Good morning. My name is Dennis and I will be your conference facilitator today. At this time, I would like to welcome everyone to Lear Corporation's fourth quarter 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) Thank you. I would now like to turn the call over to Mel Stephens, Vice President, Investor Relations.

Okay, thank you. Good morning everyone, and thanks for joining our fourth quarter earnings call. By now you should have received our fourth quarter earning's press release and our financial review package that we intend to review on the call today. These materials have also been filed with the Securities and Exchange Commission and they are posted on our website at lear.com through the Investor Relations' link. Our Chairman, Bob Rossiter, is traveling in Asia today and so he will not be joining our call. The presenters for today's review are Matt Simoncini, our Chief Financial Officer, Dan Ninivaggi, Executive Vice President, and James Vandenberghe, Vice Chairman. And also here in Southfield participating on the call are Shari Burgess, our Treasurer, Wendy Foss, Controller, Bill McLaughlin, in Tax, John Trifall, Vice President of Business Planning and Analysis. Before we begin, I would like to remind you all that during the call, we will be making forward-looking statements that are subject to risks with uncertainties, and there still are factors that could impact our future results are described in the last slide of our deck and also included in our SEC filings. In addition, we will be referring the certain non-GAAP financial measures. Additional information regarding these measures can also be found in the slide labeled non-GAAP financial information, which is at the end of our presentation. If you will turn the slide number 2, here we show an agenda for today's review. Matt Simoncini will begin and review our fourth quarter and full year production for our top five customers in Europe was up 4%. Commodity cost changes did not have a meaningful impact on our results in the fourth quarter on a year-over-year basis. Slide #6 provides our financial score card for the fourth quarter in more detail. Starting…

Okay. Thanks Dan and good morning. I would like to start out by putting our recent developments in perspective and really give you our thoughts on the outlook for Lear. Since mid 2005, we have been restructuring our operations and implementing a number of actions to increase shareholder value and improve our long-term competitiveness. We are getting the desired results as we have now improved our operating and financial results for the second consecutive year. We are diversifying our sales as we continue to make study progress in growing our business in Asia and increasing our total sales with Asian manufactures globally. For 2007, 55% of our revenue was generated outside of North America. Importantly, with all the changes we have made and our continuing to make, one thing has remained constant. That is our focus on delivering the best possible quality and customer service. Within our segments, our seating business is performing well and as Dan just outlined we have an improvement plan in place for the electrical electronics business. Moving to slide number 25, as I have mentioned earlier, despite challenging conditions in North America we improved the operating performance of our core business substantially in the last two years. The major factors that drove the improvement in performance include global restructuring and other productivity initiatives, selective vertical immigration and the benefit of new business primarily outside of North America. On the slide 26, our recent financial results and strong cash flow have led significant improvements in our liquidity position and strengthened our balance sheet. As you can see from the slide, our cash balances are up and our net debt balances are down. In addition, we have no significant debt maturities until our revolving line of credit comes due in 2010. We talked about failed diversification and…

(Operator Instructions) Our first question will come from the line of Rod Lache with Deutsche Bank.

Can you hear me?

Yeah, hi Rod.

A couple things, first on the production for Q1. You said that the top 15 platforms in Q4 were about a million units in North America next year or are you looking from $3.6 million. How, is this Q1 or the first task look?

Yeah, if we look at the C starting with the first half right now, in North America the overall industry pullback rises about 650,000 units and we see about 70% or so coming out of the first half. From on it, it breaks in our key platforms is pretty consistent with that. Now for the first quarter, we see production that our key platform is down slightly above 10%. We think from our standpoint that we will be able to contain it within the 10% variance year-over-year on the midpoint guidance.

Okay and just switching gears to the electronics business. Can you talk a little bit about what the margin potential is there by 2010 and how much savings do you think you are going to achieve by shifting more to low-cost countries? And just generally, can you talk about what do you feel you need take any kind of strategic action there? You mentioned there you are the number three or number four position in electrical distribution. Is that is something that you think is a sort of a defensible position and something that where you achieve your margin objectives longer term?

