Automotive seating, electrical and electronics specialist Lear Corporation has posted a 5% drop in sales and a 61% fall in pretax income for the second quarter of 2008 and has revised its full year outlook downwards.
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Net sales of $4.0bn and pretax income of $55.8m, including restructuring costs of $58.3m, compared with net sales of $4.2bn and pretax income of $143.9m, including restructuring costs of $34.8m and other special items of $3.4m, a year ago.
Net income was $18.3m, or $0.23 per share compared with $123.6m, or $1.58 per share in 2007.
Core operating earnings were $163.8m versus $229.3m in Q2, 2007.
“Business conditions in North America were very difficult in the second quarter, primarily due to sharply lower industry production, a significant mix shift away from full-size pickups and large SUVs and higher raw material and energy prices,” said chairman, chief executive officer and president Bob Rossiter.
He said the supplier had focused on further diversifying sales, implementing structural cost reductions, investing in growth opportunities and managing liquidity.
“We have a clear operating plan and committed liquidity to manage through the challenging business conditions we see ahead,” Rossiter added.
Lear said the decline in net sales reflected a 15% fall in industry production in North America, including the impact of the American Axle strike, though this was offset partially by favourable foreign exchange.
Seating sales were down due lower industry production and unfavourable platform mix in North America, though, again, there were foreign exchange gains.
Operating margins declined, reflecting the impact of lower production in North America, offset partly by improved operating performance. In the electrical and electronic segment, net sales increased slightly, helped by favourable exchange and new business, partially offset by lower industry production in North America. Operating margins improved.
Lear said it had won about $600m of net new business globally in the first half of the year, further diversifying sales.
It has reduced its 2008 net sales forecast to $15.0bn from $15.3bn previously due to lower forecast industry production in North America.
Core operating earnings of $550 to $600m are seen down from the previous outlook of $600 to $640m, also reflecting lower industry production in North America.
Restructuring costs in 2008 are estimated to increase to approximately $140m, reflecting further capacity actions and staff reductions.
Pretax income before restructuring costs and other special items is estimated to be in the range of $325 to $375m.
Lear now expects 2008 industry vehicle production in North America of approximately 13.5m units compared with about 13.8m units in previous guidance and says the Detroit Three’s output will be down about 15% from 2007.
It expects European industry production of around 20.3m units.
