Please welcome Ed Lowenfeld, Vice President, Investor Relations.
Thank you for joining us for Lear Seating Product Day. I'd like to extend a special welcome to everyone that could join us here in Southfield, Michigan, at our Global Product and Technology Center. I also want to welcome everyone joining us remotely via the webcast. We have a full morning planned for you, including a tour of some of our exciting new products and technologies. Before we get into the agenda, I have a couple of housekeeping items. Here is our safe harbor statement. Our presentation and related discussion today will reference forward-looking statements that are subject to the risks that we outline in our Form 10-K. Also, during the presentation, we will refer to non-GAAP financial measures. Reconciliations to the corresponding GAAP financial measures are included at the end of the presentation.
Turning to today's agenda, in a moment, our CEO, Ray Scott, will come up and provide a strategic perspective on Lear, including the steps we have taken to position our Seating business as the undisputed leader in the market. You will hear from Frank Orsini, the President of Lear Seating business, who will provide a general overview of the business, our growth outlook, and demonstrate how we are positioned for continued success. Eric Ealy, who leads our Thermal Comfort Systems business, will share the exciting work we are doing to further differentiate our product offerings by improving the seat system's performance and packaging. Jason Cardew, our CFO, will wrap up with an overview of our financial performance in the Seating segment, along with a medium and long-term financial outlook. Following the presentations, the team will assemble as a panel to take your questions.
We are asking everyone to submit their questions today through the Q&A portal, and you can do that at any time. For those of you listening online, there is an option to submit questions through the webcast portal, and for those of you in the room, there is a QR code in front of you that will bring up the portal on your device. After the Q&A, we will conclude the public event, and people in the audience here in Southfield will have the opportunity to take a product tour. Subject matter experts from our Seating division will showcase our Seating products, along with some new technologies we've developed to disrupt the sourcing model for thermal comfort products. With that, we're going to kick things off with a short video that depicts the spirit and passion of the Lear team. Thank you.
Here's to you. The ones who got us here. The ones who said, "Why not?" The ones who gave a little more, and a lot more. The ones who stood up to challenges and adversities and said, "We're not going anywhere, except forward." The ones who found a way to help them go further: engineers, operators, designers, leaders. To those who wonder, you share our dream. To those who dare, our story is yours. Behind every mile and every milestone, braving new frontiers, electrifying adventure, pioneering innovation with enduring grit and endless commitment to a better tomorrow. As we face the future, we will rise to the occasion together as one. Here's to you and what's to come.
Oh, I love that video. It's great. Every time I see that video, I get a little bit emotional here, it really is about people and culture, I think it does a great job of reflecting who we are as a company. Good morning, everyone, thank you for joining us today. It's really great to be back in person, I couldn't be more excited to share with you the fantastic opportunities ahead for Lear and our Seating business. We have an incredibly talented and experienced team that has positioned Lear as one of the leading suppliers to the global automotive industry. I've spent my entire career at Lear. It's actually going on 35 years this August, as I look around this room today, I have worked closely with this team that's gonna present for more than 20 years.
The company was built on a foundation of strong manufacturing, program management, and engineering capabilities, outstanding customer relationships, and a culture that drives operational excellence and innovation. We have two industry-leading business segments, Seating and E-Systems. We have automotive content on more than 450 vehicle nameplates worldwide. Before we take a deep dive into the Seating business, I wanted to reiterate the four pillars of our strategy that was really developed in 2020 to position Lear for sustainable revenue growth and profitability. In Seating, we are extending and building on our leadership position by focusing on investments in technology and innovation that will expand our capabilities in priceable features. Throughout the day, you will see the progress we have made.
In these systems, we are transitioning the business and focusing on product lines that align with our core competencies. The work we have done to streamline the portfolio has simplified the business and improved visibility.
At the same time, we are increasing the level of vertical integration and winning business in key areas that will support margin improvement going forward. Through our Lear Forward plan, we continue to build on our reputation as a leader in operational excellence, and aim to extend our leadership position in quality by continuing to invest in Industry 4.0 to enhance our efficiencies across our business. We continue to invest in products and processes that benefit the environment. Today, you will see several innovative products that are positively impacting our Seating business. Now I'm gonna move and focus on Seating. This slide highlights the investments we have made to improve our product capabilities and separate Lear as the undisputed leader in complete seats.
As we looked at the business landscape in the mid-2000s, we recognized that in order to meet our growth and margin goals, we would need to increase our component capabilities with a particular emphasis on price-able features. Following Lear's IPO in 1994 until 2008, Lear was primarily a seat assembler, with capabilities in seat structures, mechanisms, and trim. This is where most of our key Seating competitors are today. Starting with the Renosol acquisition, we made a series of acquisitions to increase our vertical integration capabilities and add value for our customers to improve design, comfort, and quality of the complete seat. Additional Industry 4.0 acquisitions have been made to extend our leadership position in operational excellence. The benefits of this strategy are apparent in the market share gains and the margin performance.
Jason will provide some perspective on our industry-leading margins later on in the presentation. As we developed our INTU Seating concept over the last decade, we realized we needed dedicated engineering and manufacturing capabilities for thermal comfort components to really disrupt the seating industry. Our latest two acquisitions, Kongsberg and IGB, provide these capabilities and position Lear as the only Seating supplier with expertise in complete seats, as well as comprehensive Thermal Comfort Systems capabilities. These unique capabilities will enhance Thermal Comfort Systems by creating innovative designs that will improve performance, efficiency, and comfort while reducing cost. Eric Ealy, who runs the Thermal Comfort business, will cover this opportunity in more detail later on in the presentation. Looking ahead, we see a clear path to achieving 29% market share by 2027, an increase from our prior 28% target.
Over the years, we have made several strategic investments in our Seating business, while our primary competitors have not matched our level of investment. Our focus is on innovation, technology, and delivering a value proposition to our customers that cannot be matched. This will enable us to maintain the highest margins and returns on capital in the industry. I couldn't be more proud of what we've built in Seating and where we're headed. Today, you will have the opportunity to hear from our Seating experts, who will showcase our industry-leading products and innovative technologies. We're confident our plan will create significant value for all of our stakeholders. Before I turn it over to Frank Orsini, the President of our Seating division, we have a short video showcasing our Seating business.
Lear is a recognized global leader in automotive seating. The seat system is critical to the overall interior cabin experience. Lear has a vast product portfolio that delivers comfort and safety while contributing to the future of electric mobility and protecting our planet. Our footprint allows us to be wherever our customers need us to deliver the highest quality seats just in time to match their production needs. In fact, Lear is known for operational excellence, and we continue to improve our performance through innovation and Industry 4.0 capabilities. How do we do it? We have the most capable and experienced team in the industry, dedicated to superior engineering, craftsmanship, and customer satisfaction. Our performance routinely earns awards from the world's top automakers and industry leaders. This is a testament to our quality and operational excellence.
