Autoliv Inc (ALV) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Autoliv's fourth quarter financial earnings 2008 conference call hosted by Jan Carlson, President and CEO.

My name is Ina and I will be your coordinator for today's conference.

For the duration of the call you'll be on listen-only.

However, at the end of the call you'll have the opportunity to ask questions.

(Operator Instructions) I'm now handing you over to Mr.

Carlson to begin today's conference.

Thank you, Ina.

Welcome all of you to our presentation of the fourth quarter results.

Here in Stockholm we have our new CFO, Marika Fredriksson; our VP of Corporate Communications, Mats Odman; and me, Jan Carlson, Chief Executive Officer.

We will as usual start with a quick review of the quarterly results.

This will include an update on our liquidity position and a status report on the action program.

Then, turning to the outlook, we will focus on the overall business climate and how we see this impacting our Company in the near term.

After that we will remain available for questions.

You can find the slide presentation through a link on the front page of the Autoliv corporate website under "Financial Reports."

If we turn to the next page, you will find the safe-harbor statement.

As you know, this is an integrated part of the presentation.

I want you to be aware that this presentation includes some non-US GAAP measures where the reconciliations to US GAAP can be found in the back of the quarterly earnings release and in the 10-Q filing.

Moving on to the next page, I would like to first of all extend a sincere thank you to all our employees for their support in the quality, safety, and delivery, along with the action program focus during 2008.

These actions helped to save margins and remain profitable during fourth quarter before restructuring activities.

We continued to have a strong cash flow.

And by securing new medium-term financing, despite a very tight credit market, we again demonstrate our superior financial strength.

Our cash on hand of $0.5 billion exceeds debt maturities due during 2009 by close to $100 million.

In addition, we have unutilized credit lines of close to $700 million.

As we enter 2009 it's already clear that the global light-vehicle production will be much worse than what we saw in 2008.

We will continue to be nimble, adapt quickly, and are prepared to meet these challenges as we are confident that Autoliv will emerge as one of the long-term winners out of this crisis.

And we should remember that at some point the auto sales will bounce back as they always do.

If we turn to the next page we have the latest fourth quarter global light-vehicle production figures as they come from CSM and J.D.

Power.

This illustrates the severity of the decline with an overall decrease of 21%, and represent 3.8 million fewer vehicles than the same period in 2007.

In NAFTA and Western Europe, where we generate more than 70% of our sales, light-vehicle production declined by 28%.

Not surprising, the light-vehicle production declines have quickly spread to other parts of the world.

For instance, Japan produced 18% fewer vehicles, and China showed a decline of 13%.

Globally, there were 2.1 million fewer vehicles produced in the quarter than originally expected in October.

On to the next slide, we have the summary for our fourth quarter results, which was severely destroyed by the December freefall in light-vehicle production.

Excluding restructuring, we managed to achieve a 1% EBIT margin and exceed our revised guidance of a breakeven, despite the 26% decline in organic sales.

In October and November sales developed as expected.

But in December there was a sudden drop, as we know, drop-off of more than 50% below last year.

This low level was the starting point for 2009.

Even in this steep declining environment we still generated a strong operating cash flow of $188 million.

After paying the dividend and the capital expenditure we reduced our net debt by $84 million during the quarter.

Turning the page, we have the commodity impact on our business.

The commodity costs came in $59 million higher than 2007, and this is $47 million more than we anticipated in the beginning of 2007.

For the fourth quarter only the commodity inflation was $22 million; this was below the expectation of $26 million due to lower volumes in the quarter than originally expected.

Looking ahead, in 2009, if current level continues, we will return to the commodity cost level of 2007.

And we estimate a positive effect of $50 million in 2009.

The difference to the $59 million in 2008 is due to the lower light-vehicle production.

And most of this improvement will occur in the second half, while quarter one we estimate a flat or a slightly negative impact.

For distressed suppliers our cost in 2008 was $14 million.

Looking ahead in 2009 we have about 35 suppliers on the watch list, and expect to contain the cost at a similar level as 2008.

On to the next page, we have our gross margin trend.

Lower sales, commodity inflation, and a fixed-asset impairment charge had a negative effect of almost 10%.

However, we were able to partly compensate the negative sales effect, primarily labor cost savings, which had a positive effect of 170 basis points.

In addition, a favorably currency transaction effect of 40 basis points helped to lower the cost.

In this way, with the action taken, the decline in gross margin was 760 basis points, despite the organic sales decline of 26%.

