Autoliv Inc (ALV) 2007 Q4 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Autoliv fourth-quarter 2007 results conference call hosted by Jan Carlson, President and CEO.

My name is Wendy and I will be your coordinator for this conference.

Throughout the presentation, you will be on listen-only.

However at the end of the call, there will be an opportunity to ask questions.

(OPERATOR INSTRUCTIONS).

I will now hand you over to Mr.

Jan Carlson to begin the conference.

Thank you Wendy and welcome all of you to this presentation of the fourth-quarter results for Autoliv.

Here in Stockholm, we have our Chief Operating Officer, Benoit Marsaud; our Chief Financial Officer, Magnus Lindquist; our VP, Corporate Communications, Mats Odman; and myself, Jan Carlson, Chief Executive Officer.

We intend to run this teleconference as we normally do.

However, this time we will also discuss a little bit more the outlook for 2008.

After that, we will open up for questions.

As usual, you can find the slides for this presentation available through a link on the front page of our corporate Web site.

If we now turn the page, you will find the Safe Harbor statement.

As you know, it's an integrated part of the integration presentation and we will not go through the details at this time.

So instead, we move on to the next page and we find a summary for quarter ending December 31.

In quarter four, we achieved a record sales and operating income for any quarter, and quarter four was the second-best quarter ever for operating cash flow.

Our sales of close to $1.8 billion was an improvement of more than 11% while the EBIT of $164 million was a 20% increase and the earnings-per-share excluding discrete tax items of $1.36 was 40% better.

The EBIT improvement is a reflection of our margin recovery programs and our organic growth.

Our strong operating cash flow with $232 million represented an increase of 47%.

And last but not least, we continued the share repurchase program and purchased 2.1 million shares, thereby returning $152 million to our shareholders.

So overall, we think this was a very good quarter for Autoliv which came in also a little bit better than our guidance.

If we move on to the next line slide, we find some of the key highlights for the quarter.

We continued to increase our presence in low-cost countries and we acquired 100% of our seatbelt joint venture in India.

During 2007, we made three acquisitions totaling $121 million.

Even if these are not seen as major acquisitions, they are strategically important since they are all -- have been within the fast-growing Korean, Chinese and Indian markets.

We also successfully refinanced some of our short-term debt into longer-term by issuing $400 million of guaranteed senior notes.

Furthermore, we continued to reduce our cost of application engineering for standard products without compromising our core engineering innovation for future technology initiatives.

On the negative side for Autoliv, we saw signs of a turbulent NAFTA light vehicle production environment heading into 2008.

Chrysler for instance announced a last-minute platform cut and a volume adjustment.

So if we go to the next slide, we find our sales trend, and in quarter four our sales increased $182 million, or 11%.

7% was related to currency effects, $58 million resulted from an organic growth and close to $8 million from the India seatbelt acquisition.

This organic growth was better than expected and was mostly driven by the Western European vehicle production.

Geographically, Japan and the Rest of the World continued to grow the fastest.

For example, Japan organic growth was 19% which was three times the Japanese light vehicle production.

And in Rest of the World, specifically China, our organic growth was 25% which was 6% more than the light vehicle production growth.

So our organic sales of close to $6.8 billion is a record and is up 9% versus 2006, in line with the long-term trend of 8.5% per year since quarter four of 2002.

This should be compared to the EBIT trend on the next slide, where you can see that our operating income has improved at a rate of 13%, 50% more than the sales growth for the same time frame.

We should also note that some figures have been restated for comparability due to the onetime items as indicated on the slides.

In the quarter four, EBIT improved by 20% which is almost twice as fast as the strong sales growth and it is a reflection of our continuous improvement in cost controls.

Turning the page, we have our earnings-per-share trend which represents a 23% accumulated average growth rate in quarter four 2002.

This is more than twice as fast as our sales trend of 9% as you saw in an earlier slide and it's 10 basis points faster than our EBIT growth of 13% over the last five years.

This superior EPS is above all a reflection of our share repurchase program.

Looking specifically at quarter four 2007, earnings per share improved by $0.39 on a comparable basis mainly due to share repurchase that added $0.07, the currency effects of $0.08 and an operation performance of $0.22.

Moving on to the next slide, we have as usual the light vehicle production figures.

