Autoliv Inc (ALV) 2009 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Autoliv financial report for fourth quarter 2009 conference call.

At this time, all participants are in listen-only mode until we conduct the question and answer session, and instructions will be given at that time.

(Operator Instructions).

Just to remind you, this conference call is being recorded.

I would now like to hand over to your chairperson, Jan Carlson, CEO of Autoliv.

Please begin your meeting and I'll be standing by.

Thank you, [Rupal].

Welcome, everyone, to our presentation for the fourth quarter results.

Here in Stockholm, we have our Chief Financial Officer, Mats Wallin; and our VP Corporate Communication, Mats Odman; and me, Jan Carlson President and CEO.

As in the past, we will open with a review of the overall business conditions along with our quarterly results.

Then we will discuss the near term outlook and the full year guidance for 2010.

At the conclusion of this presentation, we will remain available to respond to your questions and, as usual, the slide deck is available through a link on the front page of our corporate website.

Turning the page, we have the safe harbor statement which, as you know, is an integrated part of this presentation.

The presentation includes some non-US GAAP measures, and the reconciliations to US GAAP are disclosed in the quarterly press release and the 10-Q filing.

Moving on to the next slide; during the quarter, we continued to demonstrate how we are staying ahead of the curve.

On the growth side, we closed the acquisition of the Delphi passive [restraint] assets in North America and Europe, and we have in January agreed to acquire their Delphi Asian business in Korea and in China.

Secondly, we outperformed the global light vehicle production in all regions, and have a strong platform mix as we head into 2010.

And lastly, our small car and active safety programs continue to gain momentum, and we have resulted in an increased order intake over the last year.

On the financial side, our strong cash flow and margin recovery continued throughout the year.

We became the first automotive company with an investment grade to be upgraded since the crisis began.

We also increased our credit capacity by securing a covenant-free $325 million long term loan commitment from the European Investment Bank.

So overall, we believe we are emerging from the crisis as one of the winners, stronger than ever.

Turning the page, we have the overview of our fourth quarter financial performance.

Our organic sales increased by 26% due to exceptionally strong sales in China and a favorable vehicle mix in Europe.

Excluding restructuring, we managed to achieve an EBIT margin of 10.8%.

This was better than last year due to higher sales and our cost base.

Our free cash flow of more than $200 million was one of the strongest quarters ever, and our earnings per share was $1.39, excluding restructuring.

Overall, we are very pleased with our sharp recovery in the second half of 2009.

Before we move on, I would like to turn to the entire Autoliv team to acknowledge and sincerely thank you for your support and your collective efforts to stay ahead of the curve, especially during the crisis.

Thank you to all of you for an excellent job.

If we now turn the page; we had a very strong free cash flow, not only for the fourth quarter, but also for the full year.

Our free cash flow of $209 million in the quarter was approximately $100 million better than for the same period last year.

Our full year CapEx represents approximately 2.5% of sales.

This low level is due to the slowdown in the industry and to our action program.

In 2010, we expect CapEx to be in the range of 4% of sales.

The reduction in working capital of $145 million led us to a level of 6.5% of sales, the lowest level in 10 years.

Looking ahead into 2010, we expect our cash from operations to continue at least at the same level as 2009.

Turning the page, we can see that our net debt to cash ratio has declined to 21%, mainly due to our strong cash flow.

During the quarter, we reduced our net debt by [$260] million to $662 million.

At the end of the fourth quarter, our leverage ratio was in compliance at 1.6 times.

Our interest coverage ratio has also improved, and we are now expecting to be in compliance by the end of first quarter 2010.

Moving on to the next page, we can see, specifically in looking at the figures specifically at the fourth quarter, we have the lightest -- global light vehicle production figures.

The actual light vehicle production of 16.7 million was 1.1 million higher than the expectations at the beginning of the quarter.

It is also a sequential increase of 1.7 million from quarter three.

