Visteon, Ford Sign Memorandum of Understanding for New Business Arrangement
May 25 2005 - 7:00AM
PR Newswire (US)
Visteon, Ford Sign Memorandum of Understanding for New Business
Arrangement Plan would streamline Visteon's North American
operations, improve Visteon's cost-competitiveness and balance its
customer and geographic footprint VAN BUREN TOWNSHIP, Mich., May 25
/PRNewswire-FirstCall/ -- Visteon Corporation (NYSE:VC) has signed
a memorandum of understanding with Ford Motor Company that provides
for significant structural changes to Visteon's North American
manufacturing operations. When finalized, the transaction is
expected to increase Visteon's competitiveness by streamlining and
improving the cost structure of its North American operations.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO )
"This is a milestone agreement which, upon completion, will create
a more competitive business structure for Visteon in the United
States and remove a number of structural barriers to the company's
long-term sustainable success," said Mike Johnston, Visteon's
chairman-elect and chief executive officer. "Visteon will have a
more competitive North American structure, a more balanced global
customer portfolio and a healthy regional mix. We will be able to
accelerate our focus on products most valued by our customers and
be well-positioned for growth." Going forward, a smaller, leaner
Visteon will focus its engineering and capital resources on
products that have been generating significant new business with
major vehicle manufacturers -- interiors, climate control and
electronics, including lighting. Visteon has significant global
scale in these products and intends to strengthen its position
through a more focused investment in capital, people and
technology. "The completion of this transaction will be a
significant step forward for Visteon. We will now have the
opportunity to appropriately size our operations on a global
basis," said Johnston. "This positions us to achieve our vision of
being a world-class automotive supplier. In every aspect of our
business, we're strengthening Visteon as a global competitor.
However, we will need to take significant additional restructuring
actions over the next several years to bring our vision to full
fruition." Key aspects of the proposed agreement include: *
Transfer of manufacturing facilities and other locations listed
below and certain associated assets, including machinery,
equipment, tooling, inventory, purchase and supply contracts, and
prepaid assets to a separate entity that will be acquired by Ford.
Following the closing of the transaction, Visteon will not have any
ownership of this new entity. * Termination of the current leasing
arrangements for approximately 17,400 Ford-UAW employees. * Relief
of Visteon's remaining liability, including about $1.5 billion of
previously deferred gains, related to Ford-UAW post-retirement
health care and life insurance benefit obligations (OPEB) for
former assigned employees and retirees and certain salaried
retirees, totaling about $2 billion. * Transfer of all assets in
the Visteon Corporation UAW Voluntary Employee Beneficiary
Association (VEBA) to the Ford-UAW VEBA. * Ford would agree to
reimburse up to $550 million of further restructuring actions by
Visteon. * Payment of transferred inventory based on net book value
at the time of closing. * Upon the signing of the definitive
agreement, Ford will provide a secured loan of $250 million to
refinance Visteon's public notes due August, 1, 2005. Visteon will
repay the loan when the transaction is closed. * Visteon will issue
to Ford warrants to purchase 25 million shares of Visteon stock at
an exercise price of $6.90 per share. Under the proposed
arrangement, Visteon will also provide transition services, such as
information technology, human resources and accounting support to
facilitate the operations of the Ford-managed legal entity. These
services will be available to the Ford-managed legal entity at cost
for up to 39 months after closing the transaction, and for a period
thereafter at an agreed upon mark-up. In addition, certain salaried
and hourly employees will be leased from Visteon and will be
directly assigned to support the operations of the Ford-managed
legal entity. These resources will be leased at cost from Visteon
until transitioned to a subsequent buyer. The non-binding
memorandum of understanding is subject to certain customary
conditions, regulatory approvals and the ratification of the
affected Ford-UAW members assigned to Visteon. Visteon and Ford
expect to sign a definitive agreement on or before August 1, 2005
and close the transaction by the end of the third quarter of 2005.
Transferred Plants and Facilities At closing, Visteon will transfer
the following plants and facilities, in alphabetical order by
location: Plant / Facility Location Primary Operation Bellevue
Bellevue, Ohio Service Parts Autovidrio Chihuahua, Mexico Glass El
Jarudo Chihuahua, Mexico Powertrain Chesterfield Chesterfield,
Michigan Interior Commerce Park South Dearborn, Michigan
Engineering/Support Glass Labs Dearborn, Michigan Glass Product
Assurance Center Dearborn, Michigan Engineering Visteon Technical
Center Product Dearborn, Michigan Engineering/Support Indianapolis
Indianapolis, Indiana Chassis Kansas City VRAP Kansas City,
Missouri Interior Carlite Automotive Lebanon, Tennessee Glass Milan
Milan, Michigan Powertrain / Exterior Monroe Monroe, Michigan
Chassis Nashville Nashville, Tennessee Glass Lamosa I, II, III
Nuevo Laredo, Mexico Chassis / Powertrain Vitro Flex Nuevo Leon,
Mexico Glass Sheldon Road Plymouth, Michigan Climate Control Saline
Saline, Michigan Interior Sandusky Sandusky, Ohio Powertrain /
Exterior Sterling Sterling Heights, Michigan Chassis Tulsa Tulsa,
Oklahoma Glass Utica Utica, Michigan Interior / Exterior
Rawsonville Ypsilanti, Michigan Powertrain Ypsilanti Ypsilanti,
Michigan Powertrain A Leaner, More Competitive Visteon The
agreement will reshape Visteon from a company that had $18.7
billion in revenue in 2004 to a leaner, more competitive $11.4
billion organization, based on estimated 2005 pro forma revenue.
