Autoliv Inc (ALV) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Autoliv Inc first-quarter financial earnings 2011 conference call.

For your information today's call is being recorded.

At this time I would like to turn the conference over to Mr.

Jan Carlson, President and CEO.

Please go ahead sir.

Thank you very much, Geraldine.

Welcome everyone to this earnings presentation.

Here in Stockholm we have our CFO, Mats Wallin; and our VP Corporate Communications, Mats Odman; and myself, Jan Carlson, President and Chief Executive Officer.

We will open with a review of our first quarter results including a review of general business conditions.

Then we will discuss our near-term guidance and our full-year 2011 indication.

At the conclusion of this presentation we will remain available to respond to your questions.

And as usual the slidage 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.

We will reference some non-US GAAP measures throughout the presentation.

The reconciliation to US GAAP are disclosed in our quarterly press release and the 10-Q filing.

Moving on to the next slide, I would like to open today's remarks with some comments around the recent events in Japan.

Our thoughts are with the Japanese people who have lost so many family members and friends in this devastation.

To the Autoliv family in Japan and the rest of the world I would like to sincerely thank you for promptly supporting the recovery.

I will come back to the effects of the earthquake on our Company when we discuss the outlook.

However, in the first quarter our global presence helped to mitigate the consequences and we achieved an EBIT margin of 12.1% on $2.1b in sales.

Strong performance in China, Europe and the Americas allowed our organic sales to grow almost three times more than the global light vehicle production which grew by 5%.

Our sales in active safety grew much faster than the market.

In addition, we announced earlier this week that we have acquired important vision technologies from Hella.

Lastly, I'm pleased to say that we continue to make solid progress in our quality performance.

We are making good progress in solving the quality issues with General Motors and many thanks go to the efforts of our employees in North America.

Onto the next page.

We achieved our best sales, profit and earnings per share during this first quarter.

On a 23% sales increase from prior year our EBIT improved by 31% to $255m.

This result was despite commodity price increases of $18m and $18m less profit due to the disruption in Japanese Light Vehicle Production.

Combined these headwinds had 130 basis points negative effect on margins during the quarter.

In addition, our earnings per share improved 39% year over year to $1.93.

This was mainly due to the strong EBIT performance and a lower-than-expected tax rate of 24%.

And lastly, we achieved a record return on capital employed of 33%.

Once again, our associates have done an excellent job to deliver these record results.

Turning the page.

We have the first quarter light vehicle production according to IHS presented in our new reporting format with five regions instead of four.

The global light vehicle production increased by approximately 5% year over year.

However, sequentially this was 200,000 vehicles lower than quarter four 2010.

As illustrated, our organic sales significantly outperformed the light vehicle production increase in all regions except Rest of Asia.

Consequently our 14% organic sales increase was 9 percentage points better than global light vehicle production.

Turning the page.

We have our production figures for the first quarter which includes recent acquisitions.

For the first time as part of our improved reporting we are reporting our active safety products where we almost doubled our production volumes year over year.

In all product areas we continue to significantly outperform the light vehicle production, both globally and in the triad, as we did last year.

Therefore we believe we took market shares in all product areas this quarter.

Onto the next slide.

We have our best selling platforms during the first quarter in terms of sales.

Our outperformance of the global light vehicle production is mainly driven by these models.

Many of them were launched last year and had a high safety content per vehicle.

This favorable platform mix is expected to continue into the second half of 2011, albeit at a lower rate.

If we now turn the page.

Our strong cash flow performance continues.

Cash from operations was $141m for the quarter, capital expenditures of $80m or 3.8% of sales is in line with our full-year 2011 estimate of around 4% of sales.

During the quarter we spent close to $30m on our capacity expansion in emerging markets.

We still anticipate that we will generate at least $0.5b of free cash flow for the full year 2011.

I should also mention that we recently completed our new five-year $1.1b revolving credit facility.

As with all our debt, our revolver is covenant free and we pay 55 basis points margin over Libor when we draw on this credit facility.

If you now turn the page we have our dividend trend.

Since reinstating the dividend in the second quarter of last year we have increased our dividend per share by 43% over the last three quarters.

The dividend declared for the second quarter of $0.43 per share represents an annualized payment to shareholders of approximately $150m.

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

For the first quarter we had a negative effect of $18m versus the same quarter last year.

Looking ahead, we now expect a negative year-over-year effect of nearly $30m in both second and third quarters and approximately a $25m headwind in quarter four.

In total, this is $99m for the full year which is approximately $40m worse than we expected at the beginning of the year.

We now expect the commodity margin headwind to be 1.5% during the second quarter and approximately 1.2% for the full year 2011.

This negative effect is primarily caused by steel and yarn.

Sequentially, the accumulated full year 2011 effect is $73m.

Moving on to the next page, we have summarized our situation from the tragic event in Japan.

As I mentioned earlier, Autoliv has been very fortunate.

None of our employees were injured and our facilities were all operational well before the OEMs resumed production.

As with the rest of the automotive industry, electronic component supply remains our most critical supply issue.

However, our crisis teams are doing a remarkable job to implement contingency plans and to keep the situation under control.

Within Japan most of our customers are currently expected to run the second quarter at approximately 50% of the volumes previously anticipated.

Outside Japan we see isolated light vehicle production reductions, often with short notice.

As illustrated on the next page, we have the second quarter light vehicle production according to IHS.

All major regions are expected to decline except China which is expected to be up 10% year over year.

The global light vehicle production is now expected to decline roughly 6% year over year as opposed to an increase of 7%.

Hence a 13 percentage point swing or 11.5% drop from January 17.

Turning to the next page, we have illustrated the swing in the light vehicle production outlook according to IHS.

Looking specifically at the second quarter, the drop of 2.2m vehicles from January 17 is expected to mostly recover in fourth quarter.

Sequentially, the light vehicle production is expected to decline 9% from the first quarter to 16.9m in the second quarter.

For Autoliv this presents an important cost issue as we will only flex our variable costs to this lower volume in the second quarter.

Therefore, we will not reduce fixed overheads further in order to have enough capacity and be prepared for the expected rebound in the fourth quarter.

The light vehicle production recovery in the fourth quarter is expected to be approximately 4m vehicles or 24% from the second quarter.

Onto the next slide, we have the full year light vehicle production comparison according to IHS.

The global light vehicle production is expected to increase roughly 4% year over year.

This is 1 percentage point lower than IHS expected when we released our full year 2011 guidance on February 1.

Japan is now expected to be down 1.7m vehicles compared to an expected decline of only 300,000 vehicles at the beginning of the year.

On the other hand, other regions are expected to increase more than expected in January.

This has a favorable effect on our organic growth as you can see when we flip to the next page.

We have raised our full-year 2011 organic sales growth indication to 8%, approximately 8% from approximately 6% expected in January.

In addition, we expect a 2% increase from acquisition and a 5% improvement from currencies.

Therefore, for the full year 2011 consolidated sales are expected to increase by approximately 15%.

For the full-year 2011 we still believe we can reach an EBIT margin around 11.5% despite seeing higher raw material costs of $40m since our last earnings call.

For the second quarter our organic sales are expected to be flat year over year, even after the effects of lower light vehicle production.

This is based on our current call-offs and other information from our customers.

Acquisitions and currencies should add less than 1% and less than 9% respectively; therefore, consolidated sales are expected to increase by 9% in the second quarter.

We expect the EBIT margin to be approximately 9% in quarter two.

This is due to nearly $200m less organic sales from the earthquake effect and $40m higher raw material costs than we saw last quarter.

I should emphasize, due to the risk of industry component shortages that there is an exceptionally high uncertainty in the light vehicle production projections which is the basis for our forecast.

Turning to the final page, this concludes the formal presentations of today's call.

We would now like to open it up for questions and I leave the word back to you, Geraldine.

Thank you.

Thank you, sir.

(Operator Instructions).

We will now move to our first question.

This comes from Brett Hoselton from KeyBanc.

Please go ahead.

Good morning, gentlemen, or good afternoon.

Good morning to you, Brett.

A couple of thoughts here.

First, with regards to the situation in Japan, as you look at your forecasts or IHS, can you talk a little bit about the anecdotal commentary you're hearing from your OEM customers versus the IHS forecast.

Are there any discrepancies that you see one versus another; in other words, are some of the Japanese customers maybe a little bit more conservative or concerned or are they potentially more aggressive than IHS?

I would say there are no major differences, Brett, to what we pick up in our communications with our customers, our Japanese customers, and also for the other customers.

They're all basically the same.

That can vary a little bit if you look inside domestic Japan and outside Japan and also from car lines to car lines where our customers will, of course, tend to focus on best-selling vehicles and best-selling platforms.

But overall there is not a major difference here.

We have also to say that we stay in constant contact with our customers.

We are basically on a daily alert with our customers.

And I don't know to what extent TSM has the daily contact with our customers.

So from that take there might be a lag, we can see a lag sometimes in information but otherwise not any major difference.

And as you've seen the Japanese bringing their production back up to these higher levels here, have you seen them focus particularly on higher end models or exports versus vehicles being sold in Japan or anything like that?

In other words, are they favoring a particular mix of vehicles as they've brought production back up?

Well, as I said, I think they are trying to do their utmost to focus on their best-selling platforms, their best-selling vehicles within the frame they can pick and choose.

Sometimes you cannot because of a shortage of components you're stuck, no matter if the car is selling well or not, but otherwise there has been some signs of focusing on best-selling cars.

And then as we look at your guidance, your operating margin guidance into the second quarter, the 9%, you mentioned two primary drivers, lower sales and then higher raw material costs.

Now is there anything else in there that is potentially worth calling out?

In other words, do you have significant premium freight or overtime or anything along those lines that you may be incurring in the second quarter that might be more one-time in nature?

Or would you say that the primary drivers of that lower margin are really the decline in sales and the raw materials?

I can answer the first part of the question and Mats can fill you in to the detail.

If you take the raw material effect and the earthquake effect on second quarter and you take on the operating margin, the earthquake effect corresponds to approximately 2.5% operating margin on the second quarter and the raw material effect is another 0.7% on the operating margin.

I don't know, Mats, if you wanted to factor in any other detail?

No, I think that's principally doing it and that's why it's moving down from the 12.1% we have now down to 9%, it's doing the 3 percentage gap we have.

Very good.

Gentlemen, thank you very much.

Thanks, Brett.

Thank you.

We'll now move to our next question.

This comes from Himanshu Patel from JP Morgan.

Please go ahead.

Hi, good morning, guys, or good afternoon.

Hi, good morning.

A couple of questions back on Japan, Jan.

When you think about the German OEMS, Koreans, US, Japanese OEMs, I'm curious, are you finding one set of carmakers providing you considerably more or less visibility on their production disruption risk prospectively at this stage?

And maybe an add-on to that is I'm just curious, have any of the major global OEMs been willing to issue an all-clear type of message to you guys saying that we really won't have any issues at this stage?

I think there are basically no guarantees from anyone in this difficult situation.

We have been speaking to our European OEMs that some of the Germans are somewhat more confident maybe that they will not halt production, they're running well.

But overall there is no guarantees.

I think everybody are seeing some dependence on the Japanese on and off.

The US, there has been reports of some US plant shutdowns from US automakers due to the Japanese interruption and component shortages.

And, of course, the same in Europe.

But overall there is a clear difference between the JOEMs and the rest.

And then shifting to commodities, obviously your own guidance indicates that we're going to see a fairly big level of increase here on the gross commodity hit.

I'm curious, where are the conversations with OEMs right now regarding commodity cost recoveries?

For a while you've indicated that Autoliv was not in a very strong position to demand recoveries just given where your margins are but obviously spot prices have moved up a lot since then, I'm curious if you think there's more scope at this stage to go back to OEMs and ask for some more recoveries?

There is a $100m big reason compared to last year to go to our OEMs and ask for recovery.

So we are in the midst of negotiation of this one, we have anticipated some raw material compensation here in the numbers but we are in the midst of this negotiation and I can't see the full outcome of it yet today.

And then lastly, the Hella transaction was pretty unique.

Can you just provide us some color on -- when you think of your desires to expand into active safety, what are the other major pockets that you feel like you may still need to do some tie-ups or acquisitions in?

Well, in general, we have said for quite some time we will do acquisitions in active safety.

We are seeking for opportunities.

The Hella transaction here is a superb addition and a very excellent combination of resources at Hella.

Intellectual property and technologies that combined with what we are developing today will be a very, very good and powerful and competitive addition here.

Besides this I cannot comment on any specific activity that we have ongoing but this execution only demonstrates the strategy we had and we are determined to continue to execute on this strategy also in the future.

Great, thank you.

Thanks.

We'll now move to our next question.

This comes from Johan Trocme from Nordea.

Please go ahead.

Hi, Jan.

A quick question regarding the outlook when it comes to mix.

In your planning and in your conversations with your customers do you anticipate any impact for the remainder of this year, potentially in the North American market particularly from high fuel prices?

I'm thinking that there could be an impact on the vehicle mix and obviously a lot of the successes that you've had with the fantastic growth rates you've experienced relate to sales of vehicles with a high safety content which tend to be often larger vehicles, ones which could suffer if consumers get concerned about the fuel bill.

Do you see any major change there or any risks associated with that?

Well, if the gas price will approach $5 or something like that I think there would be people having second thoughts about buying bigger cars as it was some years ago when we saw gas prices between $4 and $5.

I think though we should remember that the new cars being launched and the recent models that we are seeing are also more fuel efficient.

We don't see exactly the same pattern, even if they are taking more gas the bigger cars than the smaller cars, we see a higher fuel efficiency in also bigger cars which might have an impact.

We cannot judge on the gas price, we don't know how this is going to develop.

If it would increase it may have some impact on it but we don't know really today.

Thanks.

Thank you.

Thank you.

We'll now move to our next question.

This comes from Thomas Besson from BofA Merrill Lynch.

Please go ahead.

Hi, Jan, Thomas Besson with Bank of America Merrill Lynch.

Two quick questions please; one on free cash flow, one on raw materials.

On free cash flow, can you update us on the trends for working capital which has picked up a bit?

And on CapEx, you're still relatively under-spending compared with, I think, the range you've given going forward, more 4% to 4.5%, still below 4 and working capital was at its lowest at the end of last year.

Should we expect it to be a source of outflows in '11 as well?

And on the raw materials, you've updated us very transparently over the last few quarters, your latest update is based on -- what kind of visibility do you have?

Do you already have a view on how much you're going to pay for steel or yarn in H2 or it's your best estimate based on current spot prices?

How much visibility do you have on the fact that this is effectively the most accurate likely headwind for the year?

Okay, to talk about the working capital here, we had a working capital in relation to sales coming out for the first quarter of 6.8%.

And we should also think about that we still have around $46m as restructuring reserves reducing the working capital.

So the underlying working capital is more pointing to around 7.4% if you would adjust for that.

And that is a level we see currently.

We still believe that we will have working capital well below our target of 10% also going forward.

I don't see anything more unusual than that.

We also have regarding the CapEx target of 4% in relation to sales $300 to $350m and now coming out of Q1 we are on 3.8%.

So we believe that we are fairly on track with our own target here for 2011.

Okay.

On the raw material side if you look to the second quarter year-over-year effect for second quarter we believe we are going to see almost $30m year-over-year effect as we said earlier in this slides.

Steel part of that will be approximately $10m and yarn part of that a little bit more than $10m.

Yes, Jan, my question was how much visibility do you have because basically your guidance for raw materials has been going up every quarter significantly, it almost doubled every quarter.

So how do you effectively -- how do you base this guidance on?

What do you use?

How much visibility do you have?

We use, of course, our discussions on the market on the yarn prices and the contracts that we have and also the availability and I think with the volumes here the availability has been one of the reasons for the increase in yarn prices.

On the steel side, there have been increases of course overall and there we are looking on to different forecasting institutes and trying to make the best assumption looking ahead of how the steel prices are going to look like.

When we make our forecast we take the existing steel price and use that as the basis.

So the figures that we are seeing here when we say $99m, that is based on today's prices that we see today and not speculating the outlook going forward.

Then we, of course, try to have visibility from the forecasting institute itself.

But the existing prices are the basis for the forecast, both on yarn and both on steel.

Okay.

So it might be conservative if effectively production were to come down or discountings.

Yes, you know as I said the forecasting institute looks like -- it looks today that steel prices may come down later on this year so that can be -- but you never know, there is going to be a lot of steel also may be consumed in the rebuild of Japan.

So (multiple speakers).

Okay.

Thank you very much, it's very clear.

Thank you.

Our next question today comes from Hampus Engellau from Handelsbanken.

Please go ahead.

Thank you very much.

I have some questions regarding the active safety that you kindly provided to us.

If you could discuss more detailed thing around the night vision and also the radar systems development and market share and how much that constitutes of the sales?

And maybe also commenting on the Hella acquisition which was interesting to note, and what potentially you see for lane assistance and etc.

going forward.

Thanks.

If we look to the business that we have ongoing today the bulk of that business is radar and it is night vision business.

And we don't have any major production business in vision yet, and that's why we are now focusing on developing this business because we see it has pretty big potential.

We are looking ahead, when we looking into 2015 we would target a market share of 30%.

That is what we have communicated.

We would like to go to that target.

And we would estimate that the market by that time be around approximately S1.5b for that market.

That is in 2015.

That would be our target.

We will have to come back later on throughout the year and see how the sales is developing.

But I said earlier here that it would be possible for us we think to -- within 2011 to double our sales in active safety within this year from last year.

But the bulk of the business today is radar and it's night vision.

Right.

And in terms of market share currently on the night vision and radar systems where are you?

We estimate our market share today overall in this segment that we have now talked about, night vision, vision and radar to be approximately 20%.

Right.

And a final question in terms of profitability is this business below or above the Group?

This business should have the potential to generate a profitability above corporate average.

If you look to the business today it includes a lot, and I mean a lot, of technology development which we expense over the P&L line, so if you include that it is below the corporate average clearly.

But if you take the business as such, excluding this extraordinary investment that we are now undertaking in building up the business, it has the potential to be above corporate average.

All right, thank you very much.

Thank you.

Philip Watkins from Citi has our next question.

Please go ahead.

Oh, thanks very much for taking my call.

I just wondered if I could ask -- I'm sorry I missed part of the call earlier on, but on pricing pressure how that's developed during Q1 and how you think that might develop over the rest of the year.

And secondly, on Japan, in terms of the profitability of that market compared to other mature markets can you give me -- give us an idea about that?

And then finally on labor costs, I was just wondering how inflation was developing really for low cost countries relative to high cost.

Thanks

If you talk on the pricing pressure during the quarter it has not changed.

We said it was almost 4% at the end of fourth quarter in our earnings call February 1, and it's basically the same.

It's almost 4% also this time.

So there has been no change in the pricing development when it comes to the first quarter.

If we look to profitability in Japan, we have generally said Japan is slightly lower than corporate average.

And it is today also slightly lower than corporate average.

Even if the profitability over very good progress due to very good progress of our team in Japan has picked up over the recent years, couple of years.

As of right now, due to the fall in the production volumes of course, Japan if you look on that isolated in quarter one and quarter two in particular it is of course suffering quite significant.

But that's of course naturally due to the drop in sales.

Looking onto the wage inflation I leave that word to Matthew.

Yes.

Of course, labor inflation is higher in the low-cost countries than in high-cost countries.

But they are starting from a much lower base level, so it does not yet have such a major impact there.

To give you an idea of what we are talking about here I can tell you that 63% our headcount are in low-cost countries.

But in cost terms, those 63% they represent less than 20% of our overall labor cost.

And then you should remember that the white collars there is nor such a major difference in the world between the salary costs.

Thanks.

Is it -- I am hearing inflation running around 10% is that -- does that sound right in low cost countries do you think?

Yes.

It varies from country to country though, you get (multiple speakers) with the same brush here -- in low-cost countries and it sometimes varies also from within the countries.

Is it worse in places like China than other regions.

Yes.

It is.

And developed markets?

There we are talking about maybe 3% or something.

3% yes.

Thank you.

Thank you.

Our next question comes from David Leiker from Robert W Baird.

Please go ahead.

Good morning.

It's Keith Schicker on the line for David.

Hi, good morning.

I have a first question here, with your technology and market leadership position we are just curious why is it such a challenge to get commodity costs back from OEMs?

Well, it has -- that has been a question I have been asking myself also all the time.

But this is a market very affected, we have three main competitors and you have a number of other ones, smaller ones that is competing for this market.

And there is always some guy ready to eat their lunch and to take an order or just compete with you.

And when you ask for raw material compensation it is many times so that it is mixed with normal price negotiations.

It is factored in when you are being awarded business or when you have your price discussions in general.

And that's the way it has been working for us unfortunately.

Okay.

And then if we look at the free cash flow that you're expecting to generate this year and the years ahead, obviously acquisitions on the active safety side, is there any other priorities for the use of cash?

Are you going to have a significant increase in shareholder returns?

Otherwise it looks like cash might build up on the balance sheet.

We are -- the prime strategy for using our strong balance sheet is to grow the business.

And we are looking for acquisitions.

You have been following our company so you have seen over the years how we have spent the cash.

We have built up a stronger balance sheet just because we are aiming for growing the company and using this for acquisitions and technology investment also organically.

We have increased technology investments of $50m on top of all everything else we did last year.

And we made some significant acquisitions also here over the last 12, 18 months.

And of course on top of that we increased also the dividend now to correspond to an annual payout of $150m.

If we for some reason, and I've stated that before, will not believe any more in our acquisition path we believe we have to adjust the capital structure.

But that will then be a discussion for the Board.

And we have not given up our first target here to use the balance sheet for acquisitions, and we are going down that path.

Okay, very good.

And then lastly if we look at the Chinese market there is some indications that the Government is trying to slow down the economy over there.

We see the industry forecast from IHS.

Could you give us some perspective on Autoliv's position in that market, your growth potential relative to the market and maybe your outlook from your experience in China?

If you look to IHS number the latest ones from April they say it is slightly over 10% likely production increase for 2011.

We believe it is going to be at least 10% for 2011, so that's our current outlook.

We are on the path of growing our market share in China, and we look very positive on the development in China.

Any market developing that fast as the Chinese market has the short term ups and downs and there might be adjustments here, also in China hard to say, but overall we have no different opinion that China will for the long haul be a growth market.

Okay.

That's all I had, thank you.

Thank you.

Niclas Hoglund from Swedbank has our next question.

Please go ahead.

Thank you, good afternoon.

A couple of questions if I may.

Firstly, when we look at your new region split it's really interesting and helpful.

Could you give some more flavor on the profitability between these regions?

Well, as you know we don't share profitability per region, and we are not going to do it.

We didn't do it on four regions and we are not going to do it on five regions either, so there is no change.

And we have commented this on -- before that regions and areas where you have high utilization and seeing a strong growth, which means that everybody knows we are pointing to China, would have a stronger profitability.

And China has had and have a stronger profitability, and that also remains.

But apart from that we are not commenting directly on profitability per region.

Okay, other than Japan.

But if you then look at the commodity prices could you please clarify on previous question on visibility any -- your indications here for a short increase about $30m in the second quarter how much is that related to your own contracts and how much is your best guesstimates looking at spot prices?

And the second part of that question it seems like you're short at least on the steel side is dollars, and well, we have seen a slight dip in dollar versus euro lately.

Could you say that some of your European contracts are based more on a euro basis and then that could mitigate the effect on the Group?

You are right, the contracts in Europe are more based on the euro side that's right, and we are trying to source as much as we can in local currency to get naturally hedged.

That's our strategy all over when it comes to material handling and sourcing.

I think it's important to explain that the basis for this forecast is on existing prices.

We have used the existing prices that we have seen currently for the outlook.

And we are following on [MAPS], on other forecasting institute what's happening, and we are looking ahead.

But that is from a perspective of our strategy in negotiating contracts.

If we believe that prices are going to fall we'd like to have as short term contract as possible.

If we believe they are going to increase we want to extend the contract.

But the forecast to avoid any speculation or any type of assumption from one time to another we take the current prices that we have as a basis, and we use that.

And that is what we are seeing now when we are putting this together and seeing the $99m.

Okay, thank you very much.

And just a final question, Millicom yesterday announced that they are going for one listing of their share, and exiting the US market so to speak.

What's your thoughts on your double listing today?

Could you repeat that again?

Sorry, I (multiple speakers).

Well, Millicom, the Swedish so-to-speak telecom operator yesterday announced that they are -- were canceling their US listing of their share, what's your thought on your double listing?

No, that is not in our cards.

Okay, thank you very much.

Thank you.

Thank you.

We'll now move to our next question.

This comes from Anders Trapp from SEB Enskilda.

Please go ahead.

Yes, hi there.

I have a couple of small questions.

First when it comes to your full-year guidance of organic growth of 8%, what is the split between car production growth with your mix, regional mix, and your own sort of outperformance on top of the car production growth.

Is it like 50/50?

Yes.

Well, we are going to have a continued positive vehicle mix throughout the year.

And we expect to continue to outperform for the rest of the year.

But approximately -- or a little bit lower than what we are seeing so far throughout the year.

So, if you look to the global light vehicle production for the full year it is now expected to be up 4%, and we are talking about 8% organically.

Yes, so basically it's twice.

Yes, for the full year.

Yes, for the full year.

But if you look to the second half it might be a slightly lower rate than what we have seen for the first half.

Yes, all right, very good.

Also just try to remember looking at the raw material headwind you are talking the $100m this year.

Is this the highest headwind or the worst headwind you've had on raw materials in the last whatever 10 years?

I think it (multiple speakers)

It is about the highest level we have seen.

If it is the highest or close to I don't know.

Yes, it's close too okay, very good.

And finally also on -- I know you don't always talk about the order intake, etc, but it's been to me at least I think clear that the strong development that you have had in growth in the last couple of years, I guess, is very much reflecting the strong order intake you had in 2008 and '09 where you said you grew the order intake faster than your actual market share was on the sales.

What have been the latest developments on order intake for you guys?

As a consequence of the GM new business hold we have seen a slight decline that we assume should be temporary for the first quarter.

So we are slightly lower than what we normally should be due to the GM new business hold.

But to what extent that would have an impact and if this will have an impact at all over the full year we'll have to come back to.

But it has had an effect on the first quarter.

Also in the new regions like China?

No, no on GM, on GM orders that is -- it's global, but -- it's a global impact but the other regions are not -- or the other OEMs are not affected.

All right, thank you.

Thank you.

Thank you.

Our next question comes from Patrick Nolan from Deutsche Bank.

Please go ahead.

Good morning everyone.

Good morning.

Morning.

I just had a couple of questions first your organic growth continues to surprise to the upside.

Could you maybe give us some color on which is the stronger driver here?

Is it a function of your customer and product mix that you're on right now, or is it more a function of we are seeing increased safety penetration in a number of the emerging markets that driving it higher?

Yes.

I think it's both, it's both it is both actually that is the short answer.

And you think it's pretty equal among both drivers?

We have not made an analysis on that, but it's definitely both.

Yes.

When you think about your incremental margins in the back half of the year as the [initial] starts to ramp up production are they going to be towards the lower end of your historic range, towards the higher end.

I know the amount of production will be coming up pretty quickly.

Is there going to be a lot of overtime cost that's going to weigh on that incremental margin?

How are you thinking about that in the back half?

I think it's very difficult to answer on that one actually to be honest with you; we'll have to see how this plays out.

It depends on the load and it depends on the spread.

If you look to the IHS forecast it's going to be very skewed, it looks very skewed to quarter four, which would imply that we will have to work overtime if that -- to do that.

But to what extent that is going to be spread I think that is very much dependant on the availability of components, it may be coming back even earlier than that.

So it's hard to say -- give you.

We have said 25% to 35% maybe 30% as the midpoint is not a bad idea to count with.

And just lastly, I know you're in the midst of negotiating the raw material recoveries with your customers, but what's the earliest you think you could see that start to flow through your income statement?

The raw material recovery?

Yes.

Or the effect of it?

Yes.

Yes.

Well, let's come back to that.

And I'll be here -- I will report on the following earnings earning, I don't want to jump ahead and make any conclusions out of when we can see inflows on this one.

It depends on discussion that we are currently having with our customers.

Okay, thank you very much.

We'll now move to our next question from Tom Fogarty from Jefferies.

Please go ahead.

Hi, it's actually Peter Nesvold for Tom Fogarty from Jefferies.

Quick question on 2Q production and then going back to the second half of the year, if the Japan supply chain disruptions play out as you sort of guided to here, do you continue to produce at the Autoliv level throughout these, presuming you have sufficient components?

Or do you ramp down your production to meet the global production run rates at the same time as the industry and then re-ramp in the back half of the year?

We are ramping it down when it comes to direct production.

We are not producing for stock and building inventory or doing anything like that.

So we are [working] production according to our call offs and our build schedules.

And what we also said earlier is that we are flexing our direct workforce as much as possible to avoid extra cost, but we are not flexing out here our indirect workforce.

We think it is essential now to prepare for the ramp up that we all see is coming here on the second half of the year.

And it means that we are initiating go and see activities at our supply base.

We are working with our supply base to make sure that the ramp up is possible and that we will be able to supply.

But flex, direct workforce we are taking down as much as we can.

Great, thank you.

Thanks.

Thank you.

We'll now move to our next question from Johan Dahl from Erik Penser Bank.

Please go ahead.

Thank you.

