Crafted by Lear
With a 2009 bankruptcy in the rearview mirror, Matt Simoncini and Lear Corp. have set their sights on expanding the supplier’s global automotive seating business by cultivating its Detroit roots.
It wasn’t all that long ago that downtown Detroit’s Capitol Park district was little more than a blighted and forgotten relic of the city’s once grand past. If you happened to wander by, you were likely to step up your pace to pass through as quickly as possible.
Now, however, Capitol Park is a model of the city’s transformation and revival, with several renovated apartment complexes completed or under construction, along with new shops and restaurants. In fact, every building bordering the triangular park behind the Westin Book Cadillac hotel has been recently modernized or is being renovated.
These days, visitors often slow their pace to take it all in. And if you pause for a moment, especially late in the day, above the cacophony of traffic and construction you might catch a few notes from a blues guitar echoing off the concrete and sandstone structures. Listen and follow the sound and it will draw you to one of Capitol Park’s oldest buildings, nearly demolished by neglect but now in the midst of a restoration.
Like a Pied Piper with a wah-wah pedal, the sound from the guitarist leads to a historic brick building’s stairwell, whose walls are decorated with graffiti created by local artists. Finally, you’ll emerge onto the fourth floor, where, tie slackened and a jacket draped on the back of a chair, you’ll find Matt Simoncini letting loose.
“This is where I like to come and relax after a long day,” he says, a smile spreading across his face as he gently strokes a Fender guitar. Simoncini, 56, would be honored to sit in with any of the jazz, blues, or Motown artists who have called Detroit home over the years, but playing a guitar is just a way for the CEO of Lear Corp. to balance both sides of his brain. And the supplier’s $18 billion Innovation Center, housed in the old building on State Street, is a fitting place to do just that.
Lear spent about $10 million to acquire and renovate what originally housed the Brown Brothers Cigar Co. when it was built 129 years ago. Long abandoned, the six-story brick building was acquired by Dan Gilbert’s Bedrock development arm and, Simoncini proudly notes, is the only piece of property that Bedrock has sold since it began gobbling up large swaths of downtown real estate in 2012. Still a work in progress, the Innovation Center brings together Lear designers and engineers, as well as 20 paid interns from Wayne State University and the College for Creative Studies, both in Detroit.
“This building (will) generate creative, cutting-edge ideas that, in five years, I believe, will begin to go into production, whether it’s the design of a seat or the software that runs a car,” Simoncini says as he settles back in the Innovation Center’s fourth floor boardroom, where a wall-to-wall, palatial window lets him watch the work underway across the park.
The center, with its distinctive Victorian Romanesque design, is a 25-minute drive from Lear’s headquarters and office campus along Telegraph Road, just north of Eight Mile. It is only natural to consider, given the distance, why Lear didn’t take the idea for the Innovation Center and build it in the suburbs.
Simoncini initially responds as he would to an investor, emphasizing his “fiduciary responsibility” to deliver maximum return on investment. By locating in Detroit, he explains, Lear can readily tap into the growing pool of talent that has been repopulating a city long drained by suburban flight and corporate disinvestment. “It’s got such a great vibe,” he says. “If you can get people to come here and check the city out, they will stay here. For the first time in a long time, I’m really excited about the city.”
Separating Simoncini from his fiduciary duties, you quickly discern the civic pride of a kid who grew up on the east side of Detroit attending Finney High School and then Wayne State University. He came from an immigrant family; his parents were raised in what had been a solid Italian neighborhood near Detroit City Airport.
There’s not much left of that community today. It was drained, like so many others, in the wake of the exodus to the suburbs starting in 1950, culminating after the 1967 riots, and brought to a head by blockbusting and redlining, and the search for what was long seen as a better life on the other side of Eight Mile.
Detroit’s population today is barely a third of its official 1.8 million peak in the 1950 census. Many of the jobs that kept its largely unskilled workforce employed are gone, as well. In fact, Lear’s own story mirrors the exodus.
