FULLTEXT DEL 3 AV 4
Årsredovisning 2024
38
Net Income and Earnings Per Share
Net income in 2024 increased by $159 million compared to 2023. Earnings per share, diluted increased by $2.32 compared to a year
earlier, where the main drivers were $2.83 from higher operating income and $0.45 from lower number of outstanding shares, diluted,
partly offset by $0.76 from higher taxes and $0.21 from higher financial and non-operating items, net.
The weighted average number of shares outstanding assuming dilution in 2024 was 80.4 million compared to 85.2 million in 2023.
NON-GAAP PERFORMANCE MEASURES
In this annual report, the Company sometimes refers to non-GAAP measures that the Company and securities analysts use in measuring
Autoliv’s performance.
The Company believes that these measures assist management and investors in analyzing trends in the Company’s business for the
reasons given below. Investors should not consider these non-GAAP measures as substitutes for, but rather as additions to, financial
reporting measures prepared in accordance with GAAP.
These non-GAAP measures have been identified, as applicable, in each section of this annual report with tabular presentations provided
below, reconciling them to GAAP.
It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
Organic Sales
The Company analyzes its sales trends and performance as changes in “organic sales growth” or “organic sales decline”, because the
Company currently generates approximately three quarters of net sales in currencies other than the reporting currency (i.e. U.S. dollars)
and currency rates have proven to be rather volatile. Organic sales present the increase or decrease in the overall U.S. dollar net sales
on a comparable basis, allowing separate discussions of the impact of acquisitions/divestitures and exchange rates.
See tabular reconciliations above, that present changes in “organic sales growth” as reconciled to the change in total GAAP net sales.
Net debt
The Company, from time to time enters into “debt-related derivatives” (DRDs) as a part of its debt management and as part of efficiently
managing the Company’s overall cost of funds. Creditors and credit rating agencies use net debt adjusted for DRDs in their analyses of
the Company’s debt, therefore we provide this non-U.S. GAAP measure. DRDs are fair value adjustments to the carrying value of the
underlying debt. Also included in the DRDs is the unamortized fair value adjustment related to a discontinued fair value hedge that will
be amortized over the remaining life of the debt. By adjusting for DRDs, the total financial liability of net debt is disclosed without grossing
debt up with currency or interest fair values.
Reconciliation of GAAP measure "Total debt" to non-GAAP measure “Net debt”
DECEMBER 31 (Dollars in millions) 2024 2023
Short-term debt $ 387 $ 538
Long-term debt 1,522 1,324
Total debt 1,909 1,862
Cash and cash equivalents (330) (498)
Debt issuance cost/Debt-related derivatives, net (24) 3
Net debt $ 1,554 $ 1,367
Adjusted operating income, adjusted operating margin and adjusted diluted Earnings per share (EPS)
Adjusted operating margin and adjusted diluted EPS are non-GAAP measures the Company uses to evaluate its business, because the
Company believes it assists investors and analysts in comparing the Company's performance across reporting periods on a consistent
basis by excluding items that are non-operational or non-recurring in nature (such as costs related to capacity alignments, costs related
to antitrust matters and for diluted EPS unusual tax items) and that the Company does not believe are indicative of its core operating
performance and underlying business trends. Adjusted operating margin and adjusted diluted EPS, as shown in the table below, should
be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP,
including operating margin and diluted EPS.
Reconciliation of GAAP measure "Operating income" to Non-GAAP measure "Adjusted Operating income"
(Dollars in millions) 2024 2023
Operating income (GAAP) $ 979 $ 690
Non-GAAP adjustments:
Less: Capacity alignments 19 218
Less: The Andrews litigation settlement - 8
Less: Antitrust related items 8 4
Total non-GAAP adjustments to operating income 27 230
Adjusted Operating income (Non-GAAP) $ 1,007 $ 920
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Reconciliation of GAAP measure "Operating margin" to Non-GAAP measure "Adjusted Operating margin"
2024 2023
Operating margin (GAAP) 9.4 % 6.6 %
Non-GAAP adjustments:
Less: Capacity alignments 0.2 % 2.1 %
Less: The Andrews litigation settlement - 0.1 %
Less: Antitrust related items 0.1 % 0.0 %
Total non-GAAP adjustments to operating margin 0.3 % 2.2 %
Adjusted Operating margin (Non-GAAP) 9.7 % 8.8 %
Reconciliation of GAAP measure "Earnings per share - diluted" to Non-GAAP measure "Adjusted Earnings per share - diluted"
2024 2023
Earnings per share - diluted (GAAP) $ 8.04 $ 5.72
Non-GAAP adjustments:
Less: Capacity alignments 0.24 2.56
Less: The Andrews litigation settlement - 0.09
Less: Antitrust related items 0.10 0.05
Less: Tax on non-GAAP adjustments (0.06 ) (0.24 )
Total non-GAAP adjustments to Earnings per share - diluted 0.28 2.46
Adjusted Earnings per share - diluted (Non-GAAP) $ 8.32 $ 8.19
Weighted average number of shares outstanding - diluted (in millions) 80.4 85.2
The following tables reconcile Income before income taxes, Net income, Net income attributable to controlling interest, Capital employed,
which are inputs utilized to calculate Return On Capital Employed (“ROCE”), adjusted ROCE, Return On Total Equity (“ROE”) and
adjusted ROE. The Company believes this presentation may be useful to investors and industry analysts who utilize these adjusted non-
U.S. GAAP measures in their ROCE and ROE calculations to exclude certain items for comparison purposes across periods. Autoliv’s
management uses the ROCE, adjusted ROCE, ROE and adjusted ROE measures for purposes of comparing its financial performance
with the financial performance of other companies in the industry and providing useful information regarding the factors and trends
affecting the Company’s business.
The Company believes ROCE and adjusted ROCE are useful indicators of long-term performance both absolute and relative to the
Company's peers as it allows for a comparison of the profitability of the Company’s capital employed in its business relative to that of its
peers. The Company’s management believes that ROE is a useful indicator of how well management creates value for its shareholders
through its operating activities and its capital management.
With respect to the Andrews litigation settlement, the Company has treated this specific settlement as a non-recurring charge because of
the unique nature of the lawsuit, including the facts and legal issues involved.
Accordingly, the tables below reconcile from U.S. GAAP to the equivalent non-U.S. GAAP measure.
Reconciliation of GAAP measure "Income before income taxes" to Non-GAAP measure "Adjusted Income before income taxes"
(Dollars in millions) 2024 2023
Income before income taxes (GAAP) $ 875 $ 612
Non-GAAP adjustments:
Less: Capacity alignments 19 218
Less: The Andrews litigation settlement - 8
Less: Antitrust related items 8 4
Total non-GAAP adjustments to Income before income taxes 27 230
Adjusted Income before income taxes (Non-GAAP) $ 902 $ 842
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Reconciliation of GAAP measure "Net income" to Non-GAAP measure "Adjusted Net income"
(Dollars in millions) 2024 2023
Net income (GAAP) $ 648 $ 489
Non-GAAP adjustments:
Less: Capacity alignments 19 218
Less: The Andrews litigation settlement - 8
Less: Antitrust related items 8 4
Less: Tax on non-GAAP adjustments (5 ) (20 )
Total non-GAAP adjustments to Net income 22 210
Adjusted Net income (Non-GAAP) $ 670 $ 699
Reconciliation of GAAP measure "Net income attributable to controlling interest" to Non-GAAP measure "Adjusted Net income
attributable to controlling interest"
(Dollars in millions) 2024 2023
Net income attributable to controlling interest (GAAP) $ 646 $ 488
Non-GAAP adjustments:
Less: Capacity alignments 19 218
Less: The Andrews litigation settlement 0 8
Less: Antitrust related items 8 4
Less: Tax on non-GAAP adjustments (5 ) (20 )
Total non-GAAP adjustments to Net income attributable to controlling interest 22 210
Adjusted Net income attributable to controlling interest (Non-GAAP) $ 668 $ 697
Reconciliation of GAAP measure "Return on Capital Employed" to Non-GAAP measure "Adjusted Return on Capital Employed"
2024 2023
Return on capital employed1) (GAAP) 25.0 % 17.7 %
Non-GAAP adjustments:
Less: Capacity alignments 0.4 % 5.1 %
Less: The Andrews litigation settlement - 0.2 %
Less: Antitrust related items 0.2 % 0.1 %
Total non-GAAP adjustments to Return on capital employed1) 0.6 % 5.3 %
Adjusted Return on capital employed1) (Non-GAAP) 25.6 % 23.1 %
Adjustment on Return on capital employed1) (in millions) $ 27 $ 230
1) The average capital employed amount is calculated as an average of the opening balance amount and the closing balance amounts for each
quarter included in the period.
Reconciliation of GAAP measure "Return on Total Equity" to Non-GAAP measure "Adjusted Return on Total Equity"
2024 2023
Return on total equity1) (GAAP) 27.2 % 19.0 %
Non-GAAP adjustments:
Less: Capacity alignments 0.7 % 7.5 %
Less: The Andrews litigation settlement - 0.3 %
Less: Antitrust related items 0.3 % 0.1 %
Less: Tax on non-GAAP adjustments (0.2 %) (0.7 %)
Total non-GAAP adjustments to Return on total equity1) 0.8 % 7.2 %
Adjusted Return on total equity1) (Non-GAAP) 28.0 % 26.2 %
Adjustment on Return on capital employed1) (in millions) $ 22 $ 210
1) The average total equity amount is calculated as an average of the opening balance amount and the closing balance amounts for each quarter
included in the period.
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LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL POSITION
Years ended December 31
(DOLLARS IN MILLIONS) 2024 2023
Net cash provided by operating activities $ 1,059 $ 982
Net cash used in investing activities (563) (569)
Net cash used in financing activities (680) (490)
Effect of exchange rate changes on cash and cash equivalents 16 (20)
Decrease in cash and cash equivalents (168) (96)
Cash and cash equivalents at beginning of year 498 594
Cash and cash equivalents at end of year $ 330 $ 498
NET CASH PROVIDED BY OPERATING ACTIVITIES
Cash flow from operations, together with available financial resources and credit facilities, is expected to be sufficient to fund the
Company’s anticipated working capital requirements, capital expenditures and future dividend payments.
Net cash provided by operating activities was $1,059 million in 2024 compared to $982 million in 2023. The increase of $77 million in
2024 was mainly due to $159 million in higher net income. The improvement was also a supported by continued reduction of working
capital, although on a smaller scale compared to the 2023 reduction. The improvement of operating assets and liabilities, net in both 2023
and 2024 was mainly a result of improved customer call-off accuracy enabling more precise planning and use of resources as well as a
multi-year working capital efficiency program aiming at improving working capital by $800 million. At the end of 2024, the Company
estimates that around $700 million improvement in working capital has been achieved since the start of the program. The remaining
around $100 million in the program is targeted to be achieved mainly in inventories and is dependent on a continued improvement in
customer call-off accuracy in the years to come.
Receivables outstanding in relation to sales was 19% at December 31, 2024, compared to 20% at December 31, 2023. Factoring
agreements did not have any material impact on receivables outstanding for 2024 or 2023.
Inventory outstanding in relation to sales was 9% at December 31, 2024, compared to 9% at December 31, 2023.
Payables outstanding in relation to sales was 17% at December 31, 2024 compared to 18% at December 31, 2023.
NET CASH USED IN INVESTING ACTIVITIES
In 2024 and 2023, net cash used in investing activities amounted to $563 million and $569 million, respectively. The Company's investing
activities primarily consist of investments in property, plant and equipment. Net cash generated by operating activities continued to
sufficiently cover capital expenditures for property, plant and equipment.
In relation to net sales, capital expenditures, net was 5.4% compared to 5.4% in previous year. The 5.4% level is slightly above what the
Company expects for the longer term, due to investments in capacity, mainly in Asia, and in footprint optimization, mainly in Europe and
Japan.
Depreciation and amortization totaled $387 million in 2024 compared to $378 million in 2023.
During the years 2024 and 2023, a majority of the Company's investments were for production capacity to support new product launches
and automation projects for improved efficiency.
NET CASH USED IN FINANCING ACTIVITIES
Net cash used in financing activities amounted to $680 million and $490 million for the years 2024 and 2023, respectively. The increase
of $190 million in cash used in financial activities was mainly the result of $200 million additional repurchased shares in 2024 as compared
to 2023.
The Company's net issuance of short-term and long-term debt was $94 million in 2024 and $87 million in 2023.
In 2024, the Company paid cash dividends of $219 million. In 2023, the Company paid dividends of $225 million. The Company's dividend
approach has been the same for several years.
The Company repurchased shares to an amount of $552 million and $352 million in 2024 and 2023, respectively. The Company intends
to continue to repurchase shares in accordance with the current authorization until the end of 2025.
INCOME TAXES
The Company has reserves for taxes that may become payable in future periods as a result of tax audits. At any given time, the Company
is undergoing tax audits covering multiple years in several tax jurisdictions. Ultimate outcomes are uncertain but could, in future periods,
have a significant impact on the Company’s cash flows. See discussions of income taxes under Significant Accounting Policies in this
section, Note 2, Summary of Significant Accounting Policies, and Note 5, Income Taxes, to the Consolidated Financial Statements
included herein.
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PENSION ARRANGEMENTS
The Company has defined benefit pension plans covering nearly half of the U.S. employees. As of December 31, 2021, the main U.S
defined benefit plan was frozen for further benefits. Many of the Company’s non-U.S. employees are also covered by pension
arrangements.
At December 31, 2024, the Company’s net pension liability (i.e. the actual funded status) for its U.S. and non-U.S. plans was $153 million
compared to $159 million at December 31, 2023.
The plans had a total net unamortized actuarial loss before tax of $36 million recorded in Accumulated Other Comprehensive (Loss)
Income in the Consolidated Balance Sheets at December 31, 2024, compared to $34 million at December 31, 2023. The amortization of
the actuarial loss is expected to be $22 million in 2025.
Total pension expense associated with the defined benefit plans was $34 million in 2024 and $21 million in 2023, and is expected to be
$21 million in 2025. The increase in 2024 pension expense was due to the negative impact from curtailment and settlement losses in
mainly Americas.
The Company contributed $29 million to its defined benefit plans in 2024 and $11 million in 2023. The Company expects to contribute
$15 million to these plans in 2025 and is currently projecting a yearly funding at approximately the same level in the subsequent years.
For further information about retirement plans see Note 19, Retirement Plans, to the Consolidated Financial Statements included herein.
EQUITY
During 2024, total equity decreased by $285 million to $2,285 million as of December 31, 2024. The change was mainly due to dividends
paid to shareholders of $219 million, share repurchases of $558 million, negative foreign exchange effects of $161 million, partly offset
by $648 million from net income.
TREASURY ACTIVITES
DEBT AND CREDIT ARRANGEMENTS
The Company's total debt as of December 31, 2024 and 2023 was $1,909 million and $1,862 million, respectively. The Company had a
net debt position (see section Non-U.S. GAAP Performance Measures) at December 31, 2024 and 2023 of $1,554 million and $1,367
million, respectively.
In July 2024, the Company entered into a $125 million bilateral revolving credit facility (Bilateral RCF) with substantially the same terms
as the revolving credit facility (RCF) with the 11 banks (see below). In May 2022, the Company refinanced its existing RCF of $1,100
million. The facility was syndicated among 11 banks and matures May 2029. The Company pays a commitment fee on the undrawn
amount of 0.10%, representing 35% of the applicable margin, which is 0.275% (given the Company’s ratings of "BBB+" from Fitch and
“Baa1” from Moody’s). Borrowings under the facility are unsecured. On December 31, 2024, the Company’s unutilized long-term credit
facilities were $1,225 million, represented by the RCF and the Bilateral RCF. These facilities are not subject to any financial covenants
nor is any other substantial financing of Autoliv.
In February 2024, the Company priced and issued a 5.5-year green bond for a total of €500 million in the Eurobond market. The bond
carries a coupon of 3.625% and matures in August 2029.
In March 2023, the Company priced and issued a 5-year green bond for a total of €500 million in the Eurobond market. The bond carries
a coupon of 4.25% and matures in March 2028.
In June 2020, the Company utilized its SEK 3,000 million facility with Swedish Export Credit Corporation which was signed in May 2020.
The SEK 3,000 million loan mature in May 2025 carrying a floating interest rate of 3M STIBOR +1.85%.
