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June 01, 2005
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Ford, Visteon Sign Memorandum Of Understanding For New Business Arrangement

  • Represents the next logical step in Ford's business plan by creating opportunities for production material cost savings that are expected to result in annual savings of $600 million to $700 million by the end of the decade.

  • Protects Ford's supply of parts and components as 24 Visteon plants and facilities transfer to a Ford-managed entity.

  • Allows Ford to diversify its supply base, improving its ability to benefit from competitively-priced and high-quality parts, systems, and technologies.

  • Expected to result in special charges in the range of $450 million to $650 million in 2005; $300 to $500 million in 2005-2009 related to buy-outs for hourly workers.

DEARBORN, Mich. - Ford Motor Company announced today it has signed a Memorandum of Understanding (MOU) with its largest supplier, Visteon Corp., that protects the Company's supply of critical parts and components, creates opportunities for production material cost savings, and improves its ability to benefit from competitively-priced and high-quality parts, systems and technologies.

The MOU proposes the transfer of 24 Visteon plants and facilities in the U.S. and Mexico and associated assets to a new, temporary business entity to be managed by Ford. Over time, Ford would prepare most of these transferred Visteon operations for sale to companies with the expertise and capital to supply Ford with parts, systems and technologies that are competitive in price and quality. In addition, once the transaction is closed, the agreement provides Ford with warrants to purchase up to 25 million shares of Visteon Corp. common stock at $6.90 per share, and continued annual price reductions from Visteon through 2008.

 

The MOU with Visteon is subject to customary approvals and conditions, ratification by Ford-UAW hourly employees that would be affected by the proposed agreement, and negotiation by Ford and Visteon of a definitive agreement, which the parties are working to complete in the third quarter. The transaction is expected to be closed by September 30.

Business Entity Details

At the transaction's closing, 24 Visteon plants and facilities in the U.S. and Mexico will transfer to a Ford-managed business entity. The entity's operations, assets and liabilities will be reflected in Ford's consolidated financial results and balance sheet.

In keeping with its temporary status, the new business entity will not have its own employees. It will lease salaried employees from Visteon, and all hourly UAW-Ford employees currently working in Visteon facilities. In addition, Ford is expected to implement over time buy-outs for about 5,000 Ford-UAW hourly employees.

Leading the new business entity as chief executive officer will be Frank E. Macher, a 35-year veteran of the automotive industry who most recently served as CEO and chairman of Federal-Mogul Corp., and previously as president and CEO of the former ITT Automotive, an $8 billion global automotive supplier. He will report to Greg Smith, Ford's executive vice president and president, The Americas. Macher's career experience includes 30 years with Ford, including as vice president and general manager of the Company's Automotive Components Division, the predecessor to the current Visteon Corp. Also, Al Ver, Ford's current vice president of Advanced and Manufacturing Engineering, has been appointed the new business entity's president and chief operating officer. He will report to Macher. Ver has 37 years of industry experience, including 33 years with Ford that includes significant experience with Manufacturing operations, as well as engineering expertise in automotive components, powertrain and vehicle assembly.

Financial Impact

The agreement is expected to result in special charges ranging from $450 million to $650 million in 2005. In addition, there will be an estimated $300 million to $500 million in special charges in 2005-to-2009 related to the buy-outs for hourly workers. The new business arrangement also is expected to result in significant material cost savings in the range of $600 million to $700 million per year by the end of the decade; however, operating losses of about $125 million in the fourth quarter of 2005, and annual operating losses of $200 million to $300 million in 2006 are expected in addition to the special charges.

(May 25, 2005)

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