Bob Krakowiak - VP, Treasurer and IR Sachin Lawande - President and CEO Christian Garcia - CFO Bill Robertson - VP & Corporate Controller.

Matt Stover - SIG Steven - Barclays David Lim - Wells Fargo Securities Tavis McCourt - Raymond James Brian Sponheimer - Gabelli.

Operator:.

Good morning. I am Bill Robertson, Vice President of Finance for Visteon. Welcome to our Third Quarter 2016 Earnings Call. All lines have been placed in a listen-only mode to prevent background noise. As a reminder, this conference is being recorded.

Before we begin this morning's call, I would 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 or 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 titled 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've 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 Christian Garcia our new Chief Financial Officer who joined the company on October 1. We have scheduled the meeting for an hour and will open the lines for your questions after Sachin and Christian's remarks. Please limit your questions to one question and one follow-up.

Thank you for joining us and now I'll turn it over to Sachin..

Thanks Bill good morning, everyone. Earlier this morning, we released strong results for the third quarter. Before we get into the numbers, I want to take a few minutes to discuss some key trends we see in the cockpit electronics segment.

As I'm sure you're aware, Visteon is exclusively focused on this space and we also happen to have the largest product and technology portfolio in the industry. Cockpit electronics is one of the fastest growing segments in the automotive industry.

It's also changing very rapidly as the industry response to the broader trends of digitization, internet connectivity and the increased focus on user experience. These trends are driving significant changes in the core products in the cockpit such as instrument clusters, displays and infotainment systems.

To address the need to display fast evolving content such as safety-related data and integration content, instrument clusters are quickly evolving from fixed function mechanical gauges to hybrid small LCD display plus gauges to now all digital display based clusters.

This increased digital content is driving the center information displays to get larger with higher resolution and graphics quality. Larger displays also provide the need for seamless integration with the rest of the dashboard panel.

Infotainment systems in the past have largely been static systems with limited internet connectivity or downloadable apps. However, the trend is to look at cars as mobile app platforms much like the smartphone. This is driving a fundamental change in how infotainment systems of the future will need to be built.

In addition to the change in the core cockpit electronics products, rapid growth in the number of electronic control unit or ECUs coupled with the emergence of multi-core processors and hypervisor software is enabling car OEMs to consolidate ECUs.

In addition to reducing costs, this approach also results in reduced power consumption in late which are also very important. Visteon is in an excellent position to capitalize on the strengths in cockpit electronics and our performance in the third quarter and year to date with respect to new business wins is a good indicator.

Visteon is the market share leader in displays and instrument clusters and has strong capabilities in both as these product categories converge around digital displays it puts us in a great position to offer market-leading solutions.

We're also developing a new infotainment platform that's based on HTML5 in open standards which is designed with approximately developers in mind and will be the first of its kind in the industry.

And finally, Visteon is also the first supplies in the industry to offer a complete domain integration technology called SmartCore, which is a multi-core CPU and hypervisor based solution or integration of cockpit electronics.

No other supplier in the industry is as well positioned as Visteon to provide the technologies and capabilities to address these trends.

Now moving to Slide 3, we continue to execute well in the third quarter, despite the third quarter being the seasonally weakest quarter due to plant shutdowns and the headwinds with vehicle production that we experienced with some customers. I'm very pleased with our overall performance across several key metrics.

Despite soft production we achieved sales of $749 million in the quarter and delivered a 10% adjusted EBITDA margin which is 130 basis points increase over prior year.

We continue to generate positive adjusted free cash flow, the $1.3 billion in new business with significant wins in key product areas that I would discuss more later, increasing our backlog to $16.2 billion at the end of the third quarter. We continued our track record of successful product launches and have now launched 48 new products year-to-date.

I am really proud of the work that everyone at Visteon has done during the quarter to generate strong results and position us well to finish the year on a strong note. In the rest of the presentation, I will provide more details on our operations in the quarter.

Moving to Slide 4, vehicle production in the third quarter was mixed with respect to top Visteon customers. Ford and Mazda production were down in the third quarter as compared to prior year.

However as we expected, Mazda volume did recover from the lower level experienced in the second quarter and the recovery is expected to continue into the fourth quarter. China production volume was significantly higher in the third quarter in part due to the government actions and to program.

Visteon sales in China were further boosted by the new product launches throughout the year. We'll discuss China in more detail later in the presentation. Visteon sales for the third quarter was $749 million or $22 million less than the same quarter last year.

This shortfall is primarily explained by the drop in vehicle production at customers mentioned before. Despite the lack of sales growth, I'm pleased that we were able to deliver strong adjusted EBITDA for the quarter as indicated by the chart on the right of the slide.

Adjusted EBITDA was $75 million in the third quarter of 2016 as compared with $67 million in the prior year, resulting in improvement of 130 basis points in adjusted EBITDA margin for the quarter.

We continue to focus on operational excellence and we've made significant process in going beyond the JCI acquisition synergies by reducing operational costs, which has been the primary driver behind the improved profitability of the business. We'll discuss this in more detail in a later slide and provide an outlook for the future.