In 2014, the Company issued and sold long-term debt securities in a U.S. Private Placement pursuant to a Note Purchase and Guaranty
Agreement dated April 23, 2014, by and among Autoliv ASP Inc., the Company and the purchasers listed therein. As of December 31,
2024, $470 million remains outstanding with $285 million maturing in April 2026 and $185 million maturing in April 2029.
The Company has a €3,000 million Euro Medium Term Note Program in place for being able to issue notes to be traded on the Global
Exchange Market of Euronext Dublin. At December 31, 2023, €1,000 million had been issued under this program.
At December 31, 2024 Autoliv’s long-term credit rating from S&P Global Ratings was BBB, from Moody’s Baa1, and from Fitch BBB+. All
ratings with stable outlook. As of February 7, 2025, S&P Global Ratings withdrew the ratings for Autoliv on the Company’s request. The
company aims to maintain a strong investment grade credit rating.
For additional information about the Company's debt and credit arrangements, see Note 14, Debt and Credit Agreements, to the
Consolidated Financial Statements included herein.
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FACTORING
During 2024 and 2023, the Company sold receivables and discounted notes related to selected customers. These factoring arrangements
increase cash while reducing accounts receivable and customer risks. At December 31, 2024, the Company had received $211 million
for sold receivables without recourse and discounted notes with a discount cost of $3 million during the year, compared to $209 million
at December 31, 2023 with a discount cost of $3 million recorded in Other non-operating items, net.
NUMBER OF SHARES
At December 31, 2024, 77.7 million shares were outstanding (net of 2.7 million treasury shares), a 6.0% decrease from 82.6 million one
year earlier.
The number of shares outstanding is expected to increase by 0.5 million when all RSUs and PSs vest and if all SOs to key employees
are exercised, see Note 17, Stock Incentive Plans, to the Consolidated Financial Statements included herein.
During 2024 the Company repurchased and retired approximately 5.1 million shares equal to $552 million. In addition, the Company also
retired 2,000,000 treasury shares in December 2024. In 2023, the Company repurchased and retired approximately 3.7 million shares
equal to $352 million. During 2022, Autoliv repurchased and retired approximately 1.4 million shares, equal to $115 million. In 2022, the
Company also retired 10 million shares of common stock that had been repurchased under a prior stock repurchase program and since
held in treasury. Under the current stock repurchase program authorized by the Board to repurchase up to $1.5 billion, or 17 million
common shares (whichever comes first), between January 2022 and the end of 2024. In November 2024, the Board of Directors approved
the extension of the current stock repurchase program through the end of 2025.
Contractual Obligations and Commitments
Contractual obligations include debt, sponsored defined benefit plans, lease and purchase obligations that are enforceable and legally
binding on the Company.
For material contractual debt obligations as of December 31, 2024, see Note 14, Debt and Credit Agreements, to the Consolidated
Financial Statements included herein.
Operating lease obligations represent the payment obligations (undiscounted cash flows) under leases classified as operating leases.
Capital lease obligations are not material. See Note 3, Leases, to the Consolidated Financial Statements included herein.
There are no unconditional purchase obligations other than short-term obligations related to inventory, services, tooling, and property,
plant and equipment purchased in the ordinary course of business. Purchase agreements with suppliers entered into in the ordinary
course of business do not generally include fixed quantities. Quantities and delivery dates are established in “call off plans” accessible
electronically for all customers and suppliers involved. Communicated “call off plans” for production material from suppliers are normally
reflected in equivalent commitments from Autoliv customers.
The Company sponsors defined benefit plans that cover a significant portion of the Company's U.S. employees and certain non-U.S.
employees. The pension plans in the U.S. are funded in conformity with the minimum funding requirements of the Pension Protection Act
of 2006. Funding for the Company's pension plans in other countries is based upon plan provisions, actuarial recommendations and/or
statutory requirements. Due to volatility associated with future changes in interest rates and plan asset returns, the Company cannot
predict with reasonable reliability the timing and amounts of future funding requirements. The Company may elect to make contributions
in excess of the minimum funding requirements for the U.S. plans in response to investment performance and changes in interest rates,
or when the Company believes that it is financially advantageous to do so and based on other capital requirements. See Note 19,
Retirement Plans, to the Consolidated Financial Statements included herein.
COMMITMENTS
The Company has entered into a number of unrecognized unconditional purchase agreements relating to Solar Farms in US and China
during 2024, of which none is individually significant for disclosure. Together these agreements have an aggregated termination fee
(discounted) of approximately $51 million as of December 31, 2024.
These Solar Farm agreements have a contract period ranging from 20-25 years. The future payments (undiscounted) relating to these
unrecognized unconditional purchase agreements are in total $62 million to be paid over the following years: 1-3 years: $6 million; 4-5
years: $4 million and; more than 5 years: $52 million.
Risks and Risk Management
The Company is exposed to several categories of risks. They can broadly be categorized as operational risks, strategic risks and financial
risks. Some of the major risks in each category are described below. There are also other risks that could have a material effect on the
Company’s results and financial position, and the description below is not complete but should be read in conjunction with the discussion
of risks described in Item 1A above, which contains a description of the Company's material risks.
As described below, the Company has taken several mitigating actions, applied numerous strategies, adopted policies, and introduced
control and reporting systems to reduce and mitigate these risks. In addition, the Company from time to time identifies and evaluates
emerging or changing risks to the Company in order to ensure that identified risks and related risk management are updated in this fast-
moving environment.
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Operational Risks
LIGHT VEHICLE PRODUCTION
Around 30% of Autoliv’s costs are fixed; therefore, short-term earnings are dependent on sales volumes and highly dependent on capacity
utilization in the Company’s plants.
Global LVP is an indicator of the Company’s sales development. Ultimately, however, sales are determined by the production levels for
the individual vehicle models for which Autoliv is a supplier (see Dependence on Customers). The Company’s sales are split over several
hundred contracts covering more than 1,300 vehicle models. This moderates the effect of changes in vehicle demand of individual
countries and regions as well as production issues. The risk of fluctuating sales has also been mitigated by Autoliv’s rapid expansion in
Asia and other growth markets, which has reduced the Company’s former high dependence on sales in Europe to a diversified mix with
Europe, the Americas and Asia each accounting for approximately 28%, 33% and 39%, respectively, of the Company's 2024 total sales.
It is the Company’s strategy to reduce the risks associated with fluctuating LVP by using temporary personnel in direct production, when
appropriate. During 2024 and 2023, the level of temporary personnel in relation to total personnel in direct production decreased to 11%
from 13%. To reduce the potential impact of unusual fluctuations in the production of vehicle models supplied by the Company such as
during the financial crisis in 2008-2009 and the COVID-19 pandemic in 2020-2021 – it is also necessary for the Company to be prepared
to quickly adapt the level of permanent employees as well as fixed cost production capacity.
PRICING PRESSURE
Pricing pressure from customers is an inherent part of the automotive components business. The historical extent of price reductions
varies from year to year and takes the form of one time give backs, reductions in direct sales prices and/or discounted reimbursements
for engineering work.
In response, Autoliv is continuously engaged in efforts to reduce costs and to provide customers added value by developing new products.
Generally, the speed by which these cost-reduction programs generate results will, to a large extent, determine the future profitability of
the Company. The various cost-reduction programs are, to a considerable extent, interrelated. This interrelationship makes it difficult to
isolate the impact of costs on any single program, therefore, the Company monitors key measures such as costs in relation to sales and
productivity.
In 2024, due to cost pressures from labor and other items the Company engaged in extensive negotiations with its customers regarding
compensations.
COMPONENT COSTS AND RAW MATERIAL PRICES
The cost of direct materials was approximately 55% of sales in 2024 (55% in 2023).
The main raw materials being used as input material for the Company's operations are steel, textiles, plastic and non-ferrous metals.
The Company still sees effects coming from import tariffs and trade barriers across borders. These barriers are impacting the raw material
market and creating pricing and availability uncertainties. There is also volatility in the sea freight rates driven by geopolitical events.
In 2024, raw material inflation was limited. Cost inflation remained significant and related primarily to labor. The Company took actions,
including pricing discussions with customers and suppliers, competitive sourcing and exploring alternative materials.
LEGAL
The Company is involved from time to time in regulatory, commercial, and contractual legal proceedings that may be significant, and the
Company’s business may suffer as a result of adverse outcomes of current or future legal proceedings. These claims may include, without
limitation, commercial or contractual disputes, including disputes with the Company’s suppliers and customers, intellectual property
matters, alleged violations of laws, rules or regulations, governmental investigations, personal injury claims, product liability claims,
environmental issues, tax and customs matters, and employment matters.
A substantial legal liability or adverse regulatory outcome and the substantial cost to defend the litigation or regulatory proceedings may
have an adverse effect on the Company’s business, operating results, financial condition, cash flows and reputation.
No assurances can be given that such proceedings and claims will not have a material adverse impact on the Company’s profitability and
consolidated financial position, or that reserves or insurance will mitigate such impact. See Note 18, Contingent Liabilities, to the
Consolidated Financial Statements included herein and Item 3 – Legal Proceedings.
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PRODUCT WARRANTY AND RECALLS
If our products are alleged to fail to perform as expected or are defective, the Company may be exposed to various claims for damages
and compensation. Such claims may result in costs and other losses to the Company even where the relevant product is eventually found
to have functioned properly. If a product (actually or allegedly) fails to perform as expected or is defective, we may face warranty and
recall claims. If such actual or alleged failure or defect results, or is alleged to result, in bodily injury and/or property damage, we may
also face product liability and other claims. The Company may experience material warranty, recall, product or other liability claims or
losses in the future, and the Company may incur significant cost to defend against such claims. The Company may be required to
participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product
liability actions relating to its suppliers. Government safety regulators also have policies and practices with respect to recalls. As suppliers
become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers
are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. In addition, with global
platforms and procedures, vehicle manufacturers are increasingly evaluating our quality performance on a global basis. Any one or more
quality, warranty or other recall issue(s), including the ones affecting few units and/or having a small financial impact, may cause a vehicle
manufacturer to implement measures which may have a severe impact on the Company’s operations, such as a temporary or prolonged
suspension of new orders or the Company’s ability to bid for new business.
In addition, over time, there is a risk that the number of vehicles affected by a failure or defect will increase significantly (as would the
Company’s costs), since our products often use global designs and are increasingly based on or utilize the same or similar parts,
components, or solutions.
Although quality has always been a central focus in the automotive industry, especially for safety products, our customers and regulators
have become increasingly attentive to quality with even less tolerance for any deviations, which has resulted in an increase in the number
of automotive recalls. This trend is likely to continue as automobile manufacturers introduce even stricter quality requirements and
regulating agencies and other authorities increase the level of scrutiny given to vehicle safety issues. A warranty recall or a product liability
claim brought against the Company in excess of the Company’s insurance may have a material adverse effect on its business and/or
financial results. Vehicle manufacturers are also increasingly requiring their external suppliers to guarantee or warrant their products and
bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the
Company responsible for some or all of the repair or replacement costs of defective products under new vehicle warranties when the
product supplied did not perform as represented. Additionally, a customer may not allow us to bid for expiring or new business until certain
remedial steps have been taken. Accordingly, the future costs of warranty claims by the Company’s customers may be material.
The Company’s warranty reserves are based upon management’s best estimates of amounts necessary to settle future and existing
claims. Management regularly evaluates the appropriateness of these reserves and adjusts them when we believe it is appropriate to do
so. However, the final amounts determined to be due could differ materially from the Company’s recorded estimates. We believe our
established reserves are adequate to cover potential warranty settlements typically seen in our business.
The Company’s strategy is to follow a stringent procedure when developing new products and technologies and to apply a proactive
“zero-defect” quality policy (see section Quality Management). In addition, the Company maintains a program of insurance, which includes
commercial insurance, self-insurance, or a combination of both approaches, for potential recall and product liability claims in amounts
and on terms that it believes are reasonable and prudent based on our prior claims experience. However, such insurance may not be
sufficient to cover every possible claim that can arise in the Company’s businesses, now or in the future, or may not always will be
available should the Company, now or in the future, wish to extend, renew, increase or otherwise adjust such insurance. In recent years,
the cost of recall and product liability insurance as well as the Company’s level of self-insurance and deductibles has increased.
Management’s decision regarding what insurance to procure is also impacted by the cost for such insurance. As a result, the Company
may face material losses in excess of the insurance coverage procured. A substantial recall or liability in excess of coverage levels could
therefore have a material adverse effect on the Company.
ENVIRONMENTAL
Most of the Company’s manufacturing processes consist of the assembly of components. As a result, the environmental impact from the
Company’s plants is generally modest. While the Company’s businesses from time to time are subject to environmental investigations,
there are no material environmental-related cases pending against the Company. Therefore, Autoliv does not incur (or expect to incur)
any material costs or capital expenditures associated with maintaining facilities compliant with U.S. or non-U.S. environmental
requirements. To reduce environmental risk, the Company has implemented an environmental management system in all plants globally
and has adopted an environmental policy (see corporate website www.autoliv.com).
Autoliv is subject to a number of environmental and occupational health and safety laws and regulations. Such requirements are complex
and are generally becoming more stringent over time. There can be no assurance that these requirements will not change in the future,
or that the Company will at all times be in compliance with all such requirements and regulations, despite its intention to be. The Company
may also find itself subject, possibly due to changes in legislation or other regulation, to environmental liabilities based on the activities
of its predecessor entities or of businesses acquired. Such liability could be based on activities which are not related to the Company’s
current activities.
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TRADE
Autoliv is subject to various international trade regulations and regimes and changes in these regimes could lead to increased compliance
costs and costs of raw materials and other components. In addition, political conditions leading to trade conflicts and the imposition of
tariffs or other trade barriers between countries in which the Company does business could increase its costs of doing business.
Strategic Risks
REGULATIONS
In addition to vehicle production, the Company’s market is driven by the safety content per vehicle, which is affected by new regulations
and new vehicle rating programs, in addition to consumer demand for new safety technologies.
The most important regulations are the seatbelt installation laws that exist in all vehicle-producing countries. Many countries also have
strict enforcement laws on the wearing of seatbelts. Another significant vehicle safety regulation is the U.S. federal law that, since 1997,
requires frontal airbags for both the driver and the front-seat passenger in all new vehicles sold in the U.S.
In 2007, the U.S. adopted new regulations for head impact and enhanced thorax protection in side impact crashes, which now have been
fully phased-in. China introduced a vehicle rating program in 2006 and during the past 18 years this China NCAP, together with the
additional Chinese rating program, CIASI, from 2017, drive Chinese vehicle safety performance and safety content with regards to
crashworthiness and occupant protection. Latin America introduced a basic rating program in 2010 followed by ASEAN NCAP in
Southeast Asia in 2011, and Global NCAP is rating vehicles sold in significant emerging markets. Several countries, e.g., Malaysia and
Thailand, are increasingly adopting the UN Regulations regarding vehicle safety under the UN 1958 agreement, and Malaysia started a
world first motorcycle safety rating program in 2021.
The United States upgraded its vehicle rating program, US NCAP, in 2011 and again in 2024. Europe upgraded the Euro NCAP rating
system during 2018, and is now completing a new upgrade, intended to be fully implemented by 2025. Japan and South Korea are
continuously upgrading their respective vehicle rating programs, JNCAP and KNCAP respectively. India requires frontal airbags for the
driver from July 2019, and passenger airbags from 2021 for all new passenger vehicles (M1), moreover has announced that side airbags
shall become mandatory in 2023. In addition, India's Bharat NCAP went into effect in 2023 and was updated in 2024.
Vehicles with automated driving systems (ADS) are expected to provide additional opportunities through integration of protective safety
systems with ADAS technologies, as well as new vehicle interior layouts and seating configurations. This development is likely to become
subject to legal requirements.
There are also other plans for improved automotive safety through new or changed regulations, both in these countries and others that
could affect the Company’s market. However, there can be no assurance that changes in regulations will not adversely affect the demand
for the Company’s products or, at least, result in a slower increase in the demand for them.
DEPENDENCE ON CUSTOMERS
As a result of this highly consolidated market, the Company is dependent on a relatively small number of customers with strong purchasing
power. In 2024, the Company's five largest customers accounted for around 41% of global LVP and the ten largest accounted for around
62% of global LVP. In 2024, the Company’s five largest customers accounted for around 44% of consolidated sales and the ten largest
customers accounted for around 71% of consolidated sales. The Company's largest customer contract accounted for around 4% of
consolidated sales in 2024.