These figures as you know, come from CSM and J.D.

Power.

The trend continues as we have seen for several years now.

The major light vehicle production growth is occurring with the new domestic OEMs in North America, in Eastern Europe and in the Rest of the World, and that is then predominantly Asia and South America.

Overall, the 7% global light vehicle production improvement was better than the 5.6% that was estimated at the beginning of the quarter.

On to the next slide, we find our organic growth versus light vehicle production, starting with the black line, which represents the light vehicle production in the Triad.

Our organic growth of close to 4% is in line with the Triad light vehicle production.

The difference compared to the global light vehicle production of 7.6% is primarily due to the faster-growing regions like Rest of the World and Eastern Europe, which have a significantly lower safety content per vehicle than the global average, which is $270.

And the Rest of the World is approximately $160 per vehicle.

For the full-year, the Autoliv organic growth of 4% was ahead of the Triad of 2.6% and slightly behind the global light vehicle production of 5.4% mentioned -- due to the reasons I mentioned earlier.

Turning the page, we have the quarterly production figures for the quarter as compared to the prior year, and seatbelt continues to show a strong growth.

The most important reason is the increased market share since we have grown our sales of seatbelt units, including pretensioners, by 18%.

This is more than twice as fast as the global light vehicle production of 7.6%.

Overall, we think that our market share is improving mainly due to strong increases in seatbelts and in safety electronics.

And we believe we continue to grow in line with the market for side systems.

The next page, and we conclude our sales analysis with a bridge versus prior year.

We have a positive translation effect on the non-U.S.

currency that added $116 million, or 7%.

As illustrated, we also see that seatbelts, side airbags and safety electronics added close to $100 million combined, and that represents more than 50% of the sales improvement for the quarter.

Frontal airbags and other sales were down close to $30 million combined.

Now moving on to the next slide, we have the gross margin and the EBIT margin.

The gross margin for quarter four is virtually unchanged.

The small decline that we had is mainly due to a continued customer pricing pressure and some headwinds that we will come back to in a minute.

The reported EBIT margin of 9.2% was in line with our guidance of more than 9%.

The improvement of 0.7% is mainly due to savings in RD&E and SG&A, that improvement compared to quarter four last year.

The improvement is more than offset then with a minor decline in gross margin -- or offset a bit with a minor decline in gross margin.

The EBIT results also includes restructuring costs that were $9 million higher than quarter four 2006.

And this is equivalent to 0.5% of sales, which was essentially offset by a onetime royalty settlement.

Now moving on to the next slide.

We have highlighted the major headwinds that we have experienced during 2007.

And you know many of them since our earlier earnings calls.

We have estimated that the commodity surcharges, distressed suppliers and the Asian startup costs have had the negative effect of $13 million in the quarter and $55 million for the full year.

This equates to approximately 72 and 81 basis points, respectively.

Moving on to the next slide, we see the EBIT bridge for the quarter versus prior year, where we have separated the currency effects so you can see the underlying differences.

We have been able to improve the EBIT $27 million due to the strong organic sales and direct cost reductions.

In addition, the RD&E and currency effect improved profitability by $15 million and $7 million, respectively.

This aggregate improvement of $47 million was partially offset by the negative headwind we had mentioned on the previous slides.

On to the next slide, we have the headcount development.

As illustrated on this slide, we continue to increase our presence in local countries where we now have achieved an all-time high of 53% of our workforce.

Excluding the acquisition that added 600 associates, our headcount declined on a comparable basis by 1%.

This compares with organic sales increase of 4% for the year and this is an indication of a strong productivity improvement of more than 7% during 2007.

Moving on to our next slide, we have the key figures on a comparable basis.

If we start with return on equity of 17% adjusted for the discrete tax items in both years, it's 4 percentage points better than prior year.

And return on capital employed of 18.9% is also better than prior year of 16.2% primarily due to a lower working capital and capital expenditures, along with an improved EBIT.

We are pleased that our working capital of 9.1% is less than our goal of 10% of sales.

Receivables and inventories contributed to the majority of the improvement.

Factoring program of close to $120 million now represents close to 1.8% of annual sales and has helped to reduce our overall cost of capital.

Lastly, our net debt to capitalization increased to 33% from 29% a year ago due to accelerated share buybacks, the dividend and three acquisitions.

