Visteon Corp (VC) 2007 Q4 法說會逐字稿

Good morning, and welcome to the Visteon year-end 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 would like to remind you, this presentation contained 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 actual our 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 to the company's website this morning.

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

After the speaker's remarks there will be a question and answer period.

(OPERATOR INSTRUCTIONS)

I would 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 your conference.

Thanks, Janice, and good morning, everybody.

Joining me on the call today are: Mike Johnston, our Chairman and CEO, Don Stebbins, our President and COO, and Bill Quigley, our CFO.

After the call we will take your questions.

With that, I will turn the call over to Mike.

Okay.

Thanks, Derek, and good morning, everyone.

In today's presentation, I will make a few opening remarks before turning the call call over to Don, who will provide an operational review.

As we've mentioned on the last several calls, it is our intention to increase transparency in our operations to make it easier for those of you in the financial community to understand where Visteon is heading.

Last month at the auto show here in Detroit, we provided our outlook for 2008 and beyond.

Today's presentation is focused on our results for the fourth quarter and full year 2007 and our outlook for 2008 specifically.

Visteon's dependency on the North American market has declined to less than 1/3 of our total revenue as our sales to Ford in the region have decreased and we have launched new business with other customers globally.

There are some additional concerns in the market regarding where the industry and economy here in the U.S., however, with our diverse customer and geographic sales base, we have not seen enough change to require a change in our guidance.

Our new business wins continued at a very strong base, as we won $235 million during the fourth quarter which brought the total for the year to nearly $1 billion for the second straight year.

Our restructuring activities remain on tract as with the completion of Connersville we address the seven targeted facilities we had scheduled for 2007.

Additionally as I mentioned in January, we have begun the implementation of what we refer to as the 2009 imperative.

Our operating results improved from what we expected as of our last quarterly call.

EBIT-R and free cash from improved from our projections and are both a bit stronger than the estimates we provided at the autoshow last month.

We ended 2007 with nearly $1.8 billion in cash globally, with $1.2 billion here in the United States.

Slide three provides a summary of our 2007 full year results.

Sales for the year were $10.7 billion, which is higher than the guidance we provided on the third quarter call and in line with the projection we provided last month.

EBIT-R was negative $49 million.

This is better than both our third quarter and preliminary look given in January.

Free cash flow was a use of $83 million for the year.

This included a decrease of $68 million under our European securitization facility.

Recall that our guidance for free cash flow of negative $230 million was based on a constant level of $157 million on the European facility.

So on an apples-to-apples basis, our free cash flow was a use of $15 million, an improvement of about $215 million.

Our guidance was consistent for 2007 with the only adjustment related to the divestiture of our Chassis facilities in April.

Our restructuring efforts are taking hold.

We have increased our ability to deal with downturns in demand and do not have the same level of exposure to one customer here in North America.

Importantly, we have the financial flexibility to restructure the business, and set Visteon on the path for becoming free cash flow positive in 2009 and profitable in 2010.

Now I will turn the call over to Don.

Thanks, Mike.

Slide four provides our consolidated sales full year for both 2006 and 2007.

Year over year total product sales were basically unchanged at $10.7 billion.

However there was some fairly significant movement in the composition of our sales.

We had significant growth from Hyundai/Kia as sales grew by 27% year over year and were 15% of total sales.

Global sales to Ford declined by 14% year-over-year, primarily driven by Ford North America where sales declined from 22% of total sales in 2006 to 15% of total sales in 2007.

Bill will cover the walks in more detail, however about $400 million of the decline was related to the closure of our Connersville and Chicago plants while volumes declines in North America accounted for another $150 million of the decrease.

Turning to sales by product group on slide five, the big change year-over-year was in the other or noncore category which declined from 17% of sales in 2006 to 13% of total sales in 2007.

This decrease reflects the divestiture of our Chassis-related facilities in Germany, Poland and Brazil as well as the divestiture of our starters and alternators facility in India.

Our nonconsolidated sales grew by $292 million, or more than 20% to $1.64 billion in 2007.

Yanfeng Visteon, our China-based joint venture with SAIC, had U.S.

GAAP revenue in 2007 of $937 million, an increase of $237 million or 33% year-over-year.

Net income at our nonconsolidated affiliates also increased substantially year-over-year as it grew over 40%.

Turning to the sales by region on the following chart, you can see that there was a fairly significant decline in our North American sales as they decreased five percentage points and now represent 32% of total sales.

This decline was completely offset by growth overseas primarily in Asia where our consolidated sales increased to $3 billion.

Our nonconsolidated revenue also increased significantly in Asia, increasing nearly $300 million to represent 82% of unconsolidated sales.

Slide seven provides an overview of our restructuring activities.

We began the year looking to close, fix or sell seven facilities in 2007.

And we addressed seven facilities during the year.

This included the closure of three plants and the divestiture of four others.

We have targeted an additional eight facilities in 2008 and are making very solid progress.

Our facility in Bedford will close this in the middle of this year, we also announced that we will close our fuel-tank facility in Concordia, Missouri.

