Q4 2024 Lear Corp Earnings Call
I'll take it.
Speaker Change: Good morning, everyone and welcome to the Lear Corporation fourth quarter and full year 2024 earnings conference call.
All participants will be in a listen only mode.
Speaker Change: If you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: As a note today's event is being recorded.
Speaker Change: At this time I'd like to turn the floor over to Tim Brumbaugh, Vice President Investor Relations. Please go ahead.
Tim Brumbaugh: Thanks, Jamie Good morning, everyone and thank you for joining us for Lear's fourth quarter and full year 2024 earnings call.
Ray Scott: Any today are Ray Scott Lear, President and CEO, and Jason Carter, Senior Vice President and CFO.
Ray Scott: Other members of Lear's Senior management team have also joined us on the call.
Ray Scott: Following prepared remarks, we will open the call up for Q&A you.
Ray Scott: You can find a copy of the presentation that accompanies these remarks at IR Dot dot com.
Ray 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.
Ray 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.
Ray Scott: Also I 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.
Ray Scott: The agenda for today's call is on slide three.
Speaker Change: Ray will review highlights from the year and provide a business update Jason will then review our fourth quarter and full year financial results and provide our outlook for 2025.
Speaker Change: 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 thanks, Tim Please turn to slide five.
Jason: Which highlights key financial metrics for the fourth quarter and full year 2024.
Jason: They are generated $23 $3 billion of revenue in 2024 core operating earnings were $1 $1 billion or four 7% of net sales for the year adjusted.
Jason: Adjusted earnings per share was $12 62, an increase of 5% from last year, driven by the benefit of our share repurchase program and higher earnings.
Jason: Operating cash flow was $1 1 billion and free cash flow was $561 million in 2024.
Jason: Slide six highlights the key financial and strategic initiatives, we delivered on 2024.
Jason: As a reminder, we have four strategic priorities, one innovation to building on our automation and Digitization.
Speaker Change: Vantage through idea by Alere.
Speaker Change: Improving our market share, but growing customers and for delivering financial performance for our shareholders.
Speaker Change: Our execution on these key priorities enabled us to generate strong free cash flow conversion.
Speaker Change: Meeting our target of 80% for the year, driven by our operating performance and inventory management.
Speaker Change: It's allowed us to repurchase $400 million worth of shares surpassing our $325 million target, while maintaining our dividend.
Speaker Change: The restructuring and efficiency plans, we implemented implemented helped us reduce our global headcount by 15000.
Speaker Change: Our head count was reduced by 9% in seating and 8% knee systems.
Speaker Change: These reductions exceeded the targets for both segments, we laid out earlier in the year.
Speaker Change: We grew adjusted earnings per share for the fourth consecutive year.
Speaker Change: 5% year over year.
Speaker Change: Our total company revenue outperformed the market by two percentage points sales in both segments beat the industry with these systems outperforming by six percentage points.
Speaker Change: While consolidated seating outgrowth was less than one percentage point it was two percentage points, including growth through our non consolidated joint ventures.
Speaker Change: Additionally, we improved E systems margins for the second consecutive year to over 5%.
Speaker Change: We clearly have more work to do but we are executing our strategic and operational initiatives to drive margin improvements.
Speaker Change: Our growth with Chinese Oems has been significant.
Speaker Change: We launched our seats on the Xiaomi <unk>, seven and one New awards with BYD, Geely and other Chinese domestic Oems and seating as well as Shanghai and down trading in both seating and E systems.
Speaker Change: In E systems. We also won an award for a <unk> program in Europe, displacing the current Chinese supplier, who produces the same components for the local market.
Speaker Change: In terms of innovation, we introduced idea by Lear and acquired with automation to enhance our capabilities in automation and artificial intelligence.
Speaker Change: Investing in these areas with proven returns.
Speaker Change: We recently announced the acquisition of Stone Shield engineering, which specializes in the development of automation technology for wire harness application.
Speaker Change: Stone shields capabilities will further improve our efficiency and operational excellence in our wire harnesses Assembly business, which is our most labor intensive manufacturing process.
Speaker Change: We launched the industry first comfort flex module and secured 19 contracts, representing Andrew annual revenues of approximately $135 million with.
We validated the comfort mack's seat with Ford Motor company opening new growth opportunities.
Speaker Change: Yeah.
Speaker Change: We recently received approval from general Motors to incorporate innovative comfort mack's seat solution into their mid sized trucks.
Speaker Change: Through our partnership with GM, we are integrating thermal comfort components into lear's trim covers in a modular solution to enhance occupant comfort by bringing the seat he's closer to the occupant, while streamlining the manufacturing process.
Speaker Change: This will be the first comfort mack's seat application to entered the market with a scheduled launch mid year 2025.
Speaker Change: Finally, we won our first program award for Bentley for are into Health and Wellness Award and software technology. This is the first vehicle award from the agreement we announced during our seating product day in June of 2023.
Speaker Change: And we expect future.
Speaker Change: Vehicle awards and additional into applications.
Speaker Change: Slide seven highlights the actions, we are taken to improve margins and cash flow generation in both business segments.
Speaker Change: 2025, we are seeing incremental savings from our strategic actions, we have been executing over the last few years.
Speaker Change: We're continuing to improve efficiency in our wire plant and are benefiting from lower launch and engineering costs. Although we are investing in automation, our capital efficiency from in house capabilities and reuse allows us to maintain our capex spend below our targeted 3% of revenue.
Speaker Change: We are seeing the benefits from automation investments, we have been making and expect approximately $75 million of cost savings in 2025 growing to an annualized savings of $150 million.
Speaker Change: We continue to optimize our capacity and move facilities to lower cost countries to mitigate wage inflation and implement capital in automation actions in our new facilities.
Speaker Change: In 2024, we closed or sold 13 facilities, reducing our total facility count by 4% during a year when the industry production was down 1%. This year, we're in the process of selling or closing an additional five facilities, primarily in Europe, where we see the most excess capacity.
Speaker Change: As these savings are realized through the year, we expect operational margins to improve and target to exit 2025 with approximately a 5% run rate for the total company we.
Speaker Change: We are investing in areas with proven returns such as automation and efficiency through our idea by Alere and we'll continue with our capacity optimization strategy.
Speaker Change: We continue to grow with Chinese domestic automakers are and excited to see additional progress on potential new growth opportunities with Japanese automakers.
Speaker Change: The awarded programs for comfort flex in our comfort Mack's seat are starting to launch the conquest awards. We are pursuing will drive continued market share gains in both seating and E systems.
Speaker Change: Our product and process innovations will help us win win these programs as our customers are looking for suppliers that can deliver components that meet their quality and reliability metrics, while delivering innovative products at a competitive cost.
