Bob Krakowiak - Vice President, Treasurer and Investor Relations Sachin Lawande - President and Chief Executive Officer William Robertson - Interim Chief Financial Officer.

Matt Stover - SIG Samik Chatterjee - J.P. Morgan Brian Sponheimer - Gabelli & Company.

Good morning. I’m Bob Krakowiak, Vice President, Treasurer and Investor Relations for Visteon. Welcome to our first quarter 2016 earnings call. All lines have been placed on a listen-only mode to prevent background noise. As a reminder, this conference is being recorded.

Before we begin this morning’s call, I’d like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks, and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the slide entitled forward-looking information for further details.

Presentation materials for today’s call were posted on the investors section of Visteon’s website this morning. Please visit www.visteon.com/earnings to download the material if you have not already done so. Our Form 10-Q was filed earlier this morning with the news release.

Joining us today are Sachin Lawande, President and Chief Executive Officer; and Bill Robertson, Interim Chief Financial Officer. We have scheduled the meeting for an hour and will open the lines to your questions after Sachin and Bill’s remarks. Please limit your questions to one question and one follow-up.

We appreciate your interest in our company and again thank you for joining us. Now, I will turn it over to Sachin..

SAIC, Dongfang, FAW, and Changan. This gives us excellent access to a large portion of the automotive market in China. As shown on the chart, China light vehicle production volumes increased 4% during the quarter compared with the previous year. Visteon’s sales grew at 13% during the same period, significantly faster than the overall market.

Excluding currency, our sales increased by 17%. We remain confident that our sales in China will grow at two to three times the production growth as we have stated previously. We are very focused on China as we believe it represents a unique opportunity for Visteon.

As the market stabilizes and grows over the long term, we believe our assets and capabilities will serve as a significant competitive advantage and we expect our domestic China sales to grow at an even faster pace for the remainder of the year than the 17% year over year growth excluding currency that we achieved in the first quarter.

Turning to page 6, I’m pleased with the rate at which we’re winning new business from our customers. I’m also happy to report that we have expanded our customer base in the latest quarter by adding a new EV vehicle manufacturer. Our backlog was $15.2 billion as of December 31, 2015.

During the quarter, new business wins amounted to $1.2 billion, exceeding our quarterly sales by $400 million and increasing our backlog to $15.6 billion. Over the last nine months, since I joined Visteon, our backlog has increased by $1.1 billion or 8% and our goal is to achieve double digit growth for the full year.

Our core product lines of instrument clusters, displays, entry and mid infotainment, SmartCore, and head-up displays are very competitive and doing well in the market.

The strong increase in the backlog is a clear indication of the confidence that customers have in our products and technologies and points to higher sales and market share going forward.

Turning to slide 7, we had another quarter of strong program engineering execution with 17 product launches globally that cover the full range of cockpit electronic solutions that Visteon provides to the marketplace.

Some of the key launches are the GM Cadillac CT6 cluster which is an expansion of our 8-inch reconfigurable cluster platform that has now been launched across multiple vehicle lines at GM. We also completed the development and launched the Ford Escape cluster in North America, with launches in Europe and China to follow later in the year.

Another innovative product is the head-up display launched with the Peugeot Traveller and Citroen Space Tourer, shown at the top of the slide. This product will be launched in additional vehicles in 2017 at PSA and Opel.

As you can see from the charts on the right, the vast majority of our product launches in 2016 are occurring in Asia and mostly in China. The market in China for cockpit electronics is still evolving with more vehicle-specific solutions than in other more mature markets where the sourcing is done on vehicle platform basis.

2016 will be another strong year for product launches, with 61 currently planned. Turning to page 8, Visteon regularly receives awards from our customers for our technologies and innovations. We highlight a few recent examples on this slide as we will do each quarter.

I’m pleased that customers continue to recognize Visteon as a technology-driven company. We look forward to showcasing additional awards throughout the course of 2016.

We are very proud of our team’s accomplishments during the quarter and very pleased to see that our performance and capabilities are also recognized by our customers as shown by the awards we have received. Moving to slide 9, Visteon used to be the best-kept secret in the industry when it came to cockpit electronics, but that’s changing now.

We are increasing our technology marketing and business development activities with a particular focus on technology seminars at customer locations, which is the most effective way to market our products and technologies in my experience.

The Consumer Electronics Show in January was a big success for us, not only on account of the meetings during the show, but also the follow-up customer events that have resulted from it. We took our show on the road first to Japan, where in March we had six separate customer events with over 400 people attending them.

We are continuing with additional technology seminars in Europe and China and this week we are also participating in the Auto China Show in Beijing. While we have had a strong presence in China for many years, this is the first time that Visteon is participating in the auto show in Beijing.

We’re investing significant resources in marketing and business development and I’m confident that these initiatives will show results in the coming quarters in terms of new business wins. And it’s important to note that we are doing this while reducing our SG&A costs at the same time.

