Good morning, everyone, and welcome to the Lear Corporation Third Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Please also note today’s event is being recorded. At this time, I’d like to turn the floor over to Tim Brumbaugh, Vice President, Investor Relations. Please go ahead.

Thanks, Jamie. Good morning, everyone and thank you for joining us for Lear’s third quarter 2024 earnings call. Presenting today are Ray Scott, Lear President and CEO; and Jason Cardew, Senior Vice President and CFO. Other members of Lear’s senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I’d like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear’s expectations for the future. As detailed in our Safe Harbor statement on Slide 2, our actual results could differ materially from these forward-looking statements, due to many factors discussed in our latest 10-Q and other periodic reports. I also want to remind you that during today’s presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today’s call is on Slide 3. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our third quarter financial results and provide an update on our full year financial guidance. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now I’d like to invite Ray to begin.

Thanks, Tim. Please turn to Slide 5 which highlights key financial metrics for the third quarter of 2024. Lear delivered $5.6 billion in revenue in the third quarter despite a very challenging production environment. Core operating earnings were $257 million or 4.6% of net sales. Adjusted earnings per share was $2.89, an increase of 1% driven by the benefit of our share repurchase program. Operating cash flow was $183 million in the third quarter and free cash flow was $51 million. Slide 6 summarizes key business and financial highlights from the quarter. Total company revenue outperformed the market by three percentage points with sales in both segments leading the industry. Five percentage points in E-Systems and three percentage points in Seating. Revenue outperformed industry production in each of our major regions. During the quarter, we repurchased $209 million of shares and paid $43 million in dividends. We continue to repurchase additional shares throughout our quiet period, achieving the full year $325 million target communicated in our second quarter earnings call. Adjusted earnings per share grew by 1% in the third quarter, driven by the benefits of our share repurchase program despite the decline in industry production. In China, our strong relationship with domestic automakers led to significant new business awards in the quarter. In Seating, we won several new awards with BYD, Xiaomi and Seres. The new programs combined are expected to generate average annual sales of over $100 million. In E-Systems, we will be supplying wiring for several upcoming platforms to the Dongfeng Group. Our first ComfortFlex Module launched in July with Volvo. By combining heat, ventilation and massage components into a more efficient solution, we reduced the thermal comfort part numbers shipped to the just-in-time assembly plant by 50%, and our system enhanced the end customer experience by improving pressure and sensation to the occupant by 30%. Interest for our ComfortFlex Solutions continues to grow. During the quarter, we were awarded our second program with a premium European OEM. We will provide the heat and pneumatics as well as other components in a ComfortFlex Module. For Hyundai, we will be providing steering wheel heat combined with hands-on detection sensors. Our innovative products continue to earn recognition from key industry groups. The Zone Control Module our E-Systems team developed was named an Automotive News PACE Award Finalist. Its highly configurable software increases the ability to scale. The unique design improves the flexibility to adapt to changes in the wire harness connectors, enabling increased automation for manufacturing. The first generation models are expected to launch in 2025 with plans for broader adoption. Lear continues to lead the J.D. Power U.S. Seat Quality and Satisfaction Study with eight top awards, more than double the awards of any other seat supplier. Lear swept the premium car category and won an additional three top three finishes in the premium SUV category. These awards once again solidify our leadership and quality. Turning to Slide 7, I will provide an update on the initiatives we are pursuing to achieve long-term sustainable revenue and earnings growth through innovation in both our products and our processes. Our customers are reassessing their powertrain strategies to align with customer demand while meeting regulatory requirements. Our product portfolio is largely powertrain agnostic, allowing us to win new business for any new vehicle. Chinese domestic automakers continue to gain market share, leveraging our relationships with key customers to win new business has been a priority for both Seating and E-Systems. Our new business wins with BYD, Xiaomi, Seres, and the Dongfeng Group are a result of this effort. New programs with Leap Motor, Neo, and Xiaomi were key contributors to our backlog this quarter. We are seeing additional opportunities as these automakers are looking to grow globally. Our focus on innovation and automation through Idea by Lear is driving growth opportunities for our products while further reducing our manufacturing costs. The internal design and superior execution of our new capital deployment in our facilities allow us to bring products to market quicker while reducing costs. The efficiency actions we have taken, along with investments in automation and restructuring have us on track to reach our headcount targets for the year. E-Systems has already achieved its 6% reduction target, and Seating is on pace to meet or exceed its 8% target. Much of the improvement is coming from our most labor-intensive products such as cut-and-sew wiring and other component facilities, largely in Mexico, as well as from our footprint actions in Europe. In Seating, the interest from our customers for our ComfortFlex and ComfortMax seat products continues to grow. The launch of the first ComfortFlex module and additional business wins illustrates the progress we have made. Our list of opportunities for ComfortFlex, ComfortMax, and FlexAir has grown to 62 projects with 22 OEMs, an increase of 40% since the end of 2023. These projects will enable us to achieve our $1 billion revenue target for thermal comfort by 2027. LearVUE is our AI-based proprietary vision system technology, leveraging the software capabilities we have acquired over the last several years. LearVUE enables us to use low-cost, off-the-shelf cameras to develop vision system solutions for many applications across both businesses. Our first application for LearVUE enhances our trim defect detection to improve consistency and quality in our just-in-time plants. We have identified additional opportunities to utilize LearVUE such as for wire connection detection and other end-of-line testing applications. We continue to expand the use of Thagora automated leather cutting technology and are extending the use of Palantir cloud-based operating systems foundry for digital reporting. Our teams continue to develop new use cases for the foundry software to improve real-time decision-making on the plant floor. In E-Systems, our focused product portfolio has helped improve margins over the last two years. The growth of the connection systems capabilities we acquired through M&N has been a key driver of that improvement. We continue to expand our vertical integration opportunities and extend our footprint to serve the European market. The new innovations we are developing in our core products, such as our PACE award-winning Zone Control Module, will continue to drive growth in E-Systems. The flexibility we are designing into our products allows us to increase the use of automation, further improving cost structures. To offset labor inflation, we continue to aggressively shift our wiring operations to new lower-cost manufacturing locations. We are leveraging our footprint in North Africa to supply the European markets. In North America, we are moving more wire operations to Honduras. Today our headcount is about 60% in Mexico and about 40% in Honduras. We expect a shift to 40% in Mexico and 60% in Honduras over the next couple of years. Our focus on product process innovation, combined with restructuring our footprint to reduce excess capacity, has us well-positioned for any production environment. Slide 8 highlights Lear's growth with Chinese domestic automakers. Lear has 30 years of automotive experience in China. Over that time, Lear has strengthened its local presence, built strong relationships with key customers, and has become the clear leader in luxury seating. We continue to grow with key established customers such as BYD, Geely, Changan, and the Dongfeng Group, and see additional opportunities with emerging automakers such as Xiaomi, Neo, Leap Motors, and Xfang. The new business wins with BYD are consistent with our target of supplying approximately 30% of their seats in the next few years. The portion of our total revenue from Chinese domestic automakers grew from about 20% in 2021 to roughly 30% in 2024. During that time, our total revenue in China grew from about $4 billion to approximately $5 billion, despite the significant shift in market share from multinational automakers to Chinese domestic OEMs. By 2027, we expect our revenue to grow on average 6% annually to approximately $6 billion. As a result, the portion of our revenue coming from Chinese domestic automakers is expected to approach 50%. China continues to be an important market for Lear, and our relationship with key domestic automakers is driving consistent growth. And now I'd like to turn the call over to Jason for the financial review.

