Autoliv Inc (ALV) 2002 Q3 法說會逐字稿

Ladies and gentlemen thank you for waiting. Your Autoliv conference call is due to begin in one minute's time. Please continue to stay on the line and once again thank you for waiting.

.

Good morning and good afternoon ladies and gentlemen. Welcome to the Autoliv conference call. I would like to turn it over to Lars Westerberg. Please go ahead and I will be standing by for questions.

Thank you very much and welcome to this third quarter conference call

.

My name is Lars Westerberg. As usual I'm sitting here with Magnus Lindquist the Chief Financial Officer, as usual. And also

the Chief Information Officer, as usual.

And we intend to do the conference pretty much as we always have done. Which means that if you go into our homepage, you will find on the financial information you will find a slide package, which we are going to talk about for the first say 20 minutes. And then later on we'll open up for questions, and hopefully some answers.

With that I guess we could start by saying that we from the Autoliv side, we think we had a very successful third quarter and as you may have seen already the sales came in with about - an increase of about 17 percent out of which is organic increase - mainly seven percent, which is about twice as much as before and then we have currency effect and we also have some acquisitions.

So if we look at the first page with sales we can say that the increase was 17 percent we had guided and we had thought it would end up in the neighborhood of 13 percent and the surprise was our own organic growth and we'll be back to why - it has to do with the

we supply.

The Q3 as you can see is now in line with the 12 months average planned which is unusual because as you can see quarter 3 is almost always somewhat below the trend and that just indicates again that we had a very strong sales month.

We also believe that these CQ3 here confirms the positive trend we have had since quite some quarters now. If we look at maybe the more interesting the organic sales in light and organic sales and compare that with the light vehicle production, and here we have, as you know we have compensated for acquisitions and we have compensated for currencies, we can see that we had a second quarter here with organic sales up seven percent, while the core production was up roughly five percent or actually I believe if we take it worldwide was 4.6 and for the two - Europe and North America a little bit more than five.

We can also see that again the ... slightly better than the underlying market but usually out perform the underlying better than we did this time and the reason is of course is it has been an uneven increase this time - as you are all aware we had a very good increase in the United States in core production partially because we compare with a very low figure third quarter last year because of the tragic events of September, 11.

So therefore since we have half our sales in Europe and the European production actually shrank a little bit more than ... for our Autoliv market makes was up about two percent and we were actually up seven so from that point of view we did better than what really meets the eye here with not too

a distance between ourselves and the market.

So organically a very rewarding quarter, even better than what we can see on the graph. If you look at the US core and trust mix we took another big step up here with the light trucks and as you can see now the market has all of a sudden a mix with 55 percent light trucks and about 45 percent cars.

As we have mentioned many times before we are gradually picking up here in Autoliv but for the time being we are round about 50/50. So even though we are increasing our sales to the truck market we are yet lagging a little bit.

However if you pluck this one which we have done it changes quarter by quarter and we are going to be up to 60/40 sometime during the

of next year and then fall back to 55/45 again and part of the reason why we have the biggest

these days of the light trucks than we used to have is that the

acquisition has a very large percentage into the truck market - typically Ford Explorers, Ford Excursions and so forth.

So, so far we are trailing a little bit and that will swing during the next year but then again we do not know how the mix will change of course.

The production for quarter three North America was up as we mentioned and 12 percent that looks very impressive but really that is coming back you could say to a more normal level in the United States so if we exclude last year this is basically where we usually are in North America in quarter three.

I think that our forecast in July was nine percent

again we came out better here with a production and forecast. Also Europe was better even it went down 1.1 percent we thought we would have done more in the order of four percent so goals the biggest main markets for us did slightly better then expected.

Looking bit a little bit into the European market and compared with registrations and that is of course registrations in Europe and that's not take into account the exports from Europe. We have seen that the European registrations are here today their down about 3.5 percent but lately September was actually up one percent which hopefully could be a good indication even Germany was up with about 3.5 percent in September.

So all in all the plan we had in July was out performed by the actionable. We had about 2.4 percent and you could say that actionable out performed last year's actionable with about 5.3 percent. So slightly better on both Europe and North America.

Looking at the unit sales, again we have to look at the likely production in the three main markets is about 4.6 percent as a reference and it's quite clear they will take market share and seat belts for instance. We are up 16 percent in Uni.-trends where the corporate action is only 4.6.

Potential is hard to say we're up about a quarter as you can say. Prompt and airbags we defiantly take market shares also are up 13 percent for the quarter in question.