Since joining Visteon and announcing our strategy, we have made it a priority to upgrade our capabilities across people, process and tools to allow us to achieve our goals. Turning to page 10, with respect to talent, I’m happy to report that we have made several key hires that add to the strength of the company.

I’m particularly pleased that we are able to attract seasoned leaders from the industry to join us on our mission. Our new Chief Technology Officer, Markus Schupfner, brings a wealth of experience in infotainment and ADAS technologies and is highly regarded by many OEMs in Europe and US that he has worked with in the past.

Markus will report to me and will be based in our office in Germany. And his mission is to help Visteon emerge as a technology leader in infotainment and autonomous driving domains.

We are already well on our way with the new infotainment platform development based on the three focus areas of cyber security, HTML5 user interface, and advanced smart phone integration. However, there’s more work to do in the area of ADAS and autonomous driving.

Our new General Counsel, Brett Pynnonen, is also an industry veteran who brings a wealth of experience around intellectual property, compliance, corporate transactions and risk management.

In addition, we have hired top notch talent to lead sales and business development activities in Germany and also in China, and also recruited technology experts in cyber security and V2X technologies to lead our efforts in these technology domains.

It’s a very competitive environment for talent in this industry globally and it’s very heartening to see that the vision and the culture that we are developing at Visteon is attracting such talent to the organization.

While we have made talent acquisition, a priority at Visteon, I want to assure you that we are going about it in a fiscally responsible manner. We remain focused on reducing our SG&A and engineering spend as we’ve outlined in prior discussions and the new hires will not affect that plan. Slide 11 provides the summary of our full year 2016 outlook.

Overall, we are reaffirming our initial 2016 guidance for sales, adjusted EBITDA and adjusted free cash flow. With respect to sales, we feel good about the outlook for new product launches during the year.

Offsetting this favorability, we foresee some headwinds due to South America and potential slowdown in North America due to sluggish retail environment, although no customer has significantly modified their production releases thus far.

We are also currently assessing the impact of the earthquake in Japan on our revenue projections for the balance of the year. We are pleased with our first quarter adjusted EBITDA performance and expect continued strong product mix and cost performance going forward.

And despite the potential headwinds, we are comfortable maintaining our range of $305 million to $335 million for adjusted EBITDA for the full year 2016. Finally, we are also maintaining our outlook for adjusted free cash flow for the year.

Overall, our results for the first quarter were strong and in line with our expectations and gives us confidence to maintain our outlook for the balance of the year. Turning to page 12, in closing, I’m pleased with our achievements during the quarter.

We continued to deliver strong sales and profitability performance in our core business, with sales growth outpacing global production. With a strong start to the year, even with the potential headwinds that I mentioned on the prior slide, we are comfortable reaffirming our 2016 full year guidance.

We’ve won $1.2 billion of new business during the quarter and have increased our backlog to $15.6 billion, improving $400 million during the quarter and $1.1 billion over the last nine months. Confidence in Visteon continues to grow at OEMs and we’re on track to achieve the revenue targets we’ve outlined for 2016, 2018, and 2020.

We’re focused on building a strong team across all functions and I’m pleased with the progress we’ve made in hiring key talent to the organization. Successful program execution is the lifeblood of this business and I’m pleased with how the engineering organization has stepped up to the challenge.

We launched 17 new products during the first quarter and are on track for another good year from new product launch perspective. We also increased our marketing and business development activities starting with the successful Consumer Electronics Show in January and continuing with multiple tech shows at customer locations.

We’re also participating for the first time at the auto show in Beijing, China which is happening this week and is off to a great start. And finally, we signed a definitive agreement to acquire AllGo Systems, a leading provider of multimedia and smartphone connectivity software or automotive infotainment.

And now Bill will walk you through our financial results for the quarter..

Thanks, Sachin. On slide 14, we present our key financial results for first quarter 2016 versus the comparable period in 2015. As we have explained on prior calls, our financial results are impacted by a number of items that make year over year comparisons difficult.

The adjusted financial information presented on this slide excludes these items and represents how we manage the business internally. As non-GAAP financial measures, this adjusted financial information is reconciled to US GAAP financials in the appendix on pages 25 through 33.

As we have also explained previously, we have reclassified the majority of our climate and interiors business as discontinued operations in our financial statements. As a result, our income statement has been adjusted to exclude both climate and interior-specific income and expense.

Climate and interior’s net profit has been combined and reflected on one line as discontinued operations. The financials on this slide exclude discontinued operations, with the exception of free cash flow and adjusted free cash flow for consolidated Visteon.

Sales for the first quarter of 2016 were $802 million, $14 million lower than first quarter 2015. The year over year decrease is more than explained by the sale of the German interiors facility in the fourth quarter of last year.

