Visteon Corporation
Q1 2019 Earnings Call Transcript

Published: 25 Apr 2019

[Kris Doyle:]

Good morning. I'm Kris Doyle, Director of Investor Relations for Visteon. Welcome to our Earnings Call for the First Quarter of 2019. Please note this call is being recorded and all lines have been placed on listen-only mode to prevent background noise. Before we begin this morning's call, I'd like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled Forward-Looking Information for further details. Presentation materials for today's call were posted on the Investors section of Visteon's website this morning. Please visit investors.visteon.com to download the material if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer; and Christian Garcia, Executive Vice President and Chief Financial Officer. We have scheduled the call for one hour, and we'll open the lines for your questions after Sachin's and Christian's remarks. Please limit your questions to one question and one follow-up. Again, thank you for joining us. Now I'll turn the call over to Sachin.

[Sachin Lawande:]

Thank you, Kris, and good morning everyone. I will start by providing an overview of our first quarter results on Page 2. On subsequent pages, I will discuss our key achievements in the quarter and provide our perspective on the outlook for vehicle production for the remainder of 2019. Christian will then take you through our financial results in more detail. Vehicle sales and production were down globally in the first quarter. Visteon’s first quarter sales were $737 million in line with our expectations and below last year by $77 million. Adjusted EBITDA was $41 million or 5.6% of sales. Adjusted free cash flow was negative $30 million for the quarter. Our profitability was impacted by three specific items that I'll mention briefly here and provide more details in the later pages. First, we experienced multiple issues in the industrialization and launch of a new curved display module. Second, we incurred higher than expected costs in the transfer of our manufacturing plant in Reynosa, Mexico to new facilities. And the third item is the higher engineering costs in the quarter, which are largely due to timing of engineering recoveries that are more backend loaded this year. I will discuss these items and the timing of the resolution in a couple of pages. New business wins continued to be strong with $1.4 billion in lifetime sales awarded to Visteon in the quarter. In a first for Visteon, we were selected by a U.S. automaker provide a battery management system for the next generation of electric vehicles, but optimistic that this product category will become more significant going forward. We also expanded our business into commercial truck segment, but winning a digital cluster program with the European commercial truck manufacturer, a second customer in this segment of the market. The automotive market in China was very soft in the first quarter down 13% year-over-year. Visteon, however, was able to outperform the market with sales of $108 million and organic growth of 11 percentage points above the market. It kind of remains a bright spot for the company. And with 28 new product launches in the past 12 months, we expect to see similar performance going forward. Our balance sheet remains strong with cash of $435 million and debt of $404 million and we have remaining authorization for share repurchase of $400 million. Looking ahead to the rest of the year, we expect OEM production volumes in North America to stabilize while Europe will continue to face headwinds due to new emissions testing requirements that go into effect in the third quarter and the continuing decline in demand for diesel powered vehicles. In China, we expect OEM production volumes will improve on the year-over-year basis with the full year decline in the low single-digit percentage. While the first quarter performance in terms of profitability is a disappointment on account of the operational challenges, it does not change our view of the fundamentals of the business. Based on the continued strength of our new business wins, our confidence in achieving the long-term good targets remains unchanged. Turning to Page 3, Visteon had sales of $737 million for the first quarter, down 9% year-over-year. This decline is mainly due to the drop in vehicle production at Visteon customers and the impact of pricing and currency. Pricing was in line with historical trends at about 2% while the impact of currency was about 3% mainly driven by the euro and the Chinese RMB. In terms of a year-over-year comparison, the first quarter was further impacted by the exit from sedans in North America by Ford in Q2 of last year and the loss of infotainment business at Mazda, which we have discussed previously. The decline was partially offset by the positive contribution of 50 new product launches over the past 12 months, of which nine occurred in the first quarter. Key product launches include an 8-inch infotainment system with CM in China for the new high volume vehicle. This system offers an 8-inch display with embedded navigation and online services. In Europe, we launched a 7-inch all-digital cluster on PSA’s upscale brand, the DS. And in India, we launched a SmartCore system with dual 10.25-inch displays on the Harrier SUV from Tata Motors, our first SmartCore system in the fast growing market. Turning to Page 4, on this page I'll provide more details on the operational challenges in engineering costs that impacted us in the first quarter. The cumulative impact of these special items was $27 million on our margins in the first quarter. As shown at the top of this page, we were impacted by two operational items. Challenges with the launch of a central information display for our European OEM and the higher than expected costs associated with the transfer of a Reynosa manufacturing plant to a new facility combined these two items at an impact of approximately $10 million. The center information display module includes several features that were relatively new to Visteon and to the industry. Two features in particular, proximity sensing using infrared sensors and curved glass cover lens posed several challenges during design and development and later during the manufacturing ramp up of the system. Additionally, the supplier of the glass cover lens was slow to achieve the level of production throughput required to support customer demand. These steps of challenges are not uncommon in the launch of new products, especially when the incorporate new technologies and capabilities. However, the lack of experience at Visteon in this specific display technologies and manufacturing processes led to delays and addressing the issues in a timely manner. We incurred increased costs due to higher inbound and outbound freight, scrap and engineering and manufacturing overhead to address these issues. The current status is that the design issues with the center information display have been addressed. We have established a task force to work on manufacturing throughput at our plant and they're making steady progress in improving the yield and they’re working with the glass supplier to improve the product quality and throughput. We expect to be able to resolve the throughput issues and reduce the higher freight and other costs associated with this product by the end of the third quarter. We realized that large and curved displays will be an important part of cockpit electronics going forward. To address the evolving and increasingly complex display technologies, they're forming a new team to be based in Asia. We have already hired a leader from the display industry and expect to have the core team up and running by the end of this year. I'm confident that we will be able to design and manufacture large curved displays in the future without experiencing the kind of challenges we faced with this program. The second issue we faced in operations in the quarter had to do with the relocation of our plant in Reynosa, Mexico to new state-of-the-art facility. The transfer was not managed efficiently and resulted in additional cost for about $3 million. There were two main drivers of these inefficiencies

