Visteon Factory (Basildon)

– in the House of Commons at 6:03 pm on 30th April 2009.

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Motion made, and Question proposed, That this House do now adjourn. —(Ms Diana R. Johnson.)

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Photo of Angela Smith Angela Smith Labour, Basildon 6:05 pm, 30th April 2009

I am grateful for the opportunity to hold this debate on issues that are of particular concern to me and my constituents, especially those who are former employees of Visteon. I am pleased to see the support in the Chamber for the issues I am raising this evening, which is unusual on a Thursday, from my hon. Friends the Members for Thurrock (Andrew Mackinlay), for Edmonton (Mr. Love) and for Dagenham (Jon Cruddas), my right hon. Friend Joan Ryan and the hon. Members for Castle Point (Bob Spink) and for Billericay (Mr. Baron). I also thank Unite and its members, as well as former employees of Basildon Visteon, for their help and information in preparing for this debate.

Ford had significant interests in Basildon, with the radiator plant, the tractor plant, the offices at Trafford house in Basildon town centre and the research establishment at Dunton. In addition, a large number of people travelled daily to Dagenham. Ford was important to the economy of the town and had a good and valued relationship with the local community. The community is now showing that support to the Visteon workers.

I grew up as the daughter of a Ford and then Visteon employee. My dad worked at the radiator plant in Basildon on the production line. Visteon UK was created wholly from the Ford Motor Company in 2000. Ford workers employed at the Basildon radiator plant were transferred to the new company Visteon. At the time I met both Ford and Visteon and was given the same assurances as those who worked there were given, which was that their terms and conditions of employment were guaranteed, just as if they were Ford employees. I have copies of numerous documents and letters that were given to employees at the time. The point could not have been clearer. Let me quote from one such document, which tells workers that:

"The agreement governing the separation of the Visteon organisation" makes it clear that their

"existing terms and conditions, including pension entitlements" will give them

"lifetime protection while an employee of Visteon UK Limited".

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Photo of Bob Spink Bob Spink Independent, Castle Point

We are all grateful to Ford for what it has done over many years in our constituency. Does the hon. Lady accept that Visteon has treated loyal and excellent employees in a disgraceful and underhand manner? I thank her for her assiduous and caring work, not only on behalf of her constituents, but on behalf of my constituents too. They appreciate her work very much.

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Photo of Angela Smith Angela Smith Labour, Basildon

I am grateful for the hon. Gentleman's comments. I should point out that Sammy Wilson has turned up this evening and that two hon. Members from Belfast—the hon. Members for Belfast, South (Dr. McDonnell) and for Belfast, North (Mr. Dodds)—have also given their support.

Visteon has never made a profit. The closure and sale of some other Visteon plants meant that only three remained, in Basildon, Belfast and Enfield. There has been concern about Visteon's finances for some time. In 2006 the deficit was more than £82.2 million and in 2007 it was more than £118 million.

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Photo of Joan Ryan Joan Ryan Labour, Enfield North

I congratulate my hon. Friend on securing this important debate. Does she agree with me and others that Visteon is, in fact, an internal accounting mechanism that has been allowed to go bust? Although we know that people will lose their jobs in a recession, the way in which they lose them is important. Those loyal workers have been treated very badly indeed. I hope to be able to support any moves that my hon. Friend makes to ensure that we hold Visteon and Ford to account, so that they do not get off the hook.

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Photo of Angela Smith Angela Smith Labour, Basildon

My right hon. Friend is absolutely right. In some ways I would go further. I find it strange that a deficit should be allowed to run for so many years, if doing so is not in the interests of the company concerned.

On 2 March 2009, I went to the Visteon radiator plant in Basildon at the request of union representatives to meet members of Unite and Visteon management. At that time, staff were on a three or four-day week. The American parent company was demanding that the multi-million pound deficit, which had been growing since 2000, be erased within that financial quarter. I cannot see how that could be possible, after years of operating with a deficit.

A number of issues were discussed at that meeting, and the management remained firmly of the view that the reasons for the financial problems were the "legacy structure" and the "inadequate pace of change". I queried why, when more work was needed for Basildon, an order that had been fulfilled in Basildon until January 2009 was now coming into Basildon and then being sent out to Autopal, Visteon's sister plant in the Czech Republic. Surely, even if the costs were slightly higher for that one order, keeping work in Basildon would have brought the unit costs of all work down.

