Visteon Corp (VC) 2007 Q3 法說會逐字稿

Good morning and welcome to the Visteon third quarter 2007 earnings conference call.

All lines have been placed on listen-only mode to prevent background noise.

As a reminder this conference call is being recorded.

Before we begin this morning's conference call, I'd like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements.

Please refer to the slide entitled forward-looking statements for further information.

Presentation materials for today's call were posted on the Company's website this morning.

Please visit www.visteon.com/earnings to download the material if you have not already done so.

After the speakers' remarks, there will be a question-and-answer period.

(OPERATOR INSTRUCTIONS)

Now I'd now like to introduce your host for today's conference call, Mr.

Derek Fiebig, director of investor relations for Visteon Corporation.

Mr.

Fiebig, you may begin.

Thanks, Janice, and good morning, everyone.

Joining me on today's call are Mike Johnston, our Chairman and Chief Executive Officer, Don Stebbins, our President and Chief Operating Officer, and Bill Quigley, our Chief Financial Officer.

Following our formal remarks, we'll be happy to take your questions.

With that, I'll turn the call over to Mike.

Okay.

Thanks, Derek, and good morning, everyone.

Chart 2 shows our plan with three colors; restructuring, improving our base operation and growing our business.

In January we'll be two-thirds of the way through the three-year plan that we first introduced in January of '06.

In the past two years, we have made significant progress in transforming Visteon.

In the area of restructuring, we have hit all of our marks along the way.

We delivered on the 11 restructuring actions we had for 2006 and at minimum will complete seven identified actions for 2007.

We have also made significant progress in moving our manufacturing and engineering footprint to lower-cost countries and we have also done a good job of decreasing our SG&A costs.

We have also continued to make progress on improving the business.

Volume declines and some sourcing decisions have made it more difficult to see the progress we've been making.

However, during the past quarter, in a more stable volume environment, we were able to demonstrate fairly significant improvement in our financial performance.

We've done an outstanding job in winning new business.

Since January of last year, we have won $1.75 billion in new business and will likely have $2 billion by the end of this year.

These wins are at healthy margins and will help to improve the financial performance of the Company when they are launched.

Slide 3 provides our third quarter highlights.

Although we do not provide quarterly guidance as a matter of practice, our financial results were better than consensus expectations.

We had indicated that our third quarter results would show improvement when compared with 2006 and they did.

Our third quarter net loss was reduced by $68 million from the same period last year and our EBITDA improved by $94 million.

Visteon continued to become a more focused Company, with a divestiture of our non-core starters and alternators business in India and earlier this month we reached a memorandum of understanding to sell our facility in Swansea, Wales.

The third quarter was another strong quarter for new business wins, as we won nearly $300 million.

We continue to have very strong cash balances and liquidity to implement our plan.

Slide 4 shows our 2006 and 2007 second -- our quarter product sales by group and region on a consolidated basis from continuing operations.

As you can see, we remain well balanced by product group and we expect the balance to continue based on the new wins we had over the past seven quarters.

Sales in the other category are lower, reflecting the divestiture of the chassis facilities, as well as the divestiture of the Chennai facility.

On a regional basis, there was a fairly significant shift, which Bill will expand on, by customer.

Europe/South America, which was impacted by the sale of our chassis facilities, was down slightly year-over-year.

North America decreased from 36% to 33%.

Asia increased by five percentage points to 28%.

In addition, to our consolidated sales, we also have significant nonconsolidated sales related to our joint ventures.

Taking those into account, Asia was our largest region and makes up 35% of total revenue, Europe/South America is 35%; North America, 30%.

Slide 5 provides an overview of our restructuring actions.

As you know, the restructuring of our business is vital in making Visteon successful.

In 2006, we had planned to address 11 noncore or unperforming facilities and we accomplished that goal.

In 2007, our target is to address seven facilities and to date we've completed six of them by closing two and selling four.

The other remaining item for 2007 is the closure of our Connorsville facility, where we will cease production in December.

Additionally, earlier this month, we announced that we have an MOU to sell our Swansea facility and we have reached agreement with the union in terms of the closure of our facility in Bedford, Indiana, which will be closed by the middle of 2008.

We continue for forecast savings of at least $400 million from our restructuring activities.

Slide 6 provides an overview of our significant Indian operations.

Our sales on a consolidated basis in 2006 were just under $260 million, and we have just over $200 million in sales so far this year.

We have a leading position in climate, as well as in instrument clusters.

We have four plants and two technical centers, and about 2,000 employees in India and we plan to improve and grow our business there.

In August, we divested Visteon powertrain control systems India in Chennai.

This non-core operation manufactured starters and alternators.

Sales from the facility were $90 million in 2006 and we had about $60 million in sales during 2007.

The sale was completed on August 31st and we received $30 million in cash proceeds.

Turning to our UK operations on Slide 7, sales for 2006 were about $540 million, nearly half of which were in noncore products.

Our 2006 net operating loss in U.S.

GAAP was about $110 million.

We have five major sites that principally serve Ford and PAG.

We have taken steps to improve the operations in the UK, including the exit of brakes at Swansea, the movement of our PCB's and clusters to lower-cost countries, and we've taken administrative reductions.

We're working with our customers and labor to address the losses in the UK and as mentioned and we announced earlier this month.

we are selling our facility in Swansea, which is by far the largest.

