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UNITED STATES

(Mark One)

x

For the quarterly period ended September 30, 2002, or

o

For the transition period from              to             

Commission file number 1-15827

VISTEON CORPORATION

5500 Auto Club Drive, Dearborn, Michigan 48126

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

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

Yes  ü    No       

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 31, 2002, the Registrant had outstanding 130,095,997 shares of Common Stock, par value $1.00 per share.

Exhibit index located on page number 28.

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VISTEON CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VISTEON CORPORATION AND SUBSIDIARIES

The accompanying notes are part of the financial statements.

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VISTEON CORPORATION AND SUBSIDIARIES

The accompanying notes are part of the financial statements.

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VISTEON CORPORATION AND SUBSIDIARIES

The accompanying notes are part of the financial statements.

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VISTEON CORPORATION AND SUBSIDIARIES

      1. Financial Statements — The financial data presented herein are unaudited, but in the opinion of management reflect those adjustments, including normal recurring adjustments, necessary for a fair statement of such information. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the consolidated financial statements and accompanying notes included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Securities and Exchange Commission on March 29, 2002, as amended on August 13, 2002. Certain amounts for prior periods were reclassified to conform with present period presentation.

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

      2. Selected costs and expenses are summarized as follows:

      Amortization amounts for 2001 include amortization of goodwill of $5 million and $17 million for the third quarter and first nine months of 2001, respectively.

      3. Special Charges — Visteon recorded in costs of sales $26 million and $142 million of pre-tax special charges in the third quarter of 2002 and first nine months of 2002, respectively, as summarized below:

	*	First nine months of 2002 amount includes $5 million related to the write-down of inventory.

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NOTES TO FINANCIAL STATEMENTS — (Continued)

     3. Special Charges — (Continued) — As part of Visteon’s ongoing restructuring efforts to improve operations, the company is implementing a comprehensive plan in Europe. Under the plan, Visteon and its unions in Europe expect to implement a number of restructuring actions of manufacturing operations in the UK, Germany and France. Visteon recorded a pre-tax charge of $26 million related to this plan in the third quarter of 2002. Of this charge, $10 million is related to the separation of about 138 hourly employees located at Visteon’s plants in Germany through a special voluntary retirement and separation program. The remaining $16 million is a non-cash impairment charge related to a group of machinery and equipment in Europe for which production activities will be discontinued and the related future undiscounted cash flows are less than the carrying value of the assets held for use. Visteon measured the impairment loss by comparing the carrying value of these fixed assets to the expected proceeds from disposal of the assets after completion of remaining production commitments.

      In the first quarter of 2002, Visteon recorded pre-tax charges of $95 million related to the separation of 820 employees at Markham, Ontario as the company moves nearly all of the non-restraint electronics business to facilities in Mexico, the elimination of about 215 engineering positions in the United States to reduce research and development costs, the closure of our Visteon Technologies facility in California and 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 240 manufacturing positions in Mexico. The engineering-related and Mexican manufacturing-related separations, and the closure of Visteon Technologies, were completed in the first quarter of 2002. The separation of approximately 500 Markham employees occurred in the second and third quarters of 2002, with the remaining separations expected to be completed by the end of the first quarter of 2003.

      Also in the first quarter of 2002, $5 million of accrued restructuring liabilities relating to prior year restructuring plans were reversed reflecting a change in estimated costs to complete these activities.

      Effective April 1, 2002, Visteon completed the sale of its restraint electronics business to Autoliv, Inc. for $25 million, resulting in a pre-tax charge of $26 million in the first quarter of 2002. The sale includes Visteon’s North American and European order book of approximately $150 million in annual sales to Ford Motor Company and its affiliates, including associated manufacturing operations in Markham, Ontario, as well as related assets and liabilities. As part of the sale, approximately 280 employees from Markham and about 95 engineers from Dearborn, Michigan transferred to Autoliv.

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NOTES TO FINANCIAL STATEMENTS — (Continued)

      3. Special Charges — (Continued) — During the second quarter of 2001, Visteon recorded pre-tax charges of $158 million ($100 million after-tax), of which $146 million related to the elimination of more than 2,000 salaried positions, mainly in the United States, and $12 million related to the closure of two European facilities, ZEM in Poland and Wickford in the U.K., and other actions. Of the total pre-tax charges, $42 million is recorded in selling, administrative and other expenses and $116 million is recorded in cost of sales; with $142 million included in the Automotive Operations segment and $16 million included in the Glass Operations segment.

