Company Quick10K Filing
Visteon
Price77.11 EPS3
Shares28 P/E25
MCap2,175 P/FCF18
Net Debt-98 EBIT113
TEV2,077 TEV/EBIT18
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-18
10-Q 2020-09-30 Filed 2020-10-29
10-Q 2020-06-30 Filed 2020-07-30
10-Q 2020-03-31 Filed 2020-04-30
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-10-24
10-Q 2019-06-30 Filed 2019-07-25
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-10-25
10-Q 2018-06-30 Filed 2018-07-26
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-09
10-Q 2010-09-30 Filed 2010-10-27
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-11-12
8-K 2020-10-29
8-K 2020-10-22
8-K 2020-09-30
8-K 2020-09-09
8-K 2020-08-14
8-K 2020-08-11
8-K 2020-07-30
8-K 2020-06-11
8-K 2020-06-03
8-K 2020-04-30
8-K 2020-04-17
8-K 2020-04-05
8-K 2020-03-19
8-K 2020-03-05
8-K 2020-02-20
8-K 2020-01-29
8-K 2019-12-19
8-K 2019-12-19
8-K 2019-11-06
8-K 2019-10-24
8-K 2019-09-20
8-K 2019-09-05
8-K 2019-08-13
8-K 2019-07-25
8-K 2019-06-05
8-K 2019-04-25
8-K 2019-02-21
8-K 2019-01-15
8-K 2018-11-06
8-K 2018-10-25
8-K 2018-09-05
8-K 2018-08-08
8-K 2018-07-24
8-K 2018-06-06
8-K 2018-05-30
8-K 2018-04-26
8-K 2018-03-06
8-K 2018-02-22
8-K 2018-02-12
8-K 2018-01-15

VC 10K Annual Report

Part I
Item 1.Business
Item 1A.Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3.Legal Proceedings
Item 4.Mine Safety Disclosures
Item 4A. Information About Executive Officers and Key Employees
Part II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
Item 8.Financial Statements and Supplementary Data
Note 1. Summary of Significant Accounting Policies
Note 3. Non - Consolidated Affiliates
Note 4. Restructuring Activities
Note 5. Inventories
Note 6. Other Assets
Note 7. Property and Equipment
Note 8. Intangible Assets
Note 9. Leases
Note 10. Other Liabilities
Note 11. Debt
Note 12. Employee Benefit Plans
Note 13. Stock - Based Compensation
Note 14. Income Taxes
Note 15. Stockholders' Equity and Non - Controlling Interests
Note 16. Earnings per Share
Note 17. Fair Value Measurements
Note 18. Financial Instruments
Note 19. Commitments and Contingencies
Note 20. Segment Information and Revenue Recognition
Note 21. Other Income, Net
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Part III
Item 10.Directors, Executive Officers and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions, and Director Independence
Item 14.Principal Accountant Fees and Services
Part IV
Item 15.Exhibits and Financial Statement Schedules
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Visteon Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
2.31.81.30.80.3-0.22012201420172020
Rev, G Profit, Net Income
2.71.70.7-0.3-1.3-2.32012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 001-15827
VISTEON CORPORATION
(Exact name of registrant as specified in its charter)
State ofDelaware38-3519512
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Village Center Drive,Van Buren Township,Michigan48111
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (800)-VISTEON
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, par value $0.01 per shareVC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer," "accelerated filer,” "smaller reporting company"  and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  Accelerated filer    Non-accelerated filer    Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2020 (the last business day of the most recently completed second fiscal quarter) was approximately $1.9 billion.

As of February 11, 2021, the registrant had outstanding 27,915,661 shares of common stock.

Document Incorporated by Reference
DocumentWhere Incorporated
2021 Proxy Statement
Part III (Items 10, 11, 12, 13 and 14)
1




Visteon Corporation and Subsidiaries
Index
Part I
Page
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Part II
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 9A. Controls and Procedures
Part III
Item 11. Executive Compensation
Part IV
Signatures
2



Part I

Item 1.Business

Description of Business

Visteon Corporation (the "Company" or "Visteon") is a global automotive supplier that designs, engineers, and manufactures innovative automotive electronics and connected car solutions for the world's major vehicle manufacturers including Ford, Mazda, Volkswagen, General Motors, Renault/Nissan, BMW, Jaguar/Land Rover, Daimler, and Stellantis. Visteon is a global leader in cockpit electronic products including digital instrument clusters, information displays, infotainment, head-up displays, telematics, SmartCore™ cockpit domain controllers, the DriveCore™ advanced safety platform and battery management systems. Visteon is headquartered in Van Buren Township, Michigan, and has an international network of manufacturing operations, technical centers, and joint venture operations dedicated to the design, development, manufacture, and support of its product offerings and its global customers. The Company's manufacturing and engineering footprint is principally located in Mexico, Bulgaria, Portugal, Germany, India, and China.

The Company’s Industry
The Company operates in the automotive industry, which is cyclical and highly sensitive to general economic conditions. The Company believes that future success in the automotive industry is, in part, dependent on alignment with customers to support their efforts to effectively meet the challenges associated with the following significant trends and developments in the global automotive industry:
Electronic content and connectivity - The electronic content of vehicles continues to increase due to various regulatory requirements and consumer demand for increased vehicle performance and functionality. The use of electronic components can reduce weight, expedite assembly, enhance fuel economy, improve emissions, increase safety and enhance vehicle performance. These benefits coincide with vehicles becoming more electric, connected, and automated. Additionally, digital and portable technologies have dramatically influenced the lifestyle of today’s consumers, who expect products that enable such a lifestyle. Consequently, the vehicle cockpit is transforming into a fully digital environment with multi-display systems incorporating larger, curved and complex displays and the consolidation of discrete electronic control units into a multi-core domain controller.
Electric vehicles – The trend towards electrification is accelerating, driven by government incentives and standards, announced restrictions of internal combustion engine vehicles in multiple cities and countries, and the significant increase of investment in electrification by Original Equipment Manufacturers ("OEMs"). The shift to electric vehicles increases the digital content of a vehicle as the majority of cockpit electronics will be all-digital to support the new electrical architecture. In addition, all battery electric vehicles will require a battery management system to manage the rechargeable battery pack.
Advanced driver assistance systems ("ADAS") and autonomous driving - The industry continues to advance toward semi-autonomous and autonomous vehicles. The Society of Automotive Engineers has defined five levels of autonomy ranging from levels one and two with driver-assist functions whereby the driver is responsible for monitoring the environment, to level five with full autonomy under all conditions. Levels one and two are already popular in the market while levels three and above utilize a combination of sensors, radars, cameras and LiDARs, requiring sensor fusion and machine learning technologies, as the system assumes the role of monitoring the environment. Level three includes features such as highway pilot and parking assist technology, for which an increased market penetration rate is expected over the next several years.
Safety and security - Governments continue to focus regulatory efforts on safer transportation. Accordingly, OEMs are working to improve occupant and pedestrian safety by incorporating more safety-oriented technology in their vehicles. Additionally, in-vehicle connectivity has increased the need for robust cybersecurity systems to protect data, applications and associated infrastructure. Security features are evolving with advances in sensors and silicon. Suppliers must enable the security/safety initiatives of their customers including the development of new technologies.

Vehicle standardization - OEMs continue to standardize vehicle platforms on a global basis, resulting in a lower number of individual vehicle platforms, design cost savings and further scale of economies through the production of a greater number of models from each platform. Having operations in the geographic markets in which OEMs produce global platforms enables suppliers to meet OEMs’ needs more economically and efficiently, thus making global coverage a source of significant competitive advantage for suppliers with a diversified global footprint. Additionally, OEMs are looking to suppliers for increased collaboration to lower costs, reduce risks, and decrease overall time to market. Suppliers that can
3



provide fully engineered solutions, systems and pre-assembled combinations of component parts are positioned to leverage the trend toward system sourcing. As vehicles become more connected and cockpits more digitized, suppliers that can deliver modular hardware architectures, “open” software architectures, and a software platform approach will be poised to help OEMs achieve greater reuse of validated hardware circuitry, design scalability, and faster development cycles.
Financial Information about Segments
The Company’s reportable segment is Electronics. The Company's Electronics segment provides automotive electronics products to customers, including instrument clusters, information displays, infotainment systems, audio systems, telematics solutions, head-up displays, and battery management systems.
Refer to Note 20, “Segment Information and Revenue Recognition” to the Company's consolidated financial statements included in Part II, Item 8 of this Form 10-K for more information about the Company’s reportable segment.
The Company’s Products
The Company designs and manufactures innovative automotive electronics and connected car solutions further described below:

Instrument Clusters
The Company offers a full line of instrument clusters, from standard analog gauge clusters to high-resolution, all-digital, fully reconfigurable, 2-D and 3-D display-based devices. The Company uses a platform approach to accelerate development and manage multiple vehicle variants. These clusters can use a wide range of display technologies, graphic capabilities and decorative elements, free-form, and curved displays. Premium clusters support complex 3-D graphics and feature embedded functionality such as driver monitoring, camera inputs, and ambient lighting.
Information Displays
The Company offers a range of information displays for various applications within the cockpit, incorporating a sleek profile, and touch sensors designed to deliver high performance for the automotive market. These displays can integrate a range of user interface technologies and graphics management capabilities, such as 3-D, dual view, cameras, optics, haptic feedback, light effects and dual displays. The Company offers a new generation of large, curved, complex multi-display modules with optical performance designed to be competitive with mobile devices. The Company's microZone™ display technology offers high contrast and brightness and a wide color gamut that enables automotive displays to cost-effectively achieve life-like imaging capability on par with consumer mobile devices, without sacrificing reliability or life span. The Company also developed the first bendable glass multi-display cockpit in the automotive industry.
Audio and Infotainment Systems
The Company offers a range of infotainment and connected car solutions, including scalable Android infotainment for seamless connectivity including integration with Android Auto and Apple CarPlay technology for wireless smartphone projection. Phoenix™, the company's display audio and embedded infotainment platform that is based on Android automotive operating system Phoenix™, the company's display audio and embedded infotainment platform that is based on Android automotive operating system. Phoenix embedded infotainment offers Android App Store that enables third-party developers to create apps easily through a software development kit and software simulation of the target hardware system. Additionally, Visteon offers an onboard artificial intelligence ("AI")-based voice assistant with natural language understanding.

Battery Management Systems (“BMS”)

The Company offers wired and wireless battery management systems that include control and sensing sub system hardware and software. Visteon’s wireless BMS replaces wired connections between the sub systems with secure and reliable wireless communication technology. This solution supports multiple charging protocols with modular and scalable design to meet OEM cost, weight, battery pack configuration, and packaging requirements. Visteon’s wireless BMS solution can more easily be connected to the OEM's thermal management systems and other vehicle controls.

