UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

(Mark One)

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005, or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                   

Commission file number 1-15827

VISTEON CORPORATION

(Exact name of Registrant as specified in its charter)

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 is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes        No  ü  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes        No  ü  

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Act.

Large accelerated filer  ü    Accelerated filer        Non-accelerated filer      

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

Yes        No  ü  

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2005 (the last business day of the most recently completed second fiscal quarter) was approximately $774 million.

As of March 1, 2006, the registrant had outstanding 128,006,167 shares of common stock.

Document Incorporated by Reference*

INDEX

PART I

ITEM 1. BUSINESS

The Company’s Business

Visteon Corporation (“Visteon” or the “Company”) is a leading global supplier of automotive systems, modules and components to global vehicle manufacturers and the automotive aftermarket. Headquartered in Van Buren Township, Michigan, with regional headquarters in Kerpen, Germany and Shanghai, China, a workforce of over 49,000 employees and a network of manufacturing sites, technical centers, sales offices and joint ventures located in every major region of the world.

The Company was incorporated in Delaware in January 2000 as a wholly-owned subsidiary of Ford Motor Company (“Ford” or “Ford Motor Company”). Subsequently, Ford transferred the assets and liabilities comprising its automotive components and systems business to Visteon. The Company separated from Ford on June 28, 2000 when all of the Company’s common stock was distributed by Ford to its shareholders.

ACH Transactions

In September 2005, the Company transferred 23 of its North American facilities and certain other related assets and liabilities (the “Business”) to Automotive Components Holdings, LLC (“ACH”), an indirect, wholly-owned subsidiary of the Company, and its subsidiaries. Subsequently, on October 1, 2005, the Company sold to Ford all of the capital stock of the parent company of ACH in exchange for Ford’s payment to the Company of approximately $300 million, as well as the forgiveness of certain other postretirement employee benefit (“OPEB”) liabilities and other obligations relating to hourly employees associated with the Business, as well as the assumption of certain other liabilities (together, the “ACH Transactions”). The Business accounted for approximately $6.1 billion of the Company’s total sales for 2005, the majority being products sold to Ford. Also, the transferred facilities included all of the Company’s plants that leased hourly workers covered by Ford’s master agreement with the UAW.

The ACH Transactions addressed certain strategic and structural challenges of the business. The Company expects additional restructuring activities and business improvement actions will be needed in the foreseeable future for the Company to achieve sustainable success in an increasingly challenging environment. The Company has identified additional facilities that require significant focus and restructuring necessary to improve the financial results of these operations.

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

ITEM 1. BUSINESS — (Continued)

ITEM 1. BUSINESS — (Continued)

ITEM 1. BUSINESS — (Continued)

Pursuant to the ACH Transactions, the Company and Ford terminated certain existing commercial agreements, including the Funding Agreement, dated as of March 10, 2005, as amended; the Master Equipment Bailment Agreement, dated as of March 10, 2005, as amended; the Purchase and Supply Agreement, dated as of December 19, 2003; and the 2003 Relationship Agreement, dated as of December 19, 2003; as well as the Amended and Restated Hourly Employee Assignment Agreement, dated as of April 1, 2000, as amended and restated as of December 19, 2003.

Organization and Operating Structure

In late 2005, the Company announced a new operating structure to manage the business following the ACH Transactions. This operating structure is comprised of the following global product groups: Climate, Electronics, Interiors and Other. These general product groups have financial and operating responsibility over the design, development and manufacture of the Company’s product portfolio. Regional customer groups are responsible for the marketing, sales and service of the Company’s product portfolio to its customer base. Certain functions such as procurement, information technology and other administrative activities are managed on a global basis with regional deployment.

The Company is currently in the process of realigning systems and reporting structures to facilitate financial reporting under the revised organizational structure. Although the Company expects to change its reporting segments as described above in early 2006, such realignment was not complete at December 31, 2005 and accordingly the Company did not meet the criteria to change its reportable segments under Statement of Financial Accounting Standards No. 131 (“SFAS 131”) “Disclosures about Segments of an Enterprise and Related Information.” However, pursuant to the ACH Transactions, the Company established and commenced operations of Visteon Services, a centralized administrative function to monitor and facilitate transactions with ACH for the costs of leased employees and other services provided to ACH by the Company. As the activities of Visteon Services do not share similar economic characteristics with the Company’s other business operations, the Company has provided separate disclosure of these operations as of December 31, 2005.

The Company’s reportable segments as of December 31, 2005 are as follows:

Automotive Operations — The Company’s Automotive Operations supply automotive systems, modules and components on a global basis for product offerings related to climate control, interior, exterior, powertrain, chassis and electronics. For a more detailed description of the Company’s products, see “The Company’s Products” below. The Automotive Operations segment accounted for approximately 97% of the Company’s 2005, 2004 and 2003 total net sales.

Glass Operations — The Company’s Glass Operations supply automotive glass products to Ford and various aftermarket customers, and float glass for commercial architectural and automotive applications. The Glass Operations segment accounted for approximately 2%, 3% and 3% of the Company’s 2005, 2004 and 2003 total net sales, respectively.

ITEM 1. BUSINESS — (Continued)

Services Operations — The Company’s Services Operations supply leased personnel and transition services as required by certain agreements entered into by the Company with ACH as a part of the ACH Transactions. Pursuant to the Master Services Agreement and the Salaried Employee Lease Agreement the Company agreed to provide ACH with certain information technology, personnel and other services to enable ACH to conduct its business. Services to ACH are provided at a rate approximately equal to the Company’s cost until such time the services are no longer required by ACH or the expiration of the related agreement. The Service segment accounted for approximately 1% of the Company’s total net sales in 2005.

Further information relating to the Company’s reportable segments can be found in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (Note 18, “Segment Information,” of the Company’s consolidated financial statements).

The Company’s Industry

The Company is a leading global supplier of a range of integrated 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. Vehicle manufacturers have moved toward a competitive sourcing process for automotive parts, including increased purchases from independent suppliers, as they seek lower-priced and/or higher-technology products. Additional significant factors and trends in the automotive industry include:

ITEM 1. BUSINESS — (Continued)

The Company’s Business Strategy

By leveraging the Company’s extensive experience, innovative technology and geographic strengths, the Company aims to grow its leading positions in its key climate, interiors and electronics product groups and improve margins, long-term operating profitability and cash flows. To achieve these goals and respond to industry factors and trends, the Company is working to improve the performance of base operations, reduce overhead costs, and restructure underperforming and non-strategic operations, as more fully described below.

Improving Base Operations

ITEM 1. BUSINESS — (Continued)

Reduce Overhead Costs

To further improve the Company’s administrative and engineering costs, the Company has taken actions to implement more competitive benefits and compensation programs for its employees, build and redesign its engineering capability in more competitive cost locations, and re-examine its current third-party supplier arrangements for purchased services

Three-Year Improvement Plan

In January 2006, the Company announced a three-year improvement plan that involves the restructuring of certain underperforming and non-strategic plants and businesses to improve operating and financial performance and other cost reduction efforts. Currently, this plan is expected to affect up to 23 facilities. The majority of the cash expenses for this plan are expected to be funded by the $400 million escrow account established pursuant to the ACH Transactions.

The Company’s Products

When working with a customer, the Company’s goal is to understand the design intent and brand image for each vehicle and leverage the Company’s extensive experience and innovative technology to deliver products that enable the customer to differentiate the vehicle. The Company supports its components, systems and modules 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 lines within the Automotive Operations segment that the Company produces or offers as of the date of this report. Financial information relating to sales attributable to each of these product groups can be found in Note 18, “Segment Information,” of the Company’s consolidated financial statements.

ITEM 1. BUSINESS — (Continued)

Interior Products & Systems

The Company is one of the leading global suppliers of cockpit modules, instrument panels, door and console modules and interior trim components.

Exterior Products & Systems

The Company can provide exterior packages that deliver high quality and functionality to the automotive customer.

Climate Control Products & Systems

The Company is one of the leading global suppliers in the design and manufacturing of components, modules and systems that provide automotive heating, ventilation and air conditioning and powertrain cooling.

ITEM 1. BUSINESS — (Continued)

Electronic Products & Systems

The Company is one of the leading global suppliers of advanced in-vehicle entertainment, driver information, wireless communication, safety and security electronics technologies and products.

Other Products & Systems

The Company designs and manufactures an array of chassis-related products, from driveline systems for popular all-wheel drive vehicles to steering and suspension systems, as well as powertrain products and systems, which are designed to provide the automotive customer with solutions that enhance powertrain performance, fuel economy and emissions control.

The Company’s Customers

The Company sells its products primarily to global vehicle manufacturers as well as to other suppliers and assemblers. In addition, it sells 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

The Company sells to all of the world’s largest vehicle manufacturers including Ford, General Motors, Toyota, DaimlerChrysler, Honda, Volkswagen, Renault, Nissan, Hyundai, Peugeot, Mazda and BMW. Ford is the Company’s largest customer, and product sales to Ford, including those sales to Auto Alliance International, a joint venture between Ford and Mazda, accounted for approximately 62% of its 2005 total product sales. Customers other than Ford include Mazda, of which Ford owns a 33.4% equity interest. No other customer accounted for more than 6% of 2005 total product sales.

ITEM 1. BUSINESS — (Continued)

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. The Company has agreed to provide specific average productivity price reductions to its largest customer, Ford, for most North America sales through 2008. The Company has an aggressive cost reduction program that focuses on reducing its total costs, which are intended to offset these customer price reductions, but there can be no assurance that such cost reduction efforts will be sufficient to do so, especially considering recent increases in the costs of certain commodities used in the manufacture of the company’s products.

Aftermarket

The Company sells 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 2005, the Company had aftermarket sales of $1.1 billion, representing 6% of its total sales. The Company currently sells 60% of these products to the independent aftermarket and 40% to Ford’s aftermarket sales organization. In 2005, aftermarket sales of its glass products were $92 million, representing 1% of its total product sales and 9% of its total aftermarket sales.

The Company’s Competition

The Company conducts its 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.

A summary of the Company’s primary independent competitors by reportable segment as of and for the year ended December 31, 2005 is provided below.

