) is a leading supplier of automobile parts to manufacturers worldwide. Specifically, Lear focuses on two areas. The Seating division (79% of 2010 sales) designs and manufactures seat frames, recliner mechanisms, tracks, trim covers, headrests, filler material, and delivers completely assembled seats. Electrical Power Management Systems (EPMS) builds electrical distribution and wiring systems for vehicles, which include harnesses, terminals, junction boxes, and control modules. This division also makes a few "select" electronic compontents, such as keyless entry systems and both interior and exterior lighting (including headlights). EPMS also designs advanced electrical systems for hybrid and electric vehicles, including the Chevy Volt. Lear is internationally diversified, with 42% of sales in Europe, 34% in North America, 16% in Asia, and 8% in the rest of the world.
Lear, like many companies in the auto industry, is enjoying a rebirth. The industry unraveled in 2009, as vehicle shipments in North America plummeted to just 8.6 million units, from over 15 million just two years earlier - a staggering 43% decline. This hit hard on the domestic auto industry, which over the years was saddled with over-capacity, excessive debt, uncompetitive labor agreements, and shifting tastes towards Asian brands, notably Toyota (TM). General Motors (GM) and Chrysler both filed for bankruptcy protection, and Ford (F) barely escaped.
Similar issues confronted Lear. The tremendous troubles at GM and Ford (Lear's 2 largest customers) gutted sales. Lear itself suffered from labor issues, unprofitable business units, and a heavy debt burden, forcing it into Chapter 11 bankruptcy in July of 2009.
The company has emerged as a much more attractive entity. The debt load is down to a more managable $700 million, which is covered over two times by cash ($1.8 billion), and has no maturities until 2018. Interest coverage is more than comfortable at 17 times. The unprofitable interiors business was divested and the majority of labor in both Seating and EPMS was moved to low-cost locales overseas. Lear's robust health now is demonstrated by its commitment to return capital to shareholders, with the initiation of a small (1.2%) dividend, and a $400 million share repurchase program, in addition to a stock split earlier this year.
Going forward, Lear is well-positioned to thrive for the near future. North America auto sales rebounded to 12 million units last year, and is expected to show about 5% annual growth through 2016.