Autoliv Inc (ALV) 2014 Q1 法說會逐字稿

Good day, and welcome to the Q1 2014 Autoliv earnings conference call.

Today's conference is being recorded.

And at this time, I'd like to turn the call over to your host today, Mr. Jan Carlson.

Please go ahead, sir.

Thank you, Sarah.

Welcome, everyone, to our first quarter 2014 earnings presentation.

Here in Stockholm, we have our CFO, Mats Wallin; our VP of Corporate Communications, Thomas Jonsson and myself, Jan Carlson, President and CEO.

During today's earnings call, I will provide a brief overview of our Q1 and full year 2013 performance, along with the current outlook for our business, while our CFO will provide some commentary around the financial results.

Then at the conclusion of our presentation, we will remain available to respond to your questions.

And as usual, the slide deck is available through a link on the home 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 and includes the Q&A that follows.

During the presentation, we will reference some non-US GAAP measures and the reconciliations to US GAAP are disclosed in our quarterly press release and the 10-Q that will be filed with SEC.

On the next slide are our first quarter highlights.

Record first quarter sales drove another quarter of solid financial performance where we achieved close to 8% organic sales growth and an adjusted operating margin of 8.6%.

Our operating margin and sales were both better than guidance, mainly due to stronger than expected production in Western Europe and South Korea.

Adjusted earnings per share of $1.43 increased year-over-year mainly due to our sales growth, which resulted in increased profit performance.

Our exceptional operating cash flow of $185 million were the best ever for a first quarter while we continue to deliver strong returns on return on capital employed return on equity, 23% and 13% respectively.

During the quarter, we continued to adjust our capital structure by returning approximately $143 million to shareholders by repurchasing around 1 million shares and paying a record dividend of $0.52 per share.

In line with achieving our long-term leverage ratio target of 1 times, we raised $1.25 billion through a private debt offering, which was concluded on April 23, 2014.

And lastly, we receive two Pace Awards for most innovative technology and best OEM corporation.

I would like to take this opportunity to sincerely thank the entire Autoliv team for their continued focus and commitment to quality and our customers while creating value for our shareholders.

Turning the page, we have some of the key models that contributed to our strong organic sales growth.

In the first quarter, these platforms represented close to 70% of organic sales growth and 9% of our total sales.

This strong model mix has enabled our Company to continue to outperform the light vehicle production in all our major regions during the quarter.

Our active safety growth of 68% was the fourth consecutive quarter of more than 50% growth.

Looking now upon our overall market position on the next page, we have our delivery figures for the first quarter this year.

Overall we are pleased with our strong volume growth in virtually all product areas and therefore continue to enhance our overall market position.

The 1% decline in seatbelts is a temporary changeover effect as we phase out old programs now and ramp up new programs later this year.

It is encouraging to see continued high growth rates with newer products like knee airbags, active seatbelts and active safety, which increased the overall safety content.

I will now turn it over to our CFO, Mats Wallin, who will comment on the financial results for the first quarter.

Please go ahead, Mats.

Thank you, Jan.

Moving now to the next slide, we have our key figures for the first quarter.

Our sales of $2.3 billion were the best first quarter ever due to our strong growth in all regions, especially in Japan, China and active safety.

These three areas combined accounted for more than 70% of our year-over-year organic sales growth for the quarter.

This sales performance drove our second best gross profit for the first quarter and our better than expected operating margin results.

Looking at our margin development on the next page.

Our adjusted operating profit increased 6% year-over-year.

The 8.6% adjusted operating margin was 60 basis points better than our guidance and 20 bps lower than the same period last year.

As shown by the chart on the left, the improvement versus guidance was mostly due to our strong execution on higher organic sales growth.

When comparing to the prior year, as illustrated by the chart to the right, the benefit from organic sales and commodity costs were 150 bps and 40 bps respectively.

These favorable items were more than offset by combined footprint effects of 140 bps.

Adverse currencies were 10 bps and higher RD&E net of 60 bps, which is mostly due to the higher engineering costs in active sales bps.

