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Am!Ual R(~port 2007 Autofiv


Adv8nced Satety Systeins

Autoliv - Driven for Life

Autoliv has accounted forvirtually all majortechnological breakthroughs in the occupant restraint industry over the last 20 years and we are determined to remain in the torefront of development. The new 2008 Laguna obtained the highest result ever in the EuroNCAP crash test program. This is an example of a vehicle that features many advanced productsfrom Autoliv


&Jatbelt Systems


Modern seatbelts can reducethe overall risk of serious injuries in frontal erashes by as much as 60% thanks to two advanced seatbelt tech- no logi es installed i n the Lag u n a' s front and rear seats: pretensioners and load limiters.


Retractor pretensioners tighten the belt at the onset of a frontal crash, using a small pyro- technic charge. Slack is eliminaled and the oc- cupant is restrained as earlyas possible, thereby reducing the risk of ribfractures.

~ Load limiters pay out som e webbing i n a con- trolied way to avoid the load on the occupant's c hest from becoming too high.

\ U

Lap pretensioners in each front seatbelt system further tig h ten the webbi ng to avoid si id- i ng under the belt which im proves lower leg pro- teetlon and prevants abdominal injuries from a loose belt. These pretensioners are deployed bothin frontal and side-impact collisions.

When used in combination, pretensioners, load limiters, lap pretensioners and frontal air- bags can reduce the risk for life-threatening head or chest injuries by 75% in frontal crashes.


Curtain airbags reduce the risk of life-threat- ening head injuries in side impacts by approxi- mately 50% for occupants who are sitting on the side of the vehicle that is struck. Curtain airbags c over the whole upper side of the vehicle.

The adaptive frontal airbag for the driver re- duces fatelities in frontal erashes by approxi- mately 25% (for belted drivars) and serious head injuries by over 60%. Bot h the driver and the pas- senger airbag in the new Laguna are "smart".

Consequently, the power of the airbags can be tuned to the severity of the crash, using dual- staga airbag inflators (i.e., airbag inflators with adaptive output). The Laguna driver airbag is


also using a new type of cushton. Multt-Volume Cushion (see separate description).

The 3D frontal airbag for the front-seat pas- senger reduces fatal ities in frontal erashes by ap- proximately 20% (for belted front-seat passen- gers). lt deploys in 50 milliseconds, halt the ttme ofthe blink of an eye.

Front side-airbags have dual chambers to proteet both the pelvis and the c hest areas of the occupant, reducing the risk of serious injuries in side-impact erashes by approximately 25%.

Rear side-airbags reduce injuries for rear sea t occupants.

tiOI'lS for contlvl _.,.

sttttng at •a flnger tlp'!. dtli~

make lt not only more comfona01e te» cotttM!

ferent functions bu t also makesdnvmg


1' Other lmportant Products

Autohv also produces knee a~rbags, antt-sHdmg bags, whiplash proteetJon ,;ystems, chtld seats, and pedestrian hood-lifters, as weil a5 mght vision systems, telernatics and other act1ve safety systems.


E leetronies

tian system should be deployed. The ECU con- tains crash sensors and a microprocessor, as weil as back-up alectricity in the event the con- nection to the ear battery is cut off in the crash.

The ECU is located in the middle of the vehicle, where it is weil proteet ed d u ring a eras h.

The Electronic Contra! U nit (ECU) is the brain of the car's safety systems. lt decides not on ly if, but also exactly when, the seatbelt pretension- ers should be tightened and each airbag protec-

To further improve the proteetlon of the eecu- pants in side crashes, special attantian has been put inta the Laguna's side crash sensor system.

For controll i ng the deployment of the curtain air- bags and the new generation dualchamberside airbags, the alectronie system has two sate/lite sensors located in e a ch door instead of on ly on e.

A specific algorith m sets the time for deployment depending of the violence and diraction of the impact.

Multi-Volume Cushion

The Laguna d H ve r airbag cushion is not circu l ar as most trad itional driver airbags Than ks to its specific shape, the bag catches the occupant ear l i- er. makmg the "landing" in the bag safter. The bag also has a nu m ber of different tear-seams that will open depending on the actual size of the occu pant and the eras h severity.


Small staturad occupants and relatively low crash severity; on lythetear seams in the lower part of the c u sh i on o pen d u ring d eployment d u e to lo w we i g ht of the occu- pant.


Full staturad occupants and high crash severity; the t ear seams in the lower part of the cushion will open as for the smaller occupant. Additionally, the inertia force from a heavier o cc u pant will al so o pen t ear seams in the upper part of the cushion increasing the vol u me andadding venting areas to adapt the performance of the air bag.



Reader's Guide

Aulaliv lnc. is incorporated in Delaware, USA, and Aulaliv follows Generally Accepted Accounting Principles in the United states (U.S. GAAP). This annual repartaisa conteins certaln non-U.S. GAAP measures, see pag~s 32.-33. All amounts in this annual report are in U.S. dollars uniess otherwiseindicated.

"We", "the Company" and "Autoliv" referto "Autoliv lnc." as delinad in Note 1 "Principles of Consolidation"

on page 49.

For forward-looking information, refer to the "Safe Harbor Statement" on page 31.

Data on markats and campatitors are Autoliv's esti- mates t hat are basad on orders awarded to u s or ou r com-


3 Advanced Safety Systems 5 2007 in Summary

6 Overview

8 President's Letter

12 Vision, Mission & Strategy 14 Customers

18 Technology 20 Cost Contro l 22 Employees 24 Shareholders 28 OurValues


30 Management's Discussion and Analys is 44 Management's Report

45 Consolidated statements of l neo me 46 Consolidated Balance Sheets

47 Consolidated Statements of Cash Flows

48 Consolidated statements of Shareholders' Equity 49 Nates to Consolidated Financial statements 63 Auditor's Reports

64 Corporate Governance 66 Board and Diractors 67 Senior Management

68 Locations and Capabilities; Financial Definitions 69 Selected Financial Data


E very year, Aulaliv pub l is hes an ann u al report and a proxy statement prior to the An nual General Meeting (see page 26). The proxy statement provides informa- tion not on ly on the agenda for the meeting, bu t als o on the work of the Board and its committees, campensa- tian paid to and presentation of diractors and certaln sen i or officers.

For financial information, please also refer to the Form 10-K and Form 10-Q reports and Autoliv's other fil i ng s with the Secu ritles and Exchange Commis- sion (SEC) and the New York stock Exchange (NYSE).