Moving on to Slide 5, we had another strong quarter of program execution with 13 product launches around the world including 11 in Asia. We continue to launch new programs on schedule and to the level of quality our customers expect.

Our strong launch performance is continuing to build our customer's confidence in us and is helping Visteon win follow-on business. It's also helping to offer softness in vehicle production volumes and customer pricing impacts. Our third quarter launches included two key launches of infotainment products in China, which I would like to highlight.

We successfully launched a new high infotainment system called Shanghai GM cars including [Excel] Sail and a new vehicle Cavalier.

Key features of this product include a highly accurate IR touch screen to support multi touch and gesture and variable conductivity support that facilitates use of a mobile phone in the vehicle, including Bluetooth, Wi-Fi and Baidu CarLife.

A customized cockpit acoustic system provides an excellent sound experience, while natural language, voice recognition provides a robust user experience. In addition to launching on this specific models, we have been awarded additional SGM vehicles, to deceive this high end infotainment platform in the future.

We also executed the first launch of the PSA modular cluster in China for Duckyang Yanfeng Visteon Automobile Limited joint venture known as DPCA. This architecture has been adopted and reused by PSA in its global entry instrument cluster platform.

In addition, it will serve as a baseline instrument cluster for reuse in other projects slated to rollout starting in 2017. As we told you last quarter, 2016 is a strong year for launches. Year-to-date we've launched 48 projects with a total of 61 planned for the full-year 40 of which are in China.

Moving to Slide 6, on our second quarter call earlier this year, we said that we were expecting a rebound in our sales in China for the second half of the year and our sales was indeed quite strong in the third quarter. As shown on the chart on the left, in the third quarter, passenger vehicle production volumes in China grew 33% year-over-year.

On a constant currency basis Visteon sales increased 47% in the same period. Year-to-date production volumes increased 15% year-over-year, whereas Visteon sales increased 19% on a constant currency basis. The foster than market growth is due to new product launches in Visteon's customer mix which is growing faster than overall market.

We had nine new product launches in the third quarter and 34 for year-to-date in China and our products are very well received in the market such as the high end infotainment system mentioned earlier.

We expect the strong performance in China to continue into the fourth quarter with both production volumes and Visteon sales growing to deliver a strong finish to the year. As I'm sure you're aware, the Chinese government incentive for vehicle sales is expected to expire at the end of the year.

Although the incentives certainly had a positive effect on the market, we do not believe that it fully explains the strong performance we've seen in this quarter. It is our expectation that even without the continuation of incentive, the market will grow at around 5% next year in 2017.

Based on the strong new product launch of this year, we expect Visteon sales to continue to grow faster than the market in 2017 and achieve double-digit growth next year as well.

Now moving to Slide 7, winning new business is the ultimate measure of our customer's confidence in Visteon and as you can see, we had another strong quarter in terms of new business wins. During the quarter, customers awarded Visteon new business with expected lifetime revenue of approximately $1.3 billion.

This brings our new business wins to $4.1 billion for the first three quarters of 2016. This is about a $1 billion higher than the same period in 2015 a 33% increase.

While we considered 2015 a strong year from a new business perspective, we have nearly equaled last year's total new business wins of $4.3 billion through the first nine months with the full quarter remaining. Our third-quarter wins included our second major award for our SmartCore cockpit domain controller technology.

As we have previously shared with you, we will be the first to market with this technology with a European automaker in 2018. The second SmartCore award is for a 2020 European vehicle program and will provide enhanced functionality.

As noted earlier, the consolidation of electronic control units in the cockpit space is a trend that Visteon is well-positioned to lead and we're in active dialogue with several other OEMs to adopt SmartCore into their vehicles. The SmartCore win is one of six infotainment programs we have won year to date.

We're pleased with how we're expanding our infotainment business ahead of the pending debut of our breakthrough next-generation infotainment platform Phoenix at CES in Las Vegas in January. We're also a market leader in instrument clusters and our third quarter clusters wins have given us even more momentum in multiple regions.

We won a significant award for an all digital instrument cluster with a German OEM, which is the largest award of its kind in the industry. As I have mentioned at the start, instrument clusters are evolving from hybrid mechanical systems to all digital display based systems.

We're very excited about this award as it puts us in the leading position to win follow-on business with other OEM customers for similar products. Another key instrument cluster award was with the top three China JV OEM.

This win will greatly boost our instrument cluster volumes within China and was enabled by a successful execution on the European lead variant of this vehicle. On Slide 8, we show you our awarded business backlog which stands at a record $16.2 billion at the end of the third quarter.

Since December 31, 2015, our backlog has increased by $1.3 billion or 9% very close to our aggressive goal of double-digit growth for the year.

Our backlog which represents cumulative remaining life of program book sales remains at a level more than five times greater than our 12 month sales, which underscores the health of our business and the attractiveness of our technology to world's leading automakers.

As you can see on the chart on the right, our instrument cluster technology continues to be a major driver of new business wins, but we're also generating new business across our other core product lines including displays, entry and mid level infotainment and head-up displays.