Automotive Operations — The Company’s principal competitors in the Automotive Operations segment included the following: American Axle & Manufacturing Holdings, Inc.; Behr GmbH & Co. KG; Robert Bosch GmbH; Dana Corporation; Delphi Corporation; Denso Corporation; Faurecia Group; Hella KGaA Hueck & Co.; Johnson Controls, Inc.; Lear Corporation; Magna International Inc.; Siemens VDO Automotive AG; TRW Automotive Holdings Corp.; and Valéo S.A.

Glass Operations — The Company’s principal competitors in the Glass Operations segment included the following: Asahi Glass Co., Ltd.; AFG Industries, Inc.; Guardian Industries Corp.; Pilkington plc; and PPG Industries, Inc.

ITEM 1. BUSINESS — (Continued)

The Company’s Sales Backlog

Anticipated net sales for 2006 through 2008 from new and replacement programs, less net sales from phased-out and canceled programs are approximately $1.5 billion. The Company’s estimate of anticipated net sales may be impacted by various assumptions, including vehicle production levels on new and replacement programs, customer price reductions, foreign exchange rates and the timing of program launches. In addition, the Company typically enters into agreements with its customers at the beginning of a vehicle’s life for the fulfillment of a customers’ purchasing requirements for the entire production life of the vehicle. Although instances of early termination have historically been rare, these agreements generally may be terminated by our customers at any time. Therefore, our anticipated net sales information does not reflect firm orders or firm commitments. See “Risk Factors” contained in Item 1A below.

ITEM 1. BUSINESS — (Continued)

The Company’s International Operations

Financial information about sales and net property by major geographic area can be found in Note 18, “Segment Information,” of the Company’s consolidated financial statements. The attendant risks of the Company’s international operations are primarily related to currency fluctuations, changes in local economic and political conditions, and changes in laws and regulations. The following table sets forth the Company’s net sales and net property and equipment by geographic region as a percentage of total net sales and total net property and equipment, respectively:

Seasonality of the Company’s Business

The Company’s business is moderately seasonal because its largest North American customers typically halt operations for approximately two weeks in July for model year changeovers and approximately one week in December during the winter holidays. Customers in Europe historically shut down vehicle production during a portion of August and one week in December. In addition, third quarter automotive production traditionally is lower as new models enter production. Accordingly, the Company’s third and fourth quarter results may reflect these trends. Refer to Note 19, “Summary Quarterly Financial Data” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

ITEM 1. BUSINESS — (Continued)

The Company’s Workforce and Employee Relations

The Company’s workforce as of December 31, 2005 included approximately 49,575 persons, of which approximately 17,075 were salaried employees and 32,500 were hourly workers. As of December 31, 2005, the Company leased approximately 4,200 employees to ACH under the terms of the Salaried Employee Lease Agreement.

A substantial number of the Company’s hourly workforce in the U.S. are represented by unions and operate under collective bargaining agreements. In connection with the ACH Transactions, the Company terminated its lease from Ford of its UAW master agreement hourly workforce. Many of the Company’s European and Mexican 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. The Company constantly works to establish and maintain positive, cooperative relations with its unions around the world and believes that its relationships with unionized employees are satisfactory. There have been no significant work stoppages in the past four years, except for a brief work stoppage by employees represented by the IUE-CWA Local 907 at a manufacturing facility located in Bedford, Indiana during June 2004.

The Company’s Product Research and Development

The Company’s research and development efforts are intended to maintain its leadership position in the industry and provide the Company with a competitive edge as it seeks additional business with new and existing customers. Total research and development expenditures were approximately $804 million in 2005, $896 million in 2004 and $913 million in 2003. The Company also works with technology development partners, including customers, to develop technological capabilities and system enhancements.

The Company’s Intellectual Property

The Company 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 the Company 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 appropriate countries, on its patentable developments which are considered to have business significance.

The Company also views its name and mark as significant to its business as a whole. In addition, the Company holds rights in 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.

ITEM 1. BUSINESS — (Continued)

The Company’s Raw Materials and Suppliers

Raw materials used by the Company in the manufacture of its products primarily include steel, aluminum, resins, precious metals, urethane chemicals and electronics components. All of the materials used are generally readily available from numerous sources. Although the Company does not anticipate significant interruption in the supply of raw materials, the cost of ensuring this continued supply of certain raw materials, in particular steel, aluminum and resins, has risen dramatically. This increase has had an adverse impact on the Company’s results of operations and will continue to adversely affect results of operations unless the Company’s customers share in these increased costs. To date, the Company has not been able to fully recover these costs from all of its customers, and the Company cannot provide assurance that it will be able to recover those costs in the future.

Impact of Environmental Regulations on the Company

The Company 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. The Company is also subject to environmental laws requiring the investigation and cleanup of environmental contamination at properties it presently owns or operates and at third-party disposal or treatment facilities to which these sites send or arranged to send hazardous waste.

At the time of spin-off, the Company and Ford agreed on a division of liability for, and responsibility for management and remediation of, environmental claims existing at that time, and, further, that the Company would assume all liabilities for existing and future claims relating to sites that were transferred to it and its operation of those sites, including off-site disposal, except as otherwise specifically retained by Ford in the master transfer agreement. In connection with the ACH Transactions, Ford agreed to re-assume these liabilities to the extent they arise from the ownership or operation prior to the spin-off of the locations transferred to ACH (excluding any increase in costs attributable to the exacerbation of such liability by the Company or its affiliates).

The Company is aware of contamination at some of its properties and relating to various third-party superfund sites at which the Company or its predecessor has been named as a potentially responsible party. It is in various stages of investigation and cleanup at these sites. At December 31, 2005, the Company had recorded a reserve of approximately $9 million for this environmental investigation and cleanup. However, estimating liabilities for environmental investigation and cleanup is complex and dependent upon a number of factors beyond the Company’s control and which may change dramatically. Accordingly, although the Company believes its reserve is adequate based on current information, the Company cannot assure you that its eventual environmental investigation and cleanup costs and liabilities will not exceed the amount of its current reserve.

During 2005, the Company did not make any material capital expenditures relating primarily to environmental compliance.

ITEM 1. BUSINESS — (Continued)

The Company’s Website and Access to Available Information

The Company’s current and periodic reports filed with the Securities and Exchange Commission, including amendments to those reports, may be obtained through its internet website at www.visteon.com free of charge as soon as reasonably practicable after the Company files these reports with the SEC. A copy of the Company’s code of business conduct and ethics for directors, officers and employees of Visteon and its subsidiaries, entitled “Ethics and Integrity Policy,” the Corporate Governance Guidelines adopted by the Company’s Board of Directors and the charters of each committee of the Board of Directors are available on the Company’s website at www.visteon.com. You may also request a printed copy of the foregoing documents by contacting the Company’s Shareholder Relations department in writing at One Village Center Drive, Van Buren Township, MI 48111; by phone (877) 367-6092; or via email at vcstock@visteon.com.

ITEM 1A. RISK FACTORS

The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties, including those not presently known or that the Company believes to be immaterial, also may adversely affect the Company’s results of operations and financial condition. Should any such risks and uncertainties develop into actual events, these developments could have material adverse effects on the Company’s business and financial results.

A decline in automotive sales could reduce the Company’s sales and harm its operations.

Demand for the Company’s products is directly related to automotive vehicle production. Automotive sales and production can be affected by general economic conditions, such as employment levels and trends, fuel prices and interest rates, labor relations issues, regulatory requirements, trade agreements and other factors. Automotive industry conditions in North America and Europe continue to be challenging. In North America, the domestic automotive industry is characterized by significant overcapacity, fierce competition, high fixed cost structures and significant employee pension and health care obligations for the domestic automakers. Domestic automakers continue to report market share loss to other vehicle manufacturers resulting in lower annual production volumes and the need to further address their production capacity and cost structure. Similarly, in Europe the market is highly fragmented and certain automakers continue to report lower annual sales volumes. Any decline in automotive production levels of its current and future customers could reduce the Company’s sales and harm its results of operations and financial condition.

Further, certain automakers, particularly in North America and Europe, report significant financial challenges due to the factors described above. These automakers continue to implement actions to further reduce capacity and streamline their cost structure while at the same time investing in new technologies and vehicle platforms. In the United States, two of the largest automakers, General Motors Corporation and Ford Motor Company, have announced restructuring plans aimed at realigning their cost structure in light of current and projected market share and production volumes for the North American market. A significant element of these cost reduction actions include the negotiation with and participation of the respective unionized workforces in addressing legacy costs related to health care, pensions, wages and other employee benefits. The results and effects of these actions and related negotiations are uncertain and, accordingly, could have a material adverse affect on the Company’s results of operations and financial condition.

The Company is highly dependent on Ford. Ford is currently undergoing a restructuring plan and further decreases in Ford’s vehicle production volume would adversely affect the Company’s results.

Ford is the Company’s largest customer and accounted for approximately 62% of total product sales in 2005, 70% of total product sales in 2004 and 76% of total product sales in 2003. Although the Company has made progress in diversifying its customer base with other automakers, and has further reduced its sales concentration with Ford as a result of the completion of the ACH Transactions in the latter half of 2005, Ford will continue to be the Company’s largest customer for the foreseeable future. Further, Ford has recently announced a restructuring plan and may ultimately restructure its operations in a way that could be adverse to the Company’s interests. As in the past, any change in Ford’s vehicle production volume will have a significant impact on the Company’s sales volume.

The Company currently leases approximately 4,200 salaried employees to ACH, a company controlled by Ford, and has an agreement with Ford to reimburse the Company for up to $150 million of the costs related to separating any of the leased employees should they be returned to us for any reason. In the event that Ford was unable or unwilling to fulfill its obligations under this agreement, the Company could be adversely affected.

ITEM 1A. RISK FACTORS — (Continued)

The discontinuation of, the loss of business with respect to, or a lack of commercial success of a particular vehicle model for which the Company is a significant supplier could affect our estimates of product sales backlog.

Although the Company has purchase orders from many of its customers, these purchase orders generally provide for the supply of a customer’s annual requirements for a particular model and assembly plant and are renewable on a year-to-year basis, rather than for the purchase of a specific quantity of products. Therefore, the discontinuation, loss of business with respect to, or a lack of commercial success, of a particular vehicle model for which the Company is a significant supplier could reduce the Company’s sales and affect its estimates of product sales backlog.

