Lear’s sales hit by decline in auto production

Worldwide
Published:  24 July, 2019
Range Rover with Lear's leather seats

The U.S. headquartered automotive seating and parts manufacturer has revised its full year 2019 financial outlook and reported preliminary second quarter 2019 results.

Lear said it expects second quarter sales to be approximately US$5 billion, 10% lower compared with the same period in 2018 (down 7% excluding the impact of foreign exchange and acquisitions), and core operating earnings to be approximately 7% of sales. Adjusted margins in Lear's Seating and E-Systems segments are expected to be approximately 8.2% and 8% (including the impact of the Xevo acquisition), respectively. The Seating division is reported to have performed well in the quarter against a challenging macroeconomic backdrop, with second quarter margins expected to exceed first quarter margins.

According to Lear, its financial results in the first half of 2019 were negatively impacted by continued declines in industry production volumes and other macroeconomic headwinds, including continued weakening of global currencies against the U.S. dollar. "Previously, we indicated that we anticipated an increase in industry production volumes in the second half of the year and an associated improvement in sales and earnings. We now believe general macroeconomic and industry factors will continue to put pressure on sales and earnings throughout the remainder of 2019", said Ray Scott, President and CEO, Lear, adding that the Company has already undertaken significant restructuring actions and is currently developing a comprehensive operational and organisational plan designed to further reduce costs and improve profitability. “We intend to increase our 2019 restructuring program to US$200 million. The additional US$60 million in restructuring cost is intended to reduce capacity, improve our manufacturing footprint and organisational efficiency, and position our business for continued success in the future”, said Scott.

At the midpoint of Lear's current 2019 outlook, sales are expected total US$20.1 billion, down 5% from 2018. Excluding the impact of foreign exchange and acquisitions, sales are expected to be down 2% year-on-year, reflecting lower production on key Lear platforms, partially offset by the addition of new business. Core operating earnings at the midpoint of Lear's current 2019 outlook are expected to be approximately 7% of sales compared with 8.3% of sales in 2018, and adjusted margins in the Seating segment are expected to be approximately 8%.

Eagle Ottawa by Lear is the leather manufacturing arm of the company and is part of Lear’s seating business.

Mercedes Benz AMG E53 leather seats by Lear