Q1 2024 Lear Corp Earnings Call

Operator: Good morning, and welcome to the Lear Corporation first quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note that today's event is being recorded. At this time, I'd like to turn the floor over to Ed Lowenfeld, Vice President, Investor

Okay.

Speaker Change: Good morning, and welcome to the Lear Corporation first quarter 2024 earnings Conference call.

Speaker Change: All participants will be in a listen only mode.

Speaker Change: Did you need assistance please signal.

Speaker Change: A conference specialist by pressing the Starkey followed by zero.

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

Please also note today's event is being recorded.

At this time I'd like to turn the floor attitude at all.

Investor Relations: This president Investor Relations. Please go ahead.

Ed Lowenfeld: Thanks, Jamie. Good morning, everyone.

Investor Relations: Thanks, Jamie.

Ed Lowenfeld: And thank you for joining us for Lear's first quarter 2024 earnings call. Presenting today are Ray Scott, new president and CEO, and Jason Cardew, senior vice president and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.

Investor Relations: Everyone and thank you for joining us for Lear's first quarter 2024 earnings call.

Investor Relations: Renting today are Ray Scott, our president and CEO, and Jason <unk>, Senior Vice President and CFO.

Investor Relations: Other members of Lear's Senior management team have also joined US on the call. Following prepared remarks, we will open the call for Q&A.

Investor Relations: You can find a copy of the presentation that accompanies these remarks.

Investor Relations: They are not near Dot com.

Ed Lowenfeld: Before we begin, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future. However, as detailed in our Safe Harbor Statement on slide 2, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10Q and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics.

Raymond E. Scott: Before we begin I'd like to take this opportunity to remind you that as we conduct this call we will be making forward looking statements to assist you in understanding lear's expectations for the future.

Raymond E. Scott: As detailed in our Safe Harbor statement on slide two our actual results could differ materially from these forward looking statements due to many factors discussed in our latest 10-Q and other periodic reports.

Raymond E. Scott: I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

Ed Lowenfeld: The slide in the appendix of our presentation for the reconciliation of non-GAAP items.

Ed Lowenfeld: Transcripts provided by Transcription Outsourcing, LLC. The agenda for today's call is on slide three. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our first quarter financial results. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now, I'd like to invite Ray to begin.

Raymond E. Scott: The agenda for todays call on slide three.

Raymond E. Scott: First Ray will review highlights from the quarter and provide a business update.

Raymond E. Scott: Jason will then review our first quarter financial results finally, Ray will offer some concluding remarks.

Speaker Change: Following the formal presentation, we'll be happy to take your questions now.

Speaker Change: I'd like to invite ray to begin.

Raymond E. Scott: Thanks a lot, Ed. Thanks. Please turn to slide 5, which highlights key financial metrics for the first quarter of 2024. They started the year strong, delivering higher revenue and adjusted earnings in the first quarter compared to last. Sales increased 3% to $6 billion, and core operating earnings grew by 6% to $280 million. Jet earnings per share was $3.18, an increase of 14%, driven by stronger operating performance and the benefit of our share repurchase. Operating cash flow was in line with the first quarter of last year. Slide 6 summarizes key business and financial highlights from the quarter. The $6 billion in revenue was a record for the first quarter.

Raymond E. Scott: Got it thanks.

Please turn to slide five.

Which highlights key financial metrics for the first quarter of 2024.

Raymond E. Scott: Started the year strong delivering higher revenue and adjusted earnings in the first quarter compared to last year.

Raymond E. Scott: Sales increased 3% to $6 billion in core operating earnings grew by 6% to $280 million.

Raymond E. Scott: Jet earnings per share was $3.18, an increase of 14% driven by stronger operating performance and the benefit of our share repurchase program.

Raymond E. Scott: Operating cash flow was in line with the first quarter of last year.

Raymond E. Scott: Slide six summarizes key business and financial highlights from the quarter, a $6 billion in revenue was a record for the first quarter.

Raymond E. Scott: Our sales outperform industry production, driven by 10 points of growth over market in each system. The systems team continues to drive improvements in the business, as evidenced by the seventh consecutive quarter with higher year-over-year margins. Yesterday, we announced the acquisition of WIP Industrial Automation, to further strengthen our automation capability. WIP leverages robotics, automation, and software to design turnkey solutions for complex industrial challenges that will help accelerate our automation initiatives globally.

Raymond E. Scott: Our sales outperform industry production, driven by 10 points of growth over market in E systems.

Raymond E. Scott: These systems team continues to drive improvements in the business.

Raymond E. Scott: As evidenced by the seventh consecutive quarter with higher year over year margins.

Raymond E. Scott: Yesterday, we announced the acquisition of Wip industrial automation.

To further strengthen our own automation.

Raymond E. Scott: Capabilities.

Raymond E. Scott: Wip Leverages robotics automation and software to design turnkey solutions for complex industrial challenges that will help accelerate our automation initiative initiatives globally.

Raymond E. Scott: We continue to make progress in our thermal comfort strategy. Later this year, we will be launching component modules with Volvo and Lucid. Lear's modular solutions reduce the number of parts, resulting in lower weight and complexity while improving performance at a lower cost. The Volvo module combines seat heat, ventilation, and massage, while the Lucid module combines ventilation, lumbar support, and massage.

Raymond E. Scott: We continue to make progress in our thermal comfort strategy.

Later this year, we will be launching component modules with global and lucid.

Raymond E. Scott: Theres modular solutions reduce the number of cards, resulting in lower weight and complexity, while improving performance at a lower cost the global module combined seat heat ventilation and massage.

Raymond E. Scott: Well have a lucid module combines ventilation lumbar and massage.

Raymond E. Scott: In addition, we initiated the validation process with Ford Motor Company for our first complete seat module for a vehicle scheduled to launch in 2026. This opportunity is incredibly exciting for two reasons. First, it gives Lear design responsibility for the thermal comfort components and trim. Second, once validated, it will be the first automotive application fully integrating the thermal comfort components into the trim cover. This will allow us to reduce our complete seat assembly time in our JIT facility.

Raymond E. Scott: In addition, we initiate initiated the validation process with Ford Motor Company, where our first complete seat module for a vehicle scheduled to launch in 2026.

Raymond E. Scott: This opportunity is incredibly exciting for two reasons first it gives lear design responsibility for the thermal comfort components and shrimp.

Raymond E. Scott: Second once validated it will be the first automotive application fully integrating the thermal comfort components into the trim cover this.

Raymond E. Scott: This will allow us to reduce our.

Raymond E. Scott: Complete seat assembly time in our jet facilities.

Raymond E. Scott: In China, we continue to diversify our customer base as we won our first complete seat program with FAW Toyota. And in these systems, our second wiring award with BMW is a result of a strong customer relationship that we have built. Our customers continue to recognize Lear as a leader in innovation, technology, and quality. For the seventh consecutive year, General Motors recognized Lear as its supplier of the year. We remain committed to returning excess cash to our shareholders. In February, Lear's board approved an increase to and an extension to the company's share repurchase authorization of $1.5 billion through the end of 2026. Okay, turning to slide seven.

Raymond E. Scott: In China, we continued to diversify our customer base as you want our first complete seat program with FAA W. Toyota.

And in E systems, our second wiring award with BMW as a result of our strong customer relationship that we have built.

Raymond E. Scott: Our customers continue to recognize Lear as a leader in innovation and technology and quality for the seventh consecutive year General Motors recognized Lear as a supplier of the year.

Raymond E. Scott: We remain committed to returning excess cash to our shareholders.

Raymond E. Scott: In February or February Lear's Board.

Raymond E. Scott: Approved an increase and an extension to the company's share repurchase authorization of $1 $5 billion through the end of 2026.

Raymond E. Scott: Okay, turning to slide seven we are introducing idea by Alere and.

Raymond E. Scott: We are introducing Idea by Lear, an important evolution in our strategy. Accelerating the adoption of digital tools and automation will extend our competitive advantage and enable us to more efficiently engineer, develop, and manufacture innovative products that will drive profitable growth. Elevated wage inflation, geopolitical risk, and uncertainty surrounding the pace of the EV transition combined with the introduction of artificial intelligence are creating new challenges and opportunities for automotive companies. Those that adapt most effectively will be best positioned for significant growth and margin expansion.

Raymond E. Scott: An important evolution in our strategy.

Raymond E. Scott: Accelerating the adoption of digital tools and automation and will extend our competitive advantage and enable us to more efficiently engineer and develop and manufacture innovative products that will drive profitable growth.

Raymond E. Scott: Elevated wage inflation geopolitical risk and uncertainty surrounding the pace of the transition combined with the introduction of artificial intelligence is creating new challenges and opportunities for automotive companies.

Raymond E. Scott: The other dog.

Raymond E. Scott: Death, most effectively will be best positioned for significant growth and margin expansion.

Raymond E. Scott: Lear has consistently invested in our products and processes to become a leader in operational expertise. With Idea by Lear, we identified a broader opportunity to leverage new technologies to move faster and drive efficiencies in both businesses. Digital innovation combined with automation and robotics will allow Lear to streamline our processes while accelerating product development and reducing manufacturing costs. These tools improve ergonomics, quality, and safety, resulting in higher job satisfaction for our employees while enhancing efficiencies at our plant.

Raymond E. Scott: There has consistently invested in our products and processes to become a leader in operational excellence.

Raymond E. Scott: With idea by Lear, we had.

Raymond E. Scott: <unk> identified a broader opportunity to leverage new technologies to move faster and drive efficiencies in both businesses.

Raymond E. Scott: Digital innovation combined with automation and robotics will allow there to streamline our processes, while accelerating product development and reducing manufacturing cost.

Raymond E. Scott: These tools improve ergonomics quality and safety, resulting in higher job says says certification for our employees, while enhancing efficiencies at our plants.

Raymond E. Scott: Slide 8 illustrates Lear's long history of strategic investments to enhance our manufacturing capability. Through our acquisitions, we brought key automation capabilities in-house, lowering our manufacturing costs. ASI's automated material delivery, storage, and retrieval systems have been deployed in all of our North American just-in-time facilities. ASI equipment has improved reliability, uptime, and throughput within our plants. We will continue to automate material movement across our seeding plants globally, as well as within e-systems. The acquisition of InTouch added equipment to automate end-of-line testing to ensure all seat functions meet performance and quality specifications.

Raymond E. Scott: Slide eight illustrates literally near long history of strategic investments to enhance our manufacturing capabilities.

Raymond E. Scott: Through our acquisitions, we brought key automation capabilities in house lowering our manufacturing costs.

Raymond E. Scott: Asi's automated material delivery storage and retrieval systems have been deployed in all of our North American just in time facilities.

Raymond E. Scott: ASI is equipment has improved reliability uptime and throughput within our plans, we will continue to automate material movement across our seating plants globally as well as within E systems.

Raymond E. Scott: The acquisition of Intouch added equipment.

