Visteon Corp (VC) 2008 Q1 法說會逐字稿

Good morning, and welcome to the Visteon first quarter 2008 earnings conference call.

(OPERATOR INSTRUCTIONS) Before we begin this morning's conference call, I would 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 the actual result to differ materially from those expressed in these statements.

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

The (inaudible) materials for today's call were posted to the company's Web site 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) 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.

Thanks, Ashley.

And good morning, everyone.

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

Following our formal presentation, we will open up the line for questions.

And with that, I will turn it over to Mike.

Okay.

Thanks, Derek, and good morning, everyone.

I will provide a high-level overview of the progress Visteon has made in our business before turning the call over to Don and Bill, who will provide additional color on the operations and the financials.

In January, we shared our outlook for 2008 with the financial community, and we highlighted the fact that 2008 is expected to be a significant year of restructuring as we close out the final year of our three-year plan.

The actions we have taken over the last two plus years coupled with the actions we are taking this year will put us in a position to be free cash flow positive in 2009.

We are targeting eight actions for completion during 2008.

We completed one of the eight in the first quarter, and we are confident that we will deliver on remaining items before the end of 2008, and we continue to look to accelerate additional actions yet this year.

In addition to the three-year plan, we announced earlier this year that we've begun an initiative to further reduce our overhead cost structure primarily related to administrative and engineering costs.

This initiative is expected to generate $215 million of cumulative gross savings over a three-year period, and we are on track to deliver the results.

Customer diversification on a geographic and customer basis remains a key tenant of the Visteon improvement story, and we continue to become less dependent on the North American market and Ford in North America.

We continue to drive improvements in our core business as we focus on quality, safety and operational excellence.

We currently are nearly at world-class levels for safety performance, and our quality continues to improve.

We realize that the near-term environment, particularly here in North American, is uncertain.

However, with our improved global footprint and decrease dependence on North American market, we continue build on the momentum we established in 2007.

Turning to our first quarter highlights on slide three, our sales diversification continued as our consolidated sales in Asia grew by more than $150 million, which I will highlight in a moment.

Gross margin for the first quarter of 2008 increased from a year ago by 67% to $195 million, and, despite a weaker U.S.

dollar, our SG&A decreased by $21 million year-over-year.

Our non-consolidated operations, which include Yan Feng, continue to grow.

Sales are up about $125 million, and profits increased by 67% year-over-year.

We narrowed our loss for the quarter by $48 million from the same period last year even though our book tax provision was significantly higher.

EBIT-R was positive $51 million for the quarter, an improvement of $97 million from first quarter 2007.

Our free cash flow remains on tract, and, as of quarter end, we had $1.6 billion of cash as well as additional untapped liquidity under existing facilities.

All-in-all, the quarter was one in which Visteon showed solid performance as we continue progress our goal to becoming free cash flow positive in 2009 and profitable in 2010.

Slide four presents our consolidated product sales by customer for the first quarters of 2007 and 2008.

Overall, sales were only down about $20 million from last year despite a large decrease associated with divestitures and closures of facilities, which totaled $340 million.

Higher sales in Asia and favorable currency were partial offsets.

As it has been the trend, We continue to have a fairly significant shift in the composition of our sales.

Global sales to Ford decreased by nearly $200 million and represent 36% of the total.

With our sales to Ford North America declined five percentage points to 12% of total.

Our Hyundai Kia-related sales increased significantly, growing from 19% of total last to 21% of total this year.

This increase was driven by higher production volumes in Korea as well as global expansion in China and Turkey.

We continue to grow our business with Chrysler this year with the launch of the new Dodge Ram.

Slide five presents our product group sales on a consolidated and non-consolidated basis.

For our consolidated sales, the big change on a year-over-year basis was a reduction of our non-core segment, which declined from 14% of total in 2007 to 7% of total this year.

Decline is attributed to the divestiture of our chassis facilities in Germany and Poland at the end of April 2007 as well our starters and alternators business last August and sale of North American ethanol in January of this year.

This decrease was offset by increases in each of our other product groups with Interiors and Climate growing by two percentage points and Electronics increasing by three percentage points.

Our non-consolidated sales increased by $125 million or 35% to nearly $0.5 billion.

Turning to sales by region on the following slide, sales in Europe were down slightly, reflecting the divestitures I mentioned earlier.

North America declined by five percentage points and now accounts for 26% of total product sales.

Our Asian sales increased six percentage points and now represent 29% of total consolidated product sales as they grew by $158 million to $843 million.

On the bottom of this slide is a regional split of non-consolidated sales.

Asian joint ventures had significant growth increasing 41% or $115 million to nearly $400 million for the quarter.

And, our joint ventures are highly profitable.

Gross margin was $73 million for the quarter, and net income was $30 million, $15 million of which was our share.

This represents a 67% increase over last year.

As you can see, we are much more diversified, and we expect to continue capitalize on our strong position in Asia and to continue to grow our business in this region.

Now, I will turn the call over to Don.

Thanks, Mike.