Sales for our core electronics business increased by $12 million versus last year, reflecting higher production volumes and the impact of new business wins, which more offset unfavorable currency. Adjusted EBITDA was $89 million in the quarter compared to $78 million for the same period last year.

Adjusted EBITDA for electronics was $94 million, $10 million higher than first quarter 2015. The $10 million year over year increase largely reflects increased production volumes, including the impact of new business. Adjusted free cash flow was an outflow of $28 million in the quarter.

It should be noted that year over year comparisons are difficult for adjusted free cash flow as first quarter results last year included cash flow generated from our climate business which was sold at the end of the second quarter of 2015. Adjusted free cash flow for electronics in the first quarter of 2016 was an outflow of $22 million.

I’ll cover each of these metrics in more detail on the following pages. Turning to slide 15, we provide 2015 and first quarter 2016 sales and adjusted EBITDA for the electronics product group, other operations and total Visteon.

Beginning this quarter, we have combined electronics product group results in corporate SG&A as we have divested the majority of our climate and interiors businesses. First quarter sales for electronics were $793 million, $12 million higher than last year.

Adjusted EBITDA for electronics was $94 million in the first quarter compared with $84 million in the same period last year. Sales for the other operations declined from $44 million in the first quarter of last year to $9 million in the first quarter of 2016.

This decrease primarily reflects the sale of the German interiors facility which occurred last December. The remaining business still classified as other operations relates to legacy operations in South America and South Africa previously associated with the climate business which are not subject to discontinued operations.

I’ll go into more detail on the year over year sales and adjusted EBITDA comparisons on the following slides. Moving to slide 16, electronics sales for the first quarter of 2016 were $793 million. Adjusted EBITDA for electronics was $94 million.

Sales increased versus 2015 by $12 million, largely driven by higher production volumes and new businesses, partially offset by unfavorable currency impacts related to the euro and China RMB. Adjusted EBITDA increased $10 million in the first quarter versus 2015.

Again, the increase was largely driven by the flow through of the positive volume and new business, which improved profits by $12 million. Unfavorable currency primarily related to the Japanese yen was a partial offset. The business equation was consistent year over year. Material and manufacturing cost savings offset customer pricing productivity.

Our second quarter business equation did include a one-time $3 million warranty benefit related to supply recoveries for warranty charges incurred during the second quarter of 2015. We anticipate a smaller supplier recovery later in 2016.

For 2016, recovery is partially offset by the non-recurrence of a one-time patent sale benefit of $2 million recorded during the first quarter of 2015. SG&A performance is also part of the business equation. Adjusted SG&A for the quarter was $51 million or 6.4% of electronics sales.

We continue to focus on achieving our forecasted SG&A reductions in 2016. On slide 17, we highlight electronics’ adjusted EBITDA and adjusted EBITDA margins for the last several quarters. As you can see, we continued to see significant improvement in adjusted EBITDA quarter over quarter.

That said, Q1 adjusted EBITDA should not be considered to be a run rate as our operating results are seasonal. First and fourth quarter results tend to be the strongest, reflecting the typical calenderization pattern for engineering recoveries. In addition, first quarter results benefited from the warranty good news previously discussed.

Nonetheless, as Sachin said earlier, first quarter results were strong and a nice start to the year. Adjusted EBITDA as a percent of sales for the quarter was 11.9% compared with 10.8% for the first quarter of last year. Even excluding the $3 million warranty recovery, adjusted EBITDA was 11.5% as a percent of sales.

On slide 18, we take a look at cash flow. Total adjusted free cash flow was a use of $28 million in the first quarter. Visteon generated $139 million in adjusted free cash flow in the first quarter of last year, but $133 million was related to Halla Climate which was sold at the end of the second quarter.

On this slide, we have separated the electronics cash flows from the cash flows related to other operations in our discontinued operations. Our core electronics adjusted free cash flow was a use of $22 million for the quarter, $28 million lower than first quarter last year.

As we explained on the year end call, our 2015 adjusted free cash flow benefited from $55 million of items that will not repeat in 2016. The most significant item related to tax payment timing in certain jurisdictions. You will notice that cash taxes in the first quarter totaled $32 million, $26 million higher than prior year.

This increase in cash taxes explains most of the year over year decrease in electronics’ adjusted free cash flow and is in line with our expectations. I would like to point out that the first quarter 2016 adjusted free cash flow use was expected.

Just for comparative purposes, our 2015 full year adjusted free cash flow was $212 million for Visteon electronics. $206 million of this cash flow was generated in the last nine months of the year, with only $6 million generated in the first quarter.

Free cash flow is seasonal and we continue to project that our 2016 full year adjusted free cash flow will be in line with our guidance of $110 million to $150 million. Cash and short term investments at the end of the quarter were $808 million.

This represents a decrease of $1.975 billion from year end, which is summarized in the lower right portion of the slide. The decrease includes the January $1.74 billion special shareholder distribution and the $500 million for repurchases. The $356 million Korean withholding tax refund received in January was a partial offset.