Over the years, we've been strategically investing in innovations and technologies to meet the growing demands of the industry. Today, Lear is the most vertically integrated seat supplier in the world. We're the only supplier with in-house capabilities to design, manufacture, and assemble virtually every component of the seat. Our broad product portfolio allows us to optimize and integrate components with fewer parts, less complexity, and lower costs. This provides a unique value proposition for our customers that is unmatched in the industry. Lear's first-to-market, award-winning solutions are leading the industry with innovations in sustainability, comfort, and personalized features, and reconfigurability, all delivered by the best team in the industry. Lear, making every drive better.
Good morning, everyone, and thank you for coming. My name is Frank Orsini. I'm the Executive Vice President and President of our Global Seating business at Lear Corporation. Today's presentation will provide a general overview of our Seating business, our growth outlook, and why we believe we are positioned for continued success in the automotive market.
As a recognized global leader in automotive seating, we have positioned ourselves to be the largest, most profitable, and sustainable seat company in the world. To accomplish this, we have leveraged 3 strategic enablers over the past several years: operational excellence, vertical integration, and transformative innovation. We are focused on driving value creation for our company, our customers, and our shareholders. We are doing this through competitive differentiation of our products, above-market growth, improving margins, and free cash flow generation. Over the past decade, we have consistently invested in our people, operational excellence, and innovation. We've made strategic investments to expand our vertical integration capabilities, increasing the percentage of seating components we can source internally from 36% to 82% of the total Seating system. Believe me, Lear stands alone as the only seat supplier with this level of component capabilities.
We've prioritized innovation and have strategically grown our engineering talent to over 3,000 strong, with more than 1,300 patents in our portfolio. We've expanded our global seat manufacturing presence to 186 world-class operations, spanning 33 countries. Over the last 15 years, our JIT market share has grown by five percentage points. Just for reference, one percentage point of JIT market share equates to approximately $700 million in revenue. We strategically evolved our Seating business model, prioritizing initiatives that drive priceable content and features, allowing us to capture additional content per vehicle opportunities. Above-market growth is a priority for our company. We have a leading market position in growing segments that will be critical to the future expansion of the automotive industry. We believe segments like premium and SUV platforms, as well as EVs, are key drivers for growth above market.
You know, when I think about the future, I'm most excited about the opportunity to continue to expand our market share. We have tremendous opportunity to grow with customers, vehicle segments, and emerging markets. Furthermore, our technology is strategically aligned with key industry growth trends in the areas of sustainability, reconfigurability, and personalized comfort, providing additional growth potential for our company. We have a clear path to increase our market share to 29% by 2027, with the goal of capturing 1/3 of the global seating market longer term. One of the things we are most proud of is our unwavering commitment to best-in-class operational excellence. We have the most skilled operational team in the world, and it's led by a senior management team with an average of over 25 years of automotive experience per leader.
In a typical year, our global team will manufacture over 370 million parts, including over 25 million frames, 85 million foam pads, and 5 million leather hides, all while flawlessly launching 120 product lines for our customers worldwide. We have world-class systems for designing and manufacturing our industry-leading product portfolio, and we continue to invest in Industry 4.0 to further improve our operational performance. We focus on operational excellence in the areas of quality, plant efficiency, and inventory management, all of which are key drivers for our free cash flow conversion and industry-leading margins. Lear has been recognized year after year for our superior performance in the areas of quality, launch performance, innovation, and talent development. This slide highlights only a few of our recent awards from both our customers and industry-recognized publications.
I'm proud to say we are a recognized leader in the industry. In fact, Lear received more than twice as many J.D. Power Seat Quality Awards than any other seat supplier in 2022. Of note, Lear received GM's Supplier of the Year award for the 22nd time overall, and Stellantis selected us as their top global supplier for quality performance. This slide highlights our product portfolio, which uniquely positions us as the most capable global seating company. We believe in order to be the best in the industry, you have to have the best capabilities in the world. Seating systems are very complex products, made up of hundreds of engineered components, assembled just in time to provide the most comfortable and crafted seats in the industry. In order to accomplish this, we've assembled the best team in the world, including business leaders, engineers, chemists, doctors, and industry-leading operational experts.
Our vertical integration strategy is centered around building capabilities, high-performing teams, and a world-class footprint, which we believe positions us for competitive differentiation. Lear's unique in-house product capabilities and technologies drive value for our customers, enabling them to differentiate their interiors while providing Lear with priceable content, growth potential, and margin enhancement opportunities. Some of our competitors have chosen a path of depending on partnerships for seating technology. We believe partnerships can only take you so far. Our complete capabilities have differentiated our company, enabling our customers to change their sourcing model, allowing Lear to control more OEM-directed components. At Lear, we are constantly pushing ourselves to innovate and reimagine what the future of seating will be to the auto industry. We believe technology drives value creation, and for Seating Systems, this will present opportunities in the areas of thermal comfort, health and wellness, sustainability, and reconfigurability.
Our industry-leading vertical integration capabilities provide a platform for transformative innovation, which has allowed us to develop PACE Award-winning technologies like INTU Seating and ConfigurE+. I'm also very excited about our recent innovations in the area of Thermal Comfort Systems, including modularity, which provides performance benefits while reducing part complexity by 50% and mass by 20%. FlexAir, our sustainable cushioning technology, is 100% recyclable and delivers a CO2 emission improvement of up to 50% over traditional foam. We've also developed a premium and fully recyclable surface material, ReNew Knit, a first-to-market automotive textile composed of 100% recycled materials. Our innovations are focused on providing value to our customers by reducing complexity, cost, and mass, while improving overall performance. We are focused on meaningful innovation that will transform our seating business by improving our competitive position and providing opportunities for profitable growth.
As you can see, we have a very balanced customer base, providing seat systems to global and domestic OEMs all over the world. Over the years, we have established long-standing customer relationships, which have ultimately provided us opportunities for new business awards. In the future, our customer diversification will continue to expand, further strengthening our position with EV manufacturers and Asian OEMs. Historically, our customer base in China was dominated by Western OEMs, such as European luxury producers, General Motors, and Ford. Over the years, our customer base has evolved. Today, we have more business with Chinese, Japanese, and Korean OEMs than ever before, and by 2027, we expect almost 40% of our sales in China will come from Chinese domestic OEMs. For example, our business with BYD is growing fast, and we expect to produce over 30% of their seats within the next few years.
By 2027, we anticipate BYD will be our second-largest customer in China, accounting for approximately 14% of our sales in the region. Our customers select Lear to provide seat systems for the most iconic vehicles. This slide illustrates the depth and strength of our seating business. Our business performance and customer relationships have positioned Lear for success across all automotive markets on key platforms worldwide. Our global market share is comprised of ICE and EV platforms. We hold leading positions in truck and SUV segments, and we continue to build on our leadership position in luxury and premium car lines, which offer significant growth opportunities across our product portfolio. As previously mentioned, our goal is to have the best capabilities, talent, and technology to drive competitive differentiation.
