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Executives

Unidentified Host – Barclays Capital

Donald J. Stebbins – Chairman of the Board, President & Chief Executive Officer

Martin E. Welch, III – Chief Financial Officer & Executive Vice President

Analysts

Unidentified Analysts

Visteon Corporation (VC) Barclay’s Capital Global Automotive Conference November 14, 2011 1:25 PM ET

Unidentified Host – Barclays Capital

We’re pleased to have with us Visteon. We just initiated on Visteon last week with $65 and a price target and a two week away, kind of an exciting midterm story we think with some optionality but we want to be cautious around some of the shorter term M&A prospects. More fundamentally Scott, especially in light of what you heard from Jim Farley about I think a couple of things, the midterm growth in China and emerging markets and as well the just rocket ship that Hyundai is in terms of global sales gains.

Visteon brings a very interesting relationships on both fronts through its affiliation with HASCO Automotive it’s a 50/50 JVs in China, one of the market leaders therefore in the China auto interiors and other parts and with its ownership of Halla Climate Control one of the lead global partners of Hyundai and really the global partner in climate control.

Pleased to have with us today Don Stebbins, the CEO and the new CFO Marty Welch. They’ll be making the presentation from there.

Donald J. Stebbins

Marty is starting his fifth week with us so please take it easy on him in the Q&A. But for those of you who don’t know Visteon we are a global automotive supplier of interiors, climate electronics, and lighting products. Global manufacturing and engineering footprint, we believe we’re strategically positioned to capitalize on emerging growth and through a 16 month stint in bankruptcy we’ve delevered the company quite substantial and have a significant technology portfolio.

As I mentioned, the journey to get to where we are today has been a fairly long road. We’ve closed over 51 facilities, we’ve reduced our work force by over 21,000 people and as I mentioned, we had a 16 month stay in Chapter 11. Through that process we reduced our revenue by over $9 billion yet improved our margin by 720 basis points and substantially delevered the company.

You can also see on this Slide that over the past five years or so, Ford has moved from 62% of our total revenue down to 25% and we’ve also made a significant shift from a North American based supplier to a true global supplier.

We have four product groups, as you can see here: climate; interior; electronics; and lighting. We show here year-to-date sales climate by far is our strongest product group in terms of revenue followed by interiors, electronics, and lighting. Then you can see down on the bottom we’ve listed our joint ventures, our significant joint ventures as Brian has mentioned. In the climate space we own 70% of Halla Climate Control in Korea and then in interiors and electronics we have a 50/50 joint venture with HASCO as I will talk about in a few minutes.

These charts depict both our market share and our financial performance. On the left hand side of the chart shows our market shares and the size of the market. We’re number two in the world in both climate and interiors, as you can see. Then on the right hand side shows the profitability both on a margin perspective as well as an absolute dollar basis.

As I mentioned, we are a global company servicing all the regions of the world. We’ve got 59 facilities in Asia, 45 in Europe, and then 17 in North and South America. Then when we look at our market position we look at it two ways, first on a consolidated basis and then on a market penetration basis which includes our joint venture. So on these charts you can see on a regional basis Asia Pacific is our largest region and Europe is our second largest under both the consolidated look as well as a market penetration look. Then on a customer basis, Hyundai Kia is our largest customer followed by Ford Motor Company.

Here we compare our revenue on a consolidated and market penetration basis to global production. For example, 47% of the world’s cars and trucks are produced in Asia while 42% of our consolidated sales are in the Asia Pacific and 58% of our market penetration sales are in the Asia Pacific region so clearly we are well positioned to benefit from the growth in the emerging Asian market.

Our presence in Asia includes the 59 facilities I mentioned and accounted for $6.4 billion of revenue in 2010 of which $3.3 billion is non-consolidated. One of the reasons for our strength in Asia is our history there. As you can see, 17 years in China, Korea 25 years, India 18 years so we’re not a newcomer in this region of the world.