Chest space

to say airbags we don't know either as you all know this, this is a very much of a growth market and the inflatable trunk from ultimately is up quarter on quarter with last year.

In volume terms we're actually up 43 percent and see reprecately there may unfortunately be somebody that is higher then us but it's in any case a very good increase.

Gross margins we came in at 18 percent, which is marginally better then the same quarter last year, which was 17.9. Part of the reason for coming in at 18.0, we had actually hoped to be about half a percent higher was that we had a couple of unusual costs in the quarter past of in this year.

Maybe the biggest one was that you all know we've had a turmoil in the currency markets in Brazil and in the month of September alone we had to take a hit of $3 million because the real the Brazilian real depreciated against the U.S. dollar with some 25 - 26 percent and for a company that buys components in dollars and Euros perhaps receivables in local currency that is a big hit actually. So that in itself is 0.3 percent.

Then of course we've had, had some reclassification but on the other hand we have had the dis

and restraint electronics for that evens out. So basically I would say that the underline should properly be more like 18.5 percent.

Operating margins we had guided you to believe that we should be some where in the order of seven percent and that's where we ended up to. We came in at 7.2 percent EBIT margins and clearly that was driven by the volume increase that we saw here and of course the gross margins that we got to described had a negative impact.

Also worth mentioning is in 43 which some of you have said it's a little bit risky and that is correct. We've had, had no significant stock problems or clarity issues since five of the many launches viewing 43, so from that point of view a fairly smooth quarter if we exclude South America.

Income statement has we mentioned them face up 17.5 percent translating into a EBIT increase of about 20.6 percent and goes down to an earning before tax where we're closing in on 28 percent and finally netcome income after tax compared to the previous year but compensated for one time effect and compensated for restructure package. We are up actually no less than 37.1 percent. If we look on the overheads they are in percentages, they are the same and we can say here that the

is

research and on the sales and administration costs we are somewhat burdened and which will remain there by higher insurance costs this year, we have also some

costs and some legal costs.

As a percentage of sales they are unchanged. Key figures what remains for the shareholder on the bottom line. Well last year again cleaned up for one time events and cleaned up for restructuring packages we go up 31 cents and this year we go 42 cents which I believe is 35 percent up.

Another of our key ratios is the return on capital employed and last year we managed to 8.8 percent and this quarter we did increase two full percentage points to 10.8 percent on capital employed.

Another one is of course the working capital where with the last three quarters have gone from 10.7 percent to 10.3 percent to the last quarter now we're down to 9.5 percent and we have a target that we would like to be below 10 percent and now we're finally there actually.

Net debt as you can see have gone down basically almost $200 million here in one year so we have a net debt to capitalization ratio which has gone in one year from 37 percent to 31 percent so a very nice cash flow which ties into the next line which describes the cash in more detail.

And if you take the quarter three year loan to start with we have it ... with last year which is almost $100 million and if you take the accumulative figure for the last four quarters which is the last year you can say we have a positive cash flow of $260 million and the debt equity ratio for those to follow that one more than debt to capitalization, we have a debt equity that is down to 45 percent. Strong cash flow again then.

The operating and free cash flow the working cap is of course the main contributor to the increased cash flow. We have gone from a negative 138 to a positive of 64 million, which is about 200 million. Then again of course if you look at the net income that has tripled from 48 to 159 million, and those two together explains the improved cash flow that we have.

Also worth noting maybe is that we have yet another quarter right now where the depreciation is higher than the

and that also adds of course and means for the future the depreciation will be lower and lower.

All and all we had a cash flow here of 282 and the difference with the above mentioned 260 is of course the investments we have made notably its the

Research Electronics and some other minor investments and also some actual divestitures.

Working capital which we have undertaken to take down below 10 percent and you can see the last five quarters or so coming from 11.4 percent we're now down to 9.4 which actually is fairly neat because even in actual dollar terms we are lower in spite of 17 percent higher sales than last year and also in spite of the acquisition of

electronics, and what happened this ... you may have seen is that the receivable came down nicely.

Actually the payables came down a little bit too and the inventory added a little bit. But all in all down to below 10 percent.

The capital expenditures and the depreciation we are now running at a level or a little bit less than 50 million per quarter and you can say if we take the last 12 months here we're running today at the level of say $225 million per year. And part of the reason as we described in the report also is that we invest as you know more and more in low labor cost countries where, of course, the payback is not so good for highly automated lines. So we spend less on automated equipment.

