Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.
Innovative Vehicle Technology
AnnuAl RepoRt 2008
08
Contents
Direction and Strategy Page
Highlights of 2008 1
Report from the Ceo 2
Strategic orientation 4
Research and development 8
the vehicle market 10
Haldex divisions
Commercial Vehicle Systems 12
Hydraulic Systems 16
traction Systems 20
Garphyttan Wire 24
Haldex in the society
Human Resources 26
Social responsibility 27
environment 28
Consolidated and Parent Company Financial Statements
Directors’ report 30
Consolidated income statement 34
Consolidated balance sheet 35
Changes in Group equity 36
Consolidated cash flow statement 37
notes Group 38
parent company income statement 56
parent company balance sheet 57
Changes in parent Company equity 58 parent Company cash flow statement 58
notes parent Company 59
Audit Report 63
Corporate Governance
Corporate Governance Report 64
Board of Directors and Auditors 70
executive Committee 71
Other
Haldex share 72
Five-year summary and quarterly review 74
Definitions 75
Addresses 76
FinanCial inFOrmatiOn in 2009 February 20, 2009
Year-end Report 2008 march 2009
Annual Report 2008 april 16, 2009
Annual General Meeting april 24, 2009
Interim report January 1 to March 31, 2009 July 17, 2009
Interim report January 1 to June 30, 2009 October 23, 2009
Interim report January 1 to September 30, 2009 Year-end and interim reports are published in Swedish and english and can be downloaded from the Haldex website www.haldex.com. the Annual Report is publis- hed in Swedish and english on the Haldex website.
annual General meeting 2009
Haldex’s 2009 Annual General Meeting will be held at 4 p.m. Cet on thursday, April 16, 2009, at the IVA Conference Center, Grev turegatan 16, Stockholm.
Participation in 2009 annual General meeting Shareholders who wish to participate in the Annual General Meeting must be registered in the VpC AB share register no later than Wednesday, April 8, 2009. notifica- tion must be made no later than noon on Wednesday, April 8, 2009, to Haldex AB, Box 7200, 103 88 Stockholm, or by telephone to +46 (0)8-545 049 50, or by e-mail to info@haldex.com.
Guide to reading the annual report
Haldex is a Swedish company, subject to Swedish laws. All values are expressed in Swedish kronor unless otherwise indicated. Millions of kronor are abbreviated as SeK m.
Figures in parentheses refer to 2007. Data concerning markets and the competitive situation represent Haldex’s own assessments unless a specific source is identified.
these assessments are based on the best and most recently available factual documentation from published sources in the vehicle industry.
D
Mission
Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.
We strengthen our competitiveness and develop long-term customer relationships through products that offer high performance and low total costs for the customer throughout the prod- uct’s service life, ethical business practices and commitment to long-term partnerships.
Vision
Haldex will be the global vehicle industry’s first choice as a long-term partner.
We will contribute to social development by pro- viding vehicle technology that satisfies our cus- tomers and society. By staying on the cutting edge of technology and developing skilled and moti- vated employees, we will also achieve profitable growth.
Values
• Customer first
• Respect for the individual
• Elimination of waste strategy
The Group should focus on areas in which Haldex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability.
This strategy includes evaluating structural opportunities in order to create competitive units with favorable prospects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth:
• Create growth and improve our competitive capabilities by developing and commercializ- ing new products
• Create growth by sharply strengthening posi- tions in new markets, primarily through deter- mined expansion in China, India, Brazil and Russia
• Reduce purchasing costs, in part by continuing to increase the share of purchases from low-cost countries
• Improve the cost structure by increasing the share of production in low-cost countries
• Improve productivity and quality through intensified use of Haldex Way, our concept for management and process improvement
• Develop employee competencies, strengthen the corporate culture and increase the focus on leadership
• Acquire companies and establish programs of cooperation that are consistent with the strategic direction
• Niche strategy – safety, environment and vehicle dynamics
Market
Europe accounted for 53% of Group sales, North America for 38% and remaining markets for 9%
in 2008. The markets in South America and Asia, particularly China, are showing robust growth, and their importance to the Group is increasing rapidly.
Legislation focusing on traffic safety, the envi- ronment and vehicle dynamics, combined with demands for continuous cost rationalization mea- sures, is the driving force for product development in today’s automotive industry. Demand is also driven by the increase in vehicle production world- wide. Haldex has a global market presence, with 23 production plants in Sweden, Germany, the UK, Hungary, the US, Mexico, Brazil, India and China.
the Group in brief
net sales by region 2008 net sales by customer
segment 2008 net sales by division 2008
South America, 3%
North America, 38%
Europe, 53%
Asia and Middle East, 6%
Traction Systems, 12%
Garphyttan Wire, 13%
Commercial Vehicle Systems, 50%
Hydraulic Systems, 25%
Other, 3%
Engines, 20%
Heavy vehicles, 58%
Light vehicles, 12%
Industrial vehicles, 7%
HalDex DiVisions
CoMMeRCIAl VeHICle SYSteMS (CVS)
During 2008, Haldex reached an agreement with Suzuki Metal Industry Co. to divest its division Garphyttan Wire. the transaction is expected to be completed during the period April to June 2009.
D
HAlDeX 2008Net sales, share of Group total
Employees, average share of Group total Operating income*
Operations Market share
CoMMerCial VeHiCle systeMs;
Develops and manufactures brake sys- tems for heavy trucks, trailers and buses.
the product offering covers all primary components and subsystems included in complete air brake systems. operations are divided into five business units: Actu- ators, Air Management, Brake Controls, Foundation Brake and Friction products.
HyDrauliC systeMs; Develops and manufactures gear and georotor pumps, hydraulic power packs and high density power systems; technology for diesel engines, i.e. pumps for lubricating oil, coolants and diesel fuel, and technology for reducing emissions of exhaust gases from engines. Hydraulic lifting systems and drive systems for industrial vehicles and trucks are also supplied.