The management, led by the former Basildon plant manager and then UK director, Steve Gawne, also claimed that the work force at Basildon had failed to support initiatives to cut costs, and repeatedly said that the problem was the "terms and conditions" of the work force, yet these were the very terms and conditions that the work force were told were guaranteed for life when they were transferred to Visteon.

I also disputed the assertion that the unions and the work force had not supported cutting costs. I will give the House an example. The competitive cost rate—CCR—programme was agreed with the union in 2006. This was an agreement that all new staff brought in to fill the vacancies resulting from people leaving to go back to work at Ford would be employed on lower rates of pay. The notice from the then manager, Jason Field, said that if this were not agreed, the company would be left with no alternative but to source the business to Autopal, the Visteon plant in Czech Republic. That is the same place where Jason Field is now the manager and undertaking work previously done at Basildon.

Given the management's insistence that they needed to cut staff costs, and that that was the only way to achieve cuts, I queried the most recent early retirement programme. Although Mr. Gawne insisted that everybody who had wanted early retirement had achieved it, a number of people have complained to me that the offer was significantly lower than in previous years. However, the CCR workers—those on the lower rates of pay—who had perhaps only two years, service were offered more than £10,000 to leave. I am not suggesting that that is a good principle, but if the real issue was the cost of the work force, surely the management would have been keen to keep the lower paid workers on rather than offering them a proportionally much higher payment than those taking early retirement. By contrast, one person with more than 12 years' service was offered a redundancy payment of just over £16,000.

I also asked why there had not been more efforts to use the Visteon work force to undertake work being done by contractors at the plant. I did not a get satisfactory answer to that, or to my other questions. I do not have time today to go into all the detail of the discussions, but I left the plant feeling very queasy that the management were not committed to a long-term future and that the problems being experienced, while being exacerbated by the recession, were not due to the recession, as they go back much further.

On 31 March, I spoke again to Steve Gawne, who told me that, immediately after our conversation, he would be informing the work force that the company was going into administration with immediate effect, as the US was unable to continue its financial support. Despite my concerns, I really had not anticipated that the company would be so brutal. As people turned up for work they were told to leave, and given just a few minutes to collect their belongings. I immediately spoke to the administrators, KPMG, who confirmed that of the 610 employees in the UK, all except 15 would be losing their jobs immediately, of which 158 were at Basildon. KPMG also confirmed that the pension plan was in deficit and that the Government would be required, through the Pension Protection Fund, to step in.

Many of the workers at Basildon have been very long-term employees. It is not unusual to have 20 or even 30 years' service under both Ford and Visteon. My father worked at the same plant for 30 years. Becoming unemployed at such short notice without any redundancy payment or support has been the most dreadful shock imaginable. I should like to pay tribute to Basildon Jobcentre Plus. Most companies in these circumstances would offer advice and support before closing, but Visteon chose not to do so. Basildon Jobcentre Plus staff have done their best to help.

Since then, there have been two meetings between the union leadership and Visteon regarding redundancy, and I can confirm that Visteon made an offer. Following the rejection of that inadequate offer, it has subsequently improved it. Having said that, while Visteon might consider that the offer complies with its newer terms and conditions—known as the orange book or the pumpkin book—it does not comply with the original blue book terms and conditions that staff were told would apply for life when they transferred in 2000. I strongly believe that Visteon has behaved absolutely disgracefully.

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Photo of John Baron John Baron Opposition Whip (Commons)

Like the hon. Lady, I visited the picket line in Basildon, as some of my constituents were there. I informed her of the visit. She is absolutely right to focus on that point. The key concern among the Visteon workers is the fact that they had an agreement in place—she and I, and other Members, have seen the evidence—that gave them parallel terms with Ford workers. That is why those on the picket line and the ex-Visteon workers feel so aggrieved. I would like to ask the Minister, through the hon. Lady, to ensure that the Government do what they can to look at that agreement to see whether it can be enforced. That is the main gripe of the Visteon workers, alongside their concern about whether the Pension Protection Fund will kick in.

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Photo of Angela Smith Angela Smith Labour, Basildon

The hon. Gentleman is right and I will develop the point about the relationship with Ford. Visteon relies on the fact that there was a new book—the orange or pumpkin book—but that does not remove the fact that the blue book contained their lifetime terms and conditions.