      During the third quarter of 2001, Visteon recorded a pre-tax charge of $34 million ($21 million after-tax) related to special voluntary retirement and separation programs offered to hourly employees located at Visteon’s Nashville Glass plant. This action resulted in the separation of about 245 employees during the third quarter of 2001, and is included in the Glass Operations segment.

      Reserve balances of $23 million and $41 million at December 31, 2001 and September 30, 2002, respectively, are included in current accrued liabilities on the accompanying balance sheets. The September 30, 2002 reserve balance of $41 million includes $9 million related to 2001 restructuring activities. The company currently anticipates that the restructuring activities to which all of the above charges relate will be substantially completed by the end of the first quarter of 2003.

      The following table summarizes the activity related to the remaining restructuring reserves from the 2001 actions, as well as restructuring reserve activity related to the 2002 actions. This table does not include the loss related to the sale of the restraint electronics business:

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NOTES TO FINANCIAL STATEMENTS — (Continued)

      4. Income Per Share of Common Stock — Basic income per share of common stock is calculated by dividing net income by the average number of shares of common stock outstanding during the applicable period, adjusted for restricted stock. The calculation of diluted income per share takes into account the effect of dilutive potential common stock, such as stock options and restricted stock. Basic and diluted income per share were calculated using the following numbers of shares:

      For the third quarter of 2002, first nine months of 2002, third quarter of 2001 and first nine months of 2001 potential common stock of about 551,000, 658,000, 697,000 and 367,000 shares, respectively, are excluded as the effect would have been antidilutive.

      5. Transactions with Ford and its Affiliates — Visteon’s supply agreement and related pricing letter with Ford Motor Company required Visteon to provide Ford with productivity price adjustments for 2001, 2002 and 2003. In March 2002, Visteon and Ford reached an agreement resolving North American pricing for 2001 that was consistent with Visteon’s previously established reserves. In June 2002, Visteon and Ford reached an agreement resolving European pricing for 2001 and 2002 that, together with resolution of other commercial matters, was consistent with Visteon’s previously established reserves.

      6. Land Lease — In January 2002, Visteon completed an arrangement with a special-purpose entity, owned by an affiliate of a bank, to lease land in Southeast Michigan for a headquarters facility. The lease term is through October 31, 2002, at which time Visteon has the option to renew the lease on terms mutually acceptable to Visteon and the lessor, purchase the land or arrange for the sale of the property. Visteon has a contingent liability for up to approximately $23 million in the event the property is sold for less than full cost.

      From June 30, 2002, the assets, liabilities, results of operations and cash flows of the special-purpose entity are included in Visteon’s consolidated financial statements, based on an assessment made when the lease was extended during the second quarter of 2002, that substantially all of the expected residual risks and rewards of the leased land reside with Visteon. This assessment included consideration of the terms of the lease agreement, the amount of the owner’s equity capital investment, and that Visteon began to finance the special-purpose entity’s debt.

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NOTES TO FINANCIAL STATEMENTS — (Continued)

      7. Inventories are summarized as follows:

      8. Debt — During the second quarter of 2002, Visteon renewed its financing arrangements with third-party lenders that provide contractually committed, unsecured revolving credit facilities. The new financing arrangements are with a syndicate of lenders providing for a maximum of $1.8 billion in committed, unsecured credit facilities (the “Credit Facilities”). The terms of the Credit Facilities provide for a 364-day revolving credit line in the amount of $775 million, which expires June 2003, and a five-year revolving credit line in the amount of $775 million, which expires June 2007. The Credit Facilities also provide for a five-year delayed draw term loan in the amount of $250 million, which will be used primarily to finance construction of a headquarters facility in Southeast Michigan. Consistent with the prior financing arrangements, the Credit Facilities would bear interest based on a variable interest rate option selected at the time of borrowing and the Credit Facilities contain certain affirmative and negative covenants including a covenant not to exceed a specified leverage ratio. As of September 30, 2002, there were no amounts outstanding under the Credit Facilities.

