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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)

10/23/2020 | 09:23am EST
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 Company is proud of the way it handled the COVID-19 crisis. The worst demand
decline on record in the second quarter was followed by a faster than expected
recovery in the third quarter, with its challenges of managing the supply chain
in a safe and efficient way. The quarter started weak and volatile but gradually
grew stronger and more stable and the Company managed to record higher sales,
higher profits and higher cash flow compared to the third quarter 2019. The
third quarter outcome reflects the Company's efforts to come out of the crisis
as a stronger company. The adjusted operating margin was the second highest for
a third quarter in the past 10 years, the operating cash flow and free cash flow
are the highest the Company has recorded in a third quarter and the Company's
net debt is the lowest since the spin-off of Veoneer. The strong performance was
a result of good operational execution, effects of the Company's Structural
Efficiency Programs and crisis management in the second quarter leading to cost
reductions which, although of a more temporary nature, still supported the
Company's third quarter performance.

The Company's sales outperformed organically (non-U.S. GAAP measure) the global
light vehicle production by almost 5%, with outperformance in all major regions.
Backed by recent product launches, the Company expects a further pick up of
outperformance in the fourth quarter, supporting a full year outperformance of
around 6pp. As expected, order intake activity was slow in the third quarter,
but the Company expects a very busy fourth quarter.

Although it is important to realize that the COVID-19 crisis is not behind us, and global uncertainty persists, business stability and visibility have nevertheless improved, which allows the Company to provide a full year guidance.


The Company's Structural Efficiency Programs are on track and delivering
savings. As part of the Company's footprint optimization ambitions, the Company
decided to close one plant in Germany and the Company will continue with further
footprint optimization. With the health and safety of Autoliv employees as the
Company's first priority, the Company continues with more activities to further
improve efficiency, optimizing the Company's footprint and implementing the
strategic initiatives outlined last year to support next year being a solid
stepping stone on the journey to the Company's 2022-24 targets.



Financial highlights in the third quarter of 2020

$2,037 million net sales

0.4% organic sales growth (Non-U.S. GAAP measure, see reconciliation table below)

8.6% operating margin

10.1% adjusted operating margin (Non-U.S. GAAP measure)

                                       18

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$1.12 EPS - an increase of $0.14

$1.48 adjusted EPS (Non-U.S. GAAP measure) - an increase of $0.18

Key business developments in the third quarter of 2020

• Organic sales (Non-U.S. GAAP measure) increased by 0.4% which was 4.7pp higher

than the change in global light vehicle production. Organically, all major

regions developed better than LVP. Sales in China grew by 10.4% compared to

8.7% growth in LVP. Sales in Americas grew by 1.2% compared to the LVP decline

of 4.3%. In Europe, LVP declined by 7.6% while our sales declined by 4.8%.

Customer sourcing activity was, as expected, low in the quarter, with more

than half of planned sourcing for the year expected in the fourth quarter.

   First nine months order intake supports a prolonged period of outgrowth.



• Profitability improved as demand recovered and our cost reduction activities

progressed according to plan. Adjusted operating margin (Non-U.S. GAAP

measure) improved both vs. Q2 2020 and Q3 2019. The gross margin improved by

0.9pp compared to Q3 2019. Indirect workforce was reduced by around 4% vs. Q3

   2019 and by around 2% vs. Q2 2020.



• Strong cash flow and strengthened balance sheet. Operating cash flow of $352

million and free cash flow (Non-U.S. GAAP measure) of $276 million was

significantly above Q3 2019 levels. Net debt (Non-U.S. GAAP measure) declined

vs. a year earlier and the debt leverage ratio (Non-U.S. GAAP measure) of 2.4x

improved vs. 2.9x in Q2 2020, although still higher than the 1.8x in Q3 2019.

As of October 2, 2020, our Revolving Credit Facility is repaid and available

   for us to draw on as needed.



