Visteon Corp (VC) 2011 Q3 法說會逐字稿

Good morning, and welcome to the Visteon third quarter 2011 earnings call.

All lines have been placed on mute to prevent any background nice.

As a reminder, this conference call is being recorded.

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

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

Please refer to the slide entitled Forward-looking Information for further information.

Presentation materials for today's call are posted to the Company's website this morning.

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

I would now like to introduce you to today's host for today's conference, Mr.

Chuck Mazur, Vice President, Investor Relations for Visteon Corporation.

Mr.

Mazur, you may begin.

Thank you, Brandy.

Good morning, and thank you for joining us for Visteon's third quarter 2011 earnings call.

As Brandy mentioned, I'm Chuck Mazur, the new Vice President of Investor Relations, and I look forward to working with all of you, and will be available for follow-up questions after this call.

As Brandy also mentioned, our presentation materials have been posted to the Investor Relations section of the website.

Today's presenters are Don Stebbins, Chairman, CEO and President, and Marty Welch, Executive Vice President and Chief Financial Officer.

Following the formal presentation, we will open up the lines and take your questions.

With that, I would like to turn the call over to Don.

Thanks, Chuck, and good morning everyone.

During today's presentation I will review Visteon's 2011 third quarter, and then I will turn the call over to Marty Welch for the financial review.

In the third quarter, our consolidated sales totaled $2 billion, 20% higher than the third quarter of 2010.

Third quarter and year-to-date sales improved for all of Visteon's product lines versus 2010, largely driven by higher production volumes and favorable currency.

Adjusted EBITDA was $166 million, up 11% from a year ago.

And we ended the quarter with strong liquidity, $780 million in cash, in debt of $588 million, translating into a net cash position of $192 million.

Our $220 million asset-backed revolving credit facility remains undrawn.

During the quarter, we were rewarded over $300 million in incremental new business, showing growth across all of our product lines and in all regions of the world.

Through September, our year-to-date new business wins of $865 million are well ahead of the $606 million in new business that we won for the entire full year of 2010.

For the full year 2011, we are affirming our full year guidance given during the second quarter earnings call for product sales and adjusted EBITDA, and improving our free cash flow guidance by $25 million.

Slide three shows the breakdown of our third quarter revenue of $2 billion by product line, by region, and by customer.

The slide also shows the impact of our non-consolidated joint venture sales of $951 million on a market penetration basis.

Climate, our largest product line, generated 48% of our total consolidated sales in the quarter.

On a market penetration basis, interiors was our largest product line, accounting for 43% of our sales largely due to Yanfeng, our non-consolidated interiors joint venture in China.

Climate represented 36% of our market penetration, followed by electronics at 16%, and lighting at 5%.

On a regional basis, we continue to experience strong growth in Asia, with the region accounting for 44% of our total consolidated product sales.

Europe represented 33%, North America 17%, and South America 6%.

Including our non-consolidated affiliates, Asia increases to 60% of our market penetration, while Europe, North America, and South America represented 24%, 12% and 4%, respectively.

Hyundai-Kia accounted for 32% of our third quarter sales, and Ford accounted for 26%.

If we include our non-consolidated affiliates, Hyundai-Kia and Ford contributed 22% and 21% of our sales respectively.

On slide four, we compare our year-to-date regional consolidated and market penetration based sales compared to regional production.

You can see that year-to-date, 47% of global production was in the Asia Pacific, while 42% of Visteon's consolidated sales were in the Asia Pacific region.

When we include our non-consolidated affiliates, 58% of our sales are in the Asia Pacific region.

You can see that we are well-positioned in a region of the world where industry analysts expect strong growth over the next several years.

On slide five, you will see that Visteon's third quarter consolidated sales increased by 20% year-over-year, and outpaced industry vehicle production volumes, which increased 5% over the same period.

Visteon sales, when adjusted to exclude the impact of divestitures, closures and currencies, increased 8% versus 2010.

When we include our non-consolidated sales, Visteon's sales are up 14% versus 2010.

On slide six, you can see we continue to win significant new business.

For the third quarter, new business wins totaled just over $300 million, giving us a 9-month total of $865 million.