Yeah, I mean, we have talked in the past about a longer term margins target of 6.5% to 7%. We think that is very achievable. The scale is important right now. We are about 9% of the global wire-harness business in light of you know the competitive landscape. We think we probably need to be in the 15% range at least. We think we can do that internally. In some other components like junction boxes and wireless, it is really jut scaling the businesses and the competencies we already have. For example the wireless products we have a name almost entirely in North America, so that we think there is a real solid opportunity to extend that to Europe and Asia. Junction boxes are disproportionately in Europe. We think we have opportunity to penetrate new customers and expand our market there in North America. Those are higher margin products though. So, you know, we think we can get there on our own. We have an internal plan to get there. You know, whether consolidation opportunities arise that could accelerate that. You know, sort of outside of our control but we clearly we would be, you know, we would look at anything that came along.

But what is the breakdown of that business regionally?

Of the overall business?

Of the electrical and electronics segments.

Right now, it is, Europe is probably, I want to say, 16% of it. Yeah, Europe is 1.7 probably 1.7 billion of the 3.1 billion. North America is about a billion in 2007. That shifts a little bit going forward.

Okay. My last one as you mentioned the hybrid opportunity. Do you have like content for vehicle on a hybrid vehicle for electrical distribution versus what a typically used these days?

Well it is a little bit tough to quantify and I do not want to mislead anybody. The hybrid components, you know, can be quite expensive. For example, inverters or converters, you know, could be 500 dollars to a thousand dollars of contact. We are not going to be doing all of those components though and will be relying to some extent on partnerships for that. But the overall content is significantly higher on hybrid systems than low voltage systems. The Q1 in that is that it is a redundant system. You do not do a way with a low voltage just sit on top of it more or less. So the basic architecture of the vehicle stays the same. So for a high breed stand point, the high voltage systems and the converters are incompletely incremental.

Ahuh. Okay. Thank you.

Your next question will come from the line of Rich Kwas from Wachovia.

Hi. Good morning. I just wanted to follow up on that electrical question on margins list for 2008. Now what is the key swing factor that would prevent you from getting back to the mid 4% range?

Volumes obviously are a key factor and volumes on you key car lines would impact it. Right now, we think we have taken a pretty balance and a little bit conservative approach to our outlook on our volumes that would be one. Two would be the ability to get to achieve the run way savings on restructuring actions that we have already implemented or initiated. Those are probably the two biggest factors.

And then on Asian margins. I think in the past you have talked about Asian margins being above the corporate average but that there is some potential for that to come down over the next few years, you know, what do you see in Asia right now and where do you see margins going directionally?

They were slightly running hotter than the overall business. Overall, we think longer term that do not pretty much fit the profile their product line so right now we see them settling in the 6.5% to 7% range there and as the market evolves the more localized-type vehicles for that continent.

Okay. In terms of restructuring as you look beyond 2010, what is the cadence restructuring cost that, you know, you are going to do a hundred million in restructuring charges this year. How does that fall out on 2009 and 2010 and then beyond 2010 does that drop down significantly?

Right. We believe the pulls back and you know we talked a couple of weeks ago in Detroit at the auto show that we see in 2009 pulling back from the hundred million dollars in 2010 becoming more normalize that the, you know, $50 million range give or take amount a small amount and the outer period, we see the same impact though what could impact that is, you know, if you don’t at least decide to start to take some capacity out specifically in North America to reflect losing share that actually benefits us longer term but we would adjust. But for the most part, we think to normalize run way restructuring is around $50 million and we will get to that probably in the 2009 and 2010 time frame.

Thank you.

Your next question will come from the line of John Murphy with Merrill Lynch.

Good morning guys.

Good morning John.

If you were to be the wiring line in this business, and this is sort of following up on another question and you decide to __3:42__ in some ceremony those are really 900-pound gorillas in that space and then, you know, after that you follow up I mean you said you had 9% in electronics business is that similar in wiring harnesses and would you have to do a transaction there? It looks like you want it as, you know, a potential partner.

