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MarketScreener Homepage  >  Equities  >  Nyse  >  Autoliv, Inc.    ALV

AUTOLIV, INC.

(ALV)
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AUTOLIV : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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07/17/2020 | 09:53am EDT
The following discussion and analysis should be read in conjunction with our
Condensed Consolidated Financial Statements and accompanying Notes thereto
included elsewhere herein and with our Annual Report on Form 10-K for the year
ended December 31, 2019 filed with the United States Securities and Exchange
Commission (the "SEC") on February 21, 2020. Unless otherwise noted, all dollar
amounts are in millions.

Autoliv, Inc. ("Autoliv" or the "Company") is a Delaware corporation with its
principal executive offices in Stockholm, Sweden. The Company functions as a
holding corporation and owns two principal operating subsidiaries, Autoliv AB
and Autoliv ASP, Inc.

Through its operating subsidiaries, Autoliv is a supplier of automotive safety systems with a broad range of product offerings, including modules and components for passenger and driver airbags, side airbags, curtain airbags, seatbelts and steering wheels. Autoliv is also a supplier of anti-whiplash systems, pedestrian protection systems and child seats.


Autoliv's filings with the SEC, including this Quarterly Report on Form 10-Q,
annual reports on Form 10-K, current reports on Form 8-K, proxy statements and
all of our other reports and statements, and amendments thereto, are available
free of charge on our corporate website at www.autoliv.com as soon as reasonably
practicable after such material is electronically filed with or furnished to the
SEC (generally the same day as the filing).



The primary exchange market for Autoliv's securities is the New York Stock
Exchange (NYSE) where Autoliv's common stock trades under the symbol "ALV".
Autoliv's Swedish Depositary Receipts (SDRs) are traded on Nasdaq Stockholm's
list for large market cap companies under the symbol "ALIV SDB". Options in SDRs
trade on Nasdaq Stockholm under the name "Autoliv SDB".  Options in Autoliv
shares are traded on Nasdaq OMX PHLX and on NYSE Amex Options under the symbol
"ALV".


Autoliv's fiscal year ends on December 31.

EXECUTIVE OVERVIEW


The challenges the Company managed in the second quarter were unprecedented. The
COVID-19 pandemic is first and foremost a human crisis, where safeguarding
health and safety is the Company's first priority and its global Smart Start
Playbook has been instrumental to the Company in safely restarting its
operations. The Company has a solid organization that managed to reduce costs
and safely restart operations while continuing to execute on the Company's
long-term strategy.

The pace and scope of the demand decline coupled with a volatile ramp-up had a
significant impact on the Company's financial performance in the second quarter.
The Company's largest markets Americas and Europe were virtually standing still
in April, followed by a restart and ramp-up in May and June. Daily adjustments
were needed to respond to a low and volatile customer demand, including
headcount reductions of 3,700 since March, furloughing personnel and significant
reductions in capital expenditures and discretionary spending.

It is essential that the Company balance the cost reduction responses against
the need for capacity to manage the recovery that started mid-quarter and
continues into the first weeks of July. The Company also need to preserve
capacity for the new normal market demand and its expected outgrowth. The
Company is confident that the actions implemented and planned are positioning it
well to benefit from any demand recovery.

The Company's sales declined slightly more than global LVP, which declined
almost 50% in the second quarter compared to the same quarter of the previous
year. The Company's organic sales development was better than LVP in all regions
but because high safety content markets declined more than low safety content
markets, the sales mix was unfavorable.

Encouragingly, operating cash flow turned positive in June. It is also positive
that the Company's customers´ sourcing activities and model launch plans are
close to unchanged. The Company's engineering support for these activities
remains high, even though there are some limited new model launch delays. The
order intake for the first half year was in line with last year.

The Structural Efficiency Program (SEP) launched last year was close to complete
at the end of the second quarter of 2020. As the next step, the Company has
launched a second SEP, or SEP2, during the second quarter of 2020. The Company
also seeks to continue the strategic initiatives and structural improvement
projects outlined at its Capital Markets Day in 2019. The ambition is to ensure
that the Company has an adequate cost structure supporting its medium-term
profitability targets in a reduced LVP environment, although the additional
challenge could mean more time is needed to reach the Company's targets.



Financial highlights in the second quarter of 2020

$1,048m net sales

48% organic sales decline (non-U.S. GAAP measure)

                                       18

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(22.3)% operating margin

$(2.00) EPS - a decrease of $3.25

Key business developments in the second quarter of 2020

• Organic sales (non-U.S. GAAP measure) declined 2.6pp more than the global

light vehicle production declined, with the negative regional mix offsetting

the Company's outperformance within each of the regions. April sales declined

year-over-year organically by 65%, May by 55% and June by 20%. Order intake in

the first half year was in line with last year and supportive of prolonged

   sales outperformance.



• Profitability and cash flow negatively impacted by customer plant closures and

a volatile industry ramp up, and by continued high engineering activity

preparing for future model launches. Our liquidity position remains strong

with $1.7 billion in cash and committed, unused loan facilities. Operating

   cash flow was $128 million negative in the second quarter, but it turned
   positive in June.



• Substantial cost reductions with short- and long-term effects includes

reduction of personnel costs by 25% compared to the first quarter, and

launching SEP2, which targets additional annual employee cost reductions of

around $65 million. Further potential structural cost reductions, including

   footprint, remain under evaluation.