Raymond E. Scott: To automate end of line testing to ensure all steep functions meet performance and quality specifications.

Raymond E. Scott: The combination of ASI's material movement capabilities within touch and End-of-Line Testing has allowed us to fully automate the final steps of our just-in-time seating assembly process. Ultimately, we plan to automate from finesse, the process to remove wrinkles from the seat covers all the way to installation within the customer's facility, resulting in significant manufacturing cost efficiencies and Quality Improvement.

Raymond E. Scott: The combination of ASI as material movement capabilities within touch.

Raymond E. Scott: End of line testing has allowed us to fully automate the final steps of our just in time seeding Assembly process. Ultimately we plan to automate from finesse the process to remove wrinkles from the seat covers all the way to installation within the customer's facility, resulting.

Raymond E. Scott: Resulting in significant manufacturing cost efficiencies.

Raymond E. Scott: And quality improvements.

Raymond E. Scott: The Gore's use of vision systems and software combined with precision cutting capabilities optimizes utilization of leather hides, equipment Uptime, and Productivity. We are expanding the first application of the GORUS system across our leather facilities globally, with additional performance improvements to be deployed over the next 18 months. We continue to evaluate additional tools to accelerate automation in our plans, and yesterday, we announced the acquisition of WIP Industrial Automation. WIP is a European supplier that leverages AI, vision systems, and robotics to develop turnkey solutions to complex industrial problems. WIP's technology can be used in multiple applications in seating and e-systems and expands our automation footprint in Europe.

Raymond E. Scott: The gores use of vision systems, and software combined with precision cutting capabilities optimizes utilization of leather hides equipment uptime and productivity.

Raymond E. Scott: We are expanding the first application of the <unk> system across our leather facilities globally with additional performance improvement prevents to be deployed over the next 18 months.

Raymond E. Scott: We continue to evaluate additional tools to accelerate automation in our plants.

Raymond E. Scott: And yesterday, we announced the acquisition of Wip industrial automation.

Raymond E. Scott: Wip as a European supplier that Leverages, AI vision systems, and robotics to develop turnkey solutions to complex industrial problems.

Wip's technology can be used in multiple applications in seating and E systems and expands our automation footprint in Europe.

Raymond E. Scott: Looking forward, we will continue to evaluate additional opportunities to accelerate the rollout of automation tools in both seating and each system. For example, last year, we started working with Palantir and completed four pilot programs utilizing their foundry software in our manufacturing facility. These acquisitions, coupled with organic strategic initiatives, are key enablers to continue to expand our competitive advantage and leadership in operational excellence. Turning to slide nine, we'd like to discuss several of the innovative products we have developed in recent years to expand our vertical integration capabilities in both seeding and e-systems.

Looking forward, we will continue to evaluate additional opportunities to accelerate the rollout of automation tools in both seating and E systems.

For example, last year, we started working with Perl interior and completed four pilot programs utilizing their foundry software and our manufacturing facilities.

Raymond E. Scott: These acquisitions, coupled with organic strategic initiatives are key enablers to continue to expand our competitive advantage and leadership and operational excellence.

Raymond E. Scott: Turning to slide nine I'd like to discuss several of the innovative products. We have developed in recent years to expand our vertical integration capabilities in both seating and E systems.

Raymond E. Scott: The combination of our engineering and manufacturing capabilities allows us to innovate and develop new product offerings to drive profitable growth. These products are accretive to our segment margin targets and offer an attractive value proposition for our customers. In seeding, our acquisition of Kongsberg Automotive Interior Comfort Systems, IGB, and Gruppel and Antolin's seeding business provided valuable vertical integration capabilities. We are the only complete seat manufacturer with thermal comfort components, allowing us to develop unique proprietary module solutions.

Raymond E. Scott: Combination of our engineering and manufacturing capabilities allows us to innovate and develop new product offerings to drive profitable growth.

Raymond E. Scott: These products are accretive to our segment margin targets and offer an attractive value proposition for our customers.

Raymond E. Scott: In seating our acquisition of Cogs Berg automotive interior comfort systems, I E beam and Grupo Antolin seating business provided valuable vertical integration capabilities we.

We are the only complete seat manufacturer with thermal comfort components, allowing us to develop unique proprietary module solutions.

Raymond E. Scott: The two recent component modularity awards and our first customer validation in process for our complete thermal comfort module are proof that our strategy is working. Our thermal comfort business is on track to achieve our target of $1 billion in revenue by 2027 with operating margins of 10%. In these systems, the acquisition of M&N expanded our connection systems and engineered component portfolio. Combining the molding and overmolding capabilities from M&N with the precision stamping technology from Seeding improved the cost competitiveness of our battery disconnect unit and inter-cell connect board products.

Raymond E. Scott: The two recent component Modularity awards, and our first customer validation and process for our complete thermal comfort module are proof that our strategy is working.

Raymond E. Scott: Our thermal comfort business is on track to achieve our target of $1 billion in revenue by 2027 with operating margins of 10%.

Raymond E. Scott: In E systems, the acquisition of Eminem expanded our connection systems and engineered component portfolio, combining the molding and over molding capabilities from Eminem with the precision stamping Tech now technology from seeding improved the cost competitiveness of our battery disconnect units and you yourself connect.

Raymond E. Scott: Products.

Raymond E. Scott: As volumes grow on the BDU and ICB, we expect these products will be a key driver of continued margin growth in these systems. The initiatives we are implementing through IDEA will allow us to innovate and engineer next-generation products faster with improved designs at a lower cost. Now, I'd like to turn the call over to Jason for a financial review. Thanks, Ray.

Raymond E. Scott: As volumes grow on the Btu and ICD. We expect these products will be a key driver of continued margin growth in E systems.

Raymond E. Scott: The initiatives, we are implementing through idea will allow us to innovate and engineered next generation products faster with improved designs at a lower cost.

Raymond E. Scott: Now I'd like to turn the call over to Jason for a financial review.

Jason: Thanks Ray.

Jason Cardew: Slide 11 shows vehicle production and key exchange rates for the first quarter. Global production decreased 1% compared to the same period last year and was flat on a Lear sales weighted basis. Production volumes increased by 1% in North America and by 5% in China, while volumes in Europe were down 2%. From a currency standpoint, the US dollar weakened against the euro but strengthened against the RMB.

Jason: At 11 shows vehicle production in key exchange rates for the first quarter.

Jason: Global production decreased 1% compared to the same period last year and was flat on alere sales weighted basis production.

Jason: Volumes increased by 1% in North America, and by 5% in China.

<unk> in Europe were down 2% from a currency standpoint, the U S dollar weakened against the euro strengthened against the RMB.

Jason Cardew: Slide 12 highlights Lear's growth in the market. For the first quarter, total company growth over the market was two percentage points, with seeding flat, and these systems growing 10 points above the market. Sales outperformed industry production in every region. In North America, growth over market was two percentage points, reflecting favorable platform mix and backlog in these systems, partially offset by unfavorable platform mix and seeding. Higher volumes on the Ford Escape and Super Duty, as well as the Chevrolet Colorado and GMC Canyon, contributed to the eSystems growth. However, lower volumes on Lear platforms such as the Audi Q5 and the build out of the Chrysler 300, Dodge Charger, and Challenger impacted seating in North America.

Jason: Slide 12 highlights lear's growth over market.

For the first quarter total company growth over market was two percentage points when sitting flat any systems growing 10 points above market sales.

Jason: Sales outperformed industry production in every region.

Jason: In North America growth over market was two percentage points, reflecting favorable platform mix and backlog in E systems, partially offset by unfavorable platform mix and C D.

Jason: Higher volumes on the Ford escape and Super duty as well as the Chevrolet, Colorado and GMC Canyon contributed to the E systems growth.

Jason: Lower volumes on Lear platforms, such as the Audi Q five and the Buildout of the Chrysler 300, Dodge Charger challenger impacted sitting in North America.

Jason Cardew: Your growth over the market was one percentage point, with both business segments benefiting from higher volumes on the Land Rover Range Rover and Range Rover Sport. In China, revenue growth outperformed the market by one percentage point, driven by conquest programs in seeding such as the BMW 5 Series and i5. Turning to slide 13, I'll highlight our financial results for the first quarter of 2024. Sales increased 3% year-over-year to $6 billion, a first quarter record.

Jason: Europe growth over market was one percentage point with both business segments benefiting from higher volumes on the land Rover range Rover and range Rover sport.

Jason: In China revenue growth outperformed the market by one percentage point driven by conquest programs incident, such as the BMW five series and Eisai.

Jason: Turning to slide 13, I will highlight our financial results for the first quarter of 2024.

Jason: Sales increased 3% year over year to $6 billion, a first quarter record.

Jason Cardew: Excluding the impact of exchange, commodities, and acquisitions, sales were up 2%, reflecting the addition of new business in both of our business cycles. Core operating earnings were $280 million compared to $263 million last year. The increase in earnings resulted primarily from positive net performance in the addition of new business. Adjusted earnings per share improved to $3.18 as compared to $2.78 a year ago, primarily reflecting higher earnings and the benefit of our share repurchase program. Reported earnings per share, which are not shown on the slide, were lower year over year.

Jason: The impact of foreign exchange commodities and acquisitions sales were up 2%, reflecting the addition of new business in both of our business segments.

Core operating earnings for $280 million compared to $263 million last year.

Jason: The increase in earnings resulted primarily from positive net performance and the addition of new business.

Adjusted earnings per share improved to $3.18 as compared to $2.78 a year ago Pri.

Jason: Primarily reflecting higher earnings and the benefit of our share repurchase program.

Jason: Reported earnings per share, which are not shown on the slide were lower year over year.

Jason Cardew: Higher core operating earnings were offset by operational restructuring charges and other special items which totaled $74 million, primarily reflecting future plant closures in Europe to improve our manufacturing cost structure and impairment charges related to fiscal. First quarter operating cash flow was in line with last year, reflecting higher core operating earnings partially offset by higher cash restructuring. Slide 14 explains the variance in sales and adjusted operating margins in the seeding cycle. Sales for the first quarter were $4.5 billion, an increase of $25 million or 1% from 2023, driven primarily by our backlog acquisitions and commercial recoveries, partially offset by lower volumes on their platform. Excluding the impact of commodities, foreign exchange, and acquisitions, sales were flat.

Higher core operating earnings were offset by operational restructuring charges and other special items, which totaled $74 million, primarily reflecting future plant closures in Europe to improve our manufacturing cost structure and impairment charges related to Cisco.

Jason: First quarter operating cash flow was in line with last year, reflecting higher core operating earnings partially offset by higher cash restructuring.

Jason: Yes.

Jason: Slide 14 explains the variance in sales and adjusted operating margins in the seating segment.

Jason: Sales for the first quarter were $4 $5 billion, an increase of $25 million or 1% from 2023.

