Jan Carlson - Chairman, President and CEO Mats Wallin - CFO, Thomas Jonsson - Group VP, Corporate Communications.

Fei Teng - Credit Suisse Erik Golrang - Nordea Samik Chatterjee - JPMorgan Rod Lache - Deutsche Bank David Leiker - Robert W.

Baird David Lim - Wells Fargo Securities Anders Trapp - SEB Thomas Besson - Kepler Cheuvreux Sheila Weekes - BOA Agnieszka Vilela - Carnegie Hampus Engellau - Handelsbanken Chris McNally - Evercore ISI Ashik Kurian - Goldman Sachs Steven Hempel - Barclays.

Good day and welcome to the Q3 2015 Autoliv, Incorporated Earnings Conference Call. Please note, today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Thomas Jonsson. Please go ahead..

Thank you, Lauren and welcome everyone to our third quarter 2015 earnings presentation. Here in Stockholm, we have our Chairman, President and CEO, Jan Carlson; our Chief Financial Officer, Mats Wallin, and myself, Thomas Jonsson, Group Vice President, Corporate Communications and Investor Relations.

During today’s earnings call, our CEO will provide a brief overview of our third quarter along with an update on general business conditions, while our CFO will provide further commentary around the financial results and outlook.

Then at the conclusion of our presentation, we’ll remain available to respond to your questions, and as usual, the slide deck is available through a link on the homepage of our corporate website page. If we turn the page, we then have the Safe Harbor statement, which is an integrated part of this presentation including the Q&A that follows.

During the presentation, we will reference some non-US GAAP measures and the reconciliations to US GAAP are disclosed in our quarterly press release and the 10-Q that will be filed with the SEC. With that I will now turn it over to our Chief Executive Officer, Jan Carlson..

Thank you Thomas and welcome everyone once again. Looking first on to our third quarter highlights and we do that by turning the page. We had another quarter of exceptional sales growth and solid financial performance, despite the slightly negative global light vehicle product and a decline in Chinese market.

Our organic sales growth over 8.4% was better than guidance, as we experienced strong growth in all regions, despite our decline in China. This quarter once again is evidenced that our balanced global foot print is the right strategy and provides more resilience against volatile market conditions.

This growth drove our better than expected adjusted operating margin of 9.4%. Our adjusted return on capital employed of 22%, return on equity of 16%, and earning per share of $1.53 shows that our strategies are creating shareholder value. We also returned $49 million to our shareholders through the dividend during the quarter.

Within our Electronic segment, we had another strong quarter with 36% organic sales growth in Active Safety. We also took further steps to expand our Active Safety product portfolio and capabilities through various M&A activities as illustrated on the next page.

In the third quarter, we are pleased to have closed the MACOM Automotive Solutions acquisition in mid-August and also announced that our Electronic Horizon product from this acquisition is not market ready. We are also pleased to have signed a license agreement for certain IP with Volvo Car Corporation.

In addition, we joined the Drive Me project which marks our second global OEM where we are participating in autonomous driving projects. Thirdly, we announced that an agreement where we intend to form a joint venture with Nissin Kogyo in the area of break control systems.

This handing transaction which is subject to customary closing conditions including confirmatory due-diligence and regulatory approvals is anticipated to close in early 2016. In addition to these three transactions, we had several vision and radar launches during the third quarter.

As some of you experienced that our recent capital market day, we showcased our new Active Safety technologies that we will launch later this year. For example, our real life safety approach demonstrated how our stereovision technology outperforms other products.

Our internally developed mono-vision system will also launch later this year, and will offer autonomous emergency breaking features during 2017. We believe that autonomous emergency breaking will be designed in to the majority of the vehicles produced in the developed markets from 2019.

If we turn the page, we have highlighted some of the key moles that contributed to our strong organic growth. During the third quarter these moles contributed significantly to our overall net organic sales growth. However, on an annualized basis these modules represents only around 6% of our group sales.

If we turn to our market position on the next page, we have our delivery figures for the third quarter. We continue to improve our underlying market position as we grew at least in line or faster than the light vehicle production in all product areas.

Seat belts and electronic control units were essentially in line with global light vehicle production due to our weak organic sales development in China for the quarter. Active Safety products were boosted by the MACOM acquisition. Overall, this performance illustrates our investments in technology for growth continues to pay off.

If we turn the page and look in to China situation; during the third quarter, we have seen a continued uncertainty in China around the light vehicle production and underlying market conditions.

For the first time since 2008, the year-over-year quarterly light vehicle production declined in China by more than 5% and for the full year 2015 is now expected to increase only 2%. This is more than 5% lower than the IHS expectation in the beginning of the year.

On the positive side, the actions taken by OEMs over the last few months seem to improve the industry situation and now the government is creating various stimulus programs. Assuming these consensus take hold and the IHS LVP outlook is correct, quarter three could mark the current trough in fuel volume terms.

For Autoliv during quarter three sales growth was lower than expected due to our continued negative vehicle transition mix and lower volumes on new model launches due to the general light vehicle production design. Despite these effects, we managed to outperform the light vehicle production during the quarter.

Even with all of these uncertainties, we remain confident in the long term growth prospects for China. However, in the near term to mitigate the margin impact of lower growth, since Q1 we have made discretionary spending caps reduce net headcount by 13% while at the same time increasing our engineering capabilities.

Looking on to the macro market conditions on the next page, the most recent figures from IHS for full year 2015 indicates that global light vehicle production will grow by less than 1%, down from 2.4% expected in the beginning of the year.

During the fourth quarter, the light vehicle production in China and rest of Asia is expected to roughly flat year-over-year, while Japan is expected to decline by 3%.

In the Americas, the outlook remained mix, in North America light vehicle production is expected to grow approximately 2% in fourth quarter, driven by a strong US SAAR, while inventories remain relatively low. In South America, the weak economic conditions continue where the LVP is now expected to decline by almost 30% in quarter four.