We outperformed the light vehicle production in all regions, by 9% in Europe, by 4% in Japan, by 18% in North America, and by 54% in Rest of The World.

China and India continued to be very strong.

Production increased 88% and 56% respectively.

We also outperformed these high growth rates with organic sales growth of 169% and 114% respectively.

Turning to the next slide, we have our fourth quarter production volumes.

Our Seatbelt business increased by 24%, 6 percentage points better than the global light vehicle production.

Equally important, seatbelt pretensioners were up 21%, 17% better than the Triad, which is the dominating market for these products.

For Side Systems, we continued to outperform the Triad, the main market for the side airbag.

For electronic control units, we increased market share as our volumes were up 10 times the light vehicle production in the Triad.

On to the next page we can see our gross margin.

Our gross margin of 20.4% was our best performance for a fourth quarter since 2005.

Higher organic sales had a positive effect of 340 basis points.

In addition, we were able to improve margin primarily from labor savings by 180 basis points, lower commodity costs by 180 basis points, and other net by 150 basis points.

I might also mention that the impact of distressed suppliers was less than $1 million during the quarter.

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

The dashed line on this slide excludes restructuring charges.

The increased sales effect on our overhead cost was 310 basis points.

Actions to reduce RD&E and SG&A costs generated approximately 90 basis points of margin improvement.

This improvement was partially offset by lower engineering income of 120 basis points and other net of 160 basis points.

Our cost savings improved margins by 2.7%.

This includes the savings from the gross margin.

We thereby achieved an operating margin of 10.8%, excluding restructuring charges, on a comparable basis, the highest since second quarter year 2000.

On the next slide, we have summarized the results achieved so far by the action program and other action.

With a $71 million accrual and a $26 million cash outlay for the quarter, we have now $100 million accrued on the balance sheet.

Margin improvement meant savings effects were $41 million for the quarter.

In 2010, we expect the restructuring efforts to return to normal and, historically, we have been in the range of $10 million to $20 million in restructuring costs.

The cash outlay in 2010 should be in the range of $75 million, while the annualized incremental margin improvement in 2010 is expected to be $80 million.

I should point out here that this is in relation to 2009 and not 2008 where we started the action program.

Turning the page, you can see the long term associate development, excluding acquisition.

Since the action program started in July 2008, we have reduced headcount by almost 7,000 associates.

In quarter four, we had an increase of 300 due to higher sales, but this increase was only low-cost countries, and the increase was limited to direct, temporary workers.

And we have continued to reduce our break-even point and increased our flexibility even further.

On the next page, we have the commodity impact on our business.

The commodity indices remain below 2008 levels.

However, our majority commodity indices have been creeping up for the last two quarters.

For the fourth quarter, we had a positive effect of $31 million.

Considering the most recent volume and commodity effects, we now anticipate the impact of commodity prices to be relatively neutral for full year 2010; that is slightly favorable in the first half and slightly unfavorable in the second half.

Moving on to the next page, we have the progression of our results during 2009.

As we all remember, quarter one 2009 started with a global light vehicle production drop of 35%, and organic sales dropped by 40%.

Consequently, we reported a negative 7.8% operating margin, excluding restructuring charges.

However, throughout the year, our action program and other cost saving actions gained momentum, and vehicle volumes recover sequentially.

By the fourth quarter, our sales had rebounded to an annualized run rate close to our record sales in 2007 of $6.8 billion.

More importantly, our margins in the fourth quarter recovered to 10.8%, excluding restructuring costs.

And lastly, we had a negative free cash flow in the first quarter of $43 million.

However, the cash flow improved significantly throughout the year.

If we turn the page, we have the summary for our full year 2009.

Despite the sales decline of $1.4 billion, our gross margin decline was only 80 basis points, and our free cash flow was better than 2008.

Our EBIT margin only declined 2.1 percentage points to 3.9%, excluding restructuring costs.

