visteon 1Q 2003 Form 10-Q

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

≤ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003, or

n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission Ñle number 1-15827

VISTEON CORPORATION(Exact name of Registrant as speciÑed in its charter)

Delaware 38-3519512(State of incorporation) (I.R.S. employer

identiÑcation number)

17000 Rotunda Drive, Dearborn, Michigan 48120(Address of principal executive oÇces) (Zip code)

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

Indicate by check mark whether the Registrant: (1) has Ñled all reports required to be Ñledby 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 Ñle such reports), and (2) hasbeen subject to such Ñling requirements for the past 90 days.

Yes „ No

Indicate by check mark whether the Registrant is an accelerated Ñler (as deÑned inExchange Act Rule 12b-2).

Yes „ No

As of April 30, 2003, the Registrant had outstanding 130,709,152 shares of common stock,par value $1.00 per share.

Exhibit index located on page number 29.

VISTEON CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENT OF INCOMEFor the Periods Ended March 31, 2003 and 2002

(in millions, except per share amounts)

First Quarter

2003 2002

(unaudited)

SalesFord and aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,721 $3,646Other customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 983 823

Total sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,704 4,469Costs and expenses (Notes 2 and 4)

Costs of sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,477 4,356Selling, administrative and other expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 242 202

Total costs and expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,719 4,558Operating lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) (89)Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 6Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 29

Net interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (19) (23)Equity in net income of aÇliated companies (Note 2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15 5

Loss before income taxes, minority interests and change in accounting ÏÏÏÏÏ (19) (107)BeneÑt for income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12) (40)

Loss before minority interests and change in accounting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7) (67)Minority interests in net income of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 6

Loss before change in accounting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) (73)Cumulative eÅect of change in accounting, net of tax (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (265)

Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(15) $ (338)

Basic and diluted loss per share (Note 5)Before cumulative eÅect of change in accounting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.12) $(0.57)Cumulative eÅect of change in accounting (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (2.06)

Basic and dilutedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.12) $(2.63)

Cash dividends per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.06 $ 0.06

The accompanying notes are part of the Ñnancial statements.

1


CONSOLIDATED BALANCE SHEET(in millions)

March 31, December 31,2003 2002

(unaudited)

AssetsCash and cash equivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 896 $ 1,204Marketable securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51 74

Total cash and marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 947 1,278Accounts receivable Ì Ford and aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,698 1,401Accounts receivable Ì other customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,053 828

Total receivables, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,751 2,229Inventories (Note 8)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 889 878Deferred income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199 199Prepaid expenses and other current assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171 153

Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,957 4,737Equity in net assets of aÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 201 191Net property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,450 5,443Deferred income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 607 566Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 234 233

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,449 $11,170

Liabilities and Stockholders' EquityTrade payablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,226 $ 2,083Accrued liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,001 1,021Income taxes payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 14Debt payable within one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 347 348

Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,599 3,466Long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,295 1,298Postretirement beneÑts other than pensions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,414 2,283Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,159 1,142Deferred income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 3

Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,470 8,192Stockholders' equityCapital stock

Preferred stock, par value $1.00, 50 million shares authorized,none outstandingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì

Common stock, par value $1.00, 500 million shares authorized,131 million shares issued, 131 million and 129 million sharesoutstanding, respectively ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 131

Capital in excess of par value of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,287 3,298Accumulated other comprehensive loss (Note 9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (112) (140)OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26) (33)Accumulated deÑcitÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (301) (278)

Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,979 2,978

Total liabilities and stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,449 $11,170


2


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the Periods Ended March 31, 2003 and 2002

(in millions)

First Quarter

2003 2002

(unaudited)

Cash and cash equivalents at January 1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,204 $1,024

Cash Öows (used in) provided by operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (135) 58Cash Öows from investing activities

Capital expendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (181) (140)Purchases of securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (48) (199)Sales and maturities of securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70 100Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 Ì

Net cash used in investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (153) (239)Cash Öows from Ñnancing activities

Commercial paper (repayments) issuances, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17) ÌShort-term debt, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (1)Proceeds from issuance of other debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 44Principal payments on other debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (27) (48)Purchase of treasury stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5) (11)Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8) (8)Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) Ì

Net cash used in Ñnancing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (22) (24)EÅect of exchange rate changes on cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 (4)

Net decrease in cash and cash equivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (308) (209)

Cash and cash equivalents at March 31ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 896 $ 815


3


NOTES TO FINANCIAL STATEMENTS(unaudited)

Note 1. Financial Statements

The Ñnancial data presented herein are unaudited, but in the opinion of management reÖectthose adjustments, including normal recurring adjustments, necessary for a fair statement of suchinformation. Results for interim periods should not be considered indicative of results for a fullyear. Reference should be made to the consolidated Ñnancial statements and accompanyingnotes included in the company's Annual Report on Form 10-K for the Ñscal year endedDecember 31, 2002, as Ñled with the Securities and Exchange Commission on February 14, 2003.

Visteon Corporation (""Visteon'') is a leading, global supplier of automotive systems,modules and components. Visteon sells products primarily to global vehicle manufacturers, andalso sells to the worldwide aftermarket for replacement and vehicle appearance enhancementparts. Visteon became an independent company when Ford Motor Company (""Ford'')established Visteon as a wholly-owned subsidiary in January 2000 and subsequently transferredto Visteon the assets and liabilities comprising Ford's automotive components and systemsbusiness. Ford completed its spin-oÅ of Visteon on June 28, 2000 (the ""spin-oÅ''). Prior toincorporation, Visteon operated as Ford's automotive components and systems business.

Note 2. Selected Costs, Income and Other Information

Depreciation and Amortization

Depreciation and amortization expenses are summarized as follows:

First Quarter

2003 2002

(in millions)

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $140 $140Amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 21

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $163 $161

Investments with AÇliates

The following table presents summarized Ñnancial data for those aÇliates accounted forunder the equity method. The amounts represent 100% of the results of operations of theseaÇliates. Visteon reports its share of their net income in the line ""Equity in net income ofaÇliated companies'' on the Consolidated Statement of Income.

First Quarter

2003 2002

(in millions)

Net sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $291 $179Gross proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67 33Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 12

4


NOTES TO FINANCIAL STATEMENTS Ì (Continued)(unaudited)

Note 3. Stock-Based Awards

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148""Accounting for Stock-Based Compensation Ì Transition and Disclosure Ì an amendment ofFASB Statement No. 123.'' This statement amends Statement of Financial Accounting StandardsNo. 123 (""SFAS 123''), ""Accounting for Stock-Based Compensation,'' to provide alternativemethods of transition for a voluntary change to the fair value based method of accounting forstock-based employee compensation. In addition, this statement amends the disclosurerequirements of SFAS 123 to require prominent disclosures in both annual and interim Ñnancialstatements about the method of accounting for stock-based employee compensation and theeÅect of the method used on reported results.

