SOUTHFIELD, Mich. -- Lear Corp., the world's biggest maker of car seats, announced yesterday that it will cut about 2,800 jobs, or nearly 5 percent of its 60,000 workers, as it closes 18 plants in a previously disclosed plan to reduce costs in North America and Europe.
Lear will take a pretax charge of about $133 million, or $1.37 a share, in the fourth quarter, which is expected to result in a loss for the quarter, analysts said. About $85 million of the charge will be in cash.
The charge is greater than Lear's initial estimate of about $125 million. The company said it had unexpectedly high costs in Europe and advised analysts in October to lower 1999 earnings estimates to about $3.60 a share from an average of $4.01 because of the costs and a less-rosy outlook for vehicle sales in Europe.
"It makes sense because they're looking at a weaker outlook for sales in Europe and pricing is much more of an issue there," said Richard Hilgert, an analyst at Fahnestock & Co.
The restructuring was prompted by the need to cut costs after Lear's rapid growth in Europe and North America during the past two years, which included its purchase of Delphi Automotive Systems' seating unit for about $250 million in September.
The purchases built on Lear's growth as automakers demand that suppliers build complete systems instead of individual auto parts.
Lear shares rose $1.4375, to $38.8125, yesterday. The shares have fallen about 19 percent this year, largely on concern about slowing sales in Europe.
The Southfield, Mich.-based company will close 15 plants in Europe, two in North America and one in South America, the majority of which are expected to be interior plastic-trim manufacturing plants. Of the 2,800 jobs being eliminated, about 1,700 will be in Europe and the rest in North America.
The majority of the job cuts in Europe are expected to be manufacturing, while the majority in North America are anticipated to be in administration, analysts said.
Lear had net income of $68.6 million, or $1 a share, in the year-earlier quarter on sales of $2.14 billion. The company was expected to earn $1.07 a share in the latest fourth quarter, the average estimate of analysts surveyed by First Call Corp.
Pub Date: 12/08/98