I've mentioned before that the growth of the backlog is a good leading indicator of the future growth in sales for the business. I'm encouraged by our ability to grow the backlog this year and thankful to our customers who have placed their trust and confidence in Visteon.

Moving to Slide 9, I'm particularly pleased with the progress we've made in improving our operational capabilities this year, which has resulted in strong adjusted EBITDA performance despite lack of health from the topline.

We've moved well beyond the synergies from the JCI acquisition and are focusing on approaching best-in-class levels on key metrics such as manufacturing operations, engineering and SG&A as a percent of sales.

This performance is even more impressive considering that in 2015 and 2016 year-to-date, we have launched more new products than ever before and have also won new business at record levels.

We're also investing in the development of two very important technologies for our future, the next-generation infotainment platform and the new autonomous driving platform, which will create new growth opportunities for the company.

With the progress we've made thus far on operational effectiveness, I'm confident that we're well on our way to achieve the goal of 12% plus EBITDA margin for the business while investing in this future growth opportunities. Slide 10 summarizes our full-year 2016 outlook.

On the strength of our performance through the first nine months of 2016, for electronics product group, we have increased the low end for full-year 2016 guidance for adjusted EBITDA and adjusted free cash flow.

The new guidance is sales of $3.1 billion, adjusted EBITDA is projected in the range of $325 million to $335 million, adjusted free cash flow is projected in the range of $125 million to $150 million. Overall, our operational execution was very strong in the third quarter and we continue to improve margins and free cash flow.

Despite some headwinds, our results for the first three quarters of the year give us confidence in our outlook for the remainder of 2016. Before I turn it over to our new CFO, Christian Garcia let me say that we're very pleased that Christine has joined our leadership team.

Christian brings more than 30 years of financial experience and has held a variety of leadership roles in the energy, software and consulting, and business equipment manufacturing industries. He is an accomplished and highly respected finance leader with a proven ability to drive growth at technology focused companies like Visteon.

I also want to thank Bill Robertson for his Interim CFO leadership over the past several months prior to Christian's arrival. And now Christian will walk you through our financial results for the quarter..

Thanks Sachin. I'm very excited to be part of the Management Team at Visteon and I'm looking forward to meeting many of you in the coming weeks. On Slide 12 we present our key financial results for third quarter 2016 versus the comparable period in 2015.

As 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. These are non-GAAP financial measures that are reconciled to U.S.

GAAP financials in the attached appendix that starts on Page 17. Also we have reclassified the majority of our climate and interiors businesses as discontinued operations in our financial statements.

As a result, our income statement has been adjusted to exclude the portions of climate and interior specific income and expense that are now reflected as discontinued operations. The financials on this slide exclude discontinued operations. Sales for the third quarter of 2016 were $770 million, $38 million lower than third quarter 2015.

The year-over-year decrease largely reflects the sale of the German interiors facility in the fourth quarter of last year as well as lower sales in our core electronics business. Electronic sales decreased by 3% or $22 million versus last year. Adjusted EBITDA was $75 million in the quarter, compared to $65 million for the same period last year.

Adjusted EBITDA for electronics was also $75 million, representing a 12% increase or $8 million improvement versus third quarter 2015. The year-over-year increase largely reflects favorable business equation, including gross margin and SG&A cost savings.

Adjusted free cash flow for electronics was positive $23 million in the quarter versus $83 million in the third quarter 2015. The increase in adjusted EBITDA was offset by higher taxes and timing of working capital payments. I will cover each of these metrics in more detail on the following pages.

On Slide 13 we highlight electronics sales, adjusted EBITDA and adjusted EBITDA margins for third quarter and year-to-date 2016 versus the same period last year. As Sachin mentioned, third quarter results were strong and we continue to build upon our solid performance in first half 2016.

Adjusted EBITDA margin was 10.0% in the quarter and 10.8% on a year-to-date basis up 130 basis points and 180 basis points respectively over the same periods of 2015. Electronic sales for the third quarter 2016 were $749 million and adjusted EBITDA was $75 million.

Sales decreased by $22 million versus 2015 as the benefit of new business wins was offset by lower production volumes, unfavorable currency related to the Euro and Chinese Yen and customary price productivity given to customers. Adjusted EBITDA increased $8 million in the third quarter versus 2015.

The impact of lower volumes and product mix was roughly offset by favorable currency. The impact of currency and adjusted EBITDA was dollars positive despite its negative impact on sales, largely related to the weakening Mexican peso. Visteon has no sales exposure to the peso, but does have cost exposure.

Despite this volumes and currency impacts, the most significant year-over-year driver of adjusted EBITDA increase was cost efficiencies impacting both gross margin and SG&A.

The improvement in our adjusted gross margin percentage from 13.7% to 14.3% was driven by material and manufacturing cost savings, partially offset by price productivity to our customers and increased warranty costs. SG&A cost performance continues to be positive year-over-year and adjusted SG&A as a present of sales continuous to improve.

