Visteon granted court approval of Chrysler accommodation agreement

By Alice Popovici

New York, Oct. 7 - Visteon Corp. received approval of an accommodation agreement with the Chrysler Group, LLC that calls for the re-sourcing and transition of some Chrysler lines of business, the sale of inventory, equipment and tooling and accommodations for retained businesses, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Visteon said the accommodation agreement will help it address its liquidity needs, exit lines of business that no longer fit into its strategic business plan and maintain a business relationship with Chrysler in connection with other significant lines of business.

Under the agreement, Chrysler has agreed to:

• Pay $13 million in surcharges for component parts produced by Visteon;

• Make a $5.24 million cash payment for the purchase of tooling used at a Saltillo, Mexico, facility to manufacture Chrysler component parts;

• Pay 100% of Visteon's costs for raw materials and 100% of the purchase order price for finished goods specifically related to re-sourced Chrysler component part production;

• Award new business to Visteon and transition some business lines to Visteon's non-debtor affiliates;

• Reimburse Visteon for costs associated with the wind-down of some lines of Chrysler component part production, including fixed overhead costs and employee-related costs;

• Pay $13.08 million to Visteon for cure payments in connection with the assumption and assignment to Chrysler of purchase orders in Old Caro LLC's Chapter 11 case;

• Make payments on accounts arising from shipments of component parts on accelerated 15-day payment terms; and

• Release specified commercial claims against Visteon.

In exchange for these benefits, Visteon said it will continue to produce and deliver component parts to Chrysler during the term of the agreement, as well as to provide assistance to Chrysler in re-sourcing some lines of production that are no longer part of Visteon's business plan to other suppliers.

As part of this re-sourcing assistance, Visteon said it will provide Chrysler with intellectual property licenses and sublicenses related to re-sourced production lines.

Visteon also has agreed to build an inventory band for Chrysler, provided that Chrysler will pay for the parts and will cover Visteon's incremental costs incurred in production to the extent the costs exceeds purchase order prices.

In addition, Visteon will grant Chrysler an option to purchase machinery and equipment used exclusively to manufacture Chrysler component parts.

Visteon has also agreed to seek court approval to sell its Highland Park, Mich., and Saltillo, Mexico, facilities if Chrysler designates them for sale before the agreement ends.

Visteon, a Van Buren Township, Mich., global automotive supplier, filed for bankruptcy on May 28. Its Chapter 11 case number is 09-11726.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.