When demand soared for Ford minivans, pickup trucks and sport utility vehicles a decade ago, employment in Ford's Indianapolis steering systems plant neared 3,000. But as rivals launched a spate of competing trucks, Ford sales sagged. Hourly employment in the Eastside plant, one of the state's highest-wage factories, slipped to 2,200.
Today, recovery signs are on the horizon for the factory and parent company Visteon, the 72,000-employee former Ford auto parts division that has lost more than $1 billion since it separated from the automaker four years ago.
"For the first time in years, this plant has some stabilizing business coming in," said Jim Lewis, president of United Auto Workers Local 1111, which represents production workers at the English Street plant.
What underpins the turnaround is a sharp change on the factory floor. Ford and Visteon are offering a slew of older UAW members early retirement buyouts. Visteon then will pay new hires less under a cost-cutting two-tier wage scale accepted by the UAW.
With production costs coming down, a batch of new orders have come in from Ford, Chrysler and General Motors, Lewis said, preserving about 700 jobs that otherwise might have left the Eastside plant over several years.
Moreover, hiring to replace retiring workers accepting the $35,000 buyouts, as well as filling dozens of vacant positions, could result in several hundred new employees coming in to the plant. "This year will have some significant hiring," Lewis said, noting the last hiring binge was during Ford's 1990s boom.
Bringing in new workers in Indianapolis will be a marked change for Dearborn, Mich.-based Visteon. Since the spinoff, Visteon has shed more than 10,000 workers worldwide, including about 1,500 in Indiana. Visteon hourly and salary employment now totals about 5,500 at Indianapolis, Connersville and Bedford, where 1,000 employees struck for 15 days in May to protest wage concessions and job losses.
The Bedford concessions, the two-tier pay scale, the early buyouts -- each reflect a cost-cutting mindset that traces to Visteon's troubled origins. Ever since the separation from Ford, Visteon has been forced to cut back in an attempt to match rivals such as Delphi Corp. of Troy, Mich. Delphi, whose electronics division has head offices in Kokomo, is the 192,000-employee auto-parts empire spun off in May 1999 by General Motors.
Trying to match Toyota Motor Co. in low-cost efficiency, GM let go of its auto parts business so it could shop for less expensive components from suppliers paying wages less than the UAW's scale of $24 an hour. Delphi's spinoff prompted Ford to release Visteon.
"Visteon got booted out the door before it was ready, frankly," said automotive analyst Chris Struve of the credit rating agency Fitch and Co. of Chicago.
In the seven years before the spinoff, GM upgraded or closed troubled plants, Struve said, while Visteon's streamlining intensified after its independence.
Visteon separated from Ford on June 28, 2000. The timing was unfortunate. Between 2001 and 2003, Ford sales sank and its car and truck output fell 10 percent, dropping Visteon's Ford revenue by $1.2 billion a year from the 2000 level.
Profits dried up as struggling Ford demanded regular price concessions on auto parts. While Delphi lost $83 million in total in the last three years, in part because GM market share has declined, Visteon lost $1.6 billion.
Most rating agencies now put Visteon's credit rating below investment grade -- or junk status, although Fitch has it at BBB- stable, a notch above junk. Struve said the rating, which influences borrowing costs, assumes Ford auto sales and, consequently, Visteon output should improve as new models such as the Ford Five Hundred sedan and Ford Freestyle tall wagon reach market this autumn.
"Our relationship with Ford has never been stronger than it is today," Visteon spokesman James Fisher said, adding that Chief Executive Mike Johnston notes the turnaround under way makes 2004 the company's "defining year."
Wall Street agrees. Analysts forecast Visteon earnings at 78 cents a share this year, and $1.07 a share next year, up from last year's loss of $9.65 a share.
One reason for the optimism is the seven-year labor agreement Visteon and the UAW worked out in April. Under a two-tier wage pact, Visteon's new hires will receive $14 an hour, $10 less than established employees.