COVID-19 Pandemic Related Business Update

First nine months of 2020


The COVID-19 pandemic had a substantial impact on the Company's operations in
the first quarter, particularly in China, where most of its 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 24% in the
first nine months of 2020 vs. the same period the prior year. The decline in
global LVP and the slow and volatile restart and ramp-up had a significant
impact on the Company's sales and profitability in the first six months of 2020
while it managed to achieve improvements in sales, profitability and cash flow
in the third quarter as its cost reduction initiatives and positive sales
development more than offset the 4% global LVP decline in the third quarter.

Liquidity and management actions undertaken to manage this challenging period


During the first six months of 2020, Autoliv undertook a number of actions to
support employee health and safety, corporate liquidity, cash flow and
profitability. Actions included introducing a Smart Start Playbook for safe
re-start and ramp-up, investing in employee safety equipment and re-designing
production lines and work places as necessary. Other initiatives included
drawing on the Revolving Credit Facility (which is now fully repaid),
withdrawing full year guidance (now provided again), extensive use of
furloughing (very limited use today), reducing headcount, sharply reducing
capital expenditures, close monitoring of working capital, reducing or
suspending discretionary spending and accelerated cost savings initiatives,
cancelling the dividend and suspending future dividends, although the Board of
Directors will review such suspension on a quarterly basis. Direct COVID-19
related costs, such as personal protective equipment, temporary supplier support
and premium freight, were around $10 million in the second quarter and around $5
million in the third quarter. Support from governments in connection with
furloughing, short-term work weeks and similar activities was around $25 million
in the second quarter and around $10 million in the third quarter.

Current situation


In all regions, the automotive industry, including Autoliv, are in different
stages of ramp-up of operations. Visibility and predictability of customer
demand has improved but is still limited, particularly regarding the
sustainability of current demand levels, including the effects on LVP of
inventory build-ups, government vehicle subsidies and the risks of another wave
of COVID-19 infections in one or more of the regions where the Company operates
or has customers or suppliers.

While we continue to focus on health and safety and cost optimization, we are
ramping up production in coordination with our customers and suppliers. Below is
a summary of our current view of our three most important regions.

China: LVP was above pre-crisis production levels in the second and third quarter. IHS forecasting 5% year-over-year decline in LVP in the fourth quarter, the decrease mainly a result of high LVP in Q4 2019.

Europe: LVP development has improved gradually from second quarter's year-over-year decline of 60% to a 8% decline in the third quarter according to IHS, which forecasts around 1% year-over-year decline in LVP in the fourth quarter.

                                       19

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North America: LVP development has improved gradually from second quarter's year-over-year decline of 68% to unchanged in the third quarter according to IHS, which forecasts around 1% year-over-year decline in LVP in the fourth quarter. Inventory levels are still low in North America.

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.

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               Nine months ended
                                              or as of September 30           or as of September 30
                                               2020            2019            2020            2019
Total parent shareholders' equity per
share                                      $       24.05$   22.78$      24.05$   22.78
Capital employed 1)                                3,686         3,781            3,686          3,781
Net debt 2)                                        1,573         1,781            1,573          1,781

Operating working capital 2)                         379           620              379            620
Operating working capital relative to
sales, % 10)                                         5.3           7.2              5.3            7.2

Gross margin, % 3)                                  19.6          18.7             15.1           18.2
Operating margin, % 4)                               8.6           7.6              1.5            7.8

Return on total equity, % 5)                        19.4          17.1              0.0           20.7
Return on capital employed, % 6)                    18.7          16.2              2.7           18.0

Headcount at period-end 7)                        65,300        64,900      

65,300 64,900


Days receivables outstanding 8)                       73            75               90             72
Days inventory outstanding 9)                         36            37               45             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 income relative to sales.

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

6) Operating 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.