Slide seven shows our new business this quarter.

We won approximately $125 million of new business, which is slightly below last year's level as certain of our customers have delayed sourcing decisions and, in some cases, have even cancelled platforms as they reexamine their product portfolio in light of certain market conditions .

As you can see, the wins this quarter were primarily in Climate and Interiors and almost exclusively in Asia and Europe.

Slide eight provides the usual brief update on operations.

On the quality front ,we continue to drive improvement as we lowered our PPMs for the first quarter of this year by 40% versus performance in 2007.

Regarding our safety performance, after posting a world-class performance in 2007, we stumbled our way into 2008 as we had an increase of 29% from full year 2007.

We fully expect to see year-over-year improvement for 2008.

Premium costs are down significantly from what we experienced in 2007.

For the first quarter, our costs of $4 million were $10 million better than first quarter '07.

As we discussed throughout last year, we suffered from labor, launch and supplier disruptions, which caused last year's poor performance.

We expect this year to be substantially better.

Finally, CapEx was $10 million higher than a year ago, reflecting our investment in our new business.

We still expect capital expenditures for 2008 to be below 2007 levels.

Slide nine provides an overview on our overhead cost reduction initiative.

Over the next three years, we expect this to provide over $200 million in gross savings as we address our SG&A and engineering costs.

Of this, we expect $80 million in net savings in 2008.

Compared to the first quarter of 2007, we reduced our cost by over $20 million or more than 8%.

This performance was in spite of the weaker dollars translation impact.

Slide 10 shows our shift of manufacturing and engineering head count to lower cost areas of the world.

At the end of the first quarter, 58% of our manufacturing personnel were in low cost areas, and, since 2006, we have improved this ratio by 22%.

Engineering is currently at 36% low cost, which represents a 19% improvement from 2006.

We are on track with our plan and expect to continue to shift our footprint to lower-cost areas of the world.

However, we also do expect some growth in higher cost areas, such as the United States in order to support our new business wins.

Slide 11 provides an update on restructuring.

During the first quarter, we closed our Interiors facility in Bellignat, France, and consolidated the majority of its products into existing French facilities.

Our two U.S.

facilities scheduled for closure in the middle of this year remain on track.

And -- while the discussions regarding the sale of the of our Swansea to Linamar continue to progress.

During the quarter, we also recognized $46 million in charges related to two German non-core fuel tank facilities, which expect to be closed or sold by year end.

So, as Mike mentioned, we fully expect to reach our restructuring goals and deliver over $400 million of savings.

As we announced in January, we did complete the sale of our North American after-market business to Centrum Equities.

The business employed 575 people and manufactured climate control and suspension products as well as starters and alternators, which primarily were sold in the independent aftermarket.

2000 sales were $133 million with a gross margin loss $16 million Cash proceeds were $26 million, and we had a book loss of $40 million, which was included in our reportings for the quarter.

As I mentioned, the discussion regarding our sale of Swansea plant continue to progress.

Importantly, though while these negotiations continue, we have reached agreements with our customers to address the operating losses generated from the plant until these discussions conclude.

Additionally, we are working towards similar agreements for our loss-making operations in the U.K.

I will now turn the call over

Thanks Don, and good morning ladies and gentlemen.

This slide summarizes our financial results for the first quarter.

Product sales of $2.7 billion were even with the prior year.

Yet, as Mike discussed, we continue to experience a shift in composition by customer, product group and region.

Our product gross margin for the quarter was $194 million compared to $115 million a year ago, a $79 million improvement.

EBIT-R, which excludes asset impairments, [walcon] business divestitures and net restructuring expenses, was positive $51 million for the quarter as compared to negative $46 million a year ago, an improvement of $97 million .

Cost improvements in our product groups, including restructuring saving as well as other actions to improve our cost profile, drove much of the improvement.

Free cash flow in the quarter was a usage of $200 million compared to $195 million last year.

Year-over-year, improvement in EBIT-R as well as lower securitization levels were offset by increased cash outlays related to our restructuring actions, timing of recoverable tax assets, higher capital net spending and net movement in pension and OpEx expense and cash payments.

I will address each of these items in further detail.

On slide five, this provides a change in production volumes for the first quarter for key vehicle platforms by customer, by which Visteon has significant content.

These customers account for about two-thirds of our total of first quarter product sales.

And Ikea production volumes were 33% higher than a year ago, reflecting both a significant increase in Asia Pacific volume as well as increased Europe buying, related to new business launched for this customer during the last quarter.

Ford Europe production volumes, which were solid in 2007 were up 3% while Ford north America was lower by about 7% or about 55,000 units.

Production units for Nissan were lower by 17% in the first quarter, reflecting continue pressure on the truck segment.

GM and Chrysler North America and PSA levels for vehicles we have content on were also slightly lower for the first quarter.

As we look to the rest of the year, on the North American production front, we are revising our full year 2008 production forecast for Ford North America to 2.6 million a units, a 100,000 unit decline from our previous expectation.

