Lear Corp. is tempering expectations for its second quarter earnings by revising its 2019 financial outlook lower due to a global economic decline.
The Southfield, Mich.-based seating and electronics supplier Tuesday lowered its full-year outlook by more than $1 billion to revenue between $19.8 billion and $20.3 billion from a previous projection of $20.9 billion to $21.7 billion. The projection also alters its year-end net income to between $885 million and $965 million from a previous outlook of $1.1 billion to $1.2 billion.
The expected reduction of earnings and profit stem from lower production from key customers, partially offset by new business, the company said in a news release. Lower than expected production will reduce operating margins by 1.3 percent to 7 percent from previously projected 8.3 percent, the company said.
"Previously, we indicated that we anticipated an increase in industry production volumes in the second half of the year and an associated improvement in sales and earnings," President and CEO Ray Scott said in the release. "We now believe general macroeconomic and industry factors will continue to put pressure on sales and earnings throughout the remainder of 2019."
Scott said the company continues to undergo restructuring to reduce costs and improve efficiency. The company will increase its restructuring costs by $60 million to $200 million to reduce capacity. Scott did not indicate whether that capacity reduction would include layoffs.
Lear plans to permanently close its plant in Taylor in a move that will affect 76 employees, according to a WARN notice filed with the state last month. Lear is shifting work from the Taylor facility to one in Traverse City and said it is offering affected employees the chance to transfer, the company said. The layoffs will start Aug. 12.
Lear also released preliminary second quarter financial results ahead of its earnings release later this month. The supplier expects second quarter revenue of approximately $5 billion, down 10 percent from the same quarter in 2018.
Lear shares fell 5.54 percent to $129.74 in Tuesday trading. Shares are down nearly 6 percent from the year high of $142.84 on June 28.
General Motors Co. is Lear's largest customer, accounting for 18 percent of the supplier's business in 2018, followed by Ford Motor Co. at 16 percent, according to Lear's annual 10-K report filed with U.S. regulators.