Starting January 1, 2003, Visteon began expensing the fair value of stock-based awardsgranted to employees pursuant to SFAS 123. This standard was adopted on a prospectivemethod basis for stock-based awards granted, modiÑed or settled after December 31, 2002. Forstock options and restricted stock awards granted prior to January 1, 2003, Visteon measurescompensation cost using the intrinsic value method. If compensation cost for all stock-basedawards had been determined based on the estimated fair value of stock options and the fairvalue set at the date of grant for restricted stock awards, in accordance with the provisions ofSFAS 123, Visteon's reported net loss and loss per share would have changed to the pro formaamounts indicated below:

First Quarter

2003 2002

(in millions, exceptper share amounts)

Net loss, as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (15) $ (338)Add: Stock-based employee compensation expense included

in reported net loss, net of related tax eÅects ÏÏÏÏÏÏÏÏÏÏÏÏ 1 2Deduct: Total stock-based employee compensation expense

determined under fair value based method for all awards,net of related tax eÅects ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) (3)

Pro forma net loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (17) $ (339)

Loss per share:Basic and diluted Ì as reportedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.12) $(2.63)Basic and diluted Ì pro forma ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.13) $(2.64)

5



Note 4. Special Charges

First Quarter 2003 Actions

In the Ñrst quarter of 2003, Visteon recorded pre-tax charges of $31 million ($20 millionafter-tax) which includes $27 million related to the involuntary separation of about 135 U.S.salaried employees, the separation of about 35 hourly employees located at Visteon's plants inEurope through a continuation of a special voluntary retirement and separation program startedin 2002, and the elimination of about 120 manufacturing positions in Mexico and other minoractions. Included in the $31 million pre-tax charge are $4 million of non-cash charges related tothe write-down of a group of coiled spring and stamping equipment at our Monroe, Michigan,plant for which production activities will be discontinued and the future undiscounted cash Öowsare less than the carrying value of these Ñxed assets held for use. Visteon measured theimpairment loss by comparing the carrying value of these Ñxed assets to the expected proceedsfrom disposal of the assets after completion of remaining production commitments. The aboveactions were substantially completed during the Ñrst quarter of 2003.

Related to the special voluntary early retirement and separation program that was oÅered toU.S. salaried employees and recorded during the fourth quarter of 2002, about 82 of the 308employees who accepted such packages were separated during the Ñrst quarter of 2003. Theseparation of the remaining 226 U.S. salaried employees will take place at various times duringthe remainder of 2003.

First Quarter 2002 Actions

In the Ñrst quarter of 2002, Visteon recorded total pre-tax charges of $116 million($74 million after-tax) in costs of sales related to a number of actions discussed further below.In addition, Visteon recorded an impairment loss on goodwill of $363 million ($265 million after-tax) as a cumulative eÅect of change in accounting principle in the Ñrst quarter of 2002 asdiscussed further in Note 10.

EÅective April 1, 2002, Visteon completed the sale of its restraint electronics business toAutoliv, Inc. for $25 million, resulting in a pre-tax charge in the Ñrst quarter of 2002 of $26 million($16 million after-tax) recorded in costs of sales. The sale includes Visteon's North Americanand European order book of approximately $150 million in annual sales to Ford Motor Companyand its aÇliates, and associated manufacturing operations in Markham, Ontario, as well asrelated assets and liabilities. As part of the sale, approximately 280 employees from Markhamand about 95 engineers from Dearborn, Michigan, transferred to Autoliv.

6



Note 4. Special Charges Ì (Continued)

In the Ñrst quarter of 2002, Visteon recorded pre-tax charges of $95 million ($61 millionafter-tax) related to the separation of 820 employees at Markham, Ontario, as a result of thecompany's decision to move nearly all of the non-restraint electronics business to facilities inMexico, the elimination of about 215 engineering positions in the United States to reduceresearch and development costs, the closure of our Visteon Technologies facility in Californiaand the related discontinuation of support for our aftermarket navigation systems product line,the closure of our Leatherworks facility in Michigan and the elimination of about 240manufacturing positions in Mexico. Included in the $95 million pre-tax charge are $12 million ofnon-cash charges related to the write-down of equipment to be disposed of and the write-downof aftermarket navigation systems inventory. The engineering-related and Mexicanmanufacturing-related separations, and the closure of Visteon Technologies, were completed inthe Ñrst quarter of 2002. The Leatherworks facility was closed in the third quarter of 2002.Visteon completed moving all of the non-restraint electronics business to other facilities andseparated substantially all Markham employees by the end of 2002.

Accrued restructuring liabilities relating to 2001 restructuring actions of $5 million ($3 millionafter-tax) were credited to costs of sales in the Ñrst quarter of 2002, reÖecting a change inestimated costs to complete these activities.

Reserve Activity

Reserve balances of $32 million and $37 million at March 31, 2003 and December 31, 2002,respectively, are included in current accrued liabilities on the accompanying balance sheets. TheMarch 31, 2003 reserve balance of $32 million includes $18 million related primarily to 2002actions. The company anticipates that the restructuring activities to which all of the abovecharges relate will be substantially completed by the end of 2003.

Automotive Operations Glass Operations

Employee-Related Other Employee-Related Total

(in millions)

December 31, 2002 reserve balanceÏÏÏÏÏ $ 36 $Ì $ 1 $ 37First quarter 2003 actions:

Included in costs of salesÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 4 1 26Included in selling, administrative

and other expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 Ì Ì 5

Total net expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 4 1 31Utilization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (31) (4) (1) (36)

March 31, 2003 reserve balance ÏÏÏÏÏÏÏÏ $ 31 $Ì $ 1 $ 32

Utilization in the Ñrst quarter of 2003 of $36 million includes $10 million incurred related tospecial pension and other postretirement beneÑts, $22 million of cash payments mainly forseverance pay and $4 million related to the non-cash write-down of certain plant assets.

7



Note 5. Income (Loss) Per Share of Common Stock

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

First Quarter

2003 2002

(in millions,except per share

amounts)

Numerator:Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (15) $ (338)

Denominator:Average common stock outstandingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129.9 130.6Less: Average restricted stock outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3.9) (2.2)

Basic shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126.0 128.4Net dilutive eÅect of restricted stock and stock options ÏÏÏÏÏÏ Ì Ì

Diluted shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126.0 128.4

Loss per share:Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.12) $(2.63)DilutedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(0.12) $(2.63)

For the Ñrst quarter of 2003 and Ñrst quarter of 2002 potential common stock of about515,000 and 317,000 shares, respectively, are excluded as the eÅect would have beenantidilutive.

Note 6. Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46 (""FIN 46''), ""Consolidation ofVariable Interest Entities.'' Until this interpretation, a company generally included another entity inits consolidated Ñnancial statements only if it controlled the entity through voting interests. FIN 46requires a variable interest entity to be consolidated by a company if that company is subject to amajority of the risk of loss from the variable interest entity's activities or entitled to receive amajority of the entity's residual returns. There was no eÅect of adopting FIN 46 on Visteon'sresults of operations or Ñnancial position.

From June 30, 2002, a variable interest entity, which is owned by an aÇliate of a bank andestablished to build a headquarters facility to be leased to Visteon, is included in Visteon'sconsolidated Ñnancial statements, based on an assessment that substantially all of the expectedresidual risks or rewards of the entity reside with Visteon. Total assets of this entity were about$45 million and $36 million at March 31, 2003 and December 31, 2002, respectively.

8



Note 7. Guarantees

In November 2002, the FASB issued Interpretation No. 45 (""FIN 45''), ""Guarantor'sAccounting and Disclosure requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others.'' FIN 45 clariÑes that at the time a company issues a guarantee, thecompany must recognize an initial liability for the fair value, or market value, of the obligations itassumes under that guarantee. The initial recognition and initial measurement provisions applyon a prospective basis to guarantees issued or modiÑed after December 31, 2002. As ofMarch 31, 2003, the eÅect of adopting FIN 45 on Visteon's results of operations and Ñnancialposition was not material.