Jason: Driven primarily by our backlog acquisitions and commercial recoveries, partially offset by lower volumes on their platforms.

Jason: Excluding the impact of commodities foreign exchange and acquisitions sales were flat.

Jason Cardew: Co-operating earnings were $295 million, down $5 million or 2% from 2023, with adjusted operating margins of 6.6%. Operating margins were down slightly compared to last year as the benefit of our net performance, including lower commodity costs, and our margin-accretive backlog was offset by unfavorable platforms. Slide 15 explains the variance in sales and adjusted operating margins in the E-Systems segment. Sales for the first quarter were $1.5 billion, an increase of 124 million, or 9% from 2023. Excluding the impact of foreign exchange and commodities, sales were up 10%, driven primarily by an increase in volumes on Lear platforms and our strong backlog.

Jason: Operating earnings were $295 million down $5 million or 2% from 2023 with adjusted operating margins of six 6%.

Jason: Margins were down slightly compared to last year as the benefit of our net performance, including lower commodity costs and a margin accretive backlog was offset by unfavorable platform mix.

Jason: Slide 15 explains the variance in sales and adjusted operating margins in the system segment.

Jason: Sales for the first quarter were $1 $5 billion, an increase of $124 million or 9% from 2023 excluding.

Jason: Excluding the impact of foreign exchange and commodities sales were up 10% driven primarily by an increase in volumes on Lear platforms and our strong backlog.

Jason Cardew: Core Operating Earnings improved significantly $77 million or 5.1% of sales compared to $49 million and 3.5% of sales in 2020. The improvement in margins reflected higher volumes on their platforms, strong net operating performance, and a margin accretive backlog. Now, we shift to our 2024 outlook.

Jason: Core operating earnings improved significantly to $77 million or five 1% of sales compared to $49 million and three 5% of sales in 2023.

Jason: The improvement in margins reflected higher volumes on Lear platforms strong net operating performance and a margin accretive backlog.

Now shifting to our 2024 outlook Slide 16 provides global vehicle production volume and currency assumptions that form the basis of our full year outlook.

Jason Cardew: Slide 16 provides global vehicle production volume and currency assumptions that form the basis of our full-year outlook. We have updated our global production assumptions, which remain generally aligned with the latest S&T forecast. At the midpoint of our guidance range, we assume that global industry production will be flat compared to 2023 on a Lear sales weighted basis. We are maintaining the same exchange rate assumptions of an average euro exchange rate of $1.09 per euro and an average Chinese RMB exchange rate of 7.15 RMB to the dollar.

Jason: We have updated our global production assumptions, which remained generally aligned with the latest S&P forecast.

Jason: At the midpoint of our guidance range, we assume that global industry production will be flat compared to 2023 and all their sales weighted basis.

Jason: We are maintaining the same exchange rate assumptions of an average euro exchange rate of $1 nine per euro and an average Chinese RMB exchange rate of 715 RMB to the dollar.

Jason Cardew: Slide 17 provides detail on our outlook for 2020. Our first quarter results were consistent with our expectations, and we are maintaining the full-year guidance ranges outlined during our last earnings call on February 6. Total company operating margins are on track to achieve the midpoint of our guidance of 5.1% for the full year. Second quarter margins are expected to be flat, slightly higher in both segments compared to the first. We continue to make progress operationally and in our commercial negotiations. We're also facing higher hourly labor costs from contracts that take effect in the second quarter as well as modestly higher engineering costs.

Jason: Slide 17 provides detail on our outlook for 2024.

Jason: Our first quarter results were consistent with our expectations and we are maintaining our full year guidance ranges as outlined during our last earnings call on February six.

Jason: Company operating margins are on track to achieve the midpoint of our guidance of five 1% for the full year.

Jason: Second quarter margins are expected to be flat to slightly up in both segments compared to the first quarter.

Jason: While we continue to make progress operationally and in our commercial negotiations.

Jason: We're also facing as expected higher hourly labor costs from contracts that take effect in the second quarter as well as modestly higher engineering cost.

Jason Cardew: While the vast majority of our contractual labor cost increases took effect in the beginning of the year, certain contracts become effective in the second quarter. In the second half of the year, we expect margins to improve through a combination of operating actions, including the benefit of automation and restructuring actions, as well as commercial negotiations. Restructuring costs were elevated in the first quarter, reflecting future plant closures in Europe to improve our manufacturing costs. Our restructuring cost guidance for the full year remains unchanged.

Jason: While the vast majority of our contractual labor cost increases took effect in the beginning of the year certain contracts become effective in the second quarter.

Jason: In the second half of the year, we expect margins to improve through a combination of operating actions, including the benefit of automation and restructuring actions as well as commercial negotiations.

Jason: Restructuring costs were elevated in the first quarter, reflecting future plant closures in Europe to improve our manufacturing cost structure our.

Our restructuring cost guidance for the full year remains unchanged.

Jason Cardew: Despite our expectations for flat industry volumes, we are forecasting our fourth consecutive year of higher sales and operating earnings. Earnings per share will increase due to the higher earnings as well as the lower share count from our share repurchase program. Moving to slide 18, we highlight our commitment to continue to return capital to shareholders. Since initiating the share repurchase program in 2011, we have repurchased over $5.2 billion worth of shares and returned approximately 85% of free cash flow to shareholders through repurchases and dividends.

Jason: Despite our expectations for flat industry volumes, we are forecasting our fourth consecutive year of higher sales and operating earnings.

Jason: Earnings per share will increase due to the higher earnings as well as a lower share count from our share repurchase program.

Jason: Yeah.

Moving to slide 18, we highlight our commitment to continue to return capital to shareholders since initiating the share repurchase program in 2011, we have repurchased over $5 $2 billion worth of shares and returned approximately 85% of free cash flow to shareholders through repurchases and dividends.

Jason Cardew: They're targeting a free cash flow conversion of approximately 85% in 2024, which will support continued share repurchase. We remain committed to returning excess cash to our shareholders, having repurchased $30 million worth of stock in the first quarter and will continue to repurchase additional shares throughout our quiet period. In February, Lear's board increased the share repurchase authorization to $1.5 billion and extended the authorization period through December 31st, 2020. Now, I'll turn it back to Ray for some closing thoughts. Please turn to slide 20.

Jason: We are targeting free cash flow conversion of approximately 85% in 2024, which will support continued share repurchases.

Jason: We remain committed to returning excess cash to our shareholders, having repurchased $30 million worth of stock in the first quarter and continued to repurchase additional shares throughout our quiet period.

Jason: In February Lear's board increased the share repurchase authorization to $1 5 billion and extended the authorization period through December 31.

Jason: 2026, now I'll turn it back to Ray for some closing thoughts.

Jason.

Raymond E. Scott: Please turn to slide 20, we started the year off strong with first quarter record revenue and continued margin improvements in E systems.

Raymond E. Scott: We started the year off strong with first quarter record revenue and continued margin improvements in each system. As Jason just mentioned, our board approved an increase and extension of our repurchase plan, reaffirming our commitment to returning cash to shareholders. Both businesses continue to diversify their customer base with key awards, and our momentum in thermal comfort systems is accelerating. Beginning with our Lear Forward initiative, we identified creative solutions to reduce cost and improve operational efficiency.

Raymond E. Scott: As Jason just mentioned our board approved an increase and extension of our repurchase plan. We are reaffirming our commitment to returning cash to shareholders. Both businesses continued to diversify their customer base with key awards and our momentum and thermal comfort systems is accelerating.

Raymond E. Scott: Beginning with our Alere forward initiative, we identified creative solutions to reduce cost and improve operational efficiencies. We also identified a much larger opportunity to accelerate could use of automation and digital tools.

Raymond E. Scott: We also identified a much larger opportunity to accelerate the use of automation and digital tools. Idea by Lear is a significant evolution of our broader strategy to grow seeding in these systems and extend our leadership positions in operational excellence. Accelerating the use of vision systems, robotics, and software will enhance our competitive advantage and enable innovation to further drive returns and improve margins. Now, we'd be happy to take your questions.

Raymond E. Scott: Again by Lear is a significant evolution of our broader strategy to grow seating and E systems and extend our leadership positions.

Raymond E. Scott: Positioning and operational excellence.

Raymond E. Scott: Accelerating use of vision systems robotics, and software will enhance our competitive advantage and enable innovation to further drive returns and improve margins and now we'd be happy to take your questions.

Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your question, you may press star and two. At this time, we'll pause momentarily to assemble the roster, and our first question today comes from Joseph Spak from UBS.

Ladies and gentlemen at this time well begin the question and answer session to ask a question you May press star and one on a touchtone telephone. If you are using a speaker phone. We do ask that you place took up the handset prior to pressing the keys to ensure the best sound quality.

So let's draw your question you May press Star two.

Raymond E. Scott: At this time, we will pause momentarily to assemble the roster.

Raymond E. Scott: And our first question today comes from Joe Spak from UBS. Please go ahead with your question.

Joseph Robert Spak: Thanks. Good morning, everyone. I guess just to start, 10% growth over marketing systems. A good start to the year. Can you just again, sort of go over the drivers there again and how we should really think about the balance of the year in the cadence, because it looks like you've got a little bit of a tougher year over year comp, if you will, next quarter, and then maybe a little bit easier in the back of the half, but some color on sort of what you're expecting in that business for the year would be helpful.

Joseph Robert Spak: Hi, Thanks, good morning, everyone.

Joe Spak: Yeah.

Joseph Robert Spak: I guess just to start a 10% growth of our market knee systems.

Joseph Robert Spak: Start to the year can you just again sort of go over the drivers there again and how we should really think about the balance of the year.

Joseph Robert Spak: The cadence because it looks like you've got a little bit about that.

Joseph Robert Spak: Or year over year comp if you all next quarter, and then maybe a little bit easier in the back half, but some some color on sort of what you're expecting in that business for the year would be helpful.

Jason Cardew: Yeah, there really were two drivers in the first quarter. It was a combination of the backlog and some favorable production volumes on some of our top platforms, which we highlighted in the prepared remarks. As we look at the balance of the year, I think you sized it up about right. We do expect that 10 points of growth over market to moderate, and we would expect for the full year to be about five points of growth over market in each system. So, a strong, solid year overall, but certainly, the first quarter will be the highest from a growth over market perspective based on our assumptions right now.

Speaker Change: Yeah, there really were two drivers in the first quarter. It was a combination of the backlog and some favorable production volumes on some of our top platforms, which we highlighted in the prepared remarks as we look at the balance of the year I think you sized it up about right. We do expect that that 10 points of growth.

Speaker Change: Market to moderate and we would expect for the full year.

To be about five points of growth over market.

Speaker Change: Any system, so strong solid year overall, but certainly the first quarter will be the highest from a growth over market perspective based on our assumptions right now.

