Lear Corporation has today announced plans to implement a global restructuring plan to address what it terms ‘unfavourable automotive industry conditions and position Lear for improved long-term competitiveness and profitability’.
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The initial phase of restructuring activity will affect five facilities in North America and Europe, as well as certain administrative functions. These actions are the initial phase of a more comprehensive restructuring strategy intended to better align Lear’s manufacturing capacity with the changing needs of its customers; eliminate excess capacity and lower operating costs; and streamline Lear’s organizational structure, the company says.
The restructuring will primarily consist of facility consolidations and closures, including the movement of certain manufacturing operations to lower-cost countries, and census reductions.
In connection with the restructuring, Lear expects to incur pre-tax costs of up to $250 million. Such costs will include asset impairment charges and employee severance, as well as other incremental costs resulting from the Company’s restructuring activities. The severance and other costs generally represent cash charges, while the asset impairment charges are non-cash. Lear estimates that approximately 80% of the restructuring costs will result in future cash expenditures, although the overall restructuring plan has not been finalised.
Commenting on the restructuring, Bob Rossiter, chairman and chief executive officer of Lear stated, “We are implementing this restructuring plan to improve our overall competitive position in light of extremely challenging industry conditions. While the actions we are taking are difficult, these steps are consistent with our strategy to deliver superior long-term value to our customers and shareholders.”
The company estimates that pre-tax costs of approximately $30 million will be incurred in the second quarter of 2005 in connection with the restructuring, although the actual second quarter impact will depend on the timing of certain actions. The company currently estimates that a substantial portion of the remaining costs will be incurred in the second half of 2005. In addition, the company anticipates recording an additional non-cash charge of approximately $17 million in the second quarter of 2005 relating to the impairment of an equity investment in a non-core business that the company has decided to divest.
