Hayes Lemmerz Business report FY2006

Business Highlights

Financial overview

in million dollars FY 2006 (year ended Jan. 2007) FY 2005 (year ended Jan. 2006) Rate of change
Net Sales 2,056.2 1,956.5 5.1 -Factor 1
Operating Income 6.6 (215.2) - -
Automotive Wheels
Net Sales 1,671.6 1,594.4 4.8 Factor 2
Operating Income 53.3 (150.4) - Factor 3
Net Sales 384.6 362.1 6.2 Factor 4
Operating Income (26.8) (35.0) - Factor 5


1. Overall sales increased 5.1% or $99.7 million during FY2006 (year ended Jan. 2007) to $2,056.2 million during FY2006 from $1,956.5 million during FY2005 (year ended Jan. 2006). Higher overall sales volumes increased sales by $57 million and primarily resulted from an increase in international wheels volumes, which were partially offset by a decrease in domestic volumes. Favorable fluctuations in foreign exchange rates relative to the U.S. dollar and the impact of higher metal pass-through pricing increase sales by $46 million and $64 million, respectively. Lower overall pricing and an unfavorable product mix resulted in a $67 million sales decrease.

2. Net sales rose $77.2 million or 4.8% to $1,671,6 million from $1,594.4 million in FY2005. Higher unit volumes, primarily on international steel passenger car and truck wheels, increased sales $55 million. Favorable fluctuations in foreign exchange rates relative to the U.S. dollar increased sales $43 million. While higher metal pass-through pricing increased sales $45 million, this increase was more than offset by lower pricing and an unfavorable mix.

3. Earnings from operations increased $203.7 million during FY2006 to earnings of $55.3 million compared to a loss of $150.4 million during FY2005. Profitability was negatively affected in FY2005 by $185.5 million goodwill impairment, while no goodwill was impaired during FY2006 . Earnigs from operations during FY2006 also improved as a result of reductions in wages and benefits and improvements in operational efficiencies, as well as strong unit volumes. While lower depreciation espense, and favorable foreign exchange fluctuations increased earnings during FY2006 , these factors were offset by lower pricing and an unfavorable product mix.

4. Net sals rose $22.5 million or 6.2% to $384.6 million form $362.1 million in FY2005. Higher metal pass-through pricing and favorable foreign exchange fluctuations increase sales $22.1 million. Unit volumes, pricing, and product mix were responsible for the remaining difference.

5. Loss from operation was $26.8 million during FY2006 compared to a loss of $35.0 million during FY2005. Loss from operations decreased in FY2006 due to lower asset impairment charges as well as a lower depreciation expense. These were partially offset by lower unit volumes, lower pricing, and an unfavorable product mix, as well as higher material cost.

In November 2005, the Company increased its percentage of ownership in its Turkish aluminum-wheel joint venture, Jantas Aluminyum Jant Sanayi ve Ticaret A.S., located in Manisa, Turkey. The Company and Inci Holding A.S., one of the other two original joint-venture partners in Jantas Aluminum Wheels, acquired the 35 percent interest in the joint venture previously held by Cromodora Wheels S.p.A. As a result of the transaction, the Company increased its interest from 40 percent to 60 percent, while Inci Holding A.S. increased its share from 25 percent to 40 percent. The joint venture is expected to eventually produce 1.5 million wheels annually and will start production in early 2006.


- In October, 2006 the Company sold its Southfield, Michigan suspension components machining plant to the group of private investors who purchase its Cadillac, Michigan ductile iron foundry in December 2005. Under the agreement, this group acquired all of the outstanding shares of stock of Hayes Lemmerz International-Southfield, Inc., the Company's wholly owned subsidiary.

- In 2007, the Company and Brembo S.p.A. announced the sale of Hayes Lemmerz' Automotive Brake Components division to Brembo North America, Inc. The amount of the transaction is approximately $ 58 million. The Company's Automotive Brake Components division includes production facilities in Homer, Michigan and Apodaca, Mexico that manufacture brake rotors and drums for the North American passenger car and light truck markets. (From a press release on Nov. 9, 2007)


in million dollars

Year ended  
Jan.  2007
Year ended  
Jan.  2006
Year ended  
Jan.  2005

R&D Expenditure

4.4 5.8 8.9

New product Development
Novachrome(TM) wheel:
The Company released the Novachrome(TM) wheel--the next step in chrome technology. Novachrome(TM) yields a mirror finish in the spokes, while retaining crisp, sharp corners, giving a whole new look to the chrome plated wheel.

Zinc Dust Brake Coating
The Company developed its leading-edge and environmentally friendly Zinc Dust Brake Coating, which gives added durability to the brake system.

Flex(TM) Wheel system
The Company's global engineering teams worked together to develop the Flex(TM) Wheel system (known as the Structure wheel outside the U.S.). This steel wheel utilizes one design with multiple styling appearances to closely resemble an aluminum wheel at a lower cost.

Investment Activities

Capital expenditures

in million dollars Year ended  
Jan. 2007
Year ended  
Jan.  2006
Year ended  
Jan.  2005
Automotive Wheels 65.4 78.6 91.6
Components 14.4 16.0 25.6
Other 1.0 0.6 9.0
Total 80.8 95.2 126.2

In Feb. 2007, the Company announced that its subsidiary in India, Kalyani Lemmerz Limited, has completed the expansion of its state-of-the-art commercial vehicle steel wheel facility, bringing annual capacity to 800,000. Kalyani Lemmerz expects to add an additional 200,000 units of capacity in future months, bringing the total annual capacity of the facility to 1,000,000 units. The Company also announced that Kalyani Lemmerz will build a new plant to produce passenger car steel wheels.The plant will be located next to its existing commercial vehicle steel wheel facility and is expected to begin production October 2008.