Lear said that net sales backlog now totals $1.4 billion for 2010 to 2012, up roughly 25%, despite lower production industry wide. The new backlog also represents continued sales diversification for Lear, with 40% coming from its seating business and 60% from its electrical/electronic unit. Geographically, more than half of the new business comes from outside North America. The financial reorganization has reduced its debt obligations by approximately $2.8 billion,
The collapse of vehicle production that began in 2008, continue into 2009, and was felt most acutely in North America, forced Lear's hand and pushed it to accelerate plans to diversify its sales mix away from the "Detroit three" and install more capacity in low-cost regions. Ultimately, it also forced it to restructure debt.
In its annual shareholder meeting on May 21 as the market downturn deepened, Lear said it was expanding and quickening its cost reduction and restructuring efforts, saying that even then, discussions with lenders to reorganize its debt were ongoing. The shareholder report used a CSM Worldwide study to show how bleak global vehicle production had become. After increasing every year from 2001 through 2007, the manufacture of vehicles fell in 2008 from 68.6 million to 65.4 million. The fourth quarter of that year was particularly difficult, with global production of 14 million vehicles down 22% from the year prior. For Lear, whose top 15 platforms were off 26% for the quarter, it meant that 2008 net sales fell to $13.6 from $15.3 billion, while core operating earnings were nearly cut in half, plummeting from $749 million to $418 million. The market tumult pushed Lear's cash flow $51 million into the red.
In the first quarter 2009, the contraction worsened, with net sales down 44% from the year prior to $2.2 billion, dropping core operating earnings into a net loss of $67 million. Lear said "major weakness" remained in North America, where production settled in at an annualized rate of 9.5 million units, compared to about 15 million units in 2008. The company noted, however, that although there was a significant amount of plant downtime scheduled for second quarter in North America, second half production was forecast to improve.
Globally, first quarter production of 11.4 million vehicles in the first quarter was down 36% compared to 2008. Production for Ford, GM, and Chrysler for the first three months of the year was off 55% to 900,000 vehicles, with Lear's top 15 platforms down 42%. Even China contracted, albeit at a 2% rate, to 1.9 million vehicles for the first three months of 2009.
Lear noted that from 2005 through 2008 it restructuring continued apace, with the company closing or consolidating more than 25 facilities worldwide, reducing salaried census by 33% in North America, and increasing component manufacturing, sourcing, and engineering in low-cost countries, with plants in 21 countries throughout Central and South America, Eastern Europe, Africa, and Asia. In terms of customer diversification, Lear said it did manage to push the total percentage of sales outside North America to 64% in 2008. That said, it's two largest customers remained GM and Ford.
The worst might be over, with CSM worldwide forecasting North American vehicle production will rebound in 2010, reaching 10,492 million light vehicles, with increases forecast through 2013, when production will reach. 14,764.1 million units. For September, CSM noted that North American light vehicle production was down 12.20% from year-ago levels to an annualized rate 10.82 million units, 96% higher than the January 2009 production rate. - [email protected]