Speaker Change: In the long term, our lower returned noncore electronic products will build out.
Speaker Change: As the next generation replacement programs launched in our core business. They are pricing will fully reflect current economics, which will have weighed on which has weighed on margins for the last couple of years.
Speaker Change: The combined effects of these actions will enable us to grow faster than the market, while improving margins and cash flow generation, allowing us to continue to return capital to our shareholders.
Speaker Change: Yeah.
Speaker Change: Okay moving to slide eight.
Speaker Change: We highlight where we highlight the sustainable cost advantage, we have created through our product and process innovations in situ or.
Speaker Change: Our comfort flex and comfort mack's seat by layer solutions can drive a 5% to 20% thermal comfort cost improvement by reducing components weight and complexity.
Speaker Change: While also enabling us to remove assembly labor from our just in time facilities. The savings potential is dependent on the scale of the complexity of the existing system.
Speaker Change: Our systems with more components will result in higher potential savings. For example, there is greater opportunity for savings in our luxury three row SUV with lumbar event, the massage systems compared to a mid market vehicle that only has heater minutes.
Speaker Change: Process improvements driven by our <unk>.
Speaker Change: Dia initiatives are estimated to reduce cost for the additional value added content by approximately 10% to 20%.
Speaker Change: We expanded our <unk> capabilities into all of our lender facilities driving better utilization.
Speaker Change: Our rollout of our Leer viewed defect detection and finance operations as well as designing a product to leverage our automation capabilities.
Speaker Change: Expanding our competitive advantage in seating.
Speaker Change: Product innovation and process improvements have allowed us to reduce seeding cost for new for new programs by 200 to over 500 basis points.
Speaker Change: Durable cost advantage will allow us to increase our industry, leading seed margins and continue to separate ourselves from our competitors.
Speaker Change: Okay.
Speaker Change: And when combined with innovative designs that drive better efficiency and time to sensation, we're able to provide a better value proposition to our customers.
Speaker Change: Okay.
Speaker Change: Slide nine provides an update on <unk> growth with Chinese domestic automakers.
Speaker Change: Lear has 30 years of automotive experience in China.
Speaker Change: Over that time Lear has strengthened this local presence the strong relationship with key customers and has become a clear leader in luxury seating.
Speaker Change: In 2025, we have we have several launches with BYD Geely Sharpon truong.
Speaker Change: <unk> Dong Fang and Neil.
Speaker Change: We also continue to see growth with additional sourcing opportunities with xiaomi.
Speaker Change: The portion of our total revenue from Chinese domestic automakers grew from about 20% three years ago to approximately 33% in 2024 and increasing to more than 37% in 2025.
Speaker Change: With our current backlog and the new business opportunities we are pursuing.
We expect 50% of our revenue in China to be from Chinese domestic automakers by 2027.
Speaker Change: <unk> continues to be an important market for layer and our relationships with key domestic automakers is driving consistent growth.
Speaker Change: Yeah.
Speaker Change: Now please turn to slide 10, which provides details on the changes to our 2024 to 2026 sales backlog since it was originally announced last February.
Speaker Change: As a reminder, our sales backlog includes awarded programs net of any loss business and programs rolling off it excludes pursued business.
Speaker Change: Net new business in our non consolidated joint ventures, and the rollout of the discontinued product lines in these systems with.
Speaker Change: We typically provide an update on our sales backlog for the next three years at this time.
Speaker Change: We have limited visibility into 2027 due to the rapidly evolving industry environment and customer production plans are.
Speaker Change: Our customers are reassessing their product in powertrain strategies due to the changes in customer demand and potential changes in regulations.
Speaker Change: Which has led to a delay in new programs sourcing activities and awards.
Speaker Change: As Oems reassess their powertrain strategies in 2024, they made significant cuts to EV production volumes delayed EV launches and canceled several programs.
Speaker Change: Throughout the course of the year, our 2024 backlog declined due to lower than expected volumes on programs, including the global <unk>.
Speaker Change: Next 90, Pollstar three BMW.
Speaker Change: And several G M E D.
Speaker Change: Largely offset by stronger than expected volume on the Xiaomi <unk> seven and the new vehicles for leap motor.
Speaker Change: The pace of the sourcing activity slowed significantly in 2024.
Speaker Change: Resulting in a buildup of quoting activity into 2025, including several large conquest opportunities in both segments.
Speaker Change: In 2025, we expect approximately $230 million of net new business compared to the $800 million. We had expected when we provided our last backlog update at the start of 2024.
Speaker Change: The reduction is primarily driven by lower production assumptions for various vehicles, including the Ram Charger mobile UX 90, the polestar, three and cerebral <unk> as well as the launch delay of the Ram Ralph.
The decrease in our 2025 backlog is partially offset by an increase in our 2026 backlog from $800 million to approximately $1 1 billion.
Speaker Change: Several ice programs that were expected to roll off by 2026 had been extended including the Lincoln Aviator and addition of new business Awards with Changan Leap Motors and others are launching in 2026.
Speaker Change: Some programs that had been scheduled to launch in 2024 or 2025 are now expected to launch in 2020 states such as the ramp rep.
Speaker Change: We provide group provided an overview of key program launches for 2025 for both segments in the appendix.
Speaker Change: The 2024 to 2026 sales backlog at our non consolidated non consolidated joint ventures increased by $100 million.
Speaker Change: From our prior update to $750 million, our non consolidated joint ventures continue to win new business, particularly with Chinese domestic Oems.
Speaker Change: <unk> remains a pivotal customer representing approximately 50% of our non consolidated backlog.
We are exploring options to consolidate.
Speaker Change: Selective seating joint ventures, which also increased our consolidated backlog.
Speaker Change: We anticipate the new program sourcing activity that was delayed in 2024 will resume in the coming months and we will result, and it will result in increase to our backlog for 2027 and beyond we expect to provide an update on the future three year backlog later this year in 2025.
Speaker Change: Slide 11 outlines the key metrics investors can use to track our progress towards expanding margins and generating long term revenue growth.
Speaker Change: Proceeding we have about $3 billion worth of conquest opportunities that we expect a quote throughout the year and in these systems. We are pursuing two of our largest conquest opportunities in our history.
Speaker Change: We expect our customers.
Speaker Change: To complete the award activity over the course of the year or early 2026 and will provide updates on key awards as a sourcing process is completed.
Speaker Change: We continue to see significant interest from our customers for our innovative modular seat products. These opportunities along with continued growth with our core thermal comfort products are driving revenues from $630 million in 2024 to our target of $1 billion by 2027.
Speaker Change: Our pipeline of new business with Chinese domestic automakers is strong and growing we will continue to give updates on growth in new New awards with key customers, both in China and globally.