Moving my slide 19, we provide an update on the company’s share repurchase activity. To recap, we repurchased about 15 million shares between Q4 of 2012 and year end 2015. Adjusted for the impact of the special distribution, the average price for those repurchases was $43.85.

As Sachin mentioned earlier and as we communicated in the year end call, we had authorization for $500 million in additional share repurchases through 2016.

That authorization has now been exhausted with the execution of a $105 million 10b5-1 program which ran from late January through February and the subsequent entry into a $395 million accelerated share buyback or ASB program on March 1. 1.6 million shares were repurchased under the 10b5-1 program at an average price of $65.05.

An additional 4.4 million shares have been delivered under the accelerated share buyback, which was 80% of the expected amount under the program based on the March 1 closing reference price of $72.30.

The final amount of shares will be determined based on the volume weighted average price of the shares over the repurchase period less an agreed discount. The program will complete no later than December 15, 2016, but may be terminated any time after August 2 based on our counterparty’s option.

Based on our current share price, this implies that approximately an additional 1 million shares will be delivered at the program’s conclusion for a total repurchase of 7 million shares in 2016. This will reduce our share count in total by the end of 2016 to about 33 million shares, approximately 20% less than at the end of 2015.

Turning to slide 20, as Sachin said earlier, we are reaffirming our full year 2016 financial guidance. These amounts relate to our electronics operations only and exclude our other operations as well as our discontinued operations.

For the full year, we are projecting sales of $3.2 billion, adjusted EBITDA of $305 million to $335 million, and adjusted free cash flow of $110 million to $150 million. Now, let me turn it back to Sachin for some closing thoughts..

Thanks, Bill. Moving to slide 21, in closing, I want to reiterate that we are very pleased with our performance in the first quarter. We delivered strong sales growth which outpaced industry production volumes and grew our backlog to $15.6 billion, a $1.1 billion increase in the last nine months.

And we achieved the highest quarterly adjusted EBITDA margin since our acquisition of JCI’s electronics business in mid 2014. We also continued to reward our shareholders by substantially completing our previously announced $2.75 billion capital return to shareholders.

Visteon has been committed to driving shareholder value and that focus will continue in the years to come. I’m really proud of the work that everyone at Visteon has done during the quarter to drive our vision and mission and I’m confident that we have the right team in place to execute our strategy.

I see significant long term opportunity for our employees, customers and shareholders as we continue to drive strong growth by investing in our core products and by expanding our customer and geographic footprint. Thanks for joining us today. Now, I would like to open the call for any questions..

[Operator Instructions] And your first question comes from the line of Brian Johnson with Barclays..

This is actually [Steven] Johnson. Just wanted to touch base on slide 9 here, it looks like you’re definitely stepping up your engagements with some Japanese customers.

I’m just wondering what the strategic rationale is, what’s your thinking behind such emphasis on Japan and Japanese customers [indiscernible] most opportunities for Visteon moving forward? Any color you could provide there would be helpful..

So we have a significant amount of business today with Japanese OEMs, with customers such as Malta, Nissan and Mitsubishi. So we think that that’s the market that is very good for us today and also going into the future.

As you know, with all of these new technologies especially in infotainment and our new SmartCore platform have opened up, Japan is one of the areas where we believe there is a lot of interest in looking at these technologies and that was further validated by the response that we saw with our tech shows.

We had over, I think, about six technology shows in Japan with 400 plus attendees, so pretty good response..

And is that part of a function of the, call it, local supply base just not up to speed so to speak on more advanced cockpit electronics and infotainment devices or there is another reason for the overall emphasis on Japanese customers?.

I think it’s two-fold. One, as far as Visteon is concerned, we’ve been in Japan for a long time. So it’s not like Visteon is new to the OEMs there and vice versa. So that’s one thing.

The second is exactly what you referred to, which is some of the new technologies whether it is smartphone integration or this domain integration through hypervisor are now and it’s new and it’s very evolving and it’s a challenge for the entire industry, including the domestic suppliers in Japan.

We do see by the way a slight opening for non-Japanese suppliers in traditional, what used to be considered as traditional Japanese supplier domains. So we see that the market over there is opening up and we want to be looking at the opportunities that that would present very closely..

And then just touching on the SmartCore technology, I believe we last had an update back in January I think at some electronics show, but just trying to gain a sense for what attraction is there with unpenetrated customers or even current customers.

I know back at our conference in November, you prepared a nice slide that listed all your current customers for those potential opportunities and also unpenetrated customers, just want to know if you can give us an update on how that SmartCore technology is progressing with customers?.

So this quarter, or I should say the first quarter was a very busy quarter for us from a business development perspective and especially with respect to SmartCore.

We met with over six different OEMs across Japan, Europe and Asia, specifically now talking about SmartCore and this concept of domain integration is very exciting and interesting and we had really good discussions with all of them.

