Fitch Ratings Downgrades Visteon to 'BB+'; Placed on Rating Watch Negative.

CHICAGO -- Fitch Ratings has downgraded Visteon Corporation's (NYSE:VC) senior unsecured debt to 'BB+' from 'BBB-' and has withdrawn the 'F3' short-term rating. Additionally, Fitch has placed VC on Rating Watch Negative with the expectation that this watch will be resolved by further disclosure of company plans on how management intends to address existing issues such as capacity, cost structure, and business concentration with Ford.

Fitch's expectation had been that with improvements associated with last year's commercial agreements with Ford, the sale of the Chesterfield facility, growth in non-Ford business, and with ongoing cost cutting that VC would post a substantial improvement in net income and would generate free-cash. With the recent announcement of weakened second half fiscal performance, VC's ability to remain on track to post substantially improved 2004 and 2005 financial figures has weakened. Although at least a portion of this weakness can be attributed to Ford's change in strategy (focusing on margin rather than absolute volume), it also highlights the sensitivity of VC's financial performance to Ford's production levels.

Going forward, Fitch expects to see a resolution to the Rating Watch Negative status by the end of this calendar year. The outcome will be principally dependent upon the actions taken by VC, Ford, and the United Auto Workers (UAW) to address VC's non-competitive operations. Given that much of the problem lies within VC's Ford business, additional emphasis will be focused on VC's ongoing relationship with Ford such as changes to pricing terms, liability absorption, other means of financial support, and VC's success in winning non-Ford business. Consideration will also be given to the impact of likely restructuring on VC's balance sheet, which to date has remained relatively strong despite several years of underperformance. These impacts could include substantial cash outflows associated with potential labor restructuring as well mostly non-cash charges associated with plant closures and/or asset sales. Finally, expectations are that substantial restructuring will take place at VC and the timeframe and level of support from Ford will be major factors in determining whether the outlook reverts to stable or whether further rating action will be warranted.

VC, with $1 billion of cash and marketable securities on-hand and unused credit facility capacity of over $1.3 billion (both as of June 30, 2004) has sufficient liquidity to address this announced shortfall while having a cushion to address potential future restructuring.