As we have noted on the previous earnings calls, the combined footprint effect mainly includes our build-up for growth, including vertical integration and operating inefficiencies in Brazil steering wheels and Europe.

The still very low production levels in Western European continues to weigh on our margins, which we are addressing through our capacity alignment, as highlighted on the next slide, where during Q1 the cash outlay was $5 million and we expensed $5 million for future activity.

For the full-year 2014, our estimate for the capacity alignment costs and cash outlay remain unchanged.

Both are expected to be in the range of $20 million to $40 million.

In full-year 2014 we now expect to realize an additional $9 million in savings throughout the year, which reflects some delays.

This is in addition to the $12 million in savings we had in 2013.

We expect to see step-up in savings in 2015 and further savings in 2016-2017 as these activities are implemented.

Looking now onto our cash flow on the next slide.

Our exceptional operating cash flow of $185 million was our best ever for a first quarter.

Thanks to this strong start to the year, we are well on our way to achieve our full-year operating cash flow target of at least $700 million.

We now expect RD&A to be 30 bps higher than 2013 levels and CapEx net to be in the range of 4.5% to 5% of sales for full-year 2014.

During the quarter we returned $143 million to our shareholders through dividends and repurchases.

Looking now on our debt structure, as illustrated on the next slide.

During the quarter, we successfully priced a private debt offering in the US for $1.25 billion.

Subsequently, on April 23, 2014, the transaction funding was completed.

This debt raise is in line with the gross debt level that would be required to reach our long-term leverage ratio target of 1 time.

As illustrated on the left-hand chart, the maturity tranches (inaudible) from 5 to [15] years and carry an average interest rate of 3.8%.

But the maturity level does not exceed $300 million in any one year.

We are very pleased with the result of this offering and believe this debt level to provide the required flexibility to execute on our financial priorities for the medium and long term.

As we have communicated in the past, we remain focused on growth and increasing shareholder value.

I will now turn it back to our CEO for further comments.

Thank you, Mats.

Moving on to the next page.

We are proud to have been recognized with two Pace Awards for innovation.

Autoliv, together with Volvo Car, was recognized with the innovation partnership award for the pedestrian protection airbag on the Volvo V40 and XD40.

The aim of this new airbag is to decrease the impact on the pedestrian when coming in contact with the vehicle.

In addition, our new green inflator technology have received an award for safety innovation.

This inflator is lighter, less costly and more environmentally friendly since the only residual product is water.

There are further examples that our investments in RD&E are paying off and are supporting our underlying strategies for growth.

Shifting now from innovation to quality on the next page.

Our industry continues to see a heightened focus on quality.

This confirms our overall strategic mission of zero defects and executional focus on quality is the only way to go.

Q5 is about shaping an Autoliv culture, leading to zero defect and providing the best value for all our customers in all aspects of our business.

That is customers, suppliers, products, growth and behavior.

Our zero defect policy focuses on four primary areas, which include designing robust products up front in the product development process, purchasing flawless components from our suppliers, manufacture flawless products within our production system and lastly, verify conformity of product through mistake proofing.

With this focus, we have reduced our non-conforming events with our customers more than 40% since 2010.

On to the next page, we continue to expect another solid year of light vehicle production growth in 2014.

Within Asia, we foresee solid demand in China continuing in the upper single-digit, while rest of Asia is expected to see moderate growth.

After a fast start of the year in Japan, partly due to the increase in consumption tax in April, light vehicle production is expected to decline by around 10% for the remainder of the year.

In Americas, the growth rate is slowing while the US SAAR continues to track in around $16 million range with fairly healthy inventories.

The economic conditions in South America are deteriorating as the light vehicle production has been revised down to a double-digit year-over-year decline.

Vehicle registrations in the EU27 are improving slightly on a last 12-month basis, however are still at low levels.

This in combination with strong export demand, mainly due to premium brands, is positively affecting inventory.

However, consistent with our view that there are no real signs of an economic recovery or cyclical rebound, the light vehicle production growth in Europe is expected to be slow.