Joseph Robert Spak: Okay. And then, if I could just pick just one, I guess a little bit bigger picture. You know, you talked about the restructuring. It sounds like it's related to some European policy actions. So can you just remind us of your, I guess, restructuring plans for the year, if you think you need to do more there. And then also, you know, Ray, you talked about, you know, the idea by Lear, higher automation, you had a recent string of acquisitions, there are also some organic efforts. How should we think about this going forward? Like as you automate and automate more, should we also expect a corresponding increase in restructuring to implement that automation?

Okay.

Speaker Change: And then if I could just one I guess, a little bit bigger picture.

Speaker Change: When you talked about the restructuring it sounds like it's related to some European plant actions. So can you just remind us.

I guess restructuring plans for the year. If you think you need to do more there and then also you know Ray you talked about the idea of Bally air higher automation.

Speaker Change: You had a recent string of acquisitions. There are also some organic efforts.

Speaker Change: Should we think about this going forward like as you automate and automate more should we also expect a corresponding increase in restructuring to implement that automation.

Jason Cardew: Let me start with that.

Jason Cardew: Here we start with the restructuring outlook for this year. Our guidance is 125 million euros, and we did, you know, it was very front-end loaded as expected, and the second quarter will likely be pretty significant as well, and really it's focused on Europe.

Raymond E. Scott: Yeah, let me start with the restructuring outlook for this year.

Speaker Change: Our guidance is $125 million and we did you know it was very front.

Speaker Change: Front end loaded as expected in the second quarter will be likely pretty significant as well and and really its focused on Europe.

Jason Cardew: You know, we're still, what, 20, more than 20% below the production peak in the European market from 2017 and, I think, still 18% lower than where that was pre-COVID, and so we've been steadily restructuring our operations to realign to the lower volumes in Europe, but we also see a tremendous opportunity to reduce costs by shifting our footprint from Eastern Europe to North Africa, and we're doing that pretty much across the board. When we acquired IHB and Kongsberg, they did have some higher-cost facilities in Eastern Europe. We have launched a new facility in Tunisia that will significantly improve the performance of that business. We're also moving sea covers from Eastern Europe to North Africa.

Speaker Change: We're still what 28 more than 20% below the the the production peak in the European market and from 2017, and I think still 18% lower than where that was pre COVID-19 and so we've been steadily.

Speaker Change: Restructuring our operations to realign to the lower lower volumes in Europe, but we also see tremendous opportunity to reduce cost by shifting our footprint from eastern Europe to North Africa, and we're doing that pretty much across the board.

When we acquired <unk> and consequently, they did have some higher cost facilities in eastern Europe, we have watched a new facility in Tunisia that will significantly improve the performance of that business and.

Speaker Change: We're also moving see covers from eastern Europe to North Africa, we're moving wire pretty aggressively from eastern Europe to a.

Jason Cardew: We're moving wire pretty aggressively from Eastern Europe to Morocco, and so there's still a lot of kind of runway there in terms of just an opportunity to reduce our manufacturing costs by shifting the footprint. So it's a combination of those two things and then the third point on restructuring is just the impact of some of our customers' sourcing decisions. For example, we've had programs where the customer has built out in a production plant where we had the JIT business today and they're not replacing it, or they're replacing that program in a different facility. And so it's resulted in the closure of a couple of our just-in So those are sort of the kind of drivers of restructuring. Maybe Rick can talk a little bit about the idea.

Speaker Change: Morocco, and so there's still a lot of kind of runway there in terms of just an opportunity to reduce our manufacturing costs through shifting the footprint. So it's a combination of those two things and then the third point on our restructuring is just the impact of some of our customers sourcing decisions.

Speaker Change: So for example, we've had programs where the customer has built out in and in a production plant, where we had the chip business today, and they're not replacing it or they're replacing that program in a different facility until it's resolved and the closure of a couple of our just in time plants in Europe.

Speaker Change: Which won't really have an operating income benefit associated with them, but it's an action we have to take down the loss. So those are sort of the kind of the drivers of restructuring maybe.

Speaker Change: Ray can talk a little bit about idea, yes, I think.

Raymond E. Scott: Yeah, I think what's important and we've been working on this strategy for multiple years, and I think the inorganic nature of bringing in some very, very selective partners and acquisitions has really helped us really discover opportunities even within how we purchase capital. And capital, you know, as we're looking at capital, it is coming in significantly lower as we're designing our own specific capital for our own specific needs around multiple different platforms, and so we're The efficiencies within the plant and how we scale these things across the different facilities, both in these systems and seeding, not only prove the cost, like the, you know, the reduction of labor heads within the plants, but also, the work that is there is much better improved from an ergonomics, safety, throughput, and quality standpoint.

Raymond E. Scott: What what's important and we've been working on this strategy for multiple years and I think the inorganic nature of bringing in some very very selective partners and acquisitions has really helped us really discover opportunities.

Raymond E. Scott: Even within how we purchase capital and capital.

Raymond E. Scott: As we're looking at capital is coming in significantly lower as we're designing our own specific capital for one specific needs.

Raymond E. Scott: Around multiple different platforms, and so we're seeing benefits on lower capital cost.

Raymond E. Scott: Efficiencies within the plant and how we scale these things across the different facilities, both in E systems and seating not only improve the costs the reduction of labor heads within the plants, but also.

Raymond E. Scott: The work that is there is much better improved from ergonomic safety throughput quality. So those are generating great benefits for us.

Raymond E. Scott: So those changes are generating great benefits for us. And the way we're looking at this, and I described it in my overview, is that plant centering existence today, particularly an example with a just-in-time facility, where we're able to automate from finesse all the way till the customer's delivery is a significant opportunity, because labor is very scarce today around the world. That helps us gap out from an efficiency standpoint, and it's deployed in a way that we have a And so we are very selective about where we're deploying capital. It's based on, you know, customer needs and volume at that particular time, and it is very selective how we're implementing it.

Raymond E. Scott: The way we're looking at this and I described it in my overview as planned.

Raymond E. Scott: <unk> existence today, particularly like an example, with a just in time facility, we're able to automate from finance all the wait till the customer's delivery is a significant opportunity because labor is very scarce today around the world that it helps us gap out from an efficiency standpoint, and is deployed in a way that we have a customer contract and we're <unk>.

Raymond E. Scott: <unk> on those particular contracts that we have in place and so we are very selective on where we're deploying the capital it's based on customer needs and volume at that particular time and it is very selective.

Raymond E. Scott: So it has been very beneficial in the short term. And I think that, I do believe this, companies that are looking at this very, very proactively and strategically will be in a much better position three to five years from now. This labor scarcity is a real issue, and it isn't just selective to one area. It's around the world, and the attractiveness of manufacturing jobs is declining, while the need for output or manufacturing is increasing.

Raymond E. Scott: Implementing it and so it has been very beneficial short term and I think that I do believe this that companies that are looking at this very very proactively and strategically will be in a much better position.

Raymond E. Scott: Three to five years from now this labor scarcity is a real issue and it isn't just elected to one area. It's around the world and the attractiveness to manufacturing jobs is declining and the need for output or manufacturing is increasing and so those that are in a much more flexible better position when it comes to automation.

Raymond E. Scott: And so those that are in a much more flexible, better position when it comes to automation and ideas or industry 4.0 are going to survive. And so it's been very successful. It's one of the reasons why we look at our quarter over quarter expectations of improvements. Not just this year, but the coming years, it's really paying dividends.

Raymond E. Scott: And I.

Raymond E. Scott: Idea or industry four <unk> are going to are going to survive and so it's been very successful. It's one of the reasons why we look at our quarter over quarter expectations, but improvements not just this year, but the out years, it's really paying dividends.

Jason Cardew: In terms of the last part of your question and how it will impact restructuring going forward, I wouldn't say that, near term, it's a meaningful impact on restructuring. A lot of the head count changes that happen as a result of automation will come out through normal attrition. There is turnover in our facilities, and so that is a factor as well. It's not to say that there won't be some level of restructuring, but it's not going to move the needle in the near term.

Speaker Change: In terms of the last part of your question and how it will impact restructuring going forward I wouldn't say that near term, it's a meaningful impact on restructuring a lot of the.

Speaker Change: The head count changes that happened as a result of automation will.

Speaker Change: We will come out through normal attrition you know there is turnover in our facilities.

Speaker Change: And so that that is a factor as well and that's not to say that there won't be some level of restructuring but.

Speaker Change: It's not going to move the needle in the near term.

Speaker Change: Okay. Thanks, a lot guys.

Operator: Our next question comes from John Murphy from Bank of America. Please go ahead.

Speaker Change: Welcome.

Speaker Change: Our next question comes from John Murphy from Bank of America. Please go ahead.

John Joseph Murphy: Good morning guys. I just want to follow up on your question on this automation front. I mean, could you give us a rough estimate of how much of your operating cost is made up by labor? And then if you think about, you know, automation, does that, ultimately, over time, just replace it one for one? Or is there an opportunity to potentially take those costs down on that basis? Obviously, one would be capitalized, and one would be operating expenses, but just, you know, long term, you know, what the output could ultimately be.

John Joseph Murphy: Good morning, guys just want to follow up on that.

John Joseph Murphy: Good morning.

John Joseph Murphy: Question on this automation front I mean could you give us a rough estimate of how much of your operating cost is made up by labor and then as you think about automation does that ultimately over time just replace it one for one or is there an opportunity to.

John Joseph Murphy: Take those costs down on a net basis, obviously recognize one will be capitalized won't be operating expense, but just.

John Joseph Murphy: Long term, what the delta could ultimately be.

Jason Cardew: Yeah, in terms of terms, I'd rather not go into specifics on labor as a percentage of sales, because each subset of the seeding and e-systems business is a little bit different. You know, for example, in electronics, there's very little labor content today; it's already fully automated. I will say our most automated, our most labor-intensive operations are in wire and cut and sew. And we're working on automation solutions that will have a meaningful impact on labor content there, longer term.

Speaker Change: Yeah in terms of I'd, rather not go into specifics on labor.

Speaker Change: A percentage of sales to each subset of seating and E systems business is a little bit different for example, electronics there is very little labor content today, it's already fully automated I will say, our most automated our most labor intensive operations are and wire and cut and sew and where we're working on automation. So.

Speaker Change: <unk> that will have a meaningful impact on labor content there longer term in the near term. The biggest benefits are coming in are just in time.

Jason Cardew: In the near term, the biggest benefits are coming in our just-in-time seed plants, where you're seeing sort of the full effect of the acquisitions from ASI and InTouch and now WIP helping to accelerate our ability to automate a lot of the steps in the just-in-time seed process. In addition to that, modularity is a big driver of taking labor out of the higher-cost JIT facilities as well. And then with Tagora and what we're doing on the leather side, we're also seeing significant improvements in labor costs in that part of the business.

Speaker Change: The plants are you seeing sort of the full effect of.

John Joseph Murphy: The acquisitions from ASI, and then touch on our wip, helping to accelerate our ability to automate.