4



Telematics Solutions
The Company provides a cost-optimized, high-speed telematics control unit to enable secure connected car services, software updates, and data. The Company’s telematics solution uses a single hardware and flexible software architecture to support regional telematics service providers and mobile networks. The Company’s wireless gateway platform is designed to meet future connectivity requirements including 4G, V2X, Wi-Fi® and next-generation mobile standards such as 5G. The Company also offers a hands-free telephone unit that provides Bluetooth® and Universal Serial Bus ("USB") connectivity.
Head-Up Displays
The Company provides a complete line of head-up displays ("HUD") that present critical information to the driver in a convenient location, at a comfortable focal distance. Combiner HUD projects a virtual image in front of the driver using a compact, transparent screen mounted on top of the instrument panel. Windshield HUD projects the image directly on the vehicle windscreen. The Company has demonstrated an augmented reality system that overlays graphics in the driver’s line of sight to represent objects in the vehicle’s path; provide navigation guidance; and display relevant information, such as a lane departure warning.
SmartCore Cockpit Domain Controller
The Company offers SmartCore™, an automotive-grade, integrated domain controller approach, which can independently operate the infotainment system, instrument cluster, head-up display, rear-seat displays, and other features on a single, multi-core chip to improve efficiency, create a unified experience across products, and reduce power consumption and cost. Included are: SmartCore Runtime, middleware, enabling communication between domains and apps to be shown on any display; and SmartCore Studio, a PC-based configuration tool to generate hypervisor configurations. The latest generation of SmartCore seamlessly connects the human machine interaction ("HMI") across an increasing number of display domains, such as surround view and in-cabin sensing of driver drowsiness, attentiveness, and facial recognition.
DriveCore Advanced Safety Driving Controller
DriveCore™ is an open, scalable platform for addressing multiple levels of vehicle automation, with a focus on Level 2-plus. DriveCore consists of the centralized computing unit, middleware framework, and software applications process AI/machine learning algorithms for Level 2-plus functionality. DriveCore provides an open platform for the development of sensor-based solutions for the auto industry, through three main components:
Compute - A modular and scalable cost-efficient computing hardware platform designed to be adapted to Level 2-plus and above levels of automated driving;
Runtime - In-vehicle middleware that provides a secure framework enabling applications and algorithms to communicate in a real time, high-performance environment; and
Studio - A PC and cloud based development environment that enables automakers to create an ecosystem of developers for rapid algorithm development.
The Company’s Customers
The Company's ultimate customers are global vehicle manufacturers including Ford, BMW, Mazda, Volkswagen, Renault/Nissan, Daimler, General Motors, Fiat, and Jaguar/Land Rover. Ford, Renault/Nissan, Mazda, and BMW are the Company's largest ultimate customers.
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The following is a summary of their percentage of net sales:
Percentage of Total Net Sales
December 31,
202020192018
Ford22 %22 %26 %
Mazda11 %14 %18 %
Renault/Nissan11 %13 %12 %
BMW11 %%%

The Company typically supplies products to OEM customers through purchase orders, which are generally governed by general terms and conditions established by each OEM. Although the terms and conditions vary from customer to customer, they typically contemplate a relationship under which customers place orders for their requirements of specific components supplied for particular vehicles but are not required to purchase any minimum quantities. Individual purchase orders can be cancelled for cause, non-performance, and, in most cases, insolvency or certain change in control events. Additionally, many of our OEM customers have the option to terminate contracts for convenience; this option permits the OEM customers to impose pressure on pricing during the life of the vehicle program or issue purchase contracts for less than the duration of the vehicle program. This has the potential to reduce the Company’s profit margin and increases the risk of loss of future sales under those purchase contracts.

The Company manufactures and ships based on customer release schedules, normally provided on a weekly basis, which can vary based on OEM automotive production or dealer inventory levels. Although customer programs typically extend to future periods, and although there is an expectation that the Company will supply certain levels of OEM production in those future periods, customer agreements (including the applicable terms and conditions) do not necessarily constitute firm orders.

The price related to these products are typically negotiated on an annual basis. Any subsequent price reductions are intended to take into account expected annual cost reductions to the supplier of providing products and services to the customer, through such factors as manufacturing productivity enhancements, material cost reductions and design-related cost improvements. The Company has an aggressive cost reduction program that focuses on reducing its total costs, which are intended to offset customer price reductions. However, there can be no assurance that the Company’s cost reduction efforts will be sufficient to fully offset such price reductions. These relationships typically extend over the life of the related vehicle.

The terms and conditions generally require a warranty on products sold; in most cases, the warranty period is the same as the warranty offered by the OEM to the ultimate customer. The Company may also be required to share in all or part of recall costs if the OEM recalls vehicles for defects attributable to Visteon products.

The Company’s Competition
The automotive sector continues to remain highly competitive resulting from the ongoing industry consolidation. OEMs rigorously evaluate suppliers on the basis of financial viability, product quality, price competitiveness, technical expertise, development capability, new product innovation, reliability and timeliness of delivery, product design, manufacturing capability, flexibility, customer service, and overall management. The Company's primary independent competitors include, but are not limited to, Alpine Electronics, Aptiv PLC, Continental AG, Denso Corporation, Samsung Group, LG Corporation, Nippon Seiki, Panasonic Corporation, Hyundai Mobis, Innolux Corporation, Magneti Marelli, and Robert Bosch GmbH.
The Company’s Business Seasonality and Cyclicality

Historically, the Company’s business has been moderately seasonal because its largest North American customers typically cease production for approximately two weeks in July for model year changeovers and approximately one week in December during the winter holidays. Customers in Europe historically shut down vehicle production during a portion of August and one week in December. In China, customers typically shut down approximately one week in early October and one week in January or February.  Additionally, third-quarter automotive production is traditionally lower as new vehicle models enter production.

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The Company’s Human Capital Resources, Workforce, and Employee Relations

Attract and Retain

The Company’s ability to sustain and grow its business requires the recruitment, retention and development of a highly skilled and diverse workforce. The Company’s Chief Human Resources Officer ("CHRO"), reporting directly to Chief Executive Officer ("CEO"), oversees its global talent processes to attract, develop and retain its employees. To attract the best talent, the Company offers market competitive compensation and benefits around the globe, annual and long-term incentive programs, as well as health and wellness benefits. The Company also provides a variety of resources to help its employees grow in their current roles and build new skills. Hundreds of online courses are available in the Company’s learning management system where individual development is emphasized as part of the annual goal setting process. The Company continues to build tools for leaders to develop their teams on the job and in roles to create new opportunities to learn and grow. Because retention of the employee base is significant to its business strategy, executive management discusses it with the Board of Directors on a regular basis.

Workforce

Visteon’s strength comes from a workforce of approximately 10,000 employees operating in approximately 18 countries globally. Our workforce is globally distributed and located in 26% in the Americas, 32% in Europe, 21% in China, and 21% in the Asia Pacific region. Visteon believes that all employees are leaders and expects leaders to drive operational and financial results and build strong teams.

Many of the Company’s employees are members of industrial trade unions and confederations within their respective countries. Often these organizations operate under collectively bargained contracts that are not specific to any one employer. The Company constantly works to establish and maintain positive, cooperative relations with its unions and work representatives around the world.

Diversity and Inclusion

Diversity represents an environment of open communication where the contributions of all employees are valued. As a multicultural organization, the Company embraces human differences and harnesses the power of its employees’ varied backgrounds, cultures and experiences to create a competitive edge. The Company encourages many forms of corporate communication such as global town hall employee meetings, informal small-group employee discussions, and an open-door policy so all employees have direct access to senior leadership and have the opportunity to ask questions, make suggestions, and provide input. Our goal is to create a culture where we value, respect, and provide fair treatment and equal opportunities for all employees.

Workplace Safety

The Company requires protective equipment, enforces comprehensive safety policies and procedures, and encourages its employees and leaders to continually look for ways to improve workplace safety. It has implemented and maintains a health and safety management system that is certified to the OHSAS 18001 or ISO 45001 standard. The Company provides regular health and safety reports to the Board of Directors, which during fiscal 2020, included updates on the return to work health and safety protocols globally as a result of COVID-19. To protect its employees and maintain operations during the COVID-19 pandemic, the Company implemented a number of new health-related measures including a requirement to wear face-masks at all times while on its property, temperature taking protocols, increased hygiene, cleaning and sanitizing procedures, social-distancing, restrictions on visitors to its facilities, and limiting in-person meetings.

Regulation

Visteon operates in a constantly evolving global regulatory environment and is subject to numerous and varying regulatory requirements for its product performance and material content. Visteon’s strives to identify potential regulatory and quality risks early in the design and development process and proactively manage them throughout the product lifecycle through the use of routine assessments, protocols, standards, performance measures, and audits. New regulations and changes to existing regulations are managed in collaboration with the OEM customers and implemented through Visteon’s global systems and procedures designed to ensure compliance with existing laws and regulations.

Visteon works collaboratively with a number of stakeholder groups including government agencies, its customers, and its suppliers to proactively engage in federal, state, and international public policy processes.
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Environmental, Health, Safety, and Legal Matters

Visteon is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other matters. Although the outcome of such lawsuits, claims and proceedings cannot be predicted with certainty and some may be disposed of unfavorably to Visteon, it is management's opinion that none of these will have a material adverse effect on Visteon's financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented. Further details are provided in Part II, Item 8 of this Form 10-K in Note 19, "Commitments and Contingencies," of the notes to consolidated financial statements.

The Company’s Product Research and Development

The Company’s research and development efforts are intended to maintain leadership positions in core products and provide the Company with a competitive edge as it seeks additional business with new and existing customers. The Company also works with technology development partners, including customers, to develop technological capabilities and new products and applications.

The Company’s Intellectual Property

The Company owns significant intellectual property, including a number of patents, copyrights, proprietary tools and technologies and trade secrets and is involved in numerous licensing arrangements. Although the Company’s intellectual property plays an important role in maintaining its competitive position, no single patent, copyright, proprietary tool or technology, trade secret or license, or group of related patents, copyrights, proprietary tools or technologies, trade secrets or licenses is, in the opinion of management, of such value to the Company that its business would be materially affected by the expiration or termination thereof. The Company’s general policy is to apply for patents on an ongoing basis, in appropriate countries, on its patentable developments that are considered to have commercial significance. The Company also views its name and mark as significant to its business as a whole. In addition, the Company holds rights in a number of other trade names and marks applicable to certain of its businesses and products that it views as important to such businesses and products.

The Company’s International Operations

Financial information about sales and net property by major geographic region can be found in Note 20, "Segment Information and Revenue Recognition," to the Company's consolidated financial statements included in Part II, Item 8 of this Form 10-K.

The Company’s Raw Materials and Suppliers

Raw materials used by the Company in the manufacture of its products include electronics components, resins, copper, and precious metals. While generally the supply of the materials used are available from numerous sources, semiconductor suppliers, and silicon wafer production is concentrated. In general, the Company does not carry inventories of raw materials in excess of those reasonably required to meet production and shipping schedules. The Company monitors its supply base and endeavors to work with suppliers and customers to mitigate the impact of potential material shortages and supply disruptions.

While the Company has not experienced any significant interruption in the supply of raw materials in 2020, it has experienced semiconductor shortages in 2021 and there can be no assurance that sufficient sources or amounts of all necessary raw materials, and specifically semiconductors, as disclosed in "Note 1, Accounting Policies," to the Company's consolidated financial statements, included in Part II, Item 8 of this Form 10-K, will be available in required volumes in the future.

