Making Driving Safer Content
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Annual Report 2010 Making Driving Safer Content 03 Summary 04 President's Letter 07 Autoliv's Targets 08 Autoliv in Brief 10 Safety Systems 16 Innovations 17 Responsibility 22 Global Presence 24 The Market 26 Manufacturing & Purchasing 28 Quality 30 Shareholders FINANCIALS 34 Content 35 Management’s Discussion and Analysis 51 Management’s Report 52 Consolidated Statements of Income 53 Consolidated Balance Sheets 54 Consolidated Statements of Cash Flows 55 Consolidated Statements of Total Equity 56 Notes to Consolidated Financial Statements 8 7 Auditor’s Reports 79 Glossary and Definitions 80 Corporate Governance 82 Board of Directors 83 Executive Management Team 84 Contact Information & Financial Calendar 85 Multi-Year Summary Reader’s Guide Financial Information Autoliv Inc. is incorporated in Delaware, USA, and follows Every year, Autoliv publishes an annual report and a proxy The annual and quarterly reports, the proxy statement and Generally Accepted Accounting Principles in the United States statement prior to the Annual General Meeting of sharehold- Autoliv’s filings with the SEC as well as the Company’s Cor- (U.S. GAAP). This annual report also contains certain non-U.S. ers, see page 32. porate Governance Guidelines, Charters, Codes of Ethics and GAAP measures, see page 38 and page 49. All amounts in this The proxy statement provides information not only on the other documents governing the Company can be downloaded annual report are in U.S. dollars unless otherwise indicated. agenda for the meeting, but also on the work of the Board from the Company’s corporate website. Hard copies of the “We”, “the Company” and “Autoliv” refer to “Autoliv Inc.” and its committees as well as on compensation paid to and above-mentioned documents can be obtained free of charge as defined in Note 1 “Principles of Consolidation” on page 56. presentation of directors and certain senior executive officers. from the Company at the addresses on page 84. For forward-looking information, refer to the “Safe Harbor For financial information, please also refer to the Form Statement” on page 45. 10-K and Form 10-Q reports and Autoliv’s other filings with Data on markets and competitors are Autoliv´s estimates the Securities and Exchange Commission (SEC) and the New (unless otherwise indicated). The estimates are based on or- York Stock Exchange (NYSE). These filings (including the CEO/ ders awarded to us or our competitors or other information CFO Section 302 Certifications, Section 16 Insider Filings, put out by third parties as well as plans announced by vehicle and the 2010 CEO Certific ation to the NYSE) are available at manufacturers and regulatory agencies. www.autoliv.com under Investors/Filings and at www.sec.gov. Summary / AUTOLIV 2010 03 2010 in Summary (DOLLARS IN MILLIONS, EXCEPT AS INDICATED) 2008 2009 2010 Highest ever Net sales $6,473 $5,121 $7,171 √ Gross profit 1,124 848 1,592 √ Operating income 306 69 869 √ Income before taxes 249 6 806 √ Net income1) 165 10 591 √ Earnings per share in $ 2.28 0.12 6.39 √ Gross margin (%) 17.4 16.6 22.2 √ Operating margin (%) 4.7 1.3 12.1 √ Cash flow from operations 614 493 924 √ Return on total equity (%) 7.3 0.5 22.3 √ 1) Attributed to controlling interest. Net Sales vs LVP Operating Income & Margin Cash Flow US$ (MILLIONS) US$ (MILLIONS) US$ (MILLIONS) 100 14.0 7,171 924 6,769 869 6,473 6,188 781 75 71,58 10.5 700 5,121 520 614 560 502 493 50 7.0 467 306 334 362 265 25 3.5 69 0 0 1009080706 06 10090807 1009080706 Consolidated sales Operating income Cash flow, total Global Light Vehicle Production (million units) Operating margin (%) Cash flow, net after capex Consolidated sales rose by 40% in 2010 to a Operating margin improved by 11 percent- Operations generated $924 million in new record high of $7.171 million and age points to 12.1% in 2010, which was 2 cash, $143 million more than in the organic sales (non U.S. GAAP see page 38) percentage points higher than the previous previously best year 2007. After capital rose by 31% compared to a 25% increase in record from 1997 (on a comparable basis). expenditures net of $224 million, free cash global light vehicle production (LVP). Since Operating income improved by $800 million flow (non U.S. GAAP, see definition on 2006 Autoliv’s sales have increased by 16% to $869 million which was 67% higher than page 79) amounted to $700 million, which while global LVP has increased by 10%. the previous record from 2006. was $233 million more than in 2007. 