Good morning, everyone and welcome to the Lear Corporation Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time I'd like to turn the floor over to Ed Lowenfeld, Vice President Investor Relations. Please go ahead.

Thanks, Jamie. Good morning, everyone and thank you for joining us for Lear's Third Quarter 2023 Earnings Call. Presenting today are Ray Scott, Lear's President and CEO; and Jason Cardew Senior Vice President and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before we begin, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future. As detailed in our safe harbor statement on Slide 2, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-Q and other periodic reports. I also want to remind you that during today's presentation we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on Slide 3. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our third quarter financial results and provide an update on our full year outlook. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now I'd like to invite Ray to begin.

Thanks, Ed. Now please, turn to Slide 5, which highlights key financial metrics for the third quarter. We had another strong quarter with double-digit increases in sales and operating earnings. Total company revenue was $5.8 billion, a 10% increase compared to last year. Core operating earnings increased by 14% from last year to $267 million. Adjusted earnings per share increased 23% and operating cash flow improved significantly to $404 million for the quarter. Slide 6 summarizes key highlights from the quarter. The third quarter marked our fifth consecutive quarter of year-over-year improvements in both revenue and operating income. Our Seating team demonstrated their industry-leading operating capabilities by successfully launching the Wagoneer and Grand Wagoneer just-in-time programs. This was an important conquest win and an unprecedented mid-cycle transition of a very complex luxury Seating program. Our thermal comfort integration and innovation continues to gain traction. During the quarter, we leveraged our strong relationship and we're awarded our first ventilation program with General Motors. The customer response to our expanded thermal comfort capabilities has been tremendous and we will continue to work with existing and new customers to add Lear content. Key third parties continue to recognize our leadership in quality and innovation. Lear once again received more than twice as many J.D. Power Seat Quality awards as any other supplier including first place awards in both luxury categories. ReNewKnit, our fully recyclable suede alternative that will start production next year was named as an Automotive News PACE Award finalist. In E-Systems we continue to diversify our customer base with new wiring awards with Renault and Geely. Our strong performance allowed us to increase the pace of share repurchases. In the quarter, we repurchased approximately $75 million worth of stock, more than we repurchased in the first and second quarters combined. I…

Thanks, Ray. Slide 11 shows, vehicle production and key exchange rates for the third quarter. Global production increased 4% compared to the same period last year and was up 8% on a Lear's sales weighted basis. Production volumes increased by 9% in North America and by 6% in Europe, while volumes in China were down 1%. From a currency standpoint, the US dollar weakened against the euro but strengthened against the RMB compared to 2022. Slide 12 highlights Lear's growth compared to the market. Total company revenue growth lagged the market by one percentage point, primarily driven by unfavorable platform mix and several key programs in North America. The largest driver of the unfavorable platform mix reflected downtime in seating at General Motors full-size truck plants. Excluding the impact of the downtime, total company sales growth would have been in line with the overall market. The UAW strike at GM's Wentzville facility and Ford Chicago facility also had a modest negative impact on seating revenue. In E-Systems growth of the market of three percentage points was driven by our backlog in all regions, as well as favorable platform mix in Europe. Europe sales outperformed industry production by eight points with both business segments benefiting from higher volumes on the Land Rover Range Rover, Range Rover Sports and Defender. New conquest programs such as the BMW 5 and 7 Series in Seating and new business with a global OEM as well as BMW, Mercedes and Fisker and E-Systems contributed to the strong growth in the region as well. Through the first three quarters, total company growth over market was two percentage points with Seating growing one point above market and E-Systems growing five points above market. Turning to slide 13 I will highlight our financial results for the third quarter of…

Thanks, Jason. Please turn to Slide 21. Our third quarter results provided another clear example of our ability to deliver strong performance in a very volatile industry environment. In Seating, we are accelerating the pace of innovation for thermal comfort systems. The response from our customers and the demand for our modular solutions has been overwhelmingly positive. In E-Systems, our execution and focus on efficiencies continues to drive margin improvement. We are on pace to improve margins again in the fourth quarter. Our Lear Forward initiatives have yielded savings in excess of our goal for this year by streamlining processes and changing plant layouts to optimize plant capacity and accelerate automation to address labor shortages and improve efficiencies. These results put us on track to achieve our target cash conversion, allowing us to continue to return capital to shareholders. And now, we'd be happy to take your questions. Questions and Answers

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Rod Lache from Wolfe Research. Please go ahead with your question.

