Autoliv Inc (ALV) 2015 Q4 法說會逐字稿

Good day and welcome to the Q4 2015 Autoliv earnings conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Thomas Jonsson.

Please go ahead.

Thank you and welcome, everyone, to our fourth-quarter 2015 earnings presentation.

Here in Stockholm we have our Chairman, President, and CEO, Jan Carlson; our Chief Financial Officer, Mats Wallin; and myself, Thomas Jonsson, Group Vice President of Corporate Communications.

During today's earnings call, our CEO will provide a brief overview of our full-year 2015 performance and our full-year 2016 outlook as well as an update on general business conditions, while our CFO will provide further commentary around the financial results and outlook.

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 homepage of our corporate website.

So we turn the page and here we have the Safe Harbor statement, which is an integrated part of this presentation and includes the question-and-answer session 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-K that will be filed with the SEC.

I will now turn the word over to our CEO, Jan Carlson.

Jan, please.

Thank you, Thomas.

Welcome, everyone, again to this earnings call.

I will start off with a recap of 2015 and if we turn the page; we are placed our strong finish to last year, exceeding our organic sales growth and margin expectations for the fourth quarter and full year 2015.

Our full-year 2015 organic sales growth of 8%, of which active safety grew 31%, was more than 5 times higher than the global light vehicle production growth rate.

In line with our estimation at the beginning of 2015, we improved our adjusted operating margin 60 basis points from last year to 9.7%.

That is despite increasing RD&E with the hiring of more than 300 engineers in electronics.

We have further expanded our active safety capabilities with the Volvo IP license agreement, the MACOM automotive business acquisition, and the brake control joint venture with Nissin Kogyo, which is expected to close towards the end of first quarter 2016.

Our operating cash flow of approximately $750 million was our third-best ever and we returned roughly $300 million to our shareholders through record dividends and share repurchase.

This, with other actions, resulted in a leverage ratio of 0.4 times.

Our operating cash flow or return on capital employed of 24% and our return on equity of 17% continued to run above our historical levels.

And, lastly, the long-term transformation of our company continues to evolve as we expand in the growth markets and launch new technologies in passive and active safety, while adjusting our global footprint with the market, all for the long term.

With all of this in mind, I would like to express my sincere thanks to the entire Autoliv team for delivering another year of quality and operational excellence, along with our solid financial performance as we execute towards our end-of-decade target.

Turning to 2016 on the next page, during October 2015 we outlined our end-of-decade targets at our capital market day.

On this journey we see 2016 as a year with many challenges to balance the near term with the long term, despite an expected strong start of 2016.

Our early indications for full year 2016 is an organic sales growth of around 5%, which is roughly 2 percentage points better than global light vehicle production, even though half of the estimated inflator business we expected for 2016 will now be pushed into 2017.

In addition, we now see the potential for additional delivery volumes beyond the 20 million units, but most likely until 2017 and perhaps also into 2018.

Our early indication for full year 2016 is for an adjusted operating margin of more than 9% despite increased engineering efforts in both passive and active safety.

We estimate our RD&E cost, net, to be in the high end of the range of 6% to 6.5%.

During this volatile and mixed macro environment we believe it is more important than ever to maintain a strong balance sheet.

Not only to navigate through uncertainties, but also to be able to capitalize further on strategic opportunities for growth as we have done in the past.

Our indication for full-year 2016 is to generate around $0.8 billion of operating cash flow, excluding antitrust matters, with a leverage ratio within our long-term range of 0.5 to 1.5.

Lastly, during 2016 we will continue our company transformation towards our end-of-decade target.

This will include further implementation of the capacity alignment program while investing for growth.

In addition to the RD&E net we expect depreciation and amortization to increase 60 basis points and CapEx to be near the high end of our long-term range of 4% to 5%.

Now looking on our active safety business on the next page.

During the fourth quarter we are pleased to have launched our advanced suite of active safety products which debuted on the new Mercedes E-Class at the Detroit Auto Show.

These products include software and hardware for both mono and stereo vision, 77 gigahertz radar, and the industry's first ADAS ECU, which in this case is the host for the customer-developed sensor fusion algorithms.

We are equally proud to be a major active and passive supplier on the Mercedes E-Class, the world's first serial production vehicle to be awarded an autonomous drive test license in the state of Nevada.

This is a strong confirmation and testament that our customers believe we have an industry-leading technology for real-life safety.

Also, as some of you have experienced on our recent capital market day, we showcase our latest active safety technologies at the Consumer Electronics Show in Las Vegas where close to 300 customers, investors, and media participated in our real-life safety demonstrations.

And, lastly, we achieved another milestone for our active safety business in 2015 as we achieved $611 million in sales, over $100 million more than our target of $500 million that was set back in 2012.

Now looking on China on the next page, during the fourth quarter we have seen a strong rebound in China, likely due to the incentives announced during late quarter three and low interest rates.

Although inventory seems to be at an acceptable level, we believe the light vehicle production in China could remain volatile for some time as the market normalizes to an underlying demand.

Our sales in China achieved a new record in full year 2015 due to a strong fourth quarter, despite the 2% currency headwinds and the market share shift within our customer mix.

Looking ahead to full-year 2016 in China, we expect strong organic sales growth with several Chinese and multiple global OEMs.

Even with all of these uncertainties, we remain confident in the long-term growth perspectives in China as we continue to increase our sales and engineering capabilities, both in passive and active safety.

Now looking on the macro conditions on the next page, the most recent figures from IHS for full year 2016 indicate that global light vehicle production will be growing year over year by around 3%.

During the first quarter, the light vehicle production in China is expected to continue its rebound to grow 5% year over year, with Japan expected to remain relatively flat and rest of Asia is expected to decline by roughly 1%.

In the Americas, the outlook remains mixed.

In North America the light vehicle production is expected to grow approximately 6% in first quarter, driven by a strong US SAAR while inventories remained relatively low at around 61 days.

In South America, the weak economic conditions continue while the light vehicle production is now expected to decline by almost 22% in first quarter.

In Europe the overall light vehicle production is improving and is now expected to increase roughly 2% year over year in first quarter.

However, the mix is different between Eastern Europe and Western Europe, where Eastern Europe is expected to decline by 3% while Western Europe is expected to increase by 4%.

To conclude the full-year 2016 light vehicle production outlook according to IHS, there should be an underlying growth year over year of approximately 3%.

This assumes a mid single-digit growth in China, along with a strong North America and continued steady recovery in Europe.

Now looking on our key launches for 2016 on the next page.

We are pleased to once again be very well represented on many new models being debuted at this year's North American International Auto Show.

Combined, these nine models represent around $600 million of annualized revenue and carry on an above content per vehicle -- average content per vehicle for Autoliv.

Autoliv provides the electronic safety content on all of these models.

Now I would like to turn over to our CFO, Mats Wallin, who will comment further on our financials and outlook.