Seating systems are very complex, and in order to optimize, improve, and ultimately provide innovative product solutions, you must have a leadership position in engineering, manufacturing, and technology. Through our targeted investments over the years, we've expanded and strengthened our core capabilities, building the strongest product portfolio in the industry for every category of the seating system. Positioning ourselves as the most vertically integrated global seat supplier has further separated us from the competition, providing us with a clear advantage in the areas of product performance, cost optimization, quality, and technology. Ultimately, the successful execution of our vertical integration strategy has driven market share gains and industry-leading margin performance. Today, we are excited to share the latest evolution of our vertical integration strategy focused on Thermal Comfort Systems, a market with tremendous growth potential, targeted in the areas of priceable content with features that drive value for our customers.
For the past decade, we have dedicated our best engineering talent to designing, developing, and validating the future of Thermal Comfort Systems. Our focus has been to drive a value proposition for our customers by improving performance, reducing cost, reducing mass, and providing sustainable solutions by taking a complete system approach in which every component within the seat is optimized. Our recent acquisitions of Kongsberg Automotive and IGB are the final steps to completing our vision for Thermal Comfort Systems. Eric Ealy will now take you through our plan to reinvent Thermal Comfort Systems while providing transformative, patented innovations that will support our market share objectives and margin expansion opportunities, all while driving value for our customers and our investors. Thank you.
Thank you, Frank, and good morning, everybody. Over the next few minutes, I'll provide more detail about Lear's Thermal Comfort Systems business. This slide provides a pro forma outlook of our thermal comfort portfolio. The addition of IGB results in a business that has an annual revenue of approximately $600 million. The current business consists largely of pneumatic, lumbar, and massage, ventilation, and seat heat products, along with other thermal products such as panel and steering wheel heating. Also included with the IGB acquisition are occupant detection sensors. These sensors provide complementary capabilities to Lear's INTU suite of technologies. We have plans to grow Thermal Comfort Systems to $1 billion by 2027.
This growth will be driven by the increasing take rates for thermal comfort features, Lear's ability to vertically integrate thermal comfort content within our existing seat portfolio, and expanding Lear's content per vehicle through leveraging new product innovations. In the following slides and on the product tour, we will show you how we get there. The current total addressable market for thermal comfort systems is almost $2.8 billion. This market is expected to grow to $3.5 billion by 2027, which represents a growth rate that is approximately 4 percentage points above the global automotive growth rate. We believe this above market growth is realistic based upon the consumer's appetite and importantly, the OEM's ability to price for thermal comfort features. The addition of IGB gives Lear strong market positions in each of the key thermal comfort categories.
We estimate we have a top 3 market position for each major product today. Our innovation and growth plans will improve these market positions to number one or number two by 2027. On this slide, I will walk you through the evolution of our Thermal Comfort Systems product strategy. There are 3 phases to our product evolution. Phase I is business integration. We've expanded our product portfolio with the acquisition of IGB. We are currently optimizing the combined businesses and seeing positive results. Phase II is component modularity. The Lear team is designing more efficient thermal comfort modules by combining multiple functions across multiple components. We are also developing brand-new innovations to include in our Thermal Comfort Systems offerings. For example, a great new product we are very excited about is FlexAir. For those of you in the room, there's a sample of FlexAir on your table.
I'll get INTU more details about why FlexAir is such a disruptive technology shortly. In phase III of our strategy is a complete thermal comfort module. By combining our component modularity solutions with our FlexAir foam alternative and Lear's seat trim cover capabilities, we will produce a fully integrated comfort module. This module will deliver industry-leading performance, efficiency, and comfort. Let's look at these three phases in more detail. Phase I is well underway. With the completion of the IGB acquisition, we are able to execute a comprehensive integration of the Kongsberg and IGB businesses. We are already seeing benefits from material purchasing and logistics synergies, as well as operational improvements by leveraging the footprints and best practices of both organizations. We expect to capture further benefits through restructuring redundancies over the next 18 months. Our strategy is also resonating with our customers.
A substantial increase in new product development contracts and new business awards compared to historical per-performance. This is a proof point that OEMs want to enjoy the benefits of a fully integrated seat supplier. In phase II, we are innovating and enhancing the product design. Thermal comfort innovation starts in premium luxury seating, where Lear holds the number one position globally. Traditionally, the lumbar, massage, ventilation, and heating products have been designed as independent systems in a multilayered sandwich model. The acquisitions of Kongsberg and IGB, as well as the work we have done internally over the last 10 years, provide broad-based capabilities to improve upon this model. Innovations are being achieved by optimizing the product design. Lear is redesigning this layered model with modular products that combine the thermal comfort features into fewer parts. These enhanced product designs lead to significantly improved performance, packaging, complexity reduction, and cost.
This enables our customers to easily add thermal comfort features INTU rear seats and on non-luxury vehicles, which have not included these products previously. Moving to the right side of the slide, Lear has developed a urethane cushion alternative called FlexAir. FlexAir is a 100% recyclable alternative to molded urethane cushions. It provides up to a 20% reduction in weight and up to a 50% reduction in carbon dioxide emissions. Its open air structure also has better cooling and ventilation characteristics than urethane. Lear has secured or filed 190 patents that protect this technology and provide automotive exclusivity.
We are offering this product to all our customers as part of our Thermal Comfort Systems portfolio. The response has been overwhelming. In phase III, we are leveraging all of Lear's complete seat system expertise and capabilities to deliver the most efficient and feature-packed seat in the industry. Lear has developed a complete thermal comfort module that combines FlexAir, all the thermal comfort features, and the seat trim cover into one piece. The complete thermal comfort module positions the comfort elements closer to the occupant by attaching them directly to the trim cover, which improves performance. By incorporating all the thermal comfort components into an efficient modular design, we can drive significant part reduction and mass savings while enhancing the comfort for the occupant. These improvements will further reduce the cost of the thermal comfort system to our customers while increasing the value proposition for Lear.
Lear's complete thermal comfort module is also seat structure agnostic. This means that Lear can supply this product to any seat supplier on any seat structure with traditional foam or FlexAir anywhere in the world, simplifying any seat assembly operation. Lear has filed or been issued an additional 48 patents for modularity, further distancing ourselves from our competition. I would like to play a video now which highlights the JIT assembly advantages of the Thermal Comfort Module. On the left side of the screen, you will see a seat being assembled with the layered or sandwich design. On the right side of the screen, you will see a seat being assembled with our modular innovations. The traditional assembly has 26 steps in the process. The modular design reduces the process to 5 steps, making the assembly much more efficient.
You will notice the seat on the right is assembled in a much shorter time than the seat on the left. The time of the videos have been compressed, but they accurately represent the improvement in final seat assembly time we can achieve with our Thermal Comfort Module design. The efficiencies we realize from the modular design are compelling, and our customers continue to separate us from our competition. The evolution in design results in up to a 20% less weight, up to 40% improvement in performance, up to 40% improvement in final seat assembly time, and up to a 50% reduction in part complexity. Our unique thermal comfort and seat complete capabilities make Lear the only company in the world that is capable of delivering a complete thermal comfort module.