These filings (including the CEO/CFO Section 302 Cer- tifications, seetio n 16 Insider Fi lings, and the 2007 CEO

The annual and q uarterly re ports, the proxy statement and Autaliv's filings with the SEC as weil as the Com- pany's earparate Governance Guidelines, Charters, Godes of Ethics and other documents governing the Company can be downloaded from the Company's ear- parate website. Hard caples of the above-mentioned documents can be abtai ned Irae of charge fram the Company at the addresses on page 27.

petitors. Theestimatasars also basad on plans announced Certification to the NYSE) are available at www.autoliv.

by vehicle manufeeturars andregulatory agencies. com under Investors/Fil in g s and at



2001 In Summary

• Sales grow th resumed.

• Operating margin affected by start-up costs in China, commodity prices and a court ruling.

• Continued strong cash flow and record returnsto shareholders.

• Continued move to and expansion in low-cost countries.

• Acquisitions of joint ventures in Korea, China and lndia.

• First order for Europe's "eCall in Every Car" and new contracts for night vision and integrated ECUs.

Growth Aebound

Netsales US$ (millions)


6,000- 5,000- 4,000- 3,000- 2,000- 1,000-

Global LVP Units in miltians - 100

- 80

- 60

- 4 0

- 2 0

o- - o

03 04 05 06 07 Global Light Vehicle Productian (LVI') - Netsales


In 2007, sales grew by 9% to a record leve! of

$6.8 billlon after three years with relatively flat sales due to weak light vehicle productian in Western Europe and North America where Auto- liv generates m arethan 70% of sales. Growth in 2007 was driven primarily by strong demand for seatbelts and strong growth in light vehicle pro- ductian in emerging markets.

(Dollars in millions, except as indicated) 2007') 200621 2005

Sales $6,769 $6,188 $6,205

Operating 1ncome 502 520 513

l neo me befor e tax e s 446 481 482

Netincome 288 402 293

Earnings pershare in $3i 3.68 4.88 3.26

Operating margin (%) 74 84 83

Cash flo w from operations 781 560 479

Return on shareholders' equity (%) 12.0 171 11 7

Dividends pald 121 112 105

Share repurchases $380 $221 $378

''A court ruling (see page 37) reduced operating income and income betare laxes by $30 million, net lncome by $20 million, eamings pershare by 26 cents, operaUng margin by 0.5 percentaga points. cash from operations by $36 million and return on equity byO.B percentaga points (see page 32). ~ Ratease of tax reserves and other discretetax ttems boosted net income by $95 milion, earni'lgs pershare by$1.15 and return on eqLity by3.9 percentaga points (see page32). 3Assumingdilutlon.

Strong Eammgs




3- 2 -


00 04 05 06 07

- Reported , _ Trend Iine Non-U.S GAAP

Earning per Share (EPS)

In 2007, a court ruling (see page 37) reduced ea_rnings per share by 26 cents while earnings pershare in 2006 was boosted by $1.15 from the release of tax reserves. Excluding these effects, earnings per share rase by 6% to $3.94 (non- U.S. GAAP measure, see page 32) between 2006 and 2007, and at a compounded averaga annual growth rate (CAGR) ot'8.8% since 2003.

Record Shareholder Return s

US$ (mUiions) 600- 500- 400- 300-



% - 12

- 10

- 8

- - 6

- 4


- 2

03 04 05 06 07

. Share buybacks - Yield

~c Dividends

Shareholder Retums

During 2007, Autoliv returned $501 million to shareholders through s hare buybacks and quar- terly dividends. This was $151 million more than cash flow before flnanclng of $350 million and earresponds to a yleld of 11% in relation to the Company's averaga market capitalization dur- ing the year.




A Quick Ride Through Autoliv

Each year mo re than on e million people are killed in automotive accidents and many more are in j u red, eausing immeasurable s uffering to individuals and families- Autoliv's vision is to substantially reduce traffic accidents, fatalities and injuries.

Grm'lfth O rivers

(see page 141 Autoliv's market-the global occupant restraint market-has grown at an annual average rate of 5% du ring the last 10 years to $18.5 billion. The market has grown by 2% per year du e to higher light vehicle productian and by 3% as a result of growing sa fet y content per vehicle.

Our Market

US$ (billions) 2 0 -

. ~

+5%/yr +3%/yr 1 5 -

- "'"~~::;=1FIFIMr1


1 0 -

5 -l

o -


... ..._

97 98 99 00 01 02 03 04 05 06 07 Total market

·~~ Average safety content per vehicle

=•' Global light vahicle productian


US$ (billions) 7,000- 6,000- 5,000- 4,000-

::::: d


0 ~~~ALAL~ALAL~~

97 98 99 00 01 02 03 04 05 06 07 - Europe - Japan ~~~ Trend

- N. America RoW Iine

Global Pr~sence

(see page 141 Autoliv's sales have risen at an average rate of 7.6% per year to $6.8 billion since the start of the new Autoliv lnc. company in 1997. This cam- pares favorably with the ave r ag e g rowth rate of o ur m arket of 5% per year.

One reason for this outperformance and in- crease in our market share is our strong pres- ence in Asia and other Rest of the World-coun- tries. As a result, Autoliv now accounts for mo re than enethird of the global market for occupant restraints (i .e. airbags, seatbelts and related safety electronics).

Techno~ogicai teaderat~ip (see page 1s1

Autoliv is a high ly innovative company. We hold 7% of all im portant automotive safety patents in the world. R,D&E, gross earresponds to 8% of sales.

World's Firsta from Autoliv

-~; ;·.-..._ .. -·~.:::,:.~.·.::~:::-~;~~~~~~~


2007 2006

Bumper Airbag, Front Edge Airbag, Multi·Volume Cushion

Safety Vent Airbag, ECU integration

~ : ~

2005 Night vision systern, Pedestrian hood 2004 Asymmetric driver airbag

2002 Anti-silding bag, Adaptive load lim~er

20110 Telernatics

1998 Guttam airbag, Anti-whiplash seat 1997 ITS (side airbag for head protacllon) 1995 Knee airbag, seatbelt load limiter 1994 Side thorax airbag

1992 Steering wheelmtegrated sensor 1989 Seatbelt buckle pretensioner

191l6 Bell grabber 1980 Airbag productian 1956 Seatbelt productian



Quality Excellence

(seepage21) Au to l iv's products never get a seeond c han ce.

Therefore, manufacturing and quality excellence areimperative for a world-el ass s u pplier of safety systems. Plants accounti ng for mo re t han 99% of con so Iidated sales are certified to t h e automat i ve qualilystandard ISO/TS 16949.

