SOUTHFIELD, Mich. — In light of current market conditions, Lear Corp. announced it is implementing a number of actions to further reduce structural costs and improve operating results.
Actions in the plan include reducing program development costs consistent with the significantly lower production outlook; acceleration of low-cost engineering and sourcing initiatives; more targeted investments in growth initiatives focused on high-priority programs; and further reductions in procurement, manufacturing, engineering and logistics costs to reflect present business conditions.
The company said it also plans to cut more staff including, temporary layoffs and additional “thrifting” of personnel-related costs.
"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 chairman, chief executive officer and president. "We have faced challenging conditions before, and each time we have emerged as an even stronger company. I fully expect the company to overcome the present challenges as an even more formidable competitor."
Rossiter continued, "Management’s strategy is to take all actions necessary to withstand the current industry downturn, maintain our focus on strategic priorities and position the company 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."
In addition, the company announced that it has drawn $400 million under its revolving credit facility to protect against possible short-term disruptions in the credit markets.
"The profit improvement plan outlined in this release is designed to restore the company to a level of profitability necessary to preserve our financial flexibility going forward," said Matt Simoncini, Lear senior vice president and chief financial officer. He added that this profit improvement plan is designed to restore the company to a level of profitability necessary to preserve its financial flexibility going forward. "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," said Simoncini.
At the end of the third quarter Lear had in excess of $500 million in cash. After this revolver borrowing, the company will have more than $800 million in availability remaining under its revolving credit facility and continues to expect positive free cash flow for 2008.
Additional details of the $150 million operating improvement plan will be provided as part of the company’s third quarter earnings conference call on October 30th.
