Jason Cardew
Thanks, Ray. Slide 10 shows vehicle production and key exchange rates for the first quarter.
Global production increased 1% compared to the same period last year, slightly better than expected due to higher production in all regions, but still down 5% on a sales weighted basis, driven by lower year over year production in North America and Europe.
Production volumes declined by 5% in North America and by 7% in Europe, while volumes in China were up 12%.
The US dollar strengthened against both the EUR and the RMB.
Slide 11 highlights there’s growth of the market. In the first quarter, sales performed in line with global industry production, with seeing growth of the market in line and these systems down 1%. Excluding the impact of the wind down of discontinued product lines, the system’s growth over market would have been 4%.
In Europe, sales outperformed industry production by 2% points, driven by new business with BMW and Renault in these systems, as well as higher volumes and several Mercedes and Land Rover programs and seating.
North America revenue growth lagged the market by 2% points, reflecting lower volumes on their platforms such as the Jeep Wagoneer and Ford Explorer and aviator and seating, and the Ford Escape and E-Systems. New seating in the Systems business on the Volvo EX 90 and the Chev Chevrolet Equinox EV and seating offset a portion of the underperformance in the region.
Our China business lagged industry growth estimates by 5% points, driven by lower volumes on several BMW programs and seating in the wind down of onboard charger business for several GLR programs in these systems.
New business on the Xiaomi SU seven and two leap motor programs and seating and the Xiaoping Mona in these systems offset a portion of the underperformance 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.
We recently took operating control of the seeding joint venture in China supporting two BYD programs, which will have a positive impact on our consolidated growth over market going forward and provide investors with a clear view of the strength of our competitive position in this key market.
According to slide 12, I’ll highlight our financial results of the first quarter of 2025. Our sales declined 7% year over year to $5.6 billion excluding the impact of foreign exchange, commodities, acquisitions, and divestitures. Sales were down 5%, reflecting lower volumes on their platforms, partially offset by the addition of new business in both our business segments.
Who operating earnings for $270 million compared to $280 million last year, driven by lower volumes on their platforms, partially offset by positive net performance in our margin of creative backlog.
Adjusted earnings per share were $3.12 as compared to $3.18 a year ago, reflecting lower adjusted net income, partially offset by the benefit of our share repurchase program.
First quarter operating cash flow was a use of $128 million.
As expected, operating cash flow was negatively impacted in the quarter by the timing of the close of this quarter as compared to last year and higher cash restructuring costs, which will further improve our cost structure going forward.
Slide 13 explains the variance in sales and adjusted operating margins for the first quarter in the seating segment. Sales for the first quarter were $4.2 billion a decrease of $327 million or 7% from 2024.
Excluding the impact of foreign exchange, commodities, acquisitions, and divestitures, sales were down 5% due to lower volumes on their platforms, partially offset by the addition of new business.
Adjusted Earnings were $280 million down $15 million or 5% from 2024, with adjusted operating margins of 6.7%. Operating margins were higher compared to last year, reflecting strong net performance, partially offset by lower production on their platform.
Slide 14 explains the variance in sales and adjusted operating margins in the e-system segment for the first quarter. Sales for the first quarter for $1.4 billion a decrease of $108 million or 7% from 2024.
Excluding the impact of foreign exchange, commodities, acquisitions, and divestitures, sales were down 5%, driven primarily by the wind down of discontinued product lines and lower volumes and platforms, partially offset by the addition of new business.
Adjusted Earnings were $74 million with 5.2% of sales compared to $77 million and 5.1% of sales in 2024.
Operating margins were higher compared to last year, reflecting strong net performance in the roll on of our margin accreta backlog, partially offset by lower production on their platforms in the wind down of discontinued product lines. The strong net performance in the quarter was driven by operating improvements across all regions that we expect to result in durable improvements to our margins going forward.
Slide 15 provides an update on our full year outlook.
While our first quarter results were solid, and we have made significant progress on our operational improvement initiatives, the ongoing international trade negotiations have introduced significant uncertainty in both the broader global economy as well as the automotive industry.
As Ray indicated earlier, there are two exposures that we’re managing. The direct impact of tariffs and the indirect impact on production volume and mix. We remain confident that we will recover the indirect impact, the direct impact of tariffs.