HalDex Group
traCtion systeMs; Develops and manufactures electronically controllable systems for all-wheel-drive systems for cars, known as AWD systems. the system software can be customized to meet each carmaker’s particular desires in terms of driving characteristics and traction.
20–30%
SeK
2,095
mSeK
4,234
m50%
25%
12%
SeK
1,021
mnet sales,
Group total employees, average
Group total operating income,
Group total*
SeK
8,403
m50%
15%
2,335 2,856
48%
39%
6%
339
6,004
SeK
250
mHaldex market share of the market served with its current product program is about 15%. the market share is sub- stantially higher in individual product areas.
Hydraulic is a niche player with about 20% of the market share in its market niches. Business unit engines is market leader for oil, fuel and water pumps in north America and the rest of the world.
Haldex’s global market share in these sec- tors is slightly more than 30%, and just over 40% for oil pumps in north America.
Haldex is a market leader in controlla- ble AWD systems. the market share in europe exceeds 50%.
* excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. operating income amounted to SeK 92 m (289).
GarpHyttan wire; Develops and manufactures advanced spring wire from various alloys for use mainly in combustion engines and transmissions.
the main applications are valve springs, transmission springs, piston rings and springs for fuel injection systems.
net sales amounted to SeK 1,053 m in 2008.
operating income amounted to SeK 59 m in 2008.
Garphyttan had 474 employees in 2008.
the market share of the global market for oil-hardened valve spring wire is about one-third, which gives Garphyttan Wire a leading global position in this product area.
SeK
4
mSeK
146
mSeK
41
m1
HAlDeX 2008
Highlights of 2008
Highlights of 2008
Key figures 3 years 2008 2007 2006
Net sales, SEK m 8,403 7,940 7,890
Operating income* 250 339 403
Earnings after tax, SEK m –43 141 310
Earnings per share, SEK –1.92 6.24 13.96
Operating margin*, % 3.0 4.4 5.3
Proposed dividend, SEK – 4.50 4.50
Return on capital employed, % 2.4 8.3 11.5
Equity/assets ratio, % 29 37 40
Cash flow from operations, SEK m 857 312 402
Investments, SEK m 392 453 409
Average number of employees 6,004 5,518 4,683
* excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. operating income amounted to SeK 92 m (289).
SeK 8,403 m
Sales totaled SEK 8,403 m (7,940). Adjusted for currency exchange rates, sales rose 6%. Order intake totaled SEK 7,923 m (8,098). After adjustments for currency exchange rates, the decrease was 3%SeK –43 m
Earnings after tax amounted to SEK –43 m, (141). Earnings per share amounted to SEK –1.92 (6.24)SeK 250 m
Operating income* and operating margin* amounted to SEK 250 m (339) and 3.0% (4.4) respectivelySeK 857 m
Cash flow from operating activities was strong in the period amounting to SEK 857 m (312)April 1
Haldex completed the acquisition of Concentric on April 1SeK 800 m
An agreement was reached with Suzuki Metal Industry to divest the Garphyttan Wire division. The purchase price is estimated to SEK 800 m on a cash and debt free basis2 report from the Ceo
HAlDeX 2008lower costs and greater efficiency
create strong position when business conditions recover
Haldex endured a challenging and strategically critical year in 2008. the rapid decline in demand during the second half of the year was met by expanded cost-rationalization programs and improvements in operating efficiency. the Group implemented its renewed strategy and strengthened its structure with the completion of the Concentric acquisition and divestment of Garphyttan wire. Haldex is now a more focused company, with a better structure and cost level, competitive products and solu- tions to meet the recovery when it occurs.
2008 will go down in history as a year of extremes. After favorable development during the first half of the year, demand declined sharply in the second half. It was one of the worst periods the automotive industry has experienced in a very long time, as reflected clearly in our full-year earnings and the results of our competitors.
• Sales totaled SEK 8,403 m (7,940). After adjustments for changes in currency exchange rates, sales rose 6%. Order bookings amounted to SEK 7,923 m (8,098), down 3% after currency adjustments.
• Operating income* amounted to SEK 250 m (339) and the operat- ing margin* was 3.0% (4.3).
• Earnings after tax amounted to SEK –43 m (141). Earnings per share amounted to SEK –1.92 (6.24).
• Cash flow from operating activities developed strongly and totaled SEK 857 m (312), a strength factor in these difficult times.
Comprehensive cost-reduction program
Given these background conditions, we decided in autumn 2008 to make further adjustments in our cost structure and increase our production effi- ciency to meet the economic decline. These cost-reduction programs call for personnel cutbacks that will affect 1,500 employees from mid-2008 through mid-2009, of whom 1,000 had left the company before year-end.
The total reduction in personnel corresponds to 25% of our workforce.
The positive impact on earnings is estimated at SEK 425 m per year.
The programs will create savings in all divisions which will strengthen the Group structure and reduce working capital. We are closing several production plants and distribution units while increasing the efficiency of our production processes and the way we manage our operating capital.
Costs for the programs are estimated at SEK 150 m, of which SEK 85 m was charged against earnings during the fourth quarter and the remainder, SEK 65 m, will be charged against earnings in the first quarter of 2009.
We have been working actively with cash-management programs and have reduced working capital by 50%, which has resulted in a strengthening of our cash flow.
The measures were necessary adjustments to the rapid economic decline during the second half of 2008 and, combined with more effec- tive capital management, yielded favorable effects on our clearly improved cash flow. However, this also means that we are improving our potential to derive even greater benefits from our strategic structural mea- sures when demand starts to rise.
Adjusting the cost structure and adapting the workforce to a lower level of demand is always very painful. As in all such situations, the diffi- cult times have entailed hard work and major efforts on the part of our employees. I would like to express my gratitude for the contributions
made and the loyalty shown by Haldex employees both those who have already left the Group and those who remain.