I will cover this in more detail on the following slide.

On October 18th, we announced that we have a nonbinding memorandum of understanding to sell our Swansea facility to Linamar Corporation.

This facility, which currently employs about 400 people, manufactures power transfer units, transfer cases and axles, for which Ford is the primary customer.

Annual sales were about $100 million and the facility generates a fairly significant loss.

We expect to reach final agreement on the terms of the transaction and close by the end of this year.

The sale of Swansea will be a good solution for all parties involved and is a critical step in Visteon addressing the negative financial results in the United Kingdom.

Now, I will turn the call over to Don.

Thanks, Mike, and good morning.

In addition to the restructuring of our noncompetitive and noncore assets, we are also improving our cost competitiveness by moving to more competitive-cost regions.

Slide 9 presents this movement for both our manufacturing and engineering employees.

For manufacturing, our goal is to have 75% of our employees in competitive-cost countries in 2009.

As of September 30th, 57% of our manufacturing personnel were in these areas.

This represents an increase of nine percentage points since the end of '05, as head count in high-cost areas has decreased by some 4,800 employees.

As you would expect, the manufacturing numbers are significantly impacted by our asset sales and plant closures.

During the third quarter of this year, our lower-cost head count went down as the 800 employees at our Chennai facility left Visteon's payrolls.

We expect head count in our high-cost countries to decrease significantly, as we close Bedford and Connorsville and divest Swansea.

For engineering, the goal is to have half of our employees in competitive-cost countries for 2009.

As of September 30th, more than one-third of our engineers were in these areas.

This represents an increase of 15 percentage points since the end of '05, as our engineering head count in high-cost countries has decreased by about 500 positions.

As I've said in the past, the movement in engineering is expected to be more linear than the movement in manufacturing and overall we remain on track and continue to improve our footprint.

The second pillar in our plan is improving the base operations.

We have focused on quality, safety, investments and efficiencies, and we continue to make very solid progress with the exception of premium costs, which remain higher than they were a year ago.

In the third quarter of this year production volumes moderated, as we did not have the large falloff in North American production.

Additionally, for the quarter we delivered positive net cost performance, which Bill will take you through in additional detail.

Year over year, we improved our margin in our climate and interiors product groups.

Our electronics group showed a decline, primarily due to the performance of our lighting facilities and the mix of electronics products.

Slide 11 shows some of our key operating metrics.

Our quality, as measured by defective parts per million, continues to improve, decreasing by 32% during the first nine months of 2007, while our safety performance also continues to improve, declining 25% this year.

We remain highly focused on our capital expenditures, as the first nine-month spend was $33 million less than one year ago.

We expect CapEx spending to be higher in the fourth quarter, as we make investments to support near-term program launches.

Our premium costs were significant again in the third quarter, and for the year-to-date September 30th, we experienced about $43 million of premium costs, primarily associated with our European noncore operations, as well as several difficult program launches.

Chart 12 shows the year-over-year change in volumes for the third quarter in which Visteon has significant content.

Ford production was flat in North America, while for the quarter, Ford of Europe was down slightly, but remains on track for a record year.

Production levels for vehicles that we supply parts to Nissan in North America was off 26% year over year, as most of our production is on their truck platforms.

In Europe, we had a slight decrease with PSA and in Asia, Hyundai/Kia production was up versus the third quarter of last year, as last year production was impacted by a labor disruption.

We expect fourth quarter production levels to be flat to above last year.

Slide 13 presents our product segment results for the third quarter of this year.

This is information that we include in our quarterly filings with the SEC.

In the climate segment, we had sales just under $800 million for the quarter.

Our gross margin was 6.5% of sales, and increased 500 basis points when compared with a year ago.

About 175 basis points of this improvement was attributable to volume, mix, currency and unusual items, with about 325 basis points of net cost performance.

We expect the climate group to continue to improve its performance, as we restructure our high-cost facilities.

Electronic sales were a little higher than climate for the quarter.

Our gross margin was 4.4% of sales, which represents a decline of 1.6% year over year.

Most of this change is related to volume mix, currency, and unusual items, and about 38 basis points is attributable to net cost performance.

This performance is primarily at two facilities and is expected to turn around in the fourth quarter of this year.

In the interiors group our sales were approximately $700 million for the quarter.

The gross margin improved 333 basis points year over year, as net cost performance was more than 170 basis points higher.

The interior product group is presently going through a significant expansion period and we are incurring expenses now as we prepare for the launch of the Dodge Ram truck business next year, which will help the returns of this product group.

Turning to our year-to-date product segment results, year-to-date sales for climate are $2.5 billion and our gross margin was 5.8% of sales.

Volume mix and exchange adversely impacted margins by 114 basis points, and unusual items were a negative 56 basis points.

Net cost performance was almost 200 basis points better than the previous year.

In electronics we had $2.6 billion of sales, gross margin was 6.2% of sales, which is down a little more than four percentage points from a year ago.

This decline is primarily the result of Ford sourcing decisions made several years ago regarding our powertrain control modules, which carried significant gross margins.

Unusual items hurt results by more than 100 basis points and net cost performance was negative 77, primarily related to our performance at our lighting plants, which have been launching a very significant amount of new business.