For comparison purposes, in the full year of 2010, we won $606 million in new business.

Clearly our strong balance sheet, our technology, our footprint and our service are proving be valuable to our customers as we compete to win new business.

On slide seven, we provide an overview of our business wins by product line and by region.

In the third quarter and on a year-to-date basis, climate represents the majority of our business wins.

However, as you can see, we continue to win business across all product lines and in all regions.

Slide eight provides an update from our prospective on the Thailand situation.

Visteon has three manufacturing facilities in Thailand with about 850 employees.

Our facilities were not damaged, and our employees are safe.

These facilities manufacture and engineer climate, interiors and electronics products, and represents about $215 million in annual consolidated sales.

Our largest customers in Thailand are Nissan, Auto Alliance, General Motors and Honda.

In terms of financial impact, we are estimating loss sales and profits of approximately $25 million and $6 million respectively in the fourth quarter of 2011.

There remains a lot of uncertainty around supplier and customer capability as it relates to Thailand.

We continue to watch the situation closely.

And with that, I will now turn it over to Marty.

Thanks, Don, and good morning everyone.

As Don stated, third quarter product sales of $2 billion were $335 million, or nearly 20% higher than the third quarter 2010.

Sales were higher across all products and regions, with our climate business enjoying the largest increases, and Asia Pacific providing the largest contribution on a regional basis.

Adjusted EBITDA was $166 million for the quarter, $17 million higher than a year ago.

Our adjusted EBITDA excludes the impact of the 2010 OPEB termination, restructuring costs, reorganization and other costs which impact our reporting gross margin.

Moving to slide ten, on a year-to-date basis, 2011 product sales improved $751 million, versus 2010 to $6.19 billion.

As in the third quarter, year-to-date sales improved versus 2010 for all products and regions.

Adjusted EBITDA was $526 million year-to-date, $50 million higher than a year ago.

Slide 11 highlights or product sales performance for the third quarter and year-to-date.

Volume and mix increased sales by $164 million in the third quarter, and $595 million year-to-date, reflecting an improved OEM production environment, as well as strong positions with Ford and Hyundai-Kia.

Divestitures and closures lowered sales by $19 million in the third quarter, and $144 million year-to-date.

More than 60% of year-to-date decrease impacted North America as we completed the exit of a number of interiors and electronics facilities in the first half of 2010.

Currency favorably impacted sales by $204 million in the third quarter, and $377 million year-to-date, principally reflecting the weakening dollar versus most major currencies, including the Euro and the Korean won.

As we have previously mentioned, year-to-date sales increase in each product line, with climate providing the largest contribution in both the quarter and year-to-date.

Moving to slide 12, as of September 30, 62% of our employees were in low-cost countries, up from 57% at year-end 2009.

Our sales per employee also continues to improve from $199,000 in 2009, to $253,000 in the third quarter of 2011, a 27% increase.

Turning to the climate business on slide 14, climate sales in the third quarter were $1 billion and gross margin was $79 million or 7.9% of sales.

On a year-to-date basis, climate sales were $3.04 billion, and gross margin was $258 million, 8.5% of sales.

Climate's gross margin, excluding the impact of OPEB terminations and reorganization items, decreased by $22 million in the third quarter, and $56 million year-to-date when compared to last year.

The entire decrease can be explained by the impact of the non-reoccurrence of benefits associated with the 2010 customer agreements, and increased D&A resulting from the adoption of fresh start accounting.

Key performance drivers, volume, mix, currency and net cost performance on a combined basis were flat for the third quarter, and slightly positive on a year-to-date basis.

Though climate net cost performance has been negative in 2011, this metric has improved sequentially in each quarter of 2011.

On slide 15, we see the climate sales increased year-over-year by $140 million in the third quarter and $380 million year-to-date.

Both volume and currency were favorable factors.

Over half of climate sales are in Asia Pacific and Hyundai-Kia and Ford are the largest customers, representing 46% and 24%, respectively.

We've also included, for the first time on our website, a direct link to Halla's financial statements.

This link can be found on the main page of the Investors section of our website by clicking on the HCC Financials link.