Many former employees still believe that the commitment to Ford's terms and conditions means just that; that Ford still has a duty of care towards its former employees. It transferred them and assured them there would be no changes. I have been in contact with Ford and the statement I have received from the head of government affairs at Ford says about the contract of employment:

"According to Visteon HR, all Visteon UK employees were sent letters in 2000 informing them of their new employment status (i.e. that they were Visteon UK employees). In line with the separation agreement Visteon agreed to mirror Ford terms and conditions for Ford employees transferring to Visteon. The responsibility for administering and funding these was Visteon's. When Visteon management took the decision to put Visteon UK into administration we understand the contracts were subsequently terminated by the administrators...Ford very much regrets the job losses."

It then goes on about difficulties in the motor industry.

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Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

Does the hon. Lady agree that Ford has been complicit in all this? It seems to have walked away from agreements that it had passed on. Surely it must have some obligation to ensure that these were adhered to and honoured.

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Photo of Angela Smith Angela Smith Labour, Basildon

I am unclear whether there is a legal obligation and I want to look into that further. I am absolutely clear that there is a moral obligation.

I welcome the fact that Ford of Europe's senior management have met Unite. However, I am disappointed to be informed that, so far:

"At these discussions, Ford acknowledged the concerns expressed and agreed to pass them on to senior management in Visteon Corporation."

So far, to no effect.

May I highlight to the Minister my five main areas of concern? Although I appreciate that he could not and should not be held accountable for the actions of a private company such as Visteon, I would be grateful for any advice or help he gave in trying to get to satisfactory answers to these questions.

First, the issue raised by other hon. Members has been the links with Ford. Notwithstanding the above, it is hard for Visteon employees to accept that Ford has no responsibility towards them when their access ID cards display the Ford logo. I have N. Chapman's card here with me; it says "Ford Motor Company, Basildon radiator plant." That was the card when this gentleman concerned lost his job. Long service awards are given out in the name of Ford, not Visteon. Employees get a discount through the Ford employees' scheme on Ford cars and have access to the Ford social club.

I have spoken with Ford about that and it has explained that the long service awards presented to staff after 25 years' or more service should have the logos of both companies on to reflect the continuous service across both companies. It would be great if that were the case, but why does Richard Carey's award—a very nice crystal vase—after 25 years' service not have any Visteon identification at all, only Ford's?

Internal job vacancies for Ford were advertised at Visteon and those who were successful would go back to Ford under the flow-back arrangements. These are incredibly strong links between the two companies.

There is also the issue of the company deficit. Visteon states that it

"sustained accumulative losses approaching £800 million through 2008."

I think that the company wrote to the hon. Member for Castle Point on the same issue. As early as 2000, the plant manager at the time, Ron Stockwell, wrote to all employees at Basildon stating that the key challenges were to

"reduce cost and change our business strategy."

I outlined earlier the deficits in 2006 and 2007; multi-million pound deficits. Why would any company maintain such a deficit for so long unless it suited the company to do so?

Automotive Holdings Ltd was set up on 4 February 2009 with directors from Visteon, including the UK director Stephen Gawne, one from the US and one from France. It is registered in the UK, with Visteon International Holdings in Michigan as the shareholder. It is based at the other Visteon site in Basildon. James Fisher from Visteon in the USA e-mailed me to say that the company

"was established as a potential legal entity solely for tax planning purposes. Visteon was exploring the ability to monetize"— not a word that I have come across before—

"certain of significant tax losses and other tax attributes accumulated in the UK with the objective of generating cash for Visteon UK Ltd, however further planning concluded that such planning was not feasible".

Why would a new company be set up in the Basildon area, with directors of Visteon UK, in February 2009, given that the plant was shut down in March?

Other issues of great concern are something called project Protea, and outsourcing. I have briefly mentioned my concerns about work being outsourced from Basildon to the Visteon plant, Autopal, in the Czech Republic. It was shocking for workers to see work coming in from Korea only for it to go out again to Autopal.

More alarming was a document I received marked "Visteon Confidential" and headed "Project Protea", and dated 21 May 2007. It relates to Belfast plants and has implications for Basildon and Enfield. It says:

"Belfast is one of five UK manufacturing facilities which generate losses and contribute to the overall loss making performance of Visteon UK."