For the full year, we managed to achieve a positive net income and earnings per share, including restructuring costs, of $133 million.

This result is much better than we expected at the beginning of the year, when we thought we would make a slight operating profit before restructuring costs.

So after a difficult start, we had a very good ending to 2009.

By turning the page, we are now coming to the outlook.

During the quarter, we stepped up our activities in Asia.

First, we announced that we will acquire 100% ownership of our inflator joint venture in Japan.

Second, we announced that we will invest $10 million in Japan to consolidate our seatbelt and airbag operations, while expanding our technical center capability at the same location.

And lastly, yesterday, we announced that we signed an agreement to acquire the seatbelt and airbag business of Delphi in Asia during the first quarter this year.

Turning the page, we have summarized the combined effect of all three Delphi transactions.

The annual sales of the business we take over is approximately $400 million, of which $250 million is in Korea and China, and $125 million in North America, and the remainder is in Europe.

Assuming we close the Asian transaction during the first quarter this year, we should benefit from approximately 75% of the Asian sales this year.

North America and Europe will have a full year effect.

Hyundai Kia represents approximately 60% of the sales, while General Motors, including Daewoo, is approximately 25%.

We now expect the Asian OEMs to represent more than 30% of sales in 2010.

Turning the page, we have the latest full year global light vehicle production figures.

As illustrated, full year 2010 is now expected to increase by 11% from 2009.

For our two largest markets, NAFTA and Western Europe combined, the increase is expected to be approximately 10% versus prior year.

However, we should note that the global light vehicle production of 63.1 million is 6% less than the almost 67 million annualized run rate recorded in quarter four 2009.

You can see this on the next slide, where we have the global light vehicle production quarterly trend from 2008 through 2010.

During 2010, on a global basis, all quarters are expected to perform below levels than we experienced in the fourth quarter last year.

On to the next slide; we are looking specifically at the first quarter.

We have the global light vehicle production outlook according to CSM.

The forecast of 15.6 million vehicles is 35% above 2009 level, which was the lowest first quarter production in many years.

In NAFTA and Western Europe combined, the improvement is expected to be 39%.

China and India are expected to continue with strong performance, with increases of 36% and 19%, respectively.

And lastly, the annualized quarter one run rate of 62 million is below both the average expected run rate for full year 2010 of 63 million vehicles, and the last quarter 2009 run rate of 67 million vehicles.

Turning on to the next slide, we have the financial outlook for quarter one and full year 2010.

In quarter one, our organic sales are expected to increase by more than 50%.

Three more reporting days will boost quarter one's sales by approximately 8%.

This effect will be neutralized in quarter four 2010.

Consolidated sales are expected to increase by more than 70%, given the current exchange rates.

On a US GAAP basis, including restructuring charges, we expect the quarter one EBIT margin to be approximately 8.5%.

For the full year 2010, we anticipate our consolidated sales to increase in the range of 15% to 20%.

Based on current exchange rates, we expect the currency effect to be approximately 3%, while we expect the organic sales to grow between 10% to 15%.

The effect of acquisitions is expected to be between 2% and 3%.

Based on these assumptions, we should generate an operating margin of between 8% to 9%, including restructuring.

We are very pleased to be able to guide to our long term EBIT margin target only two years after the crisis began.

Then turning to the final page, we will conclude the formal presentation with this slide.

And I would like to turn the call back to you, Rupal, and open up for questions.

Rupal.

Thank you.

(Operator Instructions).

Our first question comes from the line of Peter Testa.

Please go ahead with your question and announce your company name.

Yes, it's Peter Testa from One Investments.

I just wanted to help understand your sales performance Q4 and guidance for Q1 versus the LVP production growth.

Obviously, you're doing a lot better than the LVP production growth.

Can you give us then, please, the extent to which you think this relates to inventory management, or inventory changes in the supply chain at the customer level versus mix or vehicle penetration of LVP products, please?