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THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED WITH THREE MONTHS ENDED SEPEMBER
30, 2019





Consolidated Sales



                                        Three months ended                            Components of change in
                                           September 30                                      net sales
                                                                   Reported        Currency
                                        2020          2019          change        effects 1)           Organic 3)
Airbags and other 2)                  $ 1,331.6$ 1,349.3           (1.3 )%          (0.1 )%              (1.2 )%
Seatbelts 2)                              705.6         678.4            4.0 %            0.3 %                3.7 %
Total                                 $ 2,037.2$ 2,027.7            0.5 %            0.1 %                0.4 %

Asia                                  $   806.2$   777.7            3.7 %            0.4 %                3.3 %
Whereof:   China                          425.2         381.7           11.4 %            1.0 %               10.4 %
Japan                                     180.3         202.4          (10.9 )%           0.9 %              (11.8 )%
Rest of Asia                              200.7         193.6            3.7 %           (1.4 )%               5.1 %
Americas                                  693.3         713.1           (2.8 )%          (4.0 )%               1.2 %
Europe                                    537.7         536.9            0.1 %            4.9 %               (4.8 )%
Total                                 $ 2,037.2$ 2,027.7            0.5 %            0.1 %                0.4 %



1) Effects from currency translations.

2) Including Corporate and Other sales.


3) Non-U.S. GAAP measure.




Sales by product - Airbags

Sales of side airbags increased slightly, mainly from most types of side airbags
in South Korea and inflatable curtains and chest airbags in China. Sales of
frontal airbags decreased slightly, due to weak sales of passenger airbags in
Japan and ASEAN. Sales of inflators, including inflator replacements, decreased
by around $20 million.

Sales by product - Seatbelts


Seatbelt sales organic growth (Non-U.S. GAAP measure) mainly reflects positive
development with pretensioner seatbelts, especially in North America, China and
Japan. Europe was the only large region with organic seatbelt sales decline.



Sales by Region

Our global organic sales (Non-U.S. GAAP measure) increased by 0.4% compared to
the LVP decline of 4.3% (according to IHS). Sales increased organically in
China, Rest of Asia and Americas and decreased in Europe and Japan. Our organic
sales development outperformed LVP in all major regions - by almost 6pp in
Americas, by almost 3pp in Europe and by almost 2pp in China.



                                                                                                                           Rest of
Q3 2020 Organic growth1)                  Americas             Europe               China              Japan                 Asia              Global
Autoliv                                            1.2 %             (4.8 )%              10.4 %            (11.8 )%                5.1 %             0.4 %
                                        Tesla, Toyota,        PSA, Toyota        GM, VW, Honda            Suzuki,      Hyundai/Kia, GM,           Toyota,
Main growth drivers                                 VW                                              Toyota, Honda                  Tata     Tesla, GM, VW
                                                                                      Daimler,                                                Mitsubishi,
                                            Inflators,           Daimler,              Nissan,        Mitsubishi,           Mitsubishi,           Nissan,
                                           Nissan, FCA       Renault, BMW           Mitsubishi      Nissan, Mazda                Toyota          Daimler,
Main decline drivers                                                                                                                            Inflators






1) Non-U.S. GAAP measure.

Light Vehicle Production Development

Change vs. same quarter last year



                                                                                           Rest of
                                    Americas        Europe        China        Japan         Asia         Global
LVP1)                                    (4.3 )%       (7.6 )%        8.7 %     (11.8 )%      (16.8 )%       (4.3 )%
1) Source: IHS October 2020.




                                       21

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Earnings



                                                    Three months ended September 30
(Dollars in millions, except per share data)         2020                    2019              Change
Net Sales                                       $       2,037.2$       2,027.7             0.5 %
Gross profit                                              399.7                   379.1             5.4 %
% of sales                                                 19.6 %                  18.7 %           0.9 pp
S, G&A                                                    (91.7 )                 (97.7 )          (6.1 )%
% of sales                                                 (4.5 )%                 (4.8 )%         (0.3 )pp
R, D&E, net                                              (101.6 )                 (99.1 )           2.5 %
% of sales                                                 (5.0 )%                 (4.9 )%          0.1 pp
Amortization of Intangibles                                (2.4 )                  (2.9 )         (17.2 )%
Other income (expense), net                               (29.5 )                 (25.6 )          15.2 %
Operating income                                          174.5                   153.8            13.5 %
% of sales                                                  8.6 %                   7.6 %           1.0 pp
Adjusted operating income1)                               205.6                   182.5            12.7 %
% of sales                                                 10.1 %                   9.0 %           1.1 pp
Financial and non-operating items, net                    (26.0 )                 (19.4 )          34.0 %
Income before taxes                                       148.5                   134.4            10.5 %
Tax rate                                                   33.5 %                  36.0 %          (2.5 )pp
Net income                                                 98.8                    86.0            14.9 %
Earnings per share, diluted2)                              1.12                    0.98            14.3 %
Adjusted earnings per share, diluted1),2)                  1.48                    1.30            13.8 %



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

related matters and in 2019 separation of our business segments.