Speaker Change: We will also update our progress on the key metrics that will drive margin improvement.
Speaker Change: The investments, we are making an idea and automation projects are expected to generate over $75 million of savings this year growing to $150 million of annualized savings.
Speaker Change: The restructuring investments, we are making will drive an additional $55 million of savings in 2025.
Speaker Change: The actions we are taking will continue to improve efficiency in our operations. In 2024, we were able to reduce head count by 15000 and are targeting a very similar reduction in 2025, allowing us to lower labor costs throughout our operations you will see the benefits from these actions come through in the net <unk>.
Speaker Change: Formats, we report on a quarterly basis in.
Speaker Change: In 2024, we delivered 30 basis points of net performance in seating and 50 basis points of net performance improvement in these systems and.
Speaker Change: In 2025, we expect to accelerate our positive net performance and deliver about 40 basis points in seating and about 80 basis points of improvement performance improvement in these systems.
Demonstrating strong performance on these metrics will put us on a clear path towards this.
Speaker Change: <unk> growth and improve margins margins for both segments are expected to improve throughout the year and we expect the underlying core operating margin run rate to improve to approximately 5% for the total company as we exit 2025.
Speaker Change: Our focus is to continue to convert at least 80% of our adjusted net income to free cash flow, allowing us to continue to continue returning capital to our shareholders.
Speaker Change: Purchase program.
Speaker Change: Strong operating performance combined with our share repurchase will continue to drive earnings per share growth based on our outlook EPS is on track to grow on average 19% per year from 2020 through 2025.
Jason: Now I'd like to turn the call over to Jason for the financial review.
Jason: Thanks, Ray Slide 13 shows vehicle production in key exchange rates for the fourth quarter.
Speaker Change: Global production increased 1% compared to the same period last year, but was down 1% on alere sales weighted basis production volumes declined by 3% in North America and by 8% in Europe, while volumes in China were up 8%.
Jason: S dollar was flat against the euro weakened against the RMB.
Jason: Slide 14 highlights clears growth compared to the market for the full year as well for the fourth quarter.
For the full year total company growth over market was two percentage points with seating slightly up and he system six points above market.
Jason: Looking at our full year growth by region in 2020 for North America growth over market was three points, reflecting favorable backlog in both business segments.
Jason: New conquest programs, such as the Jeep Wagoneer and Grand Wagoneer in seating as well as new E systems business on the General Motors Altium platform, including the Chevrolet Blazer, EV had a prologue and accuracy Dx contributed to the growth in the region.
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: <unk> also benefited from new business with the BMW five series and <unk> five.
Jason: Electronics business across several BMW Renault vehicles contributed to <unk> systems outperformance.
Jason: The growth in the region was partially offset by lower volumes on the Audi E Tron and seating and the Volvo XC 40 any systems.
Jason: China revenue growth lagged the market by three percentage points, driven by lower volumes on Lear platforms, such as the Buick Regal BMW <unk>, three and <unk> III in seating and the Volvo XC 40 in these systems.
Jason: When you include revenue from our non consolidated joint ventures, our China growth over market improves by six points to three percentage points for the year.
Jason: New business on the Xiaomi <unk>, seven and <unk> as a child paying Mona any systems offset a portion of the underperformance in consolidated sales in China, and we continue to grow our share with key Chinese automakers, such as BYD, and Julie's, which will improve our customer mix in China going forward.
Jason: We're also in active discussions with our seating JV partners in China to potentially consolidate select joint ventures, which would have a positive impact on our consolidated growth over market going forward and provide investors with a clearer view of the strength of our competitive position in this key market.
Jason: In the fourth quarter total company revenue growth lagged the global market by one percentage point with seating underperforming by 2%, partially offset by E systems outperforming by 3% include.
Jason: Including the impact from our non consolidated joint ventures, our total company revenue growth was in line with the global market.
Jason: Turning to slide 15, I will highlight our financial results for the fourth quarter of 2024.
Jason: Our sales declined 2% year over year to $5 7 billion, excluding the impact of foreign exchange commodities acquisitions and divestitures sales were also down 2%, reflecting lower volumes on their platforms, partially offset by the addition of new business in both of our business segments.
Jason: Our operating earnings were $258 million compared to $288 million last year, driven by lower volumes on Lear platforms, partially offset by positive net performance in a margin accretive backlog.
Jason: Adjusted earnings per share were $2 94, as compared to $3 three a year ago.
Jason: Reflecting lower adjusted net income, partially offset by the benefit of our share repurchase program.
Jason: Fourth quarter operating cash flow was $681 million compared to 570 million last year, primarily due to improvements in working capital, partially offset by lower core operating earnings and higher cash restructuring costs.
Jason: Slide 16 explains the variance in sales and adjusted operating margins for the fourth quarter in the <unk> segment.
Jason: Sales for the fourth quarter were $4 2 billion, a decrease of $157 million or 4% from 2023.
Jason: Excluding the impact of foreign exchange commodities acquisitions, and divestitures sales were down 3% due to lower volumes on Lear platforms, partially offset by the addition of new business.
Jason: Adjusted earnings were $257 million down $37 million or 12% from 2023 with adjusted operating margins of six 1%.
Jason: Operating margins were down compared to last year, reflecting lower production on key Lear platforms, partially offset by the roll on of a margin accretive backlog and positive net performance.
Jason: Slide 17 explains the variance in sales and adjusted operating margins in E systems segment for the fourth quarter sales.
Jason: Sales for the fourth quarter were $1 5 billion, an increase of $31 million or 2% from 2023.
Jason: Excluding the impact of foreign exchange and commodities sales were also up 2% driven primarily by our strong backlog, partially offset by lower volumes on key platforms.
Jason: Adjusted earnings were $77 million or 5% of sales compared to $84 million and five 6% of sales in 2023.
Jason: The decrease in margins reflected lower volumes on Lear platforms.
Jason: Negative net performance and foreign exchange, partially offset by a margin accretive backlog the.
Jason: The negative net performance resulted primarily from year over year reductions in finished goods inventory levels.
Jason: Slide 18 explains the variance in sales and adjusted operating margins for the full year in the seating segment sales.
Jason: Sales for 2024 were $17 2 billion, a decrease of $327 million or 2% from 2023.
Jason: Excluding the impact of foreign exchange commodities acquisitions, and divestitures sales were also down 2% due to lower volumes on Lear platforms, partially offset by the addition of new business.
Jason: Adjusted earnings were $1 1 billion down $76 million or 6% from 2023 with adjusted operating margins of six 5%.
Jason: Operating margins were down compared to last year, reflecting lower production on key Lear platforms, the impact from foreign exchange and acquisitions and divestitures, partially offset by positive net performance in the rollout of our margin accretive backlog.