Additionally this month we ceased production at our interiors facility in Bellignat, France, and are progressing on the divestiture of our Swansea facility.

As mentioned in our January presentation, we expect to generate $420 million of gross savings related to the restructuring through 2010.

Slide eight provides a more in-depth update on our restructuring activities.

The seven actions we completed in 2007 now bring the total number of facilities addressed to 18.

Our savings from the restructuring plan since inception total approximately $210 million and we expect to double this savings over the next two years to a total of $420 million.

We expect savings of $105 million in 2008, however we also anticipate $35 million in incremental nonreimbursed costs.

These costs include accelerated depreciation as well as other nonreimbursed expenses.

In 2009 there will be an addition $95 million of savings, and the nonreimbursed expenses will be $50 million lower than during 2008, which will positively impact our 2009 financial results.

Slide nine provides additional detail on divestitures.

At the end of last month we announced the sale of three aftermarket manufacturing facilities, two of which are located in Mexico, with a third located in Tennessee.

These facilities which employ 575 people manufacture climate and remanufactured suspension products as well as starters and alternators which were sold primarily in the independent aftermarket.

2000 sales were $133 million and the business had a negative gross margin.

Cash proceeds were $26 million and we expect to have a book loss of about $40 million on the sale which will be recorded in the first quarter of this year.

Regarding the divestiture of Swansea, the discussions with Ford, Linamar, Visteon and [labor] are continuing and I expect to have a formal announcement by the end of the first quarter.

Slide 10 provides an overview of our movement to lower cost countries.

A percentage of Visteon's manufacturing headcount and lower cost areas has increased from 48% to 57% over the past two years.

As our high cost manufacturing head count has decreased 20% since the end of 2006.

On the engineering side, we also continue to move the footprint to more competitive areas as our cost -- as our competitive cost engineering has increased 19% -- from 19% to 35% over the past two years.

So overall we remain on track and continue to improve our footprint.

As Mike mentioned we are also attacking our overhead costs as part of our 2009 initiate through reductions in all of our spending.

We have identified almost 60 different actions which we expect to deliver approximately $215 million of gross savings over the next three years.

These savings show further integration of our product and customer groups, our continuing to right size the organization, increasing our utilization of outsourced and more competitive cost resources and significantly reducing our infrastructure costs.

In 2008 we expect $110 million of savings with $30 million of implementation costs resulting in a year over year EBIT-R benefit of $80 million.

For 2009, the savings are expected to be $65 million, with $15 million of implementation costs resulting in another $80 million of year-over-year EBIT-R improvement.

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

We have focused on quality, safety, and investment efficiencies and we continue to make very solid progress.

Although premium costs were also double from 2006 it moderated in the second half of 2007.

About 1/3 for our premium costs were launch related, 1/3 supplier related, and 1/3 was labor related.

For the quarter and the second half of the year we delivered very positive net cost performance which Bill will take you through in additional detail.

Year over year we improved our margin in our climate and interior product groups, while the electronics product group which includes lighting and powertrain control modules was down year-over-year.

Slide 11 shows some of the performance of these key operating metrics.

Our quality as measured by defective parts per million, improved 38% for an almost 80% improvement in two years.

Our safety performance also continued to improve, as our lost time case rate declined 29% in 2007 after a 40% improvement in 2006.

We also remain highly focused on our capital expenditures.

2007 spending was essentially flat with last year, while we anticipate 2008 spending to be approximately $310 million.

Before turning this presentation over to Bill, I would like to highlight our new business wins on slide 14.

In 2007 we won $235 million in the fourth quarter, which totals $980 million for the full year.

This follows the over $1 billion which we won during 2006.

The full year wins by product group are 40% climate, 38% interiors with the remaining 22% in electronics.

By geography 25% were in Asia with the remaining 75% evenly split between North America and Europe.

In addition to the consolidated wins we had another $370 million at our nonconsolidated operations.

These wins were primarily in Asia and split about 50%/50% between electronics and interiors.

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 fourth quarter.

Product sales of $2.7 billion were slightly up from a year ago, but as we have discussed, we continued to experience a significant shift in the composition of our sales on both a customer and regional basis, which we will review in more detail.

Our net loss for the quarter was $43 million or $0.33 per share compared to a net loss a year ago of $39 million.

However, our 2007 results do include nonasset impairments of $30 million related principally to our restructuring actions as well as Visteon funded restructuring and related costs of about $32 million as compared to our 2006 results.

As we discussed in the third quarter, we are now in the 50/50 cost sharing match under the escrow account.

EBIT-R which excludes asset impairments and net restructuring expenses was positive $15 million for the quarter as compared to negative $37 million a year ago, an improvement of $52 million.

Cash provided by operating activities was $331 million compared to $239 million a year ago, also an improvement of $92 million.

Capital spending in the quarter was $144 million slightly higher than a year ago, reflecting increased spending related to new business launches in 2008 for both interiors and our climate business.

Free cash flow in the quarter was $187 million, $56 million higher than last year.

This year over year is despite the fact that the fourth quarter last year included a $21 million benefit from increased receivable sales in the quarter under our year of securitization facility.