Focusing the business
Haldex has excellent potential to create value for its stakeholders based on the company’s expertise in vehicle technology that improves safety, the environment and driving characteristics, reflecting some of the global economy’s most important trends. With profitability as the primary pri- ority, Haldex is working on strategies to change the Group’s structure and focus on areas where we can achieve internal synergies and a sustainable market position based on innovative and leading products that provide the best potential for continued business growth and higher profitability.
The first step was the acquisition of Concentric, which was finalized in April 2008. The integration of Concentric has progressed extremely well, and we are achieving cost savings and offensive synergies in prod- uct development and marketing, in line with expectations. The “New Hydraulics Systems” will be one of the diesel engine market’s largest suppliers of technologies and products that reduce emissions and fuel consumption, which are customer requirements that provide healthy global growth potential. In view of the current market conditions, we see opportunities for strong growth with favorable profitability.
The second stage was the sale of Garphyttan Wire to Suzuki Metal for SEK 800 m on a debt-free basis, a transaction that will be finalized in April–June 2009. Garphyttan has a very strong global position in its niche, spring wire for engines and transmissions used in the automotive industry.
In our judgment, however, the synergies with other areas of the Haldex Group’s business activities were not strong enough, and Garphyttan has a better future now as part of the global spring wire specialist Suzuki.
The divestment of Garphyttan enabled us to reduce Haldex’s net debt to SEK 1,535 m, pro forma, as per December 31, 2008. We also expect to realize a capital gain of about SEK 400 m.
Accordingly, Haldex’s financial position will be strengthened and we will be able to repay the bridge financing we raised to acquire Con- centric. After renegotiating our syndicated loan, which matures in 2012, combined with private placement loans with various terms of maturity through December 2011, Haldex has secured a stable financ- ing base. Lower investment requirements after the establishment of new business units in low-cost countries during recent years and our ongoing efficiency enhancement programs will contribute favorably to the Group’s cash flow development.
positioned for profitable growth
Like the industrial sector in general, we expect a troublesome 2009. The market outlook has seldom been more difficult to forecast. We have some security, however, in knowing that our skills, product development and products are favorably positioned to meet the long-term demand trend and generate profitable growth, efforts that are now gaining support from the actions we have taken to reduce costs and improve our operating efficiency.
A brief review of business prospects for our various divisions shows the following:
CVS: Although significant efforts have been made over the past two years to improve CVS’s structure and reduce costs, these were not sufficient to offset the exceptionally sharp decline in volume and higher raw material
* excluding restructuring costs, nonrecurring items and amortization of acquisition- related surplus values. operating income amounted to SeK 92 m (289).
3
HAlDeX 2008
report from the Ceo
costs during 2008. However, we have completed the restructuring program in the Friction unit and we are now able to see positive results from ratio- nalization measures implemented over the past few years. Combined with the program of measures to consolidate European distribution operations in a single unit and the closure of the production plant in Redditch, UK, as well as price adjustments and lower raw material prices, we will be posi- tioned favorably when demand starts to rise again. Investments in the prod- uct development of brake and air suspension systems are now starting to generate market successes, and we have several new concepts in the launch phase that will further strengthen our market position.
Hydraulic Systems: Our cost-reduction programs are also yielding effects in this area, and projected synergy gains totaling as much as SEK 70 m annually from the integration of Concentric are being realized.
With the exception of the Chinese market, we are now the global market leader for oil, fuel and water pumps for the diesel engine market, with good potential for continued success. Strengthened by a new generation of the successful Alfdex concept, and a broader launch of Varivent, we have two leading product technologies to meet the increasingly stringent environmental demands being imposed on our customers. We are con- tinuing to work on development of a new technology for electronic con- trol of hydraulic systems designed to provide major improvements in engine fuel economy. With a better cost base and lower raw material prices, the “New Hydraulic Systems” concept has good potential to grow with strong profitability when demand recovers and starts to increase.
Traction Systems: Haldex technology for all-wheel drive has gone from strength to strength, and we are now the leading source of product development and the leading supplier of electronically controllable systems, also known as AWD systems. This was confirmed in 2008 by an order from the manufacturer of one of the world’s most prestigious sports cars, with deliveries scheduled to begin in 2010, and another order for a European manufacturer’s new passenger car platform, with deliveries beginning in 2011. The future of all-wheel drive is secure, par- ticularly in view of growing safety demands. Haldex has a highly promi- nent position, with prototypes for the next generation that are now
being tested by two major car manufacturers. We are also conducting several research projects, including solutions for hybrid vehicles, which provide exciting potential in existing and new areas of technology.
Market outlook for 2009
It has seldom been more difficult to forecast future business trends than it is now during this winter. We do not expect any brightening of the demand trend during the first half year of 2009. In the large flow sys- tem that is the automotive industry, inventories are being reduced in all areas, thereby impacting new order bookings. When this process has been completed, there will be some potential for a recovery. In the long- term perspective, there is virtually no doubt that vehicle transportation comprises a growth segment of an increasingly globalized economy, in which more and more countries want to, and will, benefit from more jobs and improved welfare generated through the distribution of inter- national labor. There are also strong indications that more stringent demands will be imposed in terms of environmental and safety consid- erations, areas of particular importance to Haldex.
Positive aspects of the economic situation include falling energy and raw material prices, lower capital costs and the highly comprehensive economic stimulus packages that are now being launched in most coun- tries. Our own intensive work efforts to reduce costs and improve oper- ating efficiency will also yield favorable effects. As a result, Haldex will be well positioned and highly competitive when the market recovers.
Stockholm, March 2009
Joakim Olsson CEO and President
«In the long term perspective, there is no doubt that vehicle transportation
comprises a growth segment of an
increasingly globalized economy.»