Jason: Slide 19 explains the variance in sales and adjusted operating margins for the full year E systems segment.
Jason: Sales for 2024, or $6 1 billion, an increase of 166 million or 3% from 2023.
Jason: The impact of foreign exchange and commodities sales were up 4% driven primarily by our strong backlog, partially offset by lower volumes on Lear platforms.
Jason: Adjusted earnings were $310 million or five 1% of sales compared to $275 million and four 6% of sales in 2023.
Jason: The increase in margins, reflecting strong net performance in a margin accretive backlog, partially offset by lower volumes on their platforms.
Jason: Now shifting to our 2025 outlook.
Jason: Slide 20 provides global vehicle production volume and currency assumptions that form the basis of our full year outlook.
We base our production assumptions on several sources, including internal estimates customer production schedules and S&P forecasts.
Jason: At the midpoint of our guidance range, we assume that global industry production will be 1% lower than in 2024 are down 2% on alere sales weighted basis, driven primarily by lower volumes in our two largest markets North America and Europe.
Jason: Global production assumptions are generally aligned with the latest S&P forecasts or estimates differ for a few programs such as the GM full size Suvs and key land Rover vehicles due to a combination of customer releases and current demand expectations.
Jason: From a currency perspective, our 2025 outlook assumes an average euro exchange rate of $1 four per euro and an average Chinese RMB exchange rate of seven three RMB to the dollar.
Jason: Okay.
Jason: Slide 21 provides detail on our outlook for 2025 due to the uncertainty of size scope and implementation, we have not assumed any impact from potential changes to tariffs.
Jason: Our revenue is expected to be in the range of $21 nine to $22 $9 billion at the midpoint. This would be a decrease of $931 million or 4% compared to 2024.
Jason: The impact of foreign exchange commodities acquisitions, and divestitures, our revenue would be down 2%.
Jason: Core operating earnings are expected to be in the range of $915 million to $1 175 billion.
Jason: At the midpoint this implies a decrease of 5% compared to 2024.
Jason: Adjusted net income is expected to be in the range of $575 million to $765 million.
Jason: Restructuring costs are expected to be approximately $175 million to support our continued footprint rationalization actions as we continued to aggressively reduce excess capacity, particularly in Europe and reduced manufacturing costs through automation and by shifting our footprint to lower cost regions capital spending is expected to be approximately six.
Jason: <unk> hundred $25 million to fund, our new vehicle launches and investments in automation.
Jason: Our outlook for operating cash flow for the year is expected to be in the range of one one to $1 3 billion.
Jason: And our free cash flow is expected to be $530 million at the midpoint of our guidance the.
Jason: The midpoint of our outlook is consistent with our free cash flow conversion target of 80%.
Jason: Lear's strong focus on generating cash allows us to maintain a strong balance sheet, while making organic and inorganic investments to strengthen our business as well as to continue funding share repurchases.
Jason: Slide 22 walks, our 2020 for actual results to the midpoint of our 2025 outlook.
Jason: Year over year revenue is expected to decline by $931 million due to lower volumes and the negative impact from foreign exchange as well as the divestiture of a noncore seeding operation.
Jason: We expect to maintain overall company adjusted margins at four 7% driven by strong performance in a margin accretive backlog.
Jason: Positive net performance primarily reflects the benefits from our idea by Lear initiatives and savings from restructuring actions with wage inflation and customer contractual price reductions fully offset by material cost reductions from our suppliers cost technology optimization commercial recoveries and normal plant efficiency programs.
Jason: <unk> operating margins are expected to be flat at six 5%, reflecting strong outperformance offset by the impact of lower volumes on existing platforms.
Jason: The systems segment is expected to maintain flat operating margins at five 1% driven by continued performance improvements in our margin accretive backlog offset by the impact of lower volumes on existing platforms.
Jason: A detailed walk to the midpoint of our guidance for seating and E systems in the appendix, we expect net performance to contribute 40 basis points of margin improvement in seating and 80 basis points in E systems in 2025, an increase from the 40 to 50 basis points. We previously estimated reflecting the positive momentum in both our automation investments.
Jason: And restructuring actions.
Jason: Moving to slide 23, we highlight our commitment to continue to return capital to shareholders too.
Jason: 2024, we achieved our target of approximately 80% free cash flow conversion, which enabled us to accelerate share repurchases in the second half of the year and the fourth quarter, we bought back $101 million worth of stock, bringing our full year repurchases to $400 million exceeding our target of $325 million over.
Jason: Over the course of the year, we reduced our share count by approximately 6%, which will support EPS growth going forward.
Jason: In 2025, we are again targeting 80% free cash flow conversion, which will enable us to buy back a minimum of $250 million worth of stock with additional repurchases, depending on free cash flow generation and acquisition opportunities.
Jason: Since initiating the share repurchase program in 2011, we have repurchased $5 $6 billion worth of shares and returned over 85% of free cash flow to shareholders through repurchases and dividends.
Jason: Our current share repurchase authorization has approximately $1 $1 billion remaining which allows us to repurchase shares through December 31, two.
Jason: <unk> thousand 26, now I'll turn it back to Ray for some closing thoughts. Thanks, Jason. Please turn to slide 25, we are focused on executing our strategic initiatives to grow and improve our margin profile in seating we are expanding our market share by growing with all customers, particularly the Chinese domestic automakers, while our.
Jason: Our solutions are reducing cost and complexity.
Ray Scott: We're accelerating the deployment of our thermal comfort products and continued to win new business at accretive margins in E systems, we are winning new business across all powertrains, while continuing to improve our operational performance.
Ray Scott: That is we are making in advanced manufacturing and capacity optimization, including aggressive steps to accelerate the deployment of automation will drive margin expansion in both segments.
Ray Scott: Our strong focus on generating cash will help us continue to achieve free cash flow conversion of 80%.
Ray Scott: We will remain committed to returning excess cash to our shareholders now.
Ray Scott: Now we'd be happy to take your questions.
Ray Scott: Ladies and gentlemen at this time, we'll begin the question and answer session.
Ray Scott: To ask a question you May press star and one on a touchtone phone. If you are using a speaker phone. We do ask that you. Please pick up your handset prior to pressing the keys to ensure the best sound quality.
Ray Scott: Withdraw your question you May press star into.
Ray Scott: Then that is star and then one to join the question queue.
Ray Scott: Momentarily to assemble the roster.
Ray Scott: Okay.
Speaker Change: And our first question today comes from John Murphy from <unk>.
Speaker Change: Please go ahead with your question.
John Murphy: Good morning, guys.
John Murphy: Maybe one question with the kind of two parts.
John Murphy: I'm just curious if you could talk about sort of the dynamics.
John Murphy: Of competition.