And maybe

come back to that in the presentation here. But actually during the year so far we have added about a headcount of 1,700 persons. And out of those 1,700 1,600 are in low labor cost countries. And just 100 in high labor cost countries. And those are basically a lot of engineers in

electronics.

If you look again on the left debt to capitalization we have a good trend of course. We are coming from 35 percent at the end of last year, we are now down to 31 percent. And that's of course because of the cash flow. And we have plenty of space now for either acquisitions or a repurchase of shares.

Capex due in quarter three, and it's the usual ones. We could say we have installed $5 million worth of equipment for airbags in Europe, and $4 million worth of inflater capacity in Europe. And also side hybrid inflaters mainly. And the same type of inflater in the United States 3 million.

We have electronics capacity and that it is - I don't really know if that's in -

mainly in Europe I think. We have a couple of German contracts to start up.

With the expenditure at $500,000 during the quarter for a new Korean facility, that is state of the art I would say, complete with a high

. And I think you are aware that we have sales of about 40 million this year. Two years from now we think that is going to be 150 and we're going to pass 200 million the year after that one.

We have some new nice contracts from the

on particularly side system - airbags for side system protection.

Recent events, we had an auto show in Paris where Renault introduced the new Megane, and demonstrated the new anti-sliding airbag which is installed in the two and the three door versions of the Megane.

We did inaugurate the new airbag plant I just mentioned in Korea, plus we started yet another company in China, company number six in China which is growing very fast for us, and with very good margins. And this one is in

and will produce seat belts for

and

. As time goes by it will also produce airbags, but initially it's only seatbelts.

Looking a little bit ahead, what could we expect then. The next slide will describe the very short-term future we have and maybe difficult to see, but it's a blue line here explaining the stock situation in the United States of vehicles. And as you can see we are smack on the average now after September. And you may recall that we were very, very low during the summer and now you can say it's caught up so we are on a very normal level in United States, really nothing remarkable at all.

And then given that the - as you know we have the

and the

institutes that we take information from. What they predict for quarter four in North America is we should see an increased production of cars of about 3.5 percent. And that is quarter four of this year.

We have also - as you can see, we have put in also the estimates for next year. And all in all we can say that as far as anybody knows now, middle of October 2002, the next year will be roughly the same level as this year. So you can say another fairly good year. And I think this year will be the third best in history in the United States, and the prediction is a similar year next year with no big change.

And that is actually the same in Europe basically by coincidence and European car production with is estimated to have an increase again in the fourth quarter from roughly 3.5 percent again.

And also here as you can see a little bit ups and downs across the year but if you add it all up it is very marginally above this year in volume terms so the conclusion here would be small

in the U. S. small

in Europe for the fourth quarter and next year will be in both cases be similar levels to this year nothing dramatic.

The Euro dollar exchange rate continues to favor us I mean we am as you can see here we are predicting that if the dollar Euro exchange rate stays the same for the remainder of the year we will see an increase sales in quarter four of about 54 million and an EBIT of about $4 million and that is of course the currency effect alone.

If we then have a look at the summary of what we believe for the quarter four the cordial rate as we mentioned earlier for the post quarter was

and we think that's going to moderate down to roughly plus three percent.

The acquisitions of four percent is about the same for quarter three and quarter four and the foreign exchange of five percent for this quarter and if you add all of that up it's about 12 percent and we believe that we can probably hang on to the trend that we will continue to increase market share and that's why we indicate that we hope that we can a sales increase in quarter four that is almost as high as it was in quarter three.

And then on from the

or maybe some of cautious we maybe burnt from the Brazilian exercise but we also have as you know the problem to predict the Christmas shut down so we are some what cautiously saying that we believe that the operating margin will be approximately the same as it was in quarter three.

And with that I would like to leave the floor open for the questions and comments and we'll try to do our best to answer.

Thank you. We will now poll for questions using our quick you polling feature. If you have a question please press the number one on your telephone keypad and that's the hash or a pound sign to cancel. Once again that's the number one on your telephone keypad to register a question.

The first question today comes from Charles Evans please go ahead announcing your company's name.

Yes hello it's Charles Evans the name

and Capital. Congratulations on your results.

Thank you.

I was just wondering I mean with regards to your cautious, kind of relatively cautious margin guidance from Q4 could you possibly flush out the impact with Brazil as you see it in Q4 and also could you flush out what potential impact you might see in terms of these plant shut downs till Christmas which you can't predict and if don't tell what would be the listing of margins above let's say the 7.2 percent you saw in Q3?