Good morning everybody. I wanted to ask you about the E-Systems performance, obviously, came in better than expected. I presume that that was partly related to recoveries but it looks like as well you've got a pretty strong exit rate 6.4% in the fourth quarter excluding the strike. Could you maybe just speak to whether we should be looking at that level of profitability as a reasonable launching point for modeling 2024? And then just to the extent that some of that improvement look going forward is going to be driven by recoveries. Just characterize how those discussions are going just particularly in light of the pressures that some of the OEMs are seeing on labor and other areas?

There's a lot to unpack there Rod. I'll start maybe with the third quarter E-Systems performance when we issued kind of a mid-quarter update on what we're expecting in E-Systems. We talked about 4.75% operating margins. So, primary improvement from that point until the end of the quarter was really a lesser impact from the strike and slightly stronger volumes. The commercial recoveries and the operating performance was directly in line with the targets we had established and was meaningful in terms of both sequential improvement in performance and year-over-year improvement in performance. As we think about what that may mean for the business as we look out to next year, I think the right way to model these systems is to look at the second half forecast for both third quarter actuals and our outlook for the fourth quarter, which right now sits at 5.4%. Now, that does include the impact of the labor strike. It also includes some out-of-period benefit from the commercial negotiations that happened in the third quarter and that we anticipate happening in the fourth quarter. If you sort of normalize for all of that, the real run rate in the second half of the year in E-Systems is about 5.5%. So, I think that's the right launching point as you look out into 2024 for that business. I would say overall we're quite pleased with the progress we've made both operationally, particularly in North America where we were struggling with efficiencies that we talked about earlier in the year, but also in our commercial negotiations. We completed some really important negotiations in the quarter that I think established a nice precedent going forward for us give us a little more predictability. That said we do anticipate there will be challenges with that as we look out to next year but we're very happy with the performance thus far in E-Systems.

Yes. I think Rod when we simplified this portfolio and I've said it before that we're trying to be everything to everybody and started deemphasizing areas that we quite candidly couldn't compete in longer term with the type of investment dollars that were required is really paying dividends. And so the simplification of the product portfolio clarifying it allowing us to grow profitably in those areas and we are growing. I mean what I'm really excited about is that three years of consecutive $1 billion of backlog businesses gives us a lot of confidence that we're in the right area we have a right to grow in those areas and we can generate good returns. The diversification -- the customer diversification was a key part of our strategy and we're doing a really nice job of diversification across Geely. We talk about Jag, Land Rover, Volkswagen, European OEs just continue to accelerate our diversification across customers and the vertical integration. I mean it's a really -- in a time right now when customers are looking for solutions it's really opening their eyes to different possibilities of what we can do both from a Ts and Cs perspective but also engineered components. And so we just had a great review with one of our major customers to really talk about what we can do to lower their overall cost, but also help us expand our margins with the new systems. And so a lot of the aspects of what we put in with the strategy are really starting to pay off. And so we have a lot more confidence that would continue on this path. We got more work to do Rod. I mean there's no question we're going to work hard on our efficiencies our improvements some of the commercial negotiations. But really confident where we're at.

Yes, I think people highlight that E-Systems is sort of a Shelby Store. I think we're starting to prove that the plan that Ray just laid out is working. Our operating margins for the second half of the year are 200 basis points higher than our full year margins were last year 160 basis points higher than they were in the first half of this year. So, we are -- third quarter is both an inflection point and another proof point with the fifth straight quarter of year-over-year margin expansion in E-Systems. So, we've seen a lot of progress there.