COVID-19 Pandemic Related Business Update




Autoliv is navigating the same challenges that many other companies are facing
in managing and forecasting the overall impact the COVID-19 pandemic is having
on the automotive industry. In this environment, on April 2, 2020, the Company
withdrew its previously issued 2020 guidance until the effects of the pandemic
can be better assessed.

First half of 2020

The COVID-19 pandemic had a substantial impact on our operations already in the
first quarter, particularly in China, where most of our customers' plants were
closed for several weeks in February and operated at low levels in March. In
Europe and North America, sales declined substantially in the second half of
March as the pandemic led to customer plant closures. A large number of customer
plants were closed in April and parts of May, followed by a ramp-up in June.
According to IHS, global light vehicle production (LVP) declined by 22% in Q1
2020 compared to Q1 2019, and by 45% in Q2 2020 compared to Q2 2019. In addition
to the decline in global LVP, the slow and volatile restart and ramp-up of
production had a significant impact on our sales and profitability in the first
half of 2020.

Liquidity and management actions to manage this challenging period

• In response to ongoing volatility and uncertainty, the Company canceled the

dividend in Q2 2020 and suspended future dividends; although, the Board of

Directors will review such suspension on a quarterly basis. In addition, the

Company drew down $1.1 billion of cash on its existing Revolving Credit

Facility (RCF) in two tranches in March and April and secured SEK 6 billion

($0.6 billion) in loans from Swedish Export Credit Corporation in May, which

was primarily used to pay down $0.5 billion of the RCF. The cash balance and

unutilized, committed credit facilities amounted to approximately $1.7 billion

as of June 30, 2020, which provides the Company with a healthy liquidity

position as debt maturities are $218 million in 2020 and $275 million in 2021.

Capital expenditures were also reduced year-over-year by 50% in Q2 2020.

• The Company's executives voluntarily agreed to reduce their base salaries by

20% for Q2 2020 and non-employee board members agreed to reduce their cash

compensation by 20% for Q2 2020.

• The Company reduced headcount by 5.6% during Q2 2020 compared to Q1 2020. The

Company also instituted strict inventory control, close monitoring of

receivables and close collaboration with suppliers to navigate the ongoing

volatility due to COVID-19. In addition, the Company adjusted production and

   work week hours due to rapid changes in demand, reduced or suspended
   discretionary spending that was not critical for daily operations and
   accelerated cost saving initiatives and furloughed personnel, many in
   government supported programs.

• The Structural Efficiency Program I (SEP1) was close to complete at the end of

Q2 2020 and the Company launched SEP2 in Q2 2020. SEP1 was launched in Q2 2019

and reduced the indirect workforce by around 800 employees. SEP1 cost the

Company approximately $52 million; however, annual savings from SEP1 are

approximately $60 million. SEP2 targets an additional reduction of

approximately 900 indirect workers and $65 million in annual savings for the

Company. SEP2 is targeted to be completed in 2021 and is estimated to cost the

Company approximately $65 million. The costs for SEP1 and SEP2 are included in

our capacity alignment adjustments.

• Based on the Company's Smart Start Playbook, developed for its ramp-up

following COVID-19 related shutdowns, the Company has invested in employee

safety equipment, re-designed production lines and work places as necessary,

and adapted new processes for interactions with its suppliers and customers to

   safely manage the restart and ramp-up of the Company's


                                       19
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operations. Direct COVID-19 related costs, such as personal protective

equipment, temporary supplier support and premium freight was approximately

   $10 million in Q2 2020.




Second half of 2020

In all regions around the world, the automotive industry, including Autoliv, are
in different stages of ramp-up of operations. This is a positive trend, but with
certain challenges, as global LVP is expected to still be below 2019 levels and
there is still high volatility in customer call-offs. The high volatility and
thus low volume predictability have a negative impact on operational efficiency,
including cost and capital efficiency. The volatility has gradually declined but
is still higher than normal in all regions. As communicated earlier, the Company
also expects second half 2020 profitability headwinds from lower inflator
replacement sales, costs relating to investments in the factory of the future
and higher depreciation and amortization. The Company expects profitability
tailwinds in the second half year from cost reduction actions such as the
Structural Efficiency Programs and strategic initiatives outlined at the Capital
Markets Day in 2019, execution of the strong order book and lower raw material
costs.





Next steps

While we continue to focus on cost reduction actions, we are ramping up
production in coordination with our customers and suppliers. Although visibility
is limited, below is a summary of our current view of our three most important
regions.



China: OEMs returned to pre-crisis production levels in the second quarter, with
7% year-over-year growth in LVP according to IHS. China Association of
Automotive Manufacturers reported that Q2 2020 retail sales were 7.1% above Q2
2019.



Europe: LVP improved gradually from April's year-over-year decline of 93% to 61%
in May and 29% in June. Car registrations in Western Europe improved during the
quarter but June was still around 22% below a year earlier, as dealers in large
parts of Europe did not re-open until late May or in June. The production rate
will likely continue to be volatile for the next few months at least, with
reduced shifts to adapt to uncertain demand and component availability.



North America: LVP improved gradually from April's year-over-year decline of 99%
to 85% in May and 26% in June. Light vehicle sales improved during the quarter
from a SAAR of 8.6 million in April to 12.3 million in May and 13.1 million in
June. Retail sales were significantly stronger than fleet sales, as large fleet
buyers such as rental companies are not yet buying in large volumes. Dealer
inventories at the end of June were low, at 2.6 million, or 59 days of supply,
and there is scope for demand support from inventory build-up in the next few
months.




Non-U.S. GAAP financial measures


Some of the following discussions refer to non-U.S. GAAP financial measures: see
reconciliations for "Organic sales", "Operating working capital", "Net debt",
"Leverage ratio", "Adjusted operating income", "Adjusted operating margin" and
"Adjusted EPS" provided below. Management believes that these non-U.S. GAAP
financial measures provide supplemental information to investors regarding the
performance of the Company's business and assist investors in analyzing trends
in the Company's business. Additional descriptions regarding management's use of
these financial measures are included below. Investors should consider these
non-U.S. GAAP financial measures in addition to, rather than as substitutes for,
financial reporting measures prepared in accordance with U.S. GAAP. These
historical non-U.S. GAAP financial measures have been identified as applicable
in each section of this report with a tabular presentation reconciling them to
the most directly comparable U.S. GAAP financial measures. It should be noted
that these measures, as defined, may not be comparable to similarly titled
measures used by other companies.

                                       20

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RESULTS OF OPERATIONS

Overview

The following table shows some of the key ratios management uses internally to
analyze the Company's current and future financial performance and core
operations as well as to identify trends in the Company's financial conditions
and results of operations. We have provided this information to investors to
assist in meaningful comparisons of past and present operating results and to
assist in highlighting the results of ongoing core operations. These ratios are
more fully explained below and should be read in conjunction with the
consolidated financial statements in our Annual Report on Form 10-K and the
unaudited condensed consolidated financial statements in this Quarterly Report
on Form 10-Q.

                                   KEY RATIOS

                  (Dollars in millions, except per share data)



                                              Three months ended           Six months ended
                                               or as of June 30            or as of June 30
                                              2020          2019           2020        2019
Total parent shareholders' equity per
share                                      $    22.24$   23.21$    22.24$   23.21
Capital employed 1)                             3,793         3,849          3,793       3,849
Net debt 2)                                     1,838         1,811          1,838       1,811

Operating working capital 2)                      498           645            498         645
Operating working capital relative to
sales, % 10)                                      7.0           7.5            7.0         7.5

Gross margin, % 3)                                1.4          18.6           11.9        18.0
Operating margin, % 4)                          (22.3 )         7.9           (3.4 )       7.9

Return on total equity, % 5)                    (34.9 )        21.8           (9.7 )      22.4
Return on capital employed, % 6)                (25.0 )        18.3         

(5.3 ) 18.9


Headcount at period-end 7)                     61,800        65,700         

61,800 65,700


Days receivables outstanding 8)                   104            72             75          72
Days inventory outstanding 9)                      74            35             53          35




1) Total equity and net debt.

2) See tabular presentation reconciling this non-U.S. GAAP measure to U.S. GAAP

below under the heading "Liquidity and Sources of Capital".

3) Gross profit relative to sales.

4) Operating (loss) income relative to sales.

5) Net (loss) income relative to average total equity.

6) Operating (loss) income and income from equity method investments, relative to

average capital employed.

7) Employees plus temporary, hourly personnel.

8) Outstanding receivables relative to average daily sales.

9) Outstanding inventory relative to average daily sales.

10) Latest 12 months of net sales. For 2019 excluding EC antitrust non-cash

provision.



THREE MONTHS ENDED JUNE 30, 2020 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2019





Consolidated Sales



                            Three months ended June 30                                   Components of change in net sales
                                                                                        Currency
                               2020               2019         Reported change         effects 1)                 Organic 3)
Airbags and other 2)      $        653.8$  1,435.7                 (54.5 )%              (3.4 )%                   (51.1 )%
Seatbelts 2)                       393.8            719.0                 (45.2 )%              (4.1 )%                   (41.1 )%
Total                     $      1,047.6$  2,154.7                 (51.4 )%              (3.6 )%                   (47.8 )%

Asia                      $        587.9$    757.7                 (22.4 )%              (2.4 )%                   (20.0 )%
Whereof:   China                   366.4            349.5                   4.8 %               (3.7 )%                     8.5 %
Japan                              104.6            191.1                 (45.3 )%               2.1 %                    (47.4 )%
Rest of Asia                       116.9            217.1                 (46.2 )%              (4.5 )%                   (41.7 )%
Americas                           213.4            758.1                 (71.9 )%              (5.3 )%                   (66.6 )%
Europe                             246.3            638.9                 (61.4 )%              (3.1 )%                   (58.3 )%
Total                     $      1,047.6$  2,154.7                 (51.4 )%              (3.6 )%                   (47.8 )%



1) Effects from currency translations.

                                       21

--------------------------------------------------------------------------------

2) Including Corporate and Other sales.


3) Non-U.S. GAAP measure.




Sales by product - Airbags

Sales of all our different airbag products except textiles declined organically
(non-U.S. GAAP measure) by between 40% and 80% in the second quarter. Textiles
increased organically by 40%, reflecting new sales of textiles for manufacturing
of personal protection equipment. Inflator sales declined organically by around
75%.

Sales by product - Seatbelts

Seatbelt sales organic decline (non-U.S. GAAP measure) broadly reflected the
regional sales declines, with seatbelt sales in China growing organically by 12%
while organic seatbelt sales in all other regions declined by between 17% and
76%.

Sales by Region

The Company's global organic sales (non-U.S. GAAP measure) declined by 47.8%
compared to the LVP decline of 45.2% (according to IHS). Sales declined
organically in all regions except China, which was up by 8.5%. The largest
organic sales decline drivers were Americas and Europe, followed by Japan and
Rest of Asia. Our organic sales development outperformed LVP in all regions - by
almost 11pp in Asia excluding China, by more than 5pp in Americas, by around 3pp
in Europe and by 1.6pp in China. Despite outperforming in all regions, our sales
did not outperform on a global level because markets with high safety content
per vehicle such as North America and Europe, declined significantly more than
markets with lower safety content per vehicles such as China which lead to the
automotive safety market declining significantly more than LVP.



Q2 2020 Organic growth1)    Americas          Europe             China             Japan             Rest of Asia             Global
Autoliv                          (66.6 )%         (58.3 )%             8.5 %           (47.4 )%                (41.7 )%            (47.8 )%
                                                                 VW, Ford,
Main growth drivers           Textiles        Inflators            Toyota,     Honda, Suzuki                 Renault       BYD, Textiles
                                                              Mazda, Honda
                           FCA, Honda,              VW,                          Mitsubishi,                                FCA, Nissan,
                               Nissan,         Renault,            Nissan,           Toyota,            Hyundai/Kia,        Honda, Ford,
Main decline drivers         Ford, GM,         Daimler,          Inflators            Mazda,         Suzuki, Toyota,         VW, Toyota,
                             Inflators        PSA, BMW,                              Nissan,       Mitsubishi, Isuzu        Hyundai/Kia,
                                              Ford, FCA                               Subaru                                 GM, Renault






1) Non-U.S. GAAP measure.




Light Vehicle Production Development

Change vs. same quarter last year




                      Americas        Europe          China          Japan        Rest of Asia        Global
LVP1)                     (71.8 )%       (61.2 )%          6.9 %       (47.4 )%           (60.7 )%       (45.2 )%
1) Source: IHS
July 2020.




                                       22
--------------------------------------------------------------------------------

Earnings



                                                      Three months ended June 30
(Dollars in millions, except per share data)           2020                2019            Change
Net Sales                                          $     1,047.6$   2,154.7           (51.4 )%
Gross profit                                                14.4              399.7           (96.4 )%
% of sales                                                   1.4 %             18.6 %         (17.2 )pp
S, G&A                                                     (98.5 )           (101.1 )          (2.6 )%
% of sales                                                  (9.4 )%            (4.7 )%          4.7 pp
R, D&E, net                                                (88.0 )           (117.0 )         (24.8 )%
% of sales                                                  (8.4 )%            (5.4 )%          3.0 pp
Other income (expense), net                                (59.0 )             (9.2 )         541.3 %
Operating (loss) income                                   (233.5 )            169.5          (237.8 )%
% of sales                                                 (22.3 )%             7.9 %         (30.2 )pp
Adjusted operating (loss) income1)                        (171.4 )            183.2          (193.6 )%
% of sales                                                 (16.4 )%             8.5 %         (24.9 )pp
Financial and non-operating items, net                     (13.1 )            (18.7 )         (29.9 )%
(Loss) income before taxes                                (246.6 )            150.8          (263.5 )%
Tax rate                                                    29.3 %             27.4 %           1.9 pp
Net (loss) income                                         (174.3 )            109.4          (259.3 )%
(Loss) earnings per share, diluted2)                       (2.00 )             1.25          (260.0 )%
Adjusted (loss) earnings per share, diluted1),2)           (1.40 )             1.38          (201.4 )%



1) Non-U.S. GAAP measure, excluding costs for capacity alignment and antitrust

related matters.

2) Assuming dilution, when applicable, and net of treasury shares. Participating

   share awards with right to receive dividend equivalents are under the
   two-class method excluded from the EPS calculation.



Second quarter 2020 development


Gross profit decreased by $385 million and the gross margin decreased by 17.2pp
compared to the same quarter 2019. The gross margin decline was primarily driven
by lower sales and lower utilization of our assets from the decline in LVP. The
sharp sales decline in April coupled with a volatile restart and ramp-up in May
and June with limited visibility and predictability had a significant effect on
our gross margin, despite major reductions in costs for material and labor.
Direct COVID-19 costs amounted to around $10 million in Q2 2020.

S,G&A declined by $3 million, or 3%, compared to the prior year, mainly due to lower personnel costs.

R,D&E, net declined by $29 million compared to the prior year, mainly due to positive year-over-year effects from lower personnel costs due to reduced headcount and furloughing.


Other income (expense), net declined by $50 million compared to a year earlier,
mainly due to capacity alignment accruals of $62 million in Q2 2020 compared to
$13 million a year earlier. The Q2 accruals are mainly related to future
reductions of our indirect workforce under the Structural Efficiency Program II.

Operating (loss) income decreased by $403 million compared to the same period in
2019, as a consequence of the lower gross profit and other income (expense), net
being partly offset by lower costs for S,G&A and R,D&E, net.