This has been our position from the start, and we have made significant progress in our negotiations with customers. On the other hand, the indirect impact associated with production volume and mix is not yet clear.
External production forecasts have deteriorated since February, and we expect that OEMs will need time to adjust their production and mixed plans to account for the recent changes in global trade policy.
On the positive side, we expect the recent weakening of the US dollar to have a favourable impact on our full year results, and we continue to make progress on negotiations with customers to recover the full cost of tariffs. In addition, we’re making significant progress on our operating performance initiatives and remain on track for the net performance targets outlined at the beginning of the year.
We are increasing our investment and restructuring to accelerate our footprint rationalization actions and reduce costs. At the same time, we are lowering our capital spending by roughly the same amount as we adjust our new capacity and other discretionary capital investments in response to the weaker industry production outlook.
Well, as a result of the uncertainty in the industry, we are not reaffirming our 2025 full year outlook. We do remain confident we can deliver the operating performance improvements highlighted on our last earnings call.
We typically speak at a public investor conference during each quarter, and we’ll use those opportunities to provide updates on the business, and we’ll reintroduce a fuller outlook when we have increased clarity from customers on their production plans for the remainder of the year.
Moving to slide 16, we highlight our balanced capital allocation strategy. We have a strong balance sheet and liquidity profile, which is a significant competitive advantage for us in today’s uncertain environment.
We do not have any near-term outstanding debt maturities. Our earliest by maturity is in 2027, and our debt structure has a weighted average life of approximately 12 years.
Our cost of debt is low, averaging approximately 4%. In addition, we have $2.8 billion of available liquidity.
Our capital allocation priorities remain consistent. We’re focused on generating strong cash flow, investing in the core business to drive profitable growth, and returning excess cash to shareholders. During the quarter, we repurchased $25 million worth of shares.
Our current share repurchase authorization has approximately $1.1 billion remaining, which allows us to repurchase shares through December 31, 2026.
We are temporarily pausing share repurchase activity to ensure we maintain our strong liquidity position during this period of uncertainty.
Based on recent developments, we believe this pause will be short and are planning to reinstate shared purchase as soon as disability improves.
Now I’ll turn back to Ray and closing thoughts.
Ray Scott
Thanks, Jason. Please turn to slide 18. Our first quarter results provided another clear example of our ability to deliver strong performance in a volatile industry environment. We continue to execute on our strategic initiative to position the company for revenue growth and margin improvement. In seeing we are winning new business in thermal comfort and expanding our presence with Chinese domestic customers.
Motor Trend recognized the performance improvements we can deliver through our Comfort Flex and Comfort Max seat module solutions.
In these systems, our historic quarter of business ones, particularly in wiring, and the next generation battery disconnect unit, sets us up for long-term revenue growth of our focus product portfolio. The Automotive Newspace award for our zone control module highlights the innovation our teams are developing for our customers.
Extending our leadership in operational excellence through our investments and idea by layer is driving marginal improvement throughout the business.
We have a strong balance sheet with no near-term debt maturities that allows us flexibility in our capital allocation strategy and positions as well to navigate tariff-related industry headwinds.
As we work through challenging industry conditions, we are proactively taking steps to position Lear for future success, and we’re committed.
To keeping the investor community updated in the current dynamic environment. I couldn’t be more proud to lead the LA team, and I want to thank all our employees for their dedication and hard work, and I we’d be happy to take your questions.
Operator
(Operator Instructions) Joe Spak, UBS.
Joseph Spak
Thanks. Good morning, everyone. Right, I guess first question. Have you seen any meaningful changes to the production schedules yet, or are you just anticipating this? And the reason I ask is it just seems interesting that, the further we get into earning season here, the more guidance’s we’re getting. So, I’m wondering if we’re seeing some more breaking changes to the schedules.
Jason Cardew
Yeah, I think we have seen changes announced throughout the last four or five weeks. I wouldn’t say that there has been, any recent uptick in the number of announcements, but it’s clearly the environment remains pretty dynamic and, maybe you’ll just take a minute to explain our thought process on why we decided to withdraw guidance at this point.
As a result of having our call a little bit later in the in the cycle, we’ve had the benefit of hearing from our customers, what they’re saying on their calls. We’ve seen some positive developments in terms of the cost of tariffs for the industry.
And certainly this industry has faced challenges over the last five years with COVID, the chip shortage issue and supply chain.