Turning to the interiors segment, we have seen some improvement in the year-to-date results, as net cost performance of 70 basis points was offset by volume mix, currency, and unusual items totaling 60 basis points.

The third pillar of our plan on Slide 15 is to grow the business and the momentum of $1 billion of new business wins in 2006 is continuing in 2007.

For the first nine months of 2007, we won $750 million in new business, which will launch primarily in late 2009 and 2010.

Just over half of the year-to-date wins were in climate, with the balance split fairly evenly between electronics and interiors.

By geography, 40% of the wins were in Europe/South America, and about a quarter were in North America, with the balance in Asia.

In addition to the $750 million of new business wins, there are about $200 million worth of wins at our nonconsolidated operations.

As you know, in January we'll provide you with a full update on our 2008 business plan, reflecting our updated customer vehicle volumes, asset divestitures, plant closures, and any customer program decisions.

I'll now turn the call over to Bill Quigley.

Thanks, Don, and good morning, ladies and gentlemen.

This slide provides a summary of our financial results for the third quarter.

Product sales of $2.4 billion were essentially even from a year ago, although we continue to experience shifts in the distribution of our sales on both a customer and regional basis.

For the quarter, we had a net loss of $109 million, or $0.84 per share, as compared to a net loss of $177 million a year ago.

This result does include $14 million of noncash asset impairments related to our restructuring actions in the quarter.

EBITDAR, which excludes asset impairments, was -$33 million for the quarter as compared to -$127 million a year ago, an improvement of $94 million.

Cash used by operating activities was $53 million compared to $34 million a year ago and capital spending in the quarter was $88 million, slightly higher than a year ago.

Free cash flow in the quarter was a use of $141 million, $25 million lower than last year.

This change is more than explained by the $67 million increase in receivables sold under our Europe securitization facility in the third quarter of 2006.

In the current quarter, receivables sold under this facility were essentially flat from the second quarter at about $96 million.

Cash at the end of the quarter totaled $1.4 billion.

These financial results reflect significant operating improvement year over year, driven by our ongoing restructuring and cost reduction actions.

Our third quarter results did reflect lower stock-based compensation expense, driven by a decline in our stock price during the quarter, as well as several other items that I will address during the course of my comments.

We are improving our outlook for full year EBITDAR results and refining our free cash flow range for the full year.

Slide 17 highlights our product sales for the third quarter of this year and last.

Total product sales in the third quarter of 2007 of $2.4 billion were $37 million lower than a year ago.

The year-over-year decline can be largely explained by two factors; favorable currency of $103 million offset by the impact of the European chassis divestiture completed earlier this year, which reduced sales by $139 million.

Other factors, including new business and increased direct sourcing, were offset by lower production volumes, the impact of past, sourcing actions and customer pricing.

Sales to non-Ford of $1.5 billion increased to $126 million as compared to the prior year and represented 63% of total sales.

Ford sales of $0.9 billion decreased $163 million and represented 37% of total sales.

At the bottom of the slide, the left box provides the year-over-year change in sales to Ford on a regional basis.

The right box provides the same information for non-Ford sales.

As you'll note the European chassis divestiture and the impact of currency impacted both Ford and non-Ford sales in the quarter.

Ford sales in North America were $134 million lower on a year-over-year basis.

While production volumes were essentially even to a year ago, lower sales reflect the impact of past sourcing actions, reducing our content per vehicle.

As we outlined last quarter, these actions principally impacted our Chicago facility, which we closed in April of this year, our Connorsville facility, which is expected to close by the end of the year, and certain of our electronics facilities.

The electronics actions, principally in audio and powertrain controls, as Don stated, results in a significant decline in year-over-year sales in the first half of this year, but as we commented in our last call, the impact did moderate in the third quarter.

Ford sales in Europe and Asia were higher by $26 million, principally reflecting the impact of new business in Europe, and currency increased Ford sales by $40 million.

On a non-Ford side, North America sales were down slightly, primarily reflecting the decline in Nissan production volumes of about 29,000 units, offset by new business.

Europe non-Ford sales were up slightly year over year, while Asia non-Ford sales were up significantly, reflecting both new business and higher directed source and parts of about $50 million.

Currency did increase non-Ford sales by $63 million.

This slide provides our product gross margins for the third quarter of this year and last.

Gross margin in the third quarter of 2007 of $97 million was $47 million higher than a year ago.

In the first half of this year, gross margin was lower on a year-over-year basis on effectively flat sales and our net cost performance was offset by lower production volumes and product mix, as well as the impact of accelerated depreciation expense and employee benefit plan charges, principally related to our restructuring actions.

The chart below highlights the key drivers of the year-over-year change in our gross margin for the current quarter.

In this quarter, while volume and mix, accelerated depreciation expense, and the impact of the Europe chassis divestiture lowered our gross margins by $25 million, these factors were significantly offset by our net cost performance of $42 million.

Restructuring savings, material and manufacturing efficiencies, and other cost reductions significantly exceeded customer pricing in the quarter.

In addition, margins were impacted by gains on asset sales of $15 million that were completed in the third quarter, as well as lower stock-based compensation expense reflecting the change in our stock price during the quarter.

Our SG&A performance for the quarter is highlighted on Slide 19.

SG&A expenses for the third quarter totaled $131 million, or 5.4% of total product sales.