As I mentioned two significant joint ventures Halla Climate Control, HCC is a joint venture that we own 70% of, 30% is traded on the Korean Stock Exchange. It is an integral part of our global climate business and as you might expect Hyundai Kia is the largest customer. The other significant joint venture is Yengfeng Visteon which is a 50/50 joint venture between us and HASCO. HASCO is owned by SAIC Automotive, the fourth largest components company in China. It has five primary businesses: seating; electronics; interiors; exteriors; and safety. It has 75 facilities and approximately 22,000 employees and in 2010 under PRC GAAP at $4.7 billion in revenue and 75% of HASCO’s revenue comes from YFV.

While we’re talking Asia, I’ll give you an update on our situation in Thailand. We have three facilities there, about 850 employees, no damage has occurred due to the floods on our facilities and all of our employees are safe. We manufacture climate, interiors, and electronic product there. We have about $200 million in annual revenue an on our third quarter earnings call we announced that we expect about a $25 to $30 million sales impact, negative sales impact and about $6 to $7 million of EBITDA impact.

With that I’ll turn it over to Marty.

Martin E. Welch, III

Turning to adjusted EBITDA first of all, we can see that the levels are up third quarter $166 compared to $149 the prior year and year-to-date $476 in 2010 compared to $526 for the nine months this year. However, as a percent we’ve decreased to 8.1 in the third quarter compared to 8.8 in the third quarter of 2010 primarily due, as we said on the call, to negative net cost performance.

Taking a look at cash flow, in the third quarter we had a use of $24 million and year-to-date we have a use of $130 million. This really comes from working capital usage as well as cash taxes and cash pension contributions. Capital expenditures were $59 million in the third quarter of which $43 million was in climate primarily in Asia supporting future customer programs. Our cash balances at September 30, $780 million down $81 million from June 30 due primarily to the negative free cash flow and negative exchange.

New business wins, Don talked about our strong product and technology portfolio we’ve got combined with our cap ex investments, our global footprint, and our strong balance sheet with essentially no net debt, has allowed us to win significant new business this year. For the third quarter $302 million and for the year-to-date $865 million. We’re on track – we’re already exceeding last year’s full year of $606 million and we’re on track for this to be a record year for Visteon for new business wins.

When we talk about our EBITDA margin objective we are targeting a 10% plus EBTIDA margin by 2014. We think there’s kind of three drivers to that: first of all, volume and mix as we get a higher proportion of our sales in high growth areas; leveraging our structural cost to hopefully hold our SG&A and our cost base while getting additional volume; and of course, our net cost performance has got to improve we have to get that equation to at least break even. It’s really unacceptable to have negative net cost performance for any period of time.

Just briefly the Duck Yang sale, Duck Yang is an interiors business in Korea. A couple of weeks ago we sold a small portion of that, less than 1% to our partner in Korea which brought our ownership to exactly 50% and that allowed us to deconsolidate Duck Yang and carry it on the equity method which we will do beginning November 1st this year. Duck Yang has a relatively small gross margin because it has a fairly high amount of directed [inaudible] from the end customer. What would have happened if it had been deconsolidated for all of this year for the first nine months sales for the company would have been $5.67 billion instead of $6.19 billion and gross margin would have been 8.6% versus the 8% we actually achieved so it has a meaningful impact on our gross margin percentage.

With that, I’ll turn it back to Don.

Donald J. Stebbins

Just in summary, we are focused in on moving forward and enhancing the value of Visteon. There are a number of ways we’re going to do that: first, is through the optimizing of the portfolio; second, is improving our margins; third, strengthening our relationships with both our customers and our joint ventures; and then prudently using our financial flexibility due to our strong balance sheet. With that, I will take any questions.

Question-and-Answer Session

Unidentified Host – Barclays Capital

I’ll kick if off. It was actually maybe a more specific question recognizing Marty I know you’ve only been here five weeks or so, but any first impressions of the cash cycle at Visteon? Certainly, back when you were at K-Mart you did some things with the cash cycle, Federal Mogul of the players in the aftermarket where the cash cycle can be challenging has always been a leader in that. Do you see any low hanging fruit there vis-à-vis that or is it going to take some work with suppliers and customers around that?

