1. 2006 Paris Auto Show
JPMorgan Investor Conference
September 26, 2006
2. Agenda
Strategic Evolution
Bob Rossiter, Chairman and CEO
Improving Global Competitiveness
Doug DelGrosso, President and COO
Financial Review
Matt Simoncini, SVP Operational Finance
Summary and Outlook
Bob Rossiter, Chairman and CEO
2
3. Strategic Evolution
Since the Company
Systems
Supplier went public, we have
Integrator
transformed from an
automotive seat
manufacturer to one of
Total Interior
Seat Manufacturer
Capability
the world’s leading
automotive interior
suppliers.
1994 2005
3
4. Lear’s Customer Focus
Has Supported Sales Growth
Net Sales
(in billions)
$17.1
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0 $3.1
$2.0
$0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
“At Lear, we believe if you provide superior quality,
outstanding customer service and new product
innovation, sales growth is inevitable.”
4
5. We Have Diversified Our Geographic Mix. . .
2005
1994
Europe
Europe
38%
17%
Rest Of World North America
North America
8% 54%
83%
5
As of 12/31/05
6. And, Diversified Our Customer Mix
2005
1994
Classic Ford & GM Extended Ford & GM;
Classic Ford & GM Saab, Volvo,
44%
Jaguar and Land Rover
75%
9%
All Other
Chrysler
Toyota
BMW
Porsche
All Other
Fiat
Renault
VW
Nissan PSA
Mazda Mercedes
Hyundai
6
As of 12/31/05
7. Factors Adversely Impacting Our Business
Declining Big Three market share
Major restructuring actions at key customers
Sustained high raw material and energy prices
Distress throughout supply chain
Industry shift away from full size pickups and SUV’s
Reversal of trend toward total interior integration
7
8. New Strategic Direction*
Strategic
Systems
Supplier Partner
Integrator
• Product-Line Focused
Total Interior • Globally Competitive
Seat Manufacturer
Capability • Working Collaboratively
with Customers
2006 and Forward
1994 - 1999 2000 - 2005
8
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
9. Improvement Plans In Place*
Sales Growth and Customer Diversification
New product innovation to increase sales
Growing our content per vehicle in major markets
Expanding our infrastructure in Asia
Winning new business with non-traditional customers
Global Competitiveness
$250 million global restructuring plan being implemented
Accelerating manufacturing & sourcing footprint actions
Aggressively implementing cost reduction and operating
improvement initiatives
Implementing new strategic direction for Interior Segment
9
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
10. Strategy For Interior Segment*
Signed Definitive Agreement to Contribute Substantially all of Lear’s
European Interior Business to International Automotive Components
Group, LLC in Return for a Minority Stake:
Creates a large [20 manufacturing facilities in 9 countries, with
$1.2 billion in annual sales] and well capitalized enterprise
Solid platform for improving ongoing operating efficiency and
financial performance
Expected to close shortly
Working Aggressively to Restructure Operations and Put in Place a
New Business Model for Lear’s North American Interior Business:
Continuing to evaluate strategic alternatives
Working Toward Definitive New Strategic Direction
For Interior Business By Year End 10
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
12. Improving Global Competitiveness*
Increasing our Product-line Focus
Emphasis on New Technology and Product Innovation
Delivering Superior Quality and Customer Service
Restructuring Initiatives Improving Operating Efficiency
Customer, Regional and Segment Diversification Underway
Continuous Improvement / Operational Excellence
12
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
13. Innovative Product Solutions
CORE DIMENSIONS STRATEGY
COMFORT &
SAFETY ENVIRONMENTAL FLEXIBILITY CONVENIENCE INFOTAINMENT COMMONIZATION CRAFTSMANSHIP
• ProTecTM PLuS • Cushion Tilt 2nd • ComforTecTM
• Lt. Weight • Premium • Lear Flexible Seat • Sculpted Seat
Back Panel Row Audio Architecture Technology
• Adaptive Front • Climate Seat Amplifier
2nd
Light System • Soy Foam • Remote Release • Gateway Module • Flat Flexible
Row Easy Entry • Fluid Power Motion • Rear Seat Cable
• IntelliTireTM • Polyurethane Entertainment • Passive Junction
Foam • Thin Profile Folding • Passive Entry Box • Seamless
• Car2UTMTwo- Alternatives Rear • TV Receiver Airbag Cover
• Car2UTM
Way Remote Home Analog • Smart Junction
• SmartFoldTM
Keyless Entry • Battery 3rd Automation System Box • Trim Clip
Monitoring Row
• Immobilizer System • Pneumatic Seat • Insert Molded
Carpet
• Foam in Place • DC/AC • Integrated Seat
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Head Impact Inverters Adjuster Module