Electronics adjusted SG&A for the quarter was $49 million or 6.5% of electronic sales down from 7.1% of sales in the same period last year. Over the last two years, adjusted SG&A as a percent of sales has dropped by roughly 200 basis points. We continue to focus on achieving our forecasted SG&A reductions in 2016. Slide 14 provides our cash flow.

Total adjusted free cash flow was positive $25 million in the third quarter, compared to $77 million in the third quarter of last year. On this slide, we have separated the electronics cash flows from the cash flows related to other and discontinued operations.

Our core electronics adjusted free cash flow was positive $23 million in the core compared to $83 million in the third quarter of last year. The year-over-year decrease in adjusted free cash flow reflects the impact of trade working capital and higher taxes, partially offset by increased adjusted EBITDA.

Our day sales outstanding and inventory days improved from prior year but we saw a deterioration in payable days. In the third quarter of 2015 trade working capital was unseasonably positive as system conversions and several former JCI locations resulted in payable delays.

Cash and short term investments at the end of the quarter were $854 million and that was $371 million. We presently project the majority of our remaining cash settlements related to our latest agreements of approximately $115 million to occur in the fourth quarter of 2016. Yearend cash balances will be impacted by this settlement.

We continue to have a very strong capital structure with a net cash position and debt-to-EBITDA of 1.1 time. As we continue to generate free cash flow and with our current capital structure, I want to spend a few minutes discussing capital deployment, which is indicated in Slide 15.

We will be discussing our capital allocation strategy with our Board in the next few months and as such it is not appropriate for me to outline our specific actions in this phone. What I would like to cover is the approach we will be taking and the metric that we will use to guide our capital deployment activities.

The company has made very good progress in increasing it's return in invested capital from upper single digits to the mid teens in the last two years and I believe we can enhance these returns to the upper teens and beyond with an efficient deployment of capital.

If you look at our cash balance, we currently have approximately $850 million cash in hand of which we need roughly $225 million of cash to operate the business with the industry cycle in mind.

As we discussed, we have approximately $125 million of payments that will still to be made with regard to the legacy business that's in other restructuring actions. This leads us to about $500 million to deploy.

We will deploy the cash for following activities, we will ensure that we have enough funds to fill the engineering resources in-house to continue to capitalize on the industry trends that Sachin referred to in the beginning of this presentation.

We're also exploring buying, partnering, or investing in technologies that will enable us to further differentiate our offering. These will be in the form of boot-on so they are easy to integrate and where we can extract value quickly. We will also investigates distributing cash to our shareholders depending on our underlying valuation.

The magnitude and the pace of deployment in each of these activities will be driven by our objective of increasing the company's overall returns. In last two years, the company has returned approximately $2.7 billion to shareholders. We will remain good stewards of capital and continue to focus on driving shareholder value.

I would now like to turn it over to Sachin for closing comments..

Thanks Christian. In closing I am very pleased with our overall performance in the third quarter. We had a record number of new businesses wins, which will drive higher future sales for the company. I am also very pleased with our ability to control cost and drive operational excellence.

It just put us well on our way to our goal of 12% plus adjusted EBITDA margin. We're also investing in next generation technologies that will create future growth opportunities for the business. We remain focused on driving shareholder value and we look forward to your continued support in the coming quarters. Thank you for joining us today.

Now let's open the call up for any questions..

[Operator Instructions] Our first question will come from the line of Matt Stover with SIG. Please go ahead..

Thank you very much for taking my question. I had something about shorter term and then longer term. I guess within the quarter, was there anything unusual recoveries that sort of thing that would have affected the margin because it was really powerful year-over-year performance..

Hello Matthew this is Christian, just in terms of the quarter, you're absolutely right. We had a very good margin performance 130 basis points improvement over last year and if you look at where the components are, about half of that is in our adjusted gross margin and the other half is SG&A.

The only thing that I think would be a contributor for the strong EBITDA performance is the weakening Mexican peso that I mentioned in my prepared remarks, but other than that everything is a normal..

Okay.

And then in China, who knows what the market is going to offer next year, but you've launched an awful lot of products in 2016 with more to come in '17 and I’m wondering if you folks have looked at what the perhaps organic growth could be from new launches into next year excluding the effect of the overall market move and I know that that’s difficult to do but….

Sure, yes this is Sachin. So we here have a very positive view of China. As you mentioned we have launched quite a few new products this year. In fact 34 out of the 48 new product launches year-to-date have been in China, but in China what we've seen in this year, the production volumes have also done very well.

The first half China grew at about 7% in production volume. In Q3, we saw a solid pickup in production volumes of upwards of 30% and we expect that to continue into Q4.

Some of this is attributable to the government incentive that is expected to expire at the end of the year and our expectations for next year is that the production volumes will still perform at a healthy level of about 5% growth.

Now our performance in China has been boosted by the launches that we've said and we expect that to continue in Q4 and the benefits of those launches will again continue to have a very positive effect for us in next year as well. So overall we expect to maintain our double-digit growth performance in China into next year..