This will redirect you to Halla's financial statements that were prepared under Korean IFRS, and translated into US dollars.

These statements should be available later on today.

Turning to electronics on slide 16, our sales in the third quarter totaled $338 million and gross margin was $30 million.

Gross margin included a $7 million charge relating to the closure of our Cadiz, Spain manufacturing facility.

Adjusting for this item, gross margin for the quarter was 10.9% of sales, ahead of our results in the first and second quarters of 2011.

For 2011 year-to-date, sales were $1.05 billion, and gross margin was $105 million.

Electronics gross margin, excluding the impact of OPEB terminations, restructuring and reorganization costs increased year-over-year by $21 million in the third quarter, and $37 million year-to-date.

The non-reoccurrence of benefits associated with 2010 customer agreements and increased D&A negatively impacted margin.

The other key performance drivers, volume and mix, divestitures and closures, currency and net cost performance, improved electronics margins by $25 million in the third quarter, and $48 million year-to-date.

Electronics sales increased by $40 million in the third quarter, and $112 million year-to-date.

Favorable volume and currency were the main drivers.

45% of electronics sales are in Europe.

From a customer perspective, Ford is our largest customer, contributing 44% of total sales.

Turning to interiors on slide 18.

Sales in the third quarter were $606 million, gross margin was $31 million, or 5.1% of sales.

You'll note that sales and margins have both decreased versus the second quarter.

As we highlighted during our second quarters earnings call, second quarter sales and margins benefited from customer agreements.

Similar agreements provided only a minimal benefit in the third quarter.

On a year-to-date basis, sales were $1.85 billion, and gross margin was $116 million.

Interiors gross margin, excluding the impact of OPEB and reorganization costs, was up $1 million year-over-year in the third quarter, and up $21 million year-to-date.

The key performance drivers, volume and mix, divestitures and closures, currency and net cost performance, were relatively flat in total for the third quarter and positive year-to-date.

Slide 19 shows that interior sales increased by $115 million in the third quarter, and $213 million year-to-date.

Volume and currency were both favorable factors.

On a regional basis, interior sales are fairly balanced between Europe and Asia Pacific, and the four largest customers are Hyundai-Kia, Renault-Nissan, Ford and PSA.

You should note that this information reflects our consolidated sales only, and does not include unconsolidated sales from our joint ventures, such as Yanfeng Visteon.

Moving on to lighting on slide 20.

Sales in the third quarter were $131 million.

Gross margin was $8 million, or 6.1% of sales.

Lighting's year-to-date sales were $394 and gross margin was $15 million.

Lighting's gross margin excluding the impact of OPEB, reorganization, increased year-over-year $5 million in the third quarter, and $4 million year-to-date.

Favorable factors included lower D&A and higher volume, offset by negative cost performance.

Lighting sales increased year-over-year by $31 million in the third quarter, $49 million year-to-date.

Two-thirds of lighting sales are in Europe, with the remainder largely in North America.

The largest customer is Ford, followed by General Motors and Jaguar Land Rover.

Moving to slide 22, SG&A expense totaled $100 million in the third quarter, $9 million higher than the third quarter of 2010.

Year-to-date, SG&A expense was $313 million, $21 million higher than 2010.

Excluding the impact of the termination of OPEB plans, reorganization, other employee costs, SG&A increased by $12 million in the third quarter, and $27 million year-to-date.

The drivers of the change in SG&A are outlined on the right side of this slide.

The increase is largely explained by currency, intangibles, amortization related to fresh start accounting, and increased expense related to employee equity awards.

Despite the increase in cost, SG&A as a percent of sales improved slightly for both the third quarter, and on a year-to-date basis.

On slide 23, we see that the third quarter of 2011 equity and net income of Visteon's non-consolidated affiliates totaled $43 million, an increase of $8 million, or 23% versus 2010.

Higher OEM production volumes, particularly in China and (Inaudible - audio break) favorable customer positions with SAIC, SVW and SGM drove significant growth at Yanfeng Visteon and its affiliates.

On the right side of this slide, we've provided a summary of YFV's financial results on a US GAAP basis, and this information is also disclosed in notes to our periodic SEC filings.