Thanks, Ray. Slide 10 shows vehicle production and key exchange rates for the third quarter. Global production decreased 5% compared to the same period last year and was down 6% on a Lear sales weighted basis. Production volumes decreased by 5% in North America, 6% in Europe, and 3% in China. From a currency standpoint, the U.S. dollar weakened against both the euro and RMB. Slide 11 highlights Lear's growth over market. In the third quarter, revenue outperformed the industry in both Seating and E-Systems, as well as in each of our major markets. Total company growth over market was three percentage points, with Seating at 3% and E-Systems at 5%. Growth over market was particularly strong in North America at seven percentage points, reflecting favorable backlog and platform mix in both segments. Seating benefited from higher volumes on General Motors full-size trucks and SUVs, as well as complex wins on the Jeep Wagoneer and Grand Wagoneer. EV-Systems business on the General Motors Ultium platform, including the Honda Prologue and Acura ZDX, as well as higher volumes on the General Motors Auto and Canyon and Ford Super Duty contributed to the strong growth in the region. In Europe, sales outperformed industry production by two percentage points, driven by new Conquest programs, including the BMW 5 series and i5 in Seating, as well as new business with BMW and Renault in E-Systems. Lower volumes in several Stellantis, BMW, and VW programs negatively impacted Seating platform mix in Europe. In China, revenue outperformed the market by one percentage point, driven by new business on the Xiaomi SU7 and two leap motor programs in Seating and the Xtang Mona in E-Systems. Lower volumes on several GM programs in Seating and on Volvo programs in E-Systems offset a portion of the outperformance in China. We continue to grow our share with key Chinese automakers such as BYD and Geely, which will further improve our customer mix in China going forward. When you include revenue from our non-consolidated joint ventures, our China growth over market improves by five points to 6% for the quarter. Turning to slide 12, I'll highlight our financial results for the third quarter of 2024. Our sales declined 3% year-over-year to $5.6 billion. Excluding the impact of foreign exchange and commodities, sales were also down 3%, reflecting lower volumes on their platforms, partially offset by the addition of new business in both of our segments. Our operating earnings were $257 million, compared to $267 million last year. Despite lower sales, operating margins were flat year-over-year at 4.6%, driven by positive net performance and our margin-accretive backlog. Adjusted earnings per share were $2.89 as compared to $2.87 a year ago, reflecting the benefit of our share repurchase program. Third quarter operating cash flow was $183 million compared to $404 million last year, primarily due to the impact of Lear's fiscal calendar and the timing of customer collections. Slide 13 explains the variance in sales and adjusted operating margins in the Seating segment. Sales for the third quarter were $4.1 billion, a decrease of $173 million or 4% from 2023. Excluding the impact of foreign exchange and commodities, sales were down 3%, due to lower volumes on Lear platforms partially offset by the addition of new business. Adjusted earnings were $262 million, down $13 million or 5% from 2023, with adjusted operating margins of 6.4%. Operating margins were flat compared to last year as the impact from lower production on key Lear platforms was offset by positive net performance and the roll-on of our margin-accretive backlog. Slide 14 explains the variance in sales and adjusted operating margins in the E-System segment. Sales for the third quarter were $1.5 billion, a decrease of $23 million or 2% from 2023. Excluding the impact of foreign exchange and commodities, sales were down 1%, driven primarily by lower volumes on Lear platforms, partially offset by our strong backlog. Adjusted earnings were $74 million or 5% of sales, compared to $79 million and 5.3% of sales in 2023. The decline in margins reflected lower volumes on Lear platforms, partially offset by our margin-accretive backlog and strong net operating performance. Now shifting to our 2024 outlook, slide 15 provides global vehicle production volume and currency assumptions to form the basis of our full-year outlook. We have updated our global production assumptions, which are based on several sources including internal estimates, customer production schedules, and S&P forecasts. Our production assumptions are lower than the latest S&P forecasts across our key regions, reflecting our most recent customer production schedules and our expectations regarding near-term market conditions. At the midpoint of our guidance range, we assume that global industry production will be down 4% compared to 2023 and nearly 4.5% on a Lear sales weighted basis. This is lower than our prior guidance assumption of a 3% increase in production volumes. From a currency perspective, we are maintaining an average euro exchange rate of $1.085 per euro and an average Chinese RMB exchange rate of 7.2 RMB to the dollar. Slide 16 provides detail on our outlook for 2024. Key changes to the midpoint of our guidance include the following. Our revenue is