Adjusted operating (loss) income (non-U.S. GAAP measure) decreased by around
$355 million compared to the prior year, mainly due to lower gross profit partly
offset by lower S,G&A and R,D&E, net.

Financial and non-operating items, net improved by $6 million, mainly due to lower interest rates on debt and foreign currency gains.

(Loss) income before taxes decreased by $397 million compared to the prior year, mainly due to the lower operating income.

Tax rate was 29.3% compared to 27.4% the same quarter last year, impacted by unfavorable country mix with some losses without tax benefit.

(Loss) earnings per share, diluted decreased by $3.25 compared to a year earlier, where the main drivers were $5.70 from lower operating income partly mitigated by $2.37 from lower tax.







                                       23
--------------------------------------------------------------------------------

SIX MONTHS ENDED JUNE 30, 2020 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2019






Consolidated Sales



                            Six months ended June 30                                   Components of change in net sales
                                                                                      Currency
                              2020              2019         Reported change         effects 1)                 Organic 3)
Airbags and other 2)      $     1,855.9$ 2,883.4                 (35.6 )%              (2.6 )%                   (33.0 )%
Seatbelts 2)                    1,037.5         1,445.3                 (28.2 )%              (3.3 )%                   (24.9 )%
Total                     $     2,893.4$ 4,328.7                 (33.2 )%              (2.9 )%                   (30.3 )%

Asia                      $     1,185.1$ 1,508.5                 (21.4 )%              (2.1 )%                   (19.3 )%
Whereof:   China                  563.9           680.0                 (17.1 )%              (3.5 )%                   (13.6 )%
Japan                             307.6           399.2                 (22.9 )%               1.7 %                    (24.6 )%
Rest of Asia                      313.6           429.3                 (26.9 )%              (3.6 )%                   (23.3 )%
Americas                          885.5         1,501.1                 (41.0 )%              (3.3 )%                   (37.7 )%
Europe                            822.8         1,319.1                 (37.6 )%              (3.0 )%                   (34.6 )%
Total                     $     2,893.4$ 4,328.7                 (33.2 )%              (2.9 )%                   (30.3 )%



1) Effects from currency translations.

2) Including Corporate and Other sales.


3) Non-U.S. GAAP measure.


Sales by Product - Airbags



Sales of all our different airbag products except textiles declined organically
(non-U.S. GAAP measure) by between 27% and 65% in the first half of the year.
Textiles increased by 18%, reflecting new sales of textiles for manufacturing of
personal protection equipment. Inflator sales declined organically by around
65%.

Sales by Product - Airbags

Japan showed a slight organic (non-U.S. GAAP measure) seatbelt sales growth, while all other regions showed organic sales declines between 12% and 45%.



Sales by Region



The global organic sales decline (non-U.S. GAAP measure) of 30.3% was 3.3pp
better than LVP (according to IHS). Sales declined organically in all regions.
The largest organic sales decline drivers were Americas and Europe, followed by
Rest of Asia, Japan and China. Our organic sales development outperformed LVP in
all regions - by 9.4pp in Asia excluding China, by 7.3pp in China, by 4.7pp in
Europe and by 4.5pp in Americas.



First six months
2020 Organic                                                                       Japan             Rest of Asia             Global
growth1)                Americas          Europe              China
Autoliv                      (37.7 )%         (34.6 )%              (13.6 )%           (24.6 )%                 (23.3 )%           (30.3 )%
                            Tesla,

Main growth drivers Textiles, Inflators BYD, Ford, Mazda

   Honda, Suzuki              Renault, GM         Tesla, BYD
                             Mazda
                                           Daimler,                                                                          FCA, Honda,
                       FCA, Honda,              VW,                              Mitsubishi,                                 Nissan, VW,
                           Nissan,         Renault,         Nissan, Great            Toyota,             Hyundai/Kia,              Ford,

Main decline drivers Ford, GM, BMW, Ford, Wall, Honda,

          Mazda,          Suzuki, Toyota,           Daimler,
                         Inflators        PSA, FCA,             Geely, VW            Nissan,        Mitsubishi, Isuzu       Hyundai/Kia,
                                              Volvo                                   Subaru                                     Toyota,
                                                                                                                               Inflators



Light Vehicle Production Development

Change vs. same period last year



                             Americas        Europe          China          Japan        Rest of Asia        Global
LVP1)                            (42.2 )%       (39.3 )%       (20.9 )%       (26.6 )%           (38.3 )%       (33.6 )%
1) Source: IHS July 2020.




                                       24
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Earnings



                                                    Six months ended June 30
(Dollars in millions, except per share data)         2020               2019           Change
Net Sales                                        $    2,893.4$  4,328.7           (33.2 )%
Gross profit                                            345.4             778.5           (55.6 )%
% of sales                                               11.9 %            18.0 %          (6.1 )pp
S, G&A                                                 (192.0 )          (202.5 )          (5.2 )%
% of sales                                               (6.6 )%           (4.7 )%          1.9 pp
R, D&E, net                                            (190.6 )          (224.4 )         (15.1 )%
% of sales                                               (6.6 )%           (5.2 )%          1.4 pp
Other income (expense), net                             (56.9 )            (3.2 )       1,678.1 %
Operating (loss) income                                 (99.2 )           342.7          (128.9 )%
% of sales                                               (3.4 )%            7.9 %         (11.3 )pp
Adjusted operating (loss) income1)                      (35.4 )           349.6          (110.1 )%
% of sales                                               (1.2 )%            8.1 %          (9.3 )pp
Financial and non-operating items, net                  (36.0 )           (38.3 )          (6.0 )%
(Loss) income before taxes                             (135.2 )           304.4          (144.4 )%
Tax rate                                                 26.5 %            27.4 %          (0.9 )pp
Net (loss) income                                       (99.4 )           220.9          (145.0 )%
(Loss) earnings per share, diluted2)                    (1.14 )            2.52          (145.2 )%
Adjusted (loss) earnings per share, diluted1),2)        (0.53 )            2.57          (120.6 )%



1) Non-U.S. GAAP measure, excluding costs for capacity alignment and antitrust

related matters.