Thank you, Jan.

Look upon our financial results on the next slide.

We had another quarter of exceptional sales growth and solid financial performance.

Our organic sales growth of 13.4% was better than guidance due to strong growth in all regions, in particular China, and was 9 percentage points better than the light vehicle production.

This strong growth drove our better-than-expected adjusted operating margin of 11.1%.

Our adjusted return on capital employed on 29% and return on equity of 21% and earnings per share of $12.08 shows that our strategies are creating shareholder value.

We also returned $49 million to our shareholders through the dividend during the quarter.

We had another strong organic sales growth in active safety of 29% and, as Jan mentioned, 2015 was a demanding launch year in active safety where we introduced four new key products and technologies.

Turning to the next slide.

We had our delivery figures for the fourth quarter.

We had another strong quarter where we grew at least in line with or faster than the light vehicle production in most product areas.

High value-added seatbelts, side airbags, and electronic ECUs showed exceptional growth.

In addition, active safety products were boosted by the MACOM automotive acquisition.

Overall, this performance illustrates our investment for growth and continues to pay off.

Looking now on to our model mix on the next slide, we have highlighted some of the key models that contributed to our strong organic growth.

During the fourth quarter these models contributed significantly to our overall net organic sales growth.

Looking now more specifically on our financials on the next page.

We have our key figures for the fourth quarter.

Our record sales of $2.5 billion were driven by strong organic sales growth, with volume acres in Europe and non-US OEMs in North America, China, active safety, and inflator replacement business.

The consolidated net sales increased 7% despite negative currency translation effects of around $170 million.

Our gross margin improvement is mainly due to higher organic sales, product mix, currency effects, and commodity costs.

Our adjusted earnings per share of $2.08 was 15% better than the same quarter last year.

This year-over-year improvement is mainly due to the improved profitability and lower shares outstanding.

Despite investments for vertical integration, inflator replacement capacity, and acquisitions, our adjusted return on capital employed increased slightly to 29%, while our adjusted return on equity increased to 21% as a result of our higher earnings and share repurchase program.

Looking now at our operating margin development on the next slide, our adjusted operating margin of 11.1% was 60 basis points better than our guidance.

Looking on the chart to the left, our margin improvement versus guidance was mainly due to the better-than-expected organic sales growth and lower-than-expected RD&E net.

This strong growth is partly related new product launches in active safety in Europe as well as the short recovery in China.

This has resulted in launch costs which partially offset the benefit from the organic sales growth.

Compared to prior year, as illustrated by the chart on the right, our adjusted operating margin was 100 basis points better than last year.

The benefit from organic sales and commodity costs were partially offset by higher investments in RD&E net and other net, which primarily includes launch costs and our investments for growth including vertical integration.

Looking now to the next slide, we have our key figures for the full year 2015.

Despite negative currency translation effects of $837 million, our consolidated net sales reached $9.2 billion.

This was driven by strong organic sales growth, mainly in North America, Europe, active safety, and inflator replacement business.

Our gross margin improvement is mainly due to higher organic sales mix, sales, product mix, currency effects, and commodity costs despite higher investments for growth.

Our adjusted earnings per share of $6.65 was 12% better than last year, mainly due to the improved profitability and fewer shares outstanding, which were partially offset by a higher tax rate.

Despite investments of vertical integration, inflator replacement capacity, and acquisitions, our adjusted return on capital employed remained around 24% while our adjusted return on equity increased to 17%, mainly due to the improved capital structure.

Looking now at our segments on the next slide, we have summarized our segments reporting for full-year 2015.

In passive safety, organic sales growth of around 7% was primarily driven by strong growth in Europe, North America, and Japan.

In particular, airbags, high value-added seatbelts, and the inflator replacement business.

This growth was impacted by negative 9% currency translation effect.

The net consolidated sales effect was a total sales decrease of $179 million to $7.6 billion in passive safety.

The reported operating margin of 8.8% for passive safety was driven by higher organic sales, positive product mix, and favorable commodity costs.

In electronics, the strong organic sales growth of around 13% was primarily driven by new model launches, higher customer take rates in active safety, while acquisitions added $30 million to the top line.

This strong growth was negatively impacted by 8% currency translation effects, which resulted in a consolidated net sales of $1.6 billion for the segment.

For full-year 2015 currency translation effects negatively impacted the operating margins along with higher RD&E net.

Looking now to our cash flow on the next slide.

We achieved the second-highest ever operating cash flow for the quarter with $321 million mainly due to better net income and timing of working capital.

CapEx net of 4.9% of sales for full-year 2015 is lower than expected, partly due to our exceptional growth in the fourth quarter.

For our capacity alignment program in full year 2015 we had a cash outlay of $63 million, while we accrued $83 million for further actions.

Consequently, we have $88 million on the balance sheet to cover planned actions in 2016 and 2017.

The savings generated in 2015 was around $20 million.

We estimate an additional $20 million savings for 2016 based on the cash outlay in 2015.

In 2015 our commodity cost savings were $40 million.

Our best estimate for 2016 is to be roughly the same level of additional savings.

As we mentioned at our capital market day, looking beyond 2015 we expect annual restructuring to be around 30 basis points per year on our current business.

Excluding more than $80 million of antitrust-related payments, we exceeded $0.8 billion operating cash flow for the full year, in line with our indication at the beginning of the year.

As mentioned earlier, we returned roughly $300 million to shareholders through our dividends and share repurchases and made acquisitions for close to $130 million.

Due to the strong cash flow generation during the fourth quarter, our leverage ratio is now 0.4 times, slightly below our long-term target range.

Looking now to our outlook on the next slide.

We have our guidance for the first quarter, which excludes any effect related to the Nissin Kogyo joint venture, which expected to close towards the end of the first quarter 2016.

Based mainly on customer core loss, our organic sales are expected to increase year over year more than 10%, mainly due to the strong growth in all major regions, active safety and inflator replacement business.

This growth is positively impacted by three more days of sales year over year and has 5 percentage points positive effect included in our organic sales growth of more than 10%.

This calendar effect will swing back in the fourth quarter 2016.

Sequentially our consolidated sales are expected to decline by close to 8%, mainly due to seasonality and the lower inflator replacement volumes.

As a result, we expect to achieve an adjusted operating margin of around 8.5% for the first quarter.

Year over year the benefit from higher organic sales, lower commodity costs, and currencies are offset by higher RD&E investments and costs related to the ramp up of capacity and new technologies for growth.

Sequentially, adjusted operating margin decline is mainly due to the lower consolidated sales and the higher R&DE net.

Looking out upon our full-year 2016 on the next slide, our early full-year indication excludes any effect related to the Nissin Kogyo joint venture, which is expected to close toward the end of the first quarter 2016.

Our full-year 2016 indication for organic sales growth is 5%.

This growth is mainly expected from Europe, China, and active safety.