4 strategic orientation
HAlDeX 2008Mission, vision, strategies and objectives
strategies
The Group should focus on areas in which Hal- dex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability. This strategy includes evaluating structural opportunities in order to create competitive units with favorable pros- pects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth:
• Product development
• Stronger positions in new markets
• Reduced purchasing costs
• Increased production in low-cost countries
• Improved productivity – Haldex Way
• Development of employee competencies, strengthening of the corporate culture and increased focus on management
• Strategic acquisitions
• Niche strategy – safety, environment and vehicle dynamics
Profitability has the highest priority in the Group’s strategy. In parallel, continued robust growth is an important prerequisite for success.
Haldex offers proprietary vehicle technology solutions that meet three customer require- ments, safety, environment and vehicle
dynamics. These customer requirements represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth combined with healthy profitability.
objectives
Haldex shall create value for the shareholders by focusing on competence, stable growth and increased profitability in a sustainable manner.
The goal will be achieved through a dis- tinct customer focus, growth in niche sectors offering higher growth potential than the automotive market in general and deter- mined strategies for cost savings and greater efficiency.
Financial objectives
Haldex has two overall objectives:
• 15% return on capital employed
• 6% annual growth
the secondary goals are:
• Operating margin of 7%
• Capital turnover rate of 2.5
Mission
Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.
We strengthen our competitiveness and create long-term customer relations through highly skilled employees, high-performance products, low total costs for the customer throughout the product’s service life, ethical business practices and a commitment to long- term partnerships.
Vision
Haldex will be the global vehicle industry’s first choice as a long-term partner.
We shall contribute to social improvements by providing vehicle technology that satisfies both customers and society. We shall also achieve profitable growth by staying at the cutting edge of technology and developing skilled and motivated employees.
Values
• Customer first
• Respect for the individual
• Elimination of waste
safety, environment and vehicle dynamics
The Haldex Group offers proprietary vehicle technology solutions that meet three primary customer requirements: safety, environment and vehicle dynamics. These customer requirements represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth.
The direction of demand is governed by such factors as increasingly stringent safety and environmental requirements from legislators, reflecting global consumer opinion that is becoming progressively pro- nounced. Growth opportunities are strengthened further by the impor- tance of vehicle dynamics in positioning and differentiating between vehicle manufacturer brands. With Haldex’s brake systems, all-wheel drive systems, hydraulic systems and engine products, the Group is able to offer technical solutions of the highest quality to the world’s leading vehicle manufacturers.
In accordance with the company’s vision of being a reliable, long- term primary choice, our products are often developed in close coopera- tion with customers to meet their specific requirements and applications.
Haldex creates value for the world’s leading vehicle manufacturers, which provides opportunities for continued strong growth and expansion.
optimizing the Group structure
To achieve sustainable growth, healthy profitability and increased share- holder value, Haldex focuses on areas in which the Group can secure a strong market position based on innovative market-leading products.
The core business is conducted within three divisions: Commercial Vehicle Systems, which is positioning itself for continued growth through ongoing efficiency-enhancement and rationalization programs, Hydraulic Systems, whose growth is mainly generated through the development and launch of new technologies that satisfy future demands arising from environmental legislation, and Traction Systems, a global technology leader in a segment characterized by high growth.
As a feature of the Group strategy, Haldex continuously evaluates its operations and a variety of structural opportunities for strengthening the competitiveness of its various units. These could take the form of cooperation with other companies, supplementary acquisitions or divestments. The acquisition of Concentric during 2008 was an initial step in Haldex’s strategic plan for optimizing the Group structure and creating a strong Hydraulic Systems Division. Another step towards a more focused business was taken towards the end of the year when an agreement was entered with Suzuki Metal concerning the divestment of the Garphyttan Wire Division.
5
HAlDeX 2008
Growth:
• Niche strategy for increased growth, through a focus on products with higher growth potential than for the vehicle market as a whole. For Haldex, this involves products that improve safety, the environment and vehicle dynamics.
• Increased competitiveness through product development is a central element in Haldex’s strategy. This involves both new product development and efforts to create new applications for our existing products.
• Strengthening positions in new markets is essential for growth. This will be achieved through goal-oriented expansion, primarily in China, but also in other countries such as India, Brazil, Russia and countries in Eastern Europe.
• Haldex continuously analyzes opportunities for strategic company acquisi- tions, while simultaneously launching other forms of cooperation. Developing new technologies and more rapidly establishing positions in new markets are key goals in Haldex’s acquisition strategy.
profitability:
• The cost structure is being improved by means of structural and efficiency- enhancing measures. An increasing share of production is being located in low-cost countries, thus reducing costs and bringing important parts of pro- duction closer to our strategic markets and customers.
• In order to increase profitability, Haldex strives to reduce purchasing costs, mainly by increasing the proportion of procurements from low-cost countries.
• Productivity is being improved through continued implementation and devel- opment of the Haldex Way management system.
• The organization’s efficiency is being improved through increased competen- cies and more distinct lines of control and responsibility.
• Making sure that large development projects are profitable.
• Synergies in the new Hydraulics Division.
• Expanded cost reduction program.
strategic orientation
Hydraulics and engine components
Daewoo Bus, Daimler, Dongfeng Motor, Eicher, Ford, First Auto Works, Freightliner, General Motors, Hino, Hyundai, Isuzu, Iveco, Kamaz, MAN, Oshkosh, Paccar, Renault Trucks, Scania, TATA, Volkswagen, Volvo.
trucks and busses Axles and trailers
Forklift trucks Industrial vehicles tailgate lifting devices and bogie axles
passenger cars products for
product areas Haldex largest customers
Ford (Ford,Volvo), Land Rover, General Motors (SAAB, Opel, Buick, Cadillac), Volkswagen (Audi, Bugatti, SEAT, Skoda, VW).
Caterpillar, Cummins, DAF, Daimler, Detroit Diesel, Deutz, Iveco, JCB, John Deere, Scania, Volvo, Tata Cummins.
Behrens, Bär, Dautel, D’Hollandia, Maxon, Scania, Sorensen, Zepro, Volvo.