now expected to be approximately $23 billion. Core operating earnings are expected to be approximately $1.07 billion. We are reducing our outlook for capital expenditures by $75 million, primarily as a result of slower customer ramp-up on various new vehicles and to continue aggressively managing capacity utilization. Operating cash flow is expected to be approximately $1.14 billion. The midpoint of our full-year free cash flow guidance remains at $560 million, with the benefit of lower capital expenditures offsetting the impact of lower earnings. Slide 17 compares our current outlook to our prior outlook for sales and core operating earnings. We forecast the midpoint of our 2024 sales outlook to be down $400 million from our July outlook, primarily reflecting the impact of reductions in vehicle production volumes. The midpoint of our core operating earnings outlook is expected to be down $50 million from our prior outlook. The reduction in our core operating earnings outlook reflects the impact of lower volumes, partially offset by improvements in net performance. Slide 18 provides detail on the drivers of net performance. Our consistent investment in operational efficiency has positioned Lear as the most competitive supplier in terms of both quality and cost. Over the past three years, we have generated an average of 40 basis points of margin growth per year in Seating and 50 basis points per year in E-Systems through net performance. In 2024, we expect 30 basis points of net performance in Seating and 40 basis points in E-Systems, driven by investments in advanced manufacturing and restructuring as well as from commercial recoveries. This performance is expected to improve operating earnings by approximately $100 million, helping to partially offset the negative impact of lower industry volumes. Through strategic acquisitions of automation capabilities, we have transformed our manufacturing processes, resulting in improved quality and efficiency. Deployment of these capabilities will allow us to accelerate our efforts and continue offsetting wage inflation while supporting margin expansion in both segments. Our plans to reduce headcount by 8% in Seating and 6% in E-Systems as compared to the end of 2023 remain on track. These restructuring actions will help to align capacity with demand while shifting our footprint to regions with lower labor costs, including North Africa and Central America. Our strong competitive position and the value proposition we bring to our customers helps us with commercial negotiations to address changes in production volumes, inflation, and other matters. We've continued to focus on negotiating commercial agreements that ensure sustainable financial returns. Moving to slide 19, we highlight our commitment to continue to return capital to shareholders in the third quarter. In the third quarter, we accelerated share repurchases, buying back $209 million worth of stock. We continued to repurchase shares in our quiet period and achieved our target for the year of $325 million with capacity for further repurchases in the fourth quarter. Year-to-date, we have reduced our share count by more than 4.5%, which will help drive EPS growth going forward. Since initiating the share repurchase program in 2011, we have repurchased $5.5 billion worth of shares and returned over 85% of free cash flow to shareholders through repurchases and dividends. Our current share repurchase authorization has approximately $1.2 billion remaining, which allows us to repurchase shares through December 31, 2026. Now turning to Slide 20. This slide highlights the key factors that will impact our financial outlook for 2025 and beyond. In recent years, the automotive industry has faced a variety of challenges, including a global pandemic, a semiconductor shortage, fluctuations in commodity prices and FX rates, and elevated wage inflation. To navigate these headwinds, we introduced Lear Forward, a strategic initiative focused on improving capacity utilization through footprint optimization and increasing flexibility across both business segments. In addition, we streamlined our portfolio to prioritize investments in products that leverage our core capabilities and strengths in engineering and manufacturing. Currently, macro conditions including vehicle affordability, the regulatory environment, and wage inflation continue to weigh on the automotive industry. The unprecedented transition to electric vehicles has caused near-term uncertainty around vehicle production. As customers assess their powertrain strategies, we have seen a delay in sourcing activity, particularly in North America and Europe. Consistent with our historical track record, we are taking actions such as improving our operating performance, optimizing our footprint through restructuring actions, and resolving commercial negotiations with our customers. We continue to make significant progress through our Idea by Lear initiatives, including aggressive steps to accelerate the deployment of automation. These performance improvement actions, coupled with growth opportunities through innovative products, Conquest wins, and customer diversification, have positioned both businesses for sustained revenue growth and margin expansion. Now I'll turn it back to Ray for some closing thoughts.

