Socialist Worker

How Visteon profited out of failure

by Simon Basketter
Issue No. 2148

Ford set up Visteon in 1997 and outsourced it in 2000. An internal Visteon UK document in the possession of Socialist Worker reveals the method underlying the outsourcing process.

The document, which was presented to bosses in 2005, is couched in management jargon with obscure formulas for calculating risk and costs.

It shows how outsourcing was meant to lower costs.

It starts by saying the benefits of outsourcing are “increased productivity” and “cost reductions”, though it notes that outsourcing doesn’t “improve quality” of products.

The document uses the example of the outsourcing of part of Visteon to India. In 2002 this part had a resource per hour cost of $80 in the UK and $25 in India.

In 2004 it had a resource per hour of $75 in the UK and $20 in India. In other words, outsourcing drives down wages in both countries.

The document argues that outsourcing requires directors to have “toughness” in increased proportion to the number of outsourced companies.

It says that there are three options for contractual agreements: “Negotiate” which is described as “expensive and time consuming”, “Ignore”, or “Remove liability insertion points”.

The last two describe what has happened to the contracts of Visteon UK workers in Enfield, Basildon and Belfast.

The removal of “liability insertion points” is what lies behind the myriad of companies and their deliberately obscure accounts (see » Chart showing how Visteon relates to Ford and » Visteon UK’s boss: the bucks stop here).

It is what has created a situation in which the administrators say that Visteon UK owes more than £400 million to Visteon Corp.

So the company owes money to itself, although the accounts show that the debt doesn’t have to be repaid until 2016.

The precise nature of all the inter-company relationships is hard to discover, and deliberately so.

Visteon UK accounts state that, “The company has taken advantage of the exemption under Financial Reporting Standard 8 – Related party disclosures not to disclose related party transactions with Visteon Corporation or any of its wholly-owned group undertakings.”

And it may not be just Visteon UK that is wound down as part of the outsourcing trick.

The Visteon corporation itself could be pushed into bankruptcy. It has retained the services of Rothschild, a New York-based corporate restructuring firm, as well as Kirkland & Ellis, a New York-based law firm specialising in bankruptcy and corporate restructuring.

While outsourcing keeps the true nature of Ford and Visteon hidden, we do know that, while workers are thrown on the scrapheap, the bosses will look after themselves.

Visteon UK’s pension fund has collapsed. But fortunately the bosses were able to move their pensions to Visteon Engineering Limited – a part of the company that hasn’t been shut down.

In 2007, the year a secret plan to run down Visteon UK was produced, Michael F Johnston, the then boss of Visteon, got a salary of $1,341,667. This was topped up to a staggering $8,393,607 with shares and bonuses.

Donald J Stebbins, the chief executive of Visteon Corp, got at least $1.48 million in cash and bonuses last year.

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