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UNITED STATES

FORM 10-K

(Mark One)

x

For the fiscal year ended December 31, 2002, or

o

For the transition period from                    to                   

Commission file number 1-15827

VISTEON CORPORATION

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

Securities registered pursuant to Section 12(b) of the Act:

     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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

    Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  ü    No      

    As of January 31, 2003, the registrant had outstanding 129,024,309 shares of common stock. The aggregate market value of such common stock held by non-affiliates of the registrant as of such date was $877,805,738, based on the closing price of the common stock on that date ($6.87 a share) as reported by the New York Stock Exchange.

Document Incorporated by Reference*

*	As stated under various Items of this Report, only certain specified portions of such document are incorporated by reference in this Report.

PART I

ITEM 1. BUSINESS

Overview

      Visteon Corporation is a leading global supplier of automotive systems, modules, and components to global vehicle manufacturers and the automotive aftermarket. Headquartered in Dearborn, Michigan, we have global capabilities, with regional headquarters in Cologne, Germany, Yokohama, Japan, and São Paulo, Brazil. We have a workforce of approximately 77,000 and a network of manufacturing sites, technical centers, sales offices and joint ventures located in every major region of the world.

      Visteon operates in two business segments: Automotive Operations and Glass Operations.

      Automotive Operations: Visteon is a leading global supplier of automotive systems, modules and components in the following product areas: climate control, interior, exterior, powertrain, chassis, and electronics. Our products are featured on vehicles built by many leading automotive manufacturers, including Ford Motor Company, General Motors, Toyota, Daimler-Chrysler, Volkswagen, Honda, Renault, Nissan, Hyundai, Peugeot, Mazda and BMW.

      Glass Operations: Our Glass Operations segment is composed of our vehicle glazing product group, which produces glass products for Ford and aftermarket customers, and our commercial glass product group, which produces float glass for commercial architecture.

      Visteon was incorporated in Delaware in January 2000 as a wholly-owned subsidiary of Ford. Ford subsequently transferred to Visteon the assets and liabilities comprising its automotive components and systems business. Visteon separated from Ford on June 28, 2000 when all of the common stock of Visteon was distributed by Ford to its shareholders.

Financial Information About Business Segments

      Business segment financial information can be found on pages 72-74 of this Annual Report on Form 10-K (Note 16, “Segment Information”, of our consolidated financial statements).

Automotive Parts Industry

      The automotive parts industry provides systems, modules, and components to vehicle manufacturers for the manufacture of new vehicles, as well as to the aftermarket for use as replacement and enhancement parts. Historically, large vehicle manufacturers operated internal divisions to provide a wide range of component parts for their vehicles. More recently, vehicle manufacturers have moved towards a competitive sourcing process for automotive parts, including increased purchases from independent suppliers, as they seek lower-priced and/or higher-technology products. Demand for aftermarket products tends to increase when vehicle owners retain their vehicles longer, as these vehicles generally have a greater need for repairs.

      Industry Trends. The following key trends have been affecting the automotive parts industry over the past several years:

	•	Demand for Safe and Environmentally Friendly Products. Consumers are increasingly interested in products and technologies that make them feel safer and more secure. Vehicle manufacturers and many governmental regulators are increasingly requiring safe and environmentally friendly products. This demand coupled with advances in technology have led to a number of new product opportunities for companies like Visteon possessing strong innovation capabilities such as advanced front lighting systems, driver information technologies, emissions controls, fuel consumption improvements and recyclable materials. In addition, Visteon is prepared to support the technology needs of advanced systems to support environmentally focused power systems, such as fuel cells, which could revolutionize the automotive industry.