On a US GAAP basis, YFV's net sales rose to $740 million in the third quarter of 2011, net income is $68 million in the current quarter decreased approximately 30% compared to 2010.

Moving to slide 24, adjusted EBITDA in the third quarter was 2000 -- of 2011 was $166 million, compared to $149 million in the third quarter a year ago.

On a year-to-date basis, adjusted EBITDA improved from $476 million in 2010 to $526 million in 2011.

Despite higher absolute adjusted EBITDA, as a percent of product sales, adjusted EBITDA decreased to 8.1% in the third quarter, versus 8.8% in 2010, primarily due to currency and negative net cost performance.

Free cash flow in the third quarter of 2011 was a use of $24 million, year-to-date free cash flow was a use of $130 million.

Cash from operating activities in the third quarter was $35 million and $55 million year-to-date, reflecting trade working capital usage, cash taxes, pension contributions, and payment of Chapter 11 related expenses.

Capital expenditures were $59 million in the third quarter.

Of this amount, $43 million was in climate, mostly driven by Asia, and primarily in support of future customer programs.

Cash balances, including restricted cash on September 30, were $780 million, down $81 million from June 30, primarily due to negative free cash flow, and negative exchange.

Slide 26 provides an overview of our 2011 year-to-date product line capital expenditures.

Through September this year, $125 million, or nearly 70% of Visteon's capital expenditures, have been related to climate -- to the climate product line.

On a regional basis, more than half of Visteon's capital expenditures support the Asia Pacific region.

Now, turning to Duckyang on slide 27.

On Monday of this week, Visteon sold a small portion of its investment in Duckyang, one of our interior joint ventures, reducing our interest to a non controlling 50%.

Duckyang will be deconsolidated from the Company's financial statements, and equity method accounting will be applied effective November 1.

Had Duckyang been deconsolidated for the period ending September 20, 2011, year-to-date sales would have been $5.67 billion versus the $6.19 billion, and gross margin would have been 8.6% versus the 8%.

My last slide, 28, talking about our guidance.

As Don stated, we're reaffirming our full guid -- full year guidance for product sales and adjusted EBITDA, and improving our guidance for free cash flow.

Full year product sales guidance is $8 billion to $8.2 billion, our adjusted EBITDA guidance is $660 million to $680 million, and our full year free cash flow is projected at a use of $150 million, the change due to lower claims and restructuring.

That concludes our third quarter presentation.

Before we open the line for questions, I would like to address recent media reports that have speculated on specific actions Visteon is said to be exploring.

Our practice is that we do not comment on rumors and speculation.

So, at this time, we would like to take your questions, and Brandy, please open up the call for the Q&A session.

Thank you, sir.

(Operator Instructions).

Your first question comes from the line of Colin Lincoln of UBS.

Good morning.

[Hi], Colin.

I know you just said you wouldn't comment on the recent news, but any color on your priority in terms of the segments in your long-term view, and any update on your interest in the other 30% of Halla?

Is that something that your -- has changed?

I think, in the Frankfurt show, you indicated maybe you wouldn't be willing to use any cash at this point in time?

I'll follow on Marty's comment that we won't specifically comment, but we have been, I think, pretty clear in terms of our other comments in terms of remaining convinced that portfolio optimization is an important part of the Visteon story in terms of maximizing shareholder value, and that in either scenario, either acquiring or divesting, we certainly will remain disciplined and thoughtful throughout that process.

Our expectation is that we're going to be a leader in our product groups, and if there's not a clear path to that leadership -- and that's both from a customer viewpoint as well as from a return profile -- then we'll certainly move to -- move to help that business.

Okay.

Any color, Marty, in terms of your -- how maybe you'll do things differently, in terms of taking over as CFO?

As I've gotten here, I'm in my third week, so getting to know the team here, we have a really excellent finance team here, and a lot of good operators.

I can tell you there's a lot of focus on the operating side, on the net cost performance metric, and people are working real hard.

We're going to continue to be very open, and tell people what we're doing, and try to move the Company forward.