Well first of all thank you for the flattering remark

. Quarter four if we take quarter three Brazil I have manuals in front of me here we did lose about $4.6 million in quarter three alone in Brazil and believe it or not that's the same order of magnitude as the total sales for Brazil.

Out of that three million is one time effectively we could say about this which is really the hitch which will

evaluation. Whether that's going to come back or not we have not a clue of course but given it that we all wish we see a better result if you could call it better when you lose almost the whole place.

So you say operationally I would say we are 1.5 million or so negative for quarter three.

In Q4 you mean 1.5 million.

No if we disregard the evaluation it was about 1.5 in quarter three.

Yes.

So the three million was one time if that was really your question. Recording plant shut down.

not it was because you failed to preserve in Q4 are you saying that one and a half to be the run rate to Q4.

That was

...

It was

Yeah you know quarter three is not too strong and given the turmoil we have seen in South America it can hardly be worth I believe.

OK.

We regard the devaluation of course as a long term earning an unusual item and hope that it doesn't repeat. Regarding plan shut down

it's very difficult to answer I mean it depends which pant shut down where if we had shut down we couldn't care less really but

are more sensitive of course so I'm afraid I cannot answer. That would hurt

as well as the margin but I think our guidance from the top line is fairly realistic in our guidance in the margin might be much more cautious you could say.

I think you could say that generally speaking more cautious on the margin than we are on the talk line. It's just because you may recall that in quarter three we had a legal issue that came in and hit us which was kind of on fore seen and now we have everything in the evaluation and maybe where some

so we give a very relatively cautious guidance on the margin.

OK.

We have not calculated any particular plant shut down. That's just one of the things that may happen that we cannot control.

So the way you want us to read that statement is 7.2

go well and it could be high if

don't go wrong.

It could be high.

evans OK. Thank you very much.

Thank you.

Thank you. The next question comes from

. Please go ahead and announce your company name.

. Hi there.

Could you speak up a little Anders?

: Is this better?

More than

.

: Ok. I have a question on the cash flow. As you said you had a lost 12 months free cash flow excluding the

280 million. I wonder if you could elaborate a little bit on potential reasons why this should look different going froward 12 months assuming the markets in our that you outlay when it comes to core productions being roughly flat next year. I mean working capital, cap ex other reasons I mean it looks like there should be a very very good cash flow once it goes forward.

Well let's hope that you are right. I think that there's no particular reason to change the

I think you are aware Anders you've fallen out many years that geographically we are probably as spread as we can be. Now when we inaugurated the Korean plan and we had booked lots of

in Korea we all already

expanded. What we do now is

capacity investments or investments in new model bound

so that's what we do from that point of view sir. I think that the

will not be higher for sure going forward. Regarding other working capital we don't

We don't suppose that we will make in a sort of negative there isn't a working capital so Yes we expect to have a good quarter in the last quarter of this year.

So it would be a disappointment to see a

like the 200 million again in the coming program.

On the coming 12 months. That is of course a limit to how much you can shrink the working capital. I mean ...

Even you just

the working capital has contributed like 60 million or so in the last 12 months so 220

.

I don't know if I've any comments for that. The truth is that we are not budgeting these at least not yet on quarter by quarter working capital degrees. We have your sort of what we're doing is that we try to get a cash flow by spending less on

and then control the working capital.

But that's roughly what we do.

So the follow up question is when are you going to decide what to do with this all this cash.

I think you could say following an exam we had prepared all paper work for taking action but we're not yet decided to take it. But it has to actually number of contracts and things to sign and that is none.

And then we're going to decide and then when we decide we're going to let the market know very fast. But we've also been given the advice that once you publish a financial statement you should wait a couple of days until you decide.

Because you don't really know why the share was stabilized.

All right. A final question also regarding your comments in a report about the results

in the three main ingredients seem to be an improvement in Japan and a recovery in the US but varied results development in Europe. Could you sort of explain a bit what varied means.

Varied means that you might have seen in an absolutely disgusting. The volumes in Europe are not they're actually going down so far and that means that some countries we do better and some worse and usually that is not pride to the sales in the country in question.

Like if you compare the two years we are slightly off in Sweden and England and we are better off in Germany and France etcetra. So therefore it's a mixed bag which means that it's also I guess that's the main explanation because if you look at England for instance much of our sales in England merely depending on how the

performs and the

is not so much in England as it is in Central Europe.

But Europe as a region is that up or down or flat.