Turning the page, we have the cash flow which was a record high for our company.

A positive swing in the working capital contributed $160 million of the $467 million.

When looking over the last year, these temporary working capital swings has neutralized, and therefore resulting in a four-year average cash flow of approximately $316 million.

Both CapEx and depreciation and amortization continued to track closely and were less than 5% of sales for the year.

This is the lowest level in relation to sales over the last several years and it's partially a reflection of the fact that we expand primarily in local countries.

Turning the page, our share returns to shareholders where we combined dividends and share buybacks.

For the year 2007, we have returned more than 11% of average market capitalization to shareholders throughout the year.

Included in the $500 million returns, close to $120 million was related to dividends while the share repurchase was around $380 million.

Moving on to the outlook for 2008, we have the light vehicle production change on the next slide for the major regions by quarter as compared to Autoliv's expected organic growth in 2008.

If we start from the top in this slide, you will find the annual change, the full-year change for light vehicle production in the regions -- Western Europe, NAFTA and also for Triad and the global number.

You also find the full-year Autoliv organic growth, which we estimate to be 2% for 2008.

Going then into the growth, you find, we start from the lower part of the growth, you find the red bar representing the change quarter to quarter in 2007, 2008, the red bar represents the Western European region.

In a similar way, we find that the black line representing the NAFTA region.

Both of these regions have significantly below 5% in change for the first quarters.

NAFTA improves gradually over quarter three and quarter four, and Western Europe remains a negative change of more than 5% in quarter three, then coming back to approximately a flat level in quarter four.

In the same way, you find the green line representing the change for the Triad and the purple line representing the change in light vehicle, the global light vehicle production.

Overlaid here, you also find then in the blue line the Autoliv organic sales curve for the quarter 2008.

This starts then with a decline of 3% in quarter one and gradually improves over the year up to 5% in -- approximately 5% in quarter four.

Despite the significant headwind of lower production volumes, Autoliv expects for the full year to outperform not only the NAFTA and Western Europe markets, but also the Triad almost 3%, and by 4% if we include the recent acquisition of the Indian seatbelt company.

Lastly, we expect our organic growth to improve sequentially throughout the years that we have said, and as we said earlier, we will reach approximately a 5% level in quarter four.

One reason for this improvement is partially illustrated on the next slide where we have identified the top six launches for our Company in 2008.

Although we generally have not announced the specific content, these platform launches represent an excellent mix of incumbent replacement business, along with new conquest business.

Here, you can see that Autoliv has significant content on the two largest vehicle volume platforms in Europe, the Volkswagen Golf and the Renault Megane, as well as the second-highest selling platform in North America, the Ford F-Series truck.

It is expected that these along with other launches during 2008 will contribute significantly to the sequential improvement during the year in organic sales.

Moving on to the next slide, we have updated our side curtain penetration rate by region; and we expect the NAFTA region to increase the fastest from a little over 50% in 2007 to almost 65% in 2008.

This trend reflects the fact that all new vehicles will have side curtains by 2013 according to the new law.

Europe and Japan are expected to increase penetration rates to above 60% and 40%, respectively, in 2008, while the average penetration in Rest of the World largely depends on the vehicle mix.

Moving on then to raw materials.

We have summarized the annual effects of commodity inflation since 2003.

As we mentioned earlier, the 2007 effect of commodities was approximately $20 million and distressed suppliers was an additional $12 million.

As we look ahead to 2008, the risk for further increased cost appears to be with the steel and magnesium which is expected to be somewhat offset by an improvement with zinc.

We expect the net commodity increase to be $12 million for the year and $2 million in quarter one.

In addition, we believe that higher fuel prices will increase our logistic cost by $5 million during 2008.

Lastly related to the distressed suppliers, we do not foresee any further incremental cost in 2008, and therefore we expect these costs to remain at the same level as 2007, which is $12 million.

All of these assumptions have been built into our 2008 guidance.

On to the next slide, we have our net debt to capitalization.

During 2007, we increased our gross debt by $170 million.

This caused our net debt to cap to increase from 29% to 33% at the year end 2007.

Given the current economic climate, turbulent financial markets and light vehicle production uncertainty in our key markets, we continue to keep a close eye on our debt levels.