The automotive supply industry is subject to inflationary pressures with respect to raw materials, which have historically placed operational and financial burdens on the entire supply chain. Accordingly, the Company continues to take actions with its customers and suppliers to mitigate the impact of these inflationary pressures in the future. Actions to mitigate inflationary pressures with customers include collaboration on alternative product designs and material specifications, contractual price escalation clauses, and negotiated customer recoveries. Actions to mitigate inflationary pressures with suppliers include aggregation of purchase requirements to achieve optimal volume benefits, negotiation of cost-reductions, and identification of more cost competitive suppliers. While these actions are designed to offset the impact of inflationary pressures, the Company cannot provide assurance that it will be successful in fully offsetting increased costs resulting from inflationary pressures.
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The Company’s Website and Access to Available Information
The Company’s current and periodic reports filed with the United States Securities and Exchange Commission (“SEC”), including amendments to those reports, may be obtained through its internet website at www.visteon.com free of charge as soon as reasonably practicable after the Company files these reports with the SEC. A copy of the Company’s code of business conduct and ethics for directors, officers and employees of Visteon and its subsidiaries, entitled “Ethics and Integrity Policy,” the Corporate Governance Guidelines adopted by the Company’s Board of Directors and the charters of each committee of the Board of Directors are also available on the Company’s website. A printed copy of the Company’s Ethics and Integrity Policy may be requested by contacting the Company’s Investor Relations department in writing at One Village Center Drive, Van Buren Township, MI 48111; by phone (734) 710-7893; or via email at investor@visteon.com.

Item 1A.Risk Factors
The risks and uncertainties described below are not the only ones facing the Company. Risks attributable to all registrants are not included below. Additional risks and uncertainties, including those not presently known or that the Company believes to be immaterial, also may adversely affect the Company’s results of operations and financial condition. Should any such risks and uncertainties develop into actual events, these developments could have material adverse effects on the Company’s business and financial results.

Operations Related Risk Factors

The Company’s business, results of operations, and financial condition have been, and may continue to be, adversely affected by the recent COVID-19 pandemic

The COVID-19 pandemic poses the risk that the Company or its affiliates and joint ventures, employees, suppliers, customers, and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions, and other actions and restrictions that may be requested or mandated by governmental authorities. In addition, the Company has experienced, and may continue to experience, disruptions or delays in our supply chain as a result of such actions, which is likely to result in higher supply chain costs to us in order to maintain the supply of materials and components for our products. While the Company has implemented measures to mitigate the impact on its results of operations, there can be no assurance that these measures will be successful. The Company cannot predict the degree to, or the period over, which its financials and operations will be affected by this outbreak and preventative measures, and the effects could be material.

The Company may also experience impacts from market downturns and changes in consumer behavior related to pandemic fears and impacts on its workforce as a result of COVID-19. In the first half of 2020 the Company experienced a significant decline in demand from its customers as a result of the impact of efforts to contain the spread of COVID-19 and this pattern could repeat. In addition, some customers may choose to delay or abandon projects on which the Company provides products and/or services in response to the adverse impact of the COVID-19 pandemic. The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity of COVID-19, the longevity of COVID-19, and the impact of COVID-19 on economic activity. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts on its business and financial performance as a result of its global economic impact, including a recession that has occurred or may occur in the future. To the extent the COVID-19 pandemic materially adversely affects the Company’s business and financial results, it may also have the effect of significantly heightening many of the other risks associated with the Company’s business, liquidity, and indebtedness.

The Company could be negatively impacted by the distress of its suppliers or other shortages

In an effort to manage and reduce the costs of purchased goods and services, the Company, like many suppliers and automakers, has been consolidating its supply base. As a result, the Company is dependent on single or limited sources of supply for certain components used in the manufacture of its products including semiconductor chips which are integral components of new vehicles and are embedded in multiple vehicle systems including automotive and cockpit electronics. The significant vehicle production slowdown in the first half of 2020 as a result of COVID-19, was followed by increased consumer demand and vehicle production schedules in the second half of 2020, particularly in the fourth quarter. This surge in demand led to a worldwide semiconductor supply shortage in early 2021, as semiconductor suppliers have been unable to rapidly reallocate production lines to serve the automotive industry. In 2021, the Company has experienced semiconductor shortages
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and if such shortages of semiconductors or other critical components from other suppliers continue, or worsen, it will impact the Company's ability to meet its production schedules for some of its key products or to ship such products to its customers in a timely fashion. Furthermore, unfavorable economic or industry conditions could result in financial distress within the Company's supply base, thereby increasing the risk of supply disruption.

Such disruptions could be caused by any one of a myriad of potential problems, such as closures of one of the Company’s or its suppliers’ plants or critical manufacturing lines due to strikes, mechanical breakdowns, electrical outages, fires, explosions or political upheaval, as well as logistical complications due to weather, global climate change, volcanic eruptions, or other natural or nuclear disasters, mechanical failures, delayed customs processing, the spread of an infectious disease, virus or other widespread illness and more. Additionally, as the Company grows in best cost countries, the risk for such disruptions is heightened. The lack of even a small single subcomponent necessary to manufacture one of the Company’s products, for whatever reason, could force the Company to cease production, even for a prolonged period. Similarly, a potential quality issue could force the Company to halt deliveries while it validates the products. Even where products are ready to be shipped, or have been shipped, delays may arise before they reach the customer. The Company’s customers may halt or delay production for the same reason if one of their other suppliers fails to deliver necessary components. This may cause the Company’s customers, in turn to suspend their orders, or instruct us to suspend delivery, of our products, which may adversely affect our financial performance.

If the Company were to fail to make timely deliveries in accordance with contractual obligations, the Company generally must absorb its own costs for identifying and solving the “root cause” problem as well as expeditiously producing replacement components or products. Generally, the Company must also carry the costs associated with “catching up,” such as overtime and premium freight. Additionally, if the Company is the cause for a customer being forced to halt production, the customer may seek to recoup all of its losses and expenses from the Company. These losses and expenses could be significant, and may include consequential losses such as lost profits. Any supply-chain disruption, however small, could potentially cause the complete shutdown of an assembly line of one of the Company’s customers, and any such shutdown could lead to material claims of compensation.

The Company continues to work closely with suppliers and customers to minimize any potential adverse impacts of the semiconductor supply shortage and monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise, due to this or any other issue. However, if the Company is not able to mitigate the semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our financial condition, results of operations or cash flows.

The Company’s substantial international operations make it vulnerable to risks associated with doing business in foreign countries

The Company has manufacturing and distribution facilities in many foreign locations. International operations are subject to certain risks inherent in doing business abroad, including:
changes to international trade agreements;
local economic conditions, expropriation and nationalization, foreign exchange rate fluctuations, and currency controls;
withholding, border, and other taxes on remittances and other payments by subsidiaries;
investment restrictions or requirements;
export and import restrictions, including increases in border tariffs;
the ability to effectively enforce intellectual property rights;
new or additional governmental sanctions on doing business with or in certain countries or with certain persons; and
increases in working capital requirements related to long supply chains.

Additionally, the Company’s global operations may also be adversely affected by political events, domestic or international terrorist events, and hostilities or complications due to natural or other disasters. These or any further political or governmental developments or health concerns in Mexico, China, or other countries in which the Company operates could result in social, economic, and labor instability. These uncertainties could have a material adverse effect on the continuity of the Company’s business, results of operations, and financial condition.

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While we have worked to mitigate any adverse impact, existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Despite recent trade negotiations between the U.S. and Chinese governments and between the U.S. and European governments, given the uncertainty regarding the scope and duration of the imposed tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., China or other countries, the Company can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.

The Company has invested significantly and is expected to continue to invest significantly in joint ventures with other parties to conduct business in China and elsewhere in Asia. These investments may include manufacturing operations, and technical centers as well as research and development activities, to support anticipated growth in the region. If the Company is not able to strengthen existing relationships, secure additional customers, and develop market-relevant advanced driver assistance and autonomous vehicle technologies, it may fail to realize expected rates of return on these investments. The Company’s ability to repatriate funds from these joint ventures depends not only upon their uncertain cash flows and profits but also upon the terms of particular agreements with the Company’s joint venture partners and maintenance of the legal and political status quo. As a result, the Company’s exposure to the risks described above is substantial. The likelihood of such occurrences and its potential effect on the Company vary from country to country and are unpredictable. However, any such occurrences could be harmful to the Company’s business, profitability, and financial condition.

On December 31, 2020, the United Kingdom (“U.K.”) officially withdrew from the European Union (“E.U.”), commonly referred to as “Brexit”. The long-term effects of Brexit are uncertain and may adversely affect European and worldwide economic and market conditions, including vehicle production, significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets, and could contribute to instability in global financial and foreign exchange markets. While the Company's overall footprint in the U.K. is not significant, the potential impacts of Brexit could adversely impact other global economies, and in particular, the European economy, a region which accounted for approximately 36% of the Company’s total net sales for the year ended December 31, 2020. The Company will continue to actively monitor the ongoing potential impacts of Brexit and will seek to minimize its impact on the Company’s business through review of its existing contractual arrangements and obligations, particularly in the European region. Any of these effects of Brexit, among others, could adversely affect the Company’s business, business opportunities, results of operations, financial condition and cash flows.

The Company’s ability to effectively operate could be hindered if it fails to attract and retain key personnel

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

The Company may incur significant restructuring charges

The Company has taken, and expects to take, restructuring actions to realign its engineering organization and to realign and resize its production capacity and cost structure to meet current and projected operational and market requirements. The extent to which these strategies will achieve the desired efficiencies and goals in 2021 and beyond is uncertain because their success depends on a number of factors, some of which are beyond the Company’s control. Charges related to these actions could have a material adverse effect on the Company's financial condition, operating results and cash flows. Moreover, there can be no assurances that any future restructuring will be completed as planned or achieve the desired results.

Work stoppages and similar events could significantly disrupt the Company’s business

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

Industry and Competition Related Risk Factors

The automotive industry is cyclical and significant declines in the production levels of the Company’s major customers could reduce the Company’s sales and harm its profitability

Demand for the Company’s products is directly related to the automotive vehicle production of the Company’s major customers. Automotive sales and production are cyclical and can be affected by general economic or industry conditions, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, the cost and availability of credit, and other factors. Due to overall global economic conditions, including COVID-19, in 2020, the automotive industry experienced decreased global customer sales and production schedules. Compared to 2019, global light vehicle production in 2020 decreased by 5% in China, 22% in the Americas, 21% in Europe and 16% globally. As a result, the Company has experienced and may continue to experience reductions in orders from OEM customers in certain regions.

The Company must continue to develop, introduce, and achieve market acceptance of new and enhanced products in order to grow its sales in the future

The growth of the Company's business will be dependent on the demand for innovative automotive electronics products, including but not limited to advanced driver assistance and autonomous vehicle technologies. In order to increase sales in current markets and gain entry into new markets, the Company must innovate to maintain and improve existing products, including software, while successfully developing and introducing distinctive new and enhanced products that anticipate changing customer and consumer preferences and capitalize upon emerging software technologies. However, the Company may experience difficulties that delay or prevent the development, introduction, or market acceptance of its new or enhanced products, or undiscovered software errors, bugs, and defects in its products may injure the Company's reputation. Furthermore, these new technologies have also attracted increased competition from outside the traditional automotive industry, and any of these competitors may develop and introduce technologies that gain greater customer or consumer acceptance, which could adversely affect the future growth of the Company.