Countermeasure
14. Putting It All Together On BMW 3-Series. . .
TV Receivers
Sound Systems
Lighting Power System
Body Controller
23 Way Pinheader
Terminals & Connectors
for Wire Harness
Premium Seating System
Pre Safe Box with
Power Fuse
Advanced Front
Lighting System
14
Jumper Start
15. Customer Awards Reinforce Lear’s Quality
And Customer Service Commitment
Customer Awards
General Motors--Supplier of the Year for Seating Systems (Global)
Ford Motor Company
Special Recognition for Customer Service (Global)
Special Recognition for Design Engagement (Europe)
Toyota
Superior Logistics Performance (Argentina)
Superior Supplier Diversity and Excellence in Quality (Global)
Mazda--Value Engineering Award for Number of Ideas Submitted (Japan)
Volkswagen
Excellence in Quality and Product Development (Mexico)
Best Quality and Among Top Three in Cost Reduction (Brazil)
Supplier of the Year (South Africa)
Honda--Delivery and Quality Performance
Volvo Cars--Supplier Award of Excellence
Mahindra & Mahindra--Best Performance in Product Development
GAZ--Best Supplier Award
15
16. Industry Recognition Validates Lear’s Internal
Quality And Customer Service Improvements
Industry Recognition
Auto Interiors Show--Lear Content on all Six ‘Interior of the Year’
Winning Vehicles (United States)
Industry Week Magazine--Lear’s Liberty, Missouri plant among
Finalists for Best Plant Award (North America)
Philippine Economic Zone--Employer of the Year
Society of Plastics Engineers--Excellence in Performance &
Customization for the Cargo Compartment on Ford Escape
DLC Design--4.7 Rating (out of 5) for Lear Audio System in the
BMW 530i (2006 SAE World Congress)
JD Power 2006 Seat Quality Survey--Highest Quality Major Seat
Supplier for Past Six Years
16
17. Restructuring To Improve Operating Efficiency*
Pretax Restructuring Costs
Restructuring Objectives
(in millions)
Eliminate excess capacity
Eliminate excess capacity $120 - 150
Streamline organization and
Streamline organization and
improve operational efficiency
improve operational efficiency $103
Accelerate move to lower-
Accelerate move to lower-
cost sources
cost sources
2005 2006+
Estimated Payback Of Restructuring
Initiatives Is 2.5 Years
17
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
18. Maintaining A Competitive Global Footprint
Legend for Product Examples
Global Technology Centers Wire Harness……WH Term & Conn…….TC
Seat Trim…………ST Metals & Mech…...MM
Interior Trim….……IT Electronic Comp….EC
Eastern Europe
Czech Republic [WH, IT, TC]
Hungary [WH, ST]
Poland [WH, ST, IT, MM]
Romania [WH]
Slovakia [IT]
Slovenia [MM] Asia
Turkey [WH, ST] China [WH, ST, IT, EC]
India [IT]
Africa Philippines [WH, EC]
Morocco [WH] South Korea [ST]
S. Africa [WH]
Central America Taiwan [ST, TC]
Tunisia [WH]
Mexico [WH, ST, IT, MM] Thailand [ST]
Honduras [WH]
South America
Argentina [WH, IT]
Brazil [ST, IT]
Venezuela [ST]
Today About 30% Of Lear’s Components Come From
21 Low-Cost Countries; Target Is 40% By 2010* 18
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
19. Global Strategy
For Customer And Product Diversification*
North America
Fully participate in fast-growing Crossover segment
Expand emerging relationships with Hyundai, Nissan and Toyota
Grow content per vehicle with new products and technology:
Safety-Related – IntelliTireTM, Pro-TecTM PLuS and Adaptive Front Lighting
Electronics – RKE Technology, Premium Audio/Visual, Home Automation
Participate in Hybrid growth with high-voltage Electrical Systems
Europe and Rest of World
Accelerate growth with Asian automakers and Volkswagen
Continue to invest in infrastructure in China, India and Korea
Leverage existing relationships with Big Three and European
automakers to grow in Emerging Markets
19
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
20. Rapidly Growing Our Total Asian Sales*
Revenue in Asia and with Asian Manufacturers
(in millions)
$2,200
$1,800
27%
$1,250
29%
$800 73%
32% 71%
16%
68%
84%
2002 2003 2004 2005 2008 Outlook
Consolidated
Non-consolidated
Rapid Growth In Asian Sales Led By Expanding
Relationships With Hyundai, Nissan And Toyota 20
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
21. Examples Of New Asian Business
Lear Relationship
Product
Customer
Supply 100% of North American seating
•
Provide value-add technologies (e.g. TPMS)
•
Wiring harnesses provided through JV with a Korean partner
•
Leverage Lear’s quality reputation and global footprint to
•
support Hyundai’s quality reputation
Rapid growth potential as a global preferred supplier
•
Santa Fe -- Seating, IntelliTireTM
Nissan evolving its sourcing strategy to global suppliers
•
Lear’s relationship with Tachi-S now encompasses three
•
joint ventures:
– North America (Mt. Juliet, TN)
– Europe (Sunderland, U.K.)