That doesn’t mean that all of these OEMs will translate or convert into Visteon customers, but we are in fairly advanced stages of discussions with a couple of those, which we expect to be making a decision, I would say, in the second or third quarter of this year. But the fact remains that there is a lot of interest in this new technology.

And while I fully expect that there will be other solutions that will emerge in the marketplace because the industry necessarily won’t just allow a single source in this space, we are ahead of the competition. So we are getting a lot of interest. There’s a lot of discussions that are happening in this space.

Even this week, in China, where we are present at the Beijing Auto Show, where we demonstrated SmartCore, that was one of the product that garnered the most interest and I expect to see also new business opportunities open up in China as a result of that..

Your next question comes from the line of Itay Michaeli with Citi..

This is actually [Justin] on behalf of Itay. So I just wanted to touch real quickly upon the backlog, the $1.2 billion that you quoted.

Can you give us some color maybe on a breakout between existing and new customer split, the location of the business wins and maybe give us a sense of what product lines those came from?.

So the $1.2 billion of new business, you can imagine that the breakdown of the product mix there reflects fairly closely the product mix that we shared with you on slide 3 in our quarterly sales. So the breakdown still reflects what we currently see in shipping in the business, which is good.

One thing I would say is that I’m extremely happy with how our new business wins have developed over not just the last quarter, but over the last nine months since I’ve come here. With over 8% of the backlog growth over that period, I think that’s a really strong statement of our customers’ confidence in Visteon, in our technologies and our products.

I would like to remind everybody that if you were to go back a couple of years, the backlog and the new business wins at both Visteon and then JCI was fairly challenged on account of the situation that those two companies found themselves in at the time.

And I’m very happy to see that in a short period of time that we have been able to really rebuild confidence in Visteon amongst the customer base and an 8% growth over a three quarter period, I think, is a tremendous accomplishment on part of the team and I’m really happy about that.

Now, the question about the breakdown and where we stand with respect to the product mix, I would say that our core products of instrument clusters, displays, head-up displays, SmartCore and also entry and mid infotainment are extremely competitive.

We continue to win really good business in these product categories, even infotainment that most people don’t imagine or don’t link to Visteon. We won five new awards over the last nine months.

And I’m very confident with the new emphasis that we have put on infotainment with the new platform that we’re developing that we will continue to see more wins which to us is upside. The revenue guidance that we have given you for 2016, 2018, and 2020 does not necessarily count on any significant new product wins in those categories.

So I’m pretty happy with where we stand. This is a strong momentum that we are accumulating here and I think the outlook as a result of that for the rest of the year should be pretty good..

If I could also sneak in one more quick question, when I’m thinking about obviously the technology profile that you have for cockpit electronics, how dependent is Visteon on like mid and upper [trim] level mix, so within a given car, the higher mix versus low, how dependent are you guys with regards to your technologies on the mix distribution?.

In general, higher trim levels obviously drive more content. That is generally the case and that’s true for cockpit electronics across the board. It’s not just for Visteon; I would say that’s true for all suppliers in this space.

So having said that, we have more than other suppliers more products that go across all trim levels, okay, instrument cluster is a very good example of that.

The other thing that we are starting to see which is very new and something that I think really adds to our story is for products like the head-up displays are starting to migrate into trim levels that in the past did not carry these products.

So combined head-up displays is one of the fastest growing new product segments in the industry and we are extremely well positioned with respect to this particular product segment.

So although, in general, we obviously benefit from higher sales at the higher trim levels, we are starting to see a reverse migration of these products into lower trim levels as well. So net-net, I do not look at that as either a benefit or a loss of any form.

I think in general the growth numbers that we have talked to you about of the industry as well as for Visteon we are pretty comfortable with that. I think there is a secular long term growth in cockpit electronics that’s occurring across all of the trim levels, which should bode well for the industry..

Your next question comes from the line of Colin Langan with UBS..

This is [Eddie] on for Colin.

I had a quick question, I was wondering if you can give an update on your view on connected technology? It looks like a lot more opportunities are opening up in this space, I’m just wondering if you’re getting any traction with customers on your capabilities for over the air update or vehicle to vehicle?.

So in general, Eddie, what we see happening is all of the products that we offer or virtually all are affected by the cars getting connected. So it’s not specifically just the telematics product opportunity, but we see that over the air update capabilities affecting instrument clusters, infotainment and other products as well.

So the whole industry has to essentially reengineer the products to be able to address this new requirement. Now, along with the good, there is also some concerns and the concerns are largely on account of security.

So one of the things that we have done here at Visteon where we will be absolutely at the cutting edge of this industry is that all of our products will be built on very secure condition. As I have indicated in one of the slides in this deck that we have recruited some of the top notch talent to bring this capability in-house.

We don’t want to rely on third party solutions because some of the solutions have to be built from the ground up.