Third quarter expense was $45 million lower than the third quarter of last year and on a year-to-date basis, SG&A expenses are $92 million lower than a year ago.

The chart at the bottom of this slide provides the key drivers of the year-over-year improvement in the third quarter.

Three factors explain the majority of the SG&A improvement in the quarter.

The first factor is the impact of lower accounts receivable reserves, which reflects both the focus on collections and past-due management of our trade receivables, as well as a significant recovery of receivables from a former customer that had been written off in a prior year.

The second factor is the impact of stock-based compensation expense, which did decline in the third quarter of this year, reflecting the change in our stock price.

The third factor is net cost efficiencies, which totaled $12 million for the quarter and reflected the impact of our salary-reduction program, and other cost improvements during the quarter.

On a year-to-date basis, net efficiencies totaled $38 million.

We expect SG&A in the fourth quarter to be higher than the second quarter and third quarters, as stock-based compensation expense and receivable reserves return to more normal levels.

Slide 20 provides a reconciliation of net loss to EBITDAR for the third quarter of 2007 and 2006, as well as the key drivers of the year-over-year improvement of $94 million.

While our gross debt increased on a year-over-year basis for additional borrowings under our term loan, interest expense was up only slightly, reflection our cash balances.

In the third quarter we did record noncash asset impairments of $14 million related to the sale of the Chennai, India starters and alternators business.

These assets were adjusted to their estimated fair value pursuant to the transaction.

EBITDAR was -$33 million in the third quarter of 2007.

The drivers of the change in EBITDAR from a year ago reflect many of the items just previously discussed, and while there are a number of items of a nonrecurring nature impacting the year-over-year comparisons as highlighted in this slide, we remain focused on improving our net cost performance, which in this quarter significantly exceeded the impact of volume and product mix.

Slide 21 provides the same reconciliation of net loss to EBITDAR for the first nine months of 2007 and 2006.

Although our net loss increased by $205 million, EBITDAR decreased by $128 million, as it excludes the asset impairments recorded in each quarter and the extraordinary items associated with the acquisition of a lighting facility in Mexico a year ago.

The key drivers of the year-over-year performance are provided on this slide and highlight the items discussed today, as well as in our first and second quarter updates.

Overall, the change in EBITDAR can be explained by nonrecurring OPEB and pension liability relief in 2006 of $72 million, accelerated D&A, and the impact of the chassis divesture.

Volume and mix wasn't significant and negative in the first half of this year, although net cost performance and stock-based compensation has offset the negative on a year-to-date basis.

Turning to free cash flow, cash from operations was a use of $53 million, $19 million lower than the third quarter a year ago.

As we stated earlier, this reduction is more than explained by the change in the receivables sold line.

We did increase receivables sold under our Europe securitization facility in the third quarter of 2006 by $67 million, while this year receivables sold remained relatively flat during the quarter.

After $88 million of capital expenditures, free cash flow was a -$141 million in the quarter.

Capital spending in the first half of 2007 was significantly lower than the previous year, but as we said during the last call, we expected spending would increase in the second half of the year to support a number of significant customer launches.

We still expect fourth quarter spending to be higher than the first three quarters, but we are revising our full-year estimate of capital spending from $370 million to $350 million.

We ended the quarter with $1.4 billion in cash.

Our debt levels are higher than last year due to the financings we completed last year and in the second quarter of this year, and net debt is slightly down year over year.

Slide 23 provides our cash balances and global distribution of cash.

Cash balances as of September 30th were approximately $1.4 billion, with over 72% in North America and Europe.

From second quarter levels, our cash balances declined by about $50 million in a seasonal low cash flow quarter.

Our cash position did benefit from the sale of Chennai and certain assets during the quarter.

We have been working on several strategies that will allow us to consolidate our global cash further in the U.S., and we will start to see the results of these strategies over the next few quarters.

We do expect that these strategies will bring several hundred million dollars into the U.S.

over the next several quarters.

And lastly, as of September 2007, our combined U.S.

asset base loan and Europe securitization facility have available capacity of approximately $375 million, $229 million available independent the US ABL and $146 million available under the Europe securitization facility.

On Page 24, and as I mentioned earlier, we are revising our outlook for our full-year results.

We expect our product sales to be down slightly to $10.6 billion for the year, $100 million lower than previously projected.

This does reflect a reduction in North American production volumes for both Ford and Nissan from our previous projections, as well as the Chennai divestiture.

We are projecting our full year EBITDAR to be -$50 million to -$80 million.

This compares to our previous estimate of $-35 million to -$135 million, and free cash flow is expected to be a use of $200 million to R260 million.

And with that, I'll turn over the call to Mike with some closing remarks.

Okay.

In summary, we will soon be in the final year of the three-year plan we rolled out in January 2006.

Our restructuring is progressing as we planned and communicated two years ago.

Our 2007 third quarter financial results improved compared to the prior year, and we continue to win a very significant amount of new business at good margins, with $750 million awarded through the end of September.

We have sufficient liquidity to implement our plan and we'll continue to restructure Visteon to achieve our goals of being free cash flow positive in 2009 and profitable in 2010.

We're looking forward to describing in more detail the steps we've taken and are taking to achieve these goals when we give our presentation at the North American Auto Show in January.

With that, we'll be happy to take your questions.

Janice, if you could please remind the callers how to get into the queue for question and answer, please.