In Europe, the overall light vehicle production is improving and is now expected to increase approximately 1% year-over-year in the fourth quarter, however the mix is different between Eastern Europe and Western Europe, while Eastern Europe is expected to decline by 5%, while Western Europe is expected to increase by 4%.

To conclude the full year 2015 light vehicle production outlook, the growth rate in China is lower than expected at the beginning of the year, and deterioration in South America continues. These negative trends are somewhat offset by an improving situation in Europe, while North America remains relatively unchanged for the time being.

Now, our Chief Financial Officer, Mats Wallin will comment on our financials and outlook. Please go ahead Mats..

Thank you Jan. Looking up on our financial details on the next slide. We have our key figures for the third quarter. Our sales of 2.2 billion was driven by strong organic sales growth to the volume makers in Europe, non-US OEMs in North America Active Safety, including acquisitions and the inflator replacement business.

The consolidated net sales was negatively impacted by currency translation effect of around 220 million. (inaudible) modern improvement is mainly due to higher organic sales product mix, net currency aspects and commodity costs. Our adjusted EPS of $1.53 was 22% better than last year despite lower consolidated sales.

This year-over-year improvement is mainly due to the improved profitability; lower interest met and share account, which were partially offset by the higher tax rate.

Despite investments for vertical integration, inflator replacement capacity and acquisitions, our adjusted return on capital employed increased slightly to 22%, while our adjusted return on equity increased to 16% as a result of our higher earning and share repurchase programs.

Looking now at our operating margin development on the next slide; our adjusted operating margin of 9.4% was 40 basis points better than our guidance. Looking on the shot to the left, our margin improvement versus guidance was mainly due to the better than expected organic sales growth and lower than expected (inaudible) met.

These were virtually offset by unfavorable net currency aspects 60 basis points mainly related to the revaluation aspects from the Turkish lira and the Chinese renminbi. In addition the quarter was negatively impacted by one-time SG&A costs related to our recent M&A activities of close to 16 basis points.

Compared to prior year as illustrated by the shot on the right, our adjusted operating margin was 90 basis points lesser than last year. The benefit from organic sales and commodity costs were partially offset by higher RD&E net, currency effects and other net which includes increase footprint cost for growth and vertical integration.

Looking now to our cash flow on the next slide; we had another strong operating cash flow for the third quarter of $191 million, mainly due to better adjusted operating income.

Although CapEx net of 4.4% of sales was below the range of 5% to 6% we mentioned last quarter, we expect to come back to this range during Q4 partly due to the ramp up or the inflator replacement program and vertical integration. Therefore for full year ’15, we expect CapEx met to be the lower end of 5% to 6% range.

As we mentioned at our recent Capital Market day, we expect CapEx in the coming year to remain in the high end of the range 4% to 5% of sales to support our organic sales growth target.

For the full year ’15 capacity alignment program, we estimate the cash outlay was 60 million, while we plan to spend more than 90 million for further capacity alignment actions, and expect savings this year of close to 20 million.

As we mentioned at our Capital Market day looking beyond 2015, we expect annual restructuring to return to an average normal level of around 30 basis points per year on our current business. For full year ’15 we still expect strong operating cash flow of around 0.8 billion excluding the antitrust settlements.

During the quarter, we invested more than 220 million in CapEx and M&A for growth, while returning 49 million to shareholders through the dividend. Our leveraged ratio is now 0.6 times, within our long term range as we commented at our Capital Market day. Looking now at our next slide, we have summarized our segment reporting.

In Passive Safety organic sales growth of close to 7% was primarily driven by airbags including steering wheels in North American and Europe, along with inflator replacement business. This growth was impacted by a negative 10% currency translation effect. The net (inaudible) was a total net sales decline of 66 million to 1.8 billion.

For the quarter, the reported operating margin of 18.1% of Passive Safety was negatively affected by capacity alignment costs. Passive Safety CapEx were roughly in line with last year.

In electronics, a strong organic sales growth of around 70% was primarily driven by new model launches, higher customer take rates in Active Safety, while acquisition added around 11 million to the top line.

This strong growth was negatively impacted by a 9% currency translation effect, which resulted in consolidated net sales for $0.4 billion for the segment. For the quarter in electronics, currency transaction effects negatively impacted the margins.

Looking out for our outlook on the next slide; we have our guidance for the fourth quarter based mainly on customer call-offs, our organic sales are expected to increase year-over-year by around 9%, mainly due to the strong growth in Europe, North America, Active Safety and the inflator replacement business.

Sequentially, our consolidated sales are expected to improve by around 12% mainly due to the seasonality and acquisition aspect along the new model launches in China and the replacement business. As a result, we expect to achieve an adjusted operating margin of around 10.5% for the fourth quarter.

Year-over-year benefit from high organic sales, lower commodity costs and currencies are partially offset by higher RD&E cost in electronics and costs mainly related to the ramp up of capacity for growth including vertical integration in China.

Sequentially, the adjusted operating margin improvement is mainly due to the higher consolidated sales which is partially offset by higher RD&E, net. Looking out on our full year ’15 outlook on the next slide, based on our fourth quarter guidance, the implied organic sales growth for full year is around 7%.

This strong growth is mainly due to Europe, North America, Active Safety including acquisitions and the inflator replacement business. With most of the 2015 inflator replacement business fall during the second half; this implies an organic growth of 2-4 percentage point of our organic sales growth.

However, for full year ’15 the inflator replacement business is 1-2 percentage point of around 7 organic sales growth. As a result of our continued execution, we estimate our adjusted operating margin to be around 9.5% for full year ’15.

Year-over-year the positive aspect from organic sales commodity cost currencies are partially offset by higher RD&E net and cost mainly related to the ramp up of capacity for growth and vertical integration.

