UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

xþ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2005,~~March 31, 2006, or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-15827

VISTEON CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware (State of incorporation)		38-3519512 (I.R.S. employer Identification number)
One Village Center Drive, Van Buren Township, Michigan (Address of principal executive offices)		48111 (Zip code)

Registrant’s telephone number, including area code: (800)-VISTEON

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ü No ü

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, ~~(as defined~~or a non-accelerated filer. See definition of “Accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange ~~Act).~~Act.

~~Yes~~Large Accelerated Filer ü NoAccelerated Filer Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No ü

As of ~~November 14, 2005,~~April 30, 2006, the Registrant had outstanding ~~128,743,368~~127,982,626 shares of common stock, par value $1.00 per share.

Exhibit index located on page number ~~62.~~45.

~~TABLE OF CONTENTS~~VISTEON CORPORATION AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

INDEX


				Page No.
~~PART I. FINANCIAL INFORMATION~~
Part I — Financial Information			~~ITEM 1. FINANCIAL STATEMENTS~~
	~~NOTES TO FINANCIAL STATEMENTS~~Item 1 — Financial Statements
		~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Report of Independent Registered Public Accounting Firm			2
		~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Consolidated Statements of Operations			3
		~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Consolidated Balance Sheets			4
		~~ITEM 4. CONTROLS AND PROCEDURES~~Consolidated Statements of Cash Flows			5
		~~PART II. OTHER INFORMATION~~Notes to Consolidated Financial Statements			6
	~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations				28
	~~ITEM 6. EXHIBITS~~Item 3 — Quantitative and Qualitative Disclosures about Market Risk				40
	~~SIGNATURE~~Item 4 — Controls and Procedures				42
Part II — Other Information
	Item 1 — Legal Proceedings				43
	Item 1A — Risk Factors				43
	Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds				43
	Item 6 — Exhibits				43
Signatures					44
Exhibit Index					45
Amendment to Salaried Employee Lease Agreement and Payment Acceleration Agreement
Statement ~~re:~~Re: Computation of Ratios
Letter of PricewaterhouseCoopers LLP
~~Rule 13a-14(a)~~ Certification of Chief Executive Officer
~~Rule 13a-14(a)~~ Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer

~~VISTEON CORPORATION AND SUBSIDIARIES~~

PART I. I

FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS (unaudited)

~~CONSOLIDATED STATEMENT~~REPORT OF ~~OPERATIONS~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~For~~To the ~~Periods Ended September 30,~~Board of Directors and Shareholders

Visteon Corporation

We have reviewed the accompanying consolidated balance sheet of Visteon Corporation and its subsidiaries as of March 31, 2006, and the related consolidated statements of operations and cash flows for the three-month periods ended March 31, 2006 and 2005. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2005, and ~~2004~~

~~(in millions, except per share amounts)~~

Third Quarter First Nine Months

2005 2004 2005 2004

(Restated) (Restated)
(unaudited)
Sales

Ford and affiliates $ 2,649 $ 2,772 $ 9,126 $ 9,900
Other customers 1,472 1,364 4,985 4,078

Total sales 4,121 4,136 14,111 13,978
Costs and expenses (Notes 4 and 6)

Costs of sales 4,032 4,366 14,815 13,603
Selling, administrative and other expenses 239 225 763 728

Total costs and expenses 4,271 4,591 15,578 14,331
Operating loss
(150 ) (455 ) (1,467 ) (353 )
Interest income 6 5 16 14
Debt extinguishment cost (Note 9) — — — 11
Interest expense 44 28 114 75

Net interest expense and debt extinguishment cost (38 ) (23 ) (98 ) (72 )
Equity in net income of affiliated companies (Note 4) 8 9 22 38

Loss before income taxes and minority interests
(180 ) (469 ) (1,543 ) (387 )
Provision for income taxes (Note 4) 21 963 41 983

Loss before minority interests
(201 ) (1,432 ) (1,584 ) (1,370 )
Minority interests in net income of subsidiaries 6 7 24 28

Net loss
$ (207 ) $ (1,439 ) $ (1,608 ) $ (1,398 )

Net loss per share (Note 10)

Basic and diluted $ (1.64 ) $ (11.48 ) $ (12.78 ) $ (11.16 )
Cash dividends per share
$ — $ 0.06 $ — $ 0.18

~~The accompanying notes are part~~the related consolidated statements of operations, shareholders’ (deficit)/ equity and cash flows for the year then ended, management’s assessment of the ~~financial statements.~~

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEET~~

~~(in millions)~~

September 30, December 31,
2005 2004

(unaudited) (Restated)
Assets

Cash and cash equivalents $ 898 $ 752
Accounts receivable — Ford and affiliates 1,127 1,255
Accounts receivable — other customers (Note 8) 1,196 1,285

Total receivables, net (Note 4) 2,323 2,540
Inventories (Note 12) 575 889
Deferred income taxes (Note 4) 35 37
Assets held for sale (Note 4) 329 —
Prepaid expenses and other current assets 235 212

Total current assets 4,395 4,430
Equity in net assets of affiliated companies 242 227
Net property 3,254 5,303
Deferred income taxes (Note 4) 136 129
Assets held for sale (Note 4) 623 —
Other assets 173 203

Total assets
$ 8,823 $ 10,292

Liabilities and Stockholders’ (Deficit) Equity

Trade payables $ 2,333 $ 2,493
Accrued liabilities 989 894
Income taxes payable (Note 4) 8 27
Debt payable within one year (Note 9) 433 508
Liabilities associated with assets held for sale (Note 4) 228 —

Total current liabilities 3,991 3,922
Long-term debt (Note 9) 1,522 1,513
Postretirement benefits other than pensions 709 639
Postretirement benefits payable to Ford 94 2,135
Deferred income taxes (Note 4) 288 287
Liabilities associated with assets held for sale (Note 4) 2,448 —
Other liabilities 1,201 1,476

Total liabilities 10,253 9,972
Stockholders’ (Deficit) Equity

Capital stock
Preferred stock, par value $1.00, 50 million shares authorized, none outstanding — —
Common stock, par value $1.00, 500 million shares authorized, 131 million shares issued, 129 million and 130 million shares outstanding, respectively 131 131
Capital in excess of par value of stock 3,394 3,380
Accumulated other comprehensive (loss) income (Note 13) (147 ) 5
Other (30 ) (26 )
Accumulated deficit (4,778 ) (3,170 )

Total stockholders’ (deficit) equity (1,430 ) 320

Total liabilities and stockholders’ (deficit) equity
$ 8,823 $ 10,292

~~The accompanying notes are part~~effectiveness of the Company’s internal control over financial ~~statements.~~reporting as of December 31, 2005 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005; in our report dated March 16, 2006, we expressed (i) an unqualified opinion on those financial statements, (ii) an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and (iii) an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2005, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Detroit, Michigan

May 9, 2006

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

~~For the Periods Ended September 30, 2005 and 2004~~

~~(in millions)~~(Unaudited)

First Nine Months

2005 2004

(Restated)
(unaudited)
Cash and cash equivalents at January 1
$ 752 $ 953
Cash flows from operating activities
Net loss (1,608 ) (1,398 )
Depreciation and amortization 473 514
Asset impairment charges 1,176 314
Earnings of affiliated companies less than dividends remitted 11 4
Sale of receivables 42 72
Changes in assets and liabilities:
Accounts receivable 65 (382 )
Inventories 1 (122 )
Accounts payable (14 ) 156
Postretirement benefits other than pensions 219 147
Income taxes deferred and payable, net (41 ) 911
Other assets and other liabilities 22 (21 )
Other 29 28

Net cash provided by operating activities 375 223
Cash flows from investing activities
Capital expenditures (400 ) (569 )
Acquisitions and investments in joint ventures (20 ) —
Deposit on transferred business 311 —
Sales and maturities of securities — 3
Other, including proceeds from asset disposals 39 18

Net cash used in investing activities (70 ) (548 )
Cash flows from financing activities
Commercial paper repayments, net — (31 )
Other short-term debt, net 191 (30 )
Proceeds from issuance of other debt, net of issuance costs 40 548
Maturity/ Repurchase of unsecured debt securities (250 ) (269 )
Principal payments on other debt (39 ) (32 )
Treasury stock activity (2 ) (11 )
Cash dividends — (24 )
Other, including book overdrafts (76 ) (48 )

Net cash (used in) provided by financing activities (136 ) 103
Effect of exchange rate changes on cash (23 ) (2 )

Net increase in cash and cash equivalents 146 (224 )

Cash and cash equivalents at September 30
$ 898 $ 729


		Three-Months Ended
		March 31

		2006			2005

		(Dollars in Millions,
		Except Per Share Data)
Net sales
	Product	$	2,816		$	4,987
	Services		145			—

			2,961			4,987
Cost of sales
	Product		2,573			4,840
	Services		144			—

			2,717			4,840

Gross margin			244			147
Selling, general and administrative expenses			168			250
Restructuring expenses			9			7
Reimbursement from Escrow Account			9			—

Operating income (loss)			76			(110	)
Interest expense			47			34
Interest income			8			5
Equity in net income of non-consolidated affiliates			7			6

Income (loss) before income taxes, minority interests in consolidated subsidiaries and cumulative effect of change in accounting			44			(133	)
Provision for income taxes			30			22
Minority interests in consolidated subsidiaries			7			8

Net income (loss) before cumulative effect of change in accounting			7			(163	)
Cumulative effect of change in accounting, net of tax			(4	)		—

Net income (loss)		$	3		$	(163	)

Earnings (loss) per share:
Basic and diluted earnings (loss) per share before cumulative effect of change in accounting		$	0.05		$	(1.30	)
Cumulative effect of change in accounting, net of tax			(0.03	)		—

Basic and diluted earnings (loss) per share		$	0.02		$	(1.30	)

~~The~~See accompanying notes ~~are part of~~to the consolidated financial statements.

VISTEON CORPORATION AND SUBSIDIARIES

~~NOTES TO FINANCIAL STATEMENTS~~CONSOLIDATED BALANCE SHEETS


		(Unaudited)
		March 31			December 31
		2006			2005

		(Dollars in Millions)
ASSETS
Cash and equivalents		$	881		$	865
Accounts receivable, net			1,764			1,738
Inventories, net			544			537
Other current assets			229			205

Total current assets			3,418			3,345
Equity in net assets of non-consolidated affiliates			234			226
Property and equipment, net			2,994			2,973
Other non-current assets			172			192

Total assets		$	6,818		$	6,736


LIABILITIES AND SHAREHOLDERS’ DEFICIT
Short-term debt, including current portion of long-term debt		$	234		$	485
Accounts payable			1,764			1,803
Employee benefits, including pensions			245			233
Other current liabilities			394			438

Total current liabilities			2,637			2,959
Long-term debt			1,849			1,509
Postretirement benefits other than pensions			857			878
Employee benefits, including pensions			646			647
Deferred income taxes			191			175
Other non-current liabilities			416			382
Minority interests in consolidated subsidiaries			237			234
Shareholders’ deficit
	Preferred stock (par value $1.00, 50 million shares authorized, none outstanding)		—			—
	Common stock (par value $1.00, 500 million shares authorized, 131 million shares issued, 128 million and 129 million shares outstanding, respectively)		131			131
	Stock warrants		127			127
	Additional paid-in capital		3,397			3,396
	Accumulated deficit		(3,437	)		(3,440	)
	Accumulated other comprehensive loss		(202	)		(234	)
	Other		(31	)		(28	)

Total shareholders’ deficit			(15	)		(48	)

Total liabilities and shareholders’ deficit		$	6,818		$	6,736

~~(unaudited)~~


~~NOTE 1.~~	~~Financial Statements~~

The financial data presented herein are unaudited, but in the opinion of management reflect those adjustments, including normal recurring adjustments, necessary for a fair statement of such information. Results for interim periods should not be considered indicative of results for a full year. Reference should be madeSee accompanying notes to the consolidated financial statements and accompanying notes included in Amendment No. 1 to Visteon’s Annual Report on Form 10-K/ A (“2004 Form 10-K/ A”), for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission (“SEC”) on November 22, 2005.

Visteon Corporation (“Visteon”) is a leading, global supplier of automotive systems, modules and components. Visteon sells products primarily to global vehicle manufacturers, and also sells to the worldwide aftermarket for replacement and vehicle appearance enhancement parts. Visteon became an independent company when Ford Motor Company (“Ford”) established Visteon as a wholly-owned subsidiary in January 2000 and subsequently transferred to Visteon the assets and liabilities comprising Ford’s automotive components and systems business. Ford completed its spin-off of Visteon on June 28, 2000 (the “spin-off”). Prior to incorporation, Visteon operated as Ford’s automotive components and systems business.


~~NOTE 2.~~	~~Restatement of Financial Statements~~

Visteon has restated its previously issued consolidated financial statements for 2002 through 2004, for accounting corrections related to freight, raw material costs, other supplier costs and income tax matters. The decision to restate Visteon’s consolidated financial statements was previously announced in a press release that was filed with the SEC as part of a Current Report on Form 8-K of Visteon dated October 21, 2005. For a more detailed description of these restatements, see Note 2, “Restatement of Financial Statements,” to the audited consolidated financial statements contained in the 2004 Form 10-K/ A.

As a result of the restatement, previously reported net loss increased by $15 million ($0.12 per share) and $18 million ($0.15 per share) for the third quarter and first nine months ended September 30, 2004, respectively.statements.

VISTEON CORPORATION AND SUBSIDIARIES

~~NOTES TO FINANCIAL~~CONSOLIDATED STATEMENTS ~~— (Continued)~~OF CASH FLOWS

~~(unaudited)~~(Unaudited)


		Three-Months
		Ended March 31

		2006			2005

		(Dollars in Millions)
Cash provided from (used by) operating activities
Net income (loss)		$	3		$	(163	)
Adjustments to reconcile net income (loss) to net cash (used by) provided from operating activities:
	Depreciation and amortization		102			176
	Equity in net income of non-consolidated affiliates, net of dividends remitted		7			3
	Other non-cash items		(23	)		22
Changes in assets and liabilities:
	Accounts receivable		2			(23	)
	Inventories		1			(58	)
	Accounts payable		(99	)		140
	Other assets and liabilities		(25	)		81

Net cash (used by) provided from operating activities			(32	)		178
Cash provided from (used by) investing activities
Capital expenditures			(85	)		(127	)
Acquisitions and investments in joint ventures, net			—			(9	)
Proceeds from asset disposals			7			19

Net cash used by investing activities			(78	)		(117	)
Cash provided from (used by) financing activities
Other short-term debt, net			(270	)		21
Proceeds from issuance of other debt, net of issuance costs			371			12
Principal payments on other debt			(7	)		(13	)
Other, including book overdrafts			21			(17	)

Net cash provided from financing activities			115			3
Effect of exchange rate changes on cash			11			(7	)

Net increase in cash and equivalents			16			57
Cash and equivalents at beginning of year			865			752

Cash and equivalents at end of period		$	881		$	809


~~NOTE 2.~~	~~Restatement of Financial Statements — (Continued)~~

The following summarizes the impact of these accounting corrections on Visteon’s previously reported net loss as reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2004 as filed with the SEC on March 16, 2005. These accounting corrections impacted previously reported costs of sales and income tax expense onSee accompanying notes to the consolidated ~~statement of operations.~~financial statements.

Third First Nine
Quarter Months

2004

(in millions)
Net loss, as previously reported $ (1,424 ) $ (1,380 )
Accounting corrections for freight costs (pre-tax)(1) (1 ) 3
Accounting corrections for raw material costs (pre-tax)(2) (9 ) (16 )
Accounting corrections for other supplier costs (pre-tax)(3) — (2 )
Tax impact of above(4) (2 ) —
Accounting correction for income taxes(5) (3 ) (3 )

Net loss, as restated $ (1,439 ) $ (1,398 )


~~(1)~~	Represents corrections to record freight costs incurred for services provided that were not properly accrued in the period such services were performed. The impact of the correction of these errors had an impact of less than $500,000 on net loss for the third quarter of 2004 and decreased net loss by approximately $3 million ($0.03 per share) for the nine months ended September 30, 2004.

~~(2)~~	Represents corrections to record raw material cost increases that were not properly accrued in the period such increases were incurred. The impact of the correction of these errors increased net loss by approximately $11 million ($0.09 per share) and $16 million ($0.14 per share) for the third quarter and the nine months ended September 30, 2004, respectively.

~~(3)~~	Represents corrections to record other supplier costs that should have been accrued in periods prior to September 30, 2004. The impact of the correction of these errors increased net loss by approximately $1 million ($0.01 per share) and $2 million ($0.02 per share) for the third quarter and the nine months ended September 30, 2004, respectively.

~~(4)~~	~~Represents the deferred tax impact of the pre-tax accounting corrections described above.~~

~~(5)~~	Represents a correction for income taxes related to various foreign affiliates that should have been recognized in 2004. The impact of this correction increased net loss by approximately $3 million ($0.02 per share) for the third quarter and the nine months ended September 30, 2004.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~— (Continued)~~

~~(unaudited)~~(Unaudited)


NOTE 2.1.	~~Restatement~~Description of ~~Financial Statements — (Continued)~~Business and Company Background

~~The following~~Visteon Corporation (the “Company” or “Visteon”) is a ~~summary~~leading global supplier of automotive systems, modules and components to global vehicle manufacturers and the ~~impact~~automotive aftermarket. Headquartered in Van Buren Township, Michigan, with regional headquarters in Kerpen, Germany and Shanghai, China, the Company has a workforce of these accounting corrections on Visteon’s previously issued consolidated statement of operations and consolidated balance sheet. These accounting corrections had no impact on Visteon’s consolidated statement of cash flows.

~~CONSOLIDATED STATEMENT OF OPERATIONS~~

~~(in millions, except per share amounts)~~

First Nine Months
Third Quarter 2004 2004

As As
Previously As Previously As
Reported Restated Reported Restated

Sales

Ford and affiliates $ 2,772 $ 2,772 $ 9,900 $ 9,900
Other customers 1,364 1,364 4,078 4,078

Total sales 4,136 4,136 13,978 13,978
Costs and expenses

Costs of sales 4,356 4,366 13,588 13,603
Selling, administrative and other expenses 225 225 728 728

Total costs and expenses 4,581 4,591 14,316 14,331
Operating loss
(445 ) (455 ) (338 ) (353 )
Interest income 5 5 14 14
Debt extinguishment cost — — 11 11
Interest expense 28 28 75 75

Net interest expense (23 ) (23 ) (72 ) (72 )
Equity in net income of affiliated companies 9 9 38 38

Loss before income taxes and minority interests
(459 ) (469 ) (372 ) (387 )
Provision for income taxes 958 963 980 983

Loss before minority interests
(1,417 ) (1,432 ) (1,352 ) (1,370 )
Minority interests in net income of subsidiaries 7 7 28 28

Net loss
$ (1,424 ) $ (1,439 ) $ (1,380 ) $ (1,398 )

Net loss per share

Basic and diluted $ (11.36 ) $ (11.48 ) $ (11.01 ) $ (11.16 )

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 2.~~	~~Restatement of Financial Statements — (Continued)~~

~~CONSOLIDATED BALANCE SHEET~~

~~(in millions)~~

December 31, 2004

As
Previously As
Reported Restated

Assets
Cash and cash equivalents $ 752 $ 752
Accounts receivable — Ford and affiliates 1,255 1,255
Accounts receivable — other customers 1,285 1,285

Total receivables, net 2,540 2,540
Inventories 889 889
Deferred income taxes 51 37
Prepaid expenses and other current assets 212 212

Total current assets 4,444 4,430
Equity in net assets of affiliated companies 227 227
Net property 5,303 5,303
Deferred income taxes 132 129
Other assets 203 203

Total assets
$ 10,309 $ 10,292

Liabilities and Stockholders’ Equity
Trade payables $ 2,403 $ 2,493
Accrued liabilities 894 894
Income taxes payable 38 27
Debt payable within one year 508 508

Total current liabilities 3,843 3,922
Long-term debt 1,513 1,513
Postretirement benefits other than pensions 639 639
Postretirement benefits payable to Ford 2,135 2,135
Deferred income taxes 296 287
Other liabilities 1,476 1,476

Total liabilities 9,902 9,972
Stockholders’ Equity

Capital stock 131 131
Capital in excess of par value of stock 3,380 3,380
Accumulated other comprehensive income 5 5
Other (26 ) (26 )
Accumulated deficit (3,083 ) (3,170 )

Total stockholders’ equity 407 320

Total liabilities and stockholders’ equity
$ 10,309 $ 10,292

~~Certain amounts in Notes 4, 5, 6, 10, 13, and 14 have been restated to reflect the restatement accounting corrections described above.~~

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 3.~~	~~Arrangements with Ford and its Affiliates~~

~~Funding Agreement~~

On March 10, 2005, Visteon and Ford entered into a funding agreement, effective as of March 1, 2005, under which Ford has agreed (a) to accelerate the payment on or prior to March 31, 2005 of not less than $120 million of payables that were not required to be paid to Visteon until after March 31, 2005; (b) to accelerate the payment terms for certain U.S. payables to Visteon arising on or after April 1, 2005 from an average of 33 days after the date of sale to an average of 26 days; (c) to reduce the amount of certain wages by 23.75% that Visteon is currently obligated to reimburse Ford with respect to Visteon-assigned Ford-UAW hourly47,000 employees that work at Visteon facilities, beginning with the pay period commencing February 21, 2005; and (d) to release Visteon from its obligation to reimburse Ford for Ford profit sharing payments with respect to Visteon-assigned Ford-UAW hourly employees that accrue in 2005.

During the first nine months of 2005, costs of sales were reduced by $170 million as a result of the funding agreement’s impact on labor costs for Visteon-assigned Ford-UAW hourly employees. That reduction was comprised of $175 million in reduced labor charges from Ford and a ~~one-time reduction~~network of ~~$17 million~~manufacturing operations, technical centers, sales offices and joint ventures in ~~previously established vacation accruals and was offset by $17 million of asset write-offs and $5 million from reduced inventory valuations. Cash flows provided by operating activities for~~every major region in the ~~first nine months of 2005 were favorably impacted by the reduced wage reimbursements to Ford and by the acceleration of payment terms from Ford under the funding agreement.~~world.

ACH Transactions

On May 24, 2005, ~~Visteon~~the Company and Ford entered into an amendment to the funding agreement. This amendment further accelerates the payment terms for certain U.S. payables to Visteon arising on or after June 1, 2005 to (i) an average of 18 days for the period from June 1, 2005 through July 31, 2005; (ii) an average of 22 days for the period from August 1, 2005 through December 31, 2005; and (iii) an average of 26 days for the period from January 1, 2006 until termination of the agreement. This agreement was terminated in connection with the closing of the transactions discussed below.

~~Master Equipment Bailment Agreement~~

Also on March 10, 2005, Ford and Visteon entered into a master equipment bailment agreement, effective as of January 1, 2005, pursuant to which Ford has agreed to pay third-party suppliers for certain machinery, equipment, tooling and fixtures and related assets, which may be acquired during the term of the agreement to be held by Visteon, which are primarily used to produce components for Ford at certain of the Visteon plants in which Visteon-assigned Ford-UAW employees work. The agreement covers (a) certain capital expenditure project commitments made by Visteon before January 1, 2005, where less than one-half of the full amount of the project cost was paid by Visteon as of January 1, 2005; and (b) capital expenditures for equipment where the expenditure has not yet been committed by Visteon and which is subsequently approved by Ford. To the extent approved capital expenditures are related to the modification of existing equipment, title of the modified equipment would transfer to Ford.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 3.~~	~~Arrangements with Ford and its Affiliates — (Continued)~~

During the first nine months of 2005, Visteon recognized a charge in costs of sales of about $17 million related to capitalized costs of $27 million for projects that were less than one-half complete which will be transferred to a Ford-controlled entity. The loss primarily represents costs incurred and capitalized by Visteon at December 31, 2004 associated with these projects. Cash proceeds of $10 million from these sales were received during the second quarter of 2005.

On May 24, 2005, Visteon and Ford entered into an amendment of the master equipment bailment agreement, effective as of May 1, 2005, under which Ford agreed to pay third-party suppliers for certain machinery, equipment, tooling, fixtures and related assets that are used to produce certain components for Ford at the remaining Visteon plants in which Visteon-assigned Ford-UAW employees work not previously covered under the original March 10, 2005 agreement. This agreement was terminated in connection with the closing of the transactions discussed below.

~~Sale of North American Facilities~~

~~On May 24, 2005, Visteon and Ford~~Motor Company (“Ford”) entered into a non-binding Memorandum of Understanding, ~~(“MOU”),~~ setting forth a framework for the transfer of ~~twenty-three~~23 North American facilities and related assets and liabilities (the “Business”) to a ~~Ford controlled~~Ford-controlled entity. In September 2005, ~~Visteon~~the Company and Ford entered into several definitive agreements and ~~Visteon~~the Company completed the transfer of the Business to Automotive Components Holdings, LLC (“ACH”), an indirect, wholly-owned subsidiary of ~~Visteon, and its subsidiaries.~~the Company.

Following the signing of the MOU and at September 30, 2005, Visteon has classified the manufacturing facilities and associated assets, including inventory, machinery, equipment and tooling, as well as associated liabilities including postretirement benefits, to be sold as “held for sale”. Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires long-lived assets that are considered “held for sale” to be measured at the lower of their carrying value or fair value less cost to sell and future depreciation of such assets is ceased. During the second quarter of 2005, the Automotive Operations recorded a pre-tax non-cash impairment of $920 million to write-down those assets considered “held for sale” to their aggregate estimated fair value less cost to sell. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms.

~~SUBSEQUENT EVENT~~

~~Sale of North American Facilities~~

On October 1, 2005, Ford acquired from Visteon all of the issued and outstanding shares of common stock of the parent of ACH in exchange for Ford’s payment to ~~Visteon~~the Company of approximately ~~$311~~$300 million, ~~(subject to post-closing adjustment),~~ as well as the forgiveness of certain other postretirement employee benefit (“OPEB”) liabilities and other obligations relating to hourly employees associated with the Business, and the assumption of certain other liabilities with respect to the ~~Business.~~Business (together, the “ACH Transactions”). Additionally, on October 1, 2005, Ford acquired from the Company warrants to acquire 25 million shares of the Company’s common stock and agreed to provide funds to be used in the Company’s further restructuring.

The Company maintains significant commercial relationships with Ford and its affiliates. Accordingly, transactions with Ford constitute a significant amount of the Company’s product sales and services revenues, accounts receivable and certain postretirement benefit obligations as summarized below:


	Three-Months Ended
	March 31

	2006		2005

	(Dollars in Millions)
Product sales	$	1,339	$	3,254
Services revenues	$	145	$	—


	March 31		December 31
	2006		2005

	(Dollars in Millions)
Accounts receivable, net	$	584	$	618
Postretirement employee benefit related obligation	$	132	$	156


NOTE 2.	Basis of Presentation

Interim Financial Statements: The unaudited consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 2. Basis of Presentation — (Continued)


~~NOTE 4.~~	~~Selected Costs, Income and Other Information~~

~~Depreciation and Amortization~~

~~Depreciation and amortization expenses~~These interim consolidated financial statements include adjustments (consisting of normal recurring adjustments) that management believes are ~~summarized as follows:~~

Third Quarter First Nine Months

2005 2004 2005 2004

(in millions)
Depreciation $ 99 $ 152 $ 403 $ 434
Amortization 18 27 70 80

Total $ 117 $ 179 $ 473 $ 514

~~Investments in Affiliates~~

~~The following table presents summarized financial data~~necessary for ~~those affiliates accounted for under the equity method. The amounts represent 100%~~a fair presentation of the results of operations, financial position and cash flows of ~~these affiliates. Visteon reports its share of their net income~~the Company for the interim periods presented. The Company’s management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the consolidated financial statements and the notes thereto included in the ~~line “Equity in net income of affiliated companies”~~Company’s Annual Report on Form 10-K for the ~~Consolidated Statement of Operations.~~

Third Quarter First Nine Months

2005 2004 2005 2004

(in millions)
Net sales $ 446 $ 340 $ 1,159 $ 1,127
Gross profit 70 50 174 198
Net income 16 20 45 76

~~Accounts Receivable~~

~~The allowance for doubtful accounts was $80 million at September 30, 2005 and $44 million at~~fiscal year ended December 31, ~~2004. Allowance~~2005, as filed with the Securities and Exchange Commission. Interim results are not necessarily indicative of full year results.

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all subsidiaries that are more than 50% owned and over which the Company exercises control. Investments in affiliates of 50% or less but greater than 20% are accounted for ~~doubtful~~using the equity method. The consolidated financial statements also include the accounts of certain entities in which the Company holds a controlling interest based on exposure to economic risks and potential rewards (variable interests) for which it is ~~determined considering factors~~the primary beneficiary.

Reclassifications: Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect amounts reported herein. Management believes that such ~~as length of time accounts~~estimates, judgments and assumptions are ~~past~~reasonable and appropriate. However, due ~~historical experience of write-offs, and our customers’ financial condition. The September 30, 2005 allowance includes a provision related~~ to the ~~bankruptcy of a customer~~inherent uncertainty involved, actual results may differ from those provided in the ~~U.S. and Europe.~~

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 4.~~	~~Selected Costs, Income and Other Information — (Continued)~~

~~Assets Held for Sale and Liabilities Associated with Assets Held for Sale~~

Visteon has classified certain assets and liabilities as “assets held for sale” and “liabilities associated with assets held for sale” following the signing of the MOU as described in Note 3, “Arrangements with Ford and its Affiliates.” Included in the balance sheet at September 30, 2005 are assets held for sale of $952 million and liabilities associated with assets held for sale of $2,676 million. The assets held for sale and liabilities associated with assets held for sale are as follows:

September 30,
2005

(in millions)
Assets Held for Sale:
Accounts receivable — Ford and Affiliates $ 5
Inventories 299
Prepaid expenses and other current assets 25

Current assets held for sale 329
Net property, after asset impairment charge 595
Other assets 28

Non-current assets held for sale 623

Total assets held for sale $ 952

Liabilities Associated with Assets Held for Sale:
Accrued liabilities $ 228

Current liabilities held for sale 228
Postretirement benefits payable to Ford 2,183
Other liabilities 265

Non-current liabilities associated with assets held for sale 2,448

Total liabilities associated with assets held for sale $ 2,676

~~Income Taxes~~

Visteon’s provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income (loss) before income taxes, excluding related equity in net income of affiliated companies, for the period. Effective tax rates vary from period to period as separate calculations are performed for those countries where Visteon’s operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 4.~~	~~Selected Costs, Income and Other Information — (Continued)~~

For the third quarter and first nine months of 2005, Visteon recorded provisions of $21 million and $41 million, respectively, as compared with provisions of $963 million and $983 million, respectively, for the third quarter and first nine months of 2004. Visteon’s provision for income taxes for the third quarter and first nine months of 2005 reflects the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign countries, where full valuation allowances against our deferred tax assets have been maintained since the third quarter of 2004. The provision for the third quarter and first nine months of 2005 reflects primarily income tax expense related to those countries where Visteon is profitable and whose results continue to be tax-effected, accrued withholding taxes, and certain non-recurring and other discrete tax items.

