Visteon Corporation has approved new commercial agreements with Ford Motor Company which improve the competitiveness of both companies. Visteon’s competitive position is strengthened through the elimination of a significant structural challenge. Visteon also announces fourth quarter 2003 estimated fixed asset and deferred tax asset write-downs. “These cooperative agreements with Ford provide a framework that allows both companies to improve operating performance, clarify our relationship and re-energize our employees,” said Peter J. Pestillo, Visteon chairman and chief executive officer. “Combined with our diligent restructuring actions over the last three years, the Ford agreements strengthen our vitality as a global Tier I supplier with a promising future. We are well positioned to enhance our profitability beginning in 2004.” The commercial agreements culminate discussions that began in mid-2003 between Ford and Visteon, its former automotive components subsidiary that was spun off from Ford in 2000. The agreements include changes to a number of structural and commercial elements established between the two companies as part of the spin. Key aspects of the structural elements include:
* Visteon is no longer obligated to fund about $1.7 billion of an estimated $3 billion in post-retirement health care and life insurance benefit obligations (OPEB) related to Visteon-assigned United Auto Workers (UAW)-Ford hourly employees * Funding of the remaining OPEB obligations for assigned employees will be extended over an additional 29 years, reducing Visteon’s cash funding requirement substantially starting in 2006 * Visteon and Ford will share equally the cost related to Information Technology (IT) separation of up to a combined total of $200 million * Visteon’s exposure to UAW profit sharing for Ford assigned employees will continue to be capped Key aspects of the commercial elements include:
* Visteon will make lump-sum payments totaling $150 million for 2003 North American price reductions on sales to Ford and has agreed with Ford on a schedule of North American price reductions annually for the next four years * Ford has agreed to revised payment terms over the next three years which will result in accelerated payments to Visteon for components supplied to Ford * Visteon has the opportunity to receive labor differential relief, defined as the difference between UAW Master Agreement fully-fringed wages and competitive Tier I wages, on new model programs won from Ford
In addition, Visteon and Ford will establish a Governance Council to ensure the intent of the agreements is achieved.