The Company may not realize sales represented by awarded business

The Company estimates awarded business using certain assumptions, including projected future sales volumes. The OEM customers generally do not guarantee production volumes. In addition, awarded business may include business under arrangements that OEM customers have the right to terminate without penalty. Therefore, the Company’s actual sales volumes, and thus the ultimate amount of revenue that it derives from such sales, are not committed. If actual production orders from its customers are not consistent with the projections used by the Company in calculating the amount of its awarded business, the Company could realize substantially less revenue over the life of these projects than the projected estimate.

The discontinuation or loss of business, or lack of commercial success, with respect to a particular product for which the Company is a significant supplier could reduce the Company’s sales and harm its profitability

Although the Company has purchase orders from many of its customers, these purchase orders generally provide for the supply of a customer’s annual requirements for a particular vehicle model and assembly plant, or in some cases, for the supply of a customer’s requirements for the life of a particular vehicle model, rather than for the purchase of a specific quantity of products. In addition, certain customers have communicated an intent to manufacture components internally that are currently produced by outside suppliers, such as the Company. If the Company's OEM customers successfully insource products currently manufactured by the Company the discontinuation or loss of business for products which the Company is a significant supplier, could reduce the Company’s sales and harm the Company’s profitability.

Escalating price pressures from customers may adversely affect the Company’s business

Downward pricing pressures by automotive manufacturers, while characteristic of the automotive industry, are increasing. Virtually all automakers have implemented aggressive price-reduction initiatives and objectives each year with their suppliers, and such actions are expected to continue in the future. In addition, estimating such amounts is subject to risk and uncertainties because any price reductions are a result of negotiations and other factors. Accordingly, suppliers must be able to reduce their
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operating costs in order to maintain profitability. The Company has taken steps to reduce its operating costs and other actions to offset customer price reductions; however, price reductions have impacted the Company’s sales and profit margins and are expected to continue to do so in the future. If the Company is unable to offset customer price reductions in the future through improved operating efficiencies, new manufacturing processes, sourcing alternatives, and other cost-reduction initiatives, the Company’s results of operations and financial condition will likely be adversely affected.

The Company is highly dependent on Ford Motor Company and decreases in this customer’s vehicle production volumes would adversely affect the Company

Ford is one of the Company’s largest ultimate customers and accounted for 22%, 22% and 26% of sales in 2020, 2019 and 2018, respectively. Accordingly, any change in Ford's vehicle production volumes may have a significant impact on the Company’s sales volume and profitability.

Product Related Risk Factors

The Company's inability to effectively manage the timing, quality, and costs of new program launches could adversely affect its financial performance

In connection with the award of new business, the Company often obligates itself to deliver new products and services that are subject to its customers’ timing, performance, and quality standards. Additionally, as a Tier 1 supplier, the Company must effectively coordinate the activities of numerous suppliers in order to launch programs successfully. Given the complexity of new program launches, especially involving new and innovative technologies, the Company may experience difficulties managing product quality, timeliness, and associated costs. In addition, new program launches require a significant ramp up of costs; however, the sales related to these new programs generally are dependent upon the timing and success of the introduction of new vehicles by the Company's customers. The Company's inability to effectively manage the timing, quality, and costs of these new program launches could adversely affect its results of operations, financial condition, and cash flows from operations.

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

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

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

The Company owns significant intellectual property, including a number of patents, trademarks, copyrights, and trade secrets and is involved in numerous licensing arrangements. The Company’s intellectual property plays an important role in maintaining its competitive position in a number of the markets served. The Company may utilize intellectual property in its products that requires a license from a third-party. While the Company believes that such licenses generally can be obtained, there is no assurance that the necessary licenses can be obtained on commercially acceptable terms or at all. Failure to obtain the right to use third-party intellectual property could preclude the Company from selling certain products and have materially adverse effects on the Company’s business, results of operations, and financial condition. Developments or assertions by or against the Company relating to intellectual property rights could materially impact the Company’s business.

The Company also derives significant revenue from countries outside the U.S. (including China) and significant intellectual property assets are licensed to joint ventures and customers in foreign jurisdictions. While the Company is not aware of any material intellectual property theft or forced transfer and believes it has appropriate protections in place, if such action were to
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occur it could materially and adversely affect the Company’s business, results of operations, and financial condition. In addition, the Company has continued to see an increase in patent claims related to connectivity-enabled products where other patent-holding companies are seeking royalties and often enter into litigation based on patent infringement allegations. Significant technological developments by others also could materially and adversely affect the Company’s business, results of operations, and financial condition.

Privacy and security concerns relating to the Company's current or future products and services could damage its reputation and deter current and potential users from using them

The Company may gain access to sensitive, confidential, or personal data or information that is subject to privacy and security laws, regulations, and customer-imposed controls. Concerns about the Company's practices with regard to the collection, use, disclosure, or security of personal information or other privacy related matters, even if unfounded, could damage its reputation and adversely affect its operating results.

Furthermore, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning cybersecurity and data protection. In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe, and elsewhere are often uncertain and in flux. Complying with these various laws could cause the Company to incur substantial costs.

Tax Related Risk Factors

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

Changes in the Company’s debt and capital structure, among other items, may impact its effective tax rate. The Company is in a position whereby losses incurred in certain tax jurisdictions generally provide no current financial statement benefit. In addition, certain jurisdictions have statutory rates greater than or less than the United States statutory rate. As such, changes in the mix and source of earnings between jurisdictions could have a significant impact on the Company’s overall effective tax rate in future periods. Changes in tax law and rates, changes in rules related to accounting for income taxes, or adverse outcomes from tax audits that are regularly in process in any of the jurisdictions in which the Company operates could also have a significant impact on the Company’s overall effective rate in future periods.

The Company may not be able to fully utilize its U.S. net operating losses and other tax attributes

The Company has net operating losses ("NOLs") and other tax attributes which could be limited if there is a subsequent change of ownership. If the Company were to have a change of ownership within the meaning of IRC Sections 382 and 383, its NOLs and other tax attributes could be limited to an amount equal to its market capitalization at the time of the ownership change multiplied by the federal long-term tax exempt rate. The Company cannot provide any assurance that such an ownership change will not occur, in which case the availability of the Company's NOLs and other tax attributes could be significantly limited or possibly eliminated. Certain tax benefit preservation provisions of its corporate documents could delay or prevent a change of control, even if that change would be beneficial to stockholders.

Recent changes in the U.S. federal income tax rules could adversely affect us and our shareholders

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law, making significant changes to the U.S. Internal Revenue Code. Changes included, but were not limited to, a corporate income tax rate decrease, the migration from a worldwide tax system to a territorial tax system with a one-time transition tax on cumulative post-1986 foreign earnings, a modification of the characterization and treatment of certain intercompany transactions, and the creation of a new U.S. corporate minimum tax on certain earnings of foreign subsidiaries. Any future changes in U.S. federal income tax rules could adversely impact Visteon’s financial results.

Market Related Risk Factors

The Company is subject to significant foreign currency risks and foreign exchange exposure

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As a result of Visteon's global presence, a significant portion of the Company's revenues and expenses is denominated in currencies other than the U.S. dollar. The Company is therefore subject to foreign currency risks and foreign exchange exposure. The Company's primary exposures are to the euro, Chinese renminbi, Brazilian real, Indian rupee, and Bulgarian lev. While the Company employs financial instruments to mitigate transactional foreign exchange exposure, including multi-year contracts, exchange rates are difficult to predict and such actions may not completely insulate the Company from those exposures. As a result, volatility in certain exchange rates could adversely impact Visteon financial results and comparability of results from period to period.

General Risk Factors

A disruption in the Company's information technology systems could adversely affect its business and financial performance

The Company relies on the accuracy, capacity, and security of its information technology systems as well as those of its customers, suppliers, partners, and service providers to conduct its business. Despite the security and risk-prevention measures the Company has implemented, the Company's systems could be breached, damaged, or otherwise interrupted by a system failure, cyber-attack, malicious computer software (malware), unauthorized physical or electronic access, or other natural or man-made incidents or disasters. The Company is also susceptible to security breaches that may go undetected. Such a breach or interruption could result in business disruption, theft of the Company intellectual property or trade secrets, and unauthorized access to personnel information. To the extent that business is interrupted or data is lost, destroyed, or inappropriately used or disclosed, such disruptions could adversely affect the Company’s competitive position, relationships with customers, financial condition, operating results, and cash flows.

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

The Company is involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes (including disputes with suppliers), intellectual property matters, personal injury claims, and employment matters. No assurances can be given that such proceedings and claims will not have a material adverse impact on the Company’s profitability and financial position.

Climate change, climate change regulations and greenhouse effects could adversely impact the Company’s operations and markets

Climate change and its association with greenhouse gas emissions is receiving increased attention from the scientific and political communities. The U.S. federal government, certain U.S. states, and certain other countries and regions have adopted or are considering legislation or regulation imposing overall caps or taxes on greenhouse gas emissions from certain sectors including automotive. Failure to comply with any legislation or regulation could potentially result in substantial fines, criminal sanctions, or operational changes. Moreover, even without such legislation or regulation, increased awareness of, or any adverse publicity regarding, the effects of greenhouse gases could harm the Company’s reputation or reduce customer demand for our products and services.

Legislation to address global climate change, including but not limited to CO2 emission restrictions in Europe, may lead to early termination of current production contracts and/or reduced vehicle sales.

Additionally, as severe weather events become increasingly common, operations of the Company, its customers, and/or suppliers may be disrupted, which could result in increased operational costs or reduced demand for products and services. While the Company has invested in administration of programs and physical loss prevention improvements to mitigate the risk of natural disasters causing disruption to its ability to serve its customers and communities in times of need, extended periods of disruptions could have an adverse effect on its results of operations.

The Company’s pension expense and funding levels of pension plans could materially deteriorate or the Company may be unable to generate sufficient excess cash flow to meet increased pension benefit obligations

The Company’s assumptions used to calculate pension obligations as of the annual measurement date directly impact the expense to be recognized in future periods. While the Company’s management believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company’s
15



pension obligations and future expense. For more information on sensitivities to changing assumptions, please see “Critical Accounting Estimates” in Item 7 and Note 12, “Employee Benefit Plans” in Part II, Item 8 of this Form 10-K.

Item 1B.    Unresolved Staff Comments

None

Item 2.    Properties

The Company's principal executive offices are located in Van Buren Township, Michigan. At December 31, 2020, the Company and its consolidated subsidiaries owned or leased approximately:

30 corporate offices, technical and engineering centers and customer service centers in 14 countries around the world, all of which were leased. .
15 Electronics manufacturing and/or assembly facilities in Mexico, Portugal, Russia, Slovakia, Tunisia, India, Japan, China, Thailand, and Brazil, of which 12 were leased and 3 were owned.
In addition, the Company's non-consolidated affiliates operate approximately 6 manufacturing and/or assembly locations, primarily in the Asia Pacific region. The Company considers its facilities to be adequate for its current uses.