Moving on to the next page, we have the operating margin.

In addition to the 760 basis points negative gross margin we have a declining sales effect on our SG&A and RD&E.

That is a cost of 285 basis points.

Actions to reduce SG&A and RD&E and other costs generated, $29 million or almost 175 basis points.

Therefore, our total cost reduction actions improved the operating margin by 3.5%, including the 170 basis points of savings from the previous slide.

These actions allowed us to achieve an operating margin of around 1%, excluding restructuring charges.

On the next page we have the cash flow performance.

Cash from operations was $188 million during fourth quarter, as we mentioned earlier.

Working capital was an important source of funds, mainly due to a reduction of receivables along with the lower sales in December.

For the fullyear 2008 we generated more than $600 million cash from operations.

And the free cash flow of $335 million was supported by a relatively low CapEx of only $279 million.

This is roughly $100 million less than our estimate at the beginning of the year where we expected capital expenditures to run between $350 million and $380 million.

And it is $70 million less than [D&A] of $347 million.

We expect this favorable difference to continue and increase in 2009.

Turning the page, we have summarized our liquidity improvement actions that we're taking during fourth quarter.

We raised $250 million of medium-term funding without any financial covenants in a very tight credit market.

We stopped the share repurchase program, and we also cut dividend by 50%.

By taking quick and early actions we preserved cash and allowed our net debt coverage to increase to 150% of long-term facilities with an average life of 4.2 years at yearend.

This improvement from the third quarter compares favorably to our minimum policy that at least 100% of net debt should be covered by long-term facilities, and the average life should be at least three years.

Turning the page again, we have illustrated our debt capacity along with the maturity profile.

We have approximately $2.4 billion of short, medium, and long-term financing available.

On this amount, close to $700 million is long term, and remains untapped through revolving credit facilities.

Our current net debt level of $1.2 billion utilizes approximately 50% of our debt capacity.

The net debt remains relatively unchanged also from 2007 due to our strong cash flow.

The debt maturities, 2009 through 2011, as illustrated here on the slide, is a little over $600 million.

We believe that this is a strong position, especially given close to $400 million of maturities through 2009 could be covered with our current cash balance of almost $500 million.

We should note that the cash will only be used if the medium-term notes and commercial papers would be difficult to roll over.

It is our intention to renew future maturities with similar debt structure to what we have today as the US and Swedish commercial paper programs remains active in 2009.

On to the next page, we have the action program.

We will not go through the details again of our action program that we announced in July last year.

But as you know, it comprised of three things -- its aligning capacity, its accelerating material initiatives, and its further investing in technology.

Moving on to the next page, we have summarized our small car safety initiative where we are reinforcing our commitment to innovation and technology leadership.

Even after considering these investments we anticipate our RD&E cost will be around 6.5% of sales for the fullyear 2009.

And that is despite the declining sales environment.

This is due to further cost reductions in the application engineering.

On to the next page, we have summarized all results related to the action program.

And as mentioned earlier, we have decreased the workforce by close to 5,900 people, or almost 14% since quarter two.

Close to 2,500 of the reductions have been made to the permanent workforce.

The temporary workforce has declined 3,400, or close to 50% during the same period.

9% of our current workforce are temporaries, which still provides flexibility when we now head into 2009.

Our savings for 2008 is $29 million from these activities.

The restructuring charge of $73 million includes $8 million of fixed asset impairments, $18 million was paid out in 2008, while the remaining $47 million is expected to be paid out in 2009.

Based on a continued eroding production environment, we anticipate further actions in 2009.

On to the next page, we have our associate developments.

And during 2008, we reduced headcount by more than 4,600 people or 11%, down to 37,300, of which 3,400 were in high-cost countries.

We now have 55% of our associates in low-cost countries.

In response to the severe market conditions, we will continue to adjust our permanent and temporary workforce until we have right-sized our Company to the lower production environment.

On to the next page, we have our production figures for the full year.

The volume in our seatbelt business decreased with 4% and this was essentially in line with the global light-vehicle production, but better than the Triad.

Continued strong demand in the rest of the world, market share gains in North America, and the acquisition we made in India earlier, somewhat mitigated the negative effect of the Western European sales decline.

Our curtain airbags were up 2%, mainly due to increased penetration in the Triad.

And for our other product lines, the volume declines vary between 4% to 11%.

However, this is still less than the light-vehicle production declines in our major markets, Western Europe and North America, of almost 30% combined.

As a result we may have lost some market shares in the steering wheels, but we have gained market shares in seatbelts and electronics we believe.

