Visteon Corp. is the latest among a growing number of companies, especially in the auto industry, to scale back benefits that had been promised to retirees. The embattled auto-parts maker — once a unit of Ford Motor Co. — warned employees that it will cut back on post-retirement health coverage and life insurance benefits for as many as 6,700 white-collar workers, reported the Detroit News.
Salaried workers who retire on or after June 1, 2007, will no longer receive company-subsidized health insurance, according to the report. The News also said that as many as 4,300 employees, most of whom are under 45, will be required to pay the full health-care premium after they retire. Individuals who are closer to retirement will not be hit as hard since they will receive credits to defray their health-care costs.
In addition, Visteon reportedly announced that it will no longer provide life insurance for employees who retire after the 2007 cut-off date, although those workers will be eligible for group-rate discounts. Current salaried retirees and those who retire before June 1, 2007, are unaffected, according to the News. Also exempt from the changes: roughly 1,300 high-seniority workers who are guaranteed Ford-level benefits.
“We must be positioned competitively to address the challenges of a global market and a tough business environment,” chairman and chief executive officer Mike Johnston wrote in a letter to employees, reported the News. According to the paper, the company declined to estimate how much money the cuts will save.
Eileen Ellis, principal of Lansing, Michigan-based Health Management Associates, told the paper, “This is certainly the trend. It goes back to the movement from defined pensions to 401(k). This is parallel to that, exactly.”
According to the report, in a detailed brochure for Visteon employees, the company pointed to a 2004 Towers Perrin study, which found that 45 percent of all auto-industry suppliers have eliminated medical coverage for future retirees. Of those companies that still offer coverage, 67 percent have reduced their benefits while 18 percent have not changed their plans, according to the report.
Other auto suppliers that recently announced their intent to discontinue retiree benefits include Metaldyne Corp. and ArvinMeritor Inc. In addition, Delphi Corp. plans to cease paying medical insurance in 2007 for 4,000 retired salaried workers and thousands of other future retirees.