Autoliv Has $1 Billion for Japan Acquisitions as Car Production Rebounds

Autoliv Inc., the world’s largest maker of automotive air bags and seatbelts, has about $1 billion to spend in Japan and fast-growing segments such as electronic accident prevention, Chief Executive Officer Jan Carlson said.

“We’re better equipped to do acquisitions, and we are looking to do more of them ahead,” Carlson said in an interview yesterday at the company’s headquarters in Stockholm. “We have the strongest balance sheet we’ve ever had.”

Autoliv is interested in buying companies in Japan, where its 20 percent market share in the country is lower than elsewhere, Carlson said. Autoliv has a 35 percent share globally, including about 40 percent in Europe and North America. The company is holding “loose discussions” with potential sellers, Carlson said, without identifying candidates.

Global car production has rebounded from the recession, spurring sales of seatbelts and airbags. About 70.3 million cars will be built in 2010, up from 57.4 million last year, IHS Automotive forecasts. Production may surpass 91 million in 2015, the researcher predicts.

Autoliv’s biggest rival in Japan is Tokyo-based Takata Corp., which Carlson said has about an equal market share in the country for seatbelts and airbags. Smaller competitors include Ashimori Industry Co. Ltd. and Nihon Plast Co. Ltd.

Photographer: Magnus Skoglof/Autoliv Via Bloomberg

Autoliv Inc. Chief Executive Officer Jan Carlson. Close

Autoliv Inc. Chief Executive Officer Jan Carlson.

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Photographer: Magnus Skoglof/Autoliv Via Bloomberg

Autoliv Inc. Chief Executive Officer Jan Carlson.

Smaller Companies

“If Autoliv has $1 billion to spend then Takata is too big,” said Hisahiro Yamaoka, an analyst with Nomura Securities in Tokyo. “They would have to look for some smaller company.”

Autoliv’s Swedish depository receipts rose 0.6 percent to 549 kronor at 12:43 p.m. in Stockholm trading, giving the company a market value of 48.7 billion kronor ($7.1 billion.)

The manufacturer this year bought parts of Delphi Automotive LLP’s automotive safety business in Korea and China.

Outside Japan, Autoliv is now mainly pursuing acquisitions of companies making “active-safety” products, which include radar and other electronic equipment that help prevent accidents, Carlson, 50, said. While this segment’s volume is many times smaller than the market for seatbelts and airbags, its growth pace will be “much faster,” he said, adding Autoliv this year will sell almost $100 million worth of active-security products.

Acquisition Funds

“We would like to do an acquisition in active safety, but the difficulty is there aren’t many sellers,” he said. “They probably see the same growth potential in this area as we do.”

Autoliv has the capacity to spend about $1 billion on acquisitions by using existing cash and borrowing funds while still not “burdening the debt grade too much,” Carlsson said. Its net debt at the end of September was $338 million, down from $878 million a year earlier.

Autoliv expects fourth-quarter revenue to grow 15 percent and the operating margin to hit 12 percent, Carlson said in the interview, maintaining an earlier forecast.

Brazil represents one of Autoliv’s biggest growth opportunities, Carlson said, noting that from 2014 all cars sold in the country must be equipped with front airbags. Autoliv, whose Brazilian market share is between 40 and 45 percent, said last month it’s started construction of an airbag inflator factory near Sao Paulo.

In China the company has invested between $90 million and $100 million in expanding and upgrading some of its 11 local factories. Autoliv aims to boost its share of the Chinese market to 35 percent by 2012 from today’s 30 percent, Carlson said.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

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