1. R
R
UBS Paris Auto Show
Investor Conference 2004
September 23, 2004
world’s leading automotive interior supplier fast forward
advance relentlessly
1
1
2. R
Agenda
Industry Trends and Lear’s Strategic Evolution
Jim Vandenberghe, Vice Chairman
International Update
Don Stebbins, President & COO – International
Financial Update
Dave Wajsgras, SVP and CFO
Q&A
2
2
4. R
Industry Trends
Consumers demanding more interior features
Automakers focused on world-class interiors and
“Perceptual Quality”
Industry progressing toward total interior
integration
Automotive interiors are the fastest growing
segment of the auto industry
4
4
5. R
Top 10 Vehicle Features for Commuters
1. Comfortable seats
2. Automatic transmission
3. Good visibility
4. In-dash CD changer or satellite radio
5. Steering wheel-mounted stereo controls
6. Controlled noise, vibration and handling
7. Good fuel economy
8. Well-designed cup holders and ample storage
9. Two power points and a hands-free voice activated phone system
10. Reasonably compact external size
Lear Offers Solutions to Six of Edmunds.com’s
Top Ten Features for Commuters
5
Source: List issued in a press release from Edmunds.com on August 11, 2004. 5
6. R
Priority Emphasis on the Interior
“(In the) Interior is where you spend all of your time. It
makes total sense to me to want to get it right.”
J Mays, Ford
“Interiors are an area of huge focus for General
Motors.”
Bob Lutz, GM
“For us, the interior has always been a priority of
design.”
Helmut Panke, BMW
6
6
7. R
New Emphasis on the Interior in Advertising
Volvo XC90
VW Multivan
Reconfigurable Seating
7
Nissan Quest 7
8. R
Automotive Industry Moving to Integrated Systems
Increasing Supplier
Responsibility
Dec., 2002 - -
Integrated First Total Interior
System Design
Integrator Program
& Development
Awarded
to Lear
Co-located
ND
Design
E
TR
RY
Mfg.
T
US
Feasibility
D
IN
Build to
Print
Increasing
Systems
Complexity
Component System System
Sub Sub
Assembly System Integration
8
8
9. R
Global Growth of Vehicle Sub-Elements
26%
Average Annual Growth
2004 - 2009
9%
6%
5%
Powertrain Electrical Chassis Interior
Interiors are the Fastest Growing Segment
9
Source: 2004 CSM Worldwide, Study 9
10. R
Estimated Size of Total Interior Market* (Global)
Global Market
(billions) $145
$25
$90
$30 $30
$25
Electrical
Distribution
$20
Interiors
$30
$90 $90 $90
Seats
$40
Add Cockpits
Current Global Add Add
and
Cockpits**
Market Electronics
Electronics
A Broader Focus on Cockpits and Electronics
Significantly Expands Lear’s Potential Market***
* Based on internal Lear estimates.
** Excludes IP substrate and cockpit electronics, which are included in current global market. 10
10
*** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
12. R
Strategic Evolution
Profitably Grow the Business
Going Forward
Operational Excellence;
1999-2003
Reduce Debt
Seat Systems to
1994-1999
Total Interior Capability
Seat Components
1990-1994
to Seat Systems
12
12
13. R
Lear’s Strategy has Supported Rapid Growth
Net Sales
(billions)
ome
$15.7
t I nc %
$16.0 $14.4
Ne
$14.1
$13.6
23
AGR
$14.0
SALES
$12.4
C
CAGR
$12.0
20%
$9.1
$10.0
$7.3
$8.0 $6.2
$4.7
$6.0
$3.1
$4.0
$2.0
$0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Net sales have steadily No strategic hole in Lear’s
increased since IPO to about product line up
$15.7 billion in 2003
Lear ranks 129 among the
17 major acquisitions during
Fortune 500 and is the 23rd
the 1990’s
fastest growing company in the
60% acquisition growth
U.S. over the last ten years
40% organic growth 13
13
14. At the Same Time, R
We have Diversified Our Product Mix…
1994 Present*
Seats and Seating
Seating Systems
Components
68%
100%
Interior Systems Electronics
* Based on 2003 financials.
