Lear (LEA) Wolfe Research Virtual Autos Summit summary

Business performance and growth

• Strong operational execution in both Seating and E-Systems, with early-year performance tracking well against plans.

• Recent wins include a mid-cycle modular Seating award for GM and validation of a Ford modular system, supporting growth in thermal comfort systems.

• Targeting thermal comfort systems revenue to grow from $630 million to $1 billion, with a $3 billion Seating conquest opportunity backlog.

• E-Systems growth supported by new battery disconnect unit awards and a simplified product portfolio, with significant quoting activity in early 2024.

• Investments in automation and vertical integration, including recent acquisitions, are expected to drive $150 million in annualized benefits by next year.

Financial outlook and margin expansion

• Q1 sales and operating income are in line with guidance, with revenue near $5.5 billion and operating margins in the low 4% range.

• Europe and Asia production slightly stronger than expected, North America slightly weaker; modest benefit from a weaker US dollar.

• Positive net performance in both segments, with a goal to exit the year at 5%+ operating margins.

• Continued share buybacks, with $17 million repurchased so far in Q1 and a target of $25 million for the quarter.

Tariff exposure and mitigation strategies

• Imports from Mexico to the US are $2.8 billion, mostly USMCA-qualified, minimizing direct tariff risk under current rules.

• Active engagement with customers to recover any tariff costs, as margins do not allow for absorption of such costs.

• Ongoing efforts to qualify components, source alternatives, and shift production, with a target to move 60% of E-Systems wiring out of Mexico.

• Exploring US assembly for modular components and accelerating moves for labor-intensive products to mitigate tariff impacts.