This includes a slight decline in inflator replacement business since 20 million units are now expected to be supplied during 2015, 2016, and 2017.

This negatively impacts our organic sales growth by around 1 percentage point in full year 2016.

Based on our mid-January rates, we expect a negative year-over-year translation effect of around 3%.

As a result of our continued execution, we estimate our adjusted operating margin to be more than 9% for full-year 2016.

Year over year positive margin effects from organic sales, commodity cost, and currencies are more than offset by higher RD&E investments and costs related to the ramp up of capacity and new technologies for growth.

As mentioned earlier, we estimate our RD&E net will be in the high end of 6% to 6.5% range as we outlined in our capital markets day in October.

In summary, this full-year 2016 estimate indicate steady growth throughout the year with an adjusted operating margin above our long-term target range despite investment for growth.

On the next slide we have summarized our outlook which excludes costs for restructuring and antitrust-related matters and assumes mid-January exchange rates.

And excludes any effect for the Nissin Kogyo joint venture mentioned earlier.

Our consolidated sales in Q1 are expected to be 7%, mainly due to our strong organic sales growth, which includes 5 percentage points from more production days and is partially offset by negative currency translation effect.

For full-year 2016 indication, our consolidated sales is an increase of more than 2% due to a negative currency translation effect which partially offsets the organic sales growth.

Based on these sales assumptions, we expect an adjusted operating margin of around 8.5% for Q1 and more than 9% for the full year 2016.

In full year 2016, we now expect an underlying tax rate of 29%, excluding any discrete items.

Also assuming our present currency mix and mid-January rates, we believe that the positive transaction effect, excluding revaluation effects, could neutralize the unfavorable translation effects on EPS for full-year 2016.

In conclusion, we are pleased with our execution in 2015, which provides a solid base to increase our investment for growth and maintain an adjusted operating margin of more than 9% in 2016.

Turning the page, I will now hand it back to Jan for some closing comments before the Q&A.

Thank you, Mats.

Just to conclude and summarize a bit, we are very pleased with our strong organic growth and financial performance in 2015 as well as our development with the technology roadmap.

For 2016, we are executing towards our end-of-decade targets, delivering solid organic growth and adjusted operating margin above the high end of our long-term targeted range, and aggressively investing in technology for our long-term future -- all consistent to what we outlined at the capital market day in October.

With that I would like to conclude the formal comments for today and would like to hand it back to Tina.

(Operator Instructions) Hampus Engellau, Handelsbanken.

Thank you very much.

I have three questions, starting off on North America.

Looking during the quarter a very strong organic growth, 17%, compared to 2% growth in the underlying market.

Could you maybe talk a little bit about where you are gaining business and also how you see that developing throughout the year?

Could we expect this to continue?

Second question is more on these new launches on advanced driver systems, electronic control units, and also stereo and mono vision on the E-Class.

Is that also including in the S90?

And maybe you could talk a little bit about the interest from the industry on these new products.

Last question is a bit visionary for you guys on the Lidor.

What's your thoughts on Lidor?

And are you looking at developing it yourself or is this a potential M&A activity going forward?

Thanks.

Thank you.

If we start off with the North American business and the situation in quarter four we had, it was a mix of many things.

We had strong sales to North American OEMs.

We had strong sales to transplants.

We had a boost of the inflator replacement business in North America that also gave us a strong growth number year over year.

So it was a combination in the US of several things that give us this strong number in fourth quarter.

In the launch of the E-Class, that is a strong interest from customers.

I think the overall comments we got from CES in Las Vegas and what we have also demonstrated this in several locations, we are very pleased with the reception and the feedback that we get from the customers there and from the market interest.

And this is also promising for the future.

Looking then into the S90 and the car line there, we are not represented in that sense to that level that we have here on the active safety side that we are on the E-Class.

So that is primarily not our technology.

On the Lidor thing, we are monitoring this and we are also using types of Lidor in our advanced driver, highly-automated driving cars that we are working within our development stage.

This is a technology we believe will come later on and we are monitoring this, and how to take the next step we will see in the future.

But it is an interesting part for future autonomous drive.

Thank you.

On the US side, is this -- do you think this momentum will continue?

And is it also a function of the Takata losing share?

I know one of their biggest clients US-based.

I think the longer-term outcome of the Takata situation it's too early to speculate, and we have been talking about this before.

We are also seeing a lot of the R&D investment coming from strong quarter intake in passive safety really.

Now we're talking about sales performance here and that is not the same.

If you look to the numbers from IHS here, you see a continued relatively strong growth in the first quarter of close to 6%.

You see for the full year in North America around 4%, so it appears that it's going to continue in good growth numbers for the time being in North America.

Thank you.

Can I have one last question then I will get back in line?

I think on third quarter you kindly gave us some market shares on order intake for frontal airbags and also on the active safety side.

Would you be prepared to do that also in fourth quarter?

We get a lot of questions around order intake and we believe, for various reasons, it's not really always relevant to comment on order intake.

When you take active safety it's regarding take rates and all; in general also for us it has a history to see how successful you are or how successful the car line is when it's launching.

You can have a good order intake and then the car line will not be as successful as expected.

Therefore, we are not talking that much about order intake.

We gave you some numbers on frontal airbags earlier when it comes to the order intake on a quarterly basis.

And we may from time to time on a yearly basis and on a capital market day give you some updates on order intake, but we don't think that is particularly relevant a quarterly basis.

But just to illustrate a bit also regarding the higher R&D investments we are seeing here, for the full year 2015, we took around 50% of all the business on the passive safety side.

Again here, I would like to mention you shouldn't draw a lot of conclusions on one year of strong order intake.

But what it really leads to is it requires engineers; it requires and kicks off a lot of projects and that is driving also basically half of the engineering increase that we are seeing here from 2015 into 2016.

That was for the full passive safety part.

On the frontal airbag side that we talked earlier about, that is between 45% and 50%, or over 45%.

So that is also again here significantly over the market share that we have in sales on frontal airbags.

But I would like to caution that one year of strong order intake; to draw long-term conclusions on it it is difficult and could be risky.

But again, here for us, we need to kick off the projects and, therefore, we need to invest in the engineering.

Thank you very much.

Ryan Brinkman, JPMorgan.

Great, thanks for taking my question which is really on your business in China.

I think IHS is looking for 6% growth there.

You mentioned mid single digit.

Is that your industry assumption for China too in 2016?

Then, because I think there are a lot of moving pieces there, right, with the government incentives, the customer, and segment mix shifts, regardless of your industry assumption, how should we think about your business specifically performing in China in 2016?

What are the puts and takes we should consider relative to the industry?

We demonstrated in second and third quarter a very swift action when the market declined and we had a pullback on light vehicle production.

We were fast to take out capacity.

We reduced workforce on the production side with 1,200 people.

We were there to continue to support engineering and projects for future development.