Item 3.Legal Proceedings

Certain legal proceedings in which the Company is involved are discussed in Note 19, "Commitments and Contingencies" to the Company's consolidated financial statements included in Part II, Item 8 of this Form 10-K, "Financial Statements and Supplementary Data" and should be considered an integral part of Part I, Item 3, "Legal Proceedings." 

Item 4.Mine Safety Disclosures

None
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Item 4A. Information about Executive Officers and Key Employees
The following table shows information about the executive officers of the Company and other key employees as of February 1, 2021:
NameAgePosition
Sachin S. Lawande53Director, President and Chief Executive Officer
Jerome J. Rouquet53Senior Vice President and Chief Financial Officer
Abigail S. Fleming39Vice President and Chief Accounting Officer
Matthew M. Cole51Senior Vice President, Product Delivery
Jochen Ladwig47Senior Vice President, Global Quality and Procurement
Brett D. Pynnonen52Senior Vice President and General Counsel
Joao Paulo Ribeiro51Senior Vice President, Operations and Supply Chain
Kristin E. Trecker55Senior Vice President and Chief Human Resources Officer
Robert R. Vallance60Senior Vice President, Customer Business Groups

Sachin S. Lawande has been Visteon’s Chief Executive Officer, President and a director of the Company since June 29, 2015. Before joining Visteon, Mr. Lawande served as Executive Vice President and President, Infotainment Division of Harman International Industries, Inc., an automotive supplier, from July 2013 to June 2015. From July 2011 to June 2013, he served as Executive Vice President and President of Harman’s Lifestyle Division, and from July 2010 to June 2011 as Executive Vice President and Co-President, Automotive Division. Prior to that he served as Harman’s Executive Vice President and Chief Technology Officer since February 2009. Mr. Lawande joined Harman International in 2006, following senior roles at QNX Software Systems and 3Com Corporation. He also serves on the board of directors of Cognex Corporation, a leading worldwide provider of machine vision products that are widely used in automotive, consumer electronics, life sciences and logistics industries. Within the last five years, he also served on the board of directors of DXC Technology Company.
Jerome J. Rouquet has been Visteon’s Senior Vice President and Chief Financial Officer since February 2020 (after joining the Company as Senior Vice President, Finance in January 2020). Prior to that, he held leadership roles of increasing responsibility at Federal-Mogul (a global supplier of automotive and industrial products), including Senior Vice President and Chief Financial Officer from January 2016 to September 2018, Chief Accounting Officer and Controller from July 2010 to January 2016, and Finance Director from March 1999 to July 2010. Following the acquisition of Federal-Mogul by Tenneco, Inc., he most recently served as Senior Vice President Finance, Motorparts from October 2018 to December 2019. From 1990 to 1996, Mr. Rouquet served in various roles at Imaje SA, from Logistics Manager to Financial Controller.
Abigail S. Fleming has been Visteon’s Vice President and Chief Accounting Officer since joining the Company in August 2020. Prior to joining Visteon, Ms. Fleming was Executive Director and Assistant Controller of Tenneco Inc. (formerly Federal-Mogul, LLC), an automotive supplier, from March 2017 to August 2020, and Director, Capital Markets and Accounting Advisory Services at PricewaterhouseCoopers LLP from March 2015 to March 2017. Ms. Fleming began her career at PricewaterhouseCoopers in August 2004, and is a certified public accountant.
Matthew M. Cole has been Visteon’s Senior Vice President, Product Delivery since January 2020 and Senior Vice President, Product Development from December 2016 to December 2019. Prior to that, he was Vice President, Product Development upon rejoining the Company in July 2014. From July 2011 to June 2014, he served as Vice President, Engineering at Johnson Controls, Inc., an automotive supplier. From July 2010 to June 2011, he served as Johnson Controls' Vice President, Product Management. Prior to that, he spent 19 years at Ford Motor Company and Visteon in product development, engineering and leadership positions in the U.S. and Asia.
Jochen Ladwig has been Visteon’s Senior Vice President, Global Quality and Procurement since January 2020. Prior to that, he was Vice President, Global Procurement and Supplier Quality since joining the Company in October 2017. From April 2014 to September 2017, he served as Head of Procurement & Supplier Quality Connected Systems, Displays & Digital Content for Daimler AG. Prior to that, he held management positions of increasing responsibility at Daimler AG and DaimlerChrysler in procurement and supplier quality.
Brett D. Pynnonen has been Visteon’s Senior Vice President and General Counsel since December 2016. Prior to that, he was Vice President and General Counsel since joining the Company in March 2016. Before joining Visteon he was Senior Vice President, General Counsel and Corporate Secretary of Federal-Mogul Holdings Corporation, a global automotive supplier,
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from November 2007 to March 2016. Prior to that, he was General Counsel and Secretary of Covansys Corporation, a technology services company, and an attorney at the law firm of Butzel Long.
Joao Paulo Ribeiro has been Visteon’s Senior Vice President, Manufacturing and Supply Chain since March 2020. Prior to that, he was Vice President, Manufacturing Operations since March 2014, and Managing Director, European Operations from October 2010 to March 2014. During his career with Visteon and Ford Motor Company, he has held management positions of increasing responsibility in manufacturing and operations.

Kristin E. Trecker has been Visteon’s Senior Vice President and Chief Human Resources Officer ("CHRO") since joining the Company in May 2018. Before joining Visteon, she served as Executive Vice President and CHRO for Integer Holdings Corp. (formerly Greatbatch, Inc.), a medical device outsource manufacturer, from November 2015 to May 2017, and as Senior Vice President and CHRO of MTS Systems Corp., a global engineering firm, from February 2012 to October 2015. Prior to that Ms. Trecker spent 16 years with Lawson Software, Inc. in roles of increasing responsibility, ranging from Director of Compensation and Benefits to Senior Vice President of Human Resources.

Robert R. Vallance has been Visteon’s Senior Vice President, Customer Business Groups since December 2016. Prior to that, he was Vice President, Customer Business Groups upon rejoining the Company in July 2014. From February 2008 to June 2015, he served as Vice President, Electronics Business Group of Johnson Controls, Inc., an automotive supplier. Prior to that, he spent 23 years at Ford Motor Company and Visteon in product development, program and commercial management, strategy and planning, product marketing and manufacturing.

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Part II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
As of February 11, 2021, the Company had 27,915,661 shares of its common stock, $0.01 par value per share, outstanding, which were owned by 3,384 shareholders of record.
No dividends were paid by the Company on its common stock during the years ended December 31, 2020 and 2019. The Company’s Board evaluates the Company’s dividend policy based on all relevant factors. The Company’s credit agreements limit the amount of cash payments for dividends that may be made. Additionally, the ability of the Company’s subsidiaries to transfer assets is subject to various restrictions, including regulatory requirements and governmental restraints.
No sales of the Company’s common stock were made by or on behalf of the Company or an affiliated purchaser during the fourth quarter of 2020.
The following information in Item 5 is not deemed to be “soliciting material” or be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (“Exchange Act”) or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing.

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Performance Graph
The following graph compares the cumulative total stockholder return from December 31, 2015, through December 31, 2020, for Visteon's existing common stock, the S&P 500 Index and the Dow Jones U.S. Auto Parts Index. The graph below assumes that $100 was invested on December 31, 2015, in each of the Company's common stock, the stocks comprising the S&P 500 Index and the stocks comprising the Dow Jones U.S. Auto Parts Index, and that all that dividends have been reinvested.

vc-20201231_g1.jpg
December 31, 2015December 31, 2016December 31, 2017December 31, 2018December 31, 2019December 31, 2020
Visteon Corporation$100.00$121.14$188.69$90.89$130.56$189.26
Dow Jones U.S. Auto & Parts Index$100.00$99.16$118.75$89.79$108.33$327.60
S&P 500$100.00$109.54$130.81$122.65$158.07$183.77
The above comparisons are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company's common stock or the referenced indices.
Item 6. Selected Financial Data
None
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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations, financial condition, and cash flows of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and related notes appearing in Item 8 of this Form 10-K “Financial Statements and Supplementary Data”.

Executive Summary
Strategic Priorities
Visteon is a global automotive supplier that designs, engineers and manufactures innovative automotive electronics and connected car solutions for the world’s major vehicle manufacturers. The automotive electronics market is expected to grow faster than underlying vehicle production volumes as the vehicle shifts from analog to digital and towards device and cloud connectivity, electric vehicles, and more advanced safety features.
The Company has laid out the following strategic priorities:
Technology Innovation - The Company is an established global leader in cockpit electronics and is positioned to provide solutions as the industry transitions to the next generation automotive cockpit experience. The cockpit is becoming fully digital, connected, automated, learning, and voice enabled. Visteon's broad portfolio of cockpit electronics technology, the industry's first wireless battery management system, and the development of the DriveCore™ advanced safety platform positions Visteon to support these macro trends in the automotive industry.
Long-Term Growth and Margin Expansion - The Company has continued to win business at a rate that exceeds current sales levels by demonstrating product quality, technical and development capability, new product innovation, reliability, timeliness, product design, manufacturing capability, and flexibility, as well as overall customer service.
Enhance Shareholder Returns - The Company has returned approximately $3.3 billion to shareholders since 2015 through a combination of ongoing share repurchases and a onetime $1.75 billion special distribution in 2016.

Financial Results

The pie charts below highlight the sales breakdown for Visteon for the year ended December 31, 2020.

vc-20201231_g2.jpg

*Regional sales are based on the geographic region where sale originates and not where customer is located (excludes inter-regional eliminations).
Global Automotive Market Conditions and Production Levels

During 2020 global light vehicle production decreased 16.2% as compared to 2019 primarily due to closed or significantly reduced production at manufacturing facilities due to COVID-19.

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Light vehicle production levels for 2020 and 2019 by geographic region are provided below:
Light Vehicle Production
(In millions)20202019Change
Global74.588.9(16.2)%
China23.624.7(4.5)%
Other Asia-Pacific17.321.5(19.5)%
Europe16.621.1(21.3)%
Americas15.319.6(21.9)%
Other1.72.0(15.0)%
Source: IHS Automotive, January 2021
The automotive industry was negatively impacted in 2020 by the COVID-19 pandemic, with industry production coming to a stop at most locations at varying times throughout the first half of the year, followed by a faster than anticipated recovery in the second half of the year.

This recovery has led to a worldwide semiconductor supply shortage in early 2021, as semiconductor suppliers have been unable to rapidly reallocate production lines to serve the automotive industry. The magnitude of the impact on the Company's 2021 financial statements and results of operations and cash flows will depend on the semiconductor supply shortage, related plant production schedules and supply chain impacts.