John Murphy: In the seating business, specifically you know as you think about market share in 'twenty five 'twenty six 'twenty seven <unk> in the next in the next few years.
John Murphy: To specific angles, I mean first on the innovation side, particularly like stuff like comfort, Max which it sounds like Youre, winning business very quickly and it's being.
John Murphy: Launch very quickly on comfort matched with which again.
John Murphy: And then also from the angle of the cost actions and automation, which kind of go hand in glove with that.
John Murphy:
John Murphy: Are you able to underprice, the competition and still earn.
John Murphy: Good margins and adequate returns.
Curious what you think those two factors will drive us sort of your market share go forward and your ability to potentially win even greater business in these out years.
Speaker Change: Yes, Thanks, Mark that's a good question and obviously you know we've been at this for some time I mean, we've been thinking about CE.
Speaker Change: Seating and the need to really change and drive efficiency in the process as I've been in state since 1988, so I've seen even back to the cushion rooms, where things were.
Speaker Change: Very similar to the way, we were even building years ago and the need to change there are absolutely what they need to change and so we've been acquiring.
Speaker Change: Very very selectively strategic companies that allow us.
Speaker Change: To really change the dynamics of the seat.
Speaker Change: Think about it in a more modular approach, which really eliminates a lot of cost Wade mass and in all respects from all the data that we're seeing improves the comfort field and really sensation for the end consumer and so.
Speaker Change: So right now.
Speaker Change: We have been continuing to work is that combination of the components themselves and the manufacturing facility itself with automation Digitization, how we're looking at components. It's a combination so being able to buy your own manufacturing equipment.
Speaker Change: Going out and buying selective very jet generic.
Speaker Change: Capital is very inefficient with the way we're looking at now we can lower our capital costs much more geared towards efficiency on the plant floor and is really driving a benefit I think the idea by Lear was really the next step that we had to take was really grabbing a hold of all the different capabilities, what we're seeing in our <unk>.
Speaker Change: That's a communize them into.
Speaker Change: Really a holistic look at how we get it into all of our facilities and so one is just a continuation within our facilities to drive our margin expansion within seating, but your second question is is really good at and what we're seeing is now we can actually look at it holistically across all of our innovation both on the modular side with the <unk>.
Speaker Change: And how they integrate with the manufacturing facility and what we're seeing is absolutely. Our whole goal is to continue to generate really nice returns in seating, but driving our costs down so that makes it very very competitive and that's why I talk about.
Speaker Change: A durable sustainable approach to how we look at margins. We think this is very competitive.
Speaker Change: We've been using the model now in our quote assumptions as we look at future applications.
Speaker Change: It really has.
Speaker Change: And we're protecting our margins or if we're going to protect our margins. We think that we have done a nice job through the investments we've made and we deserved a margin that gives us a really nice return and we're being able to actually really compete at a level that I think sets the benchmark. So.
Speaker Change: I'm careful we put in this presentation intentionally and I'm, a little bit hesitant about it because I don't want our competition to see that type of advantages, we're seeing internally, but I also think it's fair for investors to understand how we've created a durable lasting margin.
Speaker Change: I think our vantage and how we're looking at the business and that's what we're tracking ourselves too and so we get to retain the margin.
Speaker Change: That's the goal and we get to drive a different process in a different way of thinking and so that's why we're really confident even though we've had delays in some of these these quoting our programs we feel really really confident in our ability to go in and show our customers.
Speaker Change: What we're doing and I think this most recent announced that I talked about forward in a modular approach and what we did there in a validated that was a big step that gave us an enormous amount of confidence as we went in and won the midsize truck with general Motors and that's.
Speaker Change: That's later this year, we're going to launch it and so what we used to kind of think about these programs was it had to be a new program launch this kind of sets the tone that we can go in and drive cost and inefficiency in an existing program and the timing couldnt be better our customers. When we talk about these delays.
Speaker Change: Getting it right on the cost side, they're looking for innovative solutions something that's different we were just in China.
Speaker Change: <unk> weeks ago, and what Theyre looking for innovative solutions through automation Digitization and we have it and so that's helping us across the board and we get to really retain that margin profile.
Speaker Change: Great and just one follow up bid.
Speaker Change: To launch.
Speaker Change: Obviously, it's faster in China, but now it sounds like what you just did with GM with comfort Max that actually your products are on a shorter schedule than that.
Speaker Change: Traditionally so I mean are we looking at the book to launch it might be 18 to 24 months as opposed to 36 three.
Speaker Change: Three years to six years like we used to thinking what's kind of just the timeframe traditional players in China now because it sounds like blockbuster.
I think everybody's on that push for a much faster turnaround and I think like I said by validating and having our system validated it.
Speaker Change: Design, so it's agnostic to frame so we don't have to.
Speaker Change: It doesn't isn't determined by a certain style seat, we can actually move much quicker and I think the result was this recent award I think the award the award we got we announced it was significant I think seeing how quick general motors is moving towards a modular approach.
Speaker Change: Really again gives a lot of credibility to what we've been talking about with how we're looking at seats. It allows us to scale I think one of the question as it comes.
Speaker Change: To mind is as we're putting capital in it allows us to be flexible with our capital and so we can run multiple modules across capital that's invested for a single program continued to lower our cost.
Speaker Change: Thank you very much.
Speaker Change: Yes.
Speaker Change: Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question.
Colin Langan: Oh, great. Thanks for taking my questions.
Colin Langan: Just can you help us frame the market assumption you're down one.
Colin Langan: And a lot of uncertainty on how the market is actually going to set off for sure.
Any color on how we should think about Incrementals decrementals is there any more opportunity to cut cost of things slow down and then you also commented that you are in line with S&P, but youre different on Gms movies and land Rover.
Speaker Change: More cautious there im just trying to understand what that reference.
Colin Langan: Sure.
Colin Langan: Sorry, the last part of that question Colin.
Colin Langan: When we look at S&P is forecast for those platforms in particular, we thought they were too cautious.
Colin Langan: On the GM full size SUV and they've just gone through a design change I think that S&P had their volume assumption on that that platform down.
Colin Langan: Year over year pretty significantly I think 15% that didn't make sense to us and I just given the magnitude of that CPE beyond that platform for us I thought it was important to highlight that the other group of programs the range Rover range Rover sport and defender.
Colin Langan: We had really strong we saw really strong performance from <unk> in December in particular that was one of the primary reasons, we exceeded our guidance for the fourth quarter volumes.
Colin Langan: Were stronger than expected and and I think finally sort of in line with the demand for those platforms and so there were a number of supply disruptions that <unk> dealt with throughout last year weather versus the aluminum issue or other other parts shortages and finally at the end of the year they were able to run.