Therefore, the underlying trend continues for 2014 where the majority of the light vehicle production growth is coming from the growth market, while the triad remained relatively flat.

Turning the page, we have our guidance for the second quarter.

And based on our customer call offs, organic sales are expected to increase approximately 5% year-over-year, mainly due to continued strong growth in China and active safety.

Sequentially, organic sales are expected to increase roughly 2%, mainly due to China and North America.

In the second quarter we expect to achieve an adjusted operating margin of around 9%.

Year-over-year, higher costs for RD&E net and the ramp-up for capacity for growth and vertical integration, are expected to essentially offset the benefit from organic sales, commodities and currency.

Sequentially, the adjusted operating margin improvement is mainly due to the currencies.

On to the next page, we have our outlook, which excludes costs for capacity alignment and antitrust investigation and assumes mid-April exchange rates prevailing.

Based on these exchange rates, the effect on sales is expected to be slightly favorable by approximately 1% for both second quarter and full-year 2014.

Based on our stronger than expected Q1 sales, our full-year organic sales growth indication is now more than 5%.

However, our operating margin remains unchanged due to increasing our engineering costs in active safety.

We estimate RD&E net to be less than 6% of sales and commodities to be a slight tailwind of approximately $20 million in full-year 2014.

Excluding any discrete and non-recurring tax items, we now expect an underlying tax rate of approximately 29% and target an operating cash flow of at least $700 million in 2014.

Regarding our capital structure, we have 10.6 million shares remaining on our repurchasing program and as communicated earlier, we aim to reach 0.5 times leverage ratio by the end of this year.

To summarize, we continue to see 2014 as a transition year where we are addressing margin challenges and adjusting our footprint to meet evolving market trends while implementing our strategies towards our long-term target.

We believe that through a combination of these efforts and our continued quality focus, we will be able to achieve a margin improvement beyond 2014 as we position our Company to capitalize on long-term industry trends.

Turning the page, this concludes the formal comments of today's earnings call.

We would now like to open it up for questions.

And with that, I leave the word back to you, Sarah.

Thank you.

(Operator instructions) Rod Lache, Deutsche Bank.

It's actually Pat Nolan on for Rod.

A couple of questions, Jan.

First, I just wanted to discuss the 0.5 times leverage for the year-end.

You repurchased 94 million of stock during the quarter.

To get to that 0.5 times leverage, you need to either significantly take up the buyback pace in the remaining three quarters or potentially you may be seeing some type of acquisition as another way to get you there.

Can you just discuss the buyback pace in Q1 and how you expect it to play out for the balance of the year?

The buyback, if you compared the buyback program in Q1 compared to Q4, you can see that it's lower.

And the reason for that is fewer days.

We had a late report date in February, so we had to report coming in at end of January and that preventing us to start the buyback program in the month of January.

Then month of February is shorter, so we had fewer days for buyback.

But that gave a natural lower pace on the buyback program in February.

When you talk about the 0.5 leverage ratio as we said here in the presentation, we have an aim to reach 0.5 and as you know, we are doing this through several ways.

Acquisitions is one of it, buybacks or returning money to shareholders are another one.

And the strategy for us is to build the Company for the future and to grow the Company.

And as you know, that is also the reason why we build up the strong buyback program.

So we will see how that will evolve throughout the year.

Got it.

And can I ask a follow-up on your comments about margins improving post-2014?

How does that -- I mean previously you've said normalized margins for the Company are not that different from where you're guiding to for 2014.

Has your long-term expectations for the margins of the Company changed at all?

We have not changed our long-term margin range over the business cycle.

The long-term business cycle target has been 8% to 9%.

We have said that in better times we will do above that and probably also being forced to see quarters below that in times not so good.

We have communicated already last quarter and we repeated that now that beyond 2014 we could see margin improving because of the issues that we have should slow down and improve throughout the year.

Effects of vertical integrations will start kicking in in 2015 and beyond and this should give us an opportunity to improve margins beyond 2014.

Otherwise, the communicated margin range, et cetera, is unchanged.