In the third quarter of 2005, the $3 million tax benefit related to favorable currency exchange rate movements was largely offset by other non-recurring and discrete tax provision items in the quarter. Visteon’s provision for income taxes of $963 million for the third quarter of 2004 includes a charge of $931 million to write-down our net deferred tax assets, as of the beginning of the third quarter, in the U.S. and certain foreign countries. This charge is comprised of $948 million related to deferred tax assets as of the beginning of the year and $60 million for income tax benefits recorded during the first half of 2004, offset by the reduction of related tax reserves of $77 million.

Non-recurring and other discrete tax items recorded in the first nine months of 2005 resulted in a net benefit of $37 million. This includes the items described above, as well as a benefit of $29 million, reflecting primarily a reduction in our income tax reserves corresponding with the conclusion of U.S. Federal income tax audits for 2003, 2002 and certain pre-spin periods recorded in the second quarter of 2005, and a net benefit of $8 million recorded in the first quarter of 2005, consisting primarily of benefits related to a change in the estimated benefit associated with tax losses in Canada and the favorable resolution of tax matters in Mexico, offset by net provisions recorded primarily to increase our income tax reserves for prior year tax exposures. The first nine months of 2004 includes a charge of $871 million related to additional valuation allowances established against Visteon’s deferred tax assets in the U.S. and certain foreign countries. This charge is comprised of $948 million related to deferred tax assets as of the beginning of the year, offset by the reduction of related tax reserves of $77 million. Visteon’s results for the first nine months of 2004 reflect no income tax benefits for current year losses in the U.S. and other affected countries.

The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will continue to cause variability in the quarterly and annual effective tax rates. Visteon will maintain full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries until sufficient positive evidence exists to reduce or eliminate them.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 4.~~	~~Selected Costs, Income and Other Information — (Continued)~~

~~Liquidity~~

Visteon believes that cash flow from operations, combined with access to external liquidity sources, will be sufficient to fund capital spending, debt maturities and other cash obligations in 2005. However, liquidity from internal or external sources to meet these obligations is dependent on a number of factors, including availability of cash balances, credit ratings, industry economic factors, and the availability of the capital markets. In addition, because Visteon was not timely in its SEC filings in 2005, we are currently ineligible to use Forms S-2 and S-3 to register securities until all required reports under the Securities Exchange Act of 1934 have been timely filed for 12 months prior to the filing of a registration statement for those securities. Accordingly, we are unable to use our presently effective shelf registration statement to sell securities in the public market without first obtaining a waiver from the SEC. We do not believe this will have a material impact on our liquidity as we have access to bank facilities and other capital market alternatives; however, Visteon can provide no assurance that, if needed, additional liquidity will be available at the times or in the amounts needed, or on terms and conditions acceptable to Visteon. At September 30, 2005, Visteon was in compliance with the covenants contained in its credit agreements, although there can be no assurance that Visteon will remain in compliance with such covenants in the future. If we were to violate aCompany’s consolidated financial covenant and not obtain a waiver, the credit agreements could be terminated and amounts outstanding would be accelerated. We can provide no assurance that, in such event, we would have access to sufficient liquidity resources to repay such amounts.statements.

~~Long-Lived Assets~~Recent Accounting Pronouncements:

Visteon continues to assess the recoverability of our long-lived assets in light of the challenging environment in which we operate and as part of our business planning process. If conditions indicate that any of these assets are impaired, impairment charges will be required, although we cannot predict the timing or range of amounts, if any, which may result. Visteon considers projected future undiscounted cash flows, trends and other circumstances in making such estimates and evaluations. While we believe that our estimates of future cash flows are reasonable, different assumptions regarding such factors as future automotive production volumes (primarily for Ford), selling price changes, labor cost changes, material cost changes, productivity and other cost savings and capital expenditures could significantly affect our evaluations.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 5.~~	~~Stock-Based Awards~~

In ~~December 2004,~~March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 156 (“SFAS 156”), “Accounting for Servicing of Financial Assets.” This statement amends Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a transfer of financial assets that meet the requirement for sale accounting. In addition, all of these separately recognized servicing assets or liabilities are required to be initially measured at fair value, with two permitted methods available for subsequent measurement: the amortization method or the fair value measurement. SFAS 156 is effective for the Company on January 1, 2007 and the Company is currently evaluating the impact of the requirements of this statement on its consolidated financial statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004) (“SFAS 123(R)”), “Share-Based Payments.” This ~~revised~~ statement requires that all share-based payments to employees be recognized in the ~~fair-value~~financial statements based ~~method to be used and eliminates the alternative use of the intrinsic value method.~~on their estimated fair value. SFAS 123(R) ~~is required~~was adopted by the Company effective January 1, 2006 using the modified-prospective method. In accordance with the modified-prospective method, the Company’s consolidated financial statements for prior periods have not been restated to ~~be adopted as of the beginning of the first annual period that begins after June 15, 2005. Visteon is currently evaluating~~reflect, and do not include, the impact of SFAS 123(R). Under the ~~requirements~~modified-prospective method, compensation cost includes:


•	Share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the fair value estimated in accordance with the original provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”),

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2. Basis of Presentation — (Continued)


•	Share-based payments granted subsequent to January 1, 2006, based on the fair value estimated in accordance with the provisions of SFAS 123(R).

The cumulative effect, net of tax, of adoption of SFAS 123(R) ~~on its consolidated financial statements, but does not expect~~was $4 million or $0.03 per share as of January 1, 2006. The Company recorded $6 million or $0.05 per share of incremental compensation expense during the ~~impact~~three-months ended March 31, 2006, under SFAS 123(R) when compared to the amount that would have ~~a material effect, as starting~~been recorded under SFAS 123. Additional disclosures required by SFAS 123(R) regarding the Company’s stock-based compensation plans and related accounting are provided in Note 3 “Stock-Based Compensation.”

Prior to the adoption of SFAS 123(R) and effective January 1, 2003 ~~Visteon~~the Company began expensing the fair value of stock-based awards granted to employees pursuant to ~~Statement of Financial Accounting Standards No. 123 (“~~SFAS 123”), “Accounting for Stock-Based Compensation.” In addition any stock options granted prior to January 1, 2003 will be fully vested at the time of adoption. SFAS 123(R) specifies that an award is vested when the employee’s retention of the award is no longer contingent on providing subsequent service (the “non-substantive vesting period approach”). Currently, Visteon grants stock options and stock appreciation rights which allow the employee to continue to vest in the award after retirement without providing additional service. Compensation expense for these awards is recognized over the vesting period. The impact of applying the non-substantive vesting period approach for retirement eligible employees under SFAS 123(R) compared to Visteon’s current methodology of expensing over the vesting period would not have a material effect on its results of operations for the third quarter and first nine months ended September 30, 2005.

~~SFAS 123~~123. This standard was adopted on athe prospective method basis for stock-based awards granted, modified or settled after December 31, 2002. For stock options and restricted stock awards granted prior to January 1, 2003, ~~Visteon measures~~the Company measured compensation cost using the intrinsic value ~~method.~~method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” as permitted by SFAS 123. If compensation cost for all stock-based awards had been determined based on the estimated fair value of stock options and the fair value ~~set~~ at the date of grant for restricted stock awards, in accordance with the provisions of SFAS 123, ~~Visteon’s~~the Company’s reported net loss and net loss per share would have ~~changed to~~resulted in the pro forma amounts ~~indicated~~provided below:


			Third Quarter						First Nine Months
																Three-Months Ended
			2005			2004			2005			2004				March 31, 2005

						(Restated)						(Restated)				(Dollars in Millions,
			(in millions, except per share amounts)													Except Per Share Amounts)
Net loss, as reported	Net loss, as reported		$	(207	)	$	(1,439	)	$	(1,608	)	$	(1,398	)	Net loss, as reported	$	(163	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects	Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects		��	18			6			25			12		Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects		2
Deduct: Total stock-based employee compensation expense determined under fair- value based method for all awards, net of related tax effects				(18	)		(11	)		(26	)		(20	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects															Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(3	)

Pro forma net loss	Pro forma net loss		$	(207	)	$	(1,444	)	$	(1,609	)	$	(1,406	)	Pro forma net loss	$	(164	)

Net loss per share:	Net loss per share:														Net loss per share:
As reported:															As reported:
	As reported:														Basic and diluted	$	(1.30	)
Pro forma:															Pro forma:
		Basic and diluted	$	(1.64	)	$	(11.48	)	$	(12.78	)	$	(11.16	)	Basic and diluted	$	(1.31	)
	Pro forma:
		Basic and diluted	$	(1.64	)	$	(11.52	)	$	(12.79	)	$	(11.22	)

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs — an amendment of ARB No. 43, Chapter 4.” This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 was adopted by the Company with effect from January 1, 2006 and did not have a material effect on results of operations, financial position or cash flows.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 3.	Stock-Based Compensation

Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R) using the modified-prospective transition method, accordingly prior period amounts have not been restated to reflect and do not include the impact of SFAS 123(R). Prior to the adoption of SFAS 123(R) the Company accounted for stock-based compensation in accordance with SFAS 123. For the three-months ended March 31, 2006 and 2005 the Company recorded compensation expense of $7 million and $2 million, respectively, for various stock-based compensation awards issued pursuant to the plans described below. No related income tax benefits were recorded during the three-months ended March 31, 2006 and 2005.

Stock-Based Compensation Plans

The Visteon Corporation 2004 Incentive Plan (“2004 Incentive Plan”) was approved by shareholders, is administered by the Organization and Compensation Committee of the Board of Directors and provides for the grant of incentive and nonqualified stock options, stock appreciation rights (“SARs”), performance stock rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and stock and various other rights based on common stock. The maximum number of shares of common stock that may be subject to awards under the 2004 Incentive Plan is 14.8 million shares. During the first quarter of 2006, the Company granted under the 2004 Incentive Plan approximately 4.7 million SARs and 2.1 million RSUs. At March 31, 2006, there were approximately 1.0 million shares of common stock available for grant under the 2004 Incentive Plan.

The Visteon Corporation Employees Equity Incentive Plan (“EEIP”) was approved by shareholders, is administered by the Organization and Compensation Committee of the Board of Directors and provides for the grant of nonqualified stock options, SARs, performance stock rights and stock, and various other rights based on common stock. The maximum number of shares of common stock that may be subject to awards under the EEIP is 6.5 million shares. At March 31, 2006, there were approximately 1.0 million shares of common stock available for grant under the EEIP.

The Visteon Corporation Restricted Stock Plan for Non-Employee Directors provides for the automatic annual grant of RSAs to non-employee directors, unless deferred by such director. In addition, during 2004 the shareholders approved the Visteon Corporation Non-Employee Director Stock Unit Plan, which provides for the mandatory deferral into RSUs by non-employee directors. RSUs awarded under the Non-Employee Director Stock Unit Plan vest immediately, but are distributed after the participant terminates service as a non-employee director of the Company.

Stock-Based Compensation Awards

Substantially all of the Company’s stock-based compensation awards take the form of stock options, SARs, RSUs and RSAs.

•

Stock options and SARs granted under the aforementioned plans have an exercise price equal to the average of the highest and lowest prices at which the Company’s common stock was traded on the New York Stock Exchange on the date of grant and become exercisable on a ratable basis over a three year vesting period. Stock options and SARs granted under the 2004 Incentive Plan after December 31, 2003 expire five years following the grant date. Stock options granted under the EEIP, and those granted prior to January 1, 2004 under the 2004 Incentive Plan, expire 10 years after the grant date. Stock options are settled in shares of the Company’s common stock upon exercise. Accordingly, such amount is recorded in the Company’s consolidated balance sheets under the caption “Additional paid-in capital.” SARs are settled in cash and accordingly result in the recognition of a liability representing the vested portion of the obligation.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 3.	Stock-Based Compensation — (Continued)

•

RSAs and RSUs granted under the aforementioned plans vest after a designated period of time (“time-based”), which is generally two to five years, or upon the achievement of certain performance goals (“performance-based”) at the completion of a performance period, which is generally three years. RSAs are settled in shares of the Company’s common stock as a result of the lapse of restrictions on the underlying shares. Accordingly, such amount is recorded in the Company’s consolidated balance sheets under the caption “Additional paid-in capital.” RSUs awarded under the 2004 Incentive Plan are settled in cash and, accordingly, result in the recognition of a liability representing the vested portion of the obligation. The current portion of such liability is recorded in the Company’s consolidated balance sheets under the caption “Other current liabilities” and the long-term portion of such liability is recorded under the caption “Other non-current liabilities.”

Fair Value Estimation Methodology and Assumptions

Use of the Black-Scholes option pricing model requires management to make various assumptions including the risk-free interest rate, expected term, expected volatility, and dividend yield. Expected volatilities are based on the historical volatility of the Company’s stock. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. The risk-free rate for periods during the contractual life of stock-based compensation rewards is based on the U.S. Treasury yield curve in effect at the time of grant.

Prior to the adoption of SFAS 123(R) the Company used the Black-Scholes option pricing model to determine the fair value of its equity based awards. All other awards were based on the intrinsic value of the underlying stock. Assumptions used to estimate the fair value for awards granted during the three-months ended March 31, 2006 and 2005 are as follows:


	SARs			Stock Options
	2006			2005

Expected term (In Years)		4			4
Risk-free interest rate		4.8	%		4.0	%
Expected volatility		54.0	%		42.0	%
Expected dividend yield		0.0	%		0.0	%

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 3.	Stock-Based Compensation — (Continued)

Stock Appreciation Rights and Stock Options

The following is a summary of the range of exercise prices for stock options and SARs that are currently outstanding and that are currently exercisable at March 31, 2006:


							Options and SARs
	Options and SARs Outstanding						Exercisable

			Weighted		Weighted				Weighted
	Number		Average		Average		Number		Average
	Outstanding		Remaining Life		Exercise Price		Exercisable		Price

	(In Thousands)		(In Years)				(In Thousands)
$ 5.00 - $ 7.00		15,331		4.5	$	5.92		6,376	$	6.51
$ 7.01 - $12.00		3,115		3.2	$	9.94		890	$	9.83
$12.01 - $17.00		4,502		5.3	$	13.43		4,502	$	13.43
$17.01 - $22.00		2,329		5.1	$	17.54		2,328	$	17.54

		25,277		4.6				14,096

Since the market value of the Company’s stock was less than the exercise price as of March 31, 2006 the aggregate intrinsic value of stock options and SARs both outstanding and exercisable at March 31, 2006 was $0. Additionally, there were no exercises during the period. The weighted average fair value of SARs granted during the three-months ended March 31, 2006 was $2.12. The weighted average grant date fair value of stock options granted during the three-months ended March 31, 2005 was $2.38.

As of March 31, 2006, there was $5 million and $7 million of total unrecognized compensation cost related to non-vested options and SARs, respectively, granted under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted average period of 1.75 years for options and 1.79 years for SARs.

A summary of activity for the three-months ended March 31, 2006, including award grants, exercises and forfeitures is provided below for stock options and SARs.


								Weighted Average
		Stock Options			SARs			Exercise Price

		(In Thousands)
Outstanding at December 31, 2005			15,014			6,103		$	9.74
	Granted		—			4,658		$	4.76
	Exercised		—			—			—
	Forfeited or expired		(265	)		(233	)	$	11.34

Outstanding at March 31, 2006			14,749			10,528		$	9.74

Exercisable at March 31, 2006			12,142			1,954		$	10.75

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 3.	Stock-Based Compensation — (Continued)

Restricted Stock Units and Restricted Stock Awards

The weighted average grant date fair value of RSUs granted during the three-months ended March 31, 2006 and 2005, was $4.76 and $6.25, respectively. The total fair value of RSAs vested during the three-months ended March 31, 2006 and 2005 was $10 million and $1 million, respectively. No related income tax benefits were recorded for the three-months ended March 31, 2006 and 2005. As of March 31, 2006, there was $1 million and $19 million of total unrecognized compensation cost related to non-vested RSAs and RSUs, respectively, granted under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted average period of 2.73 years for RSAs and 2.03 years for RSUs.

A summary of activity for the three-months ended March 31, 2006, including award grants, exercises and forfeitures is provided below for RSAs and RSUs.


								Weighted Average
		RSAs			RSUs			Grant Date Fair Value

		(In Thousands)
Non-vested at December 31, 2005			2,217			5,599		$	7.89
	Granted		—			2,098		$	4.76
	Vested		(2,015	)		(35	)	$	6.83
	Forfeited		(15	)		(202	)	$	7.73

Non-vested at March 31, 2006			187			7,460		$	8.30


NOTE 4.	Restructuring Activities

The Company has undertaken various restructuring activities to achieve its strategic objectives and improve profitability. Restructuring activities include, but are not limited to, plant closures, employee reductions, production relocation, administrative realignment and consolidation of available capacity and resources. The Company expects to finance restructuring programs through cash reimbursement from an escrow account established pursuant to the ACH Transactions, from cash generated from its ongoing operations, or from cash available under its existing debt agreements, subject to the terms of applicable covenants. The Company does not expect that the execution of these programs will have a significant adverse impact on its liquidity position.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 4. Restructuring Activities — (Continued)

Escrow Agreement

Pursuant to the Escrow Agreement, dated as of October 1, 2005, among the Company, Ford and Deutsche Bank Trust Company Americas, Ford paid $400 million into an escrow account for use by the Company to restructure its businesses. The Escrow Agreement provides that the Company will be reimbursed from the escrow account for the first $250 million of reimbursable restructuring costs, as defined in the Escrow Agreement, and up to one half of the next $300 million of such costs. Monies in the escrow account are invested, at the direction of the Company, in high quality, short-term investments and related investment earnings are credited to the account as earned. Under the terms of the Escrow Agreement, investment earnings are not available for disbursement until the initial funding is utilized. The following table provides a reconciliation of amounts available in the escrow account.


	Three-Months Ended			Inception through
	March 31, 2006			March 31, 2006

	(Dollars in Millions)
Beginning escrow account available	$	380		$	400
Add: Investment earnings		4			8
Deduct: Disbursements for restructuring costs		(33	)		(57	)

Ending escrow account available	$	351		$	351

As of March 31, 2006 and December 31, 2005, approximately $3 million and $27 million, respectively, of amounts receivable from the escrow account were included in the consolidated balance sheets.

Restructuring Reserves

The following is a summary of the Company’s consolidated restructuring reserves and related activity as of and for the three-months ended March 31, 2006. Substantially all of the Company’s restructuring expenses are related to employee severance and termination benefit costs.


	Climate			Electronics			Other			Total

	(Dollars in Millions)
December 31, 2005	$	—		$	2		$	12		$	14
Expenses		2			6			1			9
Utilization		(2	)		(3	)		(7	)		(12	)

March 31, 2006	$	—		$	5		$	6		$	11

First Quarter 2006 Restructuring Actions

On January 11, 2006, the Company announced a three-year improvement plan that involves certain underperforming and non-strategic plants and businesses and is designed to improve operating performance and achieve cost reductions. Activities associated with this plan are expected to affect up to 23 facilities with costs expected to include employee severance and termination benefit costs, contract termination costs, and production transfer costs.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 4. Restructuring Activities — (Continued)

During the first quarter of 2006 the Company recorded $9 million of severance and other restructuring costs related to this three-year improvement plan. The most significant of these costs relates to the Company’s Electronics segment, which recorded approximately $6 million of severance costs related to activities at certain facilities located in Mexico and Portugal. These severance costs are associated with the termination of approximately 500 hourly and 50 salaried employees. Approximately $5 million related to these activities is recorded in other current liabilities as of March 31, 2006.

The Company had previously recorded restructuring reserves related to the three-year improvement plan of $14 million as of December 31, 2005. Such reserves were related to employee severance and termination benefit costs associated with the termination of approximately 1,200 hourly and salary employees at certain facilities located in the U.S., Europe, Mexico and Puerto Rico. Approximately $6 million related to these activities is recorded in other current liabilities as of March 31, 2006.

The Company estimates that the total cash cost associated with this three-year improvement plan will be approximately $550 million, offset by $400 million of escrow account reimbursement. Generally, charges will be recorded as elements of the plan are finalized and the timing of activities and the amount of related costs are not likely to change. The cumulative costs incurred to date related to the three-year improvement plan are approximately $46 million, including $11 million related to Electronics, $2 million related to Climate and $33 million related to Other.


NOTE 5.	Inventories

Inventories are stated at the lower of cost, determined on afirst-in, first-out basis, or market. A summary of inventories is provided below:


		March 31			December 31
		2006			2005

		(Dollars in Millions)
Raw materials		$	153		$	154
Work-in-process			250			242
Finished products			180			178

			583			574
	Valuation Reserves		(39	)		(37	)

		$	544		$	537

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~

~~NOTE 5. Stock-Based Awards — (Continued)~~

During the first quarter of 2005, Visteon granted under the Visteon Corporation 2004 Incentive Plan and the Visteon Corporation Employees Equity Incentive Plan about 4.3 million stock appreciation rights (“SARs”), 2.7 million restricted stock units (“RSUs”), and 2.0 million stock options. Stock options and SARs granted have an exercise price equal to the average of the highest and lowest prices at which Visteon common stock was traded on the New York Stock Exchange on the date of grant, expire five years after the date on which they were granted and become exercisable one-third after one year from the date of grant, an additional one-third after two years and in full after three years. SARs granted entitle the participant to receive a cash amount equal to the appreciation in the underlying share of common stock, which is equal to the difference in fair market value of Visteon common stock on the date the SAR is granted and the fair market value of Visteon common stock on the date the SAR is exercised. RSUs granted consist of units valued based upon the fair market value of Visteon common stock and are settled in cash upon vesting after a designated period of time, which is generally three years.

In addition, treasury stock increased $10 million during the first nine months of 2005 primarily from the forfeiture of about 700,000 shares of restricted stock awards, originally granted in 2002, that did not vest as certain performance goals were not achieved.


NOTE 6.	~~Special Charges~~Property and Equipment

~~First Nine Months~~Property and equipment is stated at cost. Depreciable property is depreciated over the estimated useful lives of the assets, principally using the straight-line method. A summary of property and equipment is provided below:

March 31 December 31
2006 2005

(Dollars in Millions)
Land $ 111 $ 113
Buildings and improvements 1,160 1,148
Machinery, equipment and other 3,705 3,492
Construction in progress 211 200

Total property and equipment 5,187 4,953
Accumulated depreciation (2,356 ) (2,140 )

2,831 2,813
Special tools, net of amortization 163 160

$ 2,994 $ 2,973

Depreciation and amortization expenses are summarized as follows:

Three-Months Ended
March 31

2006 2005

(Dollars in Millions)
Depreciation $ 88 $ 150
Amortization 14 26

$ 102 $ 176


NOTE 7.	Non-Consolidated Affiliates

The following table presents summarized financial data for non-consolidated affiliates accounted for under the equity method for the three-months ended March 31, 2006 and 2005, ~~Actions~~

~~Visteon recorded in costs~~respectively. The amounts represent 100% of ~~sales $11 million and $1,194 million~~the results of ~~pre-tax special charges in~~operations of all non-consolidated affiliates accounted for under the ~~third quarter and first nine months of 2005, respectively, as summarized below:~~equity method.

Third Quarter First Nine Months

Pre-tax After-tax Pre-tax After-tax

(in millions)
Restructuring and other charges:
Non-U.S. employee actions $ 11 $ 11 $ 11 $ 11
U.S. salaried voluntary separation related — — 7 7

Total restructuring 11 11 18 18
Asset impairment charge — held for sale (Note 3) — — 920 920
Asset impairment charge — held for use — — 256 256

Total special charges $ 11 $ 11 $ 1,194 $ 1,194


	Net Sales				Gross Margin				Net Income

	2006		2005		2006		2005		2006		2005

	(Dollars in Millions)
Yanfeng Visteon Automotive Trim Systems Co., Ltd.	$	311	$	193	$	48	$	27	$	11	$	6
All other		132		148		13		21		3		6

	$	443	$	341	$	61	$	48	$	14	$	12

During the third quarter of 2005, Visteon recorded a pre-tax special charge of $11 million in costs of sales ($11 million after-tax) for non-U.S. prior service pension costs to reflect a reduction of expected future years of service for some plan participants.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 7. Non-Consolidated Affiliates — (Continued)

The Company’s share of net assets and net income is reported in the consolidated financial statements as “Equity in net assets of non-consolidated affiliates” on the consolidated balance sheets and “Equity in net income of non-consolidated affiliates” on the consolidated statements of operations. Included in the Company’s accumulated deficit is undistributed income of non-consolidated affiliates accounted for under the equity method of approximately $140 million and $130 million at March 31, 2006 and December 31, 2005, respectively.


NOTE 6.8.	~~Special Charges — (Continued)~~Other Liabilities

During the second quarter of 2005, the Automotive Operations recorded a pre-tax, non-cash impairment of $256 million, to reduce the net book value of certain long-lived assets. This impairment was based on an assessment by product line asset group completed in the second quarter of 2005, excluding those assets considered held for sale, of the recoverability of our long-lived assets in light of the challenging environment in which we operate. The assessment considered the impact of lower than anticipatedOther current ~~and near term future year production volumes and the related impact on our future operating projections. Assets~~liabilities are considered impaired if the book value is greater than the undiscounted cash flows expected from the use of the asset. As a result of this analysis the assets located in the U.K, Germany, Poland and Brazil related to two product groupings were considered impaired: driveline and engine/air fuel systems. The write-down was determined on a “held for use” basis. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms.

During the first quarter of 2005, Visteon recorded pre-tax special charges of $7 million in costs of sales ($7 million after-tax) related to a continuation of an incentive program offered during the fourth quarter of 2004 to eligible U.S. salaried employees to voluntarily separate employment. Terms of the program required the effective termination date to be no later than March 31, 2005, unless otherwise mutually agreed. Through March 31, 2005, 409 employees have voluntarily elected to participate in this program, comprised of 374 employees during the fourth quarter of 2004 and 35 employees during the first quarter of 2005. As of June 30, 2005, substantially all of the employees have terminated their employment.

~~First Nine Months 2004 Actions~~

~~Visteon recorded in costs of sales $336 million and $355 million of pre-tax special charges in the third quarter and first nine months of 2004, respectively,~~summarized as follows:


	March 31		December 31
	2006		2005

	(Dollars in Millions)
Salaries, wages and employer taxes	$	101	$	83
Product warranty and recall		80		74
Postretirement employee benefits other than pensions		42		42
Interest		28		46
Income taxes payable		22		23
Restructuring reserves		11		14
Other		110		156

	$	394	$	438

Other non-current liabilities are summarized ~~below:~~as follows:

Third Quarter First Nine Months

Pre-tax After-tax Pre-tax After-tax

(in millions)
Restructuring and other charges:
U.S. hourly early retirement incentive $ 25 $ 25 $ 25 $ 25
Plant closure related — — 10 6
European plan for growth related — 2 9 9
Adjustment related to prior periods (3 ) (3 ) (3 ) (3 )

Total restructuring 22 24 41 37
Asset impairment charges 314 314 314 314
Deferred tax valuation allowance (Note 4)* — 931 — 871

Total special charges $ 336 $ 1,269 $ 355 $ 1,222


	March 31		December 31
	2006		2005

	(Dollars in Millions)
Non-income tax liabilities	$	132	$	131
Product warranty and recall		80		74
Other		204		177

	$	416	$	382


*	~~Third quarter 2004 amount includes $60 million of tax expense related to tax benefits recorded during the first half.~~

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~


NOTE 6.9.	~~Special Charges — (Continued)~~Debt

~~During~~The Company had $234 million and $1,849 million of outstanding short-term and long-term debt, respectively at March 31, 2006. Short-term and long-term debt, including the ~~third quarter of 2004, the Automotive Operations recorded a pre-tax, non-cash impairment of $314 million in costs of sales to reduce the net book~~fair market value of ~~certain long-lived assets. This impairment~~related interest rate swaps, were as follows:


	March 31		December 31
	2006		2005

	(Dollars in Millions)
Short-term debt
Five-year revolving credit facility	$	100	$	347
Other — short-term		88		107
Current portion of long-term debt		46		31

		234		485

Long-term debt
Five-year term loan due June 25, 2007		241		241
18-Month term loan due June 20, 2007		350		—
8.25% notes due August 1, 2010		699		701
7.00% notes due March 10, 2014		435		442
Other		124		125

		1,849		1,509

	$	2,083	$	1,994

On January 9, 2006, the Company closed on a new18-month secured term loan (the “18-Month Term Loan”) in the amount of $350 million, which expires in June 2007, to replace the Company’s $300 million secured short-term revolving credit agreement that expired on December 15, 2005. The 18-Month Term Loan was made a part of the Company’s existing five-year revolving credit agreement, resulting in $1,122 million available to the Company under this agreement. Also at this time, the terms and conditions of the five-year revolving credit agreement and the five-year term loan credit agreement (the “Credit Agreements”) were modified to align various covenants with the Company’s restructuring initiatives and to make changes to the consolidated leverage ratios. Borrowings under the Credit Agreements bear interest based on ~~an assessment by product line asset group, completed~~a variable rate interest option selected at the time of borrowing. The Credit Agreements contain certain affirmative and negative covenants including a covenant not to exceed a certain leverage ratio of consolidated total debt to consolidated EBITDA (as defined in the ~~third~~Credit Agreements) of 4.75 for the quarter ending March 31, 2006; 5.25 for the quarter ending June 30, 2006; 4.25 for the quarter ending September 30, 2006; 3.00 for the quarter ending December 31, 2006; 2.75 for the quarter ending March 31, 2007; and 2.50 thereafter. In addition, the Credit Agreements limit the amount of ~~2004,~~capital expenditures and cash dividend payments. The Company was in compliance with applicable covenants and restrictions, as amended, as of the recoverability of our long-lived assets in light of the challenging environment in which we operate. The assessment included consideration of lower than anticipated Ford North American production volume and the related impact on our future operating projections. Assets are considered impaired if the book value is greater than the undiscounted cash flows expected from the use of the asset. As a result of this analysis the assets of the steering systems product group were impaired. The impairment was approximately $249 million in North American and $65 million in Europe and was determined on a ‘held for use‘ basis. Fair values were determined primarily based on prices for similar groups of assets determined by a third-party valuation firm.March 31, 2006.