Thanks, Jason. Please turn to slide 22. Lear has been positioning itself for long-term success in any industry environment through our continued focus on what we can control and the execution of our strategic initiatives. In Seating, we are accelerating the deployment of our thermal comfort systems products. Our ComfortFlex module solutions are entering the market, and we are continuing to win new business for future applications. In E-Systems, we are winning new business across all powertrains, resulting in strong growth. We continue to diversify our customer base in both Seating and E-Systems. The relationships we have built with Chinese domestic automakers are driving new business opportunities for both businesses and we are starting to see increased opportunities to grow with the Japanese OEMs. The investments we are making in advanced manufacturing and capacity optimization are improving our cost structure and allowing us to be the most competitive supplier in our key products. During the quarter, we accelerated the pace of our share repurchases to take advantage of the current share price. As a result, we repurchased our target of $325 million worth of shares, reducing the share count by over 4.5% since the beginning of the year, driving earnings per share growth. We remain committed to returning excess cash to shareholders through our dividend and share repurchases. And now we'd be happy to take your questions.

At this time, we'll pause momentarily to assemble the roster. Our first question this morning comes from Joe Spak from UBS. Please go ahead with your question.

Thanks. Good morning, everyone. I guess just to start with the implied fourth-quarter guidance, it looks like you've taken a pretty punitive view on fourth-quarter production. I'm wondering if that's something you're seeing specific to your customers or platforms, some conservatism? And then what are your sort of early indications here for 2025? Because you previously talked about the backlog being impacted by slower EV uptake. It feels like in the quarter since then things have gotten worse. Now you're saying some sourcing activity is being delayed. I know there was a chance that you said that existing programs could be extended or higher volume on existing programs could occur, but just how do we sort of put all these pieces together as we start thinking about next year?