In fourth quarter when light vehicle production picked up again, we rehired close to 1,000 people in China to cope with the production.

So when it comes to outlook for 2016, we will continue to monitor what's going on and what will happen.

I don't think we have really a better outlook than IHS numbers, etc., for the business as such.

And we all know how volatile this is and how fast it can change.

To communicate from my side any other different opinion of what is already out there, I think it's not really particularly relevant here at this stage.

But what I can assure you is that we will monitor; and we have demonstrated we are fast and flexible and we will continue to be so.

Okay, thanks.

Then last question.

I see your guidance is excluding the Nissin JV.

Can you give us some insight into how the guidance would change upon the inclusion of Nissin, whether due to consolidating results or considering some sort of purchase price amortization or any other factor?

Thanks.

Right.

In our guidance we are assuming a close at the end of Q1.

And when we released our pro forma in our press release last year, we were talking about 2016 sales of around 600 million.

So basically if we close now end of March, three-quarters of that amount would then come into the consolidation.

We also expect that the margin from the business itself is within our corporate long-term margin range of 8% to 9%, but then you also have to expect that there will be costs in addition to that related to the purchase accounting, related to the integration, and also some Autoliv costs going into this joint venture.

But you should also remember that this is a joint venture, so that means that on the EPS line we will get 51%.

Okay, thank you.

Rod Lache, Deutsche Bank.

Thanks.

Just a follow-up on that last question on the Nissin accounting; what would be the expected margin net of your purchase accounting amortization?

We will have to come back about that when we are ready with the close.

Okay.

On the Takata push out, did you have 8 million units in 2015?

Are you guiding to 6 million?

And why is it getting pushed out?

We have up to 20 -- you could say up to 20 million units that is intact.

Roughly around a third coming -- came in 2015, as we said, and two-thirds coming in 2016.

Of that two-thirds, half of it is pushed into 2017.

The reason for that is when you come into the recall, further into the recall, the demand for different variants changes and cars are being brought into dealers for change in a different pattern than originally expected.

This has generated new demand for variants, different variants of inflators that is causing us to reengineer our lines and set up different tooling.

So we are essentially going through the same process as we did when we ramped up from the beginning, and that means that it's pushed out into 2017.

Just two other things.

One is this acceleration in RD&E; is that for specific things that been awarded, so should we expect some benefit to the organic growth acceleration maybe in 2017?

And then lastly, it was very helpful to get all of the positives and negatives from R&D maybe up $85 million, D&A $55 million, and raw material positive of $40 million, and $20 million of savings.

But it looks like to make the margin at the low end of the -- sort of close to 9%, you would need to either have a lower than historical incremental margin or some other costs.

Could you give us some color on whether there is something else that we are missing there?

If I start off with the R&D split and Mats will continue, this is a lot related to technology development in active safety and also related to programs in that area.

But as I said, roughly half of this increase is also related to the passive safety business and it's related to order intake and needs we see on growing this business.

As I alluded to, 50% order intake for entire passive safety is causing us to spend money in engineering for future growth.

As I said also, somewhat caution there to draw too much a conclusion of it, but it is a significantly -- significant step up from what we have in our market share today.

Coming back to your second question here then, if you now make the journey here for the full year 2016 versus 2015 and with our organic sales growth of 5%, then you would expect to see an impact from the RD&E increase, the effect of that increase to be around 90 basis points.

The effect of the higher depreciation and amortization combined to be an effect of 60 basis points and the positive impact of raw materials to be an impact of 40 basis points.

And the remainder on this journey is basically other costs related to support our growth.

Is that helpful?

Yes, it's helpful.

I think we may need to just get a little bit more detail, but we can follow up.

Thank you.

Brian Johnson, Barclays.

Good morning.

When we look ahead to next year's organic sales increase, certainly understand the production delta between 1Q and full year.

But can you give us a sense, and maybe if it has changed at all since capital markets, of the internals on the organic sales by the key passive safety electronics segment?

And then also, following up on the last question, should we be thinking differently about incremental margins in each of those segments?

If you look to the outer years, organic sales or sales growth, we refer to the CAGR of 7% over the period leading to the target of $12 billion for the outer years.

We have not given yet, or so far, any more details on 2017, 2018, etc., so you should look to the targets we presented in capital market day.

I have one comment.

If you compare the segments, and also coming back to what we have seen in 2015, in the electronic segment, we see of course more RD&E costs if you go back to 2015 and we also see that we are negatively impacted by the transaction currency effects, because we are buying components in US dollars and selling in other currencies.

That is the difference, the main differences we have seen if you go back to 2015.

But can you comment on the different growth rates within the two segments for the full year 2016?

Growth rates on sales?

Yes.

No, we don't give any specific segment guidance besides what we do here.

So we haven't any more details on that to color.

Okay.

And how should we be thinking about incremental margins between the two different groups, passive safety versus electronics?

Not more than the comments I have given about 2015.

Okay, thanks.

Erik Golrang, Nordea.

Thank you, I have two questions.

First one is a follow-up on the increase in R&D here.

I was wondering if there has been any specific recent development since the CMD that has triggered that.

That's the first one.

And then the second question is on the new proposal in the US and an overall of the crash test rating system there.

Any particular items or other you would like to highlight from that?

Thank you.

No, there are always things going on in the area of business development and order intake and technology development that is generating the need for further R&D.

As I said, I keep coming back to this with some caution, but still a strong order intake requires immediate attention that will kickoff and lead to, hopefully, further business growth.

So that is one thing that is happening.

It's a blend of what's happening in the passive safety market with our competitors, but also, of course, our position of being a strong player.

And then you have the technology need, which is in line with what we have outlined in the capital market day.

We are investing for growth and we intend to grow to our target of $12 billion and we intend to improve our margins further on towards the end of decade in electronics.

So nothing particularly new that is happening there.

Okay.

So on the rating in the US, I think we have two parallel developments.

One is this voluntary agreement between NHTSA and 10 OEMs that seems to be moving towards more and more formalization if you want, but then also NHTSA's own driven initiative right now is to have preventive crash technologies from 2018 or model year 2019, but really implementation 2018.

And we can see that start to raise more interest particularly for AEB in the US.

I can say that both those initiatives that have come -- the NHTSA one on December 8 to be formalized, I believe, very soon in February.

And I think both of those will drive, probably largely through AEB, also the growth of active safety in the US, where Europe maybe has been the strongest driver so far.

I think that is what we see right now.

Thank you.

David Lim, Wells Fargo.

Good afternoon, everyone.

The question that I have is on your vision algorithm systems.

Obviously, you are supplying E-Class.

Is there another SOP that you are going to launch on probably in the next 12 to 18 months with possibly another or a different OEM?

We do not comment; we stay out of commentaries on further launches until they come up.

But as we have been saying, we have seen a lot of customer interest from these technologies.