Agco, Bobcat, Case New Holland, Caterpillar, John Deere, Doosan, Dynapac, Genie, Grove, JCB, JLG, Komatsu, Liebherr, O&K, Pinguely & Haulotte, Manitowoc, Skyjack, Terex, Vögele, Weyhausen, Volvo.
Atlet, Crown, Jungheinrich, Linde (Still, OM Pimespo), NACCO (Hyster, Yale), Rocla, Toyota (BT, Raymond, Prime Mover).
Arvin Meritor, Bendix Spicer, Bosch, BPW, CICM, Dana, Gigant, Great Dane, Guerra&Facchini, Hendrickson, Jindo, Kögel, Krone, Randon, SAF, Schmitz, Stoughton, TRW, Utility, Wabash.
engines Heavy vehicles
industrial vehicles
strategies for growth and profitability
Profitability has the highest priority in the Group’s strategy. In parallel, continued robust growth is an important prerequisite for success. To achieve its financial objectives for growth and profitability, Haldex applies the following strategies:
Brake systems
awD-systems
6 strategic orientation
HAlDeX 2008positioned for growth
Haldex is well positioned to meet the demands of the global vehicle industry.
Haldex’s mission and strategic orientation position the Group for growth. Asia, Eastern Europe and South America are markets with major requirements and characterized by robust growth. In countries such as China and India, the pace of social development is currently rapid. At the same time, climate issues and other challenges are placing greater demands on all of us to assume a global responsibility for reduc- ing energy consumption and achieving a better and safer environment.
In parallel with greater global commerce, which is driving increased transport requirements, the Western World’s infrastructure is being expanded and upgraded. For Haldex, this trend is creating strong driv- ing forces for business growth.
We develop and deliver products that improve safety, the environ- ment and the dynamics of vehicles used in the transport and infrastruc- ture sectors. In the world’s new and expansive markets, investments in these sectors are vital for growth and social welfare. In traditional indus- trialized countries, the transport and vehicle sectors must assume a greater responsibility for improving the environment and increasing safety. As a result of Haldex’s expertise in the form of technologies for satisfying the demands deriving from future legislation and the driving forces underly- ing improved fuel economy and increased safety, the Group is extremely well positioned to meet the demands of the global vehicle industry.
• Global presence and world-leading customers
Haldex has a global presence and its customers include world-leading vehicle manufacturers, which is a strategic strength. The Group has pro- duction operations distributed among 23 production plants and nine development units in North America, South America, Europe and Asia.
We are favorably positioned and able to offer proprietary products that focus on the environment, safety and vehicle dynamics. All of these features and characteristics are strategically important to our customers
and provide considerable growth potential. Haldex is positioned on the cutting edge of technology in all areas, but without being an inventor.
We develop and commercialize innovations, often in partnership with our customers, to provide maximum customer value. Serving world- leading customers in all product areas subjects the company to consider- able demands, while also signifying recognition of Haldex as a leading global manufacturer and market driver within its market segments.
• Product development and world-leading products Product development is a key driving force for organic growth and is a decisive success factor for Haldex. The Group specializes in transforming innovations into profitable, world-leading products in its niches. Invest- ments in product development have increased steadily and led to a pio- neering contribution to the vehicle industry’s technological advancement in all-wheel drive and disc brakes and in cleaning and increasing the effi- ciency of engines and hydraulics.
In 2008, development costs accounted for about 4% of sales. Prod- uct development is a key factor in Haldex’s strategy for being able to offer products in high-growth niches of the global vehicle market.
An important prerequisite is the ability to develop technical solutions that satisfy customer requirements arising several years into the future, while having the product planning that facilitates efficient and profit- able sale of new products. With its model for innovative product devel- opment, Haldex will be able to offer a series of new and attractive prod- ucts to the market in the years ahead.
• Competencies of managers and other employees Continuously operating at the leading edge of technological develop- ment and having world-leading customers exposes the competencies of both individual employees and the organization as a whole to stringent
0 4 8 12 16 20
01 00 Target 15%
%
02 03 04 05 06 07 08 12.1
5.8 6.06.8 12.8 12.3
11.5
8.3
2.4
return on capital employed To better reflect the conditions in Haldex’s markets and the long-term nature of its
business, financial objectives are expressed as average values over a business cycle.
the Group’s overall objectives are:
• return on capital employed of 15%
• annual growth of 6%
the Group also has the following secondary goals:
• profit margin of 7%
• capital turnover rate of 2.5
The objectives apply to the Group as a whole. Targets for the various business areas may differ depending on capital structure, degree of refinement or other business- related conditions. The return on capital employed has been less than 15% in the past five years. Efficiency efforts to strengthen Haldex’s profitability remain one of management’s main priorities.
Financial objectives
7
HAlDeX 2008
strategic orientation
«For Haldex, the world’s mega trends are creating strong driving forces for business growth.»
0 1 2 3 4 5 6 7 8
01 00 Target 7%
%
02 03 04 05 06 07 08 3.0 4.3 5.55.1 5.1
3.9 3.5 2.9 5.2
profit margin*
–10 –5 0 5 10 15 20 25
01 00 Target 6%
%
02 03 04 05 06 07 08 6.0
–4.0 7.0
15.0 11.0
5.0
1.0 6.0
–7.0
annual sales growth
0.0 0.5 1.0 1.5 2.0 2.5 3.0
00 01 2.21.9
2.0 2.2
2.5 2.4 2.3 2.2 2.2
Target 2.5 times times
02 03 04 05 06 07 08
Capital turnover rate requirements. Based on the skills and efforts of its employees, Haldex
aims to develop a high-performance, world-class organization that con- tinuously strives to improve operations in accordance with the internal management system, Haldex Way. Determining factors are how well this work is organized and ensuring that each employee is given oppor- tunities to utilize his or her full potential.