John Joseph Murphy: A lot of the steps and the just the time feed process. In addition to that modularity.

John Joseph Murphy: Driver of taking labor out of the higher cost debt facilities.

John Joseph Murphy: Well and then with the GOR of what we're doing with <unk>.

John Joseph Murphy: On the leather side, we're also seeing significant improvements in labor cost in that part of the business. The way, we're primarily looking at automation John as a catalyst for.

Jason Cardew: The way we're primarily looking at automation, John, is as a catalyst for, you know, offsetting wage inflation and driving higher margins longer term, driving that positive net performance in both business segments. That's, that's what we're, what we're focused on.

John Joseph Murphy: Offsetting wage inflation in driving higher margins longer term.

John Joseph Murphy: Driving that positive net performance in both business segments.

John Joseph Murphy: That's what we're <unk>.

Raymond E. Scott: I think John would talk a little bit about this, this automation, not only does it change the manufacturing footprint and the concept of how you manufacture products in the plant, but the product itself. I think the significant announcement that we made on the development program with Ford Motor Company is significant because we will automate that module. The assembly of the components into the trim cover will be automated.

John Joseph Murphy: John and talk a little bit about this is this automation not only does it change the manufacturing footprint in the concept of how you manufacture products in the plant, but it is the product itself.

Speaker Change: Thats significant.

Speaker Change: Announcement that we made in the development program with Ford Motor Company is significant because we will automate that module the automation of the components into the trim cover will be automated.

Raymond E. Scott: The, the redeployment of that labor out of a JIT facility into what we consider to be more of a spoken hub concept where you can scale it properly across multiple platforms is the future. And so it's a combination of what we love is our design engineering and manufacturing capabilities coupled with this advanced and really quick pace of technology and innovation within the manufacturing plant. They fit together.

Speaker Change: The redeployment of that labor out of a jet facility into what we consider to be more of a spoken hub concept, where you can scale it.

Speaker Change: Properly across multiple platforms is the future and so it's a combination.

Speaker Change: We love is our design engineering and manufacturing capabilities, coupled with this advanced in really quick pace of technology and innovation within the manufacturing plant. They fit together with the partnership that we have with Palin tier with what we're doing on the shop floor and what we're doing with the visual systems.

John Joseph Murphy: The partnership that we have with Palantir, with what we're doing on the shop floor, what we're doing with visual systems and automation, it's coupled with our designs. And so everything that we're doing, the acquisitions we've made on the product side, are complementary to what we're doing on the manufacturing side. And I couldn't be more happy with where we're at or excited about where we're at with the modular concept and seating.

Speaker Change: Nation, it's coupled with our designs and so everything that we're doing the acquisitions. We've made on the product side were complementary to what we're doing on the manufacturing side.

Speaker Change: And I couldnt be more happy with where we're at are excited with where we're at with the modular concept in seating every customer is moving at a little different pace. Some are still sourcing individual components.

John Joseph Murphy: Every customer is moving at a slightly different pace. Some are still sourcing individual components, which is fine, but we have 11 customers that we're working on right now with modular concepts that combine that automation within the plant with the components themselves and the product itself. And so we're just going to keep steadfast on what we're doing. We know that the success we've had in a short period of time will continue to accelerate, but it is a combination of the manufacturing plant coupled with our expertise in engineering design and changing the product designs for a much more modular approach that will where we'll be successful.

Speaker Change: <unk> is fine, but we have 11 customers that we're working on right now with modular concepts that combined net automation within the plan with the components itself and the product itself and so.

Speaker Change: We're just going to keep steadfast in what we're doing we know that the success. We've had in a short period of time will continue to accelerate but it is a combination of the manufacturing plant coupled with our expertise in engineering design and changing the product designs for a much more modular approach is where we'll be successful.

Jason Cardew: Great. And I hate to put you on this, but, like, I mean, it sounds like you guys are doing all the right stuff. But I mean, is this ultimately, Ray, as you think about this, sort of a necessary course of action to remain competitive and grow the business over time? Or do you think you could pick up a couple hundred basis points of margin expansion from this automation, you know, these automation actions alone?

Speaker Change: Great.

Speaker Change: And I hate to put you on this but like I mean, it sounds like you guys are doing all the right stuff, but I mean is this ultimately raise you think about this sort of a necessary course of action to remain competitive and grow the business over time or do you think you can pick up a couple of hundred basis points of margin expansion from from this automation.

Speaker Change: And you know automation actions alone I mean, I'm, just trying to understand where the ultimately the you're doing all the right soft clearly and probably with the global way ahead of the curve on this stuff just trying to say, where it's going to land.

Jason Cardew: I mean, I'm just trying to understand where, you know, ultimately the, I mean, you're doing all the right stuff, clearly, and probably ahead of the curve or way ahead of the curve on this stuff. I'm just trying to understand where it's going to land.

Speaker Change: Yes.

Jason Cardew: John, I'll start; Ray probably has some additional comments, but I look at this as a key enabler to achieving the margin targets we've communicated, the midterm target in seeding of 8% and 7% in e-systems, sorry, 8% in e-systems as well, and 8.5 plus percent in seeding longer term. And so it's not necessarily, you know, 100 base points, 200 base points beyond that.

Speaker Change: John I'll start probably have some additional comments, but I look at this as a key enabler to achieving the margin targets, we've communicated the midterm target and seeding of 8% and 7% of new systems I'm, sorry at 8% of new systems as well, an eight five plus percent longer term.

Speaker Change: In seating and so it's it's not necessarily a 100 basis points 200 basis points beyond that.

Raymond E. Scott: It's a key competitive differentiator that allows us to grow the business, achieve the four points and six points of growth over market targets that we've established in both segments, and a key enabler to hit the margin targets that we've communicated. I love the way Jason goes about it, and it's good, but, you know, I'm going to tell you that I love what we're doing on the manufacturing side. We have to move faster; we're pushing harder.

Speaker Change: It's a key competitive differentiator that allows us to grow the business achieved four points to six points of growth over market targets established in both segments and a key enabler to hit the margin targets that we've communicated.

Speaker Change: I Love I Love the way, Jason goes at it and it's good but.

Speaker Change: I'm going to tell you that I love, what we're doing in the manufacturing side, we have to move faster and we're pushing harder I agree that right now we haven't changed our targets long term I think there's a benefit.

Raymond E. Scott: I agree that right now, we haven't changed our targets long term. I think there's a benefit, you know, obviously, to gapping out where we're at short term, but I think, longer term, John, to answer your question, it is about survival.

Speaker Change: Obviously, the gapping out where rent short term, but I think longer term to Jon to answer. Your question. It is about survival I think that those companies that have this capability will be the companies that survive and then there'll be the companies that did not move in this direction fast enough, we will be looking at on the outside looking in and so one is the short term how we get it.

Raymond E. Scott: I think that those companies that have this capability will be the companies that survive, and then they'll be the companies that did not move in this direction fast enough, and we'll be looking outside, looking in. And so one is this short term, how we get at some of the expectations. When you can go in and tell your customer that you are the most cost competitive in the world, it's a powerful statement, and you can do that with analytics and data. It's strong, both commercially and in how you win business.

Speaker Change: Some of the expectations when you could go in and tell your customer that you are the most cost competitive in the world.

Speaker Change: It's a powerful statement and you can do that with analytics and data it's strong both commercially and how you win business and I think we've proven both sides of those longer term I think those companies that have this advantage will be the one standing and so we're pushing fast we're thinking differently and we're driving accountability throughout the organization. So we went out.

Raymond E. Scott: And I think we've proven both sides of those. In the long term, I think those companies that have this advantage will be the ones standing. And so, you know, we're pushing fast, we're thinking differently, and we're driving accountability throughout the organization. So, you know, we want to outperform those numbers. I think this is an area that we can accelerate, but right now, we're staying steadfast short term on the target

Speaker Change: Outperform those numbers.

Speaker Change: I think this is an area that we can accelerate but right now we're staying steadfast short term on the targets that we've given.

Speaker Change: That's helpful. Just one follow up on the tier two and three supply base, they're facing the same labor challenges well, we're hearing a little bit of stress down there maybe below your guys in tier two and three supply basin really because of labor shortages as well.

John Joseph Murphy: That's awful. Just one follow-up. On the Tier 2 and 3 supply base, they're facing the same labor challenges as well. We're hearing a little bit of stress down there below you guys, really because of labor shortages as well as the cost of labor. I just wonder if you could comment on that, what you've been hearing more lately, and if that is constraining production right through the value chain, or is that something that you guys are able to handle with the help of your automaker customers?

Speaker Change: Cost of Labor I, just wonder if you could comment on that.

Speaker Change: What youre hearing more lately and if that is constraining production right through the value chain or is that something that you guys are able to handle with you to help your automaker customers.

Speaker Change: What youre hearing is accurate I think throughout the supply chain.

Speaker Change: Labor scarcity is a significant issue and it depends on regions, but it's generally across the board when you talk about just.

Speaker Change: Different types of.

John Joseph Murphy: I think what you're hearing is accurate. I think throughout the supply chain, labor scarcity is a significant issue. It depends on regions, but it's generally across the board when you talk about different types of metrics based on turnover or absenteeism or lack of workers.

Speaker Change: Metrics based on turnover or absenteeism or lack of workers and so that is an issue. We're working with our suppliers, we've been able to balance it but it has been an issue I think throughout the supply base for for all Oems.

Speaker Change: That we're seeing I would say just to add to that the level of component cost inflation that we're seeing this year.

Jason Cardew: That is an issue. We're working with our suppliers. We've been able to balance it, but it has been an issue, I think, throughout the supply base for all the OEMs that we're seeing. I would say just to add to that the level of component cost inflation that we're seeing this year is less than what we've experienced over the last number of years. So you're seeing some moderation on the commodity side and then maybe some acceleration on the labor side, and the two are slightly positive when taken together overall. That's incredibly helpful. Thank you, guys.

Speaker Change: Less than what we've experienced over the last number of years. So youre seeing some moderation on the commodity side and then maybe some acceleration on the labor side and the two are slightly positive when taken together overall that's incredibly helpful. Thank you guys.

Speaker Change: Yep. Thanks.

Speaker Change: Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question.

Colin M. Langan: Thanks for taking my questions.

Colin M. Langan: Maybe if you could talk a little bit about the cadence of margins through the year.

Colin M. Langan: Called out in your commentary and increase in labor and engineering into Q2, I would've expected maybe margins improve as that kind of offset any way to quantify how much of a track that might be as we think sequentially.

Operator: Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question.

Colin M. Langan: Thanks for taking my questions. One, maybe if you could talk a little bit about the cadence of margins through the year. You called out in your commentary an increase in labor and engineering into Q2. I would have expected maybe margins to improve. Is that going to offset any way to quantify how much of a drag that might be as we think sequentially?