Generally, we also believe that there has been no major changes in our overall market share although there may be minor shifts by the region.

Turning the page, we have the summary for our fullyear 2008 results.

We are satisfied that we managed to reach an EBIT margin close to 5%.

This includes our major restructuring program of $73 million and commodity inflation of $59 million.

If we exclude restructuring costs, we met the operating margin guidance of 6%.

Our organic sales decline of 10% was essentially in line with light-vehicle production declines in the Triad and our major markets in Western Europe and NAFTA.

Another important achievement during this financial turmoil was our strong operating cash flow which exceeded $600 million.

Turning the page, we have illustrated the uncertainty in the light-vehicle production forecast over the last year.

We expect the market turmoil experienced in 2008 to continue into 2009.

Weak consumer confidence together with tight consumer credit will most likely result in 2009 being the lowest US light-vehicle sales in 35 years and almost 20 years for Western Europe.

In our two largest markets, EU and NAFTA, the 2009 light-vehicle production is 21% and 31% respectively lower than what was expected in the beginning of 2008.

Turning the page, we have the latest global light-vehicle production figures from CSM and J.D.

Power for the first quarter 2009.

Not surprising, the depressed developments in quarter four is expected to carry through the entire first quarter, and consequently the global light-vehicle production is expected to be down 30%.

For our two largest markets, the combined effect is approximately 40% versus the prior year.

As you also can see from the slide, the vehicle volumes sequentially from quarter four last year to quarter one 2009 are 1 million units or 11% worse than they already -- low volumes of quarter four 2008.

On to the next page, we have global light-vehicle production by quarter four in 2003 to 2009.

The global light-vehicle production is expected to be down 13% in 2009, something we have not seen in recent history.

As we all know, there is a high level of uncertainty in the 2009 light-vehicle projections as the production volumes are changing almost daily.

The quarter one level represents the run rate of 50 million vehicles, and will hopefully be the low point of 2009.

On the other hand, if you take the run rate in quarter four, the annualized level will be 62 million vehicles.

If we turn the page, we have the annual light-vehicle production from CSM and J.D.

Power.

And for our financial planning purposes, our indication for 2009 is based on the 57.5 million vehicles, along with the quarterly splits shown on the previous slide.

For our major markets, light-vehicle production is expected to decline close to 20%, while the Triad is expected to decline around 18% in 2009.

Moving on to the next page, we have summarized some of our further plans, actions to reduce our breakeven point as back in July last year.

I cannot provide you with the specific details of the actions.

But I can assure that we will move as swiftly as possible to further reduce cost, as we have done in the past.

There will be further facility rationalizations to those already announced in 2008, and further alignments of our global workforce with evolving customer demand.

We will continue to move as quickly as possible during first quarter to adopt to the lower light-vehicle production.

For instance, we have already identified 1,000 positions that will leave the Company during the quarter.

We are also implementing a general freeze in wages and bonuses along with reduced work week hours where it's appropriate.

This is in addition to the hiring freeze we already have in place.

To continue to preserve cash and liquidity we will be cutting all capital spending from already lower levels in 2008, and hold off on share buybacks while maintaining an adequate debt capacity headroom.

Turning the page, we have the financial indication for the first quarter and fullyear.

In quarter one we expect organic sales to decline in line with the light-vehicle production in our major markets, roughly 40%.

Consolidated sales are expected to decline more than 45%, given the current exchange rate.

Consequently, excluding restructuring, we expect the EBIT margin to be a loss of between 5% to 7% due to the severe drop in our organic sales.

We expect cash flow to be negative in quarter one, mainly due to the operating loss and the cash outlays from the action program.

For the fullyear 2009, we anticipate our organic sales to decline in line with the light-vehicle production and the Triad and generate positive operating profits excluding further restructuring charges.

To summarize, the first half of 2009 will continue to challenge our organization to cut cost.

As we emerge in the second half 2009, our continued cost focus, commodity, and action program tailwinds, along with anticipated volume improvements will allow us to move more than -- to more than offset the negative effects from the first half of this year -- of the year.

The next slide concludes the formal presentation of today's call, and I leave the word back to you, Ina, and we open up for questions.

Thank you, Mr.

Carlson.

(Operator Instructions) The first question is coming from the line of Himanshu Patel from JPMorgan.

Please go ahead, Himanshu.

Hi, this [Rahul Chadha] on behalf of Himanshu Patel.

Hello.

Hi.