Well, I think it is a combination of both.

If you look into the inventory level, it has actually decreased in United States from 62 days in November down to 53 days in December, so we have a below usually -- a below usual low inventory level in the US.

It is normally between 60 days or approximately 70 days.

So we think that is one contribution to the performance.

For us, it's also the fact that we have a strong vehicle mix.

We have a strong vehicle mix from second half of 2009 continuing into 2010.

The reasons for that are twofold.

We have had good launches in 2009 that is performing very well, and also [delay] to 2008 continuing to perform well.

We have Renault Megane; we have the Volkswagen Golf; we have the GM Delta platform; and we have the Ford F-Series truck, that are all strong, well selling platforms as our top platforms.

So that is a good mix situation.

You have another effect also; that we see a trend to more high -- towards higher specified vehicles as the incentive programs in some cases have ceased and, therefore, it's returning to higher specified vehicle.

Okay.

No, thank you for that.

I was wondering if you could help be a little bit more specific as to what you thought the inventory was for Q4 and guided Q1.

As I said, we haven't split the inventory effect of the outperformance of light vehicle production.

I cannot refer to a specific reason.

Actually, it's a mix of it all.

Okay.

Will you say it's more or less than half of the outperformance?

I don't know really.

I would guess it is -- the strongest reason is the positive, positive mix and the good launches.

Very good.

Thank you for the help.

Thank you.

Our next question comes from the line of Brett Hoselton.

Please go ahead with your question and announce your company name.

KeyBanc.

Morning, Jan.

Morning, Brett.

Or good afternoon, I guess.

Or good afternoon, or good morning.

Two questions here.

First of all, when we look at the margins, fourth quarter 10.8% but then 2010 8.9%, I think many investors were anticipating margins would be better than 8.9% in 2010.

The question I would have is, is that conservatism on your part, or is there also -- should we be thinking about margins -- some headwinds as far as the margins are concerned bringing it from that 10.8% down?

Well, if you look at -- if we look sequentially, fourth quarter is normally a strong quarter; if you look from quarter four, 10.8% to guiding 8.5%.

We have lower than expected engineering income effects on the fourth quarter [boost] that is helping us.

We have a higher sales effect that is helping us.

So the seasonality effect is giving us a help when it comes to the fourth quarter.

If you look on to the long term effect and compare it to the 8.5% versus the 8% to 9% effect, it's very difficult to estimate the [outer] years, and that is the reason why we have this range.

I think we are very pleased to come back and guide to 8% to 9% for the full year.

Okay, very good.

Thank you.

And then, as you think about your cash flow, free cash flow rebounding as well, obviously, you're going to start to think about your dividend, your share repurchase; an important component of the Company.

How should we think about your preference between share repurchase or dividend; reinstating one versus the other?

And then, secondly, how should we think about the potential timing of reinstating one or the other?

We haven't discussed this really in the Board, actually.

This is, as you know, a question for the Board of dividend.

And when the timing of that -- the timing of it is, first, we have to be compliant with the interest coverage ratio, as I said.

And we have written in the report we are complying with the leverage ratio by year end, and we are expecting to be compliant with the interest coverage ratio after first quarter.

Then, we will bring that to the Board and have a discussion.

And after that, I will get back to you.

Okay, excellent.

Thank you very much, and very good quarter.

Thank you very much, Brett.

Our next question comes from the line of Thomas Besson.

Please go ahead with your question and announce your company name.

[Good afternoon].

It's Thomas Besson at Bank of America Merrill Lynch.

I have a couple of questions, if I may.

Firstly, I'd like you to explain us the difference between your first quarter and full year guidance in terms of how much you expect to outperform your guidance for global light vehicle production.

Listening to what you said for Q1, you should do roughly 15% better than the global light vehicle production in Q1, but you're only guiding for something which is very close to full year global light vehicle production for the full year.