As we all know, the validation of our strategy is when our customers engage with us and award us new business. In the past year, Lear has seen tremendous excitement from our customers, and we are encouraged by our initial progress. As you can see from the chart on the left, the Thermal Comfort Systems business is diversified and growing. We are seeing new business awards at a pace that is 40% ahead of this time last year. This tells us that we are on the right path, and our customers prefer to work with a fully capable seat system supplier. We are also seeing many OEMs rethinking their direct sourcing strategy. The sandwich model results in the OEM designing and direct sourcing the layers or products.
In the past year, Lear has received complete seat system sourcing control that includes the thermal comfort products on vehicles from 7 different OEMs. We believe that this shift in behavior is just the beginning. OEMs will no longer need to focus as many resources to the design of seats. Lear is the only company with the full vertical integration capabilities that is able to provide a complete Thermal Comfort Module seat system with superior performance and lower costs. Our customers are also engaging us in development projects with our innovations from both phase II and phase III of our strategy. We currently have development projects on over 40 different car lines, which represents over $170 million in revenue opportunities.
I am very pleased to announce today that a FlexAir module has been approved for production beginning in 2024 on an Asian OEM crossover vehicle. This will represent what we believe to be many production awards for FlexAir. An additional element of our phase III in our product evolution is Lear's INTU technology. INTU is intelligent seating that provides features and software and improves occupant comfort and wellness. Lear has established an expertise in INTU seating through extensive research and investment over the last decade. The addition of Kongsberg and IGB capabilities have strengthened the INTU product portfolio. Today, Lear is also very excited to announce we have reached an agreement to supply INTU to a number of Bentley Motors models. Thank you. This is a great opportunity for Lear to deliver our innovative health, wellness, and long-term comfort products to the automotive market.
This partnership with Bentley will be the first commercial application for Lear's INTU technologies. We believe that the INTU business will provide additional opportunities for growth and margin expansion in the long term. I'd like to thank you all again for your time today, and I'll turn things over to Jason for a financial review.
Thank you, Eric. That was an impressive display of Lear's innovation. Everyone at Lear knows this is my favorite chart. I've closely monitored it since my days as CFO of the Seating business. It shows our sales and margin performance in seating over the past 24 years. I love this chart because it shows the strategic actions we've taken have resulted in steadily and continuously improving operating margins. Lear operates in a cyclical industry. This chart shows the progress we've made to strengthen our margin profile over a long period of time. Comparing prior downturns in 2005 and 2020, we've increased our trough margins by 190 basis points. Importantly, each peak margin has exceeded the prior peak through the last several industry cycles.
Our recent organic and inorganic investments in innovative products and Industry 4.0 manufacturing technologies will allow us to continue this long-term trend of growing revenue through market share gains, while continuing to expand operating margins and generate consistent financial returns far in excess of our cost of capital. During the current cycle, the automotive industry has taken longer to rebound, which reflects the unique supply constraints driven by the COVID pandemic and subsequent semiconductor chip shortage. Despite these challenges, Lear is positioned to improve seating margins to 6.7% this year. The improvement we have seen for the first half of the year gives us confidence to increase our full-year targets as well. Today, we're increasing the midpoint of our outlook for net sales by $1 billion, adjusted operating earnings by $100 million, and free cash flow by $80 million.
The detailed ranges are included in the appendix of today's presentation. Adding thermal comfort products to our seating portfolio is the next iteration of our long-term strategic plan. These products will allow us to continue to deepen and widen the competitive moat we've built, extending our industry-leading financial performance. As you can see, we expect to achieve margins above 8% in 2025, improving to 8.5% or higher by 2027. On the next several slides, I'll provide some details of how we're going to get there. Our Seating business has consistently grown through a combination of steadily increasing content per vehicle and market share gains. Going forward, we expect the Seating business to continue to grow faster than automotive production.
Over the next five years and beyond, we expect our sales to grow on an average four percentage points faster than the market, with some individual years above that and others a bit below. The growth will primarily come from increase in our market share. We expect to continue to win contracts for an outsized portion of new vehicles our customers are designing and launching globally in the coming years, and to continue displacing incumbent competitors on existing platforms. Key ongoing and near-term launches include new entries such as the Chevrolet Silverado EV and the Polestar 3. Others, such as the Wagoneer and Grand Wagoneer, the Chevrolet Colorado, and GMC Canyon, and the BMW 5 Series, resulted from conquest wins, where our customers chose Lear over the incumbent supplier due to our operational excellence and quality performance.
Since 2019, we have won approximately $2 billion of conquest business in key segments such as SUVs, midsize pickup trucks, and luxury vehicles, and our pipeline of opportunities remains large. We expect to continue to win more than our fair share of programs as the undisputed leader in automotive seating. As we look out over the next several years, we see five key drivers of revenue and margin growth for our Seating business. The first driver is volume recovery for the automotive industry overall. We expect industry volumes to grow approximately 2.5% per year through 2027. The automotive industry production has been running well below trend levels for the last five years, and even with high prices and elevated interest rates pressuring vehicle affordability, there's still pent-up demand.
For example, in the U.S., the average age of vehicles has risen for the sixth consecutive year, reaching 12 and a half years in March. Although dealer inventory levels have increased, they remain well below the historic average. These factors will continue to drive industry growth, which in turn improves our capacity utilization. With variable margins of 15%-20%, industry volume will drive both revenue growth and margin expansion. We also have a strong backlog, which will convert at margins of about 10%. At the same time, we continue to quote new business with a current quote pipeline of approximately $5 billion. We're focused on optimizing our manufacturing footprint and reducing administrative costs through our Lear Forward Plan. Additional restructuring actions focus on improving margins in areas such as seat structures in Europe. These initiatives will produce significant savings over the next 3-5 years.
While labor and commodity inflation have weighed on seating margins in recent years, we have seen a modest improvement this year through a combination of moderating commodity prices and additional customer recoveries. Near term, we're seeing benefits from lower ocean freight rates and lower steel costs in North America. Going forward, we do expect additional headwinds from wage inflation and a generally tight labor market, particularly for manufacturing workers. Wages in key geographic regions, particularly in Mexico, continue to increase while availability remains constrained. We have negotiated successfully pricing adjustments that help offset this impact with many of our customers, and we're having constructive discussions with all of our customers right now, which we expect to contribute to margin expansion beyond this year.