Escalating pricing pressures from the Company’s customers may adversely affect our business.

Downward pricing pressures by automotive manufacturers has been a characteristic of the automotive industry in recent years. Virtually all automakers have aggressive price reduction initiatives and objectives each year with their suppliers, and such actions are expected to continue in the future. Accordingly, suppliers must be able to reduce their operating costs in order to maintain profitability. The Company has taken steps to reduce its operating costs to offset customer price reductions, in addition to other actions designed to resist such reductions; however, price reductions have impacted our sales and profit margins and are expected to do so in the future. If the Company is unable to offset customer price reductions in the future through improved operating efficiencies, new manufacturing processes, sourcing alternatives and other cost reduction initiatives, our results of operations and financial condition would be adversely affected.

The automotive supplier environment in which we operate continues to evolve and be uncertain.

In recent years, the competitive environment among suppliers to the global automotive manufacturers has changed significantly as these manufacturers have sought to outsource more vehicular components, modules and systems. In addition, the number of suppliers worldwide has been declining due to continued consolidation. In the United States, declining sales volumes of certain domestic automakers combined with high material and labor costs has adversely impacted the financial condition of several domestic automotive suppliers, including resulting in several significant supplier bankruptcies. The Company expects to respond to these developments by continuing to diversify its customer base through the continued development of innovative products at competitive prices as well as through strategic alliances, joint ventures, acquisitions and divestitures. However, there is no assurance that the Company’s efforts will be successful or that competitors with lower cost structures and better access to liquidity sources will not significantly impact our business, results of operations and financial condition.

Severe inflationary pressures impacting ferrous and non-ferrous metals and petroleum-based commodities may adversely affect the Company’s profitability and the profitability of the Company’s Tier 2 and Tier 3 supply base.

The automotive supply industry has recently experienced significant inflationary pressures, primarily in ferrous and non-ferrous metals and petroleum-based commodities, such as resins. These inflationary pressures have placed significant operational and financial burdens on automotive suppliers at all levels, and are expected to continue for the foreseeable future. Generally, it has been difficult to pass on, in total, the increased costs of commodities used in the manufacture of the Company’s products to its customers. In addition, the Company’s need to maintain a continued supply of raw materials and/or components has made it difficult to resist price increases and surcharges imposed by its suppliers.

ITEM 1A. RISK FACTORS — (Continued)

Further, this inflationary pressure, combined with other factors, has adversely impacted the financial condition of several domestic automotive suppliers, including resulting in several significant supplier bankruptcies. Because the Company purchases various types of equipment, raw materials and component parts from suppliers, we may be materially and adversely affected by the failure of those suppliers to perform as expected. This non-performance may consist of delivery delays, failures caused by production issues or delivery of non-conforming products, or supplier insolvency or bankruptcy. Consequently, the Company’s efforts to continue to mitigate the effects of these inflationary pressures may be insufficient if conditions were to worsen, resulting in a negative impact on the Company’s financial results.

The Company could be adversely affected if we experience shortages of components from our suppliers.

In an effort to manage and reduce the costs of purchased goods and services, the Company, like many suppliers and automakers, has been consolidating its supply base. As a result, the Company is dependent on single or limited sources of supply for certain of components used in the manufacture of our products. The Company selects its suppliers based on total value (including price, delivery and quality), taking into consideration their production capacities and financial condition, and we expect that they will be able to support our needs. However, there can be no assurance that strong demand, capacity limitations or other problems experienced by the Company’s suppliers will not result in occasional shortages or delays in their supply of components to us. If the Company was to experience a significant or prolonged shortage of critical components from any of its suppliers, particularly those who are sole sources, and could not procure the components from other sources, the Company would be unable to meet its production schedules for some of its key products and to ship such products to its customers in timely fashion, which would adversely affect its sales, margins and customer relations.

Work stoppages or similar difficulties could significantly disrupt the Company’s operations.

A work stoppage at one or more of the Company’s manufacturing and assembly facilities could have material adverse effects on the business. Also, if one or more of the Company’s customers were to experience a work stoppage, that customer would likely halt or limit purchases of our products which could result in the shut down of the related manufacturing facilities. Further, because the automotive industry relies heavily on just-in-time delivery of components during the assembly and manufacture of vehicles, a significant disruption in the supply of a key component due to a work stoppage at one of the Company’s suppliers or any other supplier could have the same consequences, and accordingly, have a material adverse effect on the Company’s financial results.

ITEM 1A. RISK FACTORS — (Continued)

The Company has a history of significant losses; the Company is in the process of implementing a three-year improvement plan but may be unable to successfully improve its performance or attain profitability.

The Company incurred net losses of $270 million, $1,536 million and $1,229 million for 2005, 2004 and 2003, respectively. The Company’s ability to improve its financial performance and return to profitability is dependent on its ability to implement its three-year improvement plan, and realize the benefits of such plan. The Company expects to fund the majority of the cash restructuring costs contemplated by its three-year plan with reimbursements from the $400 million escrow account established by Ford upon the completion of the ACH Transactions. However, it is possible that actual cash restructuring costs could vary significantly from the Company’s initial projections as the plan progresses, which could result in unexpected costs in future periods that may be in excess of amounts available from the escrow account, which could have an adverse impact on the Company’s financial results. Further, the Company cannot provide assurances that it will realize the expected benefits in the time periods projected, or at all, from its restructuring actions, or that such actions will improve its financial performance or return the Company to profitability in the near term or at all. In addition, a majority of the Company’s hourly workforce is unionized. Labor contracts with these unions can significantly restrict the Company’s ability to close plants and divest unprofitable, noncompetitive businesses as well as limit its ability to change local work rules and practices at a number of the Company’s facilities, constraining the implementation of cost-saving measures. These restrictions and limitations could have adverse effects on our results of operations and competitive position and could slow or alter the Company’s improvement plans.

Moreover, the Company recorded asset impairment charges of $1,511 million, $314 million and $436 million in 2005, 2004 and 2003, respectively, to adjust the carrying value of the Company’s property and equipment to its estimated fair value. Additional asset impairment charges in the future may result in the event that the Company does not achieve its internal financial plans, and such charges could materially affect the Company’s results of operations and financial condition in the period(s) recognized. In addition, the Company cannot provide assurance that it will be able to recover its remaining net deferred tax assets which is dependent upon achieving future taxable income in certain foreign jurisdictions. Failure to achieve our taxable income targets may change the Company’s assessment of the recoverability of its remaining net deferred tax assets and would likely result in an increase in the valuation allowance in the applicable period. Any increase in the valuation allowance would result in additional income tax expense, would reduce stockholders’ equity and could have a significant impact on the Company’s earnings going forward.

Sources of financing may not be available to the Company in the amount or terms required.

The Company has secured credit facilities that mature in June 2007. These facilities require the Company to attain a specified financial ratio as of the end of each quarter; specifically, a ratio of consolidated total debt to consolidated EBITDA, as such terms are defined in the facilities.

Because the Company’s financial performance is impacted by various economic, financial and industry factors, the Company cannot say with certainty whether it will satisfy the covenants under these facilities in the future. Non-compliance with these covenants would constitute an event of default, allowing the lenders to accelerate the repayment of any borrowings outstanding under the facilities. While no assurance can be given, the Company believes that it would be able to successfully negotiate amended covenants or obtain waivers if an event of default were imminent. Any default under our credit facilities may result in defaults under our other debt instruments. The Company’s business, results of operations and financial condition could be adversely affected if it were unable to successfully negotiate amended covenants or obtain waivers on acceptable terms.

ITEM 1A. RISK FACTORS — (Continued)

The Company’s working capital requirements and cash provided by operating activities can vary greatly from quarter to quarter and from year to year, depending in part on the level, variability and timing of our customers’ worldwide vehicle production and the payment terms with our customers and suppliers. Despite the Company’s expected improved performance for 2006, we cannot provide assurance that it will be able to satisfy its capital expenditure requirements during 2006 or subsequent years, or during any particular quarter, from cash provided by operating activities. If the Company’s working capital needs and capital expenditure requirements exceed its cash flows from operations, cash balances and borrowings, the Company may need to raise additional capital, which may not be available to us on satisfactory terms and in adequate amounts. For a discussion of these and other factors affecting the Company’s liquidity, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

The Company’s business is highly dependent upon the ability to access the credit and capital markets. Access to, and the costs of borrowing in, these markets depend in part on the Company’s credit ratings, which are currently below-investment grade. There can be no assurance that the Company’s credit ratings will not decline further in the future. Further downgrades of our ratings would increase our costs of borrowing again and could imperil our liquidity.

The Company’s pension and other postretirement employee benefits expense and underfunding levels of our pension plans could materially increase.

Substantially all of the Company’s employees participate in defined benefit pension plans or retirement/termination indemnity plans. The Company has previously experienced declines in interest rates and pension asset values. Future declines in interest rates or the market values of the securities held by the plans, or certain other changes, could materially increase the underfunded status of our plans and affect the level and timing of required contributions in 2006 and beyond. A material increase in the underfunded status of the plans could significantly increase pension expenses and reduce the Company’s profitability.

The Company also sponsors other postretirement employee benefit (“OPEB”) plans that cover many of our U.S. and certain non-U.S. employees and provide for benefits to eligible employees and dependents upon retirement. The Company funds its OPEB obligations on a pay-as-you-go basis; accordingly, the related plans have no assets. We are subject to increased OPEB cash outlays and costs due to, among other factors, rising health care costs. Increases in the expected cost of health care in excess of our assumptions could increase our actuarially determined liability and related OPEB expense along with future cash outlays.

The Company’s expected annual effective tax rate could be volatile and materially change as a result of changes in mix of earnings and other factors.

Changes in the Company’s debt and capital structure, among other items, may impact its effective tax rate. Our overall effective tax rate is equal to consolidated tax expense as a percentage of consolidated earnings before tax. However, tax expense and benefits are not recognized on a global basis but rather on a jurisdictional basis. The Company is in a position whereby losses incurred in certain tax jurisdictions provide no current financial statement benefit. In addition, certain jurisdictions have statutory rates greater than or less than the United States statutory rate. As such, changes in the mix of earnings between jurisdictions could have a significant impact on the Company’s overall effective tax rate in future periods. Changes in tax law and rates could also have a significant impact on the Company’s overall effective rate in future periods.

