But Lear is still stinging from a losing streak that started 10 months ago when GM pulled back in-house the design and integration of automotive interiors. The move drastically decreased the value of a Lear plastic trim business that it had spent heavily to build over the years.
Lear's response exacerbated the problem. The company isolated its trim operations from Lear's seating and electronics business. And it pledged the assets to a joint venture with billionaire investor Wilbur Ross that remains in limbo.
Customer production cuts delivered the second blow. Those cuts exposed Lear's dependence on GM and Ford, especially on low-mpg light trucks. GM is Lear's largest customer, accounting for 28 percent of its sales in 2005.
The third blow was largely self-inflicted. Lear last fall engaged in a public spat with the Chrysler group over a demand for price increases to cover rising raw-material costs. Chrysler sued Lear to ensure shipment of parts.
Then the automaker whacked Lear from its incumbent position to produce interiors for the next generation Dodge Ram pickup. The loss of the job to Visteon Corp. and Johnson Controls Inc. will cost Lear about $400 million a year in revenue when the models begin hitting the road in 2008.
DelGrosso said Lear has put aside the dust-up in recent meetings with key Chrysler purchasing staff.
The declines in light-truck volumes that made 2005 so difficult continue to be a headwind against progress. But Lear is showing signs of improvement, DelGrosso said.
For instance, Lear's core seating business improved in the first quarter on the strength of new-vehicle launches and additional volumes with the Asian car makers.
The successful launch of GM's popular new SUVs, known as the GMT900 program, is bringing a return to Lear. Lear also supplies the seats for the new Hyundai Santa Fe crossover.
Seats account for about 65 percent of sales, with the other 35 percent split between electronics and interior trim, such as door panels, instrument panels and headliners.
A first-quarter margin on seat sales of 4.2 percent, though not up to historic standards, was still much better than 1.8 percent for the first quarter in 2005.
In the recent conference call with analysts, executives said plant closings, savings from using a common seat architecture and more profitable business lines should return seat margins to historical levels in 2008.
Lear's improvements have yet to move the investment community. Standard & Poor's Ratings Services dropped Lear's corporate credit rating deeper into junk territory in March. The agency rated Lear a B-plus, down from BB-plus, saying earnings and cash flow for the next few years will not beat previous expectations.
Analyst John Murphy of Merrill Lynch said in an April report that the company improved its liquidity by completing a $1 billion term loan. But he dropped Lear's 2006 earnings estimate nearly in half because of higher tax projections.
DelGrosso said Lear intends to decide on the future of its interior trim business by the end of the year.
The business continued to be a drag on earnings in the first quarter, posting a loss of $59.5 million in the quarter before interest, income taxes and other expenses.
Lear would like to contribute the business to a joint venture with Ross for a minority stake in the new business, DelGrosso said. But for that to happen, Ross needs to win the bidding against four other competitors to buy a reorganized Collins & Aikman Corp. from Chapter 11 reorganization.
DelGrosso said if Ross cannot obtain Collins & Aikman's North American business, Lear will go in another direction by year end. He said Lear cannot just shutter the operation, which posted revenue of about $3 billion last year, because key customers rely on the parts for their interiors.
You may e-mail Dave Barkholz at [email protected]