Visteon scales back proposed bonus plan

DOVER, Del. — Auto parts supplier Visteon Inc. has backed off a proposal to pay up to $80 million in bonuses to top executives and other employees, but a revised bonus plan it has filed in bankruptcy court is still generating opposition.

Michigan-based Visteon, the top supplier to and a former subsidiary of Ford Motor Co., filed for Chapter 11 bankruptcy protection in May after automakers cut production and revenues plunged.

Barely a month later, the company proposed three separate bonus programs that carried a total maximum payout of just over $80 million. One program proposed payments of up to $30.1 million to roughly 100 “key employees,” with $11.7 million set aside for 12 insider officers.

Insiders also would have received 10 percent of the $38 million proposed in annual incentives for about 2,450 employees, including about 400 inactive workers, as well as a share of the money in a $12 million long-term incentive plan.

The proposal generated objections by the U.S. trustee, the creditors committee, labor unions, Ford, and General Motors, which along with Ford was part of a group of automakers considering acting as Visteon’s debtor-in-possession lenders. Several of the objectors suggested that the bonus plan was both too rich and a disguised retention plan that violated bankruptcy law.

Visteon withdrew the bonus proposal last month, but the scaled-down plan with which it was replaced is still generating opposition.

The revised plan proposes key-employee bonuses of up to $8.1 million for the 12 board-elected officers, and up to $3.3 million in long-term incentives for 83 managers. According to court papers, the new plan is supported by the creditors committee and an ad hoc group of term lenders.

“The amended incentive program is designed to incentivize the eligible employees to achieve the debtors’ twin goals of a prompt emergence from Chapter 11 and improved operating earnings,” the company said in seeking court approval.

But the U.S. trustee, the United Auto Workers and International Union of Electrical Workers on Thursday filed objections to the plan, which will be the subject of a hearing next Wednesday.

“In effect, the top handful of insiders who run Visteon are seeking permission to enrich themselves with bonuses of between $450,000 and $675,000 each — bonuses equal to many times the annual earnings of Visteon’s rank-and-file employees,” attorneys for the UAW wrote.

The UAW attorneys noted that the company is seeking permission to pay the bonuses at the same time that it wants to eliminate all health and life insurance coverage for retirees.

The unions and the trustee maintain in their objections that the revised proposal is still a disguised retention plan that lacks true performance benchmarks to justify the bonuses.

“While the debtors have reduced the proposed amounts payable under the amended incentive program (mainly by reducing the number of participants from over 2,500 to just 95), the criteria for payment remain essentially the same,” wrote Jane Leamy, an attorney representing the acting U.S. trustee. “The primary change appears to be that the debtors removed lower level executives and rank and file employees from the plan so that insiders will still receive bonuses.”