Southfield, MI, April 12, 2006--Lear Corp., said it would consider an outright sale of its struggling North American interiors business, and offered details of its 2006 outlook and restructuring plans.
However, chief operating officer Doug DelGrosso said Lear plans to proceed with a joint venture on automotive interiors with billionaire financier Wilbur Ross if it can execute a plan to shift most European interiors business into the venture.
Lear has agreed to combine nine European facilities in the Ross joint venture, the International Automotive Components Group. The businesses 2005 revenue was about $750 million, or one-quarter of Lear's $3.1 billion overall interiors revenue.
"Assuming we are successful there, we will apply the same strategy to the North American side of our business," DelGrosso said at a Morgan Stanley auto conference that was a web cast.
The IAC group, which has acquired the European interiors business of Collins & Aikman Corp., is also seeking the bankrupt supplier's North American units. Lear and Ross said acquiring Collins & Aikman's assets was a key part of the plan when they announced the venture last fall.
Lear has only about 4 percent of the still fragmented global interiors market and believes combining its interiors businesses with Collins & Aikman's has better long-term potential than selling the units.
The joint venture would increase the capacity of the businesses, establish normal pricing, help to recover resin cost increases, and provide new and increased service in North America and Europe, Lear chief executive Robert Rossiter said.
"As a stand-alone company it can be a very successful business," Rossiter said.
Lear reported 2005 revenue of about $17.1 billion, with $11 billion from seating and another $3 billion from electrical and electronics systems.
Most U.S. auto parts suppliers are restructuring in or out of court after suffering to varying degrees after North American market share losses by General Motors Corp.. and Ford Motor Co., and rising raw materials costs.
Southfield, Michigan-based Lear forecast sales would rise 3.5 percent in 2006 to $17.7 billion. Analysts on average expect about $17.8 billion, according to Reuters Estimates.
The company said it expected core operating earnings to increase to between $400 million and $440 million in 2006 from $325 million in 2005. It sees income before special items, including impairment and restructuring charges, rising to a range of $120 million to $160 million, from $97 million.
Lear's outlook was "modestly ahead" of market expectations on operating profit and in line on pretax income, J.P. Morgan analyst Himanshu Patel said.
"The market is likely to be reassured that management is now putting firmer parameters around 2006 performance," Patel said, but Lear's ability to offset commodity costs remains a concern, particularly in its North American interiors unit.