Management and HR work is governed by the following aims:
• To continuously develop our ability. By constantly raising the com- petency level of the organization and creating conditions that enable us to remain innovative and by continuously learning and improv- ing our operations, we generate a distinct competitive edge over our competitors.
• To continuously improve as managers. By increasing our ability to manage people and the organization, in both the short and the long term and in a generally more complex business, conditions are cre- ated for Haldex to become a high-performance company.
• To strengthen our corporate culture. By developing a strong corporate culture that encourages performance and responsibility, we create an attractive workplace for our employees and conditions for contin- uous improvements in our operations and earnings.
This can only be achieved through the contribution of each employee in the organization and when each individual:
• can act independently, make decisions and act on the basis of his or her ability and in accordance with the company’s norms and values.
• is positively committed to and participates in the development of his or her work and has the capabilities to interact with others for the benefit of both the employee and the company.
• Productivity and Haldex Way
In order to capitalize on its excellent growth potential, Haldex must improve is cost-effectiveness and increase its productivity. This work is conducted within the framework of the overall management and pro- cess improvement system, Haldex Way.
Haldex Way focuses on customer satisfaction and the achievement of world-class production. Haldex Way is based on the lean production philosophy, and the objective is to create a continuous link in flows between customers, subcontractors, production and product develop- ment. Haldex Way is an overall management philosophy for the entire value chain, including products, information and future requirements.
Haldex Way creates a shared direction based on active management and a uniform culture, while simultaneously facilitating tangible changes and improvements in the Group’s operations.
The concept for Haldex Way is based on three fundamental values:
• Customer first
• Respect for the individual
• Elimination of waste
Customer requirements are the controlling factor for these values. Our customers’ needs form the platform for what we produce – motivated employees are a basic prerequisite for the production of qualitative products – and we strengthen our competitiveness by eliminating all forms of waste. Management within Haldex must go hand-in-hand with the principles of Haldex Way and serve in a manner that provides support, leadership and development.
* excluding restructuring costs, one-off items and amortization of acquisition-related surplus values.
8 research and development
HAlDeX 2008new innovative
products generate growth
Haldex’s technical solutions for improved safety, environment and vehicle dynamics are based on customer requirements and requests.
Research and development represent a fundamental strategy for achieving Haldex’s long-term goal of profitable growth. In cooperation with custom- ers, Haldex specializes in developing and commercializing innovations into world-leading products in niches that enhance the vehicles’ performance in terms of the environment, safety and vehicle dynamics. In 2008, invest- ments in product development totaled 4% of consolidated sales.
The basis for research and development is in-depth knowledge of cus- tomer requirements, a high level of technical expertise and extensive knowl- edge of factors affecting the business environment. R&D work is con- ducted in collaboration with customers and partners, which include world- leading vehicle manufacturers and sub- suppliers to the vehicle industry.
The main driving forces for product development in the vehicle industry are legislation aimed at increased traffic safety, satisfying inten- sified environmental requirements, improved vehicle dynamics and reductions in fuel consumption, combined with demand for continu- ous cost- rationalization. Products that satisfy these more rigorous demands are also adjudged to generate significantly higher growth than the vehicle market in general, which provides Haldex with favourable prospects for increased value generation.
Product development activities are conducted in each division. Haldex’s specialist expertise is its ability to industrialize innovations, that is, develop ideas from the concept stage to products and industrial production, and then adapting them to the customer’s production and use in the market.
Haldex satisfies the unique requirements of each customer based on platforms designs, which require solid knowledge of the customer’s prod- uct planning and the correct position in the pro duct development cycle.
In parallel with proprietary product development, Haldex also acquires concepts and innovations that are then refined for cost-effective volume production.
Cooperation within research and development
Haldex cooperates closely with a number of European universities and colleges. Research is conducted in cooperation with the University of Technology in Luleå, Sweden. Haldex also engages in programs of cooper- ation with Chalmers Institute of Technology in Gothenburg and the Royal Institute of Technology (KTH) in Stockholm, both in Sweden, the University of Dresden in Germany and Cambridge University in the UK.
During 2008, Haldex together with KTH, another Swedish vehicle supplier and a Swedish vehicle manufacturer jointly received support from the Swedish Foundation for Strategic Research via the ProViking 2 program. The purpose of the project is for universities and industry to cooperate with the aim of improving development methods for mechatronics design.
The Program for Automotive Research (PFF) is conducting a Green Car research project to develop more environmentally compatible vehicles.
Haldex contributes knowledge and the experience gained through its devel- opment of Alfdex and Varivent. Within this project, Haldex is also cooper- ating with the Faculty of Engineering at Lund University, with the aim of optimizing the life and function of AWD systems.
products and functions that enhance vehicle safety generate growth exceeding that of the vehicle market as a whole. this trend is being driven by increas- ing demand from customers and new legislation aimed at improving traffic safety. Haldex adopts a proactive approach and represents innovation in the field of brake technology for trucks and trailers, while advancing development in cooperation with customers.
For enhanced safety in pas- senger cars, Haldex has devel- oped an electronic differential slip based on its all-wheel drive system – Haldex XWD. together with Haldex couplings, this electronically controlled mod-
ule is integrated into the AWD system for enhanced stability when maneuvering at high speeds. Haldex XWD provides increased safety by offering complete integration of this with the brake and stability systems.
BraKe anD air suspension In the vehicle trailer segment, Haldex currently occupies a leading position as a supplier of brake and air suspension systems. In cooperation with Europe’s
leading trailer manufacturers, Haldex has implemented improvements to the EB+ (Gen2)
In recent years, Haldex has pur- sued a strategy of meeting and exceeding society’s increasingly stringent environ mental requirements and the Group now offers a portfolio of competitive products that contribute to more efficient emission control and superior fuel economy. Some of these products are already available for series production in the market, while others are at various stages of development.