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.



Third quarter 2020 development

Gross profit increased by $21 million and the gross margin increased by 0.9pp compared to the same quarter 2019. The gross margin increase was primarily driven by labor and direct materiel productivity.

S,G&A declined by $6 million, or 6%, compared to the prior year, mainly due to lower costs for personnel, including consultants.


R,D&E, net costs increased by $3 million compared to the prior year, as reduced
personnel costs was more than offset by negative effect from lower engineering
income and miscellaneous items.

Other income (expense), net was negative $30 million, mainly relating to restructuring activities in Europe.

Operating income increased by $21 million compared to the same period in 2019, as a consequence of the higher gross profit and lower costs for S,G&A being partly offset by higher costs in Other income (expense), net and R,D&E, net.

Adjusted operating income (Non-U.S. GAAP measure) increased by $23 million compared to the prior year, mainly due to the higher gross profit and lower costs for S,G&A being partly offset by higher costs for R,D&E, net.

Financial and non-operating items, net costs were $7 million higher vs. Q3 2019, mainly as a result of higher interest expense due to higher debt and higher pension related expenses.

Income before taxes increased by $14 million compared to the prior year, mainly due to the higher operating income.

Tax rate was 33.5%, compared to 36.0% in the same quarter last year, impacted by losses without tax benefit and an unfavorable country mix.


Earnings per share, diluted increased by $0.14 compared to a year earlier, where
the main drivers were $0.17 from higher adjusted operating income (Non-U.S. GAAP
measure) and $0.06 from lower tax partly offset by $0.04 in higher capacity
alignment accruals and $0.05 from higher costs for financial items.







                                       22

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

NINE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2019





Consolidated Sales



                                         Nine months ended                            Components of change in
                                           September 30                                      net sales
                                                                   Reported        Currency
                                        2020          2019          change        effects 1)           Organic 3)
Airbags and other 2)                  $ 3,187.5$ 4,232.7          (24.7 )%          (1.8 )%             (22.9 )%
Seatbelts 2)                            1,743.1       2,123.7          (17.9 )%          (2.1 )%             (15.8 )%
Total                                 $ 4,930.6$ 6,356.4          (22.4 )%          (1.9 )%             (20.5 )%

Asia                                  $ 1,991.2$ 2,286.1          (12.9 )%          (1.3 )%             (11.6 )%
Whereof:   China                          989.1       1,061.7           (6.8 )%          (1.8 )%              (5.0 )%
Japan                                     487.9         601.6          (18.9 )%           1.4 %              (20.3 )%
Rest of Asia                              514.2         622.8          (17.4 )%          (2.9 )%             (14.5 )%
Americas                                1,578.9       2,214.2          (28.7 )%          (3.5 )%             (25.2 )%
Europe                                  1,360.5       1,856.1          (26.7 )%          (0.8 )%             (25.9 )%
Total                                 $ 4,930.6$ 6,356.4          (22.4 )%          (1.9 )%             (20.5 )%



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 airbag products except textiles declined organically (Non-U.S.
GAAP measure) by between 17% and 58% in the first nine months of the year,
reflecting the 23.9% decline in LVP. Textiles increased by 51%, reflecting new
sales of textiles for manufacturing of personal protection equipment. Inflator
sales declined organically (Non-U.S. GAAP measure) by around 58%.

Sales by Product - Seatbelts

Japan showed a slight organic seatbelt sales growth (Non-U.S. GAAP measure), while all other regions showed organic sales declines between 5% and 31%.

