This automotive supplier’s Indiana plant just reached a new wage agreement with its workers. The company beat analysts’ estimates by $0.15 per share in the last quarter.
Lear Corp. (LEA)
from Dow Theory Forecasts
Lear (LEA) reached a tentative agreement with workers at an Indiana plant who participated in a one-day strike. When Lear emerged from bankruptcy in 2009, the workers agreed to a two-tiered pay system that caps hourly wages at $16 for new hires, now comprising two-thirds of the plant’s 760 workers. In recent negotiations, Lear had originally offered raises of 6% to 8%. Following the strike, the two sides hammered out a proposal that would end the two-tiered system and raise the ceiling on pay. Workers were slated to vote on the proposal September 21, after our deadline. (Editor’s note: the workers approved the contract on September 21).
Of Lear’s 226 facilities, 26 are located in the U.S. The Indiana plant negotiations could precipitate wage hikes at other U.S. locations, potentially pressuring Lear’s profit margins. In the first half of 2014, operating margins stood at their highest level for any six-month period since the first half of 2011. In July, management predicted it could keep profit margins at current levels.
The company says plants in Europe are still running “significantly below peak volumes,” offering an opportunity to increase profitability if demand picks up.
Lear is a Focus List Buy and a Long-Term Buy.
Richard J. Moroney, CFA, Dow Theory Forecasts, www.dowtheory.com, 800-233-5922, September 22, 2014