 15 years, Reuters added.
The news agency said payments of that size would consume most of Visteon’s cash flow so the company has been in talks to modify the agreement and the talks appear to have broadened after Ford, Visteon and the UAW agreed to new contracts in September.
Reuters said that, under the new UAW agreements, Visteon has more flexibility to transfer hourly workers back to Ford, and is negotiating with the union to set up a lower wage for new employees.
Ford reportedly said the talks with Visteon “are primarily focused on sourcing and pricing.” Reuters noted that, as part of its own turnaround plan, Ford has been pushing Visteon to cut component prices while Visteon has been trying to lure non-Ford business while competing against lower-cost suppliers.