I would say it's probably up but not so much. A little bit up it's a mixed bag.

All right thank you.

Thank you.

Thank you the next question comes from

. Please go ahead announcing your company name.

Yes good afternoon.

from Morgan Stanley. A couple of questions on cost because I think we're all pleased with the growth development.

On the cost side you mentioned SGNA which was stable as a percent of sales but you mentioned higher costs and insurance and IT. Could you qualify those amounts for us roughly and then secondly if I'm right in the work force calculation you now have around 30 percent of your work force in low cost countries which is close to your initial objective.

Could you give us an update on where you could take that percentage in over the work force in low cost countries over the next couple of years.

Hello

well insurance costs are up I would say in the order of

to 40 percent but we're not going to reveal to you exactly how much the

for competitive reasons.

But that is the whole calm of all types of insurances and that is not because we have any particular high range of insurance flames.

It's rather the market that maybe triggered by the September 11 attack and many other points really. But about 40 percent the increase in insurance and of course that translates into a number of millions of dollars.

IT I would say is driven mainly as a renewal of our licensees with companies like Microsoft and general upgrading. I think it's the best asset.

We do not we haven't all our number but I think we keep it ourselves but those are two explanations because we got of course we would like to see the STNIA go down as a percent of sales rather then being stable.

Regarding the low labor cost countries, lets see here, I have the figures somewhere here oh I have the I think it is the 28.5 percent of

not taking it from the top of my head. But you can take it cause you know it.

Yes.

Let's look at our head stroke head count we have a number of head count in low labor cost countries at year end at 22.7 percent and then with this quarter up at 26.5 percent. That close forms to eight thousand - a little bit more then 8,800 people.

OK. So first let's start because of how my little

. And if we start from the beginning yet we make a distinction between head count and employees that's just as important to start with and head count that is everybody that we pay and employees and then we have a number of temporarily employees which we encourage because if the market will go down we have we're much costed to take them out you can say and that is particular in Europe we have a number of temporaries.

So at the beginning of the year here we were a 25.5 percent is that the figure you had too?

For head count sales.

No for employees and now we're going have to rise at 28.5 percent of the total number of employees in

in those countries and means we have increased them by about 1600 in head as you can say.

OK.

And victorious we believe we can properly get to 35 percent or so given the present mix of product but then that depends on how the bags develop. How many bags would we produce ourselves, how many should we buy, how is the leatherwork seeing we developing a relationship with

etcetera etcetera.

But person thinking is that if you're gone from 25.5 to 28.5 we could keep shipping away in either two or three years and then we're basically there unless product may changes.

Great, maybe these two could as a follow up tell me roughly what you're percentage of temp is, it's about 10 percent of total or less?

We properly could you have

we have more or less 10 percent

.

The number is around 10 percent.

Just hang on a minute we're going to find it for you. We have been three figures head counted 33,600 at the end of September and then we're have to go and find them for me.

Do you have that?

I don't have that.

And I let this note up. Maybe we could come back to that

if you're going to stay on the conference and we don't consume too much time.

Not a problem. Thank you very much.

Deal with

is ten percent in any case.

Very good thank you.

Thank you.

Thank you the next question comes from

please go ahead announcing your company name.

from

here.

Three questions first regarding the out look that you are giving for the production in North America and you're able to see like North America continues to be revised off boards for heavy quarter and I was wondering your sources supplying these fore costs have they made any fore costs given the fact if the incentives are cut sharply because since they are prolonging them all the time, we're seeing as just a production upwards but if you or your sources have a view on the incentives effective they were cut on the production for North America that would be interesting to hear?

And the second question is we saw Ford's results was very poor in the European operations it was kind of a surprise and I was wondering if you are seeing any effects from their problems in yours that should be related to accounts that you hey I am not that big on?

And a follow up of the third one would be Volvo's loss in market share in North America, what is your view there, for example for the fourth quarter? And could you update us on the

, what's your feeling about the delay of the production for that? Thank you.

Thank you.

Well OK

. The - they have not really, our sources

and

, they have not really given us any kind of forecast

incentives. But I think we're all aware that there is always incentive, always has been. And to some extent I believe these incentives that I believe were averaging about $2,900

, they were very, very high.

But maybe they're not as high as what meets the eye because we do understand also that

keeps increasing sticker price that's $70 here, $80 there. So the sticker price goes up, and then the incentive is higher, but from a higher sticker price.

Sure.

I think the philosophies are slightly different between the various suppliers in the United States.