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	•	Increasing Electronics Integration and Technological Content. Electronics integration, which typically involves replacing bulky mechanical components with electronic ones and/or adding new electrical functions to the vehicle, allows vehicle manufacturers improved control over vehicle weight, costs and functionality. Integrated electronic solutions help auto manufacturers improve fuel economy through weight reduction and reduce emissions through improved air and engine control systems. In addition, Visteon is combining its leadership position in automotive supply with leaders in non-automotive electronics to offer vehicle manufacturers integrated technologies that meet key consumer and regulatory needs.
	•	Globalization of Suppliers. In order to serve multiple markets more efficiently, vehicle manufacturers are assembling vehicle platforms globally. With this globalization, vehicle manufacturers are increasingly interested in global suppliers that can better serve multiple markets, address local consumer preferences while controlling design costs and minimizing import tariffs in local markets. Visteon’s presence in more than 190 facilities, in 25 countries, on 6 continents makes it well positioned to meet this need.
	•	Ongoing Industry Consolidation. The worldwide automotive parts industry is consolidating as suppliers seek to achieve operating synergies through business combinations, shift production to locations with more flexible work rules and practices, acquire complementary technologies, build stronger customer relationships and follow their customers as they expand globally. Visteon’s ability to provide vehicle manufacturers with single-point sourcing of integrated systems and modules on a global basis has improved its ability to respond to this consolidation.
	•	Design of several model derivatives off of a single vehicle platform. Vehicle manufacturers have moved to designing and producing several vehicle models off of a single vehicle platform. With this method, vehicle manufacturers will vary the design of some components to create the different vehicle models and standardize other components across the platform, helping to reduce the overall cost of design and manufacture of each model. Suppliers like Visteon with its broad product line of innovative new systems are well positioned to assist vehicle manufacturers in differentiating each of their vehicle models.
	•	Increased competitive intensity and market pressures on OEs. As vehicle manufacturers are under increasing pressure to adjust to changing consumer preferences and to incorporate technological advances, they are shortening product development times. These shorter development times allow vehicle manufacturers to effectively introduce vehicles and features that match prevailing consumer preferences. In order to simplify the vehicle design and assembly processes and reduce their costs, vehicle manufacturers are experimenting with opportunities for their suppliers to provide fully engineered, pre-assembled systems rather than individual components. By offering sophisticated systems and modules rather than individual components, automotive suppliers like Visteon are well positioned to capture value from the design, engineering, research and development and assembly functions vehicle manufacturers are increasingly looking to outsource.

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Products

      Visteon designs and manufactures components, systems, and modules that can make up as much as 40% of the value of a vehicle. We support our products with a full-range of styling, design, testing and manufacturing capabilities, including just-in-time and in-sequence delivery.

      The following discussion describes the major product groups within each segment. Financial information relating to sales attributable to each of these product groups can be found in Note 16, “Segment Information”, of our consolidated financial statements.

Automotive Operations

      Chassis Products & Systems. Visteon designs and manufactures a wide array of chassis-related products, from driveline systems for popular all-wheel drive vehicles to steering and suspension systems.

      Interior Products & Systems. Visteon is one of the leading global suppliers of cockpit systems, instrument panels, door modules and interior trim and console modules.

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      Climate Control Products & Systems. Visteon is one of the leading global suppliers of components, modules, and systems that provide automotive heating, ventilation and air conditioning, and powertrain cooling.

      Powertrain Products & Systems. Visteon offers innovative designs in engine management, fuel storage and delivery, and electrical conversion systems, which are designed to provide the automotive customer with solutions that enhance powertrain performance, fuel economy and emissions control.

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      Electronic Products & Systems. Visteon is one of the leading global suppliers of high-tech in-vehicle entertainment, driver information, wireless communication, safety and security electronics.

      Exterior Products & Systems. Visteon’s can provide exterior packages that deliver high quality and functionality to the automotive customer.

Glass Operations

      Our Glass Operations are composed of our vehicle glazing product group, which produces glass products for Ford and aftermarket customers, and our commercial glass product group, which produces float glass for commercial architecture. Glass Operations accounted for about $600 million, or 3%, of our 2002 total sales. The following table provides a description of the Glass Operations segment product lines:

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Customers

      Visteon sells its products primarily to global vehicle manufacturers. In addition, we sell products for use as aftermarket and service parts to automotive original equipment manufacturers and others for resale through their own independent distribution networks.

Vehicle Manufacturers

      Visteon does business with all of the world’s largest vehicle manufacturers including Ford, General Motors, Toyota, Daimler-Chrysler, Honda, Volkswagen, Renault, Nissan, Hyundai, Peugeot, Mazda and BMW. Ford is our largest customer, and in 2002 our sales to Ford accounted for about 80% of our 2002 total sales. Our top five customers other than Ford accounted for approximately 8% of our total 2002 sales, which includes certain sales to Mazda Motor Corporation, of which Ford owns a 33.4% equity interest. In 2002, we secured over $1 billion of net new non-Ford business for the second year in a row.

      Price reductions are typically negotiated on an annual basis between suppliers and vehicle manufacturers. Such reductions are intended to take into account expected annual reductions in the overall cost to the supplier of providing products and services to the customer, through such factors as overall increases in manufacturing productivity, material cost reductions, and design-related cost improvements. Visteon has an aggressive cost reduction program that focuses on reducing our total costs, which are intended to offset these customer price reductions.