Martin E. Welch, III

I think it is going to take a little bit of work. I think it is something that the team is focused on and there should be some opportunity there. Certainly, it’s also a seasonal business so we get some working capital back at year end. But, I don’t see any low hanging fruit, I wouldn’t say that per say but we are focused on it.

Unidentified Host – Barclays Capital

Just as you kind of think strategically about the kind of walk from operating income and net income down to cash, do you see any leverage there that can improve that?

Martin E. Welch, III

I think as you look at the relationships that we have with our suppliers, they were obviously strained through the Chapter 11. They’re not fully restored even yet, but I think that’s an opportunity as you go around the world there’s no question and I think it is a case-by-case thing. It’s a very global business so each country kind of has its own story on that front.

Unidentified Analyst

Could you give us a little more information on what we should expect timing wise of potential asset sales?

Donald J. Stebbins

As we’ve talked about the time in terms of if we are to sell anything, the time we would announce that would be the day of the transaction. So we understand and agree that portfolio optimization is an important part of the Visteon value story and we’re working hard to move that ball forward.

Unidentified Analyst

What is the current pension status and what discount rate does that use?

Martin E. Welch, III

The unfunded pension I think was a little over $300 million and the cash pension contributions for the defined benefit plans is about $55 million a year. Those have all been put in already for 2011. That number is roughly the same for the next few years, changes in valuation don’t affect the cash contribution very much because of the smoothing effect and so it’s certainly one of my goals to continue to work on closing that gap. I think closing unfunded pension is an equity enhancing move for a company so we’re certainly going to work on that.

Unidentified Analyst

I assume that the lighting and interior business on a fully loaded basis is losing money. Is that a far assumption?

Donald J. Stebbins

I think the lighting business probably is on a fully allocated cost basis. I think it’s pretty close for the interiors business.

Unidentified Analyst

Could you give us a framework of how much you’re losing in that area?

Donald J. Stebbins

Well I think the SG&A, corporate SG&A runs about 5% a little less than that so you could allocate that to the lighting business as shown in the financial statements.

Unidentified Analyst

Hypothetically, if those businesses were united with another player in the industry, could they convert that loss into a profit?

Donald J. Stebbins

I don’t know, I think you’d have to ask somebody who’d be buying that business. But, I would say this in terms of the lighting business specifically, it has a tremendous footprint. Our facilities in lighting are in Mexico, the Chez Republic, China, and India. We are subscale in the business in terms of our revenue, we’re number six in the world which I think contributes to the underperformance on the margin front so I would think that if somebody else owned it, it is possible they could do better, yes.

Unidentified Analyst

Have you ever considered contributing non-cash assets or perhaps Visteon stock to the pension plan, or if you haven’t would you consider that going forward?

Donald J. Stebbins

I think Marty hit it right on the head that closing the funding gap certainly is important. We believe that if we could take that off the table so to speak, that would be helpful and so I would say that everything is under consideration for that option.

Unidentified Analyst

I’d like to ask the question about leverage versus your negative cash flow, and I assume some of the negative cash flow because you have low leverage and should be cash flowing positive, are some of the capital expenditures legacy transition costs that you started in 2005 and you have a few more years of that?

Donald J. Stebbins

We had guided to -$1.75 in free cash flow this year. Three reasons for that: one, is we still have about $100 million left in terms of Chapter 11 expenses to pay out; secondly, we’re doing a significant restructuring of our facility in Cadiz Spain so we’ve provisioned for that as well in that guidance. Then we also had about $40 million of capital that we had targeted for a technology change in our climate business so that’s something that doesn’t occur every year so that’s kind of a once in a six seven year time frame. If you adjust for those you’d be free cash flow positive and we expect to be free cash flow positive in 2012.

Unidentified Analyst

Could you give us an idea as to what the indenture, the 6 ¾ allows you to do to the extent you do monetize certain assets what you can do with the proceeds, what does it require to pay down the debt?