Is there something that happens in Q2 or H2 explaining why you would grow organically slower than global light vehicle production in the rest of the year?

Well, we believe, firstly, that the light vehicle production might be a little bit better in first quarter than the figures that we see from CSM.

So the outperformance that you see from these figures here reported to in CSM might be slightly less.

We also believe that there is an uncertainty going forward into the rest of the year.

You don't know really how it's going to play out and, therefore, the guidance that we have said here, 10% to 15% on the organic level, is the best -- our best estimate for the time being.

Thank you, that's fair enough.

Moving on to your CapEx level, I've been impressed you managed to spend in 2009 less than what you spent in 1996, with revenues that are 3 times higher.

You're not guiding yet for CapEx in 2010.

Should we expect that you get back to, I don't know, somewhere between 4% and 5% of revenues in terms of CapEx?

Or are you going to be able to continue to live with some $150 million CapEx?

We have said -- I think we've said in the past that you should look towards 4% to 4.5% of CapEx, and in the lower part of that range.

We are now saying around 4%; 4% of sales should be the level you should look towards for 2010.

Okay, great.

Another one from me.

On Delphi, you gave us a good profile of what you're effectively acquiring but not mentioning anything about the profitability of the business and the potential addition to goodwill.

Can you say a word about the relative profitability of the acquired business and amortization of goodwill we should count on in your Q1 accounts for the year for all the Asian deals?

We have -- we are not disclosing that.

You can understand that we are not giving any figures.

We have said that it will have insignificant effect on -- due to the size and the profitability of the level, it will have an insignificant effect on the earnings per share and on the margin.

Okay.

Lastly, and it will be all from me, on raw materials, you're a bit more positive than I thought you could be given the creep-up you have mentioned over the last two quarters.

So should we basically expect Q1 to still have a similar tailwind than what you had in Q4 for the full year to be neutral?

Or it's already declining in terms of tailwind in Q1 versus Q4?

It is declining.

We had $31 million in tailwind in Q4, so it's definitely declining.

We have said that we would expect below $10 million.

I would say between $5 million and $10 million for the first half in tailwinds.

And then, there is to be an [easing] up with the same amount in the second half, and thereby having neutral effect for the full year.

Okay, [very well.] Thank you very much, and congratulations for this quarter.

Thank you very much, Tom.

Appreciate it.

Our next question comes from the line of Patrik Sjoblom.

Please go ahead with your question.

Good afternoon, gentlemen.

This is Patrik Sjoblom at Cheuvreux.

Just trying to get some kind of catch-all number.

You talked about initially in your presentation that you have now further lowered your costs, etc., and the break-even point has come down even further.

I think you guided for a break-even point, as it was at the Capital Markets Day, or maybe a little bit after that, of around 50 million annual vehicles, or I think you translated that into about $4.4 billion sales.

What would the new number be, given that you, obviously, have cut even more?

We -- I think we said at the Capital Markets Day between 50 million and 55 million cars on a break-even level, and we are at the top; it must be 50 million cars today.

We believe we have lowered the break-even point with approximately another $100 million, so we are at $4.3 billion today.

Okay.

So a further little bit more there?

Yes.

Then just finishing off, just coming back to the dividend discussion gentleman before me had, as you say, you're going to be in compliance with your two, should we call it, gearing ratios quite shortly.

Is it far-fetched to think that dividends will be resumed during this year, because I think you referred to these leverage and interest coverage ratios when you postponed dividend?

I think you even know the answer to the question.

I will not go before the Board and sort of come out with a statement before the Board.

I leave the question to the Board and see what that -- well, what the discussion will be.

I was more thinking, actually, of -- I mean, we have seen, obviously, Delphi North America was for sale; some contracts in Europe; and now the whole of Delphi Asia.

And maybe there is something else out there, so maybe buying other companies would be sort of --.

Do you see, if I sort of spin the question further on the M&A side, has there -- there's been more, should we say, opportunities opening up for you?