Aftermarket

      We sell products to the worldwide aftermarket as replacement parts or as customized products, such as body appearance packages and in-car entertainment systems, for current production and older vehicles. In 2002, our aftermarket sales were $905 million, representing 5% of our total sales. We currently sell 59% of these products to the independent aftermarket and 41% to Ford’s Automotive Consumer Service Group, the principal aftermarket sales organization of Ford. In 2002, aftermarket sales of our glass products were $171 million, representing 1% of our total sales and 19% of our total aftermarket sales.

      In connection with Visteon’s separation from Ford, Visteon and Ford entered into a series of agreements outlining the terms of separation and the relationship between Visteon and Ford on an ongoing basis. The following summary of certain of these agreements is qualified in all respects by the actual terms of the respective agreements.

      Master Transfer Agreement. The master transfer agreement, effective as of April 1, 2000, provided for Ford to transfer to Visteon and/or its subsidiaries, all assets used exclusively by Visteon, including but not limited to real property interests, personal property and ownership interests in subsidiaries and joint ventures.

      In addition, Visteon and Ford agreed to a division of liabilities including liabilities related to product liability, warranty, recall, environmental, intellectual property claims and other general litigation claims. Visteon and Ford agreed on a division of responsibility for product liability, warranty and recall matters as follows: (a) Ford will retain liability for all product liability, warranty or recall claims that involve parts made or sold by Visteon for 1996 or earlier model year Ford vehicles, (b) Visteon is liable for all product liability, warranty or recall claims that involve parts made or sold by Visteon for 1997 or later model year Ford vehicles in accordance with Ford’s global standard purchase order terms as applied to other Tier 1 suppliers and (c) Visteon has assumed all responsibility for product liability, warranty or recall claims relating to parts made or sold by Visteon to any non-Ford customers.

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      Supply Agreement and Pricing Letter Agreement. The supply agreement provides that Visteon’s existing purchase orders with Ford as of January 1, 2000, will generally remain in effect at least through the end of 2003, subject to Ford’s right to terminate any particular purchase order for quality or other reasons. In addition, the pricing letter required a one-time 5% price reduction on products that Visteon was supplying to Ford as of January 1, 2000, based on a market pricing review conducted by Ford and Visteon. The pricing letter also required productivity price adjustments in each of 2000, 2001, 2002 and 2003 to reflect competitive price reductions obtained each year by Ford from its other Tier 1 suppliers. Visteon and Ford agreed on a 3.5% productivity price reduction for 2000 on such products. In March 2002, Visteon and Ford reached agreement regarding disputed North American pricing for 2001 as well as general consensus on issues relating to productivity price adjustments for 2002 and 2003. Subsequently in June 2002, Visteon and Ford reached agreement regarding disputed European pricing for 2001 and 2002, as well as certain other commercial matters.

      Under the supply agreement, until May 31, 2003, we have a right of last refusal to meet competitive terms, including price, technology, service and design, on replacement products that (1) we produce in North America, Europe and Mexico (for Mexican production intended for export to the U.S. only) and (2) we supplied to Ford on January 1, 2000. Although the right of last refusal does not apply to Ford’s Volvo or Jaguar brand vehicles or to Mazda Motor Corporation’s vehicles, Ford has agreed to use reasonable efforts to provide us with similar opportunities to bid for business with respect to these vehicles.

      We have the opportunity to bid on the same basis as other suppliers for other new Ford business. Our ability to realize sales on all Ford business, including business awarded pursuant to existing purchase orders, is in all cases subject to a variety of factors, including the volume and option mix of vehicles actually produced by Ford, the timing of that production and our continuing competitiveness.

      Master Separation Agreement. Ford provides a number of transitional services to Visteon pursuant to the master separation agreement and related arrangements, including information technology, human resources, accounting, customs, product development technology and real estate services. Visteon agreed to pay Ford amounts which reflect its fully accounted cost for these services, including a reasonable allocation of internal overhead costs, as well as any direct costs incurred from outside suppliers. Except for certain information technology services, Ford’s obligation to provide these services pursuant to the master separation agreement expired in June 2002, and Visteon and Ford are in the process of negotiating new arrangements covering many of these services.

      Hourly Employee Assignment Agreement. The hourly employee assignment agreement sets forth a number of rights and obligations with respect to the United States hourly employees of Ford who (i) were represented by the UAW, (ii) were covered by the Ford UAW Master Collective Bargaining Agreement dated as of September 30, 1999, (iii) were employed in one of Visteon’s facilities as of the date of the spin-off and (iv) after Visteon’s spin-off were assigned to work for Visteon.