Sales by Region


The global organic sales (Non-U.S. GAAP measure) decline of 20.5% was 3.4pp
better than LVP (according to IHS). Sales declined organically in all regions.
The largest organic sales decline drivers were Americas and Europe, followed by
Japan, Rest of Asia and China. Our organic sales (Non-U.S. GAAP measure)
development outperformed LVP in all regions - by 5.5pp in China, by 4.3pp in
Americas and by 3.6pp in Europe.



                                                                                                                                 Rest of
First nine months 2020 Organic growth1)      Americas              Europe              China                Japan                  Asia                  Global
Autoliv                                             (25.2 )%            (25.9 )%             (5.0 )%             (20.3 )%                (14.5 )%              (20.5 )%
Main growth drivers                          Tesla, Mazda           Inflators           GM, Ford,        Suzuki, Honda             GM, Renault                 Tesla
                                                                                           Toyota
                                              FCA, Honda,        Daimler, VW,       Nissan, Great          Mitsubishi,             Mitsubishi,          FCA, Nissan,
Main decline drivers                              Nissan,        Renault, BMW               Wall,        Nissan, Mazda          Suzuki, Toyota       Daimler, Honda,
                                                Inflators                               Inflators                                                          Inflators



Light Vehicle Production Development

Change vs. same period last year



                                                                                          Rest of
                                    Americas       Europe        China        Japan         Asia        Global
LVP1)                                   (29.5 )%     (29.5 )%     (10.5 )%     (21.9 )%      (31.3 )%     (23.9 )%
1) Source: IHS October 2020.




                                       23

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Earnings



                                                    Nine months ended September 30
(Dollars in millions, except per share data)         2020                    2019              Change
Net Sales                                       $       4,930.6$       6,356.4           (22.4 )%
Gross profit                                              745.1                 1,157.6           (35.6 )%
% of sales                                                 15.1 %                  18.2 %          (3.1 )pp
S, G&A                                                   (283.7 )                (300.2 )          (5.5 )%
% of sales                                                 (5.8 )%                 (4.7 )%          1.1 pp
R, D&E, net                                              (292.2 )                (323.5 )          (9.7 )%
% of sales                                                 (5.9 )%                 (5.1 )%          0.8 pp
Amortization of Intangibles                                (7.5 )                  (8.6 )         (12.8 )%
Other income (expense), net                               (86.4 )                 (28.8 )         200.0 %
Operating income                                           75.3                   496.5           (84.8 )%
% of sales                                                  1.5 %                   7.8 %          (6.3 )pp
Adjusted operating income1)                               170.2                   532.1           (68.0 )%
% of sales                                                  3.5 %                   8.4 %          (4.9 )pp
Financial and non-operating items, net                    (62.0 )                 (57.7 )           7.5 %
Income before taxes                                        13.3                   438.8           (97.0 )%
Tax rate                                                  104.4 %                  30.1 %          74.3 pp
Net (loss) income                                          (0.6 )                 306.9          (100.2 )%
(Loss) earnings per share, diluted2)                      (0.02 )                  3.50          (100.6 )%
Adjusted earnings per share, diluted1),2)                  0.95                    3.87           (75.5 )%



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

related matters and in 2019 separation of our business segments.

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 nine months 2020 development




Gross profit declined by $413 million and the gross margin declined by 3.1pp
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 $17 million, or by 6%, mainly due to lower personnel costs.

R,D&E, net declined by $31 million, or by 10%, mainly due to positive year-over-year effects from lower personnel costs due to reduced headcount and furloughing.


Other income (expense), net costs increased by $58 million compared to a year
earlier, mainly due to higher accruals for restructuring activities in the first
nine months of 2020 compared to a year earlier. The accruals are mainly related
to future reductions of our indirect workforce.

Operating income decreased by $421 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 income (Non-U.S. GAAP measure) decreased by $362 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 costs were $4 million higher than a year
earlier, mainly due to unfavorable effects of exchange rate changes and higher
pension related expenses.

Income before taxes decreased by $426 million, as a consequence of lower operating income.

Tax rate was 104.4%, compared to 30.1% last year, impacted by unfavorable country mix and losses without tax benefit.


Earnings per share, diluted decreased by $3.52 where the main drivers were $2.89
from lower adjusted operating income and $0.60 from higher capacity alignment
accruals.