We also project full-year production volumes for Nissan Trucks with significant Visteon content will be about 20% lower than a year ago.

These declines are largely off-set due to increased projections for Ford of Europe as well as Asia Production volumes.

Slide 16 provides a comparison of our product sales for the first quarter of this year and last.

Total product sales of $2.7 billion in the first quarter were $19 million lower than a year ago.

Although sales were basically flat, sales to non-Ford customers increased significantly offset by lower Ford sales.

Sales of non-Ford customers of $1.8 billion increased $165 million compared to the prior year and represented 64% of our total sales.

This increase reflected the impact of currency, increased new business and higher Hyundai-Kia production volumes.

These factors were partially offset by divestitures and customer pricing.

Ford sales were lower in North America and rest of the world, primarily reflect the impact of divestitures and plant closures.

Ford North America sales of $339 million decreased $121 million and represented 12% of total sales.

Ford rest of world sales of $639 million decreased about $63 million and represented 24% of total sales Currency in the impact of our restructuring plan did have a significant impact on sales in the first quarter.

Currency increase sales by about $181 million, primarily related to the strengthening of the Euro.

Divestitures of plant closures, the majority of which was completed during 2007, reduced sales by about $340 million.

Divestitures do include the impact of the European chassis, which we completed in May of 2007, the starters and alternators business in India , which we completed in August of 2007, and the North American after-market business completed earlier this year.

These three divestures along account for about $225 million of the change.

In addition, to divestitures, product sales also reflect a number of plant closures both completed and planned.

Closures we completed this 2007 include Chicago, Chesapeake and Connersville and account for approximately $100 million of the change in 2008.

We also include in the plant closure category the impact of plants that will be addressed in our restructuring plan, an example being Bedford, which we expect to complete later this year.

Excluding currency, divestitures and plant closures, sales were flat in North America and Europe.

Sales in the Asia-Pacific region increased by over $140 million, reflecting both higher production volumes and new business.

Slide 17 provides a comparison of product group gross margin and the key drivers of the year-over-year change.

Product group gross margin in the first quarter of 2008 of $194 million was $79 million higher than a year ago.

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

Investitures and closures reduced gross margin by $27 million.

In addition, other restructuring-related expenses resulted in an increase in gross margin of $24 million on a year-over-year basis.

We include in this drivers, such items as accelerated depreciation expense, asset dispositions, and benefit curtailments and settlements.

The improvement in these costs is largely attributable to the non-recurrence of a $17 million Canadian pension settlement in the first quarter of last year.

Volume of mix had a favorable impact on gross margin.

New business launches, like the Ikea volume, offset production declines with other customers.

Currency also improved margins by about $30 million, primarily related again to the strengthening Euro.

The largest driver of improvement in gross margin was positive net cost performance of $34 million.

Restructuring savings and improvement in overhead costs were significant drivers as well were ongoing improvements in materials and manufacturing efficiencies across the globe.

These cost improvements significantly exceeded customer pricing in the quarter.

Slide 18 presents our product segment results for the first quarter of this year.

Year-over-year gross margin improved in both absolute dollars and as a percent of sales for all three core product groups.

Climate sales in the first quarter were $874 million, and gross margin was $83 million or 9.5% of sales.

Gross margin as a percent of sales increased 463 basis points when compared with a year ago.

Volume and currency, special items and cost performance all improved margins year-over-year.

Favorable volume was driven primarily by increased Hyundai-Kia sales.

Special items include lower accelerated depreciation expenses, associated with largely with our Connersville facility and a gain on the sale lease back of a facility in the U.K.

completed in the first quarter of this year.

Net cost performance, includes restructuring savings related to the closure of our Connersville facility as well.

Electronic sales in the first quarter were $968 million.

Gross margin was $93 million 9.6% of sales, an improvement of 262 basis points from the prior year.

Special items primarily increased accelerated depreciation had a negative impact.

Favorable volume and currency was driven predominantly from new lighting programs launched last year and the impact of the stronger Euro.

Net cost performance improved gross margins by 238 basis points.

We do expect volumes in the Electronics product group to be lower on a year-over-year basis in the second half of this year, primarily related to poor specific sourcing actions largely attributable to Powertrain control modules.

Interior sales were $841 million for the quarter.

And gross margin were $14 million or 1.7% of sales, a 90 basis point improvement over the prior year.

Volume and currency and special items were slightly favorable, including non-recurrence of accelerated depreciation for the Chicago facility, which we closed in 2007.

Net cost performance was positive for the quarter despite costs related to two new facilities in North America for the launch of Chrysler business in the second-half of this year.

SG&A expenses for the first quarter totaled $148 million or 5.4% of total product sales.

SG&A expense is $21 million lower than the first quarter of last year despite the impact of currency.

The chart at the bottom of this slide outlines the key drivers for this improvement.

Efficiencies related to the impact of our salary reduction program and other cost improvements totaled about $15 million in the quarter.

Four other factors combined to reduce SG&A additional $6 million year-over-year.

