Market Overview
During the fourth quarter 2008, global light vehicle production (LVP) is estimated by CSM and J.D. Power to have decreased by more than 20% while LVP in the Triad, where Autoliv generates close to 90% of its sales, dropped by approximately 25% compared to the same quarter 2007.
In Europe (including Eastern Europe), where Autoliv derives more than half of its revenues, LVP is estimated to have dropped by almost 30% according to preliminary figures. The important Western European market is estimated to have declined by approximately 30% and the Eastern market by close to 25%. The overall European LVP ended more than 20 percentage points weaker than expected at the beginning of the fourth quarter 2008.
In North America, which accounts for almost one quarter of consolidated revenues, LVP dropped by 26% which was 7 percentage points worse than expected at the beginning of the quarter. Light truck production decreased by 38% and car production by 10%. GM cut their production by 23%, Ford their production by 29% and Chrysler their production by 37%. The Asian and European vehicle manufacturers reduced their production in the region by 22%.
In Japan, which accounts for about one tenth of Autoliv’s consolidated sales, LVP was reduced by 18%. This
reduction affected particularly the manufacturing levels for vehicles with higher safety content, for instance, vehicles for export to markets in North America and Western Europe.
In the Rest of the World (RoW), which accounts for more than one tenth of sales, LVP was expected to be flat but declined instead by 12%. This decline affected particularly China as well as export vehicles for North America and Western Europe with higher safety content. Autoliv’s market is driven not only by vehicle production but also by the fact that vehicles are being equipped with more safety systems in response to new crash test programs and regulations. For instance, next month a more stringent crash-test rating program will be introduced by EuroNCAP. In the U.S., a similar revision of NHTSA’s crash-test rating program has been finalized and will be implemented by the fall of 2010.
Outlook
Additionally, LVP levels during the first quarter will be affected by substantial inventory reductions, and could turn out to be the low point for the year. Provided that these trends and assumptions prevail, it could be possible to report a positive operating income excluding restructuring costs later in the year, and potentially even for the full year 2009.
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