                                       24

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LIQUIDITY AND SOURCES OF CAPITAL

Third quarter 2020 development




Operating working capital (Non-U.S. GAAP measure) was 5.3% of sales compared to
7.2% of sales a year earlier, mainly as a consequence of more positive effects
from accounts receivables, inventories and various accruals vs. the prior year.
The Company targets that operating working capital in relation to the last
12-month sales should not exceed 10%.

Operating cash flow was $352 million, compared to $195 million a year earlier.
The improvement was mainly due to more positive effects from changes in accounts
payable and accrued expenses, inventories and income taxes partly offset by more
negative effect from receivables and other assets vs. the prior year.

Capital expenditure, net was 38% lower than a year earlier, reflecting our efforts to reduce capital expenditure to support cash flow. Capital expenditure, net in relation to sales was 3.8% vs. 6.0% a year earlier.


Free cash flow (Non-U.S. GAAP measure) amounted to $276 million, compared to $73
million a year earlier. The increase was due to the higher operating cash flow
and lower capital expenditure, net.

Cash conversion (Non-U.S. GAAP measure) defined as free cash flow (Non-U.S. GAAP
measure) in relation to net income, was 279%, driven by the high level of free
cash flow.

Net debt (Non-U.S. GAAP measure) was $1,573 million as of September 30, 2020,
which was $208 million lower than a year earlier and $265 million lower compared
to June 30, 2020.

Liquidity position At September 30, 2020, the cash balance was $1.5 billion, and
including committed, unused loan facilities, our liquidity position was $2.0
billion. On October 2, 2020, the Revolving Credit Facility was fully repaid
through a $600 million payment. Remaining debt maturing in 2020 is $117 million,
with another $275 million maturing in 2021.

Leverage ratio (Non-U.S. GAAP measure) 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 (Non-U.S. GAAP measure).
The long-term target is to maintain a leverage ratio of around 1x within a range
of 0.5x to 1.5x. As of September 30, 2020, the Company had a leverage ratio of
2.4x, compared to 1.8x at September 30, 2019 as a lower net debt was more than
offset by a lower adjusted 12 month trailing EBITDA vs. a year earlier. At June
30, 2020, the leverage ratio was 2.9x.

Total equity increased by $114 million compared to September 30, 2019 mainly due
to $155 million in net income and $28 million from positive foreign exchange
effects, partly offset by $55 million in dividends.



First nine months 2020 development


Operating cash flow was $380 million compared to $328 million a year earlier.
The improvement was primarily a result of more positive effects from changes in
working capital in 2020 and the EC antitrust payment of $203 million in Q2 2019,
partly offset by a lower net income in 2020.

Capital expenditure, net of $229 million was 36% lower than a year earlier, reflecting efforts to reduce capital expenditure to support cash flow. Capital expenditure, net in relation to sales was 4.6% compared to 5.6% in the same period 2019.


Free cash flow (Non-U.S. GAAP measure) amounted to $152 million compared to $30
million negative a year earlier, where the improvement was due to the higher
operating cash flow and lower capital expenditure, net.

Cash conversion (Non-U.S. GAAP measure) defined as free cash flow (Non-U.S. GAAP
measure) in relation to net income, was not meaningful in the first half year as
net income was close to zero.





                                       25

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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 September 30, 2020                     Three months ended September 30, 2019
                                       Reported                                                  Reported
                                         U.S.                                   Non-U.S.           U.S.                                   Non-U.S.
                                         GAAP            Adjustments1)            GAAP             GAAP            Adjustments1)            GAAP
Operating income                     $      174.5       $          31.1       $      205.6$      153.8       $          28.7       $      182.5
Operating margin, %                           8.6                   1.5               10.1              7.6                   1.4                9.0
Earnings per share, diluted                  1.12                  0.36               1.48             0.98                  0.32               1.30



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

   2019 separation of our business segments.