The thing with this technology is that we have developed it with the aim for the launch of the E-Class, so it has been not until recently or so not too long distance in the past that we have been able to demonstrate this technology.

But when it's now there and you maybe have seen it in CES or in the capital market day, you can see the difference between our technology and competing technologies and the performance of it.

So there is a lot of interest looking ahead.

Got you.

Then on the margin guidance, what are some of the swing factors that could inch the 9% or about 9% or greater than 9%, I should say, more of the 10% level or what you have actually achieved in 2015?

Thank you.

Well, if you look to the margin and you look to -- of course, there are several factors that could affect it and higher light vehicle production and higher utilizations, etc.

You can speculate in a lot of things.

You could speculate in further concessions and raw materials.

Or, of course, if you would like to -- cutting back on costs or R&D, etc., there would be things that could affect it.

This is the best estimate that we have for the time being now with all the uncertainties that we have in there.

It is securing what we believe is the right thing for the long term and executing towards the long term and end-of-decade target.

Got you, thank you very much.

Joseph Spak, RBC Capital Markets.

Mats, I appreciate all the color for the margin puts and takes over year over year, but I just want to confirm that that's again without Nissin Kogyo.

I know you're not going to give us color on the margin profile there, but maybe some help as to whether the R&D profile looks similar.

Like in your D&A assumption, which you mentioned the higher D&A, is the amortization from that deal already included in that?

I guess I'm just confused as to what you're including from that deal and what you are not.

First of all, we are still sort of heading for a close here, so --.

As I said earlier, the operation itself we believe is running between the 8% to 9%, our long-term target range, but then you will have to expect the integration costs in connection to this in addition.

And you will also have -- what I was talking about amortization, the effect to the purchase accounting needs to be added to this.

And then there will also be some Autoliv costs.

Right.

So if we think about the R&D profile of that JV, is it similar to the 6% to 6.5% you are talking about as well for base Autoliv?

I don't think we have any comments to give you on this one until we close this.

We will come back with more color on this if it -- it's now is expected in closing at the end of March and then we will come back to you with more details around this in the April earnings call.

Okay.

And then on the higher D&A; is there included some higher amortization from that deal already or there's an additional increase once you do close?

The D&A I was talking about is the items coming out to the purchase accounting.

Okay.

I guess the second question -- the second question is just as it relates to Takata, and we saw some reports that they may look to form a JV with Daicel.

I guess have you had conversations direct with Takata to potentially be just a supplier, an ongoing supplier of inflators to them and maybe they just become more of an assembler?

I don't want to comment on any of this situation.

I should not speculate in any of this situation.

As you know, we are really keen on helping out the industry as such.

We are keen on helping out our customers and we would welcome sort of different ways of doing this so that the customers can get reliable supply on the inflator side and put in high-quality airbags in their cars.

That remains to be seen how this is going and I would not -- stay out of comments on this one here as well.

Okay, thanks a lot.

Joseph, can I come back to your D&A question?

Sure.

I guess you were talking about the 60 basis points increase, which I mentioned, or --?

Yes.

Yes.

So that is a blend of higher depreciation related to capital to support our growth, which we have been talking about, but it also includes amortization from the purchase accounting we have done now for MACOM but also the worldwide [PD] last year.

But not any amortization from the Nissin deal?

No Nissin.

Okay, thank you.

Anders Trapp, SEB.

I have some detailed question actually on the RD&E, the 90 bps increase that you sort of are guiding for.

I think, yes, it's actually partially been answered, but of that increase, how much is R and D and E?

I think you could sort of answer that because that would give a good indication on what type of costs we're talking about or cost increase.

Smaller portion is R, a bigger portion is D, and the biggest portion is E.

So it's really related to growth that you will -- basically quarters that you have gained, the E part I guess (multiple speakers)?

Yes, you can say that.

It's difficult in all of this is that a lot of D is also customer related; you develop technology together with customers.

To really split the D portion into pure conceptual development or what is D or technology development for a specific car line, where you can reuse that technology for other customers, that is a hard trick.

But as I have alluded to here, half or ballpark half of this is related to passive safety and a lot of that increase is related to engineering and projects.

Just on that issue about order intake, I didn't really fully hear you what you said.

Did you say that you had a 50% market share on orders in 2015 on passive safety as a whole or was it frontal airbags?

I didn't really hear you.

No, we have seen a strong order intake of passive safety as a whole; 50%, or over 50%, of all orders for passive safety coming our way for the year.

But as I said, and we have also alluded to before, to draw conclusions out of one year of order intake may be a little bit risky.

But when you get the orders, because it's a lot of projects coming our way, it requires us to invest in engineering and these products will kickoff and generate business.

But to increase long-term market share you will have, and we have said that for frontal airbags, you will have several consecutive years of the same level of order intake to move the average global market share on sales.

So we can't conclude; it's a good start then?

So far it's a good start, yes.

Two more little questions.

About the inflator replacement sales; could you say anything if that has been accretive or not to the margin in the fourth quarter for instance?

We have not commented on that, but it's not dilutive on the margin.

Great.

You said also that there was a calendar effect of plus 5% on the organic growth in Q1 and you said it will be negative in Q4.

Is that of the same magnitude then?

Yes, so there is no impact for the full year.

Okay, thank you.

Richard Hilgert, Morningstar.

Thanks for taking my question and good afternoon over there.

Wanted to ask about the ADAS ECU and I'm curious to know is there any particular functionality that Autoliv programs into the ECU that manufacturers in particular would be looking for.

Because if you've got several competitors that are going to be doing the same kind of thing, are you looking at the algorithms that the manufacturer wants to include or is there something about this ADAS ECU that makes it unique to Autoliv?

This is a flexible architecture that combines the input from algorithms that we have developed in vision systems and in our radar products, etc., and that combines that together with customer-provided software technologies and sends (technical difficulty) that further on into the electronic architecture in the car.

We believe this is the world's first type of ADAS controller in this way, where we have been developing this in tight relation with our customer.

In addition to this, we have been developing our own algorithms for the vision systems, the stereovision and the monovision camera that we are now launching.

So it is the control unit, the brain unit for the ADAS system combining the different inputs, including customer-provided software.

From that point of view also, this unit that we have developed, this hosting software that we don't fully have control over or we don't fully know really what it's in all the detail is doing.

And that's the way we believe it's important to do also for the future to promote an open architecture where we can host other companies' algorithms or software.

We believe that is how technology should and could develop in the future.

So then your ADAS doesn't necessarily have to go along with your vision or sensors or brake or steering?

It could go with other competitors' systems, if the OEM wanted your particular ADAS ECU?

If that would be the case, that could exactly be the situation and I think that is how it's probable to turn out.

And this may be different opinions in the industry about this one, but we are of the opinion that an open architecture that allows the OEM to get access to the latest technologies from different companies and different technologies, but being incorporated on one platform and, therefore, taking a more standardized connection into the rest of the car is the way to go.