Generally speaking the official sticker price is high, that is true. But there is no forecast given as far as I understand.

But your view is that that makes it possible for the

to continue with the incentives also during next year at these levels? Or ...

I think they're going to be - what I read here in the news just today, I believe, is that

has kicked in another incentive again.

Yeah.

Because the first two weeks in October was less successful than expected for

.

Yeah.

So they keep increasing. And I agree with you, every revision we see and every outcome is higher than expected in North America.

Yeah OK.

If we talk about Ford in Europe, I think as you know we are main supplier to the so-called

with the Fusion, the Fiesta, and so forth and so on. I believe and I should probably not say so, but I believe that Ford is a bit disappointed with the volumes. And nevertheless the volumes are much higher than it was on the old

, so from that point of view we do have a little uptake.

So I think Ford is slightly disappointed with the volume they have received on the

. And I think I know that they are also above their target on cost for the

. And that of course translates into a less favorable result.

To talk about other Ford accounts. Land Rover and Jaguar, they are for us insignificant, they have really - they are not meaningful for us in Europe. They may be in the future.

But the problems with the Fiesta lower volumes, do you think that might lead to a halt in production in the fourth quarter

? Or ...

No I don't believe so. You know, the volumes are high but they are not as high as they had hoped.

OK.

But they are higher than they were last year.

market share, yeah I would think it's a pity too. They have a good model range, and as you know we have a big percentage of the supplies to Volvo, so that's a problem.

The

the cross-country, that is the record breaker for us when it comes to value per car. So we just hope it's going to be very successful. It's been delayed in launch and the only thing I can tell you

, that we are not the cause.

OK. OK. Thank you.

Thank you.

Thank you ...

OK. Here comes Magnus with the number of employee's we've got!!

The percentage of

, when it comes to percentage of headcount is this end of quarter 13 percent. And if we compare it to one year ago it was close to 12 percent.

So 13 percent this year, and 12 percent last year ...

Twelve percent. Yes.

Is

in relation to ...

Headcount.

Headcount.

OK.

Thank you. The next question comes from

. Please go ahead, announcing your company name.

Hi this is

from

.

I wonder first of all on the stock buy back. It seems like you're almost on the edge of starting buying back, do you have a mandate from the board?

We have a mandate for quite some time to the tune of about five million shares.

That's from the

but unless you have an

from the board to act as well.

Yes.

OK. And ...

Five and a half million shares to be exact.

Right. It sounds like - you're getting much closer now to execute that

. Did I read write - or listen right between the lines?

I don't know. I mean you hear what you hear I guess.

OK. Another one of those tricky questions I suppose is the

margin. If you're not to be conservative or more off to look for your best estimate of Q4

margins is usually about a percent higher on as average than the Q3 so it's - should it be that the historic average is the best assumption for the most likely outcome or is there any specific items this quarter that hasn't been in the history?

No I think

we came in with an estimate roughly the same

as the past quarter which is as you say 7.2. And the only remark we would like to say is we may be a little bit cautious because as you know we have been hit by this

. We have also read in the newspapers about collapse throughout the multi market and the financial markets has been diving down like a submarine so of course we get a little bit nervous but I don't think we should give you any further guarantee. It might be a little bit conservative that's about it. And what ...

a percentage of sales? It's really increasing so that's also one explanation.

So that's where we are. So basically as I say we are probably a bit cautious and we are a bit cautious because sentiment in the market at in the general market we are a little bit afraid. We have been hurt a little bit by legal staff and now lately by

. It seems like something always shows up and therefore we are taking it a little bit cautious.

Yeah. I don't think you're wrong in taking a cautious

on the contrary. How concerned are you that the uneven production level - you write in the report that you see a split development between a newly launched model and the older ones. Would that put some strain on your production capacity and therefore you cannot optimize production efficiency?

Well we are not seriously worried about it. We will sort it out but I think sometimes in our reports we mix up cars in geographical market so basically what I tried to explain a some minutes ago maybe not so clear was that the

has not much to do with the English market because one of the drivers is the BMW mini which is selling outside the English market so therefore from my point of view we have a plant in England that's going to be more or less occupied because of a low that is generated in Europe somewhere not necessarily England.

And how is we are trying to even out and balance out but of course in some places when they

seven days away

and then in other parts we and up having like a five day

and we can balance it out but it does take time. So we're not seriously worried that's the answer.

Excellent. Many thanks Lars.

Thank you.

Thank you the next question comes from

. Please go ahead announcing you company name.

