Detroit — On the surface, it seems there isn't much synergy between a vehicle's electrical architecture and its seats. Ray Scott, who took over as Lear Corp.'s CEO on March 1, doesn't see it that way.
With ride-sharing and self-driving vehicles on the horizon, Scott, 52, believes technology and the changing ways cars will be used will require a convergence of seats and intelligent technology. That is exactly Lear's strategy play for the future — to boost the electronics side of its global business while developing smart seats that tie it all together.
Scott, a 30-year Lear veteran, spoke with Automotive News' News Editor Lindsay Chappell and Reporter Richard Truett at Lear headquarters in suburban Detroit. AN is a sister publication of Plastics News.
Q: Did you ever imagine the industry would change at such a rapid pace?
Scott: No. I have never seen it like this before. And that's what we talk about as a team. The door is open, and the amount of quotes we're getting in electrification, connectivity and reconfigurability, all these areas we participate in today — talk about opportunity. It's a significant amount of opportunity to manage, and you have to make sure you're picking the right strategic places, making sure you are going to be successful with launches and that you can manage the type of growth in a reasonable way to keep delivering quality.
Our backlog [booked business] right now is close to $4 billion, the largest we've ever had.
Q: How does Lear define backlog?
Scott: We measure backlog differently than many of our competitors. We measure it as net booked business, contracts. Not wishful thinking or hypotheticals or high probability or multiple year contracts. It's just a year-over-year contract look at the business. We're very confident in what we have booked. We're looking at the amount of quotes we have in the pipeline. They have tripled in the last six to eight months in the areas of connectivity, convergence and electrification.
Q: Estimates are all over the map for how fast EVs (electric vehicles) will be adopted by car buyers. What's your forecast?
Scott: I think the adoption of EVs will be quicker than most estimates. When you get that sensation, that feeling of instant torque, it's a completely different type of drive. I have not heard anyone who doesn't like it. And I think the younger generation will pick up on it.
Q: Where will Lear be five years from now?
Scott: We will be a leading technology innovation company. I think the core of our company, what we hold true, is our operational excellence. That's always what made Lear great, and that will continue going forward. We're very good operators, and we do a great job launching products for our customers.
What we're seeing now is this transition coming from some of our acquisitions and some of the targeted companies we've gone after, such as Arada Systems and EXO Technologies. For instance, when we bought Grupo Antolin's seating unit, that gave us a reconfigurability aspect.
Q: Can you give us an example of that?
Scott: Grupo Antolin's seating engineers were designing rails in the floor of vehicles for a customer that will be launching in a couple of years, and we created an electric seat rail. So, the seats will move on a powered rail. You've seen seats where the harness hangs down. Now, we've integrated technology into the rail system so you no longer have a need for wires.
In a world of reconfigurability with mobility and even autonomous vehicles, where you can move seats and rotate seats in the vehicle, that's essential. And we created that through the technology we have with our E-systems.
Q: How will Lear be different from Adient or other competitors?
Scott: There is no seat company in the world that has an E-Systems division and seating, and what we call convergence. Except for the craftsmanship and quality, seats haven't really changed. Seats today are pretty passive in the vehicle. But I absolutely believe the seat itself is going to become a smart device. It is the first point of physical connectivity. So when a consumer gets into a seat, we've engineered and designed headrests that allow consumers to individualize their internal space.
A center stack right now is essentially like this: "I have to listen to that music, I have to take that phone call, and listen to that text message." We know whose call is coming in. But now, we'll control that through the seat. With all the technology we have in our E-Systems group, you can get into a seat and listen to your individual music, you can take your individual call, and you can take your individual text messages. Think about that with mobility and ride sharing. One of the complaints is that you have to adapt to everyone else's preferences because of the center stack.
Q: What other ways will seats evolve in the mobility and ride-sharing era?
Scott: Heating and cooling. I've heard that when consumers get into mobility and ride sharing they are almost nervous asking the person next to them, "Hey, do you mind if I turn up the heat?" Or cool down the cabin. Well, we can heat and cool occupants on their own personal preference in the seat system. Through our Bluetooth capabilities, you'll set those preferences from your phone. So when you get into your seat, it will set you up for proper posture and comfort, your heating and cooling and your music preferences.
Q: What roles do seats play with self-driving vehicles?
Scott: That's the end game. We see cabins changing dramatically, and not just because of personal preference. It's what you want to do in that space.
You'll have some people who want to recline and get some sleep and others who want to work. In seats today, we have smart tracks and smart recliners that are no longer passive. Because the technology has advanced so quickly, we can now detect when a vehicle is approaching from the rear or front at a certain rate. We can notify that occupant that something is abruptly changing and move the seat forward or move it out of a dangerous position in a collision.
We're also working on health monitoring systems. We have Bluetooth capabilities. We have audio capabilities. There is no question in my mind you are going to have smart seats.
Q: How far away are these innovations?
Scott: We're in development programs with two or three customers right now — 2022-2023. It is more about the due care and process in the testing and validation we go through. But with the intuitive seat, we are creating a business that doesn't exist yet. I don't have a requirement for a customer yet.
Q: What percentage of sales is going for r&d, and is that amount increasing?
Scott: Yes. It is much more than it used to be. It depends on the product. In our electronics business, it's somewhere between 8 percent and 9 percent. Wiring is much lower, around 3 percent. Seating is 2 percent. We are spending more than we've spent before in pure r&d.
Q: Which side of the house — seating or electronics — does the technology come from to develop these innovations?
Scott: The convergence I'm talking about is playing perfectly to our strengths on both sides. With EXO and Arada, we have incredible capabilities with our gateway modules, which are some of the most advanced technologies within the vehicle. They are the communications devices. They do all the communications. We have to have competencies and capabilities with cybersecurity, GPS monitoring, vehicle-to-grid, vehicle-to-vehicle, over-the-air software updates.
If you are talking about safety within the vehicle with the occupant in the seat, there is an overlap that is very complementary. There are capabilities we need to continue on this journey in electrification, connectivity and convergence — our three growth engines. Each one of them has to have its own return on investment capital.
Q: Is electrification the sweet spot for Lear's growth?
Scott: Some of the biggest accelerated growth opportunities are in electrification. You look at what's going on right now. It's estimated that something like 40 percent of all vehicles are going to be electrified by 2027. We do 48-volt architectures, and we supply all the traditional and high-powered wiring. We do battery chargers and some of the best technology in the industry, 22-kilowatt battery chargers. Our first real program was the Chevrolet Volt. We had $2,200 of content on that.
Q: What other acquisitions does Lear need to take advantage of the convergence you want?
Scott: Though we're not desperate for any acquisitions, we are constantly looking for tuck-ins. We've probably looked at between 25 and 50 companies, from purely engineering companies that fit, for convergence, electrification and connectivity; and at other manufacturing companies that could give us a special capability or that would let us diversify ourselves to a customer or a region.
Q: When do you think the industry will see Level 3 and Level 4 self-driving cars?
Scott: If you mean self-driving vehicles that can operate in nongeofenced areas, I'd say 2035. I think it is out there. There are a lot of obstacles out there. In a controlled environment, you will obviously see them much quicker.