[Christian Garcia:]

Thank you, Sachin, and good morning everyone. On Page 11, we present our key financial results for the first quarter of 2019 versus the comparable period in 2018. Sales of $737 million in the first quarter decreased $77 million, or 9%, compared to last year as new product launches partially offset the impact of lower production volumes, currency and pricing. Excluding the impact of currency, sales would have been down by approximately 6%. Adjusted EBITDA was $41 million representing a decrease of $63 million from 2018. Besides the impact of lower revenues, we experienced unfavorable mix, higher engineering expense and operational challenges discussed earlier. Adjusted free cash flow was negative $30 million in 2019, which was lower than last year, primarily related to lower adjusted EBITDA in a lower contribution from trade working capital. I will provide more detail on the following pages. Slide 12 walks our adjusted EBITDA performance year-over-year. Adjusted EBITDA was negatively impacted by lower production volumes and unfavorable mix away from older, but higher margin product, which has been offset by efficiencies. Annul price reductions lowered sales by $19 million, or 2.3%, which is at the lower end of our historical rate of between 2% to 3% while unfavorable currency impacted adjusted EBITDA by $9 million. Higher engineering expense as a result of timing and the operational challenges we faced in the first quarter combined to reduce adjusted EBITDA by $27 million. As expected Visteon’s net engineering expense increased $17 million representing a 25% year-over-year increase. Our net engineering expenses comprised of two components

[Operator:]

[Operator Instructions] Your first question comes from Itay Michaeli from Citi.

[Sachin Lawande:]

Hello, Itay.

[Operator:]

Your line is open.

[Itay Michaeli:]

Hi. Hi, good morning everybody. Just the first question…

[Sachin Lawande:]

Good morning.

[Itay Michaeli:]

Good morning. Just the first question just on the guidance, the cadence you just mentioned was helpful. Can you just talk about the level of confidence a bit more in the second half of the year, I guess to the implied margins there? And to what extent some of the engineering timing recovery is contingent upon a customer pricing and where are we in terms of those discussions and the level of conference around that?

[Sachin Lawande:]

Right. So, as I pointed out, the walk that we are doing is that our margins are flat in the second quarter. 2019 will look like a mirror image of 2018. And the reason for that is again the cadence of our product launches that we're seeing as well as, as you've pointed out, our recoveries being backend loaded, okay. In terms of the recoveries, when you look at our recoveries, they’re very, very program specific really has nothing to do with the pricing around that. Those are – have already been set when we go into or get awarded at the new business wins. And therefore, based on the visibility that we have – it’s – we're projecting that it is going to be much more weighted towards Q4 than we've seen in the past.