VariaBle Flow puMps Since Haldex’s technologies are fully developed for the next generation of engines, the Group’s various prod- ucts can provide improvements in terms of performance, efficiency and
Haldex is one of the world’s leading suppliers of all-wheel drive (AWD) systems. the first generation of Haldex’s AWD coupling was introduced in 1998 for Audi tt and Volkswagen Golf. Subsequently, the devel- opment of new generations has continued and the fourth gen- eration was launched in 2008.
Although the mechanical components in Haldex’s all- wheel drive system are fundamentally the same for the various cars, vehicle dynamics can be customized through a variety of programming and control systems. the combina- tion of mechanics and electron- ics – mechatronics – provides considerable flexibility, while
Haldex’s modular approach reduces costs for vehicle manufacturers.
In order to broaden the product portfolio, a system with a controllable differential slip has been developed, which improves the vehicle’s traction and stability when maneuver- ing at high speeds.
Generation i – 1998
The first Haldex coupling comprised a wet multiple disc clutch integrated in the rear axle.
Cars equipped with Generation i:
Audi A3 TT, VW Golf, Bora, Sharan, Beetle, Seat Leon, Alhambra, Skoda Octavia
saFety
enVironMent
VeHiCle DynaMiCs
9
HAlDeX 2008
research and development
electronic brake system that provide improved functionality and superior system integration.
In addition to brake adjustment, the system also features electronic stability control (ESC), intelligent control of lift axles (ILAS) and a new product generation for raising/ lowering trailer chassis (COLAS+), which also includes a roll-on roll-off function for optimal adaptation and safety in connection with, for example, ferry transports. The system also offers Reset To Ride, Haldex’s patented comfort and safety function for automatic repositioning of the chassis level after loading and unloading.
BraKe By wire
To meet the demands placed on tomorrow’s brake systems, including further improvements to brake performance and vehicle dynamics, Haldex has developed brake- by-wire systems, which are completely electronic brake systems for trucks and trailers that feature electromechanical
brakes. This means that each wheel is fitted with a brake that is intelli- gently regulated by an electric motor, replacing today’s compressed-air brakes.
The signal to apply or release the brakes is transferred electrically from the driver’s pedal to the wheel end.
With electromagnetic brakes, the braking distance for heavy trucks is shortened by an average of 15% as a result of a more rapid response and enhanced control, thereby contributing to increased traffic safety.
Other advantages include lower energy consumption compared with current systems and more efficient energy recovery when braking with hybrid vehicles.
trailer rolloVer staBility
In 2008 Haldex announced the addition of the 2nd Generation Trailer Rollover Stability (TRS) System. The system, built on Haldex’s newest 4S/2M ABS platform provides the next genera- tion of high performance braking along with roll stability safety technology. TRS is designed for one to three or more axle trailers using an air suspension. The system delivers superior braking performance by adjusting for the trailer condi- tions during normal and ABS braking events as well as to intervene with active braking if conditions indicate a rollover is imminent.
emissions, as required by Euro 6 and regulations beyond EPA 10. In addition to normal exhaust emissions, the more stringent legislation for engines includes other types of emissions, such as crankcase gases.
By combining Haldex’s variable flow pumps for oil and water, fuel savings exceeding 4% can be generated. The pumps adapt the flow of fluid to the vehicle’s requirements, thus limiting the energy required for operating the pumps. As a result, both CO2 emissions and fuel consumption are reduced, providing significant benefits for both trucks and passenger cars.
VariVent
The environmental benefits offered by Varivent are similar. The EGR (Exhaust Gas Recirculation) is an established method of reducing nitrous oxide emissions and its efficiency is enhanced by Varivent, which uses variable throat technology
to pump exhaust gases more efficiently. This, in turn, means that less energy is wasted in pump- ing gas through the EGR circuit and so reduces fuel consumption and CO2 emissions.
Extensive engine testing has confirmed fuel savings of 4% for heavy trucks. The technology is particularly suitable for turbo charging and high EGR (Exhaust Gas Recirculation) flows and can be adapted for individual engine turbocharging and EGR strategies. Naturally, the trend towards reduced fuel consumption also applies to gasoline-powered cars. In terms of volume, the engines of the future will be smaller but will generate the same horsepower as current engines. This will be achieved by means of high boost pressures and applying other turbo- strategies and here Varivent has a major contri bution to make.
alFDex
The Alfdex system offers the market a highly efficient method for separating oil and particu- late matter from ventilation gases in the crank- cases of diesel engines, also known as crankcase gases. Alfdex is a joint venture based on Alfa Laval’s expertise in centrifugal separation and Haldex’s position as a supplier to the global vehicle industry.
During 2008, a new generation of the Alfdex system was launched, which is up to four times as effective and can handle up to three times the amount of crankcase gases as compared with the current model.
The system uses centrifugal technology to remove particles down to 0.1 g/h or lower in normal driving conditions. With a rotational speed of 7,000–8,000 RPM, particles and oil mist are separated from the gas and returned to the oil sump.
Generation ii – 2002
The second-generation Haldex coupling was equipped with more intelligent software and new valve technology for faster reaction.
Cars equipped with Generation ii:
Audi A3, TT, Bugatti Veyron, Ford Freestyle, 500, Mercury Montego, Seat Altea, Freetracker
Skoda Octavia, VW Golf, Passat, Multivan, Volvo S40, V50, S60, V70, XC70, S80, XC90
Generation iii – 2004
The third generation received more pressure from an electric pump in connection with start, which eliminated wheel spin and in turn improved vehicle dynamics and off-road driving.
Cars equipped with Generation iii:
Land Rover Freelander, Volvo S60, V70, XC70, S80, XC90
Generation iV & xwD– 2007/2008 The faster and lighter Generation IV can also be combined with an additional coupling that con- trols the torque between the left and right rear wheels – Haldex XWD
Cars equipped with Generation iV:
Audi A3, TT
Skoda Octavia, Superb, Yeti VW Golf, Passat, Tiguan Land Rover Freelander
Volvo S60, XC60, V70, XC70, S80, XC90
Cars equipped with Haldex xwD:
Saab 9-3 XWD, Opel Insignia Buick Lacrosse, Cadillac SRX
Generation V
The development of a fifth generation is under way. Estimated production start: 2012.