Thank you.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Chris Ceraso with Credit Suisse.

Thanks, good morning.

Good morning, Chris.

Morning.

Can you spend a minute on Slide 13 where you go through the segment results and specifically can you give us a little more color on the special item, the $73 million, that hurt the margin in the electronics business, what was that?

Yes, Chris, this is Bill Quigley.

If you think about what we're doing in electronics and we've spoken in the previous calls, that predominantly is accelerated depreciation expense related to a buy versus make arrangement that we're working through, with an outsourcer with respect to some of our printed circuit board assembly.

So that's really the big driver of that unusual item.

That will occur as we go forward with the implementation of that and provide us benefits.

from both the margin as well as from a working capital perspective.

So that's the biggest driver there, Chris.

How many more quarters does it last at that level?

Full -- full implementation, I think we've got a couple more quarters with respect to this initiative, but we would expect to have it fully launched sometime in mid 2008.

But -- so the accelerated D&A just carries through the rest of this year, or when --?

It will carry through for the rest of this year.

Okay.

The sale of the business in the UK, is there any contingency in there that has Visteon maintaining responsibility for the people or for the benefits of the people post the sale?

No.

What we've got, we will retain the current liabilities that we have today, but upon the closure date, Linamar will pick up anything going forward.

Okay.

How much of the restructuring that you expect to do in '08 will be funded by Visteon out of your own cash flow as opposed to out of the escrow account?

Yes, Chris, it's Bill.

As you know, we have through the third quarter used, if you will, the 100% allocation of the escrow account.

So for the fourth quarter, we'll actually be in the 50/50 sharing and we do expect some minimal sharing in the fourth quarter as we continue to execute our restructuring plan.

As we go into 2008 we'll obviously give more guidance in January with respect to that, but we will be, obviously, fully into the 50/50 sharing and of course we still have a number of restructuring actions to execute in '08.

Maybe in that light, if you can just catch us up and remind us, of the $400 million of total restructuring-related cost saves, how much have you achieved already?

Related to our realized savings?

Yes, out of the $400 million for the total three-year plan, how much have you achieved so far?

About 150 million, Chris.

Okay.

Okay, thanks a lot.

Thank you.

Your next question comes from the line of Rod Lache with Deutsche.

Good morning, everybody.

Good morning.

A couple things.

First of all, just a small item, can you just reconcile why the EBITDAR guidance was revised higher, but the cash flow was the same?

Sure, Rod, this is Bill Quigley.

If you look at -- obviously the roll-forwards that we've got, we've got a number of noncash items, one being, for example, our stock-based compensation expense.

So obviously as we look to EBITDAR, that's not a flow-through into free cash flow.

So those benefits are we've got, again, some nonrecurring -- nonrecurring -- we've got noncash items in both our year-to-date results, as well as we go into the fourth quarter, one, as you'll note, we've talked about previously, is we've got some fairly significant curtailment gains associated with certain closures.

Those are noncash by nature, so we're not going to benefit from a cash flow perspective in the current year related to those actions.

Okay, and those curtailment gains, I seem to recall a $40 million gain.

Is that the number that you're referring to?

Yes.

Okay, so like the EBITDAR of $50 million to $80 million for this year includes that $40 million curtailment gain, or no?

Yes.

Okay.

And then looking at the net savings -- just back to that, again, there's that says gain, but there's also a pension charge in there, is that correct?

Yes, for Canada.

Okay.

Those were settlements that we had earlier in the year.

About $21 million year to date.

Okay.

And that plan has now settled.

It was on old plan in Ontario.

Okay.

So net-net it's like the base EBITDAR, you'd adjust by about $20 million just to be able to abait those things.

Looking at the savings, I guess adjusted for the asset sales, some of which were profitable, are you still looking for a $40 million improvement next year, or does that Swansea, UK sale change the expectation for improvement?

The 40 -- Rod, could you just speak on the $40 million you stated?

Yes, you've done the -- you've given us gross cost reduction and -- but have pointed out that that the net earnings improvement on the year-over-year basis is not consistent with that because some of the assets that you're closing or selling are contributing to the EBITDAR.

So I think you guys had pointed to like a $40 million net improvement for next year.

Is that correct?

I don't think so, Rod.

No, okay.

I -- let's go back to your base question on Swansea.

If you looked at the overall, we're pretty pleased that we're able to move this forward into the year, and with respect to that, we had over time in our $400 million savings obviously actions related to Swansea.

So if you look at it from an increment perspective, there'll likely be some increment, but it's not going to be very significant.

That was a facility that we obviously needed to deal with as we went forward with our restructuring plan.

But in January, Chris -- or, Rod, I think we'll be able to go through those actions in detail as part of our normal process.

Okay.

And what's the magnitude of the accelerated D&A that goes away next year?

Well, year to date we've got $30 million.

Okay.

Obviously Chicago has closed ahead of a piece of that in the first half.

We'll continue to have a run rate into the fourth quarter and probably into the first and second quarter, so that year over year is probably about $40 million.

Okay, great.

Thank you.

Yet we should caution a bit, Rod, as we look to other facilities and other actions that we will be taking over the coming year and a half, accelerated depreciation expense will likely crop back up as we move into other facilities.

Okay.

All right, thank you.

Your next question comes from the line of John Murphy with Merrill Lynch.