A reconciliation of changes in the product warranty liability is summarized as follows:

First Quarter

2003

(in millions)

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17Accruals for products shipped ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4Settlements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17

Note 8. Inventories

Inventories are summarized as follows:


(in millions)

Raw materials, work-in-process and supplies ÏÏÏÏÏÏÏÏÏÏÏ $757 $743Finished products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132 135

Total inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $889 $878

U.S. inventoriesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $551 $548

9



Note 9. Comprehensive Income (Loss)

Comprehensive income (loss) is summarized as follows:

First Quarter

2003 2002

(in millions)

Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(15) $(338)Change in foreign currency translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 (13)Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 4

Total comprehensive income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 13 $(347)

Accumulated other comprehensive loss is comprised of the following:


(in millions)

Foreign currency translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (41) $ (62)Realized and unrealized gains/(losses) on derivatives,

net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (8)Unrealized loss on marketable securities, net of tax ÏÏÏÏÏ (1) (1)Minimum pension liability, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (69) (69)

Total accumulated other comprehensive lossÏÏÏÏÏÏÏÏÏÏ $(112) $(140)

Note 10. Accounting Change

EÅective January 1, 2002, Visteon adopted Statement of Financial Accounting StandardsNo. 142 (""SFAS 142''), ""Goodwill and Other Intangible Assets.'' SFAS 142 no longer permitsamortization of goodwill and establishes a new method of testing goodwill for impairment byusing a fair-value based approach. Under previous accounting standards, Visteon evaluatedgoodwill for possible impairment by comparing operating income before amortization of goodwillto the amortization recorded for each of the acquired operations to which the goodwill related.Goodwill is related primarily to the acquisition of the interiors division of Compagnie PlasticOmnium and the increase of Visteon's ownership in Halla Climate Control Corporation to 70% bypurchasing an additional 35%, both of which occurred in 1999.

SFAS 142 requires goodwill to be evaluated for possible impairment as of January 1, 2002,and periodically thereafter, using a fair-value approach. An initial test for goodwill impairmentusing a fair-value approach was performed for the Automotive Operations reporting unit bycomparing the estimated fair value of our Automotive Operations reporting unit to its net bookvalue. Visteon's stock market capitalization, as well as market multiples and other factors, wereused as the basis for determining the fair value of the Automotive Operations reporting unit.Because the fair value of the Automotive Operations reporting unit was considered less than itsnet book value, Visteon recorded an impairment loss on goodwill of $363 million ($265 millionafter-tax) as a cumulative eÅect of change in accounting principle in the Ñrst quarter of 2002.The pre-tax impairment loss consists of $357 million of net goodwill as of December 31, 2001,and $6 million reclassiÑed to goodwill related to certain acquired intangible assets, as required bySFAS 142.

10



Note 11. Segment Information

Visteon's reportable operating segments are Automotive Operations and Glass Operations.Financial information for the reportable operating segments is summarized as follows:

Automotive Glass TotalOperations Operations Visteon

(in millions)

First Quarter

2003:Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,551 $153 $ 4,704Income (loss) before taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (23) 4 (19)Net income (loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (18) 3 (15)Total assets, end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,164 285 11,449

2002:Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,321 $148 $ 4,469Income (loss) before taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (116) 9 (107)Net income (loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (344) 6 (338)Total assets, end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,737 299 11,036

Note 12. Litigation and Claims

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

Litigation is subject to many uncertainties, and the outcome of individual litigated matters isnot predictable with assurance. Reserves have been established by Visteon for mattersdiscussed in the foregoing paragraph where losses are deemed probable; these reserves areadjusted periodically to reÖect estimates of ultimate probable outcomes. It is reasonably possible,however, that some of the matters discussed in the foregoing paragraph for which reserves havenot been established could be decided unfavorably to Visteon and could require Visteon to paydamages or make other expenditures in amounts, or a range of amounts, that cannot beestimated at March 31, 2003. Visteon does not reasonably expect, based on its analysis, that anyadverse outcome from such matters would have a material eÅect on our Ñnancial condition,results of operations or cash Öows, although such an outcome is possible.

11



Note 13. Information Technology Agreement

Since our separation from Ford, Ford has provided us with and charged us for many of ourinformation technology needs. In January 2003, we entered into a 10-year outsourcing agreementwith International Business Machines (""IBM'') pursuant to which we will outsource a wide rangeof IT services on a global basis, including mainframe support services, data centers, customersupport centers, application development and maintenance, data network management, desktopsupport, disaster recovery and web hosting. The service charges under the outsourcingagreement are expected to aggregate about $2 billion during the ten years covered by theagreement, subject to decreases and increases in the service charges based on Visteon's actualconsumption of services to meet its then current business needs. The outsourcing agreementmay also be terminated for Visteon's business convenience after its second full year for ascheduled termination fee. As part of this agreement, IBM will assist us in transitioning from theuse of Ford's IT systems through a one-time, infrastructure replication, application cloning andmigration and data warehousing project. We expect additional IT expenditures in 2003 associatedwith the transition of the outsourcing agreement and the separation from the Ford systems to bein the range of $150 million to $200 million. We anticipate that the result of these actions will be agreater systems separation from Ford, improved Öexibility in our overall IT systems and improvedglobal IT services suited to our business.

Note 14. Seating Operations

As previously announced, Visteon entered into a summary commercial agreement in principlewith Ford Motor Company to exit the Ford seating business located in ChesterÑeld, Michigan,and transfer seat production to another supplier's facilities. As contemplated in the summaryagreement, about 1,400 Visteon-assigned Ford-UAW employees working at the ChesterÑeld,Michigan, facility would transfer to Ford. In addition, Visteon would be responsible to reimburseFord for the actual net costs of exiting seating production through a speciÑed date in 2004,including costs related to hourly employee voluntary retirement and separation programs thatFord is expected to implement during the transition process, oÅset by certain cost savingsexpected to be realized by Ford. Pending completion of a binding agreement, Visteon expects torecord pre-tax charges of about $225 million based on management's current estimate of theproposed agreement's net costs. The ultimate costs of this proposed agreement could varysigniÑcantly from management's current estimate depending on several factors including theultimate net costs incurred during the seating production transition process. The most criticalassumptions underlying this accounting estimate are the actual costs incurred related to therelocation, re-deployment and/or employment termination of the 1,400 Visteon-assigned Ford-UAW employees, oÅset by deÑned savings achieved by Ford resulting from resourcingproduction. A binding agreement is expected to be Ñnalized during the second quarter of 2003,subject to completing the negotiation of deÑnitive terms satisfactory in form and substance to allparties.

12

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and StockholdersVisteon Corporation

We have reviewed the accompanying consolidated balance sheet of Visteon Corporation andits Subsidiaries as of March 31, 2003, and the related consolidated statement of income for eachof the three-month periods ended March 31, 2003 and March 31, 2002 and the condensedconsolidated statement of cash Öows for the three-month periods ended March 31, 2003 andMarch 31, 2002. These interim Ñnancial statements are the responsibility of the Company'smanagement.

We conducted our review in accordance with standards established by the American Instituteof CertiÑed Public Accountants. A review of interim Ñnancial information consists principally ofapplying analytical procedures and making inquiries of persons responsible for Ñnancial andaccounting matters. It is substantially less in scope than an audit conducted in accordance withgenerally accepted auditing standards, the objective of which is the expression of an opinionregarding the Ñnancial statements taken as a whole. Accordingly, we do not express such anopinion.

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

We previously audited in accordance with auditing standards generally accepted in theUnited States of America, the consolidated balance sheet as of December 31, 2002, and therelated consolidated statements of income, stockholders' equity, and of cash Öows for the yearthen ended (not presented herein), and in our report dated January 17, 2003, except forNote 18, as to which the date is January 27, 2003, we expressed an unqualiÑed opinion on thoseconsolidated Ñnancial statements. In our opinion, the information set forth in the accompanyingconsolidated balance sheet as of December 31, 2002, is fairly stated in all material respects inrelation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLPDetroit, MichiganApril 15, 2003

13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

The Ñnancial data presented herein are unaudited, but in the opinion of management reÖectthose adjustments, including normal recurring adjustments, necessary for a fair statement of suchinformation. Reference should be made to the consolidated Ñnancial statements andaccompanying notes included in the company's Annual Report on Form 10-K for the Ñscal yearended December 31, 2002, as Ñled with the Securities and Exchange Commission onFebruary 14, 2003.

