Lear Corp. posted a $264.8 million net loss for the first quarter as the seating and electronics supplier suffered because of plant closings at Chrysler LLC and General Motors and braces for more.
Net sales dropped 44 percent to $2.17 billion for Lear, which drew 42 percent of its 2008 revenue from GM and bankrupt Chrysler. Sales to North America dropped nearly 52 percent, and revenue from Europe fell 46 percent. The net loss, the companys third in a row, compared with a $78.2 million profit in the first three months of 2008.
Focus on cash
The entire company is focusing on cash-flow considerations, as the supplier attempts to further its restructuring, CEO Bob Rossiter said today in a conference call with analysts.
It is our strong preference to accomplish this outside of court, he said. Its not over.
A possible GM bankruptcy declaration is an independent issue from Lears decision on whether to file Chapter 11 bankruptcy, Lear CFO Matt Simoncini said during the call.
Lear said it had $1.23 billion in available cash at the end of the quarter, down from $1.59 billion at the end of 2008. But the supplier expects cash flow to decrease each quarter this year, Simoncini said. The first quarters cash burn should represent at least 35 percent of the total for the year, he said.
That quarter, Lear suffered from extended holiday shutdowns at GM and Chrysler. The automakers were trying to reduce inventories that on Jan. 1 had reached more than 100 days supply amid sales rates at more than quarter-century lows.
Shutdowns will continue to plague Lear this quarter and the next, so Simoncini said he did not see any improvement in second quarter production. GM, on the brink of bankruptcy, is idling 13 of its plants for as long as nine weeks through the third quarter, some of them starting this week. Chrysler declared bankruptcy April 30 and last week closed its plants while it restructures.
Research firm IHS Global Insight on Wednesday said it expected both GM and Chrysler to cut 2009 North American light-vehicle production in half from already-depressed 2008 levels.
Currently, sales to GM make up about one-fifth of Lears revenue, and we dont have a lot of business with Chrysler any more, Simoncini said. Lears North American business with the Detroit 3 dropped 55 percent during the quarte compared with the same quarter last year.
On Wednesday, Lear said it reached an agreement with its bankers that waives existing defaults under its primary credit line until June 30. A temporary waiver was going to expire tomorrow.
"Yesterday's waiver gives Lear a little more time to restructure," Standard & Poor's analyst Efraim Levy wrote today. "If the company can sufficiently restructure its balance sheet and reduce costs, we believe its product strengths can position it for a recovery in global automotive demand.
"Meanwhile, we see negative operating cash flows shrinking sequentially, assuming no major additional disruptions, but we still expect net losses for the year."
In another development, at least one entity has approached Lear and expressed an interest in investing in the company, Simoncini said today.
The supplier, which has posted net losses in three out of the last four years, had violated its banking agreements at the end of 2008, after borrowing all of the $1.2 billion available under its lending arrangement.
Through April 2009, the light-vehicle sales rate has averaged 9.4 million units. That's down from 16.2 million autos sold in 2007 and 13.2 million in 2008. Production should improve in the second half of the year, Simoncini said.
Lear, of suburban Detroit, ranks No. 4 on the Automotive News list of top 150 suppliers to North America, with sales to automakers of about $4.9 billion in 2008.
Reuters contributed to this report.