GM's strike results in Lear's loss of revenue of $ 525 million, adversely affecting its financial income in 2019, so the company will lower its full-year revenue forecast.
Earnings report, Lear Car Seat, Lear Electronics System, Lear Earnings, GM Strike
According to foreign media reports, American car seat and electronic system supplier Lear announced on Friday (October 25) that UAW had launched a six-week strike against General Motors in 2019. The annual financial income situation has adversely affected the company. Therefore, the company will lower its annual income forecast.
Lear said that the company's net income in the third quarter of 2019 fell by nearly 15% year-on-year to reach 216 million US dollars, compared with 253 million US dollars in the same period last year. Lear's third-quarter operating income was $ 4.84 billion, down 1% from $ 4.89 billion in the same period last year. Lear revealed that this also reflects that the third quarter's revenue was affected by the decline in production and exchange rate fluctuations.
Lear's third-quarter core operating income was US $ 338 million, accounting for 7.0% of sales, compared with core business operating income of US $ 399 million during the same period last year, accounting for 8.2% of sales. In the third quarter, the profit and adjusted profit of Lear ’s seat business were 7.6% and 8.2% of sales, respectively, while the profit and adjusted profit of the electronic systems business were 6.7% and 7.6% of sales, respectively.
Lear's third-quarter earnings per share were $ 3.58, and adjusted earnings per share were $ 3.54, compared with $ 4.09 in the same period last year. This also reflects the decline in operating income, but the decrease in the number of shares offset some of the decline. In addition, net cash flow from operating activities for the quarter was $ 343 million, while free cash flow was $ 193 million.
GM is Lear's largest customer, accounting for 18% of its business in 2018. Lear CEO Ray Scott said GM's strike resulted in a loss of $ 525 million in revenue. "The strike will cost him $ 70 to $ 75 million per week," Ray Scott said.
Lear expects adjusted net income in 2019 to be between $ 765 million and $ 845 million, while operating income is expected to be between $ 19 billion and $ 19.5 billion. Lear previously expected total adjusted net income for the year to be between $ 885 million and $ 965 million, while operating income was between $ 19.8 billion and $ 20.3 billion. Jason Cardew, Lear ’s vice president of finance and incoming chief financial officer, said that after assessing the impact of GM ’s strike, Lear adjusted his 2019 revenue expectations. "The strike has caused a significant decline in our business volume and will also have an impact on our revenue in 2019," Cardew said. "We will take comprehensive measures to mitigate the adverse impact.
GM's strike has also affected other mainstream suppliers, including Nemak, Andorra and Faurecia. GM and UAW have reached an agreement on intent on a new four-year labor contract. Scott said he did not know how GM would recover lost production. In addition, Lear said that the electronic system business plans to achieve growth in new areas have made some progress.