Yeah that 9% is the electrical distribution side.

So that would be wiring harness?

That is the wiring harness business right.

So do you think with the size that they have that you can be competitive because they are much larger?

Yeah. We think we can be competitive I mean obviously the Asian customers are extremely challenging with Gazaki and Sumitomo. We think we have an opportunity to penetrate, you know, our existing customers further and bring in new customers to invest in Europe and North America in particular.

Okay.

We think, I think, from a competitive stand point too John is that we have got a pretty good footprint in North America, competitive footprint, and low-cost access to manufacturing and that is the key in that segment. And also if you look at Sumitomo over the last few years they have grown significantly penetrating the Europe and North America largely internally with some acquisitions and they have improved their position conservatively so we think, you know, we can do the same thing.

Okay. Let me introduce being simply about the GMT 900 and the price that it is leasing in 2008 intentionally beyond that. Are there any big launches or big vehicles that might help all set that negative makeshift that we are seeing in the short-term and long-term?

For us, you mean what is in our backlog, I think one of the exciting programs that are out there…I do not know how much it carries the water for the 900 but got the new crossover for the BMW the X6 into the exciting product that could help carried but they think, as well as some Hyundai business under Sta. Fe and the new link in MKS crossover, so we have got some product but it depends again as you know, what happens with the 900 and how much now we think we have taken in our balanced approach to the production numbers on net platform. We are fairly consistent with our net (inaudible).

Again, lastly, would just think about your production forecast of 14-4 just at least in our opinion that is pretty, you know, conservative and you know there is a lot of people in line with that. If we saw some improvement in production in the second half of the year going to 2009, and given your, you know, your current restructure actions which seemed to be going pretty well and you think was it fairly good operating leverage and be able to take advantage of that upside, the potential upside in production (inaudible).

We do believe that but as always John, it depends on which platforms are off, hopefully they are the ones that were on with a lot of contacts so as always, it just depends on what platform but yet we… if we had enough taken sales, we are pretty confident that we could convert it pretty well.

Next is (inaudible) the share, what was the current authorization?

It was a million-and-a-half shares.

A million-and-a-half shares. And…I mean…you think…if you do the RP back again, it looks like you have a lot more room to return by the shareholders and that is growing over time. Could you potentially get a higher authorization there?

Yeah, the authorization we got was actually sometimes we pull together relatively quickly, kind of late in the fourth quarter, so we did not have a chance to use it all, you know, something that we look at and again, we just have to balance it against other ways to enclose shareholder value but clearly, we thank the stock as, you know, as massively under valued right now.

Okay, thank you very much.

Our next question will come from the line of Patrick Archambault from Goldman Sachs.

Hi, good morning.

Good morning.

Can you just help us dimension a little bit like on slide 8 in how does it might look for your '08 guidance? And how much do you have factored in, you know, from restructuring, I know you are going to do 100 million and spend but what are you going to make it incrementally in benefits year-on-year? What kind of margin might we be using on the 330 new business backlog and, you know, just can help us pencil to the platform next industry production piece?

Yeah, I think if we go back to what we talked about at the North America's meeting in Detroit back a couple of weeks ago, we think that the restructuring actions that are on year-over-year basis would provide about a little over $40 million a year incrementally versus 2007 and typically, on backlog at the $300 million backlog, if you use a…you know high single-digit margin to low double-digit margin you are probably in the right range depending upon how efficient we are getting these things up and running and how the cadence of how the customers pull the product, so if you use that, you know 10% height number you will not be too far off.

Okay. So, in the end, then I guess you know the decline, it looks like the other piece would probably has to be in the neighborhood of sort of 160 husband, if this is the Math I am doing, 150 or 160 husband, if the Math I am doing is right.

Talking about the down-working version and the volume index?

Correct.

Yes. That is about right.