We think it is very important to have a capital structure which is optimal for our shareholders and at the same time it's equally important for the Company to maintain a relatively conservative financial leverage.

Therefore, we continue to keep to our policy, that Autoliv should maintain a strong investment grade rating of at least BBB+.

On to our last slide, we have the Autoliv financial outlook.

For the full year 2008, we expect to increase our organic sales by around 2% as you saw on an earlier slide.

Assuming the current exchange rates prevail, consolidated sales are expected to increase by approximately 7%.

Despite the weak vehicle production environment, we expect operating margin to improve and reach a level of 8% to 8.5%, which is in line with the earlier target we have communicated of 8% to 9%.

This EBIT range includes restructuring activities which are currently under review with the Company.

For the first-quarter 2008 specifically, our organic growth as we already mentioned is expected to be minus 3%.

This is due then to the drop in light vehicle production as we talked about, primarily coming from Western Europe 7% and North America 6%.

Consolidated sales are expected to increase 5%, and that is assuming that current exchange rates prevail

Operating margin in the first quarter is expected to be close to 7%.

The fact that the Easter holiday falls into quarter one this year is expected to have a negative impact for the quarter of 70 basis points.

Moving now on to the next slide, we conclude the formal presentation and we thank you all for listening.

And we're ready to take your questions.

As usual, we will do our best to answer them in the best possible way.

Sorry for interrupting here.

I have heard, got a note that some people have problems downloading the slides from the Thomson website.

But if that is the case, you can find these slides on Autoliv's website.

So please go and find them there instead, if you have that problem.

That was all I had to say.

(OPERATOR INSTRUCTIONS) Himanshu Patel, J.P.

Morgan.

I had a couple of questions.

The 2% organic growth outlook for 2008, can you help us understand how much of that is due to revisions with CSM's or Global Insight's production schedule, versus some -- I think Chrysler had some model discontinuations as well.

How much could that have contributed to what seems like slightly slower growth than maybe we saw before?

Yes, we have talked before.

You remember we talked on our capital market day of a growth in total 4% to 5%.

And what you can say is that if you look on the North American market as such, the Chrysler cut, production cut, approximates 1 percentage point for the Company.

Then, we see approximately another percentage point coming from the general down trend in light vehicle production in North America.

And then, you have approximately 0.5% coming from a different vehicle mix, primarily in Western Europe actually.

That's how it builds up together.

Okay.

Then, Jan, the restructuring costs, it sounds like they have started to accelerate last quarter and we had another elevated quarter of that.

What is your outlook on that for 2008?

Do we sort of assume this $10 million per quarter level for all of 2008, or does that taper off in the back half of the year?

You should assume this same overall level for the year.

We have built in -- we had last year a restructuring cost of $23 million.

You should assume the same level for full-year 2008.

We are currently under review of the restructuring program for the Company and if you look specifically into quarter one, you should expect a minimal level for restructuring cost.

For the other three quarters, we will come back to that.

It's just under planning.

I wanted to lastly go back to the comment you made on slide 22.

It sounds like you guys are suggesting that the cost of assisting distressed suppliers will be comparable to '07.

I'm a little bit curious by that because some of these commodity costs, steel in particular, are going up.

North American production in the first half is expected to be considerably weaker than maybe what the expectations were just six months ago.

Are you thinking that maybe there's elevated cost for distressed suppliers in the first half, but by the second half, you think things will become easier?

Or you don't see any incremental deterioration in the last quarter or so of the health of the Tier 2 supply base?

We have not seen any significant differences between the quarter.

It is evenly spread between the quarter.

You remember, we talked earlier last year that we would see the distressed suppliers sort of fading away.

We would hope it would fade away by end of '07 and at least in beginning of '08.

We see that is not the case.

It is on the same level.

One reason is that the North American supply base are experiencing one tough time period right now.

Lower light vehicle production, lower volumes, still the high raw material price level, and also of course the financial turmoil that is happening.

That is causing the supply base in North America to have some difficulties.

So evenly spread, $3 million per quarter is what we would expect it to be.

One small last one I will sneak in on that same question.

I understand the earnings impact from distressed suppliers, you're expecting that to be the same.

But is there extra working capital support or anything like that that you guys are starting to provide them in the last, let's say, three to six months, or you would say that has not changed at all?