18% 14% 14
14
15. R
Diversified Our Geographic Mix…
Present*
1994
Europe
Europe
36%
17%
Rest of World North America
North America
5% 59%
83%
* Based on 2003 financials.
15
15
16. R
And Diversified Our Customer Mix
Present*
1994
Extended Ford & GM -
Classic Ford & GM Opel, Saab, Volvo,
47% Jaguar and Land Rover
Classic Ford & GM 12%
75%
DaimlerChrysler
BMW
All Other Fiat
VW
All Other
25% PSA GP
Asian
Renault
/ Nissan
* Based on 2003 financials.
16
16
17. Going Forward, We have a Focused R
Strategy to Grow Our Business Worldwide*
Aggressively
expand our
presence in
Asia and with
Asian OEMs
Improve our
globally
business
structure and
grow our market
Leverage our
share in Europe
leadership
position in total
interiors in North
America
Profitably Grow and Diversify Our Business Worldwide
17
17
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
18. In North America, R
We Plan to Leverage Our Leadership Position in Total Interiors
North America
Quality and customer satisfaction continues to improve
Ranked #1, #2 or #3 in seats, electrical distribution
systems, headliners, door panels and flooring &
acoustics*
Awarded first total interior integrator program for General
Motors
Record North American backlog coming on-line in 2005**
* Source: Lear’s Internal Market Share Study.
18
* * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 18
20. R
Europe Business Summary
(billions)
Top 10 Customers
Sales
$5.6
$4.5
$4.3
2001 2002 2003
20
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
20
21. R
Europe Market Share Rankings
Seating Systems #1 #3
Door Panels
Electrical #4
#3 Instrument Panels
Distribution Systems
#3
Headliners
Industry Leader in Seating;
Growth Opportunity in Instrument Panels and Cockpit Systems
21
21
Source: Lear’s Internal Market Share Study.
22. R
J.D. Power Seat Survey Shows Improvement for European Seats
Things Gone Wrong (TGW)
per 100 vehicles Lear’s 2003 J.D. Power
Results for Lear Europe
21% Improvement
7.1
U.S. data for seats
5.6
supplied by Lear’s
European plants
21% improvement
from 2002
2002 2003
Source: 2003 J.D. Power Seat Survey
Independent J.D. Power Survey
Shows Solid Improvement in Lear’s European TGW 22
22
23. In Asia, R
We are Rapidly Expanding Our Presence*
China Korea
• 11 facilities • 2 facilities
• 1 engineering center • 1 engineering center
• 21 customers • 2 customers
• Seats, interiors, electrical • Seats
distribution, electronics, IP
India Japan
• 3 facilities • 3 engineering centers
• 1 engineering center • 5 customers
• 4 customers • Interior integration
• Seats, interior integration
Thailand Philippines
• 2 facilities • 4 facilities
• 5 customers • 1 engineering center
• Seats, seat trim, • 7 customers
door panels • Electrical distribution
23
23
* Includes facilities held through joint ventures.
24. R
Second Quarter Developments in China
New Business This Year:
Lear awarded first contract with First Autoworks (SOP – Oct. 04)
New electronics plant to supply Shanghai GM, Honda and Saturn
(SOP – July 04)
Business Development:
Lear / Yunhe JV awarded first seat business with Peugeot
(SOP – Q4 05)
JV with Dongfeng Motors is well positioned to serve Nissan and
Honda
Leveraging Joint Venture Infrastructure and Relationships
with Global Customers to Support Rapid Growth in China 24
24
25. We are Rapidly Growing Our Business R
in Asia and with Asian Automakers Globally*
(millions)
≈$1,600
$1,250
$850
2002 2003 2004 Future
Asian Sales About Double from 2002 to 2004;
Solid Growth Expected to Continue**
* Consolidated and unconsolidated sales.