Brian Johnson, Barclays.

It's actually Steven Hempel on for Brian Johnson.

I just wanted to turn to China real quick, kind of get your view on the China content story.

I mean right now we have suppliers that are benefiting from domestic OEMs up-contenting to compete with the foreign OEMs.

And while on the other hand you have -- there's a market view that the low-end A&B segment vehicle growth will cut into the CPV and margins.

I guess the question to you is just in terms of your view on current up-contenting persisting over the next few years.

Do you see that occurring?

And if so, to what extent do you believe that gains of up-contenting by the domestics will be offset by growth in A&B segment vehicles combined with potential market share losses by domestic OEMs moving forward?

We don't see it quite like what you said even though what you've described is right if you look upon from an average perspective.

We see an increase in content coming through in Chinese market, even in the lower specified cars, as well as mid specified, and of course in the upper segment.

It's just so that the inflow of lower specified cars are so high during growth times that it offsets the higher -- the impact of the higher specified vehicles.

So that overall, the market is growing significantly in China, but the average content per vehicle is relatively flat.

And we, looking ahead, we don't see a significant change on the average content per vehicle over time due to the fact that you have the influx of lower specified cars.

Right, that was very helpful.

And then in terms of active safety growth for the remainder of the year, I read the comment in terms of given the tough comps here in the back-half of the year we might see some moderation in active safety revenue growth.

But I also understand that you launched some new brake controller business in 1Q and I'm just wondering how we can kind of put that to tougher comps combined with a new active safety brake controller business that's launching in 1Q and I perceive the rest of the year.

We are -- you are very correct, we are launching the first program right at this stage and we will hope we will be able to comment more on that in the next earnings call.

We are also seeing to launch our second program here in first quarter 2015 in this area.

We commented this some time ago that we have to come back while we are coming a little bit further into the business of brake control, what target we aim for when it comes to market share and the impact of it.

The change of the electronic architecture by integrating passive electronics together with active electronics is relatively new to most of the OEMs.

So we will see the adoption rate, how that will evolve and based on that, we will come back and give you some more color on our position.

And just a follow-up on that.

In terms of the engineering spend, kind of the parity, was this something you were expecting roughly three, four months ago or is this incremental investment strategy to your expansion looking forward?

We commented last quarter that we would spend $40 million and more in engineering 2014 compared to 2013.

We have upped that figure now to $50 million.

All of that $10 million increase is going into active safety.

And that is a combination, of course, in being prepared for the future, also taking care of the continued strong growth that we see in the active safety.

Brett Hoselton, KeyBanc.

Two questions here.

First, how much capital do you estimate that you're going to need to deploy to reach your 0.5 leverage ratio by year-end 2014?

Right.

If you are looking to the balance sheet of today and how we measure it, it will take -- the gap is around $800 million.

And the second question I had for you was can you talk about the acquisition environment?

I know you're obviously looking for active safety opportunities, but what's the deal flow look like?

Are there any deals out there?

And then secondly, kind of what do valuations look like?

There are deals out there to make and there are a flow of deals too.

What is important to us is that we make the right deal.

We have a very strong balance sheet and we have the opportunity to execute.

And we are picky when it comes to deal execution because it needs to be the right deal fitting into our strategy, filling the gap that we are looking for in terms of market position and building up resources, et cetera.

So there are deals, but the deals that we are looking for aren't available.

And that has been the case for some time and it's still the case.

Having said all of that, we are in discussions and we have been in discussions with the potential sellers of assets, et cetera.

And that's something that is happening all the time.

But nothing today that I can comment on.

Nothing today that is -- I'm able to give you more color on.

If you were to put a probability on it, what would you say the likelihood of completing a meaningful acquisition by the end of the year might be?

Well, these deals are very digital.

I wouldn't dare to give any probability at a call like this today.

People may change their mind of strategies and then suddenly sell and it can go relatively fast.

I think we have talked about that before, people changing their mind and then the deals will come out for details.

So I stand away from giving any probability on it.

Ryan Brinkman, JPMorgan.

