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Plant left with hazy future: Ex-Visteon factory employs 2,000-for now

May 29, 2006

A struggling auto plant on Indianapolis' east side has quietly shed 300 workers in the past year, reducing employment to 2,000, and analysts say it remains vulnerable to closing.

If the steering-components plant on English Avenue meets that fate, employment losses would exceed the 1,500 jobs Indiana hopes to win by persuading Honda Motor Co. to build a $400 million plant in the southeastern part of the state.

Before last fall, the east-side plant was part of Visteon Corp., a Ford Motor Co. spin-off. Ford in September created a new entity, Automotive Components Holdings LLC, to take back 17 money-losing factories-including the Indianapolis steering plant-until they are closed or sold.

"We're still conducting a global search to find a buyer for these plants in the U.S.," said Ford spokesman Eric Mitchell. "There's really no timetable for the sale, but we've made it clear we want to sell these plants to a company that can take them into the future."

The local ACH plant makes automotive steering components, gears, pumps and columns. Other ACH facilities make instrument panels, fuel tanks, glass, climatecontrol parts, chassis components and lights. In total, the 17 plants in the United States and Mexico employ about 13,500.

Components makers in the United States have lost business in recent years as Asian automakers with their own supplier networks gained market share from their Detroit counterparts The U.S. suppliers also have struggled to compete on price with suppliers in Asia and Mexico with lower labor costs.

The Indianapolis steering plant opened in 1957. Employment peaked at 3,000 during the plant's heyday more than a decade ago. Until lower-cost workers signed on in recent years, plant employees routinely collected wages topping $20 an hour, with lifetime benefits.

State economic development officials say the ACH plant is on their radar screens.

"We are involved with Ford's Automotive Components Holdings group, but due to confidentiality during ongoing negotiations, we are not able to comment at this time," said Weston Sedgwick, spokesman for the Indiana Economic Development Corp., Gov. Mitch Daniels' economicdevelopment initiative.

Officials for Indy Partnership, a not-forprofit that markets the Indianapolis region to businesses, said they've been monitoring the ACH situation since fall.

"These are very-good-paying jobs, so we're doing everything we can to assure the facility survives," said Indy Partnership CEO Gordon Hendry.

Indy Partnership is providing ACH officials with information on potential local tax breaks and training grants that would make the operation more competitive.

"We feel this is a very good business, and a very important business for the east side," Hendry said. "This [former] Visteon plant is one of the largest of the [17] and one of the most efficient, so we think it has a future."

In February, Plastics News, an Ohiobased trade publication, said Chinese auto supplier Wanxiang Group had met with Ford officials to discuss buying at least some ACH operations

Ford officials said numerous companies have expressed interest in acquiring ACH facilities, but would not comment on Wanxiang.

If the plant is going to have a future, it will have to improve management, and employees will have to take further wage concessions, said Dennis Virag, president of Automotive Consulting Group Inc. in Ann Arbor, Mich.

In 2004, UAW Local 1111, which represents employees at the plant, agreed to replace retired employees or those accepting contract buyouts with workers making as much as $10 less an hour. The lower pay scale could save ACH more than $10 million annually in labor costs.

UAW Local 1111 President Jim Lewis did not return calls seeking comment.

Ford officials said 2,300 ACH employees have accepted contract buyouts since last year, and they're hoping another 2,700 ultimately accept. Figures were not available for the local plant, Ford officials said, but an industry source said the automaker achieved the 300 recent cuts largely through buyouts.

Virag said the local plant has another problem.

"Ford didn't invest in those facilities" before spinning off Visteon into a separate company in 2000, Virag said. "Ford instead focused on new products to compete with Japanese carmakers. They have to streamline productivity and invest in the facility or they won't make it under any owner."

Although Ford officials say they've invested several million dollars in machinery and other upgrades in recent months, industry experts said more improvments are likely needed.

"If a parts supplier hasn't made significant changes in the last five years, I don't think their chances of survival are very good," said John Sullivan, director of Purdue University's Center for Advanced Manufacturing.

Virag said Ford will have to recognize it's a buyer's market.

"The probability of a sale is fairly low, aside from putting a bargain basement price on it," he said. "The former Visteon plants are not a good business today. But if a company can buy it right, and manage it right, it could be a viable business."

One strength of the local plant, experts said, is its experienced work force. If the plant can expand its customer base beyond the Detroit automakers to serve Toyota in Princeton, Subaru in Lafayette and the potential Honda factory, it might prosper.

"Automakers want to get their components from within a 500-mile radius to facilitate just-in-time delivery and to keep themselves lean," Sullivan said.

Some distressed units of American automakers have gone through wrenching changes and survived as competitive businesses. For instance, American Axle & Manufacturing, a Detroit-based GM spinoff, fell on hard times before improving productivity and upgrading plants.

"American Axle is going strong today," Virag said. "They proved what can be done."

In the fall of 2002, New Castle's DaimlerChrysler Corp. machining and forging plant appeared to have a bleak future. But then Michigan-based Metaldyne Corp. agreed to buy the 1,200-employee plant. After it cut wages, in some cases 50 percent, the plant survived.
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