Business model of Lear Corporation

Customer Segments

Lear provides a range of products and services across its two operating segments, serving numerous commercial customers across all vehicle segments of the automotive market. This notably includes automotive and light truck manufacturers. According to its annual report, Lear has automotive content on over 350 vehicle nameplates worldwide, and serves all of the world’s major automotive manufacturers.

In 2015, Ford and General Motors, two of the largest automotive and light truck manufacturers in the world, accounted for 23% and 20% of the Company’s net sales, respectively. In addition, BMW accounted for approximately 10% of the Company’s net sales. Lear also includes Renault- Nissan, Jaguar, Lamborghini, Porsche, Mercedes-Benz, and Land Rover among its major customers.

Lear primarily serves customers across North America, with the US its principal market. The Company, however, also has a significant customer base across Europe and Asia Pacific.

Value Propositions

Lear provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company established as a market leader in its field, having established a strong reputation and brand over the course of many years, and grown a customer base that includes major automotive manufacturers such as BMW, Ford, and Renault-Nissan;
• The diversity and quality of its products, with the Company providing abroad range of products across its Seating and Electronics segments, which serve customers across vehicle segments of the automotive industry;
• Its international sales reach, with the Company serving a broad portfolio of clients across Europe and Asia Pacific, in addition to customers across its core market of North America; and
• Its proprietary technologies and commitment to innovation, with the Company employing proprietary technologies in many of its products and solutions that cannot be found elsewhere, and with the Company dedicated substantial resources each year to the development of new and innovative products.

Channels

Lear operates a website at www.lear.com, through which it provides information on it various products, services, locations, and facilities. The nature of the Company’s business activities is not conducive with the operation of an online sales channel. The Company also does not appear to operate an online customer portal. Instead, Lear receives purchase orders from its customers through its direct sales force, which operates out of technical and administrative offices across the Americas, Europe, and Asia Pacific, including locations in Sao Paulo, Tokyo, Shanghai, Wilmington, and Bangkok.

Lear also operates its own manufacturing and distribution channels, comprising facilities located close to its major customers in order to provide an efficient service. This includes assembly facilities across multiple locations- including in Mexico, Honduras, Eastern Europe, Africa, China, the Philippines, Brazil and Thailand – and separate manufacturing plants – including in Germany, China, Eastern Europe and the US.

Customer Relationships

Lear does not provide products or services to its customers on a self-service basis, beyond certain regulatory and support resources that can be found on its website. Lear serves its customers through a direct sales force, which typically receives contracts several years before actual production is scheduled to begin.

The Company agrees contracts that are tailored to the individual needs of each client and that often run the length of the entire lifespan of a certain vehicle model, with the Company seeking to establish longstanding relationships with its customers. Through its manufacturing facilities the Company produces parts and systems to the exact build specifications provided by its customers.

Lear provides ongoing support to its customers. potential and existing customers can make enquiries with the relevant operating department over the phone or via an online contact form, while existing customers are able to contact members of their account management team. Lear also provides a range of resources on its website, including industry insights.

Additionally, Lear operates a number of social media accounts – including with Facebook, Twitter, Instagram, LinkedIn, and YouTube – through which it is able to interact directly with customers.

Key Activities

Lear is a supplier of parts and systems to the global automotive industry. The Company is engaged in the design, manufacture, and supply of seating, electrical distribution systems, and electronic modules, as well as related sub-systems, components and software, to customers across all segments of the automotive manufacturing sector.

Lear’s operations are aligned into two reportable business segments: Seating, which relates to the development and sale of seat systems and components; and Electrical, which relates to the development and sale of electrical distribution systems that route electrical signals and manage electrical power within a vehicle.

It has over 240 manufacturing, engineering and administrative locations in approximately 40 countries, and serves a number of the world’s largest vehicle manufacturers, including Ford, General Motors, BMW, and Jaguar.

Key Partners

Lear works in collaboration with a range of companies throughout the production, assembly, and distribution of the Company’s products. These partners can be categorised broadly as:

• Supplier and Vendor Partners, comprising suppliers of raw materials, tools, and equipment that are utilised in the manufacture and assembly of the Company’s products, as well as services that are utilised enterprise-wide in support of the Company’s general operations;
• Channel and Distribution Partners, comprising authorised distributors and sales agents that assist in the distribution and delivery of the Company’s various products;
• Technology Partners, comprising various technology companies and hardware providers that license technologies for use in Lear solutions, as well as software companies and It service providers that assist in developing and maintaining the Company’s It and communications systems; and
• Social and community Partners, comprising various non-profit and charitable organisations, with which the Company collaborates on various community and social projects.

Lear has a number of partnerships in place, including a strategic partnership with Tempronics, and a learning partnerships with Hortonworks, as well as social and community partnership with United Way and the Grow Cody Rouge Project.

Key Resources

Lear’s key resources are its technologies and intellectual properties, its raw materials and supply chain, its manufacturing and assembly facilities, its logistics and distribution infrastructure, its IT and communications infrastructure, its sales and support channels, its partnerships, and its personnel.

Lear owns a number of patent and intellectual properties that are key to the success of its business. The Company currently has around 2,000 patents and patent applications pending, and owns Lear owns a number of patent and intellectual properties that are key to the success of its business. Searches of records published by the US Patent and Trademark Office identified numerous patent applications filed in Lear’s name, including applications entitled ‘Adjustable head restraint assembly for vehicle seats’, ‘Seat assembly having a side airbag module’ and ‘Electric connector with contact protection’.

Lear also owns and or leases a number or properties that are key to its ongoing activities, notably its network of 240 facilities, including 82 just-in-time manufacturing facilities, 112 dedicated component manufacturing facilities, 6 sequencing and distribution sites, 34 administrative and technical support facilities, and 6 advanced technology centres, in 36 countries worldwide.

Cost Structure

Lear incurs costs in relation to the procurement of materials and supplies, the development of its technologies, the operation of its various manufacturing and assembly facilities, the operation of its distribution infrastructure, the maintenance of its IT and communications infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 Lear recorded total cost of sales in the amount of $16.39 billion. The Company also accrued selling, general and administrative expenses totaling $580.5 million, including engineering and development costs of $126.8 million.

Revenue Streams

Lear generates revenue through the development, manufacture, assembly, and sale of various automotive products. The Company’s revenue is reported in two segments:

• Seating, comprising revenue derived from the sale of complete seat systems and seat components; and
• Electrical, comprising revenue derived from the sale of complete electrical distribution systems and electronic control modules.

In 2015 Lear generated total net sales of $18.21 billion, up on the 16.23 billion recorded by the Company in 2014. More than $14.09 billion of this sales revenue was generated by the Company’s Seating segment, while the Company’s Electrical segment generated $4.11 billion.