Okay. One last question, on other income, obviously that was in a pretty strong for you this quarter, is that and you guys mentioned, I think the JV as being part of the driver there? I mean how should we think about modeling that going forward, is that a kind of performance that we expect to continue to improve in 2008 or was that sort of unusual?

Well, it was a little bit unusual. The way I would think first of it is a lot of things that go to that and besides earnings in nonconsolidated…there is also royalties and some (inaudible) some state and local taxes. So it is pretty choppy line. How remodeling it implies a range of 35 million to 45 million for the full year about in expense and an average of about $10 million a quarter. From what I see, specifically in our projections for 2008, we fell to neutral because of the uncertainty in the production environment and also as we are continuing this consolidate, though this is a little difficult to see, but that business would do. For 2007, the icy venture on our portions of their earnings was positive in the range of about $15 million dollars between North America and Europe.

Okay. So you would have $15 million positive, I guess somewhere in the neighborhood of $55 million in negative cost offsets.

For 2007, that is correct. In Europe, we should see incremental improvement year over year. As I think I mentioned on the last call in North America, 2008 really is a year of restructuring and rebuilding the backlog so it goes a little slightly the other way. But again I think if you use that rule of thumb of $10 million per quarter liable to a line, I think you would be pretty close, though.

Okay. Thanks a lot.

Your next question will come from the line of Itay Michaeli of Citi.

Matt, on the cash balance, how much of the cash is domestic and what do you guys think the minimum cash requirements are going into 2008?

Well, we think.. Let me start in reverse. We think we are going to be cash positive obviously. There may be a little bit of a cadence issue at slow start in the first quarter because of the earnings pullback and also there is the fiscal close of the quarter, would make us a little bit negative in the quarter. From a cash balance standpoint, a portion of it obviously is restricted or trapped, I think would be a better term. As far as how much of it is domestic, I am looking at our treasury shares…

540 of it is in either joint ventures or in Asian countries in which it is a bit more difficult to get hold of it, and then in Europe, we have about 150 but we have maximum to utilize that should we achieve it.

Great.

And Matt, back at the auto show, you spoke about, I guess, a few hundred million, I believe it was and a new backlog opportunity. Any update there, IT has almost been couple of weeks, about when we may see some of that if at all in the course of the year.

Yeah. No, I do not have an update but what I can say about our backlog is we do not include any high probability backlog. It is only just booked and so the way that we do it is if we know our program is going to roll off and we have not received a replacement business, we exclude it from our backlog. For a frame of reference, if you look at what we are able to book in the near term last year while we picked up $200 million incremental throwaway during 2007; there is always a level of business that is being pursued longer term and near term. Some of it is just an existing program that you are on, you get content increased. Programs do not end exactly when they say they are going to end so there are always a lot of puts and takes but there is no formal update. The number that we have is still probably our best look based on that but we do think that there is opportunity to improve the backlog number even in the near term.

Great. Thank you.

Your next question will come from the line of Himanshu Patel from J.P. Morgan.

Good morning. For your backlog for 2008 through 2010, can you tell us of the electronic and the electrical backlog, like how much is electronic and how much is electrical?

Well, I do not have the exact figure broken down but it would be a little bit higher in the… actually, it would be a fair bit higher in electrical distribution, which includes junction boxes. We do not typically, I do not have the breakdown as far as electronics but just based on the base business, I would say a good rule of the thumb is probably two thirds of three quarters will be on electrical distribution.

The electrical business, in order to achieve scale I think you mentioned, you mentioned you wanted to be about 15% of the global market to get the margin that you are looking for. So, would that mean that you need to maybe buy another asset or something or you think in total growth insufficiency where you get that?

I mean clearly if we are going to buy something would accelerate that and we will look at what is available. There have been some assets on the market over the past year or so but you know, we have to assume that we get there internally so we are focused on the internal plan of acquisition opportunities to present themselves, we clearly look at it.

How core is the electronics portion of that, of your business, I mean it is the $900 million business?

