By Staff Report
Aug. 17, 2009
Visteon Corp. argued in bankruptcy court it needed to curtail health-care insurance for about 7,700 retirees and employees.
The parts supplier said August 14 it needed to reduce the benefits to save $31 million this year and $310 million long term. Visteon attorneys argued that despite drastic steps in recent years, such as slashing staff, the former Ford Motor Co. unit still needed the cuts to benefits to continue operating.
At the same time, the company has been seeking approval to begin an incentive program that could pay $30.1 million in bonuses to top managers.
A two-day hearing on the matter ended August 14.
“The court will thoroughly review the record,” said Sontchi at the close of the hearing.
One third of the affected retirees will be left without access to Medicare. Visteon’s attorney acknowledged the difficulty the move was causing.
“This is one of a lot of tough deals. There’s been a whole big ball of misery here. The goal is to try having something left to have some sort of venture to come out of this,” said Steven McCormick of Kirkland & Ellis, which represents the supplier.
“This is not just a hardship, but for some a death sentence,” said Susan Jennik of Kennedy, Jennik & Murray, who represented unions opposed to the cuts.
Those opposed to the cuts argued that employees and retirees paid for the benefits by accepting pay cuts in recent years.
The company did not seek to change health care coverage for its active staff, although some will have their potential retiree benefits trimmed.
Arguments centered around the company’s right to unilaterally amend benefit agreements. Sontchi said at one point he could see one “hypothetical” scenario in which a judge might deny the motion and have it resubmitted using different arguments.
Several retirees wrote to the judge to argue for continuing their benefits, and some even appeared in court.
“This would be a shame if you let them do their older workers this way and then probably give the executives bonuses for the job they have done in the past,” said one hand-written letter, signed “two Visteon retirees from Indiana with 68 years working.”
Visteon was spun off by Ford in 2000 and hasn’t recorded an annual profit since.
While the company sought to cut retiree benefits, it has also requested an incentive and severance program worth up to $80 million. That request will be heard at a later date.
The company believes they are both actions that have to be taken, said McCormick.
“These are actions that the company has to take to salvage this enterprise. That’s the goal.”
The incentive plan has been opposed by Ford, which has been funding the supplier’s bankruptcy.
As auto sales and production have plummeted 40 percent from peak levels of a few years ago, car makers and their suppliers have been forced to reorganize in bankruptcy court and many have sought to cut retiree benefits.
Delphi Corp., the former General Motors Co. unit that’s been operating under court protection for four years, won bankruptcy court approval to cut benefits for 15,000 employees in March. GM also sought to cut benefits for its 122,000 nonunion retirees and their dependents as part of its bankruptcy.
Visteon, of suburban Detroit, currently employs 31,900 worldwide and 5,769 in the United States.
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