ITEM 1A. RISK FACTORS — (Continued)

The Company’s ability to effectively operate could be impaired if we fail to attract and retain key personnel.

The Company’s ability to operate its business and implement its strategies effectively depends, in part, on the efforts of its executive officers and other key employees. In addition, the Company’s future success will depend on, among other factors, the ability to attract and retain qualified personnel, particularly engineers and other employees with critical expertise and skills that support our key customers and products. The loss of the services of any of our key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on the Company’s business.

The Company’s international operations, including our Asian joint ventures, are subject to various risks that could adversely affect the Company’s business, results of operations and financial condition.

The Company has operating facilities, and conducts a significant portion of its business, outside the United States. The Company has invested significantly in joint ventures with other parties to conduct business in South Korea, China and elsewhere in Asia. Our ability to repatriate funds from these joint ventures depends not only upon their uncertain cash flows and profits, but also upon the terms of our particular agreements with the Company’s joint venture partners and maintenance of the legal and political status quo. We risk expropriation in China and the instability that would accompany civil unrest or armed conflict within the Asian region. More generally, the Company’s Asian joint ventures and other foreign investments could be adversely affected by changes in the political, economic and financial environments in host countries, including fluctuations in exchange rates, political instability, changes in foreign laws and regulations (or new interpretations of existing laws and regulations) and changes in trade policies, import and export restrictions and tariffs, taxes and exchange controls. Any one of these factors could have an adverse effect on the Company’s business, results of operations and financial condition. In addition, the Company’s consolidated financial statements are denominated in U.S. dollars and require translation adjustments, which can be significant, for purposes of reporting results from, and the financial condition of, our foreign investments.

Warranty claims, product liability claims and product recalls could harm the Company’s business, results of operations and financial condition.

The Company faces inherent business risk of exposure to warranty and product liability claims in the event that our products fail to perform as expected or such failure of our products results, or is alleged to result, in bodily injury or property damage (or both). In addition, if any of our designed products are or are alleged to be defective, then we may be required to participate in a recall of them. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, automakers are increasingly expecting them to warrant their products and are increasingly looking to them for contributions when faced with product liability claims or recalls. A successful warranty or product liability claim against the Company in excess of its available insurance coverage and established reserves, or a requirement that the Company participate in a product recall, would have adverse effects, that could be material, on our business, results of operations and financial condition.

ITEM 1A. RISK FACTORS — (Continued)

The Company is involved from time to time in legal proceedings and commercial or contractual disputes, which could have an adverse effect on its business, results of operations and financial position.

The Company is involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes, including disputes with our suppliers, intellectual property matters, personal injury claims and employment matters. In addition, the Company, certain directors, officers and employees have been named in lawsuits alleging violations of the federal securities laws, ERISA and fiduciary obligations. No assurances can be given that such proceedings and claims will not have a material adverse impact on the Company’s profitability and financial position.

The Company could be adversely impacted by environmental laws and regulations.

The Company’s operations are subject to U.S. and non-U.S. environmental laws and regulations governing emissions to air; discharges to water; the generation, handling, storage, transportation, treatment and disposal of waste materials; and the cleanup of contaminated properties. Currently, environmental costs with respect to former, existing or subsequently acquired operations are not material, but there is no assurance that the Company will not be adversely impacted by such costs, liabilities or claims in the future either under present laws and regulations or those that may be adopted or imposed in the future.

Developments or assertions by or against the Company relating to intellectual property rights could materially impact its business.

The Company owns significant intellectual property, including a large number of patents, trademarks, copyrights and trade secrets, and is involved in numerous licensing arrangements. The Company’s intellectual property plays an important role in maintaining our competitive position in a number of the markets served. Developments or assertions by or against the Company relating to intellectual property rights could materially impact the business. Significant technological developments by others also could materially and adversely affect our business and results of operations.

The Company’s business and results of operations could be affected adversely by terrorism.

Terrorist-sponsored attacks, both foreign and domestic, could have adverse effects on the Company’s business and results of operations. These attacks could accelerate or exacerbate other automotive industry risks such as those described above and also have the potential to interfere with our business by disrupting our supply chains and the delivery of our products to customers.

ITEM 1A. RISK FACTORS — (Continued)

Management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2005 because of the existence of a material weakness in the Company’s internal control over financial reporting. The failure to remediate this material weakness, or any control deficiencies that the Company may discover in the future, could adversely affect the Company’s ability to report its financial condition and results of operations accurately and on a timely basis. As a result, our business, operating results and liquidity could be harmed.

As disclosed in the Company’s Annual Report on Form 10-K/ A for 2004 and in its Quarterly Reports on Form 10-Q for each of the first three quarters of 2005, management’s assessment of the Company’s internal controls over financial reporting identified several material weaknesses. These material weaknesses led to the restatement of the Company’s previously issued consolidated financial statements for fiscal years 2002 through 2004 and resulted in an adverse opinion by our independent registered public accounting firm on the effectiveness of the Company’s internal control over financial reporting. Although the Company made progress in executing its remediation plans during 2005, including the remediation of two material weaknesses, as of December 31, 2005, management has concluded that the Company did not maintain effective internal control over financial reporting due to a remaining material weakness in internal controls. Please see Item 9A “Controls and Procedures” for more information regarding the material weakness.

If the Company is unable to remediate the remaining material weakness, and other control deficiencies currently identified or identified in the future, and otherwise continue to improve its internal control, the Company’s ability to report its financial results on a timely and accurate basis could be adversely affected, which could result in a loss of investor confidence in its financial reports or have a material adverse affect on the Company’s ability to operate our business or access sources of liquidity. Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls or fraud, even effective internal control over financial reporting may not prevent or detect all misstatements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company’s principal executive offices are located in Van Buren Township, Michigan. The Company also maintains regional headquarters in Kerpen, Germany and Shanghai, China.

The Company and its joint ventures maintain 55 technical facilities/sales offices and 128 manufacturing facilities in 27 countries throughout the world, of which approximately 80 facilities are owned in fee simple and 102 are leased. In some locations, the Company has combined a manufacturing facility, technical center and/or customer service center and sales office at a single multi-purpose site. Although the Company believes that its facilities are suitable and adequate, and have sufficient productive capacity to meet its present needs, additional facilities may be needed to meet future needs in growth products and regions. The majority of its facilities are operating at normal levels based on their respective capacities except those facilities that are in the process of being closed.

ITEM 2. PROPERTIES — (Continued)

The following table shows the approximate total square footage of its principal owned and leased manufacturing facilities by region as of December 31, 2005:

ITEM 3. LEGAL PROCEEDINGS

Securities and Related Matters — In February 2005, a shareholder lawsuit was filed in the U.S. District Court for the Eastern District of Michigan against the Company and certain current and former officers of the Company. In July 2005, the Public Employees’ Retirement System of Mississippi was appointed as lead plaintiff in this matter. In September 2005, the lead plaintiff filed an amended complaint, which alleges, among other things, that the Company and its independent registered public accounting firm, PricewaterhouseCoopers LLP, made misleading statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The named plaintiff seeks to represent a class consisting of purchasers of the Company’s securities during the period between June 28, 2000 and January 31, 2005. Class action status has not yet been certified in this litigation. In December 2005, the defendants moved to dismiss the amended complaint for failure to state a claim. Oral argument on that motion is scheduled for April 2006.

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

ITEM 3. LEGAL PROCEEDINGS — (Continued)

In March and April 2005, the Company and a number of current and former employees, officers and directors were named as defendants in three class action lawsuits brought under the Employee Retirement Income Security Act (“ERISA”) in the U.S. District Court for the Eastern District of Michigan. In September 2005, the plaintiffs filed an amended and consolidated complaint, which generally alleges that the defendants breached their fiduciary duties under ERISA during the class period by, among other things, continuing to offer the Company stock as an investment alternative under the Visteon Investment Plan (and the Visteon Savings Plan for Hourly Employees, together the “Plans”), failing to disclose complete and accurate information regarding the prudence of investing in the Visteon stock, failing to monitor the actions of certain of the defendants, and failing to avoid conflicts of interest or promptly resolve them. These ERISA claims are predicated upon factual allegations similar to those raised in the derivative and securities class actions described immediately above. The consolidated complaint was brought on behalf of a named plaintiff and a putative class consisting of all participants or beneficiaries of the Plans whose accounts included Visteon stock at any time from July 20, 2001 through May 25, 2005. Class action status has not yet been certified in this litigation. In November 2005, the defendants moved to dismiss the consolidated amended complaint on various grounds. Oral argument on that motion is scheduled for March 2006.

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

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

Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the Company for matters discussed in the immediately foregoing paragraph where losses are deemed probable and reasonably estimable. It is possible, however, that some of the matters discussed in the foregoing paragraph could be decided unfavorably to the Company and could require the Company to pay damages or make other expenditures in amounts, or a range of amounts, that cannot be estimated at December 31, 2005 and that are in excess of established reserves. The Company does not reasonably expect, except as otherwise described herein, based on its analysis, that any adverse outcome from such matters would have a material effect on the Company’s financial condition, results of operations or cash flows, although such an outcome is possible.

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 the Company. All ages are as of March 1, 2006:

Michael F. Johnston has been Visteon’s Chairman of the Board and Chief Executive Officer since June 2005, and a member of the Board of Directors since May 2002. Prior to that, he was Chief Executive Officer and President since July 2004, and President and Chief Operating Officer since joining the company in September 2000. Before joining Visteon, Mr. Johnston served as President, e-business for Johnson Controls, Inc., and previously as President-North America and Asia of Johnson Control’s Automotive Systems Group, and as President of its automotive interior systems and battery operations. Mr. Johnston is also a director of Flowserve Corporation and Whirlpool Corporation.

Donald J. Stebbins has been Visteon’s President and Chief Operating Officer since joining the Company in May 2005. Before joining Visteon, Mr. Stebbins served as President and Chief Operating Officer of operations in Europe, Asia and Africa for Lear Corporation since August 2004 and prior to that he was President and Chief Operating Officer of Lear’s operations in the Americas since September 2001.

James F. Palmer has been Visteon’s Executive Vice President and Chief Financial Officer since joining the Company in June 2004. Until February 2004, he was Senior Vice President of The Boeing Company, where he also served as President of Boeing Capital Corporation from November 2000 to November 2003, and President of the Boeing Shared Services Group prior thereto.