Yes. It sounds like you've got a lot of momentum there on the margins as well as the wins. I was just hoping to lastly you can address just one thing you can't control is just the timing of launches in EVs which has been obviously a good part of the backlog. Can you maybe just give us some color on what you're seeing and how we might want to just calibrate the backlog that we've been seeing just to the reality of pushouts here or there? How significant is that?

Yes as you know Rod we'll formally update our three-year backlog on our fourth quarter earnings call at the beginning of next year. But we continue to win new business at a pace that would support delivering a three-year backlog for 2024 to 2026 that was similar to the most recent backlog. We published $2.85 billion overall $1.8 billion in Seating and $1.05 billion in E-Systems just given the wins that we've experienced so far this year. With that being said our plan for 2024 that we released at the beginning of this year was for a $1.5 billion backlog in 2024 would have been the single biggest year in our history. And I think some of the announcements from customers what GM talked about on their earnings call sort of delaying some of the launches maybe reducing near-term volumes. Ford's done the same. Others have as well. We would expect that that will have a negative impact on the first year of the backlog in 2024. We still feel confident that the three-year backlog overall will hold up. In our electrification revenue in E-Systems in particular is holding up towards that $1.3 billion target that we had established for 2025. So we're still seeing really solid growth there with new wins sort of offsetting some of the impact of the volume changes. But -- if I look at our 2024 backlog specifically 75% or so of our new business wins in Seating were on electric vehicle platforms. And I would expect based on all of those announcements you could see a 20% or so reduction in that first year with much of that made up in the second and third year of the backlog. So, yes, you're right Rod there is an expected impact Dexter, but I think over the three-year period we still feel pretty good about the growth outlook.

Okay. Great. Thank you.

Welcome, Rod.

Our next question comes from John Murphy from Bank of America. Please go ahead with your question.

Good morning, guys. I just had two quick follow-ups to Rod's question there and then one other. On the backlog, I mean, if EVs are pushed out presumably there's other vehicles on ICE that are still made. So on the net backlog you might not -- things might not change or actually could potentially be for the better. Is that a fair way to think about that?

Yes. I think, absolutely. And I think that coupled with what may happen with the strike the longer it were to continue this year on certain platforms that could benefit next year on ICE vehicles specifically. So I think that kind of real kind of broad base that's a reasonable assumption that we would also expect stronger ICE volumes apart from the offset.

Yes. And then on E-Systems margins. I mean can you just remind us the target and the time frame as to when you're what level and where you're trying to get?

Yes. Our target is 8% in 2025. And as we've said before it's not linear between this year and 2025, but we do expect to have a meaningful improvement in operating margins next year. With the run rate of 5.5% in the second half of the year we would expect to continue improving that into next year. Now the backlog will benefit operating margins. There's a number of puts and takes. Obviously, too early to give guidance. But we -- I'd be disappointed if we didn't have something with a 6% in front of it somewhere in the range next year in E-Systems.

Then just lastly on thermal, you're making great progress there $1 billion in 2027 10% margins it's really great to hear. But it seems like it might be a far larger opportunity over time. As you look at the way that thermal is set up in your seats versus the antiquated HVAC system that exists right now and ICE in EVs, is there a potential real content grab and efficiency gain that you could make yourselves and help out the automakers in saving money and then improving efficiency of powertraining the entire vehicle in a big way because you didn't talk about that. And that seems like a really big deal that this thermal system could shift from antiquated running off the ICE engine to something all new in your seats?