No.

It's no extra such charges.

No.

Adam Jonas, Morgan Stanley.

Just a couple of questions.

First on the working capital, you mentioned that over time these things tend to even out.

You did just mention to Himanshu that as far as the distressed suppliers are concerned, that should not represent an extra helping hand.

But given that you ended the year on such a strong swing back with the $100 million or so working capital swing year-on-year, is it fair to assume then back to a normal or maybe a reversion to mean for the year ahead?

That we should have another buildup, or should I say a use of working capital for '08?

Maybe you could elaborate a bit on that.

I know it's kind of tricky.

And just a second question, on credit.

Of course it's natural in this environment of uncertainty to give a bit more of a priority to the balance sheet vis-a-vis maybe cash return.

Am I reading too much into that?

I guess what I'm saying is, in the past, I think some of the language of your predecessors in your position was that you did not want to be a single A credit, that your credit rating was too good.

Nice quality problem to have, I guess.

But now, you're saying you want to be BBB at least.

It seems like you're giving a bit more emphasis on keeping a bit more dry powder or a bit -- a little more cushion with the credit rating agency.

How does that compete with your return of cash strategy going forward?

Well, starting with the working capital, I think we are very positive and we're very happy to be able to reach the low level, 9.1%.

We have the target of 10% of sales and we are striving to keep that level.

So that is what I can say about the capital.

You, Magnus, can fill in more on that afterwards.

Coming back to the balance sheet structure, I think that from a financial point of view, from a company point of view, we are a shareholder return friendly Company.

We have been that and we still is.

But also on the other hand, you have to watch out for the financial market.

And if there is -- at some point, you would like to have a strong investment grade, it is during these days, clearly.

So generally, we are shareholder friendly and we will continue to be that also moving forward.

But a cautious view on the balance sheet is of course something that we take in these days.

I don't know if that is helping you.

You will get more help on Monday or Tuesday when we [start] again.

So that will help answer the question.

What I guess I'm taking from it is that you are taking a bit more cautious view in terms of the balance sheet condition.

I think that, of course it is a different market situation.

It is the uncertainty with what will happen going forward.

That's by nature like that.

But having said all that, we are very committed to return the money to our shareholders.

Understood.

That still remains.

Magnus, do you want to have another comment on the working capital?

No, just to emphasize what you already said, Jan, is that we are committing to strive for the 10%.

And of course, 9.1% is extremely good.

So likely we will see some swings over the quarters.

So normally the first quarter is a little bit weaker if we have had a very strong fourth quarter.

So, yes, you can count on that; it will continue to be a little bit volatile.

And coming back to the credit rating, Jan, you emphasized that we are committed to a strong investment-grade BBB+ in your presentation.

There is really no change in commitment there.

So the difference to getting a single-A rating, it doesn't really do that much for you in other words?

As Jan said, if -- we are still committed to a strong investment-grade rating, BBB+.

Got it.

But also if there are times where you should really have a strong balance sheet and take care of your cash flow, it's when the times are a little bit more uncertain and the economic situation is more risky in the world, and that's what we see right now.

Very prudent.

I'm sure your shareholders will thank you later.

Thank you.

Erik Karlsson, AKO.

I'd be interested to know if there has been any change in price declines, i.e.

deceleration or acceleration of price declines for both airbags and seatbelts?

There has been no change.

We have seen a price decline of roughly around 4%, and there is no change.

And that's what we should expect for the medium-term as well?

That is what you should expect also for the medium-term.

Kenneth Toll, Kaputhing.

A quick question regarding the balance sheet.

You talked a little bit, this fall, about reviewing your strategy and maybe becoming a bit more focused on acquisitions.

Might that lead to less share buybacks going forward?

We are just in the midst of reviewing, as you have seen in some articles in the press.

We are reviewing our strategy when it comes to acquisitions and when it comes to the strategy in general going forward.

This is something we have started off late last summer, we have intensified it during last quarter and we will continue this quarter.

I will present later on here to the Board an update on where we are on this one.

Of course, it could affect the level of share repurchase, but we have always been looking for acquisitions.

So this is nothing really new.

Even when we bought back shares on the quarter four, quarter three, etc., we were still looking for acquisitions.