It then says that the strategy is to

"Develop duplicate sources for all the Belfast product lines by the end of 2007. Stockpile service parts to avoid duplication"— and I highlight—

"Engage Ford for assistance in transferring products to new locations", from Belfast.

The product line summary refers to manifolds, and states:

"The growth in manifold business in Belfast is driven by a sourcing agreement between Ford and Visteon which enabled the exit of the oil and water pumps...Direction is to actively work with Ford to re-source all Manifold and ACA's business out of Visteon, to suppliers of Ford's choice."

On the issue of fuel rails, it says:

"This business is marginally profitable in Belfast...The Sigma fuel rail is injection moulded and assembled in Belfast and under Project Protea it will be transferred to the Visteon Port Elizabeth facility."

The concern must be that not only was work not being sought to be brought into the UK, but on the contrary Visteon UK was actively seeking to remove work from the UK and seeking support from Ford to do so.

The other issue of great seriousness, worry and concern for all our constituents is pensions. As confirmed by KPMG, the pension fund is now in deficit. It would appear that existing pensioners of pensionable age still receive their full entitlement, but those who took early retirement, or have yet to retire, have been told to expect cuts of about 10 per cent. of their pension. The Government may have to step in to compensate those who have paid into the company pension fund.

In August 2000, employees transferred to Visteon from Ford on 1 May 2000 were told that the new Visteon scheme would provide exactly the same benefits as the Ford fund. In January 2001, it could not have been made clearer:

"If you join The Visteon UK Pension Plan, then for future service from 1 April 2001, you will receive the same pension benefits as you would have received from your Ford Pension Fund based on the current and future provisions of that scheme."

Management of the pension fund is causing enormous concern, and I ask the Minister to look at whether the fund has been mismanaged. I understand that the pensions regulator has been contacted and has received information. I appeal to the regulator to investigate the matter fully, and urge the Minister to support any such investigation.

I will give the Minister one example of a complaint submitted. The trustee agreed to transfer the benefits of the members, together with assets totalling over £21 million, on 30 May 2007. That related, I think, to flow-back from Visteon to Ford. Visteon UK Ltd then made a special contribution of more than £7 million to the Visteon UK pension plan, so that in making the transfer it would

"not be reducing the security of the remaining Plan members."

I have seen complaints about several similar situations whereby very large sums have been transferred from the Visteon pension fund into the Ford pension fund. The trustee of the Visteon pension fund has apparently said that such transfers did not affect the security of the remaining plan members. Why are we now seeing such a deficit in the pension fund, which does affect the security of existing plan members?

My constituents who have worked for Ford and then Visteon are very loyal, very hard-working employees. They wanted to work with management to examine ways of cutting costs in order to increase the sustainability of their company and their employment. There was huge frustration among those who worked at Visteon that they were not able to work better with management to achieve those cost-cutting measures. All that the management would talk about, as I found too when I spoke to them, was staff terms and conditions. They were not talking about the terms and conditions of management, because the information that I have received is that the management got a substantial pay rise while they were trying to cut the terms and conditions of the staff.

My constituents, such as those of my right hon. Friend the Member for Enfield, North, the hon. Member for Castle Point, my hon. Friend the Member for Thurrock and others, have not been shown the same respect and dedication that they showed to their former employers. The Minister will understand my anger, their anger and the anger of the Members who are present about the lack of justice.

I have highlighted a number of issues of concern. The promises made at the time of separation between Ford and Visteon have not been kept. I am talking not about one promise, but about repeated promises made in numerous items of correspondence and in documents. These promises of lifetime protection of terms and conditions, including redundancy, were not kept. There has been a curious deficit in the pension fund, a lack of any real action from the managers of Visteon in respect of the sustainability of the company and a lack of genuine co-operation with the union. The most serious thing is what appears to be the deliberate outsourcing and running down of the company, as highlighted in a secret document dated 21 May 2007 from Belfast. All those issues have to be addressed, and any help that the Minister can give my colleagues and me here tonight will be greatly welcomed in trying to fight this injustice.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury 6:27 pm, 30th April 2009

I congratulate my hon. Friend Angela E. Smith. She has championed the interests of Visteon's UK workers powerfully over a long time, and I have had many conversations and meetings with her on the subject. I welcome the opportunity to respond to her today on the record. I also welcome the strong interest of a number of hon. Members in the House today who have constituents, be they in Basildon, Enfield or Northern Ireland, who have been affected by this situation.