      Under this agreement, Visteon exercises day-to-day supervision over the covered individuals and Ford will continue to provide the same employee benefits generally offered to other hourly employees of Ford who are represented by the UAW. Visteon reimburses Ford for the wage, benefit and other costs incurred by Ford related to these individuals. However, Visteon’s reimbursement obligation for profit sharing based on Ford’s profits is limited to $50 million per year in each of 2000-2004. After 2004, Visteon will be responsible for reimbursing Ford for the full amount of profit sharing based on Ford’s profits. For further information, see “Workforce” set forth below.

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Competition

      We conduct our business in a complex and highly competitive industry. The global automotive parts industry principally involves the supply of systems, modules, and components to vehicle manufacturers for the manufacture of new vehicles. Additionally, suppliers provide components to other suppliers for use in their product offerings and to the aftermarket for use as replacement or enhancement parts for older vehicles. As the supplier industry continues to consolidate, the overall number of competitors has decreased and the automotive parts industry remains extremely competitive. Vehicle manufacturers rigorously evaluate suppliers on the basis of product quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, leanness of facilities, operational flexibility, customer service and overall management. Many of our competitors have lower cost structures, particularly with respect to wages and benefits, than our company.

      Our overall product portfolio is extremely broad by industry standards. Very few other Tier 1 suppliers compete across the full range of our product areas. Visteon does have significant competition in each of its market segments; the most significant competitors by segment are listed below.

      Automotive Operations. Our principal competitors in the Automotive Operations segment include the following: American Axle & Manufacturing Holdings, Inc., Behr GmbH, Robert Bosch GmbH, Dana Corporation, Delphi Corporation, Denso Corporation, Faurecia Group, Johnson Controls, Inc., Lear Corporation, Magna International, Inc., Siemens VDO, TRW Inc. and Valéo S.A.

      Glass Operations. Our principal competitors in the Glass Operations segment include the following: Asahi Glass Company Limited, AFG Industries, Inc., Guardian Industries Corp., Pilkington and PPG Industries, Inc.

International

      Financial information about sales and net property by major geographic area can be found on page 74 of this Annual Report on Form 10-K (Note 16, “Segment Information”, of our consolidated financial statements).

Seasonality

      Our business is moderately seasonal because our largest North American customers typically halt operations for about two weeks in July for model year changeovers and about one week in December during the winter holidays. In addition, third quarter automotive production traditionally is lower as new models enter production. Accordingly, our third and fourth quarter results may reflect these trends.

Product Research and Development

      Visteon’s research and development efforts are intended to maintain our leadership position in the industry and provide us with a competitive edge as we seek additional business with new and existing customers. Total research and development expenditures were approximately $902 million in 2002, $1,037 million in 2001 and $1,115 million in 2000. We realigned resources to focus on our growth businesses and discontinued work on products where revenues and margins were not in line with investments. Visteon also works with technology development partners, including customers, to develop technological capabilities and system enhancements.

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Intellectual Property

      Visteon owns significant intellectual property, including a large number of patents, copyrights, proprietary tools and technologies, and trade secrets, and is involved in numerous licensing arrangements. Although the company’s intellectual property plays an important role in maintaining its competitive position, no single patent, copyright, proprietary tool or technology, trade secret or license, or group of related patents, copyrights, proprietary tools or technologies, trade secrets or licenses, is, in the opinion of management, of such value to Visteon that its business would be materially affected by the expiration or termination thereof. The company’s general policy is to apply for patents on an ongoing basis in the United States and appropriate other countries on its significant patentable developments.

      Visteon also views its name and mark as significant to its business as a whole. In addition, the company owns a number of other trade names and marks applicable to certain of its businesses and products that it views as important to such businesses and products.

Raw Materials

      Raw materials used by Visteon in the manufacture of our products primarily include steel, aluminum, resins, precious metals and urethane chemicals. All of the materials used are generally readily available from numerous sources except precious metals. Precious metals (for catalytic converter production) are purchased from Ford, and Ford assumes the risk of assuring supply and accepts market price risk. We do not anticipate significant interruption in the supply of raw materials that would have a material impact on our business.