Disruptions, but I think this is really a very different situation. And as we were thinking about how to guide in this environment, what would be helpful to investors, what we struggled with is the wide range that we would end up guiding to account for all the variability in the production outlook. There are really 3 variables that that remain right now.
First, how the end consumers respond to price increases, a higher pricing in the market, which seems, likely to happen. Then how do our customers react to that, to those changes? Do they have a preference for market share, or do they try and capture some price benefits? And the opportunity for their margins associated with that.
And then lastly, what additional trade policies are enacted by the US or our trading partners as these negotiations evolve and, listening to our customers’ earnings calls, you could hear the sort of tension in that decision-making framework between market share and margins that they’re working through.
And so given that uncertainty and what their plans are, we thought that, we ended up with too wide of a range to be helpful for investors and so until there’s visibility, at least on those first two variables, we’re not in a position to provide guidance that would be useful, I think, for investors.
Now, we have fairly decent, clarity and visibility on the second quarter, but there still are changes coming, and we are presenting at an investor conference in the second week of June 10 or 11, and we will provide, more, clear guidance on the second quarter, specifically, at that event, once we see a little bit more visibility on the items I just mentioned.
Joseph Spak
Thanks for thanks for all that color. As a second question, I just want to make sure I understand, and sorry to sort of go back to tariffs here, but it seems like with the disclosure you laid out on the direct impact, actually Honduras ends up being one of the bigger factors here.
Is there a way to get the your customers to be the importer record or get anointed as an approved importer record such that they could claim that 3.75% reimbursement and then.
As you think about that that particular country exposure and the reimbursement is, expected to go down in one year, maybe in two years, is that where you need to see most of the work done, Ray? I know you’ve made some comments about, potentially moving some production around.
Ray Scott
Yeah, well, I think the first point, Joe, yes, we we’ve I think that the team has done a remarkable job of presenting all options to our customers, and one of those options is, who is going to, be the, reporter of record as far as, locations.
And so that is an option we have put on and it absolutely is, something that, we’re considering and talking to our customers about, in respect to the ability to move parts. And manufacturing, I mean, those are the things that we’re looking at.
There, it’s still a very competitive, Location for us and obviously like Jason mentioned, there, there’s still a lot of work to be done and or there’s still work that’s going to be done on what that’s going to be at the end of the day. And so, it’s really going to come down to what that reciprocal tariff or what that tariff will be on those components in Honduras will look like. And so those discussions are going on with our customer. I don’t know Jason, if you want to.
Jason Cardew
Have a little bit of yeah, and our understanding, Joe, on the 3.75%. Exemption credit, so to speak, is that they, that the OEMs our customers can indicate which of their components can be, given that exemption. And so I think a product like wire harnesses has a fairly high likelihood of being a product that would be imported to the US tariff free, whether we’re the importer of record or the customer is.
I don’t think that that Necessarily has to shift from us to our customer in order to take advantage of that new rule there. And just kind of go back to your first comment, your, in regard to Honduras, yes, it is our most significant exposure. And since, I’m sure this is a question that is going to come up as the call progressive but I can address that now.
Overall, we see our gross tariff costs at about $200 million and so about half of that is Honduras, and that’s because the wire harnesses are on the annex that accompanies the section 232 auto tariffs and so they’re subject to the 25% tariff. We think it’s highly likely that that tariff rate is adjusted because wire harnesses really don’t have a place on that annex in the same way engines, transmissions, or other highly technical parts do.
It’s, I think it’s kind of misplaced and you’ve heard customers and others advocate for that change. So as a result of that, you would then revert to the 10%. Tariff rate, the reciprocal tariff rate that’s in place with Honduras, and at a 10% rate, Honduras is still competitive with Mexico. And so, we think ultimately that’s where it ends up, but there’s clearly some uncertainty on, how long that that process takes to get there. The other half of our tariff exposure.
The other $100 million for this year, roughly half of that is on components where our customers are the, control the sourcing with our suppliers. And so, they have direct responsibility for that. They’re having negotiations and discussions with those suppliers and that would be passed through, whatever the outcome of that negotiation would be passed through from our customer to the supplier.