Overview

Visteon's worldwide sales for the Ñrst quarter of 2003 were $4.7 billion, compared with$4.5 billion for the same period in 2002. Visteon reported a net loss of $15 million, or $0.12 pershare, for the Ñrst quarter of 2003. The loss included after-tax special charges of $20 million.This compares with a Ñrst quarter net loss in 2002 of $338 million, or $2.63 per share, whichincluded after-tax special charges of $339 million.

Restructuring, Dispositions and Special Charges

The table below presents special charges related to restructuring initiatives and other actionsduring the Ñrst quarter of 2003 and 2002:

Automotive Glass TotalOperations Operations Visteon

(in millions)

First Quarter 2003:

Special charges:North American salaried restructuring ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (18) $Ì $ (18)Monroe Plant equipment write-down ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4) Ì (4)European Plan for GrowthÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) Ì (3)Other actions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5) (1) (6)

Total Ñrst quarter 2003 special charges, before taxes ÏÏÏÏÏÏÏ $ (30) $(1) $ (31)

Total Ñrst quarter 2003 special charges, after taxes ÏÏÏÏÏÏÏÏÏ $ (19) $(1) $ (20)

First Quarter 2002:

Special charges:Exit of Markham and other actionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (95) $Ì $ (95)Loss on sale of restraint electronics businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26) Ì (26)Adjustments to prior year's expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 2 5

Total Ñrst quarter 2002 special charges, before taxes andchange in accounting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(118) $ 2 $(116)

Total Ñrst quarter 2002 special charges, after taxes* ÏÏÏÏÏÏÏÏ $(341) $ 2 $(339)

* Includes a special charge of $265 million for a change in accounting (goodwill).

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS Ì (Continued)

In the Ñrst quarter of 2003, Visteon recorded total pre-tax special charges of $31 million($20 million after-tax). This total includes $21 million ($13 million after-tax) for salariedrestructuring actions taken at various North American manufacturing operations and for furtherimplementation of the European Plan for Growth. A non-cash, pre-tax charge of $4 million($3 million after-tax) was also recorded to write-down coiled spring and stamping equipmentlocated at our Monroe, Michigan, plant. Production activities related to this equipment will bediscontinued and future undiscounted cash Öows are less than the carrying value of these Ñxedassets held for use. Other special charges recorded in Ñrst quarter of 2003 related primarily toadditional employee separation programs resulting in pre-tax charges of $6 million ($4 millionafter-tax). See Note 4 of our consolidated Ñnancial statements, which is incorporated herein byreference, for a further description of these restructuring actions. Of the $31 million in pre-taxcharges described above, $27 million are expected to be settled in cash and $4 million arenon-cash related. We incurred charges in 2002 associated with the European plan for Growthand expect additional charges in 2003 and 2004, with total lifetime restructuring charges relatedto the plan of up to $150 million.

During the Ñrst quarter of 2002, Visteon recorded special charges of $116 million beforetaxes ($74 million after-tax) related to a number of restructuring actions and the sale of ourrestraint electronics business, as described in Note 4 of our consolidated Ñnancial statements,which is incorporated herein by reference. In addition, during the quarter the company adoptedStatement of Financial Accounting Standards No. 142 (""SFAS 142''), ""Goodwill and OtherIntangible Assets.'' With this change in accounting principle, Visteon recorded a non-cash write-oÅ for the value of goodwill of $265 million after-tax, as described in Note 10 of our consolidatedÑnancial statements, which is incorporated herein by reference. Of the $116 million in pre-taxcharges recorded in the Ñrst quarter of 2002, $78 million is cash related and $38 million isnon-cash related.

In addition, Visteon entered into a summary commercial agreement in principle with FordMotor Company to exit the seating business located in ChesterÑeld, Michigan, and transfer seatproduction to another supplier's facilities as described in Note 14 of our consolidated Ñnancialstatements, which is incorporated herein by reference. Pending completion of a bindingagreement, Visteon expects to record pre-tax special charges of about $225 million based onmanagement's current estimate of the proposed agreement's net costs. The ultimate costs of thisproposed agreement could vary signiÑcantly from management's current estimate depending onseveral factors including the ultimate net costs incurred in the seating production transitionprocess. The most critical assumptions underlying this accounting estimate are the actual costsincurred related to the relocation, re-deployment and/or employment termination of the 1,400Visteon-assigned Ford-UAW employees, oÅset by deÑned savings achieved by Ford resultingfrom resourcing production. A binding agreement is expected to be Ñnalized during the secondquarter of 2003, subject to the completion of the negotiation of deÑnitive terms satisfactory inform and substance to all parties.

We continue to evaluate the possibility of partnerships, sales or closings involving otherunder-performing or non-core businesses. However, there can be no assurance that atransaction or other arrangement favorable to Visteon will occur in the near term or at all.

15


Results of Operations

First Quarter 2003 Compared with First Quarter 2002

Sales for each of our segments for the Ñrst quarter of 2003 and 2002 are summarized in thefollowing table:

2003First Quarter over

2003 2002 2002

(in millions)

Automotive Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,551 $4,321 $230Glass Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 153 148 5

Total sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,704 $4,469 $235

Memo: Sales to non-Ford customersAmount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 983 $ 823 $160Percentage of total sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21% 18% 3 pts

Sales for Automotive Operations in the Ñrst quarter of 2003 were $4,551 million, comparedwith $4,321 million in the Ñrst quarter of 2002, an increase of $230 million or 5%. Sales for GlassOperations were $153 million in the Ñrst quarter of 2003, compared with $148 million in the Ñrstquarter of 2002, an increase of $5 million or 3%. Increased sales for Automotive OperationsreÖect primarily new business and favorable currency Öuctuations, oÅset partially by pricereductions. Sales for Automotive Operations also were aÅected by lower sales associated withprecious metals purchased under sourcing arrangements directed by Ford and the sale of ourrestraint electronics business eÅective April 1, 2002. Increased sales for Glass Operations reÖectprimarily favorable product mix and higher aftermarket volume, oÅset partially by lowercommercial volume and price reductions. Sales to non-Ford customers increased $160 million, or19%, from the Ñrst quarter of 2002, and were 21% of total sales for the Ñrst quarter of 2003.

Cost of Sales for the Ñrst quarter of 2003 were $4,477 million, $121 million higher whencompared with the Ñrst quarter of 2002. Cost of sales primarily includes material, labor,manufacturing overhead and other costs, such as product development costs. The increasereÖects primarily costs associated with new business, the impact of currency Öuctuations, andhigher health care costs, pension costs and wage costs, oÅset partially by net material costreductions, lower costs associated with precious metals purchased under sourcing arrangementsdirected by Ford, manufacturing eÇciencies, and the eÅect of lower Ford North Americanproduction volume. Special charges were also lower in the Ñrst quarter of 2003 than in the Ñrstquarter of 2002, totaling $26 million and $116 million, respectively.

Selling, administrative and other expenses for the Ñrst quarter of 2003 were $242 million ascompared with $202 million in the Ñrst quarter of 2002, an increase of $40 million. The increasereÖects primarily several infrastructure actions including information technology spending,supplemental resources to support our cost reduction initiatives, currency impact, and specialcharges. Costs associated with such infrastructure actions are expected to result in higherselling, administrative and other expenses in 2003. Special charges of $5 million were classiÑedin selling, administrative and other expenses in the Ñrst quarter of 2003.

Net interest expense of $19 million in the Ñrst quarter of 2003 was down $4 million from theÑrst quarter of 2002 reÖecting lower average debt balances and lower average interest rates onboth cash and debt balances.

16


Equity in net income of aÇliated companies was $15 million in the Ñrst quarter of 2003compared with $5 million for the same period in 2002, with the increase related primarily to ouraÇliates located in China.

