Financial overview

Joint-ventures
- Tachi-S and the Company announced they have established a third joint venture under a master alliance formed in July 2003, to support business with Nissan globally. The joint venture, TACLE Seating, U.S.A. LLC, held a groundbreaking ceremony to celebrate construction of a new facility in Mt. Juliet dedicated to supplying seats to Nissan's assembly plant in Smyrna, Tenn. The Tennessee facility is TACLE's first U.S. plant and its third location globally. Once it is fully operational in mid-2007, the 90,000-square-foot plant will employ up to 170 people. Tachi-S Engineering U.S.A. will hold 51% stake and Lear will hold 49% stake in TACLE Seating. (From a press release by the company on Mar. 30, 2006)

- The Company announced that it has reached an agreement to establish two joint ventures with Comer Holdings, LLC, a minority business, for assembling and manufacturing of automotive interior components. Comer Holdings acquired a 51% interest in Bing Assembly Systems, LLC (BAS), the former joint venture between Lear and Bing Manufacturing Inc., as part of a reorganization in which a Bing Group affiliate has acquired BAS's Detroit plant. The Detroit facility will continue to supply Lear with components under a long term supply agreement. In addition, Comer Holdings has agreed to assume a 51% ownership in JL Automotive (JLA), the former joint venture between Lear and Piston Automotive. Financial terms of the agreement were not disclosed. (From a press release by the company on Feb. 2, 2006)

Divestitures
In 2006, the Company decided to exit the interior business, which includes instrument panels and cockpit systems, headliners and overhead systems, door panels, flooring and acoustic systems and interior trim.
In October 2006, the Company completed the contribution of substantially all of its European interior business to International Automotive Components Group, LLC, a joint venture with WL Ross & Co. LLC and Franklin Mutual Advisers, LLC, in exchange for a one-third equity interest in IAC Europe. In addition, on November 30, 2006, the Company entered into an Asset Purchase Agreement with International Automotive Components Group North America, Inc. and International Automotive Components Group North America, LLC, WL Ross and Franklin under which the Company agreed to transfer substantially all of assets of its North American interior business segment (as well as its interests in two China joint ventures) and 25 million dollars of cash to IAC North America.

-In 2006, the Company divested its ownership interest in RecepTec Holdings, L.L.C, recognizing a gain of USD 13.4 million. In addition, the Company and its joint venture partner dissolved Lear Diamond Electro-Circuit Systems Co., Ltd.

Outlook
In addition to maintaining and expanding the Company's business with their existing customers, they have increased their emphasis on expanding their business in the Asian market and with Asian automotive manufacturers worldwide. The Company currently has tweleve joint ventures in China and several other joint ventures dedicated to serving Asian automotive manufacturers. They will continue to seek ways to expand their business in the Asian market and with Asian automotive manufacturers worldwide.

R&D Expenditure

R&D Structure
- The Company has the ability to integrate the engineering, research, design, development, and validation testing of all automobile interior systems.
- The Company has more than 5,000 engineers worldwide.
- Technology development is conducted at their 5 advanced technology centers and at their product engineering centers worldwide.
- Global Innovation & Technology Center located in Southfield, Michigan, is their central location for consumer research, benchmarking, craftsmanship and individual design activity.
- The Company has state-of-art acoustic testing and instrumentation and data analysis capabilities.
- They also maintain electromagnetic compatibility labs at several of their electronic and electrical facilities.

Seven Dimensions
The Company has a seven-dimensional view of product and technological innovation. These dimensions are Safety, Comfort & Convenience, Environmental, Craftsmanship, Commonization, Infotainment and Flexibility.


Technology
- Intertronicsﾂｮ is the Company's umbrella technology, reflects its ability to integrate electronic products with automotive interior systems.

- The Company continues to develop new products and technologies, including solid state junction boxes and new radio frequency products. They have created certain brand identities, which identify products for their customers.
- ProTec邃｢ brand products are optimized for interior safety.
- SonoTec邃｢ brand products are optimized for interior acoustics.
- EnviroTec邃｢ brand products are optimized for environmentally friendly.


New Production Technologies
- SoyFoam邃｢ is a soybean oil-based flexible foam material for use in automotive applications. The Company, working in partnership with Ford, has developed market-ready seating applications for SoyFoam邃｢.
- Advantages of SoyFoam邃｢
(1)Lower environmental impact to produce
(2)Up to 24% renewable vs. traditional non-renewable petroleum-based foam
(3)Reduces dependency on volatile energy markets
(4)Potential for reducing automotive seatng foam costs as use reaches critical mass

- The Company announced an "industry first" with the introduction of its Solid-State Smart Junction Box Technology (S3JB) which provides a dramatic improvement in volume, a significant reduction in weight and lower systems cost as well as improved electrical-system diagnostics and double failure-mode protection. The S3JB, developed in a partnership among Lear, STMicroelectronics (ST) and Smart Automotive System Engineering (SASE), will be demonstrated on a 2006 Ford Escape at the Convergence 2006. Smart Junction Box technology is the main hub in a vehicle's electrical system, controlling and providing power to various electrical features such as power windows, power door locks, lighting (interior and exterior), instrumentation and the audio system. When Lear's advanced connection systems are combined with ST's solid-state drivers, the smart junction box is reduced from multiple-printed circuit boards to a single small-printed circuit board. The smaller board reduces the number of parts, manufacturing complexity and size of the junction box. (From a press release by the company on Oct.16, 2006)

Technological Alliance
- The Company announced that it has signed a license agreement with Transense Technologies plc to integrate Transense's batteryless Tire Pressure Monitoring System (TPMS) technology with the Company's Remote Keyless Entry receiver (RKE) technology. Financial terms were not disclosed and the Company's agreement with Transense does not affect an existing joint development agreement the Company has with Beru for TPMS Under terms of the agreement, the Company and Transense will work closely together to integrate Transense's batteryless Surface Acoustic Wave (SAW) TPMS technology with the Company's Remote Keyless Entry receiver technology. The two companies have recently worked together on the development of two functional North American vehicle prototypes equipped with the batteryless Transense TPM systems. (From a press release by the company on Sep.28, 2006).

R&D costs