Workforce

      Visteon’s workforce as of December 31, 2002, included approximately 77,000 persons, of which approximately 18,000 were salaried and 59,000 were hourly. Of the hourly workforce, approximately 21,500 are covered under the Ford UAW Master Collective Bargaining Agreement but have been indefinitely assigned to work for Visteon, and another 600 hourly employees are employed by Visteon and work in the same UAW-represented facilities. Under an agreement between Ford and Visteon, we have agreed to reimburse Ford for the cost of the Visteon-assigned Ford-UAW hourly employees. This includes amounts (limited to $50 million per year until after 2004) for profit sharing based on Ford’s profits. About $4 million of profit sharing expense was recognized in 2002; no profit sharing expense was recognized in 2001; and the full $50 million was recognized in 2000. We also have agreed with Ford that all new hourly employees hired into our UAW-represented facilities during the term of the current four-year Ford UAW agreement and the terms of the next two master agreements between Ford and the UAW will, for the duration of their employment with and retirement from Visteon, receive wages, benefits and other terms and conditions of employment that closely reflect those required to be provided from time to time by Ford to its UAW-represented employees. The present Ford UAW agreement expires in September 2003. Although we have the right to participate in future negotiations as well as the planning and strategy development concerning the terms of, and issues arising under, the Ford UAW collective bargaining agreements, Ford reserves the right to handle such matters if a joint course of action cannot be agreed upon.

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      In Europe, all Ford employees (both hourly and salaried) working in Visteon facilities at the time of the spin-off became Visteon employees. In the spin-off agreement with the employee representatives, it was agreed that, during their employment and retirement, Visteon would provide these employees with wages, benefits and other terms of employment that closely reflect those provided by Ford to its employees in the respective countries. The majority of our European employees are members of industrial trade unions and confederations within their respective countries. Many of these organizations operate under collective contracts that are not specific to any one employer. Visteon’s national agreement with the British trade unions will expire in November 2004. Visteon’s collective agreement with the German trade unions will expire in February 2004.

      We constantly work to establish and maintain positive, cooperative relations with our unions around the world and we believe that our relationships with unionized employees to be satisfactory. There have been no significant work stoppages in the past three years.

Environmental Matters

      Visteon is subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions, water discharge and waste management. Visteon is also subject to environmental laws requiring the investigation and cleanup of environmental contamination at properties it presently owns or operates and at third party disposal or treatment facilities to which these sites sent or arranged to send hazardous waste. Further, in connection with our spin-off from Ford, Visteon and Ford have generally agreed that we are liable for all future claims relating to the sites that have been transferred to us and our operation of those sites, including off-site disposal. At the time of spin-off, Visteon and Ford also agreed on a division of liability for, and responsibility for management and remediation of, environmental claims existing at that time.

      We are aware of contamination at some of our properties and have agreed to an allocation of liability with Ford relating to various third party superfund sites at which Ford has been named as a potentially responsible party. We are in various stages of investigation and cleanup at these sites. At December 31, 2002, Visteon had recorded a reserve of approximately $12 million for this environmental investigation and cleanup. However, estimating liabilities for environmental investigation and cleanup is complex and dependent upon a number of factors beyond our control and which may change dramatically. Accordingly, although we believe our reserves to be adequate based on current information, we cannot assure you that our eventual environmental investigation and cleanup costs and liabilities will not exceed the amount of our current reserve. During 2002, we did not incur any material capital expenditures relating primarily to environmental compliance.

Available Information

      Our current and periodic reports filed with the Securities and Exchange Commission, including amendments to those reports, may be obtained through our internet website at www.visteon.com free of charge as soon as reasonably practicable after we file these reports with the SEC.

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ITEM 2. PROPERTIES

      Our principal executive offices are located in Dearborn, Michigan. We occupy this facility, as well as a number of other facilities, under arrangements with Ford. We also maintain regional headquarters in Cologne, Germany, in Yokohama, Japan and in São Paulo, Brazil.

      We and our joint ventures maintain 65 technical facilities/ sales offices and 126 plants in 25 countries throughout the world, of which approximately 96 facilities are owned in fee simple and 95 are leased. The following table shows the approximate total square footage of our principal owned and leased manufacturing facilities by region as of December 31, 2002:

      In some locations, we have combined a manufacturing facility, technical center and/or customer service center and sales office at a single multi-purpose site. The following table shows the approximate number of various types of facilities by region and segment as of December 31, 2002:

      We believe that our facilities are suitable and adequate, and have sufficient productive capacity, to meet our present needs. The majority of our facilities are operating at normal levels based on their respective capacities except those facilities that are in the process of being closed or transferred.

ITEM 3. LEGAL PROCEEDINGS

      We are involved in routine litigation incidental to the conduct of our business. We do not believe that any litigation to which we are currently a party would, if determined adversely to us, have a material adverse effect on our financial condition, results of operations or cash flows, although such an outcome is possible.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

ITEM 4A. EXECUTIVE OFFICERS OF VISTEON

      The following table shows information about the executive officers of our company. All ages are as of February 1, 2003:

      Peter J. Pestillo has been the company’s Chairman of the Board and Chief Executive Officer since the company’s formation in January 2000. Before that, Mr. Pestillo had been the Vice Chairman and Chief of Staff of Ford, and previously Ford’s Executive Vice President, Corporate Relations. Mr. Pestillo had been, prior to the Visteon spin-off in June 2000, a Ford employee since 1980. Mr. Pestillo is also a director of Rouge Industries, Inc. and Sentry Insurance.

