# Dear
Shareholder

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_ALV_2018/NYSE_ALV_2018.mmd` · pages 5-11_

---

Dear
Shareholder

As we reflect on the past year, we look back at a year of change for Autoliv and the automotive industry. We spun off our Electronics business, allowing
for a more focused strategy, optimized for our industry and market opportunities. We delivered on past years' strong order intake, resulting in a record-high level of launch activity in North America.

Autoliv continued to outpace the market in 2018, and our market share reached around 40%. We grew organically by close to 5% while light vehicle production declined by about 1%, according to IHS, an outperformance of close to 6 percentage points. We had a solid operating cash flow, and I am pleased that our order intake remained high, supporting our growth opportunities for the long term.

## FOCUS ON PROFITABLE GROWTH

The spin-off of the Electronics business marked a new beginning for Autoliv. As a more focused business, we have been able to concentrate on what matters most when it comes to securing profitable growth.

Having strengthened our market position in recent years, our efforts are now focused on managing our strong order intake, with flawless launches and smooth ramps, operational excellence and executing on our innovation pipeline.

In 2018, we were successful in executing launches, delivering on schedule with good precision. However, with a sharp increase in launch activity, by 20% in total and by 50% in North America, this came at the expense of higher launch-related costs. In the second half of 2018, we also experienced significant changes in light vehicle production in Europe and China, resulting in un-even utilization of our production assets and supply chain.

## FINANCIAL TARGETS

Our sales and earnings capacity is supported by the continued high order intake, and our target of reaching more than $10 billion in sales and around 13% in adjusted operating margin remain. However, due to the slowdown in global light vehicle sales and production, and increased raw material pricing, we now expect to reach these targets beyond 2020. We target to reach a leverage ratio of about 1.0x over time. Our long-term ambition is to achieve growth in line with light vehicle production plus at least 1%.

<--- Page Split --->

## LEVERAGING OUR TECHNOLOGICAL EXPERTISE

A key success factor for Autoliv is our strong customer focus, from innovation to manufacturing and delivery of our products. Through research conducted in cooperation with customers and leading universities, we are leveraging our combined technological expertise to improve safety for road users.

One recent example is our research collaboration with a customer to provide airbags for scooter riders. The number of two-wheelers has surged, and they are involved in a high percentage of fatal and serious accidents. Governments are increasingly becoming aware of the need to protect this vulnerable group of road users, and we foresee that demand for safety systems for these vehicles will grow. Together with our customers, we can make a positive difference.

Another research collaboration is the new research project Future Occupant Safety for Crashes in Cars (OSCCAR), in which we are partnering with car manufacturers, research organizations and other automotive suppliers to ensure a harmonized approach to designing future safety systems for cars with self-driving capabilities. In this project, we expect to better anticipate future accident scenarios in order to provide optimal safety systems for the highly automated vehicles and safety systems of the future, adapted for people of different sizes and ages.

## SAFETY CONCEPTS FOR THE FUTURE VEHICLE

The development of vehicles with increasing levels of electrification and autonomy is placing new demands on automotive safety systems. With our strong platform of existing products as well as our technological expertise and close cooperation with customers, we are well positioned to meet these requirements. Our research in steering wheel technology has resulted in improved ease of control and additional driver monitoring systems, including solutions for autonomous driving. We are developing seatbelt systems, integrating mechatronics in order to reduce reaction time, including proactive safety features and improving comfort and customization.

As we improve the effectiveness of existing airbags, we discover advances in engineering that allow designs for the interior and seating positions of autonomous cars to be adapted in order to protect people traveling in the vehicles of today and tomorrow. We will also continue to lead the development of safety systems for vulnerable road users, such as pedestrians, cyclists and powered two-wheelers.

## SUSTAINABLE DEVELOPMENT

Sustainability is at the core of what we do, and we have a global strategy to align our sustainability priorities, ambitions and targets, taking into account stakeholder and business priorities. In 2018 we defined targets for our key priorities. These include a restated target for saving more lives, intended to reflect the impact of the Electronics business, revised targets for health and safety, new targets for the environment and formalized targets for supply chain sustainability. The existing business ethics targets remain unchanged.

## QUALITY, INNOVATION AND COLLABORATION

The automotive industry is experiencing short and long-term changes that are creating challenges and opportunities for our industry. Ultimately it boils down to one question: How can we best protect road users in a sustainable way? I believe that quality, innovation and collaboration have brought Autoliv to where it is today. Due to our relentless focus on quality, only around 2% of vehicles recalled in our industry since 2010 have been related to Autoliv. And thanks to our focus on innovation and research collaborations, we have brought many industry firsts to the market for over 65 years.

At Autoliv, our motto is, "It Starts with Me" This reflects the ownership we all assume for our way of working and our awareness of the fact that we are all important when it comes to bringing safety to road users. I thank our employees for contributing to our important vision every day. Together, we share a culture that I truly believe provides a strong and robust platform to further develop our company, thereby saving more lives and creating more value for our stakeholders.

With our commitment to safe road journeys,

![](images/6_0.jpg)

Mikael Bratt,
President & CEO
Stockholm February 21, 2019