      9. Comprehensive Income (Loss) is summarized as follows:

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NOTES TO FINANCIAL STATEMENTS — (Continued)

      10. Accounting Change — Effective January 1, 2002, Visteon adopted Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. SFAS 142 no longer permits amortization of goodwill and establishes a new method of testing goodwill for impairment by using a fair-value based approach. Under previous accounting standards, Visteon evaluated goodwill for possible impairment by comparing operating income before amortization of goodwill to 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 Plastic Omnium and the increase of Visteon’s ownership in Halla Climate Corporation to 70% by purchasing 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 impairment using a fair-value approach was performed at the Automotive Operations level by comparing the estimated fair value of our Automotive Operations segment to the segment’s net book value. Visteon’s stock market capitalization, as well as market multiples and other factors, were used as the basis for determining the fair value of the Automotive Operations segment. Because the fair value of the Automotive Operations segment was considered less than its net book value, Visteon recorded an impairment loss on goodwill of $363 million ($265 million after-tax) as a cumulative effect of change in accounting principle in the first quarter of 2002. The pre-tax impairment loss consists of $357 million of net goodwill as of December 31, 2001 and $6 million reclassified to goodwill related to certain acquired intangible assets, as required by SFAS 142.

      The following presents net income and earnings per share, adjusted to reflect the adoption of the non-amortization provisions of SFAS 142, as of the beginning of the periods presented:

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NOTES TO FINANCIAL STATEMENTS — (Continued)

     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:

      Total assets at December 31, 2001 were $10,853 million, $309 million and $11,162 million for Automotive Operations, Glass Operations and Total Visteon, respectively. Total assets at December 31, 2000 were $11,116 million, $289 million and $11,405 million for Automotive Operations, Glass Operations and Total Visteon, respectively.

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NOTES TO FINANCIAL STATEMENTS — (Continued)

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

      Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by Visteon for matters discussed in the foregoing paragraph where losses are deemed probable; these reserves are adjusted periodically to reflect estimates of ultimate probable outcomes. It is reasonably possible, however, that some of the matters discussed in the foregoing paragraph for which reserves have not been established could be decided unfavorably to Visteon and could require Visteon to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated at September 30, 2002. Visteon does not reasonably expect, based on its analysis, that any adverse outcome from such matters would have a material effect on future consolidated financial statements for a particular year, although such an outcome is possible.

      In July 2002, Visteon entered into an agreement to consolidate the resolution of various pending employment-related claims and litigation relating to allegations made by current and former employees at a Michigan facility. The amounts paid pursuant to this agreement were in line with reserves established in the second quarter of 2002.

      Visteon has resolved a number of commercial issues with Ford. See Note 5 for further discussion of some of the commercial issues resolved with Ford under the supply agreement and pricing letter agreement.

      13. Subsequent Event — In October 2002, Visteon extended the lease discussed in Note 6 through December 31, 2017.

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To the Board of Directors and Stockholders

      We have reviewed the accompanying consolidated balance sheet of Visteon Corporation and its Subsidiaries as of September 30, 2002, and the related consolidated statement of income and condensed consolidated statement of cash flows for the three-month and nine-month periods ended September 30, 2002 and September 30, 2001. These financial statements are the responsibility of the Company’s management.

      We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

      We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2001, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated January 16, 2002, except for Note 17, as to which the date is March 11, 2002, and Note 3, as to which the date is August 12, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2001, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

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      The financial data presented herein are unaudited, but in the opinion of management reflect those adjustments, including normal recurring adjustments, necessary for a fair statement of such information. Reference should be made to the consolidated financial statements and accompanying notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2002, as amended on August 13, 2002.

Overview

      In the third quarter of 2002, Visteon’s worldwide sales were $4.3 billion, compared with $3.7 billion in the third quarter of 2001. Visteon reported a net loss of $52 million, or $0.40 per share, in the third quarter of 2002, including after-tax special charges of $17 million. The third quarter net loss in 2001 was $95 million, or $0.74 per share, including after-tax special charges of $21 million. Excluding special charges, Visteon reported a net loss of $35 million in the third quarter of 2002, compared with $74 million in the third quarter of 2001.

      Special charges incurred in the third quarter of 2002 are associated with the comprehensive plan being implemented in Europe as part of our ongoing efforts to improve operations. Under the plan, Visteon and its unions in Europe expect to restructure a number of manufacturing operations in the U.K., Germany and France. In the third quarter of 2002, Visteon recorded an after-tax charge of $17 million related to this plan. Of this charge, about $7 million is related to the separation of approximately 138 hourly employees located at Visteon’s plants in Germany through a special voluntary retirement and separation program. The remaining $10 million is a non-cash impairment charge related to a group of machinery and equipment in Europe for which production activities will be discontinued and the future related undiscounted cash flows are less than the carrying value of the assets held for use.