04 AUTOLIV 2010 / President's Letter A Record Year 2010 WAS A RECORD YEAR FOR AUTOLIV. Our company sur- continued during 2009 and 2010 in high-cost countries (HCC), passed several previous records, such as: particularly for indirect personnel in overhead functions, to maintain and improve the cost reductions we had achieved. • 6% higher SALES than 2007 Despite these substantial headcount reductions, we launched a new R&D project (for small car safety) in the midst of the crisis. • 31% higher EARNINGS PER SHARE than 2006 In parallel with the decrease of permanent employees in • 18% higher OPERATING CASH FLOW than 2007 HCC, we expanded in low-cost countries (LCC), particularly in direct manufacturing personnel, to ensure that Autoliv would • 12% OPERATING MARGIN compared to 10% in 1997 be well prepared for the rebound of these markets. In summary, These records reflect our swift restructuring efforts, which we reduced headcount in HCC by 21% and expanded headcount significantly reduced our Company’s cost base and helped in LCC by 26% from the 2007 levels. transform our Company's global footprint to take advantage As a result, Autoliv had 63% of total headcount in LCC at the of the dramatic shift that global light vehicle production (LVP) end of 2010 compared to 52% at the end of 2007. In addition, has undergone since 2007. 20% of headcount were temporary personnel and 30% were indirect personnel in overhead functions compared to 16% and Shifts in Global LVP 34%, respectively. This gives us more flexibility, an even better In 2010, the global LVP rebounded from its precipitous drop to presence in the fastest growing markets, and a significantly an annualized run rate of only 45 million at the low point of the better cost structure with a lower break-even point. crisis and reached a record high of nearly 72 million vehicles. While the 2010 LVP level exceeded its 2007 pre-crisis peak, Reduced Cost Base the geographical mix has changed dramatically, as illustrated Following this transformation, we estimate that Autoliv can by the graph below. LVP has dropped by nearly 20% in Europe, reach its break-even point at a sales level that is approximately North America and Japan (“The Triad”) where we used to gen- $0.8 billion lower than since the crisis. erate more than 80% of revenues. This decline was more than This is mainly due to lower labor costs. In relation to sales, offset by the Rest of the World (RoW) where LVP has increased we have reduced these costs by nearly 4 percentage points by more than 50%. The markets in China and India stand out by (see graph). However, this not only reflects our restructur- increasing LVP by 109% and 66% compared to the 2007 levels. ing actions and strategic moves to LCC but also includes To take full advantage of the growth opportunities primarily productivity improvements of 6% in manufacturing in every in China, India and Thailand, we are allocating more than 60% year during 2008–10, which is in line with our target of at in our expansion-related capital expenditures to our growth least 5% per year. markets, even though these markets "only" accounted for Another major improvement in our cost structure is the approximately 20% of sales in 2010 (despite the very rapid reduction in depreciation due to plant closures in high-cost sales increases in recent years). Additionally, we have made countries. New manufacturing capacity required in response acquisitions to strengthen our position in Asia and with the local Asian vehicle manufacturers (see "Stronger than ever" on the next page). As a result, Autoliv now has virtually one third of sales in Global Light Vehicle Production each of our three regions Europe, North America and Asia US$ (MILLIONS) including Japan. At the end of 2010, China accounted for 13% Total: 71.6 of sales compared to 4% in 2007. Consequently, not only has Total: 68.5 +53% Autoliv's geographical sales mix become better balanced, but 20.9 we have improved our Company's position in areas where LVP 32.0 is expected to grow the most over the next few years. 10.8 -17% 8.9 Company Transformation 47.6 21.7 We initiated our action program already in July 2008. We were 18.7 39.6 therefore well positioned to expand and accelerate the program when the crisis fully developed after the Lehman Brothers bank- 15.1 12.0 ruptcy in September 2008. 2007 2010 This enabled us to adjust headcount by nearly 10,000 or North America Japan close to 25% already within nine months. These adjustments Europe Rest of the World 05 In conclusion, Autoliv has “ emerged as one of the winners from the crisis; stronger and more efficient than ever ” to the increased LVP has been concentrated in LCC, where the "Stronger than ever" costs for buildings and machinery are lower and where less Our improved market position and cost structure have resulted capital-intensive manufacturing processes and automation in a very healthy cash flow.