Eliminale bad designs

Eliminale bad camponents

Elimmate bad manufacturing

Autoliv Producl Development System


Aulaliv Supplier Manual


Attractive Cusicmer Mix

(see page 14)

We have sales to all the leading vehicle manufacturers, and our attractive customer mix has become even more diversified.



~·l·ric!cmcy (see page24) Since 2003, Aulaliv has grown sales by 28%

and operating income (on an comparable basis) by 25% without increasing capital employed by more than 11%. This capital efficiency improve- ment has resulted in steady earnings per share growth and cash flow.

Cap~tal Employed vs. Sales & Operating lncome

% Index (2003 = 1 00) 130-





- Openating income - Capital employed

07 Sales

Customer Mix 2007


Ford 12% /Volvo 6%

Renault Nissan 12%



Volkswagen 1 O%


Peugeot Citroen 8%



BMW6% Honda5% Mercedes4%

Chrysler 4%


Others 12%

Opportunistic Shewa Buybacks

(see page 25)

We have u sed som e of this cash flo w to bu y back shares in an opportunistic way; i.e. we have bought mo re s hares when we believe the price to be lo w and fewer s hares w hen the price has been high er.

Shar$ Buybacks

Nu m ber of $hares (millions) 3 0 -

2 5 -

~ .-l

2 0 - 15 - 1Q - :;.-

• m


(l~ 04 Cl6 00 01

Total amount tor each year.

Eliminate non-conform i ng products

Autoliv Productian System


Aulaliv Qualily System


Zero defect

Motivated c;r.d




Autoliv's dedicated and motivated 42,000 asso- ciates in 32 countries provide the highest earn- mitment and service to customers all over the globe.




Ou r Sih::w eho!dler s

(see p&ge 25) Ou r s hare repurchases have contributed to g row- ing earnings pershare by 40% which is a growth rate of 8.8%, significantly fasterthan operating in- come, which increased by 25% at a rate of 5.7%. All numbers adiusted see page 32.

Earmngs per Share


Operating lncome

Index (2003=1 00) 140-





90 ---=03~~0~4--~0~5---06~--~0~7

<>~• Earnings pef share

~ Operating lncame

~ Average growth



· President's Letter

Dear Shareholders,

On April1, l h ad the honor of becoming the new President and CEO of your company. 1 have worked for Autoliv in various positions for eight years and my predecessor, Lars Westerberg, is now the Ch airman of the Board. Continuity is therefore assured.

l intend - tagether with ou r associates - to fur- ther develop Autoliv's leading positions. We will continue to grow our Company faster than the global automotive safety market, both organi- cally and through acquisitions. We will al so con- tinue to reduce costs to i nerease our profitabili- ty and cash flow. This cash can then be used to create shareholder value either through share buybacks, dividend increases or acquisitions.

And, of course, in Iine with our social respon- sibility and business vision, we will continue to create value for ou r customers, employees and the societies where we operate.

Autollv's vision "to substantially reduce traf- fic accidents, fatallties and injuries" is concrete and measurable. lt is highly motivating- in fact a privilege - to work for this company and for something as lmportant and meaningful as sav- i ng lives. Unlike many companies' visions which are abstract and only achievable in the distant future, weturn ou r vislon in to reality every day.

However, as we "Live our Vision", we must not lose focus of the realitles of business. Since no company in the Iong run can provide value- added products for its customers, weil pay- ing jobs for lts associates, or attractive returns for its shareholders without profitability and growth, l set the following priority list when l as- sumed office:

1. Short- and long-term Protitabil ity 2. Long-term Growth

3. Shareholder Returns

Move to Low Cost Countnes

Headcount 50,000-

20,000- 71%•


o - -

o~ u4

~·u• Trend IInes






Profitabllity quickly became our top priority re- flecting the fact thai we saw operating margin sliding. The margin slid from 8.4% achieved in 2006 to "exceeding 8%" expected for 2007 at the beginnlng of the year, and then slid further to "close to 8%" expected after the first quarter.

The final level land ed at 7.9% on a comparable basis (i.e. excluding the effect of a court ruling, see page 37).

Although this declina of 0.5 percentaga points Is due to unusually high start-up costs in China, higher raw material prices and distressed suppliers, we had to ensurethat this would not become thestart of a new trend.

Therefore in 2007, we intensified our efforts to shift productlon and engineering to low-cost countrles (LCC) and to i nerease o ur sourcing of components in !hese countries. As a result, we currently have 52% of ou r personneJ in LCC (see graph) campared to 47% a year ago and less than 10% when the program starled in 1999.

As to purchasing components, we increased the share purchased in LCC to 30% (see graph}

and we remaln committed to our target to reach 50% by the end of this decade.

Additionally, In 2007, our restrueluring activ- illes were unusually high, which resulted in $10 million higher restrueluring costs than in 2006.

One seatbelt plant In the

u. s

was ciased down and several other manufacturing Iines were moved to Mexico and other LCC.

LCC Share of Externa! Purchasing

% 5 0 -




/ ;





04 05 06 07 08 09 - Actual ~~ Target

In 2007, we also lm proved laber productivity by mo re than 7%, weil above ou r target of at least 5% annually (see g rap h).

Ou r 42,000 associates have done a great jo b to hel p Autoliv achieve !hese results. l am grate- ful to everyone who continously contributes to the success of our company through their ded- icated daily work. Thanks to them and the ac- tions l just mentloned, operating margin should recover in 2008.

Long-term Growth

However, it is not enough to maintain a steady marg in. In order to grow earnings and cash flow we also need to grow ourtop Iine.

In this respect, we are helped by the expected continued growth of both vehicle production and the safety content per vehlcle. Globallight vehi- cle productian Is expected to i nerease at an av- erage annual rate of 4% through 2010 according to industry foracasting institutes and, according to our estimates, the average safety content per vehicle is expected to increase in the range of 0-1% per year depending on the productian mix (see page 14) during same period. Our target is to grow fasterthan this expected growth rate for the market of at l east 4% and, as a result, to take markel share.

Of course, as Autollv already has more than on e third of the global market, this target is chal- lenging. However, we have several opportu- n i ties to conti nu e to outperform the m arket.

Productiv1ty lmprovement

% 8 - 7- 6-

5 -~-~--~---. . 1--1 ....

4- 3- 2 - 1-

0- - -

04 05 -~ Target - Actual

06 07 ' -



Furthermore, we have initialed a strategic re- view to identify new ways to accelerate growth even further, for instance, by acquisitions and/

or by expandlng inte adjacent markets. Conse- quently, we are pursuing a dual-path strategy.