(inaudible) reserves had a favorable impact on SG&A of about $3 million, reflecting our continued focus on customer account management.

Lower incentive compensation expense principally related to lower stock price reduced SG&A by $5 million.

Other costs, primarily reduced costs associated with our securitization facility in Europe, reduced SG&A by another $5 million.

These three factors were offset by currency, which increased SG&A by $7 million year-over-year.

As we have communicated in previous business updates, restructuring actions will have a significant impact in in earnings and cash flow in 2008 as we continued execute our plan.

As Don stated, in the first quarter, we recognized $46 million of restructuring charges related to actions in three facilities in Western Europe as well as costs related to staff action in both North America and Europe.

We are now in the 50/50 cost sharing match under the escrow account, and, as a result, $23 million of these charges were Visteon funded.

We did receive about $1 million qualifying costs and other qualifying costs that are not classified as restructuring in our financial statements.

The net impact of restructuring in our 2008 first quarter cash flow was an out flow of $28 million Cash received from the escrow account in the quarter was $22 million, and cash out flow was for $50 million, mostly related to completed actions in Connersville and Bellignat as well as our overhead cost actions.

This compares to a cash inflow of approximately $35 million in the first quarter of 2007.

Slide 21 provides our income tax provision for the first quarter of this year and last's.

Income tax expense in the first quarter of 2008 of $51 million was $34 million higher than a year ago.

In this quarter, both the mix and overall increase in profits countries where we pay tax contributed to a $20 million increase in the provision compared to a year ago.

However, we have made strides in addressing cash taxes paid in certain countries, and we have, for book purposes, established reserves to reflect position subject to audit of about $13 million in the quarter.

We do continue to carry deferred tax valuation allowances in various countries, which generally prevent us from tax benefiting losses, and, accordingly, our effective tax rate will remain volatile for the foreseeable future.

In certain situations, however, we can benefit these losses if there is adequate pretax income from other categories of earnings, such increases in our other comprehensive income accounts.

Such increases as in the past largely driven by currency translation and pension and OpEx remeasurements.

Despite the volatility in our tax provision, we continue to expect our cash taxes for 2008 to be about $100 million even as profits grow in taxable jurisdictions.

Slide 22 provides a reconciliation of net loss to EBIT-R to the first quarter in 2008 to 2007.

EBIT-R was $51 million for the first quarter of 2008, a $97 million improvement from a year ago.

The top of the slide provides a walk from net loss to EBIT-R, and the drivers of the change are detailed below and reflect all of the items that I've previously discussed.

Turning to free cash flow on page 23, free cash flow in the first quarter was a use of $200 million, slightly higher than last year.

Factors favorably impacting free cash in the first quarter compared to a year ago were a lower net loss and improved trade working ,partially offset by net capital investment.

That's capital spending in the change in appreciation expense.

Further last year's cash flow use of $195 million, included an impact of about $41 million related to lower levels of receivables sold under our Europe securitization facility.

Other changes in cash flow of $130 million were higher by $94 million as compared to a year ago.

Representing net restructuring cash outflows of about $30 million, the net impact of OpEx and net pension expense, an excess of cash contributions of about $20 million and an increase in value-added tax assets of about $30 million.

Net debt at March 31st was $1.23 billion compared to about $1.1 billion at the end of 2007 obviously reflecting free cash flow offset by asset dispositions.

Slide 24 summarizes our cash balances at the end of the quarter.

At the end of the first quarter, cash balances totaled $1.6 billion, a decrease from year-end 2007 levels of about $145 million.

This change reflects a free cash flow $200 million offset by cash proceeds from asset dispositions, including $ 26 million for the North American after-market divestitures included earlier this year.

At the end of the first quarter, North America-Europe cash balances totaled about $1.4 billion, of almost which $1.1 billion was in the U.S.

Availability in our revolving facilities remain strong, about $400 million in total.

It is important to note we continue to drive cash flow performance throughout each of our product groups.

As an example, our 2008 compensation plans have been adjusted to include product group specific as well as corporate cash flow objectives.

This slide provides a summary of our full year outlook for 2008.

We are affirming guidance for EBIT-R-R and free cash flow that at we presented the Auto Analyst Meeting in January.

We are still expecting full year EBIT-R-R to improve year-over-year to be about break even.

This includes benefits from restructuring plan as well as additional cost reduction actions, relating to our overhead cost structure initiative.

We are also affirming our full-year free cash flow guidance at a use of about $300 million plus or minus $50 million.

Free cash flow is expected to be in use before 2008 before turning positive in 2009.

We are adjusting our full year-outlook for product sales to be about $10.1 billion.

This is higher than our original guidance, primarily reflecting our latest currency assumptions for 2008.

Our outlook also includes our latest assumptions related to 2008 divestitures and production volumes as previously discussed.

We do believe the remainder of 2008 will continue to be a time of uncertainty, and, as a result, we remain prudent in our outlook as I look out over the rest of the year.

Now, we will be happy to take your calls or

Ashley, if you could please remind the callers how to get into the queue?