Over the medium and long term, our Thermal Comfort Systems strategy will be a key driver of margin expansion and will ultimately allow us to achieve operating margins that are beyond our prior peak. Digging further INTU the impact of Thermal Comfort Systems, the combination of Kongsberg and IGB has created a product portfolio that's expected to generate revenue of approximately $600 million this year. We previously expected this business to grow to $800 million by 2027, but given the increase in demand for these products, we now expect Thermal Comfort Systems to grow to approximately $1 billion by 2027, growing 14% per year over the next four years. Today, the average vehicle has about $30-$35 of Thermal Comfort Systems content, given the relatively low penetration rate of these features outside of the luxury segment.
If you look at the CPV of each thermal comfort component, you can see a sizable opportunity to increase the content in an average vehicle, especially as our new designs make proliferation INTU the second row more feasible. As the leading supplier for luxury vehicles, our product portfolio skews to the upper end. The average luxury vehicle equipped with TCS content has CPV ranging from $150-$300. Thermal comfort products have a margin profile above most of our other seat components. As volumes recover and we execute our plan, we expect Thermal Comfort Systems to generate adjusted operating margins of about 10% by 2027. Margin expansion in Thermal Comfort Systems will mirror the 3 phases of our product evolution, which Eric discussed earlier. Our modular solutions will reduce the cost of the system.
We intend to share a portion of the lower cost with our customers, which we believe will drive increased penetration rates while retaining the balance of the cost savings to enhance Lear's seating margins. Phase I began even before the acquisitions closed. We're leveraging best practices across Lear, Kongsberg, and IGB. For instance, we're utilizing Lear's commercial relationships and purchasing scale to accelerate growth and reduce material costs. In addition, we've identified footprint and administrative synergies that will improve cost competitiveness and operating results. Phase I improvements will increase earnings by $55 million from the end of this year through 2027. In parallel, we're implementing phase II. During phase II, we're combining multiple components INTU modular solutions while changing our customer sourcing strategy for thermal comfort components within our new JIT program awards. These initiatives will provide multiple benefits.
The modular solutions can drive more thermal comfort content INTU vehicles, growing the penetration of these priceable features. Today, the revenue from thermal comfort components is captured in the overall JIT program revenue. While our seating revenue will increase if we deliver thermal comfort components to other JIT assemblers, when we build components for our own use, this will obviously drive margin improvement with no impact on overall seating revenue. At Lear, we're seeing that the sourcing model for thermal comfort components is changing. This is because Lear is bringing a system-level approach that no competitor can match, as we're the only supplier with capabilities in JIT assembly, surface materials, and thermal comfort components.
Conversely, for JIT programs sourced to our competitors, we don't expect thermal comfort sourcing to change, as most of that content will continue to be directed by our OEMs, as our competitors lack capabilities to design, engineer, and manufacture TCS products. During phase II, we also are commercializing our innovative seat products. FlexAir will be coming to market with its first application next year. We have more programs in the pipeline and expect to expand the use of FlexAir INTU additional areas of the seat. Our phase II strategy is expected to contribute an additional $45 million improvement in earnings. By combined, combining phase I and phase II, we're expecting to see an improvement in seating earnings of $100 million by 2027.
The agreement we announced today to supply INTU features on several future Bentley models is an example of our ability to bring new technologies to market. We will do the same for our complete seat modular solution in phase III. Our complete seat solution is expected to drive operating margins beyond 10% for Thermal Comfort Systems. We will achieve that by offering an innovative, proprietary system that creates value for our customers and higher margins and financial returns for Lear and our shareholders. Although we are projecting the benefits to occur beyond 2027, our customers are already excited about our products and are entering INTU development agreements for these solutions. Our ability to improve the efficiency and performance of these products will lead to additional Thermal Comfort awards and ultimately, a greater share of the overall seat market.
We're confident recent strategic actions we have taken in seating will drive improvements in market share, profitability, and financial returns. By 2025, we expect to generate seating revenue of approximately $19 billion. We see this revenue growing to over $21 billion by 2027. We expect seating margins to grow steadily throughout this time period and ultimately exceed the high end of our prior target range of 7.5%-8.5% by 2027. I highlighted our key drivers of seating margin improvement earlier in the presentation. This walk illustrates the relative contribution of each driver as we progress towards our 2025 target. Industry volume recovery is expected to contribute approximately 40 basis points, as we expect global production volumes to continue recovering and again, reach pre-pandemic levels.
An additional 20 basis points is expected to come from our accretive new business. Thermal Comfort Systems will also become accretive to seating margins during this time frame, and the initial phase I and II benefits are expected to add an additional 20 basis points to overall seat margins. Finally, our net performance, driven by our Lear Forward plan, our continued focus on operational efficiencies, and additional restructuring activities we have identified, will contribute about 60 basis points of margin improvement after more than offsetting annual wage inflation and customer price reductions. Looking beyond 2025, we see additional opportunities for margin growth. As the industry continues to grow and we increase market share further, we expect to add approximately 10 basis points above our 8+% 2025 target.
During this time period, we expect the full impact of phase II of our Thermal Comfort strategy to be realized, which will add an additional 10 basis points. Our focus on continuous improvement and operational excellence will never end. We expect these actions to generate a modest margin improvement of 30 basis points over this time period. We expect these incremental improvements to drive our seating margins beyond 8.5% by 2027. Over the last decade, we've extended our leadership position in seating, increased market share, improved our industry-leading margins, and generated consistent financial returns. Organic and inorganic investments and first-to-market product innovation have given us the most vertically integrated and technically advanced product portfolio in seating.
We have built a competitive moat around our Seating business, which will drive sustainable long-term growth, consistent financial returns, and generate significant free cash flow, which we believe will create tremendous value for our shareholders. By 2027, we are confident we will have a Seating business with over $21 billion in revenue, a J.D. Power market share of 29%, and 32% share of the overall seat market. Today, we're increasing our long-term margin targets for seating to 8.5%-9%. Our improving financial results will support our plan to increase share repurchases and create significant value for our shareholders. I'd like to turn it back to Ray for some closing comments. Thank you.
Thanks, Jason. Before we begin the Q&A, I'd like to take a moment and thank everyone for attending today. We really appreciate you taking time to visit us here in person or join us via the webcast. As you can tell, the team and I are very excited about the incredible opportunities that we have in front of us. With the completion of our two recent acquisitions, we see a clear path to deepen and widen that moat in seating and change the customer sourcing model for Lear. Over the next several years, we expect to continue to increase our market share and to generate significant increases in sales and earnings.
The slide on the screen behind me, I think that's a great slide, highlights the announcements we just made today, which include updating our 2023 guidance, increasing our seating market share target, increasing our long-term target margins in seating, and several other highlights and new business awards supporting the significant opportunities we see as we continue to build out our Thermal Comfort Systems business. Now I'd like to invite my team up on stage for the beginning of the Q&A. Thank you.
First thing, I want to give a quick reminder. For those of you listening online, there is an option to submit questions through the webcast portal. For everyone in the room, we're also going to use the same. Use the QR codes on the screen or the one at your table. It does look like we've gotten a few questions already, keep them coming, and I'll moderate, we'll go. First question we've got: What gave you the confidence to raise your outlook? You gave us some good detail on seating, can you give us an update on the outlook for E-Systems? Are there any other areas you want to highlight? What's the light vehicle production you're assuming? Any puts and takes for the second half?