Yes, there's a lot to unpack, Joe. Looking at the fourth quarter, our interactions with customers have provided a clear indication of what volumes are expected for the remainder of the year. Unfortunately, the fourth quarter has declined significantly from our mid-third quarter expectations when we updated our outlook during a conference. We are projecting the fourth quarter to be about 5.5% lower than IHS forecasts, or nearly 8% lower on a Lear sales weighted basis, with Europe specifically down 11%. The largest disconnect appears to be in Europe, where we've seen a year-over-year decline of approximately 19% in the fourth quarter, North America down 9%, and China down 7.6%. This is how we see the market overall; it’s not a conservative estimate, but rather balanced. Certain platforms are performing better than others. Regarding 2025, we’ll hold back most comments about next year's revenue and industry volumes until our fourth quarter earnings call. However, I can share insights on the sourcing environment, as mentioned in the prepared remarks. The new business sourcing for 2024 has been much slower than anticipated at the beginning of the year, with completed sourcing processes being significantly lower than what is typical. This slowdown appears to stem from customers reassessing their powertrain strategies and looking to design costs out of their battery systems, particularly with electric vehicles. We are noting an increase in Requests for Information (RFIs) rather than Requests for Quotations (RFQs), resulting in a longer and slower quoting process than usual.

Just to give a little insight, the RFI is a request for information. And what we're seeing is there's a lot of different scenario planning within the multinationals on, like Jason explained, for cost or efficiency or what demand really looks like. So as opposed to a request for quote, which leads to an award, we're seeing a lot more in the pipeline requests for information that then they are modeling inside for different evaluations and building their models for what the vehicle cost and what the architecture would look like. We have seen an acceleration in RFIs over the last several quarters.

And I think that's prudent. And I think it'll lead to a more competitive offering with our key customers as new programs launch. And so I don't think it's a bad thing; I think it's a good thing. But it will have an impact, most likely in our three-year backlog that we would report in the fourth quarter earnings call. But as we're thinking about our performance in both business segments, our win rate on business that's been sourced is consistent with what we've seen in prior years. And I think that's a key point. And our competitive position in both business segments has improved dramatically over the last twelve months. I'll start with Seating because the investments we've made in product and process innovation, more specifically what we've done around thermal comfort and modularity, and the advanced manufacturing processes that really facilitate what we're trying to accomplish in automation and reduce our capital costs going forward. We've extended the competitive advantage that we already had in Seating coming into the year. We've extended that advantage. And I think there are a couple of important data points that really reinforce this. One, the overall Seating business quote sourced so far this year, again we've won it consistent with our historical win rate. Our quote pipeline at the end of the year is higher than it was at the start of the year. So the population of new business opportunities available to us is growing, and an important subset of that in particular our conquest opportunities are at a record level. We're not going to win everything in that population, but we have over $3 billion of conquest awards that we're being asked to quote by our customers. And I think that's a recognition by our customers that we have created a point of differentiation on quality, cost, and of course, on innovation. So I think those two factors taken together, just the overall win rate and then our conquest opportunity and the size of the pipeline really gives us confidence in a clear path to meeting or exceeding the market share target of 29% in Seating over the next several years. In E-Systems, we're seeing increased interest from both important existing customers and new customers. And we have two of the largest conquest opportunities in our history potentially to be sourced over the next three to six months. Again, we may not win both of those, but the fact that we're being asked to quote programs that we didn't previously have access to is a really important development. Our quality performance, our consistent execution in E-Systems, our leading manufacturing cost footprint, the position we have already in Honduras, the strong position we have in North Africa, and then leveraging the relationships we have with the Chinese domestics, particularly on the Seating side, that's really what's leading to that kind of increased population of conquest growth opportunities in E-Systems. So I think both businesses are really poised to generate significant growth over the midterm and long-term. The near term is going to be really impacted by just the pace of some of the EV programs in the pipeline that are launching. And I think similar to what we saw this year with our backlog, it came down meaningfully from what we released in February to kind of where we ended up at this point. I think our initial backlog for 2024 was $1.2 billion. We see that around $885 million now. And as we look out to next year, we see a similar phenomenon in terms of just lower volumes and delayed launches on many of the programs that comprised that backlog. And we'll provide a lot more detail, of course, on the fourth quarter earnings call.

Yes, that's an incredible amount of detail already, so thanks for that. If I could ask one other quick one here. If I look at slide eight on your China progress, which has obviously been pretty good, it does seem like you're assuming maybe a 2% annual decline in China for the multinationals, and I think we've seen greater declines to date. So are you expecting that to moderate over the period or is it supplanted by maybe some share gains there?