Yes. And I think we've talked about a partnership and a project we're working on with Taleo that I think will help us more fully exploit that opportunity. I think you're right. Longer-term that does create additional growth potential on the Thermal Comfort components specifically. We've already embedded a $400 million roughly revenue increase in the Thermal Comfort Systems business over the next four years. So we've got a pretty aggressive target. I think longer term where we see even more growth opportunity is in modularity. And so sort of an extension of what we're doing in Thermal Comfort, but then incorporating our FlexAir products and seat covers on programs where we don't have the JIT necessarily. I see that as a path to increasing market share in our Seating business overall. We've talked about going from 26% to 29% market share in Seating by 2027. We also see having roughly one-third or 32% of the total seat market when you consider the component sales independent of JIT that we sell to our competitors that are directed by our customers. I don't see any reason why that number can't continue to grow three, four, five years down the road as well. And in our target is certainly much more ambitious to maybe capture 35% or 40% of that total seat market over time. I think that's the real long-term growth driver for the business.

And just we had a really good review on what we're doing. And again, I'd say, we're conservative in how we're willing to sell, because we're in the process right now of even validating what Jason just mentioned on a fully modular concept. And the timing obviously, we put the strategy in place eight years ago and we're building up pieces really give us the complete ability to look at the thing from a manufacturing component perspective and the engineering designs to a modular system that's integrated right into traditional form or FlexAir into the actual trim cover itself. So all those components layered together really gets to the savings. And I would say, in the other day the timing -- there's a lot of pressure right now on cost and labor scarcity and different challenges within the manufacturing plant couldn't be better timed. And when we had this review with this major customer, I mentioned that it became more of a we're pushing to a pull. How fast can you go how fast can you go? So we're putting out timing based on validation within modulars modular systems. But it's how fast the customer can go to. And so we're really focused on putting it in a perspective on how we can get this in. But once you get it into a platform it goes across multiple vehicles. That's where you really get the synergies. That's really -- you really get the benefit. So something that can be a $5 million or $10 million saving can grow exponentially when you start talking about across all their different vehicle lines. And we've been receiving incredible feedback and I think the timing is perfect, I mean, the timing has been when the customers are coming in and asking for we need more help on the cost side. We have a great really lay up in front of them say not only do you get a better customer feature it's a savings in labor efficiencies and savings within the components themselves. So in consumer benefits, our customers benefit and we love it because we get to expand our margins.

And it's not an insignificant benefit. We can see savings up to 20% on the relevant components in a fully featured vehicle system. And in most programs 10% to 15%. So this is a meaningful opportunity. So not only does it improve the performance and sustainability of the seat it also lowers the cost for customers.

Yeah. Looking forward to hearing more about it over time. Thank you so much, guys.

Thank you.

Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question.

Hey, good morning, everyone. It's great to see the early momentum in thermal comfort. I think as of last quarter right Lear had one source and control with seven OEMs. Now that number is 9. You now have 21 development contracts you were at 16 last quarter. Can you just speak to the strength in the pipeline here to sustain this type of quarterly buildup in momentum as we think about next year? Thanks.

Yeah. I think that the traction we have is as Ray mentioned, it's starting to become a pull from customers. And so the demand for customers wanting to learn more about the products has really been a positive surprise to us. And maybe Frank, if you want to elaborate on some of the things we're seeing and some of the interest we're seeing from customers in these technical reviews.

Yes absolutely. As both Ray and Jason had mentioned the reception from the customer has been really fantastic. And to Jason's point just now, James, we've had a lot of technical reviews on a global basis. We have a lot of customer engagements or tracking all of that as a team to make sure we understand. We're getting tremendous activity with not only our commercial discussions, but our technical discussions and validation development projects that we're working on. So we're extremely encouraged by the global reception too of this product. We're working with Asian customers. We're working with customers in Europe and here in North America and it's really cross-sport. I guess, as we will continue through the quarters I believe the momentum is just going to continue to build.

Yeah. So I think the swing is we're still quoting individual components but every JIT program that we've been awarded we have sourcing control. And so that's what's been nice and that's a major shift. And not every -- well JIT suppliers that don't have this capability don't get that flexibility. It varies. So that's one thing that we're right now in the process of these development programs. We're focused on making sure those go off and we execute those flawlessly. And the rest of it as we continue to build across multiple car lines independent, if we have the JIT is what's picking up steam as they're starting to see the benefits and then asking us to quote across car life or seat systems that aren't even being quoted yet today.