Early retirement incentive and other related charges during the third quarter of 2004 related to incentive programs offered to eligible Visteon-assigned Ford-UAW employees to voluntarily retire or to relocate in order to return to a Ford facility. About 500 employees elected to retire early at a cost of $18 million and about 210 employees have agreed to return to a Ford facility at a cost of $7 million.

Plant closure charges are related to the involuntary separation of about 200 employees from the closure of our La Verpilliere, France manufacturing facility in 2004. European Plan for Growth charges are comprised of $9 million related to the separation of about 50 hourly employees located at Visteon’s plants in Europe through a continuation of a special voluntary retirement and separation program started in 2002.

In the third quarter of 2004, accrued liabilities of $3 million relating to prior year’s actions were credited to costs of sales, including $2 million related to costs to complete the transfer of the seat production located in Chesterfield, Michigan, to another supplier.

~~Reserve Activity~~

~~Reserve balances, excluding those related to seating operations, are included in current accrued liabilities on the accompanying balance sheet.~~

Automotive Glass Total
Operations Operations Visteon

(in millions)
December 31, 2004 reserve balance $ 52 $ 3 $ 55
First nine months 2005 expense 18 — 18
Utilization (62 ) (3 ) (65 )

September 30, 2005 reserve balance $ 8 $ — $ 8

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~


~~NOTE 6.~~	~~Special Charges — (Continued)~~

Utilization in the first nine months of 2005 includes $39 million related to the U.S. salaried voluntary separation program, comprised of $36 million in cash payments and $3 million incurred related to special pension and other postretirement benefits. Reserves related to the U.S. salaried voluntary separation program were $2 million and $34 million at September 30, 2005 and December 31, 2004, respectively. In addition, utilization includes $11 million incurred for non-U.S. prior service pension costs and $15 million of cash payments related to other actions.

Separately, during the first nine months of 2005, Visteon paid Ford about $15 million of previously accrued amounts ($205 million at December 31, 2004) related to an agreement entered into in 2003 to reimburse Ford for the actual net costs of transferring seating production, including costs related to Ford hourly employee voluntary retirement and separation programs that Ford implemented as well as postretirement health care liabilities associated with hourly employee transfers.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


NOTE 7.10.	Employee Retirement Benefits

~~Visteon’s retirement plans’ expense~~The components of postretirement benefits other than pensions are as follows:


	March 31		December 31
	2006		2005

	(Dollars in Millions)
Visteon sponsored postretirement benefits other than pensions	$	727	$	724
Postretirement benefit related obligation to Ford		130		154

Postretirement benefits other than pensions	$	857	$	878

Net Periodic Benefit Costs

The components of the Company’s net periodic benefit costs for the ~~third~~three-months ended March 31, 2006 and 2005 were as follows:


		Retirement Plans												Health Care
														and Life
														Insurance
		U.S. Plans						Non-U.S. Plans						Benefits

		2006			2005			2006			2005			2006			2005

		(Dollars in Millions)
Service cost		$	16		$	15		$	9		$	9		$	4		$	12
Interest cost			19			18			17			16			11			17
Expected return on plan assets			(18	)		(17	)		(13	)		(15	)		—			—
Amortization of:
	Plan amendments		2			2			1			2			(13	)		(1	)
	Actuarial losses and other		1			2			5			2			7			7
Curtailment gain			—			—			(1	)		—			—			—

Visteon sponsored plan net periodic benefit costs			20			20			18			14			9			35
Expense for Visteon-assigned Ford-UAW and certain salaried employees			(3	)		27			—			—			(25	)		55

Net periodic benefits costs, excluding restructuring		$	17		$	47		$	18		$	14		$	(16	)	$	90

Retirement Benefit Related Restructuring Expenses

In addition to retirement benefit expenses, the Company recognized retirement benefit-related restructuring charges totaling $3 million during the first quarter ~~and first nine months~~ of 2005 ~~and 2004, respectively, are summarized as follows:~~reflecting a pension loss related to the continuation of the voluntary termination incentive program in the U.S. which began in 2004.

Retirement Plans Health Care
and Life
Insurance
U.S. Plans Non-U.S. Plans Benefits

2005 2004 2005 2004 2005 2004

(in millions)
Third Quarter
Service cost $ 15 $ 14 $ 9 $ 9 $ 12 $ 10
Interest cost 18 16 16 15 16 15
Expected return on plan assets (17 ) (16 ) (14 ) (15 ) — —
Amortization of:
Transition — — 1 — — —
Plan amendments 2 2 1 3 (4 ) —
Losses and other 2 1 1 1 8 5
Special termination benefits — — — 1 — —
Curtailment — — 11 — (1 ) —

Net pension/postretirement expense related to Visteon sponsored plans 20 17 25 14 31 30
Expense for Visteon-assigned Ford-UAW and certain salaried employees 28 27 — — 55 38

Net pension/postretirement expense $ 48 $ 44 $ 25 $ 14 $ 86 $ 68

First Nine Months
Service cost $ 46 $ 42 $ 26 $ 27 $ 36 $ 31
Interest cost 54 49 48 48 50 46
Expected return on plan assets (51 ) (48 ) (44 ) (46 ) — —
Amortization of:
Transition — — 1 — — —
Plan amendments 7 7 5 8 (5 ) —
Losses and other 5 3 5 2 21 16
Special termination benefits — — 1 4 — —
Curtailment — — 11 — (1 ) —

Net pension/postretirement expense related to Visteon sponsored plans 61 53 53 43 101 93
Expense for Visteon-assigned Ford-UAW and certain salaried employees 87 85 — — 166 113

Net pension/postretirement expense $ 148 $ 138 $ 53 $ 43 $ 267 $ 206

1918

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 10. Employee Retirement Benefits — (Continued)

Contributions


~~NOTE 7.~~	~~Employee Retirement Benefits — (Continued)~~

During the first ~~nine months~~quarter of ~~2005,~~2006, contributions to ~~Visteon~~the Company’s U.S. retirement plans and postretirement health care and life insurance plans were ~~$33~~$8 million and ~~$24~~$5 million, respectively, and contributions tonon-U.S. retirement plans were ~~$45~~$20 million. ~~Visteon~~The Company presently anticipates additional contributions to its U.S. retirement plans and postretirement health care and life insurance plans of $8$75 million and ~~$18~~$35 million, respectively, in ~~2005~~2006 for a total of ~~$41~~$83 million and ~~$42~~$40 million, respectively. ~~Visteon~~The Company also anticipates additional ~~2005~~2006 contributions tonon-U.S. retirement plans of ~~$15~~$44 million for a total of ~~$60~~$64 million.

~~During June 2005, Visteon approved changes~~Postretirement Benefit Related Obligation to ~~its U.S.~~Ford

Effective January 1, 2006, Ford acquired two plants from ACH, which are located in Rawsonville, Michigan and Sterling Heights, Michigan. In connection with this transaction and the Salaried Employee Transition Agreement between the Company and Ford, certain salaried postretirement health care and life insurance plans which will become effective June 1, 2007. Employees who retire after that date will not be provided life insurance benefits, but will have access to company-sponsored health care at group rates if they elect to pay the related health care premium cost. Visteon will provide credits to offset a portionemployees of the ~~health care premium cost~~Company were transferred to Ford including the accumulated postretirement benefit obligations for these employees. The Company recorded approximately $23 million related to the relief of postretirement benefits payable to Ford in the first quarter of 2006 and expects to record a curtailment gain of approximately $40 million in the second quarter of 2006 related to Visteon sponsored benefit obligations for the transferred employees.


NOTE 11.	Income Taxes

The Company’s provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against income (loss) before income taxes, excluding related equity in net income of affiliated companies, for the period. Effective tax rates vary from period to period as separate calculations are performed for those ~~employees that retire from Visteon with hire dates on or before June 30, 2005 that attained~~countries where the ~~age of 45 by July 1, 2005. Credits accumulate at the rate of $3,000 per year plus an interest factor,~~Company’s operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are ~~further increased at retirement by~~maintained.

Income taxes during the first quarter of 2006 and 2005 included the impact of maintaining a ~~factor of $750 multiplied by~~valuation allowance against the ~~employee’s combined years of service and age. These changes are estimated to result in a reduction~~Company’s deferred tax assets in the ~~related accumulated plan benefit obligation~~U.S. and certain foreign countries. As a result, income tax benefits attributable to pre-tax losses incurred in the affected jurisdictions were not provided. The Company recorded a provision of ~~$336~~$30 million at June 30, 2005, of which approximately $1 million was recognized in September 2005 and the remainder will be amortized beginning in October 2005 as a reduction of postretirement benefit expense over the estimated average remaining employee service lives of approximately 14 years for the ~~Visteon Corporate Plan and 10 years~~first quarter of 2006, compared with $22 million for the ~~Visteon Systems Salaried Plan.~~first quarter of 2005. The provisions for both the first quarter of 2006 and 2005 reflect primarily income tax expense related to those countries where the Company is profitable and whose results continue to be tax-effected, accrued withholding taxes, and certain non-recurring and other discrete tax items.

~~During~~Non-recurring and other discrete items recorded in the ~~third~~first quarter of 2006 resulted in additional tax expense of $3 million related primarily to unfavorable currency exchange rate movements in the quarter. Included in the provision for income taxes for the first quarter of 2005 ~~Visteon~~was a benefit of $8 million, consisting primarily of benefits related to a change in the estimated benefit associated with tax losses in Canada and the favorable resolution of tax matters in Mexico, offset by net provisions recorded ~~a pre-tax special charge~~to increase the Company’s income tax reserves for prior year tax exposures.

The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will continue to cause variability in the Company’s quarterly and annual effective tax rates. Full valuation allowances against deferred tax assets in the U.S. and applicable foreign countries, which include the U.K. and Germany, will be maintained until sufficient positive evidence exists to reduce or eliminate them.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 12.	Comprehensive Income (Loss)

Comprehensive income (loss), net of ~~$11~~tax is summarized below:


	Three-Months Ended
	March 31

	2006			2005

	(Dollars in Millions)
Net income (loss)	$	3		$	(163	)
Change in foreign currency translation adjustments		36			(48	)
Other		(4	)		2

	$	35		$	(209	)

Accumulated other comprehensive loss is comprised of the following:


	March 31			December 31
	2006			2005

	(Dollars in Millions)
Foreign currency translation adjustments	$	81		$	45
Minimum pension liability		(274	)		(274	)
Realized and unrealized losses on derivatives and other		(9	)		(5	)

	$	(202	)	$	(234	)

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 13.	Earnings (Loss) Per Share

Basic earnings (loss) per share of common stock is calculated by dividing reported net income (loss) by the average number of shares of common stock outstanding during the applicable period, adjusted for restricted stock. The calculation of diluted earnings (loss) per share takes into account the effect of dilutive potential common stock, such as stock options, and contingently returnable shares, such as restricted stock.


		Three-Months Ended
		March 31

		2006			2005

		(Dollars in Millions)
Numerator:
Net income (loss) before cumulative effect of change in accounting		$	7		$	(163	)
Cumulative effect of change in accounting, net of tax			(4	)		—

Net income (loss)		$	3		$	(163	)

Denominator:
Average common stock outstanding			128.3			128.7
Less: Average restricted stock outstanding			(1.2	)		(3.1	)

	Basic shares		127.1			125.6
Net dilutive effect of restricted stock			0.1			—

	Diluted shares		127.2			125.6

Earnings (loss) per share:
Basic and diluted earnings (loss) per share before cumulative effect of change in accounting		$	0.05		$	(1.30	)
Cumulative effect of change in accounting			(0.03	)		—

Basic and diluted earnings (loss) per share		$	0.02		$	(1.30	)

Stock options to purchase about 20.6 million shares of common stock at exercise prices ranging from about $6 per share to $22 per share, and which expire at various dates between 2009 and 2012, were outstanding during the first quarter of 2006 but were not included in ~~costs~~the computation of ~~sales ($11~~diluted earnings (loss) per share because the stock options’ exercise price was greater than the average market price of the common shares. In addition, warrants to purchase 25 million ~~after-tax) for non-U.S. prior service pension costs~~shares of the Company’s common stock at an exercise price equal to ~~reflect a reduction~~$6.90 per share, and which expire on October 1, 2013 were outstanding during the first quarter of ~~expected future years~~2006 but were not included in the computation of ~~service for some plan participants.~~diluted earnings (loss) per share because the exercise price was greater than the average market price of the common shares.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


NOTE 8.14.	Asset Securitization

~~United States~~

~~During 2004, Visteon established a revolving~~The Company has certain agreements in place whereby trade accounts receivable ~~securitization facility~~are sold to third-party financial institutions without recourse. The Company had sold 58 million euro ($71 million), and 99 million euro ($117 million) under such agreements in ~~the United States (“facility”). Under this facility, Visteon can sell a portion~~Europe as of its U.S. trade receivables from customers other than Ford to Visteon Receivables LLC (“VRL”), a wholly-owned consolidated special purpose entity. VRL may then sell, on a non-recourse basis (subject to certain limited exceptions), an undivided interest in the receivables to an asset-backed, multi-seller commercial paper conduit, which is unrelated to Visteon or VRL.

~~During the first nine months of 2005, gross proceeds from new securitizations were $237 million; and collections and repayments to the conduit were $237 million. At September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively. Additionally, the ~~undivided interest~~Company had sold ~~was $55 million. The retained interest of $208~~830 million and $178 million at September 30, 2005 and December 31, 2004, respectively, is included in accounts receivable — other customers on the Consolidated Balance Sheet. For the first nine months of 2005, the loss on sale of receivables was about $1 million.

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~

~~NOTE 8. Asset Securitization — (Continued)~~

The facility was extended during the first quarter of 2005 to expire in March 2006, and can be extended annually through March 2008 based upon the mutual agreement of the parties. The agreement contains financial covenants similar to Visteon’s unsecured revolving credit facilities, and a mechanism which considers changes in Visteon’s credit ratings in determining the maximum amount of undivided interests that VRL could sell to the conduit. The April 2005 reductions in Visteon’s credit ratings would have effectively reduced the maximum amount of undivided interest that VRL could sell to the conduit to zero; however, Visteon has obtained a waiver to this credit rating reduction effective through December 15, 2005, pursuant to which the maximum amount of undivided interests that VRL can sell to the conduit at September 30, 2005 is about $71 million.

~~Europe~~

As of September 30, 2005 and December 31, 2004, Visteon has sold euro 52 million ($62 million) and euro 19 million ($26 million), respectively, of trade receivables without recourse, under European sale of receivables agreements that are renewable on an annual basis with certain banks. These agreements currently provide for the sale of up to euro 80 million in trade receivables.

~~Asia~~

~~As of September 30, 2005, Visteon has sold~~ Japanese yen ~~671 million~~ ($67 million) of trade receivables ~~without recourse,~~ under ~~a Japanese sale~~such agreements as of ~~receivables agreement that is renewable on an annual basis.~~ December 31, 2005.

The ~~agreement currently provides~~Company recognized losses of approximately $1 million for the ~~sale of up~~three-months ended March 31, 2006 and less than $1 million for the three-months ended March 31, 2005, representing the discount from book values at which these receivables were sold to ~~Japanese yen 1.5 billion in trade receivables.~~third parties.


NOTE 9.15.	~~Debt~~

~~Debt, including the fair market value of related interest rate swaps, was as follows:~~

September 30, December 31,
2005 2004

(in millions)
Debt payable within one year

Revolving credit facility $ 300 $ —
Other — short-term 107 221
7.95% notes retired August 1, 2005 — 253
Current portion of long-term debt 26 34

Total debt payable within one year 433 508

Long-term debt

8.25% notes due August 1, 2010 702 707
7.00% notes due March 10, 2014 444 446
5-Year Term loan due June 25, 2007 239 223
Other 137 137

Total long-term debt 1,522 1,513

Total debt $ 1,955 $ 2,021

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


~~NOTE 9.~~	~~Debt — (Continued)~~Commitments and Contingencies

~~Credit Facility Agreements~~Guarantees

~~During~~The Company has guaranteed approximately $137 million and $136 million of debt capacity held by consolidated subsidiaries, and $88 million and $84 million for lifetime lease payments held by consolidated subsidiaries at March 31, 2006 and December 31, 2005, respectively. In addition, the ~~first quarter~~Company has guaranteed certain Tier 2 suppliers’ debt and lease obligations and other third-party service providers’ obligations of up to $20 million at March 31, 2006 and December 31, 2005, ~~Visteon’s primary bank credit agreements were (i)~~to ensure the ~~364-Day Credit Agreement, dated as~~continued supply of ~~June 18, 2004 (the “364-Day Credit Agreement”)~~essential parts.

The Company and its subsidiaries own a 38% equity interest in Vitro Flex S.A. de C.V., ~~(ii)~~a joint venture that manufactures and supplies tempered and laminated glass for use in automotive vehicles. Pursuant to the ~~Five-Year Term Loan Credit Agreement, dated as~~joint venture agreement the Company is required to provide, though 2008, sales orders and/or other competitively-priced business opportunities meeting certain average annual levels, mainly based on the venture’s manufacturing capacity. In addition to the Company’s equity investment of ~~June 25, 2002 (the “Term Loan Credit Agreement”),~~$19 million, the Company has exposure to the after tax cash effect for shortfalls to agreed upon average annual sales levels pursuant to the joint venture agreement.

Litigation and ~~(iii)~~Claims

In February 2005, a shareholder lawsuit was filed in the Five-Year Revolving Loan Credit Agreement, dated as of June 20, 2002 (the “Five-Year Credit Agreement”). In May 2005, Visteon entered into amendments and waivers to each of these credit agreements to extend the deadline for Visteon to deliver its first quarter 2005 financial statements until July 29, 2005, which was subsequently amended as discussed below, and change the Eurocurrency margin to 250 bpsU.S. District Court for the ~~364-Day Credit Agreement~~Eastern District of Michigan against the Company and ~~Five-Year Credit Agreement~~certain current and ~~to 275 bps for~~former officers of the ~~Term Loan Credit Agreement. On June 19,~~Company. In July 2005, the ~~364-Day Credit Agreement expired.~~

~~On June 24,~~Public Employees’ Retirement System of Mississippi was appointed as lead plaintiff in this matter. In September 2005, ~~Visteon entered into a $300 million short-term secured revolving credit agreement (the “Short-Term Credit Agreement”) with a syndicate~~the lead plaintiff filed an amended complaint, which alleges, among other things, that the Company and its independent registered public accounting firm, PricewaterhouseCoopers LLP, made misleading statements of ~~financial institutions, and entered into amendments and restatements (the “Amendments”, and together with~~material fact or omitted to state material facts necessary in order to make the Short-Term Credit Agreement, the “Credit Agreements”) to the Five-Year Credit Agreement and the Term Loan Credit Agreement to conform certain provisions of such agreements to provisions of the Short-Term Credit Agreement. The Short-Term Credit Agreement will expire on December 15, 2005. Further, the Credit Agreements provided that Visteon has until December 10, 2005 to provide quarterly financial statements ~~for each of the periods ended March 31, 2005, June 30, 2005, and September 30, 2005, which Visteon fulfilled by filing these financial statements~~made, in ~~November 2005. In~~ light of the ~~upcoming expiration~~circumstances under which they were made, not misleading. The named plaintiff seeks to represent a class consisting of purchasers of the ~~Short-Term Credit Agreement~~Company’s securities during the period between June 28, 2000 and January 31, 2005. Class action status has not yet been certified in this litigation. In December 2005, ~~Visteon~~defendants moved to dismiss the amended complaint for failure to state a claim. Oral argument on that motion is ~~exploring its financing alternatives.~~

Borrowings under the Credit Agreements bear interest at variable rates equal to, at our election, (i) 3.50% plus the higher of (a) the prime rate or (b) the federal funds rate plus 50 bps, or (ii) a Eurocurrency rate plus 4.50%. Visteon elects the basis of the interest rate at the time of each borrowing. Visteon also pays a commitment fee of 50 bps in arrears on the average undrawn amount of the facility each quarter.scheduled for May 2006.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 15. Commitments and Contingencies — (Continued)


~~NOTE 9.~~	~~Debt — (Continued)~~

In March 2005, a number of current and former directors and officers were named as defendants in two shareholder derivative suits pending in the State of Michigan Circuit Court for the County of Wayne. As is customary in derivative suits, the Company has been named as a defendant in these actions. As a nominal defendant, the Company is not liable for any damages in these suits nor is any specific relief sought against the Company. The ~~Credit Agreements contain,~~complaints allege that, among other things, ~~conditions precedent, covenants, representations~~the individual defendants breached their fiduciary duties of good faith and ~~warranties~~loyalty and ~~events~~aided and abetted such breaches during the period between January 23, 2004 and January 31, 2005 in connection with the Company’s conduct concerning, among other things, the matters alleged in the securities class action discussed immediately above. The derivative matters have been stayed pending resolution of ~~default customary~~defendants motion to dismiss the securities matter pending in the Eastern District of Michigan.

In March and April 2005, the Company and a number of current and former employees, officers and directors were named as defendants in three class action lawsuits brought under the Employee Retirement Income Security Act (“ERISA”) in the U.S. District Court for ~~facilities~~the Eastern District of ~~this type. Such covenants include~~Michigan. In September 2005, the ~~requirement~~plaintiffs filed an amended and consolidated complaint, which generally alleges that the defendants breached their fiduciary duties under ERISA during the class period by, among other things, continuing to ~~use~~offer Visteon stock as an investment alternative under the ~~proceeds~~Visteon Investment Plan (and the Visteon Savings Plan for Hourly Employees, together the “Plans”), failing to disclose complete and accurate information regarding the prudence of investing in Visteon stock, failing to monitor the actions of certain ~~subsidiary~~of the defendants, and failing to avoid conflicts of interest or ~~asset sales, additional indebtedness~~promptly resolve them. These ERISA claims are predicated upon factual allegations similar to those raised in the derivative and ~~sale-leaseback transactions to reduce unused commitments and prepay or cash collateralize extensions of credit, certain restrictions~~securities class actions described immediately above. The consolidated complaint was brought on the incurrence of indebtedness, liens, acquisitions and other investments, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other repayments in respect of capital stock, voluntary prepayments of other indebtedness, capital expenditures, transactions with affiliates, sale-leaseback transactions, changes in fiscal year, hedging arrangements, negative pledge clauses, subsidiary distributions and the activitiesbehalf of a ~~certain holding company subsidiary, subject~~named plaintiff and a putative class consisting of all participants or beneficiaries of the Plans whose accounts included Visteon stock at any time from July 20, 2001 through May 25, 2005. Class action status has not yet been certified in this litigation. In November 2005, the defendants moved to ~~certain exceptions.~~ dismiss the consolidated amended complaint on various grounds. Oral argument on that motion is scheduled for June 2006.

The ~~Credit Agreements also contain financial covenants~~Company and its current and former directors and officers intend to contest the foregoing lawsuits vigorously. However, at this time the Company is not able to predict with certainty the final outcome of each of the foregoing lawsuits or its potential exposure with respect to each such lawsuit. In the event of an unfavorable resolution of any of these matters, the Company’s earnings and cash flows in one or more periods could be materially affected to the extent any such loss is not covered by insurance or applicable reserves.

Product Warranty and Recall

Amounts accrued for product warranty and recall claims are based on ~~consolidated leverage ratios, which~~management’s best estimates of the amounts that will ultimately be required to settle such items. The Company’s estimates for product warranty and recall obligations are ~~tested at each quarter-end using the ratio~~developed with support from its sales, engineering, quality and legal functions and include due consideration of ~~(a) Consolidated Total Debt to (b) Consolidated Earnings before Interest, Taxes, Depreciation~~contractual arrangements, past experience, current claims and ~~Amortization (“EBITDA”), excluding, most notably, permitted non-recurring expenses or losses~~related information, production changes, industry and ~~income or gains (each as defined~~regulatory developments and various other considerations. The Company can provide no assurances that it will not experience material claims in the ~~Short-Term Credit Agreement). The above mentioned ratio cannot exceed 5.00~~future or that it will not incur significant costs to ~~1 for~~defend or settle such claims beyond the ~~quarter ended September 30, 2005, 4.20 to 1 for~~amounts accrued or beyond what the quarter ended December 31, 2005, 3.50 to 1 for the quarter ended March 31, 2006, 3.25 to 1 for the quarter ended June 30, 2006, 3.00 to 1 for the quarter ended September 30, 2006, and 2.50 to 1 for the quarter ended December 31, 2006 and thereafter. Visteon was in compliance with this covenant as of September 30, 2005.

As of September 30, 2005, there were about $113 million of obligations under letters of credit under the 5-year revolving portion of the Credit Agreements. In addition, about $12 million in debt issue costs were incurred through the second quarter of 2005 and will be amortized pro-rata over the remaining life of the Credit Agreements.

~~7.95% notes due August 1, 2005~~

On April 6, 2004, Visteon repurchased $250 million of the 7.95% notes that were due on August 1, 2005. In the second quarter of 2004, Visteon recorded a pre-tax debt extinguishment charge of $11 million, consisting of redemption premiums and transaction costs ($19 million), offset partially by the accelerated recognition of gainsCompany may recover from interest rate swaps associated with the repurchased debt ($8 million). On August 1, 2005, Visteon retired the remaining $250 million of 7.95% notes that were due on August 1, 2005. Visteon borrowed $450 million under the Credit Agreements to fund the $250 million maturity and for general working capital requirements. A portion of this borrowing was repaid upon receipt of a $250 million loan from Ford on September 19, 2005. The Ford loan was repaid on September 30, 2005, at which time Visteon received a $311 million deposit as consideration for inventory of the transferred business, net of other amounts.

During the first quarter of 2005, Visteon terminated interest rate swaps with a notional amount of $200 million related to the 8.25% notes due August 1, 2010 and received $7 million in cash. The fair value of the interest rate swaps at termination was deferred as part of the underlying debt balance and amortized as a reduction in interest expense over the remaining term of the debt.its suppliers.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 15. Commitments and Contingencies — (Continued)


~~NOTE 10.~~	~~Net Loss Per Share of Common Stock~~

~~Basic net loss per share~~The following table provides a reconciliation of ~~common stock~~changes in product warranty and recall liability for the three-months ended March 31, 2005 and 2006:


	Product Warranty
	and Recall

	2006			2005

	(Dollars in Millions)
Beginning balance, December 31	$	148		$	94
Accruals for products shipped		11			18
Changes in estimates		8			20
Settlements		(7	)		(8	)

Ending balance, March 31	$	160		$	124

Environmental Matters

The Company is ~~calculated by dividing reported net loss by~~subject to the ~~average~~requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions, water discharge and waste management. The Company is also subject to environmental laws requiring the investigation and cleanup of environmental contamination at properties it presently owns or operates and at third-party disposal or treatment facilities to which these sites send or arranged to send hazardous waste.

The Company is aware of contamination at some of its properties and relating to various third-party superfund sites at which the Company or its predecessor has been named as a potentially responsible party. The Company is in various stages of investigation and cleanup at these sites and at March 31, 2006, had recorded a reserve of approximately $9 million for this environmental investigation and cleanup. However, estimating liabilities for environmental investigation and cleanup is complex and dependent upon a number of ~~shares~~factors beyond the Company’s control and which may change dramatically. Although the Company believes its reserve is adequate based on current information, the Company cannot provide assurance that the eventual environmental investigation, cleanup costs and related liabilities will not exceed the amount of common stock outstanding during the applicable period, adjusted for restricted stock. The calculation of diluted net loss per share takes into account the effect of dilutive potential common stock, such as stock options, and contingently returnable shares, such as restricted stock.its current reserve.

Third Quarter First Nine Months

2005 2004 2005 2004

(Restated) (Restated)
(in millions, except per share amounts)
Numerator:
Net loss $ (207 ) $ (1,439 ) $ (1,608 ) $ (1,398 )

Denominator:
Average common stock outstanding 128.6 129.6 128.6 129.7
Less: Average restricted stock outstanding (2.4 ) (4.3 ) (2.8 ) (4.4 )

Basic shares 126.2 125.3 125.8 125.3
Net dilutive effect of restricted stock and stock options — — — —

Diluted shares 126.2 125.3 125.8 125.3

Net loss per share:
Basic and diluted $ (1.64 ) $ (11.48 ) $ (12.78 ) $ (11.16 )

For the third quarter and first nine months of 2005 and 2004, potential common stock of about 3,284,000 shares, 3,410,000 shares, 2,331,000 shares and 3,238,000 shares, respectively, are excluded from the calculation of diluted loss per share because the effect of including them would have been antidilutive dueOther Contingent Matters

In addition to the ~~losses incurred during the periods. In addition, during the first nine months of 2005~~matters discussed above, various other legal actions, governmental investigations and ~~2004, options to purchase about 8,259,000 shares of common stock~~proceedings and about 8,732,000 shares of common stock, respectively, at exercise prices ranging from about $9 per share to $22 per share and $10 per share to $22 per share, respectively, and which expire at various dates between 2009 and 2012, were outstanding but were not includedclaims are pending or may be instituted or asserted in the ~~computation~~future against the Company, including those arising out of ~~diluted loss per share because~~alleged defects in the ~~options’ exercise price was greater than the average market price~~Company’s products; governmental regulations relating to safety; employment-related matters; customer, supplier and other contractual relationships; and intellectual property rights. Some of the ~~common shares.~~foregoing matters may involve compensatory, punitive or antitrust or other treble damage claims in very large amounts, or demands for equitable relief, sanctions, or other relief.