ITEM 4A. EXECUTIVE OFFICERS OF VISTEON — (Continued)

Heinz Pfannschmidt has been Visteon’s Executive Vice President and President, Europe and South America Customer Group since August 2005. Prior to that, he served as Executive Vice President and President, Europe and South America of Visteon since July 2004, and Vice President and President, Europe and South America since joining the company in November 2001. Before joining Visteon, 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.

Lorie J. Buckingham has been Visteon’s Senior Vice President and Chief Information Officer of Visteon since July 2004. Prior to that she was Vice President and Chief Information Officer since 2002, and she also served as Director of Global Software Solutions since joining the company in 2001. Before joining Visteon, Ms. Buckingham was the Chief Information Officer for Zonetrader.com, and from 1993 to 1999 she worked at Union Carbide Corporation where she served as the Director of Enterprise Information Technology Solutions.

John Donofrio has been Visteon’s Senior Vice President and General Counsel since joining the Company in June 2005. Before joining Visteon, he was Vice President and General Counsel, Honeywell Aerospace of Honeywell International since 2000, where he also served as Vice President and Deputy General Counsel of Honeywell International from 1996 — 2005. Prior to that he was a Partner at Kirkland & Ellis LLP.

John F. Kill has been Visteon’s Senior Vice President and President, North America Customer Group and Global Advanced Product Development since August 2005. Prior to that, he served as Senior Vice President of Product Development since July 2004, and Vice President of Product Development since January 2001. Mr. Kill has also served as Operations Director of the Climate Control Division since 1999, and served as the European Operations Director from 1997 to 1999. Mr. Kill began his career with Ford Motor Company in 1971, and has held various engineering and management positions.

Robert H. Marcin has been Visteon’s Senior Vice President, Leadership Assessment since December 2005. Prior to that, he served as Senior Vice President, Corporate Relations since January 2003 and 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.

Robert C. Pallash has been Visteon’s Senior Vice President and President, Asia Customer Group since August 2005. Prior to that, he was Vice President and President, Asia-Pacific since July 2004, and Vice President, Asia Pacific since joining the Company in September 2001. Before joining Visteon, Mr. Pallash served as president of TRW Automotive Japan since 1999, and president of Lucas Varity Japan prior thereto.

Joel Coque has been Visteon’s Vice President, Interiors Product Group since August 2005. Prior to that, he was Vice President and General Manager of Visteon’s PSA Peugeot-Citroën and Renault/Nissan customer business groups since 2001. Mr. Coque joined Visteon in July 1999 as Managing Director of Interior Systems for Europe and South America. Prior to that, he served as the Managing Director of Plastic Omnium’s Automotive Interiors Division.

Joy M. Greenway has been Visteon’s Vice President, Climate Product Group since August 2005. Prior to that, she was Director, Powertrain since March 2002, and Director of Visteon’s Ford truck customer business group since April 2001. She joined Visteon in 2000 as Director of Fuel Storage and Delivery Strategic Business Unit.

ITEM 4A. EXECUTIVE OFFICERS OF VISTEON — (Continued)

Jonathan K. Maples has been Vice President, Global Purchasing and Visteon Services since January 2006. Prior to that, he has served as Vice President and General Manager of Ford North American Customer Group, and Vice President of Quality and Materials Management since joining the Company in November 2001. Before joining Visteon, he was Executive Vice President of Business Services for MSX International since May 2000. Mr. Maples was Vice President of Operations and Vice President of Supplier Management for DaimlerChrysler Corporation prior thereto.

Steve Meszaros has been Visteon’s Vice President, Electronics Product Group since August 2005. Prior to that, he was Managing Director, China Operations and General Manager, Yanfeng Visteon since February 2001. Prior to that, he was based in Europe, where he was responsible for Visteon’s interior systems business in the United Kingdom and Germany since 1999.

William G. Quigley III has been Visteon’s Vice President, Corporate Controller and Chief Accounting Officer since joining the company in December 2004. Before joining Visteon, he was the Vice President and Controller — Chief Accounting Officer of Federal-Mogul Corporation since June 2001. Federal-Mogul filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code on October 11, 2001. Mr. Quigley was previously Finance Director — Americas and Asia Pacific of Federal-Mogul since July 2000, and Finance Director — Aftermarket Business Operations of Federal-Mogul prior thereto.

PART II

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

The Company’s common stock is listed on the New York Stock Exchange in the United States under the symbol “VC.” As of March 1, 2006, the Company had 128,006,167 shares of its common stock $1.00 par value outstanding, which were owned by 108,440 shareholders of record. The table below shows the high and low sales prices for the Company’s common stock as reported by the New York Stock Exchange, and the dividends the Company paid per share of common stock for each quarterly period for the last two years.

On February 9, 2005, the Company’s Board of Directors suspended the Company’s quarterly cash dividend on its common stock. The Board evaluates the Company’s dividend policy based on all relevant factors. The Company’s credit agreements limit the amount of cash payments for dividends that may be made. The ability of the Company’s subsidiaries to transfer assets is subject to various restrictions, including regulatory requirements and governmental restraints. Refer to Note 7, “Non-Consolidated Affiliates,” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

The following table summarizes information relating to purchases made by or on behalf of the Company, or an affiliated purchaser, of shares of Visteon common stock during the fourth quarter of 2005.

Issuer Purchases of Equity Securities

ITEM 6. SELECTED FINANCIAL DATA

The following table presents information from the Company’s consolidated financial statements for the five years ended December 31, 2005. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplemental Data.”

This section summarizes significant factors affecting the Company’s consolidated operating results, financial condition and liquidity for the three-year period ended December 31, 2005. This section should be read in conjunction with the Company’s consolidated financial statements and related notes appearing elsewhere in this report.

The Company’s Business

Visteon Corporation (“Visteon” or the “Company”) is a leading global supplier of automotive systems, modules and components to global vehicle manufacturers and the automotive aftermarket. Headquartered in Van Buren Township, Michigan, with regional headquarters in Kerpen, Germany and Shanghai, China, a workforce of over 49,000 employees and a network of manufacturing sites, technical centers, sales offices and joint ventures located in every major region of the world.

The Company was incorporated in Delaware in January 2000 as a wholly-owned subsidiary of Ford Motor Company (“Ford” or “Ford Motor Company”). Subsequently, Ford transferred the assets and liabilities comprising its automotive components and systems business to Visteon. The Company separated from Ford on June 28, 2000 when all of the Company’s common stock was distributed by Ford to its shareholders.

ACH Transactions

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

Following the signing of the MOU and at June 30, 2005, the Company classified the manufacturing facilities and associated assets, including inventory, machinery, equipment and tooling, to be sold as “held for sale.” The liabilities to be assumed or forgiven by Ford pursuant to the ACH Transactions, including employee liabilities and postemployment benefits payable to Ford, were classified as “Liabilities associated with assets held for sale” in the Company’s consolidated balance sheet following the signing of the MOU. Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires long-lived assets that are considered “held for sale” to be measured at the lower of their carrying value or fair value less cost to sell and future depreciation of such assets is ceased. During the second quarter of 2005, the Company’s Automotive Operations recorded a non-cash impairment charge of $920 million to write-down those assets considered “held for sale” to their aggregate estimated fair value less cost to sell. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms and management estimates.

On October 1, 2005, Ford acquired from Visteon all of the issued and outstanding shares of common stock of the parent of ACH in exchange for Ford’s payment to the Company of approximately $300 million, as well as the forgiveness of certain other postretirement employee benefit (“OPEB”) liabilities and other obligations relating to hourly employees associated with the Business, and the assumption of certain other liabilities with respect to the Business (together, the “ACH Transactions”).

Additionally, on October 1, 2005, Ford acquired from the Company warrants to acquire 25 million shares of the Company’s common stock and agreed to provide funds to be used in the Company’s further restructuring.

The Business accounted for approximately $6.1 billion of the Company’s total sales for 2005, the majority being products sold to Ford. Also, the transferred facilities included all of the Company’s plants that leased hourly workers covered by Ford’s master agreement with the UAW. The ACH Transactions addressed certain strategic and structural challenges of the business, although the Company expects additional restructuring activities and business improvement actions will be needed in the foreseeable future for the Company to achieve sustainable success in an increasingly challenging environment.

Pursuant to the ACH Transactions, the Company and Ford terminated certain existing commercial agreements, including the Funding Agreement, dated as of March 10, 2005, as amended; the Master Equipment Bailment Agreement, dated as of March 10, 2005, as amended; the Purchase and Supply Agreement, dated as of December 19, 2003; and the 2003 Relationship Agreement, dated as of December 19, 2003, as well as the Amended and Restated Hourly Employee Assignment Agreement, dated as of April 1, 2000, as amended and restated as of December 19, 2003.

Organization and Operating Structure

In late 2005 the Company announced a new operating structure to manage the business on a go-forward basis. This operating structure is comprised of the following global product groups: Climate, Electronics, Interiors and Other. These global product groups have financial and operating responsibility over the design, development and manufacture of the Company’s product portfolio. Regional customer groups are responsible for the marketing, sales and service of the Company’s product portfolio to its customer base. Certain functions such as procurement, information technology and other administrative activities are managed on a global basis with regional deployment.

The Company is currently in the process of realigning systems and reporting structures to facilitate financial reporting under the revised organizational structure. Such realignment was not complete at December 31, 2005 and accordingly the Company did not meet the criteria to change its reportable segments under Statement of Financial Accounting Standards No. 131 (“SFAS 131”) “Disclosures about Segments of an Enterprise and Related Information.” However, pursuant to the ACH Transactions, the Company established and commenced operations of Visteon Services, a centralized administrative function to monitor and facilitate transactions with ACH for leased employees and other services provided to ACH by the Company. As the activities of Visteon Services do not share similar economic characteristics with the Company’s other business operations, the Company has provided separate disclosure of these operations as of December 31, 2005.

The Company’s reportable segments as of December 31, 2005 are as follows:

Automotive Operations — The Company’s Automotive Operations supply automotive systems, modules and components on a global basis for product offerings related to climate control, interior, exterior, powertrain, chassis and electronics. For a more detailed description of the Company’s products, see “The Company’s Products” above. The Automotive Operations segment accounted for approximately 97% of the Company’s 2005, 2004 and 2003 total net sales.

