# Dear
Shareholder

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_ALV_2019/NYSE_ALV_2019.mmd` · pages 2-8_

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Dear
Shareholder

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## E DELIVERED IN A CHALLENGING MARKET ENVIRONMENT

As we reflect on the past year, we look back at one of the most challenging years for the automotive industry with light vehicle production down around 6% globally, including a more notable decrease in China of 9%. However Autoliv continued outpace the market in 2019, and our market share increased to more than 41%. We grew organically* more than 1%, which was more than 7 percentage points above light vehicle production growth. Business cycle management actions in response to the rapidly deteriorating market conditions and raw material headwinds helped us to deliver an adjusted operating margin* of 9.1%, down 1.4 percentage points compared to 2018. Our cashflow remained solid and our order intake remained high, supporting our growth opportunities for the long term.

## WE ARE UNIQUELY PLACED TO BENEFIT FROM GROWING DEMAND AND INDUSTRY TRANSFORMATION

Autoliv is a purpose-driven company and we exist because life matters. Our ambition is to save 100,000 lives annually by 2030. By further strengthening our position in 2019 as the undisputed global leader in our market, we are uniquely placed to benefit from the growing long-term demand for traffic safety as well as the significant transformation facing our industry including changing driving modes, emerging technologies and evolving competition. In response to these developments, we have broadened our mission to: Provide World Class Life-Saving Solutions for Mobility and Society. With the new mission statement, we aspire to position Autoliv as the global leader in the wider mobility safety arena, beyond the light vehicle safety industry, adopting a multi-modal view of transporting people, goods and providing service solutions. This means we continue growing our core business – airbags, seatbelts and steering wheels – while exploring opportunities in key adjacent areas where we can leverage our technological know-how, operational capabilities and strong customer relationships.

## OUR ROADMAP TO LEVERAGE GROWTH INTO HIGHER PROFITABILITY

Our key priorities in 2019 were to make our business more efficient and continue to build a company that delivers long-term profitable growth and increased shareholder value. Furthermore, we implemented business cycle management actions in response to the rapidly deteriorating business conditions. As a result, our headcount declined by more than 1,500 in 2019. To continue building a stronger company, we focused on internal and external value chain to drive improvement and excellence through a relentless focus on quality, standardization and Autoliv Production System, the quality assurance and orders should also enable us to fully leverage additional volumes into higher profitability as they go into production while RD&E costs as share of sales should normalize. To accelerate our roadmap to higher profitability, we also invest in automation and digitization in our core business and support processes.

## OUR FINANCIAL TARGETS AND AMBITIONS

At our Capital Markets Day on November 19, 2019, we communicated updated financial targets and long-term ambitions. To create shareholder value, we focus on visible near-term and sustainable long-term growth, profitability improvement and over-the-cycle resilience, cash flow generation and strong balance sheet and a prudent debt policy. Medium term, our target is to grow sales organically* by 3-4% more than light vehicle production (LVP) growth per year and we aim to improve our adjusted operating margin* to around 12%, based on an assumed average LVP growth of 1-2% per year. In addition, we aim for a cash conversion of at least 80% and to maintain a net debt leverage ratio* of around 1x, with a range of 0.5x to 1.5x. Our long-term ambition is to grow at least in line with our market and to increase our earnings capacity to an adjusted operating margin* of 13%.

## WE INNOVATE FOR BETTER ROAD USER SAFETY AND FOR OPERATIONAL EXCELLENCE

Autoliv has pioneered automotive safety for over 65 years. As the clear market leader, the way we innovate sets us apart from our competitors. Innovation for us is about anticipating safety needs for all road users – in cars, on powered two-wheelers, cyclists and pedestrians – by studying global real-life accident data, human factors and biomechanics. We develop safety solutions meeting these needs by collaborating closely with our customers, universities and business partners. 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, today and for the future. New industry trends, like autonomous driving, electrification and more comfortable interiors and cockpits, are generating new safety needs that call for smaller, lighter and better integrated safety products to protect road users. Innovation is also about continuously improving our processes and transforming our way of conducting business to drive excellence in quality, efficiency and time to market through application of automation, digitalization, simplification and standardization and by proactively building quality in our upstream value chain.

## OUR INNOVATION FOR FUTURE MOBILITY

Vehicles of the future place new and more complex developments on safety systems to protect all road users. Our innovation efforts for future mobility focus on four areas. Electrification, ADAS/ADL, Personalization and Vouloirable Road Users. Electrification provides opportunity to develop seatbelt systems, integrating mechatronics to reduce reaction time, and active safety features and improve driving comfort and customization. Another important area for us is ADAS/AD – as we improve the effectiveness of existing airbags, advances in engineering allow designs for new interiors and new seating positions to protect people traveling in the vehicles of tomorrow, such as the Life Cell Airbag, or our research in steering wheel technology that has resulted in improved ease of control. Two final areas are Adaptivity and Personalization of restraint systems for age, size and gender and Vulnerable road users (VRU) – pedestrians, cyclists and drivers of two-wheelers such as scooters, motorcycles and e-scooters. VRUs account for nearly half of all road fatalities today. We expect to continue to lead the development of safety systems in this important area.

## SUSTAINABILITY PRIORITIES THAT MATTER TO US

Sustainability is at the core of what we do, and we have a global strategy to align our sustainability priorities, ambitions and targets, to help ensure that our business will continue to thrive long-term by systematically considering all the dimensions of our business in society. As part of our sustainability agenda we support UN Sustainable Development Goal #3 – Good Health and Well-Being – and in 2019 we also became a signatory of UN Global Compact which means that we are committed to making the UN Global Compact and its principles part of our strategy, culture and day-to-day operations. During 2019 we continued to participate in several research collaborations in traffic safety, including vulnerable road user protection. Autoliv is a longstanding member in the well-established China Sweden Research Centre for Traffic Safety. This year we expanded our involvement in research platforms with regional focus to India, continuing a dialogue with the Indian government and other stakeholders, working towards a common goal to Save More Lives. Our Sustainability Report details our progression towards our targets

## WE ARE BUILDING A WINNING TEAM THROUGH TRUST AND EMPOWERMENT

Continuing as the world's leading supplier of automotive To continue to be the world's leading supplier of automotive safety systems in a changing world requires that all of us at Autoliv share a drive for excellence and a passion for saving more lives. The successful execution of our strategy and the fulfilment of our targets rest on a performance- and quality-oriented culture that can respond to sudden shifts in our circumstances, whether this means capturing unforeseen opportunities or addressing challenges and disruptions. We build a winning team by trusting and empowering our people and by creating a work environment that attracts, retains and engages our employees while promoting development, flexibility and change.

With our commitment to provide world class life-saving solutions for mobility and society,

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Mikael Bratt,
President & CEO
Stockholm February 21, 2020