2) Assuming dilution, when applicable, and net of treasury shares. Participating

share awards with right to receive dividend equivalents are under the

two-class method excluded from the EPS calculation.

First six months 2020 development




Gross profit declined by $433 million and the gross margin declined by 6.1pp
compared to the same period 2019. The gross margin decline was primarily driven
by lower sales and lower utilization of our assets from the decline in LVP. The
sharp sales decline followed by a volatile restart and ramp-up with limited
visibility and predictability had a significant effect on our gross margin,
despite significant reductions in costs for material and labor.

S,G&A decreased by $10 million, or by 5%, due to lower personnel costs.

R,D&E, net declined by $34 million, or by 15%, mainly due to positive year over year effects from lower personnel costs due to reduced headcount and furloughing.


Other income (expense), net declined by $54 million compared to a year earlier,
mainly due to capacity alignment accruals of $64 million in first half of 2020
compared to $13 million a year earlier. The accruals mainly related to future
reductions of our indirect workforce under the Structural Efficiency Programs.

Operating (loss) income decreased by $442 million, mainly as a consequence of
the declines in gross profit and other income (expense), net, partly offset by
lower costs for S,G&A and R,D&E, net.

Adjusted operating (loss) income (non-U.S. GAAP measure) decreased by $385 million, mainly due to the lower gross profit, partly offset by lower costs for S,G&A and R,D&E, net.

Financial and non-operating items, net improved by around $2 million to $36 million, mainly due to lower interest rate on debt.

(Loss) income before taxes decreased by $440 million, mainly as a consequence of lower operating income.

Tax rate was 26.5% compared to 27.4% last year, impacted by unfavorable country mix with some losses without tax benefit.

(Loss) earnings per share, diluted decreased by $3.66 where the main drivers were $6.20 from lower operating income partly mitigated by $2.50 from lower tax.




                                       25

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LIQUIDITY AND SOURCES OF CAPITAL

Second quarter 2020 development




Operating working capital (non-U.S. GAAP measure, see reconciliation table
below) was 7.0% of sales compared to 7.5% of sales a year earlier, mainly due to
accounts receivable declining more than accounts payable. The Company targets
that operating working capital in relation to the last 12-month sales should not
exceed 10%.

Operating cash flow was $128 million negative, compared to $21 million negative
a year earlier, mainly due to the lower net income, partly offset by the payment
of the EC antitrust payment of $203 million in the second quarter of 2019, and
by positive effects from changes in operating assets and liabilities in second
quarter of 2020.

Capital expenditure, net of $64 million was $64 million lower than a year
earlier, reflecting our efforts to reduce capital expenditure to support cash
flow. Capital expenditure, net in relation to sales was 6.1% vs. 5.9% a year
earlier.

Net debt (non-U.S. GAAP measure, see reconciliation table below) amounted to
$1,838 million as of June 30, 2020, which was $27 million higher than a year
earlier and $188 million higher compared to December 31, 2019.

Liquidity position At June 30, 2020 our cash balance was $1.2 billion, and including committed, unused loan facilities, our liquidity position was $1.7 billion. Debt maturing in 2020 is $218 million, with another $275 million maturing in 2021.


Leverage ratio (non-U.S. GAAP measure, see calculation table below) Autoliv's
policy is to maintain a leverage ratio commensurate with a strong investment
grade credit rating. The Company measures its leverage ratio as net debt
(non-U.S. GAAP measure) adjusted for pension liabilities in relation to adjusted
EBITDA (see calculation table below). The long-term target is to maintain a
leverage ratio of around 1x within a range of 0.5x to 1.5x. As of June 30, 2020,
the Company had a leverage ratio of 2.9x, compared to 1.8x at June 30, 2019. The
increase is due to a lower adjusted EBITDA in the current period compared to a
year earlier. At December 31, 2019, the leverage ratio was 1.7x.

Total equity decreased by $83 million compared to June 30, 2019 mainly due to $108 million in dividends and $100 million from negative foreign currency effects partly offset by $141 million in net income.

First six months 2020 development


Operating cash flow was $28 million compared to $133 million a year earlier. The
decline of $105 million was primarily due to the lower net income, partly offset
by the EC antitrust payment of $203 million in the second quarter of 2019, and
by positive effects from changes in operating assets and liabilities in first
half of 2020.

Capital expenditure, net of $152 million was 36% lower than a year earlier, reflecting our efforts to reduce capital expenditure to support cash flow. Capital expenditure, net in relation to sales was 5.3% compared to 5.4% in the same period 2019.






