Just as the in-play drama and financial dust settles at Lear Corporation in a post Icahn Enterprises takeover climate, Bob Rossiter, the man in charge, raises an intriguing possibility: is billionaire investor Carl Icahn really going to leave it at that? Mr Icahn led a failed battle to take over the giant interior and electrical-electronics parts maker but Lear’s largest shareholders rejected his bid in July.

Mr Rossiter, as chairman, assumed direct control of Lear’s global business units and the additional responsibilities of president and CEO on August 14 after former CEO Doug DelGrosso departed. The mood and fortune of the embattled company became focused on global expansion and product development.

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Mr Rossiter, a 34-year Lear veteran, is still leaving the door open to investors, and he hints that includes Carl Icahn, the activist New York investor said to be worth $14bn himself.

“We’re open to investors. Carl has bought a big stake. You never know where he’s at. They [Icahn Enterprises] have been great board members. They’ve done an exceptionally good job,” says Mr Rossiter. “And you never know what Carl is going to do.”

In a third-quarter earnings report released on November 6, Mr Rossiter confirmed that Lear surpassed Wall Street expectations with net sales of $3.6bn in its core businesses of seating, electronics and electrical distribution systems. The company’s European sales rose to $1.6bn, up 8% for the third quarter.

Global sales

Mr Rossiter says that the company is now looking for $15bn in global sales from its core businesses this year, compared with an estimated $14.5bn in 2006. The current projection excludes its interiors business, which it divested to financier Wilbur Ross for a minority stake in his International Automotive Components group in March, including a one-third stake in the European venture and 19% in the larger North American venture.

Analysts have pegged 2007 Lear sales at $15.4bn, with 2008 projected to be generally in line with that. Lear has narrowed its product line as it aims to be a world leader in its core businesses and pursues significant global expansion.

There was disappointment after the Icahn bid failed but Mr Rossiter now has bigger fish to fry. “Our balance sheet is strong. We were able to survive it and continue to grow,” he says. “I believe we can be a $25bn (or more) company over time.

“We will grow internally and add bolt-on acquisitions,” he says, though he declines to specify what those bolt-ons might be, or where the company is adding them, only saying that it is looking at areas of “social responsibility” that benefit its global customers. In a recent partnership with Ford Motor Company, Lear is developing soya-based foam seating for new Ford products, so it might be safe to assume some investments in research and development will be ‘green’.

Business focus

Currently, Lear is focusing on its seating and electrical distribution businesses, where it has high market shares, and electronics, where it has the potential to be a niche player. Its market share for seating is 42% in North America and 27% in Europe, with Johnson Controls being a key competitor.

Lear is well positioned to grow in its $3bn core electrical distribution and electronics business units, where the company hopes to double sales in the next few years, he says. Electronics-electrical distribution sales combined were $693.2m in the third quarter of 2007, up 2% from the same period a year ago.

The company has undertaken a serious restructuring drive to contain costs, streamline operations and raise profits. Much of that plan rides on Lear’s global development pursuits. And it is the company’s growth plan that is clearly on Mr Rossiter’s mind these days. Lear’s global strategy is increasingly important as it seeks to offset declining market share and the lower sales of US domestics, which are hampered by declining sales of large pick-ups and SUVs. The company is capitalising on opportunities in low-cost and emerging regions, such as China, Vietnam and Honduras. In the eastern European region, it includes Russia, Poland, Slovenia, Turkey, Czech Republic, Hungary and Romania.

Lear’s China strategy is already paying off handsomely. The company has invested in 24 locations in China, including engineering centres and 19 manufacturing sites which are joint ventures, says a spokesperson.

“Every manufacturer is trying to be in China, south-east Asia and the new emerging countries. We’re growing that business now and seeing 25% growth in Asia,” says Mr Rossiter. Lear aims to grow 35%-40% a year in China over the next three years or so, he says.

Development strategy

Analyst Kirk Ludtke at CRT Capital Group says Lear is pursuing the right strategy in its global product development, seeking less reliance on the US domestics and building relationships with Toyota, Nissan, Honda, Hyundai and other Asian makers. “Lear’s business is still weighted heavily toward the North American operations of the Detroit Three [General Motors, Ford, and the Chrysler portion of DaimlerChrysler]. So they are facing a triple whammy that includes a slow-down in the US market, Detroit Three market share losses and Lear’s own market share losses within the Detroit Three,” he says.

“The question becomes, in our [analysts] minds: can the company replace all that lost volume with new business from other auto makers? It appears that they are making progress with non- Detroit Three customers, but it will be a struggle for them just to maintain their existing sales levels.”

Mr Rossiter seems to be prepared for the struggle. In early October, he returned from his 95th Japan trip. “Lear maintains outstanding business relationships with all our customers globally. Most of them know me,” he says about high-level customers that he visits regularly.

“I want to make a commitment to our customers and Lear people: we will be among the world leaders in our core businesses and among the most competitive auto suppliers in the world,” he says.

