Lear Corporation, a supplier of automotive seating systems, electrical distribution systems and electronics products, has announced cost reductions which it hopes will improve its operating profit by US$150m over the next year.
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“In light of current market conditions, the company is implementing comprehensive actions to further reduce structural costs and improve operating results,” Lear said in a statement on Wednesday. It said it would give more details with a results announcement on 30 October.
Plans incldue reducing programme development costs, consistent with a significantly lower production outlook; acceleration of low-cost engineering and sourcing initiatives; more targeted investments in growth initiatives, focused on high priority programmes; further reductions in procurement, manufacturing, engineering and logistics costs to reflect present business conditions; further job cuts, temporary layoffs and additional “thrifting of personnel-related costs”; rescheduling and selective reductions in restructuring spending; aggressive working capital management and capital spending efficiencies; and supply base consolidation “and other commercial actions”.
“We have been very aggressive in reducing our costs as industry production has declined, and we intend to remain well ahead of the curve,” said Bob Rossiter, Lear’s chairman, CEO and president.
“We have faced challenging conditions before, and each time we have emerged as an even stronger company. I fully expect [we will] overcome the present challenges as an even more formidable competitor.”
Rossiter added: “Management’s strategy is to take all actions necessary to withstand the current industry downturn, maintain our focus on strategic priorities and position [Lear] for success when industry conditions improve.
“Longer term, we see global growth in automotive demand, with mature markets expected to recover in 2010 and emerging markets continuing to expand. With our global capabilities, low-cost footprint, superior quality and leading technologies, we are well positioned for success in the future.”
Lear also announced it had drawn $400m under its revolving credit facility to protect against possible short-term disruptions in the credit markets.
“The profit improvement plan outlined is designed to restore [Lear] to a level of profitability necessary to preserve our financial flexibility going forward,” said chief financial officer Matt Simoncini.
“Given the recent volatility in the financial markets, we believe it is also prudent to temporarily increase our cash on hand by borrowing under our revolving credit facility.”
At the end of the third quarter Lear had in excess of $500m in cash. After this revolver borrowing, it will have more than $800m still available under its revolving credit facility and continues to expect positive free cash flow for 2008.
