Ailing automotive supplier Lear (Southfield, Michigan / USA; www.lear.com) is working intensively on a restructuring programme. The company, which was in loss in 2005, said it plans "in principle" to transfer all its European production facilities for automotive interiors to International Automobile Components (IAC, Palm Beach, Florida / USA). In return, Lear will receive 34% of IAC´s stock. Apart from that, it will take out long-term loans – up to the year 2012 – totalling USD 800m, and will suspend its quarterly dividend.

IAC is Lear´s joint venture with WL Ross & Co (New York City, New York / USA; www.wlross.com) – which belongs to investor Wilbur Ross – and Franklin Mutual Advisers (www.franklintempleton.com). The jv, which Ross wants to turn into the world´s biggest supplier of plastics to the automotive sector, only recently acquired several European plants from the insolvent Collins & Aikman (C&A, Troy, Michigan / USA; www.colaik.com).

Lear intends to use around half the new loan to refinance its 2007 debt maturities. The remaining proceeds are expected to refund the retirement of its outstanding convertible senior notes as well as general corporate purposes. The 12 plants to be transferred to IAC – three in Germany, one each in the Czech Republic, France, Poland and Slovakia, two in Italy and three in Sweden – represent the entire European activities of the company´s interior components segment (excluding seats) and represent sales of some USD 750m.

In 2005, the Interiors division recorded a loss of USD 191.1m after a profit of USD 85.1m in 2004, on sales of just under USD 3.1 bn (USD 3 bn). This makes it the weakest of the company´s three divisions. Seats, with a turnover of USD 11 bn (USD 11.3 bn), account for 65% of divisional sales. Earnings in Interiors declined from USD 682m to USD 323m. Electronics was the division with the best profit margin, recording only slightly lower earnings of USD 180m (USD 210m) on sales of USD 3 bn (USD 2.68 bn).

Lear´s net result was burdened by goodwill write-downs of more than USD 1 bn. A profit of USD 422m in 2004 turned into a loss of USD 1.38 bn in 2005. The operating result was halved to USD 736m (USD 1.40 bn).

Against this background, the words of CFO James Vandenberghe sound like a prayer. In response to questions as to whether the company was considering Chapter 11 creditor protection, the executive has Lear has adequate liquidity, is solidly positioned and will be on the market for a long time to come. In the opinion of the analysts, however, Lear is not very far away from Chapter 11. The majority suggest that the supplier has only bought time with its new credit line.