Court orders Visteon retiree benefits reinstated

WILMINGTON, Delaware (Reuters) - A U.S. appeals court on Tuesday ordered bankrupt auto parts maker Visteon Corp to reinstate benefits to thousands of retirees who had them terminated during the company's ongoing Chapter 11 reorganization.

The Court of Appeals for the Third Circuit reversed a lower court ruling that affirmed a bankruptcy court decision allowing the company to unilaterally cut off health and life insurance benefits for nearly 8,000 retirees and dependents.

Visteon VSTNQ.PK had argued that it needed to end the benefits to save $31 million in 2009 and $310 million long term.

Visteon spokesman Jim Fisher said, "We are assessing the ruling and will determine an appropriate course of action."

The arguments in the case turned on whether Congress intended to restrict the ability of a bankrupt company to unilaterally end benefits, even if it had that right prior to filing for Chapter 11.

The appeals court sided with a union representing 2,100 retirees that appealed the bankruptcy court's decision. The judges said that by the plain language of the law Visteon had not gone through the proper procedures.

"It's long overdue," said Thomas Kennedy of Kennedy, Jennik & Murray, who argued the case for the unions. "This changes the law that was previously established in Second Circuit."

Christopher Sontchi, the Delaware bankruptcy court judge who approved Visteon's request to end retiree benefits, relied on a ruling in the U.S. Second Circuit, where parts maker Delphi Corp won bankruptcy court approval to cut benefits for 15,000 employees in 2009.

Van Buren Township, Michigan-based Visteon currently employs 31,900 worldwide and 5,769 in the United States.

The Third Circuit court has appellate jurisdiction over U.S. district courts in Delaware, New Jersey and Pennsylvania. The Second Circuit comprises New York, Connecticut and Vermont.

The case is In Re Visteon Corp, U.S. Bankruptcy Court for the District of Delaware, No. 09-11786.

The Appeals Court case is No. 10-1944.

(Editing by Steve Orlofsky)