Yeah. That's really helpful. And just a quick one on the commodity side. How should we be thinking about the earnings impact in the fourth quarter? And I know, it's early but just given current spot pricing and what you already have locked in on the metal side for Seating how could we start thinking about next year's setup on the commodities front? Thanks.

Yeah. There's been a modest softening in commodities in general. North America Europe steel prices have drifted down a bit. That benefited us a little bit in the third quarter. Fourth quarter, we had a pretty strong recovery quarter last year. And so year-over-year commodities may be a modest headwind just as a result of the level of recovery we received last year versus this year. As we look out to next year, I think we don't see a meaningful positive or negative at this stage. We do see steel as an opportunity and then kind of on the flip side and maybe a little bit outside of your question around commodities is wage inflation is something that we're very focused on in terms of maybe a bit of headwind and similar to what we experienced this year where we saw fairly significant increases in hourly wages in Mexico and Eastern Europe. Those pressures look to continue next year. We've got really good dialogue with our customers and there's a sharing mechanism and pass-through mechanism in most cases now on that, but that's another factor to think about as you start to model '24 and beyond.

Thanks.

You’re welcome.

Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question.

Great. Thanks for taking my questions. Sort of following up on that, any color on how cost recoveries are trending with customers since they're obviously going to be under a bit of cost pressure themselves. Has that changed at all? And the recoveries you've gotten this year, how much is piece price. You don't have to renegotiate versus sort of lump sum where I guess January 1 you'd probably have to have discussions again about getting recoveries?

Yes. I'll go ahead and start it. I think the negotiations have been ongoing and I haven't seen a significant change on how we're negotiating for recovery. The customers are very sophisticated and in some cases have very sophisticated models on what is in as far as some of the labor economics or even the commodity costs within our components. And so those are ongoing. And -- to answer your question, we have seen an increased request more on, let's call it design changes and design reductions within the product lines that they are under more pressure on that side of the equation. But one thing we've talked about before being the most competitive, cost competitive company in the world has been our focus. That puts you in a very good position when you are negotiating through some of these more challenging difficult negotiations. So, we do have evidence binders', very detailed analysis, those type of modeling scenarios. So, we haven't seen the negotiations slowdown on that side. The side that we're pricing more impactful right now it's just their willingness to look at alternative designs or what we'll call DAB or product designs that can get at cost. I mean some of them have changed their targets internally that are more aggressive than they were this year heading into next year. And we're embracing that. We actually think that we have -- our whole culture is built on being the most cost competitive. We have a couple of different things that we do internally with cost technology optimization. We have these coliseum events that are very rigorous and that we have no excuse boards that we have queues of ideas. There's enough inefficiencies in the value chain across the board to drive opportunities. And so, that's something we pride ourselves on. Like I was just mentioning, we just had a major coliseum event with one of our customers that we generated over between $60 million and $70 million of opportunities within the year. And what I like about it, buoy did they react positively. I think traditionally, it's been, it's too risky. We don't really want to do that right now. We'll come back. Maybe elements of it does get approved. But buoy they're taking a much more different look at different ideas that's where we push our vertical integration. And that's been our strategy as how we engineer our own components to create a value proposition. And so, we're picking up a lot of steam on the side of engineering our own products, terminals connectors and Lear components and wiring, vertical integration with trim covers or things like FlexAir or foam the modularity, those are all working right into our way. So, there is a pickup of momentum from our customers, but we also feel that we're in a really good position to create a value proposition for both companies.

And overall, the year kind of played out the way we expected. It's about a $25 million benefit from the full year basis on commodities between lower cost and recoveries. So it's solid improvement year-over-year.