For the full year we still expect RD&E net to increase by more than 40 million from prior year, assuming comparable currency rate and commodity costs to improve around 37 million year-over-year.

In summary this full year ’15 estimate support an improved organic sales growth and margin improved performance during the second half from the first half of this year. On the next slide, we have summarized our outlook which excludes cost for capacity alignments and antitrust related matters and assumed mid-October exchange rate.

Our consolidated sales in Q4 is expected to increase by more than 3% due to strong organic sales growth and acquisition effect which are partially offset by a negative currency translation effect.

The full year guidance for consolidated sales is still expected to decline by 2% due to negative currency translation effect which more than offset the organic sales growth and minute acquisitions aspects. Based on these sales assumptions, we expect an adjusted operating margin of 10.5% for Q4 and of around 9.5% for the full year ’16.

For full year ’15 we now expect an underlying tax rate of 32% excluding any discreet item. Also assuming our currency mix and mid-October rates, we believe positive transaction effect excluding revaluation effects could neutralize the unfavorable translation effects on EPS for the full year ’15.

In conclusion, we are pleased with our execution and strong year-to-date performance, despite making record investments this year in RD&E and CapEx for future growth. The execution provides a solid base for continued strong organic sales growth combined with a margin improvement in the fourth quarter.

Turning the page, I will now hand it back to you Thomas..

Thank you Mats. And before we open the call up for Q&A, I’d like to remind everyone that we have a webcast available on our website from the recent Capital Markets Day, where we outlined our end of decade targets and showcase latest technology innovations.

With that we conclude the formal comments of today’s call, and we’d now like to open it up for questions. So with that I leave the word back to you Lauren. .

[Operator Instructions] We will now take our first question from Fei Teng from Credit Suisse. Please go ahead. .

Firstly just on the organic growth in Q4 you’re gunning for plus 9%.

Could you go in to a bit more color about what is driving acceleration in organic growth in Q4, given that production growth is slowing from Q3 in to Q4, in particular due you see the outperformance in China could accelerate in Q4 versus Q3 and could we see outperformance there for the full year.

That will be my first question, maybe we take one by one. .

What’s driving the growth for the fourth quarter is basically a blend of growth in inflator replacement business, Active Safety, but also an underlying growth in Europe and North America. .

And on China, sorry. .

If you look to the incentive programs from the government, the (inaudible) reports coming from various sources all were positive impacting beginning of October. We can confirm that. We are also seeing a positive impact so far in to this quarter coming from the incentive programs. To what extent this will remain for the rest of the quarter is uncertain.

We don’t know, there has been a quite big volatility in the past with short notice in China. So we don’t know, but we can confirm a good start, and as we said here in the slide, if this continues and the figures are right also from my [chest] it might be the trough that we saw in quarter three.

The guidance that we have is based on the callers, the current callers that we have in our systems. So that is as far as we can see today. .

And so in terms of outperformance in China in Q4 versus production (inaudible) accelerates..

It is uncertain. We have referred to outperformance in the past, but it is uncertain to what extent we will outperform for the fourth quarter light vehicle production or not. It is a little bit based on the volatility, it is a little bit too early to say.

We do not believe we will outperform the light vehicle production for the full year, but for the quarter it still may have and we don’t know that yet. .

Just on currency as well, back in Q2 you said currency would be positive on operating come for Q3. It looks like it’s been negative in Q3.

What was the reason for that, what’s driven that and what you expect for Q4 now?.

Yeah, so what we have seen in the third quarter here is that we are seeing reevaluation effects coming out mainly from the Turkish Lira. So its reevaluation in our balance sheet items going in to our P&L. That is the main factor for this negative factor in Q3.

That is also vulnerable to the main factors for the negative dollar you will just see on year-over-year for Q3. For the outlook for the year, we still believe that translation effect, the negative translation effect will be able to offset by positive transaction effect for the full year on our EPS level.

So we still believe that we can achieve a balance there for the full year on EPS. But that is excluding any other reevaluation efforts. .

And just a final question, can you give us any updates on the market share that you’re winning on new orders for airbags for longer term business?.

We have talked before about an increase of order intake on frontal airbags. As you know, we don’t discuss particularly much the order intake as it has - historically we’ve had less of a meaning for us due to the success of different platforms.

But for the frontal airbags we have commentated second quarter, we have taken 50% of the orders which is significantly higher than our global market share of 30%. We can confirm this continues in to quarter three. .

We will now take our next question from Erik Golrang from Nordea. Please go ahead..

I have two questions, the first one on the growth trajectory there for Active Safety, Mercedes clearly being an important customer for you there, and they have a quite strong development. How dependent are you for a continued good performance for Mercedes for that good growth number to extend in to Q4 and next year. .

Mercedes is an important customer of ours, and if they do well we have a good impact coming from that. Of course we also had seen good impact on other product areas on the (inaudible) side as well, which has contributed to the stronger than expected growth in second quarter.

But Mercedes is definitely an important of it along with other important customers..

And then the second question following up on an earlier question here on the replacement inflators, could you say something about based on your current production of replacement inflator and the orders, the volumes you’ve signed.

When do you see production of the replacement volumes fading, except are we ramping up in to mid-16 and then declining from there or what does the production profile look like?.

Well for the time being it looks like we are producing in to 2016. This is a fluid situation and we are working with quotations as we speak for further project etcetera.

The best estimate still remains to produce up to 20 million during ’15 and ’16, but to what extent this will fade mid’16 or start to fade mid ’16 or later ’16 it is impossible to say actually today, and I think we all understand that because of the volatile situation with it.

We don’t know that currently, but the absolute majority of the production we have been talking about is during ’15 and ’16..

We will not take our next question from Ryan Brinkman from JPMorgan. Please go ahead..

This is Samik here on behalf of Ryan Brinkman.

Just again going back to the replacement inflator business here and curious to know when you are guiding 4Q a sequential safe increase of 12% from 3Q ’15, how much of that is being driven by the ramp up in the inflator replacement business?.

If you look to the overall organic growth of the inflator business, we have communicated this to be approximately 1% to 2% for the full year. As you understand this is coming almost all of it during second half, so you should say 2%-4% coming of the second half organic growth from the inflator replacement business. .

Okay, and is there any color you can provide on how the ramp up is expected to drive this sequential sales increase or is that something you are not disclosing at this point. .

I would say we are in a good volume production for the time being, and there might be one or the other project still remaining to ramp up. And as I said to the other question, it’s a fluid situation, we are looking in to quotes for further businesses here as well. So there might further ramp up here.

But we are in production of a good part of the volume already. .

Secondly on the margins, the 10.5% margin in 4Q that you are guiding to, that’s one of the strongest margins I’ve heard you guide during the last few years. What is driving that? Is that sort of reflecting a higher than normal level margin on the replacement inflator business that are coming through in 4Q. .

I think the main factor for our higher margins is really coming out of higher sales. It’s coming out of positive raw material effect. Those are the [two ones] are also in combination with currency effect. So that’s what’s driving the margin. .

Okay.

Are you specifying anything in terms of if the margin profile of the replacement inflator business is different from the rest of it?.

We don’t talk of margins on products. .

Got it, and just a follow-up, what is the update in terms of benefit from commodities that you expect for the full year now?.

The full year commodity benefit is expected to be 37 million up 3 million from last quarter where we saw 34 million. .

We will now take our next question from Rod Lache from Deutsche Bank. Please go ahead..

You made a comment earlier about the majority of vehicles in Western markets having active safety in the next few years.

I know there was a hearing in Washington earlier this week on ways to improve Active Safety and the [next] administrator said that there would be changes the NCAP imminently and they also highlighted the 10 companies that are voluntarily adding this in the US at least.

Can you just give us an update on what your expectations are for the timing of some of these changes and the timing of adoption? What do you mean exactly when you say the majority of vehicles is it - anymore details that you are hearing from your customers. .

Okay. So when we talk about the majority of the vehicles, we mean the majority of the vehicles in to developed markets. I don’t think we have specified beyond that, but that the totality we are talking about.

Then if we talk about the timing of the Euro NCAP, so already today, of course Active Safety content in order to get five stars, and I think by 2018 that will be driven all the way down to three star, meaning that from ’18 you probably need a multiple sensor solution and by 2020 you definitely need multiple sensors under Euro NCAP to get to five stars.

And also from next year 2016, there is dual rating system being introduced in Euro NCAP which we also think will drive adoption. And then on the US the 10 manufacturers at the September initiative that was out, I don’t think there is a timing set on that initiative yet. So we have to wait and see a little bit. That would be my base answer..

Okay, but do you have an expectation for when the majority would have that in North America as well and do you have any insight in to the timing of the NCAP changes in North America. .

No, not really. We don’t have that, we are following this as you do. As Thomas alluded to here, we believe that AEB functionality will be offered on a majority of the vehicles in the developed markets. We believe that it’s going to be driven in performance wise by Euro NCAP where North America will follow thereafter.

That is the thing we are seeing for the time being. And as you know the AEB functionality is a good part of the total reason why you equipped the vehicles with sensors, cameras and radars, and also for the more advanced systems going forward. .

Okay, and just lastly I wanted to ask about R&D, which was better than expected this quarter. Again, we would think that something along those lines is fairly predictable. Could you just explain what actually happens when there are these somewhat lower than expected R&D spending and is that something that just gets pushed out to 2016..

No, I think this is something to do with a lot of different factors; its engineering income, its hiring of people, it is professional services, it is something that is affecting the quarter from one quarter to the other. We have guided for 6% to 6.5% for this year, and we believe that we will be within that range for the year. .

We will now take our next question from David Leiker from Baird. Please go ahead. .

I’ve been in and out a little bit here, but on slide 10 with the bridge on operating income. I was wondering on the right hand side of that chart if you could provide some other color behind the others net black on the far right hand side there. .

Right. I can do with that. That’s the area where we talk about the cost for our growth, and where we now invest for further growth, you can see these companies growing quite a lot. We have to invest in areas like D&E, production overheads and that’s related very much to our growth market, it relates to also our vertical integration. .

And then I just want to reconcile that then with your income statement where you show up and other non-operating items $8.2 million of profit versus 1.09 million negative a year ago almost a $10 million swing. Is that in this bucket or is that the show up somewhere else below the line. .

These other net weight would show up in our income, and I would say that it shows up quite a lot in our production overhead where you can find it in our gross margin for example. .

I’m looking at specifically the line item on your income statement that’s below the operating income line called other non-operating items. .

Other financial item, I see. .

Yeah. So I think it’s a $10 million swing. .

That is a currency effect coming from cash we have out in our units which have been revalued in to their reporting currencies, and we have got some positive impact on our cash revaluation, and that’s showing up in the other financial items. .

Okay, great. And then on the RD&E line you have pretty good positive variance there as well, and you call it but didn’t give any color behind it. .

We talked about the RD&E investments we are doing and we will continue to invest in RD&E as also Jan said earlier we will see an higher RD&E. We expect to see a higher RD&E now to come in the fourth quarter along with alliance we’ve talked about in RD&E range in relation to say between 6-6.5.

But sometimes it is timing, and you can have timing of course, you can have timing on the income. But the long trend is still between (inaudible), and its mainly in electronics. .

You usually get your reimbursements in the fourth quarter, did some of those hit the third quarter instead this year. .

I don’t know exactly sort of the timing there between Q3 and Q4, but you are right, we usually get bigger bucket in the fourth quarter..

Okay, and then one last time on China. Over the last four months or five months as the auto sales there slowed down, everybody has done some belt tightening and cost actions there, and you’ve done it as well. On the other side of it here, some of these mid month’s data point are suggesting double digit sales increases.

So the question for you is, does that higher sales volume going to the tighter cost structure is that a positive for you on contribution margins or does that create bottlenecks to drive some inefficiencies that it could actually go the other way. .

I don’t think its driving inefficiency in that sense. We are not over doing the mitigation effect here. We are taking immediate actions all the time when we see excess capacity and shrinking volume. And as we commented here we have reduced quite significantly our temporary work force, but have been forced to do so.

And we have reduced headcount over the last couple of quarters, total headcount with 13% or if you look to production workforce with almost 20%. This is similar, no other comparisons to the two things here, but it is similar to what we did during the financial crisis.

Early out with capacity reduction, at the same time as investing in technology for the future. We are also during these two quarters increasing engineering headcount with 5% to invest for the future because we believe in China long term. .

So if this plays out where we will see double digit volume gains here in the fourth quarter, your position that you benefit from that you are not going to struggle to meet demand if that comes through are you?.

No we don’t believe so. What we have done is that we have been forced to - and its always negative when you are forced to reduce headcount and take out people. But in this case we have taken out temporary work force, and we would expect to take that back within a short notice if need be. .

We will now take our next question from David Lim from Wells Fargo Securities. Please go ahead. .

The question that I have is on AEB, I think you mentioned 2019. Are you seeing OEMs side for more on of a fusion system or radar camera system or just a camera system, can you sort of give some more color on that. And then I think in the past you mentioned a 30% win rate and wondering how that’s been shaping up for you guys in the last quarter..

If you look to what we believe is going to be the major driver for the imminent future, the next couple of years to come, we believe it’s going to be mono- vision cameras that will be the dominating sensor for AEB, and for that level of functionality meeting those level of performance.

For the long haul, when rating test sharpen up and we see changes in Euro NCAP and others; as we demonstrated in the Capital Market day comparison between a few system and also a comparison between a stereo vision camera and a mono-vision camera. We believe that fuse systems and more advanced system will start to take over.

If you look to the order intake as you commented about, we have commented that for active safety system as a whole over the last 12 months, we believe we have participated in roughly 80% of the business.

We have quoted on 80% of the business, and out of that business we have quoted on, we have seen over the last 12 month the success rate of approximately 30%. .

Is that rate still continuing or has that fluctuated any bit in the last quarter? And then just to clarify, so on the mono-vision you feel that that’s going to be the majority in the near term but eventually could be more of a fusion system longer term.

Did I correctly understand that?.

Yeah, I think if we start with the latter part, I think that is a correct thing. We are launching our stereo vision camera here with fusion controller, with updated radar system. We are launching that now later this year, and we believe that for the time being mono system might be the one that is the most penetrated technologies for AEB.

But as I said, and believe this will change for several reasons. When you’re coming back to the 30%, we don’t elaborate on this. We talked about this in second quarter and we don’t elaborate changes on order intake for this kind of products on a quarterly basis.

We believe the impact long term on the sales will vary so much due to take rate that it doesn’t really have any meaning to do a quarterly update on this one. Not for us..

And my final question is, obviously China with their new tax seeing some good acceleration in the quarter, and I know that customer call-offs you provided that in your guidance. But what is the probability that those call-offs could greater or more potential upside going in to Q4.

Is that a possibility that you may see?.

You know we are guiding to the best of our knowledge based on the call-offs and as we said earlier here, these call-offs can change positively or negatively within a very short notice. I don’t simply know here. We heard here that there was an interest rate change in China just an hour ago of quarter of a percent or so.

What the meaning of this is and how this will affect anything if it does or if there will be other changes, I don’t know simply. I cannot say. This is the best that we have for the time being. .

We will now take our next question from Anders Trapp from SEB. Please go ahead..

Most of my questions have been answered actually, but just some kind of clarification and I know it’s been asked several times. But when it comes to the inflator replacement business and the contribution to growth, I know what you said about 2015, and the total 20 million unit is what you’re talking about for ’15 or ’16 together.

But what would the good growth contribution be in ’16 under your current scenario. .

If you talk about the contribution margin or growth margin --. .

No, contribution to sales. .

In ’16 you mean..

Yes..

We will come back to that. We have not looked in to ’16 specifically yet, unfortunate and I am sorry for that. At this time of the year we limit ourselves to the end of the year and fourth quarter. So we don’t know that yet, we’ll see. .

That means you are not going to answer my next question also regarding footprint savings and commodity costs for next year. .

Probably not. .

All right. When it comes to China then the mix shift that has been happening during this year quite big mix shift from western type cars to domestic etcetera.

What has that done to the average supply value per car or content per vehicle in China what is happening? Is it actually falling if you look at the total average?.

We do it more thorough summary of this at the end of the year when we compile material for our annual report. But we don’t think it has been falling. So far when we look in to the [date], it seems to be for the time being relatively stable actually.

We believe it’s currently around $220 in average for the content per vehicle, where as of today $8 is for Active Safety and we alluded to in the Capital Market day that by 2019 that number will probably double in China. But we believe its relatively stable around 220. .

We will now take our next question from Thomas Besson from Kepler Cheuvreux. Please go ahead. .

I will be quick with two questions please. I’d just like to make sure I understand it correctly, with what you said RD&E during the presentation. Did you say that you still expect 40 million higher on RD&E fund for the year as you --..

At comparable rate. .

Sorry.

At comparable rates, yes..

At comparable rates. Okay, because you are for the timing done ’15, so what rate should we use to understand the amount you’re talking about, what is in ’15? I am sorry if I slow it. (inaudible) can you give us the dollar amount which is implied by your comment, because I must say I misunderstood you in previous calls on that. .

All right. Coming back, more that $40 million higher RD&E net at comparable rates and we have also said that we expect an RD&E net in relation to sales to be between 6 and 6.5..

6 to 6.5, but you don’t want to give the amount of R&D in dollars for this year. .

I don’t have that with --..

We don’t have that for the time being, we are sorry. This is the information we have today, and sorry for that..

Two other quick questions, can you say in the third quarter how much of the 8.4% targeted growth was from the replacement business of the inflator business. Was that already around 2% to 4% you were mentioning for the second half. .

We have not divided up, for this we have said between 1% and 2% for the year before and as most of it or almost all of it is coming second half, it will imply 2 to 4. But we have not divided it up between the different quarters. .

Okay, is that what you assume to do for Q3 and to Q4 and we don’t need to know (inaudible). Thank you. Last question, I have been surprised by the amount non-operating items in your P&L this quarter, although income and expenses this quarter are at 46 million, you are now aware of what I was expecting for the full year.

Should we expect the number in Q4 to be very small or do you still have some restructuring expenses to take in Q4 as well. .

Our outlook on our capacity alignment program in terms of cost is for the full year to expect more than 90 million. .

And we have today accrued 84 million..

Okay, so most of it is done. .

We will now take our next question from Sheila Weekes from BOA. Please go ahead..

The first one just returning to this organic sales guidance and the portion of replacement inflator sales in the quarter, how much of the raise in guidance is related to higher inflator sales coming in the fourth quarter for the organic sales guidance. .

No, the inflator sales has not really changed. We haven’t talked about the up to 20 million since before. So that impact has not really affected the guidance. This is no update as you can hear from what we see for this the next year same quarter two since our earnings call in July. .

Has a certain portion of that though been pulled forward in to Q4 versus what might have been expected to come in the first half of ’16 before?.

Well you know there are demand that of course as you can hear from the press conference yesterday that there is an acceleration need or want or wish from authorities and from manufacturers. So what we can do we do of course to speed up their replacement production here.

But overall what has been the limiting factor is to get ready to get the lines qualified and validated and up and running. .

And on the Passive Safety Electronics, your organic growth ticked up quite meaningfully in the quarter after being negative in the first half. What’s driving this improvement and is that sustainable or should we be thinking of this as just more lumpy in terms of how the organic growth is for that division. .

We don’t have any specific comments around the Passive Safety Electronics. We have provided you with the capital market there with our long term view and we talk about, we have broken out their Active Safety part, but for the electronics as a whole for the we have not given any specific guidance.

You know how it is, in a business like this, a mole comes in and goes out and then you have end of production and ramp up. So that is always happening. .

And then lastly just with respect to the pricing negotiations in terms of how your contracts are structured. There’s obviously been some press articles discussing how certain German OEMs will be taking some steps to extract additional savings from their suppliers.

Have you been seeing any indications of pricing pressure in terms of your negotiations and what will be the timing of those negotiations. .

So far we have not seen any changes from this particular OEM you are referring to. It hasn’t affected us yet. It remains to be seen and remains to see the consequences for them and what will happen. Our product is not normally sourced due to type of engine if its diesel or petrol or hybrid or what not. So its neutral to that.

And to the pricing pressure it remains to be seen what measures they will take, we haven’t seen anything yet. .

And just one more quickly if I may, on China can you comment on what your capacity utilization is in China relative to the other regions globally at this stage?.

You know as we have been taking out as we said 20% of the production work force, its somewhat lower the utilization for the time being by nature. We can flex up and to the comment on the earlier is that production will ramp up fast. We have available capacity, we’ll bring up people and train and bring people up to speed.

But its lower for the time being a little bit than in the other regions. .

We will now take our next question from Agnieszka Vilela from Carnegie. Please go ahead. .

I have some questions, if we can start to look at Americas and a bit longer trend there, I’ve seen that you have been outperforming the underlying production by some 10 percentage point, looking at your organic growth since the beginning of 2014, could you just share with us what’s the reason behind it.

Is it the fact that the content is going, are we taking market share or do you see any other reasons. .

It’s several things, we have a good product mix, we have important car lines ramping up here lately like the Ford F150.

We have a good portion of the active safety that we have commented on earlier where as we also said Mercedes and there is success in the US where we are a significant contributor, the Active Safety part is giving us a boost, and we have had over the years a good launches in to North America overall.

And now lately it’s also giving us the positive effect at the very end here now from the replacement business. There are several factors contributing to this good performance in North America..

And then looking in to your cost savings program, should we expect anymore cost savings coming from the capacity alignment program coming in to 2016?.

It is so that when we are now going out of the third quarter here we have accruals in our balance sheet related to severance to around 110 million, and those accruals will be executed in the coming future here and that will also go for 2016, and we count our payback based on when we do the cash out, not when we do so to the accrual.

So that means that there will be payable payback coming on the cash out in the future. We believe that the payback time is around three years for the older parts of the program and a little bit more than three years on the newer parts. .

And I have a question on Active Safety and you said that more and more cameras will be the driver for Active Safety or the most important segment in the coming future. Can you just clarify what kind of products you have there, because to say that you have them on the vision camera of A, B that will be launched only in 2017.

Can you still sell the mono-vision cameras based on the Mobileye chips in the coming future. .

I have to correct that, if I said that it was a miscommunication from my side. I don’t think the mono-vision will be the most important part for the future. I think for the future will be a fused system being the most driving technology.

But for the imminent part, may be a year or two or may be somewhat longer, may be three years or so, there might be mono-vision being in there for AEB.

But we believe firmly that for real life safety and for the longer term future towards semi-autonomous drive or autonomous drive will be a stereo-vision in combination with some other sensors for the future. That is what we believe.

We are launching as a part of our sensors week we are launching a mono-vision camera already this year but the customer choice has to use to use this camera for AEB functionality in calendar 2017. But we will launch camera for other functionalities earlier than so. .

And my last question is on the MACOM acquisition, can you tell us about the electronic horizon, what are the applications there and you also see that the prototype is ready, have you received any orders for that technology. .

No I don’t think we have received any orders yet for this one. We showed this at the (inaudible) here in France just not too long ago. As you know this is a product where we are right now getting ready and market ready to take orders. It was a part of the acquisition.

The main part of the sales and volume today from the MACOM business is the GPS modules that goes in to the system today. We believe that the capability of the engineers that is coming with this business is giving us access to competence and technology that we will use them as a building block for autonomous drive. .

We will now take our next question from Hampus Engellau from Handelsbanken. Please go ahead. .

I am starting to come back on this inflators again but I think yesterday we had Volkswagen launching a natural recalling in the US on the background of the cost inflators, and that is not included on your program with the 20 million units.

But my question more related to what type of a capacity do you have if you should get your fair share of this recall. .

Well it is dependent on what type of inflator it is and how it fits in to the program that we are producing. If it is a similar type of inflator, we could use lines we may be up and running as fast as we may need somewhat less of equipment.

But otherwise we believe that from an infrastructure point of view we are relatively well positioned, which means buildings and sites etcetera. But as always, you may need extra production capacity. We don’t build up that sitting and idling and waiting. And that will or may be necessary also for additional business if it counts. .

Can we also go back to (inaudible). You are gaining [mortgage] on the domestic OEMs and my question is more related, that is the driver behind that, is that new car that’s been programmed in China and content growth on the domestic OEMs or how should I look at your market share gains in China on the domestic side. .

Yeah, while I think it is a combination of us being onsite in China. I referred to earlier here, we are even in difficult in China focusing on engineering development. I said we are increasing engineering headcount with 5% when we are reducing capacity and production. So I think we are focusing on technology.

We are onsite, on ground, good relations inside China domain with our people and capacity. Then of course the China NCAP and also the fact China NCAP may come out later on this year with even Active Safety part of the China NCAP and outline their strategy for it. We’ll drive content further on in to the China and also through the Chinese OEMs.

And Chinese OEMs may realize as a whole what do I know, but I would think they see the necessity of car safety if they are going to compete with foreign OEMs. .

And then last question also coming back to this vision systems, when you say you are launching your own mono-vision system by this year end.

Is that your own developed algorithm shift in that mono-vision and will that be used for simple versions autonomous [similarity], is it breaking or will this derivation system handle all the autonomous emergency braking features. .

The launch we will have later on this year will be derivation, it will be mono-vision with other functionalities. It will be 77 gigahertz and it will domain controller for fusion of different sensors - handling fusion for different sensors.

The camera that we are developing stereo-vision and mono-vision is our own camera with our own algorithm developed, and as I said, the AEB functionality will come in place in calendar year 2017, mostly related to that customer program and the use of that for AEB..

We will now take our next question from Chris McNally from Evercore ISI. Please go ahead. .

My question is really another follow-on to the fuse product discussion for ‘19-‘20 and just considering really that the RFQs over the next couple of years will really be for advance features like AEB cyclist, AEB intersection, which at your CMD reference would be difficult with your first-gen internally developed algorithm for mono.

My question is, on these specific advanced RFQs where you are going up against a mobile eye, binocular or multi-focal offering.

Will you be able to compete on a cost and performance basis or will you have to use potentially a more expensive stereo fusion offering if your technology from mono only is not ready call it by that timeframe?.

Well I think that our technology is state-of-the-art, and I think our technology that we are developing is really a competitive offer as of right now. And we are ready to evaluate that and I think we demonstrated our capabilities at the capital market also.

And I think that we are, if you look to the outer years where real life safety may have a different focus in rating tests in legislations and also in consumer awareness, when you see how important it is to be able trust the systems in bad weather conditions and in very difficult situations in intersections etcetera.

We believe that we have a competitive offer. We believe that we have talked about a low end system having a price of around 100 to 150 and the high end of a range of 250 to 300 which then means a fuse system of two sensors plus controllers. We believe this is a competitive offer us up to date. .

Okay, so going in to RFQs today for 2020 high end AEB you think you will be competitive, that’s the takeaway. .

We definitely think so. .

We will now take our next question from Ashik Kurian from Goldman Sachs. Please go ahead. .

Thanks for taking my questions. Most of the questions have been answered. So just ask a housekeeping question, just so that I understand correctly, when you say the translation impact would be offset by these transaction, what kind of word got out to be at least 50 to 70 basis points of margin benefit.

And when I look at the first three quarters you’ve had if anything a net negative impact on margins from FX. So why does all the benefit, if I am right, come in the fourth quarter.

Is that more of an accounting issue?.

Ashik I hear a little bit disturbance here.

Can you repeat the question?.

Sure.

When you said the negative translation impact is going to be offset by the transactions in terms of contribution to margin, I worked that out to be at least 50 to 70 basis points of positive margin contribution this year, and when I look at the first three quarters it seems if anything you’ve had a slight negative margin contribution from currency, and that implies a massive FX curtailment on the margins for the fourth quarter.

I am just wondering what the mechanics of that is, as in why is all of it coming in the fourth quarter?.

I think there are several aspects on currencies, and margin is sort of a different feature here. We have been talking about impact on EPS on dollars and that’s sort of how we also say that we think that given the rates we are seeing today that we could be able to offset the negative translation with the transaction on the dollar side.

But that said also, if you look also to what has happened during the year here until at least September is that even if the translation effect has been negative on the dollar side, they have been positive on the margin side. That’s what we have been able to see now in the third quarter.

So the impact on margin dollar is not necessarily same on translation, and that’s basically due to the cost structure. .

You’re saying to work out the margin impact from currency on the fourth quarter but maybe I’ll take this question offline. .

We will now take our next question from Joseph Spak from RBC Capital Markets. Please go ahead..

Hi this is (inaudible) filing in for Joseph Spak. Most of the questions have been attempted but just to clarify, looks like the mono-vision launches for this quarter on Clubman and X1 are not your algorithm that’s coming later this year.

But can you remind us of the functionality between what to launch this quarter and what’s going to come with your own algos. And secondly is there an update on side airbags investigation and potential benefits from that later on. .

Could you repeat the second part of the question.

What do you want to know about the side airbag investigation?.

Has there been any progress towards that, any kind of actual substantives coming from it. .

That is too early, I cannot comment on that part. We don’t see that if how that has developed etcetera. We are working on several projects as we said, and looking in to quotes for further, but that specifically I unfortunately cannot comment on.

The Clubman that you talk about here that we are launching now is not our own camera, that is based another algorithm. You are right on that. But specifically that is including I cannot give you the details on what its really doing and the different feature on that one.

With respect to our own algorithm that we are launching here that is based on, as I said, our own development software and hardware. It is including AEB functionality and it is including the usual other blind spot detection, lane departure warning etcetera.

So the normal things that you expect is advanced system to do is handled by our own algorithm and the technology we are launching. .

[Operator Instructions] We will now take our next question from Brian Johnson from Barclays. Please go ahead..

Just a follow-up on that last question while she brought it up. So the mono-vision you’re launching in fourth quarter with lane departure warning and lane keep assist, is that in-house technology from Autoliv or is that even a second tier. .

As we said, this mini launch that she was specifically referring to it’s a second tier. The one that we are launching, is that what you are asking for or do you ask for the Mini Clubman..

Yeah, on slide four I believe it actually says mono-vision, the Mini Clubman is launching in 3Q, and then in the fourth quarter you’re launching --..

The Mini Clubman which she was asking for that is a second tier. .

Okay, the mono-vision in fourth quarter that’s in-house Autoliv technology. .

Yes..

In terms of your vertical integration strategy, could you just remind us what inning you’re in with that strategy, provide a little color on what’s been completed so far and what’s left and kind of what you expect from. In terms of the headwinds if you expect those to turn to tailwinds then what’s the potential timing of that. .

Could you repeat the question?.

Yeah, in terms of your vertical integration strategy, remind us just what inning you are in on that, if you could provide a little color on what’s been completed, what’s left to complete and when do you expect headwinds from that vertical integration program to turn in to tailwinds. .

This will be fully in place towards the end of the decade, it’s a several step program. We are doing two types of vertical integration, basically most of it in China.

We are doing it elsewhere too, but we are doing a pyrotechnical site in China where we are investing in generant manufacturing, igniter manufacturing, we are moving our inflator manufacturing in to a special type of pyro technique.

That is an ongoing work to feed the Asian art of the world with their pyro technique and also the growing market in China. Then you have the textile campus outside Shanghai, which is essentially cushion manufacturing and fabric manufacturing, and that is on its way. And this will not be fully completed, still remains in several years.

But some parts of it is already up and running, and this is gradually coming in to place basically from now on and gradually in 2016 and ’17..

Okay, because I might have thought some of the vertical integration headwinds might be receding as you pointed to full year vertical integration cost being a headwind, but then for fourth quarter there was no call out of vertical integration cost being the headwind. .

It will be, it is, but must refer it to as cost for growth, and that is what we refer to when we talk about the vertical integration and how we are growing that business. So you will see that headwind in to 2016 as well, and we will maybe come back to how and what portion of this and how it will develop during the year.

But it will continue in to ’16..

Okay. And then what inning of the pedestrian airbag adoption cycle are we in. I guess is that mainly going to be driven by Euro NCAP or other global NCAP rating standards or actually OEMs and end consumers actually showing interest in this technology on their own..

I think you are seeing consumer interest, at the end of the day all the rating test etcetera is at the end of the move here based on consumer interest. And where we are on this cycle we are very early to tell you for pedestrian airbag and for pedestrian protection.

We are providing it to some OEMs here and it’s progressing, but it is not developed to the extent we would like it to see and it may take some time before it is. .

Our final question comes from Thomas Besson from Kepler Cheuvreux. Please go ahead. .

I will be brief. I have two quick follow-on questions please. You said earlier on my other questions that you had spent or you had put in your P&L 86 million for your adjustment program in the first nine months. We are at 99.3 million (inaudible) between your reported and adjusted operating income. So that’s 13.3 for the antitrust related matters.

Can you tell us why these cost don’t seem to go down, while there has been some settlements and how long do you expect these to last? That would be the first question. .

On the trust you mean. .

When I look at the difference between 6 or [5.12] which is your adjusted income for the first nine months and the 505.9 million, there’s a difference of 99.3. You said 86 were related to the adjustment programs, so the remaining [813] million are linked with the antitrust.

It doesn’t seem to decline despite the fact that there has been some settlement over the last couple of years. First, question was how long is it going to last, and second, should we expect these quarterly costs to decline at one point. .

Very difficult to predict these kind of costs and that you can see in our disclosures. We still have some ongoing procedures going on in several parts of the world and the cost we are incurring is in blend of either professional services we are buying purely the cost or accruals where needed for settlements.

But to give an outlook on that is very difficult. I mean you can’t really say, really when you are able to set [sale] another one. It’s impossible. .

A very last question from me please, when you liquidate your adjusted EPS, do you adjust for the one of you described the 8.2 million Euros for FOREX accruals or not. .

When we do with adjusted EPS, we adjust it in the same way we do adjusted [EBIT]. That means that its basically antitrust and capacity alignment related costs. .

As there are no further questions in the phone queue, I would now like to turn the call back to Mr. Jan Carlson..

And I would like to thank everybody for your participation and interest in questions. But before I do that, I would like to extend my sincere thank you to the Autoliv team for your relentless focus on quality and operational excellence, and as we improve and further position our company to save even more lives.

I would like then to thank you all for today’s call. We sincerely appreciate your continued interest in Autoliv and that we look forward to speaking to you again on our fourth quarter earnings call on Friday, January 29, 2016. Until then I wish you all a safe and relaxing upcoming Holiday Season and good bye for now. Thank you..