In 2007, receivables sold under this facility quarter to quarter were basically flat at about $99 million.

Finally we ended the year with significant cash balances of almost $1.8 billion.

Slide 16 summarizes our financial results for the full year.

As Don indicated, product sales and EBIT-R for the year were better than third quarter guidance.

Free cash flow was $215 million better than our third quarter guidance reflecting both EBIT-R and strong trade performance.

Product sales for the year were $10.7 billion essentially flat from a year ago.

In 2007, we recorded a net loss of $372 million, which included $107 million of noncash asset impairments and Visteon funded restructuring of $32 million in the fourth quarter.

EBIT-R was negative $49 million for the year as compared to positive $27 million last year.

Cash provided by operating activities capital spending and free cash flow were largely even with prior year results.

Cash provided by operating activities was $293 million, $12 million higher than a year ago.

Capital spending of $376 million was $3 million higher than a year ago and free cash flow was the use of $83 million, $9 million better than a year ago.

The improvement in free cash flow on a year over year basis is despite a negative impact of almost $100 million related to the level of receivables sold under our Europe securitization facility, in 2006, utilization of this facility increased by $33 million, where as in 2007, our utilization declined by $68 million.

Slide 17 provides a year-over-year change in production volumes for our key customers for vehicles which Visteon has significant content for the full quarter and the full year.

These customers account for about 60% of our total 2007 product sales.

Ford North America production was lower in each of the first three quarters of 2007 when compared with the prior year.

Fourth quarter production did increase by 6%.

Ford Europe production volumes have been solid all year and were up slightly in the fourth quarter as well.

Productions levels for Nissan North America were lower by 21% for the fourth quarter and 27% for the full year reflecting declines in the truck segment.

Both GM and Chrysler production levels for vehicles we have content in were higher in 2007, while PSA volumes in Europe were lower in the fourth quarter but up slightly on a year-over-year basis.

And finally Hyundai/Kia production volumes were 9% higher in the fourth quarter and 2% for the full year.

Slide 18 highlights our product sales for the fourth quarter of this year and last.

Total product sales of $2.7 billion in the fourth quarter is about $46 million higher than a year ago.

The year over year increase can be largely explained by two factors: favorable currency of $168 million, partially offset by the impact of the Europe Chassis and Chennai India divestitures which we completed during 2007, which reduced sales by about $178 million.

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

Sales to nonFord customers of $1.76 billion increased $154 million compared to the prior year and represented 65% of our total sales.

Ford sales of $960 million decreased $108 million and represented 35% of total sales for 2007.

At the bottom of this slide, the left box provides year-over-year change in sales to Ford on a regional basis and the right box provides the same information for nonFord sales.

Ford sales in North America were $72 million lower on a year over year basis.

While production volumes were up 6% compared with a year ago, lower sales reflect the impact of past sourcing actions, reducing our content per vehicle, as we discussed.

As we outlined last quarter, these actions principally impacted our Chicago facility which we closed in April 2007 and Connersville facility which closed in December 2007.

Ford sales in Europe, South America, and Asia were up slightly on a year over year basis.

On the nonFord side, North American and Asia Pacific sales were higher on a year over year basis, reflecting increased Hyundai/Kia sales partially offset by a decline in Nissan North America production volumes.

Europe nonFord sales were down year over year principally reflecting lower results sales.

Page 19 highlights our product sales for the full year compared with the prior year in the same format as the quarter I just reviewed.

Total product sales in 2007 were $10.7 billion, $15 million higher than a year ago.

Sales to nonFord customers of $6.6 billion increased $674 million as compared to the prior year and now represents 61% of our total sales.

Ford sales of $4.1 billion decreased $659 million and represented 39% of total sales.

Similar to the quarter the boxes below highlight the significant changes in the composition of our customer and regional sales.

We largely anticipated these changes for 2007 and expect these trends to continue into 2008.

For 2008, we expect nonFord sales to increase to about 68% of our total sales.

Ford sales are expected to decline by about $1 billion, largely reflecting the impact of divestitures and plant closures, both those completed as well as those planned.

Slide 20 provides our gross margin for the fourth quarter of this year and last.

Gross margin in the fourth quarter of 2007 of $201 million was $62 million higher than a year ago.

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

In this quarter, gross margin was impacted by a number of factors that were largely restructuring related.

In total, the impact of the Europe Chassis divestiture, accelerated depreciation expense, curtailment gains related to Connersville and asset sales increased margin by approximately $20 million.

These factors were offset by the impact of volume and mix in the quarter.

The majority of improvement in gross margin as Don indicated is a result of positive net cost performance of $56 million.

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

The next slide provides a full year comparison of our gross margin performance.

Gross margin in 2007 of $567 million, rather than $181 lower than a year ago.

Volume and mix lowered gross margin by $168 million on a year over year basis.

While volume and mix had a negative impact in many of the quarters during 2007, the majority of that impact occurred in the first part of the year.

Lower volumes, sourcing actions and unfavorable mix in our electronics and to a lesser extent climate in North America reduced gross margin by $130 million in the first two quarters of 2007.