Hello everyone. It's

. I had two questions. Could you please talk somewhat on the acquisitions and how there're performing and hurting or boosting the

and the questions that you don't like.

The price development and if you have seen a change from the manufactures asking for lower prices or is it in the same tough environment. Thank you.

OK I'll deal with the major acquisition we have made is really the

restraint electronics and that's one example why I believe we cannot concentrate only on the EBIT margin.

As you know and as we paid about $25 million for it. They produce as I take it about $1.5 million per quarter as of last quarter in going forward. That gives us $6 million return a $25 million investment which is about 24 percent return on investments. It's an excellent investment for the shareholder and it adds to the earnings per share.

But for those of you that look at EBIT percentage it's not very good because it's only EBIT margin of three or four percent as we stand today. So the answer is yes it deletes the EBIT margin but no it's a great acquisition and it gives us a foot hold in North America.

Other than that I believe the only thing we have done is sold off the French component trend in quarter one. Other than that we've been fairly peaceful when it comes to acquisition and

.

The price from our customers they keep and

it's still reading us as we had the same quarter best estimate one and half, two percent something like that in price erosion.

OK thank you.

Thank you.

Thank you, next question comes from KJ

please go ahead announcing your company's name.

Looking at Qs for this year I guess you had obviously a big number of new launches. Could you give us some guidance on how big this was compared to the level you saw last year?

Quite difficult because you know sometimes the launch is very small like a rear seat seatbelt but sometimes it's a full car like we're had for

programs and so forth and so on.

Generally I would say the

sort of finished

it's the largest number of launches ever during this time and that's why some of you

nervous are we going to have a problem and the only thing I can say is that in some plants we running full steam but we don't destroy any customer to my knowledge nor are we incurring a lot

.

But some plants are running pretty full speed.

: Excellent.

That's where they make money you know.

: Yes it actually makes sense. Looking at this new slide in airbag that's in

is launching with you. What kind of price premium is that kind of product compared to normal traditional airbags?

It's actually cheaper that a traditional airbag and the reason is that the you can have a very simple hurt and

because it's well imbedded into the cushion and doesn't let the air out so it's a low cost solution but very efficient.

: So what is the price discount then?

All right well it's not really a discount because there is nothing like it. It's a new type of airbag you can say. It's an additional value to a car.

: And this is something that would be particularly useful for the say the say the family car segment or what would you say?

I think it has to do with the design of the seat and the design of the dashboard and the total restraint system. In many I think it could be used for in many cases actually.

What we try to explain launching the report a little bit is that if you get the passenger driver to sit more upright when the crash occurs he's going to hit the whole airbag and not only the lower part on the airbag so it's also good good for the occupant you could say. You think it's a great solution

. Sometimes you can avoid a knee bolster by having an odd night like this.

: So if you look at the say the constant value of a new Megane compared to an old Megane is there a big difference. Have you managed to increase say the constant value on other parts of this

something.

There are more products. We have the inflatable

and we have this product at least in the two doors. They are more

. So it's higher.

: But how much higher is it if you try to guard it I think you investigated the total lower of the value.

Yes we said that this conflict was the old conflict was in the value or mentions the four- percent of faith. In other words $150 million. And those contracts they are not said anything about the new contracts and I don't think we do that.

Well he's like this thing sorry about that. It's higher.

: Excellent thank you.

Thank you.

Thank you the next question comes from

. Please go ahead announcing you company name.

Good afternoon this is

from CSSD. I just have one question on North America. Your organic sales increased by just two percent in North America while vehicle production was up 12 percent.

You point to a unsolvable mix but I'm looking here at you know car as well with an eight percent and I'm just wondering if you can give us a bit of color on the reasons to that and is there any sort of evidence of any impact from GMs be contenting or what's behind those numbers. Thank you.

Well I think there are a couple of reasons. One is the mix because as you correctly remarked there we are sort of under exposed to the

. Now that's hurting a little bit.

The second reason I would say is that we have launched a new type of

so called APM3. Some of you saw that when you had capital marketization always in the spring here and this is great from our point of view because it's a lower cost to the customer and it's a higher profit for us.

Both in percentage and in dollar term. So that is kicking in and that takes down the top line but increases the bottom line.

Thirdly I think we had actually lost a couple of seat belt programs because they have reached the end of production. If I quote correctly that was the

and it was some Nissan of some type.

And here it's kind of difficult because the that means that we're going to get it some other program that kicks in and I can I have actually a reading here.