Non-U.S. GAAP measures

 Reconciliation of U.S. GAAP financial measures to "Adjusted operating income",
                 "Adjusted operating margin" and "Adjusted EPS"

                  (Dollars in millions, except per share data)



                                 Three months ended June 30, 2020                         Three months ended June 30, 2019
                        Reported U.S.                             Non-U.S.       Reported U.S.                              Non-U.S.
                            GAAP              Adjustments1)         GAAP             GAAP              Adjustments1)          GAAP
Operating (loss)
income                 $        (233.5 )     $           62.1     $  (171.4 )   $         169.5       $          13.7      $    183.2
Operating margin, %              (22.3 )                  5.9         (16.4 )               7.9                   0.6             8.5
(Loss) earnings per
share, diluted                   (2.00 )                 0.60         (1.40 )              1.25                  0.13            1.38



1) Including costs for capacity alignment and antitrust related matters.

                                       26

--------------------------------------------------------------------------------




                                   Six months ended June 30, 2020                            Six months ended June 30, 2019
                         Reported U.S.                              Non-U.S.       Reported U.S.                              Non-U.S.
                             GAAP              Adjustments1)          GAAP             GAAP              Adjustments1)          GAAP
Operating (loss)
income                  $         (99.2 )     $           63.8     $    (35.4 )   $         342.7       $            6.9     $    349.6
Operating margin, %                (3.4 )                  2.2           (1.2 )               7.9                    0.2            8.1
(Loss) earnings per
share, diluted                    (1.14 )                 0.61          (0.53 )              2.52                   0.05           2.57



1) Including costs for capacity alignment and antitrust related matters.


                  Items included in Non-U.S. GAAP adjustments

                  (Dollars in millions, except per share data)





                                     Three months ended June 30, 2020              Three months ended June 30, 2019
                                    Millions                Per share             Millions                Per share
Capacity alignment               $         61.9         $            0.71      $         13.2         $            0.15
Antitrust related matters                   0.2                      0.00                 0.5                      0.01
Total adjustments to operating
income                                     62.1                      0.71                13.7                      0.16
Tax on non-U.S. GAAP
adjustments1)                              (9.9 )                   (0.11 )              (2.7 )                   (0.03 )
Total adjustments to net
income                           $         52.2         $            0.60      $         11.0         $            0.13




1) The tax is calculated based on the tax laws in the respective jurisdiction(s)
   of the adjustment(s).






                                     Six months ended June 30, 2020               Six months ended June 30, 2019
                                    Millions               Per share             Millions               Per share
Capacity alignment               $         63.6         $           0.73      $         13.1         $           0.15
Antitrust related matters                   0.2                     0.00                (6.2 )                  (0.07 )
Total adjustments to operating
income                                     63.8                     0.73                 6.9                     0.08
Tax on non-U.S. GAAP
adjustments1)                              (9.9 )                  (0.12 )              (2.7 )                  (0.03 )
Total adjustments to net
income                           $         53.9         $           0.61      $          4.2         $           0.05



1) The tax is calculated based on the tax laws in the respective jurisdiction(s)

   of the adjustment(s).






The Company uses the non-U.S. GAAP measure "Operating working capital," as
defined in the table below, in its communications with investors and for
management's review of the development of the working capital cash generation
from operations. The reconciling items used to derive this measure are, by
contrast, managed as part of the Company's overall cash and debt management, but
they are not part of the responsibilities of day-to-day operations' management.
The historical periods in the table have been restated to only reflect
continuing operations.

  Reconciliation of U.S. GAAP financial measure to "Operating working capital"

                             (Dollars in millions)



                                                 June 30, 2020       June 30, 2019       December 31, 2019
Total current assets                            $       3,382.9$       3,052.2     $           3,002.1
Total current liabilities                              (2,152.0 )          (2,418.4 )              (2,410.2 )
Working capital                                         1,230.9               633.8                   591.9
Cash and cash equivalents                              (1,223.2 )            (406.4 )                (444.7 )
Short-term debt                                           492.9               366.8                   368.1
Derivative (asset) and liability, current                  (2.6 )              (3.5 )                  (4.2 )
Dividends payable 1)                                        0.0                54.1                    54.1
Operating working capital                       $         498.0     $         644.8     $             565.2



1) On April 2, 2020, the Company canceled its declared dividend for the second

   quarter of 2020.




                                       27
--------------------------------------------------------------------------------


          Reconciliation of U.S. GAAP financial measure to "Net debt"

                             (Dollars in millions)



                                                    June 30, 2020       June 30, 2019       December 31, 2019
Short-term debt                                    $         492.9     $         366.8     $             368.1
Long-term debt                                             2,567.0             1,850.2                 1,726.1
Total debt                                                 3,059.9             2,217.0                 2,094.2
Cash and cash equivalents                                 (1,223.2 )            (406.4 )                (444.7 )
Debt issuance cost/Debt-related derivatives, net               1.2                 0.3                     0.3
Net debt                                           $       1,837.9$       1,810.9     $           1,649.8




The non-U.S. GAAP measure net debt is also used in the non-U.S. GAAP measure
"Leverage ratio". Management uses this measure to analyze the amount of debt the
Company can incur under its debt policy. Management believes that this policy
also provides guidance to credit and equity investors regarding the extent to
which the Company would be prepared to leverage its operations. For details on
leverage ratio refer to the table.