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 15. Commitments and Contingencies — (Continued)


~~NOTE 11.~~	~~Product Warranty~~

~~A reconciliation~~Contingencies are subject to many uncertainties, and the outcome of ~~changes in the product warranty liability~~individual litigated matters is ~~summarized as follows:~~

First Nine
Months

2005 2004

(in millions)
Beginning balance $ 41 $ 22
Accruals for products shipped 30 20
Accruals for pre-existing warranties (including changes in estimates) 25 10
Settlements (25 ) (17 )

Ending balance $ 71 $ 35


~~NOTE 12.~~	~~Inventories~~

~~Financial statement amounts for 2004~~not predictable with assurance. Reserves have been ~~restated to reflect Visteon’s change in~~established by the ~~method~~Company for matters where losses are deemed probable and reasonably estimable. It is possible, however, that some of ~~determining~~ the ~~cost of production inventory for U.S. locations from the last-in, first-out (“LIFO”) method~~matters could be decided unfavorably to the ~~first-in, first-out (“FIFO”) method during~~Company and could require the ~~fourth quarter~~Company to pay damages or make other expenditures in amounts, or a range of ~~2004. This change had no significant impact~~amounts, that cannot be estimated at March 31, 2006 and that are in excess of established reserves. The Company does not reasonably expect, except as otherwise described herein, based on ~~Visteon’s results of operations for~~its analysis, that any adverse outcome from such matters would have a material effect on the ~~first nine months of 2004. Inventories are summarized as follows:~~

September 30, December 31,
2005 2004

(in millions)
Raw materials, work-in-process and supplies $ 396 $ 621
Finished products 179 268

Total inventories $ 575 $ 889

As of September 30, 2005, inventories shown above are net of inventories included in assets held for sale of $299 million as further described in Note 4, “Selected Costs, Income and Other Information.”

~~VISTEON CORPORATION AND SUBSIDIARIES~~cash flows, although such an outcome is possible.

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~The Company enters into agreements that contain indemnification provisions in the normal course of business for which the risks are considered nominal and impracticable to estimate.


~~NOTE 13.~~	~~Comprehensive Loss~~

~~Comprehensive loss is summarized as follows:~~

Third Quarter First Nine Months

2005 2004 2005 2004

(Restated) (Restated)
(in millions)
Net loss $ (207 ) $ (1,439 ) $ (1,608 ) $ (1,398 )
Change in foreign currency translation adjustments, net of tax (1 ) 14 (135 ) (19 )
Other (2 ) 9 (17 ) 11

Total comprehensive loss $ (210 ) $ (1,416 ) $ (1,760 ) $ (1,406 )

~~Accumulated other comprehensive (loss) income is comprised of the following:~~

September 30, December 31,
2005 2004

(in millions)
Foreign currency translation adjustments, net of tax $ 64 $ 199
Realized and unrealized gains on derivatives, net of tax (1 ) 16
Minimum pension liability, net of tax (210 ) (210 )

Total accumulated other comprehensive (loss) income $ (147 ) $ 5

~~VISTEON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS — (Continued)~~

~~(unaudited)~~


NOTE ~~14.~~16.	Segment Information

~~Visteon’s reportable~~Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosures about Segments of an Enterprise and Related Information,” requires the Company to disclose certain financial and descriptive information about certain segments of its business. Segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision-maker, or a decision-making group, in deciding the allocation of resources and in assessing performance.

The Company’s revised operating structure is comprised of the following: Climate, Electronics, Interiors and Other. These global product groups have financial and operating responsibility over the design, development and manufacture of the Company’s product portfolio. Within each of the global product groups, certain facilities manufacture a broader range of the Company’s total product line offering and are not limited to the primary product line. Regional customer groups are responsible for the marketing, sales and service of the Company’s product portfolio to its customer base. Certain functions such as procurement, information technology and other administrative activities are managed on a global basis with regional deployment. In addition to these global product groups, the Company also operates Visteon Services, a centralized administrative function to monitor and facilitate transactions with ACH for the costs of leased employees and other services provided to ACH by the Company.

The Company’s chief operating decision making group, comprised of the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) and Chief Financial Officer (“CFO”), evaluates the performance of the Company’s segments ~~are Automotive Operations~~primarily based on net sales, before elimination of inter-company shipments, gross margin and ~~Glass Operations. Visteon will be reassessing its reportable~~ operating ~~segments~~assets. Gross margin is defined as total sales less costs to manufacture and product development and engineering expenses. Operating assets include inventories and property and equipment utilized in the ~~fourth quarter of 2005 as a result~~manufacture of the ~~organizational changes in connection with the Ford transactions. Financial information for the reportable operating segments is summarized as follows:~~segments’ products.

Automotive Glass Total
Operations Operations Visteon

(in millions)
Third Quarter
2005:
Sales $ 3,999 $ 122 $ 4,121
Loss before taxes and minority interests (164 ) (16 ) (180 )
Net loss (191 ) (16 ) (207 )
Special charges:
Before taxes (11 ) — (11 )
After taxes (11 ) — (11 )
Total assets, end of period 8,521 302 8,823
2004 (Restated):
Sales $ 4,011 $ 125 $ 4,136
Loss before taxes and minority interests (461 ) (8 ) (469 )
Net loss (1,391 ) (48 ) (1,439 )
Special charges:
Before taxes (335 ) (1 ) (336 )
After taxes (1,224 ) (45 ) (1,269 )
Total assets, end of period 9,859 281 10,140
First Nine Months
2005:
Sales $ 13,716 $ 395 $ 14,111
Loss before taxes and minority interests (1,512 ) (31 ) (1,543 )
Net loss (1,577 ) (31 ) (1,608 )
Special charges:
Before taxes (1,194 ) — (1,194 )
After taxes (1,194 ) — (1,194 )
Total assets, end of period 8,521 302 8,823
2004 (Restated):
Sales $ 13,577 $ 401 $ 13,978
(Loss) income before taxes and minority interests (391 ) 4 (387 )
Net loss (1,358 ) (40 ) (1,398 )
Special charges:
Before taxes (354 ) (1 ) (355 )
After taxes (1,177 ) (45 ) (1,222 )
Total assets, end of period 9,859 281 10,140

2725

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 16. Segment Information — (Continued)

Overview of Segments


~~NOTE 15.~~•	~~Litigation~~Climate: The Company’s Climate product group includes facilities that primarily manufacture climate products including air handling modules, powertrain cooling modules, climate controls, heat exchangers, compressors, fluid transport, and ~~Claims~~engine induction systems.

•	Electronics: The Company’s Electronics product group includes facilities that primarily manufacture products including audio systems and components, infotainment, driver information, powertrain controls and lighting.

•	Interiors: The Company’s Interior product group includes facilities that primarily manufacture products including instrument panels, cockpit modules, door trim and floor consoles.

•	Other: The Company’s Other product group includes facilities that primarily manufacture fuel products, chassis products, powertrain products, alternators and starters, as well as parts sold and distributed to the automotive aftermarket.

•	Services: The Company’s Services operations supply leased personnel and transition services to ACH (manufacturing, engineering, and administrative support) as required by certain agreements entered into by the Company with ACH as a part of the ACH Transactions. Under the terms of these agreements, the Company is reimbursed for costs incurred in rendering services to ACH.

~~Securities~~Net Sales, Gross Margin and ~~Related Matters~~Operating Assets:

~~In February 2005, a shareholder lawsuit was filed in the U.S. District Court for the Eastern District~~A summary of ~~Michigan against Visteon~~net sales and certain current and former officers of Visteon. In July 2005, the Public Employees’ Retirement System of Mississippi was appointed as lead plaintiff in this matter. In September 2005, the lead plaintiff filed an amended complaint, which alleges, among other things, that Visteon and its independent registered public accounting firm, PricewaterhouseCoopers LLP, made misleading statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The named plaintiff seeks to represent a class consisting of purchasers of Visteon’s securities during the period between June 28, 2000 and January 31, 2005. Class action status has not yet been certified in this litigation.

In March 2005, a number of current and former directors and officers were named as defendants in two shareholder derivative suits pending in the State of Michigan Circuit Court for the County of Wayne. Asfinancial information by segment is customary in derivative suits, Visteon has been named as a defendant in these actions. As a nominal defendant, Visteon is not liable for any damages in these suits nor is any specific relief sought against Visteon. The complaints allege that, among other things, the individual defendants breached their fiduciary duties of good faith and loyalty and aided and abetted such breaches during the period between January 23, 2004 and January 31, 2005 in connection with Visteon’s conduct concerning, among other things, the matters alleged in the securities class action discussed immediately above.provided below:

In March and April 2005, Visteon and a number of current and former employees, officers and directors were named as defendants in three class action lawsuits brought under the Employee Retirement Income Security Act (“ERISA”) in the U.S. District Court for the Eastern District of Michigan. In September 2005, the plaintiffs filed an amended and consolidated complaint, which generally alleges that the defendants breached their fiduciary duties under ERISA during the class period by, among other things, continuing to offer Visteon stock as an investment alternative under the Visteon Investment Plan (and the Visteon Savings Plan for Hourly Employees, together the “Plans”), failing to disclose complete and accurate information regarding the prudence of investing in Visteon stock, failing to monitor the actions of certain of the defendants, and failing to avoid conflicts of interest or promptly resolve them. These ERISA claims are predicated upon factual allegations similar to those raised in the derivative and securities class actions described immediately above. The consolidated complaint was brought on behalf of a named plaintiff and a putative class consisting of all participants or beneficiaries of the Plans whose accounts included Visteon stock at any time from July 20, 2001 through May 25, 2005. Class action status has not yet been certified in this litigation.

Visteon and its current and former directors and officers intend to contest the foregoing lawsuits vigorously. However, at this time Visteon is not able to predict with certainty the final outcome of each of the foregoing lawsuits or its potential exposure with respect to each such lawsuit. In the event of an unfavorable resolution of any of these matters, Visteon’s earnings and cash flows in one or more periods could be materially affected to the extent any such loss is not covered by insurance or applicable reserves.


		Net Sales						Gross Margin									Property and
		Three-Months						Three-Months					Inventories, net				Equipment, net
		Ended March 31						Ended March 31
													March 31		December 31		March 31		December 31
		2006			2005			2006		2005			2006		2005		2006		2005

		(Dollars in Millions)
Climate		$	783		$	718		$	54	$	63		$	151	$	143	$	890	$	858
Electronics			795			881			97		105			112		114		695		702
Interiors			710			843			19		15			63		63		434		425
Other			664			737			50		19			218		217		385		382
Eliminations			(136	)		(384	)		—		—			—		—		—		—

	Total product		2,816			2,795			220		202			544		537		2,404		2,367
Services			145			—			1		—			—		—		—		—

	Total segment		2,961			2,795			221		202			544		537		2,404		2,367
Reconciling Items
ACH			—			2,192			—		(55	)		—		—		—		—
Corporate			—			—			23		—			—		—		590		606

	Total consolidated	$	2,961		$	4,987		$	244	$	147		$	544	$	537	$	2,994	$	2,973

2826

VISTEON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~(unaudited)~~NOTE 16. Segment Information — (Continued)

Reconciling Items

Significant adjustments necessary to reconcile segment net sales, gross margin, inventories, net and property and equipment, net to the Company’s consolidated amounts are described as follows.


~~NOTE 15.~~•	~~Litigation and Claims~~ACH — ~~(Continued)~~

~~Other Matters~~

Various other legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against Visteon, including those arising out of alleged defects in Visteon’s products; governmental regulations relating to safety; employment-related matters; customer, supplier and other contractual relationships; intellectual property rights; product warranties; product recalls; and environmental matters. Some of the foregoing matters may involve compensatory, punitive or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures.

Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by Visteon for matters discussed in the immediately foregoing paragraph where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraph could be decided unfavorably to Visteon and could require Visteon to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated at September 30, 2005 and that are in excess of established reserves. Visteon does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a material effect on our financial condition, results of operations or cash flows, although such an outcome is possible.

	Represents the financial results for the facilities that were transferred to ACH on October 1, 2005.
~~NOTE 16.~~
~~Subsequent Events~~•	Corporate — Includes the Company’s technical centers, corporate headquarters and other administrative and support functions.

Certain events have occurred subsequent to September 30, 2005 that, although they do not impact the reported balances or results of operations as of that date, are material to Visteon’s ongoing operations. Those items include the completion of certain agreements and transactions with Ford in September and October of 2005 as described more fully in Note 3, “Arrangements with Ford and its Affiliates.”

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Stockholders~~

~~Visteon Corporation~~

We have reviewed the accompanying consolidated balance sheet of Visteon Corporation and its subsidiaries as of September 30, 2005, and the related consolidated statement of operations for each of the three-month and nine-month periods ended September 30, 2005 and September 30, 2004 and the consolidated statement of cash flows for the nine-month periods ended September 30, 2005 and September 30, 2004. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of operations, of stockholders’ equity, and of cash flows for the year then ended, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004; and in our report dated March 16, 2005, except for the restatement described in Note 2 to the consolidated financial statements and the matter described in the penultimate paragraph of Management’s Report on Internal Control Over Financial Reporting, as to which the date is November 22, 2005, we expressed (i) an unqualified opinion (with an explanatory paragraph relating to the change, during 2004 of the Company’s method of determining the cost of certain inventories from the last-in, first-out method to the first-in, first-out method) on those consolidated financial statements, (ii) an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and (iii) an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

~~As discussed in Note 2 to the consolidated financial statements, the Company restated its December 31, 2004 and September 30, 2004 financial statements.~~

~~/s/ PricewaterhouseCoopers LLP~~

~~PricewaterhouseCoopers LLP~~

~~Detroit, Michigan~~

~~November 22, 2005~~

3027


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Business Overview

Visteon Corporation is a leading global supplier of climate, interiors, electronics and other automotive systems, modules and components to vehicle manufacturers as well as the automotive aftermarket. The Company sells to all of the world’s largest vehicle manufacturers including BMW, DaimlerChrysler, Ford, General Motors, Honda, Hyundia/Kia, Nissan, Peugot, Renault, Toyota and Volkswagen.

The Company has a broad network of manufacturing, technical engineering and joint venture operations throughout the world, supported by 47,000 employees dedicated to the design, development, manufacture and support of its product offering and its global customers, and conducts its business across five segments: Climate, Interiors, Electronics, Other and Services.

Over the recent past, Visteon embarked upon a multi-phase, multi-year plan to focus its business, improve its operating position and competitive profile and to ultimately achieve sustainable profitability. A significant milestone in this long-term plan was the successful completion of the ACH Transactions with Ford on October 1, 2005. Although the ACH Transactions resulted in a significant reduction in the Company’s total sales (the business constituted approximately $6 billion in 2005 sales through the date of the transaction), this business was loss making and the Company’s ability to improve profitability was significantly restricted given the inflexible operating arrangements. Further, pursuant to this transaction, the Company transferred all master Ford-UAW employees to ACH including full relief of approximately $2.2 billion of related postretirement employee obligations and received cash funding for future restructuring actions with the establishment of a $400 million escrow account funded by Ford under the terms of the Escrow Agreement. The Company’s management believes that completion of the ACH Transactions provided the Company a solid operating foundation from which to move forward and improve.

In addition to the ACH Transactions, the Company has implemented initiatives intended to improve its cost competitiveness and focus management resources. In June 2005, the Company approved changes to its U.S. salaried postretirement health care and life insurance plans which will become fully effective in June 2007. These changes resulted in the reduction to the accumulated postretirement benefit obligation of approximately $336 million and a per annum reduction of benefit expense of approximately $60 million. In December 2005, the Company approved changes to its U.S. salaried pension and 401(k) plans which will become effective July 1, 2006, resulting in a per annum net reduction to expense of approximately $40 million. During the fourth quarter of 2005, the Company executed a number of restructuring actions to reduce manpower census at certain manufacturing and other facilities, including the announced closure of three facilities in the U.S., Mexico and Puerto Rico. Restructuring costs of approximately $24 million related to these actions were reimbursed from the escrow account at the end of 2005. Finally, in late 2005, the Company announced a new operating structure to manage the business forward and align resources on a global product group basis with the initiation of the Company’s segments — Climate, Interiors, Electronics, Other and Services.

Three-Months Ended March 31, 2006

In January 2006, the Company announced a three-year improvement program designed to further restructure the business and improve profitability. This improvement plan identified certain underperforming and non-strategic facilities that require significant restructuring or potential exit, as well as other infrastructure and cost reduction initiatives. This program is expected to have a cumulative cash cost of approximately $550 million, of which $400 million is expected to be reimbursed from the escrow account. The Company expects to record restructuring charges, and related reimbursement from the escrow account as available, as elements of the plan are finalized.

The Company also replaced its $300 million secured short-term revolving credit agreement that expired in December 2005, with a new18-month secured term loan in the amount of $350 million that closed in January 2006. This secured term loan was made part of the Company’s existing five-year credit revolving credit agreement and expires in June 2007. The Company has recently initiated activities to refinance its 2007 scheduled debt maturities with an expected completion during 2006.

Financial highlights for the three-months ended March 31, 2006 include:


•	Net product sales were $2.8 billion, of which non-Ford customers accounted for 52%

•	Gross margin of 8.2%, up from 2.9% in 2005

•	SG&A of $168 million, lower than 2005 by $82 million

•	Net income of $3 million or $0.02 per diluted shares, compared to a net loss of $163 million or $1.30 per diluted share in 2005

•	Cash of $881 million, an increase of $16 million compared to 2005 year-end

•	Cash used by operating activities of $32 million, compared to cash provided by operating activities of $178 million in 2005

•	Capital expenditures of $85 million, lower than 2005 by $42 million

The automotive industry remains challenging in North America and Europe, with continued market share pressures concentrated with U.S. vehicle manufacturers. While the ACH Transactions significantly reduced the Company’s exposure to Ford’s North America vehicle production, Ford remains an important customer, constituting 48% of the Company’s first quarter 2006 net product sales. Continued declines in Ford’s vehicle production could materially affect the Company’s operating results and the Company continues to work with other vehicle manufacturers to further its sales growth and diversification. As an example of this effort, in the first quarter of 2006, Visteon was awarded a significant 2009 truck interior program by DaimlerChrysler. In order to succeed in winning and retaining business with its key customers as well as to leverage its customer position across the entire product portfolio, Visteon must continue to seamlessly execute new program launches, develop innovative and valued added products and solutions, and provide, in certain instances, co-located manufacturing and assembly capabilities.

Visteon’s customers expect it to continue to reduce the costs of the products it provides, as well as provide an increasing level of engineering and related support of vehicle programs on a global basis. The Company must continue to work on reducing its overall costs by improving productivity and restructuring its operations and infrastructure to offset the impact of lower selling prices to its customers. A significant component of the Company’s cost structure is comprised of the cost of raw materials used in the manufacture of its products. The continued inflationary pressures impacting certain commodities such as aluminum, resins and natural gas used in our manufacturing processes and facilities may adversely impact the Company’s financial results. The Company continues to develop and implement strategies and actions with both its supplier and customer base to mitigate the impact of higher raw material costs.

The Company continues to execute its long-term improvement program although no assurances can be provided that the results of these efforts will mitigate the negative industry trends currently being experienced.

Results of Operations

Organization and Operating Structure

In late 2005 the Company announced a new operating structure to manage the business on a go-forward basis, post the ACH Transactions. During the first quarter of 2006 the Company completed the accompanying realignment of information systems and reporting structures to facilitate financial reporting under the revised organizational structure. Accordingly, segment disclosures have been updated to reflect the revised operating structure and comparable prior period segment data has been revised. The Company’s revised operating structure is comprised of the following: Climate, Electronics, Interiors, Services and Other. The Company’s segments are disclosed in Note 16 “Segment Information” to the consolidated financial ~~statements~~statements.

Three-Months Ended March 31, 2006 and ~~accompanying notes included~~2005


		Sales									Gross Margin

		2006			2005			Change			2006		2005			Change

		(Dollars in Millions)
Climate		$	783		$	718		$	65		$	54	$	63		$	(9	)
Electronics			795			881			(86	)		97		105			(8	)
Interiors			710			843			(133	)		19		15			4
Other			664			737			(73	)		50		19			31
Eliminations			(136	)		(384	)		248			—		—			—

	Total product		2,816			2,795			21			220		202			18
Services			145			—			145			1		—			1

	Total segment		2,961			2,795			166			221		202			19
Reconciling Items:
ACH			—			2,192			(2,192	)		—		(55	)		55
Corporate			—			—			—			23		—			23

	Total consolidated	$	2,961		$	4,987		$	(2,026	)	$	244	$	147		$	97

Net Sales

The Company’s net sales were $3.0 billion in ~~Visteon’s 2004 Form 10-K/ A.~~the first quarter of 2006, compared with $5.0 billion in the first quarter of 2005, representing a decrease of $2.0 billion or 41%. The ACH Transactions resulted in a decrease of $2.2 billion, which was partially offset by Services revenues of $145 million and an increase in remaining product sales of $21 million. The increase in product sales reflects higher Ford Europe production volume and new business, partially offset by unfavorable Ford North America production volume and mix, unfavorable foreign currency of $134 million, and customer price reductions.

~~Restatement~~Net sales for Climate were $783 million in the first quarter of 2006, compared with $718 million in the first quarter of 2005, representing an increase of $65 million or 9%. Favorable production volume and mix of $95 million was partially offset by unfavorable foreign currency and customer price reductions. Favorable production volume and mix was concentrated in the Asia Pacific region, reflecting continued growth in the Company’s consolidated subsidiaries.

Net sales for Electronics were $795 million in the first quarter of 2006, compared with $881 million in the first quarter of 2005, representing a decrease of $86 million or 10%. Production volume and mix was unfavorable $19 million. Lower Ford North America production volume and unfavorable product mix reduced net sales by $43 million which was partially offset by increased net sales in Europe of $28 million. Unfavorable foreign currency and customer price reductions comprise the remainder of the deterioration.

~~Visteon has restated its previously issued consolidated financial statements~~Net sales for ~~2004~~Interiors were $710 million in the first quarter of 2006, compared with $843 million in the first quarter of 2005, representing a decrease of $133 million or 16%. Production volume and mix was unfavorable $75 million, with unfavorable foreign currency and customer price reductions comprising the remainder of the deterioration. The unfavorable production volume and mix was attributable to reflecting lower Ford North America production volume and adverse product mix.

Net sales for ~~accounting corrections~~Other were $664 million in the first quarter of 2006, compared with $737 million in the first quarter of 2005, representing a decrease of $73 million or 10%. Production volume and mix was unfavorable $55 million and foreign currency and customer pricing was unfavorable $18 million. The unfavorable production volume and mix was primarily attributable to lower Ford North America production volumes partially offset by higher Ford Europe production volume.

Services revenues were $145 million in the first quarter of 2006, related to ~~freight,~~information technology, engineering, administrative and other business support services provided by the Company approximating cost, under the terms of various agreements to ACH in the fourth quarter of 2005.

Gross Margin

The Company’s gross margin was $147 million in the first quarter of 2005, compared with $244 million in the first quarter of 2006, representing an increase of $97 million or 66%. The increase in gross margin is primarily attributable to the benefit of the ACH Transactions of $55 million, OPEB relief of $23 million related to the transfer of certain Visteon salaried employees to Ford in January 2006 and improved operating performance.

Gross margin for Climate was $54 million in the first quarter of 2006, compared with $63 million in the first quarter of 2005, representing a decrease of $9 million or 14%. Although net sales increased during the quarter, unfavorable customer and product mix resulted in a decrease in gross margin of $4 million. Material and manufacturing cost reduction activities and lower OPEB expense were more than offset by customer price reductions and increases in raw material costs, ~~other supplier costs and income tax matters.~~principally aluminum, resulting in a further reduction in gross margin of $5 million.

~~As a result~~Gross margin for Electronics was $97 million in the first quarter of 2006, compared with $105 million in the ~~restatement, previously reported net loss increased by $15 million ($0.12 per share) and $18 million ($0.15 per share) for the third quarter and~~ first nine months ended September 30, 2004, respectively. Further information on the nature and impact of these accounting corrections is provided in Note 2, “Restatement of Financial Statements,” to our consolidated financial statements included elsewhere in this Form 10-Q.

~~Overview~~

~~Sales for the third~~ quarter of 2005, ~~were relatively flat compared to the third quarter~~representing a decrease of ~~2004, as~~$8 million or 8%. Production volume and mix was unfavorable $39 million. Material and manufacturing cost reduction activities and lower OPEB expense more than offset customer price reductions and increases in raw material costs resulting in an increase in ~~non-Ford sales largely offset a decrease~~gross margin of $31 million.

Gross margin for Interiors was $19 million in ~~Ford sales. Consistent~~the first quarter of 2006, compared with ~~our strategy to increase our customer and geographic diversification, non-Ford sales were $1.5 billion for~~$15 million in the ~~third~~first quarter of 2005, representing an increase of $4 million or 27%. Production volume and mix was unfavorable $10 million. Material and manufacturing cost reduction activities and lower OPEB expense more than offset customer price reductions and increases in raw material costs resulting in an increase in gross margin of $14 million.

Gross margin for Other was $50 million in the first quarter of 2006, compared with $19 million in the first quarter of 2005, representing an increase of $31 million. Production volume and mix was favorable $13 million. Material and manufacturing cost reduction activities, including negotiated wage concessions in Germany, and lower OPEB expense more than offset customer price reductions and increases in raw material costs resulting in an increase in gross margin of $18 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $168 million in the first quarter of 2006, compared with $250 million in the first quarter of 2005, representing a decrease of $82 million or 33%. Under the terms of various agreements between the Company and ACH, expenses previously classified as selling, general and administrative expenses incurred to support the business of ACH are now classified as costs of sales in the consolidated financial statements. The decrease in selling, general and administrative expenses reflects $59 million of expenses incurred in support of ACH included in costs of sales in the first quarter of 2006. Lower OPEB expenses, net efficiencies, and reduced bad debt expense contributed to the remaining $23 million of lower selling, general and administrative expenses.

Interest

Net interest expense was $39 million in the first quarter of 2006, compared with $29 million in the first quarter of 2005, representing an increase of $10 million or 34%. The increase resulted from higher market interest rates on outstanding debt in 2006 compared to 2005.

Restructuring Activities

On January 11, 2006, the Company announced a three-year improvement plan that involves certain underperforming and non-strategic plants and businesses and is designed to improve operating performance and achieve cost reductions. Activities associated with this plan are expected to affect up ~~8 percent over~~to 23 facilities with costs expected to include employee severance and termination benefit costs, contract termination costs, and production transfer costs.

During the ~~same period in 2004,~~first quarter of 2006 the Company recorded $9 million of severance and ~~represented 36 percent of total sales. A majority~~other restructuring costs related to this three-year improvement plan. The most significant of these ~~non-Ford sales~~costs relates to the Company’s Electronics segment, which recorded approximately $6 million of severance costs related to activities at certain facilities located in Mexico and Portugal. These severance costs are associated with the termination of approximately 500 hourly and 50 salaried employees. Approximately $5 million related to these activities is recorded in other current liabilities as of March 31, 2006.

The Company had previously recorded restructuring reserves related to the three-year improvement plan of $14 million as of December 31, 2005. Such reserves were ~~outside~~related to employee severance and termination benefit related costs associated with the termination of ~~North America.~~approximately 1,200 hourly and salary employees resulting from activities at certain facilities located in the U.S., Europe, Mexico and Puerto Rico. Approximately $6 million related to these activities is recorded in other current liabilities as of March 31, 2006.

The ~~third~~Company estimates that the total cash cost associated with this three-year improvement plan will be approximately $550 million, offset by $400 million of escrow account reimbursement. Generally, charges will be recorded as elements of the plan are finalized and the timing of activities and the amount of such costs are not likely to change. The cumulative costs incurred to date related to the three-year improvement plan are approximately $46 million, including $11 million related to Electronics, $2 million related to Climate and $33 million related to Other.

Income Taxes

The provision for income taxes was $30 million for the first quarter ~~net loss~~ of ~~$207 million compares to a net loss of $1,439~~2006, compared with $22 million in the same period in 2004, a decrease of $1,232 million. Visteon’s net loss in the third quarter included special charges of $11 million and $1,269 million in 2005 and 2004, respectively. The special charges in 2004 included the non-cash increase in deferred tax asset valuation allowances of $931 million and a non-cash asset impairment of $314 million to reduce the net book value of fixed assets related to the steering systems product group. Operating results for 2005 were impacted by the incremental costs of supporting new non-Ford business and the underutilization of facilities supporting the Ford North American business, combined with pressure on margins due to selling price reductions, adverse product mix, higher postretirement benefits costs, and raw material cost increases in certain commodity groups.

During the first quarter of 2005, Visteon entered into several interim agreements with Ford that accelerated payment terms from Ford, reduced our UAW labor costs, and reduced the level of funding otherwise needed for planned capital expenditures. One of these agreements was amended in May to further accelerate payment terms from Ford. The net benefit of these agreements on our results of operations for the third quarter of 2005 was approximately $69 million. For the first nine months of 2005, the benefit was approximately $170 million.

In the face of a challenging first nine months of 2005, we improved cash flows from operations by $152 million over the comparable period last year. Visteon’s cash balance grew by $146 million since year-end 2004. This reflects the $311 million deposit received from Ford as of September 30, 2005, as consideration for inventory of the transferred business, the funding agreement with Ford under which we received an acceleration of payment terms for certain U.S. payables to Visteon, and retirement of $250 million of debt in August. The reduction to our capital expenditures for the first nine months of 2005 compared to the same period last year reflects the substantial completion of our facilities consolidation effort in southeastern Michigan at the end of 2004 and our continued strategy focus.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Year-to-date 2005 results include significant special charges totaling $1,194 million, contributing to a net loss of $1,608 million. Third quarter special charges include the non-U.S. prior service pension costs of $11 million to reflect a reduction of expected future years of service for some plan participants. Additional second quarter charges include the non-cash asset impairment of $920 million related to approximately $1.5 billion of assets transferred to a Ford-controlled entity during the fourth quarter, and the non-cash asset impairment of $256 million to reduce the net book value of fixed assets related to the driveline and engine air/fuel systems product groups in Europe and Brazil. First quarter charges consisted of $7 million for U.S. salaried voluntary separation.