And -- and any color on why you went -- brought you over to this job -- I mean, since the press release didn't really provide any details.

What sort of attracted you to the Company?

Well, you know, I have a history in the auto industry, and I spent ten years at Chrysler, and in the past I was the CFO Federal-Mogul.

I know the space.

I wasn't specifically looking for another full-time job, but it came at me, and I had a couple of sessions with Don, and the opportunity looked very intriguing, and so I guess, in a real sense, I was recruited.

Okay.

I guess more on the quarter.

Why the strategic action with Duckyang.

I mean, why the sale of that --part of that interest?

This was a transaction that we had been working on for five or six months or so, and just given the way the business is constructive, it's not advantageous for us to have to consolidate it.

Okay.

I think you're aware it's -- it's a significant amount of pass-through business, and so it -- it's really not an advantage to us to consolidate that entity.

So when this comes out, does that mean the interiors margin will look a little bit better for what's remaining?

Yes, absolutely.

Okay.

But this would also mean that your mix, in terms of being 58% Asia -- I guess the 58% will stay the same -- but the consolidated mix will go down once this is taken up -- this is all Asia, right?

That's correct.

Can you actually provide color on your exposure to the [wand]?

Because I know that that was kind of volatile this quarter, I thought it'd be a bit more of an issue, I mean, it seems like there's more headwind in climate?

Right, so what happens is we're a little out-of-balance on the [wand], because the cost base in climate is heavily [wand], but when you get over to the sales side, a meaningful amount of sales are in dollars or Euro so you don't get the exact matching when the [wand] moves.

Contrast that with our Euro situation where we're much more in balance with cost and revenue.

Okay.

And what per -- I mean, any sort of ratio between the cost and the sales difference?

So the -- the revenue, a portion of the revenue in climate is not in [wand] is probably about a third.

Okay.

Just one last one.

The -- you didn't change your guidance today, even though your numbers came in a little bit better than expected.

Particularly in terms of sales, is the deconsolidation of Duckyang part of why sales guidance didn't change since revenues seemed to come in pretty strong (Inaudible).

Right, so as we look at Q4, you're going to have the two months less of Duckyang in there, but you also have the impact of the floods in Thailand, also that we see softening in South America, specifically at one of the plants, one of the Ford plants has been shut down for a significant portion of Q4.

We also see softening in India and in China.

So as we look for the next couple of months here, it's a -- it's a fairly uncertain environment, in terms of production, which is why we didn't move up the sales line.

All right, thank you very much.

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

Good morning, John.

First question, on page six, you're showing a pretty good ramp up in new business wins.

I'm just curious, as we think about that in -- in two factors.

First, obviously, your emergence has given you a little bit more credibility or attractiveness to -- to your customers, so it sounds like that's helping out.

Sort of the second factor is there's a lot of speculation in the market and in the -- in the industry that the Company could be -- part of the Company could be sold off.

I'm just curious as you're going to market with your customers, how those two factors really play out, and as you're going to market with those customers to win new business, is it specifically through Halla, specifically through Duckyang, or is it -- are you going to market with those guys with your customers as Visteon?

In terms of, I guess I'll specifically address the Halla and Duckyang.

Those two businesses, from how we operate them with respect to the customers, they predominantly handle the Korean customer base solely.

And then -- so if we were to, let's use a climate example, to call on another customer, Volkswagen, that would be a Visteon relationship.

Then we would decide whether or not, if we won the business, whether or not it would be produced in a quote-unquote Halla facility or a Visteon facility, and how the engineering community would breakdown, et cetera, et cetera.

So the customer interface with Halla and with Duckyang is predominantly on the Korean OE side.

Broader question, I think what you have is two things that oppose each other with -- in some respect is that certainly the balance sheet, the Visteon as an entity that's going to continue the ability for us to put our global footprint on our engineering and technology in (Inaudible - audio break) and that shows in the backlog.

Certainly, the press reports of Visteon being broken up or being sold only hurts that ability to win new business.

Okay, that -- that's very helpful.