And then so what we’re really focused on in terms of the direct exposure is that remaining $50 million, roughly 25% of the gross exposures for products where we are the importer of record and we are we control the sourcing and We’ve already made tremendous progress in reducing that exposure through design changes and sourcing changes, and we will continue to reduce that, and we’ve had very productive discussions with our customers about recovering the cost of that that tariff in the interim.
Ray Scott
I think it’s important to mention that we’ve been very clear with the customer that we expect a 100% recovery if it’s directed or indirect, on the components. And for the majority or the majority of our customers, they’ve agreed on 100% of what I’ll call directed their source components.
And the in directed, I feel very confident that we’re going to get full recovery on a net position. I think the team has done a great job of commercializing what our expectation is, and we’re making really good improvements on that side of it.
But I also think that there are alternative, solutions, that, can work to, I think our advantage with how we can relocate components. I mentioned some of the manufacturing, the strong manufacturing presence we have in the United States, and how we can relocate things to the United States in certain areas.
I, around the ones I mentioned with foam and, textiles and, stampings and those type of components that would, work really well here in the US. And so, I think the teams have done a really nice job. And I have a confidence because the conversations are going extremely well. I think we’ve made some very good progress. I think what the team has done with these systems on the wear harness it shows the level of expectations and the results we expect across the board from all customers. Appreciate all the detail.
Jason Cardew
Appreciate all the detail guys.
Ray Scott
Thanks, Joe.
Operator
Dan Levy, Barclays.
Dan Levy
Hi, good morning. Thanks for taking the question. Wanted to start with a question on the Outlook, and I recognize there’s uncertainty and you’ll provide us with an update. Maybe we could just go back to the original outlook, that you provided and just, give us a sense, because it feels like you’re getting most of the recoveries on the tariffs and you say you expect 100% recoveries, but What is the lower end of your outlook contemplating as far as LVP by region? Maybe you could just talk about, maybe some of the losses and minuses outside of tariffs that we’ve seen versus the guidance that you provided back in February.
Jason Cardew
It, then, our February guidance, contemplated production down 1% globally and down 2% on a litter weighted basis, and, so I think we had a billion dollars dollar range on revenue, so you could, there’d be another 2% roughly decline there, beyond that, so it’s called 4% down kind of litter weighted basis.
And the other kind of key assumption affecting the top line would have been around the foreign exchange rates. We had the EUR at [104] and the RMB at [730]. So I think, we’re going to see some top line improvement as a result of FX.
You’re going to see some revenue as a result of pass through tariffs, and then you’re going to see some reduction in revenue associated with the volume reductions that are anticipated, and some of which have been announced and are taking place here in the second quarter.
Just the North American market is probably the biggest question mark.
S&P’s forecast is for $14 million units, I believe, for production and we were at [15], in the prior guidance. So that’s the biggest risk factor if you look at what the external Diagnosticos’s are suggesting. And as we think about, where the kind of puts and takes are, I think. We’re looking at Europe, we’re looking at vehicles produced in in Mexico and Canada, and then we’re looking at vehicles produced in Japan and Korea that are imported into the US.
And so the, what our customers ultimately decide to do again around market share versus margin preservation, it’s going to have a profound impact on the volumes of vehicles imported into the US market and ultimately on the production of vehicles that we supply parts to, and so that’s the big variable that’s.
Difficult to predict. In terms of the other things we can control, we talked about tariff costs and recoveries. We expect full recovery. We don’t see that as a particularly large issue, in terms of our cost structure in general, we are on track to deliver the commitments we made around automation and restructuring savings and our other.
Efficiency improvements I certainly don’t want to lose sight of the very strong first quarter we had in both business segments. It really increased our confidence in being able to achieve the full year guidance that we provided for net performance, which was, 40 basis points in seating and 80 basis points in marginal improvement in any systems for net performance.
We far exceeded that in the first quarter. So, the things that we can control remain well on track and maybe a little bit ahead of where we started the year.
Dan Levy
Great, thank you. And maybe just a follow-up question and if you could just maybe double click on, the pieces that are driving the performance, but broadly it feels like the tariffs just place an added pressure on both the seating and electrical architecture wire harness businesses which as it was, these are, tight margin businesses to begin with. You’ve laid out a series of all of these strategic actions.
How are you starting to see this play into maybe separating yourselves from the pack and taking sharing you reference that you want some wars in in E-Systems.