Glass Operations — The Company’s Glass Operations supply automotive glass products to Ford and various aftermarket customers, and float glass for commercial architectural and automotive applications. The Glass Operations segment accounted for approximately 2%, 3% and 3% of the Company’s 2005, 2004 and 2003 total net sales, respectively.

Services Operations — The Company’s Services Operations supply leased personnel and transition services as required by certain agreements entered into by the Company with ACH as a part of the ACH Transactions. Pursuant to the Master Services Agreement and the Salaried Employee Lease Agreement the Company agreed to provide ACH with certain information technology, personnel and other services to enable ACH to conduct its business. Services to ACH are provided at a rate approximately equal to the Company’s cost until such time the services are no longer required by ACH or the expiration of the related agreement. The Service segment accounted for approximately 1% of the Company’s total net sales in 2005.

Further information relating to the Company’s reportable segments can be found in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (Note 18, “Segment Information,” of the Company’s consolidated financial statements).

The global automotive parts industry is a highly competitive industry. Suppliers must rapidly develop new and innovative technologies and respond to increasing cost and pricing pressures. In order to respond to these challenges, the Company is taking actions to support its key operating strategies of improving base operations, reducing overhead costs and implementing other improvement action plans.

Improving Base Operations

Reduce Overhead Costs

To further improve the Company’s administrative and engineering costs, the Company has taken actions to implement more competitive benefits and compensation programs for its employees, build and relocate its engineering capability in more competitive cost locations, and re-examine its current third-party supplier arrangements for purchased services.

Three-Year Improvement Plan

In January 2006, the Company announced a three-year improvement plan that involves the restructuring of certain underperforming and non-strategic plants and businesses to improve operating and financial performance and other cost reduction efforts. Currently, this plan is expected to affect up to 23 facilities. The majority of the cash expenses for this plan are expected to be funded by the $400 million escrow account established pursuant to the ACH Transactions.

Critical Accounting Estimates

The accompanying consolidated financial statements in Item 8 of this annual report on Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States and, accordingly, the Company’s accounting policies have been disclosed in Note 2 to the consolidated financial statements. The Company considers accounting estimates to be critical accounting policies when:

When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that it considers to be the most appropriate given the specific circumstances. Application of these accounting principles requires the Company’s management to make estimates about the future resolution of existing uncertainties. Estimates are typically based upon historical experience, current trends, contractual documentation, and other information, as appropriate. Due to the inherent uncertainty involving estimates, actual results reported in the future may differ from those estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements, giving due regard to materiality.

Pension Plans and Other Postretirement Employee Benefit Plans

Using appropriate actuarial methods and assumptions, the Company’s defined benefit pension plans are accounted for in accordance with Statement of Financial Accounting Standards No. 87 (“SFAS 87”), “Employers’ Accounting for Pensions,” non-pension postretirement employee benefits are accounted for in accordance with Statement of Financial Accounting Standards No. 106 (“SFAS 106”), “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” disability, early retirement and other postretirement employee benefits are accounted for in accordance with Statement of Financial Accounting Standards No. 112 (“SFAS 112”), “Employer Accounting for Postemployment Benefits.”

The determination of the Company’s obligation and expense for its pension and other postretirement employee benefits, such as retiree health care and life insurance, is dependent on the Company’s selection of certain assumptions used by actuaries in calculating such amounts. Selected assumptions are described in Note 10 to the Company’s consolidated financial statements, which is incorporated herein by reference, including the discount rate, expected long-term rate of return on plan assets and rates of increase in compensation and health care costs.

Actual results that differ from assumptions used are accumulated and amortized over future periods and, accordingly, generally affect recognized expense and the recorded obligation in future periods. Therefore, assumptions used to calculate benefit obligations as of the September 30 annual measurement date directly impact the expense to be recognized in future periods. The primary assumptions affecting the Company’s accounting for employee benefits under SFAS Nos. 87, 106 and 112 as of December 31, 2005 are as follows:

While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company’s pension and other postretirement employee benefit obligations and its future expense. The following table illustrates the sensitivity to a change in certain assumptions for Company sponsored U.S. and non-U.S. pension plans on its 2005 funded status and 2006 pre-tax pension expense (certain salaried employees are covered by a Ford sponsored plan):

The following table illustrates the sensitivity to a change in the discount rate assumption related to Visteon sponsored postretirement employee health care and life insurance plans expense (certain salaried employees are covered by a Ford sponsored plan):

The following table illustrates the sensitivity to a change in the assumed health care trend rate related to Visteon sponsored postretirement employee health expense (certain salaried employees are covered by a Ford sponsored plan):

The Company’s OPEB payable to Ford includes the financial obligation the Company has to Ford for the cost of providing selected health care and life insurance benefits to certain Visteon salaried employees who retire after May 24, 2005. The health care and life insurance costs for these employees are calculated using Ford’s assumptions.

Effective October 1, 2005 and in connection with the ACH Transactions, Ford relieved the Company of all liabilities totaling $2.2 billion for the postretirement employee health care and life insurance related obligations for Visteon-assigned Ford-UAW employees and retirees and for salaried retirees who retired prior to May 24, 2005.

Impairment of Long-Lived Assets and Certain Identifiable Intangibles

Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”) requires that long-lived assets and intangible assets subject to amortization are reviewed for impairment when certain indicators of impairment are present. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. Generally, when impairment exists the long-lived assets are adjusted to their respective fair values.

In assessing long-lived assets for an impairment loss, assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Asset grouping requires a significant amount of judgment. Accordingly, facts and circumstances will influence how asset groups are determined for impairment testing. In assessing long-lived assets for impairment, management considered the Company’s product line portfolio, customers and related commercial agreements, labor agreements and other factors in grouping assets and liabilities at the lowest level for which identifiable cash flows are largely independent. Additionally, in determining fair value of long-lived assets, management uses appraisals, management estimates or discounted cash flow calculations.

Product Warranty and Recall

The Company accrues for warranty obligations for products sold based on management estimates, with support from the Company’s sales, engineering, quality and legal functions, of the amount that eventually will be required to settle such obligations. This accrual is based on several factors, including contractual arrangements, past experience, current claims, production changes, industry developments and various other considerations.

The Company accrues for product recall claims related to potential financial participation in customers’ actions to provide remedies related primarily to safety concerns as a result of actual or threatened regulatory or court actions or the Company’s determination of the potential for such actions. The Company accrues for recall claims for products sold based on management estimates, with support from the Company’s engineering, quality and legal functions. Amounts accrued are based upon management’s best estimate of the amount that will ultimately be required to settle such claims.

Environmental Matters

The Company 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. The Company is also subject to environmental laws requiring the investigation and cleanup of environmental contamination at properties it presently owns or operates and at third-party disposal or treatment facilities to which these sites send or arranged to send hazardous waste.

At the time of spin-off, the Company and Ford agreed on a division of liability for, and responsibility for management and remediation of, environmental claims existing at that time, and, further, that the Company would assume all liabilities for existing and future claims relating to sites that were transferred to it and its operation of those sites, including off-site disposal, except as otherwise specifically retained by Ford in the master transfer agreement. In connection with the ACH Transactions, Ford agreed to re-assume these liabilities to the extent they arise from the ownership or operation prior to the spin-off of the locations transferred to ACH (excluding any increase in costs attributable to the exacerbation of such liability by the Company or its affiliates).

The Company is aware of contamination at some of its properties and relating to various third-party superfund sites at which the Company or its predecessor has been named as a potentially responsible party. It is in various stages of investigation and cleanup at these sites. At December 31, 2005, the Company had recorded a reserve of approximately $9 million for this environmental investigation and cleanup. However, estimating liabilities for environmental investigation and cleanup is complex and dependent upon a number of factors beyond the Company’s control and which may change dramatically. Accordingly, although the Company believes its reserve is adequate based on current information, the Company cannot assure you that its eventual environmental investigation and cleanup costs and liabilities will not exceed the amount of its current reserve.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance on deferred tax assets by tax jurisdiction when it is more likely than not that such assets will not be realized. Management judgment is required in determining the Company’s valuation allowance on deferred tax assets. Deferred taxes have been provided for the net effect of repatriating earnings from consolidated foreign subsidiaries.

Results of Operations

2005 Compared with 2004

Sales

Automotive Operations sales were $16.4 billion in 2005, compared with $18.1 billion in 2004, representing a decrease of $1.7 billion or 9%. The ACH Transactions resulted in a decrease of $1.9 billion, which was partially offset by an increase in non-Ford sales of $810 million and favorable foreign currency of $360 million. Sales were further decreased due primarily to lower Ford North America production volume and unfavorable vehicle mix of $620 million and customer price reductions.

Sales for Glass Operations were $395 million in 2005, compared with $520 million in 2004, representing a decrease of $125 million or 24%. Substantially all of this decrease was attributable to the ACH Transactions.

Sales for Services Operations were $164 million in 2005, related to information technology, engineering, administrative and other business support services provided by the Company at cost, under the terms of various agreements, to ACH in the fourth quarter of 2005.

Gross Margin

Gross margin for the Company’s Automotive Operations was $568 million in 2005 compared with $879 million in 2004, representing a decrease of $311 million or 35%. Lower Ford North America production volumes and unfavorable vehicle mix reduced 2005 gross margin by $422 million. The net effect of the Ford funding agreement, master equipment bailment agreement and the ACH Transactions increased gross margin by approximately $110 million in 2005 as compared to 2004. Cost reduction activities, net of raw material cost increases, employee wage and benefit increases and other cost increases, were more than offset by customer price reductions resulting in a further reduction in gross margin of $35 million. Finally, the 2005 gross margin comparison was negatively impacted by a non-recurring $49 million benefit recorded in 2004 resulting from the favorable settlement of a product recall claim with a customer.

Gross margin for the Company’s Glass Operations decreased by $24 million in 2005 compared to 2004. Substantially all of this decrease was attributable to the effect of the ACH Transactions and customer price reductions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2005 were $946 million, $34 million lower as compared with 2004. Under the terms of various agreements between the Company and ACH, expenses previously classified as selling, general and administrative expenses incurred to support the business of ACH are now classified as costs of sales in the consolidated financial statements. The decrease in selling, general and administrative expenses reflects approximately $50 million of expenses incurred in support of ACH included in costs of sales in the fourth quarter of 2005. Further, net cost reduction activities of approximately $20 million were offset by approximately $30 million in bad debt expense related to the bankruptcy of a customer in the second quarter of 2005 and foreign currency of $10 million.