      Michael F. Johnston has been the company’s President and Chief Operating Officer since September 2000 and was elected to the company’s Board of Directors in May 2002. Before that, Mr. Johnston had been President, e-business for Johnson Controls, Inc., and previously President-North America and Asia of Johnson Control’s Automotive Systems Group, and President of its automotive interior systems and battery operations. Mr. Johnston is also a director of Flowserve Corporation.

      Daniel R. Coulson has been Executive Vice President and Chief Financial Officer of the company since the company’s formation in January 2000. Before that, he was Ford’s Director of Accounting. Mr. Coulson had been, prior to the Visteon spin-off in June 2000, a Ford employee since 1965.

      James C. Orchard has been Executive Vice President and President, North America and Asia of the company since August 2001. Before that, Mr. Orchard had been Chief Executive Officer, ZF Group North America and South America, and a member of the ZF Board of Management.

      Stacy L. Fox has been Senior Vice President, General Counsel and Secretary of the company since the company’s formation in January 2000. Before that, she was Group Vice President and General Counsel of the Automotive Systems Group of Johnson Controls, Inc.

      Robert H. Marcin has been the company’s Senior Vice President, Corporate Relations since January 2003 and, prior to that, he served as the company’s Senior Vice President of Human Resources since the company’s formation in January 2000. Before that, he was Executive Director — Labor Affairs for Ford and Ford’s Director, U.S. Union Affairs. Mr. Marcin had been, prior to the Visteon spin-off in June 2000, an employee of Ford or its subsidiaries since 1973.

      Dr. Heinz Pfannschmidt has been Vice President and President, Europe and South America of the company since November 2001. Before that, he was President and Chief Executive Officer of TRW Automotive Electronics Worldwide, and a member of the TRW Executive Committee, since September 1999, and Managing Director of Europe, Inflatable Restraint Systems of TRW Automotive prior thereto.

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ITEM 5. MARKET FOR VISTEON’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

      Our common stock is listed on the New York Stock Exchange in the United States under the symbol “VC”. As of January 31, 2003, Visteon had 129,024,309 shares of its common stock $1.00 par value outstanding, which were owned by 126,418 stockholders of record. The table below shows the high and low sales prices for our common stock as reported by the New York Stock Exchange, and the dividends we paid per share of common stock for each quarterly period for the last two years.

ITEM 6. SELECTED FINANCIAL DATA

      The following selected consolidated financial data reflect our financial condition, results of operations and cash flows both before and after our spin-off from Ford on June 28, 2000. Selected consolidated financial data for the periods prior to our spin-off reflect the historical financial condition, results of operations and cash flows of the businesses that were considered part of the Visteon business of Ford during each respective period. The historical consolidated statement of income data set forth below for periods prior to our spin-off do not reflect many significant changes that occurred in the operations and funding of our company as a result of our spin-off from Ford.

      The selected consolidated financial data should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere in this report. The consolidated statement of income, cash flow and balance sheet data, set forth below, have been derived from our audited financial statements. Certain amounts for prior periods were reclassified to conform with present period presentation.

      The following financial information may not reflect what our results of operations, financial condition and cash flows would have been had we operated as a separate, stand-alone entity during the periods presented or what our results of operations, financial condition and cash flows will be in the future.

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      This section summarizes significant factors affecting the company’s consolidated operating results, financial condition, and liquidity for the three-year period ended December 31, 2002. This section should be read in conjunction with the company’s consolidated financial statements and related notes appearing elsewhere in this report.

Overview

      Visteon is a leading global supplier of automotive systems, modules, and components. We sell our products primarily to global vehicle manufacturers, and also sell to the worldwide aftermarket for replacement and vehicle appearance enhancement parts. We operate in two business segments: Automotive Operations and Glass Operations.

      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.

      Visteon’s worldwide sales in 2002 were $18.4 billion, up $552 million, or 3%, compared with 2001. For the full year 2002, Visteon reported a net loss of $352 million, or $2.75 per share, including special charges of $407 million after taxes. These special charges include $142 million for restructuring actions, and $265 million for the non-cash write-off of the value of all goodwill reflected in Visteon’s financial statements resulting from the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”. Excluding these special charges, Visteon earned $55 million in 2002. Comparatively, in 2001 Visteon reported a net loss of $118 million, or $0.91 per share. The 2001 loss includes special charges of $121 million for restructuring actions; excluding these special charges, Visteon earned $3 million in 2001.