Speaker Change: Yes, so we didn't provide pinpoint guidance for for each quarter, but we did say, we do expect both segments to be flat or slightly up in the second quarter and so the sort of composition of that you have volume and backlog, which we think will be a tailwind from Q1 to Q2.

Jason Cardew: Yeah so you know we didn't provide pinpoint guidance for for each quarter but we did say we do expect both segments to be flat or slightly up in the second quarter and for the sort of composition of that you had volume and backlog which we think will be a tailwind from Q1 to Q2. We do expect revenues to be higher in the second quarter than the first quarter and then we do expect the margin increase associated with the volume to be offset by the wage economics and engineering so those two are sort of a push in in the higher margins in the second quarter result more from the operating actions and the commercial negotiations that are ongoing so some of the restructuring savings associated with actions we took at the end of last year and beginning of this year various performance improvement actions that we're taking in in our entire business you know thermal comfort for example I talked about shifting the footprint from Eastern Europe to North Africa but we also have additional synergies of integrating IGV and Kongsberg into Lear.

Speaker Change: Do expect revenues to be higher in the second quarter than the first quarter.

Colin M. Langan: And then we do expect the margin increase.

Colin M. Langan: With the volume to be offset by the wage economics and engineering. So those two are sort of a push in the higher margins in the second quarter resolved more from the operating actions in the commercial negotiations that are ongoing so some of the restructuring savings associated with actions. We took at the end of last year and the beginning of this year.

Colin M. Langan: Various performance improvement.

Colin M. Langan: Actions that we're taking in and our entire business thermal comfort for example, I talked about shifting the footprint.

Colin M. Langan: From Eastern Europe to North Africa, but we also have additional synergies integrating IGT and <unk> and Alere.

Colin M. Langan: We also have lower operating costs in our leather business from deployment of <unk> technology, and then we have lower labor costs in Europe through the deployment of <unk> foundry tool and our European seeding plants, that's going to that will benefit us as we move throughout the year.

Jason Cardew: We also have lower operating costs in our leather business from deployment of the Figura technology and then we have lower labor costs in Europe through the deployment of Palantir's foundry tool in our European seeding plants that's going to that will sort of benefit us as we move throughout the year. As we look at the second half compared to the first half we do expect revenues to be flat to slightly up from the first half to the second half really driven by the backlog being you know favorable and more back end loaded and offset by lower production volumes assumed in the second half of the year so you have the normal seasonality in Europe and to a lesser extent in North America with downtime around the middle of the year and into August in Europe and then just fewer production days say in the fourth quarter than the second quarter that that lead to that lower production volume overall and then perhaps maybe a little bit of a hedge just on demand related volume assumptions in the in the tail end of the year where there could be a little bit of upside if demand holds up.

Colin M. Langan: As we look at the second half compared to the first half we do expect revenues to be flat to slightly up from the first half to the second half really driven by the backlog being favorable and more backend loaded.

Colin M. Langan: And offset by lower production volumes assumed in the second half of the year. So you have the normal seasonality in Europe and to a lesser extent in North America with downtime around the middle of the year and into August in Europe.

Colin M. Langan: And then just fewer production days say in the fourth quarter than the second quarter, but that lead to that lower production volume overall, and then perhaps maybe a little bit of a hedge just on demand related volume assumptions.

Colin M. Langan: And the tail end of the year, where there could be a little bit of upside if demand holds up and I think if you look at IHS and this volume cadence kind of quarter to quarter.

Colin M. Langan: Our revenues will sort of mirror that at least the volume assumptions on our platforms.

Jason Cardew: I think if you look at IHS's volume cadence, you know, kind of quarter to quarter, our revenues will sort of mirror that, or at least the volume assumptions on our platforms will sort of mirror that throughout the year.

Colin M. Langan: Mirror that through throughout the year.

Speaker Change: Just to follow up, but you said flat to slightly up quarter over quarter, but revenue up does that mean percent margins are flat to down.

Colin M. Langan: Just a follow-up, you said flat to slightly up quarter over quarter, but revenue up; does that mean percent margins are flat to down?

Colin M. Langan: Yeah.

Colin M. Langan: Again, we werent looking to provide pinpoint guidance, but we would expect operating margins to be higher in the second quarter than the first quarter. I think it's also important to point out that we have a number of commercial negotiations that are ongoing and so I would say that there is a wider range than usual in both of our business segments.

Jason Cardew: Again, Colin, we weren't looking to provide pinpoint guidance, but we would expect offering margins to be higher in the second quarter than in the first quarter. I think it's also important to point out that we have a number of commercial negotiations that are ongoing. And so I would say that there is a wider range than usual in both of our business segments in terms of how this will play out quarter to quarter, maybe a little choppier than it ordinarily would.

Colin M. Langan: Of how this will play out quarter to quarter may be a little choppy here than it ordinarily what we're very focused on sustainable agreements piece price adjustments with our customer to reflect things like wage inflation.

Colin M. Langan: Rather than lump sum and we're not going to sacrifice on a deal to hit a number in a quarter. We're focused on doing the right thing for the business.

Jason Cardew: We're very focused on sustainable agreements, peace price adjustments with our customers to reflect things like wage inflation rather than lump sum. And we're not going to sacrifice on a deal to hit a number in a quarter. We're focused on doing the right thing for the business for the long term. And so that could lead to a little bit of choppiness in the quarter.

Colin M. Langan: For the long term and so that because we do a little bit of choppiness in the quarter and as we always do later in the quarter, we'll provide an update at a public investor event on how we see the quarter playing out.

Speaker Change: Got it and just lastly, any color on the recoveries some of the automakers are making pretty aggressive comments around like no more claims.

Colin M. Langan: Got it. And lastly, any color on the recovery?

Colin M. Langan: Is there any change in terms of your expectations for coverage at this point.

Jason Cardew: Yeah, no, we haven't. I mean, yeah, okay, there are different customers who handle the negotiations differently. We've always kind of clearly communicated that. But from our perspective, you know, there haven't been significant changes.

Speaker Change: No we haven't.

Speaker Change: I mean, yes, okay, there's different customers handled the negotiations differently, we've always kind of clearly communicated that in.

Speaker Change: But from our perspective, there hasnt been significant changes.

Raymond E. Scott: You know, when you boil it down, we said this before, we have a lot of data and facts around being very cost competitive. I think when you have situations and you're going in asking for a recovery and you're not cost competitive, you're not minding your own house, you don't have your own costs under control, and you're asking for additional other costs, it makes it very challenging for resolution or clarity on how you resolve it. You know, our position is always to be the most cost competitive; have the data, have the facts, present your case. And We've been very successful.

Speaker Change: When you when you boil it down and we said this before we have a lot of data and facts around being very cost competitive I think when you have situations youre going in asking for a recovery and you're not cost competitive youre not minding your own house, you don't have your own cost under control and asking for additional other costs at <unk>.

Speaker Change: It very challenging.

Speaker Change: For resolution or clarity on how you resolve it.

Speaker Change: Our position is always be the most cost competitive have the data have the facts present your case and we've been very successful to Jason's point. There is a time element on how we negotiate across the board and like I said I don't see significant changes in how we're negotiating with our customers, we're resolving them, but we will not take.

Jason Cardew: To Jason's point, you know, there's a time element to how we negotiate across the board. And like I said, I don't see significant changes in how we're negotiating with our customers or resolving them. We do not take a bad deal where we might feel pressured into resolving it for only quarterly results. We're doing it with the intent to protect the business and make sure that we're driving sustainability, and it's the best result for Lear Corporation based on the facts. And so, you know, each customer handles it differently. Some are more open externally and focused on kind of how they're setting it up.

Speaker Change: A bad deal, where we might feel pressured into resolving it for only quarterly results. We're doing it with the intent to protect the business and to make sure that we're driving sustainability in this the best result for Lear Corporation based on the facts and so.

Speaker Change: Each customer handles are definitely some some are more open externally and focused on kind of how they are setting it up but.

Colin M. Langan: But we haven't seen significant changes, and I think we're in a good position. I think each one of our negotiations is, you know, moving in the right direction. I'm very optimistic about it. But, you know, it's more, like Jason said, the timing of how we want to resolve these. We will not jump at a particular time event to try to resolve something quickly to set up a quarter or close in a quarter. So we're focused on the long term.

Speaker Change: We haven't seen significant changes and I think we're in a good position I think each one of our negotiations are.

Speaker Change: Moving in the right direction I'm very optimistic about it but it's more like Jason said the timing of how we want to resolve these we will not jump it up particular time event to drive results something quickly too.

Speaker Change: Set up a quarter or as a result of the quarter. So we're focused on long term.

Speaker Change: Got it alright, thanks for taking my questions.

Speaker Change: Welcome.

Speaker Change: Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question.

Jason Cardew: Got it. All right. Thanks for taking my question. Welcome.

Operator: Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question.

James Albert Picariello: Hey, good morning, everybody.

James Albert Picariello: Hi, good morning, just a.

James Albert Picariello: Morning. Morning. Morning.

James Albert Picariello: Just on the on the new business backlog contribution across the two segments.

James Albert Picariello: Backlog Contribution across the two segments, is the $700 million proceeding and $500 million free system still the right number? I mean, I know you touched on this, but can you just speak to the visibility in the stronger run-up?

James Albert Picariello: 700 million proceeding and 593 systems still the.

Speaker Change: Alright number.

Speaker Change: I know you touched on this but can you just speak to the visibility.

Speaker Change: And the stronger run up.

James Albert Picariello: of New Launches Embedded for the Remainder of the Year, given

Speaker Change: New launches embedded for the remainder of the year, given the slower start which to be fair has been experienced across the broader supply chain in the first quarter.

Jason Cardew: Unknown Executive, Emmanuel Rosner, Ed Lowenfeld, Lear Corp., and the broader supply chain. Yeah, I'd say overall, you know, we're not updating the full-year backlog, but there have been some changes. I'll just give you one example, of course, with Fisker having, you know, no releases that we can see, and no plans to restart production, there was a modest impact on the backlog. We were pretty conservative in our volume assumption around that. So I think it's just about 35 million dollars of revenue that won't materialize. So that that's a bit negative.

Speaker Change: Yeah, I'd say overall.

Speaker Change: We're not updating the full year backlog, but there have been some changes I'll just give you. One example of course with what Fisker.

Speaker Change: Having no releases that we can see and no plans to restart production there was a modest impact on the backlog we were pretty conservative in our volume assumption around that so I think it's just about $35 million of revenue that won't materialize so that.

Speaker Change: That's a negative on the backlog.

James Albert Picariello: On the backlog, we're seeing a nice ramp-up on other programs that are important to the backlog. You know, on eSystems, we have the Blazer EV, the Honda Prologue, and the Acura ZDX. Those began ramping up at the very tail end of last year, and they've steadily increased in volumes throughout the first quarter, and now into the second quarter, they've taken another step up. That's an important driver of eSystems' backlog. Also, GM's ramp up of battery electric trucks is driving BDU revenue.