 

COMPANY PROFILE

LEAR CORPORATION

Founded: 1917

Headquarters: Southfield, Michigan

Employees worldwide: 90,000 at 236 locations in 33 countries

Annual net sales (2006): $17.8bn

Ranking: Number 130 among Fortune 500

Just as the in-play drama and financial dust settles at Lear Corporation in a post Icahn Enterprises takeover climate, Bob Rossiter, the man in charge, raises an intriguing possibility: is billionaire investor Carl Icahn really going to leave it at that? Mr Icahn led a failed battle to take over the giant interior and electrical-electronics parts maker but Lear’s largest shareholders rejected his bid in July.

Mr Rossiter, as chairman, assumed direct control of Lear’s global business units and the additional responsibilities of president and CEO on August 14 after former CEO Doug DelGrosso departed. The mood and fortune of the embattled company became focused on global expansion and product development.

Mr Rossiter, a 34-year Lear veteran, is still leaving the door open to investors, and he hints that includes Carl Icahn, the activist New York investor said to be worth $14bn himself.

“We’re open to investors. Carl has bought a big stake. You never know where he’s at. They [Icahn Enterprises] have been great board members. They’ve done an exceptionally good job,” says Mr Rossiter. “And you never know what Carl is going to do.”

In a third-quarter earnings report released on November 6, Mr Rossiter confirmed that Lear surpassed Wall Street expectations with net sales of $3.6bn in its core businesses of seating, electronics and electrical distribution systems. The company’s European sales rose to $1.6bn, up 8% for the third quarter.

Global sales

Mr Rossiter says that the company is now looking for $15bn in global sales from its core businesses this year, compared with an estimated $14.5bn in 2006. The current projection excludes its interiors business, which it divested to financier Wilbur Ross for a minority stake in his International Automotive Components group in March, including a one-third stake in the European venture and 19% in the larger North American venture.

Analysts have pegged 2007 Lear sales at $15.4bn, with 2008 projected to be generally in line with that. Lear has narrowed its product line as it aims to be a world leader in its core businesses and pursues significant global expansion.

There was disappointment after the Icahn bid failed but Mr Rossiter now has bigger fish to fry. “Our balance sheet is strong. We were able to survive it and continue to grow,” he says. “I believe we can be a $25bn (or more) company over time.

“We will grow internally and add bolt-on acquisitions,” he says, though he declines to specify what those bolt-ons might be, or where the company is adding them, only saying that it is looking at areas of “social responsibility” that benefit its global customers. In a recent partnership with Ford Motor Company, Lear is developing soya-based foam seating for new Ford products, so it might be safe to assume some investments in research and development will be ‘green’.

Business focus

Currently, Lear is focusing on its seating and electrical distribution businesses, where it has high market shares, and electronics, where it has the potential to be a niche player. Its market share for seating is 42% in North America and 27% in Europe, with Johnson Controls being a key competitor.

Lear is well positioned to grow in its $3bn core electrical distribution and electronics business units, where the company hopes to double sales in the next few years, he says. Electronics-electrical distribution sales combined were $693.2m in the third quarter of 2007, up 2% from the same period a year ago.

The company has undertaken a serious restructuring drive to contain costs, streamline operations and raise profits. Much of that plan rides on Lear’s global development pursuits. And it is the company’s growth plan that is clearly on Mr Rossiter’s mind these days. Lear’s global strategy is increasingly important as it seeks to offset declining market share and the lower sales of US domestics, which are hampered by declining sales of large pick-ups and SUVs. The company is capitalising on opportunities in low-cost and emerging regions, such as China, Vietnam and Honduras. In the eastern European region, it includes Russia, Poland, Slovenia, Turkey, Czech Republic, Hungary and Romania.

Lear’s China strategy is already paying off handsomely. The company has invested in 24 locations in China, including engineering centres and 19 manufacturing sites which are joint ventures, says a spokesperson.

“Every manufacturer is trying to be in China, south-east Asia and the new emerging countries. We’re growing that business now and seeing 25% growth in Asia,” says Mr Rossiter. Lear aims to grow 35%-40% a year in China over the next three years or so, he says.

Development strategy

Analyst Kirk Ludtke at CRT Capital Group says Lear is pursuing the right strategy in its global product development, seeking less reliance on the US domestics and building relationships with Toyota, Nissan, Honda, Hyundai and other Asian makers. “Lear’s business is still weighted heavily toward the North American operations of the Detroit Three [General Motors, Ford, and the Chrysler portion of DaimlerChrysler]. So they are facing a triple whammy that includes a slow-down in the US market, Detroit Three market share losses and Lear’s own market share losses within the Detroit Three,” he says.

“The question becomes, in our [analysts] minds: can the company replace all that lost volume with new business from other auto makers? It appears that they are making progress with non- Detroit Three customers, but it will be a struggle for them just to maintain their existing sales levels.”

Mr Rossiter seems to be prepared for the struggle. In early October, he returned from his 95th Japan trip. “Lear maintains outstanding business relationships with all our customers globally. Most of them know me,” he says about high-level customers that he visits regularly.

“I want to make a commitment to our customers and Lear people: we will be among the world leaders in our core businesses and among the most competitive auto suppliers in the world,” he says.

 

COMPANY PROFILE

LEAR CORPORATION

Founded: 1917

Headquarters: Southfield, Michigan

Employees worldwide: 90,000 at 236 locations in 33 countries

Annual net sales (2006): $17.8bn

Ranking: Number 130 among Fortune 500