This is (inaudible) for Ryan Brinkman.

The first thing that I wanted to touch upon is when you issued your guidance for net debt to capital of 1 time back at your Investor Day you were talking about three buckets, driving acquisitions, share buyback and (inaudible) that you would look to deploy capital in.

Now, once you've done this debt transaction today, is there more clarity about how much you intend to allocate capital to between the three buckets here?

No, we haven't given any clarity -- we have not given any indication of how much will go into each bucket.

We said we will keep strong investment grade.

We said we will be able to look to bridge difficult periods like we saw in 2008-2009 timeframes.

We also, as you are right, talked about share returns, potential finds and also acquisitions.

But we haven't made any sort of one pile for this then another pile for this or for that.

I have no information to give you.

And secondly on Europe, I just wanted to ask for your views on that.

I mean we've been hearing from a few suppliers that there's potentially some upside to IHS production forecasts in that region.

Is that sort of what you're seeing as well or what your judgment on that region is?

Or any direction or commentary on that?

I agree that we also see some positive signs in Europe and we can see the trend of several quarters and the years of decline has been broken and it's flattening out and even bending upwards.

So I agree to that positive approach.

We have to recall though that Europe is still on a very, very low level.

Month of March in registrations were up over 10%, but still that month was the second worse since it was started measuring.

So it's still very -- coming from very low levels, but we have to be positive and look on the upturn.

So I agree to that.

Great.

And quickly, if I could just touch on the year-over-year walk for the second quarter.

I see that you're guiding to roughly $120 million in incremental revenues year-on-year for the second quarter.

If I can word that at roughly like 30% incremental that you always sort of execute on, there's probably another $20 million of headwinds that you're expecting in the next quarter.

Can you sort of help us with what those headwinds are?

Yes, I think there are two areas where you see cost increase.

The first area is in our footprint, as you have seen also in the first quarter.

You will also see that coming in the second quarter with basically the same size as we have seen in the first quarter, around 140 basis points.

And this mainly to support the growth of the build-up growth areas, but also the vertical integration.

So that's one area.

The other area is in the RD&E area where you also could see in the first quarter year-over-year that there is an increase.

You will see that also to come in the second quarter year-over-year that we need to spend more in RD&E and that will do around another 30 basis points approximate.

Hampus Engellau, Handelsbanken.

I have three questions.

First question is on the capacity alignment program in Europe.

The costs you saw in first quarter was kind of the low side, around $4 million installed, and I was wondering if what's -- for the big range for this year, what will decide if we'll be at the 40 level or the 20 level?

That's my first question.

Second question is R&D spending in active safety and I would be interested to know more where you're paying your most focuses in active safety.

Last is more on the demand situation, how you see your Russia exposure and the risk in Russia going forward for you guys.

We'll start with the capacity alignment and the cost of the range.

It's all depending on negotiations and it's all depending on how discussions we have with different stakeholders and this will evolve.

And you know how it is if you do something, it's sometimes digital and it then can take the entire range actually.

So based on that aspect, not to be able to go into any details of what it could be and where it could be either, as we are in discussions, you probably understand that if you're doing something somewhere it may cost some money.

And that's why the big range.

If you talk to the RD&E and the focus on spend, it is to focus on where we are.

We are active, as you know, in the radar area, we are active in vision systems and we are active in night vision systems.

We are also looking into the next and third generation of active safety autonomous drive.

And we are aiming to take up activities here and to look into these areas and be also leading supplier in this area looking ahead.

So that's the area of focus and that's the area of where spend is going.

Details in which area between the radar emission, I don't we are discussing here.

When it comes to Russia, we have one plant in Tolyatti.

This is a smaller plant providing product for the Russian market.

We have seen so far no disturbance in that plant.

We are monitoring this of course so on a daily basis more or less, sometimes even closer due to the tense situation in Russia in general.

We also have three suppliers in Ukraine.

Three suppliers that we have been monitoring taking supply for.

We are starting to build stock from these suppliers, we are building stock from these suppliers to be able to handle a cutoff totally from these suppliers.