Martin E. Welch, III

I am certainly not an expert in that at this stage, but there is if you were to try to extinguish the debt there is a significant make whole premium.

Donald J. Stebbins

I’m sorry I just don’t know the details of it.

Unidentified Analyst

Could you maybe elaborate more on Halla in a couple respects? First, before you get to the financial minority, their minority interest, maybe just talk about the managerial relationships and the customer relationships there both in terms of how the people at Halla Climate relate to Joy Greenway and to senior management in the US? Are they a happy colonial, or just an affiliate, or a direct line report? Second, what the relationship with Hyundai is and how Hyundai looks at not just Halla but the broader Visteon involvement in that. Then maybe third, how does that shape your thinking on the minority stake currently owned in the Korean market which on your last conference call you mentioned could either be purchased by you, or on the other hand you pointed out that you could also be a seller down to just a 51% stake in Halla?

Donald J. Stebbins

The Halla relationship let’s go managerial first, the Halla guys report to Joy Greenway who’s our Head of Global Climate and Joy reports to me. I think that relationship is quite good. In terms of the relationship with Hyundai, the primary relationship and clearly the most significant relationship, is with the Halla Climate Control individuals Mr. Park and Mr. [Shin] who run the HCC business for us have the most intimate relationship with the Hyundai Kia Group and regardless of whether Visteon owns 51% or 100% I would not see that changing. That’s a very important piece of the business from our perspective, the relationship with Hyundai Kia. I would also say that before any move in terms of acquiring or selling the stake we certainly would make sure that the customer was comfortable with that move.

Unidentified Analyst

Maybe similarly maybe talk about the same question vis-à-vis Yengfeng managerial relationships, the customer relationships, and in both of those the degree of interaction between the locally based joint venture personnel and senior management here. Then in those divisions where you do have the interiors for example in Europe and the US and then the financial relationship and again, eventually the cash flow and how you think about dividends versus equity income. But maybe start with the managerial relationships.

Donald J. Stebbins

If we were to contrast Yengfeng Visteon with Halla it is quite different, where Halla has a consolidated entity, a combined engineering, or combining or we’re in the process of combining more and more of the functions at Halla, YFV is a much more standalone entity where we manage it from a board level rather than an operating level. So the general manager of YFV is a Visteon employee and the deputy general manager is in the site change of command. That’s how the business is run. It’s run at an executive committee level rather than let’s call it a CEO of YFV. Then above that is a board level that has both SAIC and Visteon employees.

Now underneath that, if you were to look at the entities that YFV holds, certainly seating, exteriors, and safety are items that we manage purely from a board level and then interiors and electronics we certainly are more engaged there. But even there has a difference in that the electronics side of the business we have combined our electronics engineering with YFV so it is one combined entity today which is quite important. Then interiors a little bit different a little bit more separate in that we do not share resources with YFV as of today in terms of engineering or manufacturing but that certainly is an opportunity for us to utilize YFV both on a tooling front and an engineering front and their cost basis.

Unidentified Analyst

Maybe for Marty on sort of the equity income versus dividend and as you think about the cash generation potential of Visteon parent versus the very strong earnings growth and equity income in Yengfeng, the question we get is how much of that can go into the cash balance here or into consolidated cash?

Martin E. Welch, III

We get every year tens of millions of dollars of actual cash dividends and YFV funds all its own growth and it is a debt free company as well. So I must say, again coming into this new, it has tremendous growth potential and so great relationships and I think if you said looking at that business it’s really actually immature at this point, it has a ways to go to realize its full potential. As an investor I’d say I’m reasonably comfortable with this, not putting anything in and getting something out and it’s funding pretty good size growth in a really great market.

Unidentified Analyst

Just a question about Halla, could you talk a little bit about the current capacity utilization at Halla globally? My understanding that Hyundai is over 100% globally, are you running into any kind of capacity constraints there and is that in any way connected to the year-over-year margin compression that we’re seeing in that business? And could you talk a little bit about like kind of plans going forward for growth at Halla?

