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Ford's
Deal With Visteon On Health Costs May Come Soon Ford
filed an 8-K with the Securities and Exchange Commission Tuesday saying a
decision between itself and Visteon regarding issues of sourcing, pricing
and labor “could be imminent.” Ford declined to comment further. The
two companies have been in talks to modify the spinoff agreement inked in
2000. Analysts have speculated that Ford may take Visteon off the hook for
some pre-funding of its post-retirement benefits. After
it was spun off from Ford, Visteon had $1.9 billion in unfunded
post-retirement health-care liabilities. The current agreement calls for
Visteon to begin paying into that fund beginning in 2006 for a period of
15 years. In a research note last week,
Credit Suisse First Boston Corp. analyst Chris Ceraso said those payments
could total $240 million a year. On top of the retiree health-care
payments, Visteon is also expected to pay for the annual health-care costs
incurred by unionized Ford workers assigned to Visteon jobs. Ceraso
estimated those costs could add up to another $225 million annually. Visteon could not be reached
for comment late Tuesday. In its third-quarter report,
Ford Motor Credit said talks with Visteon “could modify certain of the
obligations assumed by Ford and Visteon in connection with the spinoff,
including, in particular, Visteon's obligations with respect to the Ford
hourly employees assigned to Visteon.” The negotiations were designed
to improve the competitiveness of Visteon, “which will ultimately
benefit (Ford) in the form of more competitive components and systems
purchased from Visteon,” the quarterly report says. The auto maker said its
disclosure about the possibility of completing the Visteon deal had also
been made in connection with a debt securities offering in Ford also said in the filing
that the impending deal with Visteon will mean the auto maker will be
forced to take a “significant non-cash charge in the fourth quarter of
2003.” Visteon shares were up last
week on speculation that Ford would relieve the company from its
health-care obligations. Ceraso, who doesn't own shares of either company,
said in his note that if Ford doesn't make concessions for Visteon, the
lack of action could be “a death sentence.” More likely, said the analyst,
is that Ford will stretch out the payments. As an example, Ceraso said
Ford could allow Visteon to make a first-year payment of $140 million,
followed by annual payments of $40 million for 30 years. Credit Suisse First Boston has a banking relationship with Visteon. Copyright
© 2002 Global Action on Aging |
