DOW JONES NEWSWIRES
Lear Corp. (NYSE:LEA) (LEA) cut its fiscal 2008 outlook amid lower North American vehicle production and increased steel costs, while noting it's implementing cost reductions and restructuring actions to mitigate their impact.
The moves make the auto-parts supplier the first in the industry to disclosed the impact of continued weak U.S. auto sales will have on the company.
Lear now expects sales for the year of $15.3 billion, down from its April outlook of $15.5 billion, and core operating earnings - which exclude interest, restructuring costs and other special items - of $600 million to $640 million, down from $660 million to $700 million. The mean estimate of analysts polled by Thomson Reuters was for revenue of $15.33 billion.
"Industry conditions in North America have continued to be challenging, with the lowest expected production volumes since the early 1990s and unprecedented increases in raw material and energy costs," Chief Executive Bob Rossiter said. "Like our customers, we are continuing to aggressively realign our capacity and implement structural cost reductions to improve our longer-term competitiveness." Rossiter also noted Lear is expanding its operations outside North America, which represented about 55% of fiscal 2007 sales.
Lear, which makes automotive seats and electronic and electrical systems, also cut its 2008 forecast for North American vehicle production to about 13.8 million units from 14.1 million amid similar revisions from its customers and industry forecasting services based on lower sales rates for full-size pickup trucks and large sport utility vehicles.
Lear said recent production cuts announced by General Motors Corp. (NYSE:GM) (GM) and Ford Motor Co. (NYSE:F) (F) are expected to require further restructuring investments in future years.
Other big suppliers to GM and Ford include American Axle Manufacturing & Holdings Inc. (NYSE:AXL) (AXL) ArvinMeritor Inc. (NYSE:ARM) (ARM) and Visteon Corp. (NYSE:VC) (VC). Just as the U.S. auto makers have relied on trucks and SUVs for the bulk of their profits, many of their suppliers have done likewise. The parts manufacturers, most of which have gone through extensive restructuring, have also been hit by the impact of high commodity costs.
Lear's stock shot up as much as 31% at the end of April when it reported first-quarter results above Wall Street expectations, but the stock remains below the $37.25 price that Carl Icahn offered for the company last year, as some investors and analysts are concerned about wider industry issues that are beyond management's control. Lear's shareholders rejected the buyout offer from Icahn, who remains the company's largest stockholder with a 16% stake, a year ago.
Shares traded recently up 1.4% at $25.10.
- By Lauren Pollock, Dow Jones Newswires; 201-938-5964; lauren.pollock@ dowjones.com
(END) Dow Jones Newswires 06-04-08 1216 Copyright (c) 2008 Dow Jones & Company, Inc.