Gain on ACH Transactions

On October 1, 2005, Ford acquired from the Company all of the issued and outstanding shares of common stock of ACH in exchange for approximately $300 million (less the amount due in repayment of the $250 million loan made by Ford to the Company on September 19, 2005 and other amounts), as well as the forgiveness of certain OPEB liabilities and other obligations relating to hourly employees associated with the Business, and the assumption of certain other liabilities with respect to the Business.

The following table summarizes the impact of the ACH Transactions as of the October 1, 2005 transaction closing date:

Interest

Net interest expense increased by $36 million from $96 million in 2004 to $132 million in 2005. The increase resulted from higher market interest rates on outstanding debt in 2005 as compared to 2004.

2004 Compared with 2003

Sales

Sales for Automotive Operations were $18.1 billion in 2004, compared with $17.1 billion in 2003, an increase of $1.0 billion or 6%. This increase reflects higher non-Ford sales of $1.5 billion and approximately $500 million of favorable foreign currency. In addition, the non-recurrence of a $150 million lump-sum settlement with Ford in 2003 for pricing in North America and higher Ford European vehicle production volumes were offset partially by the impact of lower Ford North American vehicle production volume of approximately $600 million, the loss of sales from the exit of the Company’s seating operations in 2003 of approximately $250 million, and customer price reductions.

Sales for Glass Operations were $520 million in 2004, compared with $563 million in 2003, a decrease of $43 million or 8%, resulting primarily from lower non-Ford sales of approximately $40 million and customer price reductions.

Gross Margin

Gross margin for Automotive Operations was $879 million in 2004 compared with $530 million in 2003, an increase of $349 million. Although sales volumes, net of foreign currency, improved year over year, the Company’s gross margin was negatively impacted by both unfavorable customer mix, reflecting lower Ford North America vehicle production volume, and product mix. Gross margin increased by approximately $170 million as a result of cost reduction activities, net of customer price reductions, raw material cost increases and employee wage and benefit increases. In addition, foreign currency increased gross margin by approximately $60 million. The improvement in gross margin in 2004 also reflects a reduction in costs of sales of $59 million for one-time UAW contract ratification costs in 2003, a reduction to product recall accruals of $49 million in 2004 resulting from the favorable settlement of a claim with a customer, and a $25 million benefit from the exit of the Company’s seating operations in 2003.

Gross margin for Glass Operations was $9 million in 2004 compared with $22 million in 2003. The decrease reflects lower Ford North American vehicle production volume and customer price reductions, offset partially by one-time UAW contract ratification costs of $5 million in 2003.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2004 were $980 million, $8 million lower as compared with 2003. The decrease reflects net cost reduction efforts of $52 million and reduced information technology infrastructure costs of $34 million, partially offset by foreign currency of $30 million. The 2004 selling, general and administrative expenses comparison was negatively impacted by a one-time reimbursement from Ford of $48 million for information technology costs incurred by the Company for system separation activities in 2003.

Interest

Net interest expense and debt extinguishment costs of $96 million in 2004 increased by $19 million from 2003, reflecting $11 million of debt extinguishment costs and higher average outstanding debt levels in the U.S.

Restructuring Activities

The Company has undertaken various restructuring activities to achieve strategic objectives, including the reduction of operating costs. Restructuring activities include, but are not limited to, plant closures, production relocation, administrative realignment and consolidation of available capacity and resources.

Management expects to finance these restructuring programs through cash reimbursement from an escrow account established pursuant to the ACH Transactions, from cash generated from its ongoing operations, or through cash available under its existing debt agreements, subject to the terms of applicable covenants. Management does not expect that the execution of these programs will have a significant adverse impact on its liquidity position.

Escrow Agreement

Pursuant to the Escrow Agreement, dated as of October 1, 2005, among the Company, Ford and Deutsche Bank Trust Company Americas, Ford paid $400 million into an escrow account for use by the Company to restructure its businesses. The Escrow Agreement provides that the Company will be reimbursed from the escrow account for the first $250 million of reimbursable restructuring costs, as defined in the Escrow Agreement, and up to one half of the next $300 million of such costs. Through December 31, 2005, the Company recorded reimbursements of $51 million and had received payment of $24 million in reimbursement from the escrow account. The $51 million is included in operating income in the consolidated statement of operations, while the unpaid amount of $27 million was included in accounts receivable in the consolidated balance sheet as of December 31, 2005.

Restructuring Reserves

The following is a summary of the Company’s consolidated restructuring reserves and related activity for the years ended December 31, 2005, 2004 and 2003, respectively. Substantially all of the Company’s restructuring expenses are related to severance and related employee costs.

The restructuring reserve balance of $14 million at December 31, 2005 is classified in current accrued liabilities on the consolidated balance sheet. The December 31, 2004, reserve balance of $122 million includes $71 million which is classified as current accrued liabilities and $51 million which is classified as long-term other liabilities on the consolidated balance sheet. The Company currently anticipates that the restructuring activities to which all of the above charges relate will be substantially completed by the end of 2006.

Utilization for 2005 of $93 million includes $66 million mainly for severance pay and $27 million related to pension and other postretirement employee benefits. Utilization for 2004 of $150 million includes $129 million for severance and $21 million related to pension and other postretirement employee benefits. Utilization for 2003 of $153 million includes $127 million for severance pay and $26 million related to pension and other postretirement employee benefits.

Estimates of restructuring charges are based on information available at the time such charges are recorded. In general, management anticipates that restructuring activities will be completed within a timeframe such that significant changes to the plan are not likely. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially estimated. The Company adjusted approximately $63 million, $18 million and $9 million of previously recorded reserves in 2005, 2004 and 2003, respectively.

2005 Restructuring Actions — During 2005, significant restructuring activities included the following actions:

2004 Restructuring Actions — During 2004, significant restructuring activities included the following actions:

2003 Restructuring Actions — During 2003, significant restructuring activities included the following actions:

Impairment of Long-Lived Assets

The Company recorded asset impairment losses of $1,511 million, $314 million and $436 million for the years ended December 31, 2005, 2004 and 2003, respectively, to adjust certain long-lived assets to their estimated fair values.

2005 Impairment Charges

During the fourth quarter of 2005 and following the closing of the ACH Transactions on October 1, 2005, the Company’s Automotive Operations recorded an impairment charge of $335 million to reduce the net book value of certain long-lived assets considered to be “held for use” to their estimated fair value. The impairment assessment was performed pursuant to impairment indicators, including lower than anticipated current and near term future production volumes and the related impact on the Company’s current and projected operating results and cash flows. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms and management estimates.

Following the signing of the MOU and at June 30, 2005, the Company classified the manufacturing facilities and associated assets, including inventory, machinery, equipment and tooling to be sold as “held for sale.” The liabilities to be assumed or forgiven by Ford pursuant to the ACH Transactions, including employee liabilities and postretirement employee benefits payable to Ford were classified as “Liabilities associated with assets held for sale” in the Company’s consolidated balance sheet following the signing of the MOU. Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires long-lived assets that are considered “held for sale” to be measured at the lower of their carrying value or fair value less cost to sell and future depreciation of such assets is ceased. During the second quarter of 2005, the Company’s Automotive Operations recorded an impairment charge of $920 million to write-down those assets considered “held for sale” to their aggregate estimated fair value less cost to sell. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms and management estimates.

During the second quarter of 2005, the Automotive Operations recorded an impairment charge of $256 million to reduce the net book value of certain long-lived assets considered to be “held for use” to their estimated fair value. The impairment assessment was performed pursuant to impairment indicators including lower than anticipated current and near term future production volumes and the related impact on the Company’s projected operating results and cash flows. Fair values were determined primarily based on prices for similar groups of assets determined by third-party valuation firms and management estimates.

2004 Impairment Charges

During the third quarter of 2004, the Automotive Operations recorded an impairment charge of $314 million to reduce the net book value of certain long-lived assets to their estimated fair value. This impairment was based on an assessment by product line asset group of the recoverability of the Company’s long-lived assets. The assessment was performed based upon impairment indicators including the impact of lower than anticipated current and near term future Ford North American production volumes and the related impact on the Company’s projected operating results and cash flows. Fair values were determined primarily based on prices for similar groups of assets determined by a third-party valuation firm and management estimates.

2003 Impairment Charges

During the fourth quarter of 2003, the Automotive Operations recorded an impairment charge of $407 million to reduce the net book value of certain long-lived assets to their estimated fair value. This impairment assessment was based upon impairment indicators including a decrease in the production levels of the Company’s major customers and the anticipated impact of the Ford 2003 agreements. Fair values were determined primarily based on prices for similar groups of assets determined by a third-party valuation firm and management estimates.

The Company’s Automotive Operations recorded an impairment charge of $25 million related to certain seating-related fixed assets, for which an agreement was reached with Ford to transfer production located in Chesterfield, Michigan, to another supplier. The Company measured the impairment loss associated with these assets by comparing the carrying value of these fixed assets to the expected proceeds from disposal of the assets after completion of remaining production commitments.

The Company’s Automotive Operations also recorded an impairment charge of $4 million related to certain coiled spring and stamping fixed assets located at the Company’s Monroe, Michigan, plant. Production activities were discontinued and the future undiscounted cash flows associated with these assets were less than the related carrying values. The Company 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.

Income Taxes

The Company’s 2005 income tax provision of $64 million reflects income tax expense related to those countries where the Company is profitable, accrued withholding taxes, certain non-recurring and other discrete tax items and the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign countries. Non-recurring and other discrete tax items recorded in 2005 resulted in a net benefit of $31 million. This includes a benefit of $28 million, reflecting primarily a reduction in income tax reserves corresponding with the conclusion of U.S. Federal income tax audits for 2002, 2003 and certain pre-spin periods, as well as a net benefit of $3 million consisting primarily of benefits related to a change in the estimated benefit associated with tax losses in Canada and the favorable resolution of tax matters in Mexico, offset by net provisions recorded primarily to increase income tax reserves for prior year tax exposures.

The 2004 provision of $962 million includes a charge of $871 million recorded during the third quarter to establish additional valuation allowances against the Company’s deferred tax assets in the U.S. and certain foreign countries. This charge is comprised of $948 million related to deferred tax assets as of the beginning of the year, partially offset by the reduction of related tax reserves of $77 million. The Company’s provision for income taxes for 2004 also includes a benefit of $42 million recorded in the fourth quarter to reduce its deferred tax asset valuation allowance to offset a related reduction in the net deferred tax asset. This reduction in the net deferred tax asset was the result of certain U.S. tax adjustments related primarily to foreign currency movements that were recorded through other comprehensive income during the fourth quarter.

Liquidity and Capital Resources

The Company’s cash and liquidity needs are impacted by the level, variability, and timing of its customers’ worldwide vehicle production, which varies based on economic conditions and market shares in major markets. The Company’s intra-year needs are impacted by seasonal effects in the industry, such as the shutdown of operations for two weeks in July, the subsequent ramp-up of new model production and the additional one-week shutdown in December by its primary North American customers. These seasonal effects normally require use of liquidity resources during the first and third quarters. Further, as the Company’s operating profitability has become more concentrated with its foreign subsidiaries and joint ventures, the Company’s cash balance located outside the U.S. is expected to increase. As of December 31, 2005 approximately 60% of the Company’s cash balance is located in jurisdictions outside of the U.S. The Company’s ability to efficiently access cash balances in foreign jurisdictions is subject to local regulatory and statutory requirements.

During 2005, the Company’s credit rating and outlook were downgraded as discussed further below. Accordingly, the Company’s access to liquidity has become significantly less reliable and more costly.

Committed and Uncommitted Liquidity Sources

The Company has the following committed and uncommitted sources of liquidity as of December 31, 2005.

Covenants and Restrictions

The Company is subject to various covenants and restrictions on its borrowings as further discussed in Note 9 to the Company’s consolidated financial statements. The Company’s primary credit agreements currently contain certain affirmative and negative covenants including a covenant not to exceed a certain leverage ratio of consolidated total debt to consolidated EBITDA (as defined in the Credit Agreements) of 4.75 for the quarters ending Dec. 31, 2005 and March 31, 2006; 5.25 for the quarter ending June 30, 2006; 4.25 for the quarter ending Sept. 30, 2006; 3.00 for the quarter ending Dec. 31, 2006; 2.75 for the quarter ending March 31, 2007; and 2.50 thereafter. In addition, the credit agreements limit the amount of capital expenditures and cash payments for dividends that the Company may make. The ability of the Company’s subsidiaries to transfer assets is subject to various restrictions, including regulatory requirements and governmental restraints.

At December 31, 2005, the Company was in compliance with applicable covenants and restrictions, as amended, although there can be no assurance that the Company will remain in compliance with such covenants in the future. If the Company was to violate a financial covenant and not obtain a waiver, the credit agreements could be terminated and amounts outstanding would be accelerated. The Company can provide no assurance that, in such event, that it would have access to sufficient liquidity resources to repay such amounts.

Credit Ratings

Moody’s current corporate rating is B2 and SGL rating is 3. The rating on senior unsecured debt is B3. The latest rating action by the agency was moving the outlook to negative on January 18, 2006. S&P current corporate rating is B+ and rates the Company’s short term liquidity as B-2. The agency currently has a negative outlook on the rating. Fitch’s current rating on the Company’s senior secured debt is BB with a negative outlook.

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

Other Liquidity Considerations

The Company believes that cash flow from operations, combined with access to external liquidity sources, will be sufficient to fund capital spending, debt maturities and other cash obligations in 2006. However, liquidity from internal or external sources to meet these obligations is dependent on a number of factors, including availability and accessibility of cash balances, credit ratings, industry economic factors, and the availability of the capital markets. In addition, because the Company was not timely in making its SEC filings in 2005, it is ineligible to use Forms S-2 and S-3 to register securities until all required reports under the Securities Exchange Act of 1934 have been timely filed for 12 months prior to the filing of a registration statement for those securities. Accordingly, the Company is unable to use its presently effective shelf registration statement to sell securities in the public market without first obtaining a waiver from the SEC. The Company can provide no assurance that, if needed, additional liquidity will be available at the times or in the amounts needed, or on terms and conditions acceptable to the Company.

Cash Flows

Operating Activities — Cash provided from operating activities during 2005 totaled $417 million, compared with cash provided from operating activities of $418 million for the same period in 2004. This is largely attributable to the acceleration of Ford North American receivable terms during 2005 from 33 days to 22 days, lower inventory levels, non-recurrence of Ford productivity-related payments in 2004 related to 2003, and discontinuation of the Ford supplier early pay program in 2004, offset partially by the net cash outflow associated with the run-off of retained receivables and payables of the business that transferred as part of the ACH Transactions, changes in Ford payment terms in Europe, and a higher net loss, as adjusted for non-cash items.

Investing Activities — Cash used in investing activities was $231 million during 2005, compared with $782 million for 2004. The Company’s capital expenditures excluding capital leases in 2005 totaled $585 million, compared with $827 million for the same period in 2004, reflecting cash flows associated with various agreements with Ford in 2005 and the substantial completion of facilities consolidation in 2004. Investments in four new non-consolidated affiliates located in China and one new non-consolidated affiliate in India were $21 million. In the third quarter of 2005, the Company received a deposit of $311 million from Ford related to the ACH Transactions, and refunded $12 million in the fourth quarter to Ford after final determination of the value of the transferred inventory was completed. Proceeds from asset and land disposals were $76 million. The credit agreements limit the amount of capital expenditures the Company may make.

Financing Activities — Cash used by financing activities totaled $51 million in the 2005, compared with $135 million provided from financing activities in the same period in 2004. The cash used in 2005 reflects primarily the retirement of the remaining $250 million of 7.95% notes due on August 1, 2005, termination of the General Electric Capital Corporation (“GECC”) program, and reductions in other consolidated subsidiary debt, partially offset by draws of $347 million under the five-year revolving credit facility. The Company received a $250 million loan from Ford on September 19, 2005, which was repaid on September 30, 2005. The cash proceeds in 2004 reflect the net increase in debt of $200 million due to the March 2004 issuance of debt securities offset partially by the April 2004 repurchase of certain existing notes, maturing short-term commercial paper obligations, dividend payments, and reductions in other debt. In February 2005, the Board of Directors elected to cease the payment of the quarterly dividend of $0.06 per share of common stock. The credit agreements limit the amount of cash payments for dividends the Company may make.

Contractual Obligations

The following table summarizes the Company’s expected cash outflows resulting from long-term obligations existing as of December 31, 2005:

The Company has guaranteed approximately $136 million of debt capacity held by consolidated subsidiaries and $84 million for lifetime lease payments held by consolidated subsidiaries. In addition, the Company has guaranteed Tier 2 suppliers’ debt and lease obligations and other third-party service providers’ obligations of up to $20 million, at December 31, 2005, to ensure the continued supply of essential parts.

FORWARD-LOOKING STATEMENTS

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

You should understand that various factors, in addition to those discussed elsewhere in this document, could affect our future results and could cause results to differ materially from those expressed in such forward-looking statements, including:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Foreign Currency Risk

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

The Company’s primary foreign exchange operating exposures include the Korean won, Mexican peso, euro and Czech koruna. Because of the mix between the Company’s costs and revenues in various regions, operating results are exposed generally to weakening of the euro and to strengthening of the Korean won, Mexican peso, and Czech koruna. For transactions in these currencies, the Company utilizes a strategy of partial coverage. As of December 31, 2005, the Company’s coverage for projected transactions in these currencies was approximately 41% for 2006.

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

Interest Rate Risk

The Company uses interest rate swaps to manage interest rate risk. These swaps effectively convert a portion of the Company’s fixed rate debt into variable rate debt. During the first quarter of 2005, the Company terminated interest rate swaps with a notional amount of $200 million related to the 8.25% notes due August 1, 2010, which reduced the notional amount of interest rate swaps to $350 million. Approximately 45% of the Company’s borrowings were effectively on a fixed rate basis as of both December 31, 2005 and December 31, 2004.

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

Commodity Risk

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

In the second quarter of 2005, the Company discontinued hedge accounting treatment for natural gas and copper forward contracts. Discontinuance of hedge accounting for hedges on transactions that were not expected to occur resulted in the reclassification of a gain of approximately $8 million from “Accumulated other comprehensive income (loss)” to net income (loss). These forward contracts were subsequently terminated during the third quarter of 2005. Since completion of the ACH Transactions on October 1, 2005, the Company’s exposure to market risks from changes in the price of natural gas and copper has been substantially reduced.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Visteon Corporation

We have completed integrated audits of Visteon Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Visteon Corporation and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, we have audited management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that Visteon Corporation did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of the material weakness relating to accounting for freight, raw material and other supplier costs and period-end accruals and payables in its North American Purchasing function, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment. As of December 31, 2005, the Company did not maintain effective controls over the complete and accurate recording of freight, raw material and other supplier costs and related period-end accruals and payables originating in its North American purchasing function. Specifically, controls to ensure that accruals and payables for freight, raw materials and other supplier costs were appropriately supported and reviewed did not operate effectively to ensure that costs were recorded in the correct period and that period-end accruals and payables were complete and accurate, and did not prevent or detect the improper conduct by two former, non-executive employees. Further, the Company did not have effective controls designed and in place over information received from its third-party freight administrator, and the monitoring of supplier negotiations and ongoing contract compliance, to identify and record costs in the correct period and ensure that related period-end accruals and payables were complete and accurate. This control deficiency, and the related misconduct, resulted in accounting errors which required restatement of the Company’s 2004, 2003 and 2002 annual consolidated financial statements, the 2004 interim consolidated financial statements, and adjustments to the consolidated financial statements for the first quarter 2005. Additionally, this control deficiency could result in a misstatement of freight, raw material and other supplier costs and related period-end accruals and payables that would result in a material misstatement to annual or interim financial statements that would not be prevented or detected. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

In our opinion, management’s assessment that Visteon Corporation did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Visteon Corporation has not maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the COSO.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Detroit, Michigan

March 16, 2006

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to the consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — (Continued)

VISTEON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS