ir_2004 creditsussie


Published on

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

ir_2004 creditsussie

  1. 1. R R CSFB Global Automotive Conference September 8, 2004 world’s leading automotive interior supplier fast forward advance relentlessly 1
  2. 2. R Industry Trends 2
  3. 3. 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 3
  4. 4. 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’s Top Ten Features for Commuters Source: List issued in a press release from on August 11, 2004 4
  5. 5. R Increased Demand for Driver-Focused Interior Mode of Transportation to Work Commuters spend ≈ 4.5 hrs/wk in by Number of Workers vehicles 88% of the 128 million U.S. workers Commuters (millions of People) drove or carpooled to work in 2000 7.5 6.1 8.2 Increased 39% vs. 1980 15.6 6.1 10.4 3 out of 4 workers in the U.S. drove 15.4 6.2 alone to work in 2000 19.1 97.1 Increased 56% vs. 1980 84.2 62.2 Alternative means of transportation have declined since 1980: 1980 1990 2000 Carpooling: Down 18% to 16 million Drive alone Carpool Public Trans. Other Public transit: Down 2% to 6 million Source: U.S. Census Bureau Decennial Census Other: Down 2% to 5 million 5
  6. 6. R Gridlock in America • Since 1982, while the U.S. population has grown nearly 20 percent, the time Americans spend in traffic has jumped an amazing 236 percent. • In major American cities, the length of the combined morning-evening rush hour has doubled, from under three hours in 1982 to almost six hours today. • The average driver now spends the equivalent of nearly a full workweek each year stuck in traffic. • On a typical day, the average married mother with school-age children spends 66 minutes driving--taking more than five trips and covering 29 miles. • The amount of time mothers spend behind the wheel increased by 11 percent just between 1990 and 1995, and there's every indication that the trend is continuing. • Moms spend more time driving than they spend dressing, bathing, and feeding a child. Source: “American Gridlock”, By Phillip J. Longman et al.; 6 US News and World Report, Vol. 130 , No. 21; Pg. 16
  7. 7. R U.S. Market Proliferation 300 200 60 50 100 30 1965 1985 Present 1965 1985 Present # of Makes # of Models With the Rapid Proliferation of Makes & Models, Interiors are a Key Element of Differentiation 7
  8. 8. 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 8
  9. 9. R New Emphasis on the Interior in Advertising Volvo XC90 VW Multivan Reconfigurable Seating 9 Nissan Quest
  10. 10. R Automotive Industry Moving to Integrated Systems Increasing Supplier Responsibility Jan., 2003 - - Integrated Industry’s First Total System Design Interior Integrator & Development Program 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 10
  11. 11. R Global Growth of Vehicle Sub-Elements 26% Average Annual Growth from 2004 - 2009 9% 6% 5% Powertrain Electrical Chassis Interior Interiors are the Fastest Growing Segment Source: 2004 CSM Worldwide, Study 11
  12. 12. 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 12 ** Excludes IP substrate and cockpit electronics
  13. 13. R Profitable Growth 13
  14. 14. R Strategic Evolution • Aggressively expand our presence in Asia and with Asian OEMs globally • Improve our business structure and grow Going Forward our market share in Europe • Leverage our leadership position in total interiors in North America Operational Excellence; 1999-2003 Reduce Debt Seat Systems to 1994-1999 Total Interior Capability Seat Components 1990-1994 to Seat Systems 14
  15. 15. 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 15
  16. 16. R Record Sales Backlog (millions) $1,250 $1,000 $900 $750 $500 2004 2005 2006 2007 2008 $4,400 $3,900 $750 $2,000 $3,000 Cumulative Record Backlog Driving Sales Growth and Diversification * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 16
  17. 17. R First Total Interior Integrator Program 2006 Buick LeSabre / Cadillac DeVille $825 million in annual sales Lear to provide total interior, including electrical distribution systems Systems Total Interior Integrator Integrator (TI) Design OEM Lead Supplier Lead Engineering Shared Supplier Lead Sourcing OEM Directed Supplier Lead Manufacturing Supplier Supplier Sub-Assembly Supplier Supplier Sequencing Supplier Supplier Working with Other Major Automakers to Win New Total Interior Integrator Programs 17
  18. 18. R New Product Initiatives OccuSense® IntelliTireTM ClearViewTM MediaConsoleTM 18
  19. 19. R Electronics / Electrical Market Average Wire Harness Grote & Hartmann Composition High quality producer 40% with technical expertise 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 19
  20. 20. R Asia/Asian Automakers Revenue* (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 20 ** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  21. 21. 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 seating architecture” 21
  22. 22. Low – Cost MANUFACTURING Capabilities R 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 – 1 Korea – 1 Africa – 8 Japan – 3 Philippines – 1 22
  23. 23. R Cost Technology Optimization (CTO) Centers Munich, Germany Dearborn, MI Southfield, MI Barcelona, Spain Sao Paulo, Brazil Cebu, Philippines Customer Feedback – Lear Ranks First in Cost Performance by 6 Global OEMs 23
  24. 24. R Lear Flexible Seat Architecture • 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 24
  25. 25. R Net Debt / Capitalization 100% 90% Debt/Cap 90%+ 80% 70% 70% 60% Investment 50% Grade Low 48% 46% 40% 40% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Target Lear’s Goal is to Maintain Investment Grade Status 25
  26. 26. 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 26
  28. 28. 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 we are 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. In addition, the full year 2004 per share earnings guidance is based on an assumed 70.5 million shares outstanding and does not reflect the potential dilutive impact of the Company’s outstanding convertible senior notes. 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 28 Company’s calculation of sales backlog.