25
25
** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
26. Overall in Europe, R
We are Growing Sales and Steadily Improving Margins*
European Financials
Europe CPV
Growing sales and
UP
improving margins
≈ 10+%
$309
Positive cash flow
$247
Low-cost manufacturing
and sourcing in Eastern
Europe
2002 2003 2004
On Track for Our 3rd Consecutive Year of Improving Financials
26
* Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
26
28. R
Profitable Global Growth Strategy
Industry Focus
Interiors are the fastest growing automotive segment
Intense focus on improving interiors by all major automakers
Lear Opportunity
Deliver record sales backlog (supports ≈ 5% + annual growth)
Awarded General Motors’ first total interior integrator program
Accelerate new product innovations (e.g., IntelliTireTM)
Pursue strategic acquisitions (e.g., Grote & Hartmann)
Win new business in Asia and with Asian OEMs globally
Lear is Well Positioned in the Fastest Growing Segment
of the Automotive Industry 28
28
29. R
Infrastructure Cost Reduction Actions
Low cost country strategy
Selective in-sourcing of value-add components
Global Cost Technology Optimization initiatives
Leverage Lear’s scale and commonization expertise
“Lear Flexible Seat Architecture”
29
29
30. Superior Competitive Advantage R
Low Cost Manufacturing Capabilities and Engineering Centers
Poland – 4
Hungary – 4
Czech Republic – 2
Mexico – 24
Turkey – 2
Slovakia – 1
Romania – 1
L
L
LL
LL
L L
L
L
L
L
L L
L Philippines – 4
Honduras – 3 China – 1
India – 3
Korea – 1
Africa – 8
Japan – 3
30
Philippines – 1 30
31. R
Electronics / Electrical Market
Average Wire Harness
Grote & Hartmann
Composition
High quality producer with
technical expertise 40%
Terminals
60%
& Connectors Wiring
Improves overall / Assembly
competitiveness in
electronics / electrical
market
Provides avenue for
growth and customer
diversification Wire Harness
Terminals &
Terminals & Connectors are an Integral Connectors
Part of a Wire Harness Assembly 31
31
32. R
Cost Technology Optimization (CTO) Centers
Munich, Germany
Dearborn, MI
Southfield, MI
Barcelona, Spain
Sao Paulo, Brazil
Cebu, Philippines
CTO Evaluates All Areas for Cost Reduction
32
32
33. R
Lear Flexible Seat Architecture (LFSA)
Modular system that can be packaged in several
vehicle environments through the utilization of power
and common components
Currently on over a dozen programs, totaling nearly
4 million vehicles
Benefits
Faster implementation timing
Reduced development costs and
tooling / capital
Enhanced comfort and safety
features
Increased quality and craftsmanship
33
33
34. R
Continuing to Reduce Our Net Debt
(billions)
70%
$4.0
65%
Net Debt***/Capital
63%
$3.4
$3.5
58%
$3.0
$3.0
Net Debt
$2.7
$2.5 $2.3 46%
Target
$1.9
$2.0
Low 40%
$1.5
1999* 2000 2001** 2002** 2003 2004
Lear’s Goal is to Maintain Investment Grade Status
* UTA acquisition 5/99
** Includes ABS debt of $261 million in 2001 and $189 million in 2002 (implemented in 2001).
*** Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled “Use of 34
34
Non-GAAP Financial Information” and “Forward-Looking Statements” at the end of this presentation for further information.
35. R
Alternatives for Using Cash Flow. . .