"Visteon is extremely well-positioned around the world, with strong
systems and engineering expertise and manufacturing capabilities
serving our customers on a 24 / 7 schedule," Johnston said. "This
agreement begins to place our North American structural issues
behind us and we are preparing to restructure to be a more
efficient, productive and competitive Tier I supplier." Upon
completion of the transactions, Visteon will have a more balanced
regional sales mix. Based on 2005 estimated pro forma revenue,
regions outside North America would represent about 60 percent of
Visteon's total sales -- up from 30 percent in 2004. Global revenue
would be more equally distributed between North America and Europe
with Asia Pacific accounting for the remaining 20 percent of sales.
Including unconsolidated sales from joint ventures in the Asia
Pacific region, Visteon's geographic sales mix would become more
balanced across all regions. Visteon's customer portfolio would
also gain balance as sales to customers other than Ford would
increase to nearly 50 percent of the company's total global
revenue, up from the 2004 level of 30 percent. "Through the
proposed Ford agreement and additional restructuring activities
that will need to be implemented, Visteon has defined a path to
profitability that builds on its previous operational improvements
and restructuring actions", said Jim Palmer, executive vice
president and chief financial officer. "While this agreement places
the company on track for sustainable long-term success, we will
continue efforts to improve our operational and financial
performance," he said. The completion of the transaction
contemplated by the memorandum of understanding with Ford will
allow Visteon to strengthen its global competitive position in
interiors, climate, electronics and lighting. On a limited basis in
Europe, Visteon will continue to serve customers in certain chassis
and powertrain products lines. Visteon's Aftermarket operations in
North America and Europe will continue to offer mobile electronics
and underhood parts. The transfer of operations to the new entity
will remove glass products from Visteon's aftermarket product
portfolio. Visteon expects that the transaction will result in a
net gain in the range of about $450 -- $650 million depending upon
the actual amount of assets transferred. It is expected that
Visteon would recognize a non-cash charge of approximately $1.3
billion in the second quarter offset by the gains primarily
associated with the relief of liabilities associated with the
transaction upon closing of the transaction at the end of the third
quarter. Cash and Liquidity Visteon and Ford also amended their
March 10 Funding Agreement to further change the payment terms for
certain components supplied by Visteon in the United States and
received from and after June 1, 2005 to an average 18 days through
July 31, 2005, then 22 days from August 1, 2005 to December 31,
2005. If the transaction is completed, payment terms would continue
at 22 days through December 31, 2006. Payment terms would be 26
days in 2007. Effective January 1, 2008, the payment terms would be
increased to 34.5 days and effective Jan. 1, 2009, normal payment
terms would apply. On Friday, May 20, 2005, Visteon received
amendments from its lenders under its major credit facilities that
will permit it to delay delivery of its first quarter 2005
financials until July 29, 2005. Further, Visteon is currently in
discussions with its global credit line banks regarding its
financing alternatives, including the renewal or replacement of its
364 day facility. Conference Call Scheduled at 11 a.m. EDT Today
Mike Johnston and Jim Palmer, executive vice president and chief
financial officer, will host a conference call today, Wednesday,
May 25 at 11 a.m. EDT to review today's announcement. To
participate in the call, callers in the U.S. should dial
888-452-7086 and callers outside of the U.S. should dial
706-643-3752. Please call approximately 10 minutes before the start
of the conference. For a replay of the conference, those in the
U.S. should dial 800-642-1687; outside the U.S., callers should
dial 706-645-9291. The pass code to access the replay is 6636927
(domestic and international). The replay will be available until
June 2, 2005. The conference call, along with the press release,
presentation material and other supplemental information, can be
accessed through the investor relations section of Visteon's web
site at http://www.visteon.com/ . Visteon Corporation is a leading
full-service supplier that delivers consumer-driven technology
solutions to automotive manufacturers worldwide and through
multiple channels including the global automotive aftermarket.
Visteon has about 70,000 employees and a global delivery system of
more than 200 technical, manufacturing, sales and service
facilities located in 24 countries. This press release contains
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are not guarantees of future results and conditions but
rather are subject to various factors, risks and uncertainties that
could cause our actual results to differ materially from those
expressed in these forward-looking statements, including the
automotive vehicle production volumes and schedules of our
customers, and in particular Ford's North American vehicle
production volumes; our ability to enter into definitive agreements
that reflect the terms of the Memorandum of Understanding with Ford
and close the transactions that are contemplated in the Memorandum
of Understanding; implementing structural changes that result from
the closing of the transactions contemplated by the Memorandum of
Understanding in order to achieve a competitive and sustained
business; our ability to satisfy our future capital and liquidity
requirements and comply with the terms of our credit agreements;
the results of the investigation being conducted by Visteon's Audit
Committee; the financial distress of our suppliers; our successful
execution of internal performance plans and other cost-reduction
and productivity efforts; charges resulting from restructurings,
employee reductions, acquisitions or dispositions; our ability to
offset or recover significant material surcharges; the effect of
pension and other post-employment benefit obligations; as well as
those factors identified in our filings with the SEC (including our
Annual Report on Form 10-K for the year-ended December 31, 2004).
We assume no obligation to update these forward-looking statements.
http://www.newscom.com/cgi-bin/prnh/20001201/DEF008LOGO DATASOURCE:
Visteon Corporation CONTACT: Kim Welch, +1-734-710-5593, , or Jim
Fisher, +1-734-710-5557, , both of Visteon Corporation Web site:
http://www.visteon.com/
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