Yes, we're expecting the share shift to continue, but at a more moderate pace than what we've seen over the last, certainly the last 12 months or 24 months. We're building a plan in this timeframe that has about 10 points of additional share shift from our traditional customers to the Chinese domestics. So we're trying to be, we're obviously cognizant of what's happening in that market. We're repositioning our efforts really around growing with Chinese domestics, but there are platforms with traditional customers that are continuing to perform quite well. And while we've seen some pullback recently with the luxury brands, German OEMs, generally speaking, those platforms are still performing quite well, particularly on the higher ends of that market.

You're welcome.

Good morning, guys. A first question, Ray, it's interesting, you were talking about how the bidding processes, it seems like it's slipping or slow this year relative to expectations in past years. I mean, there's a lot going on there. One thing we've also heard is that in the bidding process, in the RFI, or in the RFI process, not the RFQ side, is that there's a lot of discussions about a plan A bid sort of normal course, including China and Taiwan content and then a plan B bid or information with ex-China and ex-Taiwan content. And obviously, there's many reasons why the automakers might be requesting that, considering that the proposed auto tech ban here in the U.S. and many other reasons. Are you hearing that, and is that really jamming up the process on bidding as well?

I think what we've seen, it may be around some of the electronic components in that you have a dual design or dual source solution in the event that you have backups. And so we have seen that. We're very familiar with that. And so we've been working on that for a long period of time. So I don't think that's anything new. I think with the RFIs that we're seeing, they're more around different architectures, different architectural designs, different battery layouts, and designs within the battery for efficiency. And those are taking a little bit longer time as they're assessing different types of use cases within the vehicle based on the design and the platform that they're looking to source. And so I think on the seating side it's been somewhat helpful because it gives us an opportunity. And we were at Frank’s here and we've talked about it, John, is that we're in now with the modular concept, with our capabilities around automation has been something that has been very unique to offer a solution that is somewhat non-traditional and more innovative and it helps lower their overall cost. And so on the E-Systems side, it's more around the architecture and what they're looking at and how they're looking at future designs and how they're looking at the battery. And the seating side has been extremely helpful because it's kind of opened the door to a non-traditional sourcing model. Right now we've had some very constructive, positive meetings on how we can drive the modular solution to really drive out efficiency and really create a better cost, better seat system. And that's why when we hint to the success we're having now with the Japanese OEs, they've really opened up. I was just in Japan several weeks ago talking to key customers there on our innovation on the manufacturing side; they're looking for it. And then obviously, it's been very helpful with the Chinese domestics. It's been the thing that's opened the door is our innovation. And so I think the way we've separated ourselves, particularly in Seating with innovation, with the modular design and automation, is allowing us to get into these RFIs differently because they're not looking at a traditional statement or requirement. Let's just keep plugging along in a very similar fashion. They're open to these ideas, and we've had some very, very constructive, positive meetings that I think are going to lead to some good awards. But this leads us to one word that I don't like is patience. Unfortunately, you have to have patience because these bids are going through their systems and trying to figure it out. So we'll have patience. We know we have superior designs that are going to drive what they're looking for. And like Jason alluded to, we see a big buildup of RFQs coming really in the second, third quarter of next year that we're positioning ourselves, I think, in a very strong position to win.

That's very helpful. That just leads to kind of the second question around automation in your comments of moving more labor from Mexico down Honduras over the next few years. I mean, obviously, there's always the chase on LCC can only go so far. So at some point, you really need to lean heavily on automation, and you're doing that. I'm just curious, if you think about both businesses, how far you can go on automation and how low you can get labor as a percent of total costs. At some point, you're going to have to automate more and more over time, but how far can that ultimately go? What's the asymptotic limit?

