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Strategic Evolution and Growth Plans
JPMorgan Harbour Auto Conference
August 3, 2004
world’s leading automotive interior supplier advance relentlessly ®
fast forward
Agenda
• Strategic Evolution Jim Vandenberghe, Vice Chairman • Global Growth Plans Dave Wajsgras, SVP and CFO • Q&A
1
Strategic Evolution
2
Strategic Evolution
1990-1994
Seat Components to Seat Systems Seat Systems to Total Interior Capability Operational Excellence; Reduce Debt Profitability Grow the Business
1994-1999
1999-2003
Going forward
3
We have Diversified Our Product Mix… 1994 Present
Seats and Seating Seats and Seating Components Components 100%
Seating Systems 68%
Interior Systems 18%
Electronics 14%
4
Diversified Our Geographic Mix… 1994 Present
Europe 17%
Europe 36%
North America 83%
Rest of World 5%
North America 59%
5
And Diversified Our Customer Mix 1994 Present
Classic Ford & GM 75%
Classic Ford & GM 47%
Extended Ford & GM Opel, Saab, Isuzu, Volvo, Jaguar and Land Rover 12%
DaimlerChrysler
All Other 25%
BMW All Other Asian PSA GP Renault VW Fiat
6
North America Market Share Rankings
Seating Systems
#1
Headliners
#2
Door Panels
#1
Electrical Distribution Systems
#3
Flooring & Acoustic Systems
#2
Instrument Panels & Cockpit Systems
#5
#1 in Total Interiors
7
North America Lear Content On Top Selling Vehicles
1 2 3 4 5 6 7 8 9 10
Ford - Total F-Series Pickup GM - Total Silverado Pickup DCX - Ram Pickup Toyota - Camry Honda - Accord Ford - Explorer Toyota - Corolla/Matrix Ford - Taurus Honda - Civic GM - Impala
11 12 13 14 15 16 17 18 19 20
DCX - Caravan GM - TrailBlazer GM - Malibu Ford - Focus Nissan - Altima GM - Cavalier Ford - Escape GM - Total GMC Sierra Pickup DCX - Jeep Grand Cherokee GM - Tahoe
21 22 23 24 25 26 27 28 29 30
Ford - Ranger DCX - Jeep Liberty Toyota - Sienna GM Grand Am Toyota - Tacoma Ford - Expedition Honda - Odyssey Ford - Econoline Ford - Mustang GM - Grand Prix
Source: Ward’s Automotive Reports, July 2004 and company data.
Lear Content on 29 of 30 Top-Selling Vehicles in North America
8
Western Europe Market Share Rankings
Seating Systems
#1
Door Panels
#3
Electrical Distribution Systems
#3
Instrument Panels & Cockpit Systems
#4
Headliners
#3
Industry Leader in Seating; Growth Opportunity in Instrument Panels and Cockpit Systems
9
Western Europe Lear Content On Top Selling Vehicles
1 2 3 4 5 6 7 8 9 10
VW - Golf Peugeot - 206/207 SW Peugeot - 307/307 SW Renault - Clio Ford - Focus Renault - Megane Opel - Corsa Fiat - Punto Ford - Fiesta Opel - Astra
11 12 13 14 15 16 17 18 19 20
Renault - Scenic Citroen - C3 VW - Polo BMW - 3 Series Audi - A4/S4/RS4 VW - Passat
Toyota - Yaris Fiat - Panda
21 22 23 24 25 26 27 28 29 30
Opel - Meriva Citroen - Xsara Picasso Mercedes E-class Ford - Mondeo Toyota - Corolla VW - Touran Opel - Vectra VW - Ibiza Ford - Focus C-Max Nissan - Micra
Opel - Zafira Mercedes C-class
Source: Based on available company and industry data.
Lear Content on 18 of 30 Top-Selling Vehicles in Western Europe
10
Evolution of North American Automotive Trends Number of Nameplates
115%
190 124 267 241
1974
1984
1994
2004
11
Evolution of North American Automotive Trends New / Redesigned & Freshened Vehicles
2005 Domestic OEMs Japanese OEMs Korean European Total 47 31 2 11 91 2006 32 23 4 10 69 2007 30 10 3 1 44 2008 15 7 2 1 25 Total 124 71 11 23
229
12
Evolution of North American Automotive Trends
Percent of Vehicle Sales over US $30,000
33%
18%
5%
1990
1995
2003
13
Profitable Global Growth Strategy
Industry Focus
Interiors are the fastest growing automotive segment Interiors are the fastest growing automotive segment Intense focus on improving interiors by all major automakers Intense focus on improving interiors by all major automakers
Lear Opportunity
Deliver record sales backlog (supports ≈ 5% + annual growth) Deliver record sales backlog (supports ≈ 5% + annual growth) Awarded General Motors’ first total interior integrator program Awarded General Motors’ first total interior integrator program Accelerate new product innovations (e.g., IntelliTireTM)) Accelerate new product innovations (e.g., IntelliTireTM Pursue strategic acquisitions (e.g., Grote & Hartmann) Pursue strategic acquisitions (e.g., Grote & Hartmann) Win new business in Asia and with Asian OEMs globally Win new business in Asia and with Asian OEMs globally
Lear is Well Positioned in the Fastest Growing Segment of the Automotive Industry
14
Global Growth Plans
15
A Consistent, Disciplined Strategy
Leverage our leadership position in total interiors in North America
Improve our business structure and grow our market share in Europe
Aggressively expand our presence in Asia and with Asian OEMs globally
Profitability Grow Our Business Worldwide
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Record Sales Backlog
(millions)
$1,250 $1,000 $900 $750 $500
2004
$750
2005
$2,000
2006
$3,000 Cumulative
2007
$3,900
2008
$4,400
Record Backlog Driving Sales Growth and Diversification
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
17
First Total Interior Integrator Program
2006 Buick LeSabre / Cadillac DeVille $825 million in annual sales Lear to provide total interior, including electrical distribution systems
Systems Integrator
Design Engineering Sourcing Manufacturing Sub-Assembly Sequencing OEM Lead Shared OEM Directed Supplier Supplier Supplier
Total Interior Integrator (TI)
Supplier Lead Supplier Lead Supplier Lead Supplier Supplier Supplier
Working with other Major Automakers to Win New Total Interior Integrator Programs
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New Product Initiatives