      Revenue from Ford and its affiliates totaled 80% of Visteon’s sales in 2002 compared with 82% in 2001. Ford’s 2002 North American production volume was 3% higher than 2001; sales to Ford increased by $123 million or less than one percent. Non-Ford sales were $3.6 billion, or 20% of total sales, for the full year 2002, an increase of $429 million, or 13%, from 2001.

      In 2002, Visteon won more than $1 billion in net non-Ford new business for future production from more than a dozen global automakers located in every region of the world. Almost half of this business was outside of North America. In addition, Visteon won more than $500 million in new business with Ford. This was offset by business returned to Ford or lost during the year.

      Our solid financial position was further strengthened during 2002. At December 31, 2002, our cash and marketable securities balance was $1.3 billion and our debt-to-capital ratio was 36%, compared with $1.2 billion and 37%, respectively, at year-end 2001.

      Within this discussion, reference is made to certain non-GAAP financial measures including “income before taxes, excluding special charges” and “income, excluding special charges”. Visteon’s chief operating decision-makers regularly use these non-GAAP measures when deciding how to allocate resources and when assessing performance. These measures exclude charges recorded for accounting changes, restructuring actions, dispositions, and non-cash impairment charges. Exclusion of special charges allows evaluation of the company’s performance without these items, and is, in management’s opinion, a useful measure of operating performance especially when comparing periods.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

Restructuring, Dispositions, and Special Charges

      The table below presents special charges related to restructuring initiatives and other actions during the past two years:

*	Includes a reduction in Automotive results of $265 million for a change in accounting (goodwill).

     During 2002, Visteon recorded net pre-tax charges of $223 million related to a number of restructuring and other actions and the sale of the restraint electronics business, as described in Note 13 of our consolidated financial statements, which is incorporated herein by reference. In addition, the company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”. With this change in accounting, Visteon recorded a non-cash write-off for the entire value of goodwill of $363 million before taxes ($265 million after taxes), as described in Note 14 of our consolidated financial statements, which is incorporated herein by reference. Of the $223 million in pre-tax charges described above, $169 million are expected to be settled in cash and $54 million were non-cash related.

      During 2001, Visteon recorded net pre-tax charges of $192 million associated primarily with salaried workforce restructuring and the special voluntary retirement and separation program offered to hourly employees located at Visteon’s Nashville plant, as described in Note 13 of our consolidated financial statements, which is incorporated herein by reference. Of the $192 million in pre-tax charges recorded in 2001, $187 million are expected to be settled in cash and $5 million were non-cash related.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

      In December 2000, Visteon recorded a pre-tax, non-cash impairment write-down of $220 million ($138 million after taxes), to reduce the net book value of the assets associated with the Glass Operations segment to their estimated fair value, as described in Note 13 of our consolidated financial statements, which is incorporated herein by reference. Actual cash payments made for restructuring, including those for severance and special pension benefits, were $88 million in 2002, $94 million in 2001, and zero in 2000. The remaining cash payments for these actions are projected to continue over approximately ten years.

      In 2003, we anticipate continued implementation of restructuring actions including the continuation of the European Plan for Growth and other actions under consideration. Charges associated with the European Plan for Growth are expected in 2003 and 2004, with total lifetime restructuring charges of up to $150 million. We are constantly evaluating the possibility of partnerships, sales or closings involving under-performing businesses. We are actively reviewing such possibilities specifically relating to our seating and steering column business. However, there can be no assurance that a transaction or other arrangement favorable to Visteon will occur in the near term or at all.

Results of Operations

2002 Compared with 2001

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

      Sales for Automotive Operations were $17.8 billion in 2002, compared with $17.2 billion in 2001, an increase of $575 million or 3%. Sales for Glass Operations were $598 million in 2002, compared with $621 million in 2001, a decrease of $23 million or 4%. Increased sales for Automotive Operations reflect primarily new business and the impact of currency exchange rates, offset partially by price reductions granted to our customers, reduced revenue resulting from the sale of our restraint electronics business effective April 1, 2002, and by precious metals under sourcing arrangements directed by Ford. Reduced sales for Glass Operations reflect lower commercial and aftermarket volume and price reductions, offset partially by stronger Ford North American production volume. Sales to non-Ford customers increased $429 million, or 13%, from 2001 and were 20% of total sales for 2002.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

      Costs of Sales for 2002 were $17.6 billion, $483 million higher when compared with 2001. Costs of sales primarily includes material, labor, manufacturing overhead, and other costs, such as product development costs. The increase in 2002 reflects primarily costs associated with new business, higher wage rates, restructuring actions taken, and the impact of currency exchange rates, offset partially by net material cost reductions, improved labor efficiencies, and reduced product engineering and recall costs. Lower costs associated with precious metals purchased under sourcing arrangements directed by Ford also were an offset. Special charges included in costs of sales were $200 million in 2002 and $150 million in 2001.