Thank you.

(OPERATOR INSTRUCTIONS) Our first question is from Chris Ceraso from Credit Suisse.

Morning.

Good morning, Chris.

Just a couple of questions about some of the assumptions under your guidance.

First, is there any indication that you will be cash flow positive in 2009?

Is there an industry level of sales in North -- for U.S.

or north America that goes along with that, and what is it?

Chris, this is Bill.

As we discussed in January, we obviously marked from an industry perspective what we thought production volumes of that time would be in '08.

As we looked into '09, as you can probably imagine, we were not looking at any really significant recovery moving from '08 levels in time with January into 2009.

So, I would preface that without specifics that we looked at effectively somewhat of a stable market from '08 to '09.

Even if we are talking another 15 million unit year-over-year, you should be cash flow positive?

That is our objective.

Okay, and then, secondly, looking at the 2008 guidance for EBIT-R and cash flow, can can you update us on what you're thinking about raw materials?

How much as has it hit you with so far?

And, what is the expectation for the full your?

As you know, I think on every in the last couple of years, commodities continue to be a potential head wind.

If we look at our landscape, we have been fairly successful with respect to customer arrangements or agreements in respect to offsetting commodity costs.

If you think about Visteon and our various product groups, we obviously have exposure to aluminum and climate from an electronics perspective it is largely in purchased components, but there are raw materials, such as copper, and obviously in interiors it is a larger resin buy, if you will, a plastics buy.

If you look at that, we don't expect commodities pricing to actually decline from levels currently, but from that perspective, we continue work with the customers with respect to recoveries.

Have you outlined a figure, Bill, either in terms of the gross or the net impact in '08 versus '07 in terms of commodities?

We have not provided that, Chris.

And actually, just the last one, also on commodities, we have seen a few companies that have had gains on mark-to-market on their hedges.

Was there any of that in the first quarter for Visteon?

Nominal, Chris, from a commodity hedge.

Okay.

Thank you very much.

Our next question is from Jeff Skoglund of UBS.

Can you hear me?

Yes, we can hear you.

Great.

Okay.

I think a question for you on EBIT-R guidance for the year.

You did not take it up.

I think you beat most people's expectations for the first quarter.

And, if I am doing the math right, it looks like your guidance implies that EBIT-R should be down year-over-year for the balance of the year.

Is that accurate, or am I looking at that wrong?

Yes, I guess, I would say it is down, Chris.

Although we are exceedingly pleased with the progress the company is making as shown by the year-over-year results, I think that given the uncertainties that is created by the U.S.

recession, the difficult credit markets, raw material, slash commodity prices at or near record highs.

We all think it is prudent to leave the full-year guidance unchanged right now.

Okay.

And on the raw materials side, I think it is probably baked into the net performance number, but did you give an impact for the quarter?

You are exactly correct.

It is in the net cost performance as is obviously customer pricing and other issues.

We have not provided that information.

I think it is needles to say that we don't work with the customers with respect to arrangements on recoveries with that, Jeff.

Do you expect that to be an increasing head wind throughout the year?

Was there some sort of lag effect where recent increases did not impact necessarily impact Q1, but will increasingly impact the coming quarters?

Yes, I do think that will be increasing as we move through the year.

So we have arrangements and contracts with suppliers that have come off contract with respect to oil.

Who knows what the cost could be as we move through the course of the year, but it is probably something that will be incremental challenge to us as we move through the year.

Okay.

And then we talked before about the Interior business, and you have some contracts rolling off that are not as profitable as some ones that you anticipate coming on stream over the coming quarters.

And I guess the question is you did some margin improvement in Interiors but when should we really start to see the impact of some of the less profitable contracts rolling off and the even more profitable ones rolling on?

We somewhere have two significant launches that were just in the startup process with.

One is for Chrysler in North America, and the other is for PSA in France.

And, so, I would say that those will fully launch kind of late this year, let's say, late third quarter, early fourth quarter.

So, that you will see that benefit of those two programs really start to pick up speed fourth quarter, first quarter of next year.

Okay.

The support agreements that you had with customers for the U.K.

plants, did that affect the full quarter?

Or does that come online at some point or was that in effective prior quarters?

It impacted two-thirds of the quarter.

Of the first quarter.

Okay.

Lastly, pension and OpEx.

You have guidance in the 10-K for cash outlays for pension and OpEx in the year.

I was wondering if you could discuss what the outlook for expense was for each of those?

I think we provided that in January as well.

If you take a look at total combined OpEx and pension expense, we are looking in 2008 at about $50 million.

As we discussed, we do have curtailment gains and losses as we continue our restructuring plan, and, then, on the cash side we said about $140 million between the two continue, OpEx and pension contributions, during the course of 2008.

Great.

Thank you.

Our next question is from Joe Amaturo with Buckingham Capital.

Good morning.

Hi, Joe.

How are you?

Quick question.

As it relates to the other on the cash flow slide that you put up, could you give us a sense of how that should trend as we progress through 2008, and what are some of the main items to continue in that bucket?

Sure.

This is Bill.

As we look at the free cash flow for the quarter, obviously, the use and the other changes of $130 million, let me kind of restate what's walking through that in the first quarter.

We do have timing with respect to value ad attacks.

It is a drag in the quarter of about $33 million.

We expect that to trend out during the course of the year so it'sl not going to be a repeating feature.

From a restructuring perspective that has a net outflow of about $30 million.

As we discussed during all of our business updates, we do expect 2008 to be obviously a cash use if you will from a restructuring perspective.

That will probably trend down.

That gets a little lumpy with, Joe, respect to recoveries from the escrow account from cash payments made to execute the restructuring actions.

And then we have net OpEx pension cash payments negative about $20 million.

Also what is in here is you have interest on our bonds, which is paid in the first and third quarter.

So, you're going to have a hit, obviously, in the first quarter.

So I am nut shell, I would expect that $130 not to recur during the course of the year.

Okay, good.

And, second, as it relates to the Swansea customer agreement, you referenced that two-thirds of the quarter, is there anyway to quantify what the benefit was in the first part of the quarter as a result of the customer agreement?

It is about $6 million.

Okay.

Thank you.

That's all I have.

Good quarter.

Thank you.

Thank you.

Our next question is from Mark Warnsman of Calyon.

Good morning.

Regarding the slide 10, movement to lower costs and specifically engineering head count, I am curious as to what trends you are seeing in low cost countries?

When you think about the weakness in the U.S.

dollar, the relative productivity of a engineer in a low cost country say North America and Europe and availability of those engineers in low cost markets, is this a trend you see continuing?

How long can it continue?

How do you go about evaluating the relative pluses and minusing of sourcing engineering for low cost markets?

In the simplest sense, we look at the lowest delevered cost of the service to us.

Certainly, in a start up situation you do have inefficiencies, and, typically, you would see two engineers for every experienced engineer here.

So you have got bake that into your cost model as to whether or not it is a benefit or not.

Certainly, as you point out the weakness in the U.S.

dollar also plays into that, but you have to also recognize for us, we have got substantial engineering resources in Europe, and so that benefit so to speak of the U.S.

dollar is not translating towards us.

So we look at the lowest delivered cost for the service.

We continually evaluate whether that makes sense to do for both the business and our customers, and we will continue do that as we look forward.

Certainly, from our perspective, you do have to service the customer, so there will always, from our perspective, be the engineering -- the significant engineering support in the high-cost countries to service the customer base.

Thank you.

And, if I could, one additional question on slide 15 regarding key platforms and production units.

Oftentimes the focus is on Ford and non-Ford business, but, we you look at the non-Ford business, how would you characterize your present customer mix?

Are you comfortable that you penetrated the -- I mean, do you consider your mix -- the underlying businesses of your customers to be particularly strong, or is that something that you would like to diversify further on the non-Ford side of the business?

Two points there.

One is, it is not really a diversification away from Ford.

We would like to grow the Ford business profitably like we would any other customer.

So, it's not a diversification away from Ford.

Okay.

We also recognize the fact, though, that we are underweighted so to speak with some of the other major automotive manufacturers around the world.

So, certainly, we are trying and would like to expand those relationships.

And, what might be the top two or three?

I mean what is the best way for you to go about doing that in a general sense?

What re those under-represented OEMS particularly looking for?

Well, I think all the OEs look for the same thing, quality, delivery, service costs, technologies, and, certainly, that is how we are trying to compete.

It is very, very important for us to make sure that any of the new programs that we win are profitable new business.

So, we don't compete below that level so to speak.

Also perspective of, as our quality statistics are showing, we are producing a much better product today than we did before.

And we continue to drive that down, and I am -- I expect that we will be able to compete with anybody in terms of a quality and cost perspective if you look at our footprint, manufacturing and engineering.

That too from a cost perspective is going to allow us to compete with anybody.

So, from our -- my perspective, we are doing the right things, calling on the customer and just pounding the pavement, so to speak, to win business.

Sounds good.

Thank you for your help.

Our next question is from Patrick Archambault with Goldman Sachs.

Hi, yes I wanted to follow up a little more on the slide 18, where you present the product results.

In electronics, can you give us a sense of -- does the Q1 impact, I might have missed this.

But, does it include the impact of the [engenell] electronics de-sourcing from Ford?

And, so, can you sort of quantify that for us and give us a sense of what offset it to help bring those margins up year-on-year?

The electronics business does include the results of Powertrain control modules, obviously.

So that is a clean stub, if you will with respect to the performance of that product group.

They have done very well with respect to our material usage and manufacturing efficiencies in the product group.

You will recall a year ago, the first half was very difficult for our electronics business.

Concurrently, though, as we stated as we go into the second half that Powertrain control module business will exacerbate the results from a sales prospective and margin perspective.

That' part of the closure in divestiture analysis that we are looking at year-over-year.

So, again, we -- it is clean with respect to what is going with the Powertrain control modules.

