Lear Corporation Reports Second Quarter Earnings Amid Trade Uncertainties

Lear Corporation has released its second-quarter financial results, reporting revenues of $6 billion, unchanged from last year, while adjusted net income fell by 9% to $188 million. The core operating profit was $292 million, compared to $302 million in the second quarter of 2024. The profit margins for the seating business were 6.4% and 6.7% for adjusted margins, while the electronic systems segment had profit margins of 3.5% and adjusted margins of 4.9%. Earnings per share were $3.06, with adjusted earnings per share at $3.47, compared to $3.02 and $3.60 in the same period last year. Following the earnings report, Lear's stock price declined as the second-quarter profit results fell below expectations. The company had previously withdrawn its full-year performance outlook in the first quarter due to trade uncertainties caused by tariffs, but it has now reissued its financial forecast for the year, expecting net sales between $22.5 billion and $23 billion, with adjusted EBITDA projected at $1.6 billion to $1.7 billion. Executives mentioned in a conference call with analysts that due to potential declines in global automotive production from U.S. tariffs, Lear is focused on cutting costs and reducing expenditures, lowering its capital expenditure expectations by $35 million. The company's spending will mainly go towards layoffs and reducing production bases, with executives forecasting an increase of $40 million in costs related to footprint rationalization. However, Lear has achieved $60 million in cost savings this year through restructuring and automation measures, and expects to save an additional $90 million in the second half. In the first half of 2025, Lear laid off 4,400 employees, with nearly 20,000 hourly workers globally reduced since the end of 2023, marking an 11% decrease. Lear's automation transformation is not limited to production facilities; after the Trump administration's tariffs impacted the automotive industry, the company quickly deployed software to address supply chain disruption risks. CEO Ray Scott stated that the team rapidly developed a fully automated tariff management system, enabling real-time documentation for customers and accelerating the invoicing process, while providing insights into the best crisis mitigation opportunities. This year, Lear's direct tariff risk exposure is $210 million, a small fraction of its imports from Mexico and Canada, with over 90% of its imported products qualifying for tariff exemptions under the USMCA. However, CFO Jason Cardew noted that Lear still faces approximately $2.5 billion in indirect risk exposure, primarily from supporting imported vehicles, most of which is currently absorbed by customers. Cardew emphasized that the company has taken proactive measures to minimize its overall risk exposure. Lear also announced new project orders, notably winning a contract to supply seating components for Ford's next-generation F-150 and F-250 trucks. Despite Ford informing suppliers of delays in the new pickup's launch by over a year, the contract remains highly sought after due to its expected high sales. Scott mentioned that discussions with Ford regarding just-in-time business for the F-150 and F-250 are ongoing and progressing. He also indicated that as inflation and production cuts have become significant challenges for suppliers in recent years, Lear is working to reset contracts for more favorable pricing.