Lear says Q2 earnings rise on record sales, lowers outlook amid EV uncertainty

Lear Corp. reported record sales and a modest gain in second-quarter net income as the supplier brings more automation technology in-house and adjusts to rapidly changing automaker electrification strategies.

The suburban Detroit supplier's net income for the quarter ended June 30 rose 2.6 percent to $173.1 million from the same period a year earlier. Revenue rose 0.2 percent to $6.01 billion, a quarterly high for the company.

Lear's stock price increased 2.8 percent in afternoon trading to $119.61 per share.

The earnings report comes as Lear, the largest U.S. supplier, continues searching for ways to reduce labor costs by investing in automation, reducing head count and moving some production to lower-cost countries.

The company said it closed on its recent acquisition of Spanish company WIP Industrial Automation, the latest of several moves it has made to bring automation technology in-house.

Those investments "will allow us to really accelerate the labor cost reduction and manufacturing cost reduction over the next several years," Lear CEO Ray Scott said on a July 25 call with analysts and investors.

Lear said it was about halfway through planned head count reductions in its seating and e-systems businesses, with the company targeting to cut about 8 percent and 6 percent of its workforce in those divisions this year, respectively. Lear has also moved some operations it had in Europe to North Africa, as well as from the border region of Mexico to other parts of the country or to Honduras as a way to reduce labor costs.

Lear lowered its full-year 2024 outlook amid lower global vehicle production levels and increased uncertainty surrounding automakers' EV plans. It now expects adjusted net income of between $630 million and $760 million for the year, compared with its prior outlook of between $730 million and $840 million. It projects annual sales of between $23.23 billion and $23.67 billion, down from its previous outlook of up to $24.6 billion.

"Our adjustment to the second-half outlook is greater than we had anticipated," Lear CFO Jason Cardew said. "That really reflects the ramp-up in announcements, and also our extrapolation of what that may mean, into the fourth quarter, particularly on electric vehicle platforms, where we're just seeing a slower ramp-up and demand in the U.S. and Europe."

The outlook's figures include the tentative agreement Lear and the UAW reached July 25 for about 500 workers at a seating plant in Wentzville, Mo., where a three-day strike led to General Motors idling its nearby assembly plant.

Scott said the company is deepening its ties with Chinese automakers, saying about two-thirds of Lear's three-year backlog in China is with brands based there. It also expects to build about 30 percent of Chinese manufacturer BYD's seats in the next few years.

"Our vertical integration combined with our local engineering capabilities provide a significant opportunity for growth in China," Scott said.

Lear seating sales fell slightly during the quarter to $4.45 billion, compared with $4.47 billion a year earlier. E-systems sales rose slightly to $1.57 billion from $1.53 billion last year.

Lear ranks No. 10 on the Automotive News list of the world's largest suppliers, with $23.47 billion in global sales to automakers in 2023.