Company Highlights

Visteon proactively implemented actions early in 2020 focused on actively generating cash and aggressively adjusting its cost base. To mitigate the impact caused by the COVID-19 pandemic, Visteon implemented a series of restructuring programs, introduced strict cost controls, reduced discretionary spending, and enacted a temporary salary reduction for all salaried employees. In addition, Visteon implemented a comprehensive set of safety protocols to protect the health and safety of employees and manufactured and donated approximately 50,000 protective face shields to front line workers around the world.
As a result, Adjusted EBITDA (a non-U.S. GAAP financial measure, as defined in Note 20, "Segment Information and Revenue Recognition" to the Company's consolidated financial statements included in Item 8 of this Form 10-K) was $192 million or 7.5% of net sales for the year ended December 31, 2020. As of December 31, 2020, cash, equivalents, and restricted cash was $500 million and debt was $349 million, equating to a net cash position of $151 million.
Visteon also made significant progress towards its long-term strategic priorities of technology innovation, long-term growth, and margin expansion. In 2020, Visteon continued to set the groundwork for sustainable market out-performance driven by new business wins and new product launches. For the full-year, Visteon was awarded $4.6 billion in new business and 55 new product launches, despite the challenges caused by COVID-19.
Visteon also continued to enhance its technology capabilities through its software platform strategy, which creates scalable, cost-efficient, and quick to market products while also introducing innovative new products. In 2020, Visteon introduced the industry’s first wireless battery management system, which replaces wired connections between the subsystems with highly secure and reliable wireless communication technology. This solution supports multiple charging protocols with a safe, modular, and scalable design to meet OEM cost, weight, battery pack configuration, and packaging requirements.


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The Company's consolidated results of operations for the years ended December 31, 2020 and 2019 were as follows:
Year Ended December 31,
(In millions)20202019Change
Net sales$2,548 $2,945 $(397)
Cost of sales(2,303)(2,621)318 
Gross margin245 324 (79)
Selling, general and administrative expenses(193)(221)28 
Restructuring expense, net(76)(4)(72)
Interest expense, net(11)(9)(2)
Equity in net income of non-consolidated affiliates— 
Other income, net10 (1)
Income (loss) before income taxes(20)106 (126)
Provision for income taxes(28)(24)(4)
Net income (loss) from continuing operations(48)82 (130)
Net income (loss) from discontinued operations, net of tax— (1)
Net income (loss)(48)81 (129)
Net (income) loss attributable to non-controlling interests(8)(11)
Net income (loss) attributable to Visteon Corporation$(56)$70 $(126)
Adjusted EBITDA*$192 $234 $(42)
* Adjusted EBITDA is a Non-U.S. GAAP financial measure, as defined in Note 20, "Segment Information and Revenue Recognition" to the Company's consolidated financial statements included in Item 8 of this Form 10-K.

Results of Operations - 2020 Compared with 2019

Net Sales and Cost of Sales
(In millions)Net SalesCost of SalesGross Margin
December 31, 2019$2,945 $(2,621)$324 
Volume, mix, and net new business
(318)128 (190)
Customer pricing, net
(58)— (58)
Currency
(13)(8)
Engineering costs, net— 93 93 
Cost performance, design changes and other
(8)92 84 
December 31, 2020$2,548 $(2,303)$245 

Net sales for the year ended December 31, 2020 totaled $2,548 million, which represents a decrease of $397 million compared with 2019. Unfavorable volumes, primarily due to the impacts of COVID-19, and mix, partially offset by net new business, decreased net sales by $318 million. Customer pricing decreased net sales by $58 million. Unfavorable currency decreased net sales by $13 million, primarily attributable to the euro, Chinese renminbi, Brazilian real and Indian rupee. Other cost performance, primarily related to design changes, reduced sales by $8 million.

Cost of sales decreased $318 million for the year ended December 31, 2020, when compared with 2019. Lower volumes, primarily due to the impacts of COVID-19, partially offset by unfavorable product mix, decreased cost of sales by $128 million. Engineering costs, excluding currency, decreased cost of sales by $93 million. Foreign currency decreased cost of sales by $5 million primarily attributable to the euro, Chinese renminbi, Indian rupee, Brazilian real, and Bulgarian lev. Favorable cost performance including material design, usage, and economics decreased cost of sales by $92 million.

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A summary of net engineering costs is shown below:
Year Ended December 31,
(In millions)20202019
Gross engineering costs$(335)$(440)
Engineering recoveries134 140 
Engineering costs, net$(201)$(300)
Gross engineering includes program development costs and advanced engineering activities, excluding contractually reimbursable engineering costs. Net engineering costs of $201 million for the year ended December 31, 2020, including the impacts of currency, were $99 million lower than 2019, primarily related to short-term and long-term cost reduction initiatives including the benefits of previously announced restructuring actions implemented to optimize the structure while supporting future growth.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses were $193 million, or 7.6% of net sales, and $221 million, or 7.5% of net sales, during the years ended December 31, 2020 and 2019, respectively. The decrease of $28 million is primarily related to temporary salary reductions in 2020, other cost reduction initiatives, and the impacts of previously announced restructuring actions.
Restructuring Expense, Net
Restructuring actions initiated during 2020 include the following:
In January, the Company approved a plan primarily related to European engineering and administrative functions to improve the Company’s efficiency and rationalize its footprint. The Company incurred $26 million of net restructuring expense for cash severance, retention, and termination costs related to this plan.
In March, the Company approved a global restructuring plan impacting engineering, administrative and manufacturing functions to improve the Company’s efficiency and rationalize its footprint. The Company incurred $16 million of net restructuring expense for cash severance, retention, and termination costs related to this plan.
In September, the Company approved a plan to respond to COVID-19 impacts while at the same time improving efficiency and rationalizing the Company’s footprint. The Company has incurred $32 million of net restructuring expense related to this plan.

In December, the Company approved a plan related to engineering, administrative, and manufacturing functions in Asia to improve the Company's efficiency and rationalize its footprints. The Company has incurred $2 million in restructuring costs relation to this plan.
During 2019, the Company recorded approximately $4 million of net restructuring expenses related to end of life of certain products and the optimization of certain operations.

Interest Expense, Net

Net interest expense for the year ended December 31, 2020, was $11 million, representing an increase of $2 million as compared to 2019. The increase is primarily due to the first quarter 2020 borrowing of $400 million under the Company's revolving credit facility. The Company fully repaid the amount borrowed during the third quarter of 2020 following stronger than expected industry recovery and improved Company performance.
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Equity in Net Income of Non-Consolidated Affiliates
Equity in net income of non-consolidated affiliates was $6 million for the years ended December 31, 2020 and 2019.
Other Income, Net
Other income, net consists of the following:
Year Ended December 31,
(In millions)20202019
Pension financing benefits, net$14 $10 
Pension settlement charge(5)— 
$$10 

During 2020, the Company transferred a portion of the benefit obligation related to its defined benefit U.S. pension plan to a third-party issuer. The transaction met the criteria for settlement accounting, and accordingly the Company recognized a $5 million pension settlement charge in the fourth quarter of 2020.

Income Taxes

The Company's provision for income taxes was $28 million for year ended December 31, 2020 and reflects income tax expense related to those countries where the Company is profitable; accrued withholding taxes; ongoing assessments related to the recognition and measurement of uncertain tax benefits; the inability to record a tax benefit for pretax losses (including the U.S.) and/or recognize tax expense for pretax income in certain jurisdictions due to valuation allowances; and other non-recurring tax items.
The Company's provision for income taxes increased $4 million for the year ended December 31, 2020, compared with 2019. The increase in tax expense reflects the reassessment of the 2020 valuation allowances in connection with the realization of deferred tax assets in Germany and Brazil, as well as the non-recurrence of a 2019 discrete income tax valuation allowance release in Germany, resulting in an increase in income tax expense of $19 million. Other changes in the Company’s deferred tax asset valuation allowances did not materially impact net tax expense during the years ended December 31, 2020 or 2019. The increases described above were partially offset by approximately $15 million decrease in income tax expense primarily due to changes in the mix of earnings and differing tax rates between jurisdictions which reflects the overall decrease in earnings in jurisdictions where the Company is profitable and withholding taxes.

Discontinued Operations

During 2019, the Company recorded a $1 million charge for legal expenses related to former employees at a closed plant in Brazil.

Net Income (Loss) Attributable to Visteon

Net loss attributable to Visteon was $56 million for the year ended December 31, 2020, compared to net income of $70 million for 2019. The decrease of $126 million is related to a decrease in gross margin of $79 million, higher restructuring expense of $72 million, and higher provision for income taxes of $4 million. These decreases were partially offset by lower selling, general and administrative expense of $28 million, and lower other income, net of $1 million.
Adjusted EBITDA
Adjusted EBITDA was $192 million for the year ended December 31, 2020, representing a decrease of $42 million when compared with Adjusted EBITDA of $234 million for 2019. Unfavorable volumes, primarily due to the impacts of COVID-19, and mix reduced Adjusted EBITDA by $190 million. Foreign currency decreased Adjusted EBITDA by $7 million, primarily attributable to the euro, Chinese renminbi, Brazilian real and Japanese yen, partially offset by the Mexican peso and Bulgarian lev. Lower net engineering costs, excluding currency, increased Adjusted EBITDA by $93 million. Favorable cost performance of $128 million, including material, design, and usage economics, lower manufacturing costs, lower selling and general and administrative expenses more than offset annual customer pricing of $58 million.
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The reconciliation of Adjusted EBITDA to net income attributable to Visteon for the years ended December 31, 2020 and 2019 is as follows:
Year Ended December 31,
(In millions)20202019Change
Net income (loss) attributable to Visteon Corporation$(56)$70 $(126)
  Depreciation and amortization104 100 
  Restructuring expense, net76 72 
  Provision for income taxes28 24 
  Non-cash, stock-based compensation expense18 17 
  Interest expense, net11 
  Net (income) loss attributable to non-controlling interests11 (3)
  Net income (loss) from discontinued operations, net of tax— (1)
  Equity in net income of non-consolidated affiliates(6)(6)— 
  Other, net
Adjusted EBITDA$192 $234 $(42)

The Company's consolidated results of operations for the years ended December 31, 2019 and 2018 were as follows:
Year Ended December 31,
(In millions)20192018Change
Net sales$2,945 $2,984 $(39)
Cost of sales(2,621)(2,573)(48)
Gross margin324 411 (87)
Selling, general and administrative expenses(221)(193)(28)
Restructuring expense, net(4)(29)25 
Interest expense, net(9)(7)(2)
Equity in net income of non-consolidated affiliates13 (7)
Other income, net10 21 (11)
Income (loss) before income taxes106 216 (110)
Provision for income taxes(24)(43)19 
Net income (loss) from continuing operations82 173 (91)
Net (income) loss from discontinued operations, net of tax(1)(2)
Net income (loss)81 174 (93)
Net income attributable to non-controlling interests(11)(10)(1)
Net income (loss) attributable to Visteon Corporation$70 $164 $(94)
Adjusted EBITDA*$234 $330 $(96)
* Adjusted EBITDA is a Non-U.S. GAAP financial measure, as defined in Note 20, "Segment Information and Revenue Recognition" to the Company's consolidated financial statements included in Item 8 of this Form 10-K.
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Results of Operations - 2019 Compared with 2018

Net Sales and Cost of Sales
(In millions)Net SalesCost of SalesGross Margin
December 31, 2018$2,984 $(2,573)$411 
Volume, mix, and net new business
22 (91)(69)
Currency(59)47 (12)
VFAE consolidation38 (32)
Customer pricing and other
(71)— (71)
Engineering cost, net
— (21)(21)
Cost performance
31 49 80 
December 31, 2019$2,945 $(2,621)$324 

Net sales for the year ended December 31, 2019 totaled $2,945 million, which represents a decrease of $39 million compared with 2018. Unfavorable currency decreased net sales by $59 million, primarily attributable to the euro, Chinese renminbi, Brazilian real and Indian rupee. Net new business, partially offset by unfavorable volumes and mix, increased net sales by $22 million. Mix reflects the Company-specific content across programs. The consolidation of a previously non-consolidated affiliate, Changchun Visteon FAWAY Auto Electronics Co., Ltd, ("VFAE"), during the third quarter 2018 increased net sales $38 million. Other reductions, primarily associated with customer pricing, decreased net sales by $71 million. Design changes and other revenue claims increased net sales by $31 million.