Ray Scott
Well, it, well, first of all, it’s a great quarter. I think these systems team did a remarkable job, not just when we talk about expanding our margins and operational excellence and what they did as far as performance, but the growth side. It was a really good quarter force, and I think it comes down to, a couple of things. One, the performance and how they’re performing, with a particularly.
I do think that we can overlook the innovation and capabilities that we’ve been able to deliver both on the product side, and I think equally as important is the operational side, It’s interesting. We’ve been, really strategically looking at how we can change our operational excellence and advanced automation and software development, some of the things we’ve mentioned with how we’re designing, different efficiencies on the plant floor, that allows us to be extremely competitive and still get a return above our cost of capital.
That’s everything we’re focused on and like those elements that we’ve been working on. For more than, more than 10 years, they’re really starting to show the benefits in the operations today. We did great, we really put ourselves, out there as far as, being able to track us to our investors and show how we’re performing from a net performance perspective, and the team did a great job. But it also shows up in growth because we can quote business where we still get a return above our cost of capital as we’re introducing new technology innovation on the plant floor.
And so, I think that’s an important message because we’ve been, talking about that for some time and we’re seeing the conviction in how we’re delivering, not just from a performance standpoint, but from a growth perspective. And so, we actually believe that that is something that we can continue to do. It puts us in a great position today and currently as we expand our margins, but more importantly, as we’re winning new business.
Dan Levy
Great, thank you.
Operator
Emmanuel Rosner, Wolf Research.
Emmanuel Rosner
Great, thank you so much. I was actually hoping to follow up on this, on the cost performance, which obviously was quite impressive in the quarter. And so, you mentioned an accelerated investment in the restructuring. Curious to what extent you could still, inflect up the benefits from, these actions still this year, especially in case. Some of these indirect, tariff impact com and the volume play off sort of weaker. Do you have any room to offset some of that with accelerated benefits on the net performance side, basically higher than your initial guidance?
Jason Cardew
And that’s certainly our goal, and we’re looking to increase our restructuring investment this year by between $30 million and $40 million and some of that will produce an immediate benefit to our cost structure. And so there will be some additional net performance that results from that investment and restructuring.
Now we are dialling back our capital spending. As well by a similar amount, and most of that relates to capacity that we don’t need as a result of lower volumes and some discretionary spending, but a little bit of it is also on the automation side where you have some longer payback projects that we’re going to push out to next year.
Emmanuel, what we really did is just kind of took a step back and looked at all the investment opportunities that we have across both our capital expenditure program and our restructuring program and force ranked those based on payback and Sort of reprioritize our investments, and that led to some, again, additional investment and restructuring and a little lower investment in in CapEx, but the net effect of that should be positive for our performance this year.
Ray Scott
And, I think it’s important, Emmanuel, that, during this time of uncertainty, our priorities are operational excellence and as Jason mentioned, You know how we’re focused on capital deployment, where we’re focused based on returns, how we can accelerate, particular, areas of our products or region or manufacturing facilities the second priority is our balance sheet.
We’re very disciplined on what we’re looking at, how we’re spending capital, where we’re spending capital, even building some assumptions around, changes in volume and how we deploy capital, really. Getting it potentially even, getting it and cutting cost, our capital costs based on what we see, relative to volumes and how we’re really focused on cash. I mean, even our commercial agreements that we’re putting in place are two elements.
One is to get a 100% recovery, but also to minimize. Any type of cash impact relative to how we’re solving those commercial issues, and the two disciplines between operation and commercial are equally weighted as far as how we’re really aggressively going after that. And the last one is the strategic options, how we’re positioned.
We’re a US based company, a large US-based company. We believe we have some strategic options that we can take advantage of. And I think that’s going to play out over a little time as they’ve got these rebates that they’re going to receive and those wear out over three years, how we’re going to reposition for our customers.
But I’ll tell you one thing that comes. As we discuss all these with our customers, we learned quite a bit through COVID. We learned quite a bit through the EV, collapse, with volumes. We’re really focused on terms and conditions, if we’re going to deploy capital, what are the terms and conditions look like relative to how we’re going to get, returns above our cost of capital based on volume.
Based on deployment of capital, how we’re focused, and so we also look at this as an opportunity to go back and really discuss the terms and conditions relative to our customers because I think we’ve learned quite a bit over the last five years and those terms need to change. I mean, particularly around suppliers and making investments for our customers.