My question is -- so you guys are expecting roughly a 45% decline in sales in the first quarter, and I'm just -- and a negative 5% to 7% EBIT margin.

That actually implies pretty high decremental margins.

One, is there any specific reason why the decrementals are that high in the first quarter?

And why should we expect the margins, decrementals, to improve over the rest of year, because I think you guys are hinting at a positive EBIT margin range for the fullyear?

Well, it's -- I think it's simply so that we have --- we had an 40% organic sales decline.

We can simply not keep up with the pace of reducing our costs.

That is what happened in December.

That is what we can see also through the first quarter 2009.

We are reducing cost as much as we possibly can, but the situation with the structure we have doesn't allow us to keep up with the pace of the sales decline.

And any word on the 2009 maturity, specifically if you guys think you can de-finance it or pay down with cash or potentially use revolver proceeds, any more color on that?

What we -- the majority of the maturities we have in '09 are in March and in April, and amounts to 398, and we have, as stated, over -- close to $500 million in cash at hand for the moment.

And as we also said, as long as we can find the credit market is working we are anticipating to roll it over.

Okay, thank you.

Thank you.

Thanks you.

The next question is coming from the line of Rod Lache from Deutsche Bank.

Rod, please go ahead.

Hi, it's [Pat Nolan] for Rod.

Hi, Pat.

Hi, how are you?

Okay.

Quick question on the CapEx.

Could you just help us think about how much lower that can really go, maybe tell us what the maintenance CapEx level is?

Yes.

What we have said is that it depends on what you really mean with maintenance.

The CapEx level is -- you should think about it in the range of $200 million to $250 million.

And most of the CapEx'es that we have -- I think we have said a figure of 70% -- is new investment because it's related to new lines, it's related to [two] links dedicated to programs.

So the majority of it for the way we see it is dedicated to new investments.

And just a follow up on the question about the decremental margin, how much of your workforce right now is temporary?

We have roughly around 3,300 people temporary workforce corresponding to 9% of the total workforce.

Are most of those in Western Europe?

It's a mixture of -- throughout the world.

And is it fair to assume the assumptions you show on slide 21 are what you are planning for, for the business?

Are you taking an even more conservative approach as you put your cost structure in place for this year?

Page 21.

Did you say page 21?

Yes.

I think it was slide 21 where you showed the global --

If you think about the capacity planning.

Yes, right.

Are you are planning for that scenario?

Are you planning something worse or -- how are you thinking about it?

As we said, financially this is what we are planning from a sales point of view.

When you look into the capacity planning we have to meet the anticipated increased demand coming through in fourth quarter and into 2010, and we are swift and fast in taking action to go down, now in quarter one, also in quarter two.

And we are monitoring very close when the turnaround will come, if it comes, that we hope it will come at some point.

So the overall planning level financially you should look towards the $57.5 million.

But from a capacity point of view we have to monitor it on a quarterly basis, approximately.

And just one more quick one, and then I will get out of the -- get back into the queue.

Just on that ramp-up, you're obviously in a better financial condition than your supply base.

So how do you anticipate the supply base being able to deal with that ramp back up?

There is obviously going to be a lot of capital required, both on the working capital side and the CapEx side.

They don't have receivables to finance -- to do receivables back, the financing that they typically would do.

So how do you anticipate them being able to manage the upswing again?

We know that will be a difficult thing, and we could also foresee that in some cases we will have to support them, and that's why we have also anticipated the same type of level as last year, $14 million for distressed suppliers.

We also of course hope that at some point when this turns around we will have other actions coming from governmental initiatives et cetera that could support the industry to overcome the turnaround when it happens.

Okay.

Thank you very much, I'll get back in the queue.

Thank you.

Thank you.

The next question is coming from the line of Brett Hoselton from KeyBanc.

Brett, please go ahead.

Okay, good afternoon, I believe it is.

It certainly is.

Good morning to you.

Thank you very much.

Restructuring, obviously you've updated your plan, and you're doing a lot more restructuring than you originally anticipated.

Is there any new annualized saving target that you might be able to provide for us?

We have not any such annualized saving target that we are ready to provide for you.

The action program as it says today is exceeding the $120 million that we have announced before on the action program, so we will see a larger saving program.

For the further action program that we are planning, you have probably read in the report that we are initiating activities that could have a cost of up to or around similar level as 2008.

We're always looking to one, all round one to one-and-a-half year of payback.

So that is what you should have into -- you should calculate with going forward.

Okay.