Intensifying customer price pressures, together with expected continuing declines in Ford’s North American production volumes and raw material cost increases in certain commodity groups, highlight the need to make strategic and structural changes in the U.S. in order to achieve a long-term sustainable and competitive business. On October 1, 2005, Visteon completed the transfer of twenty-three of its North American facilities, including all of its UAW master agreement plants, to a Ford-controlled entity. As part of the transactions, Ford also agreed to reimburse up to $550 million of Visteon’s future restructuring actions and eliminated a significant portion of Visteon’s liability for certain postretirement health care and life insurance benefit obligations. These actions address some of the strategic or structural challenges facing our business, but additional restructuring actions are likely if Visteon is to achieve sustainable success in an increasingly competitive environment.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Restructuring and Special Charges~~

~~The table below presents special charges related to restructuring initiatives and other actions during the third quarter and first nine months of 2005 and 2004:~~

Automotive
Operations Glass Operations Total

Third First Nine Third First Nine Third First Nine
Quarter Months Quarter Months Quarter Months

(in millions)
2005 Special Charges
Loss related to asset impairment charges $ — $ (1,176 ) $ — $ — $ — $ (1,176 )
U.S. salaried voluntary separation related — (7 ) — — — (7 )
Non-U.S. employee actions (11 ) (11 ) — — (11 ) (11 )

Total 2005 special charges, before taxes $ (11 ) $ (1,194 ) $ — $ — $ (11 ) $ (1,194 )

Total 2005 special charges, after taxes $ (11 ) $ (1,194 ) $ — $ — $ (11 ) $ (1,194 )

2004 Special Charges (Restated)
Loss related to asset impairment charges $ (314 ) $ (314 ) $ — $ — $ (314 ) $ (314 )
U.S. hourly early retirement incentive (24 ) (24 ) (1 ) (1 ) (25 ) (25 )
Plant closure related — (10 ) — — — (10 )
European plan for growth — (9 ) — — — (9 )
Adjustment to prior year’s expense 3 3 — — 3 3

Total 2004 special charges, before taxes $ (335 ) $ (354 ) $ (1 ) $ (1 ) $ (336 ) $ (355 )

Total 2004 special charges, after taxes $ (1,224 ) $ (1,177 ) $ (45 ) $ (45 ) $ (1,269 ) $ (1,222 )

At September 30, 2005, Visteon has classified the manufacturing facilities and associated assets, including inventory, machinery, equipment and tooling, as well as associated liabilities including postretirement benefits, to be sold as “held for sale.” Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires long-lived assets that are considered “held for sale” to be measured at the lower of their carrying value or fair value less cost to sell and future depreciation of such assets is ceased. During the second quarter of 2005, the Automotive Operations recorded a pre-tax non-cash impairment of $920 million to reduce those assets considered “held for sale” to their aggregate estimated fair value less cost to sell. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms.

During the third quarter of 2005, Visteon recorded pre-tax special charges of $11 million in costs of sales for non-U.S. prior service pension costs to reflect a reduction of expected future years of service for some plan participants.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

During the second quarter of 2005, the Automotive Operations recorded a pre-tax, non-cash impairment of $256 million, to reduce the net book value of certain long-lived assets. This impairment was based on an assessment by product line asset group, excluding those assets considered held for sale, completed in the second quarter of 2005, of the recoverability of our long-lived assets in light of the challenging environment in which we operate, and included considering the impact of lower than anticipated current and near term future year production volumes and the related impact on our future operating projections. Assets are considered impaired if the book value is greater than the undiscounted cash flows expected from the use of the asset. As a result of this analysis the assets located in the U.K, Germany, Poland and Brazil related to two product groupings were considered impaired: driveline and engine/air fuel systems. The impairment was determined on a “held for use” basis. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms.

During the first quarter of 2005, Visteon recorded pre-tax special charges of $7 million in costs of sales related to a continuation of an incentive program offered during the fourth quarter of 2004 to eligible U.S. salaried employees to voluntarily separate employment. Terms of the program required the effective termination date to be no later than March 31, 2005, unless otherwise mutually agreed. Through March 31, 2005, 409 employees have voluntarily elected to separate employment under this program, comprised of 374 employees during the fourth quarter of 2004 and 35 employees2005. Income taxes during the first quarter of ~~2005. This U.S. salaried voluntary separation incentive program is expected to have~~2006 and 2005 included the impact of maintaining a ~~payback of slightly more than one year. As of June 30, 2005, substantially all of~~valuation allowance against the ~~employees have terminated their employment.~~

During the third quarter of 2004, the Automotive Operations recorded a pre-tax, non-cash impairment of $314 million in costs of sales to reduce the net book value of certain long-lived assets. This impairment was based on an assessment by product line asset group, completed in the third quarter of 2004, of the recoverability of our long-lived assets in light of the challenging environment in which we operate. The assessment included consideration of lower than anticipated Ford North American production volume and the related impact on our future operating projections. Assets are considered impaired if the book value is greater than the undiscounted cash flows expected from the use of the asset. As a result of this analysis the assets of the steering systems product group were impaired. The impairment was approximately $249 million in North America and $65 million in Europe and was determined on a “held for use” basis. Fair values were determined primarily based on prices for similar groups of assets determined by a third-party valuation firm.

Also in the third quarter of 2004, early retirement incentive and other charges related to incentive programs were offered to eligible Visteon-assigned Ford-UAW employees to voluntarily retire or to relocate in order to return to a Ford facility. About 500 employees elected to retire early at a cost of $18 million and about 210 employees have agreed to return to a Ford facility at a cost of $7 million.

~~Also in the third quarter of 2004, Visteon recorded a non-cash charge of $931 million to establish full valuation allowances against our net~~Company’s deferred tax assets in the U.S. and certain foreign countries. ~~This charge was comprised of $948 million related~~As a result, income taxes attributable to ~~deferred tax assets as of~~pre-tax losses incurred in the ~~beginning of the year and $60 million~~affected jurisdictions were not provided. The provisions for ~~income tax benefits recorded during~~both the first half of the year, offset by a reduction of related tax reserves, previously included in other liabilities of $77 million. The charge is discussed in more detail in Note 4 of our consolidated financial statements.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Plant closure charges in the first half of 2004 of $10 million are related to the involuntary separation of up to about 200 employees as a result of the closure of our La Verpilliere, France manufacturing facility. European Plan for Growth charges in the first half of 2004 are comprised of $9 million related to the separation of hourly employees located at Visteon’s plants in Europe through a continuation of a special voluntary retirement and separation program started in 2002.

Cash payments related to special charges were $66 million and $129 million during the first nine months of 2005 and 2004, respectively. The amounts include payments to Ford of about $15 million and $74 million, respectively, of previously accrued amounts related to an agreement entered into in 2003 to reimburse Ford for the actual net costs of transferring seating production, including costs related to Ford hourly employee voluntary retirement and separation programs that Ford implemented as well as postretirement health care liabilities associated with hourly employee transfers.

We continue to assess the recoverability of our long-lived assets in light of the challenging environment in which we operate and as part of our business planning process. If conditions indicate that any of these assets are impaired, impairment charges will be required, although we cannot predict the timing or range of amounts, if any, which may result.

~~Results of Operations~~


	~~Third Quarter 2005 Compared with Third Quarter 2004~~

~~Sales~~~~for each of our segments for the third~~ quarter of 2006 and 2005 ~~and 2004 are summarized in the following table:~~

Third Quarter 2005
over/(under)
2005 2004 2004

(in millions)
Automotive Operations:
Ford and affiliates $ 2,601 $ 2,717 $ (116 )
Other customers 1,398 1,294 104

Total Automotive Operations 3,999 4,011 (12 )
Glass Operations:
Ford and affiliates 48 55 (7 )
Other customers 74 70 4

Total Glass Operations 122 125 (3 )

Total $ 4,121 $ 4,136 $ (15 )

Memo: Sales to non-Ford customers
Amount $ 1,472 $ 1,364 $ 108
Percentage of total sales 36 % 33 % 3 pts

Sales for Automotive Operations in the third quarter of 2005 were $3,999 million, compared with $4,011 million in the third quarter of 2004, a decrease of $12 million. Sales to Ford and affiliates declined mainly due to lower Ford vehicle production ($40 million), price reductions and unfavorable vehicle mix. Sales to other customers increased mainly due to new business launches in the latter half of 2004. Changes in foreign currency exchange rates increased sales to Ford and affiliates and sales to other customers by $18 million and $35 million respectively.

Sales for Glass Operations were $122 million in the third quarter of 2005, a decrease of $3 million. Increased non-Ford sales were more than offset by lower Ford North American production volume and price reductions.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Costs of Sales~~includes primarily material, labor, manufacturing overhead and other costs, such as product development costs. Costs of sales for the third quarter of 2005 were $4,032 million, compared with $4,366 million in the third quarter of 2004. Results were affected by special charges which were $11 million in 2005 and $336 million in 2004.

The decrease in costs of sales was partially offset by the non-recurrence of 2004’s favorable adjustment to product recall accruals of $49 million and a 2004 favorable $20 million adjustment to annual incentive compensation accruals.

Costs of sales increased as a result of additional costs at facilities supporting new non-Ford business, without corresponding reductions at facilities supporting the Ford North American business which are underutilized. Costs of sales also reflected the impact of foreign currency exchange rate changes ($52 million).

Costs of sales were reduced by certain net efficiencies totaling $122 million. This net amount includes the benefit of the Ford funding agreement on our labor costs, material cost reductions, lower depreciation and amortization, and labor efficiencies. Increased raw material costs in certain commodity groups, and wages and benefits including OPEB, were partial offsets.

~~Selling, administrative and other expenses~~for the third quarter of 2005 were $239 million, compared with $225 million in the third quarter of 2004. The increase reflects the non-recurrence of 2004’s adjustment to annual incentive compensation accruals of $15 million and costs associated with negotiations with Ford. These increases were partially offset by cost efficiencies.

~~Net interest expense and debt extinguishment cost~~of $38 million in the third quarter of 2005 compared with $23 million in the third quarter of 2004. The increase primarily reflects higher average debt balances, lower average cash balances, and higher average borrowing rates partially offset by the non-recurrence of an $11 million debt extinguishment charge in the second quarter of 2004.

~~Equity in net income of affiliated companies~~was $8 million in the third quarter of 2005, compared with $9 million in the third quarter of 2004. The decrease is related primarily to our affiliates in China, which were impacted by lower customer production and price reductions.

~~Loss before income taxes and minority interests,~~including and excluding special charges, is the primary profitability measure used by our chief operating decision makers. The following table shows loss before income taxes and minority interests for the third quarter of 2005 and 2004, for each of our segments:

Third Quarter 2005
over/(under)
2005 2004 2004

(Restated)
(in millions)
Automotive Operations $ (164 ) $ (461 ) $ 297
Glass Operations (16 ) (8 ) (8 )

Total $ (180 ) $ (469 ) $ 289

Memo:
Special charges included above $ (11 ) $ (336 ) $ 325

Automotive Operations’ third quarter 2005 loss before income taxes and minority interests was $164 million compared with a loss of $461 million for the third quarter of 2004. Results were affected by special charges which were $11 million in 2005 and $336 million in 2004. The 2004 special charges included the non-cash asset impairment of $314 million to reduce the net book value of fixed assets related to the steering systems product group.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

The year-over-year change in third quarter loss before income taxes and minority interests also reflects the non-recurrence of 2004’s favorable adjustment to product recall accruals of $49 million and a 2004 favorable $35 million adjustment to annual incentive compensation accruals.

The impact of lower Ford vehicle production volume in North America and Europe and unfavorable vehicle mix in North America was essentially offset by the impact of increased new non-Ford business. Reduced prices to our customers were more than offset by favorable cost performance including the impact of the Ford funding agreement, and lower depreciation and amortization expense, despite raw material increases in certain commodity groups.

Loss before income taxes and minority interests for Glass Operations in the third quarter of 2005 was $16 million compared with $8 million for the third quarter of 2004. The decrease reflects lower Ford North American production volume combined with price reductions offset partially by favorable cost performance.

~~Provision for income taxes~~was $21 million for the third quarter of 2005, compared with a total provision of $963 million for the third quarter of 2004. Visteon’s provision for income taxes for the third quarter of 2005 reflects the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign countries, where full valuation allowances against our deferred tax assets have been maintained since the third quarter of 2004. The third quarter of 2005 provision reflects primarily income tax expense related to those countries where Visteon is profitable and whose results continue to be tax-effected, accrued withholding taxes, and certain non-recurring and other discrete tax items. In the third quarter of 2005, the $3 million tax benefit related to favorable currency exchange rate movements was largely offset by other non-recurring and discrete tax provision items in the quarter. Visteon’s provision for income taxes of $963 million for the third quarter of 2004 includes a charge of $931 million to write-down our net deferred tax assets, as of the beginning of the third quarter, in the U.S. and certain foreign countries. This charge is comprised of $948 million related to deferred tax assets as of the beginning of the year and $60 million for income tax benefits recorded during the first half of 2004, offset by the reduction of related tax reserves of $77 million.

~~Minority interests in net income of subsidiaries~~was $6 million in the third quarter of 2005, compared with $7 million in the third quarter of 2004. Minority interest amounts are related primarily to Halla Climate Control Corporation, a Korean company, of which Visteon holds a 70% ownership interest.

~~Net loss~~~~for the third quarter of 2005 and 2004 is shown in the following table for each of our segments:~~

Third Quarter 2005
over/(under)
2005 2004 2004

(Restated)
(in millions)
Automotive Operations $ (191 ) $ (1,391 ) $ 1,200
Glass Operations (16 ) (48 ) 32

Total $ (207 ) $ (1,439 ) $ 1,232

Memo:
Special charges included above $ (11 ) $ (1,269 ) $ 1,258

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Visteon reported a net loss for the third quarter of 2005 of $207 million compared with a net loss of $1,439 million for the third quarter of 2004 because of the factors described above in loss before income taxes and minority interests. Special charges after taxes were $11 million for third quarter 2005 compared to $1,269 million for third quarter 2004.

~~First Nine Months 2005 Compared with First Nine Months 2004~~

~~Sales~~~~for each of our segments for the first nine months of 2005 and 2004 are summarized in the following table:~~

First Nine Months 2005
over/(under)
2005 2004 2004

(in millions)
Automotive Operations:
Ford and affiliates $ 8,962 $ 9,705 $ (743 )
Other customers 4,754 3,872 882

Total Automotive Operations 13,716 13,577 139
Glass Operations:
Ford and affiliates 164 195 (31 )
Other customers 231 206 25

Total Glass Operations 395 401 (6 )

Total $ 14,111 $ 13,978 $ 133

Memo: Sales to non-Ford customers
Amount $ 4,985 $ 4,078 $ 907
Percentage of total sales 35 % 29 % 6 pts

Sales for Automotive Operations in the first nine months of 2005 were $13,716 million, compared with $13,577 million in the first nine months of 2004, an increase of $139 million. Sales to Ford and affiliates declined mainly due to lower Ford vehicle production ($523 million), selling price reductions and unfavorable vehicle mix. Sales to other customers increased mainly due to new business. Sales to Ford and affiliates and sales to other customers increased by $123 million and $195 million, respectively, from the impact of changes in foreign currency exchange rates.

Sales for Glass Operations were $395 million in the first nine months of 2005, compared with $401 million in the first nine months 2004. Increased non-Ford sales were offset by lower Ford North American production volume and price reductions.

~~Costs of Sales~~includes primarily material, labor, manufacturing overhead and other costs, such as product development costs. Costs of sales for the first nine months of 2005 were $14,815 million, compared with $13,603 million in the first nine months of 2004. Results were affected by special charges which were $1,194 million in 2005 and $355 million in 2004. The increased special charges primarily reflect non-cash asset impairment in 2005 related to assets held for sale which transferred to a Ford-controlled entity on October 1, 2005 and to fixed assets related to the driveline and engine air/fuel systems product groups in Europe and Brazil.

~~The increase in costs of sales was partially offset by the non-recurrence of 2004’s favorable adjustment to product recall accruals of $49 million.~~

Costs of sales were also impacted by higher costs at new facilities supporting increased non-Ford business as well as our limited ability to reduce costs in parallel with lower production at facilities supporting the Ford North American business due to our inflexible cost structure.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Costs of sales were reduced by certain net efficiencies totaling $243 million. This net amount includes material cost reductions, the benefit of the Ford funding agreement on our labor costs, labor efficiencies and lower depreciation and amortization. Increased raw material costs in certain commodity groups, wages and other benefits including OPEB, and warranty, were partial offsets.

~~Selling, administrative and other expenses~~for the first nine months of 2005 were $763 million, compared with $728 million in the third quarter of 2004. The increase primarily reflects increased bad debt expense ($50 million in the first nine months of 2005, $41 million higher than the first nine months 2004), the impact of foreign currency exchange rates ($7 million), and costs associated with the negotiations with Ford. These increases were partially offset by lower IT costs ($29 million) and other cost efficiencies.

~~Net interest expense and debt extinguishment cost~~of $98 million in the first nine months of 2005 was $26 million higher than the first nine months of 2004 primarily reflecting higher average debt balances, lower average cash balances, and higher average borrowing rates partially offset by the non-recurrence of an $11 million debt extinguishment charge in the third quarter of 2004.

~~Equity in net income of affiliated companies~~was $22 million in the first nine months of 2005, compared with $38 million in the first nine months of 2004. The decrease is related primarily to our affiliates in China, which were impacted by lower customer production and price reductions.

~~Loss before income taxes and minority interests,~~including and excluding special charges, is the primary profitability measure used by our chief operating decision makers. The following table shows loss before income taxes and minority interests for the first nine months of 2005 and 2004, for each of our segments:

First Nine Months 2005
over/(under)
2005 2004 2004

(Restated)
(in millions)
Automotive Operations $ (1,512 ) $ (391 ) $ (1,121 )
Glass Operations (31 ) 4 (35 )

Total $ (1,543 ) $ (387 ) $ (1,156 )

Memo:
Special charges included above $ (1,194 ) $ (355 ) $ (839 )

Automotive Operations’ first nine months 2005 loss before income taxes and minority interests was $1,512 million compared with a loss of $391 million for the first nine months of 2004. Results were affected by special charges which were $1,194 million in 2005 and $355 million in 2004. The increased special charges primarily reflect non-cash asset impairment in 2005 related to assets held for sale which transferred to a Ford-controlled entity on October 1, 2005 and to fixed assets related to the driveline and engine air/fuel systems product groups in Europe and Brazil.

~~The year-over-year change reflects the non-recurrence of a $49 million favorable adjustment during 2004 to product recall accruals.~~

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

The increased loss also reflects the impact of lower Ford vehicle production volume in North America and Europe as well as unfavorable vehicle mix in North America ($332 million), increased bad debt expense partially offset by increased, albeit lower margin, non-Ford business. Reduced prices to our customers were offset by favorable cost performance, despite raw material cost increases in certain commodity groups, and the impact of the Ford funding agreement.

Loss before income taxes and minority interests for Glass Operations in the first nine months of 2005 was $31 million compared with a profit of $4 million before taxes and minority interests for the third quarter of 2004. The decrease reflects lower Ford North American production volume and price reductions offset partially by favorable cost performance.

~~Provision for income taxes~~was $41 million for the first nine months of 2005, compared with a total provision of $983 million for the first nine months of 2004. Visteon’s provision for income taxes reflects the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign countries, where full valuation allowances against our deferred tax assets have been maintained since the third quarter of 2004. The provision reflects primarily income tax expense related to those countries where Visteon is profitable and whose results continue to be tax-effected, accrued withholding taxes, and certain non-recurring and other discrete tax items. Non-recurring and other discrete ~~tax~~ items recorded in the first nine months of 2005 resulted in a net benefit of $37 million. This includes a benefit of $29 million, reflecting primarily a reduction in our income tax reserves corresponding with the conclusion of U.S. Federal income tax audits for 2003, 2002 and certain pre-spin periods recorded in the second quarter of 2005, as well as a net benefit of $8 million recorded in the first quarter of 2006 resulted in additional tax expense of $3 million related primarily to unfavorable currency exchange rate movements in the quarter. Included in the provision for income taxes for the first quarter of 2005 was a benefit of $8 million, consisting primarily of benefits related to a change in the estimated benefit associated with tax losses in Canada and the favorable resolution of tax matters in Mexico, offset by net provisions recorded ~~primarily~~ to increase ~~our~~the Company’s income tax reserves for prior year tax exposures.

During the remaining quarters of 2006, the Company may undertake legal restructuring actions in Europe and Asia which would include an overall review of business plans in certain jurisdictions. Such review would include whether or not a portion of the past, current or future earnings of certain affiliates are permanently reinvested under Accounting Principles Board Opinion No. 23 “Accounting for Income Taxes — Special Areas.” The ~~first nine months~~Company’s policy has been to provide deferred taxes for the net effect of ~~2004 includes~~repatriating earnings from consolidated foreign subsidiaries. If a ~~charge of $871 million related~~determination is made to ~~additional valuation allowances~~treat any such earnings as permanently reinvested, the Company would reduce the previously established ~~against Visteon’s~~accruals for withholding taxes and the deferred tax ~~assets~~liability on the affected earnings, which could result in ~~the U.S. and certain foreign countries. This charge is comprised of $948 million related~~a one-time and/or ongoing reduction to ~~deferred tax assets as of the beginning of the year, offset by the reduction of related tax reserves of $77 million. Visteon’s results for the first nine months of 2004 reflect no~~ income tax ~~benefits for current year losses in the U.S. and other affected countries.~~

~~Minority interests in net income of subsidiaries~~was $24 million in the first nine months of 2005, compared with $28 million in the first nine months of 2004. Minority interest amounts are related primarily to Halla Climate Control Corporation, a Korean company, of which Visteon holds a 70% ownership interest.

~~Net loss~~~~for the first nine months of 2005 and 2004 is shown in the following table for each of our segments:~~

First Nine Months 2005
over/(under)
2005 2004 2004

(Restated)
(in millions)
Automotive Operations $ (1,577 ) $ (1,358 ) $ (219 )
Glass Operations (31 ) (40 ) 9

Total $ (1,608 ) $ (1,398 ) $ (210 )

Memo:
Special charges included above $ (1,194 ) $ (1,222 ) $ 28

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Visteon reported a net loss for the first nine months of 2005 of $1,608 million compared with a net loss of $1,398 million for the first nine months of 2004 because of the factors described above in loss before income taxes and minority interests. Special charges after taxes were $1,194 million for the first nine months of 2005 and $1,222 million for the first nine months of 2004.

~~Arrangements with Ford and its Affiliates~~

~~Funding Agreement~~

On March 10, 2005, Visteon and Ford entered into a funding agreement, effective as of March 1, 2005, under which Ford has agreed (a) to accelerate the payment on or prior to March 31, 2005 of not less than $120 million of payables that were not required to be paid to Visteon until after March 31, 2005; (b) to accelerate the payment terms for certain U.S. payables to Visteon arising on or after April 1, 2005 from an average of 33 days after the date of sale to an average of 26 days; (c) to reduce the amount of certain wages by 23.75% that Visteon is currently obligated to reimburse Ford with respect to Visteon-assigned Ford-UAW hourly employees that work at Visteon facilities, beginning with the pay period commencing February 21, 2005; and (d) to release Visteon from its obligation to reimburse Ford for Ford profit sharing payments with respect to Visteon-assigned Ford-UAW hourly employees that accrue in 2005.

On May 24, 2005, Visteon and Ford entered into an amendment to the funding agreement. This amendment further accelerates the payment terms for certain U.S. payables to Visteon arising on or after June 1, 2005 to (i) an average of 18 days for the period from June 1, 2005 through July 31, 2005; (ii) an average of 22 days for the period from August 1, 2005 through December 31, 2005; and (iii) an average of 26 days for the period from January 1, 2006 until termination of the agreement. This agreement was terminated in connection with the closing of the transactions discussed below.

During the first nine months of 2005, costs of sales were reduced by $170 million as a result of the funding agreement’s impact on labor costs for Visteon-assigned Ford-UAW hourly employees. That reduction was comprised of $175 million in reduced charges from Ford and a one-time reduction of $17 million in previously established vacation accruals and was offset by $17 million of asset write-offs and $5 million from reduced inventory valuations. Cash flows provided by operating activities for the first nine months of 2005 were favorably impacted by the reduced wage reimbursements to Ford and by the acceleration of payment terms from Ford under the funding agreement.

~~Master Equipment Bailment Agreement~~

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Sale of North American Facilities~~

On May 24, 2005, Visteon and Ford entered into a non-binding Memorandum of Understanding (“MOU”), setting forth a framework for the transfer of twenty-three North American facilities and related assets (the “Business”) to a Ford-controlled entity. In September 2005, Visteon and Ford entered into several definitive agreements and Visteon completed the transfer of the Business to ACH, an indirect, wholly-owned subsidiary of Visteon, and its subsidiaries, pursuant to the terms of the agreements described below. On October 1, 2005, Ford acquired from Visteon all of the issued and outstanding shares of common stock of the parent of ACH in exchange for Ford’s payment to Visteon of approximately $311 million (subject to post-closing adjustment), as well as the forgiveness of certain OPEB liabilities and other obligations relating to hourly employees associated with the Business, and the assumption of certain other liabilities with respect to the Business, each in accordance with the agreements described below.

Following the signing of the MOU and at September 30, 2005, Visteon has classified the manufacturing facilities and associated assets, including inventory, machinery, equipment and tooling, as well as associated liabilities including postretirement benefits, to be sold as “held for sale.” Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires long-lived assets that are considered “held for sale” to be measured at the lower of their carrying value or fair value less cost to sell and future depreciation of such assets is ceased. During the second quarter of 2005, the Automotive Operations recorded a pre-tax non-cash impairment of $920 million to write-down those assets considered “held for sale” to their aggregate estimated fair value less cost to sell. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms.

To effectuate the transactions discussed above, Visteon entered the following agreements all dated as of September 12, 2005, with Ford, a Master Agreement, (the “Master Agreement”), with Ford, a Visteon “A” Transaction Agreement, (the “Transaction Agreement”), a Visteon “B” Purchase Agreement, (the “Purchase Agreement”), and a Contribution Agreement, (the “Contribution Agreement”), with Automotive Components Holdings, Inc. (“Holdings”). In addition, Visteon entered into the following agreements in connection with the closing of the transactions discussed above.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


~~(i)~~	Warrant and Stockholder Agreement. On October 1, 2005, Visteon issued to Ford a warrant (the “Warrant”) to purchase 25 million shares of Visteon common stock at an exercise price equal to $6.90 per share, and entered into the Stockholder Agreement, dated as of October 1, 2005, with Ford, which provides Ford with certain registration rights with respect to the shares of common stock underlying the Warrant and contains restrictions on the transfer of the Warrant and the underlying shares of common stock.

~~(ii)~~	Escrow Agreement. Pursuant to the Escrow Agreement, dated as of October 1, 2005 (the “Escrow Agreement”), among Visteon, Ford and Deutsche Bank Trust Company Americas, as escrow agent, Ford paid $400 million into an escrow account for use by Visteon to restructure its businesses. The Escrow Agreement provides that Visteon will be reimbursed from the escrow account for the first $250 million of reimbursable restructuring costs (as defined in the Escrow Agreement), and up to one half of the next $300 million of such costs. In addition, any residual amounts in the escrow account after December 31, 2012 would be paid to Visteon, except in the event of a “change of control” of Visteon (as defined in the Escrow Agreement), and in which event residual amounts, if any remain, will be paid to Ford.

~~(iii)~~	Reimbursement Agreement. Pursuant to the Reimbursement Agreement, dated as of October 1, 2005 (the “Reimbursement Agreement”), between Visteon and Ford, Ford has agreed to reimburse Visteon for up to $150 million of separation costs associated with those Visteon salaried employees who are assigned to work at ACH, and whose services are no longer required by ACH or a subsequent buyer (the “Employee Restructuring Costs”). The Reimbursement Agreement provides that Ford will reimburse Visteon for the first $50 million of the Employee Restructuring Costs, and up to one half of the next $200 million of such costs. In addition, Ford will pay into the escrow account under the Escrow Agreement any unused funds as of December 31, 2009 (or, if earlier, the date on which there are no longer any Visteon salaried employees leased to ACH).

~~(iv)~~	Master Services Agreement. Pursuant to the Master Services Agreement, dated as of September 30, 2005 (the “Master Services Agreement”), between Visteon and ACH, Visteon will provide certain information technology and other transitional services (e.g., human resources and accounting services) to ACH. The services will be provided at a rate approximately equal to Visteon’s cost until such time as the services are no longer required by ACH but not later than December 31, 2008. ACH may elect to continue to obtain services for up to an additional 12 month period at cost plus a 5% mark-up. In the event that a component of the Business is sold to a third party, services will be provided by Visteon for up to 24 months after each such sale, as requested by the buyer, on additional terms. Subject to certain limitations, ACH may terminate the Master Services Agreement prior to the expiration of its term upon 30 days prior written notice to Visteon.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


~~(v)~~	Visteon Salaried Employee Lease Agreement. Pursuant to the Visteon Salaried Employee Lease Agreement, effective as of October 1, 2005 (the “Salaried Employee Lease Agreement”), between Visteon and ACH, Visteon will provide ACH with the services of Visteon salaried employees to enable ACH to continue to conduct the Business. Visteon will lease salaried employees and provide agency employees to ACH at a rate approximately equal to Visteon’s cost until December 31, 2009, unless the parties agree to an earlier termination date. The term may be extended at ACH’s option for an additional 12 month period ending December 31, 2010, during which ACH will reimburse Visteon for its costs plus a mark-up of 5% (excluding certain taxes). Upon a sale or transfer of all or a part of the Business, Visteon, ACH and the buyer will mutually agree on terms for transitioning the leased employees to the buyer, and Visteon will provide human resource services to the buyer for up to 24 months pursuant to the Master Services Agreement, or under similar terms and conditions after the termination of that agreement. Leased employees who do not receive offers of comparable employment from the buyer will be eligible for severance benefits, certain costs of which may be reimbursed to Visteon by Ford under the terms of the Reimbursement Agreement (as defined above).

~~(vi)~~	Visteon Hourly Employee Lease Agreement. Pursuant to the Visteon Hourly Employee Lease Agreement, effective as of October 1, 2005, between Visteon and ACH, Visteon will provide ACH with the services of (a) any new hourly employees hired under the terms of the Master Visteon-UAW Collective Bargaining Agreement and (b) hourly employees covered by the UAW Local #1216-Visteon Corporation Regional Assembly and Manufacturing LLC, Bellevue Plant, Labor Agreement. The services will be provided at a rate approximately equal to Visteon’s cost until the termination of employment of all of the leased employees or earlier agreement of the parties. In the event of a sale or transfer of all or part of the Business to a third party, Visteon and ACH will agree on the disposition of the leased employees, subject to UAW consent, and Visteon will provide human resource services to the buyer under the terms of the Master Services Agreement, described above, for up to 24 months.

