Financial overview

Factors
1)
- The most important growth driver for the Company's sales is global light vehicle production (LVP).
- Net sales for 2008 decreased by 4.4% or by $296 million to $6,473 million due to a $646 million decline in organic sales, partly offset by currency effects of $300 million and acquisitions which added $50 million.
- Organic sales declined by 9.5%, in line with the overall decline in North American and European LVP of 9.4%.
- Organic sales of airbag products decreased by 10%, primarily due to a 16% drop in North American and a 9% decline in Western European LVP.
- Organic sales of seatbelt products declined by 9% despite market share gains in North America and strong LVP during most of the year in emerging markets.

Sales by region
- In Europe, where the Company generates more than half of net sales, organic sales declined by 12%, which was due to the 9% decline in LVP in Western Europe where the Company generates 90% of its European revenues. Sales were also affected by a negative vehicle model mix due to the change-over of some important vehicle models such as the Renault Megane and the Volkswagen Golf.
- Sales to Eastern Europe (e.g. Avtovaz in Russia) and with respect to small cars (e.g. BMW's Mini and Ford's Kuga) performed well until demand succumbed to the credit crisis in the fall.

- In North America, which accounts for almost one quarter of net sales, organic sales declined by 12%. This was less than the 16% decrease in North American LVP thanks to the Company's relatively low exposure to SUVs and other light trucks which dropped by 25% in production volumes.
- Instead, the Company benefited from increasing demand for some smaller cars such as Chevrolet's Malibu and Traverse; Buick's Enclave; and Saturn's Aura.

- In Japan, which accounts for just over one tenth of net sales, organic sales grew by 3% compared to the Japanese light vehicle production that declined by 1%. The Company's strong performance reflects rapidly growing installation rates for side curtain airbags.

- In the Rest of the World (RoW), which generates more than one tenth of net sales, organic sales declined by 2% primarily due to a 6% decrease in LVP in Korea, which is the dominant market for airbags and other safety systems in the RoW region.

Contracts
- In Sept. 2008, the Company announced that a new passenger airbag module is introduced on the 2009 Chevrolet Traverse, Saturn Outlook, GMC Acadia and Buick Enclave.

- In Oct. 2008, the Company announced that a new anti-sliding airbag will be first introduced in the new 2-door version of the 2009 Renault Megane. This vehicle will have anti-sliding airbags for both front-seat positions.

- In Oct. 2008, the Company announced that it will supply the second generation Night Vision system for the new BMW 7-Series. This system includes the world's first advanced pedestrian detection capability using a single far-infrared sensor.

- In Oct. 2008, the Company announced that a new thermoplastic material for steering wheels will be introduced on the 2009 Renault Megane, which replaces polyurethane as covering material on the steering wheel rim and other parts of the steering wheel armature.

Acquisitions
- In Jul. 2008, the Company has announced that it has agreed to acquire the automotive radar sensors business of Tyco Electronics Ltd. for 42 million USD. This part of the business unit , based in Lowell, Massachusetts, USA and Schweinfurt, Germany, designs and manufactures active radar sensor systems used in vehicle driver assist and safety applications for the global automotive market and is the development partner of Daimler for automotive radar sensor technology. Existing customers include BMW and Chrysler. (From a press release on Jul 29, 2008)

Restructuring
Action Program
- The Company announced in July 2008 " Action Program" that stepped up its restructuring efforts significantly.
- Targeted headcount reductions of 3,000 by the end of 2009. (NOTE: actions taken in response to the market development have now reduced headcount by nearly 5,900 as of Dec. 31, 2008.)
- At a cost of 75 million USD, the Program is expected to save 120 million USD in 2010
- Two plants are currently in the process of being closed as a part of the Program.
- These intensified restructuring activities will continue in 2009.

R&D Expenditures

-Of the $367 million in 2008, 80% was for projects and programs for which the Company has customer orders, typically related to vehicle models in development. The remaining 20% is not only for completely new innovations but also for improvement of existing products, standardization and cost reduction projects.

R&D Structure
- The Company has eleven technical centers worldwide
- In total, the Company has 4,000 engineers and related support people in R,D&E. This corresponds to more than 10% of total headcount.

New Technical Center in China
In 2008, the Company started the construction of a new larger technical center in Shanghai, China. This facility is expected to be completed by early 2009 and will eventually host over 200 engineers.

Product Development
New Passenger Airbag Module
- In Sept. 2008, the Company has developed a new passenger airbag module designed to reduce weight by up to 30% by using a unique fabric container for the folded airbag, instead of a conventional steel or plastic housing. The new passenger airbag module is introduced on the 2009 Chevrolet Traverse, Saturn Outlook, GMC Acadia and Buick Enclave. Other advantages include a simpler integration of the airbag into the dashboard of the vehicle. (From a press release on Sep 16, 2008)

Anti-sliding Airbag
In Oct. 2008, the Company has developed a new anti-sliding airbag, which is 60% or almost 1 kg lighter than the existing anti-sliding airbag, using a unique textile fabric for the airbag cushion. The new product will be first introduced in the new 2-door version of the 2009 Renault Megane. This vehicle will have anti-sliding airbags for both front-seat positions. (From a press release on Oct 1, 2008)

The Second Generation Night Vision System
In Oct. 2008, the Company announced that it has developed and will supply the second generation Night Vision system for the new BMW 7-Series. This system includes the world's first advanced pedestrian detection capability using a single far-infrared sensor. An infrared sensor adopted in the new BMW 7-Series scans the road for pedestrians more than two times further than the headlight range. Once a pedestrian is detected it is highlighted on the vehicle's Night Vision display. (From a press release on Oct 2, 2008)

New Material for Steering Wheels
- In Oct. 2008, the Company has developed a new material for steering wheels. The new patented thermoplastic material will be introduced on the 2009 Renault Megane, which replaces polyurethane as covering material on the steering wheel rim and other parts of the steering wheel armature. (From a press release on Oct. 3, 2008)

- After a strong capacity build-up during the last few years, especially in China and India, capital expenditures during 2009 are expected to continue to decline and stay within the range of $200 million to $250 million.

Overseas Investment
China
- In Apr. 2008, the Company has completed construction work for a new plant in Guangzhou, China, replacing its old leased facility. This new larger facility will enable the Company to better serve and increase deliveries to vehicle manufacturers located in southern China, primarily Japanese customers like Toyota, Nissan and Honda. The Company has now completed the construction of a new plant, for manufacturing of airbags and seatbelts. Phase I of this plant has a building area of 8,000 square meters (86,111 square feet) and required a capital expenditure of $6.5 million, including manufacturing lines.(From a press release on Apr. 8, 2008)