Customer % of Autoliv sales % of Global LVP1)
VW 9.2% 10.0%
Toyota 9.1% 12.1%
Stellantis 9.1% 5.9%
Honda 8.7% 4.4%
Hyundai 7.6% 8.4%
Ford 6.8% 4.1%
General Motors 5.6% 4.7%
Nissan 5.4% 4.7%
Mercedes 5.2% 2.7%
Major EV maker 4.5% 2.0%
1) Source: S&P Global January 2025
Although business with every major customer is split into at least several contracts (usually one contract per vehicle platform) and although
the customer base has become more balanced and diversified as a result of the Company's significant expansion in China and other
rapidly-growing markets, the loss of all business from a major customer (whether by a cancellation of existing contracts or not awarding
Autoliv new business), the consolidation of one or more major customers or a bankruptcy of a major customer could have a material
adverse effect on the Company. In addition, a quality issue, shortcomings in the Company's service to a customer or uncompetitive prices
or products could result in the customer not awarding the Company new business, which will gradually have a negative impact on the
Company's sales when current contracts start to expire.
See also Note 20, Segment Information, to the Consolidated Financial Statements included herein.
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CUSTOMER PAYMENT RISK
Another risk related to the Company's customers is the risk that one or more of its customers will be unable to pay their invoices that
become due. The Company seeks to limit this customer payment risk by invoicing its major customers through their local subsidiaries in
each country, even for global contracts. By invoicing this way, the Company attempts to avoid having the receivables with a multinational
customer group exposed to the risk that a bankruptcy or similar event in one country would put all receivables with such customer group
at risk. In each country, the Company also monitors invoices becoming overdue.
Even so, if a major customer is unable to fulfill its payment obligations, it is likely that the Company would be forced to record a substantial
loss on such receivables.
DEPENDENCE ON SUPPLIERS
The Company relies on internal and/or external suppliers in order to meet its delivery commitments to the customers. In some cases,
suppliers are dictated by the customers. The Company's supply chain organization continually reviews sourcing risks and actively works
on mitigating related supply chain risks.
The Company’s ambition is to maintain an optimal number of suppliers in all significant component technologies.
NEW COMPETITION
Increased competition may result in price reductions, reduced margins and the Company's inability to gain or hold market share. OEMs
rigorously evaluate suppliers on the basis of product quality, price, reliability and delivery as well as engineering capabilities, technical
expertise, product innovation, financial viability, application of lean principles, operational flexibility, customer service, and overall
management. To maintain the Company's competitiveness and position as a market leader, it is important to focus on all these aspects
of supplier evaluation and selection.
Although the market for occupant restraint systems has undergone a significant consolidation during the past ten years, the passive
safety market remains very competitive. It cannot be excluded that additional competitors, both global and local, will seek to enter the
market or grow beyond their current Keiretsu group or traditional customer base. Particularly in China, South Korea, and Japan there are
numerous domestic competitors often supplying just one OEM group.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company’s strategy is to protect its innovations with patents, and to vigorously protect and defend its patents, trademarks, and know-
how against infringement and unauthorized use. At the end of 2024, the Company held more than 6,600 patents and patents applications.
These patents expire on various dates during the period from 2025 to 2044 The expiration of any single patent is not expected to have a
material adverse effect on the Company’s financial results.
Although the Company believes that its products and technology do not infringe upon the proprietary rights of others, there can be no
assurance that third parties will not assert infringement claims against the Company in the future. Also, there can be no assurance that
any patent now owned by the Company will afford protection against competitors that develop similar technology. As the Company
continues to expand its products and expand into new businesses, it will increase its exposure to intellectual property claims.
Financial Risks
The Company is exposed to financial risks through its operations. To reduce the financial risks and to take advantage of economies of
scale, the Company has a central treasury department supporting operations and management. The treasury department handles
external financial transactions and functions as the Company’s in-house bank for its subsidiaries.
The Board of Directors monitors compliance with the financial risk policy on an on-going basis. For information about specific financial
risks, see Item 7A – Quantitative and Qualitative Disclosures about Market Risk.
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Significant Accounting Policies and Critical Accounting Estimates
NEW ACCOUNTING STANDARDS
The Company has considered all applicable recently issued accounting standards. The Company has summarized in Note 2, Summary
of Significant Accounting Policies, to the Consolidated Financial Statements each of the recently issued accounting standards and stated
the impact or whether management is continuing to assess the impact.
CRITICAL ACCOUNTING ESTIMATES
The Company’s significant accounting policies are disclosed in Note 2, Summary of Significant Accounting Policies, to the Consolidated
Financial Statements included herein. The application of accounting policies necessarily requires judgments and the use of estimates by
a Company’s management. Actual results could differ from these estimates. By their nature, these judgments are subject to an inherent
degree of uncertainty. These judgments are based on the Company's historical experience, terms of existing contracts, and
management’s evaluation of trends in the industry, information provided by the Company's customers and information available from
other outside sources, as appropriate. The Company considers an accounting estimate to be critical if:
•It requires management to make assumptions about matters that were uncertain at the time of the estimate, and
•Changes in the estimate or different estimates that could have been selected would have had a material impact on the
Company's financial condition or results of operations. The accounting estimates that require management’s most significant
judgments include the estimation of variable considerations, estimation of pension benefit obligations based on actuarial
assumptions, estimation of accruals for warranty and recalls, uncertain tax positions, valuation allowances and legal
proceedings.
The Company has summarized its critical accounting policies requiring judgment below. These might change over time based on the
current facts and circumstances.
REVENUE RECOGNITION
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is measured based on consideration specified in a
contract with a customer, adjusted for any variable consideration (i.e., price concessions) and estimated at contract inception. The
Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. The
estimated amount of variable consideration that will be received or paid by the Company is based on historical experience and trends,
management's understanding of the status of negotiations with customers and including pricing strategies. Negotiations with customers
is an ongoing process and the recognition of variable considerations is impacted by the outcome and timing of these negations. Estimating
variable consideration to be received or paid related to price concessions requires significant judgments by management that affect the
amount of revenue recorded in the financial statements due to the unique facts and circumstances in each of the customer agreements
and the on-going commercial negotiations with the customers. For the year-end 2024 the company recognized an accrual amounting to
$185 million net for variable considerations to be received or paid for variable considerations versus $173 million the year before.
In addition, from time to time, the Company may make payments to customers in connection with ongoing and future business. These
payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments unless
the payment concession can be clearly linked to the future business award. If the payments are capitalized, the amounts are amortized
to revenue as the related goods are transferred. In the year-end 2024 and 2023 respectively the capitalized amount has been insignificant.
CONTINGENT LIABILITIES
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters
that arise in the ordinary course of its business activities with respect to commercial, product liability or other matters.
The Company diligently defends itself in such matters and, in addition, carries insurance coverage to the extent reasonably available
against insurable risks.
The Company records liabilities for claims, lawsuits and proceedings when they are probable and it is possible to reasonably estimate
the cost of such liabilities. Legal costs expected to be incurred in connection with a loss contingency are expensed as such costs are
incurred.
A loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and
the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued management evaluates, among
other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss.
Changes in these factors could materially impact the Company's consolidated financial statements.
The company continuously assesses the relevant facts and circumstances for on-going litigation matters in its determination of whether
it is probable that an asset has been impaired or a liability has been incurred. The Company also considers its historical experience of
similar matters using significant judgement to make its estimates. For the years ended December 31, 2024 and 2023 management's
estimation process has been consistent and there have not been any material changes to the contingent liabilities recorded during
2024.
For further information, see Note 18 Contingent Liabilities describing the significant on-going claims and lawsuits the company is involved
in.
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RECALL PROVISIONS AND WARRANTY OBLIGATIONS
The Company records liabilities for product recalls when probable claims are identified and when it is possible to reasonably estimate
costs. Recall costs are costs incurred when the customer decides to formally recall a product due to a known or suspected safety concern.
Product recall costs are estimated based on the expected cost of replacing the product and the customer´s cost of carrying out the recall,
which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove and replace the defective
product. The Company maintains a program of insurance, which may include commercial insurance, self-insurance, or a combination of
both approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent
based on our prior claims experience. The Company’s insurance policies generally include coverage of the costs of a recall, although
costs related to replacement parts are generally not covered. Actual costs incurred could differ from the amounts estimated, requiring
adjustments to these reserves in future periods. It is possible that changes in our assumptions or future product recall issues could
materially affect our financial position, results of operations or cash flows.
Estimating warranty obligations requires the Company to forecast the resolution of existing claims and expected future claims on products
sold. The Company bases the estimate on historical trends of units sold and payment amounts, combined with our current understanding
of the status of existing claims and discussions with our customers. These estimates are re-evaluated on an ongoing basis. Actual
warranty obligations could differ from the amounts estimated requiring adjustments to existing reserves in future periods. Due to the
uncertainty and potential volatility of the factors contributing to developing these estimates, changes in our assumptions could materially
affect our results of operations.
The provision recorded for product liabilities for the years ended December 31, 2024 and 2023 were $65 million and $96 million
respectively. The Company continuously assesses the relevant facts and circumstances for on-going product recall matters and considers
its historical experience of similar matters using significant judgement to make its estimates, which are generally supported by external
counsel expertise. For the years ended December 31, 2024 and 2023 respectively management’s estimation process has been consistent
and the ultimate outcome for settled product recall matters during the years ended December 31, 2024 and 2023 as compared to
management estimations have been favorable. The reversal of the reserve in 2024 was related to certain recall issues that were settled
with a favorable outcome.
For further information, see Note 13 Product Related Liabilities and Note 18 Contingent Liabilities.
DEFINED BENEFIT PENSION PLANS
The Company has defined benefit pension plans in thirteen countries. The most significant plans exist in the U.S. These U.S. plans
represent approximately 50% of the Company’s total pension benefit obligation. See Note 19, Retirement Plans to the Consolidated
Financial Statements included herein.
The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the projected
benefit obligation and annual pension expense. For the U.S. plans, the assumptions used for calculating the 2024 pension expense were
a discount rate of 5.13% and an expected long-term rate of return on plan assets of 6.21%.
The assumptions used in calculating the U.S. benefit obligations disclosed, as of December 31, 2024 were a discount rate of 5.60%. The
discount rate for the U.S. plans has been set based on the rates of return of high-quality fixed-income investments currently available at
the measurement date and are expected to be available during the period the benefits will be paid. The expected rate of long-term return
on plan assets are determined based on several factors and must consider long-term expectations and reflect the financial environment
in the respective local markets. At December 31, 2024, 30% of the U.S. plan assets were invested in equities, which is close to the target
of 32%.
The table below illustrates the sensitivity of the U.S. net periodic benefit cost and projected U.S. benefit obligation to a 1pp change in the
discount rate and decrease in return on plan assets for the U.S. plans (in millions). The use of actuarial assumptions is an area of
management’s estimate.
Assumption
(in millions) Change
2024 net
periodic
benefit
cost increase
(decrease)
2024 projected
benefit
obligation
increase
(decrease)
Discount rate 1pp increase $ 1 $ (14)
Discount rate 1pp decrease (1) 16
Return on plan assets 1pp decrease 2 n/a
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INCOME TAXES
Significant judgment is required in determining the worldwide provision for income taxes. In the ordinary course of a global business,
there are many transactions for which the ultimate tax outcome is uncertain. Many of these uncertainties arise because of intercompany
transactions. The measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws. Deferred tax
assets are reduced by the amount of any tax benefits that are not expected to be realized. A valuation allowance is recognized if, based
on the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
Evaluation of the realizability of deferred tax assets is subject to significant judgment requiring careful consideration of all facts and
circumstances, including key factors such as projected future profitability including tax planning strategies, interpretation of applicable tax
laws and on-going or anticipated tax audits. Deferred net tax assets amounted to $394 million for the year 2024 including a valuation
allowance of $126 million. For 2023 the deferred net tax assets amounted to $394 million including a valuation allowance of $129 million.
The Company evaluates its uncertain tax positions based on enacted tax laws and consideration of all facts and circumstances, including
key factors such as interpretation of applicable tax laws, on-going tax audits or anticipated tax controversies. The unrecognized tax
benefits amounted to $35 million and $83 million respectively for the year 2024 and 2023. The change mainly relates to expiration of
statutes of limitations.
See also the discussion of reserves for uncertain tax positions, and the determination of valuation allowances on the Company's deferred
tax assets in Note 5, Income Taxes, to the Consolidated Financial Statements.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to several markets risks in the ordinary course of business including risks related to currencies, interest rates,
financing, capital structure, credit ratings and impairment. See also Note 2, Summary of Significant Accounting Policies to the
Consolidated Financial Statements included with this Annual Report for information about how these risks are quantified.
CURRENCY RISKS
1. Transaction Exposure and Revaluation effects
Transaction exposure arises because the cost of a product originates in one currency and the product is sold in another currency.
Revaluation effects come from valuation of assets and liabilities denominated in other currencies than the reporting currency of each unit.
The Company's net transaction exposure in 2024 was approximately $2.4 billion. The four largest net exposures are U.S. dollars (sell)
against the Mexican Peso, Romanian Lei (buy) against the Euro, U.S. dollars (buy) against Korean Won and U.S. dollars (buy) against
Japanese Yen. Together these currencies accounted for approximately 50% of the Company’s net currency transaction exposure.
Since the Company can only effectively hedge these currency flows in the short term, periodic hedging would only reduce the impact of
fluctuations temporarily. Over time, periodic hedging would postpone but not reduce the impact of fluctuations. In addition, the net
exposure is limited to only around one quarter of net sales and is made up of around 45 different currency pairs with exposures of more
than $1 million each. The Company generally does not hedge these flows.
2. Translation Exposure in the Income Statement and Balance Sheet
Another effect of exchange rate fluctuations arises when the income statements of non-U.S. subsidiaries are translated into U.S. dollars.
Outside the U.S., the Company’s most significant currency is the Euro. The Company estimates that 27% of its consolidated net sales
will be denominated in Euro or other European currencies during 2025, while 18% of its consolidated net sales are estimated to be
denominated in U.S. dollars.
The Company estimates that a 1% increase in the value of the U.S. dollar versus European currencies will decrease reported U.S. dollar
annual net sales in 2025 by $28 million, while operating income for 2025 will decline by $3 million, assuming reported corporate average
margin.
The Company’s policy is not to hedge this type of translation exposure.
A translation exposure also arises when the balance sheets of non-U.S. subsidiaries are translated into U.S. dollars. The policy of the
Company is to finance major subsidiaries in the country’s local currency and to minimize the amounts held by subsidiaries in foreign
currency accounts.
Consequently, changes in currency rates relating to funding and foreign currency accounts normally have a small impact on the
Company’s income. In 2024 and 2023, the impact from the Company’s currency exposure were not material.
INTEREST RATE RISK
Interest rate risk refers to the risk that interest rate changes will affect the Company’s borrowing costs. The Company's interest rate risk
policy states that the average interest rate fixing period should be minimum 1 year and maximum 5 years.
At December 31, 2024, the average interest rate fixing period for the Company’s outstanding debt was 2.8 years, and at December 31,
2023, the average interest rate fixing period for the Company’s outstanding debt was 2.1 years.
Given the Company’s current capital structure, we estimate that a one-percentage point interest rate increase would increase net interest
expense by approximately $0.7 million on an annual basis. This is based on the capital structure at the end of 2024 when the gross fixed-
rate debt was $1,522 million while the Company had a net debt position of $1,554 million (see section Non-U.S. GAAP Performance
Measures). Thus, a change in the interest rate environment would not have a notable impact on the Company’s interest expense. As of
December 31, 2024, the Company had $330 million in cash and cash equivalents of which the majority were subject to a floating interest
rate. Taking the cash and cash equivalents of $330 million (which is primarily subject to floating interest rates) minus the portion of debt
carrying floating interest rates, we estimated that a one-percentage point interest rate increase would increase net interest expense by
approximately $0.7 million on an annual basis.
Fixed interest rate debt can be achieved both by issuing fixed rate notes and through interest rate swaps. The most notable debt carrying
fixed interest rates is the €500 million bond issued in 2023, the €500 million bond issued in 2024, and the U.S. private placement notes
totaling $470 million. See Note 14 to the Consolidated Financial Statements included herein.
