By Ryan Beene Crain's Detroit Business
Detroit, Michigan -- General Motors Co. has struck a deal with supplier Visteon Corp. to transfer some GM parts production contracts to other suppliers, speed payment terms for remaining contracts and bring Visteon at least $30 million by the end of the year.
The deal, pending approval by the US Bankruptcy Court in Delaware, is a benefit for both companies, according to a motion to approve the deal filed with the bankruptcy court Thursday.
"Visteon will receive immediate liquidity and an opportunity to wind down undesirable operations in the most cost-effective manner possible and GM is ensured of continuity of component parts until it can transition production elsewhere," the filing said.
It's unclear how much of Visteon's business with GM is represented by the contracts being moved to other suppliers.
Visteon, which spun off from Ford Motor Co. in 2000, filed for Chapter 11 bankruptcy protection on 28 May. It has never turned an annual profit since the spinoff.
Jim Fisher, Visteon director of corporate communications, and Dan Flores, GM manager of news relations, both declined to comment.
Under the deal, GM will pay Visteon at least $23 million to move some of its supply agreements for fuel tank parts, climate control components and lighting parts away from the suburban Detroit-based supplier to other parts makers.
Production of GM fuel tanks and interiors products at Visteon's plant in Eureka, Mo., will be resourced by 31 Dec and Visteon could put the plant up for sale.
Visteon's plant in Springfield, Ohio, will stop building parts by 30 Sept. Both plants could be closed -- with GM and Visteon sharing severance costs for plant employees and engineers in the interiors and fuel tank product groups working outside the plants, according to the filing.
The employee severance costs are on top of an $8 million payment for the re-sourcing.
GM will immediately move production of climate control parts made at Visteon's plant in Coclisa, Mexico. The move will cost GM $4.4 million, to cover payments for parts already shipped to GM and Visteon's engineering and design costs for the GM climate control parts.
Visteon could get an additional $7.7 million for tooling, machinery and equipment used at the plant, if GM elects to buy the production systems used to make its parts.
GM will also pay Visteon $10 million to re-source some lighting component contracts supplied by Visteon's InterAmerican plant and Carplastic plant in Monterrey, Mexico. The InterAmerican plant will be closed, and remaining GM work will be consolidated into Visteon's Carplastic plant in Monterrey.
For the GM contracts that remain, Visteon will be paid on "net 15" payments terms, or 15 days after finished parts are delivered to GM factories. The typical payment schedule is 45 days after delivery.
GM will also pay Visteon $8.2 million for contracts that will continue with the GM assets that remain in bankruptcy, known as Motors Liquidation Corp.
Visteon ranks No. 18 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $9100 million in 2008.