So not really, I would say, not for the time being.

Patrick Nolan, Deutsche Bank.

Just a couple of questions.

When you look at the first quarter, you call that the Western European mix for the full year.

How negative is that going to be in the first quarter?

What do you mean, mix of --?

You call that the Western European product mix for the full year of 0.5%.

How negative is that going to be in the first quarter?

That's hard to say.

I don't have any good answer to how that is implementing over the year and how it's affecting.

If I would say something, it would have a more negative effect on the first half of the year.

And that's primarily due to that some of the launches have faced a slower ramp up and we expect them to catch up during second half of the year.

So some of the launches that took place in the second half of '07 might have faced a little bit of a slower ramp up.

So that is what we can say.

And on the R&D budget, R&D was very low this quarter, it was 4.6% of sales.

What do you think a normalized level is for R&D going forward?

I know you were instituting savings this quarter, but what should we think about going forward as a normalized level?

Well, I guess that we would see approximately 6% or slightly below.

And then lastly on gross margins, they came in a little bit below what I think I was looking for and a few others I know that were looking for in the quarter.

Some of that is probably product mix, and then of course there is the raw material headwind.

But as seatbelts continue to grow, are we going to see the gross margins continue to go down slightly or can you maintain them at the current levels?

Or how should I be thinking about that longer-term?

I think you saw -- for the quarter here, you saw a 0.1% percentage points fall on the gross margin.

I think generally speaking, we're striving to go back to gross margin of around 20%, and that is where we have been for the last years.

And this is including the move to low-cost countries, it's including restructuring, it's including redesign of product, it's including move of purchase to low-cost countries etc., etc.

And of course, also the increased sales and the higher utilization of the Chinese plants, etc., is going to contribute.

So we're working on that plan and the target is to be at least around 20%.

If I could just sneak in one more.

You called out the startup costs for this year.

I know they come down next year, but how much are they coming down next year, the startup costs?

We expect the startup costs for this year -- I assume you mean -- this year's startup cost is going to be $16 million, we expect them to be, and that is compared to last year's of $23 million.

Thank you very much.

For those of you that remember that we said before that we would cut them in half.

We said startup costs would be about $25 million, then cut in half.

Some of the startup costs have been pushed into 2008, so that's why they are a couple of million higher than we previously have talked about.

Patric Lindqvist, HQ Bank.

I had a question, in the fourth quarter -- in October when you were talking about the fourth quarter, you were slightly less optimistic on the volumes.

So basically, volumes turned out better than you expected, whereas margins were, at least in my interpretation, you said exceed 9% and you did that.

So better volumes, but you're still not able to do better on the margin side.

Is there any specific factor which is behind that?

That's my first question.

To answer, I think we really don't understand the question.

Because we said we should exceed 9%; and if you then add the 2% on our sales, we have actually got a positive impact on the EBIT because of the higher sales.

Sure, but you did not get any leverage on it.

I'm saying that you get additional volumes where you normally should be able to get a somewhat of a leverage on that, given your fixed cost base.

But you still delivered the same kind of -- what I would say would be the same kind of margins.

That is where I'm coming from.

Okay, I see, so [we can say] got some leverage on it.

Okay.

Second question on the R&D side.

You've been talking over a few years now that you would see a reduced amount of invoicing of R&D, and I presume that there was a large chunk of that coming into the fourth quarter, why you had such extremely low R&D costs.

I first just want to check whether that's correct.

And also --

That is correct.

And then going forward, since you're saying that you will wind up around about 6%, which is a pretty -- as a percent of sales, which is a pretty decent figure if you look at the last few years, it's so that your -- this invoicing will stay a bit more than you previously expected?

Or is it that the underlying R&D expenses are going down?

If you start with the engineering income, it has continued to go down and to decrease.

It's always difficult to say how much it's going to decrease, etc., early in the year.

And if you look on the R&D cost as such, it is primarily an efficiency matter.

We have worked a lot, we have taken out 300 heads in high-cost countries, we have replaced with 270 heads in low-cost countries.

And so we are increasing the efficiency as we said on the application engineering side.

And that is primarily what is driving the R&D costs down.

Added to this, we also have now coming out much better than before on the electronics side.

We have over the last couple of years had earned a lot of growth in the electronics side that has boosted the R&D cost quite a bit.