Strengthening Core Business

First of all, we alm at capitalizing on opportuni- ties that will strengthen our core business. We will, for instance, take advantage of the fact that the fastest growing product in our m arket is side curtaln airbags.

Autoliv lntroduced this patented technolo- gy in 1998 and we still command a global mar- kel sh are of approximately 40%. Over the next several years, sales of this product will be driven by new ragulatlons issued in 2007 that, in effect, mandate the phase-in through August 2013 of side curtaln airbags in all new light vehicles sold in the U.S. In other regions, sales will be driven by the fact that curtaln airbags are twice as effi- cient in preventing head injuries in side erashes as frontal airbags are in eliminating severe inju- '·ries in frontal crashes.

We are also taking advantage of increas- ing demand for active seatbelts (see page 19).

These belts can be tightened ahead of an immi- nent crash by u se of an electrical motor. l n addi- tion, t hese seatbelts are reversible and the we b- bing can therefore be released again to normal comfort, should the driver manage to avoid the crash. Currently, we have two customers with three luxury vehicle models for these state-of- the-art seatbelts. From these manufacturers of premium vehicles, active seatbelts are Iikeiy to migrate to typical hlgher-volume vehicles there- by driving higher demand, lower cost and pric- es. The strong demand is also the result of the market penetration of electronic stability con- troi(ESC).

Our Safety-Vent Airbag (see page 18) also offers new growth opportunities. This airbag addresses the problem in a frontal crash when front-seat passengers are sitting too close or are coming too close to the airbag in a sudden pre- crash braking. Our uncomplicated but reliable


- -

satety-vent solution is also seen as an altarna- Jan Carlson, Preslden1 and CEO.

Global l-Ight Vehrcle Product1on

In milNon un~s 30- 25- -


20-- ~

15 -

10- ~-=-

· -


0--- - --- ---

03 04 05 06 07 06 09 10 _., Europe • ..,., Japan

~ N. America RoW (CAGR 1 0%)

Average Safety Val u e per Vehrcle'' US$



= = ~

200 - ~

15 0 - . . , - - - .

100 - ~


0 - - -- --- ---

97 98 99 00 01 02 03 04 05 06 07 - Global average ,_..,.., Japan

....,. Europe RoW

...,. N.Amer1ca

11 Not adjusted for currency nale fluctuations

Marlcet Growth''

US$ (biMions) 25-

1 l Basad on light vehicle productian forecasts from CSM and J.D.Power



tive in most U.S. vehicles to the expansive and camplex weight sensors that turn the airbag off if there is a child or a child seat in the front-pas- senger seat. We already have mora than 30 con- tracts for ou r cost-saving, smart airbag solution which was introduced as recentlyas 2006.

We continue to heavily invest in our existing business, particularly in Asia Pacific and East- ern Europe which are forecasted to account for the vast majority of the growth in globallight ve- hicle productian in the foreseeable future. In China, for instance, we now have ni n e plants af- ter launching four new plants with in a year, and we are now in the process of adding a new tech center in the Shanghai area. In 2007, we also made one of ourfew remaining affiliated campa- nies wholly-owned to take full advantage of the rapid m arket growth in China.

In In dia, we al so made ou r joint venture whol- ly-owned and commenced construction of lndia's first airbag plant. We also acquired the remai n in g s hares in o ur Korean j o i nt vent u re.

The costs for these three acquisitions to- talled $130 million during the year. Even if they are not major acquisitions, they are strategical- ly im portant as a means of taking better advan- tage of the rapid growth in emerging markets.

~l::pand Core Stosiness

We will also seek growth apportunities in new, adjacent market segments to our traditional air- bag and seatbelt markets. We will therefore con- tinue to invest in research, development and en- gineering (R,D&E) to further strengthen Autoliv's technological market leading position. We are committed to rnaintalning the current high R,D&E leve l of el o se to 8%, gross, which earresponds to approximately 6%, n et, of sales.

Earnings per Share vs Operat1ng l neo me

Index (2003~1 00) 140-

8.8%/y'L /

,._, ~

...-"' 130-





90 ---0~3~~0~4--~05~~0~6~~0~7

~ Earnings per sh are - Operating 1ncome

~~ Average growth


A new m arket in active safety where we have al- ready established a strong foothold is the mar- kel for night vision systems. O ur highly efficient, Jong-range far-infrared system is already op- tional in BMW's 7-, 6- and 5-series.ln addition to BMW, we have two new prestigious customers forfuture deliveries. With such compelling con- firmatians for a substantial market demand in night vision systems, we and ou r suppliers have startad to develop the next generation of ou r ad- vanced infrared sensing technology.

The night vision system is just one example of o ur active safety projects. Other such projaets are stereo vi sia n cameras and vehicle radars t hat accurately measure the distance to traffic haz- ards ahead of the vehicle. Thase systams should therafore be ableto forewarn the driver or p repare the ve h icle's safety systems w hen the eras h is u n- avoidable. This kind of pre-crash sensing will be particularly useful for improving occupant pra- taction in side impact collisions where the time to deploy our safety systems is extremelyshort and the occupant is sitting close to a thin door. Thase pre-crash sensors will, for instance, enable the ear m an ufactu rers to press u rize the door beams in acrash using airbag inflatortechnology.

Such "active" structures could also be used in frontal crashes, of course. lt is even conceiva- ble t hat the crashworthiness of the vehicle could be improved so much that it will be possible to redesign the entire chassis and take out weight.

This technology has attracted the vehicle manu- facturers' attention as they are aggressivsly try- i ng to reduce vehicle weight in order to reduce C02 emissions. The projaet is very exciting, b ut also a nu m ber of years from completion since it invalves redesigning- and then testing-a com- pletely new structure ofthevehicle.

Cash Flow from Operations

US$ (millions) 800-- 700-- 600-- 500-- 400-- 300-- 200-- 100-- 0 - - -

03 04 05 06 07 - Cash flow from operations, total

Cash flow, net afler CapEx

An entirely new area where we see significant long-term potential is alechol sensors and so caJled "interlock systems". Virtually all types of traffic fatalitles have been reduced thanks to improved vehicle and road safety. However, alcohol-related fatalitles have ramained a very serious traffic problem. Vehicle crash stalistics in di cate t h at approxi mate ly on e t hird of the auto- motiva fatallties in the Triad (i.e. North America, EU and Japan) are aleeho l related.