And by doing so, to your point, this unit will host also competing technologies to our own camera system or could host competing technologies to our radar and to our camera system.

Okay, very good.

Just wanted to confirm one housekeeping item.

Looking at the geographical revenue quarter over quarter, very big increases on an as-reported basis for Japan and the Americas.

I'm assuming that's the MACOM?

I think what you see there in the year over year for the fourth quarter it's very much related to -- that we have inflator replacement business in those two areas.

I'm sorry, what replacement?

Inflator replacement business.

Replacements for the Takata inflators.

Okay, understood.

Thank you very much.

Fei Teng, Credit Suisse.

Thanks for taking my questions.

First one just coming back to the deferred replacement in inflators.

Can you just confirm if, as I understand, this is actually driven by a bottleneck on Autoliv's side rather than delays or uncertainty from the OEMs themselves?

This is driven by change from our customer.

We had planned and set up resources for producing one type of inflator.

The customer has seen a need for -- or customers have seen need for changing type of inflators, and when doing so you need to revalidate and reconfigure the lines and that takes time.

But there's actually no change in the underlying demand for replacement inflators?

No, it's no change to the underlying demand in terms of volume.

But due to the reconfiguration of the line, it takes time to do so and, thereby, it's pushed out in timing.

I don't think there is any wish for delay of our customers and there is no wish to have a different schedule.

It's just so that to confirm the right quality and the validation it takes this time, as it did when we started this up.

In addition, we are seeing the potential for further volumes instead coming this way.

So it's rather the contrary: it's not a decrease, it's a potential increase.

Understood, thanks.

My second question is on the market share gains that you've seen in frontal airbags in 2015, can you give an indication of how much that impacted organic growth in 2015?

Does your guidance for 2016 include any assumptions on more market share gains in airbags?

Good question.

I think this takes the opportunity to explain that this is not changing market share or market share gains, and that's why the order intake is a bit difficult to talk about.

Because this is order intake: the project we take now will go into production maybe in two, three years from now and then at that stage will change the market share situation.

And that's why I'm saying you need to have several consecutive years to move the market share.

One year is only a portion of it to really affect the market share.

But what will require is that, as somebody said, it's a good start.

It will kick off a lot of new projects, but that won't -- if we are taking 50% of orders one year that will not move the market share.

It will require several consecutive years to do so and that will all remain to be seen.

Thanks.

My final question just on the buybacks.

Do you monitor the share price for the execution of buybacks and do you have a level in mind where you think the stock is undervalued?

We believe that we are shareholder-friendly and we are opportunistic on buybacks.

And further on that, we are not commenting on buybacks and we are not guiding on any share repurchases.

We have a leverage ratio range between 0.5 and 1.5 and we are at the low end of the range.

And for the time being, in this macro environment and with the uncertainties that is out there and also opportunities that would follow probably a stress market and in addition the antitrust that is also out there still, we believe that being in the range, and even if we are in the low end of the range, it's for the time being a good place to be.

Okay, thanks very much.

David Leiker, Baird.

Good afternoon.

I wanted to dig through.

I know we've talked a lot about the D&A and RD&E lines and the higher spend there.

Can you talk a bit about --?

I guess theoretically you are doing that to support higher revenues.

Is that something that we should see an acceleration in your revenue growth as we look out 18, 24 months and then see that also with the recovery in margin at that time point?

You refer to what we've said here about order intake orders.

We don't have any other numbers for the time being in end-of-decade than the $12 billion target and the $3 billion target that we have in electronics.

We stay out of that.

And I repeat again, it will take several years of order intake.

It's a good start, but we stay out of that for now.

I guess what I'm trying to get to is some people are questioning whether this D&A and RD&E is a step function change to a new level, or is this a step-up in costs ahead of an influx of new contracts that you are going to be launching; that it is a temporary issue?

Can you help with that?

It's a blend of things.

It's the technology step up, as we said, and it's a blend of -- the little portion is the research part, bigger portion is D part, and the application engineering, the E part.

So it is a support of growth and it's a support of technology developments necessary to be able to be a leading player towards autonomous drive, we believe.

And this sometimes goes hand-in-hand.

You develop for certain car lines and you develop technology, like for instance, what we've done here in the case of Daimler where a lot of this technology is developed for the E-Class.

So I'm going to take one more shot at it.

Would we expect these percentages as R&D and -- or D&A and RD&E as a percent of sales to come back down to more normal levels in the future?

We indicated at the capital market day that for some period of time you would see between 6% and 6.5%.

And then we also said that we would expect it to come down more towards the older level around 6% or below 6%.

And there has been no change to that.

Okay, great.

Thanks.

The other question I had is on the Mercedes E-Class and the launch that you had there.

Can you talk about the technology that you have on there?

How deep you are into the integration of the different sensors into the self-driving features that are on that vehicle?

And then lastly, just any thoughts you have on why you won that contract versus the previous supplier.

Well, I believe -- if I start at later end, we believe we had a better and more competitive offer.

And I think, ultimately, Daimler wants what they can find is the best-performing technology and the best-performing concept.

We were able to offer them a combined package of ADAS controller radar technologies together with vision systems.

And that, I believe, was the reason.

We stayed competitive on that one, too.

I think that was the reason why they did it.

The whole integration and going into all the technical details of how the system really works and what we really do, I maybe should defer more to our technical people.

And we can have an offline discussion of explaining all the details around it.

As I said, ADAS controller is hosting software from third parties.

It's capable of hosting other technologies that are not being provided from us.

We have developed the algorithms, as you know, that [fed] in to this controller and then it's processed and given the output to the car.

So we are relatively deep into the integration of it, but as I also said, there are softwares on this controller running that we really know the whole thing what it's about.

And that's what we need to do.

If we will provide a platform where competitors are running their program on, this is the way it has to be.

So I think that is anything that is strange or unknown in other parts -- in other areas.

Okay, great.

Thank you very much.

Agnieszka Vilela, Carnegie.

I have a couple of questions.

Starting with your organic growth guidance, 5% for 2016, if we compare it to the light vehicle production of 3%, can you say where do you see the outperformance coming?

Because if I calculate the inflators business being the same as in 2015, then we do not have this contribution here.

On the other hand, what do you think about your active safety drove?

Because today it's around 8% of the group, so if it grows only with, say, 20%, 25%, it should add almost 2 percentage points to your underlying growth.

It is a blend of order intake in the past and it's a blend of penetration of our products and also take rates in active safety that is continuing to give us a higher than light vehicle production or an outperform, a higher growth in light vehicle production.

So it's a combination of several factors.

If you combine to the light vehicle production the 3%, the 5% is also including some parts of replacement business, even though it was cut in half as we have said before.

So that is the contributing factor to the outperformance versus light vehicle production.

There are several factors giving us this outperformance.

And how should we think about the active safety growth for you in the future?

