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5. Autoliv, Inc. Business Report FY ended 2015

Factors
1) Net Sales
-The Company's net sales fell 0.8% in the fiscal year ended December 31, 2015 to USD 9,169.6 million. The Company had organic sales growth in all regions of activity, resulting in total organic sales growth of 8%, excluding currency effects.

2) Operating Income
-In the fiscal year ended December 31, 2015, the Company's operating income was USD 727.8 million, an increase of 0.7% from the previous year. Causes for the increase in operating income include higher organic sales, improved product mix, and savings from raw materials. These gains were partially offset by investments made to improve capacity and promote growth.

3) Airbag products
-In the fiscal year ended December 31, 2015, sales of airbag products increased by 0.3% over the previous year to USD 5,036.2 million. Higher sales of replacement inflators, inflatable curtains, and steering wheels, partially offset by negative effects from currency exchange, lead to the increase in the segment's sales.

4) Seatbelt products
-Sales for seatbelt products decreased by 7.2% from the previous year to USD 2,599.1 million. Despite increased sales in Europe and North America, and the trend of more advanced, and higher value-added seatbelt systems, sales decreased due primarily to negative currency effects.

5) Passive safety electronics products
-The Company's passive safety electronics products had a year-over-year decrease of 0.9%, with sales of USD 923.2 million in the fiscal year ended December 31, 2015. Higher sales of passive safety electronics products in China and South Korea could not offset the decrease in sales caused by negative currency exchange effects.

6) Active safety products
-Sales for the Company's active safety products increased by 24.9% over the previous year to USD 611.1 million. The increase in sales stemmed from increased demand for driver assistance systems from Mercedes-Benz, as well as increased demand for vision systems from BMW. Negative currency effects partially offset these increases in sales.

Recent Developments

Sales in China
-The Company announced that its sales in China in 2014 reached USD 1.52 billion, up 8.3% on a year-over-year basis. The Company's Chinese operations currently supply their products solely to Chinese customers, but plan to export them to other markets in the future including Europe and the U.S. (From news releases issued by multiple sources on March 16, 2015)

Acquisitions

-The Company announced that it has completed the previously announced acquisition of the automotive business of M/A-COM Technology Solutions Holdings, Inc. (MACOM). MACOM's Automotive Solutions business was acquired for cash considerations of approximately USD 100 million, with an additional USD 30 million based on achievement of revenue-based earn-out targets through 2019. Based in Lowell, Massachusetts, U.S., MACOM's Automotive Solutions business focuses on the design, development and production of embedded GPS modules for the automotive industry. The Company expects to have this acquisition fully integrated in its Lowell facilities before the end of 2015. (From a press release on August 17, 2015)

Joint Ventures

-The Company announced that it has entered into a definitive agreement to establish a joint venture with Nissin Kogyo Co., Ltd., a Japanese supplier of braking systems. The joint venture will focus on brake control and brake application systems for the global light vehicle market. 51% of the joint venture will be owned by the Company, while the remaining 49% will be owned by Nissin Kogyo. With manufacturing facilities in Japan, China and the U.S., the joint venture will have approximately 2,000 employees. The joint venture will have three engineering sites and two test tracks with access to over 1,200 patents and other intellectual properties. The enterprise value of the joint venture is approximately JPY 65 billion. The Company expects the transaction to close in early Q1 2016. (From a press release on September 9, 2015)

Contracts

-Major contracts of launches in 2015

-Volkswagen AG selected the Company to supply a hydrogen passenger airbag inflator for the all-new Passat, which was released in Japan on July 16, 2015. The hydrogen airbag inflator is environmentally friendly and suitable for large airbags as it inflates faster than a gunpowder airbag inflator. Consequently, European OEMs are increasingly adopting hydrogen airbag inflators. Japan's High Pressure Gas Safety Act as related to automotive airbags was revised in January 2015, prompting other European OEMs to adopt hydrogen airbag inflators on their vehicles. (From an article in the Nikkan Jidosha Shimbun on July 17, 2015)

Awards

-The Company has earned Ford Motor Company's 2014 Safety Supplier of the Year and 2014 Gold Supplier of the Year for its facility in La Pobla de Vallbona, Spain. The facility in Spain conducts deployments tests and manufactures products including driver and passenger airbags, side airbags and inflatable curtain airbags. (From a press release on June 4, 2015)

-The Company announced that it has been awarded Toyota's Global Contribution Award. This is the fourth time the Company has received the award from Toyota. Additionally, the Company was also selected as a winner of the Superior Value Improvement Award. The Company supplies Toyota with airbags, seatbelts and steering wheels. In addition, its tech centers in Japan, North America, Europe and China support Toyota with design engineering expertise in automotive safety and with crash testing capabilities. (From a press release on March 12, 2015)

Outlook

-The Company expects that its sales for the fiscal year ending December 31, 2016 will grow more than 2%, with organic sales growth reaching approximately 5%.

-No single project accounts for over 2% of the Company's gross R&D expenditures.

R&D Structure

-The Company has more than 6,000 people working in research, development, and engineering. This constitutes approximately 11% of the Company's total employees.

R&D Facilities

-The Company has 21 technical centers in the following nine countries.

• China
• France
• Germany
• India
• Japan
• Poland
• Romania
• South Korea
• Sweden
• U.S.

R&D Activities

-The Company announced that it has joined the Drive Me project, the world's first large-scale autonomous driving initiative. Drive Me involves 100 self-driving Volvos being used by families and commuters on public roads in everyday driving conditions in the Swedish city of Gothenburg. The Company joins Volvo Car Group, the Swedish Transport Administration, the Swedish Transport Agency, Lindholmen Science Park, the City of Gothenburg and Chalmers University as partners in the project. The project began in 2013 and will have the first families on the roads of Gothenburg in 2017. (From a press release on September 30, 2015)

Product Development

Electronic Horizon road context module
-The Company announced the market introduction of its Electronic Horizon module which provides beyond-line-of-sight road context and information to safety and efficiency systems. The introduction of the Electronic Horizon module is a direct benefit of the Company's acquisition of MACOM's automotive business. The module utilizes road data from a digital map database, GNSS (GPS), and inertial sensors to provide precise vehicle positioning, and uses software algorithms to identify safety and energy efficiency attributes. Combined, these provide a predictive context of the road ahead. The Electronic Horizon module is credit-card sized and meets automotive safety specifications while operating independently from any other onboard system. (From a press release on October 7, 2015)

Torricelli vacuum braking system
-The Company is showcasing a totally new vacuum braking system, the Torricelli brake, developed to significantly reduce stopping distance for Autonomous Emergency Braking (AEB) systems. The Torricelli brake features a vacuum induced plate below the vehicle which sucks down into the track during emergency braking. Tests have proven that the Torricelli brake decreases braking distances by approximately 40% in speeds up to 70 kph. (From a press release on June 11, 2015)

Patents

-As of December 31, 2015, the Company holds more than 6,600 patents covering a wide range of innovations and products in automotive safety and key supporting technologies.

Outlook

-The Company expects to invest between 6.0-6.5% of its net sales in research and development for the fiscal year ending December 31, 2016.

-The Company's capital expenditures for the fiscal year ending December 31, 2016 are expected to be approximately 5% of net sales for the year.