                                             Nine months ended September 30, 2020                      Nine months ended September 30, 2019
                                       Reported                                                  Reported
                                         U.S.                                   Non-U.S.           U.S.                                   Non-U.S.
                                         GAAP            Adjustments1)            GAAP             GAAP            Adjustments1)            GAAP
Operating income                     $       75.3       $          94.9       $      170.2$      496.5       $          35.6       $      532.1
Operating margin, %                           1.5                   2.0                3.5              7.8                   0.6                8.4
(Loss) earnings per share, diluted          (0.02 )                0.97               0.95             3.50                  0.37               3.87



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

2019 separation of our business segments.


                  Items included in Non-U.S. GAAP adjustments

                  (Dollars in millions, except per share data)





                                                Three months ended               Three months ended
                                                September 30, 2020               September 30, 2019
                                            Millions         Per share       Millions         Per share
Capacity alignment                         $     30.9$      0.36$     27.4$      0.31
Antitrust related matters                         0.2              0.00            0.1              0.00
Separation costs                                    -                 -            1.2              0.01

Total adjustments to operating income $ 31.1$ 0.36$ 28.7$ 0.32 Tax on non-U.S. GAAP adjustments1)

                0.0              0.00           (0.4 )            0.00
Total adjustments to net income                  31.1              0.36           28.3              0.32




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






                                                Nine months ended                Nine months ended
                                                September 30, 2020               September 30, 2019
                                            Millions         Per share       Millions         Per share
Capacity alignment                         $     94.4$      1.08$     40.5$      0.46
Antitrust related matters                         0.5              0.01           (6.1 )           (0.07 )
Separation Costs                                    -                 -            1.2              0.01
Total adjustments to operating income            94.9              1.09           35.6              0.40
Tax on non-U.S. GAAP adjustments1)               (9.9 )           (0.12 )         (3.0 )           (0.03 )
Total adjustments to net income            $     85.0$      0.97$     32.6$      0.37

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.

                                       26

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

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

                             (Dollars in millions)



                                              September        September
                                               30, 2020         30, 2019        December 31, 2019
Total current assets                         $    4,036.5$    2,908.8     $           3,002.1
Total current liabilities                        (3,221.3 )       (2,304.8 )              (2,410.2 )
Working capital                                     815.2            604.0                   591.9
Cash and cash equivalents                        (1,476.5 )         (334.4 )                (444.7 )
Short-term debt                                   1,025.5            289.9                   368.1
Derivative (asset) and liability, current            15.1              5.9                    (4.2 )
Dividends payable 1)                                    -             54.1                    54.1
Operating working capital                    $      379.3$      619.5     $             565.2



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

   quarter of 2020 and no additional dividends have been declared in 2020.




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

                             (Dollars in millions)



                                              September         September
                                               30, 2020         30, 2019         December 31, 2019
Short-term debt                              $    1,025.5$       289.9     $             368.1
Long-term debt                                    2,007.1           1,815.1                 1,726.1
Total debt                                        3,032.6           2,105.0                 2,094.2
Cash and cash equivalents                        (1,476.5 )          (334.4 )                (444.7 )
Debt issuance cost/Debt-related
derivatives, net                                     17.0              10.7                     0.3
Net debt                                     $    1,573.1$     1,781.3     $           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)



                                               September         September
                                               30, 2020          30, 2019         December 31, 2019
Net debt1)                                   $     1,573.1$     1,781.3     $           1,649.8
Pension liabilities                                  239.2             199.9                   240.2
Debt per the Policy                                1,812.3           1,981.2                 1,890.0

Net income2)                                         155.3             216.1                   462.8
Less; Net loss from discontinued
operations2)                                             -              (2.0 )                     -
Net income continuing operations2)                   155.3             214.1                   462.8
Income taxes 2)                                       67.6             226.8                   185.6
Interest expense, net2,3)                             65.6              67.0                    65.9
Depreciation and amortization of
intangibles2)                                        358.6             348.8                   350.6
Antitrust related matters, capacity
alignment and
  separation costs2                                  107.8             254.5                    48.6
EBITDA per the Policy                        $       754.9$     1,111.2     $           1,113.5
Leverage ratio                                         2.4               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.