So the new infotainment platform that we have already started work on, in fact late last year and will be ready by that end of this year to really talk seriously about it to customers will be one of the most secure connected infotainment platforms out there.

So to us, it’s a big positive, because it’s creating opportunities, it is dislodging sometimes incumbents who do not have a strong technical solution. And on the other side, the risks that cyber security and others are creating, I think, it also gives us an opportunity to showcase our capabilities and [success] in this area.

Now, specifically with respect to telematics, that’s a slightly different story. There the issue is more on account of how the industry is able to keep up with the pace of change that’s happening in the 4G technologies. Here, we also have a platform that is a software-based platform for telematics.

We have a couple of programs that we are currently developing for Japanese OEMs, which bring security as well as the ability to keep up with evolving 4G requirements.

So all in all, as you can hopefully see from this discussion, we are, from a technology viewpoint, getting stronger and are looking at really breaking out here with respect to our capabilities. And connected car is the trend of the date, that’s the one that we’re really focused on, but autonomous driving is going to come up in the near future.

You asked about V2X and car to car communication, we are looking at it very closely. We also indicated on the slide that we have recruited a technical expert to help develop that solution for us. This is an area where Visteon has been involved in for the past several years.

But what we are doing now is really looking at how do we come up with differentiated solutions and I think you will hear more from us in the later quarters on our progress on that front. The commercial opportunities for that are slightly further out. Connected car is here today.

The autonomous driving opportunity is going to be a little further out for Visteon..

And then another small question, it looks like your SG&A as a percentage of sales is running a little bit higher than it was last year, do you have any update on your progress at getting this down?.

I think that may not be exactly true. I think our SG&A was 6.4%, if I remember right, which is below or at the same level last year, it cannot be higher, because we won’t let it. And we are very focused on this.

This is an area where we are putting in tremendous amount of management time and effort to ensure that we are in line with the guidance that we have given you earlier in the year. And I think we are on track to be able to achieve our guided number..

Your next question comes from the line of Matt Stover with SIG..

I just had a question about the potential impact of the earthquakes in Asia are in providing this guidance.

And I’m wondering if you could talk about the impact of supply chain thus far, what you’re hearing from suppliers based on system related stock, when this might likely manifest as an issue and I guess just generically is the system being a little bit better prepared in light of what happened in Fukushima a few years ago?.

So Matt, what I would first say is that we are extremely thankful that none of our facilities have been affected. That’s the first thing I would say there.

Now, with respect to the supply situation, there is an impact and at the same time we are just now really starting to understand the scope of the impact as well as the backup and recovery plans of the suppliers. So this is a very dynamic situation. We are in daily calls both with suppliers and our customers.

And so this is a picture that will remain dynamic, I would think, for the next two to three weeks before some clarity will emerge with respect to when and how big would the impact be. I do not expect to see an immediate impact on account of the – just the product that we have in the pipeline, but we will start to probably see some impact in Q2.

But I cannot at this point really put a scope and a size on it for you. We will continue to communicate that out as we know more and that’s the best and the most accurate picture I can give you at this point in time..

Does it feel like the system has sort of adapted in light of Fukushima, just it’s not necessarily as big, certainly had been a issue, no doubt there, but is this – do you think – it just feels as disruptive as it was at that time?.

It is certainly not at the same level as the last incident, but it is still an issue because there are a few parts that – it’s not just our direct suppliers, but also the sub-suppliers. And sometimes the smaller suppliers may not be in a position to really take the actions necessary.

So I would say generally it’s a smaller size of scope as compared to the previous ones. And so hopefully and I’ll just say this very openly really, just hopefully it’s not something that will be of a material impact, but we’ll see more as time goes by..

Your next question comes from the line of Ryan Brinkman with J.P. Morgan..

This is Samik here on behalf of Ryan.

Sachin, if I may ask you a strategic question here, when I look at your goal of being a top three player cockpit electronics and I look through the different sub-segments in cockpit electronics, you’re obviously there in the top three in a few of them, but also sort of far away from the top three in a few of those.

So just thinking about it, probably like aggressively forcing acquisitions in the ones that you are not top three the way to get there eventually, is it even a target to be top three in each of those segments, maybe if you can sort of share your thoughts on that..

This is a question that we are discussing internally all the time. So let me share with you what we internally here are setting ourselves up to do. So in this industry, as I’m sure you are aware, it’s extremely important to have, from a technology viewpoint, an extremely competitive product, that’s number one.

But we also must have really great capabilities in product development and system integration. Safe launch, as it is called, is one of the most important things that drive your future success. And the third is cost.

So as has been indicated already on account of the high number of launches that we have executed very well last year and also in this quarter, Visteon’s capabilities in product development and system integration are very strong. On the technology front, it was a mixed bag. We were strong in instrument clusters and are strong in instrument clusters.