      Selling, administrative and other expenses for 2002 were $888 million, compared with $855 million in 2001, an increase of $33 million. The increase reflects several infrastructure actions and supplemental resources to support our cost reduction initiatives, including information technology spending, and higher costs associated with recently renewed insurance policies. As discussed in the subsequent event section of this filing, costs associated with infrastructure actions are expected to result in higher selling, administrative and other expenses in 2003 as well. Special charges were lower in 2002, totaling $23 million in 2002 and $42 million in 2001.

      Net interest expense of $80 million in 2002 was up from $76 million in 2001.

      Equity in net income of affiliated companies was $44 million in 2002, compared with $24 million in 2001, with the increase related primarily to our affiliates located in Asia.

      Income (loss) before income taxes, minority interests and change in accounting, including and excluding special charges, is the primary profitability measure used by our chief operating decision makers, as discussed under “Overview” above. The following table shows income (loss) before income taxes, including and excluding special charges for 2002 and 2001, for each of our segments:

      Excluding special charges, income from Automotive Operations in 2002 was $83 million, compared with income of $32 million for the same period in 2001. The $51 million improvement reflects primarily new business, continued cost savings, and earnings from our Asian joint ventures. Price reductions granted to customers, higher wage rates, increased pension and health care costs, and accruals for compensation payments were partial offsets.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

      Income before income taxes excluding special charges for Glass Operations was $23 million in 2002, compared with a loss of $9 million for 2001. The improvement reflects primarily savings from restructuring actions and cost reductions, offset partially by price reductions to customers.

      Provision (benefit) for income taxes represents an effective tax rate of 36% for 2002, compared with 37% for 2001.

      Minority interests in net income of subsidiaries was $28 million in 2002, compared with $21 million in 2001. Minority interest amounts are related primarily to our 70% ownership interest in Halla Climate Control Corporation located in Korea.

      Net income (loss) for 2002 and 2001, both including and excluding special charges, as discussed under “Overview” above, are shown in the following table for each of our segments:

      Excluding special charges after taxes, Visteon reported total income of $55 million for 2002, compared with income of $3 million for 2001. The $52 million improvement reflects primarily the impact of new business, continued cost savings, savings from special actions, and earnings from our Asian joint ventures, offset partially by price reductions granted to customers, higher wage rates, increased pension and health care costs, and accruals for compensation payments.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

2001 Compared with 2000

      Sales for each of our segments for 2001 and 2000 are summarized in the following table:

      Sales for Automotive Operations were $17.2 billion in 2001, compared with $18.7 billion in 2000, a decrease of $1.5 million or 8%. Sales for Glass Operations were $621 million in 2001, compared with $746 million in 2000, a decrease of $125 million or 17%. Decreased sales for Automotive Operations reflect primarily the 15% reduction in Ford North American production volume, price reductions granted to our customers, and unfavorable currency fluctuations. The decrease in sales for Glass Operations reflects primarily lower Ford North American customer production volume and price reductions granted to our customers. Sales to non-Ford customers increased $168 million, or 6%, from 2000 and were 18% of total sales for 2001.

      Costs of Sales for 2001 were $17.1 billion, $1 billion lower when compared with 2000. Costs of sales primarily includes material, labor, manufacturing overhead, and other costs, such as product development costs. The decrease reflects primarily net material cost reductions, improved labor efficiencies, the reduction in Ford North American production volume, lower accruals for compensation payments, and favorable currency exchange rates, offset partially by higher wage rates. Special charges in 2001 and 2000 were $150 million and $220 million, respectively.

      Selling, administrative and other expenses for 2001 were $855 million, compared with $897 million in 2000, a decrease of $42 million. The decrease reflects primarily savings from restructuring actions, offset partially by $42 million of pre-tax special charges for those actions.

      Net interest expense of $76 million in 2001 was up from $58 million in 2000.

      Equity in net income of affiliated companies was $24 million in 2001, compared with $56 million in 2000, with the decrease related primarily to the sale of Visteon’s 49% interest in the Conix Group in October of 2000.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

      Income (loss) before income taxes and minority interests, including and excluding special charges, is the primary profitability measure used by our chief operating decision makers, as discussed under “Overview” above. The following table shows income (loss) before income taxes, including and excluding special charges for 2001 and 2000, for each of our segments: