Autoliv Inc (ALV) 2010 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Autoliv Q1 Financial Teleconference.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions).

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

With that, I would now like to hand over to today's chairperson, President and CEO, Mr.

Jan Carlson.

Please begin your meeting and I will be standing by.

Thank you, Michael.

Welcome, everyone, to our earnings presentation for the first quarter results.

Here in Stockholm, we have our CFO, Mats Wallin, and our VP Corporate Communications, 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, as a convenience for our investors, analysts, and customers on the call, 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.

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

Onto the next page.

We are very proud of our record performance, especially considering where our industry was only one year ago.

Our gross profit, EBIT, EBT, and net income along with our margins were the best results for any quarter in the history of Autoliv.

In addition, sales and earnings per share was the second best ever, while our free cash flow was the best ever for a first quarter.

Before we move on, I would like to turn to the entire Autoliv team to acknowledge and sincerely thank you for your continued support and your drive to stay ahead of the curve.

Thank you for a job well done.

Turning the page, we see how the structural improvement of our company has favorably affected our profitability.

Here, we compare our recent quarter one performance to the same quarter before the crisis in 2008, since 2009 was such an extreme year.

Despite 6% lower sales and a 4% decline in the light vehicle production, our gross profit is 9% higher and our operating profit improved 53% or $68 million.

Our aggressive action program has reduced SG&A to 4.7% of sales versus 5.6% in 2008.

Earnings per share improved 25% to $1.39.

This reflects our commitment to create value for our shareholders and return on our restructuring investment.

Onto the next page.

We had a very strong free cash flow which was the best ever for the first quarter.

Our cash flow from operations was $150 million, despite $77 million higher working capital due to the strong sales recovery.

Our focus to reduce capital expenditures continue, thereby achieving almost the same low level as in 2009.

For the full year, we still anticipate CapEx to be in the range of $200 million to $250 million and continues to be less than depreciation and amortization.

We expect our operating cash flow to be at least $0.5 billion in full year 2010.

The free cash flow in the quarter was $113 million and if you turn the page, you can see that 70% of this amount or $79 million was used to make acquisitions.

We acquired the Delphi Occupant Restraint business in Asia, the minority interest of our inflator joint venture in Japan, and the radar system grew from Visteon.

These acquisitions are expected to add more than $220 million of revenue during the remainder of 2010.

In the second quarter, we expect to invest at least another $50 million by closing the acquisitions of the Delphi Pyrotechnic Safety Switch assets and the minority interest of Norma.

If we turn the page, we have summarized our financial position.

During the quarter, we reduced our net debt by $43 million to $619 million, the lowest level since 2004.

We are therefore pleased to announce that we are now in compliance with our internal financial policy.

The leverage ratio of 0.9 times is well below our policy of 3 times and the interest coverage is 6.2 times, which is well above our policy of 2.75 times.

Moving onto the next page, looking specifically at the first quarter, the global light vehicle production was 12 percentage points better than expect in January.

For our second largest market -- two largest markets in NAFTA and in Europe, the light vehicle production was 10 percentage points and 8 percentage points respectively better than expected at the beginning of the quarter.

China and India continues to have a strong performance with increases of 65% and 40% respectively as compared to quarter one last year.

Turning the page, we have the Autoliv production figure for the first quarter.

The volumes in our seatbelt business increased by 48%, essentially in line with global light vehicle production and the Triad.

For side systems, we continue to outperform the Triad, mainly due to new business and increased penetration rate.

For steering wheel, frontal airbags, and electronic control units, we outpaced the global light vehicle production.

Steering wheels and frontal airbags were held by the Delphi Occupant Restraint acquisition in NAFTA and in Europe.

So overall, we are increasing our market shares in electronics, steering wheels, and frontal airbags.

Moving onto the next page, we have our margin performance.

The record margins for this quarter reflect the combined effect of the sales increase along with our action program.

Our incremental cost savings from the action program is estimated to be $28 million as compared to quarter one 2009.

For the full year 2010, we expect the incremental cost savings to be $70 million versus 2009.

Mainly due to acquisitions, we anticipate restructuring costs to be approximately $25 million for the full year 2010, of which $15 million was accrued during the first quarter.

The cash outlay related to restructuring is expected to be $85 million for full year 2010, of which $18 million was paid out during quarter one.

Turning the page, we have our associate development, which represents a significant structural change for our company.

During the last five years, we have significantly transformed our headcount mix away from high cost countries, permanent, and indirect employees.

We have now 7,000 fewer people in high cost countries, 3,000 people fewer permanent employees, and 1,700 fewer indirect workers in production overhead, SG&A, and RD&E, despite increases due to acquisition.

Consequently, we are even more flexible than ever before and now have 22% of our work force as temporaries and 60% in low cost countries.

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

Our major commodity industries have been creeping up over the last two quarters, however they still remain well below the 2008 peak level.

For the first quarter, we had a positive effect of $8 million versus quarter one 2009.

Looking ahead for the remainder of the year, we will have a slight negative effect in quarter two of $2 million and a combined negative effect of $17 million during the second half of the year.

This negative effect is driven by steel and by nonferrous metal.

Sequentially, the raw material could cost -- could be $10 million higher in the second half of 2010, based on the prices we see in the market today.

Moving onto the next slide, we have the latest full year light vehicle production figures.

We should note that global light vehicle production of 66.2 million is expected to be the second highest year ever.

However, the mix is significantly different than what we experienced in 2007.

In 2007, our largest market, Europe, represented 32% of the global light vehicle production.

This market has now dropped by 25% as Europe has lost more than 5 million vehicles since the peak.

Despite this, we now report several profit records as presented earlier.

This is due to the fact that we have managed to offset the declines in Europe by increasing our presence in rest of the world, while we now have 20% of sales versus 11% in 2007 or 5% 10 years ago.

Onto the next slide, we have the quarterly production trends since 2008.

On a global basis, the remainder of 2010 is expected to be below the levels we saw in quarter one.

The second half of the year is expected to be 3% below the light vehicle production in the first half and this translates to 1.1 million fewer vehicles in the second half.

Onto the next slide, looking specifically then at the light vehicle production for the second quarter.

China and India are expected to continue with strong performance with increases of 17% and 27% respectively.

Lastly, the annualized quarter two run rate of 66 million is essentially in line with the full year 2010 run rate of 66.2 million vehicles.

Turning to the next slide, we have the financial outlook for second quarter and our revised full year 2010 indication.

In second quarter, organic sales are expected to increase by at least 30%, while acquisitions should add 9%.

Consolidated sales are expected to increase by more than 40%, assuming mid-April exchange rate.

On a US GAAP basis, including restructuring charges, we expect the quarter two EBIT margin to be at least 11%.

For the full year 2010, we now anticipate our consolidated sales to increase by close to 30%.

Based on mid-April exchange rates, we expect the currency effects to be approximately 1%.

We expect organic sales to grow around 20% and the effects of acquisitions to be approximately 7%.

Based on these assumptions, our indication is that we could achieve an operating margin of at least 10% given the current light vehicle production outlook and commodity assumptions.

Turning to the next slide, this concludes the formal presentation of today's call and we will now like to open it up for questions.

Then, I'll leave the word back to you, Michael.

Thank you, sir.

(Operator Instructions).

Our first question comes from the line of Himanshu Patel.

Please go ahead with your question, announcing your company and location.

Hi.

This is Ryan Brinkman for Himanshu Patel.

Could you please provide some outlook on 2H on the sustainability of the 11% tight margins?

You mean sustainable after this year or into 2011?

Into 2011.

Yes.

We don't give any guidance at this point or indications even beyond this year.

We have given the best estimate we can do based on the uncertainty and also the decline in the light vehicle production you see in the second half for the full year 2010.

And we don't give any further guidance or information beyond that.

Okay.

And then, just quickly then -- what are you seeing in terms of the latest build rates in Europe and how that has trended, order rates for manufacturers, sequentially through the quarter?

During the quarter, if we look on the production figures for -- that we have in our systems, we -- you recall that we, back in January, said that our figures that we had in our system were higher than what we could see from CSM.

Looking into the CSM numbers and into the numbers we have in our system for second quarter, they more correlate with each other.

Maybe somewhat more, but not in the same magnitude as we had in end of January last quarter.

So, basically the same as you can see for -- from CSM is what we have as our pick.

Okay.

Thank you very much.

The next question comes from the line from Rod Lache.

Please go ahead with your question, announcing your company and location.

Good morning.

This is Dan Galves in for Rod Lache from Deutsche Bank in New York.

Good morning.

Good morning.

I wondered if -- a couple housekeeping questions.

Does the full year operating margin guidance include restructuring expenses?

And also, does the -- when does this production day effect -- is that expected to reverse in the current quarter?

If you start with restructuring, this is reported this year according to US GAAP, so it includes restructuring.

And the production days -- the extra production days that we had on first quarter here will come back in the fourth quarter.

Okay.

Thank you very much for that.

In terms of -- I was wondering if you could give us any type of expectation for the pricing environment.

Are you expecting any increase in pricing headwinds in the second half as the new model year starts potentially in Europe?

We have said historically that pricing decreases varies between 2% and 4%.

When the crisis was at its worst, it was in the lower part of that range.

And as of now, I can say that it is in the higher part of the range.

But we are still, we can see, within the range or hitting the upper number.

But that's what we see today.

Okay.

Thank you.

And I just wanted to clarify your comment on commodities.

You said that the back half would be a $17 million headwind.

But did you say it could potentially be $10 million higher than that if -- based on the current commodity prices?

No.

What we said is that the back and second half of 2010 is $17 million higher than second half of 2009 and we said that sequentially in 2010, second half is approximately $10 million higher than first half.

Okay.

Thank you very much.

And one more question, on the CSM numbers, both in North America and Europe, have increased fairly substantially over the last couple months.

Could you give us any characterization of -- do you think, in either region, there are risks to the upside or downside or how would you balance that?

I don't have any more knowledge or inside information than CSM for the outer quarters.

We don't see -- what we have seen so far is that the larger vehicles we are having a good platform mix coming from cars and models like the GM Silverado and also the F truck.

And we have seen a bit of a bounce back on the larger cars compared to what we could see a year or two ago.

But more than that, we have not any more inside information than what we already have, I guess.

Okay.

Thank you very much for your time.

Thank you.

Our next question comes from the line of David Leiker.

Please go ahead with your question, announcing your company and location.

Good morning.

How are you all doing?

We are doing great, Dave.

How about you?

I'm doing very well.

Thank you.

A couple of questions here focused on a little bit bigger picture items.

If you look at the new rating systems, safety rating systems in the US and Europe, have those started to have an impact on automakers content that they have put into the vehicle yet?

We are seeing an increased interest, particularly when it comes to pedestrian protection systems.

So, I think we would say that that is probably what will affect us most.

It's too early to tell exactly how much it will add to the market and to our sales at this stage.

What about the new -- the change in the five-star ratings and making those more difficult to obtain?

What -- when would you expect to see that start potentially driving some content?

The European system will be fully implemented by 2012.

So, maybe you can see some effect already before that in anticipation of this change.

But basically, that's when you will see the effect of this.

You know how it is.

It starts to take effect, basically, when you are forced to have it in effect and we would probably see it, as Mats said, 2011 the first part and then more gradually into 2012 then.

Okay, great.

And then, on the other side of the world, as we look at China and emerging markets, safety content is well below where it is in North America and Europe.

But if you look at the newer vehicles coming to market in China, where does that safety content compare to the Western world versus the other emerging markets?

Well, it is still in the range of average $200 per car in China.

But that is due to the higher specified vehicles are much more equipped than the lower specified car and you are adding vehicles in the lower half.

So, the trend is that the total fleet will have a higher vehicle or higher safety content.

But it's diluted by the low end cars coming in.

Are those newer cars, the higher end cars, are those up at that $350 content that we see in the Western world?

Yes, absolutely.

You can see if you have several car models from Chile, for instance, that we have been talking about before that have safety content over $350, absolutely.

Okay, great.

And then, one last item here on China.

With the -- I know that you folks put a lot of assets in place over the last couple of years and with the volumes growing as they have, where are you in terms of capacity for the China market?

And then, if you could talk a little bit about what the competitive landscape looks like there today.

The competitive landscape overall we don't think has changed dramatically during the quarter or for sort of the last couple of quarters.

If you look on the capacity utilization, some of our plants are hitting full capacity and we are also running a part of overtime in some of our plants.

And that has cost us also to review a further investment in plant extensions or even in new plants in China where we would not add a size, but we will change from one size to another bigger size.

So, that is currently under evaluation.

Okay.

Great.

Thank you very much.

Thanks.

Our next question comes from the line of Brett Hoselton.

Please go ahead with your question, announcing your company and location.

Key Banc, Cleveland, Ohio.

Good morning, good afternoon.

Good morning to you, Brett.

How are you?

Thank you.

I'm doing just fine.

How are you?

Not so bad.

Let's see, in the past I think you suggested that once your internal debt policies are met that you'd kind of turn your attention to possibly reinstating either a dividend or share repurchase.

I just wanted to get your current thoughts on that.

It seems like you're positioned to do something along those lines possibly.

Well, we have said that once we are in compliance on a trailing 12-month basis, we will bring that to the Board and we have our next Board meeting here in the beginning of May.

Okay, okay.

And we will have to wait to see what the Board says.

Okay.

And then secondly, can you talk a little bit about what you view as the full strategic benefit of the Delphi acquisitions?

Is it -- is there some additional technology that's coming along with that or is it more market share related?

Well, it's primarily customer and market share related.

It's not on the Delphi Asia acquisitions as we are looking into primarily technology.

It's more of a growing with a growing customer that is essential for us.

And to be on site and sort of create a better position.

Okay.

And then, as you look at your commodity outlook, would you say -- which direction would you say you'd be biased?

Would you say that there's a bias to the upside or downside to the commodity outlook?

Well, the trend and the rumor is out there that you can see -- you hear rumors of increasing steel prices.

You hear indications or rumors of increasing iron ore prices, et cetera.

You hear other rumors about increase in raw materials.

Hard to say whether this is going to come through or not for the 2010 or not.

The estimate that we just gave you here is the best that we have at hand.

If there would be sort of a trend on some or a risk of something based on the rumors, probably on the increasing side rather than on the decreasing side.

But the best estimate is what we have heard.

Okay.

And then finally, I know that you had mentioned that -- well, anyway, European production.

Obviously, at least in my opinion, Europe has been the most uncertain coming into the beginning of the year in terms of the production outlook.

As you think about Europe and particularly Western Europe and you look at some of the production expectations and so forth, in talking with your customers, getting some feedback on the production schedules and so forth, how much confidence do you have in those production schedules at this point in time and do you sense an upward bias or a downward bias to the production expectations, specifically in Europe?

I think the best is the midpoint that you can see here.

You can always paint the risk scenarios, but you can also paint upside scenarios onto it.

The best estimate that we have is the CSM outlook.

And as we said, the production volumes we see in our system for second quarter correlates fairly well with the CSM outlook.

So, I think that is sort of a fairly good midpoint of the situation, what we see now.

Okay.

Very helpful.

Jan, thank you very much.

Thank you, Brett.

Our next question comes from the line of Patrik Sjoblom.

Please go ahead with your question, announcing your company and location.

Yes.

Good afternoon.

This is Patrik Sjoblom from Cheuvreux.

A couple of questions, if I may.

Just trying to get a grip on your operational leverage, et cetera.

I'm looking at the cash flow statement and you have a net working capital outflow of $77 million in the quarter.

Could you help us to split that up on how much is inventories, receivables, and payables?

Just looking at your balance sheet, there seems to be lots of pay receivables, but could you just sort of confirm that?

What is what here, so to say.

Yes.

I will say it's primarily related to receivables because if we look into the month of December, you know what, the December month is quite calm at the second half of December and that means that we go out of 2009 with a quite low level of receivables.

And then, when you come into 2010, you have full production in March and that has created, so to speak, a higher level of receivables than you had in December.

So, it's primarily an aspect of that activity.

Yes.

And then, just a little clarification on your $195 million EBIT.

Did that include $11 million restructuring?

And then, I thought I came in a little bit late on the conference call.

I thought I heard you said there was $15 million included in the quarter, but I may have heard wrong.

And then, there was $25 million managed for the full year.

Could you just sort of confirm which figures are correct and what's -- what is what here?

This includes gross $15 million restructuring, but the $11 million is net of some other items also being one-timers for the quarter.

All right.

So, this is just on kind of the nonrecurring of net $11 million, but $15 million was.

Thank you for that.

And $25 million was going to be the restructuring for the full year then?

Yes.

Okay.

And then just finally, on -- not -- I mean, you obviously managed to cope with this kind of 60% plus organic growth quite nicely.

But what about your suppliers?

What is sort of the auto industry's Tier 2, 3, 4 suppliers?

How are they coping with -- I mean, I'm just seeing here your electronics was up, I mean, basically doubling volumes and you have other product areas up like 60%, 70%, 80%.

How are your suppliers coping with this?

Well, there are tensions in some of the areas.

But we have been able to manage this fairly well.

Even through the volcano crisis, we weren't hit in any bigger terms through the issue with the volcano and the stoppage of the flying here in Europe.

The electronics area has seen some tension and some shortages on the components and we are seeing that as well.

Apart from that, our supply base is doing better and better.

We have, for the time being, 10 suppliers on the watch list and as you recall, probably, we had 29 suppliers on the watch list in January.

So, it's moving better and better.

It sounds very good.

Thank you very much.

Thank you, Patrik.

Our next question comes from the line of Erik Pettersson.

Please go ahead with your question, announcing your company and location.

Hi, Eric Pettersson from ABG in Stockholm.

My questions have been answered.

Thank you.

Okay.

Thank you.

(Operator Instructions).

The next question comes from the line of Thomas Besson.

Please go ahead with your question, announcing your company and location.

Hi.

It's Thomas Besson with Bank of America and Merrill Lynch in Paris.

Hello, Tom.

Hi.

Could you comment on the visibility you have on Chinese production in H2 in 2011?

There's more and more noise about inventories rising, both at dealers levels and automakers level, and obviously, we see first signs of tightening from the Chinese government.

So, how content are you with the production figures you are using for the full year and what's your visibility for next?

Not so much visibility for next year.

We are following and using the CSM for the other quarters, as you know.

So far, we have not seen any imminent decrease or any imminent tightening up on it.

So, we are relying on the information that you have.

And as commented also before, the growth of safety content per vehicle is favorable to us.

So from that perspective, together with the increase in China, we are looking favorable still on the market.

Okay.

It's a fair comment to say that this is the most profitable direct area for you in Q1?

Well, we don't comment profitability per region.

The only thing we can comment on is that if you have a booming market, if the growth is significant in the market, of course it can vary and it can trend upward.

But we don't comment specifically on the profitability per region.

Okay.

Looking at CapEx, you said you are still happy with $200 million to $250 million for the year.

You stayed at very, very, very, very minimum levels in Q1.

So, should we think it's going to be $150 million or should we really expect a spike in the rest of the year?

And is it reasonable to assume that we'll be closer to $300 million in average, say, in '11, '12, given that your revenues will be higher than previous [peaks this regular]?

We have said that on the longer term number you should look on close to 4% or approximately 4% on the CapEx level percent of sale, which is down from where we have been historically.

The figures that you have here for the year, $200 million to $250 million corresponds to a lower figure.

It depends a little bit on how the second half pay out in terms of reuse of equipment, et cetera, to -- if it's going to be lower, corresponding to the same level in -- you see in quarter one.

But our best estimate as of right now with also significant order intake that we have seen throughout last year and also throughout so far this year is that we will reach this level $200 million to $250 million.

Okay, great.

Looking at Forex, I'm not sure I understand your comments on that.

Could you iterate why Forex would be supportive for your revenues in coming quarters given the relative strength of the dollar versus the euro?

Can you explain us the other key currencies for you, please?

Yes.

If you talked about, first of all, the main currencies -- the euro, US dollar, and there we have in our forecast and rate $1.35.

And if you would compare $1.35 to what we have seen in the past, that would give the main effect, so to speak.

Okay.

We're currently at $1.32, so that -- I mean, average for Q2 '09 was actually $1.36.

So, it looks more like a negative impact from the dollar-euro than the positive impact.

That was the reason of my question.

Yes.

If you look into the second quarter, you will -- as you have$1.38 on the euro-dollar on the first quarter and then you go to $1.35, you will have a catch-up the effect and the one -- and I would expect that the second quarter will be -- actively, if you look into the quarter, $1.34, because of the catch-up effect.

Thank you.

Great.

The last question, please.

On your ability to pass on raw materials if they were to exceed your current expectations, it seems to me that the margin differential between you and your main clients has actually never been as big as it is today.

So, can you just come back and explain to us what kind of pass through contract you have, the share of this pass through contract, and on your ability, given your 11% margin, to discuss with customers that barely breakeven, to ask for compensation on that front.

Well, it is always a battle to discuss raw material compensation with a customer and it has been there for everyone in our industry and it is for us.

We have been trying to get the raw material closest into the contract as much as possible.

Sometimes we have succeeded, sometimes we have not.

To your comment on getting raw material compensation when we are reporting 11.4% operating margin, I think we have to draw attention to just only a year or two ago of when many customers of ours would have been liking to see suppliers earning money and has also been forced to rescue suppliers from being in difficult situations.

So, I think that the understanding of that, you have to earn money during the business cycle is higher now than in the past I think.

Great.

That's good news.

Thank you very much.

Thank you.

Our next question comes from the line of Adam Brooks.

Please go ahead with your question, announcing your company and location.

Yes, Sidoti & Company, New York, New York.

You talked a bit about China, but can you maybe talk about the opportunities in Brazil, Russia, and India over the next five years, maybe where your current market share is and kind of how you see things developing over the next five years or so?

We believe that Brazil will have a good development.

You know that the regulation of making frontal airbags mandatory from 2014 is already making effect on OEMs.

You see a clear, higher installation rate on airbags in Brazil.

We have roughly around 50% market share of the Brazilian market and we are well positioned with a high level of vertical integration also in Brazil.

The same goes for India, but there you have a substantially lower content per vehicle than what you have in Brazil.

In India, it is the same market position for us.

We are also vertically integrated in India.

And the content per vehicle and the development of the content per vehicle is slower than it is in Brazil for the time being.

At some point later on, we assume that this will also change and dry.

But so far, there is relatively few initiatives in -- on increasing the content in India.

Russia, we are also in Russia presently in St.

Petersburg with assembly plants there of -- for products, for seatbelts.

We are also monitoring the situation in Russia and see the market development.

It is a little bit more volatile of how the market is going to develop.

But we are focusing a lot on what will happen with the Russian auto industry, both the domestic part and also the foreign part, and what that will mean and we are well positioned there to go ahead.

And as a part of this, of course, the Norma acquisition that we did here during the quarter and that was sort of coming to an end here now in April and we expect further to be finalized during the second quarter.

That is, of course, one important step into the Russian market.

And real quick, do you expect to be able to outperform production growth in those three nations or should you more or less be in line?

That depends very much on the platform mix, on how that is developing, on which platform we are.

But we at least expect to grow in line with the production.

All right.

Thank you.

Thanks.

Our next question comes from the line of Ann-Sofie Nordh.

Please go ahead with your question, announcing your company and location.

Yes, hello.

Ann-Sofie Nordh here from Nordea in Stockholm.

Hello?

I was just wondering, we have seen some acquisitions being announced from you.

I was just wondering on your thoughts on this going forward.

What areas would be of most interest and how does the pipeline look for you?

The areas of most interest is active safety.

Technology and active safety, that is the prime interest for us.

We have said also that if we would be able to do something in Japan, as such, we would be interested in doing that.

That takes a long time.

It's not easy to sort of accomplish that.

But we have been successful through the last 10 years in doing so and we will continue to look for it.

But active safety primarily, both from a customer point of view, customer portable point of view, and also from a technology point of view is the prime interest.

Thank you.

Thank you.

Our next question is a follow-up question of the line of David Leiker.

Please go ahead, your line is open.

Hey, Jan, just two quick things.

What -- and I understand that you're in a situation where you're not updating your margin targets, but you're obviously operating well above what the targets have been previously.

When would you expect to be in a position to provide an update on what your thoughts are regarding that?

Well, our long-term target, 8% to 9% has to be seen over the business cycle and one can always wonder what is the length of the business cycle.

We have seen now a number of quarters being significantly above the longer-term target.

And to, at this point, revise the longer-term target based on the situation that we have seen a number of quarters being above the target is a bit premature.

And therefore, we are, for the time being now speaking to the longer term target.

That doesn't say that, of course, that some years we'll be above the long-term target.

It goes by definition that some years will be above and we have seen years being below.

So, that's how it is for the time being.

Okay, great.

And then, one last item -- I haven't had an opportunity really to talk with you about the efforts you're doing on the active safety side.

Can you give us an update on where you are and timing of seeing some of those technologies come to market?

We are investing in active safety.

We will increase the investments in active safety also throughout the remainder of 2010 and we are focusing on the active safety area as such.

As you know, we completed the Visteon radar system acquisitions.

We have the Taiko acquisitions.

We believe we are the leading supplier in the radar area, in the night vision area.

We have orders in the vision area, in the stereo vision area, but we are, of course, not on the same level as we are in passive safety.

But in absence of further major acquisitions in the active safety area, we believe we have the capacity now and the capability to invest on our own into this technology.

We have done that on the electronic control unit side through the IMU integration and we took the worldwide lead in this, doing that based on our own competence.

We are trying now to reinforce this and do that also on the stamping side in a bigger fashion.

Is there any way you can quantify the investment, the dollars that you're spending here and how much of a drag that might be right now as you're not generating much revenue?

For the time being, for the second half of this year, we are approximately increasing the investment in active safety with $10 million for the second half, just right now.

And that will be an effort that will continue into 2011, and all of that is included in the guidance and indication that we have now given.

And that's at $10 million increase in the second half from the first half or from last year?

Yes.

Okay, great.

Thank you.

So, you can see that is a substantial addition and we are doing this because we think we have a proven track record on the other -- in the electronics side.

Yes, great.

Thank you very much.

Thanks, Dave.

Our next question comes from the line of Hampus Engellau.

Please go ahead with your question, announcing your company and location.

Yes.

Hampus Engellau, Handelsbanken in Stockholm, Sweden.

I had a question on restructuring charges.

If we should expect $10 million for the second half or [$14 million], i.e.

is the $25 million including the [net effect items]?

Second question is if you could quantify how big a capacity investment in China would be?

Thanks.

Yes, if you talk about the $25 million, I mean, we have $15 million in the first quarter and how that, so to speak, will spread out over the rest of the year, I don't have an exact number, but you could assume, principally, the remaining $10 million to be fairly spread out even.

Yes, okay.

So for the $10 million, I was off.

Okay.

Thanks.

And the second?

If you talk about the investment in China, we believe that over the next three years it can be up to $100 million in investments in China for the coming three years.

Thanks.

Thank you.

We appear to have no further questions.

I'll hand the conference back to you.

Thank you very much, Michael.

I thank everyone for your attention and your very interesting questions and we look forward to talk to you and in the next earnings call on Friday, July 23rd.

Thank you very much.

Ladies and gentlemen, thank you for your participation.

This concludes today's conference.

You may now disconnect your lines.

Thank you.