– Asia (Guangzhou, China)
Collectively these operations will supply seven vehicle
•
lines for Nissan
Qashqai
Seats, Electrical Distribution
Expanding relationship with headliners, NVH, plastics &
•
seating by establishing new facilities alongside Toyota in
North America & Europe
Continued success on seating joint venture in N.A.
•
(Sienna) and interior programs (e.g. Tundra) provides
opportunity on next new N.A. seat program
Tundra -- Interior Trim 21
22. Improving Launch Efficiency*
Products
Selective vertical integration
Lear’s common architecture strategy
Lear Flexible Seat Architecture
Plants
Quality First initiative
Lean manufacturing processes
Efficiencies from restructuring actions
Lear Montgomery, AL Plant
Processes / Systems
Global sharing of best practices
Company-wide standardized launch process
Web-based launch information and
management system 22
Lear Program Management Process
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
23. Major Second Half 2006 And 2007 Launches
Rest of World
Europe
North America
Chevrolet Silverado
Mercedes C-Class Hyundai Veracruz
Seats, Doors and Car2UTM
Seats Seats and IntelliTireTM (Korea)
Home Automation System
Acura MDX Land Rover Range Rover Dodge Caliber (Venezuela)
Wire Harnesses Seats, Electronics Seats
Chrysler Aspen Nissan Qashqai Ford Galaxy (China)
Seats, Wire Harnesses, Seats, Wire Harnesses Seats
Overheads, F&A, Electronics Peugeot 207 Coupe Cadillac STS (China)
Nissan Sentra Seats Seats, Doors, Floors
Overheads, Trim Fiat Stilo Ford Mondeo (China)
Toyota Tundra Seats Seats, Doors, Overheads
F&A, Trim Audi A4 Renault Logan (India)
Chrysler / Dodge Minivan Seats Seats
IP, Doors, Overheads, F&A Ford Mondeo Chang'an (China)
Saturn VUE Seats Seats
Seats
Honda Accord 23
Wire Harnesses
24. Managing The Business
To Improve Product-Line Returns*
Strategic Focus
Seating
Systems Improve Margins
Electronic
and Electrical Profitable Growth
Interior New, More Sustainable
Products Business Model
24
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
26. Strong History Of Profitable Growth
Core Operating Earnings*
$768
(in millions)
Unfavorable volume / mix
Adverse raw material costs
$325
$170
1994 2004 2005
* Income (loss) before income taxes was $114.8 million, $550.2 million and $(1,187.2) million for 1994, 2004 and 2005, respectively.
Core Operating Earnings represents income before interest, other expense, income taxes, impairments, restructuring costs
26
and other special items. Please see slides titled “Use of Non-GAAP Financial Information” at the end of this presentation for further information.
27. Financial Review And Outlook
First Half Operating Earnings Improved
Income Before Interest, Other
Expense and Income Taxes* Core Operating Earnings**
(in millions)
(in millions)
$219
$165
$136
$79
2005 2006
2005 2006
* Income (loss) before income taxes and cumulative effect of a change in accounting principle was $46.3 million and $(53.3) million in the first half of
2006 and 2005, respectively. Please see slides titled “Use of Non-GAAP Financial Information” at the end of this presentation for further information.