Yes, it is a combination of both. And I think it's both what we've looked at as far as cut and sew and wiring. And as we're even moving, and I do agree with you, labor arbitrage is something that will run its course. And so we do it in parallel. And I think, our vision is obviously laid out. I mean, everything that we look at in respect to what we're doing is how do we get to the optimum scenario of lights out? And, it's what's great about what we've done with these acquisitions, and we talked about it previously, is we're manufacturing our own capital. There's certain things that are commoditized that we don't need to go after, like we discussed with cameras, and cobots, and robots; those are commoditized to a point where we can get those very efficiently. It's the software algorithms, when I talk about LearVUE, we're writing our own software. The WIP automation software that we purchased gave us in-house capabilities with AI algorithms, software that allows us to differentiate on the floor, not just from an efficiency standpoint, but what we're seeing is the benefits with quality, throughput, ergonomics, everything. It hits them all, and we're keeping that all in house. Why we acquired these companies is we're not using that and selling it to any of our competitors. It’s very, very distinctly designed for our internal use. And I think what's great, too, is we're seeing a serious reduction in capital cost because as we manufacture our own capital for our own use, we're seeing a 30%, 40% reduction in capital and the cost of capital to deploy. And I think we're going to continue to see that. So to your original question, yes, the goal is to continue to automate the areas that we are very labor-intensive and that we can become much more efficient, and we're doing that. But the benefits that we're seeing with capital costs going down, the efficiencies, the way we differentiate ourselves. The reason the customers, I think, are very attracted to how we're laying out these RFIs is because it's unique to Lear. We're not buying off-the-shelf stuff. We're buying things that we manufacture, that we produce that are unique to our own designs and our own manufacturing needs. And so like I said, patience is a word I have a tough time with because it's all about go fast, go fast, go fast, but as you're walking the customers through it and they have an appreciation for it, and they see it, they really understand how we're differentiating ourselves and what the benefits they can get across the board with quality throughput, even job satisfaction from our employee perspective, has been incredible. So but our target is to work in parallel on both of them.

Okay. One just quick one for Jason. It just looks like there's a little bit more pressure on net income on the implied in the fourth quarter than there is in core operating income actually, like a fair amount more pressure. Is there something going on in the balance between core operating earnings and equity income in the fourth quarter where equity income is getting hit much harder by your assumptions?

Yes. Let me just take a quick look here. I mean our equity earnings are expected to be down about $2 million in the fourth quarter. I think we probably have a little bit of breathing room in that number. There isn't anything meaningful that's happened with the non-consolidated joint ventures, maybe a bit of conservatism in the assumption around NAC earnings in the fourth quarter.

Yes, good morning. Thanks very much for taking the questions. First, I'm hoping you can help us to better understand what to expect for growth over market in both Seating and E-Systems over the next two to three years. The company spoke today around some sourcing headwinds, but you've also seen better momentum within China. So maybe you can help us better contextualize what that all means for growth over market in the intermediate term.

Yes. I think that we've been positively surprised by the growth over market performance this year. I mean, our growth on existing platforms has held up better than we had expected when we started the year. But as we look out over the next 12 months, it's really challenging, given all the uncertainty that we described in the prepared remarks in the near term with regards to customer demand, in particular, platforms, and in segments. Longer-term, we still have a high degree of confidence in our 4 points of growth over market in Seating and 6 points in E-Systems driven by what we described in terms of our conquest opportunities available to us that we're participating in both business segments. So I think that's at this stage, we're not ready to guide to a growth over market number for next year. But longer term, the plans that we have and the win rates that we've seen on business sourced this year in the pipeline we see in front of us would support continuing to achieve those long-term growth objectives.

Hi, thanks for taking my questions. Just earlier it was asked. I just didn't get a clear answer or maybe I missed it. I apologize if I did. So if we talk about the Q4 margin, I think it's something like 4.2% at the midpoint of your current guide. You're at 4.8% for the year. How should we think about getting margins back on track into 2025? What's sort of unique about Q4? Or should we consider the risk in 2025?

It may be useful to clarify the transition from the third quarter to the fourth quarter. We are anticipating a decrease in revenue of approximately $125 million from Q3 to Q4, which corresponds to around $20 million to $25 million in variable margin loss. This reduction is the primary factor affecting the sequential margin. Additionally, historically, the fourth quarter has been our strongest for commercial negotiations, but this year has been different due to settlements occurring throughout the year. In Q3, we finalized a couple of important negotiations in Seating, which brought in about $15 million earlier than expected, as we had originally forecasted these for Q4. This created an out-of-period benefit in Q3 with those $15 million worth of transactions that were related to the first half of the year. As a reminder, we initially projected Seating margins to be 6% in Q3 and 6.4% in Q4; however, due to the Q3 negotiations, we actually achieved 6.4% for that quarter but are now expecting to drop back down to 6% in Q4. We expect E-Systems to maintain consistent margins of 5% in both Q3 and Q4. The overall operating margin projected for Q4 is 4.2%. Looking ahead to 2025, given the volatility in commercial negotiations and the inventory adjustments from some of our major customers in Q4, it's important to note comments from Stellantis and GM regarding lower full-size truck and SUV volumes. This situation suggests that using the full-year results might provide a better basis for forecasting 2025 rather than focusing solely on the fourth quarter. As we advance into next year, we anticipate a run rate of 6.5% for Seating and just above 5% for E-Systems, which is a good indicator of where we'll start as we head into 2025.