And then as we think about the action plan, and how those costs savings might start to impact your earnings, should we think of it as a steady ramp-up through all of 2009, or should we think of it as more, let's say front-end loaded in a stair-step fashion and then plateauing as we move through the third and the fourth quarter.

You should certainly think about it as a ramp-up during the quarter actually, and that will continue.

You saw -- you remember in third quarter we had $5 million, now we have -- you have seen we have $29 million for the fullyear.

So you should look on that as a ramp-up during the year.

And then as far as your distressed suppliers -- and correct me if I'm wrong, but I think in the past you had suggested that you thought that your distressed supplier costs in 2009 were going to be roughly the same as they were in 2008 because they are a little bit than usual in 2008.

Is my understanding correct?

If not, feel free to correct me.

And then what is your outlook for 2009 ultimately?

For 2009 we look to the same level as 2008, $14 million, or you can say also approximately [$15] million, to be a rounder figure.

It's so hard to estimate in this environment.

But the same level as 2008.

Okay.

And then when you think about your dividend and your share repurchase program, what would have to happen in the marketplace to create confidence, enough confidence for you to either increase your dividend or introduce, or reintroduce, or start up the share repurchase program?

And which one would you do first if you started getting more optimistic?

I think when it comes to the dividend and the share repurchase, of course the market has to stabilize.

This is primarily a discussion we will have to have in the Board before I would be ready to further go out and announce it.

But for the time being we have no plans for restarting our share repurchase program.

Okay.

Thank you very much, Jan.

Thank you, Brett.

Thank you.

The next question is coming from the line of Thomas Besson, Merrill Lynch.

Thomas, please go ahead.

Hi.

A few questions from me.

Can you tell us -- I think you said during the call that R&D as a percentage of sales would stay at 6.5%, right?

Yes.

Q4 was, I think, the lowest absolute number you've ever had in recent years, $63 million -- $64 million, and you say in the text that you had higher engineering income.

Can you tell me how low the absolute R&D cost can be in a year like '09, please?

Well, you can certainly back calculate, reverse (technical difficulty) the figure what the R&D number will be for the fullyear.

We will continue to cut cost.

The absolute level of R&D for 2009 will be lower than -- we expect it to be lower than 2008.

But due to the severe sales decline we will increase or go above the target; not increase the target, but we will go above the target of 6%.

And so --

Sure.

Can you explain -- how did you have higher engineering income in Q4 '08?

I think in Q4 '07 you already had mentioned extraordinary low R&D numbers but still we are nearly $20 million lower in Q4 '08.

So it looks really extraordinarily low at $64 million for the quarter.

We had higher engineering income.

We actually had between $5 million and $10 million higher engineering income 2008 and 2007.

That's true.

So we had a very good year when it comes to higher engineering income.

You should remember that a vital part of the action program is investing in new technology, and reducing application engineering, and rationalizing our activities in application engineering.

And we are targeting a 30% headcount in low-cost countries for the engineering.

And we are progressing that through 2009.

So that is the contributing factor.

We should also anticipate that there will be more stress on engineering income for 2009 as our customers are more stressed this year due to the downtrend in the car production.

But still we are expecting to come in at around 6.5%.

Okay, great.

Can you help us understand the swings in tax boosting the P&L and the cash flow statements?

And you had a positive tax gain in Q1 that limited the EPS loss you report, and you have about $50 million swing in deferred taxes and other in the fourth quarter of '08 which helped actually the strong cash generation at the operating level.

Can you help us understand, are you going to have any P&L tax, and are you going to get similar positive swings from deferred taxes in '09, or is that just a one-off gain in the fourth quarter?

Well, in this environment it's very hard to predict tax.

So what we've said is that for '09 the expected tax range is the same for -- as this year's, or '08, that is 31%.

The swing you see -- and if you compare quarter four in '07 with quarter four '08 is we had an effective tax rate of 36%, and we're only getting back more or less half of that.

And that is -- an easy explanation is that we have made money and paid more tax in countries where tax rates are higher.

That's why you don't see the full benefits despite the loss.

Okay.

Sorry, I'm not sure I understand.

In Q4 '08 you've got $9 million positive tax, you had $54 million negative tax, which we find back in the cash flow statement.

For the full year you are still expecting 31% tax rate, but we -- in Q1 '09 for instance, we still could very well have a positive number, right?

Correct.

Okay.

That's very clear.

Can I ask one more question, please?

We haven't seen any write-off whether it's asset or intangible assets.

Do you foresee any need to do any write-offs?