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** Core operating earnings represents income before interest, other expense, income taxes, impairments, restructuring costs and other special items.
Please see slides titled “Use of Non-GAAP Financial Information” at the end of this presentation for further information.
28. Financial Review And Outlook
Improvement Driven By Strong Seating Performance
First Half
Segment Results 2005 2006 Comments
Seating
■ Strong new business globally
Net Sales $ 5,628.6 $ 6,088.6
■ Improved Asian profitability
Segment Earnings* $ 98.7 $ 297.4
■ Net cost improvements
% of Sales 1.8 % 4.9 %
Adjusted % of Sales** 2.5 % 5.2 %
Electronic and Electrical
■ Higher commodity costs
Net Sales $ 1,546.9 $ 1,575.0
■ Competitive price pressure
Segment Earnings* $ 110.6 $ 91.2
■ Transition to low-cost locations
% of Sales 7.1 % 5.8 %
Adjusted % of Sales** 7.8 % 6.7 %
Interior
■ Insufficient pricing
Net Sales $ 1,529.8 $ 1,825.1
■ High raw material costs
Segment Earnings* $ (26.2) $ (96.7)
■ Inefficiencies related to major
% of Sales (1.7) % (5.3) %
Adjusted % of Sales** (1.5) % (4.3) % launches & capacity utilization
* Segment earnings represent income (loss) before interest, other (income) expense and income taxes. Income before interest, other expense
and income taxes for the Company was $164.5 million and $78.8 million for the first half of 2006 and 2005, respectively. Please see slides titled
“Use of Non-GAAP Financial Information” at the end of this presentation for further information.
** Adjusted % of sales excludes restructuring and other special items of $53.8 million (Seating - $20.0, Electronic and Electrical - $14.9, Interior -
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$18.9) in first half 2006 and $56.3 million (Seating - $42.9, Electronic and Electrical - $10.2, Interior - $3.2) in first half 2005. Please see slides
titled “Use of Non-GAAP Financial Information” at the end of this presentation for further information.
29. Financial Review And Outlook
Second Half Operating Earnings Now Below A Year Ago*
Recent Big Three schedule reductions have totaled about
260,000 vehicles
These production cuts have reduced our full-year net sales
outlook by about $300 million and our core operating
earnings by about 15%
The revised outlook for full-year free cash flow is now
slightly positive
We are continuing to aggressively implement cost reduction
and restructuring actions to mitigate the impact of the
production cuts and to align our cost structure to the current
production outlook
We Will Formally Update 2006 Financial Guidance
On Our October 26th Conference Call
* Please see slides titled “Forward-Looking Statements” and “Use of Non-GAAP Financial Information” at the end of this presentation 29
for further information.
30. Margin Outlook For Seating And
Electronic And Electrical Segments Unchanged*
Global Seating margin profile expected to
return to historical levels by 2008 . . .
Supported by backlog sales, continued
diversification (by customer and platform type),
cost improvements, restructuring savings and a
return to more normal launch levels
Maintain Electronic and Electrical margin
profile . . .
Expanding low-cost sourcing and engineering,
cost improvements, restructuring savings and
product innovation
30
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
31. Summary And Outlook
Preliminary 2007 Outlook*
Definitive direction for Interior Business
New Seating and Electronic & Electrical business of about
$800 million coming on-line
Further customer and product segment diversification
Continued earnings growth in Asia
Increasing benefits from global restructuring actions
Improved launch efficiency and lower launch-related costs
Potential for moderation in commodity costs
While The Industry Volume Environment Is Uncertain,
A Number Of Lear Factors Turn Positive In 2007
31
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
33. 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 certain non-GAAP financial measures. These measures
include “income before interest, other expense and income taxes”, “income before interest, other expense, income taxes, impairments,
restructuring costs and other special items” (core operating earnings) and “free cash flow.” Free cash flow represents net cash provided by
operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to
exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a
substitute for borrowing activity.
Management believes that the non-GAAP financial measures used in this presentation are useful to both management and investors in their
analysis of the Company’s financial position and results of operations. In particular, management believes that income before interest, other
expense and income taxes and core operating earnings are useful measures in assessing the Company’s financial performance by
excluding certain items that are not indicative of the Company’s core operating earnings or that may obscure trends useful in evaluating the
Company’s continuing operating activities. Management also believes that these measures are useful to both management and investors in
their analysis of the Company's results of operations and provide improved comparability between fiscal periods. Management believes that
free cash flow is useful to both management and investors in their analysis of the Company’s ability to service and repay its debt. Further,
management uses these non-GAAP financial measures for planning and forecasting in future periods.