[Itay Michaeli:]

Got it. Are those recoveries contractual or were there engineering changes that you have to sort of go and renegotiate with your customers?

[Sachin Lawande:]

Yeah, they're actually both. When you think about recoveries, there are really two types or three types of recoveries that we have. One is contractual – contractually with our OEM customers and they are paid us, engineering costs are incurred, the second are milestone based. So we perform or develop the program throughout the year, get the recoveries towards the end of the year when we hit milestones. And third, as you pointed out, are based on change requests.

[Itay Michaeli:]

That's helpful. And then just two quick follow-up questions. The first more broadly as we think about some of the challenges in Q1, how you're thinking about longer term margins relative to the prior communication. And secondly, just on the new business wins in Q1, just how did that track relative to your internal expectations both including the BMS program as well as excluding it?

[Sachin Lawande:]

Right. So let me tackle the first question that you have as how do we feel about the target of 14% as we said in the beginning of the year. If you recall, when we discussed the target margin of 14% for 2023 at the beginning of the year, if you look at the incrementals at that time, we were expecting incrementals or the implied incrementals for that projection was about 20% to 21%. Given our updated guidance to be able to reach 14%, we now need to have an implied incrementals of somewhere in the 23% to 24%, which is higher than we would like. There's absolutely no question about that. So if you apply the 21% incremental margins to the incremental revenues we expect then that that 14% is now 13.3%. So we haven't given up on the 14%, but we have to think about how we bridge that gap.

[Christian Garcia:]

And regarding the new business win, Itay, in terms of just the demand and the customer activity in terms of new programs, we continue to see very strong demand. The pipeline looks very good. And we have been focusing especially on electric vehicles as a lot of the investment in new platforms and new vehicles are going in electric vehicles. So our content for electric vehicles and as a percent of our new business wins has continued to increase a third, almost a third of our wins in the first quarter were for EVs. And the margin profiles are consistent with the main business and our historical margins, so I do not see any change there. Now, specifically with respect to the battery management system, this is the first program that we have won for battery management system. So we will incur a higher level of engineering costs as we establish our capabilities in this area. Now, we fully expect that we will be able to leverage this across additional customers. What's interesting about this win in this particular case is it's a fairly large win. The content is quite significant. As I described in my prepared remarks, there are the cell monitoring units and a vehicle interface controller that make up the battery management system and they are anywhere between 8 to 16 cell monitoring units in a battery pack. So the content of electronics is high. This is why we like that business and also the technology in it is evolving. It's moving away from wired cell monitoring units to wireless. And this is where we believe we can bring our core capabilities to bear on this product line.

[Itay Michaeli:]

That's very helpful. I thank you for that color.

[Operator:]

Your next question comes from David Liker of Baird.

[David Liker:]

All right, good morning.

[Sachin Lawande:]

Morning, David.

[David Liker:]

I want to follow-up on a couple of things there with Itay, particularly on this 2023 target. And if you look at the issues you're talking about today, the engineering costs timing recovery not changed for the full year, the plant costs and the launch costs, those are kind of – no, I don't want to say that one-time items, but there are issues that impact today that's theoretically have no impact on where the profitability is in 2023. So given those are more kind of one-off type issues and not structural issues. Why would that change the 2023 opportunity for you?

[Sachin Lawande:]

You're absolutely right David, but we are just bridging the updated guidance to the 14% – to the 14%. And right now, we haven't given up on the 14%. So we always look at it. We look at what – the changes that we are seeing in terms of the environment as well as the program wins that we have. But at this point in time, we have not different from the 14% target.

[David Liker:]

Okay. And I just want one clarification as it relates to again something Itay was talking about on change requests. I mean these are issues that historically have come and go. As a supplier base, we had a pretty significant issue a year ago where the supply was still struggling with those and their ability to be able to recover on those engineering changes. Why is – and I'm sure you're somewhat familiar with that. Why is that you're dealing was different than what they are?

[Sachin Lawande:]

Yeah. So, David, in terms of change request make one thing very clear. When we engage in change request, we do not start the work until first the commercial agreements are completed. We do not lift the pan until that is done. So that's very important and a departure from some of the practices I've seen that industry do where the change requests are negotiated either into the work being done or in many cases after. So the discipline that we put in place here is that the change requests are only engaged upon if there is agreement on the commercials. By the way, our OEM customers actually like that because they don't want disputes on commercials late in the game where it's very difficult to really understand what was contractually agreed upon and not. Now, this is something that I put in place here at learning from our past experiences, but we do not have that issue here.