In the last half of the year, the negative impact of volume and mix moderated to approximately $35 million.

Our net cost performance improved in every quarter during the year.

On a full year basis our net cost performance improved gross margin by $84 million.

This improvement along with the impact of stock-based compensation expense asset sales was offset by the impact of the chassis divestiture, accelerated depreciation expense and curtailments that we discussed earlier.

Slide 22 represents our product segment results for the fourth quarter of this year.

This information is obviously included in our SEC filings.

Climate sales were $862 million and gross margin was $88 million or 10.2% of sales.

Gross margin as a percent of sales increased over 500 basis points when compared with a year ago.

336 basis points of this improvement were special items, the most significant of which was a curtailment gain related to the Connersville plant for about $37 million.

Gross margin improved by an additional 176 basis points reflecting net cost performance, partially offset by unfavorable volume and mix.

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

Gross margin was 10% of sales, a decline of about 118 basis points from the prior year.

Special items had a significant impact, the largest being appreciation depreciation expense for certain North America production assets.

Net cost performance partially offset by unfavorable volume improved gross margin by about 45 basis points.

A significant improvement from the third quarter results.

Interior sales were $848 million for the quarter and gross margin was $22 million or 2.6% of sales.

39 basis points higher than the prior year.

Again special items have a significant impact, the largest of which was the impact of a favorable commercial claim that we settled in the quarter.

Net cost performance was negative in the quarter, however this does reflect significant launch costs related to two new facilities in North America as we prepare for the launch of the Dodge Ram business later this year.

Turning to full year product segment results, on a full year basis, full year sales for climate were about $3.4 billion and gross margin was 6.9% of sales.

Volume mix and currency reduced margins by about 106 basis points, again special items including accelerated depreciation offset by curtailment gains related to the Connersville closure improved margins by about 43 basis points.

Net cost performance was over 200 basis points.

Electronics full year sales were $3.5 billion, gross margin of 7.2% of sales is lower than a year ago by about 350 basis points.

Also two points of this decline is due to volume and mix.

Sales related to powertrain control modules a product line of a high gross margin are down significantly year-over-year reflecting past sourcing decisions.

Special items lowered margins by about 120 basis points and net cost performance was negative about 38 basis points.

The cost performance was primarily related to difficult performance launches as several of our plants in the first half of the year as we discussed in earlier calls.

This performance improved significantly in the second half of 2007.

Turning to interiors, gross margins have improved from the prior year, despite the impact of volume principally Nissan related.

Net cost performance also was better than a year ago.

SG&A expenses for the fourth quarter totaled $191 million or 7% of total product sales.

On a full year basis, expenses totaled $636 million or 5.9% of total product sales.

Fourth quarter expense is $15 million higher than the fourth quarter of last year.

But on a full year basis SG&A expenses are $77 million lower than a year ago.

The charts of the bottom of this slide provide the key drivers in the year-over-year change for both the quarter and the full year.

Year-over-year efficiencies continue in the fourth quarter, totaling $14 million and in line with the performance that we recognized in the first the quarters of the year.

These efficiencies reflect the impact of our salary reduction program as well as other cost improvements.

On a full year basis, cost efficiencies totaled $60 million.

Three other factors impacted SG&A during the course of the year.

As we've discussed the first factor was impact of changes in accounts receivable reserves on a full year basis recoveries from prior year writeoffs as well as continued focus on collections of past due management and a favorable impact on SG&A of $18 million.

The second factor is the impact of incentive compensation expense.

On a full year basis, the factor lowered SG&A by $22 million, largely reflecting the change in our stock price.

Yet in the fourth quarter, we increased accruals to reflect our significant free cash flow performance.

And finally increased currency by $5 million for the quarter and $17 million for the full year.

Slide 25 provides a reconciliation of net less to EBIT-R for the fourth quarter of both '07 and '06.

EBIT-R was $15 million in the fourth quarter of 2007, a $52 million improvement.

Drivers of the change in EBIT-R are detailed at the chart on the bottom of the page and reflect all of the items previously discussed.

The walk from that loss to EBIT-R is provided at the top of the page.

The reconciling items include net interest expense which did increase by $7 million on a year-over-year basis reflecting additional borrowings under the term loan.

We did recognize an income tax benefit in the fourth quarter of $45 million, principally related to tax affecting changes in other comprehensive income due to the continued weakness of the U.S.

dollar.

As you will recall we did experience a similar impact in 2006.

We recorded noncash asset impairments of about $30 million related to certain noncore, production assets principally in Europe as well as a finalization of asset values associated with the completion of the chassis and Connersville restructuring actions.

And finally the reconciliation includes $32 million of net Visteon funded restructuring and other qualifying expenses.

The next slide provides the same reconciliation of net loss to EBIT-R for the full year.

Although our net loss increased by $209 million, EBIT-R increased by only $76 million as it does exclude asset impairments, the extraordinary items associated with the acquisition of a lighting facility in Mexico a year ago and net restructuring expenses not reimbursed from an escrow account.

Finally 2007 EBIT-R does include additional depreciation and amortization expense of $42 million principally related to our restructuring actions.

