NEW YORK – Auto parts maker Lear Corp. (LR) said Monday it will slash up to 7,700 jobs and revise its financial forecasts as it begins a global restructuring.
The job cuts will initially affect five production plants in North America and Europe, as well as some administrative functions, Lear said. They will eventually reach up to 20 facilities and 5 to 7 percent of Lear's 110,000 employees.
The changes mark the initial stage of a more comprehensive plan that calls for the movement of manufacturing to lower-cost countries, said Lear, which makes automotive seats, door panels and other components.
The Southfield, Mich.-based company said its goal is to eliminate excess capacity and rein in costs. Rivals such as Johnson Controls Inc., Magna International, Delphi Corp. (DPH) and Visteon Corp. (VC) are facing similar problems as U.S. automakers lose market share to overseas rivals.
"We are implementing this restructuring plan to improve our overall competitive position in light of extremely challenging industry conditions," said Lear Chief Executive Bob Rossiter in a statement.
Lear said it sees pretax costs of about $30 million in the second quarter of 2005 from the restructuring, with a substantial portion of the remaining costs to be incurred in the second half of 2005.
"They don't expect any quick fixes," said Alex Vallecillo, co-manager of the Allegiant Mid-Cap Value Fund, which recently sold its Lear holdings. "Their issues are going to persist for a while."
Vallecillo said current full-year forecasts for Lear are too high. "The forecast right now looks like a stretch," he said, adding that he expects Lear to earn about $1.50 a share this year, well below Wall Street's current average estimate of $1.99 a share, according to Reuters Estimates.
"Ultimately it's good news," said analyst John Novak of Morningstar. "The trend toward moving plants overseas and streamlining operations is a good thing."
Novak said the restructuring will help improve long-term profitability while broadening Lear's customer base, which is heavily focused on Ford and GM.
He expects the company to lower its earnings forecasts when it releases second-quarter results on July 29. Lear said it will revise its 2005 financial forecast, and detail further production cuts, at that time.
Separately, the company said it expects to record a $17 million charge in the second quarter, related to the sale of a stock investment.
Lear shares were down 52 cents, or 1.4 percent, at $35.85 on the New York Stock Exchange (search), after earlier touching $35.36.