Last question is on the all digital cockpit, I’m wondering if you get frame when that program will launch and if it's possible to describe how much incremental content a program like that might imply relative to the more traditional cockpit award because it seems a bit more comprehensive in larger scale..

So I think you're referring to our second SmartCore win and so yes this program will launch in 2020 as the European launch and it will also then launch globally from there. We are continuing to see this trend that I mentioned earlier that we are seeing first of all instrument clusters transform from mechanical gages into all digital clusters.

We're starting to see independently of the cockpit domain controller transition that we are starting to see a transition cluster that is accelerating in the 2018 timeframe.

So launches beyond '18 we expect to see will predominantly consist of all digital clusters and the second win that I talk about earlier there we have this very high volume all digital cluster really positions us well to drive the cost of this clusters to point where it can really serve well across the mass volume vehicles.

So overall I think what we have accomplished in this quarter on both the SmartCore win as well as on the all digital cluster front positions us extremely well to take advantage of the trends that we are seeing in the marketplace..

Thank you very much. .

Your next question comes from the line of Brian Johnson with Barclays. Please go ahead..

Yes, hi good morning. It's actually [Steven] for Brian Johnson here. Just wanted to drill down a little bit on the 4Q implied guide particularly around the revenues, it looks like $3.1 billion overall obviously there is some key customers is there particularly with Ford North America and to a lesser extent Ford Europe.

But as we think about the implied range there, roughly 750 or to 840 call it that's a pretty big range of down 2% to up 8%.

So just wondering if you can put kind of a finer tooth on that just thinking it's there is potential upside risk to the upside high end or potential downside and obviously China will be a factor as well as potential any further inventory production cuts or what not, but I was just trying to get a better sense of the revenue growth here in the 4Q..

Sure, sure we have been monitoring the production volumes developments here extremely closely as you can imagine and some of the shortcomings in the production volumes in Q3 we had expected that already at the end of Q2, which was partly factored into our revised guidance on the second quarter call.

Since then however, production volumes have further deteriorated and we have factored that into account in our latest update to the guidance. The main reason why we see an uptick in our revenues is on account of the new product launches and mainly in China.

So based on our new product launches and how the China market is performing, we are pretty confident about the guidance that we have issued today for the fourth quarter.

Christian would you like to add anything to that?.

No, no. So if you look at the -- we have momentum clearly in China the Sachin mentioned, much of the 61 launches that we're going to have this year 40 will be coming out of China and therefore we are looking at -- we scrubbed our forecast and quite confident around the guidance that we've provided..

Okay, so you have some pretty good visibility then into the production schedule for 4Q. So, yes that makes sense too because obviously China from a sequential standpoint is pretty strong or at least expected to be.

Okay and then just in terms of just bigger picture organic growth here, I believe roughly a year ago or nine months ago or what not, the longer term or midterm target cost 2018 was for mid to high single digit type growth and since then let's say overall there has been some potential weakness particularly around North America.

And so I’m just wondering if you could frame what’s been some of the puts and takes since then and if you could try and frame that into a above market growth type number.

I know on Slide 16 you mentioned targeting above market growth, but just wondering what the puts and takes are relative to the previous expectations for us with the high single digit growth?.

Yes, so at this target for the midterm then we should then last year do essentially built on to extensions, one was our ability to win new business and the second was the production volume forecast, with expect to new business wins what I can share with you as that we have done really well and we are actually slightly ahead of our own expectations.

But that’s one part of the story. The other part is what’s happened to the production volumes since we should have guidance. As you know I just has reduced their guidance for next year and for the people future here quite significantly.

We are in the process of really reviewing that data and confirming that data with our customers and we are putting our sales plan together as we speak we will be disclosing our -- to the sales target at the Deutsche Bank conference early January..

Okay, so then we shouldn’t read too much into the comment on slide 16 that you are just higher than sales force of the share just above market. .

That’s correct..

Okay. And then just one last here in terms of the SmartCore product it’s good to see got that went here in the quarter. I’m just wondering how basically year ago that was a opportunity I would say is meet the opportunity and since then we’ve only seen one contract win and that’s going to be launch in 2020 timeframe.

I’m just wondering if to the extent of this is more of a kind of a ECU -- type of product where taking, obviously cluster up of the OEMs or maybe it’s more of a have a long or lead time for platform changeover is that the reason why these launches are called three years from called designed into launch versus some of the other important products which could be short as called 18 to 24 months..

You are absolutely right and in prior calls -- they’ve always stated that this SmartCore wins on the very strategic nature of the technology and the impact have to has on the OEM do have longer lead times and we have said that this going to take some time or the industry to transition from the current approach which has this very distributed ECUs to more of a consolidated domain control or concept and as a result what happens to that is the content from a Visteon we point increases but it’s a very strategic decision that has fairly big implications for the OEs.

This is what is driving the longer lead times we are absolutely ready to have this win, this is a very sizable win as you can imagine such wins tend to be 100s of millions of dollars worth and we are continuing to have ongoing dialogue with another three or four OEMs and are very interested in this technology so, we are very pleased with how this trend has been unfolding, there is a lot of talk in the industry about domain controllers.

