Lear Corp. Joins the Ranks of Bankrupt Auto Suppliers

(MoneyWatch)  Another major auto supplier, seat maker Lear Corp., declared Chapter 11 bankruptcy this week.

Lear's bankruptcy follows a bankruptcy filing by Visteon Corp., on May 28. Visteon is closely tied to Ford. General Motors is Lear's biggest customer, accounting for 23 percent of 2008 sales, according to Lear's annual report. Delphi Corp., a supplier formed from GM's former in-house parts operation, has been in bankruptcy since 2005.

Ford is Lear's next-biggest customer, at 19 percent of 2008 sales. BMW accounted for 12 percent. Chrysler is also a customer, at a much lower volume.

With Chrysler and GM in and out of bankruptcy and the U.S. economy in a recession, many auto suppliers are also on the ropes. According to the Motor & Equipment Manufacturers Association, more than 40 major suppliers filed for Chapter 11 bankruptcy protection in 2008, and about one-third of all remaining suppliers are in financial distress, and rising.

On July 1, Lear said it had reached debt restructuring agreements with most of its lenders and bondholders. Lear filed for bankruptcy on July 7.

Lear, based in Southfield, Mich., is primarily known for making seats, which accounted for close to 80 percent of Lear's 2008 revenues. Lear also supplies electrical distribution systems and electronic products.

According to Automotive News, Lear was No. 11 on its list of Top 100 Global Suppliers for 2008, with $13.6 billion in sales, down from about $16 billion in 2007.

Bob Rossiter, Lear chairman, CEO and president, said in a written statement that Lear's plan is to conduct "business as usual," while proceeding through U.S. Bankruptcy Court on an expedited basis. Auto suppliers have received limited help from the U.S. government, but so far nothing like the close invovement the government has had with Chrysler and GM.