Visteon Fails To Reinstate Benefits After Bankruptcy Order

August 17th, 2010 by Reed Allmand

When Visteon unilaterally terminated the health care benefits of 6,000 retirees without following certain required steps in their Chapter 11 bankruptcy, their actions caused an uproar nationwide. Now the retirees’ are embroiled in a drawn out legal battle about whether Visteon should be allowed to terminate retiree benefits especially for those who are terminally ill.  With many retirees and their supporters arguing that Visteon’s actions to terminate their benefits in bankruptcy were inhumane.

Now, a federal appeals court has given…thousands of other Visteon retirees some potential relief. In mid-July, the Third U.S. Circuit Court of Appeals of Philadelphia reversed decisions that allowed Visteon to terminate benefits for more than 6,000 retirees without taking certain legal steps in bankruptcy court.

The ruling means that roughly 2,100 retirees should resume receiving health-care and life-insurance coverage, so long as Visteon remains under bankruptcy-court protection, which could last at least another month or so, and possibly longer. Other retirees have filed court papers arguing they, too, should be covered by the appeals court decision.

The appeals court has already denied Visteon’s request to rehear the case; but Visteon has stated that while they plan to reinstate retiree benefits while they are still in Chapter 11 bankruptcy, they fully intend to terminate those benefits eventually.

The protections in place to guard the benefits of retirees involved in a company’s Chapter 11 bankruptcy has a genesis in the 1986 Chapter 11 bankruptcy of steelmaker LTV Corp, which wiped out medical and life-insurance benefits for 78,000 retirees without notice to those former workers.  The outrage was so intense and loud that Congress enacted a special provision for terminating retiree benefits during bankruptcy.