Do you think that it could accelerate from the current level or can you keep the same growth base as in 2015?

Well, we aren't guiding on active safety.

It is -- as you know, we have outlined some numbers in the capital market day and you are familiar; I don't need repeat those.

We aren't giving any specific guidance into active safety.

We have seen throughout 2015 that expected take rates have been higher than what we originally saw in early 2015, so throughout the year take rates have been higher and we came out above 30% for the full year.

We will see how this develops as we don't give any guidance, but we believe we have a good position here in the situation overall.

Then when we look a bit more forward into 2017, should we expect then that the delayed inflator business, as well as potentially even upside to it, will boost the sales in 2017 then?

Could you repeat that question?

Because now you're saying that the inflator business in 2016 will be delayed and just one-third will come then in 2017, and on top of that you say also that you see some upside to that.

So my point is that we, as analysts, we should put some higher draw for 2017.

Is that correct?

Well, we will come back to the 2017 when we come into the end of this year and when we come back a year from now we will give our opinion for 2017.

That's a long time until then and a lot of things can happen, so let's leave 2017 for the time being.

We reiterate the target that we have for end-of-decade and we reiterate the $3 billion target on electronics for the end-of-decade.

You remember we had more than $1 billion on the active safety side, more than $1 billion on the passive electronic side, and less than $1 billion on the brake control side.

We reiterate those, and this is why we invest more in technologies to meet those targets.

I think in the meantime we will come back on a quarterly basis with the normal procedures that we have and then for 2017 in January next year.

Then on the R&D expenses of your guidance of 6.5%; my question here is, firstly, for how long should we assume that these R&D expenses would be that high?

Also, the other question is that actually at the Q4 report last year we guided for an R&D of between 6% to 6.5% for 2015 and you ended up at 5.7%.

So do you feel that there is still some uncertainty regarding that guidance?

Well, as we say here, this is the best estimate that we have for today; it's in the higher end of the range.

So we believe this is necessary; it's a little bit of a different situation this year.

We were able to recruit our people that we also talked about in the beginning of last year, up to 300 engineers, in electronics and we were there including the MACOM acquisition.

When you look to the range, we said in the capital market day for some years we will be probably in this range.

And then also come back -- as I said in a few questions before here, we aim to come back to around 6% or below, as we have been traditional, towards the end of the decade.

There hasn't been any specific mentioning about 2017 or 2018 or any targeted year for -- depends on the order intake on the technology development.

Then my last question is on the car production forecasts from IHS.

When you look at it and then when you talk to the OEMs, is there any region where you see more upside or downside to the IHS forecasts for 2016?

No, I don't think we have more visibility to this than you have.

We sit there with the call out for the next couple of months and we have visibility for what it is in production schedules.

We all know that if there is a crisis kicking in, also those can change very rapidly.

So for the longer term and the uncertainty, we don't know more what you can read in the macro situation.

It looks like for the time being that it is a continued rebound in Western Europe.

We see some growth numbers there.

It continues that -- it looks like it continues to be a more normalized situation in China and also North America continues to move on.

But everything can happen and we need to be flexible and we need to be prepared if things happen; that is what is most important to us that we have the flexibility and the readiness.

Thank you.

Sheila Weekes, Bank of America Merrill Lynch.

Good afternoon.

It's Sheila Weekes from Bank of America Merrill Lynch.

Thank you for taking my questions.

On your organic sales growth guidance of 5%, could you please clarify what the underlying organic sales is excluding the replacement inflators?

I might've misheard but did you say that the replacement inflators are a drag or are those a contributor to the 2016 organic sales growth figure?

For the 2016 sales growth figure, the 5% here that we talk about is zero growth as we see the delay of the business due to the change of variants from customers we have talked about earlier in the call.

So the push out of the business could correspond to approximately another percentage of growth since that.

If this change would not have happened, we would have arrived around 6% maybe, instead of around 5%.

There are no replacement business in the 5%.

Okay, okay, very clear.

Why is that organic sales growth figure only less than 2% above where IHS is seeing global production?

Are you more cautious on some of your end-markets and what your customer demand has been telling you?

I'm just a bit surprised that the outperformance is as small as that.

I don't know, coming back from my side here, if the 2% difference still repeats; is that your question?

Yes.

Right.

I don't think there is any particular reason for this in if it's a small -- it's a 2% outperformance of the business and we said it should have been maybe 3% outperformance of the business.

We believe it's still a very good growth given the situation that we are in and that it's a blend of the passive safety business and it's a blend of the growth in the active safety side.

So I am not really disappointed with this one.

Maybe that we should have been expecting the full replacement business coming earlier, but apart from that, this is how it is.

We will also see throughout the year how this develops and whether we will see some upside further on depending on light vehicle production.

Thank you.

With respect to the potential market share gains and the order intake that you have been receiving, could you just clarify in terms of what the time lag is from when you typically receive an order, for instance the activity you were having in 2015, and when that enters into production?

And then also how long that typical contract would span?

Well, it varies from -- depends on the product.

Maybe 18 months to 30 months or so, depends on the type of product and the type of technology and what it is.

And also from, let's say, from customer to customer.

So it varies if it's a smaller change or a totally new car, so it has a variety between that range, you could say, as an indication to it.

I guess that's the lead time.

Lifetime of the car depends maybe -- normally a car line has a facelift in the middle of it.

Three years from the launch then you have a facelift and then you may have another two or three years of the lifetime of the car.

So maybe five years as an indication where you may have some updates in the midlife.

But it's difficult to replace that airbag system except when you are on that existing model, is that correct?

Well, you would need to -- if you wanted to replace it, you would need to go through a new development with a new supplier and win new validations, etc.

If you do that -- depends on the structure and how big changes you are doing midlife to the car and how much changes there will need to be.

So you could say that also various from OEM to OEM and car line to car line.

But if you are in from the beginning, you have a good chance or a better chance to continue to do business with your customer on this platform, of course.

Lastly, just in terms of your capacity utilization in China, you mentioned in one of the slides that you are at about 85% capacity utilization in China.

Is that above or below your other regions globally?

In the past I know you've discussed that this is often a good indication in terms of relative margins amongst the regions.

Is that still the case?

This is around the average what we have in the group in the different regions, so it doesn't differ -- for the time being it doesn't differ that much within the different regions from this figure.

Okay.

Just finally on China, you had some easier comps in terms of the fourth quarter and I know there's been some issues with some of the models and product cycles.

Is -- how are things evolving there?

Because I see your organic sales growth still came in below light vehicle production in China, albeit still very positive.

How are you seeing your customer mix in China at the moment?

I think we have talked about during the year an unfavorable customer mix arriving from the focus on compact SUVs where we have not been well represented over the years.

This has been because of a focus on global OEMs and a focus on certain Chinese OEMs.

Then you had more of a sudden change in the market and a shift where we were underrepresented.