Or is it, basically, what we talked about a quarter ago?

Or any change on that point?

Well, I think there is no change in our strategy and the behavior of the Company.

We are a shareholder-friendly Company as always.

And in absence of any other opportunities to invest long term to the benefit for shareholders, we are returning money in the form of dividends and in buybacks.

Of course, we would like to use the money to long term grow the Company to even better figures, so we will continue to look for acquisitions and look for possibilities to invest the strong balance sheet we have.

Thank you very much.

Thanks.

Our next question comes from the line of Patric Lindqvist.

Please go ahead with your question and announce your company name.

Yes, hello.

It's Patric Lindqvist, HQ Bank in Stockholm.

Jan, I very seldom find myself congratulating on great quarters, but this time, you earned it really well.

I'm honored.

Thank you very much, Patric.

And talking about the savings, 2010 you mentioned that you're probably going to drive [$80 million] on top of 2009.

But, obviously, you're going to take back some people, be it in low cost countries.

Would you be able to say anything about what a net impact on the benefit of the savings less the people you're planning to take in, given the production levels that you are expecting for the year?

No, I don't have any -- it all [takes out] to see where the growth is going and how it's sort of going to play out.

It's not possible to really say any on the gross saving.

We are going away from the gross savings figure to the margin improving savings figure, and this $80 million that we presented here on top of 2009 is coming from the actions that we are sort of in control of.

If the sales will be boosted further and we will need to take onboard people, we still stick, of course, to the margin improving part of it.

But it will all be what the market is [telling us].

Right.

So the $80 million includes some assumption of taking some people back, right?

This is the margin improving effect.

Okay, yes.

Right, got it.

A question then on the same area.

You've been talking about that there may be as an overall number to be able to keep a half of all those savings that you're initially launching.

Would you care to modify that figure to any extent now and say that, well, you might be able to reach a significantly higher number, given what you --?

Are you talking about the savings that we get when we negotiate new products with our customers or --?

No, no.

The structure, the savings programs you've been initiating.

Okay.

(Multiple speakers).

Yes.

We have said it is more than half of the savings.

And it is more than half of the savings.

Definitely.

I'm just trying to get whether it's a higher figure than that.

No.

Okay, and then, a final question -- or two questions.

One on the -- you said they're more optimistic on [likely] production than the CSM numbers.

Would you care to say in what regions you're seeing the [call-off] being more aggressive than what numbers are?

Yes?

Well, we believe that it is primarily in the Rest of The World market, and primarily in those regions.

We haven't seen any significant improvement in Europe, for instance.

Okay.

A final question on CapEx then.

The 4% of sales, does that include an assumption of some kind of hangover from 2009 deferred project, or --?

Well, the 4% is the lower level than the 5% we have had some years ago, and it is up from the 2.5% approximately this year.

And that's coming from increased order intake, increased growth, and which is driving tooling primarily in production equipment.

Because why I'm asking, since you took it down so drastically, one could have thought that you would have some kind of deferred projects that would come back in 2010.

But you're not saying there are any of those kinds of investments [likely] this year?

No.

Not really, no.

Okay.

And does the number include investments that you might be able -- would be needing to do when acquiring the Asian Delphi business?

No, it does not.

We have not been including any numbers in the guidance of the Delphi Asian business.

That's perfect.

Thanks again.

Thank you.

Our next question comes from the line of Adam Jonas.

Please go ahead with your question and announce your Company name.

Hi.

It's Adam Jonas at Morgan Stanley.

Hi, Adam.

Hi.

You know, I had three really good questions about your dividend and buyback program, but [damn it] -- ah, sorry, I guess I won't ask them.

What a pity.

What a pity.

So then I'll go to a couple of others.

Okay.

To the question of mix development in Europe.

So you seem to buy into the CSM or JD Power 1% reduction in production.

How significant will value of production differ from the units decline?