Yeah. Well, particularly in the portion of the electronics business that integrates or potentially integrates into junction boxes. It is pretty core. I mean that really is our competitive advantage that we can integrate the electronics like body electronics, wireless into junction boxes or even in a more distributed architecture into different box in the vehicle and that allows us to optimize the overall electrical distribution system. So we think that capabilities in technical competency in those electronics products are important. Obviously though some of the electronic products are more important that others so there might be some rationalizing the product often as we go along as well.

And could you sort of help me (inaudible) mention that the junction box is the core part, how much of it is that at the percentage of your total electronics business?

It is about $450 million.

Okay. That sounds cool.

I am sorry. Of our total ESD business it is about $450 million in sales.

Okay. Sorry to switch gear but you know with all those stresses in production happening to some extent in the full quarter but more in the first half of 2008, how would you describe your relations with Pier 2 suppliers, like do you see any issues that are coming up either on the PNL or even through cash flows such as may be giving them better terms to something like that; do you foresee any of that happening?

We are constantly working with our suppliers both in North America and in Europe to kind of monitor it and keep in close contact with them as far as their financial needs and their financial help. We went through a pretty heavy time of restructuring and distress in the 2005 and 2006 time frame but in 2007 we saw a much more stable kind of environment with our suppliers. Right now, we do not see any thing material in the horizon but it is something that we are constantly looking at.

Okay. Lastly your capex increased, could you remind this, what that is being driven by?

Yeah, a couple of things. If you start from it back when we gave original guidance for 2007 capital spending in the beginning of the year, it was $250 million. Some of the reduction was just good old-fashion thrifting and some of it was carry over in to this year. Some of the activity that we have coming up, one we have booked billion dollars of new programs over the last 12 months and a lot of capital is associated with that in the penetration in Asia along with programs to move our modest businesses in to lower cost locations. We have some new business coming on with BMW, Nissan and those are the key drivers. If you look at our average spent at the percentage of sales over the last two years we are still slightly below what I believe our run rate is and that is 16% to 1.8% of sales in average for the last years it is about a percent and a half but the low in 2006 will higher in a way but those are the key drivers.

Thank you.

Your next question will come from the line of Brian Johnson with Lehman Brothers.

Hey good morning. If we walk the margins in the Seating from where they were last year to the goal of the mid 600s, how far can you get in restructuring what would be the contribution of scale when if it emerges and then finally what is the chunk you are thinking of in terms of moving into higher value at your product.

Okay. The way I would kind of look at it, just kind of walk in numbers when the biggest driver in the margins year over years is the pull back in the North American markets, significant pullback in the North American market and the fact that we have large pickup trucks and full sized SUVs pulling back over 10% on a year over year basis. Typically what we see on volume and mix…

The fourth quarter that would have been implied by the first three quarters, so you had earned 580 roughly through the first three quarters. That would’ve suggested that you have to print 170 million in Q4 to get to the 750. You ended up printing closer to 180 in the Q4 and still bid 750. Did you have to revise downward anything from the first three quarters?

Well we, I think what’s gold is that from a production standpoint and atop platforms in North America, it is probably one of the weakest production quarters in the year, and they are throwing off some of the excess inventory that they trade into the fourth quarter. So I think that than more than anything. Now what did happen was we had built in the inner third quarter, we had built in some contingency because we actually thought the shutdowns would be greater than what they actually ended up being.

But then, why didn’t the 750 end up higher? You know what I mean? If you did 580 through the first three quarters to get to the 750, you would have only had to do 170; you did closer to 180, so why wasn’t the full year 760? What am I missing?

I think we did 570 through the first three quarters. I got a little bit lost in the math.

Right. That’s the difference. There was 14 million in computers income in the fourth quarter…

Yeah, okay. Last one: Maybe, I’m trying to understand what is different about your business in 2008 than, let’s say, 2005 where you had a pretty sharp downturn in some of your key programs and you saw much deeper fall-off in margin here. You’re looking for a pretty steep 12% decline in your top 15 platforms but only are expecting a modest decline in margin. Is it the fact that you’re no longer in the interior trim business, or what is different about your business?

