Autoliv, Inc. Earnings Call Nuggets: Alignment Costs, Antitrust Investigation

On Friday, Autoliv, Inc. (NYSE:ALV) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Alignment Costs

David Leiker – Baird: Let’s start on these alignment costs, can you detail – you talked a little bit about what you are doing, but how much of it is plant relocation costs and investments versus headcount reductions and just kind of put that into some buckets where that spending is going?

Jan Carlson – President and CEO: I can take it. We don’t have a lot of details to share on this unfortunately, Dave, but we can say that the majority of it is severance payments going out.

David Leiker – Baird: On the your comment about the Japan, China production mix being positive for you in the second half, what’s the difference in the average content that you have in China versus Japan, and I’ll assume that’s what’s driving that difference?

Jan Carlson – President and CEO: Okay. We can come back to that Dave in a second.

David Leiker – Baird: Then one last item when we look at your Q2 numbers and your guidance is based up on your call-offs from your customers, the numbers you put in the presentation is IHS, how much of a difference is there between those two numbers right now?

Jan Carlson – President and CEO: Well, it’s hard to say Dave. For the first quarter, we indicated that it was correlation between IHS for quarter one and our call-offs. We turned out that it wasn’t that complete alignment between what we see in our call-offs. So I don’t know how much the difference is today. It’s difficult for me to comment on it. We will be back with a complete answer on the Japanese content.

Antitrust Investigation

Stephan Puetter – Goldman Sachs: The first one is on the antitrust investigation. You also gave us a bit more color on the U.S. I was just wondering, if there is also something in Europe ongoing or if there is any news on that? Secondly, you sort of got a very strong balance sheet and how do you think about deploying that cash or the part of it in needs for your organic growth, but do you see any acquisition opportunities? In the past, you mentioned about potentially looking at things in Active Safety and then on the other hand, if you can’t find any opportunities, what would be your preference for those funds which you’ve set aside? Then my third question would be can you give us a bit of color on your operational gearing in Europe versus the other regions? Presumably, you have got very strong growth in Asia, you also need to add capacity at the same time, but that mean that the margin benefits we should expect for those to come through was a bit of a lag.

Jan Carlson – President and CEO: We thought with the investigation – as we all know we have two investigations ongoing and what we have talked about here is our current best estimate for the U.S. investigation and that investigation is still ongoing, as well as the European investigation, which is still ongoing. We have no comments to say about the European investigation at this time. I am afraid, but that’s the thing. Regarding Active Safety and regarding our acquisition opportunities, we are determined to seek acquisition opportunities in Active Safety. We have a strong balance sheet. We have reported our strategy to keep a strong balance sheet for several reasons. There has been acquisition opportunity, the uncertainty and also of course, the ongoing investigations. There is nothing imminent on the table that I’m able to report to you at this time. We have been successful. I think we have been showing several good acquisitions over the past few years in vision area as well as in the radar area, and we believe we have a good opportunity to continue to do good acquisitions in Active Safety, but unfortunately nothing today that I can report back on. On the operational gearing for Europe, we don’t comment as you know on either regional or product area specific profitabilities. We have mentioned earlier that China as such has been above corporate average due to very high utilization and a very high growth rate in China and apart from that we have not commented, and I’m not able today to give you anymore color on it either unfortunately.

Mats Wallin – VP Finance, CFO: As to the question about the supply values in China and Japan, for the market the supply value for Passive Safety is almost $200 per vehicle in China and in Japan it’s 375 roughly, and we have as you saw a 38% market share in China next year, approaching that whereas some (of the share) in Japan is roughly 20%. So, if the China’s vehicle production is strong that is very helpful for us.

Jan Carlson – President and CEO: Thank you very much, Mats. Was that answering your question Dave?