The story begins with Fred Matthei, who in 1917 founded American Metal Products Co. in Detroit. The business initially produced a mix of welded, stamped, and tubular metal parts for the automotive and aircraft industry. At first, it had one plant in the city and 18 employees. Business took off in 1928, when AMP produced the first car seat frames that utilized steel coils. By the time the industry began retooling for World War II in 1941, the company was selling more than $1 million a year in seats, and employed 900 workers at its Detroit plant.
Switching to military production was profitable, but nothing like the postwar boom that would follow when returning GIs began buying cars by the millions. By 1950, AMP was a $31 million a year business.
The company was a steady innovator — one of the first to develop electrically adjustable seats — while also producing commodity parts like axles and prop shafts. By the 1960s, it company was a multinational enterprise operating in Mexico, Germany, Brazil, England, and Venezuela. The big change came in 1966, when Lear Siegler Inc. acquired AMP.
And, yes, as the corporate website notes, there really was a Lear — Bill Lear, to be more precise. He was an autodidact from Quincy, Ill., with a string of 110 patents to his name, including numerous advances in aviation electronics and communication, the first successful car radio, and the first 8-track tape player. He also had a passion for flying, and would eventually become the first person to manufacture a corporate luxury aircraft, the eponymous Lear Jet.
Lear Siegler grew the seating business rapidly, breaking the $1 billion mark before the end of the 1970s by using innovations like the so-called Captain’s Chairs to capture more than a quarter of the North American automotive seating business. It targeted overseas growth, as well, and by the mid-1990s the company was operating more than 100 global facilities in 19 countries, and employing more than 35,000 workers.
The company name changed repeatedly, from Lear-Siegler Inc. to Lear Siegler Seating Corp. to Lear Seating Corp. and, finally, to Lear Corp. Along the way, the company kept outgrowing its headquarters, moving from central Detroit to the west side — and ultimately to a string of buildings off Telegraph Road in Southfield.
For his part, Simoncini seemed determined, perhaps destined, to stay in Detroit. He helped put himself through school working at Eastern Market. After graduating from Wayne State he became a certified public accountant, landing at the consulting firm then known as Deloitte and Touche in 1985 before moving to what used to be known as United Technologies Automotive.
UTA was, in 1999, just the latest of the many industry suppliers Lear had gobbled up over the years. When Simoncini climbed aboard, he quickly found the fast track. By 2001, he was serving as CFO for Lear’s operations in Europe, Asia, and Africa. In 2004, he was running global finance operations. In 2007, Simoncini was named Lear’s CFO.
Although it was quick, it wasn’t an entirely smooth climb up the corporate ladder. Shifting industry strategies led the company to sell off its struggling Interior Systems Division in 2005, along with 26 plants and two joint ventures in China.
Then, business all but screeched to a halt when, in 2009, the U.S. and global economy collapsed, taking much of the domestic auto industry with it. Lear was one of many suppliers that were forced to declare Chapter 11 bankruptcy — others in the same predicament included giants like Delphi Corp. and Visteon Corp. Working together, Simoncini and CEO Bob Rossiter crafted a slick turnaround plan. Where Delphi took years to plow through bankruptcy court, Lear’s tour took barely four months before the company had an agreement in hand from secured lenders and bondholders. Rossiter retired two years later, and Simoncini took his mentor’s place as Lear’s CEO in late 2011.
The company he inherited has since become one of the industry’s fastest-growing suppliers, reaching sales of $18.2 billion for 2015. In the third quarter of 2016, Lear reported record sales of $4.5 billion, with net income up 18 percent to a record $214 million. When the supplier increased its full 2016 outlook, Moody’s responded by upgrading the firm’s rating to investment grade last September, declaring, “Lear’s demonstrated (its) ability to improve profit margins in both its seating and electronic units through new business, higher volumes, and ongoing cost reductions.”
Lear is now the second-largest automotive seat supplier, lagging behind only Adient, the new name for the seating unit recently spun off by longtime rival Johnson Controls. Simoncini is determined to topple the king of the hill through a mix of organic growth, acquisitions, and alliances. One of the most significant moves was the January 2015 acquisition of Eagle Ottawa, an automotive leather supplier based in Auburn Hills. The deal wasn’t cheap, at $850 million, but no other Lear operation touches more American-made automobiles, supplying leather for about half of the vehicles on the road. Eagle Ottawa’s revenue surged from $485 million in 2011 to $1 billion just three years later.