Income (loss) before income taxes, is the primary proÑtability measure used by our chiefoperating decision-makers; both including and excluding the eÅect of special items. The followingtable shows income (loss) before income taxes for the Ñrst quarter of 2003 and 2002 for eachof our segments:

2003First Quarter over/(under)

2003 2002 2002

(in millions)

Automotive OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(23) $(116) $93Glass Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 9 (5)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(19) $(107) $88

Memo: Special charges included above ÏÏÏÏÏÏÏÏ $(31) $(116) $85

Automotive Operations' Ñrst quarter 2003 loss before income taxes was $23 millioncompared with a loss before income taxes of $116 million for the same period in 2002. The$93 million improvement reÖects primarily lower special charges. Additional favorable factorsinclude net material cost reductions and manufacturing eÇciencies, earnings from operations andaÇliates in Asia and new business which are oÅset partially by price reductions to ourcustomers, higher health care costs, pension costs and IT costs. Special charges were$30 million in the Ñrst quarter of 2003 and $118 million in the Ñrst quarter of 2002.

Income before income taxes for Glass Operations for the Ñrst quarter of 2003 was $4 millioncompared with $9 million for the Ñrst quarter of 2002. The decline reÖects primarily higher wagerates and other net manufacturing costs, oÅset in part by higher aftermarket volume andfavorable product mix. Special charges were $1 million in the Ñrst quarter of 2003. The Ñrstquarter of 2002 results include the beneÑt of $2 million related to adjustments to the reserve forspecial charges.

BeneÑt for income taxes represents an eÅective tax rate of 36% for the Ñrst quarter of 2003and 2002.

Minority interests in net income of subsidiaries was $8 million in the Ñrst quarter of 2003compared with $6 million in the comparable period in 2002.

17


Net income (loss) for the Ñrst quarter of 2003 and 2002 are shown in the following table foreach of our segments:

2003First Quarter over/(under)

2003 2002 2002

(in millions)

Automotive Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(18) $(344) $326Glass Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 6 (3)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(15) $(338) $323

Memo: Cumulative eÅect of change in accounting (goodwill)ÏÏÏÏ $ Ì $(265) $265After-tax restructuring charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (20) (74) 54

Special charges included aboveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(20) $(339) $319

Visteon reported a total net loss for the Ñrst quarter of 2003 of $15 million compared with anet loss of $338 million for the Ñrst quarter of 2002. Special charges were $20 million in the Ñrstquarter of 2003 and $339 million in the Ñrst quarter of 2002.

Liquidity and Capital Resources

Our balance sheet reÖects cash and marketable securities of about $950 million and totaldebt of about $1.6 billion at March 31, 2003, compared with cash and marketable securities ofabout $1.3 billion and total debt of about $1.6 billion at December 31, 2002. Our net debt, deÑnedas the amount by which total debt exceeds total cash and marketable securities, was about$700 million at March 31, 2003, and about $370 million at December 31, 2002. The change in ourcash and marketable securities and net debt resulted primarily from a seasonal increase in tradeworking capital requirements and capital expenditures. Trade working capital includes accountsreceivable plus inventories less trade payables. Our ratio of total debt to total capital, whichconsists of total debt plus total stockholders' equity, was 36% at both March 31, 2003 andDecember 31, 2002.

Visteon has Ñnancing arrangements providing contractually committed, unsecured revolvingcredit facilities with a syndicate of third-party lenders providing for a maximum of $1.8 billion incommitted, unsecured credit facilities (the ""Credit Facilities''). The terms of the Credit Facilitiesprovide for a 364-day revolving credit line in the amount of $775 million, which expiresJune 2003, and a Ñve-year revolving credit line in the amount of $775 million, which expiresJune 2007. We expect to extend the terms of the 364-day facility for another year during thesecond quarter of 2003 although there can be no assurance it will be on the same terms andconditions. The Credit Facilities also provide for a Ñve-year, delayed-draw term loan in theamount of $250 million, which will be used primarily to Ñnance construction of a headquartersfacility. During the Ñrst quarter of 2003, Visteon did not borrow under any of these arrangements.In April 2003, Visteon made its initial draw against the delayed-draw term loan in the amount of$48 million. Visteon has maintained a commercial paper program providing up to $1,550 million ofborrowing ability, utilizing the credit lines as backup. As of March 31, 2003, the outstandingbalance under our commercial paper program was about $150 million and has been reducedsteadily compared with prior periods. In the event the availability of commercial paper is reduced,our revolving credit lines provide a backup source for funding.

18


Visteon maintains a trade payables program through General Electric Capital Corporation(""GECC'') that provides Ñnancial Öexibility to Visteon and its suppliers. When a supplierparticipates in the program, GECC pays the supplier the amount due from Visteon in advance ofthe original due date. In exchange for the earlier payment, our suppliers accept a discountedpayment. On the original due date of the payables, Visteon pays GECC the full amount. AtMarch 31, 2003, we had approximately $45 million due to GECC under this program, classiÑed astrade payables in the consolidated balance sheet. As part of the same program with GECC,Visteon is allowed to defer payment to GECC on the trade payables described above for a periodof up to 30 days at a market rate based fee. Any amounts deferred under the program would beclassiÑed as short-term debt. As of March 31, 2003, Visteon had not exercised the deferraloption of the program.

As of March 31, 2003, there have been no material changes to our long-term obligations asdescribed in our Annual Report on Form 10-K for the Ñscal year ended December 31, 2002,except related to our information technology agreement with IBM, which is discussed further inNote 13 of our consolidated Ñnancial statements, which is incorporated herein by reference. Also,from time to time we enter into purchase commitments with various suppliers in the ordinarycourse of business.

We have guaranteed about $25 million of borrowings held by unconsolidated joint venturesand have extended loans of about $8 million to unconsolidated joint ventures, as ofMarch 31, 2003. In addition, we have guaranteed Tier 2 suppliers' debt and lease obligations ofabout $16 million, at March 31, 2003, to ensure the continued supply of essential parts. Theseobligations and Visteon's level of commitment remain unchanged from December 31, 2002.

Visteon is rated by Standard & Poor's and Moody's. We presently have long-term creditratings of BBB/Baa2, respectively, and short-term credit ratings of A3/P2, respectively. OnMarch 14, 2003, Standard & Poor's reduced our short-term credit rating from A2 to A3 andreduced our outlook from Stable to Negative. On April 15, 2003, Standard & Poor's placed usand several other companies on Credit Watch, with negative implications with respect to both ourlong and short-term credit ratings, stating their concerns about underfunded employee beneÑtobligations. If we were to be downgraded to BBB-/Baa3, we believe we would continue to haveaccess to suÇcient liquidity to meet ongoing operating requirements; however our cost ofborrowing may increase. If suÇcient levels of commercial paper were no longer available, wewould utilize alternative sources of liquidity, including those discussed above and receivables-based funding sources available to us.

Visteon's net interest expense of $19 million for the Ñrst quarter of 2003 was $4 million lowerthan the Ñrst quarter of 2002. The lower net interest expense compared with the Ñrst quarter of2002 reÖects lower average debt balances in the Ñrst quarter of 2003 along with lower averageinterest rates on both cash and debt balances.

In addition, Visteon has entered into interest rate swaps to manage its interest rate risk.These swaps eÅectively convert a portion of Visteon's Ñxed rate debt into variable rate debt, andas a result, approximately 30% of the company's borrowings are on a Ñxed-rate basis, while theremainder is subject to changes in short-term interest rates. As interest rates have fallen,Visteon's interest rate swaps contributed favorably to reduce interest expense in 2003.