And any color on the amount that are a piece price versus lump sum that need to be renegotiated?

Yes. I think we're seeing a trend towards piece price generally. And there may be agreements like in the third quarter, we had an agreement with the customer that had a lump sum and a piece price component to it because, they went back to earlier in the year and the lump sum just covered the earlier part of the year, but the piece price has been adjusted going forward. And I think that there's an increased willingness in general for customers to do that particularly where it's sticky inflation or sticky commodity increases, where there isn't any reversal in sight over time. And if it's something that's more kind of transitory, then that would set itself up for more of a lump sum recovery. But where it's more permanent like wage inflation for example, you're seeing piece price adjustments.

And just lastly on FX as we think about into next year. I think you had some pretty good protection this year from some of your hedges. How should we think about sort of currency risk as those roll off or do they roll off into next year?

Yes. So, our largest exposure is the peso. And we do have a pretty aggressive hedge program in place, a 24-month rolling hedge program that largely insulated us from that issue this year. There's still a $20 million impact for us and much worse than we had anticipated when we set guidance at the beginning of the year we've had to sort of absorb that as the year has gone on. As we look out to next year, if you would have asked me that question three months ago, I probably would have felt worse about it than I do today with the peso at 18.30 [ph]. It's a manageable issue for us, as I look out to next year. It's still a meaningful impact and a little bit worse than what we experienced this year, but manageable. And we've locked in 75% of our exposure for next year already. And by the end of this year, we'll have 85% or so locked in. So we're going to be in a pretty good position to continue to mitigate that risk.

Got it. Thanks for taking my question.

You’re welcome.

Our next question comes from Dan Levy from Barclays. Please go ahead with your question.

Hi. Good morning. Thanks for taking the question.

Good morning.

Wanted to start first -- first, I want to start with a question on E-Systems. And I think you mentioned earlier Jason just that we should think about next year with a six handle on E-Systems margins. You provided some commentary some time ago that the path to 8% by 2025. And I think the biggest piece of this is volume and backlog. And I think that the difference is that we're now sitting here in an LVP environment that's hardly much higher than what most of us anticipated call it six to nine months ago. Schedule seems to be much more stable. So should we still think about that path to 8% is being intact especially as now LVP seems to be at least for now outperforming to the upside?

Yes, I think that there really isn't anything that has changed from the time we set that target. I'd say maybe the only exception would be to the last question we had from Colin on foreign exchange a little bit of a headwind on transactional FX. And we have obviously wire is a labor-intensive business. So it's sort of a dual headwind of FX and wage inflation. Outside of that, I'd say that the story is intact. The performance that we can control has improved consistent with our expectations. The recoveries and commodities are in line with our expectations. Volumes are recovering sort of consistent with what we had anticipated. The backlog is rolling on with margins that we had based that outlook on. And so I think the last piece of that is maybe the stability of the production environment. And while we've seen meaningful improvement this year from last year there still has been disruptions that leads to some inefficiencies in the plants that are a little bit outside of our control. So that would be one other factor to think about. And I think the backlog in 2024 as I mentioned earlier will be negatively impacted by some of the customers revised wash plans and some of the key programs that were embedded in our backlog. As you know the GM BDU and Intercell Connect board for example is a big part the E-Systems backlog and those volumes are going to be lower in 2024 and probably in early 2025 given the current plans there. So that will have a little bit of an impact. But we've seen again just a really nice improvement from 2022 to 2023, 110 basis points full year-over-year; 200 basis points full year last year to the second half of this year; 160, 170 basis points first half to second half of this year. We really have a nice trajectory set up here going into next year and there's a lot of moving parts, and we're working through our plans for next year, but we do feel confident that we can continue that momentum into next year and continue working towards that target.

So we're just conceptually thinking about that bridge to 25%. Is it fair to say that better LDP slightly more stable LDP more than outweighs Mexican peso and some lighter EV volume on the backlog?