Not just short term but longer term. So, we really got at this. I’m really proud of the team. I tell you that mitigation, ideas, innovation ideas, the engineering ideas, the things that they’ve come up with really, I think put us in a better position to really get at the things I mentioned as far as priorities within this company right now.
Emmanuel Rosner
Yeah, thanks for the color. And then, actually two quick follow-ups. The first one is, beyond just the, impact on, or risk to industry volumes. Do you see any risk from, the current uncertainty on backlog or the backlog that you announced, last quarter and then specifically, on the balance sheets, obviously continued commitments and returning excess cash to shareholders, but are you pausing the buyback at all, while figuring out what the outlook and free cash flow for the year looks like or is it just continuing?
Jason Cardew
Yeah, man, I’ll start with the second question first. We are pausing our share purchases here for a short period of time until there is more visibility on the on the production environment, and we believe that we’ll be brief and we hope to restart that soon, once we have a better understanding of our customers’ production plans for really the second half of the year.
In terms of the backlog, I think it’s too early to provide an update on, the two year backlog we announced the 2025, 2026 backlog, but certainly the award, in wire. And the other awards in the systems in general in the quarter will help the longer-term growth rate of that business.
$150 million of the $750 million of the new business awards were conquest awards. So those are market share gains, those will drive growth, for the business longer term and I think once we sort of get through this, wind down of products that we’re exiting in these systems, you’ll see a return to the more normalized growth rates we enjoyed over the last, five or six years in that segment.
Emmanuel Rosner
Thank you.
Jason Cardew
Welcome.
Operator
Colin Langan, Wells Fargo.
Colin Langan
Oh, great. Thanks for taking my questions. And congrats on a pretty good margin in the quarter. Just wondering, I think, a couple of weeks before the quarter ended, you were talking about a low 4%, you ended at 49.
What came in so much better at the end of the quarter to kind of get you so much higher than what you were thinking?
Jason Cardew
Yeah, there were really two things that happened. The production held up better than we had anticipated in what we were seeing at that time, particularly in Asia, we saw a very strong march, much better than we had expected and then in addition to that, we did see a little bit of a poll ahead of some of our commercial performance in the seating segment in particular.
And so there’s probably 20 basis points of that net performance that we delivered in the first quarter that we had anticipated in the second quarter and beyond, and so those are the two primary factors. And then just generally speaking, just, strong operating performance in both business segments, it’s not, doesn’t often happen that way where you get sort of everyone.
Performing at such a high level simultaneously, and that’s what we had. We had great performance in both City systems and really across all regions and so it’s just a testament to the strong finish of the quarter for the team more than anything.
Ray Scott
I appreciate the recognition too, because I feel the same way. I felt really good about the first quarter unfortunately we’re Like we’ve talked about the indirect, situation around tariffs is, it’s kind of the uncertainty that we’re faced with right now as an industry, but I think it gives you a good indication, even during a very tough quarter relative to volatility around production, we can perform well. And so, I think it’s really a great job by the operation teams, both in seeding in these systems and how they perform. I was really happy with the numbers.
Colin Langan
Oh that’s helpful color and just talking on performance, which I covered a couple of times on the call already, but if I look at the initial full year guide, I think it implies something like $130 million and $0.55 basis points. I believe you got more than half of that already in Q1.
Is that what you were anticipating? I mean, I guess it sounds like from comments earlier that performance is actually coming in stronger and should we interpret that as an if it wasn’t for tariffs, you’d actually be raising guidance today.
Jason Cardew
Yeah, I think that certainly the first quarter came in better than we expected, and that could lead to an improved number for the full year, but there’s still lots of moving parts that we’re managing here. And I think your math is right, more than half of our full year net performance was achieved in the first quarter, what we had guided to previously.
Now, part of that is kind of that year over year, look at the business. And so, the first quarter, any systems in particular, last year were pretty weak. We had very high launch costs, we had some efficiency issues in our North America.
Operations which we talked about throughout last year, those improved significantly from the first half of last year to the second half of last year, and so the comp gets a little harder in the second half of the year than it is than it was in the for the first half, so that’s also a driver. I mean, would you have raised.
Colin Langan
Guidance if it wasn’t for the tariff issue, or is that it’s just too early to say?