Income before interest, other expense and income taxes, core operating earnings and free cash flow should not be considered in isolation or
as substitutes for net income (loss), cash provided by operating activities or other income statement or cash flow statement data prepared in
accordance with GAAP or as measures of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to
service debt and therefore, does not reflect funds available for investment or other discretionary uses. Also, these non-GAAP financial
measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other
companies.
Set forth on the following slides are reconciliations of these non-GAAP financial measures to the most directly comparable financial
measures calculated and presented in accordance with GAAP. Given the inherent uncertainty regarding special items in any future period,
a reconciliation of forward-looking statements is not feasible. The magnitude of these items, however, may be significant.
33
34. Use of Non-GAAP Financial Information
Income before interest, other expense and income taxes
and core operating earnings Six Months Ended
Q2 2006 Q2 2005
(in millions)
Income (loss) before income taxes and cumulative effect of a
change in accounting principle $ 46.3 $ (53.3)
Interest expense 100.9 93.0
Other expense, net 17.3 39.1
$ 164.5 $ 78.8
Income before interest, other expense and income taxes
Restructuring actions 44.2 27.1
Goodwill impairment charges (N.A. Interior Segment) 2.9 -
Fixed asset impairment charges (N.A. Interior Segment) 7.2 -
Litigation charges - 30.0
Income before interest, other expense, income taxes,
impairments, restructuring costs and other special
$ 218.8 $ 135.9
items (core operating earnings)
34
35. Use of Non-GAAP Financial Information
Segment Earnings Six Months Ended
Q2 2006 Q2 2005
(in millions)
Segment Earnings
Seating $ 297.4 $ 98.7
Electronic and Electrical 91.2 110.6
Interior (96.7) (26.2)
Segment Earnings $ 291.9 $ 183.1
Corporate and geographic headquarters and elimination of
intercompany activity (127.4) (104.3)
Income before interest, other expense and income taxes $ 164.5 $ 78.8
Interest expense 100.9 93.0
Other expense, net 17.3 39.1
Income (loss) before income taxes and cumulative effect of a
change in accounting principle $ 46.3 $ (53.3)
35
37. Use of Non-GAAP Financial Information
Income before interest, other expense, income taxes,
impairments, restructuring costs and other special
items 2005 2004 1994
(in millions)
Income (loss) before provision for income taxes $ (1,187.2) $ 550.2 $ 114.8
Goodwill impairment charges 1,012.8 - -
Interest expense 183.2 165.5 46.7
Other expense, net 96.6 52.7 8.1
Restructuring actions 106.3 - -
Fixed asset impairment charges 82.3 - -
Litigation charges 30.5 - -
Income before interest, other expense, income taxes,
impairments, restructuring costs and other special items
(core operating earnings) $ 324.5 $ 768.4 $ 169.6
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38. 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 and liquidity. 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 or currency exchange rates, 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 outcome of customer productivity negotiations, the impact and
timing of program launch costs, the costs and timing of facility closures, business realignment or similar actions, increases
in the Company’s warranty or product liability costs, risks associated with conducting business in foreign countries,
competitive conditions impacting the Company’s key customers and suppliers, raw material costs and availability, the
Company’s ability to mitigate the significant impact of recent increases in raw material, energy and commodity costs, the
outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in
cash flow, including the Company’s ability to align its vendor payment terms with those of its customers, the finalization of
the Company’s restructuring strategy, the outcome of various strategic alternatives being evaluated with respect to its
Interior Segment and other risks described from time to time in the Company’s Securities and Exchange Commission
filings. In particular, the Company’s financial outlook for 2006 is based on the Company’s current vehicle production and
raw material pricing forecast; the Company’s actual financial results could differ materially as a result of significant
changes in these factors. In addition, the Company’s agreement to contribute its European Interiors business to
International Automotive Components Group, LLC, a joint venture with WL Ross & Co. LLC, is subject to its various
conditions, including third-party consents and other closing conditions customary for transactions of this type. No
assurances can be given that the proposed transaction will be completed on the terms contemplated or at all.
The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume
any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the
date hereof.
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