Glass Industry Biz News 

April 15, 2000

Nothing definitive, but sale of glass plants considered for years.

    Ford president Jacques Nasser announced the separation, saying an undetermined number of newly printed shares of stock in Visteon Corp. -- which will be the new name of the Dearborn-based auto parts company -- will be handed out tax-free to Ford's current shareholders.

    From the standpoint of the Indiana automotive economy, Visteon's spinoff will have significant -- but not staggering -- repercussions.

    Though the bulk of Ford's component plants are concentrated in Ohio and Michigan, Visteon has three Indiana factories in Bedford, Connersville and Indianapolis employing 7,300 workers in all.

    The spinoff turns Visteon into the world's third-largest auto parts producer.

    Long content with selling Ford $18 billion worth of components a year, the cast-off Visteon soon will use its considerable engineering and manufacturing heft to hone in on the non-Ford business held by its independent rivals.

    By increasing competition in a parts industry dogged by small profits, industry analysts say, Visteon could accelerate consolidation among the many companies that manufacture auto parts in factories throughout Indiana.

   Columbus-based Arvin Industries Inc. agreed to merge last week with another component maker, Meritor Automotive Inc. of Troy, Mich., in large part because of the consolidation pressures brought on by thin profit margins.

    Auto executives in Dearborn say Indiana's three Visteon plants will experience few, if any, changes once the transition occurs, other than to partake in the company's lean manufacturing initiatives intended to reduce production costs.

    Reducing costs throughout Visteon is a prime concern in light of a price-cutting agreement worked out with Ford last year.

    Henry Wallace, Ford's chief financial officer, said Visteon agreed to roll back parts prices 5 percent in January and trim off another 3.5 percent during the course of the year. That means a component which Visteon sold to Ford for, say, $1,000 in December 1999 apparently would be priced at $915 one year later.

    Because of those price cuts and lean production initiatives, some Wall Street analysts suggest Visteon is not as ready for independence as the 201,000-employee auto parts division spun off in 1999 by General Motors Corp.

    Delphi Automotive Systems Corp. of Troy, Mich., closed and sold more than a dozen plants during the middle and late 1990s, and pressured others to become profitable, before it finally cut away from GM last May.

    Peter Pestillo, the Ford vice chairman who became Visteon chairman and chief executive officer about six months ago, said he doesn't envision any plant closings or layoffs.

    He added that, although there may be some "rearranging ... nothing definitive is in the works at this point." Rearranging, he said, refers to the possible sale of glass plants, which Ford has been considering for years.

    "Visteon in my view is in the same shape Delphi was in," Pestillo said. "We intended not to take this forward until Visteon was ready."

    The Visteon spinoff is part of a trend in which automakers have decided to focus on marketing, design and assembly of vehicles, engines and powertrains, while farming out almost everything else.

    Getting out of the component business actually caught the attention of Wall Street in the late 1970s after the nearly bankrupt Chrysler Corp. stabilized itself by closing and selling dozens of parts plants. Chrysler bought the same components from outside suppliers able to produce at wages below the United Auto Workers union scale.

    Ford sold off a bevy of plants in the early 1980s when it was nearly bankrupt, a cost-cutting strategy intended to help the bloated auto company take on well-run international rivals such as Toyota Motor Co.

    With shareholders these days pushing for stronger stock performance, auto executives in Detroit have another reason to streamline -- to reward shareholders. Although Visteon represents about 8 percent of Ford's stock value, the combined value of the Ford and new Visteon shares should be somewhat higher than the current price for Ford stock, Nasser said.

    Investors have been pressuring Ford to take action to boost its stock value. In response, Ford will take $10 billion from its $23 billion cash hoard and distribute it to shareholders. Shareholders will have the option of accepting $20 in cash for each share they own, or receiving an equivalent value of tax-free additional Ford shares.

source: Indianapolis Star