From that single plant in Detroit with 18 employees, Lear now has 132,000 workers at 235 facilities in 34 countries.
As Lear has grown since the economic recovery began, it has made some unexpected moves. It is cautiously exploring some nonautomotive investments, including a high-tech lighting joint venture in Mexico. Overall, automotive operations account for more than 95 percent of revenue; of that, seats are the single-biggest piece of the product portfolio, accounting for 70 percent of the supplier’s revenue. “But electrical is $4.5 billion and growing,” Simoncini says. “It would rank as one of the largest automotive suppliers on its own. It’s only small compared to our seating.”
A key reason for growth in electrical sales is the anticipated explosion in sales of battery-based vehicles. On average, Lear has twice as much content on a dollar basis in plug-ins and pure battery-electric vehicles, or BEVs, than it does on conventional gasoline models.
In addition to software, the company provides a wide range of electrical components and, where Lear once focused on basic junction boxes and wiring, “instead of just routing power, we’re routing data and signals into the vehicle, so we have to be experts on cybersecurity, as well,” Simoncini says.
They may seem like two different worlds, but Simoncini sees plenty of synergies between Lear’s seating and electrical operations (the latter now employs more than 700 engineers). “The car is becoming a rolling smart device. It’ll be safer, more intelligent, and loaded with conveniences,” he says — and many of those, he’s betting, will be built right into the seat. “When you talk about connectivity, to us, that’s about gathering information about the passenger and feeding it back, whether it’s their heart rate, posture, body temperature, or how safety restraints are adjusted. I think we’re just scratching the surface of what this product could be.”
Lear has even developed a prototype seat that might be thought of as a mobile chiropractor, subtly helping set a driver’s spine straight as they drive.
There’s clearly a demand for better seating. Climb into the latest Mercedes-Benz S-Class and you’ll not only be able to heat or cool your body, but you’ll also receive a “hot stone massage.” Manufacturers have traditionally been reluctant to push things too far, questioning whether consumers really want — or would be willing to pay for — a wide array of possible features. Lear, for its part, is arguing that technologically advanced seats could deliver a competitive advantage for manufacturers, especially in the luxury market. The supplier is also promoting more radical designs and breakthrough materials, such as carbon fiber.
“We have customers asking us to do things we don’t know how to do yet,” says Mandy Rice, manager of the new Crafted by Lear design and engineering showcase that officially opened in December near the company’s Southfield headquarters. “We’ll see some seats that push the design envelope go into production in the 2019 to 2021 time frame.” While she won’t discuss specific projects, one advance is likely to be Lear’s new Illumitrim seats, which include built-in accent lighting.
Some of the most radical changes in automotive seating could come with the launch of autonomous, and even driverless, vehicles. If the driver is freed up from actually having to keep his or her hands on the wheel, a vehicle’s interior could be transformed into a mobile lounge, where occupants are able to turn their seats to face one another, watch a big-screen TV, work, or even sleep during the day’s commute.
Even as manufacturers explore new seating options, however, Simoncini concedes Lear constantly weighs the costs of producing seats and components domestically or overseas.
“You’re constantly trying to balance the equation,” he says, although the math might be changing. “The reality is that some things will never be able to be produced, from a
labor standpoint, in the U.S. using nonpoverty wages. So, certain components we won’t be able to make (here) and get
shareholders the return on investment they expect. But other things, when you balance the freight costs, the geostability risks, the benefits of being able to send engineers right to the factory without taking a plane trip, there are certain things we think we can do right here in Detroit.”
Lear already has launched a joint venture to produce seat frames locally, and it’s looking at ways to eliminate the labor-intensive process of hand-stitching seat covers, perhaps by using 3-D printing.
Simoncini insists the company is committed to bringing more manufacturing jobs to Detroit, and hints there could be something to talk about in the near future, though he won’t yet reveal what he’s working on.