Cost of sales increased $48 million for the year ended December 31, 2019, when compared with 2018. Net new business and mix, partially offset by unfavorable volumes, increased cost of sales by $91 million. Foreign currency decreased cost of sales by $47 million primarily attributable to the euro, Chinese renminbi, Indian rupee, Brazilian real, and Bulgarian lev. Engineering costs, excluding currency and the consolidation of VFAE, increased cost of sales by $21 million. Favorable cost performance including material, design and usage economics, decreased cost of sales by $49 million in 2019. The consolidation of VFAE during 2018 increased cost of sales $32 million.

A summary of net engineering costs is shown below:
Year Ended December 31,
(In millions)20192018
Gross engineering costs$(440)$(431)
Engineering recoveries140 145 
Engineering costs, net$(300)$(286)
Gross engineering includes program development costs and advanced engineering activities, excluding contractually reimbursable engineering costs. Net engineering costs, of $300 million for the year ended December 31, 2019, including the impacts of currency and the consolidation of VFAE, were $14 million higher than 2018, primarily related to costs to support the Company's new business wins.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses were $221 million, or 7.5% of net sales, and $193 million, or 6.5% of net sales, during the years ended December 31, 2019 and 2018, respectively. The increase of $28 million is related to higher stock compensation expense due to the 2018 resolution of a legal matter as further described in Note 19, "Commitments and Contingencies," to the Company's consolidated financial statements included in Item 8 of this Form 10-K, along with higher incentive compensation costs, bad debt expense, personnel costs, and the consolidation of VFAE, partially offset by favorable currency.
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Restructuring Expense, Net
During the first quarter of 2019, the Company approved a restructuring program impacting two European manufacturing facilities due to the end of life of certain product lines. During the year ended December 31, 2019, the Company recorded net restructuring expense of $2 million related to this program.
During the third quarter of 2018, the Company approved a restructuring program impacting engineering and administrative functions to optimize operations. During the years ended December 31, 2019 and December 31, 2018, the Company recorded net restructuring expense of $1 million and $19 million related to this program.
During the second quarter of 2018, the Company approved a restructuring program impacting legacy employees at a South America facility and employees at North America manufacturing facilities due to the wind-down of certain products. During, the years ended December 31, 2019 and December 31, 2018, the Company recorded net restructuring expense of $1 million and $5 million related to this plan.
During 2016, the Company approved a restructuring program impacting engineering and administrative functions to further align the Company's footprint with its core product technologies and customers. During the year ended December 31, 2018, the Company recorded net restructuring expense of $5 million related to this program.
During the year ended December 31, 2018, the Company recorded approximately $1 million associated with a former European Interiors facility related to settlement of employee severance litigation.
Interest Expense, Net

Net interest expense for the year ended December 31, 2019, was $9 million, representing an increase of $2 million when compared to 2018. The increase is primarily due to lower interest income on short-term investments.

Equity in Net Income of Non-Consolidated Affiliates

Equity in net income of non-consolidated affiliates was $6 million and $13 million for the years ended December 31, 2019 and 2018, respectively. The decrease in income is primarily attributable to the Company's equity interest in Yanfeng Visteon Investment Company due to decreases in engineering services, and to the elimination of equity income due to the consolidation of VFAE in the third quarter of 2018.

Other Income, Net
Other income, net consists of the following:
Year Ended December 31,
(In millions)20192018
Pension financing benefits, net$10 $13 
Transformation initiatives— 
Gain on non-consolidated affiliate transactions, net— 
$10 $21 

Transformation initiatives during the year ended December 31, 2018 include a $4 million benefit related to the resolution of a legal matter as further described in Note 19, "Commitments and Contingencies" to the Company's consolidated financial statements included in Item 8 of this Form 10-K.

On September 1, 2018, Visteon acquired an additional 1% ownership interest in VFAE, a former non-consolidated affiliate, resulting in a total 51% controlling interest and a non-cash gain of $4 million as further described in Note 2, "Discontinued Operations" to the Company's consolidated financial statements included in Item 8 of this Form 10-K.

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Income Taxes
The Company's provision for income taxes was $24 million for year ended December 31, 2019 and reflects income tax expense related to those countries where the Company is profitable; accrued withholding taxes; ongoing assessments related to the recognition and measurement of uncertain tax benefits; the inability to record a tax benefit for pretax losses and/or recognize tax expense for pretax income in certain jurisdictions (including the U.S.) due to valuation allowances; and other non-recurring tax items.

The Company's provision for income taxes decreased $19 million for the year ended December 31, 2019, compared with 2018. The decrease in tax expense includes approximately $15 million primarily attributable to the overall decrease in year-over-year earnings, including changes in the mix of earnings and differing tax rates between jurisdictions, and withholding taxes. During the first quarter of 2019, the closure of tax audits in Germany allowed the Company to initiate a tax planning strategy previously determined not to be prudent. This strategy provided the necessary positive evidence to support the future utilization of a portion of the Company's deferred tax assets in Germany resulting in a $12 million income tax benefit recognized in 2019.

Other changes in the Company’s deferred tax asset valuation allowances did not materially impact net tax expense during the years ended December 31, 2019 or 2018. These decreases in the tax provision were partially offset by the $8 million increase in tax expense related to uncertain tax positions, primarily attributable by the non-recurrence of a $6 million income tax benefit in connection with uncertain tax positions related to goodwill tax amortization at an affiliate in Asia, and $2 million income tax expense primarily related to certain transfer pricing positions taken between affiliates in Europe and the U.S.

Discontinued Operations
During 2019, the Company recorded a $1 million charge for legal expenses related to former employees at a closed plant in Brazil.

During the first quarter of 2018, the Company recognized a $3 million benefit related to the resolution of a legal matter as further described in Note 19, "Commitments and Contingencies" in the Company's consolidated financial statements included in Item 8 of this Form 10-K. During 2018 the Company recorded a $4 million charge for legal expenses related to former employees at a closed plant in Brazil.

The Company recorded a $4 million income tax benefit during 2018 related to uncertain tax positions in connection with the Climate transaction, resulting from statute expiration.

Net Income
Net income attributable to Visteon was $70 million for the year ended December 31, 2019, compared to net income of $164 million for 2018. The decrease of $94 million includes a decrease in gross margin of $87 million, higher selling, general and administrative expense of $28 million, lower other income, net of $11 million, and lower equity in net income of non-consolidated affiliates of $7 million. These decreases were partially offset by lower restructuring expense of $25 million, and lower provision for income taxes of $19 million.
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Adjusted EBITDA
Adjusted EBITDA was $234 million for the year ended December 31, 2019, representing a decrease of $96 million when compared with Adjusted EBITDA of $330 million for 2018. Unfavorable volumes and mix reduced Adjusted EBITDA by $69 million. Foreign currency decreased Adjusted EBITDA by $7 million, attributable to the euro, Chinese renminbi, Brazilian real and Japanese yen, partially offset by the Mexican peso and Bulgarian lev. Higher net engineering costs, excluding currency and the consolidation of VFAE, decreased Adjusted EBITDA by $21 million. Adjusted EBITDA was negatively impacted by annual customer pricing of $71 million, which was partially offset by favorable cost performance of $68 million. The consolidation of VFAE, during the third quarter of 2018, increased Adjusted EBITDA by $4 million.

The reconciliation of Adjusted EBITDA to net income attributable to Visteon for the years ended December 31, 2019 and 2018 is as follows:
Year Ended December 31,
(In millions)20192018Change
Net income (loss) attributable to Visteon Corporation$70 $164 $(94)
  Depreciation and amortization100 91 
  Restructuring expense, net29 (25)
  Interest expense, net
  Equity in net income of non-consolidated affiliates(6)(13)
  Provision for income taxes24 43 (19)
  Net (income) loss from discontinued operations, net of tax(1)
  Net income attributable to non-controlling interests11 10 
  Non-cash, stock-based compensation expense17 
  Other, net(8)12 
Adjusted EBITDA$234 $330 $(96)

Liquidity
Overview
The Company's primary sources of liquidity are cash flows from operations, existing cash balances, and borrowings under available credit facilities. As we continue to confront the many challenges caused by the impact of COVID-19, including governmental actions to mitigate the pandemic and supply chain disruptions, the Company believes that funds from these sources will be sufficient to sustain ongoing operations and support investment in differentiating technologies. The Company will continue to closely monitor and preserve its available liquidity and maintain access to additional liquidity to as needed. The Company's intra-year needs are normally impacted by seasonal effects in the industry, such as mid-year shutdowns, the ramp-up of new model production, and year-end shutdowns at key customers.

A substantial portion of the Company's cash flows from operations are generated by operations located outside of the United States. Accordingly, the Company utilizes a combination of cash repatriation strategies, including dividends and distributions, royalties, and other intercompany arrangements to provide the funds necessary to meet obligations globally. The Company’s ability to access funds from its subsidiaries is subject to, among other things, customary regulatory and statutory requirements and contractual arrangements including joint venture agreements and local credit facilities. Moreover, repatriation efforts may be modified by the Company according to prevailing circumstances.
On March 19, 2020, the Company borrowed the entire $400 million amount available under the revolving credit facility. On September 24, 2020, the Company fully repaid the amount borrowed under the Revolving Credit Facility following stronger than expected industry recovery and improved Company performance in the third quarter of 2020.

Access to additional capital through the debt or equity markets is influenced by the Company's credit ratings. As of December 31, 2020, the Company’s corporate credit rating is Ba3 and BB- by Moody’s and Standard & Poor’s, respectively. See Note 11, "Debt" in the Company's consolidated financial statements included in Item 8 of this Form 10-K for a comprehensive discussion of the Company's debt facilities. Incremental funding requirements of the Company's consolidated foreign entities are primarily accommodated by intercompany cash pooling structures. Affiliate working capital lines, which are
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utilized by the Company's consolidated joint ventures, had availability of $182 million and the Company had $400 of available credit under the revolving credit facility, as of December 31, 2020.

