“It’s been a tough 18 months,” Scott said. “The only awards that are important are the awards that we get in backlog, profitable backlog. It gives me extreme confidence that we’re doing all the right things, and we’re going to have a great future.”
Lear outlined its key product launches in the seating segment for 2022, including Mercedes EQE, EQS and GLC; BMW X5 and 7-series; Chevrolet Colorado and GMC Canyon; Arrival van; and Land Rover Range Rover Sport. It also highlighted key launches for its e-systems segment, of which six are for electric vehicles including the GMC Hummer Pickup, Mazda MX-30 and Volvo XC90.
The company pointed to its $1 billion in net conquest wins since 2019, as well as the integration of its Kongsberg Automotive’s interior comfort unit, as steps toward gaining market share on competitors. Its seating market share increased from 23 percent to 25 percent in 2021.
At the same time, the seating supplier faces familiar headwinds that have dragged down its business and that of competitors, such as Adient. The semiconductor shortage and supply chain pinch that have resulted from the COVID-19 pandemic are expected to ease this year, but there is “significant uncertainty around the pace of recovery,” said Lear CFO Jason Cardew.
While steel prices have softened considerably, other pressures include wage inflation, higher utility and logistics costs, and higher prices for other materials such as yarn, leather and chemicals.
Cardew said increased commodity costs had a gross impact of $450 million last year, but the company was able to claw back around 60 percent of it. This year, the company is expecting a gross impact of $575 million due to commodity cost increases, with a net impact of $140 million after a chunk of the increases are absorbed by customers.
Pricing struggles also remain further down the supply chain, where some tier 2 and tier 3 suppliers are demanding price increases and threatening to stop shipping parts, Cardew said, as the power dynamics at the negotiation table have shifted. In most cases, the solution is to pass through the costs or absorb the price increase because, “if the supplier is going to be bankrupt that doesn’t do you any good,” Cardew said.
“What we’re seeing now is much more aggressive positions with the supply base,” Scott added. “There does seem to be a change where the tier 2s and tier 3s don’t have the stability to produce parts going forward.”
The company offered a full year 2022 outlook of $20.8 billion to $22.3 billion in revenue, with $900 million to $1.2 billion in core operating earnings.
Lear shares rose slightly to $171.59 in after hours trading Tuesday.
“When they award us profitable business, that’s the best thank you we can get,” Scott said.
Lear, based in suburban Detroit, ranks No. 9 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $17 billion in 2020.