[David Liker:]

And then just one thing that closed the loop on all of these. If we look at the guidance for the full year, have you not been dealing with the timing on the engineer side and the plant location and the launch cost issues. What's your guess on what that guidance change – would have been for the full year, have you not experienced those exogenous items?

[Christian Garcia:]

Right, right. The – certainly in terms of the engineering, we have not changed our guidance of a mid single-digit increase. The reason why there is some timing again is because of when we actually realized the benefits of the restructuring as well as the timing of the recovery, so we just very much weighted towards the latter part of the year. So our guidance has no impact – our engineering expense has no impact on our change in guidance.

[David Liker:]

Okay. And what about the other two items, if those not happened? I know it sounds like you're in a position that your guidance wouldn’t have changed. Is that correct?

[Christian Garcia:]

Yes. So there are really three things that changed our guidance. One is the operational challenges that we talked about, right. So it's just we still have about $15 million to $16 million. Our currency is about $5 million, right, of that. And the remaining as we – what we talked about this in my prepared remarks is unfavorable mix. And so we – when you think about unfavorable mix, there's always some margin difference between older programs and newer programs. This difference has come in the form of higher costs associated with launching; learning curves and then margins improve over time because of efficiencies. We'll try to cover this increased cost through supplier negotiations. Now going forward, we could see that price negotiations from suppliers could be somewhat constrained by lower industry volumes compounded by favorable environment in the broader market and example of that would be capacitors, which is just be one example. We go after this supplier savings, but felt it is appropriate to adjust our guidance at this point for this. This represents a little less than half a point. So those are the three things that that walk us through the new guidance.

[David Liker:]

All right, thank you for the time.

[Sachin Lawande:]

Thanks, David.

[Operator:]

Your next question comes from Ryan Brinkman of JPMorgan.

[Ryan Brinkman:]

Hi, thanks for taking my question. Can you talk some more about how unique maybe the launch costs were relative to, say, the curved display nature of the product? Given that you have a lot of other launches coming in the next couple of years, can you talk about what proportion of those that are curved display? How you feel you are prepared for those launches? What if they pose the same level of engineering challenges you saw this quarter, et cetera?

[Sachin Lawande:]

Yeah, yeah, I would be happy to. And I think it would be I think useful to provide a little more insight into what exactly the issues were. So when you have a curved glass cover lens that glass cover lens is built that way through hot forming. And typically what happens when you curve using a hot forming process, the knee or the bend there can generate certain issues, which results in a lower yield. So this is a new capability that the industry is developing especially for larger displays. As an industry, we have not had to deal with how to industrialize this type of a product in high volume up till now. Now this is very important as how do we go forward from here and on account of where we see the interest from the industry go towards. This is clearly an area where we need to go and develop very good capabilities in. Now on account of this being the first program, we faced challenges in the industrialization by that I mean the ramp up of the manufacturing of this product and the supplier had similar issues in terms of getting the yield high enough. We are working through these issues. We are making good progress. I would say we are, from a supplier viewpoint, at a yield of about 50% to 55%. 70% is considered where we would say we are where we would need to be. So we are getting very close. And we expect to be there between the second and the third quarter. Now to answer your question, how many other wins we have in this category and what do we see coming on into our pipeline. So we have two additional programs that use curved displays, out of the one that or launches after this is in 2020 and the second one launches in 2022. So you can see from that, that we have some time to be able to fix the issues, develop the process and manufacturing capabilities so as not to get into similar issues going forward. But we do expect that this would be one of our core capabilities and potentially a differentiator are being one of the early ones to adopt and to be able to drive high volume in this class of products.

[Ryan Brinkman:]

That’s very helpful. Thank you. And then did I hear Christian say that the inefficiencies were expected to be $5 million in 2Q and 3Q, that's related to this particular product? Have you already started to see a step-down thus far in calendar 2Q?

[Christian Garcia:]

That is correct, Ryan. So the – we had the $10 million. The $5 million is largely really primarily the launch costs – the launch challenges that we were referring to.

[Sachin Lawande:]

And most of that is primarily freight – premium freight.

[Ryan Brinkman:]

Great, thank you.

[Operator:]

Your next question comes from Brian Johnson of Barclays.