Good morning.

When we think about asset sales and the potential maybe even breakoff of one of the divisions of the Company -- or break up of the Company, is there anything in the debt covenants that would impact these actions or maybe preclude any of these actions?

Yes, in our debt covenants there are some baskets, if you will, on asset sales, where we've got to do basically reinvestment notifications, so on and so forth.

So on the normal course of our asset sales of -- I'll call them lazy assets, or assets that we're trying to monetize from personal real property, we feel pretty good about the limits that we have.

With respect to your broader question, I think that would be -- under the context the term loan, at least, would require certain modifications to the term loan.

Okay.

And then if we think about the UK operations and [Hillwood] specifically, do the pending Jaguar sale or the execution of that Jaguar sale help accelerate the restructuring, maybe even the closing of those facilities in Hillwood?

This is Don Stebbins.

You still have to work with the customer and labor.

Doesn't really matter who the owner is, be it Ford, PAG, or a buyout firm, you've still got to work through the customer on that.

Okay.

And then also, when we think about the free cash flow positive guidance you're giving for 2009 and the profitability in 2010, what are the general market assumptions that you're using there?

Are you using trend rates, or what are the levels?

Okay, John, this is Mike.

When we look at the performance in '09 and '10, the kinds of things we'll be talking about in January will reflect whatever our volume assumptions are, but fundamentally we'll be talking about the benefits from the continued restructuring.

We're going to see the building on the improvements in the fundamentals that we're seeing today and we expect going forward we'll -- we have margins in the backlog that are higher today than our base business and we can talk about that.

We'll talk about the continued move to low-cost countries and the benefits we get there, our growth in Asia and some aggressive actions we're taking on SG&A.

So I don't think you can pull out any one item in there.

I think there's just a laundry list of beneficial actions that we're taking and build on the momentum we have and that's why we feel good about committing to free cash flow positive in '09 and profitable in '10.

Frankly, Don referenced some of the volume assumptions, changes we're seeing with the OEs that will affect our sales numbers.

We build all that in when we say we're going to be cash flow positive and profitable.

So in January, I think, is the appropriate time to give a lot more clarity into the benefits of these actions I just mentioned.

But isn't it safe to assume that's predicated on roughly trend rates in the U.S.

and Western Europe on volumes?

I'm just trying to understand how much volume sensitivity there is there.

I would assume it's on trend, right?

Yes, absolutely.

Absolutely.

Yes.

And as you know, we do deep dives on it by platform.

We look at ,obviously, overall expected build rates, but we spend a lot of time platform by platform, customer by customer as well.

So that basically is a trend rate, and then we make our own decisions with respect to what we actually think those volumes will be at a platform level.

Okay, and then just lastly, can you remind us of the size of the Dodge Ram contract is for you, roughly?

About $300 million in revenue.

Okay, thank you very much.

Your next question comes from Joe Amaturo of Buckingham Research.

Good morning, guys.

Good morning, Joe.

Quick question, on Slide 7 you highlight all the underperforming UK plants.

Could you rank those possibly from -- with respect to which ones are losing the most to the ones that are losing the least?

I think -- I think we just listed the UK plants.

We didn't say that they're all underperforming.

Okay.

And no, we won't go through the plant-by-plant financials.

Okay.

Is Swansea the most unprofitable?

I would say Swansea is a significantly unprofitable facility, yes.

Okay.

And then would you be able to give us the depreciation and amortization expense related to these plants?

If you look at -- this is Bill Quigley.

If you'll look at what we talked about briefly about Swansea, you'll note that we had some significant asset impairments related to that facility in general, with the brake exit, first quar -- or the second quarter, so right now it's fairly nominal in Swansea.

And I don't have all the other detail on the D&A are the remaining four plants, but the Swansea one, obviously we've already charged our operations for that impairment in previous quarters this year.

Okay, and then just one other question.

You discussed the global cash consolidation, bringing some more cash into the United States.

Could you just highlight what those strategies are, possibly?

Yes, we've got -- I think just a couple.

Obviously from looking at the distribution of the cash as well as what we can do from a tax perspective in the U.S., utilizing our NOLs, we do have a couple of initiatives under way with respect to effectively moving profits around the globe, principally to the U.S., based on housing, our technology, our customer relationships, and all of the other things that we bring to the marketplace.

So there's some tax-driven strategies.

We've got some ability to more aggressively repatriate cash out of Europe, for example, given our existing NOLs.

Then obviously as we look to Asia, there are other opportunities -- normal opportunities obviously being dividends, but we've got other structural items that we're pursuing.

Could you quantify what the opportunity could be as far as a dollar amount?

I think I stated in my comments that we're looking to probably bring several hundred million dollars over the next couple of quarters, and I'd like to kind of leave it at that level right now.

Okay, good quarter.

Thank you.

Thank you.

Your next question comes from Patrick Archambault with Goldman Sachs.

Hi.

Yes, good morning.

Good morning.

Good morning, Patrick.

On the cash issue, I guess your U.S.

cash balance went down by $200 million.

I think that's correct, right, quarter on quarter?

Yes.

Is that something -- that's obviously a decent amount higher than the cash outflow for the quarter on a consolidated basis.

Is that something that will swing more the other direction in the fourth quarter?

It sounds like you guys have an implied like $40 million inflow from working capital.