We are in many ways for ahead of the competition because we now have a second win and a very sizable win and I expect now a at this point where this snowball effect to start and having said that based on just what I said earlier this is a longer lead cycle sale and that’s what we don’t see change in the near future..

Okay. And then in terms of the Visteon because your cluster in there combining kind of the instrument cluster with infotainment and potentially some other devices does that basically imply that from a take rate perspective, it’s really just based on overall industry model specific volumes or is there still kind of take rates impact sort of speak..

That the take rates fundamentally are still the industry of model I would not assume anything different..

Okay. I just thought if it is collapsing called the instrument cluster plus one or plus two that, that technology that you would be providing would be basically standard but I guess there is different term levels with different kind of…..

You are absolutely right, so this allows the OEMs to configure as per the -- levels and their strategy in terms of how they want to make standard or not..

Perfect, okay great. Thanks for taking the questions. .

Thank you..

Your next question comes from the line of David Lim with Wells Fargo Securities. Please go ahead..

Hi, yes just a couple questions and good morning Sachin and congratulations and welcome Christine. The.

Thank you, David..

So you are absolutely the question that I have it on the business equation on gross margin and how much of that can you sort of balance out how much of that is for inherently higher of our better product margin mix versus your restructuring activities whether it would be tank consolidation et cetera. .

Right, so David if you look at these slide if you had and slide 13, we actually took out the impact of the mix into a different line so, the business equation really looks into the efficiencies of the, of our manufacturing operations so that’s just to your efficiencies. .

Got it and then how much more I mean from a runway basis do you have over the next several years on the business creation of the gross margin line as well as the SG&A line improving..

We mentioned we made tremendous progress in terms of extracting cost savings and efficiencies from both the manufacturing in SG&A and optimizing our engineering resources is also part of that equation and we are not done we, Sachin and I believe that there is still potential in terms of taking out class and right sizing the organization for the opportunities that we see so, so we are going into our planning cycle here for 2017 and we are putting in place actions at initiatives to ensure that we can think to extract efficiencies from both areas..

Go it an my last question for Sachin is lot of discussion on autonomous can you sort of retouch your vision on autonomous technology as it relates to Visteon and may be some sort of timeframe of where we could see may be a product from you guys and little bit of discussion on at vision is at radar, is it fusion algorithms any kind of additional color would be helpful.

Thank you.,.

Sure, David what we believe here is that the fundamentals assumptions and I believe is that conventional technologies I’m not sufficient for highly autonomous driving at levels the four and five.

We need systems that have a much higher level of accuracy in object detection and object classification under all driving conditions then what is achievable today with the conventional systems.

So all solution is based on the concept of a multi sensor fusion approach on the fault tolerant hardware and then further taking advantage of machine learning to improve the object detection and classification, accuracy rate.

Now that systems don’t exist in the market today and however at the same time we now have as a industry for the very first time the underlying technologies that are able to offer the capabilities that we need to deliver such solutions, rather the Silicon, from the likes of say Invidia, renaissance and others or machine learning are efficient intelligence technologies that are just emerging on the horizon.

So, what we are planning to do here is to do their specific expertise in what called and tolerant hardware in machine learning all targeted towards this problem of how do we have a multi Spencer approach for redundancy for increasing the accuracy of object detection and classification.

So we are very pleased with the how we’ve to come along very quickly in the last year or so in terms of our building our team and the teams will be located in Germany and in Silicon Valley and are developing unique expertise in machine learning to really apply that particular capability to this problem.

We expect that we would have this platform ready and around mid 2018 and has I said earlier nobody has in the market is I do not expect anybody to be ready prior to that considering how new so much these underlying capabilities are and we hope to be one of the first in this space so, we are very excited about for this whole thing and what this means in terms of new opportunities for discount as a business.

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If I made follow up on that would be characterize or competitors, what your competitors be like mobile or ROVs vision system and Conti’s vision system I just want to understand where you guys are going to compete from a product stand point?.

So, we will not compete with the current approaches to active safety products like the one that you just mentioned. These are the current systems and the current products are still function specific system using conventional technology.

What we see however in the future is the need for a platform that has this new capabilities that I just described and with one very big difference and the difference is that the system must be designed such that it can integrate technologies especially algorithms from the OEMs or from third parties because we do not believe that the autonomous level four and five can be fully achieved with a closed system with the technologies that are available today.

So our approach is to build a platform not a particular single product and from the platform you can envision that we can build various applications including like as appliance that you just described from the competitors.

So it's a technology development that will allows us to have a broader set of offering that will be from a technological point of view superior to what you see in the marketplace today and my expectations is that from a competitive viewpoint, I expect everybody to eventually be on a similar path to develop a multi-sensor approach or solution.

Fundamentally single sensors doing their own detection and classification independently are not going to be able to deliver the solution that we need for level four and level five.

Level three and below, I can understand that the systems are to be able to offer the functionality, but especially level five, you need a single integrated system with all of the sensor information coming in and all of the intelligence is adding in the central unit.