Those modules change-overs that occur in the second half, most notably in North America.

It'll be pressured.

Okay.

Great.

Thanks.

And just one last housekeeping one.

Can you remind us what the cash balance was in the U.S.

as of the fourth quarter?

As of the fourth quarter, it seems like such a long time ago already.

The U.S.

balance was $1.190.

Okay.

Great.

Thanks a lot guys.

Your next question is from Eric Selle with JPMorgan.

Can we get that cash at the end of the first quarter as well for the U.S.

cash while we are on that topic?

Sure, Eric, it is a $1.60 billion.

A $1.60 billion.

Okay, thanks.

Looking at your non-consolidated net income, it looks like you are almost half way to your '07 number all the way through the first quarter.

Is that sustainable?

It looks like it is growing very rapidly.

The Asian operations are going very well.

The markets continue to grow, and our market position in China specifically, is quite strong.

So yes, we expect it to continue.

And, then, further on that subject, as you look at Yan Feng, how separate from your other businesses over there?

If you were to decide to sell that does the bank have any claim on that?

I know it's not consolidated so it's not 25% of EBITDA.

So, could you guys freely use it as proceeds?

Well, yes, Eric.

Yan Feng is the cornerstone of our business in China.

So, all -- mostly joint ventures we have are under the umbrella of Yan Feng.

So, it is kind of that way, but it supplies a lot of our customers.

So, to try to carve that out as a separate identity would not make sense for us strategically.

It is a great foundation for us, and Don talked about the growth in the various customer mix that we have in Asia, and Yan Feng is a key asset that allows us to grow that business with our customers as in fact they expand in Asia and china.

So we look at Yan Feng as an integral part of our strategy today.

As the customers go more and more towards global platforms and global sourcing, Yan Feng has -- is certainly a key component of our ability to compete.

Okay.

And, then finally, just on restructuring charges, what are the plans cash in expenses for the year?

Do you have those numbers?

Yes, we've actually in the non-GAAP reconciliations gap.

If you take a look at, we've actually moved it up a bit, we're looking at restructuring charges and other reimbursements costs for full year of about $160 million and reimbursement from the escrow account about 50%, obviously, so 80 million for the full year.

Alright, thank you, sir.

Alright.

Our next question is from Adam Plissner of Credit Suisse.

Hi.

Thanks.

On slide 17, the disclosure is just a little bit different.

When you broke out the currency gain and gross margin of $30 million, I think it was offset a little bit by a negative impact of SG&A.

Where was that before?

May you could put it in perspective.

Were currency gains, how big were they, let's call it, overall 2007 and maybe bridge us to your outlook?

How much are you viewing as currency gains as the opportunity to get back to break even EBIT-R?

This is Bill.

Our currency, I think prior slides probably was depending on the magnitude was kind of in our all other pillar if you will.

And, again, you are referring to slide 17, right?

Correct.

So that $30 million for example on that depending on the moves and the various currencies that we operate was probably buried in the all others.

But, again, we are trying to provide transparency with respect to drive in the business.

If you think about just the Euro, if you rook at quarter-over-quarter, the Euro weighted average a year ago was about $1.31 or $1.32 as to where it is today.

And, so, that's going to -- and the Euro obviously moved during the course of 2007 upward.

So we're probably getting the biggest benefit, if you will, in the first quarter in respect to currency.

And, as we go through the rest of the year, that benefit year-over-year is not going be as substantial.

As we look to the rest of the year, and the forward rates and so on and so forth, we're kind of marketing it at $1.57 right now.

Again, two-fold.

Our assumption for 2008 that we shared in January part of that was, obviously,y already the year-over-year was already in those numbers as we moved through last fall.

The second piece would be, this is probably the largest benefit, is in this quarter with respect to currency.

Okay.

That is helpful.

How about, Bill, separately from that.

Any other, let's call them, special items and/commercial settlements and/or curtailment gains that help us.

Let's think about the bridge to break eve, EBIT-R.

What do you sort of include to get there?

Are there curtailment gains baked into that expectation or are there special items baked into that?

Maybe just strip out what the core net cost performance benefits are.

Right, and you will see as we progress, and we have talked a bit ability it, Adam, previously.

As we look at the close sure for example of Bedford, we have disclosed that are result in a curtailment gain to us, very similar to the Connersville gain.

So, if you look at it year-over-year, it's somewhat muting it actually.

That will be almost equal, quite frankly.

It's almost $40 million.

And, that gain will come in during the course of the next two quarters.

With, again, to respect to the half , we're probably going to continue to have some choppiness with respect to items that arise from restructuring.

But, again, I think my largest piece that we called out publicly is going be the curtailment gain with respect to Bedford during the course of this year.

And, probably, the last point I want to make is we will have costs in the back end of the year with respect to further implementation of overhead cost actions.

We talked about that in January.

We have got about $30 million or so of implementation costs that we spoke of as well as non-reimbursable

Okay.

If I could summarize, Bill, the $17 million settlement that occurred last year in the first quarter, that was a benefit year-over-year this that carries through.

