Ford, Visteon and the United Auto Workers union (UAW) are holding negotiations that may lead to the shutdown of Visteon’s troubled vehicle seat-making business, according to a report in the weekly motor industry newspaper Automotive News.
The paper said the talks are focussing on the future of the two-factory Visteon seating facility in Chesterfield Township, Michigan, which makes seats for Ford’s Focus and Mustang car lines, the giant Expedition SUV and the Lincoln Navigator and Town Car.
Automotive News said Visteon lost $US318 million in the first nine months of this year and the negotiations could signal the approach that chief executive officer Peter Pestillo, under tremendous pressure to move quickly, might take to fix his troubled company.
Automotive News said the talks would also indicate whether Pestillo can expect any help from Ford, which spun off its parts operation into the independent Visteon company in 2000.
Automotive News said one option is for Visteon to sell the plants but added that rival seat makers Faurecia and Lear have already inspected the factory and have decided not to make any offers because of the plants’ high labour costs.
Alternatively, Automotive News said, Visteon could keep the plants open for another two years or so, phase out the work and then close them down with Ford and Visteon then offering early retirements or transfers to the 1,700 hourly workers affected.
Automotive News said a third option was for Visteon to sell the seat-making contracts to another company which might take on some on some of the current workers with their wages subsidised by Ford or Visteon for a period.
Automotive News said Visteon’s decision to speed up its cost-cutting campaign comes at a critical time.
The value of Visteon shares has halved since June to about $7.40 each and Wall Street analysts have criticised the company for failing to cut jobs and close plants fast enough, the newspaper added.
In contrast, Automotive News said, in the last two years, Delphi has axed 12% of its global work force while Dana has eliminated a fifth of its jobs. In the same time, Visteon has cut only 6,000 jobs, or 7% of its global work force while also offering early retirement to another 1,100 salaried employees in the US.
In Europe, Visteon is negotiating with Ford, other car makers and unions to cut 1,100 jobs and outsource unprofitable contracts, Automotive News said, adding that the company has also tried unsuccessfully to sell its North American glass-making and steering operations.
Automotive News said Visteon CEO Pestillo would need plenty of UAW co-operation to get the results he needs, and, in any case, cannot close or sell any plants without the union’s approval – under the terms of a labour contract that does not expire until next year.
Automotive News said Chesterfield’s high labour costs must be reduced if Visteon wants to find a buyer for its seat business – hourly-paid workers there can earn as much as $53 an hour in wages and benefits, which is nearly double the compensation paid by rivals.
According to Automotive News, Visteon is also hampered by contracts agreed when Ford transferred Chesterfield seat operations to Visteon.
UAW workers employed at the time of the spinoff remain Ford employees for life and their pay cheques still carry the blue Ford logo with Visteon reimbursing Ford for the wages, the newspaper noted.
If Visteon plants have job vacancies, they must absorb UAW workers displaced at Ford plants, Automotive News said.
Automotive News said that other problems facing the Chesterfield facility, apart from its high labour costs, include the loss of the seat-making contract for the redesigned 2005 Ford Mustang (to Lear); launch difficulties with Expedition and Navigator seats that saw that business temporarily awarded to Johnson Controls last July; seat contracts negotiated with Ford – before the Visteon spinoff – that are priced too low to be profitable, and the fact that the seat-making operation is simply too small to compete with the far larger facilities run by Lear and Johnson Controls.