19


Our cash and liquidity needs are impacted by the level, variability and timing of ourcustomers' worldwide vehicle production, which varies based on economic conditions and marketshares in major markets. Our intra-year needs also are impacted by seasonal eÅects in theindustry, such as the shutdown of operations for about two weeks in July, the subsequent ramp-up of new model production and the additional one-week shutdown in December by our primaryNorth American customers. Based on our present assessment of future customer productionlevels, over a two-year time horizon, we believe we can meet general and seasonal cash needsusing cash Öows from operations, cash balances and borrowings, if needed. We also believe wecan supplement these sources with access to the capital markets on satisfactory terms and inadequate amounts, if needed, although there can be no assurance that this will be the case.

Cash Flows

Operating Activities

Cash used by operating activities during the Ñrst quarter of 2003 totaled $135 million,compared with cash provided by operating activities of $58 million for the same period in 2002.The use of cash in 2003 reÖects primarily a seasonal increase in trade working capitalrequirements which were a negative $390 million in the Ñrst quarter of 2003, compared withnegative $190 million in the Ñrst quarter of 2002. The negative $390 million in Ñrst quarter of 2003reÖects primarily an increase in receivables resulting from higher Ñrst quarter vehicle productioncompared with the fourth quarter of 2002, and the timing of collections. Depreciation andaccruals were partial oÅsets. Cash payments related to restructuring actions were $41 million and$37 million during the Ñrst quarter of 2003 and 2002, respectively.

Investing Activities

Cash used in investing activities was $153 million during the Ñrst quarter of 2003, comparedwith $239 million for the same period in 2002. Our capital expenditures for the Ñrst quarter of2003 totaled $181 million, compared with $140 million in the Ñrst quarter of 2002. We expect ourcapital spending in 2003 will be higher than the past few years as we undertake spending toconstruct a headquarters facility for consolidation of operations and also to fund our ITinfrastructure. We anticipate that our future headquarters will allow us to centralize customersupport functions, research and development, and selected business operations at less cost thanwe are spending on those activities today. During the Ñrst quarter of 2003 we had net sales andmaturities of marketable securities of $22 million, compared with net purchases of securities of$99 million in the Ñrst quarter of 2002. The lower level of securities purchased during the Ñrstquarter of 2003 reÖects the lower level of attractiveness of these securities as interest rates havefallen compared with the Ñrst quarter of 2002.

Financing Activities

Cash used in Ñnancing activities totaled $22 million in the Ñrst quarter of 2003, comparedwith $24 million in the Ñrst quarter of 2002. The use of cash reÖects primarily funds used torepay maturing short-term commercial paper obligations and dividend payments, oÅset partiallyby proceeds from issuance of other debt, net of principal payments.

On March 12, 2003, the Visteon Board of Directors declared a dividend of $0.06 per shareon the company's common stock, payable on June 2, 2003, to the stockholders of record as ofMay 2, 2003. The dividend of $0.06 per share declared by the Visteon Board of Directors onJanuary 10, 2003, was paid on February 24, 2003. Visteon has paid a dividend each quartersince it became an independent, publicly traded company in June 2000.

20


New Accounting Standards and Accounting Changes

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146(""SFAS 146''), ""Accounting for Costs Associated with Exit or Disposal Activities.'' SFAS 146requires recognition of costs associated with exit or disposal activities when they are incurredrather than at the date of a commitment to an exit or disposal plan. Costs covered by thestandard include lease termination costs and certain employee severance costs that areassociated with a restructuring, discontinued operation, plant closing or other exit or disposalactivity. The provisions of the new standard are eÅective for restructuring, exit or disposalactivities initiated after December 31, 2002. The eÅect of adopting SFAS 146 on Visteon's resultsof operations and Ñnancial position was not material, although SFAS 146 may impact the timingof recognition of costs associated with future restructuring, exit or disposal activities.

In November 2002, the FASB issued Interpretation No. 45 (""FIN 45''), ""Guarantor'sAccounting and Disclosure requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others.'' FIN 45 elaborates on the existing disclosure requirements for mostguarantees, including loan guarantees. It also clariÑes that at the time a company issues aguarantee, the company must recognize an initial liability for the fair value, or market value, ofthe obligations it assumes under that guarantee. However, the provisions related to recognizing aliability at inception of the guarantee for the fair value of the guarantor's obligations does notapply to product warranties or to guarantees accounted for as derivatives. The initial recognitionand initial measurement provisions apply on a prospective basis to guarantees issued ormodiÑed after December 31, 2002. As of March 31, 2003, the eÅect of adopting FIN 45 onVisteon's results of operations and Ñnancial position was not material.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148""Accounting for Stock-Based Compensation Ì Transition and Disclosure Ì an amendment ofFASB Statement No. 123.'' This statement amends Financial Accounting Standards No. 123(""SFAS 123''), ""Accounting for Stock-Based Compensation,'' to provide alternative methods oftransition for a voluntary change to the fair value based method of accounting for stock-basedemployee compensation. In addition, this statement amends the disclosure requirements of SFAS123 to require prominent disclosures in both annual and interim Ñnancial statements about themethod of accounting for stock-based employee compensation and the eÅect of the method usedon reported results. Starting January 1, 2003, Visteon began expensing the fair value of stock-based awards granted to employees pursuant to SFAS 123. This standard was adopted on aprospective method basis for stock-based awards granted, modiÑed or settled afterDecember 31, 2002. The eÅect of expensing the fair value of stock options granted afterDecember 31, 2002, resulted in additional compensation expense of less than $1 million, net oftaxes, during the Ñrst quarter of 2003.

In January 2003, the FASB issued Interpretation No. 46 (""FIN 46''), ""Consolidation ofVariable Interest Entities.'' Until this interpretation, a company generally included another entity inits consolidated Ñnancial statements only if it controlled the entity through voting interests. FIN 46requires a variable interest entity to be consolidated by a company if that company is subject to amajority of the risk of loss from the variable interest entity's activities or entitled to receive amajority of the entity's residual returns. There was no eÅect of adopting FIN 46 on Visteon'sresults of operations and Ñnancial position.

21


Other Financial Information

PricewaterhouseCoopers LLP, our independent accountants, performed a limited review ofthe Ñnancial data presented on pages 1 through 12 inclusive. The review was performed inaccordance with standards for such reviews established by the American Institute of CertiÑedPublic Accountants. The review did not constitute an audit; accordingly, PricewaterhouseCoopersLLP did not express an opinion on the aforementioned data. Their review report included hereinis not a ""report'' within the meaning of Sections 7 and 11 of the 1933 Act and the independentaccountant's liability under Section 11 does not extend to it.

Forward-Looking Statements

This report contains forward-looking statements made pursuant to the Private SecuritiesLitigation Reform Act of 1995. Words such as ""anticipate,'' ""expect,'' ""intend,'' ""plan,'' ""believe,''""seek'' and ""estimate'' signify forward-looking statements. Forward-looking statements are notguarantees of future results and conditions but rather are subject to various risks anduncertainties. Some of these risks and uncertainties include change in the operations of ourcustomers, particularly Ford Motor Company; our ability to win new business from customersother than Ford; our ability to realize cost savings in connection with various restructuring plans;our ability to make pension and other post-retirement payments; labor disruptions; changes inglobal economic conditions, and other factors, risks and uncertainties identiÑed in our AnnualReport on Form 10-K Ñled with the Securities and Exchange Commission on February 14, 2003,and our other Ñlings with the Securities and Exchange Commission. The risks and uncertaintiesso identiÑed are not the only ones facing our company. Additional risks and uncertainties notpresently known to us or that we currently believe to be immaterial also may adversely aÅect us.Should any risks and uncertainties develop into actual events, these developments could havematerial adverse eÅects on our business, Ñnancial condition and results of operations. For thesereasons, we caution you not to place undue reliance on our forward-looking statements. We donot assume any obligation to update any of these forward-looking statements.