                        Calculation of "Leverage ratio"

                             (Dollars in millions)



                                                 June 30, 2020       June 30, 2019       December 31, 2019
Net debt1)                                      $       1,837.9$       1,810.9     $           1,649.8
Pension liabilities                                       235.7               202.8                   240.2
Debt per the Policy                                     2,073.6             2,013.7                 1,890.0

Net income2)                                              142.5               248.1                   462.8
Less; Net loss from discontinued operations2)                 -                (2.0 )                     -
Net income continuing operations2)                        142.5               246.1                   462.8
Income taxes 2)                                            66.3               231.7                   185.6
Interest expense, net2,3)                                  61.9                68.2                    65.9
Depreciation and amortization of                          349.9               349.9                   350.6

intangibles2)

Antitrust related matters, capacity alignment             105.5               221.4                    48.6
and separation costs2
EBITDA per the Policy                           $         726.1     $       1,117.3     $           1,113.5
Leverage ratio                                              2.9                 1.8                     1.7



1) Net debt (non-U.S. GAAP measure) is short- and long-term debt and debt-related

derivatives, less cash and cash equivalents.

2) Latest 12-months.

3) Interest expense, net is interest expense including cost for extinguishment of

   debt, if any, less interest income.




Headcount



                                   June 30, 2020      March 31, 2020       June 30, 2019
Headcount                                  61,800              65,500              65,700
Whereof:
Direct workers in manufacturing                70 %                71 %                71 %
Best cost countries                            81 %                81 %                80 %
Temporary personnel                             6 %                 8 %                10 %




Compared to March 31, 2020, total headcount (permanent employees and temporary
personnel) decreased by 3,697. The decrease in the second quarter of 2020 was
driven by a reduction of around 7% of the direct workforce while the indirect
workforce decreased by around 2%. Our responses to manage the demand declines in
Europe and Americas also include furloughing employees and shorter work weeks to
reduce wage and salary costs. Our operations in almost all regions are currently
in different stages of ramp-up, as customer demand gradually increased in May
and June. Compared to a year ago, total headcount decreased by 3,903, driven by
a reduction of around 7% of the direct workforce and a reduction of 4% of the
indirect workforce.





Outlook 2020


No full year 2020 indications will be provided until effects of COVID-19 pandemic can be better assessed.

OFF-BALANCE SHEET ARRANGEMENTS


The Company does not have any off-balance sheet arrangements that have, or are
reasonably likely to have, a material current or future effect on its financial
position, results of operations or cash flows.

                                       28

--------------------------------------------------------------------------------

CONTRACTUAL OBLIGATIONS AND COMMITMENTS


The Company's future contractual obligations have not changed materially from
the amounts reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 2019 filed with the SEC on February 21, 2020.

OTHER RECENT EVENTS

Key launches in the Second Quarter of 2020


Below are some of the key models which were launched in the second quarter of
2020.



   •  Chevrolet Suburban/Tahoe & GMC Yukon/Yukon XL: Steering Wheel,
      Driver/Passenger airbags.


   •  Fiat 500: Steering Wheel, Driver/Passenger airbags, Side airbags,
      Head/Inflatable Curtain airbags.

• Audi 3 Limousine: Steering Wheel, Driver/Passenger airbags, Front Center

      Airbag, Seatbelts.


   •  Xpeng P7: Steering Wheel, Driver/Passenger airbags, Side airbags,
      Head/Inflatable Curtain airbags, Seatbelts.

• Lynk & Co 06: Driver/Passenger airbags, Side airbags, Head/Inflatable

Curtain airbags, Seatbelts.

• Buick Envision S: Steering Wheel, Driver/Passenger airbags, Side airbags,

Head/Inflatable Curtain airbags.

Kia Sorento: Side airbags, Head/Inflatable Curtain airbags, Front Center

      Airbag, Seatbelts.


  • VW Polo Sedan: Steering Wheel, Driver/Passenger airbags, Seatbelts.

• VW Tayron X: Steering Wheel, Driver/Passenger airbags, Side airbags,

Head/Inflatable Curtain airbags, Seatbelts.


Other Items


• On May 29, Autoliv provided a market and business update, including measures

taken by the Company to manage the automotive industry downturn caused by the

COVID-19 pandemic. Measures announced included reduction in capex and employee

related costs and a strengthening of the liquidity position and credit

resources through entering a lending facility of approximately $0.6 billion

with the Swedish Export Credit Corporation.

• On June 9, 2020, Autoliv announced its promotion of Kevin Fox from the

position as Vice President Brazil to the position of President, Americas and a

member of Autoliv's Executive Management Team, effective on June 15th. Mr. Fox

has extensive experience leading large-scale operations and driving positive

results over nearly two decades. He began his career at Autoliv in 1996, and

has experience from leadership roles in Engineering, Operations and Quality as

well as being a Plant Manager.

• On July 1, 2020, Per Ericson joined Autoliv as Executive Vice President Human

Resources and Sustainability and member of Autoliv's Executive Management

Team, succeeding Sherry Vasa who decided to leave her position in Sweden to

move back to the United States. Mr. Ericson has held senior Human Resources

roles in Stora Enso, Haldex and most recently as Senior Vice President, Head

   of Group Business Development at Husqvarna.




                                       29

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