Lear Corp Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Spak - UBS Securities LLC - Analyst : Thanks. Good morning, everyone. I guess just to start, with the implied fourth quarter guide looks like you've taken a pretty punitive view on fourth quarter production. And I'm wondering if that's something you're seeing specific to your customers or platforms, some conservatism and then what are your sort of early indications here for 2025? Because you've previously talked about, you know, the backlog was being impacted by slower uptake. It feels like in the quarter since then, things have gotten worse. Now, you're saying, you know, some sourcing activity is being delayed. I know there was a chance that you said that existing programs could be extended or higher volume on existing programs could occur. But, you know, just how do we sort of put all these pieces together as we start thinking about next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:00PM, LEA.N - Q3 2024 Lear Corp Earnings Call

Question: Joe Spak - UBS Securities LLC - Analyst : Yeah, that's an incredible amount of detail already. So thanks for that. If I could assess one other quick one here, if I look at slide 8 on your China progress, which has obviously been pretty good, it does seem like you're assuming like maybe like a 2% annual decline in China for the multinationals. So, and I think we've seen greater declines to date. So are you expecting that to moderate over the period or is there supplanted by maybe some share gains there.

Question: Joe Spak - UBS Securities LLC - Analyst : Thank you very much.

Question: John Murphy - BofA Global Research - Analyst : Good morning, guys. A first question, Ray, it's interesting, you were talking about how the bidding processes, it seems like it's slipping or slow this year relative to expectations in past years. I mean, there's a lot going on there. One thing we've also heard is that in the bidding process, in the RFI, or in the RFI process, not the RFQ side, is that there's a lot of discussion about a plan A bid sort of normal course, including China and Taiwan content and then a plan B bid or information with ex-China and ex--Taiwan content. And obviously, there's many reasons why the automakers might be requesting that, considering that the proposed auto tech, auto tech ban here in the US and many other reasons. Are you hearing that, and is that really jamming up the process, on bidding as well?

Question: John Murphy - BofA Global Research - Analyst : That's very helpful. That just leads to kind of the second question around automation in your comments of moving more labor from Mexico down Honduras over the next few years. I mean, obviously, there's always the chase on LCC can only go so far. So at some point, you really need to lean heavily on automation, and you're doing that. I'm just curious, if you think about both businesses, how far you can go on automation and how low you can get labor as a percent of total costs. At some point you're going to have to automate more and more over time, but how far can that ultimately go? What's the asymptotic limit?

Question: John Murphy - BofA Global Research - Analyst : Okay. One, just a quick one for Jason, it just looks like there's a little bit more pressure on net income on the implied in the fourth quarter than there is in core operating income actually like a fair amount more pressure. Is there something going on in the balance between core operating earnings and equity income in the fourth quarter where equity income is getting hit much harder by your assumptions?

Question: John Murphy - BofA Global Research - Analyst : Okay. We can follow up later. Thank you so much.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Yeah, good morning. Thanks very much for taking the questions. First, I'm hoping you can help us to better understand what to expect for growth over market in both Seating and E-Systems over the next two to three years, the company spoke today around some sourcing headwinds, but you've also seen better momentum within China. So maybe you can help us better contextualize what that all means for growth over market in the intermediate term.

Question: Mark Delaney - Goldman Sachs & Co. - Analyst : Thank you.

Question: Colin Langan - Wells Fargo - Analyst : Thanks for taking my questions. Just earlier, it was asked, I just didn't get a clear answer or maybe I missed it. I apologize if I did. So, if we talk about the Q4 margin, I think it's something like 4.2% at the midpoint of your current guide. You're, 4.8% for the year. How should we think about getting margins back on track into 2025? What's sort of unique about Q4 or should we consider the risk into '25?

Question: Colin Langan - Wells Fargo - Analyst : Okay. Alright. Thanks for taking my questions.

Question: James Picariello - BNP Paribas Exane - Analyst : Hi, everybody. Regarding Lear's China revenue mix, so back to slide 8, thanks for this level of detail, by the way, again. If we look back to last year, you had roughly $4.9 billion in sales in China with about 60% of that consolidated, and the disfigured JVs, is there a similar consolidated versus JV breakout for your 2027 target? And then can you just provide any color on the margin profile differences of your current domestic OEM relationships compared to the legacy business? Thanks.

Question: James Picariello - BNP Paribas Exane - Analyst : Appreciate that color. Really helpful. So just on buybacks, you had targeted $325 million for the year. You've essentially achieved that a full quarter early here. Just how should we be thinking about the rest of the year? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:00PM, LEA.N - Q3 2024 Lear Corp Earnings Call

Question: James Picariello - BNP Paribas Exane - Analyst : Thank you.

Question: Trevor Young - Barclays plc - Analyst : Hi. Thanks for squeezing me in here at the end. This is Trevor Young on for Dan today. Just wanted to first start with a follow up on a comment you made earlier around your expectation for 10 more points of share shift in China to the domestic OEMs, if you could give a sense of if that was through the -- if that's for the time frame to the 2027 period, you gave your estimate through. And then if that -- if there were to be a faster than expected share shift towards the domestics, do you believe you need to ramp up additional capacity in China to serve them, the domestic OEMs or would you be able to leverage your existing footprint?

Question: Trevor Young - Barclays plc - Analyst : Okay. That's helpful. Thank you. And then just as a last follow up. Just if you got time, just the last follow up on the corporate EBIT improvement, it looks like, you've seen 3Q and 2Q this year a bit below where we were looking at in the past. Is this something you expect to be consistent level going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:00PM, LEA.N - Q3 2024 Lear Corp Earnings Call

Question: Trevor Young - Barclays plc - Analyst : Much appreciated.