Is that going to be mostly U.S.

based?

That will be -- there will be an inflow of cash into the U.S.

in the fourth quarter.

If you think about our Ford platform and the advanced terms, I'll call them, with respect to the receivables, there'll be some strengthening, if you will, from base operations in the U.S.

from a cash perspective, so we should see that.

And you're right on the free cash flow and that obviously takes into account securitization level at about $157 million, so we kind of use our guidance for free cash flow, assuming we'll be at the same level in December of 2007 that we were in 2006.

Okay.

So in fact, then, most of the inflow's going to be from just securitizations.

It's not really going to be from working capital collections or anything like that?

Yes, we've made trama -- I think people on the phone would agree, we've made pretty tremendous strides, I think, in our working capital management.

But again, our guidance, we do -- and we've done this every quarter -- we do provide that based on a constant level of securitization.

So whether we use that facility in the fourth quarter, maybe, maybe not with respect to our liquidity.

We feel pretty good about our liquidity currently, but again, that free cash flow's a proxy, assuming that those securitization levels are constant at both year ends.

Okay, and I guess like looking out forward to the first quarter of 2008, your payment terms of Ford change again.

Right.

I think they step up to 35 days or something.

May not be right, but anyway, it's something higher.

What kind of a hit from a working capital perspective could that be?

Because I think that impacted you guys pretty significantly this fourth quarter, right?

A similar step-up, that is.

Yes, fourth quarter over year, right.

If you think about the Ford sales as we go forward, I mean our Ford sales will be coming in North America less and less of the total.

So from that perspective, we're going to not see as much of an impact as we did, for example, a year ago.

As we look at those changes in terms, it's probably $15 million or so.

so it's not as significant.

It would have been obviously two years ago or even a year ago.

Got you.

And I guess related to the Ford discussions with the UAW, there's a lot of speculation that there might be some additional plant closures that are established as a result of that process.

Is that something that is, A, important to have before you guys come to us with the rest of the facility closures in terms of timing?

And could you even potentially have some upside in some of these closures based on what Ford does with their new contract?

We'll just have to wait to see which facilities and probably more importantly, which products will be impacted in their product plan going forward.

If you -- an example would be the rumored Chrysler programs, where they're going to take out two or three or four product lines, as we get that information it appears to us that the impact to us is probably $10 million, maybe $15 million of revenue.

So depending on what products they are and the timing of the changes will certainly -- certainly play into whether or not it's a big impact on us.

Okay.

And then finally, just a housekeeping one.

You said you had done $150 million of the $400 million to date in savings.

Is $175 million the number that you're still expected to complete by this year?

Yes.

Okay.

All right, thank you.

Thank you.

Thanks.

Your next question comes from Brett Hoselton of KeyBanc.

Good morning, gentlemen.

Good morning, Brett.

Good morning.

I wanted to start off with cash.

$1.4 billion in cash, $500 million in the U.S., could you, Bill, elaborate on your comment about strategies to maybe increase it by -- what, I think you said couple hundred million or something along those lines?

Yes.

I think for the previous question, we've got obviously some tax strategies, we've got some repatriation opportunities to utilize our NOLs.

I think -- I'll call it some structural or transactional items that we can do with respect to redistributing the cash.

Now, it doesn't sound like you're changing anything in terms of your outlook on restructuring savings or your EBITDA improvement or anything along these lines, and I guess my understanding from what you said before is that the Swansea sale was, I guess, already anticipated in those savings and expectations and so forth?

If you think about our -- this is a three-year plan.

As we looked out for our restructuring program, that $400 million obviously captured savings from a number of facilities and other actions that we're going to take.

Swansea obviously was comprehended in that savings profile, so from that perspective, there may -- there may be some incremental pull-ahead, but in general, we needed to take action with respect to that facility over time and those savings were included in the $400 million.

There's probably some upside to that, but in general, we captured many of the facilities in the $400 million.

If you were to look out -- if you were looking out over the next couple of years at your guidance and you're saying, look, I think there's some potential upside to this guidance as a result of these factors, is there any thought -- do you have any thought as to what those factors might be?

Brett, Mike.

Hi, Mike.

Yes, I think I rattled off a bunch of them there earlier.

We see the benefit from the restructuring, the $400 million probably having a little bit of upside, but restructuring doesn't end at the end of three years.

We're closing out this three-year plan that we communicated.

We've already launched what's the 2009 imperative, and that'll be something that continues in our business.

As you achieve continuous improvement, you are always going to have some plants that don't perform up to the expectation or the average of others, so you're always going to be addressing some.

Also, what we're seeing is good improvement in the fundamentals of the business and we're trying to show that with some transparency around the product groupings, and we're talking about the basis improvements we're seeing in margin and we think we have some good actions in place in our operations that'll continue to deliver.

We don't talk about the specific margins in our backlog because of the competitive nature of that information, so we will never disclose what our margins are there because it's too sensitive.

However, what we have been saying is that the margins in the backlog are improving, they continue to improve and as you well know, it's three years from order to shipment, so those margins are flowing through on the revenue line when you get in those years.

We've talked about our significant position in moving to low-cost countries and we continue to do that.

We have significant growth in Asia and just a huge platform in Asia to build from, so that continues to contribute in '09 and '10.

