Financial Overview

in million dollars	FY2009	FY2008	Rate of change(%)	Factors
Sales	5,121	6,473	(21%)	See note "Sales" below
Operating income	69	306	(78%)

 

Factors
Sales
- Net sales for 2009 decreased by 21% due to an 18% decline in organic sales and 4% negative currency effect.

- Organic sales decline of 18% was 5% points (p.p.) more than the decline in global light vehicle production (LVP) in the Triad (i.e.North America, Europe and Japan) where the Company generates more than 80% of sales.

- Organic sales of airbag products decreased by 18%, mainly due to the 26% drop in LVP in the triad which is the primary market for airbags. However, in the Rest of the World region, airbag sales continued to grow from a low level.

- Organic sales of seatbelt products declined by 17% which was 4 percentage points more than the decline in global LVP. This reflects the sharp LVP drops in North America of 32% and Western Europe of 19%, exacerbated by the fact that seatbelts for these markets are more sophisticated with a higher value than a global-average seatbelt. These negative effects were partially offset by new business, mainly in the booming Chinese market.

Sales by region
-In Europe, where the Company generates almost half of net sales, organic sales declined by 21%, in line with the 21% decline in European LVP.

-In North America, which accounts for almost one quarter of net sales, organic sales declined by 18%. This was 14 percentage points less than the 32% drop in North American LVP, primarily due to new business for Ford’s F-Series; Chevrolet’s Traverse and Equinox; and Toyota’s Rav4 and Venza.

-In Japan, which accounts for less than one tenth of net sales, organic sales fell by 42%. This was due to a general decline in Japanese LVP of 30%, exacerbated by an even sharper drop for vehicles with high safety content for export markets in North America and Western Europe.

-In the Rest of the World (RoW), which generates more than one sixth of net sales, organic sales grew by 20% compared to a 13% increase in the
region’s LVP. Autoliv’s strong performance reflects new launches in primarily China and India where LVP grew by 48% and 17%, respectively. This favorable effect was partially offset by an 8% decline in LVP in the important Korean market.

Contracts

- In March 2010, the Company announced its Estonian subsidiary Aktsiaselts Norma (Norma) supplies automotive safety products for the Russian market and assembles seatbelts for Volvo as a subcontractor to the Company. (From a press release on March 1, 2010)

- In Dec. 2009, the Company was awarded the safety products for the smart from Daimler. (From a press release on December 7, 2009)

Acquisitions

Visteon
- The Company acquired Visteon's radar system business. (From a press release on March 4, 2010)

Delphi
- The Company would acquire Delphi's Occupant Protection Systems (OPS) operations in Korea and China. Existing customers include Hyundai-Kia, Chery and Tata. These operations are expected to generate approximately 250 million USD of annualized sales in 2010. The Asian transaction is expected to close by March 31, 2010. In the fourth quarter 2009, Autoliv separately acquired assets related to Delphi's OPS assets in Europe and North America. (From a press release on January 28, 2010)

- The Company would acquire North American passive safety systems assets from Delphi. Delphi's North American airbag and seatbelt assets would be consolidated into existing Autoliv facilities during the next several months. Under the agreement, Autoliv would acquire Delphi's steering wheel operations in Matamoros, Mexico. Existing customers for these safety products businesses include General Motors, Hyundai, Ford, Daimler and Navistar with expected combined sales of approximately 125 million USD in 2010. The transaction was expected to close by December 31, 2009. (From a press release on November 17, 2009)

Autoliv Nichiyu, Joint Venture in Japan

- The Company agreed to buy the outstanding 40% of shares in its Japanese joint venture Autoliv Nichiyu Co., Ltd. The joint venture, which is one of Autoliv's five manufacturing facilities in Japan, primarily produces airbag inflators for the Japanese domestic market. Autoliv Nichiyu Co., Ltd will be re-named Autoliv Aichi Co., Ltd and have annual sales of approximately $35 million of which virtually all is internal sales to other Autoliv companies.(From a press release on January 20, 2010)

Aktsiaselts Norma (Norma), Estonian subsidiary

- The Company announced its intention to make a cash offer for all outstanding shares not owned by the Group in its 51%-owned Estonian subsidiary Aktsiaselts Norma (Norma). Total cost for the 49% outstanding shares amounts to approximately 50 million USD. Norma is a supplier of automotive safety products for the Russian market and assembles seatbelts for Volvo as a subcontractor to the Company. (From a press release on March 1, 2010)

 

Restructuring

- Autoliv announced that it will shut down four plants as a part of its global action program. Autoliv has started to transfer the steering wheel operations from its factory in Queretaro, Mexico location to its facility in Matamoros, Mexico, for manufacturing consolidation. This transition will take place over the coming months. In France, the steel stamping facility, which was acquired from French supplier NPC in January 2009, will be closed early 2010. Also, the seatbelt assembly plant in Tunisia will be closed and most of the production transferred to Turkey. In addition, the company's steering wheel logistics center in Germany will be closed. Over 800 employees will be affected by these plans. (From a press release on December 21, 2009)

R&D Expenditures

in million $	2009	2008	2007
R&D expenditure	322	367	396

-Of the $322 million in 2009, 74% was for projects and programs for which the Company has customer orders, typically related to vehicle models in development. The remaining 26% was not only for completely new innovations but also for improvement of existing products, standardization and cost reduction projects.

R&D Structure

- The Company has technical centers in nine countries worldwide.

- In total, the Company has 3,600 engineers and related support people in R,D&E. This corresponds to more than 10% of total headcount.

Pre-crash and Active Safety Systems
The Company opened a new test facility for pre-crash and active safety systems in Vargarda, Sweden. In this facility, the company can perform and evaluate different systems based on radar, laser, vision sensors. (From a press release on October 26, 2009)

New Technical Center in China
In 2009, the Company opened a new larger technical center in Shanghai, China. This facility hosted over 200 engineers.

Product Development

Next Generation Alcohol Sensing System
The Company will develop next generation alcohol sensing system using infrared spectroscopy technology to detect alcohol within an arm-length of the driver. The Company is working closely with sensor products manufacturers in Sweden - SenseAir AB and Hok Instrument AB. (From a press release on December 10, 2009)

New Reversible Pre-pretsnsioner System for Seatbelts
The Company developed new reversible pre-pretensioner system for seatbelts. The system will pull back the occupants during the first impact to allow more optimum protection from the airbags and seatbelts in secondary impacts. The belt pretensioning force comes from a compressed air motor and generates more than twice the tension forces provided by conventional electric pre-pretensioners. (From a press release on Jun. 16, 2009)

in million $	FY2009	FY2008	FY2007
Investment	140	293	324
% against sales	2.7	4.5	4.8

- Capital expenditures in the range of $200 -250 million are expected for 2010, in line with our expectation of approximately 4% of sales.

Domestic Investment

- In Nov. 2009, the Company opened a new test facility for pre-crash and active safety systems in Vargarda, Sweden. In this facility, the company can perform and evaluate different systems based on radar, laser, vision sensors. (From a press release on October 26, 2009)

Overseas Investment

Japan
Autoliv Japan is expanding its plant and technical center in Tsukuba, Japan. This expansion will accommodate the transfer of automotive seatbelt production and development operations from its leased facility in Fujisawa, Japan. The seatbelt operations will be combined with existing airbag operations to create a consolidated automotive restraints full-service safety center in Tsukuba. The 7,400 square meter addition will bring the facility to a total of nearly 20,000 square meters. The expansion and integration process is expected to be complete by the end of third quarter 2010. (From a press release on January 22, 2010)