And I'm not pinning you against the wall here, and if you want to pass on the question, go ahead.

But do you think value of production in Europe can significantly outpace the negative 1% unit?

You mean the --?

Mix.

The mix effect?

Yes.

I have really not a good answer to that, Adam, to be honest with you.

Of course, the value effect of the increase will have a positive effect.

To what extent it will go over -- overlay the volumes, I cannot answer.

How about this?

For 2009, how bad was it in the negative direction?

How bad was the difference between -- that you were feeling in terms of the mix effect in percentage terms?

Was it --?

Let us think about that, and we may come back on that.

Fine.

I understand.

It's a complicated one.

Next, on the working capital move.

You alluded to your working capital being at unusually low levels.

Any -- given the expected production movement, and that you normally do have a positive working capital more than this, and receivables that frequently even can be larger than payables, would we -- what is the guidance on working capital?

Are you able to give us any at this point?

We haven't given any guidance on working capital.

You should remember that we have $100 million restructuring cost on the balance sheet.

Sure.

You know, we are committed to stay below the 10% of sales.

That is the only number we can give.

But just to confirm, in a typically recovering production environment, you would run an outflow on working cap -- inventory neutral?

Yes.

Okay.

And then, just another question about the -- that cost savings figure, the $80 million gross before adding workers.

It is not gross.

It is margin improvement.

Okay.

So that's a net -- that would be margin improvement adjusting for the amount of workers that you would already expect to be adding, given the growth that you're projecting?

Yes.

It's margin improving effect.

Fine; just wanted to clarify that.

It's net then.

Yes.

Then I wish then that you are adding some more workers and that things turn out more positive.

Good luck this year.

Oh, thank you, Adam.

Thanks.

Our next question comes from the line of Hampus Engellau.

Please go ahead with your question and announce your Company name.

Yes, hello.

This is Hampus Engellau from Handelsbanken.

Hello.

I have two questions, if I may.

Firstly, I would like to know if you have indicated any -- what kind of restructuring charges we could assume for this Delphi acquisition in Asia.

And then you lost me a bit when you were talking about the cost savings according to the program that you're running, and also what we should expect for 2010.

And then, I'm at page number 11 in your presentation.

So if you could please repeat that again, because I didn't follow.

Okay.

Well, if you look on the restructuring charges on the Delphi, we are expecting to do $10 million over three years.

That is as it looks today.

We will have to come back with an updated figure after the first quarter.

And the $10 million, that is what you already executed on, which is North America and partly Europe then?

This is the Delphi -- this is the Asian acquisition.

Sure.

The other one, it's already accounted for in 2009.

Okay.

And the other one?

Yes.

To come back again about the impact for 2010 compared to 2009, we estimate that the incremental saving is around $80 million marginally, so to speak, compared to 2009.

Right.

And on your guidance for full year on top line, the 3% contribution from acquisitions, on top of that we should add the Delphi $200 million -- $250 million acquisition, right?

Yes.

You should add three quarters -- [if it] closes as expected, you should add three quarters of the $250 million.

All right.

Thanks.

Thank you, Hampus.

Our next question comes from the line of Rod Lache.

Please go ahead with your question.

Hello, everybody.

I was wondering if you can talk specifically a little bit about SG&A and R&D expectations in 2010.

And I apologize if you've gone through this already; I may have missed it.

And is there a specific -- it just seems to be moving up very slightly; I mean, incredibly low incremental SG&A, for example, for the rise in revenue that you're experiencing.

Is there a point where that comparison becomes more correlated, there's going to be a need to add some additional spending?

If I start with R&D, Mats will cover the SG&A.

We have set long term target on R&D, and it should be slightly south of 6% net.

I think you should expect slightly north of 6% net for the year 2010.

And the reason for that is that we are continuing to invest in our future, continuing to invest in products for emerging markets, and in active safety and small car safety.

And the level of the Company is not where we want it to be.