On top of that there is a $40 million curtailment gain that will occur over the next couple of quarters, and on top of that we are talking about there really are not other special special items.

Adam, yes.

But, to your point on the curtailment gain, there was a curtailment gain as well in 2007.

Okay.

So not year-over-year.

So that is flat.

Correct.

Thanks a lot.

Appreciate it.

You bet.

Our next question is from Frank Jarman of Goldman Sachs.

I have a question on slide four.

Ford North America decreased to about 12% of your consolidated sales this quarter.

What should we expect to be the future run rate going forward?

Is there a chance this goes lower through the year and into next year?

Yes.

When we look at North America in total, we are down in the 26% range.

You have got offsets coming within North America.

Don talked about new program launches that come on and so on.

But, we have also publicly said that by 2010, our Ford North America number will drop to about 6% of our revenue.

And as Don said, we don't see that continuing.

We want to grow that business and grow it profitably with -- among the three core products that we manage today.

Okay.

And then on the cost cutting actions, as you guys shut down Bedford this summer, can you give me a sense for what the full run rate savings will be associated with that plant closure?

Year-over-year, I think we actually public say it is about $40 million.

Okay.

And then last question I had is as you guys think about liquidity, you still do have the 2010 note maturity down the road.

Any update to your thinking on that and potential to repurchase bonds in the open market?

Obviously, we have the want to do that under the term loan, and we will just don't do what we have been doing and monitoring the markets.

We really are focused on executing our restructuring plan, but obviously we keep an eye on that maturity.

Thanks.

That is all I had.

Thank you.

You next question is from [Derek Linger] with Jeffreys and Company.

Thank you.

When do you plan on filing the Q?

We plan on filing the Q yet this week.

Thank you.

Our next question is from the line of Chester Luy Barclays Capital.

Most of my questions have been answered, so just a few quick ones here.

Can you give us a sense of your entire costs for the quarter, and where you see it as trending for the year?

We have -- there has been an ambient level of supplier costs in '07 as well as '08.

We really don't publicly disclose what that is, but it is not that significant, quite frankly.

Our purchasing groups and product groups are doing a good job in managing the supply base and working with the supply base, basically, frankly.

But from that perspective, it has not been something very significant to us at all.

It is included in the net cost performance.

Got it.

Can you share with us the size of your annual steel purchases, and will you will able to quantify the impact of higher steel prices on 1Q results?

Yes, steel is not really a significant exposure for us.

It is more from an aluminum perspective.

On a resin perspective, we have not put out what the exposures would be.

We continue, obviously, to work with customers with respect what we can do from a recovery perspective and sharing of those costs.

But again, steel is not the exposure at Visteon.

Alright.

Final question, as you look at your present product portfolio in your three major business, are you planning to de-emphasize any of these?

No.

Not at this point in time.

We think we have good market positions in all three.

We have talked about our Climates/Interiors business being number two in market share.

We think we have a great global footprint on those and will continue to grow those.

And Don talked about the new business wins in Electronics.

There is a number of products within the Electronics group and driver information, audio entertainment.

We have very strong positions in, and we continue to win business there and grow those as well.

So we think we have got three products that we can compete globally grow and improve the financial performance of, and that is what we are all focused on execution to accomplish that.

Thanks, a lot.

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

James Leda of Merrill Lynch.

Hi, good.

Good afternoon now, and thank you for taking the question.

Can you guys hear me?

Can you guys hear me?

Yes, we can, James.

I don't think that this has been addressed yet.

Unfortunately, I dropped off for about five minutes in the middle.

So, if this is a rehash, please let me know?

I wanted to ask about 2009 free cash flow guidance.

I think you guys are on the positive, maybe ten plus/minus.

Can you kind of remind us, having, A put that in context, or are you still comfortable with that guidance and going with it?

And, kind of rehash for us what the bigger parts for that year-over-year improvement will be?

In terms of are we comfortable, we are absolutely comfortable to say that free cash flow positive in 2009.

And with respect to emphasize year-over-year as we move from '08 into '09 from a cash flow perspective, we kind of highlighted that at the ANEA presentation.

Obviously, we're going to have an EBIT-R improvement as we move through our restructuring and overhead cost action efforts.

That is about a $200 million improvement year-over-year from '08 to '09.

As well as '08 is a significant restructuring year from a cash perspective.

If you look at the cash flow '08 versus '09, we're not going to have those cash outflows that we expect to have as we wrap up most of the (inaudible) during the course of 2008.

Those really are the big drivers.

It is an improvement in EBIT-R of about $200 million.

We've got some restructuring impact.

And, obviously, from an OpEx and pension perspective, we're seeing some as well from '08 to '09.

So, those really have not changed quite frankly as we view the business right now.

Okay.

That is all.

Thank you very much.

Thanks a lot.

Great.

Well, thank you for participating in today's call, and I will be around for the rest of the day to answer your questions.

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

Thank you for your participation.

You may now disconnect at this time.

Good day.