Colin Langan: And their targeted level of production and so we see that continuing into 2025 as well, so we're a little bit higher than IHS or S&P.
Colin Langan: On those platforms.
Colin Langan: As well in terms of.
Colin Langan: The overall market, we do have Europe, and North America down again.
Colin Langan: Year over year, so we are expecting a relatively weak.
Colin Langan: Weak market of weak demand and we see that January started got started off that way, particularly in Europe in terms of decremental margins, they're right around that 20% range or a little bit richer than that.
Colin Langan: Just given the mix of programs that are down in seating and a little richer than that in E systems, as well and you'll see that in the slides we included in the back.
Colin Langan: In the appendix of the presentation.
Colin Langan: In terms of the decremental margins for the company overall, that's what really we were laser focused on as we built our plan for this year and thought about our guidance for the year and so the downward conversion on the sales that are down $931 million is less than 5% of them were down $50 million.
Colin Langan: Year over year and.
Colin Langan: And so we were very focused on.
Colin Langan: That's down downward conversion.
Colin Langan: Offsetting the impact of lower volumes through the investments, we're making in automation and restructuring and driving that net performance in both segments. So that's.
Colin Langan: That's a key part of the story here for 2025.
Speaker Change: And any color on the cadence of margins a lot of people are warning about Q1 being kind of tough is that something we should be considering.
Speaker Change: We haven't guided to the first quarter, specifically or didn't plan to today, but we do expect the first quarter to be the trough margin.
Speaker Change: For the year.
Speaker Change: We were building the plan and looking at the.
Speaker Change: The cadence of revenue and earnings.
Speaker Change: We sort of see that first half pretty similar to the second half of last year in terms of revenues, maybe even down slightly.
Speaker Change: And then we see an improvement in the second half of the year and in terms of the performance improvements in the business.
Speaker Change: We see that happening steadily throughout the year first we've got to offset customer price downs and wage inflation, but we have some nice momentum heading into the year because of the investments. We've made in automation last year and the restructuring efforts that are in process from last year sort of carrying into the start of this year and so as we progress through the year.
The underlying run rate will improve kind of quarter to quarter.
Speaker Change: You may have some choppiness due to commercial negotiations oftentimes those will be concentrated in one particular quarter and include some retroactive adjustments, but outside of that kind of the underlying run rate of what we're really trying to stress today is that youre going to see that steadily improve throughout the year driven by the combination of the automation.
Speaker Change: And restructuring.
Speaker Change: Got it alright, thanks for taking my questions.
Speaker Change: Okay.
Speaker Change: Our next question comes from Dan Levy from Barclays. Please go ahead with your question.
Hi.
Dan Levy: Good morning, Thanks for taking the question.
Dan Levy: Wanted to first start with a question on the recoveries.
Dan Levy: Yeah.
Dan Levy: And how you're pricing your programs.
Dan Levy: Interesting that you are saying there is less visibility for only two years of backlog and.
Dan Levy: And you've had some cancellation so to what extent are you having discussions with automakers a on recovering from some of these programs where you allocated resources.
Dan Levy: The volumes never materialized and be reflecting the fact that there's just less visibility on the launches that will be.
Dan Levy: <unk> seen in the past.
Dan Levy: But yeah, I think first of all from a customer perspective.
Dan Levy: We obviously are in.
Dan Levy: Negotiations and in some cases, even settlement of commercial recovery for lost volume and that's not typical.
Dan Levy: Given the contract nature of.
Dan Levy: Guaranteed volume, but in these particular cases, where the.
Dan Levy: The volumes have changed so dramatically.
Dan Levy: The capital we put in place requires some type of ability to recover we've been successful in our negotiations.
Dan Levy: We'll continue that as we start to see volumes change I think the other thing that we.
Dan Levy: We are a little bit more aggressive on was.
Dan Levy: The conservative nature of how we're deploying capital and so in some cases, we didn't completely capitalize a facility.
Dan Levy: Given the uncertainty if there wasn't a good historical track record, we would deploy particular capital for a particular run it right for a particular volume and so I think the combination of those two even though we do have capital that we deploy that.
Dan Levy: Excess we go after and get recovery from our customer, but we're much more tempered in how we look at deploying capital, particularly in new areas of investment.
Dan Levy: With our customers and Jason do you want to talk a little bit about just how we.
Jason: Look at it yes, well I think if you look at our capital expenditure guidance at the start of last year, and where we ended up the year. That's the best indication of of how we've been able to quickly.
Jason: Scale back to the new capacity, we are deploying in response to lower volumes that we're seeing in the market and so that certainly helps in the pricing negotiations. When you can demonstrate to your customers that you've already taken steps to try and help them by not.
Jason: Not putting that capacity in place.
Jason: I think that you know.
Jason: Certainly youre seeing an impact on the on the business.
Jason: Also the lower volumes on these new programs, but.
Jason: We have repriced them to a point, where the margin when you look at the margin on the backlog rolling on it.
Jason: <unk> consistently accretive to overall segment.
Jason: Segment margins. So we've seen that over the last several years and that continues with our guidance for the coming year. We are converting the backlog at about 10% this year, albeit a smaller backlog and I think Dan.
Jason: As we quote and we're talking about this buildup of quoting activity, both the new systems and seating.
Jason: You have traditional programs that we have a higher confidence level than what the run rate will look like as they get into production. But then there is other there a little bit more.
Jason: Question will we.
Jason: We really look at the contracted how we're signing up the cap for deployment of capital or investment dollars.
Jason: And working through those I mean, some of the delays that we've talked about are not just how customers will look at deploying and looking at different.
Jason: Powertrains, but what is the real volume and so some of the delays in some of the quotes as volumes.
Jason: Volumes have significantly come down in the quoting process and we make modifications, but we give.
Jason: Given the history, we do have the ability to kind of look at it contractually so that we cover our cost and that we're not putting capacity in place on a very questionable program and in some cases, if it's two questions.
Jason: It's not something that's really a targeted program.
Speaker Change: Okay. Thank you that's that's helpful commentary.
Speaker Change: The second question I wanted to ask about E systems than in light of.
Speaker Change: The move by one of your competitors to spin off their wire harness business, which I think some may look at it.
Speaker Change: Isolating the piece of the business that way.
Speaker Change: Punching at lower margin.
Speaker Change: Wondering how you view the competitive landscape playing out he sits in either an opportunity for consolidation and consolidation of emerge and then maybe you could.
Speaker Change: I know in the past you gave some long term targets on where E. Systems' margins came down at one point you said, 8% that was that a long time ago. At this point what is the updated you today given all of the labor inflation.
Speaker Change: Thank you.
Speaker Change: Well I think the first point that.
Speaker Change: One I think given the industry and where we're at I believe that theres not not.