The circumstances surrounding the closure of the facilities at Basildon, Enfield and Belfast are very sad, and I very much sympathise with the position in which the work force have found themselves. Agencies here and in Northern Ireland have taken steps to put in place a range of support that will help the workers to find other work and training opportunities, and the agencies remain committed to helping those affected. I also note that although today's debate is focusing on events at Visteon UK's manufacturing operations, Visteon Corporation's commitment to Visteon Engineering Services is extant, and it continues to have a UK presence.

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Photo of Angela Smith Angela Smith Labour, Basildon

Is the Minister aware that there are rumoured plans to move Visteon Engineering Services in Basildon away from the town to another location? That would be a further blow to my constituency from this company.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I note what my hon. Friend says, but I do not have any information about those plans and I would not want to speculate on rumours. However, I very much share her concerns, and those of other hon. Members present, about the manner in which this administration has been brought about. Although it is true that the automotive industry globally has been having a tough time, the problems that brought Visteon to its current position are rooted very much in the past: in its break from Ford; in how it has pursued business opportunities, including the outsourcing to eastern Europe and South Africa, which she discussed; and in the manner in which the work force have responded.

Although the warning signs have been apparent for some time, the speed of developments has taken many by surprise, starting with the review announced in January 2009, when Visteon UK management were charged by the parent company to put into place a plan by the end of March 2009 to stem its losses. By any stretch of the imagination, that time scale was very short. No company can maintain constant losses and since its spin-off from Ford in 2000, Visteon in the UK has never been profitable, with losses over the nine years of £800 million. In the same period, Visteon Corporation has invested some £1 billion into the UK business to continue its operations. Worldwide, the corporation lost $663 million in 2008. Visteon has been in a difficult situation, but my hon. Friend rightly points to the very short time frame in which Visteon UK was required to take action if administration were to be avoided.

The review concluded that, without ongoing funding from Visteon Corporation, its UK business activities would not be viable. The ending of funding on 31 March 2009 meant that the company was insolvent and its directors took the decision to put the company into administration immediately.

As my hon. Friend said, meetings have been held between Visteon Corporation and the unions on redundancy packages. One offer was tabled earlier this month and a further improved offer this week. This would be entirely funded by the corporation—beyond the statutory minimum. I understand that the company is keen to ensure speedy payment in recognition of the hardships faced by its ex-employees. Discussions continue with the unions and I hope that they have a positive outcome.

Hon. Members talked about the enforceability of the employment agreement between Visteon and its work force, and I am sure that the unions will take legal advice on this matter. I am also sure that Visteon will note the point that my hon. Friend makes when she talks about the moral responsibility on it to honour those agreements. That point was also supported by other hon. Members.

The Government have maintained regular contact with the company and we have tried to help where we can. As part of the company review, the Department for Business, Enterprise and Regulatory Reform suggested the involvement of the conciliation service ACAS in discussions on the mirrored—or ex-Ford—terms and conditions. Visteon UK met ACAS in February. However, while the unions were happy for ACAS to be involved in principle, they did not want to discuss terms and conditions with it. ACAS was therefore stood down as no progress was possible.

The Department has remained in close contact over the past four years as Visteon has attempted to put its UK operations on to a sound financial footing. Government in the UK and the Northern Ireland Assembly—and previously the Welsh Assembly Government with regard to the former Swansea plant—have supported the company through regional grants for Belfast, Enfield and Swansea, supply chain activity and training worth more than £1 million. There has also been a range of local support and assistance.

My hon. Friend mentioned pensions and I recognise the strong concerns that former employees of Visteon will have about their pension entitlements. I can assure my hon. Friend that the Pension Protection Fund has been notified and that it is considering the position of the scheme.

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Photo of Angela Smith Angela Smith Labour, Basildon

Will my hon. Friend press the pensions regulator to investigate this case?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I note what my hon. Friend says. One thing that I was going to suggest was that I should meet her to discuss that and other issues to do with the matter.

Clearly, my hon. Friend raised a lot of issues about the company's strong links with Ford. She will undoubtedly continue to campaign on the issue—and rightly so—and will no doubt keep me updated on her progress. I am happy to discuss with her whether the Government can play a useful role. She mentioned, in particular, involving the pensions regulator. Of course, the administrator will have to produce a report to Government in due course.

Question put and agreed to.

House adjourned.

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