This has been -- it's growing different because of our increasing market share with Chinese OEMs going forward.

We have had several launches.

We had a third of the 20 launches here during second half of the year was coming from Chinese OEMs.

And that is giving us a different picture going forward.

We have also looked into this when we saw this coming earlier in the year, but the reason for this was the more sudden growth of compact SUVs.

Do you see performance --?

Do you see performance outperforming the overall market in China going into the first quarter?

We commented here on the slides that we will see continued strong growth -- in China we will see continued strong growth.

We will see later on in the year to the outperformance or not, so we don't comment on the outperformance as such.

It is a volatile situation in China, but we continue to see strong growth opportunities in China.

Thank you very much.

Chris McNally, Evercore.

Thanks.

Good afternoon.

If I could just follow up on some of the last few questions on R&D, I know there's been a lot asked, but I think you gave enough detail that the 6% to 6.5% level you will remain at this level for a couple of years.

I guess my question is thinking out over the next couple of years as the new business comes in.

Is there sort of a level of organic growth you would need to see just to have margin expansion from other operating costs going up from the already strong sort of 10.6 levels?

Can you grow margins essentially if organic growth decelerated to a 2%, 3%, 4% level?

We keep coming back to what we have said originally, what we said in the capital market day, and that is to grow our margin in electronics, to at least maintain our margins in passive safety, to grow our business towards the end-of-decades target of a CAGR of 7%.

And that is organic 6% plus another 1%, so in total 7%.

And besides that, we don't give more indications going forward for the out-years.

So the best you should factor in there is what we said in the capital market day for future for the out-years beyond 2016.

Okay.

I guess the thought that a lot of people are trying to figure out is, if you at least cycle through the R&D expenses in for example 2017, if they will stay at the 6% to 6.5%, there shouldn't be as much -- there will be some D&A pressure, but obviously one of the largest pressures would be gone.

And so I think what people are trying to figure out is if you can grow margins in 2017 if you add a similar type revenue growth.

I understand that.

As we also said, it depends on again here on the number of products that is coming our way and how the situation with Takata will evolve, and how successful we will now be with our new sensor suites and with the technologies in active safety, and how that is affecting the end of the range, whether it's going to be in the low end of the range and the high end of the range.

I don't think, to be honest with you, we have ourselves full visibility at this point in time sitting here January 2016 whether we are going to end up in the high end of the range or the low end of the range.

I think it's likely that we will end up somewhere within the range for 2017, but further than that it isn't really possible to comment on as of right now.

Okay, thank you so much.

Matt Stover, FIG.

Thank you very much for your patience with the questions.

I fear I'm going to beat a dead horse, so apologize to the horse here.

Two things.

One, Jan, could you just comment on the changes in gross R&D versus net R&D in 2015 versus 2014, and then maybe comment on that delta in 2016 versus 2015?

Then the second question would be, when we think about the amortization of the goodwill for Nissin Kogyo, should we think of a duration period of 15 to 20 years?

And then I do have a final question on Takata.

I am not sure I will have a good answer for you to communicate on the gross and the net -- gross R&D between 2015 and 2016.

I'm looking on Mats here.

2015 and 2016 or 2015 and 2014?

That's right.

I'm just thinking about the recovery value and thinking about the growth in the R&D because the time frames.

Some of this stuff you are spending money on right now because you've got to ramp up to develop a program for the Takata replacement and then some of this stuff has a much longer duration to it.

Right.

I get that, but I'm looking on Mats here to see whether we can give you some more details here or whether we should take that offline.

We will take that offline.

Okay, we will do that.

Okay.

Maybe we can do that so we give you the right numbers on the details there.

That's fine.

The 15- to 20-year amortization period for Nissin Kogyo, is that fair?

It sounds long, but we will have to come back about that.

Okay.

Then the last question was on Takata.

In the release you make an allusion to there could be other business in 2017.

Is that other front airbag business or is that the potential for side bags?

I don't have a comment to that one.

We are in discussions with OEMs and customers out there and I am not in a position as of today to comment more on giving you more details around that.

Okay.

Thanks, guys.

Thank you, Matt.

Sorry for the no answers.

(Operator Instructions) Edoardo Spina, Exane.

Good afternoon and thank you very much for taking my two quick questions.

I'll start with the first one.

On your outlook, you mentioned customer call offs and I don't know if you already addressed this, but for me it was basically the first time that I hear of these call offs, if for that you mean cancellation of orders.

So I wanted to ask a bit more details about these; which region it comes from, because, yes, from your competitors I didn't hear so far.

No, customer call off is production build schedules.

The customer send into our factories releases for the next weeks or months for how many units they want to have delivered to their respective plants.

And they call off -- in the EDI system they call off parts electronically.

We use those build schedules to build a view of the sales and the number of units going to be shipped for the imminent quarter.

Those build schedules and releases are normally between three and six weeks out, because that's how far customers' releases give us indications of how many parts.

Beyond that, we use more the forecasting institutes, like IHS and others, to look on the build schedule, on the production volumes.

Thank you.

And there has not been a deceleration in this order in this three to six week [dark] period you cannot comment on whether there's any disappointment in recent months, recent weeks?

No, disappointment or not, this is the best information we have at hand.

We take the best and most accurate information that we can see when we do the guidance.

The build schedules and the releases they change -- fluctuates over time with customer demand and sentiments in the market.

So that changes over time and at one point we lock that and take that as the input for our forecast.

Thank you, I misunderstood the terminology.

No problem at all.

The other question would be on the restructuring costs or capacity alignment.

Do you provide an indication for 2016?

And can I ask what -- where this money would go considering your markets are growing since last two years?

So I wanted to ask the realignment, what does it affect exactly?

We are returning to more normalized level of restructuring the Company after having some big capacity alignments predominantly related to Europe and the alignment of our production facilities here.

We are now looking to, on an annual basis, of 30 basis points in relation to sales, so 0.3% in relation to sales in restructuring.

And that we communicated in the capital market day and that is what we are holding on to for the year of 2016.

Where it is going and how this is developing and concerning different plants or downsizings, there's not -- we are not in a position to comment on.

Okay, thank you.

(Operator Instructions) David Lim, Wells Fargo.

Just one quick follow-up.

Jan, maybe I misheard you.

Did you say that the 5% organic does or does not include your deliveries for the Takata airbag replacement in 2016?

The 5% is an organic increase from 2015 and that is not an increase of the replacement business in 2016 compared to 2015.

Okay, got you.

Thank you.

There are no further questions at this time.

I would like to turn the call back to your host for any additional or closing remarks.

Before we close this call, I would again like to extend my sincere thank you to the Autoliv team for relentless focus on quality and operational excellence.

And I would also like to thank everyone for participating in today's call.

We sincerely appreciate your continued interest in Autoliv and we look forward to our quarter one earnings call on Friday, April, 29 2015.

Until then, I wish you all well and goodbye for now.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.