We have tremendous experience especially with SmartCore in how to build automotive grade centralized controllers and this is what they're leveraging into new platform..

Great, excellent thanks for the color..

Sachin Lawande:.

Welcome:.

Your next question comes from the line of Tavis McCourt with Raymond James. Please go ahead. .

Hey guys, thanks for taking my question.

I’ve got a couple of accounting questions Christian and then couple few thoughts on and first I just want to make sure I’m reading correctly that the discontinued ups was a $0.20 positive contributor at this quarter, is that included and electronics and then second accounting question is on the non-electronics business, you still expect that to be largely cleaned up and sold by the end of the year or that persist into 2017 and then I’ve got a few follow ups for Sachin afterwards.

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Right so the discontinued operations is not included in electronic so that’s the first question, the second question is at this point in time we expect to finish off all of the other legacy issues that the company has been experiencing in the fourth quarter may be there is a small sale in Q1 but most of it will be done in the Q4. .

Okay.

Thanks and then Sachin some follow up questions on that the Chinese business which I think is primarily majority owned JVs but can you give us the sense of given the strength there and the weakness of some of your other large OEMs, either in Q3 or Q4 may be holistically in the back half of the year what percentage of revenues and EBITDA is from those Chinese JVs and may be little inside into the specific OEMs that those JVs have exposure too.

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Yes, so as Bill mentioned in the past, we have a the good fortune of having JVs with some of the most significant components suppliers out of the China. The Yanfeng, which is a closed business associate of SAIC which is one of the largest car manufactures in China. We have a similar joint venture with a component business of FAW and also for Duckyang.

So we in short are extremely well positioned to take advantage of the market developments that are offering in China.

We are seeing the China market really start to grow again after a little bit of pause that we had experienced and what I believe is happening there is the fact that the local market is steering towards small compact SUVs and the market itself is going beyond the Tier 1 to Tier 2 and Tier 3 cities.

We expect to see much of that business come from domestic suppliers including the JV suppliers and this is our relationship and our JVs become a very good competitive differentiator for us. We have outlined our domestic China sales on one of the slides here let me just quickly take a look.

It's Slide number 6, which shows our third quarter, China domestic sales it is as you can see from the chart growing at a pretty rapid base and this is really on the back of the new product launches also the year so, we started to see the impact of the new launches in Q3.

We expect that to continue into Q4 and since many of these launches were in the back half of this year, we expect to see a positive impact of that also in 2017..

Thanks.

That’s helpful and a couple of follow-ups Sachin, you mentioned for this year you expect 61 product launches versus 59 in '15, do you have visibility into an expectation even if it’s just qualitatively into 2017? And the secondly I still want to make sure when you guys refer to SmartCore and SmartCore wins should we think of that as a components, what should we think of that is coinciding with a larger digital instrument supply contract or infotainment contract, is it holistically is this kind of a fully integrated system supply or is it as a component with another Tier 1 that may be doing that the infotainment or cluster?.

Let me address both. So we do have visibility into the new launches for next year and I would say roughly at the same level that we would have this year and also last year. So the new business wins that we have been talking about will start to have majority of its impact from 2018 onwards.

We are transitioning from a I would say high number of vehicle-specific products to more platform products. SmartCore is a great example of that. So a SmartCore based win launches into multiple vehicle platforms simultaneously.

That’s the kind of new business that we are targeting ourselves more and we will start to see us transition from a very high number of new product launches of perhaps lower dollar value with fewer launches as we go forward, but higher dollar content per launch.

Talking about the SmartCore itself, so when we talk about SmartCore launch, predominantly it is a complete system that is delivered by Visteon with all of the infotainment and cluster facts, all of the software solutions that ride on top of the hardware are delivered by Visteon.

In some cases as we go forward, I do envision that we will be integrating third party software also in the product that we offer because the SmartCore capabilities fundamentally allows integration of ever growing list of capabilities. So we have a pretty good solution for clusters. In fact we are one of the best when it comes to clusters.

We have a good solution for mid I would say entry to mid infotainment today. We are working on our mid to high infotainment which we have talked about now couple of times already and at the same time, the SmartCore solution would enable integration of ADAS capabilities in the future.

We are starting to see interest and integration of tribal monitoring features as they come from third parties but would be integrated by Visteon and delivered to the customer by Visteon..

Great. Thanks very much..

Thank you..

Your next question will come from the line of Ryan Brinkman with JPMorgan. Please go ahead. .

Hi, good morning this is [indiscernible] on behalf of Ryan.

Sachin I just wanted -- I had another question on SmartCore please forgive if you've addressed this already, but did want to understand, so when you went for this award with German OEM who were you competing against would it be traditional infotainment and cluster players or was the customer looking for a specific solution and you went in with that specific solution.

Trying to understand if this is more like you business from infotainment and cluster players traditional ones or this is like a specific solution that the OEMs are now looking to adopt?.

We are in the case of SmartCore we are normally competing with traditional suppliers of infotainment and clusters in the industry. As you rightly pointed out to be able to offer the functionality that OEMs desire in a complete integrated solution you need to have cluster and infotainment capabilities at a minimum.