Yes, I think, Dan, it's probably a little bit early to get into that level of granularity. So I'd rather save that for the fourth quarter earnings call.

Got it. Okay. Thank you. And then as a follow-up I wanted to follow up on Seating and the TCS strategy. And I think one of the points you mentioned from the Seating day back in June was that by having the full vertical integration that you now could see more complete systems or saying this is obviously a bit of a shift from what OEMs have done in the past where much more of a direct sourcing model. In your conversations with customers are you seeing more data points that they are willing to change that sourcing model and sourcing more of a complete system?

Yes, that's exactly what we're seeing. On the programs we've been awarded from a competitive perspective we're in the contract itself the language reads we have the sourcing control over those components. And we'll in parallel path do the traditional system along with a much more technical system or innovative system with the modularity that we talked about. And now what we're doing is just taking that across multiple vehicle lines even in the case where we don't have a just-in-time award. And we're seeing that trend. And like I mentioned in my portion of the dialogue was, it went from us pushing to now them coming to us and pulling it and saying how quickly can you go across multiple vehicle lines, because they see the real savings when we could take it across significant volumes and so we're lining up our quotes in a particular way where it was individual to a Seat program. Now we say, listen, if you take this and extrapolate across multiple car lines, here is your savings and the benefits of what we are talking about with 50% part reductions much more efficient system just from a therapeutic standpoint, from a heat standpoint, from a time to sensation perspective or weight perspective you can then start plugging that into different alternative systems within the vehicle itself where it's been limited maybe not even offered in rear seats or in other vehicle options within the vehicle itself. And so, I mean that is the plan. That's exactly what we're doing. And the important part that we're focused on is executing the validation and getting that done. And we said sometime midyear next year, we'll have the validation done and that's through our customers. And so that has been validated through their own internal specifications and requirements and that's a very important part of what we're focused on.

So, there's been nine customers as we highlighted in the prepared slides for today that have granted us sourcing control. So that's nearly all the JIT programs that we've been awarded since the acquisition of IGB have included sourcing control for us of Thermal Comfort components.

Great. Thanks and it’s very helpful.

Thanks.

And our next question comes from Emmanuel Rosner from Deutsche Bank. Please go ahead with your question.

Hi. Thank you very much. A couple of follow-ups around the EV exposure and I guess potential risk from some of the slowdown in near-term investments by the automakers. Would you be able to remind us or quantify your exposure to -- your content exposure to Altium specifically? If I'm not mistaken I think that you've won a significant amount of business including multiple parts I guess of the vehicle. Can you maybe just quantify this? First remind us what you're supplying on Altium and how much that's roughly worth per vehicle?

In Altium, we have the battery electric truck platform the battery disconnect unit and we haven't quantified the CPV but we've talked about BDUs generally $600 to $800, it's content per vehicle. That saying that's the CPV on that program but just kind of holistically looking across the market. And then we also had the Intercell Connect Board, which is a much lower CPV than the BDU but that's on various Altium platforms. It's not 100% of the volume, it's dual source. And so, as I mentioned to an earlier question, we do expect to see lower revenue on the GM BDU in 2024 and probably 2025 given the announcement that they've made. But as we looked at our $1.3 billion revenue target for electrification products generally, we are in line with our previous expectations. So we've had new business awards with other customers since that target was established that have offset the impact of lower expected revenues on the BDU.

Okay. That's helpful. One quick follow-up. Do you do -- do you supply wire harnesses also on Altium?

We do not. Well, we do have low-voltage wire for certain GM EV programs but not high voltage at this point.

Understood. And then just as a quick follow-up. So I appreciate the comments around being on track feel sort of like the mid-decade target on EV. But can you just go back over the math around the 2024 EV exposure, because as you mentioned before it's not just in E-Systems. It's also obviously some EV platform within Seating. So can you just go back over sort of like the exposure you have there?