Well, there are some of the factors that are different. First and foremost, we divested the interiors business, which was a fair reason that you can drag out earnings in that timeframe. Two, we’ve completed a lot of restructuring actions and made a huge investment in restructuring and we’ve improved that footprint which has lowered our infrastructure cost. Three, we’ve seen growth and improvement in our international operations, and finally we were still struggling with the impact of observing a lot of the commodity cost increases, and while they’re still pretty high, we’ve been able to work with our customers in finding design solutions that can help mitigate the impact of those increased commodity costs.

The other thing about 2005 is we were looking at a record backlog of new business and basically all their platforms, about 80% of our platforms were changing over, so we definitely have a lot more involved in launch calls and a lot more in support for businesses and that’s not the case now.

Okay, fair enough. Thank you very much.

Your next question is a followup question from Rich Kwas of Wachovia.

Yeah, hi. Matt, just a quick followup on SG&A here. It looks like SG&A to sales ratio increased pretty materially on a sequential base. Usually, you get a decline from Q3 to Q4. What was kind of the big driver there, on the SG&A?

A couple things. One is, first and foremost, it’s the book of business that we’ve booked a billion dollars in new business coming online, the investment that we’ve made in infrastructure in Asia and foreign exchange impact of Euro-denominated centers. From a runway basis which I would say that you should probably weigh in the mid-three’s to high-three’s as a percentage basis as an ongoing basis. That’s kind of high; we’d look at that line.

That’s helpful. Thank you.

This morning, I’ll take one more question.

This morning’s final question will come from the line of Jonathan Steinwich with Morgan Stanley.

Thanks. Good morning, everyone. Can you hear me?

Yeah, good morning, Jonathan.

Good. Just a couple of questions here. I think in the past, you’ve talked about on a restructuring basis, about 90% of the book restructuring expense being cash; is that still the way should think about things going forward over 2008-2010?

No, I’m looking at it slightly differently because of the incremental charges we took in the fourth quarter that came in late in the quarter. This year, I think we’re going to have incremental cash usage if we start catching up. The cash used for restructuring in 2007 was about $100 million, and you’ll start seeing the catch-up over the next two years. There may be some timing differences, but overall we are still comfortable with 90% cash. There are obviously some things that are carrying over into 2008.

Do you have an amount of what you didn’t put out in terms of cash used in the fourth quarter that would be carried over and be paid in cash the first half of this year?

It would be the top number to peg based on a timely…some of the payments, but right now you need in the ballpark of around $50 million incremental to year-over-year, you’d be fairly close.

Okay. Just to follow up on some of the questions about the cost structure on the electrical/electronics side. Can you breakdown that on a rough basis, sort of what the fixed versus variable matrix is? I’m just trying to understand; I didn’t intuitively think of this as a major scale-driven business in terms of from a manufacturing perspective, so where does scale sort of enter it in terms of really getting the operating leverage? Maybe if you could just give us some insight, maybe what your utilization is, that kind of thing you want it to go to.

Yeah. I guess I’d break out the electronics from the electrical distribution. In electronics, there is an investment in technology there, and there may be further investment in technology, so scale is important. For example, our junction box technology we think is world-class. If we could scale that technology, it’s obviously the contribution...and terminal connectors, which has been focused largely in Europe. And so we’ve had overcapacity; that’s largely a revenue play. We need to build more scale to basically use the capacity we have and absorb some of the corporate…but basically the corporate infrastructure.

So, basically a wire harness; it’s get to a lower-cost location and add business at the same time.

Correct.

Okay. Thank you.

And at this time, there are no further questions.

Okay. I just want to thank everybody, and once again thank all the employees for your contribution this past year and I’m looking forward to your contributions going forward. Thanks, everybody.

Ladies and gentlemen, this does include Lear Corporation’s fourth quarter 2007 Earnings Conference call. You may now disconnect.