I had a question around the platform mix; we saw your best-selling platforms here relatively steady vehicles, and I presume also that it may be vehicles that OEMs prioritize in terms of production at the moment.

Are you -- how certain are you with regards to a continued out performance of these models that the overall likely production picks up in the second half for models that have not been produced here during the second quarter?

That's my first question.

We are -- as far as we can see and the visibility that we have we believe that it's going to continue.

We -- the signs that we see from our customers and the forecast that we get and also the sign from the market is that there is a focus on more premium vehicles and we believe that is going to continue.

So we believe that we are going to continue to have a positive platform mix throughout the year.

We also believe that we are going to continue to have a positive geographical mix, as we expect Europe and America to be okay.

So has it in any way impacted this --- the Japanese event-- has it anyway impacted your view when you see this potentially shifting, when this positive mix runs out?

Well, I don't think there has been any signs of mixing right now more than what I said before that in Japanese situation they try to skew the production if possible to the more best-selling vehicles, and not anything else around it.

Okay, so you won't be able to do anything about the 2012, and it's still a shot in the dark from your side in terms of platform mix?

I will -- we'll have to come back to that maybe not before the October earnings call actually.

A final question, are you seeing, and in the discussions in the industry are you seeing any sort of long-term dynamic effects on the obvious vulnerability of some supply chains in the automotive industry, and obviously with regards to passenger safety products.

I think there is the general take out of this is to look on the risk effect.

There is always a debate on risk on this industry, and there has been for a while.

And I think the vulnerability of single sourcing, double sourcing and also the risk mitigation of areas where you have this type of risk with earthquakes, etc.

we'll have to review.

And I think the entire industry will have to look through the risk effect out of the Japan tragedy here.

But apart from that I don't see any bigger change.

So it's too early to say anything about Autoliv in this context?

In what way do you mean?

No, I was meaning obviously there's a possibility the market share shifts arising from this event, but maybe it's just too early of a question.

No, that's too early to say, we will have to see how that plays out.

Okay, thank you.

Thank you.

Thank you.

We'll move to our last question for today.

This comes from Philippe Barrier from Societe Generale.

Please go ahead.

Yes, Philippe Barrier Societe Generale.

Just two questions -- good morning first, two questions the first relating to the R&D cost.

Actually the R&D costs now exceed 5%, is it some change now due to development of active safety products, does it mean that R&D cost may go up to 6% like in the past in 2007?

And the second point regards the margin in second half of the year, just based on your guidance of margin around 11.5%; it means that second half of the year margins would be above 5%.

I suppose it takes into account the rebound expected in Japanese production.

But could we see some risk relating to this rebound in more logistic costs or more extra costs as the production facility maybe use full rate and it could lead to extra cost in the second half of the year as the production would be accelerated a lot.

If we start with R&D costs temporarily for the second quarter the R&D costs may go above 6% and that is due to the lower sales, and the sales drop.

But for the long term we should calculate between 5.5% and 6%, it should not go above 6%.

We've said that for some time, and we have all included the extra efforts we are doing in under -- in active safety.

When it comes to the risk and profitability for second half and 12% you can do the reverse engineering of our guidance from first half to second half.

The risk, I think you have some risk.

As we have said there is a significant ramp up if you follow the IHS.

Their supply base, are they ready, are the OEMs ready, component shortages; there are risks always in this.

But there are also opportunities.

I think we have seen so far after the quake that their immediate situation only a couple of weeks after that earthquake have been better and have been improved.

It's remarkable how the industry, OEMs and suppliers together, can solve problems.

And I wouldn't be surprised if we could see an opportunity where we can come back also in a smoother and earlier fashion than what we today see, due to creativity, due to problem solving, etc.

So there are both risks and there are always also opportunities on this one.

And we have done -- we have taken the sum out of this and this is the best information we have for the time being.

Okay, thank you very much.

Thank you.

As there are no further questions in the queue I would like to turn the call back over to Mr.

Jan Carlson for any additional or closing remarks.

Please go ahead, sir.

Thank you very much.

I would like to thank everyone for their attention and for their continued interest in our company and in the interesting questions today.

We look forward to speak to all of you again during our second quarter earnings call on Thursday July 21, 2011.

Thank you very much all of you, and I leave the word to you, Geraldine, thank you all of you.

Thank you, sir.

That will conclude today's conference call.

Thank you for your participation you can now disconnect.