Donald J. Stebbins

In terms of the capacity utilization it really depends on the marketplace. Certainly here in the US, Hyundai Kia is running at full out and certainly our factory supporting them is running full out as well so 100% plus of capacity. In Korea it’s pretty much the same and in eastern Europe it’s close to that, I wouldn’t say it’s 100% plus but it would be low 90s in eastern Europe. In China, we just did two factory expansions so we’re probably running I’d guess at 75% to 80% again, based upon the factory expansions. Part of that was for new programs that we won so we did it all at one time so that will fill that up.

In terms of as we look at new business wins of that $865 million that Marty put up earlier, probably half of that is Hyundai Kia business so we certainly will need to, my guess, would be to expand some factories as we look forward. It does not have anything to do with the margin compression in the climate business that’s a commodity and pricing issue with the customers in that business.

Unidentified Analyst

Just a longer term question but I think time appropriate for you guys given your positioning, if you look at countries like China and India there’s definitely been a mismatch between production that’s being built, especially this year versus end demand. I know everyone is expecting demand to resume at some point but if we continue on this kind of very anemic growth, if any at all, what do you think happens to all that capacity that’s being built over there?

Donald J. Stebbins

My answer to that question would be that it starts to get exported around the world.

Unidentified Analyst

And how do you think about your business in terms of a global footprint versus region-by-region?

Donald J. Stebbins

I think we’re tremendously strong in Asia and I think that we would benefit from that process of exports outside of China or India if it did become that. Certainly, if we look at our North American footprint, we have one facility in the United States serving Hyundai Kia and then we have six in Mexico and one in Canada so we could benefit from certainly growing our North American presence and that certainly would be helpful. Whether that’s from vehicles that are shipped in or actually manufactured in North America we need to benefit from that. Certainly from a financial standpoint we have a net operating loss carry forward that would be able to benefit from any profitability here in the United States.

Unidentified Analyst

What other things are your tax advisors encouraging you to do to utilize the NOLs?

Donald J. Stebbins

One of those things that we do today is we have worked with our European facilities to essentially make them contract manufacturers so the purchase order is held, even though the product may be produced in Europe, the purchase order is held in the United States so we flow through that purchase order through the United States to take advantage of the NOL. Certainly we are exploring that opportunity to take that methodology to Asia as well, so that would be one item that we’re looking at.

Unidentified Analyst

Can you discuss how uncertainty in Europe is affecting your European business?

Donald J. Stebbins

It certainly has impacted us. We’re starting to see some schedules weaken, not substantially but certainly the concern is there. I think we’ve done a pretty good job as we’ve ramped up out of ’08 and ’09 to, as best as possible, replace or put temporary works in rather than full-time hires so we do have some benefit there if things do slow down substantially to reduce employment. But we’re starting to see schedules weaken.

Unidentified Analyst

Just drilling down on Europe I guess a couple of things one, is there any segmenting their types of vehicles or manufacturer, you don’t have to name the names, but German versus French, versus Italian, versus transplant, versus US guys? It would be helpful to understand where it’s going to hit. Two, you’ve mentioned in some meetings about having pass through cost relationships in some of the interior factories there. I think it’s well known you have one in Berlin. How will those arrangements work in the event of 5% to 10% production cuts?

Donald J. Stebbins

In terms of we’ve seen, and again, I don’t want to portray it as substantial weakening in Europe it’s just a week here, a shift there, and it’s been across various customers and various models so I don’t think there is any one statement that can cover it in terms of it’s a B segment or a French OE, it’s been across a number of different guys. Again, I wouldn’t call it substantial I would just call it something different than what we’ve been used to.

In terms of the pass through content issue or the pass through pricing is more on the commodity front is where that really is. It’s not a cost basis, although we do have a special arrangement with Ford Motor Company in Berlin, you’re absolutely correct that was detailed in the bankruptcy filings. But, those types of contracts are not normal for our business.

Unidentified Host – Barclays Capital

If there’s no more questions I want to thank Visteon.

Donald J. Stebbins

Thank you very much.

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