Auto interiors are at the heart of Visteon Corp.'s plans for its revamped future, but that future will be without one of the unit's biggest production sites.
The $16 billion global business announced a memorandum of understanding May 25 with former parent Ford Motor Co. that will allow Visteon to shed old Ford plants, reduce its reliance on expensive union employees and improve its overall fiscal health.
``This removes an untenable burden,'' said Chief Executive Officer Mike Johnston during a conference call. ``Previous to this agreement, we were unable to exit uncompetitive facilities. We were unable to control our own destiny.''
Now, Visteon will be centered on interiors, climate control and electronics.
Ford spun off its former parts division Visteon, based in Van Buren Township near Romulus, Mich., in 2000. The move created an instant multibillion-dollar, publicly traded and independent business, but one with big costs and a sprawling operation that the firm has struggled to control.
Visteon's heritage as a Ford spinoff linked its employee contracts and pay scale to the automakers' union agreements. As a result, the company had to pay more expensive wages than the bulk of its competitors and did not have the same flexibility to close unneeded plants.
The new agreement with Ford will move 24 facilities into a new, temporary business managed by the automaker and transfer more than 17,000 union workers back under Ford's wing. The United Auto Workers still must give final approval to the agreement.
Ford then will prepare those sites for sale to another supplier, or close them. The agreement, expected to be completed in the third quarter of this year, includes machinery, equipment, tooling, inventory and purchase and supply contracts.
``This will improve the structure of the company,'' Johnston said.
The deal, though, includes Visteon's massive Saline, Mich., injection molding facility, one of those slated to go into the Ford-managed group.
Saline turns out 3.1 million instrument panels annually, according to a 2002 report. It makes another 1.2 million consoles. Its 1.6 million square feet of space takes in injection molding, vacuum thermoforming, powder formed PVC skins and reaction injection urethane foam molding.
Saline has housed production of the company's proprietary Visteon Laminate Injection Molding for polyolefin instrument panels and the award-winning two-color injection molding process with sequential gating that is used to make the instrument panel on the Ford Mustang.
It also has more than 2,000 employees.
The Saline plant may fall into a gray area, housing some unprofitable business lines and some desired ones, said industry consultant Kim Korth, president of Grand Rapids, Mich.-based IRN Inc.
Some sites on the list of 24 facilities headed into the Ford-controlled entity are clearly unwanted, she said. Visteon often has said it wants to sell its glass operations, for example, and six of the plants on the list are from that unit.
But something the size of the Saline operation can run the gamut of what is wanted and what is not.
``It's clearly hard to delineate just plant by plant what should go,'' she said.
Likewise, Visteon's Utica, Mich., processing plant, also slated to go under the Ford agreement, was turning out more than 10 million door panels in 2000. Today's product line includes the Mustang door panel with an integrated subwoofer that took the grand prize in the 2004 Society of Plastics Engineers' automotive awards.
Visteon will not lose any of its technical know-how, Johnston said. The agreement ensures the firm will retain all of its intellectual property. The company will lose some of its manufacturing scale, he said, but none of its capabilities.
Full details of how Visteon will adjust its production as the Ford-managed entity takes over the 24 manufacturing sites have not been released yet, but a spokeswoman said customers will not see any interruption in deliveries.
Dropping the money-losing operations will benefit the company's long-term growth, Johnston noted, freeing up funds for investments that make business sense.
``Our structure now gives us a chance to make focused investments in new technology, new capacity and new customer programs that will gain market share,'' he said.
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The 24 plants slated to transfer from Visteon Corp. to a new entity managed by Ford Motor Co. include some major plastics processing units.
* Saline, Mich., interior plant, injection molding more than 3 million instrument panels annually.
* Milan, Mich., powertrain and exteriors, injection molding of more than 1 million bumper fascias annually and blow molding of plastic fuel tanks.
* Utica, Mich., interior and exterior components, with injection molding of more than 10 million door panels annually and bumper fascia.
* Sandusky, Ohio, powertrain and exterior components, with injection molding that includes front grilles.
* Kansas City, Mo., a regional assembly plant for interiors.
* Chesterfield, Mich., interior seating and foam production for seating.