Connect with us

Global

Autoliv Provides Market and Business Update

Company is accelerating mitigating measures and enters loan facility with Swedish Export Credit Corp.

Advertisement

Autoliv Inc., a global provider of vehicle safety systems, has provided updates on market and company measures to manage the auto industry downturn caused by the COVID-19 pandemic. 

Advertisement
Click Here to Read More
Advertisement

“With our largest markets Americas and Europe virtually standing still in April, the challenges we are managing in the second quarter are unprecedented,” said Mikael Bratt, president and CEO. “When the industry and Autoliv now moves on to the next phase – the restart and ramp-up outside China – it requires a continued focus on the health and safety of our employees as well as continued daily optimization of our resources to a low and volatile customer demand.” 

Challenging start to second quarter 2020

Automotive manufacturing was at a virtual standstill in April in Europe and Americas (normally almost 2/3 of Autoliv annual sales). The recent industry restart in these regions is a positive development, according to Autoliv. However, the ramp-up has started on a very low level and is characterized by strong fluctuations in customer demand which creates specific challenges. The company says it is balancing actions to minimize costs with the need to secure capacity to meet the volatile customer call-offs. “The frequent, large and rapid changes to customer call-offs makes it difficult to optimize and efficiently run our operations. In addition, certain countries have emergency lock-down protocols, such as Mexico and India, which create specific challenges, as employees that must stay at home are still entitled to full pay. These challenges reinforce what the company communicated in connection with the Q1 earnings release; that the limited visibility and long period of virtual stand stills in large parts of the world mean the operating leverage could be higher than the around 30% the company considers to be the standard operating leverage,” the company stated in a news release.

Advertisement

Automotive industry restart and ramp-up 

The automotive industry has in recent weeks entered a restart phase in most markets, albeit slow and volatile, with Autoliv’s operations developing in line with this. The latest IHS forecasts from May 14 indicate almost 50% decline in global light vehicle production in Q2 2020 vs. Q2 2019. 

In China, Autoliv’s sales increased by 3% in April 2020 vs. April 2019. Close to 100% of OEM plants have restarted production and Autoliv’s operations have gradually recovered to above 100% compared to this time last year. Light vehicle sales increased by 1% in April 2020 vs. April 2019 according to CAAM. The emergency declaration in Japan was lifted on May 26, but the restart for OEMs is very slow due to low demand from export markets. In India, OEMs are beginning to reopen at a very slow pace. In South Korea, plants have remained open, but at lower output levels due to lower export demand, partially offset by strong domestic demand for certain new models. 

In Europe, Autoliv’s sales in April declined by 89% compared to April 2019 as almost all of the company’s customers were closed down for most of the month. Almost all OEMs have now restarted production, but at low and unstable production levels. The latest IHS forecast indicates that Q2 2020 light vehicle production in Western Europe will decline by around 70% vs. Q2 2019.

Advertisement

In the Americas, Autoliv’s sales in April declined by 96% compared to April 2019 as almost all Autoliv customers were closed down. Currently almost all OEMs have now restarted production, albeit at very low and unstable production levels. Recent industry forecasts indicate that Q2 2020 light vehicle production in North America will decline by around 75% vs. Q2 2019.

Supply chain is a main area of industry concern, as different countries are in different stages of ramping-up. For example, the supply chain in Mexico is still partly closed down. Autoliv is working to secure its supply chain and continues to implement the appropriate health measures required to ensure the safety of our employees as we re-start and ramp-up.

Decisive actions position Autoliv to manage a challenging period

As outlined below, Autoliv is decisively managing the situation by controlling costs, reducing spending, and strengthening its liquidity position.

Cost control: Total headcount was reduced meaningfully in April, with further reductions expected in May and June. Compared to Q1 2020, the run rate in costs for R,D&E, gross, as well as production overhead is reduced by around 15% and the S,G&A run rate is reduced by almost 5%. As a result of these reductions, and extensive furloughing of employees in certain countries, the run rate of total employee related costs in April 2020 was reduced by close to 30% compared to Q1 2020. 

Advertisement

Cash flow and liquidity: Compared to the plan at the beginning of the year, capital expenditures YTD April have been reduced by more than 30%, or by approximately $50 million. Autoliv’s net working capital will be negatively impacted both by that different regions are in different phases of the ramp-up curve and by the virtual standstill of certain operations in certain regions. On April 2, Autoliv drew down the remaining $600 million from its revolving credit facility and had then a cash balance of around $1.5 billion. At April 30, Autoliv had a cash balance of $1.4 billion. May is expected to be more challenging than April for cash flow due to an increase in net working capital while the development in coming months remain uncertain. 

To further strengthen its liquidity position and credit resources, the company on May 28 entered into a lending facility of approximately $0.6 billion (SEK 6 billion) with the Swedish Export Credit Corporation with support from the Swedish Export Credit Agency (the SvEK Facility). The SvEK Facility provides a 2-year tranche and a 5-year tranche of SEK 3 billion each. The Facility is made available upon Autoliv’s repayment of the current SEK 1.2 billion loan with SEK that originally matures in June 2022. Through our liquidity preservation measures and with this new SvEK Facility in place, Autoliv’s liquidity is sufficient to repay approximately $0.5 billion million on its $1.1 billion Revolving Credit Facility during Q2 2020. The company’s Revolving Credit Facility remains available until July 2023. With the new SvEK Facility, the Company’s has a well-spread debt maturity schedule and ample committed credit facilities. This further strengthens Autoliv’s financial flexibility and increase the cash or cash equivalents plus committed facilities at its disposal by $0.5 billion. None of Autoliv’s credit facilities are subject to financial covenants.

Advertisement

Mikael Bratt concluded, “In these challenging times, I am proud that we have a solid organization with strong associates that continue to execute on our long-term strategy and I am confident Autoliv will come through this crisis as an even stronger company.”

Advertisement

SKF Announces Changes To Group Management

Sapphire Media Tapped As PR Partners For TyrexpoAsia 2021

Nexus Automotive International Unveils New Structure In China

Cooper Standard Divests Certain Europe, India Operations

Advertisement

POPULAR POSTS

Newsweek Ranks Goodyear Among Greenest Big Companies

Sponsored Content

Why Trucks Are The Future Of The Aftermarket Sweet Spot

Events

Editor’s Note: AMN On Holiday

Legislative

VA Gov. Signs Vehicle Safety Inspection Program Legislation

Connect