So that does limit the number of competitors that would qualify to compete for such business, but fundamentally it's the same industry competitors that they know very well..

Okay. Got it.

And secondly just on the -- thanks for sharing your thoughts on capital deployment here, but did want to understand better if you could give us some bucket sizes for that $500 million in terms of I think when you look at in-house -- building in-house capabilities as well as buying or partnering and if you can bucket what ticket sizes they would be so that like I’m sure you have some plans in terms of what investments you will be making in house?.

Yes, we do, but like I said we will be talking to the Board in the next couple of months.

So we probably have -- we won’t be able to give you the specifics here, but I will just tell you that prepare -- obviously the in-house capabilities -- building the in-house capabilities the second as we would either buy partner invest and that’s dependent on the maturation of the technologies that we're going to be looking at in the maturation of the entities as well as obviously the valuation of those entities that we'll be investigating..

And if I can add just one more thing to what Christian said, this from a very traditional viewpoint we are playing in one of the most exciting and fast moving spaces in technology today. There is no other space in call-up of technology that as much happening in it as automotive which I’m pretty sure you are very familiar with as well.

So what we are looking at is we have as I mentioned earlier on the call, we see the trends that are getting across the industry. We are extremely well positioned to take advantage of those and at the same time, the strength of autonomous driving is accelerating at a pace that is faster than most companies abilities to keep up with it.

So we are looking at opportunities to make -- to ensure that we stay at the frontend of it from a technology capability viewpoint and those are the kind of our opportunities that we would be looking for in terms of how we deploy the capital to strengthen our capabilities, but our base capabilities in the products that we offer today, we are in a pretty good shape on..

Got it, and just a quick follow up, I know you mentioned couple of times on the call that the pace of product launches that have continued to be strong next year as well.

I was just wondering given the uncertainty around China and what’s happening with incentives there? Are you seeing any indication from OEMs in terms of slowing down product launches before there most of plenty around incentives next year?.

No, we actually don’t see any slowdown. A lot of these products are being built and are designed to make our customers offering more competitors. There is a lot of customer pull that is comparative pull and there is regulatory pull and so in short, we don’t see any slowdown. With respect to China, we are delivers in the China story continuing.

We don’t think that it's going to slow down. Yes, there is going to be some slowdown on account of perhaps the incentives being pulled back, but it's not clear yet whether they will be pulled entirely back.

The government is very good at not showing their hand and we also believe that the government perhaps may pull back the OEMs may step in the incentives of their own. So at this point, in short there is no slowdowns, there are no delays. We are pursuing our activities to the plan as the full..

If I can add to that Sachin, so what is interesting if you look at our business in China this year, China’s estimate from production volume growth is about 8% to 9% and we are growing much faster than what that production volume growth suggest and we see that same pattern going next year. So there are various estimates here such as 1%.

We probably think it's more towards the middle single digits, but again we believe that our revenue will actually increase much faster than what those numbers are and as Sachin pointed out in his prepared remarks, we expect double-digit growth in China next year..

Sure, got it, got it. Thanks for the question. Thank you..

Our final question will come from the line of Brian Sponheimer with Gabelli. Please go ahead. .

Hi Sachin. Thank you for fitting me in and welcome to Christine. Look forward to working with you..

Thank you, Brian..

Sachin when you are at Harman, I think one of the things that you brought here is the lifetime backlog, which I think is great, but also when you guys are thinking about how these wins lay around -- one of the things that you used do we discussed it relative changes in profitability of those programs, relative to the business that's in place now.

Can you maybe speak to how this business changes over time regarding the profit impact of this -- of these business wins?.

Sure. Brain so, we have a slightly better situation here is than what you may remember from my base at the prior company in terms of the margin with respect to current business and as we look into the future.

The backlog that we have talked about is trending more or less at the same levels as the current business profitability, but we believe that there is further opportunity to improve even within the awarded backlog our profitability for the business.

Now as you also know this is a business that has a lot of leverage and as we drive further business growth, especially with new business wins and we have seen our performance now for the last five quarters, we believe that there will be further benefits of scale that will come into picture that we haven’t yet seen in the last couple of years at discount.

So, I expect based on our ability to control cars, our ability to deliver programs to the extent that we have been and the new business wins that we are successful in achieving that our margins will continue to grow.

What we have not factored into our plan so far is any benefit out of the infotainment business opportunities that we may get as a result of the launch of Phoenix. That is an upside over and on top of it, but we will talk about it more as we have -- as we make more progress with the launch of phoenix and engagement with customers..

Okay. I appreciate that. And then just one on cash and accounting, if you get 1.2 million shares delivered to you at the end of October, is there any associated cash outflow or all the cash outflow with the buyback already been made..

All the cash outflows are already been made..

Okay. All right terrific. Thank you very much..

Thank you. And with that, what I would like to say here is to thank every one of you for participating on our call today and for your ongoing support and we will at this point end the call. Thank you very much..