                                       27

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

Headcount



                                              September                              September
                                               30, 2020         June 30, 2020         30, 2019
Headcount                                           65,300              61,800             64,900
Whereof:
Direct workers in manufacturing                         72 %                70 %               71 %
Best cost countries                                     81 %                81 %               80 %
Temporary personnel                                      9 %                 6 %                9 %




Compared to June 30, 2020, total headcount (permanent employees and temporary
personnel) increased by 3,522. The increase in the quarter was driven by an
increase of around 9% of the direct workforce reflecting a sharp increase in
light vehicle production compared to second quarter 2020. The indirect workforce
decreased by around 2%, reflecting our Structural Efficiency Programs. Compared
to a year ago, total headcount increased by 0.6%, driven by an increase of
around 3% of the direct workforce and a reduction of 4% of the indirect
workforce.





Full year 2020 indications



The Company's organic sales growth and adjusted operating margin outlook
indications for 2020 reflect continuing uncertainty in the automotive markets
and are mainly based on our customer call-offs and light vehicle production
according to IHS.



Financial measure                          Full year indication
Net sales growth                           Around (14.5)%
Organic sales growth                       Around (13)%
Adjusted operating margin 1)               Around 6.0%
R,D&E, net % of sales                      Above 2019 level
Tax rate 2)                                Around 40%
Operating cash flow 2)                     Below 2019 level
Capex, net % of sales                      Below 2019 level
Leverage ratio at year-end                 Above target range

1) Excluding costs for capacity alignments and antitrust related matters. 2)Excluding unusual items.


The forward-looking non-U.S. GAAP financial measures above are provided on a
non-U.S. GAAP basis. The Company has not provided a U.S. GAAP reconciliation of
these measures because items that impact these measures, such as costs related to
capacity alignments and antitrust matters, cannot be reasonably predicted or
determined. As a result, such reconciliation is not available without unreasonable
efforts and Autoliv is unable to determine the probable significance of the
unavailable information.



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.

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.

                                       28

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

OTHER RECENT EVENTS

Key launches in the Third Quarter of 2020

• Cadillac Escalade: Steering Wheel and Driver/Passenger Airbags.

• Mercedes S-Class: Steering Wheel, Driver/Passenger Airbags, Bag In Belt and

Pyrotechnical Safety Switch.

• VW ID.3: Steering Wheel, Driver/Passenger Airbags and Seatbelts.

• Citroen C4: Steering Wheel, Driver/Passenger Airbags, Side Airbags,

Head/Inflatable Curtain Airbags and Seatbelts.

• Hyundai Tucson: Driver/Passenger Airbags, Head/Inflatable Curtain Airbags and

Seatbelts.

• Nissan Rogue/X-Trail: Driver/Passenger Airbags, Knee Airbag and Front Center

Airbag.

• Ford F-150: Driver/Passenger Airbags, Side Airbags and Head/Inflatable Curtain

Airbags.

• Ford Bronco: Driver/Passenger Airbags, Knee Airbag, Side Airbags and

Seatbelts.

• Ford Mustang Mach-E: Driver/Passenger Airbags, Knee Airbag, Side Airbags and

   Seatbelts.


Other Items


• On August 3, 2020, Autoliv announced the appointment of Laurie Brlas as an

independent member to its Board of Directors. Ms Brlas is a certified public

accountant that has held CFO positions in Newmont Mining Corporation and

Cliffs Natural Resources and currently serves on the board of directors of

   Albemarle Corporation, Exelon Corporation and Graphic Packaging Holding
   Company.



• On October 1, 2020, Autoliv announced the promotion of Colin Naughton to the

position of President, Asia and a member of Autoliv's Executive Management

Team. The promotion is expected to be effective on November 1, 2020 as Brad

Murray, current President of Autoliv Asia, has chosen to return to the United

States after a multi-decade career in Japan. Colin has extensive experience

leading large-scale operations and driving positive results for nearly two

decades. He began his career at Autoliv in 1995, progressing into various

Sales, Engineering and Operations leadership roles in several of Autoliv's

   locations in Asia. Colin will relocate from Thailand to Japan, where the
   Autoliv Asia Division is headquartered.




                                       29

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