Cash Balances
As of December 31, 2020, the Company had total cash of $500 million, including $4 million of restricted cash. Cash balances totaling $406 million were located in jurisdictions outside of the United States, of which approximately $190 million is considered permanently reinvested for funding ongoing operations outside of the U.S. If such permanently reinvested funds were repatriated to the U.S., no U.S. federal taxes would be imposed on the distribution of such foreign earnings due to U.S. tax reform enacted in December 2017, but the Company would be required to accrue additional tax expense, primarily related to foreign withholding taxes.
Other Items Affecting Liquidity
During the year ended December 31, 2020, cash contributions to the Company's U.S. defined benefit pension plans were $18 million and cash contributions of $6 million related to its non-U.S. employee retirement plans. Contributions related to certain non-U.S. plans of approximately $2 million have been deferred until 2024 due to COVID-19 relief measures. Additionally, the Company expects to make contributions to its U.S. defined benefit pension plans of $17 million and non-US defined benefit pension plans of $7 million during 2021. The Company’s expected 2021 contributions may be revised.

During the year ended December 31, 2020, the Company paid $32 million related to restructuring activities. Additional discussion regarding the Company's restructuring activities is provided in Note 4, "Restructuring Activities" in the Company's consolidated financial statements included in Item 8 of this Form 10-K.

The Company has committed to make a $15 million investment in two entities principally focused on the automotive sector pursuant to limited partnership agreements. As of December 31, 2020, the Company has contributed $5 million toward the aggregate investment commitments. As a limited partner in each entity, the Company will periodically make capital contributions toward this total commitment amount.

Purchase Obligations

As of December 31, 2020, the Company has contractual purchase obligations of approximately $75 million through 2023.

Cash Flows

Operating Activities

Notwithstanding the significant actions implemented by the Company to substantially mitigate the impacts of the COVID-19 pandemic, the Company generated $168 million of cash from operating activities during the year ended December 31, 2020, as compared to $183 million during 2019 representing a $15 million decrease.

Lower cash flow from operating activities was primarily due to lower net income of $129 million. Favorable changes in accounts receivable, partially attributable to $40 million of higher than anticipated customer receipts during the final month of 2020, were more than offset by unfavorable changes in inventory and accounts payable balances resulting in lower trade working capital of $17 million in 2020 as compared to 2019. These unfavorable impacts were partially offset by lower cash tax payments, higher net recoveries of reimbursable taxes and higher net proceeds received from customers to fund the Company's pre-production design, engineering and tooling costs necessary to support current and future programs.
The Company generated $183 million of cash from operating activities during the year ended December 31, 2019, as compared to $204 million during 2018, representing a $21 million decrease in cash provided from operations. The decrease in operating cash flows is due to lower net income of $93 million, partially offset by higher depreciation, increased stock based compensation expense, lower equity income of non-consolidated affiliates, net of dividends and other non-cash adjustments totaling $38 million. In addition, improved trade working capital performance of $27 million and favorable changes of other assets and other liabilities of $7 million further reduced the impact of lower net income on net cash from operating activities during the year ended December 31, 2019.
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Investing Activities

Net cash used by investing activities during the year ended December 31, 2020 totaled $98 million, as compared to $128 million in 2019, representing a decrease of $30 million. Net cash used by investing activities during the year ended December 31, 2020 is primarily attributable to capital expenditures of $104 million to support new business, offset by proceeds from net investment hedging transactions and loan repayments received from a non-consolidated affiliate.

Net cash used by investing activities during the year ended December 31, 2019 totaled $128 million, as compared to $98 million in 2018, representing an increase in cash used by investing activities of $30 million. Net cash used by investing activities during the year ended December 31, 2019 is primarily attributable to capital expenditures of $142 million, partially offset by net loan repayment proceeds received from non-consolidated affiliates of $11 million. Net cash used by investing activities during year ended December 31, 2018, included capital expenditures of $127, partially offset by cash acquired from the consolidation of VFAE of $16 million and $13 million of other net proceeds primarily attributable to the settlement of certain agreements related to the Interiors Divestiture.
Financing Activities
Net cash used by financing activities during the year ended December 31, 2020, totaled $58 million as compared to $49 million for 2019, representing an increase of $9 million, primarily attributable to an increase in short-term debt repayment partially offset by a decrease of common stock repurchases.

Net cash used by financing activities during the year ended December 31, 2019, totaled $49 million, compared to $335 million for 2018, representing a decrease in net cash used by financing activities of $286 million. Lower net cash used by financing activities during the year ended December 31, 2019 as compared to 2018 is primarily attributable to lower share repurchase transactions of $280 million. Activity during 2018 also includes dividends paid to non-controlling interests of $28 million, distribution payments of $14 million and proceeds from an increase in short-term debt of $12 million.

Debt and Capital Structure
See "Liquidity" above and also see Note 11, "Debt" and Note 15, "Stockholders' Equity and Non-controlling Interests" to the Company's consolidated financial statements included in Item 8 of this Form 10-K for further information.

Fair Value Measurements
See Note 17, "Fair Value Measurements" to the Company's consolidated financial statements included in Item 8 of this Form 10-K for additional information.
Critical Accounting Estimates
The Company’s significant accounting policies have been disclosed in the consolidated financial statements and accompanying notes under Note 1, “Summary of Significant Accounting Policies” to the Company's consolidated financial statements included in Item 8 of this Form 10-K for further information. Certain policies relate to estimates that involve matters that are highly uncertain at the time the accounting estimate is made and different estimates or changes to an estimate could have a material impact on the reported financial position, changes in financial condition or results of operations. Such critical estimates are discussed below. For these, materially different amounts could be reported under varied conditions and assumption. Other items in the Company's consolidated financial statements require estimation, however, in our judgment, they are not as critical as those discussed below.
Revenue Recognition

Revenue is measured based on the transaction price and the quantity of parts specified in a contract with a customer. Discrete price adjustments may occur during the vehicle production period in order for the Company to remain competitive with market prices or based on changes in product specifications. Some of these price adjustments are non-routine in nature and require estimation. In the event the Company concludes that a portion of the revenue for a given part may vary from the purchase order, the Company records consideration at the most likely amount to which the Company expects to be entitled based on historical experience and input from customer negotiations. See Note 1, "Summary of Significant Accounting Policies” in the Company's consolidated financial statements included in Item 8 of this Form 10-K for additional information.

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Product Warranty and Recall
The Company accrues for warranty obligations for products sold based on management estimates, with support from the Company’s sales, engineering, quality, and legal functions, of the amount that eventually will be required to settle such obligations. This accrual is based on several factors including contractual arrangements, past experience, current claims, production changes, industry developments, and various other considerations. The Company accrues for product recall claims related to potential financial participation in customer actions to provide remedies as a result of actual or threatened regulatory or court actions or the Company’s determination of the potential for such actions. The Company's accrual for recall claims is based on specific facts and circumstances underlying individual claims with support from the Company’s engineering, quality, and legal functions. Amounts accrued are based upon management’s best estimate of the amount that will ultimately be required to settle such claims. See Note 19, "Commitments and Contingencies" in the Company's consolidated financial statements included in Item 8 of this Form 10-K for additional information.
Restructuring
The Company accrues costs in connection with its restructuring of the engineering, administration organization and manufacturing. These accruals include estimates primarily related to employee headcount, local statutory benefits, and other employee termination costs. Actual costs may vary from these estimates. These accruals are reviewed on a quarterly basis and changes to restructuring actions are appropriately recognized when identified. See Note 4, “Restructuring Activities” in the Company's consolidated financial statements included in Item 8 of this Form 10-K for additional information.
Pension Plans
Certain Company employees participate in defined benefit pension plans or retirement/termination indemnity plans. The Company has approximately $304 million in unfunded net pension liabilities as of December 31, 2020, of which approximately $232 million and $72 million are attributable to U.S. and non-U.S. pension plans, respectively. The determination of the Company’s obligations and expense for its pension plans is dependent on assumptions set by the Company used by actuaries in calculating such amounts. Assumptions are described in Note 12, “Employee Benefit Plans” to the Company’s consolidated financial statements included in Item 8 of this Form 10-K, which are incorporated herein by reference, including the discount rate, expected long-term rate of return on plan assets, and rate of increase in compensation.
Actual results that differ from assumptions used are accumulated and amortized over future periods and, accordingly, generally affect recognized expense in future periods. Therefore, assumptions used to calculate benefit obligations as of the annual measurement date directly impact the expense to be recognized in future periods. The primary assumptions affecting the Company’s accounting for employee benefits, as of December 31, 2020, are as follows:
Expected long-term rate of return on plan assets: The expected long-term rate of return is used to calculate net periodic pension cost. The required use of the expected long-term rate of return on plan assets may result in recognized returns that are greater or less than the actual returns on those plan assets in any given year. Over time the expected long-term rate of return on plan assets is designed to approximate actual returns. The expected long-term rate of return for pension assets has been estimated based on various inputs, including historical returns for the different asset classes held by the Company’s trusts and its asset allocation, as well as inputs from internal and external sources regarding expected capital market returns, inflation, and other variables.
In determining its pension expense for 2020, the Company used long-term rates of return on plan assets. For U.S. plans, the Company used an expected rate of return of 6.6%. For non-U.S. plans, the Company used expected rates of return ranging from 2.0% to 7.25%. The Company has set the long-term rates of return assumptions for its 2021 pension expense which range from 2.0% to 7.0% outside the U.S. and 6.15% in the U.S. Actual returns on U.S. pension assets for 2020, 2019 and 2018 were 15.0%, 19.9% and (4.5%), respectively.
Discount rate: The Company uses the spot rate method to estimate the service and interest components of net periodic benefit cost for pension benefits for its U.S. and certain non-U.S. plans. The Company has elected to utilize an approach that discounts individual expected cash flows underlying interest and service costs using the applicable spot rates derived from the yield curve used to determine the benefit obligation to the relevant projected cash flows. The discount rate assumption is based on market rates for a hypothetical portfolio of high-quality corporate bonds rated Aa or better with maturities closely matched to the timing of projected benefit payments for each plan at its annual measurement date. The Company used discount rates ranging from 0.8% to 8.75% to determine its pension and other benefit obligations as of December 31, 2020, including weighted average discount rates of 2.60% for U.S. pension plans and 1.78% for non-U.S. pension plan.
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While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company’s pension benefit obligations and its future expense. The following table illustrates the sensitivity to a change in certain assumptions for Company sponsored U.S. and non-U.S. pension plans on its 2020 funded status and 2021 pretax pension expense.
Impact on U.S. 2021 Pretax Pension ExpenseImpact on
U.S. Plan 2020
Funded Status
Impact on Non-U.S. 2021 Pretax Pension ExpenseImpact on
Non-U.S. Plan 2020
 Funded Status
25 basis point decrease in discount rate (a)(b)
Less than -$1 million-$29 millionLess than -$1 million-$16 million
25 basis point increase in discount rate (a)(b)
Less than +$1 million+$28 millionLess than +$1 million+$15 million
25 basis point decrease in expected return on assets (a)
+$1.6 millionLess than +$1 million
25 basis point increase in expected return on assets (a)
-$1.6 million
Less than -$1 million
(a) Assumes all other assumptions are held constant.
(b) Excludes impact of assets used to hedge discount rate volatility.

Income Taxes
The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Significant judgment is required in determining the Company’s worldwide provision for income taxes, deferred tax assets and liabilities, and valuation allowances recorded against the Company’s net deferred tax assets. Deferred tax assets and liabilities are recorded for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable inco