IntelliTireTM OccuSense®
MediaConsoleTM
ClearViewTM
19
Electronics/Electrical Market
Electronics / Electrical Global Market Opportunity*
$44 (in billions) $28
Grote & Hartmann
**
High quality producer with technical expertise Improves overall competitiveness in electronics / electrical market Provides avenue for growth and customer diversification
$18
$25
Wire Harness/ Terminals & Connectors
Add Body Electronics & Mechatronics
Add Safety Electronics
Add Audio, Infotainment & Other
Acquisition Consistent with our Electrical/Electronics Strategy
* ** Based on internal Lear estimates Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
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Wire Harness Composition
Average Wire Harness Composition
Terminals & Connectors Wire Harness
Terminals & Connectors
40% 60%
Wiring / Assembly
Terminals & Connectors are an Integral Part of a Wire Harness Assembly
21
Grote & Hartmann Acquisition
≈ $275 million in revenue, with about 75% in Europe ≈ $275 million in revenue, with about 75% in Europe Headquarters: Wuppertal, Germany; 1,900 employees Headquarters: Wuppertal, Germany; 1,900 employees Major products: terminals & connectors and junction Major products: terminals & connectors and junction boxes boxes Major customers: VW, BMW, Ford, Opel, DCX, Renault, Major customers: VW, BMW, Ford, Opel, DCX, Renault, MAN and PSA group MAN and PSA group
Acquisition Expected to be Slightly Accretive in 2005*
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
22
Our Presence in Asia is Growing Rapidly*
China
• 11 facilities • 1 engineering center • 21 customers • Seats, interiors, electrical distribution, electronics, IP
Korea
• 2 facilities • 1 engineering center • 2 customers • Seats
India
• 3 facilities • 1 engineering center • 4 customers • Seats, interior integration
Japan
• 3 engineering centers • 5 customers • Interior integration
Thailand
• 2 facilities • 5 customers • Seats, seat trim, door panels
* Includes facilities held through joint ventures
Philippines
• 4 facilities • 1 engineering center • 7 customers • Electrical distribution
23
Lear Awarded New Seat Business with Mazda Effective June 1, 2004, Lear was awarded seats and seat component business for: Mazda 6 Mazda Tribute / Ford Escape Expected annual sales of approximately $100 million*
Making Progress with North American Transplants
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
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Asia/Asian Automakers Revenue*
(millions)
≈$1,600 $1,250 $850
2002
2003
2004
Future
* **
Consolidated and unconsolidated sales Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
Asian Sales About Double from 2002 to 2004; Solid Growth Expected to Continue**
25
Infrastructure Cost Reduction Actions Low cost country strategy Manufacturing Capacity Sourcing Selective in-sourcing of value-add components Global Cost Technology Optimization initiatives Leverage Lear’s scale and commonization expertise “Lear flexible seating architecture”
26
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ADVANCE RELENTLESSLY™
LEA Listed NYSE
www.lear.com
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to, general economic conditions in the markets in which the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or suppliers or that otherwise affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, the impact and timing of program launch costs, the costs and timing of facility closures or similar actions, increases in warranty or product liability costs, risks associated with conducting business in foreign countries, fluctuations in foreign exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company operates, competitive conditions impacting the Company’s key customers, raw material cost and availability, the Company’s ability to successfully integrate the recently acquired Grote and Hartmann operations, the outcome of legal or regulatory proceedings to which we are or may become a party, unanticipated changes in free cash flow and other risks described from time to time in the Company’s Securities and Exchange Commission filings. In addition, the full year 2004 per share earnings guidance is based on an assumed 70.5 million shares outstanding and does not reflect the potential dilutive impact of the Company’s outstanding convertible senior notes. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update them. This presentation also contains information on the Company’s sales backlog. The Company’s incremental sales backlog reflects: (i) formally awarded new programs; (ii) targeted programs for which the Company believes there is a substantial likelihood of award; (iii) phased-out and cancelled programs; (iv) estimates regarding customer-mandated changes in selling prices; and (v) estimates of expected changes in vehicle content. Changes in any of these components may significantly impact the Company’s backlog. In addition, backlog may be impacted by various assumptions imbedded in the calculation, including vehicle production levels on new, replacement or targeted programs, foreign exchange rates and the timing of major program launches. For purposes of the backlog data included in this presentation, the Company has made various assumption, including the following: (1) North American vehicle production of 16.0 million units; (2) Western European vehicle production of 16.0 million units; (3) South American vehicle production of 1.9 million units; and (4) a Euro exchange rate of $1.20/Euro. Please refer to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003 for further information on the 28 Company’s calculation of sales backlog.