10 Vehicle Market
HAlDeX 2008Haldex’s market
Production of heavy trucks and trailers is an indicator of trends in the Haldex market for brake systems. However, several important variations often give rise to a different trend in the market served by Haldex, compared with the vehicle market in general:
• the aftermarket accounts for about 40% of Haldex sales in this business sector. Since fluctuations in the aftermarket are normally not as volatile as changes in the production of trucks and trailers, the aftermarket has a stabilizing effect on Haldex sales during periods of both economic growth and decline.
• the market served by Haldex is larger for trucks than for trailers, since trucks are equipped with certain brake products that are not included in trailers.
• the markets in Europe and North America differ in several respects. In Europe, for exam- ple, disc brakes are installed in about 75% of all new trucks. The corresponding figure in North America is less than 5%. Drum brakes continue to dominate this market.
Taking all these factors into account, growth in the Haldex market for brake systems declined about 7% during the year (at unchanged sales prices).
For other business activities, demand is linked more strongly to factors other than
truck production. Industrial vehicle produc- tion is a key factor for Hydraulic Systems, as is production of construction machinery, fork- lift trucks and, to some extent, trucks.
Demand in Traction Systems is impacted, naturally, by the production of four-wheel- drive vehicles, but also to a large extent by the rate at which simple systems are replaced by more sophisticated adjustable systems.
trends and forces
In addition to the number of vehicles produced, Haldex’s market is also affected by changes in vehicle design resulting from new customer demands and requirements mandated by law- makers. These market trends and driving forces represent the foundation for Haldex’s focus and production.
safety
Brake systems and four-wheel drive are key elements in terms of vehicle safety. Today’s increased demand is being met more than ade- quately by products developed by Haldex in these areas.
environmental awareness
Haldex has several products with strong envi- ronmental profiles, such as Alfdex, which removes oil particles from crankcase gases in diesel engines, and Varivent, which makes it possible to reduce nitrogen oxide emissions
from diesel engines in a manner that also enables low fuel consumption.
Driving characteristics
Driving characteristics and vehicle dynamics are becoming increasingly important compet- itive tools and differentiation factors for vehi- cle manufacturers. Four-wheel drive and electronic brake systems are key components in the development of products that match the driving characteristics of different custom- ers and requirements.
Other trends that affect Haldex include efforts by vehicle manufacturers to produce lighter vehicles, in order to reduce fuel con- sumption, for example. Accordingly, lower product weight is an important goal in Haldex’s product development work.
In markets outside Europe and North America, demand for western technology is growing, which is driven by the markets them- selves and new legislation, particularly in large markets such as India and China. As a result, demand for Haldex products in these markets is also expected to grow more rapidly than overall vehicle production.
In total, the trends toward improved safety, environmental characteristics and vehicle dynamics are expected to generate more rapid growth in Haldex’s market compared with the general vehicle market. These expectations are also supported by development in new,
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truck production trailer production air brake wheel ends
Market trends and forces
11
HAlDeX 2008
Vehicle Market
emerging markets in Asia, where demand for advanced products and technology is increasing constantly.
Market 2008*
trucks and trailers
The first half of 2008 showed favorable sales growth. This was followed by a uniquely rapid drop during the second half of the year in Haldex’s major markets in Europe and North America. The market slowdown was particu- larly rapid during November and December, when the global financial crisis was followed by a serious downturn in the economy.
Global production of heavy trucks increased 10% in 2008 compared with the preceding year.
During the fourth quarter, production declined 13% compared with the corresponding period in 2007.
Production of heavy trucks in North Amer- ica declined in 2008 from 212,000 vehicles to 203,000, down 4% compared with 2007. In Europe, production of heavy trucks increased 8% compared with 2007, and the number of vehicles produced was 600,000. However, production declined 14% during the fourth quarter, compared with the corresponding period in 2007.
Global production of trailers declined 13%
compared with the preceding year.
The weaker economy also impacted the market for trailers in North America. Produc-
tion was down 34%, compared with 2007.
The number of trailers produced totaled about 168,000 in 2008.
In Europe, the production of trailers was 4%
lower than in the preceding year. Total produc- tion amounted to 340,000 units. Production during the fourth quarter declined 27%, com- pared with the year-earlier quarter.
The aftermarket for brake systems accounts for about 40% of sales invoiced by the Com- mercial Vehicles Systems Division. The after- market in the US was stable during the first six months of 2008, but showed some decline during the fourth quarter, mainly due to adjustments of inventory levels. In Europe, volume sales in the aftermarket declined com- pared with 2007, due to stricter credit regula- tions and extended inventory adjustments.
Construction machinery
The global market for construction machinery remained strong through the third quarter of 2008, but was impacted strongly by the eco- nomic slowdown in the fourth quarter, although not as much in North America as in Europe. The decline in North America was about 10%, compared with slightly more than 10% in Europe.
Production was down more than 10% in North America during the fourth quarter and more than 20% in Europe, compared with the fourth quarter of 2007.
Forklift trucks
Production of forklift trucks in the North American market declined 20% during 2008, compared with 2007. During the fourth quar- ter, the North American market shrank more than 40% compared with the fourth quarter of 2007.
The market for forklift trucks in Europe declined about 10% in 2008. Fourth-quarter production was about 20% lower than in the year-earlier quarter.
passenger cars
Global production of passenger cars declined 3% in 2008, compared with 2007. Production in North America was down 16%, compared with a decline of 4% in Europe.
During the fourth quarter, production in North America was down 25%, compared with the fourth quarter of 2007, and produc- tion in Europe declined 24%.
* All information about trucks and trailers (except for trailers in europe) and light vehicles are based on JD power Statistics Q4, 2008.