And if we were to think about, you know -- I apologize, there's a little bit of speculation -- but if you were to think about Halla being fully owned by Visteon, meaning you buy the 30%, would that, do you think, change your go-to-market strategy that you just mentioned of Halla being the face with -- with Hyundai and Kia, or would that relationship shift towards Visteon going to market to Halla -- I mean to Hyundai and Kia?

Would you still be able to keep the same relationship setup the same way it is now if you owned that additional 30%?

Regardless of the ownership, whether it's 70% or 51% or 100%, the relationship that Halla has with Hyundai-Kia is outstanding, and we would make no move again, regardless of the ownership, we would make no move to change that.

Okay, thank you.

And also on the Duck -- the Duckyang, the portion that was sold there, why was it only -- only a portion?

If it sounds like it's pass-through sales, there's not a lot of great, you know, profit being booked there, the returns are -- sound like they're on the low side.

Why not sell that entire part, I mean the entire business that you own at Duckyang and is that something that's strategic and helpful in your relationship with the Korean manufacturers just in -- in total?

I'm just trying to understand why it was only a partial sale.

Two things.

One, it's -- it is important to the Korean customer base, and then secondly, it's important to the global interiors business.

Again, I think as many of the customers or many of the suppliers probably talk about, more and more global platforms, and the ability to have a base in Korea that can help follow, so to speak, the Korean customers around the world, is important.

Okay.

Then just lastly on Europe.

What do you think your flexibility is to respond to potential shifts in Europe.

And obviously the concern is that Europe could potentially drop off a -- drop off a cliff, down another 10% or 15% on volumes, not saying that's what you're saying, but in case there was a real downdraft in volumes in Europe, what's your ability to respond?

Where are you on capacity (Inaudible) right now?

Do you have a lot of temp workers that you could pull off of the lines to really mitigate some of the pressure there?

I'm just trying to understand Europe.

We are not calling, as you mentioned, we are not calling for the drop-off the cliff in Europe, but understand it is a possibility.

I think we have done a very good job in terms as we have ramped up over the past 18 months or so, to do as much of that with a temporary workforce as we could.

We've not named the perce -- specific percentage because it varies greatly between each plant, so it would come down to kind of a program by program analysis, but I think we've done a pretty good job there.

Certainly, we do have some, many Western European plants that as you know are more difficult and that's where we've tried to hire temp workers for the increases in volumes.

Great, thank you very much.

Thanks, John.

Your next question comes from the line of Kirk Ludtke with CRT Capital Group.

Good morning, everyone.

Hi, Kirk.

I was wondering if maybe you could expand on the net cost performance line?

It looks like it was, if I add all of the segments up, it was a negative $9 million in the quarter, but year-to-date it's a negative $62 million.

I'm just curious if -- if there's any more color you can provide, and if you think this -- is this -- what this is attributable to and if -- and if this could turn out to being positive at some point in the future?

Historically, if you look over the past few years, net cost performance has been a positive for us.

This year we've run into a few issues, one being commodity cost increases and the recoveries, so historically we recover somewhere in the neighborhood of 70%.

We're recovering a little bit less than that, and certainly the magnitude of the commodity cost increases has been larger, so the absolute dollar impact has been greater.

In addition to that, as I think we've talked about on the -- on previous calls, the pricing pressure has been higher this year than historical norms would indicate, and so that is also a significant contributing factor to the negative cost performance.

Okay.

So the -- the commodity costs, I would guess maybe next year, could be a tailwind.

Is that possible?

It's possible.

We actually, as we look at the fourth quarter, we think that net cost performance will be slightly positive.

Okay.

And then shifting gears back to the fourth quarter guidance.

I --it looks like you're forecasting a use in the fourth quarter -- a use of cash in the fourth quarter.

And I was just curious, usually you generate cash in the fourth quarter and I was curious as to what that was attributable to?

Right, so there's -- so there's some significant payments that are in the plan, continuing to pay down the restructuring liabilities, and those things have to do when settlements are made on the various Chapter 11 claims, and so forth, and so they're not actually directly related operations, there's actually cash provided from working capital of the main operations in the fourth quarter.

Okay, now I -- okay I remember now.

So Chapter 11 claims, do you have a sense for how much those are in the fourth quarter?