Consequently, both traffic authorities and ear campanies are Iaoking for affordable inter- lock systems that could lead to standard equip- ment installations in all vehicles. In addition to being affordable, the product needs to be accu- rate, fast, reliable and easy to use- but not easy to trick! This is whatwe-and so me authorities supporting our projaet- believe we have found in an aleohoJ sensor currently in development in on e of ou r labs.

Acquisitions should also be an option to ex- pand ou r care business, provided it is the right asset and the right price. We remain interesled in the acquisition of campanies and technolo- gies that offer synergles and are accretive. Oth- erwise, it is betterthat the funds are returned to sharehold ers.


In the final analysis, our performance will be measured by the value we manage to create for Autoliv shareholders. The road to this go al starts with achieving customer satisfaction, motivat- ing ou r employees and creating trust and confi- dence in ou r commitment to society for sustain- able development.

O u r mod el for c reat i ng sharehol der (see page 24-25) value is simple and straight forward: we

Share Buybacks

US$ (millions) 1,200- -

1,000-- 800--

600- -

400- -



__, ______r- _ ____ _

03 04 05 06 07

Total amount for each year.


focus on long-term cash flow that should pro- vide competltlve returns to shareholders while ensurin g growth and long-term financial stability.

Cash flow from operations should be rein- vested In operations as Iong as the return on in- vestment exceeds the cost for capital. Such in- vestments could, of course, include strategic acquisitions.

However, when the tipping point between re- turn and east of capital is reached, it is better that funds are returned to shareholders. Whath- er this should be done through more share buy- backs or increasing the dividend depends on which method Is most beneficial for our share- ' holders. Hence, ou r approach is to be oppor- tunistic with our share repurchase program as we try to buy mo re shares when the stock price is deemed to be low and fewer shares when the price Is deemed to be high. We could also lever- ag e Autoliv's strong balance sheet to further fi- nance share buybacks, as we have in the past.

In this way, we can lmprove our key ratios fasterthan our underlying operational perform- ance, thereby providing for a better perform- ance of our shares. For instance, since 2003, Autoliv has managed to grow earnings per s hare at a compounded average growth rate (CAGR) of 8.8% campared to a CAGR of "only" 5.7% for operating income during the same period. Mo re than 70% of this suparior EPS growth is due to share buybacks.

In 2007, we bought back 6.6 million shares, thereby return l ng arecord-high amount of $380 million to shareholders - in addition to $121 million in dividends. This should have a positive long-term effect on our stock by enhancing our key ratios.

Quarter1y Dividends per Share

Cents/Share 40- 35- 30- 25- 20- 15-


s - o


01 03 01 03 01 03 01 03 01 0304 2003 2004 2005 2006 2007 - Average growth

- Actual

"In the final analysis, ou r performance will be measured by the value we manage to create for Autoliv shareholders."

Record Shareholdor Return&

US$ (millions) %

600- - 12


! \ l

- 10




- 8



- 6


100- - 4



03 04 05 06 07 Share buybacks '""""' Yield - Dividends

Outlook for 2008

Du ring this year, we expect to continue to ramp up productian In our new Chinese manufactur- ing facilities. This should have a gradual, favo- rable impact on o ur margins as the capacity uti- lization rises. We should also benefit from higher vehicle productian in Asia Pacific and Eastern Europe and from higher installation rates of side curtain airbags both In North America and Europe.

However, light vehicle productian is expect- ed to dectina by 5% both In North America and Western Europe. Since Autoliv generates more than 70% of lts consolidaled sales in North America and Western Europe, the impact on us will be significant and the weighted average in- crease in globallight vehlcles will be less in our larger markats than the expected global average of 2.5%. However, we expect to offset this neg- ative effect by strong side curtaln sales, mar- ket share gains in safety alectronies and steer- ing wheels, and by continued step-up in sales of active seatbelts and seatbelt pretension ers. We will. also be helped during the latter part of the year by a number of important launches of new vehicle models. In addition, currency effects could have a favorable impact of 4% provided thatthe mid-February exchange rates prevail.

In conclusion, we expect sales in 2008 to grow by 7% with the arganie sales portion grow- in g at approxlmately 2% and the acquisition in lndia contributing 1%. Operating margin is ex- pected to im prova despite the d rop in light vehi- cle productian In our largest markats and to reach a level between 8.0-8.5% in Iine with our Iong term target of 8-9%.

Stockholm, February 19,2008

President and CEO



Vision, Mission & Strategy

Our Strategies

We have developed a series of strategies related to Customers, Technology, Cost Control, and Employees. By applying these strategies, we laythe foundation for a strong cash flow which is the cornerstone in ourshareholdervalue-creating process.




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To substantially reduce traffic accidents, fatalities and injuries.

Our Mission

To create, manufacture

and sell state-of-the-art

automotive safety systems.


Ou r Values

We have a passion forsaving lives, and we are dedi- of ethical and social behavior. These core values cated to c reating satisfaction for o ur customers and of ou r company are global, bu t are ap p l i ed and the driving public. We are committed to the develop- executed locally.

ment of people's skills, knowled ge and creative By incorporating these values, we create a solid potential, and we are driven for innovation and con- corporate identity- the foundation for a successful tinuous improvement.We adhereto the highest level future.

p. 28-29




Global Presence

With 80 plants and mo re than 20 eras h tracks in 29 countries, Autoliv has a better global footprint for automotive s afety than any company in its industry. This competitive ed ge is becoming increasingly im portant as vehicle manufaoturers set up operations in new countries and new vehicle manufaoturers in As i a enterthe global m arket.

The global automotive occupant restraint mar- pated increase In globallight vehicle productian ket is driven both by globallight vehicle produc- through 2010. China, for instance, is aiming at tion'l and safety content per vehicle. lt is there- doubling its productian to 12 million light vehi- fore im portant to have resources in the right cles by 2012 from the 20061evel and to outpace markats and with the right customers, i.e. the Japan as the world's seeond l argest vehicle pro- fastest growing m arkets and customers. During ducing country. In addition, the safety content of the past ten years, the se growth drivers have ex- the vehlcles in lndia and other emerging m arkets panded the market at an ann u al average growth is increaslng rapldly.

rate of 2% and 3%, respectively, to $18.5 billion As a result, the Rest of the World region

in 2007. (RoW), which is mainly Korea, China, lndia and

However, these two growth drivers have now south America, has doubled its demand for au- switched In lmportance. Through 2010, glo- tomotive safety products during the past five ballight vehicle productian is expected to grow years and now accounts for almost 20% of the the market by 4% per year according to indus- globalmarket (but for 30% of globallight vehicle try torecasting institutes, while we estimate that production). In addition, the RoW is expected to the averaga safety content per vehicle will grow account for nearly 50% of the expected growth in the range of 0-1% per year during the same in the global occupant restraint market through three-year period. The latter growth rate is high- 201 O.

ly dependent on the mix of the production. The

mora emerging-market low-end vehicles that Global Presence a Necessity

are added to the market mix, the strongerthe di- These strong trends make global presence al- lutive effect on the global average content, since most a necessity for the success of an auto- the safety content in lndia, for instance, is not motive safety company, whether it is a matter even on e fifth of the average safety value per ve- of supporting Western or Japanase customers hi el e In North America or Western Europe. expanding In emerglng m arkets or establishing new business relationships with the local vehi- Volume Effects from Low-End ve;,icles cle manutseturers In these markets.

However, the low-end vehicles represent an In this regard, Autoliv is especially weil pasl- important market due to their sheer volume, tioned with manufacturing facilities in all major and this effect increases in importance as the vehicle produclng countries in Asia Pacific and emerging markats expand their vehicle produc- Esstern Europe, and with technical and/or engi- tion. Comblned, Asia Pacific andEastern Europe neering centers In China, lndia, Korea, Romania are expected to account for 90% of the antici- and Turkey (see page 68).

Sales by Customer



Ford 12% /Volvo 6%

Renault Nissan 12%


!!1'3 Volkswagen 10%

Peugeot Citroen 8%



BMW6% Honda5% Mercedes 4%

Chrysler 4%

Hyundai 4%

Others 12%


Attractive Customer Mix

Our strong global presence also contributes to achieving a mo re dlversifled customer mix. This improvement Is due both to new local custom- ers in the new m arkets and to better opportuni- ties to recelve new business in Western Europe and North America from As lan manutseturers as they penetrate these markets in their pursuit of high er global m arket shares.

The first effect is evidenced by Autoliv's rap- idly growing order intake from Brilliance-Jinbei, Chery, Chagan, Great Wall and other local Chi- nesa vehicle manufacturers that currently only accountfor 1% of our consolidated sales.

The other trend is best Illustrated by the fact that Honda and Hyundai-KIA have become our fastest growlng customers. As a resuit, Honda currently accounts for 5% of our consolidated sales and Hyundai-KIA for 4%, while they were much smaller ten years ago as shown in the graph below.

The same trend goes for all Asian OEMs and.

as a result, the Asian vehicie manutseturers now account for 27% of Autoliv's sales campared to 20% in 1997.

As a mirror effect of this trend, Autoliv's ear- ller relatively high dependence on Ford, Gen- eral Motors and Chrysler has moderated, par- ticularly in North America. These customers accounted for 37% of ou r consolidated sales in 2007 campared to 47% in 1997 (and their North American businesses for 13% of o ur total glo- bal sales campared to close to 25% in 1997).

This evolution Is a reflection of the fact that their share of the global light vehicle productian has declined from 33% In 1997 to 23% in 2007.

Our continued high global dependence on Ford, General Motors and Chrysler is partly a refiection of the fact that the vehicles fromthese customers have a higher average safety value t han the global averaga of $270 dollars.

The fact that premium vehicles are especial- ly im portant for Autoliv is even better evidenced by Volvo and BMW, whlch both account for 6%

of o ur global sales despite on ly for 1% and 2%

respectively, of global vehicle productio n.

1' Ugtn motorvehk;le.s (l.e. with a weght of less 1han 6 tons) are., by far, the most fot Autotiv's products. Heavytrucks have seatbetts bU t raraty alrbags. In addltlon, t here were 68 mil~on ~g h t vehicles produced in 2007 but only2 milon heavytrucks.


Autoliv in the World

Autoliv presence

North America 2007

% of global markel 27

% of Autoliv's sales 24

% of AutoflV's headcoum 25

% of light vehicle production 22

C hang e in Competlt!on

The rapid growth in emerging markats is also changing the competitive landscape in our in- dustry. Generally, Autoliv's major competitors are TRW and Takata which each account for ap- proximately ona fifth of the global occupant re- straint market, while Autollv accounts for mora than one third of the market.

TRW is an American company, Iisted on the

Europe 2007

% of global markel 40

% of Autoliv's sales 54

% of AutoWs headcount 45

% of light vehcle produetion 32

Rest of tha World 2007

% of global mar1<et 18

% of Auloliv's sales 13

% ol Autoliv's haadcount 25

% ollighl vehicle production 30

Consequently, both the North American and the West European markats are relatively weil con- solidated.

However, in Japan, Korea and China there are a number of local manufacturers, primarily of seatbelts, that often have close ties with the domestic vehicle manufaoturers in these coun- trles. Toyota, for instance, has ln-house sup- pliers for seatbelts, airbags (including steering New York Stock Exchange, with strong m arket wheels) and inflators that get the majority of the positions in North America and Western Europe. Toyota business in Japan for these products.

Takata is a family dominated company with 25% Consequently, these campanies are often the of its s hares Iisted on the Tokyo Stock Exchange. toughest competitors in these markets.

Taka ta is strong in North America and its domas- tic Japanase m arket. In North America, there are also two smaller competitors: Delphi and KSS.

Supenar Global Presence

Autollv SB AB SW El


• • •

Europe Japan


• • •

South America


However, as the vehicle manufacturers want to compete with safer vehicles, export them and eventually set up global manufacturing, they in-


sa AB


EL sa AB

s w


• • • • • •

• •


• •


• • •


• •

SB = Seatbelts, AB= Airbags, SW = Steering wheels, EL= Safety alectronles


%of global markel

% of Autoliv's sales

% of Autoliv's head00U11

% of light vehicle production


2007 15

5 16

creasingly turn to campanies like Autoliv with suparior global presence and technological leadership.

Our traditional customers are also fncreas- ingly turning to global contracts rather than re- gional contracts as before. Consequently, we believe these trends in the vehicle industry tand to strengthen Autoliv's competltive position long-term.

Growtng MarketShare

% 35- 30- 25- 20- 15- 10-



Autoliv TRW Takale Others 1997





Highest-Value Systems Solutions

Providing ourcustomers with the highest-value systems solutions means delivering the most advanced products, with flawless quality (see page 21), at competitive prices.

Safety- A Sales Driver for Our Customers

Safety is on e of the strongest sales d rivers for new cars. In virtually all enquiries about what consumers prefer in their next vehicle, new sate- ty products come on to p of or are very high on the i r priority l ist s.

By being at the torefront of technology, by

• Renault becoming the first company with an adaptive Multi-Volume Cushion airbag (in 2007) (see page 4).

The success of new safety innovations does not on ly depend on finding a technical solution that could satisfy a pressing market need. Equal- ly im portant-and usually the biggest hurdie- erash-testing more vehicles than anyother sate- is to fin d a technical solution that is affordable ty company and by workingas a development

partner for new vehicles, Autoliv assists vehicle manufacturers not only to meet these evolving safety trends bu t als o to take advantage of t hem and become trend leaders. Over the years, we have contri bu te d to:

• Volvo becomingthefirstcompany in theworld to in trad uce sideairbags (in 1994),

• KIA becomingthefirstcompany with kneeair- bags(in 1995).

• BMW becoming the first company with side airbags for h e ad proteetlon (in 1 997),

• Volvo and Mercedes becoming the first cam- panies with curtain airbags (in 1998),

• Renault becoming the first company to re- ceive the highest rating (i.e. five stars) in EuroNCAP's crash tests (the Laguna in 2002),

• BMW becoming the first company with seat- balts with adaptive load limiters (in 2002),

• Jaguar becoming the first companywith a pe- destrian proteetlon pop-up hood (in 2005),

• Chrysler becoming the first company with a Safety-VentAirbag (in 2006) (see page 18),

Averaga Safety Value perVehicle':




300- ~ ~

250- ~

200·- ~

150- - - - _ / " , - _

100- ~~

5 0 -


97 98 99 00 01 02 03 04 05 06 07 - Global average L..--• Japan

- Europe RoW

~N. America

, Not adjusted for currency rate fluctuations


for private individuals. Additionally, even if a new safety technology is reasonably priced for high- end vehicles, we need high volumes to recover our development costs and to make meaning- ful profits. Typically, this means making the next generation of a product even more affordable, thereby making it possible for vehicle manufao- turers to use the technology to attract buyers to their m id-rang e vehicles and, later, even to their low-end ear medels.

Consequently, we are working on several fronts to give our customers the highest-value safety systems solutions.

Higher Safety Value per Vehicle

By continuously developing new higher value solutions, we can increase the averaga safety content per vehicle and, thereby, grow the auto- motive safety market fasterthan the underlying light vehicle production. This has been the case du ring the pastten years when the occupant re- straint market has been growing at an annual av- erage rate of 5% while global light vehicle pro- by Prodoot Lme

US$ (billions) 2 0 -

1 6 -


8 -

4 -


01 04 07

~ Seatbetts I!DIII Frontal airbags IM Side airbags Electronics

ductian has been growing at an averaga rate of 2% peryear.

However, by applying this strategy, we can also grow our company faster than the market.

This has also been the case du ring the past ten years, when Autoliv's sales have risen at an aver- age annual rate of 8%, 3 percentaga points faster t han the m arket in general.

M arket


Product Line

Autoliv's suparior growth is partlya reflection of the fact that curtain airbags and other side air- bags, where Autoliv commandsam arketshare approximately of 40%, are the fastest growing product Iine in the markel (see graph). Already, these products that were first introduced in the mid-90's, account for 27% of the $19 billion glo- bal occupant restraint market. In addition, these airbags are expected to account formorethan 30% of the growth of the global market du ring the nextthreeyears.

We are also benefilting from having more than 40% of the global seatbelt market. These products have grown almost as fast as the m ar- ket. In addition, we have notonlygrown o ursales steadily but have also been at the technologi- cal torefront by introducing pretensioners and Joad limiters. As a result, we have prevenled o ur seatbelts from becoming commodified. In 2007, seatbelts accounted for 28% of the market.

The market value for frontal airbags has, on the other hand, remained at around $5 billion during the last four years despite increasing volumes. The stagnation is a reflection of pric- ing press u re. However, Autoliv has been less af- fected by this stagnation t han man y competitors since the se pro d ucts represent less t han 20% of ou r 2007 revenues.

Safety alectronies have grown in Iine with the general market and continue to account for close to 20% of the market. However, in this product Iine, Autoliv has doubled its market share to 18% in 2007 from 8% in 1997. This has been achieved both through a major acquisition in 2002 (Visteon Restraints Electronics) and as a result of more customers preterring to source the safety electronics from the supplier of the airbags. These vehicle manufacturers are, in es- sence, taking full advantage of ou r highest-val- ue safety system solutions.


Highest Level of Service and Commitment

Despite the fact that ou r products are service free and designed and manufactured to last as Iong as the vehicle, customer service and commitment are im portant competitive tools for Autoliv.

Service- A Business Opportunity Customer service is an lntegrated part of our business process. During the development of a new vehicle mod el, we are often consulted as a

"safety specialist" and work as a "development partner". We have a uniqua capability campared to our ca m petitors for this trusted ro le, since we are the on ly automotive safety supplier that has '"dedicated resaureas to perform full-seale tests with campleta vehicles and not only si ed tests.

We are also often trusted with running the crash simulations in our "high speed" camput- ers where we optimize our products and other safety critical tunetlons to the particular struc- ture of the planned vehlcle. These "optimiza- tions" are based on experiences gathered dur- lng many years of eras h testing a wide rang e of vehicle models.

Thanks to this safety expertisa and our other test analysis resources, we can provide customers advice on how to improve the


ty of a planned vehicle and how to tune the var- ious safety systems, both to each other and to the intended vehicle body design, thereby achieving the most effective overall occupant proteetlon system. The pyrotechnic seatbelts, for instance, should work hand in hand with the frontal airbags to prevent excessive loads on the occupant and minimize any risks for the eecu- pant hitting the steering wheel or dashboard.

Ultimately, the systems have to be tu ned to the

"crash pulse" of the vehicle. (A smaller vehicle stops more abruptly in a crash resulting in hi g her g-forces than a largervehicle with a longer ener- gy absorbing crush zona). This is one of theserv- ices we provide to o ur customers.

Service- Crash Testing

N ear the end of the development cycle, the new vehicle has to undergo a serles of verifying eras h tests. These are regulatory tests, NCAP rating tests and voluntary tests that the vehicle manu- facturerthinks are im portant to valldatethe sate- ty system. Since the criteria in the legally man- daled tests are different in the United States, the European Union and Japan, a significant nu m ber of crash tests are necessary for global vehicle medels. Taking responsiblllty for the proper ex- ecution of such crash tests is another im portant part in ou r service to ourcustomers.

Outsourcing these tests is aften a very cost- efflclent option for the vehicle manufacturer.

Crash tests require expansive equ.ipment (tow- ing accelerators, high-speed cameras, comput- ers, etc.). In addition, new test requirements are continuously being added to the existing pietho- ra of tests, resulting in the need for additional in- vestments.

While vehicle manufacturers are reluctant to l et any of their ca m petitors crash test a new ve- hlcle mode l, an independent specialist like Au- toliv could do that, thereby achieving better utili- zation of t hese expansive resources.

In addition, by crash testing a widevariety of vehicles from different manufacturers, Autoliv's specialists galher experience that can help im- prova the efficiency of ou r customers' test pro- grams. Such expertisa and inslght give Autoliv a unique competitive advantage as ou r campet- ilors do not specialize in such full-vehicle crash testing services to the OEM. In contrast, Autoliv has made crash testing a business idea in itself.

Ou r Commitment

The ma in commitment to ou r customers is deliv- erlng high volumes of flawless safety products just in time. Since our lite-saving products nav- er get a seeond chance, we are committed to the highest leve l of qua l ity and to deliverthese prod- uels for the entire Iife of the vehicle mode L

Cra6h Te6ts with Complete Vetlicles

These deliverles need to be at the right quanti- ties every day, both during peak productian and before the end of productian when the volumes could drop by 50% or more. These productian vol u me swings make our ca m mitment challeng- ing, and the challenge is certalnly not reduced by the inherent difficulty of correctly foresee- ing the sales success of a planned new vehicle mode L

To ensure that we will be able to deliver on our commitment, we therefore design an<t u se flexible assembly Iines, prefarably in low-cost countries, rather than high ly automated Iines in high-cost countries.

Since Autoliv specializes in automotive sate- ty and does not have any other business areas, we are fully dependent on this market and on the success of relatively few customers. The ten largest vehicle manufacturers account for 71%

of globallight vehicle productian and for 85% of ourconsolidated sales.

Our sales and profits are reduced when a customer's sales d rop and we are the suppli er to the affected vehicle or vehicles. Similarly, if ou r customer is doing weil, we usually have a good chance to do weil also.

Thisdependenceensures ourcommitmentto o ur customers, w h ich is an advantage for t hem- and a competitive strength for Autotiv.

AutOiiv is the only aulornative safety suppller with dedicated rasources for erasil testing of complete vehicles and not only vehicle bodles In sled tests. We have 8 tracl<s for such full-seale tests ~n Australia. France, Germany, Japan. Spain. Sweden ancl the U.S.). in addition to 13 sled test tracks. The exper~nce our experts galher fromthese crash tests givesAulaliv a uniqua capability to wort< as a

"safety coosultant" and a "development partner' wnh the vehicle manufacturars.

This is also evidenced by the fact that more than 20% of o ur research, development and engineering (R,D&E) actlvities are paid by customers and other extern al parties. R,D&E gross usually earresponds to nea~y 8% of sales and to appro.><Jmatefy 6%, net after englneering lncome from customers.




Technological Leadership

In o ur questto reduce traffic accidents, fatalities and injuries we u se ou r technologicalleadership to research automotive safety problems beyond current regulatory and rating requirements.

Strong Position in Patents

Our commitment to technological leadership shows up in a strong position in patent statistics.

In 2005 (latast year with official statistics), Auto- liv accounted for 4% of all new automotive safety filings, and for 7% of all subsequent filings. Sub- sequent fillngs are a good indication of the pat- ents' quality since it means that the patent owner has deemed lt worthwhile to seek a broader mar-

kel protection.

Autollv holds more than 4,500 patents cover- ing a wlde range of innovations and products in automotlve safety and keytechnologies.


Ma ny Technical Centers

We have elght technical centers worldwidewith erash-test labs for full-seale tests of complete vehicles weighing up to two tons. We al so have 13 sled tracks for crash testing of vehicie bodies.

In 2007, Autoliv became the first automo- tive safety supplier in the world with a so called

"pitching sled". This new advanced crash sled is better suited to replicale the eras h dynamics of future vehlcle designs.

Corporate research is conducled by same 30 technleal specialists at our Swedish safety center, while most of the earparate development

in France, Germany, Japan, Sweden and the United States. Application engineering projaets are eompleted locally In each major subsidiary.

In total we have 4,000 engineers and related support people In A,D&E. This earresponds to el o se to 10% of total headcount.

lovestment in R, D&E

Du ring 2007, gross expenditures for Research, Development and Applleation Engineering (R,D&E) lncreased by $7 million to $514 million which earresponds to 7.6% of sales, down from 8.2% in 2006 and the 2003 expenditures of 7.9%

projaets are asslgned to o ur technical centers which were unusually high (see graph below).

Innovation Award for New Product The Safety·Vent Airbag we launched in 2006 is seeing healthy sales growth, and we have been awarded more

!han 30 contraels for this innovative airbag that offers enhanced proteetlon for front-seat passengers.

In 2007, the bag received the Automotive News PACE Award for superi04' product Innovation.

Today's Best Growth Dnver

Curtaln airbags for head protection in side impacts is the fastest growlng producton the market. On e reason for this strong demand is the fact that these airbags are mandated by a new federallaw for all new light vehicles sold in the United States. The ragulatlon will be phased in during a three-year perlod through August 2013.

Curtaln airbags are approximately twice as afficient in side impacts as frontal airbags are in trontal eras hes. The costs for curtaln airbags are not significantly different from the east offrontal alrbags. As a result, there is a strong markel demand for t hese produats all over the world.

Product wrth Long-term Potential

Markel demand for knee airbags is growing. This reflects the fact !hat lower leg Injuries are receiving much mora attention now as mo re people survive frontal erashes

\hanks to airbags and seatbelts.

Knee airbags can halp prevent long-term disab~ng injuries whlch are very important for many occupants t hat now survive crashes.

Of the amounts, $116 million in 2007 and

$106 million In 2006 were related to customer- funded engineering projaets and erash tests.

Net of this ineome, our R,D&E expendi- tures remained almost unehang ed at $396 mil- lion compared to $395 million in 2006, but de- creased in relation to sales to 5.8% from 6.4%

in 2006. This reduction was due to better utiliza- tion of R,D&E resourees and the transfer of engi- neering work to LCC. lt did therefore not affect the development of new products.

Of the $396 milllon in 2007, BO% was for projects and programs for whieh we have cus- tomer orders, typieally related to vehicle models in development. The remaining 20% is not only for completely new innovations b ut also for im- provement of existlng products, standardiza- tion andeost reductlon pro jaets.



R, D



US$ (millions) 550-

% - 1 0

450- ~ -8







03 04 os




06 07 W · Gross - % of sales, gross - Net - %of sales, net





- 2





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