Got it. That's very helpful. As we consider 2025, two significant factors this year have been labor cost inflation and approximately 1% negative customer mix. It appears that you're still under-represented in China. How should we approach these two major factors as we head into next year, especially with labor inflation expected to ease somewhat, making it less of a concern?

We are noticing a decrease in wage inflation, which is a slight improvement from what we faced this year. However, we don't anticipate it returning to the levels of 2021 or 2022. We do expect it to be less of a challenge next year compared to this year, providing us with a better starting point for our net performance targets in both businesses. As for predicting the volume on our car lines for next year, it feels too early to make that call given the many variables at play, including the upcoming election. We'll address that during the fourth quarter earnings call.

Hey guys, good morning. It's William talking on for Adam Jonas. I think tariffs are a very topical conversation right now, especially with the election. I think it would be useful if you guys could talk about how you're going about managing any potential tariffs, especially I think with Mexico because I know you have a lot of footprint there. And if you guys don't want to give commentary, that's fine, but I think it's very helpful.

Yes. I think with regards to Mexico, the disruption of the auto industry overall would just be significant. I think there's a very low likelihood of that happening. I think we have some time before U.S. MCA is going to be renegotiated. But at the same time, we do have the benefit of shifting footprint from Mexico to Honduras, so we're not just dependent on that region for low-cost labor. But I would say that, our view at this point is that, that change in the tariff regimen in their scheme in Mexico is unlikely.

I believe, as I mentioned earlier, that what has created opportunities, which we take pride in, is the optimization of cost technology to maintain efficiency and operational excellence. This has also created the chance to explore modularity, seat designs, and ways to reduce costs. As we engage in these RFIs, it’s changing our approach to redesigning key components. This is beneficial considering the investments we’ve made in improving efficiencies within our manufacturing plants, as well as in product development and vertical integration. Our ability to combine and redesign components has accelerated our progress. Timing is crucial, and we are in an excellent position because there is a shift away from traditional requirements, prompting a reevaluation of methods. This shift contributed to our success with the Ford module, and we are currently working on 62 different programs. Much of this can be attributed to the current environment where customers are encouraged to think innovatively. It’s a process that requires patience and consistent effort to assist them. However, we haven’t observed significant changes in major launches of new productivity agreements; that aspect remains stable.

Hi, thanks for having me here at the end. This is Trevor Young representing Dan today. I wanted to follow up on a comment you made earlier regarding your expectation of a 10-point shift in market share in China towards domestic OEMs. Can you clarify if this expectation is for the period up to 2027? Additionally, if there were to be a quicker shift towards domestic manufacturers, do you believe you would need to increase capacity in China to support them, or could you utilize your existing operations?

Yes. We'll start with the first part. 2027 was the time frame that we had in mind in terms of that 10 points of share shift between now and then. And so in certain cases, we may be able to repurpose capacity that we have, particularly in our component plants and in our wire business with traditional customers. We could repurpose much of that capacity for domestic Chinese customers if that business opportunity presents itself. A lot of that will depend on the physical location of the customer plant in question. And so if there's a mismatch there, then you may see some additional CapEx to support growth with the Chinese domestics if they're more successful taking share more quickly.

Okay. That's helpful. And then just as a last follow-up. Just if you got time, just a last follow-up on the corporate EBIT improvement. It looks like you've seen Q3 and Q2 of this year a bit below where we were looking at in the past. Is this something you expect to be consistent level going forward?

Yes, I think the full year guidance indicates a decrease of about $6 million at the headquarters, although it is expected to rebound slightly in the fourth quarter. There may be some fluctuations from quarter to quarter. Our 2023 actual results and 2024 guidance will inform how we manage that headquarters figure. The final number will depend on the opportunities we encounter, such as initiatives by Lear. If we identify a chance to invest and need to support a corporate initiative, that figure could increase somewhat. However, I do not anticipate significant changes to that number in the near term.

Thank you. I believe that concludes the questions. Those still on the call are part of the Lear team, and I want to recognize everyone's hard work. I appreciate all that you are doing. While we may not be completely satisfied with our current position, I understand the challenges we are facing in the industry. I value the effort everyone is putting into focusing on what we can control. There is no doubt that we have the right strategy in place. We are making the necessary investments in our organization, capital, and products. Ultimately, we will succeed, and I truly appreciate all the efforts being made to navigate these difficult times. Thank you for your hard work.

And ladies and gentlemen, with that, we'll conclude today's conference call. We thank you for attending today's presentation. You may now disconnect your lines.