Where We See Value Creation
Invest internally Share
in high return repurchases
programs
Pursue strategic Increase
acquisitions the
dividend
. . . While Maintaining Strong Balance Sheet 35
35
36. R
Business / Industry Conditions
Factors impacting near term financial results:
Material costs, reflects increasing commodity prices
New business development costs, reflects important new
program awards, rapid expansion in Asia
N.A. vehicle production mix, primarily trucks and SUVs
Backlog strength and diversification
Near Term Challenges
36
36
37. Focused Strategy will Allow Lear to Deliver R
Value to its Customers and Shareholders
Challenging Automotive Industry Dynamics
Overcapacity
Fierce competition
Production outlook
Lear Works in Partnership with Customers to Add Value
Focus on quality, customer service, cost and delivery
Invest opportunistically in value added growth vehicles
Implement aggressive cost efficiency actions / flexible cost structure
Maintain strong balance sheet with LBO mentality
37
37
38. R
R
ADVANCE RELENTLESSLY™
LEA
Listed
www.lear.com
NYSE
38
38
39. R
Use of Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included
throughout this presentation, the Company has provided information regarding “net debt” (a non-GAAP financial measure). Net debt
represents total debt plus utilization under the Company’s ABS facility, less cash and cash equivalents.
Management believes that net debt is useful to both management and investors in their analysis of the Company’s financial condition.
Further, management uses net debt for planning and forecasting in future periods.
Net debt should be not considered in isolation or as a substitute for total debt or other balance sheet data prepared in accordance with
GAAP or as a measure of profitability or liquidity. Also, this non-GAAP financial measure, as determined and presented by the Company,
may not be comparable to related or similarly titled measures reported by other companies.
Set forth below is the reconciliation of net debt to total debt.
December 31,
(in millions)
Net debt 2003 2002 2001 2000 1999
Short-term borrowings $ 17.1 $ 37.3 $ 63.2 $ 72.4 $ 103.6
Current portion of long-term debt 4.0 3.9 129.5 155.6 63.6
Long-term debt 2,057.2 2,132.8 2,293.9 2,852.1 3,324.8
Total debt 2,078.3 2,174.0 2,486.6 3,080.1 3,492.0
Cash and cash equivalents ( 169.3 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 )
Asset backed securitization - 189.0 260.7 - -
Net debt $ 1,909.0 $ 2,271.3 $ 2,659.7 $ 2,981.3 $ 3,385.1
39
Note: Net Debt to Capital is defined as Net Debt divided by Net Debt plus Stockholders’ Equity. 39
40. R
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results
as a result of certain risks and uncertainties, including but not limited to, general economic conditions in the markets in which
the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which
the Company is a supplier, labor disputes involving the Company or its significant customers or suppliers or that otherwise
affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price
reductions, the impact and timing of program launch costs, the costs and timing of facility closures or similar actions, increases
in warranty or product liability costs, risks associated with conducting business in foreign countries, fluctuations in foreign
exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company
operates, competitive conditions impacting the Company’s key customers, raw material cost and availability, the Company’s
ability to successfully integrate the recently acquired Grote and Hartmann operations, the outcome of legal or regulatory
proceedings to which the Company is or may become a party, unanticipated changes in free cash flow and other risks
described from time to time in the Company’s Securities and Exchange Commission filings.
The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any
obligation to update them.
This presentation also contains information on the Company’s sales backlog. The Company’s incremental sales backlog
reflects: (i) formally awarded new programs; (ii) targeted programs for which the Company believes there is a substantial
likelihood of award; (iii) phased-out and cancelled programs; (iv) estimates regarding customer-mandated changes in selling
prices; and (v) estimates of expected changes in vehicle content. Changes in any of these components may significantly impact
the Company’s backlog. In addition, backlog may be impacted by various assumptions imbedded in the calculation, including
vehicle production levels on new, replacement or targeted programs, foreign exchange rates and the timing of major program
launches. For purposes of the backlog data included in this presentation, the Company has made various assumption, including
the following: (1) North American vehicle production of 16.0 million units; (2) Western European vehicle production of 16.0
million units; (3) South American vehicle production of 1.9 million units; and (4) a Euro exchange rate of $1.20/Euro. Please
refer to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003 for further information on the
Company’s calculation of sales backlog.
40
40