Sure, you know, I think that the strength of the first half really made increase in the full year outlook a pretty easy decision. I think the first quarter started off strong. Second quarter definitely came in stronger than we were expecting. We do have a couple more days yet to close out the quarter, but we're definitely on track for a strong second quarter, leading to a very strong first half of the year. So we made the decision at this point to increase our full year production assumption. I think we're at 4% and 5% on Lear sales weighted basis, roughly, whereas we had thought more like 1% and 2% respectively in our prior outlook.
Within that, you know, we've increased our seating operating margin outlook from 6.4% to 6.7%, so it's now at 50 basis points year-over-year. In E-Systems, we've held the 4.5% flat with our prior outlook, with the benefit of volumes being partially offset by transactional effects, primarily the peso and then a little bit on commodities. Taking a step back for a second, looking at the overall outlook, we've increased revenues by $1 billion. About two-thirds of that is due to the production assumption change that we made.
The other third is really a combination of higher commodity costs, pass-through agreements with our customers, where we have higher revenue and no earnings benefit, and then foreign exchange for the first half of the year, that's about $80 million or so. If I look at the first half to the second half of the year, obviously, if you do the math on our first quarter results, plus what we've talked about for the second quarter, you know, we're expecting a reduction in revenue in the second half of the year. We have revenues of about $11.7 billion in the first half of the year, and we expect about a 6.5% reduction in revenues, heading into the second half of the year, driven by two things.
One, you have the effect of normal seasonality, production shutdowns. Most of our customers are taking downtime in July in North America, and in Europe, mostly in August, 2, 3, 4 down weeks, that will lead to lower production in the third quarter. We have protected at the midpoint for some level of either demand softening or effects from the UAW and Unifor labor negotiations. If neither of those things happen, then you could see a little bit of upside to the midpoint of our guidance range. In terms of the operating margins, first half to second half, seating, we're expecting to be about 7%, a little bit below that in the first half and down in the mid-6s in the second half of the year.
We have significant launch and engineering costs associated with the Wagoneer, Grand Wagoneer that we announced in our fourth quarter earnings call. That'll be launching towards the tail end of this year, and so that will weigh on margins a little bit, and volumes on seating platforms will be a little bit lower in the second half of the year than the first half. In E-Systems, we expect operating margins to increase in the second half compared to the first half. Volumes will be a little bit lower. That'll be offset by lower launch costs and the benefit of our ongoing commercial negotiations on passing through inflation and component costs.
Okay, Lear seating margins have held up relatively well in a difficult environment over the last several years. What are the main drivers, and what are investors missing, or what don't they understand about Lear's offerings and competitive advantages?
Yeah, I... First of all, go to Jason's slide they love so much, just showing the peaks and valleys of what we've done in seating. I think we have an incredible history of being able to produce those margins at above our competitors' levels. I think the reason, one, is we've talked a little bit about is just the human capital, the people that we have, the team that we have, the intellectual knowledge that we have. I mean, we've stayed very focused on how we drive our operations, and then the investment part of how we focus on the different facilities with the investment in Industry 4.0, the go-forward plan that we have in place. In addition to, we have an enormous amount of pride in how we drive cost.
I mean, through CTO, our cost technology optimization, how we look at cost, how we manage our costs, the amount of time we put INTU being the most efficient producers of products has really helped us. You've seen even recently, we can still outperform our competitors, and it's a combination of a lot of those different activities, along with the acquisitions we've made to really differentiate ourselves in the marketplace that have really driven our margins.
I think the only, the only thing I would add to Ray's comments, too, is if you take a step back and look at our outlook at 6.7%, and you think about the impact of commodities and inflation, which is weighed on margins by 170 basis points over the last 3 years, you know, this business is running at 8.4%, which would be an all-time high. I think all the things that Ray talked through are showing themselves in the performance improvement in Seating. It's just been sort of covered up a bit by the effects of commodities and inflation, and how that's weighed on the near-term margins.
Over time, that will work itself out, either through direct recovery and the negotiations that are ongoing now, our cost reduction programs, some moderation in commodity costs, and then ultimately, as long as we're the most competitive option, the market price will adjust, you know, for the effects of wage inflation and higher commodity costs. I think if you look at that historical chart we showed, you sort of see that playing out during that 2005 time period, where we had a significant commodity impact, and ultimately, it worked its way back through revenues over time.
Okay, the next one is, someone's asking about JIT market share and how it compares across, maybe the two leading players. Can you contrast, compare, Lear's capabilities and share dynamics with the other leading player in the space? To what extent is pricing dictating program wins?
... You want me to start on that?
Yeah, I want you to start. I'll talk about pricing.
Yeah, I think by our math, we're, you know, sort of neck and neck with Adient in terms of current market share in JIT, and probably maybe a little bit lower overall in the complete seat market when you look at components as well. Look out to 2027, our projections would suggest that we will be number one in the market, and it's really on the back of the market share gains, the conquest wins that we've talked about over the last number of years. you know, I think that, you know, if we didn't communicate effectively through the slides today, the differences in our capabilities, then we missed the mark there. I think it's pretty clear the capability difference between Lear, Adient, Magna, Forvia, and others in the marketplace.
We are the only ones with complete thermal comfort, surface material, and JIT capabilities globally. I think that really differentiates us, and it's what really gives us the confidence that we've got a path to that 29% market share and 32% of the overall seat market when you consider component sales.
I'll be very clear that under no conditions are we chasing price. Under no conditions. We've lived that dream before, and we're not ever going back to that. You know, we're getting and winning business with $2 billion of conquest wins, and we have a pipeline right now we're quoting. We just got awarded the WS, which we just got awarded the business in January. It's unheard of that a seat supplier has been named in mid-cycle, a program of that significance. The reason we were named and awarded that business was because everything I mentioned, it's our team, our capabilities, our intellectual knowledge, our innovation, our technology within our operations, and our ability to deliver.
That's very important in the auto industry when you have a reputation like Lear does on delivering, you know, first-time quality, and so important to us. We are in no condition or position to have to chase price. We believe we're creating a value proposition here. This has been overwhelmingly positive. I thought it'd take some time to kind of break down what is a spaghetti-layered, you know, inefficient system, and change and evolve to where the seat system should go to and will go to. It's been such a incredible reception from our customer, and so we don't have to chase price, and we're not going to. Even the business that we've just rolled on is accretive.
I think if you just look at the conquest wins we've had during probably arguably the toughest time through COVID and all these other things, inflationary costs, what we've been dealing with, Frank and the team are doing an incredible job of winning new business that's accretive to the margin that we have in place today and launching it there. We're not gonna chase business. We don't have to.
Okay, very clear. There's another question about how we stack up versus the competition. Specifically, do we see a risk that some of our competitors will enter the thermal comfort space?