[Jason Stuhldreher:]

Hi. This is Jason Stuhldreher on for Brian. Just a few quick questions. Firstly, on Mexico, can you give us a sense for what led to the decision to relocate from Reynosa? And I guess, specifically, we've heard of higher labor costs and strikes in Mexico. How big of a risk is that for you? If you could just talk about what you’re seeing there? It would be helpful.

[Sachin Lawande:]

Sure, sure. So we have two plants in Mexico. This plant that we are talking about is in Reynosa. It's our small plant of the two. And the lease at this plant was expiring. This was a plant that we acquired through an acquisition. And we decided to go to a new facility essentially in the same industrial park but to a new facility because the older facility did not have the capabilities from a clean room viewpoint to meet the requirements of these new electronic products manufacturing, especially ISO 7 and higher. So we decided to move into a state-of-the-art manufacturing facility, which, again, is something we have done in the past. Two years ago, we relocated our other plant in Mexico into a brand-new facility and we did that flawlessly. So this is not something that we do not understand how to do. Unfortunately, in this case, as I mentioned in my earlier remarks, this was clearly a case of, I would say, lack of good plant management and that caused us some issues with respect to materials management. So we ran into shortages of certain parts as well as a higher level of labor and overhead. What that meant was that we had to again incur premium freight to make up for the parts that were short in inventory and incur higher labor costs to be able to provide enough product to the customers. Now where we stand today with respect to that is we have replaced the management team. So it's a new management team in charge. We have cleaned up all of the inventory issues. We do not see any premium freight now. So we are back to normal freight. And the lobar and overhead, we are addressing as we speak and we should be all done in the next week or two with respect to that. So this would be definitely behind us by the time we are done with this quarter. With respect to the – sorry, with respect to the other topic you mentioned, which is the labor unrest, et cetera, we do not see anything that is out of the ordinary and the wage increases I think that you mentioned as well, we have a negotiated rate with the unions. Things are calm and we do not see any real impact to our operations.

[Jason Stuhldreher:]

Okay, that’s very helpful. And then just secondly, a little more on the engineering line item. Could you give us a sense for the cadence of just the gross engineering spend through the rest of 2019? So I understand Q2 is going to be a little higher. And I would expect there'd be some puts and takes between savings in Europe and then new hiring for the new launches. But can you give us a sense for just the gross engineering spend? I think it would help us understand the risk to credits in 2019.

[Christian Garcia:]

So right, so let me go ahead and do both. As you pointed out, there are really two components of our engineering cost. Gross engineering, as you mentioned, and then recoveries and both have their own vagaries. If you look at the first quarter, gross engineering costs were down by about 11% sequentially. The reason for this is due to decline of non-personnel expenses, which is – which are costs associated with our outside technology suppliers. Some of those are OEM directed. Now as I mentioned, we expect the gross engineering to be up by mid-single digits in the second quarter. And then, the way we are projecting it, it's pretty much – it flattens out for the rest of the year as we see the benefits of our restructuring efforts. On the other hand, you look at recoveries, they were $23 million for the first quarter that was compared to $60 million in the fourth quarter and that’s actually normal seasonality. For the second quarter, we expect recoveries to be pretty much steady from the first quarter levels and then start to increase in Q4 and then really spike up in – I'm sorry, start to increase in Q3 and then really spike up in Q4, which is much like what we have seen in the past. So combining both of these components, gross engineering and recoveries, our net engineering expense should grow by mid-single digits in the second quarter. It starts to fall in the second half, which is consistent with previous years. The only difference this year is that we see a more pronounced weighting of the recoveries in the fourth quarter than we have seen in the past. Again, it has nothing to do with anything else, but just how the cadence of our programs are. So in total, we expect net engineering expense to be up in the mid-single digits for the year which is quite consistent with our guidance at the beginning of the year.

[Jason Stuhldreher:]

Okay, thank you very much.

[Operator:]

Your next question comes from Joseph Spak of RBC Capital Markets.

[Joseph Spak:]

Thank everyone. So – thanks for all the color on the puts and takes to the EBITDA, but – I guess I'm still having a little bit of trouble understanding the magnitude of the decline because of the $63 million decline you identified, $27 million of it. But then you still have a $36 million decline on $77 million in sales. And I think that Delta is – it seems like to be historically, you've recovered more or you had sort of more offsets to the pricing impact. Did something change this quarter where we you aren't able to offset some of those price downs?