To take advantage of the new pact, Visteon and Ford together offered $35,000 early-retirement buyouts to as many as 1,400 UAW members in their U.S. plants. Visteon's 700 retirees would be replaced by new hires paid the lesser tier. Ford's 700 would be replaced by senior workers flowing back from Visteon, opening 700 new low-tier positions in Visteon.
Indianapolis' gains
Including regular retirements and hiring for currently vacant positions, Visteon in Indianapolis might gain 400 to 500 workers at the lower-tier wage in the next year or two, Local 1111's Lewis said. At $14 an hour, the new hires could lower the plant's labor costs by more than $10 million a year, not including overtime.
More savings would come with the new plant operating agreement that Lewis said is already attracting new business for the factory. Local 1111 and Visteon reached the deal in March after negotiating more than a year.
The agreement calls for revising work processes so by 2007, three employees work directly in production for each nondirect worker, such as an quality inspector or janitor. The current ratio is 1.8 direct workers to one nondirect, Lewis said.
As a result, the plant has landed a pair of Ford orders, preserving 700 jobs, Lewis said, and attracted some GM and Chrysler Group business, including orders for 1 million power steering system pumps. "The power of this operating agreement is astronomical," Lewis said. "There'll be no more loss of work here."
Last year, Lewis said, the Indianapolis plant lost about $115 million on revenue of about $870 million, figures Visteon doesn't dispute. In May, it also lost its Ford Q1 quality production flag -- flown by each supplier that meets Ford standards -- for too many defects. But Lewis said the new operating agreement will restore quality and income.
"We've promised them (Visteon) it will be profitable in two years," Lewis said. "We're going to live up to it."
Connersville's contract talks
Visteon is now trying to use the Indianapolis operating agreement as a model for some of its other 15 plants, including the Connersville climate control factory.
"What they're holding out to us is almost identical to the Indianapolis agreement," said Angie Kuntz, president in Connersville of Local 919 of the International Union of Electronics Workers-Communications Workers of America.
Negotiations on a new contract are expected to wrap up by July 30 and will probably include a new two-tier wage pact, Kuntz said. With 600 workers laid off, no one is working under the original low-tier scale, which started at $7.50 an hour and graduated over eight years to parity with established workers, currently earning $22.68 an hour.
It's not clear whether the new agreement will fend off job losses. Visteon intends to move an undisclosed amount of Connersville's core work -- radiators, condensers, evaporators -- to a rival plant operated by Behr near Dayton, Ohio, Kuntz said.
"They're saying it's definite," Kuntz said about the work loss, "but maybe they'll be holding off" after a new agreement is in place.
Bedford's uncertainties
Visteon in Bedford is also facing an uncertain future.
Nearly half of its 1,026 employees produce fuel sender units, but that assembly is being centralized at the company's powertrain plant in Rawsonville, Mich., costing 500 to 600 jobs in Bedford.
The prospect of job losses on top of proposed benefit and wage cuts touched off the 15-day May strike by the IUE. Workers eventually accepted the proposal, dropping the bottom of the two-tier wage scale to $10.30 an hour.
Earl Wilson, president of IUE Local 907 in Bedford, described himself as embittered by the labor negotiations. Visteon had threatened to move the work to Mexico, he said, but just before the strike it was clear the work was destined for the higher-wage Rawsonville plant represented by the UAW.
"The tactics that were used in our negotiations were by all standards very-strong-armed and one-sided by the company," Wilson said.
Visteon's Fisher said Rawsonville already had the heart of the fuel sender assembly, and it was logical to centralize production there. "We did say early on the work potentially might go to Mexico, but we always tried to make it clear it wasn't a final decision," Fisher said.
Despite the job losses, Wilson doubts the plant will shrink further. IUE hourly wages -- $14 and $18 an hour -- are less than the $24 top scale in Visteon's 15 UAW plants.
When financial losses piled up for Visteon last year, hardly anyone expected more work. But now there's a sense the company has turned the corner, especially with the lower-tier wages, Wilson said.
"I have a feeling there's new product that's coming in," he said.
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