Jason Cardew
That’s a theoretical question. I mean, if there was, there wasn’t this level of volume uncertainty, we certainly wouldn’t have been, talking about, lowering guidance.
Ray Scott
I’ll put it this way, we have been very confident in the year. Yeah, we would have been a good position, especially coming out of that first quarter.
Colin Langan
Got it. All right, thanks for taking my questions.
Ray Scott
You’re welcome.
Operator
John Murphy, Bank of America.
John Murphy
Good morning guys. Just a very simple question, to start. When you think about doing, winding wiring harnesses in, Honduras, I just wonder, Ray, if you could walk us through sort of the evolution of how that, wound up being in Mexico, and then got, pushed down to Honduras from a labour cost perspective, but also maybe a labour availability perspective as well.
Ray Scott
Yeah, well, one, I, okay, so we’ve done a lot of work even working with Washington trying to explain, wire harnesses in very similar like trim covers. They’re very labour intensive, unattractive jobs that I, say that, like Jason mentioned, need to get up, moved off the annex.
But the migration was about labour arbitrage and then having enough labour. We have facilities that, can have anywhere from 5,000 to 6,000 employees. In a facility running multiple platforms to be the most efficient for our customers that we ship to.
And so the move from Mexico to Honduras was really driven about around the continuation of the labour aar. Honduras is a very good location for us. I mean, we have great quality, the absentee is very low. The job that.
Fashion, the work environment, everything is a really good location for us. So, it’s ideal for us. A matter of fact, we talked a little bit previously about even migrating more of our business to Honduras, obviously put that pause until we get some clarity around what’s going to happen, but, it, it’s been a move from what was Juarez to central Mexico down to.
Even, further south in Mexico now to Honduras, and so it’s worked out extremely well for us in both locations and that’s really how we’ve moved, our wire harness business from Mexico to Honduras.
John Murphy
Oh, okay, maybe you missed the follow up when you think about wiring harness and other stuff that’s, done outside of the US, what, what’s kind of the hurdle bringing back to the US?
Is it just labour costs, labour availability, and how much you think you can you can automate it, I’m just trying to understand really here, so I mean it kind of gets out there and, public a little bit more.
Ray Scott
That’s a good, it’s a good question. I think the first. Yeah, no, that it’s a good question, and I think that the first roadblock would be the labour.
Scarcity, labour issue of attracting that type of work here in the US. It’s an, it’s The way I describe it, there are very, there’s very attractive jobs that are very sophisticated, technical, we do just in time assembly of seats here in the US and UAW represented workers, great work.
That type of work makes a lot of sense. I think when you get in, when you look at a wire harness, it is very labour intensive. The automation is coming it’s going to take some time. It’s not quite there yet. There’s some very challenging, aspects of a harness, even though we’re, we’ve made significant improvements with automation and harnesses. It’s not quite there yet. So, I think the roadblocks really are the labour scarcity, the worst work.
For development that be required to bring those type of jobs here. I think the attractiveness from a worker’s perspective would be extremely low, very tough, and the technology just quite isn’t there yet to bring and automate a major wire. I mean, these harnesses are hundreds of pounds.
They’re, extremely labour intensive as you’re doing the taping and the cramping and the assembly of the harness itself and so, Those are probably the big roadblocks, that, I think would be a very tough move, to move to the United States.
John Murphy
Okay, and then just another question, you highlighted and it was incredibly helpful, the tariff commentary, a billion dollars of, parts that are coming across.
The Atlantic, from Europe on, European produced vehicles. Some of those might not make it here, it might be fewer, but in reality, there might, be market share shifts that occur in the US market that that offset that. So could you kind of remind us, generally what’s coming across, the pond there, and then also maybe your exposures here in North America because there might be a really good story. The market share gains from your domestic automakers as well as a result of that.
Jason Cardew
Yeah, John, just to clarify, so that’s a billion dollars of revenue that’s associated with parts we sell to customers that are, for vehicles produced in Europe and imported into the US, so it’s not hard imports. Yeah, so the biggest component of that is, with Jaguar Land Rover, so Range Rover Sports, Thunder, that whole product lineup and we just saw that they announced that they’re restarting shipments into the US, so they’re going to continue participating in this market. And then the VW Group, and their luxury brands, Audi and Porsche in particular, and then two laurate Mercedes, andalanttos, and with Mercedes, they’ve also announced the move of one of their key programs which we have the seating for in Europe to Tuscaloosa.