22

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

Our primary foreign exchange exposure includes the Mexican peso, the euro, the Canadiandollar and the Czech koruna. Because of the mix between our costs and our revenues in variousregions, we generally are exposed to strengthening of the Mexican peso, the Canadian dollarand the Czech koruna and to weakening of the euro. For transactions in these currencies, weutilize a strategy of partial coverage. As of March 31, 2003, our coverage for projectedtransactions in these currencies was about 60% for 2003.

The net fair value of Ñnancial instruments used to reduce our exposure to volatility in foreigncurrency exchange rates has changed since December 31, 2002. This change is due primarily tothe strengthening of the euro and the Canadian dollar and, secondarily, the weakening of theBritish pound relative to the dollar.

As of March 31, 2003 and December 31, 2002, the net fair value of Ñnancial instruments withexposure to currency risk was a loss of $17 million and $36 million, respectively. Thehypothetical pre-tax gain or loss in fair value of these instruments from a 10% favorable oradverse change in quoted currency exchange rates would be approximately $92 million as ofMarch 31, 2003, and approximately $86 million as of December 31, 2002. These estimatedchanges assume a parallel shift in all currency exchange rates. Because exchange rates typicallydo not all move in the same direction, however, the estimate may overstate the impact ofchanging exchange rates on the net fair value of our Ñnancial derivatives. It is important to notethat gains and losses indicated in the sensitivity analysis would be oÅset by gains and losses onthe underlying exposures being hedged.

Interest Rate Risk

There are no known material changes to our exposure to interest rate risk sinceDecember 31, 2002.

Commodity Market Risk

There are no known material changes to our exposure to commodity market risk sinceDecember 31, 2002.

23

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of Ñling this report, we carried out an evaluation,under the supervision and with the participation of Visteon's Disclosure Committee andmanagement, including the Chief Executive OÇcer and the Chief Financial OÇcer, of theeÅectiveness of the design and operation of our disclosure controls and procedures pursuant toExchange Act Rules 13a-14 and 15d-14. Based upon, and as of the date of, this evaluation, theChief Executive OÇcer and the Chief Financial OÇcer concluded that our disclosure controls andprocedures are eÅective to ensure that information required to be disclosed in Visteon's periodicSEC reports is recorded, processed, summarized, and reported as and when required. Inaddition, they concluded that there were no signiÑcant deÑciencies in the design or operation ofinternal controls which could signiÑcantly aÅect our ability to record, process, summarize andreport Ñnancial data. Except as otherwise discussed herein, subsequent to the date of evaluation,there have been no signiÑcant changes in Visteon's internal controls or in other factors that couldsigniÑcantly aÅect internal controls.

As discussed in Note 13 of our consolidated Ñnancial statements, which are incorporatedherein by reference, we have entered into an agreement that will alter our global IT outsourcingarrangements. This outsourcing arrangement and subsequent transition from Ford's IT systemsmay aÅect existing business processes and related internal controls within Visteon. As part of thetransition, ongoing evaluations of the internal control activity related to these processes will beperformed.

24

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings, which are ordinary, routine proceedings,incidental to the conduct of our business. We do not believe that any legal proceedings to whichwe are a party will have a material adverse eÅect on our Ñnancial condition or results ofoperations, although such an outcome is possible.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Please refer to the Exhibit Index on Page 29.

(b) Reports on Form 8-K

The Registrant Ñled the following Current Reports on Form 8-K during the quarter endedMarch 31, 2003.

Current Report on Form 8-K dated January 10, 2003, included information relating to thedeclaration of a cash dividend.

Current Report on Form 8-K dated January 23, 2003, included information relating to ourfourth quarter and Ñscal year 2002 results.

Current Report on Form 8-K dated February 12, 2003, included information related to theappointment of a new board member and the resignation of a board member.

Current Report on Form 8-K dated March 6, 2003, included information related to anagreement to exit our seating business.

Current Report on Form 8-K dated March 12, 2003, included information related to theappointment of a new board member and the declaration of a cash dividend.

25

SIGNATURE

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

VISTEON CORPORATION

By: /s/ DANIEL R. COULSON

Daniel R. CoulsonExecutive Vice President and

Chief Financial OÇcer(Principal Financial OÇcer)

Date: May 7, 2003

26

CERTIFICATIONS

I, Peter J. Pestillo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Visteon Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information includedin this quarterly report, fairly present in all material respects the Ñnancial condition, resultsof operations and cash Öows of the registrant as of, and for, the periods presented in thisquarterly report;

4. The registrant's other certifying oÇcer and I are responsible for establishing andmaintaining disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-14and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this quarterlyreport is being prepared;

b) evaluated the eÅectiveness of the registrant's disclosure controls and procedures asof a date within 90 days prior to the Ñling date of this quarterly report (the""Evaluation Date''); and

c) presented in this quarterly report our conclusions about the eÅectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

5. The registrant's other certifying oÇcer and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee of registrant's board ofdirectors (or persons performing the equivalent functions):

a) all signiÑcant deÑciencies in the design or operation of internal controls which couldadversely aÅect the registrant's ability to record, process, summarize and reportÑnancial data and have identiÑed for the registrant's auditors any material weak-nesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employeeswho have a signiÑcant role in the registrant's internal controls; and

6. The registrant's other certifying oÇcer and I have indicated in this quarterly reportwhether or not there were signiÑcant changes in internal controls or in other factors thatcould signiÑcantly aÅect internal controls subsequent to the date of our most recentevaluation, including any corrective actions with regard to signiÑcant deÑciencies andmaterial weaknesses.

Date: May 7, 2003/s/ PETER J. PESTILLO

Peter J. PestilloChairman and Chief Executive OÇcer

(Principal Executive OÇcer)

27

I, Daniel R. Coulson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Visteon Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information includedin this quarterly report, fairly present in all material respects the Ñnancial condition, resultsof operations and cash Öows of the registrant as of, and for, the periods presented in thisquarterly report;

4. The registrant's other certifying oÇcer and I are responsible for establishing andmaintaining disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-14and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this quarterlyreport is being prepared;

b) evaluated the eÅectiveness of the registrant's disclosure controls and procedures asof a date within 90 days prior to the Ñling date of this quarterly report (the""Evaluation Date''); and

c) presented in this quarterly report our conclusions about the eÅectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

5. The registrant's other certifying oÇcer and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee of registrant's board ofdirectors (or persons performing the equivalent functions):

a) all signiÑcant deÑciencies in the design or operation of internal controls which couldadversely aÅect the registrant's ability to record, process, summarize and reportÑnancial data and have identiÑed for the registrant's auditors any material weak-nesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employeeswho have a signiÑcant role in the registrant's internal controls; and

6. The registrant's other certifying oÇcer and I have indicated in this quarterly reportwhether or not there were signiÑcant changes in internal controls or in other factors thatcould signiÑcantly aÅect internal controls subsequent to the date of our most recentevaluation, including any corrective actions with regard to signiÑcant deÑciencies andmaterial weaknesses.

Date: May 7, 2003/s/ DANIEL R. COULSON

Daniel R. CoulsonExecutive Vice President and

Chief Financial OÇcer(Principal Financial OÇcer)

28

EXHIBIT INDEX

ExhibitNumber Exhibit Name

3.1 Amended and Restated CertiÑcate of Incorporation of Visteon Corporation (""Visteon'')is incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Qof Visteon dated July 24, 2000.

3.2 Amended and Restated By-laws of Visteon as in eÅect on the date hereof isincorporated herein by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q ofVisteon dated November 14, 2001.

4.1 Indenture dated as of June 23, 2000 between Visteon and Bank One Trust Company,N.A., as Trustee, is incorporated herein by reference to Exhibit 4.1 to the CurrentReport on Form 8-K of Visteon dated July 31, 2000 (Ñled August 16, 2000).