We should be running roughly 20 percent market share for the time being in the States and looking at the figure I have here it's going to take us it's going to be slightly lower in quarter four coming to 19 percent.

Coming back to 22 percent roughly in the spring and quarter four of next year. We are at 24 - 25 percent market share.

So it is really nothing extraordinary if you ask the programs die and new programs kick in and if it varies quarter by quarter you can save.

Ok thank you very much.

Thank you.

Thank you the next question comes from

. Please go ahead announcing your company name.

Hi good afternoon. This is

from Salomon Smith Barney. Most of the questions I had actually have been addressed I guess but maybe you can give us some information on the new Golf platform.

What is going to be your exposure to this platform. Will you supply

maybe the new golf itself but other models which are within the platform like the Audi A3 for instance and maybe give us an idea of what could be the impact of this major launch on your revenues looking forward in 2004.

Ok the, the why did you ask the question that maps

to

who knows every nothing about it. The long and the short of it is that we have a very much increased content in the new gulf platform than we have on the present one and

is finding out exactly what we have in the future one. In any case I know that we have a big slice if not all of the seatbelts and we're pretty big on the

and I think we have the passenger airbag as well.

We are fairly exposed to it and I think we have basically that you know both platforms not only model goals but also other types on the

platform. I don't know on the top of my head exactly which components we have and do not have.

OK maybe you could tell us if there has been any change as to the share you will have on each of these

you see a trend from this customer to give you responsibility for maybe 100 percent of a component or you see any change in the way they share between suppliers.

OK here comes first the exact ... what's actually right, and we're proud of that we have all of the passenger airbags, we have all frontal seat belts and all the rear seatbelts as well, we have all the inflatable curtains and then it says a little bit unqualified much more than

, I don't know what that means

That's the preference ...

I know that but you're very secretive today you don't give any indication of how much more, sorry and your second question was if they buy it for the first time or they take component by component.

No, no the question is do you well I guess you've answered the question, you have a larger share for each component that's just what you said right.

Yes correct.

Compared to the previous version.

Correct, correct but these are slightly different the components that we had before, before we had the Thorax bags and we have lost those and got more of the others and the reason for that is we had 100 percent of Volkswagens thorax bags and they felt that that wasn't very correct politically.

OK thank you.

Thank you.

Once again may I remind participants to press the number one on your telephone keypad if you would like to register a question and the hash or pound sign to cancel, that's the number one on your telephone keypad to ask a question. The next question is a follow up question coming from

please go ahead.

your line is open.

I believe he has withdrawn his request. The next question comes from

please go ahead.

Yes I'd like to come back to the question about your products in the US and I wonder if you could be maybe a bit more specific on what - which of these factors that you talked about were most important because it's really big affiliation I mean 12 percent growth of course

production and two percent organic growth for you guys which is a 10 percent gap that's a lot and if you would be a bit mean you could say that is actually a 15 percent gap in some and you should have a five percent sort of growth in supply ... or at least a 13 percent gap so a bit more on that would be very helpful I mean the seatbelt decline is that like seven percentage points or what.

We haven't analyzed it that carefully and it's because it's not particularly worrying we believe. The seatbelt percentages

as I tried to indicate there actually when I see the lower point we'll be leaving in quarter four and starts to kick in quarter one, two and be much higher quarter three and four next fall.

If you say the markets are last quarter then or a year ago in seat belts. Is it

or what was it a year ago? What kind of indication?

I'm sorry I don't have that, but as you know we're coming from very low season, and I think we have said before that to get it up to 20405 we will have 30 percent market share. Actually the real world is like this you know, you cannot extrapolate it. You get programs and this programs and then all of a sudden they kick you in pretentioners and so forth, and the value changes the law. Because here what I give you is just seat belts in a particular car, then they have very different values.

Have you managed any calculated values.

No, but the reason for this value curve we have in seat belts, is that they are buying more and more complete cars, all seem to

us.

That's fine. The real question is how much is seat belts, how much is

?.

I don't know.

I'm sorry

we don't have that one.

All right, thanks anyway.

Thank you.

Thank you once again may I remind participants to press the number one on you're telephone keypad to ask the questions and the hash or pound sign to cancel.

There seems to be no further questions. I would like to hand the conference call back to Lars Westerberg for any further or closing remarks.

Not really, but just I'd like to thank you all very much for you're comments and questions and be talking to you again at the end of January, when we present the full year's results. So thank you very much. Bye Bye.

Thank you. That concludes today's conference call. You may now disconnect the line. Thank you. Good bye.