I would strong in head-up displays, in displays, SmartCore, but with infotainment we were strong in entry and mid, but not in high. And telematics is a different issue. I talked about it earlier. It’s an issue of catching up and staying current with the 4G evolution.

So what we are doing here to really get to that top three across the board is really focusing on closing the gap in all of our product segments from a technology viewpoint, strengthening our product development and system integration capabilities.

And here let me remind us all that we are probably one of the only tier 1 suppliers that can build and deliver product in Europe, in Japan, in North America, in China and India. And I’ll give you a great example of that. As we speak, we are developing head-up displays in all of these five markets simultaneously. Very few companies can do that.

So we have the broadest portfolio of products as compared to our competitors. We have a great footprint and product execution capability that after me coming here we have only strengthened, we’ve brought in the practices and engineering processes to be able to really control that.

And this is why you see despite the high level of product launches that our costs are under control. And now we’re also focusing on some new opportunities in high level infotainment which is where Visteon has not been playing in the past and also in ADAS. Now in infotainment, we have made more progress on account of the start that we’d had last year.

ADAS, we are just starting out, getting Markus Schupfner on board is a big step in this direction. Markus is not only one of the few people in the world who is an expert both in infotainment and in ADAS, but he has an excellent track record having been part of many of the systems that are on the market today from German OEMs.

So we are very optimistic that we will also be in a great position with high end infotainment and with ADAS just as we are in the other product segments..

Secondly, just on the margin delivery here, I mean, I know you called out the seasonality of the margins for 1Q and also some benefit from warranty, but still looking at the margin that you delivered in this quarter, it does seem like when I go back and look at what your mid-term margin expectations were, which were like 12% for the business, it does look like you can get there before even sort of a mid-term time period and probably if you can help where is your expectation for margin now different than what it was and what’s really driving that, is it like higher margin content that you’re now executing on, anything that you can help on that?.

First of all, I would say that I’m really pleased with how margin has developed in this quarter. I think credit to the team for executing a clean and well-run quarter.

Having said that and we have talked about the seasonality of the business with the first quarter and the fourth quarter being stronger than the middle quarters, but on a year over year basis the actions that we have taken will continue to see results in improved margin.

However, when we talk about us achieving the levels that we have previously guided and when we might be able to achieve it, what we have said in the past is that the way we would get there is by half of the benefit coming through the cost savings initiatives and the other half from scale.

Now, we control the first part of that in the sense that we have a good line of sight on controlling costs in engineering and SG&A and we are already starting to see progress in those directions. But when it comes to scale, this is anybody’s guess is just as good as mine in terms of how the market will develop.

Although we are optimistic, we’re also cautious on account of what we have recently seen with respect to the retail environment.

And so since this is just the first quarter and it’s a very good first quarter gives us a lot of confidence and hope, but since it’s just one of the quarters, the first quarter, I would rather leave it to that and say we will see how the second quarter develops and the outlook for the market.

So far, none of the customers have changed any of their production plans in any significant manner, but we just talked about the earthquake, we have this retail environment that we need to understand better before we can really comment on how the margin may develop beyond what we have guided you at this point..

Your next question comes from the line of Brian Sponheimer with Gabelli..

I just to spend a little more time on your thoughts on the retail environment in North America and potentially when you see softness, is it more of a mix issue where you have a little more exposure on cars than SUVs and trucks or is this something that you think has a little bit more breadth to it where you think the industry itself needs to or you are expecting some significant production cuts in the back half?.

So from our viewpoint, Brian, as you know, we look more at the production numbers than the retail sales or sales in general, although we keep close tabs on it, because it’s sort of a leading indicator for us. Having said that, in the first quarter, North America was really strong both in terms of production and sales.

And at the level that we are at, I think we would [be vice] to just be cautious in terms of where the outlook for both sales and production may look like for the remainder of the year for North America. We are at the same time more optimistic about the production levels in Asia, which were suppressed in the first quarter.

We expect that to rise in the later the year, later part of the year. But the other thing I would like to add here, irrespective of the general sales environment and the production environment, the level of the size that we are, we are driven far more by product launches than the general market condition.

So this is something that we have internally been very focused on, which is to try to execute and launch products on time because those product launches drive our revenues and sales.

And even in a [flat side] environment, I would expect that we can still drive sales growth on account of the number of product launches that we have in the pipeline and the new business wins that we are getting.

As long as we continue to win business at the rate or higher that we have been over the last nine months, I would be a little less concerned of how the retail environment or the production levels are shaping up..

Just regarding the teammates that you brought on, how full do you think that line up is now and are there any specific areas where you think you might want to add some talent, understanding that you’re always looking for the best in the business?.

Brian, that’s a really good question and the answer to that obviously isn’t as simple answer in terms of number, but I like to share with you what we’re trying to create here. So as we have been talking about it for the past several quarters now, we want to emerge as a technology leader in this space.

This is a great time for a company like Visteon to do exactly that. The technologies are moving at a furious pace across all of our product segments.