“There’s been a lot of speculation,” say Mel Stephens, Lear’s executive vice president of communications and investor relations, when asked about rumors the company is negotiating for a plot of land on the site of American Axle and Manufacturing’s campus that straddles the Detroit-Hamtramck border. While Stephens stresses there’s “nothing imminent,” he also adds, “there’s a lot of open space” available within the Detroit city limits.
For his part, Simoncini is quick to say Lear has no plans to move its headquarters out of Southfield, as it demonstrated with the opening of the Crafted by Lear facility. It does have a clear goal of increasing its Detroit presence, however; along with the Capitol Park facility, it has purchased the old Hemmecher Building in the newly renamed Paradise Valley neighborhood. A quick walk from the Detroit Athletic Club, it covers about 50,000 square feet, or twice the size of the Innovation Center, and will eventually serve as an administrative facility complemented by ground-floor stores and restaurants.
Lear’s presence in downtown Detroit “is a physical statement of commitment for Lear and Matt to Detroit, and creates a ‘flywheel effect’ of optimism (about) the future,” says Mark Reuss, global product development chief of General Motors Co. “The Innovation Center can only help bring others to work here instead of exporting this expertise elsewhere.”
Bringing people to Detroit is becoming far less of a problem than it was just a few years ago, when automakers and automotive suppliers struggled to recruit college graduates, often losing top talent to hipper, high-tech companies in places like Boston; Austin, Texas; and Silicon Valley. That’s changing fast, as rapidly rising office occupancy rates in downtown and Midtown demonstrate.
“The Detroit narrative is changing,” says Rick Rogers, president of the College for Creative Studies, which operates two campuses in Midtown. “We find when we go out to recruit faculty and students, people who previously wouldn’t have given a thought to moving to Detroit are now taking it very seriously. We’re having a lot more success attracting world-class talent.”
Rogers credits a number of factors and people for that shift, including Quicken Loans and Bedrock billionaire Dan Gilbert, as well as industry leaders like Simoncini. Matt “always makes it clear he’s a Detroit kid. He grew up in the city and is as committed to making the city as good a place for all people as he can,” Rogers says.
Beyond the auto business, Simoncini and Lear have proven to be major contributors in the city’s philanthropic community. Along with his wife, Mona, a CCS graduate, he chaired the school’s charity wine auction this past year, helping raise a record $3.4 million. “I had a front-row seat to watch his ability to motivate people and see the energy and passion he puts into things he believes in,” Rogers says.
Much of that philanthropy is focused on education, notes Margaret Trimer-Hartley, president and CEO of Junior Achievement of Southeastern Michigan in downtown Detroit. The auto industry had collectively cut back its charitable efforts following the Great Recession, but “Matt was one of the first” to ramp things back up. “He is certainly leading the supplier sector. He’s everywhere that matters. He’s very considerate and careful in what he puts his money into.”
One of the most recent programs Simoncini helped fund is Junior Achievement’s Financial Freedom Project, which is intended to teach middle school students “how to get to the end of the month with more money than (days in the) month left ,” Trimer-Hartley explains.
Simoncini is particularly active in educational projects. His voice takes on an urgent tone describing what he sees as perhaps the biggest obstacle to a long-term revival of the Motor City. Rebuilding Detroit’s education system is critical, he contends, “if the city’s neighborhoods are going to thrive.”
Otherwise, he frets, the hipsters who have been filling up Detroit’s new apartments, lofts, and townhouses will eventually get married, start families and, when their kids get old enough, “they’ll move toFerndale or Grosse Pointe Park unless we have good schools.”
Apart from education, Simoncini is determined to nurture and grow Lear’s traditional seating business, even as he looks for new opportunities in a world of increasingly high-tech automobiles. But he’s also taken on a role as Detroit’s biggest cheerleader, sounding the praises of a resurgent
“Detroit is my home and it has a special place in my heart,” says Simoncini, a man clearly determined to bring new residents into the city, and to rebuild both the education and jobs base that will help keep them there.
It’s no slam-dunk. There are plenty of challenges to overcome. And that’s going to take “creativity and energy,” he says. But if you ask anyone who knows Simoncini, those are two words that clearly define him.