Turning to free cash flow, as discussed at the auto show presentation in January, our 2007 results did include several items not in our previous guidance, including increased dividend payments, certain tax items and commercial terms.

As we noted during that update, these items totaled about $95 million.

However free cash flow in the fourth quarter was positive $187 million, $56 million higher than last year.

The improvement in free cash flow was despite lower receivable sales and slightly higher capital spending.

On a full year basis free cash flow was a use of $83 million, an improvement of $9 million compared to a year ago.

As I mentioned earlier, the $9 million improvement included a negative impact of about $100 million related to the level of receivables sold under our Europe securitization facility.

The impact of lower receivable sales was more than offset by other improvements in cash flow, principally strong trade working capital performance.

Although full year cash flow was an outflow of $83 million, net debt did decrease by about $90 million during the year, from $1.2 billion to $1.1 billion, as we had fairly significant proceeds divestitures, and other assets.

Slide 28 summarizes our cash balances at the end of the year.

The end of 2007, our cash balances totaled $1.76 billion, an increase from the third quarter of $336 million.

This increase reflects both the positive free cash flow in the fourth quarter of $187 million as well as the completion of the Halla transaction.

The Halla transaction did provide additional cash as well of about $140 million as move $280 million of cash from Asia to the U.S.

on a very efficient basis.

At year end North American Europe cash balances totaled $1.5 billion of which $1.2 billion was in the U.S.

And availability under our revolving facilities continues to remain strong.

ll in all, a very strong liquidity position, with no significant near term maturities.

Slide 29, excuse me, provides a summary of our outlook for 2008 and certain key assumptions which we provided in January at the autoshow.

We do expect product sales for 2008 to be about $9.7 billion.

The change in sales for 2007 is almost entirely due to divestitures and plant closures, both those completed as well as those planned.

In addition to the right we have outlined with a key year over year change in production volumes for our customers.

Although we expect lower sales in 2008, we expect EBIT-R to improve, to break even as we realize the benefits from our restructuring actions as well as additional cost reduction actions related to our 2009 imperative.

Free cash flow is expected to be a use of about $300 million in 2008 turning positive in 2009.

Now I will turn the call back over to Don for final comments.

Thanks, Bill.

And before we open the line for Q&A, I wanted to summarize our 2007 performance.

In a nutshell, we delivered, we exceeded our objectives.

And although we know there is much more work to be done and that the global production environment is uncertain at best, we are attacking 2008 with the knowledge that our liquidity is in good shape, that our sales are more geographically balanced than ever before and we have averaged over $1 billion of new incremental business wins over the past two years, that we've addressed 18 of the 30 facilities that are the cornerstone of our restructuring plan and that our quality and safety performance has dramatically improved.

So although I can say with certainty that 2008 will be another challenging year, I am confident that the Visteon team will continue to perform.

We'd not be happy to take you questions.

Janice, if you can please remind the callers how to get in line for question and answer.

Thank you.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Joe Amaturo with Buckingham Research.

Good morning.

Quick question with respect to your pension fund, could you give us the actual asset return in 2007 and what the funding status of the U.S.

pension in [OPEB] was?

Yes, Joe.

This is Bill.

If you look at the -- on a global basis with respect to our funding which would obviously be in our 10K as we file, on a U.S.

basis we are about 89% funded at the end of the year and on a non U.S.

basis about 75% funded which is a significant improvement from the prior year.

Overall about 82% funded on the pension front.

With respect to returns, with they were obviously higher than on expectation at 8%, but we obviously as we look into 2008, we are going be monitoring that and adjusting those estimates based on the markets.

Okay.

And then -- on the OPEB side?

Yes.

OPEB again will be disclosed.

Our OPEB liability on a year-over-year basis has declined.

Our total health and life is about $540 million for our Visteon plants, the hourly plants as well as the salary plants at about $121 million so a total of $600 million.

Okay.

And then just one other one, with respect to the overhead cost actions and the implementation costs, could you give us a sense of the cadence throughout 2008 of when you expect to realize the cost savings and the outflows?

Yes.

Joe, if take you look, we had charges in the fourth quarter actually of about $63 million of which we got the 50/50 match on the escrow.

A piece of that was $11 million related to actions that are occurring for the 2009 imperative.

So as we look to the out year, we will have implementation costs as we've talked.

Those will probably be in the nearer term and the savings as we go forward will be in the latter half of the year.

Okay.

All right.

Thank you.

Thanks, Joe.

Your next question comes from the line of Jeff Skoglund with UBS.

Hey.

Good morning.

Could just -- we dive into the interior business a little more just given how much that margins are below the corporate average.

I was wondering if I know you are not giving guidance by segment, but just generically, could you talk about the outlook for raw material -- the impact of raw materials there.

The competitive landscape has obviously changed a lot over the last few years.

Is has changed paramount over the last month.

And then the impact -- I don't know if there is a way to separate the impact of Nissan truck volumes in there or any other significant movement in customer volumes.

But maybe you can shed additional color on where that business is going around those metrics?

Okay.

Let's try to hit a couple of those questions.