Speaker Change: Just.
Speaker Change: Particularly in E systems, but across the board, we're going to see a lot of different consolidations I think companies are going to have to make sense.
Speaker Change: Where they're at their ability to scale efficiencies synergies all of that stuff and I think that we're probably.
Speaker Change: The front of this thing that we've seen other announcements. So I don't think it's just exclusive to E systems.
Speaker Change: And so.
Speaker Change: In respect of Lear Corporation.
Speaker Change: We're constantly looking at ways that we can create and increase shareholder value and it's obviously something we stay very focused on both.
Speaker Change: How we look at it.
Speaker Change: Within Lear today or how it may look over over the course of the next year and so we're always open to any way that we can create value for our shareholders and will remain very flexible but.
Speaker Change: Our plan right now is to continue to generate I think we talked about executing executing executing we have a plan to continue to generate and build durable margins in both segments.
And if something else too.
Speaker Change: Present itself that creates more value faster and we're absolutely willing to look at it.
Speaker Change: And Dan the only thing I'll add is that we don't see any difference in terms of the long term margin target in that segment that that is the right operating margin given the level of working capital and fixed asset deployment in that space and as we continue to see.
Speaker Change: Some stability.
Speaker Change: Stability in volumes.
Speaker Change: The benefit of our restructuring actions and automation investments.
Speaker Change: Well as improvements in the underlying performance of our business. We have highlighted some challenges, particularly in our North America operations last year in the North America wire business in particular, we've made significant improvement kind of as you move throughout last year towards the end of the year and into this year, we see a continuation of those.
Speaker Change: Efficiency gains are happening throughout the first part of this year and longer term I think 8% is still the right target, we're not going to provide pinpoint timing in terms of when that will happen today on that on this call, but I think that's still the right way to think about that business long term.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Joe Spak from UBS. Please go ahead with your question.
Speaker Change: Hi, good morning.
Speaker Change: If I could start just maybe.
Speaker Change: A point of clarification or housekeeping I just wanted to understand.
Speaker Change: Like in the work and I guess, even for the first part and when you talk about the backlog like this wind down.
Speaker Change: What exactly is that because I think it says it's excluded from above on the backlog side, but I wish, but I thought you said.
Speaker Change: Today, and I know in the past, you've said that sort of a net number so I guess I just want to understand.
Speaker Change: Stand.
Speaker Change: That is and then also just.
Speaker Change: Sorry, if I missed this but in the in the full year sales walk.
Speaker Change: What is what are you divesting bedside had why not and what is the nearly $200 million in others.
Speaker Change: Okay Alright.
Speaker Change: Alright so.
Speaker Change: Starting with.
Speaker Change: The wind down so we broke that out last year separately, Joe when we disclosed our backlog.
Speaker Change: Initial 2024 to 2026 backlog.
Speaker Change: And we've talked about this for multiple years, but we have exited certain product categories on the electronics side. The most significant of which is our lighting and audio business and so that is kind of rapidly winding down now we're closing the largest facility that produces that product in Germany.
Speaker Change: As we speak.
Speaker Change: So we have separated that from the Gulf forward business, that's captured in the backlog and given the magnitude of the programs winding down over the next several years. We thought it was important just to separate that and provide some some level of visibility to it.
Speaker Change: In terms of what we're divesting.
Speaker Change: The primary driver of what you see in the work there is a transaction that's not yet complete but we anticipate completing here towards the end of the first quarter, where we're we're selling a small.
Speaker Change: Non automotive fabric business, a portion of that non automotive fabric business that we have today and that that deal is nearly complete.
Speaker Change: And that is because of.
Speaker Change: Kind of a key driver to that special item, we had in the fourth quarter, we wrote down the assets by $24 million.
Speaker Change: In the fourth quarter, reflecting the expected proceeds.
Speaker Change: From that sale relative to the book value of that business.
Speaker Change: In terms of the other assets.
Speaker Change: The last part of your question was in regards to what comprises.
Speaker Change: And the work is that yeah yeah.
Speaker Change: Okay.
Speaker Change: How much of the no I havent found somebody like anyone.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes, I think Joe we'll have to get back to that.
Speaker Change: Well, we've talked about the other on the revenue side, yes, that's primarily the pass through for us.
Speaker Change: Inflation and commodity increases that we received from our customer that we pass through to directed suppliers. That's the biggest driver of that I'm sorry.
Speaker Change: Once you are after.
Speaker Change: Okay.
Speaker Change: That's helpful.
Speaker Change: The second question is I guess just in terms of.
Speaker Change: Cash and capital I guess, I guess, maybe two parts if I if I if I.
Speaker Change: One you mentioned, a number of times or alluded to.
Speaker Change: Some potential.
Speaker Change: The consolidation of the China Jv's.
Speaker Change: I'm wondering like if you're earmarking cash for that and how how significant that could be and also on cash and again right you sort of talked about this as a driver for the improvement and investments in automation.
Speaker Change: And you've talked in the past about higher capex for that as well.
Speaker Change: I am wondering.
Speaker Change: I thought you would sort of completely go off that path, but.
Speaker Change: Our U pausing that at all near term just to sort of see exactly how policy plays out just in case you need to.
Speaker Change:
Speaker Change: <unk> facilities or anything or is it started to snow.
Speaker Change: All systems go on the continued automation investments.
Speaker Change: Well I think on the automation the capital what we've been doing the best Paybacks, we get one of the biggest as a.
Speaker Change: Just in time facilities, and so really no need to pause I think right now the only thing.
And again I know, we have been very very I think a good target around that 3% or less of capital on revenue dollars.
Speaker Change: We don't see a need that we're going to go above that we actually are seeing our capital numbers come down significantly and our efficiency numbers, improving because as we've integrated in house and manufacture our own capital is significantly lower and more specialized for our needs and so the investment dollars, we've been spending a really around higher cost.
Speaker Change: There is a higher cost regions.
Speaker Change: And I don't see a change based on policy right now that's going to change the way we're looking at it we've got some I think really good and plans are going in place. Some of it is just more validation and process improvements within our plants, but no significant changes.
Speaker Change: Those investments we.
Speaker Change: Target programs that have a long remaining life or at the start of the program even better incorporate in that automation.
Speaker Change: When the programs launch and so you get the full full benefit of that and.
Speaker Change: And as Ray mentioned, we have there are ample opportunities just on the on the just in time side, where the paybacks are our shorts and and so there is no we don't see any benefit to holding back that investment.
Speaker Change: As long as we can hit that 80%.
Speaker Change: Free cash flow conversion target that sort of the baffle that we're using to make decisions around caf.
Speaker Change: Capital investments restructuring cash investments.