Now these suppliers are in the western part of Ukraine, so there has been relatively little disturbance compared to what's happening the eastern part.

Can I do just a follow-up on the active safety side?

What proportion are you, if you would split it up in terms of R&D in hardware versus R&D in software?

Is there a split that you could maybe share with us?

The lion part is going into software development.

It's a lot of software activities in our parts.

But active safety is also a question of system integration.

To be a leading supplier you need to be able to handle a system aspect of integrating your part into the bumper, into different positions of the vehicle and thereby also testing activities, system understanding, it's requiring effort and requiring resources.

If you pick and choose there, it's probably more on the hardware side rather than on the software side.

Anders Trapp, SEB.

I have a question really on if you have been influenced by or will be influenced by and how you're going to handle the new policy from OEMs about recalls?

Judging from the last few months' development, it looks like you're going to see in the industry much more recalls than what has been the case in the past.

I notice that, for instance, Ford is now suffering from increased warranty costs, for instance.

I suspect this will have an impact on the suppliers as well eventually and even though you haven't had any part of the recall so far, you might in future.

So how do you handle this situation really and how do you see it as a threat or an opportunity going forward?

Well, I guess as you heard in the presentation, you saw in the presentation we have been focusing a lot on quality long before this was more on the radar screens from OEMs.

And we initiated our activities an initiative we call Q5 of quality and many dimensions, including behavior, growth, products, suppliers, et cetera.

And focus is on quality is absolutely essential for us in the Company.

We are making life saving products and our products never get a second chance.

So for us, we believe we are very well positioned when it comes to meeting higher quality demand and higher quality requirements from customers.

We see this as well, but we are also seeing that our value we can bring to customers in terms of the quality product and the quality system we have in place could then also give customers a higher level of comfort.

One example of actually what's happening.

If you look to, as you mentioned, the recalls, out of the recalls in 2013 and 2014 there were NHTSA decided recalls of roughly 7 million cars in 2013.

And so far this year, in quarter one, there has been 6 million cars announced by NHTSA for recalls.

Autoliv has only been involved in 25,000 of the vehicles during this timeframe.

So that gives kind of a flavor of the level of involvement that we are seeing here.

So it could be that top quality -- if you are top quality supplier you could actually gain share longer term from this changed recall behavior.

Is that what you're (multiple speakers).

Well, it's kind of way of saying it.

I wouldn't say it like that.

I would say that customer will definitely look long term to suppliers that are providing the quality they need to have.

And we have very good statistics, we have very good data to show and to prove our high quality records in our production with our product.

That's very good.

But do you see any risk that you as a Company Autoliv will need to up your own warranty reserves basically that you always have based on (multiple speakers)?

We have no data today that shows that we should up our warranty reserve or nothing like that.

So nothing on that today.

Richard Hilgert, Morningstar.

Couple of questions.

First one, the growth rate on the safety -- active safety products.

And given what the Company has said in the past about its active safety revenues and its market share in the active safety market, it looks to me like perhaps the total market for active safety this year might approach $2 billion.

Does that sound about right?

Yes, that sounds about ballpark right.

And the increase in legislation and the increase in NCAP, this drives the market additionally.

It looked like 2016, in previous comments that the Company's made, you're looking for the market to be somewhere in the $3 billion to $4 billion area, but that includes active safety, not just from the standpoint of consumer demand, but also the additional legislation that's going to come out by that time?

Well, I guess that -- I don't have on the top of my head all the assumptions behind it.

But if you look between the market on 2013 and 2016, the market in 2016 would, according to what we have estimated, would grow to around $2.8 billion of size.

And that is including what we are aware of that the Euro NCAP demand and potential legislation that is out there, those of -- to the best of our knowledge, the forecast on consumer demand.

Once the technologies really start to hit their run rate, later this decade, I'm assuming that we'll need to have another generation or two of vehicle launches before we really see it get to its ultimate peak and kind of run rate really before we even take that next step -- logical step in somewhat autonomous vehicle technology.

Where does the market go from there?

