Retiring Lear CEO sees bets pay off

Matt Simoncini can look back on his six years as CEO of Lear Corp. as a time of refocusing, restrengthening and rethinking where Lear will go next.

Simoncini, 57, will step down Feb. 28 after guiding Lear back from bankruptcy in 2009 and focusing on "smart" seats, connectivity and electrical systems.

They proved to be good bets.

With global sales of $20.4 billion this year, Lear has cemented its status as the auto industry's No. 2 seat maker, behind rival Adient. And Simoncini is confident that coming trends toward more advanced seat technology will pay off handsomely for the company.

"I don't think Lear has ever been in a better position, from a financial standpoint and a product standpoint," Simoncini told Automotive News. "Our product portfolio is in incredibly good shape."

Simoncini will be replaced by Ray Scott, president of Lear's seating division. Scott inherits a company with a strong balance sheet and a no-nonsense product portfolio that no longer includes low-margin interior trim components such as consoles, door panels and headliners.

Lear has abandoned its old ambition of being a one-stop shop for complete interiors. And the company is patching a few gaps in its product lines with acquisitions, such as the deal announced last week to acquire EXO Technologies, an Israeli company specializing in GPS mapping.

Seats are typically a vehicle's second-costliest component behind powertrains, and prices are starting to rise as seats become smarter.

In an October presentation to investors, Lear predicted that its seat content per vehicle will rise to $750 in 2022 from $710 in 2017. Part of that is due to the market's preference for SUVs — especially big SUVs, which accommodate seven or eight passengers. But part of it is due to technology that will debut over the next five years.

Lear and its rivals are developing biometric seats that can monitor a driver's alertness and health. Lear has showcased smart seat concepts in recent years, and it has lined up a customer. Next year, an unnamed luxury brand will take delivery of a Lear smart seat that automatically adjusts to accommodate the passenger's physical dimensions such as height, weight and leg length.

Lear also is developing seat- mounted sensors that monitor the passenger's heart. Other promising technologies include:

Seats that heat and cool themselves — an energy-efficient alternative to conventional climate control.

Personal "sound bubbles," with speakers in the headrests that are paired with noise-suppression technology.

Seats that quickly reposition them-selves before a crash.

"These things are in development now," Simoncini said, "and they will be industry standards in 10 years."

Vehicle electrification should prove to be another lucrative industry trend for Lear.

Lear — a major supplier of wire harnesses, connectors and terminals — is marketing 48-volt technology, battery chargers, inverters and high-voltage distribution systems for hybrids and electric vehicles. In the third quarter, Lear's E-Systems division generated sales of $1.1 billion, up 10 percent from the year-ago period.

Those sales will rise as automakers expand their EV lineups. In 2022, the global market for EV componentry will total $27 billion, according to IHS Markit. By 2027, that market will expand to $44 billion.

The segment's growth prospects looked so good, in fact, that in 2015, activist investors pressured Lear to spin off the E-Systems unit. Simoncini declined, arguing that the E-Systems division — which also includes Lear's connectivity portfolio — would benefit from the larger company's financial stability.

The auto industry's migration to EVs "is exceeding all prior estimates, and it is happening right now," Simoncini said. "Paris, London and other cities all have standards about how many internal combustion vehicles they'll allow."

Although Lear prefers to stick to its knitting, it has made acquisitions to fill gaps in its product portfolio.

In 2014, the company acquired leather producer Eagle Ottawa for $850 million.

It followed up this year with the $307 million purchase of Grupo Antolin's seat business.

The EXO Technologies acquisition will bolster Lear's technology portfolio of cloud connectivity, vehicle-to-infrastructure communications, over-the-air updates and cybersecurity.

Lear can allot as much as $2 billion for acquisitions, but a blockbuster deal isn't on the horizon. In part, Simoncini said, that's because Lear doesn't have any big product gaps to fill.