~~(vii)~~	Salaried Employee Lease Agreement. On October 1, 2005, Visteon and Ford entered into a salaried employee lease agreement that is substantially similar to the Salaried Employee Lease Agreement described above, providing for the lease to Ford of certain salaried employees employed at, or principally supporting, the plants located in Rawsonville and Sterling Heights, Michigan from the date each such plant is transferred by ACH to Ford until January 1, 2006.

~~(viii)~~	Hourly Employee Conversion Agreement. Pursuant to the Hourly Employee Conversion Agreement, dated as of October 1, 2005, between Visteon and Ford, the parties have transferred Visteon hourly employees subject to Visteon’s collective bargaining agreement with the UAW to Ford under the terms of the UAW-Ford collective bargaining agreement.

~~(ix)~~	Visteon Salaried Employee Transition Agreement. The Visteon Salaried Employee Transition Agreement, dated as of October 1, 2005 (the “Employee Transition Agreement”), between Visteon and Ford, provides that, in the event that ACH transfers its plants located in Rawsonville and/or Sterling Heights, Michigan to Ford, the salaried employees employed at such plants or principally supporting those plants will become Ford salaried employees effective as of January 1, 2006.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


~~(x)~~	Employee Transition Agreement Amendment. On October 1, 2005, Visteon and Ford entered into an amendment to the Amended and Restated Employee Transition Agreement, dated as of December 19, 2003, pursuant to which Ford released Visteon from its obligations to reimburse Ford for the cost of providing postretirement health and life benefits, and its pre-funding obligations with respect to such benefits associated with certain employees who are eligible or who may become eligible to retire under the Ford General Retirement Plan, and Ford has agreed to reimburse Visteon for one half the cost of certain OPEB and pension expenses associated with leased employees who retire as a result of a sale, closure or exit of an ACH operation.

~~(xi)~~	Purchase and Supply Agreements. On September 30, 2005, Visteon entered into two Purchase and Supply Agreements with ACH which set forth the supply obligations, pricing and related matters for certain parts, components and systems that are manufactured by one party and supplied to the other. On October 1, 2005, Visteon entered into a Purchase and Supply Agreement, dated as of October 1, 2005, with Ford which sets forth the supply obligations, pricing and related matters for certain parts, components and systems that are manufactured by Visteon and supplied to Ford.

~~(xii)~~	IP and Software Agreements. On September 30, 2005, Visteon entered into the Intellectual Property Contribution Agreement with Visteon Global Technologies, Inc. (“VGTI”), Holdings and ACH, and the Software License and Contribution Agreement with VGTI and Holdings. On October 1, 2005, Visteon entered into an Intellectual Property License Agreement with VGTI and Ford. These agreements allocate certain intellectual property rights among the parties associated with transferring the Business to ACH.

Pursuant to the agreements described above, Visteon and Ford terminated certain existing commercial agreements, including the funding agreement, dated as of March 10, 2005, as amended, the master equipment bailment agreement, dated as of March 10, 2005, as amended, their Purchase and Supply Agreement, dated as of December 19, 2003, and their 2003 Relationship Agreement, dated as of December 19, 2003, as well as their Amended and Restated Hourly Employee Assignment Agreement, dated as of April 1, 2000, as amended and restated as of December 19, 2003.expense.

Liquidity and Capital Resources

Overview

~~Visteon’s~~The Company’s cash and liquidity needs are impacted by the level, variability, and timing of ~~our~~its customers’ worldwide vehicle production, which varies based on economic conditions and market shares in major markets. ~~Our~~The Company’s intra-year needs are impacted ~~also~~ by seasonal effects in the industry, such as the shutdown of operations for ~~about~~ two weeks in July, the subsequentramp-up of new model production and the additional one-week shutdown in December by ~~our~~its primary North American customers. These seasonal effects normally require use of liquidity resources during the first and third quarters. Further, as ~~our~~the Company’s operating profitability has become more concentrated with ~~our~~its foreign subsidiaries and joint ventures, ~~our~~the majority of the Company’s cash ~~balance~~balances located outside the U.S. ~~has increased. Approximately forty percent~~continue to increase. As of ~~Visteon’s~~March 31, 2006 approximately 70% of the Company’s cash ~~at September 30, 2005 was held~~balance is located in jurisdictions outside of the U.S. ~~Visteon’s~~as compared to approximately 60% at December 31, 2005. The Company’s ability to ~~move~~efficiently access cash ~~among its operating locations~~balances in certain foreign jurisdictions is subject to ~~the operating needs of each location as well as restrictions imposed by~~ local ~~laws.~~

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Visteon’s balance sheet reflects cash of $898 million~~regulatory and total debt of $1,955 million at September 30, 2005, compared with cash of $752 million and total debt of $2,021 million at December 31, 2004. The Ford interim agreements entered into in the first quarter aided our liquidity position through the first nine months of 2005, through modified payment terms, reduction in labor reimbursement costs and Ford funding of capital expenditures at certain U.S. facilities. Visteon also received a $311 million deposit from Ford as of September 30, 2005, as consideration for inventory of the transferred business. Our overall level of capital expenditures was reduced compared to the same period last year, and the dividend was suspended in February 2005, further conserving cash resources. Finally, as discussed further above, on October 1, 2005, we completed a series of transactions with Ford that transfer all of our UAW master agreement plants to a Ford-controlled entity and provide access to additional restructuring funds.

Visteon also took several actions to address its immediate liquidity access needs. During the second quarter of 2005, Visteon obtained a $300 million short-term credit facility and amended and restated its existing five-year credit and term loan facilities, as further described below. Visteon also renewed through March 2006 its U.S. non-Ford accounts receivable securitization facility, and, despite reductions in Visteon’s credit rating, maintained access to the full amount of undivided interests that VRL can sell to the conduit until December 15, 2005. In addition, Visteon increased the sale of non-Ford receivables in Europe and initiated a program in Asia in the first quarter of 2005, and expects to continue to utilize European and Asia receivables securitization facilities.

We believe that cash flow from operations, combined with access to external liquidity sources, will be sufficient to fund capital spending, debt maturities and other cash obligations in 2005. However, liquidity from internal or external sources to meet these obligations is dependent on a number of factors, including availability of cash balances, credit ratings, industry economic factors, and the availability of the capital markets. In addition, because Visteon was not timely in making its SEC filings in 2005, we are ineligible to use Forms S-2 and S-3 to register securities until all required reports under the Securities Exchange Act of 1934 have been timely filed for 12 months prior to the filing of a registration statement for those securities. Accordingly, we are unable to use our presently effective shelf registration statement to sell securities in the public market without first obtaining a waiver from the SEC. Visteon can provide no assurance that, if needed, additional liquidity will be available at the times or in the amounts needed, or on terms and conditions acceptable to Visteon. At September 30, 2005, Visteon was in compliance with the covenants contained in its credit agreements, although there can be no assurance that Visteon will remain in compliance with such covenants in the future. If we were to violate a financial covenant and not obtain a waiver, the credit agreements could be terminated and amounts outstanding would be accelerated. We can provide no assurance that, in such event, that we would have access to sufficient liquidity resources to repay such amounts.

~~Long-Term Debt~~

Visteon had $1,522 million of outstanding long-term debt at September 30, 2005. This debt includes $702 million of notes bearing interest at 8.25% due August 1, 2010, $444 million of notes bearing interest at 7.00% due March 10, 2014, $239 million of the five-year term loan related to our facilities consolidation in Southeastern Michigan due June 25, 2007, and $137 million of various other, primarily non-U.S. affiliate long-term debt instruments with various maturities.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

On August 1, 2005, Visteon borrowed $450 million under the five-year revolving loan credit portion of the Credit Agreements to fund the remaining $250 million of 7.95% notes that were due on August 1, 2005, and for general working capitalstatutory requirements. A portion of this borrowing was repaid upon receipt of a $250 million loan from Ford on September 19, 2005. The Ford loan was repaid on September 30, 2005, at which time Visteon received a $311 million deposit from Ford as consideration for inventory of the transferred business, net of other amounts.

~~Financing Arrangements~~

We and our consolidated subsidiaries have credit line arrangements with various banks throughout the world. As of September 30, 2005, Visteon had $539 million of borrowings outstanding, and about $113 million of obligations under the letters of credit, under our primary bank credit agreements described below. In addition, as of September 30, 2005, approximately $270 million was outstanding, primarily payable in non-U.S. currencies, under committed facilities available to our consolidated subsidiaries.

During the first quarter of 2005, our primary bank credit agreements were (i) the 364-Day Credit Agreement, dated as of June 18, 2004 (the “364-Day Credit Agreement”), (ii) the Five-Year Term Loan Credit Agreement, dated as of June 25, 2002 (the “Term Loan Credit Agreement”), and (iii) the Five-Year Revolving Loan Credit Agreement, dated as of June 20, 2002 (the “Five-Year Credit Agreement”). In May 2005, Visteon entered into amendments and waivers to each of these credit agreements to extend the deadline for Visteon to deliver its first quarter 2005 financial statements until July 29, 2005, which was subsequently amended as discussed below, and change the Eurocurrency margin to 250 bps for the 364-Day Credit Agreement and Five-Year Credit Agreement and to 275 bps for the Term Loan Credit Agreement. On June 19, 2005, the 364-Day Credit Agreement expired.

On June 24, 2005, Visteon entered into a $300 million short-term secured revolving credit agreement (the “Short-Term Credit Agreement”) with a syndicate of financial institutions, and entered into amendments and restatements (the “Amendments”, and together with the Short-Term Credit Agreement, the “Credit Agreements”) to the Five-Year Credit Agreement and the Term Loan Credit Agreement to conform certain provisions of such agreements to provisions of the Short-Term Credit Agreement. The Short-Term Credit Agreement will expire on December 15, 2005. Further, the Credit Agreements provided that Visteon had until December 10, 2005 to provide quarterly financial statements for each of the periods ended March 31, 2005, June 30, 2005, and September 30, 2005, which Visteon fulfilled by filing these financial statements in November 2005. In light of the upcoming expiration of the Short-Term Credit Agreement in December 2005, Visteon is exploring its financing alternatives.

Borrowings under the Credit Agreements bear interest at variable rates equal to, at our election, (i) 3.50% plus the higher of (a) the prime rate or (b) the federal funds rate plus 50 bps, or (ii) a Eurocurrency rate plus 4.50%. We elect the basis of the interest rate at the time of each borrowing. Visteon also pays a commitment fee of 50 bps in arrears on the average undrawn amount of the facility each quarter.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

The Credit Agreements contain, among other things, conditions precedent, covenants, representations and warranties and events of default customary for facilities of this type. Such covenants include the requirement to use the proceeds of certain subsidiary or asset sales, additional indebtedness and sale-leaseback transactions to reduce unused commitments and prepay or cash collateralize extensions of credit, certain restrictions on the incurrence of indebtedness, liens, acquisitions and other investments, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other repayments in respect of capital stock, voluntary prepayments of other indebtedness, capital expenditures, transactions with affiliates, sale-leaseback transactions, changes in fiscal year, hedging arrangements, negative pledge clauses, subsidiary distributions and the activities of a certain holding company subsidiary, subject to certain exceptions. The Credit Agreements also contain financial covenants based on consolidated leverage ratios, which are tested at each quarter-end using the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA, excluding, most notably, permitted non-recurring expenses or losses and income or gains (each as defined in the Short-Term Credit Agreement). The above mentioned ratio cannot exceed 5.00 to 1 for the quarter ended September 30, 2005, 4.20 to 1 for the quarter ended December 31, 2005, 3.50 to 1 for the quarter ended March 31, 2006, 3.25 to 1 for the quarter ended June 30, 2006, 3.00 to 1 for the quarter ended September 30, 2006, and 2.50 to 1 for the quarter ended December 31, 2006 and thereafter. We were in compliance with this covenant as of September 30, 2005.

Subject to limited exceptions, each of Visteon’s direct and indirect, existing and future, domestic subsidiaries acts as guarantor for the Credit Agreements. Subject to the satisfaction of certain conditions, certain foreign subsidiaries of Visteon may be designated by Visteon as borrowers for which Visteon will act as guarantor. The Credit Agreements are secured by a first-priority lien on substantially all material tangible and intangible assets of Visteon and most of its domestic subsidiaries, including, without limitation, intellectual property, material owned real and personal property, all intercompany debt, all of the capital stock of nearly all direct and indirect domestic subsidiaries, as well as 65% of the stock of many first tier foreign subsidiaries. The terms of the Credit Agreements specifically limit the obligations to be secured by a security interest in certain U.S. manufacturing properties and U.S. manufacturing subsidiaries in order to ensure that at the time of any borrowing under the Credit Agreements, that the amount of the applicable borrowing which is secured by such assets (together with other borrowings which are secured by such assets and obligations in respect of certain sale-leaseback transactions) do not exceed 15% of Consolidated Net Tangible Assets (as defined in the indenture applicable to Visteon’s outstanding bonds and debentures).

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Receivables Securitization Facilities and Other Liquidity Sources~~

In March 2004, Visteon established a revolving accounts receivable securitization facility in the U.S. The facility allows for the sale of a portion of non-Ford U.S. trade receivables to a wholly-owned consolidated special purpose entity, VRL, which may then sell an undivided interest in the receivables to an asset-backed multi-seller conduit which is unrelated to Visteon or VRL. At September 30, 2005, VRL sold $55 million in a pool of about $263 million of net receivables. The maximum amount of undivided interests that VRL could have sold to the conduit was approximately $71 million. Visteon expects the maximum amount of undivided interest that VRL could have sold to the conduit during the fourth quarter of 2005 to be partially reduced due to the transactions with Ford on October 1, 2005. The facility has been extended to March 29, 2006 and is extendable annually through March 2008 through mutual agreement of both parties. The April 2005 reductions in Visteon’s credit ratings would have effectively reduced the maximum amount of undivided interest that VRL could sell to the conduit to zero; however, Visteon has obtained a waiver to this credit rating reduction effective through December 15, 2005. In addition, Visteon increased the capacity and sale of non-Ford receivables in Europe. The European programs now provide for up to euro 80 million in receivable sales. As of September 30, 2005, Visteon had sold euro 52 million ($62 million). Visteon also initiated a smaller program in Asia in the first quarter of 2005 of which Japanese yen 671 million ($6 million) were sold as of September 30, 2005. The Asia program provides for up to yen 1.5 billion in receivable sales.

Prior to April 2005, Visteon had maintained a trade payables program through General Electric Capital Corporation (“GECC”) that provided financial flexibility to Visteon and its suppliers. When a supplier participated in the program, GECC paid the supplier the amount due from Visteon in advance of the original due date. In exchange for the earlier payment, our suppliers accepted a discounted payment. Visteon paid GECC the full amount. Approximately $69 million was outstanding to GECC under this program at December 31, 2004. Amounts outstanding under this program are supported by a stand-by letter of credit and are reported in debt payable within one year in the Consolidated Balance Sheet. Visteon terminated the program in April 2005.

Credit Ratings

~~On April 20, 2005, Standard & Poor’s (“~~Moody’s current corporate rating of the company is B2 and SGL rating is 3. The rating on senior unsecured debt is B3. The latest rating action by the agency moved the outlook to negative on January 18, 2006. S~~&P”)~~&P’s current corporate rating of the company is B+ and the Company’s short term liquidity is B-2. The agency currently has a negative outlook on the rating. Fitch’s current rating on the Company’s senior secured debt is B with a negative outlook. The latest rating action by the agency downgraded ~~Visteon from BB+ to B+; on April 21, 2005, Fitch downgraded Visteon~~the senior secured debt from BB to B;B and ~~on April 22, 2005, Moody’s downgraded Visteon from Ba2 to B1.~~

~~On May 25, 2005, S&P announced that Visteon’s B- corporate rating remained on Credit Watch, but changed~~ the implications from developing to positive subsequent to the signing of the MOU with Ford. On May 26, 2005, Moody’s confirmed Visteon’s B3 corporate rating and SGL-4 rating and raised Visteon’s outlook from negative to developing. On May 25, 2005, Fitch placed Visteon’s B corporate rating on Positive Watch. On June 29, 2005, Moody’s raised Visteon’s corporate rating to B2 and Visteon’s SGL rating to 3, while affirming Visteon’s senior unsecured ~~rating of B3 and raising Visteon’s outlook~~debt from B to ~~stable.~~

~~On August 9, 2005, Fitch raised Visteon’s senior debt to BB with~~CCC-, while maintaining a ~~positive~~negative outlook. On October 3, 2005, S&P raised Visteon’s corporate rating to B+ and placed Visteon on negative outlook after the closing of the Ford transactions. S&P also introduced a new short-term liquidity rating on Visteon of B-2, which is considered adequate liquidity.

4933

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

~~Visteon’s access to liquidity has become significantly less reliable and more costly as a result of rating agency actions, and any~~Any further downgrade in ~~Visteon’s~~the Company’s credit ratings could ~~further~~ reduce its access to capital, increase the costs of future borrowings, and increase the possibility of more restrictive terms and conditions contained in any new or replacement financing arrangements or commercial agreements or payment terms with suppliers.

~~Cash Requirements~~Debt

~~Cash required to meet capital expenditure needs in~~The Company had $1,849 million of outstanding long-term debt at March 31, 2006. This debt includes $699 million of notes bearing interest at 8.25% due August 1, 2010, $435 million of notes bearing interest at 7.00% due March 10, 2014, $241 million of the ~~first nine months of 2005 was $400 million. Capital expenditures in 2005 are expected to continue to be lower than historic levels due~~five-year term loan related to the ~~agreements with Ford, as described above, and the substantial completion of the~~Company’s facilities consolidation in Southeastern Michigan due June 25, 2007, $350 million of the18-month term loan bearing interest at LIBOR + 4.5% due June 20, 2007, and $124 million of various other, primarilynon-U.S. affiliate long-term debt instruments with various maturities.

As of March 31, 2006, the Company had $571 million of available borrowings under the $1,122 million five-year revolving credit facility (which includes the 18-Month Term Loan) after a reduction for $101 million of obligations under letters of credit and $450 million drawn. In addition, as of March 31, 2006, the Company had approximately $427 million of available borrowings under other committed and uncommitted facilities. Borrowings under certain credit agreements are secured by a first-priority lien on substantially all tangible and intangible assets of the Company and most of its domestic subsidiaries, as well as 65% of the stock of many first tier foreign subsidiaries.

The Company has recently initiated activities to refinance its 2007 scheduled debt maturities with an expected completion during ~~2004.~~2006.

Covenants and Restrictions

The Company is subject to various covenants and restrictions on its borrowings. The Company’s primary credit agreements currently contain certain affirmative and negative covenants including a covenant not to exceed a certain leverage ratio of consolidated total debt to consolidated EBITDA (as defined in the Credit Agreements) of 4.75 for the quarters ending December 31, 2005 and March 31, 2006; 5.25 for the quarter ending June 30, 2006; 4.25 for the quarter ending September 30, 2006; 3.00 for the quarter ending December 31, 2006; 2.75 for the quarter ending March 31, 2007; and 2.50 thereafter. In addition, the ~~Credit Agreements contain limits on annual capital expenditures. In 2005, Visteon cannot exceed $400 million in~~credit agreements limit the amount of capital expenditures ~~from June 24, 2005 through December 31, 2005.~~

~~On October 3, 2005, Ford paid $400 million into an escrow account~~and cash payments for ~~use by Visteon to restructure its businesses (as described above).~~dividends that the Company may make. The ~~Escrow Agreement provides that Visteon will be reimbursed from the escrow account for the first $250 million of reimbursable restructuring costs, and up to one half~~ability of the ~~next $300 million of~~Company’s subsidiaries to transfer assets is subject to various restrictions, including regulatory requirements and governmental restraints.

At March 31, 2006, the Company was in compliance with applicable covenants and restrictions, as amended, although there can be no assurance that the Company will remain in compliance with such ~~additional costs. Ford has also agreed~~covenants in the future. If the Company was to ~~reimburse Visteon for up~~violate a financial covenant and not obtain a waiver, the credit agreements could be terminated and amounts outstanding would be accelerated. The Company can provide no assurance that, in such event, that it would have access to ~~$150 million of separation costs associated with those Visteon salaried employees who are assigned~~sufficient liquidity resources to work at ACH and whose services are no longer required by ACH or a subsequent buyer. The Reimbursement Agreement provides that Ford will reimburse Visteon for the first $50 million of reimbursable restructuring costs, and up to one half of the next $200 million ofrepay such additional costs. Also, as part of the Purchase and Supply Agreement, payment terms for components received at Ford U.S. facilities will be an average of 22 days through 2006, an average of 26 days for 2007, an average of 34.5 days for 2008, and Ford standard payment terms thereafter.amounts.

Cash Flows

Operating Activities

Cash ~~provided~~used by operating activities during the first ~~nine months~~quarter of ~~2005~~2006 totaled ~~$375~~$32 million, compared with cash provided by operating activities of ~~$223~~$178 million for the same period in ~~2004.~~2005. The ~~improvement~~decrease is largely attributable to ~~improved trade working capital flows due primarily to~~decreased utilization of receivables-based financing facilities of $132 million and non-recurrence of the $120 million acceleration of receivable payments under the March 2005 funding agreement with Ford, ~~and subsequent amendment (which in total accelerated terms from 33 days to 22 days), and lower inventory levels,~~partially offset ~~partially~~ by ~~operating losses.~~improved working capital.

Investing Activities

Cash used in investing activities was ~~$70~~$78 million during the first ~~nine months~~quarter of ~~2005,~~2006, compared with ~~$548~~$117 million for the first ~~nine months~~quarter of ~~2004.~~2005. Visteon’s capital expenditures excluding capital leases in the first ~~nine months~~quarter of ~~2005~~2006 totaled ~~$400~~$85 million, compared with ~~$569~~$127 million for the same period in ~~2004,~~2005, reflecting ~~primarily~~ the ~~interim agreements with Ford~~non-recurrence of 2005 ACH capital spending and the ~~substantial completion of facilities consolidation in 2004. Investments in three new joint ventures located in China and one new joint venture in India were $20 million. In~~Company’s continued focus on capital spending management. During the ~~third~~first quarter of 2005, Visteon received the deposit of $311 million from Ford as consideration for the purchase of inventory related to the sale of certain North American facilities, and during the first nine months of 2005,2006, proceeds from asset disposals were ~~$39~~$7 million. ~~The Credit Agreements limit the amount of capital expenditures and investments Visteon may make.~~

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

Financing Activities

Cash ~~used in~~provided by financing activities totaled ~~$136~~$115 million in the first ~~nine months~~quarter of ~~2005,~~2006, compared with ~~$103~~$3 million ~~provided by financing activities in~~for the same period in ~~2004.~~2005. The cash ~~used~~proceeds in 2006 reflect primarily the draw on the Company’s $350 million new secured18-month term loan, partially offset by repayment of $247 million on the Company’s five-year revolving credit facility. The cash proceeds in 2005 ~~reflects~~reflect primarily a draw of $80 million under the ~~retirement of~~Company’s former364-day revolving credit facility, partially offset by a reduction in the ~~remaining $250 million of 7.95% notes that were due on August 1, 2005, termination of the GECC~~General Electric Capital Corporation trade payables program and reductions in ~~affiliate debt, partially offset by outstanding~~other consolidated subsidiary debt. The Company’s primary credit line draws of $300 million. Visteon received a $250 million loan from Ford on September 19, 2005. The Ford loan was repaid on September 30, 2005, at which time Visteon received a $311 million deposit from Ford as consideration for inventory of the transferred business, net of other amounts. The cash proceeds in 2004 reflect primarily the net increase in debt of $200 million due to the March 2004 issuance of debt securities offset partially by the April 2004 repurchase of certain existing notes, maturing short-term commercial paper obligations, dividend payments, and reductions in other debt. In February 2005, the Visteon Board of Directors elected to suspend the payment of its usual quarterly dividend of $0.06 per share of common stock. The Credit Agreements alsoagreements limit the amount of cash payments for dividends ~~Visteon~~the Company may make. ~~Cash paid~~

New Accounting Standards

In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156 (“SFAS 156”), “Accounting for ~~dividends was $24 million~~Servicing of Financial Assets.” This statement amends Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a transfer of financial assets that meet the requirement for sale accounting. In addition, all of these separately recognized servicing assets or liabilities are required to be initially measured at fair value, with two permitted methods available for subsequent measurement: the amortization method or the fair value measurement. SFAS 156 is effective for the Company on January 1, 2007 and the Company is currently evaluating the impact of the requirements of this statement on its consolidated financial statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004) (“SFAS 123(R)”), “Share-Based Payments.” This statement requires that all share-based payments to employees be recognized in the ~~first nine months~~financial statements based on their fair value. SFAS 123(R) was adopted by the Company effective January 1, 2006 using the modified-prospective method. In accordance with the modified-prospective transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of ~~2004.~~SFAS 123(R). Under the modified-prospective method, compensation cost includes:


•	Share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the fair value estimated in accordance with the original provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”).

•	Share-based payments granted subsequent to January 1, 2006, based on the fair value estimated in accordance with the provisions of SFAS 123(R).

The cumulative effect, net of tax, of adoption of SFAS 123(R) was $4 million or $0.03 per share as of January 1, 2006. The Company recorded $6 million or $0.05 per share of incremental compensation expense during the three-months ended March 31, 2006, under SFAS 123(R) when compared to the amount that would have been recorded under SFAS 123. Additional disclosures required by SFAS 123(R) regarding the Company’s stock-based compensation plans and related accounting are provided in Note 3 “Stock-Based Compensation” to the consolidated financial statements.

Prior to the adoption of SFAS 123(R), the Company had valued its stock appreciation rights based upon the intrinsic value of the Company’s common stock at the end of each reporting period. With the adoption of SFAS 123(R), stock appreciation rights are valued at fair market value through the use of a Black Scholes option pricing model. As of March 31, 2006, unrecognized compensation cost related to non-vested options, stock appreciation rights, restricted stock awards and restricted stock units was $5 million, $7 million, $1 million, and $19 million, respectively, and is expected to be recognized over a weighted average period of 1.75 years, 1.79 years, 2.73 years, and 2.03 years, respectively. Additional disclosures as required by SFAS 123(R) are included in Note 3 “Stock-Based Compensation” to the consolidated financial statements.

Prior to the adoption of SFAS 123(R) and effective January 1, 2003 the Company began expensing the fair value of stock-based awards granted to employees pursuant to SFAS 123. This standard was adopted on the prospective method basis for stock-based awards granted, modified or settled after December 31, 2002. For stock options and restricted stock awards granted prior to January 1, 2003, the Company measured compensation cost using the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” as permitted by SFAS 123. If compensation cost for all stock-based awards had been determined based on the estimated fair value of stock options and the fair value at the date of grant for restricted stock awards, in accordance with the provisions of SFAS 123, the Company’s reported net loss and net loss per share would have changed to the pro forma amounts indicated below:


		Three-Months Ended
		March 31, 2005

		(Dollars in Millions, Except
		Per Share Amounts)
Net loss, as reported		$	(163	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects			2
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(3	)

Pro forma net loss		$	(164	)

Net loss per share:
As reported:
	Basic and diluted	$	(1.30	)
Pro forma:
	Basic and diluted	$	(1.31	)

Cautionary Statements Regarding Forward-Looking Information

Certain statements contained or incorporated in this Interim Report on Form 10-Q which are not statements of historical fact constitute “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements give current expectations or forecasts of future events. Words such as “anticipate”, “expect”, “intend”, “plan”, “believe”, “seek”, “estimate” and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and estimates, which are subject to risks and uncertainties including those discussed in Item 1A under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for fiscal year 2005 and elsewhere in this report. Accordingly, the reader should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent the Company’s estimates and assumptions only as of the date of this report. The Company does not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made. The Company qualifies all of its forward-looking statements by these cautionary statements.

The reader should understand that various factors, in addition to those discussed elsewhere in this document, could affect the Company’s future results and could cause results to differ materially from those expressed in such forward-looking statements, including:


•	Visteon’s ability to satisfy its future capital and liquidity requirements; Visteon’s ability to access the credit and capital markets at the times and in the amounts needed and on terms acceptable to Visteon, which is influenced by Visteon’s credit ratings (which have declined in the past and could decline further in the future); Visteon’s ability to comply with financial covenants applicable to it; and the continuation of acceptable supplier payment terms.

•	Visteon’s ability to satisfy its pension and other post-employment benefit obligations, and to retire outstanding debt and satisfy other contractual commitments, all at the levels and times planned by management.

•	Visteon’s ability to access funds generated by its foreign subsidiaries and joint ventures on a timely and cost effective basis.

•	Changes in the operations (including products, product planning and part sourcing), financial condition, results of operations or market share of Visteon’s customers, particularly its largest customer, Ford.

•	Changes in vehicle production volume of our customers in the markets where we operate, and in particular changes in Ford’s North American and European vehicle production volumes and platform mix.

•	Visteon’s ability to profitably win new business from customers other than Ford and to maintain current business with, and win future business from, Ford, and, Visteon’s ability to realize expected sales and profits from new business.


•	Increases in costs or disruptions in the supply of commodities, including steel, resins, aluminum, copper, fuel and natural gas.

•	Visteon’s ability to generate cost savings to offset or exceed agreed upon price reductions or price reductions to win additional business and, in general, improve its operating performance; to achieve the benefits of its restructuring actions; and to recover engineering and tooling costs.

•	Restrictions in labor contracts with unions that restrict Visteon’s ability to close plants, divest unprofitable, noncompetitive businesses, change local work rules and practices at a number of facilities and implement cost-saving measures.

•	The costs and timing of facility closures or dispositions, business or product realignments, or similar restructuring actions, including potential impairment or other charges related to the implementation of these actions or other adverse industry conditions and contingent liabilities.

•	Significant changes in the competitive environment in the major markets where Visteon procures materials, components or supplies or where its products are manufactured, distributed or sold.

•	Legal and administrative proceedings, investigations and claims, including shareholder class actions, SEC inquiries, product liability, warranty, environmental and safety claims, and any recalls of products manufactured or sold by Visteon.

•	Changes in economic conditions, currency exchange rates, changes in foreign laws, regulations or trade policies or political stability in foreign countries where Visteon procures materials, components or supplies or where its products are manufactured, distributed or sold.

•	Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to or difficulties in the employment of labor in the major markets where Visteon purchases materials, components or supplies to manufacture its products or where its products are manufactured, distributed or sold.