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FINANCING RISK
Financing risk refers to the risk that it will be difficult and/or expensive to finance new or existing debt to meet the financing needs of the
Autoliv Group.
The management of the financing risk ensures access to funding in a cost-efficient way by diversification of funding sources and debt
maturities.
Autoliv has diversified its long-term funding sources by issuing notes in the USPP and Eurobond markets, and by signing a long-term
credit agreement with 12 banks. The Company also has a lending facility with the Swedish Export Credit Corporation.
The Company has a Euro Medium Term Note Program in place for being able to issue notes to be listed at Euronext Dublin. The Company
also has established programs for short-term issuance of commercial papers in the Swedish and US markets and short-term credit
agreements, e.g., bank overdrafts and money market loans.
To ensure diversification of debt maturities no more than 20% of the Autoliv Group’s total debt may mature the next 12 months, unless
such maturities (in excess of 20%) are covered by unutilized committed credit facilities with maturity in excess of 12 months. Per
December 31, 2024, 20% corresponding to $387 million of the Autoliv Group’s total debt had maturity less than 12 months. This amount
was fully covered by unutilized committed credit facilities with maturity in excess of 12 months.
CAPITAL STRUCTURE AND CREDIT RATING
The overall objective relating to Autoliv’s target capital structure and credit rating is to provide the Company with sufficient flexibility to
manage the inherent risks and cyclicality in Autoliv’s business and allow the Company to realize strategic opportunities and fund growth
initiatives while creating shareholder value.
Autoliv is committed to maintain a “strong investment grade credit rating." As of December 31, 2024, the Company had a long-term credit
rating from S&P Global Ratings of BBB, from Moody’s of Baa1 and from Fitch of BBB+. As of February 7, 2025, S&P Global Ratings
withdrew the ratings for Autoliv on the company’s request.
The amount of interest-bearing debt held impacts the future financial flexibility as well as the credit rating. Management uses the non-
GAAP measure “Leverage Ratio” to analyze the amount of debt the Company can incur under its debt policy. Management believes that
this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage
its operations. Autoliv’s long-term target for the leverage ratio (sum of net debt plus pension liabilities divided by EBITDA) is 1.0x with the
aim to operate within the range of 0.5x to 1.5x. At December 31, 2024, the leverage ratio (non-GAAP measure, see calculation table
below) was 1.2x. For details and calculation of leverage ratio, refer to the table below.
CALCULATION OF NON-GAAP MEASURE LEVERAGE RATIO
December 31,
2024 2023
Net debt1) $ 1,554 $ 1,367
Pension liabilities 153 159
Debt per the Policy 1,708 1,527
Net income2) 648 489
Income taxes2) 227 123
Interest expense, net2,3) 95 80
Other non-operating items, net2) 16 3
Income from equity method investments2) (7) (5)
Depreciation and amortization of intangibles2) 387 378
Capacity alignments costs and antitrust related matters2) 27 230
EBITDA per the Policy (Adjusted EBITDA) $ 1,394 $ 1,297
Leverage ratio 1.2 1.2
1) Net debt is short- and long-term debt and debt-related derivatives less cash and cash equivalents (non-GAAP measure).
2) Latest 12 months.
3) Interest expense, net is interest expense including cost for extinguishment of debt, if any, less interest income.
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CREDIT RISK IN FINANCIAL MARKETS
Credit risk refers to the risk of a financial counterparty being unable to fulfill an agreed-upon obligation.
In the Company’s financial operations, credit risk arises when cash is deposited with banks and when entering into forward exchange
agreements, swap contracts or other financial instruments.
The policy of the Company is to work with banks that have a high credit rating and that participate in Autoliv’s financing.
To further reduce credit risk, deposits and financial instruments can only be entered into with core banks up to a calculated risk amount
of $250 million per bank for banks rated A- or above and up to $50 million for banks rated BBB+. In addition, deposits can be made in
U.S. and Swedish government short-term notes and certain AAA rated money market funds, as approved by the Company’s Board of
Directors. At December 31, 2024, the Company held $31 million in AAA rated money market funds.
IMPAIRMENT RISK
Impairment risk refers to the risk that the Company will write down a material amount of its goodwill of close to $1.4 billion as of December
31, 2024. This risk is assessed at least annually in the fourth quarter each year when the Company performs its impairment testing.
It has been concluded that presently the Company's goodwill is not “at risk”. However, there can be no assurance that goodwill will not
be impaired due to future significant declines in LVP, due to the Company's technologies or products becoming obsolete or for any other
reason. The Company could also acquire companies where goodwill could turn out to be less resilient to deteriorations in external
conditions.
See also discussion under Goodwill and Intangible Assets in Note 2, Summary of Significant Accounting Policies, and Note 10, Goodwill
and Intangible Assets, to the Consolidated Financial Statements included herein.
Item 8. Financial Statements and Supplementary Data
The Consolidated Balance Sheets of Autoliv as of December 31, 2024 and 2023 and the Consolidated Statements of Income,
Comprehensive Income, Cash Flows and Total Equity for each of the three years in the period ended December 31, 2024, the Notes to
the Consolidated Financial Statements, and the Reports of the Independent Registered Public Accounting Firm are included below.
All of the schedules specified under Regulation S-X to be provided by Autoliv have been omitted either because they are not applicable,
are not required or the information required is included in the financial statements or notes thereto.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Autoliv, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Autoliv, Inc. (the Company) as of December 31, 2024 and 2023, the
related consolidated statements of income, comprehensive income, total equity and cash flows for each of the three years in the period
ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and
2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our
report dated February 20, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures
to which they relate.
Revenue recognition
Description of the
Matter
As discussed in Note 2 to the consolidated financial statements, the Company measures revenue based on
consideration specified in a contract with a customer, adjusted for any variable consideration (i.e. price
concessions). Revenue is recognized based on the agreed-upon price at the time of shipment, and sales
incentives, allowances and certain customer payments are recognized as a reduction to revenue at the time of the
commitment to provide such incentives or make such payments.
Auditing revenue recorded for customer contracts containing variable consideration, that are subject to on-going
commercial negotiations for price concessions, was complex and judgmental due to the difficulty in evaluating the
sufficiency of evidence available to assess the existence of and likely outcome of on-going commercial
negotiations.
How We
Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls
over management’s review of customer contracts containing variable consideration. This included testing controls
over management’s process to identify and evaluate the accounting of customer contracts that contain sales
incentives, allowances, and customer payments that impact revenue recognition.
Our audit procedures to assess the Company’s identification of and accounting for contracts containing variable
consideration that are subject to on-going commercial negotiations for price concessions, included, among others,
interviewing and obtaining written representations from executives, within the Company, responsible for such
negotiations with customers and testing a sample of payments and credit memos issued to customers. Our
procedures also included inspecting a sample of customer agreements, and other related supporting
documentation, evaluating the terms therein and assessing the appropriateness of the accounting treatment.
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Product recall liabilities
Description of the
Matter
As discussed in Notes 2, 13 and 18 to the consolidated financial statements, the Company is exposed to product
liability claims in the event its products fail to perform as represented and such failure results, or is alleged to result,
in bodily injury, and/or property damage or other loss. The Company records liabilities for product recalls when
probable claims are identified and when it is possible to reasonably estimate costs. Provisions for product recalls
are estimated based on the expected cost of replacing the product and the customer’s cost of carrying out the
recall, which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove
and replace the defective product.
Auditing product recall liabilities was complex due to the uncertainty inherent in identifying product recalls, as well
as the assumptions and estimates management uses to calculate the provisions for product recalls. These
significant assumptions and estimates include the nature, likelihood, timing, and anticipated cost of known and
potential claims.
How We
Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls
over the Company’s product recall liabilities process. This included testing controls over management’s process
to identify product recalls and determine the assumptions and estimates used to record product recall liabilities.
To audit product recall liabilities, our audit procedures included, among others, obtaining and reviewing source
documentation, used by the Company to estimate the liability and assessing the reasonableness of assumptions
used by performing independent calculations and sensitivity analyses to identify contrary evidence. We evaluated
the Company’s ability to estimate the product recall liabilities by performing retrospective reviews of management’s
estimates and comparing actual results to previous estimates and judgments made by management. We also
obtained letters from the Company’s internal and external legal counsel addressing material claims against the
Company, if any, and examined relevant third-party automotive safety regulatory information to identify potential
unrecorded product recall liabilities.
/s/ Ernst & Young AB
We have served as the Company's auditor since 1984.
Stockholm, Sweden
February 20, 2025
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Autoliv, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Autoliv, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
(the COSO criteria). In our opinion, Autoliv, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income,
comprehensive income, total equity and cash flows for each of the three years in the period ended December 31, 2024, and the related
notes and our report dated February 20, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young AB
Stockholm, Sweden
February 20, 2025
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Consolidated Statements of Income
Years ended December 31,
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA) 2024 2023 2022
Net sales Note 20 $ 10,390 $ 10,475 $ 8,842
Cost of sales (8,463) (8,654) (7,446)
Gross profit 1,927 1,822 1,396
Selling, general and administrative expenses (530) (500) (440)
Research, development and engineering expenses, net Note 2 (398) (425) (390)
Other income (expense), net Notes 12, 18 (19) (207) 93
Operating income 979 690 659
Income from equity method investment Note 8 7 5 3
Interest income 13 13 6
Interest expense Note 14 (108) (93) (60)
Other non-operating items, net (16) (3) (5)
Income before income taxes 875 612 603
Income tax expense Note 5 (227) (123) (178)
Net income 648 489 425
Less: Net income attributable to non-controlling interest 1 1 2
Net income attributable to controlling interest $ 646 $ 488 $ 423
Earnings per share - basic $ 8.06 $ 5.74 $ 4.86
Earnings per share - diluted $ 8.04 $ 5.72 $ 4.85
Weighted average number of shares outstanding, net of
treasury shares (in millions) 80.2 85.0 87.1
Weighted average number of shares outstanding, assuming
dilution and net of treasury shares (in millions) 80.4 85.2 87.2
Cash dividend per share - declared $ 2.74 $ 2.66 $ 2.58
Cash dividend per share - paid $ 2.74 $ 2.66 $ 2.58
See Notes to the Consolidated Financial Statements.
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Consolidated Statements of Comprehensive Income
Years ended December 31,
(DOLLARS IN MILLIONS) 2024 2023 2022
Net income $ 648 $ 489 $ 425
Other comprehensive income (loss)before tax:
Change in cumulative translation adjustments (161) 20 (136)
Net change in unrealized components of defined benefit plans (4) 7 29
Other comprehensive income (loss), before tax (165) 27 (107)
Tax effect allocated to other comprehensive income (loss) 1 (1) (9)
Other comprehensive income (loss), net of tax (164) 25 (116)
Comprehensive income 484 514 309
Less: Comprehensive income attributable to non-controlling interest 1 1 0
Comprehensive income attributable to controlling interest $ 483 $ 513 $ 309
See Notes to the Consolidated Financial Statements.
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Consolidated Balance Sheets
At December 31,
(DOLLARS AND SHARES IN MILLIONS) 2024 2023
Assets
Cash and cash equivalents $ 330 $ 498
Receivables, net Note 6 1,993 2,198
Inventories, net Note 7 921 1,012
Income tax receivable 38 60
Prepaid expenses and accrued income 167 173
Other current assets Note 13, 18 34 33
Total current assets 3,483 3,974
Property, plant and equipment, net Note 9 2,239 2,192
Operating lease right-of-use assets Note 3 158 176
Goodwill and intangible assets, net Note 10 1,375 1,385
Other non-current assets Note 8, 18 548 606
Total non-current assets 4,320 4,358
Total assets 7,804 8,332
Liabilities and equity
Short-term debt Note 14 387 538
Accounts payable 1,799 1,978
Accrued expenses Notes 12, 13 1,056 1,135
Income tax payable 120 122
Operating lease liabilities, current Note 3 41 39
Other current liabilities 231 223
Total current liabilities 3,633 4,035
Long-term debt Note 14 1,522 1,324
Pension liability Note 19 153 159
Operating lease liabilities, non-current Note 3 118 135
Other non-current liabilities 92 109
Total non-current liabilities 1,885 1,728
Commitments and contingencies Note 18
Common stock1) 80 88
Additional paid-in capital 910 1,044
Retained earnings 2,105 2,289
Accumulated other comprehensive loss Note 15 (659) (496)
Treasury stock (2.7 and 4.9 million shares, respectively) (160) (368)
Total controlling interest’s equity 2,276 2,557
Non-controlling interest 10 13
Total equity 2,285 2,570
Total liabilities and equity $ 7,804 $ 8,332
1) Number of shares: 350 million authorized for both years, 80.4 and 87.5 million issued, and 77.7 and 82.6 million outstanding, net of treasury shares, for
2024 and 2023, respectively.
See Notes to the Consolidated Financial Statements.
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Consolidated Statements of Cash Flows
Years ended December 31,
(DOLLARS IN MILLIONS) 2024 2023 2022
Operating activities
Net income $ 648 $ 489 $ 425
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 387 378 363
Gain on divestiture of property (4 ) — (80 )
Deferred income taxes (30 ) (109 ) (40 )
Undistributed earnings from equity method investments, net of dividends (1 ) (1 ) (1 )
Other, net 7 (10 ) (13 )
Net change in operating assets and liabilities:
Receivables and other assets, gross 114 (213 ) (297 )
Inventories, gross 28 (22 ) (243 )
Accounts payable and accrued expenses (95 ) 426 596
Income taxes 6 43 2
Net cash provided by operating activities 1,059 982 713
Investing activities
Expenditures for property, plant and equipment (579 ) (573 ) (585 )
Proceeds from sale of property, plant and equipment 17 4 101
Net cash used in investing activities (563 ) (569 ) (485 )
Financing activities
Net (decrease) increase in other short-term debt (126 ) 61 167
Proceeds from long-term debt 526 559 —
Repayment of long-term debt (306 ) (533 ) (357 )
Dividends paid (219 ) (225 ) (224 )
Stock repurchases (552 ) (352 ) (115 )
Common stock options exercised 1 1 0
Dividends paid to non-controlling interest (5 ) (1 ) (2 )
Net cash used in financing activities (680 ) (490 ) (531 )
Effect of exchange rate changes on cash and cash equivalents 16 (20 ) (73 )
Decrease in cash and cash equivalents (168 ) (96 ) (375 )
Cash and cash equivalents at beginning of year 498 594 969
Cash and cash equivalents at end of year $ 330 $ 498 $ 594
See Notes to the Consolidated Financial Statements.
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Consolidated Statements of Total Equity
Accumulated
Additional other com- Total parent Non-
(DOLLARS AND SHARES Number of Common paid in Retained prehensive Treasury shareholders’ controlling Total
IN MILLIONS) shares stock capital earnings (loss) income1) stock equity interest equity
Balance at December 31, 2021 103 $ 103 $ 1,329 $ 2,742 $ (408 ) $ (1,133 ) $ 2,633 $ 15 $ 2,648
Comprehensive Income:
Net income 423 423 2 425
Foreign currency translation (134 ) (134 ) (1 ) (136 )
Pension liability 20 20 20
Total Comprehensive Income 309 0 309
Retired and repurchased shares (11 ) (11 ) (216 ) (631 ) 744 (115 ) (115 )
Stock-based compensation 10 10 10
Cash dividends declared (225 ) (225 ) (225 )
Dividends paid to non-controlling
interest on subsidiary shares (2 ) (2 )
Balance at December 31, 2022 91 $ 91 $ 1,113 $ 2,310 $ (522 ) $ (379 ) $ 2,613 $ 13 $ 2,626
Comprehensive Income:
Net income 488 488 1 489
Foreign currency translation 20 20 (0 ) 20
Pension liability 6 6 6
Total Comprehensive Income 513 1 514
Retired and repurchased shares (4 ) (4 ) (70 ) (282 ) (356 ) (356 )
Stock-based compensation 11 11 11
Cash dividends declared (225 ) (225 ) (225 )
Dividends paid to non-controlling
interest on subsidiary shares (1 ) (1 )
Balance at December 31, 2023 88 $ 88 $ 1,044 $ 2,289 $ (496 ) $ (368 ) $ 2,557 $ 13 $ 2,570
Comprehensive Income:
Net income 646 646 1 648
Foreign currency translation (161 ) (161 ) (0 ) (161 )
Pension liability (3 ) (3 ) (3 )
Total Comprehensive Income 483 1 484
Retired and repurchased shares (7 ) (7 ) (134 ) (612 ) 194 (558 ) (558 )
Stock-based compensation 13 13 13
Cash dividends declared (219 ) (219 ) (219 )
Dividends paid to non-controlling
interest on subsidiary shares (5 ) (5 )
Balance at December 31, 2024 80 $ 80 $ 910 $ 2,105 $ (659 ) $ (160 ) $ 2,276 $ 10 $ 2,285
1) See Note 15 for further details – includes tax effects where applicable.
See Notes to the Consolidated Financial Statements.
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Notes to the Consolidated Financial Statements
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1. Basis of Presentation
NATURE OF OPERATIONS
Through its operating subsidiaries, the Company is a leading developer, manufacturer and supplier of passive safety systems to the
automotive industry with a broad range of product offerings.
Passive safety systems are primarily meant to improve safety for occupants in a vehicle. Passive safety systems include modules and
components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels and inflator
technologies.
The Company also develops and manufactures mobility safety solutions such as pedestrian protection, battery cut-off switches, connected
safety services, and safety solutions for riders of powered two wheelers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in accordance with United States (U.S.) Generally Accepted Accounting
Principles (GAAP) and include Autoliv, Inc. and all companies over which Autoliv, Inc. directly or indirectly exercises control, which as a
general rule means that the Company owns more than 50% of the voting rights.
Consolidation is also required when the Company has both the power to direct the activities of a variable interest entity (VIE) and the
obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.
All intercompany accounts and transactions within the Company have been eliminated from the consolidated financial statements.
Investments in affiliated companies in which the Company exercises significant influence over the operations and financial policies, but
does not control, are reported using the equity method of accounting. Generally, the Company owns between 20-50% of such
investments.
SEGMENT REPORTING
In accordance with ASC 280, Segment Reporting, the operating segments are determined based on the information provided to the Chief
Operating Decision Maker (CODM) on a regular basis and used for the purpose of assessing performance and allocating resources within
the Company. The CEO is deemed to be the CODM of Autoliv since he is the person who makes all major decisions on how to allocate
the resources and assess the performance of the Company for both strategic and operational initiatives.
ASC 280 indicates that a component is an operating segment if it meets the following criteria:
•It engages in business activities from which it may earn revenues and incur expenses.
•Its operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the segment
and assess its performance.
•Its discrete financial information is available.
The Company as a whole has met the definition of an operating segment as it engages in business activities from which it may earn
revenues and incur expenses, the consolidated operating results are regularly reviewed by the CEO/CODM to allocate resources and
assess performance, and discrete financial information is available. Additionally, as Autoliv supplies customers on a global basis it also
manages the business on a global basis. Therefore, based on the above analysis, the Company has concluded that the Company is the
single operating and reportable segment under ASC 280, Segment Reporting. For more information on the Company's segment, see
Note 20.
RECLASSIFICATIONS AND ROUNDINGS
Certain prior-year amounts have been reclassified to conform to current year presentation.
Certain amounts in the consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have
been calculated using unrounded amounts.
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2. Summary of Significant Accounting Policies
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. The accounting
estimates that require management’s most significant judgments include the estimation of variable consideration for the Company's
contracts with customers, valuation of stock-based compensation payments, assessment of recoverability of goodwill and intangible
assets, estimation of pension benefit obligations based on actuarial assumptions, estimation of accruals for warranty and recalls,
restructuring charges, uncertain tax positions, valuation allowances and legal proceedings. Actual results could differ from those
estimates.
REVENUE RECOGNITION
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is measured based on consideration specified in a
contract with a customer, adjusted for any variable consideration (i.e., price concessions) and estimated at contract inception. The
estimated amount of variable consideration that will be received or paid by the Company is based on historical experience and trends,
management's understanding of the status of negotiations with customers and anticipated future pricing strategies. The Company
recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is recorded
to the agreed-upon price at the time of shipment, and sales incentives, allowances and certain payments to customers are recognized as
a reduction to revenue at the time of the commitment to provide such incentives or make these payments are made by the Company.
In addition, from time to time, the Company may make payments to or receive additional consideration from customers in connection with
ongoing and future business. These payments to or cash receipts from customers are generally recognized to revenue at the time of the
commitment unless the payments to customers can be clearly linked to the future business. If the payments to customers are capitalized,
the amounts are amortized to revenue as the related goods are transferred.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and
collected by the Company from a customer, are excluded from revenue.
Shipping and handling costs associated with outbound freight before control of a product has transferred to a customer are accounted for
as a fulfillment cost and are included in cost of sales.
Nature of goods and services
The Company generates revenue from the sale of parts, which includes airbag and seatbelt products and components, to original
equipment manufacturers (“OEMs”).
The Company accounts for individual products separately if they are distinct (i.e., if a product is separately identifiable from other items
and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration for
each of the products, including any price concessions, is based on their stand-alone selling prices. The stand-alone selling prices are
determined based on the cost-plus margin approach.
The Company recognizes revenue for parts primarily at a point in time. For parts with revenue recognized at a point in time, the Company
recognizes revenue upon shipment to the customers and transfer of title and risk of loss under standard commercial terms (typically FOB
shipping point).
There are certain contracts where the criteria to recognize revenue over time have been met (e.g., there is no alternative use to the
Company and the Company has an enforceable right to payment). In such cases, at period end, the Company recognizes revenue and
a related asset and associated cost of goods sold and reduction in inventory. However, the financial impact of these contracts is immaterial
considering the very short production cycles and limited inventory days on hand. The contract asset balances with customers, included
in other current assets, amounted to $20 million as of December 31, 2024 and 2023.
The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., price concessions).
Customers typically pay for the parts based on customary business practices.
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RESEARCH, DEVELOPMENT AND ENGINEERING, NET (R,D & E)
Research and development and most engineering expenses are expensed as incurred. These expenses are reported net of expense
reimbursements from contracts to perform engineering design and product development fulfillment activities related to the production of
parts. For the years 2024, 2023 and 2022 total reimbursements from customers were $213 million, $192 million and $204 million,
respectively.
Certain engineering expenses related to long-term supply arrangements are capitalized when defined criteria in accordance with ASC
340-10, such as the existence of a contractual guarantee for reimbursement, are met.
Tooling is generally agreed upon as a separate contract or a separate component of an engineering contract, as a pre-production project.
Capitalization of tooling costs is made only when the specific criteria for capitalization of customer funded tooling in accordance with ASC
340-10 is met. As of December 31, 2024 and 2023 the Company had capitalized costs for customer owned tooling as prepaid expenses
amounting to $74 million and $79 million, respectively. Tools owned by the Company that fulfills the criteria for capitalization is reported
as Property, Plant & Equipment (P,P&E). Depreciation on the Company’s own tooling is recognized in the Consolidated Statements of
Income as Cost of sales.
STOCK-BASED COMPENSATION
The compensation costs for all of the Company’s stock-based compensation awards are determined based on the fair value method as
defined in ASC 718, Compensation –Stock Compensation. The Company records the compensation expense for awards under the Stock
Incentive Plan, including Restricted Stock Units (RSUs), Performance Shares (PSUs) and stock options (SOs), over the respective vesting
period. For further details, see Note 17.
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current year. In
certain circumstances, payments or refunds may extend beyond twelve months, in such cases amounts would be classified as non-
current taxes payable or receivable. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to
temporary differences and carryforwards that result from events that have been recognized in either the financial statements or the tax
returns, but not both. The measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws.
Deferred tax assets are reduced by the amount of any tax benefits that are not expected to be realized. A valuation allowance is
recognized if, based on the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax asset
will not be realized. Evaluation of the realizability of deferred tax assets is subject to significant judgment requiring careful consideration
of all facts and circumstances. The Company classifies deferred tax assets and liabilities as non-current in the Consolidated Balance
Sheet. Tax assets and liabilities are not offset unless attributable to the same tax jurisdiction and netting is possible according to law and,
as it relates to payables and receivables, expected to take place in the same period.
Tax benefits associated with tax positions taken in the Company’s income tax returns are initially recognized when it is more likely than
not that those tax positions will be sustained upon examination by the relevant taxing authorities. The Company’s evaluation of its tax
benefits is based on the probability of the tax position being upheld if challenged by the taxing authorities (including through negotiation,
appeals, settlement and litigation). Whenever a tax position does not meet the initial recognition criteria, the tax benefit is subsequently
recognized if there is a substantive change in the facts and circumstances that cause a change in judgment concerning the sustainability
of the tax position upon examination by the relevant taxing authorities. In cases where tax benefits meet the initial recognition criterion,
the Company continues, in subsequent periods, to assess its ability to sustain those positions. A previously recognized tax benefit is
derecognized when it is no longer more likely than not that the tax position would be sustained upon examination. Liabilities for
unrecognized tax benefits are classified as non-current unless the payment of the liability is expected to be made within the next 12
months.
EARNINGS PER SHARE
The Company calculates basic earnings per share (EPS) by dividing net income attributable to controlling interest by the weighted-
average number of shares of common stock outstanding for the period (net of treasury shares). The Company’s unvested RSUs and
PSUs, of which some include the right to receive non-forfeitable dividend equivalents, are considered participating securities. The diluted
EPS reflects the potential dilution that could occur if common stock was issued for awards under the Stock Incentive Plan and is calculated
using the treasury stock method. The treasury stock method assumes that the Company uses the proceeds from the exercise of stock
option awards to repurchase ordinary shares at the average market price during the period. For unvested restricted stock, assumed
proceeds under the treasury stock method will include unamortized compensation cost and windfall tax benefits or shortfalls. For further
details, see Notes 17 and 21.
CASH EQUIVALENTS
The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents.
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RECEIVABLES AND ALLOWANCE FOR EXPECTED CREDIT LOSSES
Receivables are recorded at the invoice amount, which represents the fair value of the consideration received or receivable.
In addition to individually assess overdue customer balances for expected credit losses, the Company also calculates an allowance that
reflects the expected credit losses on receivables considering both historical experience as well as forward looking assumptions. The
method calculates the expected credit loss for a group of customers by using the customer groups’ average short-term default rates
based on officially published credit ratings and the Company’s historical experience. These default rates are considered the Company’s
best estimate of the customer’s ability to pay. The Company regularly reassess the customer groups and the applied customer group’s
default rates by using its best judgment when considering changes in customer’s credit ratings, customer’s historical payments and loss
experience, current market and economic conditions and the Company’s expectations of future market and economic conditions.
There can be no assurance that the amount ultimately realized for receivables will not be materially different than that assumed in the
calculation of the allowance for expected credit losses.
INVENTORIES
The cost of inventories is computed according to the first-in first-out method (FIFO). Cost includes the cost of materials, direct labor and
the applicable share of manufacturing overhead. Inventories are evaluated based on individual or, in some cases, groups of inventory
items. Reserves are established to reduce the value of inventories to the lower of cost or net realizable value. Net realizable value is the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.
Excess inventories are quantities of items that exceed anticipated sales or usage for a reasonable period. The Company calculates
provisions for excess inventories based on the number of months of inventories on hand compared to anticipated sales or usage.
Management uses its judgment to forecast sales or usage and to determine what constitutes a reasonable period. There can be no
assurance that the amount ultimately realized for inventories will not be materially different than that assumed in the calculation of the
reserves.
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment is recorded at historical cost. Construction in progress generally involves short-term projects for which
capitalized interest is not significant. The Company provides for depreciation of property, plant and equipment computed under the
straight-line method over the assets’ estimated useful lives, or in the case of leasehold improvements over the shorter of the useful life
or the lease term. Amortization on finance leases is recognized with depreciation expense in the Consolidated Statements of Income over
the shorter of the assets’ expected life or the lease contract term. Repairs and maintenance are expensed as incurred.
LEASES
In accordance with ASC 842, Leases, the Company recognizes contracts that is, or contains, a lease when the contract conveys the right
to control the use of a physically identified asset for a period of time in exchange for consideration in the balance sheet as a right-of-use
asset and lease liability. The Company recognizes a right-of-use asset and a lease liability at lease commencement. The lease liability
for both finance and operating leases is measured at the present value of the remaining lease payments, discounted at the Company's
incremental borrowing rate (if the implicit interest rate in the lease contract is not readily determinable). The right-of-use asset (ROU) for
finance and operating leases is initially measured at the sum of the initial lease liability plus initial direct costs plus prepaid lease payments
minus lease incentives received. Lease payments include undiscounted fixed payments plus optional payments that are reasonably
certain to be owed. Lease payments do not include variable lease payments other than those that depend on an index or rate. Variable
lease payments that depend on an index or a rate are included in the calculation of lease payments and in the measurement of the lease
liability.
If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The
Company uses its best judgement when determining the incremental borrowing rate, which is the rate of interest that the Company would
have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.
The Company has elected the practical expedient of not separating lease components from non-lease components for all its classes of
underlying assets. The Company has also elected to recognize the lease payments for short-term leases in its consolidated statement of
income on a straight-line basis over the lease term and recognize the variable lease payments in the period in which the obligation for
those payments is incurred.
Finance lease right-of-use assets are presented together with other property, plant and equipment assets and finance lease liabilities are
presented together with other current and non-current liabilities in the Consolidated Balance Sheets. Finance leases were not material
as of December 31, 2024.
For further details on the Company’s leases, see Note 3.
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LONG-LIVED ASSET IMPAIRMENT
The Company evaluates the carrying value and useful lives of long-lived assets, other than goodwill and intangible assets, when
indications of impairment are evident or it is likely that the useful lives have decreased, in which case the Company depreciates the assets
over the remaining useful lives. Impairment testing is primarily done by using the cash flow method based on undiscounted future cash
flows. Estimated undiscounted cash flows for a long-lived asset being evaluated for recoverability are compared with the respective
carrying amount of that asset. If the estimated undiscounted cash flows exceed the carrying amount of the assets, the carrying amounts
of the long-lived asset are considered recoverable and an impairment cannot be recorded. However, if the carrying amount of a group of
assets exceeds the undiscounted cash flows, an entity must then measure the long-lived assets’ fair value to determine whether an
impairment loss should be recognized, generally using a discounted cash flow model. Generally, the lowest level of cash flows for
impairment assessment is customer platform level.
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the fair value of consideration transferred over the fair value of net assets of businesses acquired.
Goodwill is not amortized but subject to at least an annual review for impairment. Other definite-lived intangible assets, principally related
to acquired technology, are amortized over their useful lives which range from 3 to 25 years.
The Company performs its annual impairment testing in the fourth quarter of each year. Impairment testing is required more often than
annually if an event or circumstance indicates that an impairment, or decline in value, may have occurred. The Company uses either a
qualitative assessment or a quantitative calculation for its impairment testing. The qualitative assessment permits the Company to assess
whether it is more than likely than not (i.e., a likelihood of greater than 50%) that goodwill is impaired. If the Company concludes based
on the qualitative assessment that it is not more likely than not that the fair value of goodwill is less than its carrying amount, it would not
have to quantitatively determine the asset’s fair value. The Company also consider external factors that could affect the significant inputs
used to determine fair value.
In 2024, the Company performed a quantitative impairment test by calculating the fair value of its goodwill. The estimated fair market
value of goodwill is determined by the discounted cash flow method.
There were no impairments of goodwill from 2022 through 2024.
WARRANTIES AND RECALLS
The Company records liabilities for product recalls when probable claims are identified and when it is possible to reasonably estimate
costs. Recall costs are costs incurred when the customer decides to formally recall a product due to a known or suspected safety concern.
Product recall costs are estimated based on the expected cost of replacing the product and the customer´s cost of carrying out the recall,
which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove and replace the defective
product. Insurance receivables, related to recall issues covered by the insurance, are included within other current and non-current assets
in the Consolidated Balance Sheets. Provisions for warranty claims are estimated based on prior experience, likely changes in
performance of newer products and the mix and volume of products sold. The provisions are recorded on an accrual basis.
RESTRUCTURING PROVISIONS
The Company defines restructuring expense to include costs directly associated with rightsizing, exit or disposal activities. Estimates of
restructuring charges are based on information available at the time such charges are recorded. In general, management anticipates that
restructuring activities will be completed within a timeframe such that significant changes to the exit plan are not likely. Due to inherent
uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially
estimated.
PENSION OBLIGATIONS
The Company provides for both defined contribution plans and defined benefit plans. A defined contribution plan generally specifies the
periodic amount that the employer must contribute to the plan and how that amount will be allocated to the eligible employees who perform
services during the same period. A defined benefit pension plan is one that contains pension benefit formulas, which generally determine
the amount of pension benefits that each employee will receive for services performed during a specified period of employment.
The amount recognized as a defined benefit liability is the net total of projected benefit obligation (PBO) minus the fair value of plan
assets (if any) (see Note 19).
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CONTINGENT LIABILITIES
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters
that arise in the ordinary course of its business activities with respect to commercial, product liability or other matters (see Note 13). The
Company diligently defends itself in such matters and, in addition, carries insurance coverage to the extent reasonably available against
insurable risks. The Company records liabilities for claims, lawsuits and proceedings, when they are probable and it is possible to
reasonably estimate the cost of such liabilities. Legal costs expected to be incurred in connection with a loss contingency are expensed
as such costs are incurred.
The Company believes, based on currently available information, that the resolution of outstanding matters, other than any antitrust
related matters described in Note 18 after taking into account recorded liabilities and available insurance coverage, should not have a
material effect on the Company’s financial position or results of operations. However, due to the inherent uncertainty associated with such
matters, there can be no assurance that the final outcomes of these matters will not be materially different than currently estimated.
TRANSLATION OF NON-U.S. SUBSIDIARIES
The assets and liabilities of subsidiaries with functional currency other than U.S. dollars are translated into U.S. dollars based on the
current exchange rate prevailing at each balance sheet date and any resulting translation adjustments are included in accumulated other
comprehensive loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured
from their local currency to their functional currency and then translated to U.S. dollars. Revenues and expenses are translated into U.S.
dollars using the average exchange rates prevailing for each period presented.
RECEIVABLES AND LIABILITIES IN NON-FUNCTIONAL CURRENCIES
Receivables and liabilities not denominated in functional currencies are converted at year-end exchange rates. Net transaction losses,
reflected in the Consolidated Statements of Income, amounted to $1 million in 2024, $(30) million in 2023 and $(25) million in 2022, and
are recorded in operating income if they relate to operational receivables and liabilities or are recorded in other non-operating items, net
if they relate to financial receivables and liabilities.
NEW ACCOUNTING STANDARDS
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards
updates (“ASUs”) to the FASB’s Accounting Standards Codification (ASC). The Company considers the applicability and impact of all
ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on
the Company’s consolidated financial statements.
Adoption of New Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures,
which improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.
The amendments in this update require that a public entity make additional disclosures related to segments if it has them. A public entity
that has a single reportable segment would be required to provide all the disclosures required by the amendments in this update and all
existing segment disclosures in Topic 280. The amendments in this update is effective for fiscal years beginning after December 15,
2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this
update should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted ASU 2023-07
in the fourth quarter of 2024.The adoption of this guidance resulted in incremental disclosures in the Company’s financial statements.
See Note 20. Segment Information.
Accounting Standards Issued But Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, to enhance
the transparency and decision usefulness of income tax disclosures as well as improve the effectiveness of income tax disclosures. The
amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation
and (2) provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update also require
that all entities disclose on an annual basis certain detailed information about income taxes paid. The amendments in this update related
to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent
categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.
The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related
tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The amendments
in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this
update should be applied on a prospective basis. Retrospective application is permitted. The Company has concluded that ASU 2023-09
will have a material impact on the income tax disclosures to its financial statements. The Company will adopt the amendments in this
update prospectively upon the effective date.
In March 2024, the SEC adopted final rules requiring registrants to disclose climate-related information in their annual reports. The final
rules require information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material
impact on, its business strategy, results of operations, or financial condition. In addition, under the final rules, certain disclosures related
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to severe weather events and other natural conditions will be required in a registrant’s audited financial statements. The new requirements
are required on a prospective basis and a phased-in compliance period becomes effective for the Company beginning with its Annual
Report on Form 10-K for the year ending December 31, 2025. However, pending the resolution of legal challenges that were subsequently
filed against these rules, in April 2024, the SEC stayed the effectiveness of the rules. Therefore, the disclosure requirements of these
rules and the timing of their effectiveness is uncertain. The Company is currently assessing the anticipated impact that the rules will have
on its financial statements if and when effective and will implement disclosures upon any such effective dates.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses, to improve financial reporting by requiring additional
information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. The
amendments in ASU 2024-03 do not change or remove current expense disclosure requirements. The amendments require that at each
interim and annual reporting period an entity should disclose the amounts of (a) purchase of inventory, (b) employee compensation, (c)
depreciation and (d) intangible asset amortization included in each relevant expense caption. The amendments in ASU 2024-03 are
effective for annual reporting periods beginning after December 1, 2026, and interim reporting periods beginning after December 15,
2027. Early adoption is permitted. The amendments in ASU 2024-03 should be applied either (1) prospectively to financial statements
issued for reporting periods after the effective date of ASU 2024-03 or (2) retrospectively to any or all periods presented in the financial
statements. The Company is currently assessing the impact that ASU 2024-03 will have on its financial statements and will adopt the
amendments in this update prospectively upon the effective date.
3. Leases
The Company has operating leases for offices, manufacturing and research buildings, machinery, cars, data processing and other
equipment. The Company’s leases have remaining lease terms of 1-43 years, some of which include options to extend the leases for up
to 25 years, and some of which include options to terminate the leases within one year.
As of December 31, 2024, the Company has no additional material operating leases that have not yet commenced.
The following tables provide information about the Company’s operating leases. The Company has not identified any material finance
leases as of December 31, 2024; therefore, the finance lease components have not been disclosed in the tables below.
Lease cost
(Dollars in millions) 2024 2023 2022
Operating lease cost $ 47 $ 54 $ 50
Short-term lease cost 6 8 9
Variable lease cost 6 5 4
Sublease income (1) (1) (1)
Total lease cost $ 58 $ 66 $ 62
Other information
Year ended or as of
December 31,
(Dollars in millions) 2024 2023
Cash paid for amounts included in the measurement of operating lease liabilities $ 45 $ 47
Right-of-use assets obtained in exchange for new operating lease liabilities 27 70
Weighted-average remaining lease term - operating leases 8.9 years 9.4 years
Weighted-average discount rate - operating leases 3.3% 3.2%
Maturities of operating lease liabilities (undiscounted cash flows) are as follows:
(Dollars in millions) Maturities
2025 $ 38
2026 27
2027 21
2028 15
2029 12
Thereafter 72
Total operating lease payments 184
Less imputed interest (25)
Total operating lease liabilities $ 159
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4. Fair Value Measurements
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities and short-term debt
approximate their fair value because of the short-term maturity of these instruments.
The Company uses derivative financial instruments, “derivatives”, as part of its debt management to mitigate the market risk that occurs
from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other
speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial
policy. All derivatives are recognized in the consolidated financial statements at fair value. Certain derivatives are from time to time
designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge
accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet
the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from
changes in interest and foreign exchange rates.
The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability.
Pricing observability is impacted by several factors, including the type of asset or liability, whether the asset or liability has an established
market and the characteristics specific to the transaction. Instruments with readily active quoted prices or for which fair value can be
measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized
in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher
degree of judgment utilized in measuring fair value.
Under U.S. GAAP, there is a disclosure framework hierarchy associated with the level of pricing observability utilized in measuring assets
and liabilities at fair value. The three broad levels defined by the hierarchy are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported
date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently, and items
that are fair valued using other financial instruments, the parameters of which can be directly observed.
Level 3 - Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets
and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant
management judgment or estimation.
The Company’s derivatives are all classified as Level 2 of the fair value hierarchy.
The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as
of December 31, 2024 and December 31, 2023. The carrying value is the same as the fair value as these instruments are recognized in
the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (ISDA agreements)
with all derivative counterparties, the fair values in the tables below and in the Consolidated Balance Sheets at December 31, 2024 and
December 31, 2023 have been presented on a gross basis. According to the close-out netting agreements, transaction amounts payable
to a counterparty on the same date and in the same currency can be netted. The amounts subject to netting agreements that the Company
choose not to offset are presented below.
DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS
There were no derivatives designated as hedging instruments as of December 31, 2024 and December 31, 2023.
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DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Derivatives not designated as hedging instruments, relate to economic hedges and are marked to market with all amounts recognized in
the Consolidated Statements of Income. The derivatives not designated as hedging instruments outstanding at December 31, 2024 and
December 31, 2023 were foreign exchange swaps.
For 2024, the Company recognized a gain of $27 million in other non-operating items, net for derivative instruments not designated as
hedging instruments. For 2023, the Company recognized a gain of $2 million. For 2022, the Company recognized a gain of $2 million.
The realized part of the losses referred to above are reported under financing activities in the statement of cash flows. For 2024, 2023
and 2022, the gains and losses recognized as interest expense were immaterial.
DECEMBER 31, 2024 DECEMBER 31, 2023
Fair Value Measurements Fair Value Measurements
Derivative asset Derivative liability Derivative asset Derivative liability
Nominal (Other current (Other current Nominal (Other current (Other current
(Dollars in millions) volume assets) liabilities) volume assets) liabilities)
DERIVATIVES NOT DESIGNATED
AS HEDGING INSTRUMENTS
Foreign exchange swaps, less
than 6 months $ 2,916 1) $ 22 2) $ 42 3) $ 1,895 4) $ 22 5) $ 12 6)
TOTAL DERIVATIVES NOT
DESIGNATED AS HEDGING
INSTRUMENTS $ 2,916 $ 22 $ 42 $ 1,895 $ 22 $ 12
1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $2,916 million.
2) Net amount after deducting for offsetting swaps under ISDA agreements is $22 million.
3) Net amount after deducting for offsetting swaps under ISDA agreements is $42 million.
4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,895 million.
5) Net amount after deducting for offsetting swaps under ISDA agreements is $22 million.
6) Net amount after deducting for offsetting swaps under ISDA agreements is $12 million.
FAIR VALUE OF DEBT
The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or
for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current
borrowing rates for similar types of financing. The Company has determined that each of these fair value measurements of debt reside
within Level 2 of the fair value hierarchy.
During the first quarter of 2024, the Company issued a second 5.5-year €500 million green Eurobond. During the first quarter of 2023,
the Company issued its first 5-year €500 million green Eurobond.
The fair value and carrying value of debt are summarized in the table below.
DECEMBER 31, 2024 DECEMBER 31, 2023
(Dollars in millions)
CARRYING
VALUE1)
FAIR
VALUE
CARRYING
VALUE1)
FAIR
VALUE
LONG-TERM DEBT
Bonds $ 1,512 $ 1,527 $ 1,023 $ 1,022
Loans 10 10 301 306
TOTAL $ 1,522 $ 1,537 $ 1,324 $ 1,328
SHORT-TERM DEBT
Short-term portion of long-term debt $ 273 $ 275 $ 297 $ 297
Overdrafts and other short-term debt 114 114 241 241
TOTAL $ 387 $ 389 $ 538 $ 538
1) Debt as reported in balance sheet.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A NON-RECURRING BASIS
In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its
balance sheet that are measured at fair value on a nonrecurring basis including certain long-lived assets, including equity method
investments, goodwill and other intangible assets, typically as it relates to impairment.
The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-
specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not
available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To
determine the fair value of long-lived assets as of the reporting date, the Company utilizes the projected cash flows expected to be
generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets.
For the period 2022-2024, the Company did not record any material impairment charges on its long-lived assets for its continuing
operations.
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5. Income Taxes
INCOME BEFORE INCOME TAXES (Dollars in millions) 2024 2023 2022
U.S. $ (51) $ 29 $ (3)
Non-U.S. 926 583 606
Total $ 875 $ 612 $ 603
PROVISION FOR INCOME TAXES (Dollars in millions) 2024 2023 2022
Current
U.S. federal $ (6) $ 19 $ 32
Non-U.S. 260 210 181
U.S. state and local 3 3 5
Deferred
U.S. federal (11) (7) (20)
Non-U.S. (16) (101) (17)
U.S. state and local (3) (1) (3)
Total income tax expense $ 227 $ 123 $ 178
EFFECTIVE INCOME TAX RATE (%) 2024 2023 2022
U.S. federal income tax rate 21.0 % 21.0 % 21.0 %
Non-Deductible Expenses 0.9 1.8 0.5
Foreign tax rate variances 2.2 4.6 3.6
Tax credits (2.1) (3.9) (3.5)
Change in Valuation Allowances 0.5 11.6 (1.7)
Changes in tax reserves (2.1) 2.7 (0.2)
Provision to Return (1.5) (0.2) 0.6
Earnings of equity investments (0.2) (0.2) (0.1)
Withholding taxes 5.6 5.2 4.0
State taxes, net of federal benefit 0.0 0.3 0.4
Tax Audits (0.5) 0.0 1.0
Other Deferred Tax Adjustments1) 0.0 (26.7) 0.0
U.S. FDII Deduction 0.0 (0.4) 0.0
U.S. GILTI Tax 1.9 3.4 3.4
Impact of Translation Rates 0.6 1.1 0.2
Other, net (0.3) (0.2) 0.3
Effective income tax rate 26.0 % 20.1 % 29.5 %
1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company's restructuring activities.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. On December 31, 2024, the Company had net operating
loss carryforwards (NOL’s) of approximately $363 million, of which approximately $339 million have no expiration date. The remaining
losses expire on various dates through 2033.
Valuation allowances have been established which partially offset the related deferred assets. Such allowances are primarily provided
against NOL’s of companies that have perennially incurred losses, as well as the NOL’s of companies that are start-up operations and
have not established a pattern of profitability. The Company assesses all available evidence, both positive and negative, to determine
the amount of any required valuation allowance. During 2024, the Company recorded valuation allowances against deferred tax assets
of tax losses in certain companies and a partial valuation allowance against the deferred tax asset recognized due to the transfer of
certain assets and operations as part of the Company’s restructuring activities, on the basis of management’s assessment of the amount
of the related deferred tax assets that are not more likely than not to be realized.
The foreign tax rate variance reflects the fact that approximately two-thirds of the Company’s non-U.S. pre-tax income is generated by
business operations located in tax jurisdictions where the tax rate is between 20-30%. The tax rate from quarter to quarter and from year
to year is also impacted by the mix of earnings and tax rates in various jurisdictions compared to the same periods or prior years.
The Company has reserves for income taxes that may become payable in future periods as a result of tax audits. These reserves
represent the Company’s best estimate of the potential liability for tax exposures. Inherent uncertainties exist in estimates of tax exposures
due to changes in tax law, both legislated and concluded through the various jurisdictions’ court systems. The Company files income tax
returns in the United States federal jurisdiction, and various states and non-U.S. jurisdictions.
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The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax
authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized
upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these
recognition and measurement standards. At any given time, the Company is undergoing tax audits in several tax jurisdictions, covering
multiple years. The Company is no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2021.
With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax
authorities for years before 2011. The Company is undergoing tax audits in several non-U.S. jurisdictions and several U.S. state
jurisdictions, covering multiple years. As of December 31, 2024, as a result of those tax examinations, the Company is not aware of any
proposed income tax adjustments that would have a material impact on the Company’s financial statements, however, other audits could
result in additional increases or decreases to the unrecognized tax benefits in some future period or periods. The Company believes that
some of these audits will conclude within the next 12 months and that it is reasonably possible the amount of uncertain income tax
positions, including interest, may decrease by $10-$15 million due to settlement of audits and expiration of statutes of limitations.
The Company recognizes interest and potential penalties accrued related to unrecognized tax benefits in tax expense. As of December
31, 2023, the Company had recorded $64 million for unrecognized tax benefits, including $14 million of accrued interest and penalties.
During 2024, the Company recorded a net increase of $3 million to income tax reserves for unrecognized tax benefits related to tax
positions taken in current year. Also, during 2024, the Company recorded a net decrease of $21 million to income tax reserves for
unrecognized tax benefits due to settlement of audits and expiration of statutes of limitations.
The Company had $11 million accrued for the payment of interest and penalties as of December 31, 2024. Of the total unrecognized
tax benefits of $43 million recorded at December 31, 2024, $13 million is classified as current income tax payable, and $30 million is
classified as non-current tax payable included in Other Non-Current Liabilities on the Consolidated Balance Sheets. Substantially all of
these reserves would impact the effective tax rate if released into income.
The following table summarizes the activity related to the Company’s unrecognized tax benefits.
UNRECOGNIZED TAX BENEFITS (Dollars in millions) 2024 2023 2022
Unrecognized tax benefits at beginning of year $ 83 $ 67 $ 65
Increases as a result of tax positions taken during a prior period 0 8 0
Increases as a result of tax positions taken during the current period 4 7 7
Decreases as a result of tax positions taken during a prior period (6) 0 0
Decreases relating to settlements with taxing authorities (6) 0 (4)
Decreases resulting from the lapse of the applicable statute of limitations (39) 0 0
Translation Difference (1) 1 (1)
Total unrecognized tax benefits at end of year $ 35 $ 83 $ 67
The tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities were as
follows.
DEFERRED TAXES(Dollars in millions) December 31,
2024 2023 2022
Assets
Provisions $ 112 $ 126 $ 99
Costs capitalized for tax 85 57 43
Other Deferred Tax Asset1) 158 160 —
Property, plant and equipment 30 11 12
Retirement Plans 39 40 42
Tax receivables, principally NOL’s 99 133 123
Deferred tax assets before allowances 523 527 319
Valuation allowances (126 ) (129 ) (46 )
Total 397 398 273
Liabilities
Distribution taxes (3 ) (3 ) (3 )
Other 0 (1 ) (2 )
Total (3 ) (4 ) (5 )
Net deferred tax asset $ 394 $ 394 $ 268
1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company’s restructuring activities,
and is partially offset by the increased valuation allowances.
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The following table summarizes the activity related to the Company’s valuation allowances (dollars in millions):
VALUATION ALLOWANCES AGAINST DEFERRED TAX ASSETS (Dollars in millions) December 31,
2024 2023 2022
Allowances at beginning of year $ 129 $ 46 $ 59
Benefits reserved current year 11 81 14
Benefits recognized current year1) (6) (2) (27)
Translation difference (8) 4 0
Allowances at end of year $ 126 $ 129 $ 46
1) Benefits reserved in 2023 include the partial reserve against deferred tax assets recognized in 2023 due to the transfer of certain assets and operations
as part of the Company's restructuring activities. In January 2025 the OECD released Administrative Guidance on Article 9.1 of the Global Anti-Base
Erosion Model Rules which amends the Pillar Two Framework. Jurisdictions that have adopted the Framework may implement and administer their
domestic laws consistent with the Model Rules and guidance. The Guidance eliminates the tax basis in certain deferred tax assets and tax credit
carryforwards for purposes of global minimum tax established under the Framework. The Company is analyzing the latest Guidance and will recognize
any impact in the first quarter of 2025.
6. Receivables
(Dollars in millions) December 31,
2024 2023 2022
Receivables $ 2,003 $ 2,206 $ 1,916
Allowance for credit losses at beginning of year (8 ) (10 ) (8 )
Reversal of (addition to) allowance (2 ) (2 ) (4 )
Write-off against allowance 0 3 2
Translation difference 0 (0 ) 0
Allowance for credit losses at end of year (10 ) (8 ) (10 )
Total receivables, net of allowance $ 1,993 $ 2,198 $ 1,907
7. Inventories
(Dollars in millions) December 31,
2024 2023 2022
Raw material $ 418 $ 457 $ 445
Work in progress 295 347 350
Finished products 290 296 265
Inventories gross 1,003 1,100 1,060
Inventory reserve at beginning of year (89 ) (91 ) (91 )
Change in reserve, net 1 3 (6 )
Translation difference 5 (0 ) 5
Inventory reserve at end of year (82 ) (89 ) (91 )
Total inventories, net of reserve $ 921 $ 1,012 $ 969
8. Other Non-Current Assets
(Dollars in millions) December 31,
2024 2023
Equity method investments $ 13 $ 11
Deferred tax assets 412 433
Income tax receivables 19 22
Insurance receivables 44 75
Other non-current assets 60 66
Total other non-current assets $ 548 $ 606
As of December 31, 2024 and 2023, the Company had one equity method investment. The Company owns 49% of Autoliv-Hirotako
Safety Sdn, Bhd (parent and subsidiaries) in Malaysia which it currently does not control, but in which it exercises significant influence
over operations and financial position.
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9. Property, Plant and Equipment
(Dollars in millions) December 31,
2024 2023 Estimated life
Land and land improvements $ 127 $ 136 n/a to 15
Buildings 1,038 1,065 20-40
Machinery and equipment 4,539 4,545 3-12
Construction in progress 629 548 n/a
Property, plant and equipment 6,334 6,294
Less accumulated depreciation (4,095) (4,102)
Net of depreciation $ 2,239 $ 2,192
DEPRECIATION INCLUDED IN (Dollars in millions) 2024 2023 2022
Cost of sales $ 347 $ 340 $ 329
Selling, general and administrative expenses 13 12 11
Research, development and engineering expenses, net 26 24 20
Total $ 385 $ 376 $ 360
No significant fixed asset impairments related to the Company’s operations were recognized during 2024, 2023 or 2022.
The net book value of machinery and equipment and buildings and land under finance lease contracts recorded at December 31, 2024
and December 31, 2023 were immaterial. The amortization expense related to finance leases is included with depreciation expenses
disclosed in the table above.
10. Goodwill and Intangible Assets
December31,
GOODWILL (Dollars in millions) 2024 2023
Carrying amount at beginning of year $ 1,378 $ 1,375
Translation differences (10 ) 2
Carrying amount at end of year $ 1,368 $ 1,378
Approximately $1.2 billion of the Company’s goodwill is associated with the 1997 merger of Autoliv AB and the Automotive Safety Products
Division of Morton International, Inc. No goodwill impairment charges were recognized during 2024, 2023 or 2022.
December 31,
AMORTIZABLE INTANGIBLES (Dollars in millions) 2024 2023
Gross carrying amount $ 386 $ 391
Accumulated amortization (379 ) (384 )
Carrying value $ 7 $ 7
At December 31, 2024, intangible assets subject to amortization mainly relate to acquired technology. No significant impairments of
intangible assets were recognized during 2024, 2023 or 2022.
Amortization expense related to intangible assets was $2 million, $2 million and $3 million in 2024, 2023 and 2022, respectively. Estimated
future amortization expense is immaterial for all future periods.
11. Supplier Finance Program Obligations
The Company has an agreement with an external payment service provider to facilitate the payments to certain suppliers. The outstanding
obligations confirmed towards the external payment service provider are recorded in Accounts Payable in the Consolidated Balance
Sheet until payment has been effected. The Company has undertaken to make sure the payment is effected on the original invoice
maturity date. The average payment terms during 2024 was 117 days.
The roll-forward of the Company's outstanding obligations confirmed as valid under its supplier finance program for the year ended
December 31, 2024 is as follows (dollars in millions):
As of December 31,
(Dollars in millions) 2024 2023
Confirmed obligations outstanding at beginning of the period $ 345 $ 314
Invoices confirmed during the period 1,536 1,436
Confirmed invoices paid during the period (1,546 ) (1,405 )
Confirmed obligations outstanding at end of the period $ 335 $ 345
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12. Restructuring
Restructuring provisions are made on a case-by-case basis and primarily include severance costs incurred in connection with employee
reductions and plant consolidations. Restructuring costs other than employee related costs are immaterial for all periods presented and
are included in the table below. The Company expects to finance restructuring programs over the next several years through cash
generated from its ongoing operations or through cash available under its existing credit facilities. The Company does not expect that the
execution of these programs will have an adverse impact on its liquidity position. The changes in the employee-related reserves in the
table below have been charged against Other income (expense), net in the Consolidated Statements of Income. The restructuring reserve
balance is included within Accrued expenses in the Consolidated Balance Sheet.
December 31,
(Dollars in millions) 2024 2023 2022
Reserve at beginning of the period $ 213 $ 32 $ 88
Provision - charge 20 212 17
Provision - reversal (2 ) (1 ) (4 )
Cash payments (69 ) (35 ) (64 )
Translation difference (11 ) 7 (5 )
Reserve at end of the period $ 151 $ 213 $ 32
Of the restructuring charges in 2024 of $20 million, mainly related to the global structural cost reduction program activities initiated in
2023 in Europe. The cash payments of $69 million in 2024, mainly related to restructuring activities in Europe. As of December 31, 2024,
the majority of the restructuring reserve balance is attributed to global structural cost reduction program activities initiated in 2023 in
Europe. The Company does not expect to recognize additional material restructuring charges during 2025 related to on-going
restructuring programs.
The restructuring charges in 2023 of $212 million related to the global structural cost reduction program activities initiated in 2023, primarily
in Europe. Cash payments of $35 million in 2023 mainly related to restructuring activities in Europe.
The restructuring charges in 2022 of $17 million mainly related to footprint optimization activities in Asia and Europe. Cash payments of
$64 million in 2022 were related to the structural efficiency program initiated in 2020, footprint optimization activities initiated in Europe in
2020 and in Asia in 2022.
13. Product Related Liabilities
Autoliv is exposed to product liability and warranty claims in the event that the Company’s products fail to perform as represented and
such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company has reserves for product
risks. Such reserves are related to product performance issues including recall, product liability and warranty issues. The reserve for
product related liabilities is included in accrued expenses on the Consolidated Balance Sheet. For further information, see Note 18.
The Company records liabilities for product related risks when probable claims are identified and when it is possible to reasonably estimate
costs. Changes in reserve for warranty claims are estimated based on prior experience, likely changes in performance of newer products,
and the mix and volume of the products sold. The changes in reserve are recorded on an accrual basis.
In 2024, the additions to the reserve mainly related to warranty related issues. The reversal of the reserve was related to certain recall
issues that were settled with a favorable outcome. Cash payments were evenly related to warranty and recall related issues. None of
these matters were individually material during 2024.
In 2023, the change in reserve and cash payments mainly related to the Andrews litigation settlement with the reserve partly offset by
reversal of recall related issues. In 2022, the changes in reserve and cash payments mainly related to warranty related issues. None of
which were individually material.
A majority of the Company’s recall related issues as of December 31, 2024 are covered by insurance. Insurance receivables are included
within other current and non-current assets on the Consolidated Balance Sheet. As of December 31, 2024, the Company had total
insurance receivables related to recall issues of $54 million ($81 million as of December 31, 2023).
The table below summarizes the change in the balance sheet position of the product related liabilities (dollars in millions).
December 31,
(Dollars in millions) 2024 2023 2022
Reserve at beginning of the year $ 96 $ 145 $ 144
Addition to reserve 16 28 21
Reversal of preexisting reserve (16 ) (3 ) (1 )
Cash payments (30 ) (74 ) (17 )
Translation difference (2 ) 0 (2 )
Reserve at end of the year $ 65 $ 96 $ 145
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14. Debt and Credit Agreements
SHORT-TERM DEBT
As of December 31, 2024 and 2023, total short-term debt was $387 million and 538 million, respectively. As of December 31, 2024, short-
term debt consisted mainly of a $273 million Swedish Export Credit Corporation loan, and $90 million commercial papers.
The Company’s subsidiaries have credit agreements, principally in the form of overdraft facilities with several local banks. Total available
short-term facilities as of December 31, 2024, excluding commercial paper facilities as described below, amounted to $428 million, of
which approximately $24 million was utilized. The weighted average interest rate on total short-term debt outstanding at December 31,
2024 and 2023, excluding the short-term portion of long-term debt, was 5% and 6%, respectively.
LONG-TERM DEBT
As of December 31, 2024 and 2023, total long-term debt was 1,522 million and 1,324 million, respectively.
In February 2024, the Company priced and issued a 5.5-year green bond for a total of €500 million in the Eurobond market. The bond
carries a coupon of 3.625% and matures in August 2029.
In March 2023, the Company priced and issued a 5-year green bond for a total of €500 million in the Eurobond market. The bond
carries a coupon of 4.25% and matures in March 2028.
In June 2020, the Company utilized its SEK 3,000 million facility with Swedish Export Credit Corporation which was signed in May 2020.
The SEK 3,000 million facility matures in 2025 and carries a floating interest rate of 3M STIBOR +1.85%.
In 2014, the Company issued long-term debt securities in a U.S. Private Placement. As of December 31, 2024, the total long-term debt
outstanding from the 2014 issuance of $470 million consist of $285 million aggregate principal amount of 12-year senior notes with an
interest rate of 4.24%, and $185 million aggregate principal amount of 15-year senior notes with an interest rate of 4.44%.
CREDIT FACILITIES
In July 2024, the Company entered into an $125 million bilateral revolving credit facility (Bilateral RCF) with substantially the same terms
as the RCF with the 11 banks (see below). As of December 31, 2024 this facility was not utilized.
In May 2022, the Company refinanced its existing revolving credit facility (RCF) of $1,100 million. The facility was syndicated among 11
banks and matures in May 2029. The Company pays a commitment fee on the undrawn amount of 0.10%, representing 35% of the
applicable margin, which is 0.275% (given the Company’s ratings of “BBB+ from Fitch and “Baa1” from Moody’s). Borrowings under the
facility are unsecured. As of December 31, 2024 this facility was not utilized.
The Company has a €3,000 million Euro Medium Term Note Program in place for being able to issue notes to be traded on the Global
Exchange Market of Euronext Dublin. At December 31, 2024, €1,000 million had been issued under this program (see long-term debt
above).
The Company has a $1.0 billion US commercial paper program and a SEK 7 billion (approx. $636 million) Swedish commercial paper
program. At December 31, 2024 the amount outstanding under these programs were $90 million and SEK 0 million, respectively.
The Company is not subject to any financial covenants, i.e., performance related restrictions, in any of its significant long-term borrowings
or commitments.
CREDIT RISK
In the Company’s financial operations, credit risk arises in connection with cash deposits with banks and when entering into forward
exchange agreements, swap contracts or other financial instruments. In order to reduce this risk, deposits and financial instruments are
only entered with a limited number of banks up to a calculated risk amount of $250 million per bank for banks rated A- or above and up
to $50 million for banks rated BBB+. The policy of the Company is to work with banks that have a strong credit rating and that participate
in the Company’s financing. In addition to this, deposits of up to an aggregate amount of $2 billion can be placed in U.S. and Swedish
government paper and in certain AAA rated money market funds. As of December 31, 2024, the Company had placed $31 million in
money market funds.
The table below shows debt maturity as cash flow. For a description of hedging instruments used as part of debt management, see the
Financial Instruments section of Note 2 and Note 4.
DEBT PROFILE
Total
PRINCIPAL AMOUNT BY EXPECTED MATURITY
(dollars in millions) 2025 2026 2027 2028 2029 Thereafter
long-
term Total
Bonds $ — $ 285 $ — $ 521 $ 706 $ — $ 1,512 $ 1,512
Loans 273 — 10 — — 10 283
Commercial papers 90 — — — — — — 90
Other short-term debt 24 — — — — — — 24
Total principal amount $ 387 $ 285 $ 10 $ 521 $ 706 $ — $ 1,522 $ 1,909
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15. Shareholders’ Equity
The number of shares outstanding as of December 31, 2024 was 77,712,479. During 2024, the Company has repurchased and retired
5,052,938 shares. In addition, the Company also retired 2,000,000 shares from Treasury stock in December 2024.
DIVIDENDS 2024 2023 2022
Cash dividend paid per share $ 2.74 $ 2.66 $ 2.58
Cash dividend declared per share $ 2.74 $ 2.66 $ 2.58
OTHER COMPREHENSIVE LOSS / ENDING BALANCE1) (Dollars in millions) 2024 2023
Cumulative translation adjustments $ (629) $ (466)
Net pension liability (31) (30)
Total (ending balance) $ (659) $ (496)
Deferred taxes on the pension liability $ 10 $ 10
1) The components of Other Comprehensive Loss are net of any related income tax effects.
Cumulative translation gains of $1 million and $12 million related to liquidated entities during 2024 and 2023 have been recycled and
reported as part of the net change of cumulative translation adjustment in the Comprehensive income statement and Equity statement.
SHARE REPURCHASE PROGRAM
In November 2021, the Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to
$1.5 billion or up to 17 million shares (whichever comes first) between January 2022 and the end of 2024. In November 2024, the Board
of Directors approved the extension of this stock repurchase program through the end of 2025.
During 2024 the Company repurchased and retired 5,052,938 shares for approximately $552 million. During 2023 the Company
repurchased and retired 3,671,252 shares for approximately $352 million. During 2022 the Company repurchased and retired
1,440,572 shares for approximately $115 million. In total, the Company has repurchased 10,164,762 shares under the new stock
repurchase program as of December 31, 2024.
16. Supplemental Cash Flow Information
Payments for interest and income taxes were as follows:
(Dollars in millions) 2024 2023 2022
Interest $ 104 $ 80 $ 64
Income taxes 207 192 215
17. Stock Incentive Plan
The Company maintains the Autoliv, Inc. 1997 Stock Incentive Plan, as amended (the “Stock Incentive Plan”), pursuant to which it has
granted to eligible employees and non-employee directors stock options (SOs), restricted stock units (RSUs) and performance shares
(PSUs).
The fair value of the RSUs and PSUs is calculated as the grant date fair value of the shares expected to be issued. The RSUs and PSUs
granted in 2024, 2023 and 2022 entitle the grantee to receive dividend equivalents in the form of additional RSUs and PSUs subject to
the same vesting conditions as the underlying RSUs and PSUs. For the grants made during 2024, 2023 and 2022, the fair value of a
RSU and a PSU was calculated by using the closing stock price on the grant date and, with respect to a PSU, assumed target
performance. The grant date fair value for the RSUs and PSUs granted during 2024 was approximately $7 million and approximately $8
million, respectively.
Pursuant to the Company’s non-employee director compensation policy effective May 1, 2024, the Company’s non-employee directors
receive an annual RSU grant having a grant date value equal to $152,500 and the Chairman of the Board of Directors also receives an
additional annual RSU grant having a grant date value equal to $90,000. All RSUs granted to non-employee directors vest in one
installment on the earlier of the next AGM or the first anniversary of the grant date, in each case subject to the grantee’s continued service
as a non-employee director on the vesting date with limited exceptions. The RSUs granted to the Company’s non-employee directors
entitle the grantee to receive dividend equivalents in the form of additional RSUs subject to the same vesting conditions as the underlying
RSUs. The grant date fair value for the RSUs granted in 2024 to the Company’s non-employee directors was approximately $2 million.
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The source of the shares issued upon vesting of awards is generally from treasury shares. The Stock Incentive Plan provides for the
issuance of up to 9,585,055 common shares for awards. At December 31, 2024, 7,156,026 of these shares have been issued for awards
and 2,429,029 shares remain available for future grants.
In 2015 and earlier, stock awards were granted in the form of SOs and RSUs. All SOs were granted for 10-year terms, had an exercise
price equal to the fair market value per share of common stock at the date of grant, and became exercisable after one year of continued
employment following the grant date. The average grant date fair values of SOs were calculated using the Black-Scholes valuation model.
The Company used historical exercise data for determining the expected life assumption. Expected volatility was based on historical and
implied volatility. All outstanding SOs as of December 31, 2024 have since been exercised or expired.
The Company recorded approximately $16 million, $14 million and $4 million stock-based compensation expense related to RSUs and
PSUs for 2024, 2023 and 2022, respectively. The total compensation cost related to non-vested awards not yet recognized is $17 million
for RSUs and PSs and the weighted average period over which this cost is expected to be recognized is approximately 1.7 years. There
are no remaining unrecognized compensation costs associated with SOs.
Information on the number of RSUs, PSUs and SOs related to the Stock Incentive Plan during the period of 2022 to 2024 is as follows.
RSUs 2024 2023 2022
Weighted average fair value at grant date $ 112.16 $ 91.81 $ 87.56
Outstanding at beginning of year 189,966 200,764 218,268
Granted 64,601 96,243 85,985
Shares issued (75,068) (94,055) (84,848)
Cancelled/Forfeited/Expired (5,352) (12,986) (18,641)
Outstanding at end of year 174,147 189,966 200,764
The aggregate intrinsic value for RSUs outstanding at December 31, 2024 was approximately $16 million.
PSUs 2024 2023 2022
Weighted average fair value at grant date $ 109.41 $ 91.80 $ 88.05
Outstanding at beginning of year 111,881 101,828 179,311
Change in performance conditions 147,022 18,211 (69,924)
Granted 79,712 93,962 82,914
Shares issued (49,509) (26,331) (64,397)
Cancelled/Forfeited/Expired (9,801) (75,789) (26,076)
Outstanding at end of year 279,305 111,881 101,828
The PSUs granted include assumptions regarding the ultimate number of shares that will be issued based on the probability of
achievement of the performance conditions. Changes in those assumptions result in changes in the estimated shares to be issued which
is reflected in the “Change in performance conditions” line above.
SOs
Number
of options
Weighted
average
exercise
price
Outstanding at December 31, 2021 49,875 68.71
Exercised (8,614) 59.28
Cancelled/Forfeited/Expired (10,150) 70.40
Outstanding at December 31, 2022 31,111 70.77
Exercised (15,537) 65.12
Cancelled/Forfeited/Expired (485) 58.63
Outstanding at December 31, 2023 15,089 76.97
Exercised (10,777) 76.53
Cancelled/Forfeited/Expired (915) 69.41
Outstanding at December 31, 2024 3,397 80.40
OPTIONS EXERCISABLE
At December 31, 2022 31,111 $ 70.77
At December 31, 2023 15,089 76.97
At December 31, 2024 3,397 80.40
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The following summarizes information about SOs outstanding and exercisable at December 31, 2024:
EXERCISE PRICE
Number
outstanding &
exercisable
Remaining
contract life
(in years)
Weighted
average
exercise
price
$80.40 3,397 0.13 80.40
3,397 0.13 80.40
The total aggregate intrinsic value, which is the difference between the exercise price and $92.98 (closing price per share at December
31, 2024), for all “in the money” SOs, both outstanding and exercisable as of December 31, 2024, was immaterial.
18. Contingent Liabilities
LEGAL PROCEEDINGS
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters
that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters. Litigation is subject
to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, and with the exception of
losses resulting from the antitrust proceedings described below, it is the opinion of management that the various legal proceedings and
investigations to which the Company currently is a party will not have a material adverse impact on the consolidated financial position of
Autoliv, but the Company cannot provide assurance that Autoliv will not experience material litigation, product liability or other losses in
the future.
ANTITRUST MATTERS
Authorities in several jurisdictions have conducted broad, and in some cases, long-running investigations of suspected anti-competitive
behavior among parts suppliers in the global automotive vehicle industry. These investigations included, but are not limited to, the products
that the Company sells. In addition to concluded matters, authorities of other countries, with significant light vehicle manufacturing or
sales may initiate similar investigations. As a result of the outcome of the European Commission investigation of anti-competitive behavior
among suppliers of occupant safety systems that the Company resolved in 2019 (the "EC investigation"), the Company is subject to
multiple subsequent civil disputes with non-governmental third parties stemming from the same facts and circumstances underlying the
EC investigation. The Company is involved in civil litigation in the UK and Germany with respect to alleged anti-competitive behavior that
occurred over a decade ago.
The trial associated with the lawsuit in the UK recently concluded and a ruling in the proceeding is expected imminently. The Company
believes the allegations in the UK are unfounded. An unfavorable outcome could have a material adverse impact on our customer
relationships, business prospects, reputation, operating results, cash flows or financial condition, and our insurance would likely not
mitigate such impact. The Company cannot predict the ultimate outcome of such dispute and is unable to estimate the loss or a range of
loss, or predict the reporting periods in which any such loss may be recorded.
On October 31, 2024, BMW filed a complaint against the Company in Germany claiming damages of €63 million plus interest (for a total
claim of approximately €95 million) related to the conduct at issue in the EC investigation (the "BMW Complaint"). BMW is one of two
European OEMs for which the Company pled guilty in 2017 in relation to the EC investigation. The Company has a period of six months
to respond to the complaint and is currently assessing the viability of the complaint. The Company has determined pursuant to ASC 450
that a loss is reasonably possible with respect to the BMW Complaint. However, the Company continues to evaluate this matter, no
accrual has been made, and the estimated range of potential loss is between €0 and €95 million. The Company cannot predict the ultimate
outcome of the BMW Complaint.
This dispute could result in significant expenses as well as an unfavorable outcome that could have a material adverse impact on our
customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and our insurance would likely
not mitigate such impact. The Company cannot predict the duration, scope, or ultimate outcome of any such disputes.
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PRODUCT WARRANTY, RECALLS AND INTELLECTUAL PROPERTY
Autoliv is exposed to various claims for damages and compensation if its products fail to perform as expected. Such claims can be made,
and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a
product (actually or allegedly) fails to perform as expected or is defective, the Company may face warranty and recall claims. Where such
(actual or alleged) failure or defect results, or is alleged to result, in bodily injury and/or property damage, the Company may also face
product liability and other claims. There can be no assurance that the Company will not experience material warranty, recall or product
(or other) liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The
Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding
product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle
design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for
contribution when faced with recalls and product liability claims. Government safety regulators may also play a role in warranty and recall
practices. Recall decisions regarding the Company’s products may require a significant amount of judgment by us, our customers and
safety regulators and are influenced by a variety of factors. Once a recall has been made, the cost of a recall is also subject to a significant
amount of judgment and discussions between the Company and its customers. A warranty, recall or product-liability claim brought against
the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also
increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such
products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the
repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer in
either a warranty or a recall situation. Accordingly, the future costs of warranty or recall claims by the customers may be material. However,
the Company believes its established reserves are adequate. Autoliv’s warranty reserves are based upon the Company’s best estimates
of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves, and adjusts
them when appropriate. However, the final amounts actually due related to these matters could differ materially from the Company’s
recorded estimates.
In addition, as vehicle manufacturers increasingly use global platforms and procedures, quality performance evaluations are also
conducted on a global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having
a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new
orders, which may have a material impact on the Company’s results of operations.
The Company maintains a program of insurance, which may include commercial insurance, self-insurance, or a combination of both
approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent based
on our prior claims experience. The Company’s insurance policies generally include coverage of the costs of a recall, although costs
related to replacement parts are generally not covered. In addition, a number of the agreements entered into by the Company, including
the Spin-off Agreements, require Autoliv to indemnify the other parties for certain claims. Autoliv cannot assure that the level of coverage
will be sufficient to cover every possible claim that can arise in our businesses or with respect to other obligations, now or in the future,
or that such coverage always will be available should we, now or in the future, wish to extend, increase or otherwise adjust our insurance.
As noted in Note 13 above, as of December 31, 2024, the Company has accrued $65 million for total product related liabilities. The
majority of the total product liability accrual as of December 31, 2024, relates to recalls, which are generally covered by insurance.
Insurance receivables for such recall related liabilities total $54 million as of December 31, 2024.
Product Liability:
Autoliv and some of its subsidiaries have been named as one of several defendants in a consolidated class action lawsuit in a multi-
district litigation (In Re: ARC Airbag Inflators Products Liability Litigation MDL, No. 3051) in the Northern District of Georgia. The plaintiffs
in the multi-district litigation (the "ARC Inflator Class Action") brought claims for fraud, breach of warranty, and violations of consumer
protection and trade practices stemming from ARC inflators included in airbag modules that Autoliv or its subsidiaries allegedly supplied
after Autoliv acquired certain Delphi assets (the “Delphi Acquisition”) in December 2009. The Company denies these allegations. Autoliv
is not aware of any performance issues regarding ARC inflators included with its airbags at the directions of its customers that it shipped
following the Delphi Acquisition. The proceedings remain ongoing. The Company has determined pursuant to ASC 450 that a loss is
reasonably possible with respect to the ARC Inflator Class Action. However, the Company continues to evaluate this matter, no accrual
has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate
outcome of the ARC Inflator Class Action.
On September 5, 2023, the National Highway Traffic Safety Administration (“NHTSA”) issued an initial decision to recall approximately
52 million frontal driver and passenger airbag inflators manufactured by ARC and Delphi Automotive Systems because NHTSA
determined that the airbag inflators contain a safety defect resulting in field ruptures. Some of the ARC inflators included in the airbag
modules that Autoliv or its subsidiaries supplied after the Delphi Acquisition were included in such initial decision. NHTSA has yet to
release its final decision. If NHTSA's final decision results in a recall, it is anticipated that such decision will be challenged in US federal
court. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the NHTSA ARC recall.
However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be
determined at this time. The Company cannot predict the ultimate outcome of the NHTSA ARC recall.
Specific Recalls:
In the fourth quarter of 2020, the Company was made aware of a potential recall by American Honda Motor Co. and the recall of
approximately 449,000 vehicles relating to the malfunction of front seat belt buckles was announced on March 9, 2023 (the “Honda Buckle
Recall”). The Company determined pursuant to ASC 450 that a loss with respect to the Honda Buckle Recall is probable and accrued an
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amount that is reflected in the total product liability accrual in the fourth quarter of 2020, increased the accrual in the fourth quarter of
2021, and reduced the accrual in the fourth quarter of 2023 based on vehicle repair cost data. Following the accrual increase in the third
quarter of 2024, the amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the
Honda Buckle Recall is approximately $12 million and includes self-insurance retention costs and deductibles. The ultimate loss to the
Company of the Honda Buckle Recall could be materially different from the amount the Company has accrued.
Volvo Car USA, LLC (together with its affiliates, “Volvo”) has recalled approximately 762,000 vehicles relating to the malfunction of
inflators produced by ZF (the “ZF Inflator Recall”). The recalled ZF inflators were included in airbag modules supplied by the Company
only to Volvo. The recall commenced in November 2020 and later expanded in September 2021. Because the Company’s airbags were
involved with the ZF Inflator Recall, the Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to
the ZF Inflator Recall. The Company continues to evaluate this matter with Volvo and ZF and no accrual has been made. Although the
Company currently estimates a range of $0 to $43 million with respect to this potential loss, the Company anticipates that any losses net
of insurance claims and claims against ZF will be immaterial.
Intellectual property:
In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company
does seek to procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the
Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products
which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result
thereof. Such claims could be material.
The table in Note 13 above summarizes the change in the balance sheet position of the product related liabilities for the fiscal year ended
December 31, 2024.
19. Retirement Plans
DEFINED CONTRIBUTION PLANS
Many of the Company’s employees are covered by government sponsored pension and welfare programs. Under the terms of these
programs, the Company makes periodic payments to various government agencies. In addition, in some countries the Company sponsors
or participates in certain non-governmental defined contribution plans. Contributions to defined contribution plans for the years ended
December 31, 2024, 2023 and 2022 were $25 million, $26 million, and $24 million, respectively.
MULTIEMPLOYER PLANS
The Company participates in a multiemployer plan in Sweden. This ITP-2 plan is funded through Alecta and covers employees born
before 1979, for whom it provides a final pay pension benefit based on all service with participating employers. The Company must pay
for wage increases in excess of inflation on service earned with previous employers. The plan also provides disability and family benefits
and is more than 100% funded. The Company´s contributions to this multiemployer plan for the years ended December 31, 2024, 2023
and 2022 were $4 million, $4 million and $6 million, respectively.
DEFINED BENEFIT PLANS
The Company has a number of defined benefit pension plans, both contributory and non-contributory, in the U.S., France, Germany,
India, Japan, Mexico, Philippines, Poland, Sweden, South Korea, Thailand, Turkey and the United Kingdom. There are funded as well as
unfunded plan arrangements which provide retirement benefits to both U.S. and non-U.S. participants.
The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings and on credited service earned
through December 31, 2021. In a prior year, the Company closed participation in the Autoliv ASP, Inc. Pension Plan to exclude those
employees hired after December 31, 2003. Within the U.S. there is also a non-qualified restoration plan that provides benefits to
employees whose benefits in the primary U.S. plan are restricted by limitations on the compensation that can be considered in calculating
their benefits. Effective December 31, 2021, the Autoliv ASP, Inc. Pension Plan is frozen to new accruals and, by extension, the non-
qualified restoration plan is also frozen. Settlement accounting has been recognized each quarter in 2024, 2023 and 2022 for the U.S.
plans because the lump-sum payments made to plan participants during 2024, 2023 and 2022 exceeded the sum of service cost and
interest cost.
For the Company’s non-U.S. defined benefit plans the most significant individual plan is in the U.K. The Company has closed participation
in the U.K. defined benefit plan to exclude all employees hired after April 30, 2003 with few members currently accruing benefits.
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