For the interior business, I think you are right.

The business globally has changed a significant amount over the past year -- past few years and will continue to change.

I think the events of last week are also are predictive in terms of there is still some distress in the supplier community on the side and there was another filing last night of a smaller plastic supplier.

So that is going continue to play out over the next couple years, I think, which from our perspective provides us opportunity.

As we look at the -- our business as it exists today, and what we expect over '08 and '09, we expect margin improvement as we go forward in each of the years.

We do have a number of key programs that are coming on stream over the next 18 months or so.

We've got a tremendous footprint in our relationship, our investment in Yanfeng Visteon in China that separates us from I think everybody else in the world in terms of positioning there.

From that perspective when you look at the restructuring actions that are taking place and would take significant losses out of the interior segment, you combine that with programs that are coming on stream, our investment, our relationship with Yanfeng Visteon, I think for us the interior business over time is going be a good business.

Let me be a little more specific.

You had bankruptcies a couple years ago, like (inaudible) and a couple others, and some of the business that is coming online now is booked post that.

You do expect a significant margin boost from that.

And then secondly, with some of the bankruptcies that were announced last week and some resourcing going on, is there a way to bring some of that business online on an accelerated basis to offset some of the volume hits you have taken be customers like Nissan?

Yes.

We are certainly in there pitching trying to help out the customers anyway we can based on the recent turmoil, and we are extremely confident that the business that we are launching that was won over the past couple years and that is going to launch -- is launching today, quite frankly and over the next months is good profitable business for us.

That is certainly part of the margin expansion story as we go forward.

Okay.

And the second question would be on the working capital front, it was a big use -- a big source of cash in 2007.

I think if I remember from your January presentation in Detroit, you expected a modest use, I think maybe $25 million in 2008.

I guess the question is why shouldn't we expect a little bit of pay back for that in 2008 and how confident are you in that?

Yes.

This is Bill.

If you take a look at our trade working capital performance it was strong in the quarters as well as for the year year, and you're exactly right, we did talk in January about seeing some drag, we believe about $25 million as you stated in 2008 principally related to terms changes associated with Ford North America.

I think the groups have done an excellent job with respect to -- especially on the receivable front.

You'll see it is a large driver of that free cash flow performance.

With respect to past dues, building our tooling on a timely basis and recovering that tooling, so i think from the perspective, we are in a good position at the end of 2007.

To your point, It is something we have got to continue to do, stay on top of it, but I think there's been market improvement over the last several years with respect to receivables in general.

So again, we've got to stay on it, we expect some drag next year, but again, that's really related principally to commercial term changes.

What has been the dollar impact of that Ford term change?

We estimate about $15 million to $25 million, depending on their volumes.

Got it.

Thanks.

By the way, the slides are great this quarter.

Thanks, Jeff.

Your next question comes from the line of Himanshu Patel with JPMorgan.

Hi.

This is Rajeev for Himanshu.

Could you talk about your interior segment?

I know '08 product I think you said launches impacted your margins.

How -- what's your -- how do you think you will improve margins in that segment in '09 and 2010 going forward?

It breaks down into a couple of simple buckets, probably three.

The first is the restructuring actions.

As we've laid out those 30 facilities, some of that is interior related.

So as we execute on those facilities, the interiors business will improve because of that.

Secondly, as we described, as the new business that we have won comes on stream and replaces the older business, the margin is substantially different and substantially better than the margin in the past, so that will be the third.

And then the third item would be the just normal running the business better, lean manufacturing, the use of Six Sigma, less scrapping and rework, etc.

More uptime on the machines.

And we see that already in each of our interiors facility.

So that is beginning to happen as we speak.

That was partially the cause of the improvement in the fourth quarter.

Any thoughts on where gross margins in that business could get to over sort of -- by the 2010 time period?

I would not like to say.

We don't really forecast by segment.

Okay.

Can you tell us your thoughts on cash and liquidity right now?

You expect about $300 million cash burn in '08.

'09 is expected to be positive.

You are sitting about $1.7 billion of cash.

So are you considering potential acquisitions?

Is that a possibility?

Or is this a cushion you think you need through '08?

As we discussed even in January of this year, we feel very good with respect to liquidity we have available, especially in light of this current market.

And we are obviously expecting a cash flow use next year of about $300 million.

So as we look today, and given the markets, we're going to continue obviously to monitor what opportunities may be presented to us or may emerge in the markets with respect to debt maturities.

From an acquisition perspective, there are some limitations with respect to what we can do in that front under our debt agreements.

We'll be opportunists there as well, but I wouldn't suggest that you'd see something in the near term that would be of any size or magnitude, given what we've got on our plate with respect to moving forward and restructuring the company currently.

Okay.

Lastly, I noticed some of your discussions for customer platform production has gone down a bit, I think in Europe and North America and -- you kept guidance intact.

Any thoughts on what happened and what is provided offsets?

We -- in January, we did note that we would be taking down if you will production volumes for a number of customers.

We really have not blocked and adjusted that much from that guidance.

We outlined that in the January update.

So we are looking at obviously Ford North America down about 4% on a year-over-year basis.