•	Changes in laws, regulations, policies or other activities of governments, agencies and similar organizations, domestic and foreign, that may tax or otherwise increase the cost of, or otherwise affect, the manufacture, licensing, distribution, sale, ownership or use of Visteon’s products or assets.

•	Possible terrorist attacks or acts of war, which could exacerbate other risks such as slowed vehicle production, interruptions in the transportation system, or fuel prices and supply.

•	The cyclical and seasonal nature of the automotive industry.

•	Visteon’s ability to comply with environmental, safety and other regulations applicable to it and any increase in the requirements, responsibilities and associated expenses and expenditures of these regulations.

•	Visteon’s ability to protect its intellectual property rights, and to respond to changes in technology and technological risks and to claims by others that Visteon infringes their intellectual property rights.

•	Visteon’s ability to provide various employee and transition services to ACH in accordance with the terms of existing agreements between the parties, as well as Visteon’s ability to recover the costs of such services.

•	Visteon’s ability to quickly and adequately remediate material weaknesses and other control deficiencies in its internal control over financial reporting.

•	Other factors, risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.

Other Financial Information

PricewaterhouseCoopers LLP, an independent registered public accounting firm, performed a limited review of the financial data presented on page 13 through 2927 inclusive. The review was performed in accordance with standards for such reviews established by the Public Company Accounting Oversight Board (United States). The review did not constitute an audit; accordingly, PricewaterhouseCoopers LLP did not express an opinion on the aforementioned data. Their review report included herein is not a “report” within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the independent registered public accounting firm’s liability under Section 11 does not extend to it.

~~Cautionary Statement regarding Forward-Looking Information~~

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate” as well as similar words and phrases signify forward-looking statements. Visteon’s forward-looking statements are not guarantees of future results and conditions and important factors, risks and uncertainties may cause our actual results to differ materially from those expressed in our forward-looking statements, including, but not limited to, the following:


	•	Visteon’s ability to satisfy its future capital and liquidity requirements; Visteon’s ability to access the credit and capital markets at the times and in the amounts needed and on terms acceptable to Visteon, which is influenced by Visteon’s credit ratings (which have declined in the past and could decline further in the future); Visteon’s ability to comply with financial covenants applicable to it; and the continuation of acceptable supplier payment terms.

	•	Visteon’s ability to satisfy its pension and other post-employment benefit obligations, and to retire outstanding debt and satisfy other contractual commitments, all at the levels and times planned by management.

	•	~~Visteon’s ability to access funds generated by its foreign subsidiaries and joint ventures on a timely and cost effective basis.~~

5139

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


	•	Changes in the operations (including products, product planning and part sourcing), financial condition, results of operations or market share of Visteon’s customers, particularly its largest customer, Ford.

	•	~~Changes in vehicle production volume of our customers in the markets where we operate, and in particular changes in Ford’s North American and European vehicle production volumes and platform mix.~~

	•	Visteon’s ability to profitably win new business from customers other than Ford and to maintain current business with, and win future business from, Ford, and, Visteon’s ability to realize expected sales and profits from new business.

	•	~~Increases in commodity costs or disruptions in the supply of commodities, including steel, resins, aluminum, copper, fuel and natural gas.~~

	•	Visteon’s ability to generate cost savings to offset or exceed agreed upon price reductions or price reductions to win additional business and, in general, improve its operating performance; to achieve the benefits of its restructuring actions; and to recover engineering and tooling costs.

	•	Visteon’s ability to compete favorably with automotive parts suppliers with lower cost structures and greater ability to rationalize operations; and to exit non-performing businesses on satisfactory terms, particularly due to limited flexibility under existing labor agreements.

	•	~~Visteon’s ability to streamline and focus its product portfolio; and to sustain technological competitiveness.~~

	•	Restrictions in labor contracts with unions that restrict Visteon’s ability to close plants, divest unprofitable, noncompetitive businesses, change local work rules and practices at a number of facilities and implement cost-saving measures.

	•	The costs and timing of facility closures or dispositions, business or product realignments, or similar restructuring actions, including potential impairment or other charges related to the implementation of these actions or other adverse industry conditions and contingent liabilities.

	•	~~Significant changes in the competitive environment in the major markets where Visteon procures materials, components or supplies or where its products are manufactured, distributed or sold.~~

	•	Legal and administrative proceedings, investigations and claims, including shareholder class actions, SEC inquiries, product liability, warranty, environmental and safety claims, and any recalls of products manufactured or sold by Visteon.

	•	Changes in economic conditions, currency exchange rates, changes in foreign laws, regulations or trade policies or political stability in foreign countries where Visteon procures materials, components or supplies or where its products are manufactured, distributed or sold.

	•	Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to or difficulties in the employment of labor in the major markets where Visteon purchases materials, components or supplies to manufacture its products or where its products are manufactured, distributed or sold.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


	•	Changes in laws, regulations, policies or other activities of governments, agencies and similar organizations, domestic and foreign, that may tax or otherwise increase the cost of, or otherwise affect, the manufacture, licensing, distribution, sale, ownership or use of Visteon’s products or assets.

	•	~~Possible terrorist attacks or acts of war, which could exacerbate other risks such as slowed vehicle production, interruptions in the transportation system, or fuel prices and supply.~~

	•	~~The cyclical and seasonal nature of the automotive industry.~~

	•	Visteon’s ability to comply with environmental, safety and other regulations applicable to it and any increase in the requirements, responsibilities and associated expenses and expenditures of these regulations.

	•	Visteon’s ability to protect its intellectual property rights, and to respond to changes in technology and technological risks and to claims by others that Visteon infringes their intellectual property rights.

	•	Visteon’s ability to provide various employee and transition services to Automotive Components Holdings, LLC in accordance with the terms of existing agreements between the parties, as well as Visteon’s ability to recover the costs of such services.

	•	~~Visteon’s ability to quickly and adequately remediate material weaknesses and other control deficiencies in its internal control over financial reporting.~~

	•	~~Other factors, risks and uncertainties detailed from time to time in Visteon’s Securities and Exchange Commission filings.~~

These risks and uncertainties are not the only ones facing Visteon. Additional risks and uncertainties not presently known to Visteon or currently believed to be immaterial also may adversely affect Visteon. Any risks and uncertainties that develop into actual events could have material adverse effects on Visteon’s business, financial condition and results of operations. For these reasons, do not place undue reliance on our forward-looking statements. Visteon does not intend or assume any obligation to update any of these forward-looking statements.

~~New Accounting Standards and Accounting Changes~~

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004) (“SFAS 123(R)”), “Share-Based Payments.” This revised statement requires the fair-value based method to be used and eliminates the alternative use of the intrinsic value method. SFAS 123(R) is required to be adopted as of the beginning of the first annual period that begins after June 15, 2005. Visteon does not expect the requirements of SFAS 123(R) to have a material effect on Visteon’s results of operations as, starting January 1, 2003, Visteon began expensing the fair value of stock-based awards, including stock options, granted to employees pursuant to the original provisions of SFAS 123.

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs — an amendment of ARB No. 43, Chapter 4.” This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Visteon has not determined the effect the adoption of SFAS 151 will have on either its results of operations or financial position.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Visteon~~The Company is exposed to market risks from changes in currency exchange rates, interest rates and certain commodity prices. To manage these risks, ~~we use~~the Company uses a combination of fixed price contracts with suppliers, cost sourcing arrangements with customers and financial derivatives. ~~We maintain~~The Company maintains risk management controls to monitor the risks and the related hedging. Derivative positions are examined using analytical techniques such as market value and sensitivity analysis. Derivative instruments are not used for speculative purposes, as per clearly defined risk management policies.

Foreign Currency Risk

~~Visteon’s~~The Company’s net cash inflows and outflows exposed to the risk of changes in exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, subsidiary dividends and investments in subsidiaries. ~~Visteon’s~~The Company’s on-going solution is to reduce the exposure through operating actions.

~~Visteon’s~~The Company’s primary foreign exchange operating exposures include the euro, Korean won, Czech koruna and Mexican ~~peso, euro, and Czech koruna.~~peso. Because of the mix between ~~our~~the Company’s costs and ~~our sales~~revenues in various regions, operating results are exposed generally to weakening of the euro and to strengthening of the Korean won, Czech koruna and Mexican ~~peso and Czech koruna.~~peso. For transactions in these currencies, ~~Visteon~~the Company utilizes a strategy of partial coverage. As of ~~September 30, 2005, our~~March 31, 2006, the Company’s coverage for projected transactions in these currencies was ~~about 42%~~approximately 40% for ~~2005.~~2006.

As of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, the net fair value of foreign currency forward and option contracts was an asset of ~~$11~~$3 million and ~~$18~~$9 million, respectively. The hypothetical pre-tax gain or loss in fair value from a 10% favorable or adverse change in quoted currency exchange rates would be approximately ~~$49~~$28 million and ~~$72~~$62 million as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively. These estimated changes assume a parallel shift in all currency exchange rates and include the gain or loss on financial instruments used to hedge loans to subsidiaries. Because ~~all~~ exchange rates typically do not all move in the same direction, the estimate may overstate the impact of changing exchange rates on the net fair value of ~~our~~the Company’s financial derivatives. It is also important to note that gains and losses indicated in the sensitivity analysis would generally be offset by gains and losses on the underlying exposures being hedged.

~~ITEM 3.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — (Continued)~~

Interest Rate Risk

~~Visteon~~The Company uses interest rate swaps to manage interest rate risk. These swaps effectively convert a portion of ~~Visteon’s~~the Company’s fixed rate debt into variable rate debt. ~~During~~Including the ~~first quarter~~effect of ~~2005, Visteon terminated interest rate swaps with a notional amount of $200~~$350 million ~~related to the 8.25% notes due August 1, 2010, which reduced the notional amount~~ of interest rate swaps, ~~to $350 million. As~~approximately 43% and 45% of ~~September 30, 2005 and December 31, 2004 about 46% and 45%, respectively, of Visteon’s~~the Company’s borrowings were effectively on a fixed rate ~~basis.~~

Asbasis as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively.

As of March 31, 2006 and December 31, 2005, the net fair value of interest rate swaps was a liability of ~~$13~~$24 million and ~~an asset of $2~~$15 million, respectively. The potential loss in fair value of these swaps from a hypothetical 50 basis point adverse change in interest rates would be approximately $9$8 million and ~~$16~~$10 million as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively. The annual increase in pre-tax interest expense from a hypothetical 50 basis point adverse change in variable interest rates (including the impact of interest rate swaps) would be approximately ~~$5 million and~~ $6 million as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004, respectively.~~2005. This analysis may overstate the adverse impact on net interest expense because of the short-term nature of ~~our~~the Company’s interest bearing investments.

Commodity Risk

~~Visteon’s~~The Company’s exposure to market risks from changes in the price of commodities including steel products, plastic resins, aluminum, natural gas and diesel fuel are not hedged due to a lack of acceptable hedging instruments in the market. ~~Visteon’s~~The Company’s exposures to price changes in ~~these~~such commodities ~~and non-ferrous metals~~ are attempted to be addressed through negotiations with ~~our~~the Company’s suppliers and customers, although there can be no assurance that ~~Visteon~~the Company will not have to absorb any or all price increases and/or surcharges. When and if acceptable hedging instruments are available in the market, management will determine at that time ~~depending upon Visteon’s exposure level,~~ if financial hedging is appropriate, ~~and~~depending upon the Company’s exposure level at that time, the effectiveness of the financial hedge and other factors.

In the second quarter, Visteon discontinued hedge accounting treatment for certain natural gas and copper forward contracts as the underlying transactions are no longer expected to occur, resulting in the reclassification of a gain of about $8 million from “accumulated other comprehensive income” to earnings. These forward contracts were subsequently terminated during the third quarter of 2005. Upon completion of the transactions with Ford on October 1, 2005 as described above, Visteon’s exposure to market risks from changes in the price of natural gas and copper will be substantially reduced.


ITEM 4.	CONTROLS AND PROCEDURES

~~(a)~~ Disclosure Controls and Procedures

~~Visteon~~The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports ~~Visteon~~the Company files ~~or submits~~with the SEC under the Securities Exchange Act of 1934 ~~as amended (the “Securities Exchange Act”),~~ is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ~~Visteon’s~~the Company’s management, including its ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer,~~CFO, as appropriate, to allow timely decisions regarding required disclosure.

~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES — (Continued)~~

~~As required by Rule 13a-15 under the Securities Exchange Act, Visteon~~The Company’s management carried out an evaluation, under the supervision and with the participation of ~~Visteon’s Disclosure Committee and management, including~~ the ~~Chief Executive Officer~~CEO and the ~~Chief Financial Officer,~~CFO, of the effectiveness of the design and operation of ~~our~~the Company’s disclosure controls and procedures as of ~~September 30, 2005.~~March 31, 2006. Based upon ~~this~~that evaluation, the ~~Chief Executive Officer~~CEO and ~~the Chief Financial Officer~~CFO concluded that ~~our~~the Company’s disclosure controls and procedures were not effective because of the existence of a material weakness ~~described~~in the Company’s internal control over financial reporting as discussed below. Notwithstanding the ~~existence of the~~ material weakness, ~~described below,~~ management has concluded that the consolidated financial statements included in this ~~report~~Quarterly Report on Form 10-Q fairly ~~present,~~state, in all material respects, ~~our~~the Company’s financial ~~condition,~~position, results of operations and cash flows for the periods ~~presented.~~presented in conformity accounting principles generally accepted in the United States of America.

~~On May 10,~~In the Company’s 2005 Visteon announced that its Audit Committee was conducting an independent review of the accounting for certain transactions originating in Visteon’s North American purchasing activity. Based on the results of the review, which were discussed in our CurrentAnnual Report on Form ~~8-K dated October 21, 2005, we have restated our previously issued consolidated financial statements for 2002, 2003 and 2004, primarily for accounting corrections related to~~10-K, management concluded that the timing of the recognition of costs and the adequacy of period-end accruals for freight, raw material costs and other supplier costs. Refer to Note 2 to the consolidated financial statements for further information regarding this restatement. In addition, the Audit Committee determined, among other things, that many of the accounting errors were principally the result of improper conduct on the part of two former, non-executive finance employees responsible for these matters.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements willCompany did not ~~be prevented or detected. Management identified the following material weaknesses in the company’s~~maintain effective internal control over financial reporting as of December 31, ~~2004 and through September 30, 2005.~~


	~~(1)~~	~~Accounting for Employee Postretirement Health Care Benefits~~


	Visteon did not maintain effective controls over the accounting for amendments to U.S. postretirement health care benefit plans. Specifically, controls to determine that such amendments were reviewed and all necessary actions were implemented, including communications to affected employees, prior to recognizing the accounting treatment in Visteon’s consolidated financial statements, were not effective. This control deficiency resulted in an adjustment to our fourth quarter 2004 financial results, and resulted in the restatement of Visteon’s consolidated financial statements for 2002 and 2003 and for the first, second and third quarters of 2004. Additionally, this control deficiency could result in a misstatement to the aforementioned accounts that would result in a material misstatement to annual or interim financial statements.

	The requirement of Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (“SFAS No. 106”), to communicate changes in eligibility requirements to employees for postretirement health care benefits prior to reflecting an accounting treatment change was not satisfied. Effective in January 2002, Visteon amended its retiree health care benefits plan for certain of its U.S. employees. Effective in January 2004, a Visteon wholly-owned subsidiary amended its retiree health care benefits plan for its employees. These amendments changed the eligibility requirements for participants in the plan. As a result of these amendments, which were not communicated to affected employees, Visteon changed the expense attribution periods, which eliminated cost accruals for younger employees and increased accrual rates for older participating employees.

~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES — (Continued)~~

~~(2)~~ ~~Accounting for Costs Incurred for Tools Used in Production~~

Visteon did not maintain effective controls to ensure that there was appropriate support and documentation of either ownership or an enforceable agreement for reimbursement of expenditures at the time of the initial recording of incurred tooling costs. Further, controls over periodic review, assessment and timely resolution of tooling costs, related aged accounts receivable balances and potential overruns to customer-authorized reimbursement levels were not effective. This control deficiency resulted in the misstatement of Visteon’s consolidated financial statements for each of the years 2000 through 2003 and the second and third quarters of 20042005 because of costs that either should have been expensed as incurred or capitalized and amortized to expense over the terms of the related supply agreement. Additionally, this control deficiency could result in a misstatement to the aforementioned accounts that would result in a material misstatement to annual or interim financial statements.


	~~(3)~~	~~Accounting for Freight, Raw Material and Other Supplier Costs and Related Period-End Accruals at our North American Purchasing Function~~

Visteon did not maintain effective controls over the complete and accurate recording of freight, raw material and other supplier costs and related period-end accruals at our North American purchasing function. Specifically, controls to ensure that accruals for freight, raw materials and other supplier costs were appropriately supported and adequately reviewed: (i) did not operate effectively to ensure that such costs were recorded in the correct period and that period-end accruals were complete and accurate; and (ii) did not prevent or detect the improper conduct by two former, non-executive employees. In addition, the Company did not have effective controls designed and in place over: (i) the information received from its third-party freight administrator to completely and accurately record freight costs and related period-end accruals; (ii) the monitoring of supplier negotiations to ensure that resulting price changes were identified and recorded in a timely manner; and (iii) ongoing supplier contract compliance to ensure that raw material costs and related period-end accruals were complete and accurate. This control deficiency and the related improper conduct resulted in accounting errors which required restatement of the Company’s 2004, 2003 and 2002 annual consolidated financial statements, the 2004 interim consolidated financial statements, and adjustments to the consolidated financial statements for the first quarter 2005. The impact of the correction of these errors was to increase net loss by $40 million, $22 million, and $11 million for the years ended December 31, 2004, 2003 and 2002, respectively, and to decrease net loss by $58 million for the quarter ended March 31, 2005. Additionally, this control deficiency could result in a misstatement of freight, raw material and other supplier costs and related period-end accruals that would result in a material misstatement to annual or interim financial statements that would not be prevented or detected.


~~(b)~~	~~Plan for Remediation~~

~~Management has formulated remediation plans and has initiated, and in certain cases, implemented actions designed to address each~~ of the existence of a material ~~weaknesses~~weakness in the Company’s internal control over financial reporting ~~described above.~~relating to ineffective controls over the complete and accurate recording of freight, raw material and other supplier costs and related period-end accruals and payables originating in its North American purchasing function. This material weakness continued to exist as of March 31, 2006.

~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES — (Continued)~~

Remediation Efforts to Address Material Weakness in Internal Control over Financial Reporting


	~~(1)~~	~~Accounting for Employee Postretirement Health Care Benefits~~

During the third and fourth quarters of 2005, the Company implemented additional controls to identify potential liabilities related to activities with its North American suppliers, and to ensure that costs are recorded in the correct period and that related period-end accruals and payables are complete and accurate. These controls included the implementation of policies and procedures to identify, assess and account for supplier activities and contracts and to estimate and record costs as incurred. Further, additional procedures have been implemented to ensure that period-end accruals and payables are complete and accurate. The Company continues to monitor and test the operating effectiveness of these controls.

In the second and third quarters of 2005, Visteon implemented additional controls to ensure that all necessary actions required to effect changes in the accounting for Visteon’s employee postretirement health care benefits have been completed prior to recognizing such changes in the Visteon’s financial records. These controls include formal employee communication procedures and specific identification, assignment and required inter-departmental coordination of employees responsible for the planning and implementation of employee benefit changes and the related accounting and recording of such changes. In the second quarter 2005, Visteon amended its employee postretirement health care plans for certain of its U.S. salaried employees; the controls described above were applied to this amendment.


	~~(2)~~	~~Accounting for Costs Incurred for Tools Used in Production~~

During the nine months ended September 30, 2005, Visteon implemented additional controls over the accounting for costs incurred for tools used in production including the evaluation and adjustment of existing policies and procedures, training of employees responsible for the accounting for these transactions, and the identification of specific determinants, and required documentation, of rights and obligations and related valuation of tooling costs incurred. Additionally, Visteon has implemented additional monitoring controls to include a complete and timely review of recorded tooling amounts, including review of aged unbilled items.


	~~(3)~~	~~Accounting for Freight, Raw Material and Other Supplier Costs and Related Period-End Accruals at our North American Purchasing Function~~

During the third quarter of 2005, Visteon implemented additional controls to identify and evaluate potential liabilities related to activities with its North American suppliers. Such controls include the establishment of processes to assess and account for supplier negotiations and on-going contract administration and to estimate and record freight costs as incurred. The two former non-executive finance employees responsible for these matters are no longer employed by the company.

~~(c)~~ Changes in Internal Control over Financial Reporting

~~Other than the items discussed above, there have been~~There were no changes in ~~Visteon’s~~the Company’s internal control over financial reporting during the ~~fiscal~~ quarter ended ~~September 30, 2005~~March 31, 2006 that have materially ~~affected,~~effected, or are reasonably likely to materially ~~affect, Visteon’s~~effect, the Company’s internal control over financial reporting.

As discussed further above, Visteon transferred twenty-three of its North American facilities and related assets to ACH on September 30, 2005, and, on October 1, 2005, Ford acquired from Visteon all of the issued and outstanding shares of common stock of the parent of ACH. Various process changes and controls are being implemented in the fourth quarter of 2005 to ensure financial transactions between Visteon and ACH are identified and separately reported.

5842

PART II

~~PART II.~~ OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

~~Securities~~See the information above under Note 15. “Commitments and ~~Related Matters~~

In February 2005, a shareholder lawsuit was filed in the U.S. District Court for the Eastern District of Michigan against Visteon and certain current and former officers of Visteon. In July 2005, the Public Employees’ Retirement System of Mississippi was appointed as lead plaintiff in this matter. In September 2005, the lead plaintiff filed an amended complaint, which alleges, among other things, that Visteon and its independent registered public accounting firm, PricewaterhouseCoopers LLP, made misleading statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The named plaintiff seeks to represent a class consisting of purchasers of Visteon’s securities during the period between June 28, 2000 and January 31, 2005. Class action status has not yet been certified in this litigation.

In March 2005, a number of current and former directors and officers were named as defendants in two shareholder derivative suits pending in the State of Michigan Circuit Court for the County of Wayne. As is customary in derivative suits, Visteon has been named as a defendant in these actions. As a nominal defendant, Visteon is not liable for any damages in these suits nor is any specific relief sought against Visteon. The complaints allege that, among other things, the individual defendants breached their fiduciary duties of good faith and loyalty and aided and abetted such breaches during the period between January 23, 2004 and January 31, 2005 in connection with Visteon’s conduct concerning, among other things, the matters alleged in the securities class action discussed immediately above.

In March and April 2005, Visteon and a number of current and former employees, officers and directors were named as defendants in three class action lawsuits brought under ERISA in the U.S. District Court for the Eastern District of Michigan. In September 2005, the plaintiffs filed an amended and consolidated complaint, which generally alleges that the defendants breached their fiduciary duties under ERISA during the class period by, among other things, continuing to offer Visteon stock as an investment alternative under the Visteon Investment Plan (and the Visteon Savings Plan for Hourly Employees, together the “Plans”), failing to disclose complete and accurate information regarding the prudence of investing in Visteon stock, failing to monitor the actions of certain of the defendants, and failing to avoid conflicts of interest or promptly resolve them. These ERISA claims are predicated upon factual allegations similar to those raised in the derivative and securities class actions described immediately above. The consolidated complaint was brought on behalf of a named plaintiff and a putative class consisting of all participants or beneficiaries of the Plans whose accounts included Visteon stock at any time from July 20, 2001 through May 25, 2005. Class action status has not yet been certified in this litigation.

Visteon and its current and former directors and officers intend to contest the foregoing lawsuits vigorously. However, at this time Visteon is not able to predict with certainty the final outcome of each of the foregoing lawsuits or its potential exposure with respect to each such lawsuit. In the event of an unfavorable resolution of any of these matters, Visteon’s earnings and cash flows in one or more periods could be materially affectedContingencies,” to the ~~extent any such loss~~consolidated financial statements which is ~~not covered~~incorporated herein by ~~insurance or applicable reserves.~~reference.


ITEM 1.1A.	~~LEGAL PROCEEDINGS — (Continued)~~RISK FACTORS

~~Other Matters~~

~~Various other legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in~~For information regarding factors that could affect the future against Visteon, including those arising out of alleged defects in Visteon’s products; governmental regulations relating to safety; employment-related matters; customer, supplier and other contractual relationships; intellectual property rights; product warranties; product recalls; and environmental matters. Some of the foregoing matters may involve compensatory, punitive or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures.

Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by Visteon for matters discussed in the immediately foregoing paragraph where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraph could be decided unfavorably to Visteon and could require Visteon to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated at September 30, 2005, that are in excess of established reserves. Visteon does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a material effect on our financial condition,Company’s results of operations, ~~or cash flows, although such an outcome is possible.~~financial condition and liquidity, see the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. See also, “Cautionary Statements Regarding Forward-Looking Information” included in Part I, Item 2 of this Quarterly Report on Form 10-Q.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~As described in a Current Report on Form 8-K of Visteon dated September 16, 2005, in October 2005, Visteon issued a warrant~~The following table summarizes information relating to ~~purchase 25 million shares of its common stock to Ford.~~

~~There were no~~ purchases ~~of shares of our common stock~~ made by or on behalf of ~~Visteon,~~the Company, or an affiliated purchaser, of shares of Visteon common stock during the ~~third~~first quarter of ~~2005.~~2006.

Issuer Purchases of Equity Securities


					Total Number of		Maximum Number (or
					Shares (or Units)		Approximate Dollar
			Average		Purchased as Part		Value) of Shares (or
	Total Number of		Price Paid		of Publicly		Units) that May Yet Be
	Shares (or Units)		per Share		Announced Plans or		Purchased Under the
Period	Purchased (1)		(or Unit)		Programs		Plans or Programs

January 1, 2006 to January 31, 2006		215	$	5.26		—		—
February 1, 2006 to February 28, 2006		723,427	$	4.99		—		—
March 1, 2006 to March 31, 2006		—		—		—		—

Total		723,642	$	4.99		—		—


(1)	This column includes only shares surrendered to the Company by employees to satisfy tax withholding obligations in connection with the vesting of restricted share awards made pursuant to the Visteon Corporation 2004 Incentive Plan.


ITEM 6.	EXHIBITS

(a) Exhibits

Please refer to the Exhibit Index on Page ~~62.~~45.

6043

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	VISTEON CORPORATION


	By:	/s/William G. Quigley III



	William G. Quigley III
	Vice President, Corporate Controller and
	Chief Accounting Officer

Date: ~~November 22, 2005~~May 10, 2006

6144

EXHIBIT INDEX


~~Exhibit~~
~~Number~~		~~Exhibit Name~~

	~~3.1~~	Amended and Restated Certificate of Incorporation of Visteon Corporation (‘Visteon”) is incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.
	~~3.2~~	~~Amended and Restated By-laws of Visteon as in effect on the date hereof is incorporated herein by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q of Visteon dated November 14, 2001.~~
	~~4.1~~	Amended and Restated Indenture dated as of March 10, 2004 between Visteon and J.P. Morgan Trust Company, as Trustee, is incorporated herein by reference to Exhibit 4.01 to the Current Report on Form 8-K of Visteon dated March 3, 2004 (filed as of March 19, 2004).
	~~4.2~~	Supplemental Indenture dated as of March 10, 2004 between Visteon and J.P. Morgan Trust Company, as Trustee, is incorporated herein by reference to Exhibit 4.02 to the Current Report on Form 8-K of Visteon dated March 3, 2004 (filed as of March 19, 2004).
	~~4.3~~	~~Form of Common Stock Certificate of Visteon is incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 10 of Visteon dated May 19, 2000.~~
	~~4.4~~	~~Form of Warrant Certificate of Visteon is incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Visteon dated September 16, 2005.~~
	~~4.5~~	Form of Stockholder Agreement, dated as of October 1, 2005, between Visteon and Ford Motor Company (“Ford”) is incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~10.1~~	Master Transfer Agreement dated as of March 30, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-1 of Visteon dated June 2, 2000 (File No. 333-38388).
	~~10.2~~	Purchase and Supply Agreement dated as of December 19, 2003 between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003. †
	~~10.3~~	2003 Relationship Agreement dated December 19, 2003 between Visteon and Ford is incorporated herein by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.
	~~10.4~~	Master Separation Agreement dated as of June 1, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Registration Statement on Form S-1 of Visteon dated June 6, 2000 (File No. 333-38388).
	~~10.5~~	Aftermarket Relationship Agreement dated as of January 1, 2000 between Visteon and the Automotive Consumer Services Group of Ford is incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form 10 of Visteon dated May 19, 2000.
	~~10.6~~	Amended and Restated Hourly Employee Assignment Agreement dated as of April 1, 2000, as amended and restated as of December 19, 2003, between Visteon and Ford is incorporated herein by reference to Exhibit 10.6 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.