Speaker Change: We're seeing a nice ramp up on other programs that are important to the backlog on E systems, we have the blazer EV, the Honda prologue and the accuracy Dx.

Speaker Change: <unk> began ramping up the very tail end of last year and steadily increased and volumes throughout the first quarter and now into the second quarter they've taken another step up that's an important driver of E systems backlog also gms ramp up of the battery electric trucks driving the Btu revenue. So we have pretty good visibility at least through.

Speaker Change: The second quarter of how many of those are going to be produced.

James Albert Picariello: So we have pretty good visibility, at least through the second quarter, of how many of those are going to be produced. You know, on the seating side, the BMW 5 Series and i5 are kind of launching as anticipated. But as we looked at the backlog combined with our production assumptions on existing platforms, we felt very comfortable maintaining the midpoint of our full-year guidance overall. Got it. That's super helpful. And then just an update on two pieces in the guide. I think you have embedded a transactional FX headwind of 70 million. Just curious what your assessment is there with the first.

Speaker Change: On the seating side.

Speaker Change: The BMW five series and <unk> five is kind of watching as anticipated. The other programs in the seating backlog are performing consistent with what we expected the only other.

Speaker Change: Maybe modest change that we've seen which has an impact.

Speaker Change: On both the business segments since the timing and volume associated with the Volvo <unk> 90 launch I think they've talked about that publicly.

Speaker Change: There is some software challenges or other issues that they're working through that may impact the volumes on that platform.

Speaker Change: As we looked at the backlog combined with our production assumptions on existing platforms and felt very comfortable maintaining the midpoint of our full year guidance overall.

Speaker Change: Got it.

Speaker Change: And then.

Speaker Change: An update on two pieces in the guide I think you had embedded a transactional FX headwind to $70 million. Just curious what's your assessment is there with the first quarter behind US and then looking at layers commodities and net net performance bucket combined which totaled almost $30 million positive in the quarter can you just strip out commodities within that.

Jason Cardew: Lear's Commodities and Net Performance Bucket Comparison

Jason Cardew: Transcripts provided by Transcription Outsourcing, LLC, full year. Yeah, so in terms of transactional effects, there's been really no change in our full year guidance or full year assumption. What we're seeing unfold here in the first quarter and into the second quarter is consistent with what we guided to. And, so our hedge programs are working as anticipated, and the impact is still in that $75 million range for the full year. In terms of commodities, we expect a modest, positive impact for the full year, which is more in seeding than in these systems.

Speaker Change: And what's assumed for the full year commodity space.

Speaker Change: Yeah. So in terms of transactional FX theres been really no change in our full year guidance.

Speaker Change: Our full year assumption, what we're seeing.

Speaker Change: Unfolds here in the first quarter into the second quarter is consistent with what we guided to in <unk>.

Speaker Change: So our hedge programs working as anticipated and the impact is still in that $75 million range.

Speaker Change: For the full year.

Speaker Change: In terms of commodities, we expect a modest positive impact for the full year, which is more in seating and E systems and so the net performance that we're guiding to for the full year.

Jason Cardew: And so the net performance that we're guiding to for the full year is really driven in these systems more by, you know, what's happening on the operations side. And we talked a lot about restructuring and how that's impacting seeding, but also, in these systems, we're seeing the benefit of our restructuring savings, we're also seeing some improvements in our North America wire business, you know; we have a lot of launch activity. So as the year progresses, we expect to see meaningful improvements in operating costs in that sort of subsegment of these systems, as well.

Speaker Change: It was really driven at many systems more by what.

Speaker Change: What's happening on the operations side, and we've talked a lot about restructuring and how that's impacting.

Speaker Change: Seating, but also in E systems, we're seeing the benefit of our restructuring savings were also seeing.

Speaker Change: Some improvements in our North American wire business, we have a lot of launch activity. So as the year progresses, we expect to see meaningful improvements.

Speaker Change: Operating costs and that sort of sub segment of these systems as well and that's a kind of a key driver of enabler of of the net performance, we see knee systems, but we really see strong performance kind of across the board.

Jason Cardew: And that's kind of a key driver of the net performance we see in these systems, but we really see strong performance kind of across the board in these systems. And I think that was on full display there in the first quarter, and we expect more of the same as the year progresses.

Speaker Change: E systems, and I think that was on full display during the first quarter and we expect more of the same as the year progresses.

Operator: Our next question comes from Chris McNally from Evercore. Please go ahead with your question.

Speaker Change: Sure. Thanks.

Speaker Change: Welcome.

Speaker Change: Our next question comes from Chris Mcnally from Evercore. Please go. Please go ahead with your question.

Chris Mcnally: Thanks so much, team. I wanted to zoom out and maybe just do a little bit of a more high-level question, particularly around e-systems and electrical architecture. We've definitely been receiving lots of investor questions around sort of new zonal architectures. If you look at VW, you know, working with Xpeng in China, and just feel that China may be moving to sort of zonal architectures quicker than expected. I know you can't talk about specific customers, specific programs, but I would love to just have you comment on the content opportunity for Lear, particularly in China, in some of these new electrical architecture systems.

Chris Mcnally: Thanks, so much team.

Chris Mcnally: I wanted to zoom out and maybe just do a little bit more.

Chris Mcnally: More of a high level question, particularly around E systems and electrical architecture.

Chris Mcnally: We've definitely been receiving lots of investor questions around sort of news on our architecture is if you look at VW working with <unk> in China, and just a just a feel that China may be moving to sort of zonal architectures quickly unexpected.

Chris Mcnally: I know you can't talk about specific customer specific programs, but would love to just have you opine on the content opportunity for Lee or particularly in China and some of these new electrical architecture.

Chris Mcnally: Are they being done more in-house? You know, is there opportunity for some sort of, you know, next-gen technology from Lear itself? Because it seems like every couple of years, we always have this discussion around, you know, will wiring and traditional legacy tier ones get priced out of new architectures, and it doesn't seem to play out. So we just wanted to give you guys the floor to talk about what we see in China over the next couple of years.

Chris Mcnally: Are they being done more in house.

Chris Mcnally: Is there opportunity for sort of next Gen technology from Lear itself because it seems like every couple of years. We always have this discussion around wiring and traditional legacy tier ones get priced out of new architectures and it doesn't seem to play out. So I just wanted to give you guys. The Florida to talk about what we see in China over the <unk>.

Chris Mcnally: Couple of years.

Carl A. Esposito: Yeah, Carl Esposito's here. I'm going to let him kind of field that question.

Chris Mcnally: Yes.

Chris Mcnally: Esposito here I'm going to let him kind of feel that question.

Carl A. Esposito: We're actually working on three zonal architecture programs already with a number of customers from a technology and architecture perspective outside of China. So I think that we'll see some of those architectures migrate into China and some domestic development, and our teams on the ground there are communicating with customers to see where there are business opportunities for us. But we're fully participating in that shift to zonal architectures, and we're talking about how each customer is going to move at a different pace, and those zonal architectures are going to migrate at different levels of integration, so we're participating in that part of the market.

Esposito: We are actually working on three zonal architecture programs already with a number of customers.

Speaker Change: From a.

Speaker Change: Technology and architecture perspective.

Esposito: Outside of China, and so I think that we'll see some of those architectures migrate into China, and some domestic development and our teams on the ground communicated with customers to see where those business opportunities for us that we are fully participating in that shift to zonal architectures.

Esposito: We talked about each customer's going to move at a different pace.

Esposito: And there was one more protections are going to are going to migrate.

Esposito: Levels of integration.

Esposito: We're participating in a firming market and I think if there is any trends picking up from some of the.

Raymond E. Scott: I think if there are any trends picking up from some of the You know, trends that we saw in seeding, particularly with the Chinese, the domestic OEMs, is that initially there may be some insourcing or design engineering work that's done in-house, but the trend is that it has moved out. I mean, you know, particularly with seeding, what we saw was our innovation technology really resonated well with the domestics on the ground. And we are one of the fastest-growing, you know, seed companies of high-premium seeding within China.

Esposito: Trends that we saw in seating, particularly with the Chinese domestic Oems is that initially there may be some.

Esposito: In sourcing or design engineering work is done in house, but the trend is that it has moved down.

Esposito: Particularly with seating what we saw was our innovation technology really resonated well with the domestics on the ground.

Esposito: And one of the fastest growing.

Esposito: Seat of high premium seating within China, and I think we're seeing that very similar knee systems that initially there is there is the technology moves that.

Raymond E. Scott: And I think we're seeing that very similar in E-Systems, that initially there are the technology moves that, you know, may occur outside of China but then will quickly be replicated or moved to China. And I think we're going to see a very similar trend. And we're already picking up additional quotes within China on some of that technological innovation. The Chinese domestic core of the E-Systems business is really with Geely and their family of brands, Volvo, Polestar, Lincoln Co, etc.

Esposito: May occur outside of China, but then we'll quickly.

Esposito: Be replicated or move to China, and I think we're going to see a very similar trend and were already picking up additional quotes within China on some of that technology innovation. The Chinese domestic kind of core of the systems business is really with Julie and their family.

Esposito: Brands, Volvo Polestar, Mike and co et cetera, W and great wall.

Raymond E. Scott: FAW, and Great Wall, and FAIC, maybe to a lesser extent. And so we haven't seen that change in that customer group. So that's really where we have the most exposure. We don't have business with Xiaoping, so we're not involved in that architecture change specifically.

Esposito: Maybe to a lesser extent and so we haven't seen that change.

Esposito: That customer groups. So that's really where we have the most exposure we don't have business with shopping so we're not.

Esposito: We're not involved in that architecture change specifically.

Chris Mcnally: And if I could just do a follow up, because it's a great point that we hear often, whether it be seats, airbags, ADOTs, that there's often this two-stage kind of application of Chinese growth, where there is a lot done in house, but when they sort of either scale or go to export markets, they use more Western suppliers, and is that an issue of quality? Or some just that they basically learn that to scale, there's some components that they really should not be working on internally, and they can give them to the Western suppliers who are doing this globally. Because your comments on Europe being ported over to China is one that we hear across multiple kinds of advanced components. Yeah, I think it's a combination of both. You know, when it depends.

Speaker Change: Yeah, and if I could just do a follow up because it's a great point that we hear often whether it be seats airbags Adas. There's often this two stage kind of application of <unk>.

Esposito: Chinese growth, where there is a lockdown in house, but when they sort of either scale or go to export markets that they are using more western suppliers in.

Speaker Change: Is that an issue.

Esposito: Of quality or some just that they basically learn that to scale. There are some components that they really should not be working on internal and they can give it to the western suppliers. So we're doing this globally because you can.

Esposito: Comment on Europe being ported over to.

Esposito: China is one that we hear across multiple kind of advanced components.