I do not.

I would kick it back to -- we'll get back to you on that.

Chuck will get back to you on that.

Now I remember there was some restructuring that got pushed back as well.

Yes.

As we mentioned last quarter, we made pretty difficult decision to close one of our facilities in Spain, and in the second quarter we took a charge for the minimum, the statutory minimum amount of severance.

Now we are still in our forecast and in our guidance, we have assumed that we come to a resolution with the Spanish unions there, and pay out those sums.

Okay, great, I appreciate that.

I --you know it, looks like -- it looks like the third party forecasters are still looking for production to be up sequentially in North America and Europe.

It sounds like -- it sounds like maybe you're -- you're thinking they might be ahead of themselves.

I think our assumption is that North America would be up.

Europe is going to be slightly down, and again I would -- some of that we may be a little bit harder hit in that, given where our programs are, et cetera, but again -- and I would think that Asia would be up and South America would be somewhat flattish.

Okay, I appreciate it.

Thank you very much.

Thank you.

(Operator Instructions).

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

Hi, good morning, guys.

Good morning, Himanshu .

I wanted to go back to the summer Analyst Day that you guys held a few months ago.

Two points from that even I wanted to follow up on.

You guys had mentioned that it seemed like there was an operational integration effort going on between Yanfeng and the consolidated interiors business, or at least you had hoped to commence that.

I'm curious, have you made progress on that, and is that still a strategy you're pursuing?

It is a strategy we are pursuing, and there have been a number of meetings among the leadership of Yanfeng as well as Visteon Interiors consolidated, so to speak.

Okay.

And then at that meeting, I think, was the first time you guys publicly mentioned that, it would ultimately perhaps make sense to own all of Halla for a lot of the reasons we've talked about.

I'm just curious, can you help us think through the variables behind that decision and in particular I wanted to understand, is that a decision that is entirely under Visteon's control, or are there exogenous dating events that may prevent the timing of when that happens, whether it's customer considerations or Korean takeover laws or whatever it may be?

In terms of the control of the decision, it would be a Visteon decision.

Certainly, the financing markets and those types of things will play into that decision, but in terms of -- and I think you have to be quite respectful of any customer relationship issues.

Again, from our prospective, in answer to John's question earlier, you know, if we were to buy the 30% or if we sold down to 51%, it doesn't really matter regardless, the relationship has been built over many, many years with the Halla team so I would never move to change that.

In terms of how we go about it, again, it is a significant use of capital so it is, we weigh the various alternatives against the benefits that we would obtain by owning the other 30%.

And that's still acquisitions, internal investments, and buy back, in that order?

Let's say internal acquisitions and internal capital financing are the two other significant items on the plate.

Okay, great.

And then, I -- I can't refuse but ask, but on the recent press release around the CFO change, you guys obviously made that one-off, random comment about retaining financial advisers.

I'm just curious, what was the thinking behind the timing of that announcement?

A couple of things.

First, say that different firms brings different skill sets to the table.

As we looked at it, adding Goldman to the advisers table brings expertise of a large global investment bank with significant capital market expertise and experience that we thought we could benefit from.

Understand that it's a bit unusual in terms of putting that information into a press release, but it is something that we received a lot of questions on, and so rather than do it kind of a one-off basis, we thought we would put it in the press release.

That comment also holds for the corporate governance items.

I know it's a little bit unusual to put that out in a public announcement, but again, the investors that we talk to on a daily basis had some questions about that, so we utilized that press release timing to do that.

And is the scope of assignments between Rothschild and Goldman entirely separate?

No, I would say that the work that they do overlaps.

Certainly, there's some work that Rothschild, given the history that we've had with them, I would call it their work, so to speak, and then Goldman will have their own work to do, as well.

Okay, great.

Couple of house keep housekeeping items.

Could you guys give us some color on pension performance year-to-date?

This is Michael Lewis.

Himanshu, in terms of the pension, as we talked about before, the valuations are typically done on a [ten-year] timeframe.