[Christian Garcia:]

Right. So as we talked about unfavorable mix we are seeing in the first quarter, but we've actually helped offset that with efficiencies. The bigger issue as you pointed out is engineering is up by $17 million, right? There is a currency exchange issue, maybe that's not quite clear, of about $9 million. And then the operational challenges of $10 million. Pricing, as we pointed out, impacted us close to $20 million. It's about 2% of last year's level.

[Joseph Spak:]

Right. I guess historically, it seems like you have been able to sort of maybe offset more of the price downs. It just seems like even if you sort of back away the $27 million of more one-time items, the incremental seem a little bit steeper than we would have expected. So that's what I'm trying to get at.

[Sachin Lawande:]

Yes. And I think one thing that we should also mention is when you look at it from a year-over-year comparison, we had, for example, some products, especially with the sedans with Ford that are no longer part of our volume this year as well as the Mazda business that we talked about in the previous call, which is starting to decline. So these two products made up a fair amount and they had a higher margin higher margin profile than the products that are replacing those volumes. So that explains the difference too.

[Joseph Spak:]

Okay, thanks. And then just maybe you could sort of update us – I think you didn't buyback any stock this quarter. If you could update us on the plans or the go forward there, especially vis-à-vis the lower free cash flow guide?

[Christian Garcia:]

Right, right, so as we pointed out, we still are in a net cash position. And with an uncertain market, a lot of companies, including us, either would actually buyback stock because of undervaluation of the stock price or they would fortify the balance sheet, right, and keep the cash. We are in the position because of our strong capital structure that we can do both. Where we would be in that continuum will be really dependent on the visibility of the markets we serve. The first sign of what we have seen so far is that historically, that we would see a softer Q2 compared to Q1. And right now, we are feeling like it's flattened, which is very atypical of the issues that we have seen in the past. So it actually bodes well for the rest of the year. And therefore, gives us a little bit more confidence around the market environment. So at this point, I'm not going to telegraph my actions, but we'll be – we'll certainly be announcing what we have implemented.

[Joseph Spak:]

Okay, thank you.

[Operator:]

Your next question comes from Anthony Deem of Longbow.

[Anthony Deem:]

Hi, good morning. Thanks for taking my questions. So a few here. I appreciate the contribution margin comments around the 2023 guide. I'm wondering if there's opportunity to bridge the gap in 2020, maybe when these headwinds reverse or do you now see the 2020 revenue coming on less profitably versus your expectation back in January, maybe we model the contribution margin next year in line with the prior kind of low 20% guidance?

[Christian Garcia:]

Yeah, so in terms of 2020, we actually look at the cadence of our program launches and we feel very comfortable with the top line in the 2020. We, I think, provided guidance of about $3.3 billion to $3.4 billion of – I am sorry $3.4 billion to $3.5 billion. And therefore, we are on track with that. Now given the launch issues – launch challenges that we have as well as the plant inefficiencies associated with the plant transfer, we feel like there is a very good possibility that we could see a double-digit margin back to where we should be by 2020. So just to clarify my comments, the guidance is $3.3 billion to $3.4 billion for 2020.

[Anthony Deem:]

Okay, very good thank you. And then I am just curious how long did it take to accumulate this $10 million operational headwinds in the first quarter? It seems like these challenges likely arose late February and in March. So I'm just kind of wondering about the timing of this.

[Sachin Lawande:]

Yeah, these – both of these issues were specific to the quarter and these are the things that we have been working on right from the beginning of the quarter in terms of the ramp-up of the center information display, the bigger challenge that we mentioned. And the other issue with respect to the plant transfer, the plant transfer issues that I mentioned had their roots in the mismanagement of the materials and the inventory issues that we faced. So I would say that they were slowly building up throughout the quarter. We acted very quickly as soon as we got wind of the situation. And it was a tremendous amount of effort on part of the team to address the issues and frankly, bring them under control. Where we stand today, as I mentioned earlier, we are at the tail end of cleaning up most of these issues. So we feel pretty good about where we're at and that these things will be pretty clean by the time we are through with the end of the third quarter.

[Anthony Deem:]

Thank you very much.

[Kris Doyle:]

This concludes our earnings call for the first quarter of 2019. Thank you, everyone, for participating in today's call and your ongoing interest in Visteon. If you have any follow-up questions, please contact me directly. Thank you.

[Operator:]

This concludes Visteon's first quarter 2019 earnings call. You may now disconnect.