Speaker Change: Balancing what we can do in terms of returning cash to shareholders through share repurchases by by meeting that 80% target. So that's the way we are.
Speaker Change: Making decisions around free cash flow.
Speaker Change: Deployment.
Speaker Change: In terms of the Nox outdated JV, we don't anticipate that being a significant cost if any.
Speaker Change: Two.
Speaker Change: To reach the consolidation it will be likely a small.
Speaker Change: Tributary to capital allocation this year.
Speaker Change: So that's not it.
Speaker Change: Our particular factor.
Speaker Change: And our plans for capital allocation overall.
Thanks appreciate it.
Speaker Change: Yes. Thanks.
Mark Delaney: And our final question comes from Mark Delaney from Goldman Sachs. Please go ahead with your question.
Mark Delaney: Good morning, Thanks for taking my question.
Mark Delaney: 1% of growth under market in <unk> and guidance for 25 points of headwind again this year and you spoke to some of those factors, including the program cancellations and push outs.
Mark Delaney: You look at where these schedules are now landing in the new backlog, including for 2026, maybe help us better understand when you think you can get back to your targeted growth over market levels and if that could occur in 2026 based on what youre seeing in the business today.
Mark Delaney: I think that near term growth is going to be a little choppy. So 25 as weak as you've highlighted coming off relatively weak fourth quarter.
Mark Delaney: But 2026 will be a strong year for growth for us and 2027 is still open there's programs that were quoting that may be.
Mark Delaney: <unk> launched in that timeframe there maybe programs that are extended in that timeframe and that's that's really the reason we chose not to provide a 2027 backlog today is theres just so many moving parts, it's difficult to give to provide an accurate number to investors that would be helpful for them or for analyst modeling the business, but.
Mark Delaney: We see a pretty clear path to bolt for 25, and 26 backlog in and so that's what we can say and then sort of near near to midterm looking out to 'twenty eight 'twenty 930, Yeah, that's where you see the competitive advantage, we built in seating leading to.
Significant new growth opportunities in the prepared remarks, we highlighted the $3 billion of conquest opportunities that we're pursuing in seating.
Mark Delaney: We're not going to win all of that we're going to we're going to win a significant portion of that and that's going to launch sort of in that $28 930 window and will lead to significant.
Mark Delaney: Growth in the seating business and allow us to achieve the market share targets that we've previously communicated and we have seen.
Mark Delaney: Our market share continuing to grow even with the relatively weak growth over market last year, we still did have positive growth over market, including our non consolidated <unk> and added market share.
Mark Delaney: And so we expect that trend to continue.
Mark Delaney: 26 will be a bigger step forward than certainly 25, though.
Speaker Change: Thanks for that Jason and then on tariffs, maybe you could speak in a little bit more detail around how much of your business both in seating and E systems might be exposed to the potential increase in tariffs to 25% tariffs do go into effect recognizing <unk> got your guidance, but if it does maybe speak more around the incremental steps here.
Speaker Change: It might be able to take and how much of the extra cost you may be able to mitigate thank you.
Speaker Change: Yes, I'll give you a little insight.
Speaker Change: Learned a lot over the last several days, leading up to a Saturday night at midnight.
Speaker Change: And one thing I've realized talking to executives from all of our customers here and then not be suppliers that this clearly is an industry issue and I.
Speaker Change: I see this more of a holistic I'm not going to sit here and polymer table.
Speaker Change: I'll tell you, we're going to get 25, or 20 or 10, it's going to it's going to come with a solution for the whole industry and what I mean by that is.
Speaker Change: What I realized like I said talking to the executives from the customers is that.
Speaker Change: They have choices and this is one of it might be that.
Speaker Change: They have a pass on and then hope that they can get it from the.
Speaker Change: Customer, which doesn't really seem reasonable or.
Speaker Change: They can they can shut down or try to run their business intermittently for as long as they can I think very similar to what happened back in <unk> you run through inventory to run again it runs through inventory.
Ron highlighted programs and move product around.
Speaker Change: No.
Speaker Change: This is going to be an industry issue it can be solved holistically.
Speaker Change: It isn't you are only as strong as your weakest link in some respects across the board, but on Sunday. There was a lot of work that was done and how we're looking at protecting ourselves.
Speaker Change: Customers would position themselves.
Speaker Change: <unk>.
Speaker Change: It's going to be solved like I said, but it can be sold across the board with all suppliers and it's going to be solved in a very similar fashion.
Speaker Change: I think of the day, it's going to lead to a lot of shutdowns in a lot of intermittent downtime because it was clear that we had suppliers.
Speaker Change: It had letters in with all kinds of different requests that we're all different end.
Speaker Change: And Mark just I think one play what I do want to make sure I'm glad you asked the question Theres been lots of numbers floating around in terms of what our imports from Mexico to the U S and just take this opportunity to.
Speaker Change: Level set everyone on that so our total imports last year.
Speaker Change: From Mexico to the U S were $2 9 billion.
Speaker Change: $2 2 billion of that some seating in about $700 million in these systems.
Speaker Change: And so I think that's a little larger number than what's what's been circulated and various estimates in seating is primarily our trim sarcee cover business structures and our thermal comfort components. So anything that's labor intensive.
Speaker Change: In North America, and seeding is manufactured in Mexico, and that's going to be the same case for all of our competitors as well in E systems, It's primarily our wire harness business and so oftentimes we're the importer of record before that wire harnesses eventually ship two to a customer.
Speaker Change: In terms of Canada.
Speaker Change: In China, our exposures are much smaller or less than $100 million of imports to the U S from Canada.
Speaker Change: And roughly $20 million of imports last year from China to the U S and it's had a very negligible.
Speaker Change: Impact on US most of that is.
Speaker Change: Recoverable distracted by our customers, so that modest impact and I know.
Speaker Change: We are working actively with our customers.
Speaker Change: In the near term to try and reduce.
Speaker Change: The near term risk of tariffs by building up some inventory and so Frank and Nick.
Speaker Change: The teams are working with us on that actively.
Speaker Change: As well, but just wanted to kind of level such on the level of imports. So you have that.
Thank you.
Speaker Change: Welcome.
Speaker Change: Okay, well I think that's the last question just for those on the call and I think the majority of that tied the Lear team, but thank you for attending the call and again to the team. The Lear team. Thank you for everything you did in 2024.
Speaker Change: We continue to invest in the right areas, we continue to differentiate ourselves.
Speaker Change: And continue to focus on what we're going to do as far as executing this year. So I appreciate all the efforts, we're going to we're going to.
Speaker Change: Go through this year to continue to execute and build a sustainable long path for margin growth. So thank you very much.
Speaker Change: And ladies and gentlemen, with that we'll be concluding today's conference call and presentation. We do thank you for joining you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.