We have been watching the performance of our assets in those classes, particularly in the US, and as we've mentioned in prior conversations, within our asset class groups, we have a strategy to mitigate the duration between the asset classes, between assets and liabilities, so although we haven't publicly announced where we are on the returns, we are happy with the performance of the asset class and we continue to watch the variables in terms of discount rates and the strategy we have to build those assets to pay off those cash flows.

So I think from our perspective, our strategy is still the right strategy to have, we continue to watch it and continue to monitor working forward, in terms of the unfunded issues with our plan.

And just a related question on that.

I -- I -- I know there's a GAAP measurement date, and a -- kind of a -- I guess a (Inaudible) funding measurement date for minimum funding calculation purposes.

Are they both December 30 for you guys, or is the funding date October 1?

We have two.

We have an October date, and a January date.

Okay, great, that's all I had.

Thank you, guys.

Your next question comes from Joe with says Susquehanna.

Hey, good morning.

Thank you.

Don, the exercise obviously is going on from all investors, in terms of your portfolio, and as you think about your global portfolio, can you expand -- you had mentioned, in response to an earlier question, can you -- can you just outline basically the pros and cons of having a global footprint in this business versus having what is obviously a more -- or a smaller, or regionally focused presence?

Just kind of outline the reasons why you think you should be global versus again, in a scenario going forward, where you trim up maybe some of the regional parts of your portfolio.

I think, at its very most basic level, the customers in a number of cases -- and you can pick many of the customers, be it Japanese, Korean, European, North American -- are sourcing programs on a global basis, and the reason they're doing that is because it's most advantageous to them obviously in terms of their cost performance and the business that they can give out to the supply base.

So there are a number of programs where, when you go in, the customer is asking you, okay, for my European production sites, where will you manufacture, for my North American production sites, where you manufacture, et cetera, et cetera, et cetera.

To be excluded, just because we're a regional player, doesn't seem to be the right strategy from our perspective, especially given the fact that we have a significant footprint around the world today, and especially given that one of the advantages to Visteon is that we have a footprint in the growth markets, and that we've been there for an extended period of time.

It's not a situation where, in most cases -- there is the rare instance, but most cases -- we have a facility in the country or in the region where the OE is going to be, or is located today.

Got it.

And is there, I guess, any guess or parameters you can give us, the number of RFPs going forward, in theory, that you could be excluded from because you don't have a global footprint is X?

Is there -- would you be willing to give us an estimate or some level parameters with respect to that?

If I knew I would be happy to give it to you.

That's something we can take a look at.

I don't -- I don't have that knowledge today, but I would be happy to do some work on it.

Okay, great.

Just one follow-up relative to the earlier pension question.

Have you guys ever provided the sensitivity associated with the expected returns that you have for that portfolio, and let's say for every 1% under or over, what it means for the unfunded balance?

Hi, Joe, this is Michael Lewis again.

We have provided a sensitivity on an accounting basis, for the -- for instance, for 25 basis point on the US plan, for a change in that discount rate would be about a $50 million change in unfunded position, but again, that can be used as a barometer for the US plan on an accounting basis.

Relative to my other comments on how we use assets and liabilities in the funding itself, the experience will likely be different because of how we are using our strategy on the liability and the duration matching between the assets and liabilities.

So while there's an accounting sensitivity providing the funding itself is going to be a little bit different, and keep in mind that any of the funding changes will also be amortized over time.

It's always nebulous, but I'll ask the question nonetheless.

Thanks a lot, guys.

Thanks, Joe.

(Operator Instructions).

Your next question comes from the line of Richard Haydon with Yield Capital.

Good morning.

Just a couple of smaller questions in order to better hone in on incremental profit margins.

The $7 million in severance cost experienced in Europe, was that included in the 166 EBITDA?

No, it was not.

Okay.

And second, the negative expected $6 billion hit in Thailand in the fourth quarter, what level of profitability -- is that an EBITDA number, or is it some other number?

Yes, it's an EBITDA number.

Okay, thank you.

You're welcome.

There are no further questions at this time, sir.

Thank you very much.

We appreciate it, we'll be around to answer any other questions you have throughout the day.

Thanks, Brandy.

Thank you, sir.

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

Thank you for your participation.

We now disconnect at this time, and have a good day.