And so, we see over time that, we will likely benefit from that business that’s relocated from Europe into the US as our customers adjust their footprint. And then in terms of who may benefit here in the US, I don’t want to go too far down that that path, but I think our largest platform. In the US market is the GM full size SUV program that’s produced down in Arlington, Texas.
But we also have the Ford Explorer, we have business with Hyundai, with BMW with, lots of customers here that have a domestic footprint that could benefit longer term from this tariff regime. So, it’s hard to say exactly how it’s going to play out, but those are some of the highlights of programs that may be impacted.
John Murphy
So it’s fair to say the uncertainty and the guidance is not all to the downside. It may actually eventually be to the upside, right? It’s uncertainty.
Jason Cardew
Yeah, that’s right. I mean, yeah, look at the GM full size SUV inventory levels. I think that came out again yesterday or the day before, 30 days on end. Yeah, certainly it seems like there could be some opportunities as well, and that affected our thought process around that, reaffirming guidance.
John Murphy
And then just lastly, it sounds like there’s some program extensions and stuff that’s getting pushed out on wins. Yeah, can you just remind us, as programs are extended, we’re looking at a five or six year program that goes to, seven or maybe eight years, whatever, it may be, what are the requirements for, refurbishing tooling or extending tooling and other, plant equipment for another year or two.
Are there big capital commitments or is this more of a, of a gravy situation for you?
Ray Scott
No, it’s more of, we like that. We like the situation. There’s extending programs, using, programs that are long in the tooth, so we’ve done a nice job with VAB engineering changes, cost savings. No, we like it, and there isn’t a tremendous amount of, there might be some modification to some capital that we have in place, but there’s no significant reinvestment that’s required. We can run the current capital. That’s in place and also gives us an opportunity to re-evaluate contracts because they need to extend the contract so the terms and conditions that are in place need to be extended, which means, in some respects, you get to sit down and re-establish where you’re at.
John Murphy
Okay, very helpful. Thanks guys.
Jason Cardew
Thank you.
Operator
Itay Michaeli, TD Cowen.
Itay Michaeli
Great, thank you. Good morning, everyone. Just, two quick ones for me. First, going back to slide eight, you mentioned, mixed headwinds due to components on high content trends. Just curious whether you’re actually seeing any pressure on remix thus far, in Q2, both in North America and perhaps.
Ray Scott
Globally.
Jason Cardew
Yeah, it’s a, it’s something we’re anticipating. We haven’t seen a lot of it, but there are some specific examples where we have seen this impact and the most notably things like rear seat entertainment where there’s a component that’s imported with a high tariff rate. And so, the customer may reconsider their option packages, and so we lose that content if that if that screen is on the back of the seat, for example, things like that. We haven’t seen, significant changes in features generally, but we wouldn’t be surprised to see that as part of the response to customers managing higher costs and so that’s, that was the reason.
Ray Scott
We included that on the slide as part of our mitigation plans we’re giving our customers alternative options so we have some insight, even the options we’re giving them to mitigate tariff costs or other related costs, or lack of components and so I think it’s just more our insight of what we’re doing and, how we’re communicating with our customers.
Itay Michaeli
That’s very helpful. And a quick follow up on the new business awards in the quarter, congrats on the progress. How should we think about the timing of when these awards flow into revenue? Did some of these actually launch as early as 2027?
Jason Cardew
Most of it is in 2028. I think there may be a little bit at the tail end of ’27, but I think it’s mostly ’28.
Itay Michaeli
Great, that’s very helpful. Thank you.
Jason Cardew
Welcome.
Operator
And ladies and gentlemen, with that, we’ll be wrapping up today’s question and answer session. I’d like to turn the floor back over to Ray Scott for any closing remarks.
Ray Scott
Yeah, thank you, and I’d like to thank everyone for participating in the call today. I also like to thank their employees that are on the call. You guys did a great job in the first quarter. I can be prouder of the work that you’re doing and an exceptional job on what we’re doing as far as the organization and really protecting the company with tariffs and costs and giving our customers. Options to mitigate their own costs. And so, I appreciate all the hard work, so proud of the work that you’ve done, and thank you.
Operator
And ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We do thank you for joining. You may now disconnect your lines.