And again, I mentioned we have some aggressive actions we're taking in the SG&A area, and we expect those to be delivered.

So I think when we get to January we can give you a little more clarity around it, but it's not like it's one item and it's not like a three-year restructuring plan ends.

We close that chapter and we move on and continuously aggressively improve the performance of the business.

Well, when you suggest that you're going to give more clarity in January, obviously you're not going to tell us whether or not you're going to change your expectation, but based on what you just said, it sounds like you're at the very least, very confident that you're going to get to the numbers that you're proposing at this point in time and there may be some upside.

Is that a fair statement?

Yes.

And the other point is we haven't given guidance, so we're not changing a number that's out there when we talk about those up years.

where I think in the past we've said that we would be cash flow positive in '09.

We've said that.

I don't think we've actually gone out and said we'd be profitable in '10.

We're saying that now.

Okay.

So I don't think we're changing anything.

I think we're starting to give clarity to the vision of Visteon beyond this three-year restructuring plan we communicated two years ago.

Yes, I would agree with that.

On Slide 15, you talk about $750 million of new business, $550 million is nonconsolidated, $200 million is consolidated.

Am I understanding that correctly?

No, $750 million is consolidated, $200 million is unconsolidated.

Okay.

Now, your old guidance I thought was $1 billion in new business.

No, $1 billion is the amount that we won in 2006.

$1 billion is the amount you won in 2006, okay.

Are you -- or could you -- or are you planning on providing some sort of a new business backlog?

Yes.

What are you expecting?

In January, we'll walk through the backlog, absolutely, and how it rolls out over the next three years, adjusted for new currencies, new volumes, any actions that the customer may take on -- to the previous question there in terms of program cancellations, et cetera,.

Got it.

Thank you very much, gentlemen.

Thanks.

Your next question comes from Frank Jarman of Goldman Sachs.

Thanks, guys.

Just a couple of items.

One on the CapEx, you guys took down your target this quarter for the full year.

Should I assume that that's a run rate going forward, or do you see the opportunity to lower that further in 2008?

I think you'll see further opportunity in '08, '09.

As we mentioned, again we've got some pretty significant launches coming up in '08 that we're spending money on now.

We're capacitizing for now, so I think there'll be more room for improvement in '088.

Got you.

And then just on '08 and specifically the Dodge Ram contract, how do you guys see production ramping up on that specific contract?

Is it a plan that's going to be fully up to speed mid year and how should I see that sort of flow through the numbers?

The first shipments are in January, very, very low, low volume at that point.

It really is a July launch, so it'll be at that point in time, July, August, September, we start to hit volumes.

Got you.

And then looking at Slide 22, on the cash flow, could you just give me some more color specifically on the -$94 million of other changes in the cash flow?

Looks like that was sort of a -- a bigger hit to cash flow this year than a year ago.

Yes.

And what that is is really kind of three-fold.

We've got obviously some benefits from OPEB and pension accruals, that being some of the curtailments, as well as some of just lower expense due to our FAS 158 remeasurements, where cash is basically [treveling] at the same level and it's about $30 million of that.

We do have asset sales as we spoke of in the call, and that's really reflected as an investing cash flow and it's about $15 million.

And then again, what's getting into that other change is that we do have benefits, if you will, from our stock-based compensation in our EBITDAR, as we've highlighted on each of the slides, yet there's no cash related to that.

Got you.

So that's what's really kind of turning that, that other change into that broad-based -$94 million.

Got you.

And there are going to be very similar items for the year to date.

Okay, and then just last question I had.

If you go to Slide 12, is there any sense -- you guys have had a lot of moving parts at the top line now, just as [forward] revenues decrease.

Could you give me a sense for going forward, at least, as of today, what each of these -- each of these accounts represent as a percent of total sales?

So, like, Ford North America, Ford Europe, Nissan North America?

Can you give me a sense for what those represent as a percent of total sales?

Yes, if you look at Ford North America and Ford Europe, Ford North America is going to be -- I think in '09, we've talked about 9% to 10% in total.

Ford Europe will continue to be a significant customer to us.

Nissan North America was about 10% right now.

GM/Chrysler, we continue to build those relationships with those two customers.

And I think probably -- we can probably give you some stratification.

PSAs probably about 5% Hyundai/Kia is probably 15%.

15%, yes.

Got you Okay, great.

Thanks a lot, guys.

Thanks.

Ladies and gentlemen, we have time for one more question.

Your next question comes from the line of [Chet Lu] with Barclays Capital.

Hi, good morning, everyone.

Most of my questions have been answered.

Just a couple.

First, do the covenants in the term loans require the use of proceeds from major asset sales to pay down the loans?

Yes, depending on a limit.

So there are baskets in the term loan and obviously that document's public, but there are baskets where it would trigger, obviously, a repayment under the term loan.

Okay.

And then second, in the event of an asset sale as well, do the back covenants limit the amount of the 8.25% notes that can be repurchased to under a certain amount, $200 million, if I may say?

Let me -- I'll have to follow back up with you on that one.

We'll follow back up on that.

Okay, that's great.

Thanks.

Okay.

Okay.

Well, thanks for joining us on the call today.

I'll be around all day to answer your questions.

Bye, now.

Ladies and gentlemen.

this concludes today's conference call.

Thank you for your participation.

You may disconnect at this time.

Good day.