So that's the reason why it's 6.1%.

To talk about the SG&A, I mean, looking into the SG&A for the fourth quarter now, in relation to sales it is, of course, very good.

We had very, very strong sales in the fourth quarter.

The annualized sales is around $6.7 billion, which is very high.

If you then look into 2010, you will not have that level in 2010.

You will have a lower level of sales, and that will make an SG&A margin of coming back to the target level we mentioned before of around 5%.

That is what we're going to come back towards in 2010.

Okay.

And then, longer term on the SG&A, as the market presumably continues to recover into 2011 and beyond, that ratio of around 5% is something you would expect to sustain?

Yes.

We believe that could be the ballpark.

Right.

Okay.

Thank you.

Our next question comes from the line of Adam Brooks.

Please go ahead with your question and announce your Company name.

It's Adam Brooks from Sidoti & Company in New York.

Just real quick on I guess China.

The question is, what was your current share I guess at the end of the year?

And is that mid 30%s goal for 2012 still good?

Or given the great performance last few quarters, could that possibly be moved up to almost 40%?

Can you maybe give a little bit of commentary on that?

Yes, we are approaching 30% in China we believe at this point, and we are holding onto the 34% market share in airbags and seatbelts by 2012.

And just a little bit, can you maybe just provide some color on India, and maybe any initiatives over there?

I know China, you've laid out much more of kind of a plan on what your goals are.

Can you maybe talk a little bit about India, about current share, and maybe what your targets are looking out over the next few years?

We have between -- approximately 45% market share in India.

And we are continuing our investment in India and we are looking forward to gain more business in India, actually, as the Indian market is continuing to grow.

You will see the Indian market grow significantly, as we commented already for 2010.

The Indian market is quite a bit away from the Chinese market, from all aspects; the number of cars produced and size, and value per vehicle and everything, so it's a very big difference between the Indian market in this area, compared to the Chinese market.

And I guess could you maybe give a rough estimate of what the content per vehicle is in China and India?

China roughly $200 per vehicle; India roughly $60/$70 per vehicle.

Thank you.

Thank you.

We have a follow-up question from Peter Testa.

Please go ahead with your question.

Just following on that sort of questioning line, please.

I was wondering if you could give us some update as to your progress made in the small car initiative.

You stated your active penetration and maybe more on penetration of basic systems with emerging market [cars].

Are you just getting a sense of the expansion of the Autoliv footprint?

Maybe some feeling as to how that's developing in terms of how and when you think we shall see more meaningful impact from that on an ongoing basis.

Well, I think the small car safety that we have is moving on very nicely, and we are making progress, I think.

Investment that we have made in small car safety is one of the reasons that we are also, as I commented, doing well on the order intake.

And we have taken, we believe, a higher than normal level share of the orders during 2009.

Looking on to the penetration rates, I think you're probably mostly interested in China.

China, if you take frontal air bags, for instance, the passenger airbag is about 75% take rate; driver airbags is about 80% take rate.

If you have side systems, it's still a very, very low take rate in China.

It's roughly somewhere between 10% and 15%, in the lower part of that range; closer to 10% more than 15% if you look on the side systems.

So there is room for growth even in this market from the content point of view.

You would then expect average value per vehicle to go up, but it seems that it is not going up.

The reason for that is that the market is also adding a lot of low content cars.

So even if the cars that we normally think about building, having higher content is increasing further with further installation rates or side systems, the average is dragged down by the entrance of low content vehicles.

Okay.

Thank you very much.

Thank you.

(Operator Instructions).

We appear to have no further questions at this time.

I'll hand the conference back to you.

Thank you very much, Rupal.

I would like to thank everyone for your attention, and would like to welcome you back on the next earnings call at April 27.

Looking forward to talking to you then.

Thank you very much.

Ladies and gentlemen, thank you for your participation.

This concludes today's conference.

You may now disconnect your line.

Thank you.