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  • 1. R R UBS Paris Auto Show Investor Conference 2004 September 23, 2004 world’s leading automotive interior supplier fast forward advance relentlessly 1 1
  • 2. R Agenda Industry Trends and Lear’s Strategic Evolution Jim Vandenberghe, Vice Chairman International Update Don Stebbins, President & COO – International Financial Update Dave Wajsgras, SVP and CFO Q&A 2 2
  • 3. R Industry Trends 3 3
  • 4. R Industry Trends Consumers demanding more interior features Automakers focused on world-class interiors and “Perceptual Quality” Industry progressing toward total interior integration Automotive interiors are the fastest growing segment of the auto industry 4 4
  • 5. R Top 10 Vehicle Features for Commuters 1. Comfortable seats 2. Automatic transmission 3. Good visibility 4. In-dash CD changer or satellite radio 5. Steering wheel-mounted stereo controls 6. Controlled noise, vibration and handling 7. Good fuel economy 8. Well-designed cup holders and ample storage 9. Two power points and a hands-free voice activated phone system 10. Reasonably compact external size Lear Offers Solutions to Six of Edmunds.com’s Top Ten Features for Commuters 5 Source: List issued in a press release from Edmunds.com on August 11, 2004. 5
  • 6. R Priority Emphasis on the Interior “(In the) Interior is where you spend all of your time. It makes total sense to me to want to get it right.” J Mays, Ford “Interiors are an area of huge focus for General Motors.” Bob Lutz, GM “For us, the interior has always been a priority of design.” Helmut Panke, BMW 6 6
  • 7. R New Emphasis on the Interior in Advertising Volvo XC90 VW Multivan Reconfigurable Seating 7 Nissan Quest 7
  • 8. R Automotive Industry Moving to Integrated Systems Increasing Supplier Responsibility Dec., 2002 - - Integrated First Total Interior System Design Integrator Program & Development Awarded to Lear Co-located ND Design E TR RY Mfg. T US Feasibility D IN Build to Print Increasing Systems Complexity Component System System Sub Sub Assembly System Integration 8 8
  • 9. R Global Growth of Vehicle Sub-Elements 26% Average Annual Growth 2004 - 2009 9% 6% 5% Powertrain Electrical Chassis Interior Interiors are the Fastest Growing Segment 9 Source: 2004 CSM Worldwide, Study 9
  • 10. R Estimated Size of Total Interior Market* (Global) Global Market (billions) $145 $25 $90 $30 $30 $25 Electrical Distribution $20 Interiors $30 $90 $90 $90 Seats $40 Add Cockpits Current Global Add Add and Cockpits** Market Electronics Electronics A Broader Focus on Cockpits and Electronics Significantly Expands Lear’s Potential Market*** * Based on internal Lear estimates. ** Excludes IP substrate and cockpit electronics, which are included in current global market. 10 10 *** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  • 11. R Strategic Evolution 11 11
  • 12. R Strategic Evolution Profitably Grow the Business Going Forward Operational Excellence; 1999-2003 Reduce Debt Seat Systems to 1994-1999 Total Interior Capability Seat Components 1990-1994 to Seat Systems 12 12
  • 13. R Lear’s Strategy has Supported Rapid Growth Net Sales (billions) ome $15.7 t I nc % $16.0 $14.4 Ne $14.1 $13.6 23 AGR $14.0 SALES $12.4 C CAGR $12.0 20% $9.1 $10.0 $7.3 $8.0 $6.2 $4.7 $6.0 $3.1 $4.0 $2.0 $0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Net sales have steadily No strategic hole in Lear’s increased since IPO to about product line up $15.7 billion in 2003 Lear ranks 129 among the 17 major acquisitions during Fortune 500 and is the 23rd the 1990’s fastest growing company in the 60% acquisition growth U.S. over the last ten years 40% organic growth 13 13
  • 14. At the Same Time, R We have Diversified Our Product Mix… 1994 Present* Seats and Seating Seating Systems Components 68% 100% Interior Systems Electronics * Based on 2003 financials. 18% 14% 14 14
  • 15. R Diversified Our Geographic Mix… Present* 1994 Europe Europe 36% 17% Rest of World North America North America 5% 59% 83% * Based on 2003 financials. 15 15
  • 16. R And Diversified Our Customer Mix Present* 1994 Extended Ford & GM - Classic Ford & GM Opel, Saab, Volvo, 47% Jaguar and Land Rover Classic Ford & GM 12% 75% DaimlerChrysler BMW All Other Fiat VW All Other 25% PSA GP Asian Renault / Nissan * Based on 2003 financials. 16 16
  • 17. Going Forward, We have a Focused R Strategy to Grow Our Business Worldwide* Aggressively expand our presence in Asia and with Asian OEMs Improve our globally business structure and grow our market Leverage our share in Europe leadership position in total interiors in North America Profitably Grow and Diversify Our Business Worldwide 17 17 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  • 18. In North America, R We Plan to Leverage Our Leadership Position in Total Interiors North America Quality and customer satisfaction continues to improve Ranked #1, #2 or #3 in seats, electrical distribution systems, headliners, door panels and flooring & acoustics* Awarded first total interior integrator program for General Motors Record North American backlog coming on-line in 2005** * Source: Lear’s Internal Market Share Study. 18 * * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 18
  • 19. R International Update 19 19
  • 20. R Europe Business Summary (billions) Top 10 Customers Sales $5.6 $4.5 $4.3 2001 2002 2003 20 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 20
  • 21. R Europe Market Share Rankings Seating Systems #1 #3 Door Panels Electrical #4 #3 Instrument Panels Distribution Systems #3 Headliners Industry Leader in Seating; Growth Opportunity in Instrument Panels and Cockpit Systems 21 21 Source: Lear’s Internal Market Share Study.
  • 22. R J.D. Power Seat Survey Shows Improvement for European Seats Things Gone Wrong (TGW) per 100 vehicles Lear’s 2003 J.D. Power Results for Lear Europe 21% Improvement 7.1 U.S. data for seats 5.6 supplied by Lear’s European plants 21% improvement from 2002 2002 2003 Source: 2003 J.D. Power Seat Survey Independent J.D. Power Survey Shows Solid Improvement in Lear’s European TGW 22 22
  • 23. In Asia, R We are Rapidly Expanding Our Presence* China Korea • 11 facilities • 2 facilities • 1 engineering center • 1 engineering center • 21 customers • 2 customers • Seats, interiors, electrical • Seats distribution, electronics, IP India Japan • 3 facilities • 3 engineering centers • 1 engineering center • 5 customers • 4 customers • Interior integration • Seats, interior integration Thailand Philippines • 2 facilities • 4 facilities • 5 customers • 1 engineering center • Seats, seat trim, • 7 customers door panels • Electrical distribution 23 23 * Includes facilities held through joint ventures.
  • 24. R Second Quarter Developments in China New Business This Year: Lear awarded first contract with First Autoworks (SOP – Oct. 04) New electronics plant to supply Shanghai GM, Honda and Saturn (SOP – July 04) Business Development: Lear / Yunhe JV awarded first seat business with Peugeot (SOP – Q4 05) JV with Dongfeng Motors is well positioned to serve Nissan and Honda Leveraging Joint Venture Infrastructure and Relationships with Global Customers to Support Rapid Growth in China 24 24
  • 25. We are Rapidly Growing Our Business R in Asia and with Asian Automakers Globally* (millions) ≈$1,600 $1,250 $850 2002 2003 2004 Future Asian Sales About Double from 2002 to 2004; Solid Growth Expected to Continue** * Consolidated and unconsolidated sales. 25 25 ** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  • 26. Overall in Europe, R We are Growing Sales and Steadily Improving Margins* European Financials Europe CPV Growing sales and UP improving margins ≈ 10+% $309 Positive cash flow $247 Low-cost manufacturing and sourcing in Eastern Europe 2002 2003 2004 On Track for Our 3rd Consecutive Year of Improving Financials 26 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 26
  • 27. R Financial Update 27 27
  • 28. R Profitable Global Growth Strategy Industry Focus Interiors are the fastest growing automotive segment Intense focus on improving interiors by all major automakers Lear Opportunity Deliver record sales backlog (supports ≈ 5% + annual growth) Awarded General Motors’ first total interior integrator program Accelerate new product innovations (e.g., IntelliTireTM) Pursue strategic acquisitions (e.g., Grote & Hartmann) Win new business in Asia and with Asian OEMs globally Lear is Well Positioned in the Fastest Growing Segment of the Automotive Industry 28 28
  • 29. R Infrastructure Cost Reduction Actions Low cost country strategy Selective in-sourcing of value-add components Global Cost Technology Optimization initiatives Leverage Lear’s scale and commonization expertise “Lear Flexible Seat Architecture” 29 29
  • 30. Superior Competitive Advantage R Low Cost Manufacturing Capabilities and Engineering Centers Poland – 4 Hungary – 4 Czech Republic – 2 Mexico – 24 Turkey – 2 Slovakia – 1 Romania – 1 L L LL LL L L L L L L L L L Philippines – 4 Honduras – 3 China – 1 India – 3 Korea – 1 Africa – 8 Japan – 3 30 Philippines – 1 30
  • 31. R Electronics / Electrical Market Average Wire Harness Grote & Hartmann Composition High quality producer with technical expertise 40% Terminals 60% & Connectors Wiring Improves overall / Assembly competitiveness in electronics / electrical market Provides avenue for growth and customer diversification Wire Harness Terminals & Terminals & Connectors are an Integral Connectors Part of a Wire Harness Assembly 31 31
  • 32. R Cost Technology Optimization (CTO) Centers Munich, Germany Dearborn, MI Southfield, MI Barcelona, Spain Sao Paulo, Brazil Cebu, Philippines CTO Evaluates All Areas for Cost Reduction 32 32
  • 33. R Lear Flexible Seat Architecture (LFSA) Modular system that can be packaged in several vehicle environments through the utilization of power and common components Currently on over a dozen programs, totaling nearly 4 million vehicles Benefits Faster implementation timing Reduced development costs and tooling / capital Enhanced comfort and safety features Increased quality and craftsmanship 33 33
  • 34. R Continuing to Reduce Our Net Debt (billions) 70% $4.0 65% Net Debt***/Capital 63% $3.4 $3.5 58% $3.0 $3.0 Net Debt $2.7 $2.5 $2.3 46% Target $1.9 $2.0 Low 40% $1.5 1999* 2000 2001** 2002** 2003 2004 Lear’s Goal is to Maintain Investment Grade Status * UTA acquisition 5/99 ** Includes ABS debt of $261 million in 2001 and $189 million in 2002 (implemented in 2001). *** Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled “Use of 34 34 Non-GAAP Financial Information” and “Forward-Looking Statements” at the end of this presentation for further information.
  • 35. R Alternatives for Using Cash Flow. . . Where We See Value Creation Invest internally Share in high return repurchases programs Pursue strategic Increase acquisitions the dividend . . . While Maintaining Strong Balance Sheet 35 35
  • 36. R Business / Industry Conditions Factors impacting near term financial results: Material costs, reflects increasing commodity prices New business development costs, reflects important new program awards, rapid expansion in Asia N.A. vehicle production mix, primarily trucks and SUVs Backlog strength and diversification Near Term Challenges 36 36
  • 37. Focused Strategy will Allow Lear to Deliver R Value to its Customers and Shareholders Challenging Automotive Industry Dynamics Overcapacity Fierce competition Production outlook Lear Works in Partnership with Customers to Add Value Focus on quality, customer service, cost and delivery Invest opportunistically in value added growth vehicles Implement aggressive cost efficiency actions / flexible cost structure Maintain strong balance sheet with LBO mentality 37 37
  • 38. R R ADVANCE RELENTLESSLY™ LEA Listed www.lear.com NYSE 38 38
  • 39. R Use of Non-GAAP Financial Information In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this presentation, the Company has provided information regarding “net debt” (a non-GAAP financial measure). Net debt represents total debt plus utilization under the Company’s ABS facility, less cash and cash equivalents. Management believes that net debt is useful to both management and investors in their analysis of the Company’s financial condition. Further, management uses net debt for planning and forecasting in future periods. Net debt should be not considered in isolation or as a substitute for total debt or other balance sheet data prepared in accordance with GAAP or as a measure of profitability or liquidity. Also, this non-GAAP financial measure, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth below is the reconciliation of net debt to total debt. December 31, (in millions) Net debt 2003 2002 2001 2000 1999 Short-term borrowings $ 17.1 $ 37.3 $ 63.2 $ 72.4 $ 103.6 Current portion of long-term debt 4.0 3.9 129.5 155.6 63.6 Long-term debt 2,057.2 2,132.8 2,293.9 2,852.1 3,324.8 Total debt 2,078.3 2,174.0 2,486.6 3,080.1 3,492.0 Cash and cash equivalents ( 169.3 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) Asset backed securitization - 189.0 260.7 - - Net debt $ 1,909.0 $ 2,271.3 $ 2,659.7 $ 2,981.3 $ 3,385.1 39 Note: Net Debt to Capital is defined as Net Debt divided by Net Debt plus Stockholders’ Equity. 39
  • 40. R Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to, general economic conditions in the markets in which the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or suppliers or that otherwise affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, the impact and timing of program launch costs, the costs and timing of facility closures or similar actions, increases in warranty or product liability costs, risks associated with conducting business in foreign countries, fluctuations in foreign exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company operates, competitive conditions impacting the Company’s key customers, raw material cost and availability, the Company’s ability to successfully integrate the recently acquired Grote and Hartmann operations, the outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in free cash flow and other risks described from time to time in the Company’s Securities and Exchange Commission filings. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update them. This presentation also contains information on the Company’s sales backlog. The Company’s incremental sales backlog reflects: (i) formally awarded new programs; (ii) targeted programs for which the Company believes there is a substantial likelihood of award; (iii) phased-out and cancelled programs; (iv) estimates regarding customer-mandated changes in selling prices; and (v) estimates of expected changes in vehicle content. Changes in any of these components may significantly impact the Company’s backlog. In addition, backlog may be impacted by various assumptions imbedded in the calculation, including vehicle production levels on new, replacement or targeted programs, foreign exchange rates and the timing of major program launches. For purposes of the backlog data included in this presentation, the Company has made various assumption, including the following: (1) North American vehicle production of 16.0 million units; (2) Western European vehicle production of 16.0 million units; (3) South American vehicle production of 1.9 million units; and (4) a Euro exchange rate of $1.20/Euro. Please refer to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003 for further information on the Company’s calculation of sales backlog. 40 40