That's a good question. That's something I've thought about for over 10 years, every single day. You know what? With this vision of what we're doing and how we're changing to a modular concept has been a lot of patience, and what we're sharing today is the most we've publicly talked about. I think that initially, you're gonna have some of our competitors are gonna say, "Oh, we have that. We have a partnership with Gentherm, or we have this partnership with this supplier relationship." That's not what we're talking about here. We had that. We did that stuff. It didn't work on creating a value proposition for us and our customers as far as the margins we expect and the returns we expect.
I think there'll be another group that will start to be intrigued and think about, "Hey, this could really differentiate Lear, and we better get on this." The 10 years we've spent, every single meeting, we put patent lawyers in the meeting, where we talk about how prideful we are of the patents. The exclusivity on the FlexAir that we built just for automotive is Lear's. Everything that we discussed during this time was: How do we ensure we protect ourselves, that somebody can't replicate or copy Lear quickly when they start to see this thing evolve? I think at some point, there might be a denial from our competitors, but I think eventually, they're either gonna have to move, or they're going to just be an assembler of just-in-time, and we'll supply all the value-added content to them.
That's where I think the world's going, is that it was time for the seat business, and I've been in it for 35 years, to evolve. Everything's evolving. How vehicles are being assembled, I mean, when you look at that mess over there, the layered approach and the inefficiencies to a singular modular assembly that improves time to sensation. It improves weight, it improves cost. I mean, everything... improves packaging, the limitation on being able to get those INTU other seating position has been limited because of packaging requirements. Well, we solved that. What I love, listen, our customers direct source a lot of different components in seating, when you can bring them a value proposition that resonates and hits all those things, that's what I say about how excited the customers are because it's easy.
You're solving something. It's not, you know, revolutionary in a lot of ways. It's just an evolution that you see that's so simplified and makes such common sense, that I think over time... We have seven programs right now that we're developing. When we validate those, the next question is: How quickly will the customers wanna really spread that across all their product portfolio? You're talking about the millions of savings and the better benefits that their end consumers are gonna get are overwhelming. We're conservative in how we look at this thing and in, yeah, how we're growing it, but at the end of the day, this product is agnostic, and we can deliver it to any JIT manufacturer in the world, including ourselves.
I think everyone, at least that's in the room here, is gonna get a really good example of that when we do the product tour afterwards, so I'm looking forward to that. This is actually a really good segue to this next question. Can you discuss the sourcing trends? Does vertical integration provide stickiness on share? What % of programs are sole sourced versus dual sourced?
... You want me to start there? Yeah.
Yeah, Frank, you can talk a little.
Yeah.
That'd be good.
Yeah, I think that, certainly, you know, just maybe start with that last part of the question. The vast majority of programs in seating are single source. There may be examples where a customer is sourced by manufacturing plant, and so you could have two suppliers in the same program to two different plants. Typically, for one assembly plant, you have one seat supplier. There may be a couple of exceptions, again, here in North America and a little bit in China, but generally speaking, single source. Maybe, Frank, you can talk about vertical integration.
I think just playing off what you're saying, Jason, it's very uncommon to have a dual source program. The bulk of all of our business is single source. When it comes to vertical integration, I certainly believe, in general, the stickiness or our ability to retain share and gain more is not just the vertical integration, but our performance. I mean, we're a very good partner for our customers. I think once you've been sourced a piece of business, if you deliver and perform repeatedly with quality, you know, you have a great shot at winning the replacement business, and that's really what we're focused on.
Vertical integration certainly provides a level of opportunity for Lear, because we are the most vertically integrated seat company in the world, and having those components on our platforms gives us an opportunity to continue on the next coming generation business when we win the next round.
I think there's an important point here, too, that, you know, 80% of the seat is directed, and our customers would love for us to solve that and help them out. As we're winning these seat programs, our vertical integration or our vertical capabilities help us. We're much more competitive. It's not just how cost competitive we are at the JIT level, but it's within the components. When we're looking at these quotes side by side, you know, as we're going and winning this business, we can still get a very fair return. We're making good money on this business because we have the ability to source ourselves the components and then build up that margin profile within the components.
I think the emphasis on priceable features is really important because these features and contents are then priceable to the customer. If you can create that value where they can in turn price it, you know, you get a better negotiated rate, I think, from a costing standpoint. Again, you're creating a value proposition for your customer, and that's what we focus on. Everything's got to create a value proposition for Lear and our customers and the end consumer at the end of the day.
Can you describe actions you have taken to strengthen your Industry 4.0 capabilities?
I'll grab that one. That's cool. Yeah, I think to talk this topic, we should really start with just operational excellence, and that is core to Lear Corporation. It's the foundation of our company. We've strategically positioned ourselves to enhance our capabilities on Industry 4.0. We're doing it both organically and inorganically. We purchased and acquired three companies over the last two years, all of which brought incredible talent and capabilities to Lear. The companies that we purchased were specializing in automation, robotics, vision systems, software, algorithms, things of that nature. For us, as we look forward, you know, there's a lot of challenges that we want to mitigate in the future: labor, scarcity, labor wage, inflation. It's also about operational excellence.
It's about delivering quality, reliability, and the best product we can possibly do. That's really where our focus has come. I think what I'm also really excited about in this area is everything that we've done on these acquisitions will benefit both of our divisions, both Seating and E-Systems. I love what we're doing in this area. We see it as a competitive differentiator. We're gonna continue to drive that as a key initiative for our business.
Okay. Can you talk a little bit about incremental margins and vertical integration? Historically, you did mid-teen incremental margins, with more vertical integration, does that increase the incrementals?
Yeah. We typically talk about 15%-20% variable margins in seating. On the low end of that range, you know, are least vertically integrated programs. At the high end of the range are most vertically integrated programs. I can see as we implement the thermal comfort strategy over time, you know, you're gonna see more programs that are more vertically integrated and land more at the high end of that range and maybe beyond that. As we look out to, you know, 2026, 2027, and beyond, I would expect variable margin and seating will increase and eventually get above 20%.
Okay. Just a reminder, you can ask questions in the room, and if you're online, we can take questions as well. Right now, we're getting one online. What's the line of sight to the 29% JIT market share target for 2027? How much has already been won, and who are these share gains coming from?
Yeah, maybe to start with the last part of that question, you know, we're taking share from everyone. It's not one competitor. If you look at the conquest business that we're launching right now, there's business that was previously Adient's, Faurecia's and Magna's that's in the mix there. You know, it's not one's competitor that's struggling per se. It's more, I think, a sign of the strength of our business than it is a sign of weakness of the competition. In terms of the line of sight to 29%-... you know, about a 1/3 to 1/4 of that revenue growth is already in the backlog, launching this year, launching next year, and launching in 2025.