I’ll give a small example, instrument cluster, which a lot of people think of as perhaps not such a sexy product is getting a lot of attention these days on account of the 3D capabilities that are now emerging in this product category. But that’s the case for us across all products.

So what we want to do is to really bring in the kind of capabilities that allow us to achieve this technology eminence in all of the product segments. Now, on top of that, we have to also get into the new areas of ADAS and autonomous driving.

So what we will be focused on doing here is that we will continue to bring new talent on board and upgrade existing talent. We are extremely focused on our SG&A cost at the same time. So we’re doing it in a way that is extremely planned and that there shouldn’t be any surprises.

So that allows us to invest in this new product platforms that we have been talking about, infotainment and ADAS and so on, at the same time keep our cost under control. And I think this is how we will emerge in the coming quarters as one of the leaders in this industry. Somebody asked a question earlier about how do we get into the top three.

You cannot just do that by having a plan. You have to back it up with then the right people, process and tools as I call it to be able to achieve that objective.

And so we will be on a continual sort of path improving our capabilities across people, process and tools and we just highlighted the few that we have already – the step that we have taken with respect to people that we are very happy to report and the level and caliber of the people that are coming to Visteon, I think that’s a huge vote of confidence in the culture and in the direction that we’re headed..

And one last one, and apologies to Bob for not asking this prior, but with the balance sheet and $400 million plus in net cash and with the understanding that the repo authorizations been exhausted, how do you think about the balance sheet going forward in balancing acquisitions versus even the opportunity for more buy backs here?.

The first thing, Brian, I would say is this company has been extremely shareholder friendly when it comes to returning excess capital. And over the last three years, I believe if I’m not mistaken there’s over $3.5 billion of capital that has been returned in the combination of share buyback and cash distribution.

So that should give everybody comfort that you have a company here that is focused on value creation for shareholders. That’s number one. Now, the specific question that you asked how do we see it, let me also share with you what our philosophy is with respect to acquisitions.

Our philosophy with respect to acquisition is really designed to achieve two objectives. The first objective is to grow our technical expertise in areas of technologies that are critical to our future success, okay. Now, AllGo, which is an acquisition that we have recently made, is a good example of that.

Now, these acquisitions tend to be fairly small, you can think of them as bolt-on acquisitions, and we don’t see a need for a high number of them either. But that’s one category of acquisitions. The other category is acquisitions where we can benefit through increase of scale.

And here, again, the JCI acquisition is a great example of that where we have shown that we can acquire a fairly large sized acquisition and integrate it and deliver the synergies as we have shown in the past several quarters.

We are open to both, but on the latter, we do want to make certain that the acquisition has to be accretive to our financials in the same year and that will continue. We will not do any large acquisition that is not accretive.

And so I would like everyone to understand given the cash that we have on our balance sheet that our philosophy of acquisitions hasn’t changed.

And with respect to how I feel about the balance sheet and capital allocation strategy, I do recognize that we will need to be looking at this very closely and I will do that once we have a CFO on board, this is going to be one of the things that will be my top priority as we go forward..

Your final question comes from the line of David Leiker with Baird..

This is [Joe] for David. I’ll hold my question to one. I’m listening to NXT’s analyst day side by side to your call, and it’s pretty telling that in the chip space, in the silicon space, automotive is maybe one of the surest growth opportunities for the chip guys.

Is that allowing you to do more with your products than you might have otherwise done in the past? And I’m just thinking you might have been fighting tooth and nail to get the silicon guys on your side historically, now they want to be working with you, so how does that change the go-to-market and what you can bring to market from a timing standpoint?.

That’s a great question, Joe. And the answer is we absolutely see that dynamic where the automotive is now where the growth of the silicon industry is. I might have said this in the past, automotive represents now I think about 10% of the total silicon market, but it’s growing the fastest within all of the segments in the semiconductor space.

So we are getting a lot of attention and that’s certainly helping us. A great example is on how we are able to take advantage of the new silicon capabilities in terms of virtualization, in terms of domain integration and this is extremely good for the automotive industry at large, not just for Visteon, but entire industry.

I’ve said this before that silicon content as well as in general cockpit electronics content is growing at a rate that OEMs are not necessarily able to pass that cost on to their customers. So overall, we are extremely focused on driving the cost of the capabilities and features that we are developing down.

And one way to do that is to leverage silicon because that is one of the largest cost factors of the overall solution.

So we are starting to see now the benefit of the investments that these large silicon suppliers are making specifically for automotive, which was not the case in the past and that will really help in generally broadening and growing the market. And this is where we expect to be at the forefront of hopefully taking advantage of some of that..

Thank you very much, Sachin and Bill. I would like to thank everyone for their participation in today’s call. If you have any additional questions, please feel free to contact me at your convenience. This concludes Visteon’s first quarter 2016 earnings call. You may now disconnect..