Nissan truck in North America down about 6%.

Ford Europe about flat and Hyundai-Kia obviously up a bit on a year over year basis.

So as we look even currently, with respect to projections out there from a sour productions unit, we feel pretty good about those right now.

Those are projections or assumptions that we have currently with respect to production volume.

Okay.

Thank you.

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

Good morning, guys.

First question is just to follow up on the loss of the Ford backlog business.

I am just wondering if you could expand on how much of that you think is really being resourced and how much is being insourced to Ford.

And is there a big chunk of that business going back into ACH.?

Okay.

I will take the piece of insource.

I don't believe any of it is being insourced to Ford.

Or we have not seen any of that.

Again the discussion topic is predominantly around the powertrain control module business that is in our electronics product group.

This is a business that essentially Visteon has been single sourced for many many years and Ford about a year and half ago, two years ago, I think, started to dual source that product.

So certainly that has impacted us negatively in the electronics segment as we move through 2007 and into 2008.

John.

Mike.

One of the things to remember is when we did the transaction that resulted in ACH, really all of the business for that product in North America really went back to ACH at that point in time.

So any sources actions going on today would not be taken -- we don't have a base business that would be available to source to ACH.

It all went to ACH with a transaction.

So they're really, we're not seeing any movement of other business into what is now ACH.

If we think of your restructuring actions that you've outlined in great detail, which we greatly appreciate, how much of this do you believe that you can actually capture at the EBITD line or the EBIT-R line or the operating line or whichever line you want to pick there without leakage?

When you refer to leakage, being --

Well, when we look at the cumulative savings that you have on slide eight, the restructuring actions of $315 million in 2008, do you believe you're going to actually be able to -- is that a net number or a gross number is the more simple question?

Yes.

The gross, as again we are trying to put more transparency into the discussion.

Those are gross savings numbers.

As we look at what happens to the margins absent those restructuring, we try to capture that in our divestitures and closures and volume mix and business walks.

So those are gross savings.

We feel confident with those gross savings as we look out and what we've achieved to date as we've launched our restructuring plan.

So from that prospective we actually raised it earlier -- later 2007 with respect to what we thought those savings would be so from a leakage perspective, the volume at the end of the day obviously can impact our operating going forward.

But with respect to savings and those gross savings, we feel really good about those gross savings.

So we should think of those as constant volume mix numbers, right?

Yes.

Constant volume and mix we have provided information with respect to what we think that environment be in '08, so in that context, yes, in that environment.

Then if we look at, as you are divesting smaller businesses over time, you seem to be alluding to running into a labor hurdle in working with labor to get out of these businesses.

And my understanding was you have gotten rid of the large majority of your UAB tier one workers with ACH -- with the return of ACH to Ford is there anything in particular or unique going on here with these labor hurdles or are they just sort of the standard practice of getting out of the business?

I don't think we have tried to talk in any detail about labor difficulties.

I would say this labor is one of the constituencies that we have to work with when we are closing these facilities and it is standard operating procedure so to speak to deal with them on an operating basis as we exit.

And I think we have been very, very successful in all of the -- again, we have completed 18 of the 30 actions, and really with no disruption to speak of.

And so we have been quite successful in our methodology, in our process that we use.

I think everything has worked out very well so far.

Okay.

And just lastly on the Ford escrow account, how much is left in the escrow account at this point?

Year end it was about $140 million.

We have a receivable on the books which you'll see as we file the K next week of about $22 million which came into the accounts this year in '08.

So I look at it, $144 million on face and there's a $22 million claim against it, so $118 million, $120 million.

Great.

Thank you very much.

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

Hang up.

Next question, I guess Rod is not there, please.

One moment, sir.

Mr.

Lache, your line is open.

Sorry.

Can you hear me?

Yes.

There you go, Rod.

Sorry about that.

This is Dan [Gowstan] for Rod.

I apologize.

I just have one question.

The impact of divesting of unprofitable businesses, is the savings from that included in your restructuring savings?

We had indicated I think specifically with respect to the North American aftermarket that was not necessarily a facility action, so that is savings, although in our projections is not in that cumulative gross savings of $420 million.

Okay.

Thanks.

Everything else has been answered.

Appreciate it.

Thanks, Dan.

Your next question comes from the line of Patrick Archambault with Goldman Sachs.

Hi.

Good morning.

I guess just one question about the guidance of breakeven for this year.

Just trying to pencil to that with the headwind on the revenue side of about $1 billion.

You are walking from a negative EBIT-R of minus $50 million to break even and it sounds like you have about $150 million of cost savings rolling on.

That would imply that really your negative contribution margin on that lost $1 billion would maybe be 10% or lower.

And I just wanted to see if I am thinking about that right?

Is it because a lot of business that was being lost was relative low quality, or maybe the -- maybe it is just the new stuff launching and replacing and on the net basis is much better quality?

Like how do we think about that?

This is Bill.

We try to provide some of that transparency again in January with respect to how we look and our drivers of EBITDA on a year-over-year basis.

To your point we do have significant gross savings in 2008 versus 2007.