4.2 Form of Common Stock CertiÑcate of Visteon is incorporated herein by reference toExhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 10 of Visteondated May 19, 2000.

10.1 Master Transfer Agreement dated as of March 30, 2000 between Visteon and FordMotor Company (""Ford'') is incorporated herein by reference to Exhibit 10.2 to theRegistration Statement on Form S-1 of Visteon dated June 2, 2000 (FileNo. 333-38388).

10.2 Purchase and Supply Agreement dated as of January 1, 2000 between Visteon andFord is incorporated herein by reference to Exhibit 10.3 to the Registration Statementon Form S-1 of Visteon dated June 2, 2000 (File No. 333-38388).

10.3 Letter Relating to Price Reductions dated March 31, 2000 from Ford is incorporatedherein by reference to Exhibit 10.3.1 to the Registration Statement on Form S-1 ofVisteon dated June 2, 2000 (File No. 333-38388).

10.4 Master Separation Agreement dated as of June 1, 2000 between Visteon and Ford isincorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to theRegistration Statement on Form S-1 of Visteon dated June 6, 2000 (FileNo. 333-38388).

10.5 Aftermarket Relationship Agreement dated as of January 1, 2000 between Visteon andthe Automotive Consumer Services Group of Ford is incorporated herein by referenceto Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form 10 ofVisteon dated May 19, 2000.

10.6 Hourly Employee Assignment Agreement dated as of April 1, 2000 between Visteon andFord is incorporated herein by reference to Exhibit 10.6 to Amendment No. 1 to theRegistration Statement on Form 10 of Visteon dated May 19, 2000.

10.7 Employee Transition Agreement dated as of April 1, 2000 between Visteon and Ford isincorporated herein by reference to Exhibit 10.7 to Amendment No. 1 to theRegistration Statement on Form 10 of Visteon dated May 19, 2000.

10.8 Tax Sharing Agreement dated as of June 1, 2000 between Visteon and Ford isincorporated herein by reference to Exhibit 10.8 to the Registration Statement onForm S-1 of Visteon dated June 2, 2000 (File No. 333-38388).

10.9 Visteon Corporation 2000 Incentive Plan is incorporated herein by reference toAppendix E to the Proxy Statement of Visteon dated March 26, 2001.*

10.10 Form of Revised Change in Control Agreement is incorporated herein by reference toExhibit 10.10 to the Annual Report on Form 10-K of Visteon for the period endedDecember 31, 2000.*

29


10.10.1 Schedule identifying substantially identical agreements to Revised Change in ControlAgreement constituting Exhibit 10.10 hereto entered into by Visteon withMessrs. Pestillo, Johnston, Coulson, Orchard and Marcin, and Ms. Fox is incorporatedherein by reference to Exhibit 10.10.1 to the Annual Report on Form 10-K of Visteon forthe period ended December 31, 2002.*

10.11 Issuing and Paying Agency Agreement dated as of June 5, 2000 between Visteon andThe Chase Manhattan Bank is incorporated herein by reference to Exhibit 10.11 to theQuarterly Report on Form 10-Q of Visteon dated July 24, 2000.

10.12 Corporate Commercial Paper Ì Master Note dated June 1, 2000 is incorporated hereinby reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q of Visteon datedJuly 24, 2000.

10.13 Letter Loan Agreement dated as of June 12, 2000 from The Chase Manhattan Bank isincorporated herein by reference to Exhibit 10.13 to the Quarterly Report on Form 10-Qof Visteon dated July 24, 2000.

10.14 Visteon Corporation Deferred Compensation Plan for Non-Employee Directors isincorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K ofVisteon for the period ended December 31, 2000.*

10.15 Visteon Corporation Restricted Stock Plan for Non-Employee Directors is incorporatedherein by reference to Appendix F to the Proxy Statement of Visteon dated March 26,2001.*

10.16 Visteon Corporation Deferred Compensation Plan, as amended, is incorporated hereinby reference to Exhibit 10.16 to the Annual Report on Form 10-K of Visteon for theperiod ended December 31, 2002.*

10.17 Visteon Corporation Savings Parity Plan is incorporated herein by reference toExhibit 10.17 to the Annual Report on Form 10-K of Visteon for the period endedDecember 31, 2002.*

10.18 Visteon Corporation Pension Parity Plan is incorporated herein by reference toExhibit 10.18 to the Annual Report on Form 10-K of Visteon for the period endedDecember 31, 2002.*

10.19 Visteon Corporation Supplemental Executive Retirement Plan is incorporated herein byreference to Exhibit 10.19 to the Annual Report on Form 10-K of Visteon for the periodended December 31, 2002.*

10.20 Executive Employment Agreement dated as of September 15, 2000 between Visteonand Michael F. Johnston is incorporated herein by reference to Exhibit 10.20 to theAnnual Report on Form 10-K for the period ended December 31, 2001.*

10.21 Service Agreement dated as of November 1, 2001 between Visteon InternationalBusiness Development, Inc., a wholly-owned subsidiary of Visteon, and Dr. HeinzPfannschmidt is incorporated herein by reference to Exhibit 10.21 to the Annual Reporton Form 10-K of Visteon for the period ended December 31, 2002.*

10.22 Visteon Corporation Executive Separation Allowance Plan is incorporated herein byreference to Exhibit 10.22 to the Annual Report on Form 10-K of Visteon for the periodended December 31, 2002.*

10.23 Trust Agreement dated as of February 7, 2003 between Visteon and The NorthernTrust Company establishing a grantor trust for purposes of paying amounts to certainexecutive oÇcers under the plans constituting Exhibits 10.14, 10.16, 10.17, 10.18, 10.19and 10.22 hereto is incorporated herein by reference to Exhibit 10.23 to the AnnualReport on Form 10-K of Visteon for the period ended December 31, 2002.*

30


10.24 Five-Year Revolving Loan Credit Agreement dated as of June 20, 2002 among Visteon,the several banks and other Ñnancial institutions or entities from time to time parties tothe agreement, JPMorgan Chase Bank, as administrative agent, and Bank of AmericaN.A., as syndication agent, is incorporated herein by reference to Exhibit 10.24 to theAnnual Report on Form 10-K of Visteon for the period ended December 31, 2002.

10.25 364-Day/1-Year Term-Out Credit Agreement dated as of June 20, 2002 among Visteon,the several banks and other Ñnancial institutions or entities from time to time parties tothe agreement, JPMorgan Chase Bank, as administrative agent, and Bank of AmericaN.A., as syndication agent, is incorporated herein by reference to Exhibit 10.25 to theAnnual Report on Form 10-K of Visteon for the period ended December 31, 2002.

10.26 Five-Year Term Loan Credit Agreement dated as of June 25, 2002 among Visteon, theseveral banks and other Ñnancial institutions or entities from time to time parties to theagreement, JPMorgan Chase Bank, as administrative agent, and Bank of America N.A.,as syndication agent, is incorporated herein by reference to Exhibit 10.26 to the AnnualReport on Form 10-K of Visteon for the period ended December 31, 2002.

10.27 Pension Plan Agreement eÅective as of November 1, 2001 between Visteon HoldingsGmbH, a wholly-owned subsidiary of Visteon, and Dr. Heinz Pfannschmidt.*

12.1 Statement re: Computation of Ratios.

15.1 Letter of PricewaterhouseCoopers LLP, Independent Accountants, dated May 5, 2003,relating to Financial Information.

99.1 Written Statement of Chief Executive OÇcer dated May 7, 2003.

99.2 Written Statement of Chief Financial OÇcer dated May 7, 2003.

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

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

31

visteon 1Q 2003 Form 10-Q

Economy & Finance

unconsolidated

precious metals

critical assumptions

provide alternative

chief executive

certied public

consolidated

sourcing arrangements