Exhibit
Number			Exhibit Name

	3	.1	Amended and Restated Certificate of Incorporation of Visteon Corporation (’Visteon”) is incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.
	3	.2	Amended and Restated By-laws of Visteon as in effect on the date hereof is incorporated herein by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q of Visteon dated November 14, 2001.
	4	.1	Amended and Restated Indenture dated as of March 10, 2004 between Visteon and J.P. Morgan Trust Company, as Trustee, is incorporated herein by reference to Exhibit 4.01 to the Current Report on Form 8-K of Visteon dated March 3, 2004 (filed as of March 19, 2004).
	4	.2	Supplemental Indenture dated as of March 10, 2004 between Visteon and J.P. Morgan Trust Company, as Trustee, is incorporated herein by reference to Exhibit 4.02 to the Current Report on Form 8-K of Visteon dated March 3, 2004 (filed as of March 19, 2004).
	4	.3	Form of Common Stock Certificate of Visteon is incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 10 of Visteon dated May 19, 2000.
	4	.4	Form of Warrant Certificate of Visteon is incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	4	.5	Form of Stockholder Agreement, dated as of October 1, 2005, between Visteon and Ford Motor Company (“Ford”) is incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	10	.1	Master Transfer Agreement dated as of March 30, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-1 of Visteon dated June 2, 2000 (File No. 333-38388).
	10	.2	Reserved.
	10	.3	Reserved.
	10	.4	Master Separation Agreement dated as of June 1, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Registration Statement on Form S-1 of Visteon dated June 6, 2000 (File No. 333-38388).
	10	.5	Reserved.
	10	.6	Reserved.
	10	.7	Amended and Restated Employee Transition Agreement dated as of April 1, 2000, as amended and restated as of December 19, 2003, between Visteon and Ford is incorporated herein by reference to Exhibit 10.7 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.
	10	.7.1	Amendment Number Two, effective as of October 1, 2005, to Amended and Restated Employee Transition Agreement, dated as of April 1, 2000 and restated as of December 19, 2003, between Visteon and Ford is incorporated herein by reference to Exhibit 10.15 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.8	Tax Sharing Agreement dated as of June 1, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form S-1 of Visteon dated June 2, 2000 (File No. 333-38388).
	10	.9	Visteon Corporation 2004 Incentive Plan, as amended and restated, is incorporated herein by reference to Appendix B to the Proxy Statement of Visteon dated March 30, 2004.*

6245


Exhibit	Exhibit			Exhibit
Number	Number		Exhibit Name	Number		Exhibit Name

	10.7		Amended and Restated Employee Transition Agreement dated as of April 1, 2000, as amended and restated as of December 19, 2003, between Visteon and Ford is incorporated herein by reference to Exhibit 10.7 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.	10	.9.1	Form of Terms and Conditions of Nonqualified Stock Options is incorporated herein by reference to Exhibit 10.9.1 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*
	10.7.	1	Amendment Number Two, effective as of October 1, 2005, to Amended and Restated Employee Transition Agreement, dated as of April 1, 2000 and restated as of December 19, 2003, between Visteon and Ford is incorporated herein by reference to Exhibit 10.15 to the Current Report on Form 8-K of Visteon dated October 6, 2005.	10	.9.2	Form of Terms and Conditions of Restricted Stock Grants is incorporated herein by reference to Exhibit 10.9.2 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*
	10.8		Tax Sharing Agreement dated as of June 1, 2000 between Visteon and Ford is incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form S-1 of Visteon dated June 2, 2000 (File No. 333-38388).	10	.9.3	Form of Terms and Conditions of Restricted Stock Units is incorporated herein by reference to Exhibit 10.9.3 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*
	10.9		Visteon Corporation 2004 Incentive Plan, as amended and restated, is incorporated herein by reference to Appendix B to the Proxy Statement of Visteon dated March 30, 2004.*	10	.9.4	Form of Terms and Conditions of Stock Appreciation Rights is incorporated herein by reference to Exhibit 10.9.4 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*
	10.9.	1	Form of Terms and Conditions of Nonqualified Stock Options is incorporated herein by reference to Exhibit 10.9.1 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*	10	.10	Form of Revised Change in Control Agreement is incorporated herein by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2000.*
	10.9.	2	Form of Terms and Conditions of Restricted Stock Grants is incorporated herein by reference to Exhibit 10.9.2 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*	10	.10.1	Schedule identifying substantially identical agreements to Revised Change in Control Agreement constituting Exhibit 10.10 hereto entered into by Visteon with Messrs. Johnston, Stebbins, Palmer, Pfannschmidt, Donofrio and Quigley is incorporated herein by reference to Exhibit 10.10.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.9.	3	Form of Terms and Conditions of Restricted Stock Units is incorporated herein by reference to Exhibit 10.9.3 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*	10	.11	Issuing and Paying Agency Agreement dated as of June 5, 2000 between Visteon and The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.
	10.9.	4	Form of Terms and Conditions of Stock Appreciation Rights is incorporated herein by reference to Exhibit 10.9.4 to the Quarterly Report on Form 10-Q of Visteon dated November 4, 2004.*	10	.12	Corporate Commercial Paper — Master Note dated June 1, 2000 is incorporated herein by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.
	10.10		Form of Revised Change in Control Agreement is incorporated herein by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2000.*	10	.13	Letter Loan Agreement dated as of June 12, 2000 from The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10.13 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.
	10.10	.1	Schedule identifying substantially identical agreements to Revised Change in Control Agreement constituting Exhibit 10.10 hereto entered into by Visteon with Messrs. Johnston, Stebbins, Palmer, Pfannschmidt, Donofrio and Marcin is incorporated herein by reference to Exhibit 10.10.1 to the Quarterly Report on Form 10-Q of Visteon dated November 22, 2005.*	10	.14	Visteon Corporation Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.*
	10.11		Issuing and Paying Agency Agreement dated as of June 5, 2000 between Visteon and The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.	10	.14.1	Amendments to the Visteon Corporation Deferred Compensation Plan for Non-Employee Directors, effective as of December 14, 2005 is incorporated herein by reference to Exhibit 10.14.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.12		Corporate Commercial Paper — Master Note dated June 1, 2000 is incorporated herein by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.	10	.15	Visteon Corporation Restricted Stock Plan for Non-Employee Directors, as amended, is incorporated herein by reference to Exhibit 10.15 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.*
	10.13		Letter Loan Agreement dated as of June 12, 2000 from The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10.13 to the Quarterly Report on Form 10-Q of Visteon dated July 24, 2000.	10	.15.1	Amendments to the Visteon Corporation Restricted Stock Plan for Non-Employee Directors, effective as of January 1, 2005 is incorporated herein by reference to Exhibit 10.15.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.14		Visteon Corporation Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.*	10	.16	Visteon Corporation Deferred Compensation Plan, as amended, is incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*
				10	.16.1	Amendments to the Visteon Corporation Deferred Compensation Plan, effective as of December 23, 2005 is incorporated herein by reference to Exhibit 10.16.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*

6346


Exhibit	Exhibit			Exhibit
Number	Number		Exhibit Name	Number		Exhibit Name

	10.15		Visteon Corporation Restricted Stock Plan for Non-Employee Directors, as amended, is incorporated herein by reference to Exhibit 10.15 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.*	10	.17	Employment Agreement dated as of December 7, 2004 between Visteon and William G. Quigley III is incorporated herein by reference to Exhibit 10.17 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.16		Visteon Corporation Deferred Compensation Plan, as amended, is incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*	10	.18	Visteon Corporation Pension Parity Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated February 15, 2005.*
	10.16	.1	Amendment to the Visteon Corporation Deferred Compensation Plan, effective as of June 27, 2005, is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated June 30, 2005.*	10	.18.1	Amendments to the Visteon Corporation Pension Parity Plan, effective as of January 1, 2005 is incorporated herein by reference to Exhibit 10.18.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.17		Visteon Corporation Savings Parity Plan is incorporated herein by reference to Exhibit 10.17 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*	10	.19	Visteon Corporation Supplemental Executive Retirement Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated February 15, 2005.*
	10.18		Visteon Corporation Pension Parity Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated February 9, 2005.*	10	.19.1	Amendments to the Visteon Corporation Supplemental Executive Retirement Plan, effective as of January 1, 2005 is incorporated herein by reference to Exhibit 10.19.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.19		Visteon Corporation Supplemental Executive Retirement Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated February 9, 2005.*	10	.20	Executive Employment Agreement dated as of September 15, 2000 between Visteon and Michael F. Johnston is incorporated herein by reference to Exhibit 10.20 to the Annual Report on Form 10-K for the period ended December 31, 2001.*
	10.20		Executive Employment Agreement dated as of September 15, 2000 between Visteon and Michael F. Johnston is incorporated herein by reference to Exhibit 10.20 to the Annual Report on Form 10-K for the period ended December 31, 2001.*	10	.21	Service Agreement dated as of November 1, 2001 between Visteon International Business Development, Inc., a wholly-owned subsidiary of Visteon, and Dr. Heinz Pfannschmidt is incorporated herein by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*
	10.21		Service Agreement dated as of November 1, 2001 between Visteon International Business Development, Inc., a wholly-owned subsidiary of Visteon, and Dr. Heinz Pfannschmidt is incorporated herein by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*	10	.22	Visteon Corporation Executive Separation Allowance Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated February 15, 2005.*
	10.22		Visteon Corporation Executive Separation Allowance Plan, as amended through February 9, 2005, is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated February 9, 2005.*	10	.22.1	Amendments to the Visteon Corporation Executive Separation Allowance Plan, effective as of January 1, 2005 is incorporated herein by reference to Exhibit 10.22.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.23		Trust Agreement dated as of February 7, 2003 between Visteon and The Northern Trust Company establishing a grantor trust for purposes of paying amounts to certain executive officers under the plans constituting Exhibits 10.14, 10.16, 10.16.1, 10.17, 10.18, 10.19 and 10.22 hereto is incorporated herein by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*	10	.23	Trust Agreement dated as of February 7, 2003 between Visteon and The Northern Trust Company establishing a grantor trust for purposes of paying amounts to certain executive officers under the plans constituting Exhibits 10.14, 10.16, 10.16.1, 10.17, 10.18, 10.19 and 10.22 hereto is incorporated herein by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2002.*
	10.24		Amended and Restated Five-Year Revolving Loan Credit Agreement, dated as of June 24, 2005, among Visteon, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citicorp USA, Inc., as syndication agent, is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated June 30, 2005.	10	.24	Second Amended and Restated Credit Agreement, dated as of January 9, 2006, among Visteon, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citicorp USA, Inc., as syndication agent, is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated January 13, 2006.
	10.25		Credit Agreement, dated as of June 24, 2005, among Visteon, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp USA, Inc., as syndication agent, and Credit Suisse, Cayman Islands Branch, Deutsche Bank Securities Inc. and Sumitomo Mitsui Banking Corporation, as documentation agents, is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated June 30, 2005.	10	.25	Credit Agreement, dated as of June 24, 2005, among Visteon, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp USA, Inc., as syndication agent, and Credit Suisse, Cayman Islands Branch, Deutsche Bank Securities Inc. and Sumitomo Mitsui Banking Corporation, as documentation agents, is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated June 30, 2005.

6447


Exhibit	Exhibit			Exhibit
Number	Number		Exhibit Name	Number		Exhibit Name

	10.26		Amended and Restated Five-Year Term Loan Credit Agreement, dated as of June 24, 2005, among Visteon, Oasis Holdings Statutory Trust, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citicorp USA, Inc., as syndication agent, is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated June 30, 2005.	10	.26	Amended and Restated Five-Year Term Loan Credit Agreement, dated as of June 24, 2005, among Visteon, Oasis Holdings Statutory Trust, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citicorp USA, Inc., as syndication agent, is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated June 30, 2005.
	10.27		Pension Plan Agreement effective as of November 1, 2001 between Visteon Holdings GmbH, a wholly-owned subsidiary of Visteon, and Dr. Heinz Pfannschmidt is incorporated herein by reference to Exhibit 10.27 to the Quarterly Report on Form 10-Q of Visteon dated May 7, 2003.*	10	.26.1	First Amendment, dated as of January 9, 2006, to the Amended and Restated Five-Year Term Loan Credit Agreement, dated as of June 24, 2005, among Visteon, Oasis Holdings Statutory Trust, the several banks and other financial institutions or entities from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citicorp USA, Inc., as syndication agent, is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated January 13, 2006.
	10.28		Hourly Employee Conversion Agreement dated as of December 22, 2003 between Visteon and Ford is incorporated herein by reference to Exhibit 10.28 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.	10	.27	Pension Plan Agreement effective as of November 1, 2001 between Visteon Holdings GmbH, a wholly-owned subsidiary of Visteon, and Dr. Heinz Pfannschmidt is incorporated herein by reference to Exhibit 10.27 to the Quarterly Report on Form 10-Q of Visteon dated May 7, 2003.*
	10.29		Letter Agreement, effective as of May 23, 2005, between Visteon and Mr. Donald J. Stebbins is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated May 23, 2005.*	10	.28	Hourly Employee Conversion Agreement dated as of December 22, 2003 between Visteon and Ford is incorporated herein by reference to Exhibit 10.28 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2003.
	10.30		Visteon Corporation Non-Employee Director Stock Unit Plan is incorporated herein by reference to Appendix C to the Proxy Statement of Visteon dated March 30, 2004.*	10	.29	Letter Agreement, effective as of May 23, 2005, between Visteon and Mr. Donald J. Stebbins is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated May 23, 2005.*
	10.31		Employment Agreement dated as of June 2, 2004 between Visteon and James F. Palmer is incorporated herein by reference to Exhibit 10.31 to the Quarterly Report on Form 10-Q of Visteon dated July 30, 2004.*	10	.30	Visteon Corporation Non-Employee Director Stock Unit Plan is incorporated herein by reference to Appendix C to the Proxy Statement of Visteon dated March 30, 2004.*
	10.32		Visteon Executive Severance Plan is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated February 9, 2005.*	10	.30.1	Amendments to the Visteon Corporation Non-Employee Director Stock Unit Plan, effective as of December 14, 2005 and February 9, 2006 is incorporated herein by reference to Exhibit 10.30.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.33		Form of Executive Retiree Health Care Agreement is incorporated herein by reference to Exhibit 10.28 to the Current Report on Form 8-K of Visteon dated December 9, 2004.*	10	.31	Employment Agreement dated as of June 2, 2004 between Visteon and James F. Palmer is incorporated herein by reference to Exhibit 10.31 to the Quarterly Report on Form 10-Q of Visteon dated July 30, 2004.*
	10.33	.1	Schedule identifying substantially identical agreements to Executive Retiree Health Care Agreement constituting Exhibit 10.33 hereto entered into by Visteon with Messrs. Johnston, Orchard and Palmer is incorporated herein by reference to Exhibit 10.33.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2004.*	10	.32	Visteon Executive Severance Plan is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated February 15, 2005.*
	10.34		Funding Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated March 10, 2005.	10	.33	Form of Executive Retiree Health Care Agreement is incorporated herein by reference to Exhibit 10.28 to the Current Report on Form 8-K of Visteon dated December 9, 2004.*
	10.34	.1	Amendment, effective as of May 24, 2005, to the Funding Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated May 25, 2005.	10	.33.1	Schedule identifying substantially identical agreements to Executive Retiree Health Care Agreement constituting Exhibit 10.33 hereto entered into by Visteon with Messrs. Johnston, Stebbins and Palmer is incorporated herein by reference to Exhibit 10.33.1 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2005.*
	10.35		Master Equipment Bailment Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated March 10, 2005.	10	.34	Funding Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated March 10, 2005.
	10.35	.1	Amendment, effective as of May 1, 2005, to the Master Equipment Bailment Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated May 25, 2005.	10	.34.1	Amendment, effective as of May 24, 2005, to the Funding Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated May 25, 2005.
	10.36		Resignation Agreement, dated as of March 10, 2005, between Visteon and Stacy L. Fox is incorporated herein by reference to Exhibit 10.36 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2004.*	10	.35	Master Equipment Bailment Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated March 10, 2005.

6548


~~Exhibit~~
~~Number~~		~~Exhibit Name~~

	~~10.37~~	Consulting Agreement, dated as of March 10, 2005, between Visteon and Stacy L. Fox is incorporated herein by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2004.*
	~~10.38~~	Contribution Agreement, dated as of September 12, 2005, between Visteon and VHF Holdings, Inc. is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~10.39~~	Visteon “A” Transaction Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~10.40~~	Visteon “B” Purchase Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~10.41~~	Escrow Agreement, dated as of October 1, 2005, among Visteon, Ford and Deutsche Bank Trust Company Americas, as escrow agent, is incorporated herein by reference to Exhibit 10.11 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.42~~	Reimbursement Agreement, dated as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.43~~	Master Services Agreement, dated as of September 30, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.44~~	Visteon Hourly Employee Lease Agreement, effective as of October 1, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.45~~	Visteon Hourly Employee Conversion Agreement, dated effective as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.9 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.46~~	Visteon Salaried Employee Lease Agreement, effective as of October 1, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.47~~	Visteon Salaried Employee Lease Agreement (Rawsonville/ Sterling), dated as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.48~~	Visteon Salaried Employee Transition Agreement, dated effective as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.10 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.49~~	Purchase and Supply Agreement, dated as of September 30, 2005, between Visteon (as seller) and Automotive Components Holdings, LLC (as buyer) is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated October 6, 2005. †
	~~10.50~~	Purchase and Supply Agreement, dated as of September 30, 2005, between Automotive Components Holdings, LLC (as seller) and Visteon (as buyer) is incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of Visteon dated October 6, 2005. †
	~~10.51~~	Purchase and Supply Agreement, dated as of October 1, 2005, between Visteon (as seller) and Ford (as buyer) is incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K of Visteon dated October 6, 2005.†


Exhibit
Number			Exhibit Name

	10	.35.1	Amendment, effective as of May 1, 2005, to the Master Equipment Bailment Agreement, dated as of March 10, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated May 25, 2005.
	10	.36	Resignation Agreement, dated as of March 10, 2005, between Visteon and Stacy L. Fox is incorporated herein by reference to Exhibit 10.36 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2004.*
	10	.37	Consulting Agreement, dated as of March 10, 2005, between Visteon and Stacy L. Fox is incorporated herein by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Visteon for the period ended December 31, 2004.*
	10	.38	Contribution Agreement, dated as of September 12, 2005, between Visteon and VHF Holdings, Inc. is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	10	.39	Visteon “A” Transaction Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	10	.40	Visteon “B” Purchase Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	10	.41	Escrow Agreement, dated as of October 1, 2005, among Visteon, Ford and Deutsche Bank Trust Company Americas, as escrow agent, is incorporated herein by reference to Exhibit 10.11 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.42	Reimbursement Agreement, dated as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.43	Master Services Agreement, dated as of September 30, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.44	Visteon Hourly Employee Lease Agreement, effective as of October 1, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.45	Visteon Hourly Employee Conversion Agreement, dated effective as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.9 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.46	Visteon Salaried Employee Lease Agreement, effective as of October 1, 2005, between Visteon and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.46.1	Amendment to Salaried Employee Lease Agreement and Payment Acceleration Agreement, dated as of March 30, 2006, among Visteon, Ford Motor Company and Automotive Components Holdings, LLC.
	10	.47	Visteon Salaried Employee Lease Agreement (Rawsonville/ Sterling), dated as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.48	Visteon Salaried Employee Transition Agreement, dated effective as of October 1, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.10 to the Current Report on Form 8-K of Visteon dated October 6, 2005.

6649


~~Exhibit~~
~~Number~~		~~Exhibit Name~~

	~~10.52~~	Intellectual Property Contribution Agreement, dated as of September 30, 2005, among Visteon, Visteon Global Technologies, Inc., Automotive Components Holdings, Inc. and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.53~~	Software License and Contribution Agreement, dated as of September 30, 2005, among Visteon, Visteon Global Technologies, Inc. and Automotive Components Holdings, Inc. is incorporated herein by reference to Exhibit 10.7 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.54~~	Intellectual Property License Agreement, dated as of October 1, 2005, among Visteon, Visteon Global Technologies, Inc. and Ford is incorporated herein by reference to Exhibit 10.14 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	~~10.55~~	Form of Secured Promissory Note of Visteon, as issued on September 19, 2005, is incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~10.56~~	Master Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	~~12.1~~	~~Statement re: Computation of Ratios.~~
	~~14.1~~	Visteon Corporation — A Pledge of Integrity, as amended effective September 23, 2005 (code of business conduct and ethics) is incorporated herein by reference to Exhibit 14.1 to the Current Report on Form 8-K of Visteon dated September 28, 2005.
	~~15.1~~	~~Letter of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated November 22, 2005 relating to Financial Information.~~
	~~31.1~~	~~Rule 13a-14(a) Certification of Chief Executive Officer dated November 22, 2005.~~
	~~31.2~~	~~Rule 13a-14(a) Certification of Chief Financial Officer dated November 22, 2005.~~
	~~32.1~~	~~Section 1350 Certification of Chief Executive Officer dated November 22, 2005.~~
	~~32.2~~	~~Section 1350 Certification of Chief Financial Officer dated November 22, 2005.~~


Exhibit
Number			Exhibit Name

	10	.49	Purchase and Supply Agreement, dated as of September 30, 2005, between Visteon (as seller) and Automotive Components Holdings, LLC (as buyer) is incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Visteon dated October 6, 2005.†
	10	.50	Purchase and Supply Agreement, dated as of September 30, 2005, between Automotive Components Holdings, LLC (as seller) and Visteon (as buyer) is incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of Visteon dated October 6, 2005.†
	10	.51	Purchase and Supply Agreement, dated as of October 1, 2005, between Visteon (as seller) and Ford (as buyer) is incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K of Visteon dated October 6, 2005.†
	10	.52	Intellectual Property Contribution Agreement, dated as of September 30, 2005, among Visteon, Visteon Global Technologies, Inc., Automotive Components Holdings, Inc. and Automotive Components Holdings, LLC is incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.53	Software License and Contribution Agreement, dated as of September 30, 2005, among Visteon, Visteon Global Technologies, Inc. and Automotive Components Holdings, Inc. is incorporated herein by reference to Exhibit 10.7 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.54	Intellectual Property License Agreement, dated as of October 1, 2005, among Visteon, Visteon Global Technologies, Inc. and Ford is incorporated herein by reference to Exhibit 10.14 to the Current Report on Form 8-K of Visteon dated October 6, 2005.
	10	.55	Form of Secured Promissory Note of Visteon, as issued on September 19, 2005, is incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	10	.56	Master Agreement, dated as of September 12, 2005, between Visteon and Ford is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Visteon dated September 16, 2005.
	12	.1	Statement re: Computation of Ratios.
	14	.1	Visteon Corporation — Ethics and Integrity Policy, as amended effective September 23, 2005 (code of business conduct and ethics) is incorporated herein by reference to Exhibit 14.1 to the Current Report on Form 8-K of Visteon dated September 28, 2005.
	15	.1	Letter of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated May 9, 2006 relating to Financial Information.
	31	.1	Rule 13a-14(a) Certification of Chief Executive Officer dated May 10, 2006.
	31	.2	Rule 13a-14(a) Certification of Chief Financial Officer dated May 10, 2006.
	32	.1	Section 1350 Certification of Chief Executive Officer dated May 10, 2006.
	32	.2	Section 1350 Certification of Chief Financial Officer dated May 10, 2006.


†	Portions of these exhibits have been redacted pursuant to confidential treatment requests filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The redacted material was filed separately with the Securities and Exchange Commission.


*	Indicates that exhibit is a management contract or compensatory plan or arrangement.

In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Visteon agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

6750


		September 30,			December 31,
		2005			2004

		(unaudited)			(Restated)
Assets
Cash and cash equivalents		$	898		$	752
Accounts receivable — Ford and affiliates			1,127			1,255
Accounts receivable — other customers (Note 8)			1,196			1,285

	Total receivables, net (Note 4)		2,323			2,540
Inventories (Note 12)			575			889
Deferred income taxes (Note 4)			35			37
Assets held for sale (Note 4)			329			—
Prepaid expenses and other current assets			235			212

	Total current assets		4,395			4,430
Equity in net assets of affiliated companies			242			227
Net property			3,254			5,303
Deferred income taxes (Note 4)			136			129
Assets held for sale (Note 4)			623			—
Other assets			173			203

	Total assets	$	8,823		$	10,292


Liabilities and Stockholders’ (Deficit) Equity
Trade payables		$	2,333		$	2,493
Accrued liabilities			989			894
Income taxes payable (Note 4)			8			27
Debt payable within one year (Note 9)			433			508
Liabilities associated with assets held for sale (Note 4)			228			—

	Total current liabilities		3,991			3,922
Long-term debt (Note 9)			1,522			1,513
Postretirement benefits other than pensions			709			639
Postretirement benefits payable to Ford			94			2,135
Deferred income taxes (Note 4)			288			287
Liabilities associated with assets held for sale (Note 4)			2,448			—
Other liabilities			1,201			1,476

	Total liabilities		10,253			9,972
Stockholders’ (Deficit) Equity
Capital stock
	Preferred stock, par value $1.00, 50 million shares authorized, none outstanding		—			—
	Common stock, par value $1.00, 500 million shares authorized, 131 million shares issued, 129 million and 130 million shares outstanding, respectively		131			131
Capital in excess of par value of stock			3,394			3,380
Accumulated other comprehensive (loss) income (Note 13)			(147	)		5
Other			(30	)		(26	)
Accumulated deficit			(4,778	)		(3,170	)

	Total stockholders’ (deficit) equity		(1,430	)		320

	Total liabilities and stockholders’ (deficit) equity	$	8,823		$	10,292


	Third			First Nine
	Quarter			Months

	2004

	(in millions)
Net loss, as previously reported	$	(1,424	)	$	(1,380	)
Accounting corrections for freight costs (pre-tax)(1)		(1	)		3
Accounting corrections for raw material costs (pre-tax)(2)		(9	)		(16	)
Accounting corrections for other supplier costs (pre-tax)(3)		—			(2	)
Tax impact of above(4)		(2	)		—
Accounting correction for income taxes(5)		(3	)		(3	)

Net loss, as restated	$	(1,439	)	$	(1,398	)


									First Nine Months
			Third Quarter 2004						2004

			As						As
			Previously			As			Previously			As
			Reported			Restated			Reported			Restated

Sales
	Ford and affiliates		$	2,772		$	2,772		$	9,900		$	9,900
	Other customers			1,364			1,364			4,078			4,078

		Total sales		4,136			4,136			13,978			13,978
Costs and expenses
	Costs of sales			4,356			4,366			13,588			13,603
	Selling, administrative and other expenses			225			225			728			728

		Total costs and expenses		4,581			4,591			14,316			14,331
Operating loss				(445	)		(455	)		(338	)		(353	)
Interest income				5			5			14			14
Debt extinguishment cost				—			—			11			11
Interest expense				28			28			75			75

	Net interest expense			(23	)		(23	)		(72	)		(72	)
Equity in net income of affiliated companies				9			9			38			38

Loss before income taxes and minority interests				(459	)		(469	)		(372	)		(387	)
Provision for income taxes				958			963			980			983

Loss before minority interests				(1,417	)		(1,432	)		(1,352	)		(1,370	)
Minority interests in net income of subsidiaries				7			7			28			28

Net loss			$	(1,424	)	$	(1,439	)	$	(1,380	)	$	(1,398	)

Net loss per share
	Basic and diluted		$	(11.36	)	$	(11.48	)	$	(11.01	)	$	(11.16	)


		December 31, 2004

		As
		Previously			As
		Reported			Restated

Assets
Cash and cash equivalents		$	752		$	752
Accounts receivable — Ford and affiliates			1,255			1,255
Accounts receivable — other customers			1,285			1,285

	Total receivables, net		2,540			2,540
Inventories			889			889
Deferred income taxes			51			37
Prepaid expenses and other current assets			212			212

	Total current assets		4,444			4,430
Equity in net assets of affiliated companies			227			227
Net property			5,303			5,303
Deferred income taxes			132			129
Other assets			203			203

	Total assets	$	10,309		$	10,292


Liabilities and Stockholders’ Equity
Trade payables		$	2,403		$	2,493
Accrued liabilities			894			894
Income taxes payable			38			27
Debt payable within one year			508			508

	Total current liabilities		3,843			3,922
Long-term debt			1,513			1,513
Postretirement benefits other than pensions			639			639
Postretirement benefits payable to Ford			2,135			2,135
Deferred income taxes			296			287
Other liabilities			1,476			1,476

	Total liabilities		9,902			9,972
Stockholders’ Equity
Capital stock			131			131
Capital in excess of par value of stock			3,380			3,380
Accumulated other comprehensive income			5			5
Other			(26	)		(26	)
Accumulated deficit			(3,083	)		(3,170	)

	Total stockholders’ equity		407			320

	Total liabilities and stockholders’ equity	$	10,309		$	10,292


			Third Quarter				First Nine Months

			Pre-tax		After-tax		Pre-tax		After-tax

			(in millions)
Restructuring and other charges:
	Non-U.S. employee actions		$	11	$	11	$	11	$	11
	U.S. salaried voluntary separation related			—		—		7		7

		Total restructuring		11		11		18		18
Asset impairment charge — held for sale (Note 3)				—		—		920		920
Asset impairment charge — held for use				—		—		256		256

		Total special charges	$	11	$	11	$	1,194	$	1,194


		Automotive			Glass			Total
		Operations			Operations			Visteon

		(in millions)
December 31, 2004 reserve balance		$	52		$	3		$	55
	First nine months 2005 expense		18			—			18
	Utilization		(62	)		(3	)		(65	)

September 30, 2005 reserve balance		$	8		$	—		$	8


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)~~


			Automotive
			Operations						Glass Operations						Total

			Third			First Nine			Third			First Nine			Third			First Nine
			Quarter			Months			Quarter			Months			Quarter			Months

			(in millions)
2005 Special Charges
	Loss related to asset impairment charges		$	—		$	(1,176	)	$	—		$	—		$	—		$	(1,176	)
	U.S. salaried voluntary separation related			—			(7	)		—			—			—			(7	)
	Non-U.S. employee actions			(11	)		(11	)		—			—			(11	)		(11	)

		Total 2005 special charges, before taxes	$	(11	)	$	(1,194	)	$	—		$	—		$	(11	)	$	(1,194	)

		Total 2005 special charges, after taxes	$	(11	)	$	(1,194	)	$	—		$	—		$	(11	)	$	(1,194	)

2004 Special Charges (Restated)
	Loss related to asset impairment charges		$	(314	)	$	(314	)	$	—		$	—		$	(314	)	$	(314	)
	U.S. hourly early retirement incentive			(24	)		(24	)		(1	)		(1	)		(25	)		(25	)
	Plant closure related			—			(10	)		—			—			—			(10	)
	European plan for growth			—			(9	)		—			—			—			(9	)
	Adjustment to prior year’s expense			3			3			—			—			3			3

		Total 2004 special charges, before taxes	$	(335	)	$	(354	)	$	(1	)	$	(1	)	$	(336	)	$	(355	)

		Total 2004 special charges, after taxes	$	(1,224	)	$	(1,177	)	$	(45	)	$	(45	)	$	(1,269	)	$	(1,222	)


			Third Quarter						2005
									over/(under)
			2005			2004			2004

			(in millions)
Automotive Operations:
	Ford and affiliates		$	2,601		$	2,717		$	(116	)
	Other customers			1,398			1,294			104

		Total Automotive Operations		3,999			4,011			(12	)
Glass Operations:
	Ford and affiliates			48			55			(7	)
	Other customers			74			70			4

		Total Glass Operations		122			125			(3	)

Total			$	4,121		$	4,136		$	(15	)

Memo: Sales to non-Ford customers
	Amount		$	1,472		$	1,364		$	108
	Percentage of total sales			36	%		33	%		3	pts


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — (Continued)~~