Raymond E. Scott: Yeah, I think it's a combination, you know, and it depends on the customer. There are particular customers we're quoting right now in Europe that are moving to Eastern Europe that are experienced on the ground. We have tremendous knowledge of labor, manufacturing, and the infrastructure we have in place. And then you have the technology side.

Speaker Change: Yes, I think it's a combination and it depends on the customer Theres particular customers were quoting right now in Europe that are moving to eastern Europe that our experience on the ground, we have tremendous knowledge with labor manufacturing infrastructure. We have in place and then you have the technology side when I talk about the seating we've done excellent job.

Raymond E. Scott: When I talk about seeding, we've done an excellent job of growing with the domestics and seeing opportunities continue to expand around technology and innovation. And you know, when I talk about modular seeding, or I talk about, you know, the technology that we're able to bring within the components, we are one of the largest, if not the largest premium seed supplier to the domestic market in China. So we're in a very good position there. But I think it depends on the application. It depends on the location of where they're moving to.

Raymond E. Scott: Rob are growing with the domestics and seeing opportunities continue to expand around technology and innovation and when I talk about modular seeding or I talk about the technology that we're able to bring within the components.

Speaker Change: We are one the largest if not the largest premium seat supplier to the domestics in China. So we're in a very good position there. So I think it depends on the application it depends on the.

Raymond E. Scott: The location of where they're moving but for a lot of reasons, just our capabilities and knowledge on the ground in the region are looking to expand but also our product and innovation within our manufacturing plants are very helpful for them.

Carl A. Esposito: But for a lot of reasons, just our capabilities and knowledge on the ground in the region are looking to expand, but also our products and innovation within our manufacturing plants are very helpful to them. And just to kind of add to Ray's point there, and I think the evidence that it's partially a technological motivation by the customers, you know, if you look at the business we're winning with BYD, for example, it's on the higher end.

Carl A. Esposito: So it kind of add to Ray's point, there and I think the evidence that its partially a technology.

Carl A. Esposito: Motivation by the customers.

Carl A. Esposito: If you look at the business, we're winning with BYD. For example, it's on the higher end, where we've just won some additional business with them there are.

Carl A. Esposito: We've just won some additional business on their Denza brand, which is a higher-end brand. We're launching with Mi Auto, you know, Xiaomi's auto arm, the SU7, which is a fantastic product, but they came to us because of our technology and innovation capabilities, NIO and the ES8 as well. So we're seeing not just when Chinese domestics move outside of China, but even within China, on their higher-end products, they're gravitating to us specifically.

Carl A. Esposito: <unk> brand, which is our higher end brands.

Carl A. Esposito: We're launching the with me auto Xiaomi is.

Carl A. Esposito: Auto arm the issues.

Carl A. Esposito: Which is a fantastic products, but they came to us because of our technology and innovation capabilities Neil on the Esa as well so we're seeing.

Carl A. Esposito: Not just with the Chinese domestics move outside of China, but even within China on their higher end products that are gravitating to us specifically I'm not sure. If it's a western suppliers generally, but two to lear, specifically because of our unique capabilities in seating and I think just to add to that the speed to market I mean, how fast, they're moving and having that innovation readily available.

Carl A. Esposito: I'm not sure if it's to Western suppliers generally, but to Lear specifically because of our unique capabilities in seeding. And I think just to add to that, the speed to market, I mean, how fast they're moving and having that innovation readily available, both on the automation side within the manufacturing plants, but on the product side. So having that knowledge and capability that's readily available is very important.

Carl A. Esposito: Alible bolt on the automation side with the new manufacturing plants built in the products side, so having that that.

Carl A. Esposito: Our knowledge and capability that's readily available is very important to them.

Operator: And our final question today comes from Dan Levy from Barclays. Please go ahead with your question.

Speaker Change: Great. Thanks, so much.

Dan Meir Levy: Thank you.

Dan Meir Levy: And our final question today comes from Dan.

Operator: Dan Levy from Barclays. Please go ahead with your question.

Operator: Hi, Trevor young on for Dan Today, I appreciate you taking the call.

Dan Meir Levy: Hi Trevor Young on for Dan today. Appreciate you taking the call and taking the questions. First, I wanted to ask about seeding, particularly around the mix impacts on OneQ. Looks like you called out negative platform mix across pretty much every region. And the one hundred and forty four million dollar volume.

Dan Meir Levy: Taking the questions first I wanted to ask about about seating, particularly around the mix impacts on <unk>. It looks like you've called out negative platform mix across pretty much every region.

Dan Meir Levy: $144 million volume and mix headwind you included in the <unk> bridge looks it looks pretty substantial versus the 2020 for bridge you set up for the full year in January.

Speaker Change: So I assume youre expecting mix headwinds to soften throughout the year is there anything driving the mix up offsetting these mixed headwinds beyond just easier easier comps.

Jason Cardew: Yeah, you know, North America is where we saw this was most pronounced, and it's a combination of mix and the backlog. So, you know, the backlog is a combination of programs rolling off that either built out or we lost and new business rolling on. So, for example, in the first quarter, we saw the effects of the Solantis programs from Brampton, you know, the 300, the Charger, the Challenger roll out. We also had an unexpected reduction in Audi Q5 volumes. They had a strike at their assembly plant that went on for four or five weeks. Those two, taken together, had about a $100 million impact on revenue.

Jason Cardew: Yes, North America is where we saw this was most was most pronounced and it's a combination of mix and the backlog. So backlog is a combination of programs rolling off that either built out or are we lost.

Jason Cardew: New business Rolling on so for example in the first quarter, we saw the effects of the.

Jason Cardew: <unk>.

Jason Cardew: Programs from Brampton 300 of the charterer of the challenger roll off.

Jason Cardew: We also had an unexpected reduction in the audit Q five volumes they had a strike in there.

Jason Cardew: Numbly plant that went on for four or five weeks.

Jason Cardew: Those two taken together were about $100 million.

Jason Cardew: Impact on revenue and so we had negative growth over market in North America, and see and would have been positive.

Jason Cardew: Absent those two items as we look at the balance of the year, we do expect.

Jason Cardew: Growth over market to improve pretty significantly for the full year and seeding we see it at about three points of growth over market.

Jason Cardew: From flat in the first quarter and that's the biggest driver of that is going to be the backlog.

Jason Cardew: As it scales up throughout the year, and then sort of the non recurrence of that unusual item with Audi Q five where they lost a lot of volume.

Dan Meir Levy: That's very helpful. Thank you. And then, as a follow-up, just wanted to ask if you could describe the smoothness and or efficiency of customer production in OneQ relative to recent quarters beyond those beyond the impacts of the strike. And then just how you're thinking about your expectations assumed in the guide for production smoothness as we move throughout the year.

Dan Meir Levy: In the first quarter down for almost a third of the quarter.

Dan Meir Levy: That's that's very helpful. Thank you and then.

Dan Meir Levy: A follow up just wanted to ask if you could describe the smoothness <unk> efficiency of customer production in <unk> relative to recent quarters beyond nodes beyond the impacts of the strike and then just how youre thinking about your expectation assumed in the guide for production smoothness as we move throughout the year.

Jason Cardew: It's definitely improved from a year ago, and we saw steady improvement throughout last year, and we're seeing that continue into the first part of this year. We've been through four months now, and we're definitely seeing an improvement in the stability of production globally. But that doesn't mean there aren't going to be one-off issues. There have been some disruptions with a handful of customers for a variety of reasons, but it's less impactful than what we saw last year and certainly two years ago.

Speaker Change: Yes, it's definitely improved from a year ago, and we saw a steady improvement throughout last year and we're seeing that continue into the first part of this year, we're through four months now.

Jason Cardew: We are definitely seeing an improvement in the stability of production globally, that's not to say there aren't going to be one off issues there have been some disruptions.

Jason Cardew: With a handful of customers for a variety of reasons, but it's less impactful than what we saw last year and certainly two years ago.

Dan Meir Levy: That's helpful. Thank you. You're welcome.

Jason Cardew: Yes.

Speaker Change: That's helpful. Thank you.

Speaker Change: Thank you.

Jason Cardew: Okay, you want to go ahead and leave? Yeah, I think that's the end of the formal presentation. It's probably just Lear employees that are still on the call. We want to take a second here to congratulate Ed Lowenfeld on his retirement. This is his last week at Lear after a successful 20-year career here in Treasury and IR and HR. He's done a little bit of everything for us. He's been an important part of the team, an important part of the finance organization, and a great support to me personally in this role, and I wish him all the best.

Dan Meir Levy: Okay.

Speaker Change: Okay do you want to go ahead.

Jason Cardew: Yes, I think thats the end of the formal presentation and it's probably because they are employees that are still on the call. We wanted to take a second here.

Jason Cardew: To congratulate <unk> on his retirement this is.

Jason Cardew: Last week at layer. After 'twenty successful 20 year career here in Treasury, and IR and HR as he has done a little bit of everything for US has been an important part of the team important part of the finance organization.

Jason Cardew: Great support to me personally and the role and I wish him all the all the best.

Jason Cardew: Ed, you've left Lear in a better place. Your work has been outstanding. I've enjoyed working with you. I want to thank you for all your years of service here at Lear. It's been great knowing you, and I wish you all the best in your new retirement life. Thank you. Thank you very much. I appreciate it.

Speaker Change: And as you've left later in a better place to work has been outstanding have enjoyed working with you.

Jason Cardew: Thank you for all your years of service here and there it's been it's been great. Knowing you and wish you all the luck in your new retirement life. Thank.

Speaker Change: Thank you. Thank you very much I appreciate it there has been a great place to work and I see great things ahead.

Raymond E. Scott: Lear has been a great place to work, and I see great things ahead. And fortunately, we have great depth in our finance organization, so we have two people. Ed's shoes are so big, it took two to fill them.

Raymond E. Scott: Fortunately, we have great depth in our finance organization and so we have.

Raymond E. Scott: Two people choose are so big it took two to fill them.

Raymond E. Scott: We've got Tim Brumbaugh, who will be the primary interface with investors, taking over for Ed, and Marianne Wiedershain, who's our treasurer, will have overall responsibility for both treasury and the IR function. So congratulations to both of you. Lear team, thank you very much. Good quarter. Looking forward to continuing our success. Thank you.

Raymond E. Scott: Got 10, Brumbaugh via the primary interface with investors.

Raymond E. Scott: Taking over for adds and Maryann theater, Shane who is our treasurer will have.

Raymond E. Scott: Overall responsibility for both treasury and the IR function. So congratulations congratulations guys.

Raymond E. Scott: Okay.

Raymond E. Scott: Alere team. Thank you very much good quarter looking forward to continuing our success. Thank you.

Operator: Ladies and gentlemen, that does conclude today's conference call and presentation. We do thank you for joining us. You may now disconnect your lines.

Raymond E. Scott: Yes.

Operator: Ladies and gentlemen that does conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.