And where and when do you see actually your net gearing ratio peak?

Is it fair to anticipate that your net debt to equity will probably peak either at the end of Q1 or at the end of Q2?

Well, it's -- as we have stated in the report, we are expecting a negative cash flow in the first quarter.

And in this environment, it is very hard to predict the cash flow due to supplier constraints and also uncertainties with our customers.

I can't tell you the exact time when we expect this to peak, but it would be in the first half, somewhere in the first half of this year.

Okay.

And any needs to write off anything?

No.

Thank you very much.

Thank you, Tom.

Thank you.

The next question is coming from the line of Adam Jonas from Morgan Stanley.

Adam, please go ahead.

Hi, thanks and good afternoon.

Got a couple of questions.

Good morning.

Good -- hi, good afternoon.

First, what's the minimum cash that you need, the minimum gross cash you need to run your business?

We would get the -- about a couple of hundred million, roughly.

We haven't gone down that avenue, but roughly between $150 and $200 million.

Okay.

So then at the -- around half the current level, roughly?

Well, if you look on to the available cash, if we are looking on the utilized debt capacity, what is left is about $150 million.

That's what we -- that would be the minimum level.

Okay.

Thanks.

Then I just want to go back to the distressed suppliers again.

I -- if I -- I think I heard you correctly, you said 35 are on the list right now.

Yes.

And that's -- is that flat with the number on the list in the third quarter, has that changed?

It has changed.

It has increased.

It think we have mentioned that we have had about a handful or a dozen, and that has changed and has increased, primarily in North America but also in Western Europe.

Still we believe we will maintain the level of about $14 million for cash-out or for expenses to the distressed suppliers.

So you're implying that if the distress on the supply base has peaked or reaching a peak and it -- you don't anticipate it getting any worse, okay.

Well, I wouldn't say it wouldn't -- getting any worse.

Actually I think that we have also solved the issues along the lines that we have handled through the fourth quarter.

We would expect it to maybe turn worse during 2009, and quarter one, quarter two in the climate we are with ultra low-volume production.

Okay.

It will hurt a lot of the tier twos, actually.

All right, and between North America and Western Europe, where is the pressure greater?

North America.

Okay.

And any emerging -- any low-cost country suppliers on that list as well, or added to that list?

There are even low-cost country suppliers on it, but the majority -- absolute majority is in North America and in Europe.

Okay.

Final question, and it's -- granted it's probably premature, but in a market like this there can certainly be some M&A opportunities.

Maybe even some of your distressed suppliers may have some IP that you find interesting, maybe not.

But can you rule out any opportunistic M&As if the price is right, or can you just give us a better color on how you approach M&A in 2009, please?

We never rule out a good opportunity as you know, and therefore, we are keeping our eyes open.

And we understand that we'll be -- our opportunities coming out of this distressed environment.

However, we will cautiously look on the -- on every opportunity due to the limited financing availability and limit during the production environment as such.

We certainly don't need added capacity.

We could benefit from technologies as we are moving ahead.

And also as we have said in the past, where we can strengthen our position in the growing markets we would be interested in doing so, but for natural reasons in this environment we would be very cautious.

Understand fully.

Thank you very much.

Thank you.

Thank you.

We have a follow-up question from the line of Rod Lache.

Please go ahead.

Hi.

It's Pat Nolan again.

Hi.

I just had one question about the Western Europe next year.

Western Europe would probably be significantly worse if it wasn't for some of the scrappage plans being put into place.

Is there a potential for you to underperform in the market pretty significantly in the fact that a lot of the vehicles that are purchased as a result of that, those scrappage plans will be lower-end vehicles and therefore have lower safety content?

Well, I think you have a point there that it's going -- it's skewed towards less safety content in fancy vehicles.

However, I wouldn't put it that we severely underperformed.

Okay.

But the initiative is -- you are right -- is looking towards smaller vehicles.

We should though remember that this is exactly the reason why we are investing now in new technology.

And well, we are taking the opportunity to spend this money.

When we have the strength and the capacity to spend the money, we are doing it so that we are prepared for this to come.

Okay, thanks very much.

Thank you.

Looks like we have no questions coming through.

(Operator Instructions) We have no further questions coming through.

I'll hand it back to Mr.

Carlson.

Okay, Ina.

Thank you very much for interesting questions.

I would like to thank everyone for your participation, and I look forward to hear you all in the next earnings call on April 21, 2009.

Thank you very much, all of you.

Thank you for joining today's conference.

You may now replace your handset.