Do you have any idea of what you're looking at for the total market?

No, unfortunately I have no color to give you on that one.

We believe that active safety and technology in general in this area will grow fast.

And it will continue to grow fast.

And if you look to the rationale behind that, it's much better to prevent the accident from happening rather than protecting the occupant when the accident has happened.

And if you can also use the equipment for more comfort feature in autonomous drive and assisting the driver, we believe this will -- this trend will continue and it will continue to grow very fast.

But I have no available data to give you at this stage.

I'm sorry.

Then a final question.

The guidance for the 8% margin level.

As we see this market develop, and given it's a combination of algorithms and electronics, and expertise in the dynamics of the vehicle in a crash, all of which you possess, does it mean that 2016 and beyond as more of this technology penetrates more vehicles, we should expect margins to slightly expand because more of this technology will be a greater concentration in your revenue?

Well, let us come back to that and talk about that later.

We have said that 8% to 9% by 2016 is our target where we should be able to do the corporate average longer-term margin range also in active safety.

Today the margin in active safety, as you are aware, as we have said before, is a drag on our margin.

It all depends too also about how much you invest in engineering and in growth.

And we are determined to grow the Company and continue to grow the Company.

And we will have to see later on what this means and how we can use economy of scale and how fast we can keep the pace in the future.

And therefore I stay out of any further color.

We have communicated to two target tier $500 million by 2015 in sales and also the margin range of 8% to 9% in 2016.

(Operator instructions) Andreas Brock, Nordea.

So two questions if I may and other questions have been asked, but two more.

Just on active safety there, do you think that you will be, for the long term success of Autoliv, do you need to team up with someone?

Either like an IT company or an IT infrastructure company to be able to, for long-term success?

And then secondly, on Europe there.

When we look at registrations in Europe, they were running at about 14 million for about a decade, 1997 to 2007.

We're now down to 11 million, so there is conception the 30% possible increase over time, whether that's a three or five year (inaudible).

If that would happen, how meaningful would that be to you for your European sales given that some of your sales probably goes to export, et cetera.

But just to focus on Europe per se, if we actually moved from 11 million to 14 million, how meaningful would that be for your European sales?

To the first question, teaming up with somebody.

Depends on what we aim to do.

I think if you go to a full-fledged autonomous drive system integrator, I think there are very few companies being able to do that alone.

So if we target to do that I think we need partnerships and we need to do that together with other companies too.

And that is involving a lot of different kind of technologies from car to car communication, car to roadside, map databases, et cetera.

So most probably in such case we will need to do that.

I think being successful, I think we are already showing a great success in active safety through our growth, taking market shares and also within very short timeframe relatively targeting our average corporate margin range in 2016.

So that points to the success we have in active safety.

And I think acquisitions will strengthen these positions further, but I think also going forward with our organic sales -- our organic investments generating the organic sales growth, we are already successful as we go and stand.

Acquisitions and partnership will take this even further.

That's my comment to the first one.

On the second question, the car production going back to the 14 million level.

Eventually it might come there, the question is how long time it will take.

The question is also how it will look into the future where cars will be produced and how it will go from being built in eastern part and exported into western part, et cetera.

It will definitely be meaningful if the volumes would come back and it would improve from the 11 million range to 14 million range it would have positive effect on us clearly.

Light vehicle production is the most important factor for our success in the Company and we are seeing that and we saw that in particular in 2008-2009 timeframe.

So that would have a positive meaning for it.

I have no more quality of figures and data to give you what such a gap would give you in terms of margin improvement, et cetera, unfortunately at this point.

Well, that's helped us to estimate it, so we'll get back to doing that.

But thank you very much.

And that will conclude today's Q&A session.

I would now like to turn the call back over to you, Mr. Carlson, for any additional or closing remarks.

Thank you.

Thank you, Sarah.

I'd like to thank everyone for your attention and continued interest in Autoliv.

We look forward to speaking with you again during our second quarter 2014 earnings call on Friday, July 18th.

Good-bye for now and thank you very much all of you.

Thank you, sir.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.