Our net plant restructuring is about $70 million.

We've had obviously our 2009 imperative which should draw in another $80 million or so.

And then just the base business efficiencies are about $80 million.

Yet on divestiture and closures as well as the volume mix and new business, from a contribution perspective, those are year-over-year impacts to us of about $180 million, so you're right, we have the savings coming online, but at the same time, if you look at it from just from a contribution perspective, without the sales, you've got fixed costs to deal with.

Those fixed costs, as we deal with them, are in the gross savings numbers.

So, we have got a lot to do, obviously, but that $1 billion in business on a year-over-year basis coming down, we have got to take the cost structure out that's related to those businesses.

Okay.

Thanks.

And just in terms of piggy-backing on some of these interiors questions, how are the contracts set up on the most recent business wins including the ones that are in your backlog in terms of cost escalators for raw materials?

Would they automatically adjust upwards if feed stock prices continue to rise as they have been?

Yes.

Without being specific, we do have coverage on raw material with most of our customers and on price escalations.

It is usually kind of the standard is a six month time lag for that.

Some are better, some are worse in terms of timing, but there is language covers us.

Okay.

Great.

And lastly, just on slide 28 with the cash, can you just provide us with you might -- you probably disclosed it last quarter but can you just provide us with the U.S.

cash from last quarter Q3?

From the third quarter?

U.S.

cash was about $500 million.

Okay.

Great.

Okay.

Thank you very much.

Thanks.

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

Your next question comes from the line of Doug Carson with Banc of America.

Great guys, thanks.

Just a quick question on the cash.

With $1.2 billion on the balance sheet that is U.S.

related, I see your guidance is for a $300 million burn, which is total company.

Can you give us an idea of how much you can burn in North American, giving I think North America will probably be more challenged than the rest of the world?

Trying to get an idea of what the U.S.

bounds could look like at the end of '08.

I think -- this is Bill again, we don't actually provide obviously geographic distributions of what our free cash flow would be.

But if you think about the $1.2 billion U.S., you need to think about it on a Europe and U.S.

North America combined basis.

We have shown actually with this balance of $1.2 billion, that we can access those cash balances both in the U.S.

as well as Europe and move that cash around.

So obviously, if we would have a need in Europe, we will put the cash there to execute our restructuring as well as have the opportunity to bring cash back from Europe into the U.S.

as we need it.

So I should think about availability in the U.S.

at like $1.5 billion, then?

Yes.

To include Europe.

I think you need to look at the full North America and Europe balances of cash.

Okay.

Plus we have obviously two facilities, the USABL, which remains obviously we have not utilized anything there other than letters of credit, and then we have additional liquidity available under our Europe securitization facility.

Again we have not really utilized that.

We have an ambient level of about $100 million utilization in it.

You guys have done a good job increasingly liquidity here.

The $280 million cash that was moved from Halla, if we got in a crisis let's say down the road, '08, '09, is there any kind of more potential to generate cash from overseas from Halla?

I think we have done this in the past obviously from a transaction perspective.

This is a good -- it was both a good financial as well as operational transaction quite frankly, the Halla transactions referred to in 2007.

There are some limitations with respect to the term debt what we can do there on Halla.

But we still have some availability to look for additional transactions such as that.

But again it is an operational benefit as well as a great financial benefit with respect to accessing that cash very efficiently.

At the autoshow you guys commented on liquidity a big concern and put a lot of effort into improving liquidity and with discussions about looking at various bonds across your cap structure, there was a focus on the 2010 bonds.

And since Detroit, they are down six or seven points.

And I am wondering at an $81 price, does that change the interest in buying some of those back, given the focus on liquidity, because they're at about 18%?

I wonder if that has increased the focus given the way the price is?

Yes.

This is Mike.

I would say our goal throughout the year was to position ourselves at the end of '07 with sufficient liquidity so that we kind of removed that as an issue for folks looking at us and give ourselves the flexibility coming into an uncertain '08, frankly, to just continue to execute our plan.

And we find ourselves right where we wanted to be.

And so we have the ability now to maybe opportunistically to look at some possible uses of that.

But, frankly, we would not disclose what that is today.

We just feel good that we got ourselves where we wanted to be and we have the flexibility to execute our plan going forward.

Sure.

Thanks, guys.

And last quick one.

On the vendor side, obviously, there are small vendors that have been having a lot of trouble and some recent bankruptcies.

Can you give us an idea of the scope of how many vendors you have that you'd kind of put maybe on the hot list of who is having problems?

Because there is a lot of working capital problems at your competitors right now that are trying to fund some of these troubled vendors.

Yes.

We do have a hot list that we track pretty closely.

It has not changed very much from last year in terms of the number, it remains fairly stagnant in terms of the number we track, the names change every once in a while.

But from our perspective, it's going to be a challenging year for the smaller suppliers and we are on top of it, and we're watching it.

Great.

Not a significant change.

Okay.

Thanks a lot, guys.

Thanks, Doug.

That concludes our call for today.

I will be around to answer your questions for the rest of the day.

Thanks for your participation.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may disconnect at this time.

Good day.