GOTHENBURG, Sweden - Swedish supplier Autoliv Inc. expects to increase its sales of side-impact airbags dramatically in the next two years.
Chief Executive Lars Westerberg said side-impact systems will be 'the fastest penetrating product Autoliv has ever launched.'
But Westerberg told analysts and investors here that intense pricing pressure has cut sharply into the profitability of airbags.
During the past four quarters, Autoliv's sales have grown 10 to 13 percent on an annual basis, after adjusting for acquisitions and currency shifts. But prices have fallen steeply in the last 21/2 years.
Since 1997, prices for front passenger airbags have fallen 25 percent, Westerberg said. Prices for side-impact chest bags have dipped 35 percent.
As a result, despite product simplification and higher volume, side airbag profitability had not been satisfactory, he said. However, pricing pressure eased a little in the first two quarters of 1999, he said.
Autoliv earned $188 million last year on sales of $3.5 billion. Westerberg said the global market for occupant restraint systems is currently $12 billion a year and is expected to grow 5.5 percent a year.
SIDE BAGS TO GROW
He predicted that new products and cost-cutting will restore net margins to more than 10 percent of sales.
'Our cost situation is not really satisfactory,' Westerberg said. 'We spend too much on overhead, but we do not plan to spend less on technology.'
Autoliv currently spends 5.2 percent of sales on research and development and expects to continue at 5 to 5.5 percent of sales.
In the short term, growth will come from side-impact airbags. Westerberg said he expects Autoliv to deliver 25 million side-impact head-protection systems in 2001, up from 200,000 in 1998.
By 2001, Autoliv estimates its annual sales volume of side-impact airbags will be about 21 million units, compared with 24 million front airbags.
Autoliv sees additional growth from anti-whiplash seats and rollover safety devices and from the upgrading of current seat belt and airbag products.
In addition, Autoliv expects increased sales from pre-tensioners and load limiters in the seat-belt market, and from development of 'smart' airbags to meet new regulatory demands.
Extra features could add 50 percent to the price of a front airbag. They include ultrasonic, weight and seat position sensors; buckle switches; two-stage inflators; and gentle airbags that match the force of the deployment to the weight, position and movement of the occupant.
Autoliv also sees growth opportunities from pre-crash systems, such as accident collision warning systems. Autoliv will ship its first accident warning system in 2001, 'but most of the market will develop on the other side of 2005,' Westerberg said.
He said growing demand for safety devices will require new capacity. His company's capital expenditures jumped 56 percent, to $285 million, in 1998, and Autoliv plans to continue to invest $270 million to $300 million a year.
To reduce costs, Autoliv plans to move seat belt subassembly from Western Europe to Central and Eastern Europe.