We do release a backlog update at the beginning of each year, and we'll do that again. Our target, as we sit here today, is for the seating three-year backlog that we announced in January, February of 2024 to exceed the backlog that we announced at the beginning of this year for 2023 through 2025. We have already seen $200 million-$300 million improvement in the 2025 component of the backlog, just based on what we've been awarded so far this year, so we're on track to see that third year of their three-year backlog increasing steadily. The balance of it is really gonna come through additional share gains.
Those could be new program awards that we're winning disproportionately as customers you know, initiate new models in the market, as well as continuing to take share from competitors. We have ample opportunities in front of us today, to continue taking share from incumbent suppliers, in all markets.
Okay. If you're successful in continuing to conquest business from the thermal comfort strategy and a change in sourcing patterns, will this require an increase in capital expenditures, since JIT is typically done close to final assembly, and you may not have the footprint where the business is won?
Our Thermal Comfort Systems business is more capital-intensive than our overall seat business. You know, our seating capital spending is around 2.5%, a little bit lower than that, 2.3%, 2.4% of sales. Thermal Comfort Systems, I think, is gonna average between 7% and 10%, depending on the year and depending on the level of growth. It is a more capital-intensive business. It's one of the reasons that the margin profile is higher there. We need a higher margin in those products to earn a return in excess of our cost of capital.
As we look at our long-range plan for return on invested capital, we see the Seating business overall getting back to that 20% range that's which was the sort of prior peak in terms of ROIC in the seat business, and Thermal Comfort Systems will be a key driver of that over time.
What's the margin profile and outlook for structures and mechanisms? Historically, it's been a challenging part of seat components.
Our seat structures business globally is profitable. In Europe, it's currently loss-making, and it's one of the reasons we highlighted that in the margin bridge between now and 25, and 25 to 27. Part of our restructuring plan is intended to address that. Globally, it is a profitable business for us, and we do believe it's important to be a credible global seat maker, you have to have some capabilities and structures. We're not looking to grow that business, we're not necessarily looking to shrink it either. It is, you know, on paper right now, as we sit here today, the lowest margin portion of the seat portfolio overall, but we do see meaningful improvement in that business over the next couple of years, as well.
I don't know if you want to add anything, Frank?
No, I think you captured it. I think we're heavily focused on the one region to get that turned around. As Jason said, it's a combination of commercial strategy plus some of the restructuring actions that we're gonna put in place. To Ray's point, we never chase business. As we win new product and we roll that on INTU our operations in Europe, that'll also create that bridge to getting us to where we wanna be, especially on the European side.
This might be one that sounds like maybe Eric gets to join the game here. How do Lear's thermal comfort products compare to competitors?
Well, we're very excited about our Thermal Comfort Systems portfolio. As Ray said, the last 10 years of investment in this technology and over the past 2 years, the acquisitions of Kongsberg and IGB have given us a world-class portfolio of products and capabilities, and we're seeing that resonate with our customers. As I said in our presentation, our sales rate this year is 40% above what it has been historically. Where the real competitive advantage and distancing from our competition will occur in is what you see in phase II and phase III, as we extract the synergies that exist in this layered or sandwiched approach, and design and bring to market, more elegant products that are less complex and less cost, at higher performance.
We really see our competitive advantage growing as we bring the seat complete INTU it.
I think just to add to that, you know, Kongsberg and IGB, over a period of time, you know, in some cases well over 5 years, was very targeted, you know. Kongsberg and IGB, from a people, culture, product, really fit well with Lear. If you just look at the landscape, the competitive landscape, there's not a lot of players out there that, you know, really fit the product portfolio that we were able to nicely align with thermal comfort, you know, between active cooling and pneumatic lumbars and heat and cool. It fit nicely together, it wasn't above market. We were able to get it at a very competitive price, and I think from a people, culture, product standpoint, it's been, boy, a really easy transition to integrate.
That transition, I think, has helped us accelerate, and we even have some product that quickly we were able to take our seating expertise and the component expertise and combine them and give the customer solutions that we've already been awarded programs on. Because we had the capability of understanding comfort and seat systems and understanding the component level, you know, specifications and requirements, matching those two up has been a game changer. I think, you know, we've been hesitant until we got IGB done. We wanted to make sure we were protecting everything we could until we could make this announcement, but I think it's just been incredible under Eric's leadership and a seamless, really, transition because of the people, culture, and product, and I think it's worked out well.
Great. How much more work ahead on vertical integration, bolt-on M&A? What other targets might you pursue?
I think, you know, over the next 18 months, 24 months, the near term, our focus is on integrating the businesses that we have, generating cash, returning that cash to shareholders through share repurchases. That is our primary focus. There isn't anything we need right now, to round out the portfolio. We're happy with where it's at. If we do acquisitions, it's gonna be more like what we did with some of the process-related acquisitions, $5 million-$10 million, $15 million, small tuck-in acquisitions that continue to differentiate our manufacturing process, more so than product needs at this stage.
Okay. Can you talk about total CPV and seating? Earlier this year, you said CPV was about $770 per vehicle. How significantly can your efforts in thermal comfort increase the CPV? $30-$35? What is your 2027 share assumption for CPV?
Yeah, we've assumed a relatively modest increase in the global CPV, although we do intend to capture more of that and manufacture more of it in-house through these thermal comfort products. I think in the luxury segment, specifically, there's room to move the CPV up, and that's why we've been so focused on the luxury market. You know, we've talked in the past about having 45% of that market. I think our estimates, as we sit here today, are 48%. We almost have half of that market, and you saw the CPV levels in luxury vehicles, $150-$300. There's room for that to move up as we move these features INTU the second row through the packaging benefits that we've designed here.
Customers wanna put those features in the second row, they just haven't been able to physically fit them. I think that's the catalyst for some level of CPV growth, but more just in the luxury segment than the market overall.
Okay, I think we've time for one last one here. Someone's asked about the margin target of 8.5% by 2027. I think we said 8.5%+ . They're saying it's only in line with past good years, despite a lot of good news and a lot of positive drivers with vertical integration and Thermal Comfort. What are some of the negative offsets versus those earlier years? Is it inflation, commodity? What might it be?
Yeah, I think, you know, we announced a new target range for operating margins of 8.5%-9%. In 2027, if I do the math, the numbers on the page, I think, is 8.6%. Our prior peak was 8.3%, so it is 30 basis points beyond that. That's not insignificant. Our longer term goals are to get to 9% and beyond. There isn't a negative offset that I'd necessarily highlight. Maybe wage inflation is running a little bit higher than what we've experienced historically, so it'll take time to offset that through Industry 4.0 and customer recoveries. I'd say that's probably the only kind of meaningful offset to the benefits that we see through the margin expansion, addition of the Thermal Comfort Systems business to our portfolio.
Okay. Well, with that, I think we're gonna sign off from the public webcast. I appreciate everyone listening in, and we're gonna take a 10-minute break here in the room, and then we'll reassemble for a product tour. Thank you.
Great.
Thanks, everyone.
Thank you.