Yes. And again, we'll provide a fuller update on the backlog as we always do in the fourth quarter earnings call, late January or early February. What I tried to do today is just highlight for the analyst modeling next year and for the investors listening to the call that obviously, the announcements by our customers would have an impact on the backlog that we had previously projected for 2024. It was previously estimated we have $1.5 billion of revenue. We don't have a precise update to that. But most of the Seating revenue in the backlog has been electric vehicles, because most of the new vehicles customers are launching are electric vehicles. And then in E-Systems we've already talked through the GM BDU specifically. And so I think it's reasonable for one to assume, based on all the comments that customers have made that the backlog for 2024 would be 20% or so less than what we expected. At the same time, we've continued to win business at a pace that would allow for the three-year backlog that we published in February to be similar to the three-year backlog we published in February of this year, which is $2.85 billion overall for the company $1.08 billion in Seating and $1.05 billion in E-Systems. There may be a little bit of mix between the two segments, but I think that's a reasonable expectation for the total backlog based on everything we're seeing including the revisions to the volumes they described for Electric Vehicles.

That's extremely helpful. Thank you.

You're welcome.

And ladies and gentlemen, our final question today will come from Joseph Spak from UBS. Please go ahead with your question.

Thanks everyone for squeezing me in. Jason, maybe just to follow on one last thing on the BEV units, like, if the units are -- like I understand it's a little bit lower in 2024 and 2025. But like, if it's sustained lower than what you assumed for over a number of years from when you've been on the business. Do you have any recourse in that contract either recover costs or raise the piece price for what is produced?

Yeah. Absolutely, Joe. The customers have been very cooperative collaborative with regards to changes in their production plan. They understand the investments that we've made. They've worked with us. That's part of what allowed us to reduce the capital spending this year push it out may eliminate it if the volumes don't materialize. So we're being much more deliberate in putting new capacity in. And then of course there are discussions around piece price tied to volume changes as well. So that's absolutely the case. And one point I also want to highlight, when we established our backlog and published that last year we weren't using customer planning volumes directly. We of course discount those. Even given that we believe that the volumes that they'll come out with in their plans for next year may still be lower even than what the discounted volumes we used in our backlog.

Perfect. And if I could sneak one in just on the strike as we sort of look like we were starting to get back to work and hopefully that expands. One of the things we've been hearing about is a little bit more sort of maybe pain in the Tier 2 or Tier 3 level. Like are you seeing any stress in your suppliers that would either add some costs or make a ramp-up a little bit slower?

Yeah. I think that we've seen pressure in the lower tiers over the last two years with commodities and inflation. And certainly this didn't help. I wouldn't say that the strike has gone on long enough or have been deep enough to have a meaningful impact on that at this point. Maybe around the edges we're seeing some modest effects from that. And I think in Seating one thing that helps us too is the vertical integration capabilities across the whole seat. So where we do have the structure in the supply base, we also have that flexibility to bring products in-house. We've done that from time to time as well where you've had a distressed supplier on an important program. We've brought that in-house to solve the issue. So we have other ways to remedy that too.

Okay. Perfect. Thank you.

You're welcome.

Okay. Great, I think probably the only ones left on the call at this point would be the Lear team. And so I'll say a few words. One great quarter. You guys have -- everyone worked extremely hard despite some external challenges we are faced with a really nice quarter. I want to thank you for all your hard work. And again, just we talk about it the incredible recognition not only from our customers but J.D. Power and the recognitions that we get from third-party just continue to validate what a great job we're doing and how we're focused to continue to drive excellence. I want to thank the team. I mean, I don't think everyone appreciates except for the team that's been working on it nonstop the incredible unprecedented launch that we had with the Wagoneer and Grand Wagoneer. Frank the team did a great job industry first never been done and just -- one jinx is but incredible job really, really special. And I just want to again just recognize the team the overall performance on OI and generating that cash really nice job. And I know we will, but let's finish this year strong. We got one more quarter left, but let's kick it in another gear and get this quarter done. Thanks you guys.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.