Now these programs are launching and then contributing to the growth, therefore the R&D on engineering is coming down.

David Leiker, Robert W.

Baird.

On slide 22 on the commodity costs, are you using current prices, market prices for those, or are you assuming some change in those costs for those materials over the course of the year?

I guess we're using the current commodity -- current market prices, if I understood your question right, because --.

Right, that's exactly what I was asking.

That's what we are, yes.

Then on slide 13, the slide on headwinds, I don't think I heard you -- we kind of talked about it, but I don't think I heard you make a comment as it relates to distressed supplier costs and the Asia startup costs, how long you think those are going to continue to be issues.

Hard to say, actually.

As I said before a little bit, we expected before that the distressed suppliers would fade out towards the end of last year or at the beginning of this year.

We started --- we see it remaining, but it's not getting worse on a dollar value level.

It's the same amount actually.

So it's hard to say.

It depends also what's happening in the world I guess with the financial crisis, etc., and if our suppliers are going to be impacted by the crisis, and the raw materials are staying high.

And so I have no really better outlook than to say that for the year '08, we will have the same level as last year.

If you talk about the commodity pressure, etc., it's also hard to speculate.

This is our best opinion what it is today.

We can speculate in that we feel it's going up even more, and it might do so.

We don't know really.

But for the year and for what we can foresee right now, these are the best estimates.

What about the Asia startup costs?

Where are you in leveraging that?

If you take the Asian startup costs, it will fade out, as we have communicated before.

It will fade out towards the end of the year, actually.

So we will see that already.

It's going -- if you look on the net effect for 2008 compared to 2007, you have a negative effect in the fourth quarter.

But already in the fourth quarter -- in the first quarter you have a negative effect of $1 million compared to '07.

In the fourth quarter for '08, we expect this to have a positive impact, so it's coming down in the fourth quarter of $5 million.

So already there, we see it leveling down.

And then on that same side, did you say your restructuring was $23 million in '07, or was it 7 -- $10 million?

It is $23 million, so this restructuring, it's $23 million for the full-year '07 and it's going to be the same for '08.

Okay.

What's the $10 million on this slide versus slide 13?

It's an incremental increase from 2006.

Okay, I follow.

Then lastly, Jan, we have talked about this in the past, that if you look at -- with this 8% to 9% margin target at the operating margin line, you generate a return on capital that's around 10% or something like that.

I think there's some indication that the profitability of the business could be better than that.

Not putting it in a box here on that 8% to 9% number, but is that in a two or three or four-year period you can get to a position to start raising that target?

Maybe we could be able to do so.

David, in all fairness, during this market conditions and where we are today, I would not speculate in going above the 8% to 9%.

As we have said before, we're committed to be in this range.

And we will see how the market turns out to be.

Of course, there are opportunities for us to increase the efficiency and be better.

In every quarter sort of, it's always like that.

But you also know the market headwind, you will have headwinds that we don't think about today.

So 8% to 9% is what we stand to.

Okay.

And then the last item is on the minority interest, I noticed it's down pretty considerably.

I think it's probably mostly due to buying out your partners, but is there anything else going on there?

No.

You're completely right.

The major part is acquisition of the Autoliv Korea Mando Corporation, which we did in the first quarter last year.

So there should be a more normal run rate going forward than what we're seeing here in the fourth quarter?

Yes.

Okay, perfect.

Thank you.

(OPERATOR INSTRUCTIONS).

Richard Howe, Polaris Capital Management.

Good morning.

I wanted to ask of the capital expenditures that you anticipate in 2008, what portion of that capital expenditure would be maintenance capital expenditure?

We have looked into this question and you know it's very hard to predict.

It depends on what you say is maintenance or what is new, etc.

But the best estimate we have is that it's less than 10% that is new.

The rest is maintenance.

Okay.

So 10% is for growth and 90% is for maintenance?

Yes.

That's great.

Thank you.

That was our final question, so I will now hand you back to your host to conclude today's conference call.

Okay.

Well here from Stockholm, we thank you all for participating and for all the good questions and we will look forward to talk to you again on April 22 for our first-quarter earnings call.

Thank you very much.

Ladies and gentlemen, thank you for joining today's conference.

You may now replace your handsets.