      In the fourth quarter of 2002, Visteon expects to incur additional special charges related to the European restructuring discussed above and a special early retirement program offered to U.S. salaried employees.

      During the third quarter of 2001, Visteon recorded an after-tax charge of $21 million related to special voluntary retirement and separation programs offered to hourly employees located at Visteon’s Nashville Glass plant. This action resulted in the separation of about 245 employees during the third quarter of 2001.

      In the first nine months of 2002, Visteon’s worldwide sales were $13.9 billion, compared with $13.4 billion in the first nine months of 2001. Visteon reported a net loss of $318 million or $2.48 per share in the first nine months of 2002 compared with a net loss of $104 million or $0.80 per share in the first nine months of 2001. Excluding special charges discussed below, Visteon’s income for the first nine months of 2002 was $38 million compared with $17 million in the first nine months of 2001.

      During the first nine months of 2002, Visteon recorded net after-tax charges of $91 million, including the third quarter actions described above, related to a number of special actions and the sale of our restraint electronics business, as described in Note 3 of our consolidated financial statements, which is incorporated herein by reference. In addition, in the first quarter of 2002 the company adopted Statement of Financial Accounting Standards No. 142 (“SFAS 142”), Goodwill and Other Intangible Assets. With this change in accounting principle, Visteon recorded a non-cash write-off for the entire value of goodwill of $265 million after-tax, as described in Note 10 of our consolidated financial statements, which is incorporated herein by reference.

      During the first nine months of 2001, Visteon implemented a number of special actions and recorded an after-tax charge of $121 million associated primarily with salaried workforce restructuring and the special voluntary retirement and separation program offered to hourly

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employees located at Visteon’s Nashville plant discussed above and as described in Note 3 of our consolidated financial statements, which is incorporated herein by reference. Cash payments related to restructuring actions were $71 million and $70 million during the first nine months of 2002 and 2001, respectively.

Results of Operations

Third Quarter 2002 Compared with Third Quarter 2001

      Sales for each of our segments for the third quarter of 2002 and 2001 are summarized in the following table:

      Sales for Automotive Operations in the third quarter of 2002 were $4.2 billion, compared with $3.6 billion in the third quarter of 2001, an increase of $613 million or 17%. Sales for Glass Operations were $153 million in the third quarter of 2002, compared with $144 million in the third quarter of 2001, an increase of $9 million or 6%. Increased sales for Automotive Operations reflect primarily stronger Ford North American production volume, new business and favorable currency exchange rates, offset partially by price reductions, lower prices associated with precious metals purchased under pass-through arrangements with Ford, and the sale of our restraint electronics business effective April 1, 2002. Increased sales for Glass Operations reflect primarily stronger Ford production volume in North America. Sales to non-Ford customers increased $181 million, or 25%, compared with the third quarter of 2001 and were 21% of total sales for the third quarter of 2002.

      Cost of Sales for the third quarter of 2002 were $4.2 billion, $557 million higher when compared with the third quarter of 2001. Cost of sales primarily includes material, labor, manufacturing overhead and other costs, such as product development costs. The increase reflects primarily stronger production volume in North America, new business, higher wage rates, and the effect of currency exchange rates, partially offset by reduced product engineering costs, net material cost reductions and manufacturing labor efficiencies. Lower costs associated with precious metals purchased under pass-through arrangements with Ford were also an offset. Special charges were lower in 2002 than 2001, totaling $26 million and $34 million respectively.

      Selling, administrative and other expenses for the third quarter of 2002 were $207 million compared to $198 million in the third quarter of 2001, an increase of $9 million. The increase reflects primarily changes to our customer interface organization with a concentration on program management and product line teams.

      Net interest expense of $19 million in the third quarter of 2002 was down $1 million from the third quarter of 2001.

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

      Equity in net income of affiliated companies was $16 million in the third quarter of 2002 compared with $5 million in the comparable period in 2001, with the increase related primarily to our affiliates located in Asia.

      Income (loss) before income taxes, including and excluding special charges, is the primary profitability measure used by our chief operating decision makers. The following table shows income (loss) before income taxes, including and excluding special charges for the third quarter of 2002 and 2001, for each of our segments: