Ladies and gentlemen, thank you for being here and welcome to the Fourth Quarter 2020 Autoliv Earnings Conference Call. All participants are currently in a listen-only mode. Following the presentation, we will have a question-and-answer session. Please note that this conference is being recorded. I will now pass the call to your speaker, Anders Trapp, Vice President and Head of Investor Relations. Please proceed.

Thank you, Alicia. Welcome, everyone, to our fourth quarter and full-year 2020 financial results earnings presentation. On this call, we have our President and CEO, Mikael Bratt; and our Chief Financial Officer, Fredrik Westin; and I am Anders Trapp, Vice President of Investor Relations. During today's earnings call, our CEO will provide a brief overview of our fourth quarter results, as well as provide an update on our general business and market conditions. Following Mikael, Fredrik will provide further details and commentary around the financials. At the end of our presentation, we will provide a status update of our journey towards our financial targets. We will then remain available to respond to your questions and as usual, the slides are available on autoliv.com. Turning to the next slide, we have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference some non-U.S. GAAP measures. The reconciliations of historical use U.S. GAAP to non-U.S. GAAP measures are disclosed in our quarterly press release and the 10-K that will be filed with the SEC. Lastly, I should mention that this call is intended to conclude at 3 P.M. Central European Time, so please follow the limit of two questions per person. I'll now hand it over to our CEO, Mikael Bratt.

Thank you, Anders. Now, let's look at the Q4 2020 highlights on the next slide. Before we proceed with the formal presentation, I want to recognize our employees for their hard work and dedication to health and safety, cost control, quality, and delivery precision during these challenging times. The COVID-19 pandemic is primarily a human crisis, and prioritizing health and safety is our main focus. I'm very pleased to report that our operations achieved record net sales, record profits, and record cash flow despite the challenges posed by the pandemic. We successfully executed our strong order book, with organic sales growing by 13%, significantly outpacing the increase of global light vehicle production by nearly 11 percentage points. The record operating income resulted from high sales growth, effective operational execution, structural savings, and proactive measures we took early in 2020. Our structural efficiency programs are progressing well and yielding savings. As part of our footprint optimization, we announced plans to close one plant in Sweden and are continuing to explore further optimizations. It is encouraging that we can report the highest operating and free cash flow in our company's history, which supports our leverage ratio target of 0.5 to 1.5 times. We are continually assessing opportunities for shareholder value creation. The order intake share of approximately 45% in 2020 supports an extended period of outgrowth, defending our growing market share. Customer sourcing activities were lower than anticipated, as some program sourcing has been pushed into 2021. Our focus throughout this crisis has been the health and safety of our employees while emerging as a stronger company. Although the COVID-19 pandemic is not yet behind us, our performance in the second half of the year shows that we’ve built a solid foundation toward our mid-term target. However, disruptions in the automotive industry supply chain, economic uncertainty, risks of further lockdowns, and the potential impact of rising unemployment on consumer demand may dampen light vehicle production development in 2021. Now, looking at the financial highlights on the next slide, our consolidated net sales increased by 15% compared to Q4 2019. This marks the highest quarterly sales for our passive safety business to date. As we outperformed the market, our global market share rose to 42%, leading across all three core product areas: airbags, seatbelts, and steering wheels. Adjusted operating income, after excluding costs for capacity alignment and antitrust matters, grew by around 30% to $311 million, and the adjusted operating margin improved by 130 basis points to 12.4%. Even with significant accruals for warranty and recalls, including a higher-than-anticipated accrual for the Toyota Prius recall first announced in 2016 and other probable recalls still under evaluation, this is the largest accrual we've ever made, and it does not reflect Autoliv's standards for quality. Our operating cash flow of $469 million is the highest we’ve recorded. Turning to sales development on the next slide, I am pleased to report that our organic sales growth exceeded global light vehicle production by 11 percentage points. We experienced solid sales growth in all major regions, with sales in Europe, China, and North America outpacing light vehicle production by 9 to 12 percentage points. This outperformance resulted from product launches over the past year and a favorable model mix. However, slowing sales of replacement inflators negatively impacted results by 0.7 percentage points, primarily affecting North America and China. On the next slide, we had several high-content model launches this quarter with no significant delays. The vehicles listed have Autoliv content per vehicle ranging from $110 to $540. Two of these vehicles are fully electric, and many others will feature some form of electrified powertrain. The ongoing trend towards higher content per vehicle is reinforced by the introduction of pedestrian airbags and hood lifters. For instance, the Subaru Levorg is the first Japanese-produced vehicle to include a pedestrian airbag from Autoliv. Turning to the next slide, our order intake share for the full year remained strong, supporting our growth potential beyond 2021. This firmly establishes us as a leading company in the passive safety automotive sector, demonstrating our effective management of previous years’ high order intake. One of our key performance indicators, customer satisfaction, has continued to rise and is currently at its highest level in several years. However, this does not mean we can be complacent. We are always aiming to improve our products, services, processes, and costs. We estimate that we captured about 45% of the available order value in 2020, marking the sixth consecutive year of higher order intake. Now, I will turn it over to our Chief Financial Officer, Fredrik Westin, who will provide more insights into the financials over the next few slides.

Thank you, Mikael. So on the next slide, we show all the highlights and key figures for the fourth quarter. Our net sales were $2.5 billion, a 15% increase compared to the same quarter last year. Gross profits increased by $75 million, and the gross margin increased by 40 basis points. The higher gross margin was primarily driven by the higher sales and direct material efficiency, partially offset for costs related to warranty and recall accruals. The adjusted operating income increased by $69 million to $311 million, mainly due to the higher gross profits. The operating cash flow was $469 million, the highest record quarterly operating cash flow for the company. Reported earnings per share was $2.15, and our adjusted return on capital employed was 33% and return on equity was also 33%. We did not pay a dividend in the quarter. Looking now at the adjusted operating margin bridge on the next slide, our adjusted operating margin of 12.4% was 130 basis points higher than in the fourth quarter 2019. As illustrated by the chart, the adjusted operating margin was positively impacted by lower costs for raw materials of 50 basis points and lower combined costs for SG&A and R&D of 70 basis points, mainly due to lower costs for personnel in relation to sales. FX effects impacted the operating margin positively by 50 basis points. This is caused by transactional effects from a number of different currency payers. Operational improvements contributed with 180 basis points. This was a result of strict cost discipline put in place during the first half of the year, and the effects from structural efficiency programs partly offset by the negative impact of COVID-19 related costs and inefficiencies. Support from governments in connection with the pandemic was around US$2 million in the quarter. The margin was also affected by accruals for warranty and recalls of 220 basis points. This is the first time in the history of our company that we have such high amount of this type of costs. Since 2010, we have accounted for less than 2% of all safety-related recalls, despite our high market share. Having said that, the automotive insurance market has become more challenging, with increased insurance premiums and health risks, which could lead to higher average costs for recalls. Looking at the next slide, for the fourth quarter of 2020, operating cash flow was $469 million, an increase of $157 million compared to last year. The increase in operating cash flow was a result of the higher net income, effects from deferred income taxes, and improved working capital. Strict inventory control, close collaboration with suppliers, but also reduced overdues and improved payables together with positive effects from other non-cash items were the main drivers for the improvement in working capital. Capital expenditures amounted to $111 million in the quarter, which is about 4.4% in relation to sales. Compared to last year, capital expenditures decreased by 6%. Free cash flow was $358 million, an increase of $164 million year-over-year. For the full-year 2020, operating cash flow was almost $850 million and free cash flow amounted to $0.5 billion. CapEx was $340 million for the full-year, a reduction of close to 30% compared to 2019 as we suspended or delayed some investments and a more normalized market will lead to some increase in investments together. The cash conversion in 2020 was more than 200% as a result of the low CapEx, positive operating working capital development, and non-cash items. Now looking at the next slide, we have, as you know, a long history of a prudent financial policy, and our balance sheet focus remains unchanged. The leverage ratio has improved from a peak of 2.9 times at the end of the second quarter to 1.8 times as of December 31, 2020. The improved leverage in the quarter was a result of our net debt decreasing by $350 million, while EBITDA over the last 12 months at the same time increased by $75 million. It is worth noting that our net debt is now $0.5 billion lower than when we spun-off Veoneer in 2018. Our strong free cash flow generation should allow further deleveraging and we expect to be within our target leverage ratio range before the end of 2021. On the next slide, you can see our key figures for the full-year 2020. 2020 was a turbulent year with the low point in the second quarter and the high points in the fourth quarter. Our net sales were $7.4 billion, with sales declining organically by 12%. This was slightly better than our guidance of a 13% decline with global LVP declining 17%; our outperformance was approximately five percentage points. The adjusted operating margin was 6.5% compared to our guidance of around 6%. A dividend of $0.62 was paid in the first quarter. Looking now on the light vehicle market on the next slide. We see risk for near-term volatility to light vehicle productions from supply chain challenges, low labor availability, and continued challenges around COVID-19 mitigation efforts. Although we're not directly affected by the semiconductor supply issues, it will potentially have a substantial impact on light vehicle production in the first half of 2021. According to IHS market, more than 600,000 unit impact is highly likely, with most of that loss production expected to be recovered in the second half of the year. The largest impact is expected in China, followed by Europe and Japan. In North America, we expect that rebuilding inventory will push light vehicle production gains above light vehicle sales increases in 2021. In Europe, the overall production outlook remains constructive, given the need to rebuild inventories and support the ongoing domestic sales recovery and increased export activity. In China, positive economic fundamentals are supporting the ongoing recovery in consumer demand. Light vehicle production is now forecasted to grow 7% for 2021, after three consecutive years of decline. Our full-year guidance is based on our customer call-offs and light vehicle production outlook according to IHS market. On the next slide, you'll see some of the key models supporting our expected sales outperformance in 2021. These models are expected to account for a large share of our organic sales growth during the year. Nine of these models were launched recently; three are yet to be launched. Our content per vehicle on these 12 models is in the range of $150 to $600. Additionally, we continue to see a high number of product launches in 2021, especially in China, Europe, and North America. Looking at our expected margin development for 2021, on the next slide, we see some tailwinds and some headwinds. The main tailwinds include the rebound of global light vehicle production, executing on the strong order book, and savings from the structural efficiency programs. The main headwinds include operational headwind from higher costs per raw material of approximately 40 basis points, a gradual normalization of discretionary spending, and higher depreciation and amortization. Considering these potential tailwinds and headwinds, we expect a year-over-year improvement in adjusted operating margin of around 350 basis points. However, supply chain disruption in the automotive industry, the risk of further lockdowns, and the potential increase in unemployment and its effect on consumer demand may still impact this outlook. I'll now hand back to Mikael.

Thank you, Fredrik. Now looking at the full-year 2021 indications on the next slide. These indications exclude costs for capacity alignments and antitrust related matters. Backed by recent product launches, we expect sales to increase organically by around 20%, supporting a full-year mid-single-digit outperformance versus light vehicle production. Our net sales increase is assumed to be around 25%, including positive translation effects of around 5%. We expect an adjusted operating margin of around 10%. Operating cash flow is expected to be in line with 2020. It is important to note that the outlook assumes that light vehicle production develops broadly in line with IHS market's latest forecasts. Turning the page, during the first half of 2020, we experienced a downturn of historical proportions. Despite this, our focused area for shareholder value creation are unchanged, and we have continued to execute on the strategic initiatives presented at our Capital Markets Day in 2019. The ambition is to ensure we have an adequate cost structure supporting our mid-term targets. Today I would like to share some updates on our journey with you. But first, I would like to say a few words about how we integrate environment, social and governance into our strategy on the next slide. Our core business contributes to the United Nations sustainable development goals for health and wellbeing. We support the UN Global Compact, and its 10 principles are an integral part of our sustainability, commitment, strategy, and work. We're well-positioned to support the industry transformation towards cleaner vehicles. Our commitment and strategic priorities include innovating products to save more lives in real-life traffic. At the same time, we focus on improving resource efficiency, reducing our carbon footprint, managing sustainability risks in our value chain, committing to the well-being of our employees, and acting in the best interest of society as a whole. During 2021, we'll especially advance our position on the climate issue and update our climate strategy. Now looking on the next slide. Here we have our financial targets as presented at our CMD in 2019. During 2020, we delivered on the growth and cash conversion targets. In 2021, we expect to continue to build towards our profitability targets of around 12% adjusted operating margin. Looking at the building blocks for profitability growth on the next slide. Improvement in margins will come from three key levers: executing on a strong order book, stabilization of market fundamentals, and our strategic initiatives. Looking more into our three key levers and an update on our targets on the next few slides. For reference, our sales outperformed the global light vehicle production organically by five percentage points in 2020. We expect that content per vehicle will grow by at least 1% per year as a result of higher installation rates and the introduction of new products. This, combined with a sustained higher order intake level, allows us to increase our medium-term target organic growth of 4% to 5% above light vehicle production on average; this is an increase by one percentage point. Looking at the market development on the next slide. The outlook for global light vehicle production looks very different today than back in 2019. IHS's expectation for global light vehicle production has been reduced by roughly 7 million units per year, or approximately 40 million vehicles totaling 2020 to 2024. These reduced light vehicle production environments create additional challenges. Looking at the next slide. To offset the effects of the expected lower light vehicle production, we expanded the structural efficiency programs. We have seen expected positive effects. The savings from our two structural efficiency programs was around $55 million in 2020 compared to 2019. In addition to the structural efficiency programs, we made a provision of around $35 million in 2020, with footprint optimization in Europe involving plant closures in Germany and Sweden. We're also targeting to make some of the temporary cost reductions that supported strong performance in the second half of 2020 permanent. Despite the pandemic, we have stayed true to our commitment and focused on driving improvements from key areas within operations, supply chain management, and engineering. Looking at the progress on the next few slides. We have increased our optimization activity more than five times in the last 12 months from around 50 projects at the end of 2019 to more than 250 projects. Implementation is at full speed. For example, we have developed the fully automated line for weaving of cotton airbags; the first line is being taken into production in the first quarter of 2021. Our digitalization journey has also been accelerated with more validated use cases. Our improvement in the Autoliv production system has shown great momentum; 80% of our plants have now reached go-level or above. During the last 12 months, 15 of our 65 plants have moved up one level or more. Today, we have no plants on basic or bronze level. Looking at Supply Chain Management on the next slide. Despite a challenging year for automotive suppliers, we managed to achieve a year-on-year cost reduction of more than 4% for components; material analytics, including 90 basis points from raw material price changes. This level of saving is clearly supporting our mid-term targets. Expanded payment terms is another focus area contributing to strong working capital improvement. The potential risk in the supply chain increased during 2020; we have taken a proactive approach and recognized supply chain risk management as a key part of our capabilities. Looking at engineering progress on the next slide. In our vision to reduce R&D in relation to sales to historic levels of around 4% of sales and to support our optimization journey, we're transforming the way we're doing engineering. This transformation includes smart connection of systems, data, processes, and tools, faster implementation of improvement projects, developing specific simulation tools for substantial reduction of prototypes and testing. During 2020, we have implemented 12 such improvement projects, and we're currently driving 40 more projects. In addition, we have more than 50 projects in the pipeline. I hope this presentation has shown you that we have a very high pace in the implementation of our strategic initiatives. Thus we're on track towards our mid-term targets. Now looking at focus for 2021 on the next slide. The health and safety of our employees is our first priority, while continuing more activities to further improve efficiency. We'll also continue our efforts on flawless execution of new launches, improving customer satisfaction further and thereby supporting our new and stronger market position. Sadly, there will be millions of traffic accidents in 2021, some fatal, some where people will get injured. Therefore, we will relentlessly continue to innovate and deliver the best quality products that will save more lives. Turning the page, we plan to hold our next Capital Markets Day in the fourth quarter, where we will showcase our full potential and provide an update on our strategy and development of the Autoliv Group. Additionally, we plan to show further future products, give an update on opportunities in core and adjacent product areas, outline further potentials that we see in flexible optimization and digitalization, and much more. I will now hand back to Anders.

Thank you, Mikael. Turning the page. This concludes our formal comments for today's earnings call. And we would like to open the line for questions. I'll now turn it back to you, Alicia.

Thank you. Ladies and gentlemen, we will now start the question-and-answer session. Thank you. Our first question comes from Emmanuel Rosner at Deutsche Bank. Please go ahead with your question. Your line is open.

Hey, it's Mikael for Emmanuel. I have two questions. First, regarding raw materials, could you discuss the impact at current spot rates going forward? If I recall correctly, there's usually a lag, so it seems like it could be 40 basis points this year. Do you have an idea of how much that might be next year? Secondly, on order intake, it has been around 50% for the past five years, but it has dropped to 45% in 2020. Can you explain why that happened? Thanks.

Thank you for your questions. I can start with the order intake, and then I'll pass on raw material to Fredrik to give you some more details. I think firstly, it's still a very strong year when it comes to our order intake. I mean, we have an order intake for 2020 that will continue to support our outgrowth of the market. We have said all along here that we have expected market share growth into the mid-40s or around 45. That is our focus to protect that market share as we move forward in the coming years here, and with the order intake that is higher than we had before the increased period here. So as I said, six years of strong order intake is doing exactly that. We're pleased with order intake and support the strategic outlook we have had regarding defending our market share.

On the raw materials side, so we're guiding for a 40-basis point impact on the 2021 financials. The main negative impact we see is from steel, but we do expect some offsetting effects from, for example, nylon still in 2021. And we also base this estimate on the assumption that steel spot prices have peaked and that the average steel price will be somewhat lower for the year compared to right now. Of course, it also takes into account how our contracts are faced and how the spot prices will turn into an impact based on our setup with our supply base, so that's pretty much the picture on our raw materials.

Thank you. Our next question comes from the line of Chris McNally from Evercore. Please ask your question. Your line is open.

Great, thank you so much. A follow-on maybe to the market share, a question; could you maybe talk about how your Salesforce and division heads are sort of incentivized? This idea of basically going after revenue versus going after profitable higher margin business. Can you just talk a little bit about how that incentive structure works? Because I guess people are trying to understand if there is business to be won above that 45% market share target; is that something that they're incentivized to go after?

I mean, first of all, we always strive to get as much business as possible to support our customers and doing that in a healthy way here. So we're focusing on both their top line and bottom line, and I think that is what we have alluded to also when we have talked about our ambitions to continue to grow here. I mean, if it's 45 or 50, some questions have been here in the past. Considering the last year’s order intake, we have been very clear that we don't have a market share target per se. Our focus is to defend the market share that we are growing and do that in a healthy way from a profitability point of view. I think we're doing that, and that's also how we drive the company, focusing here on supporting our customers with quality products that save more lives; that's our focus.

That's great. And then the second question is really more on the long-term target, which you seem to be reiterating of this 13% margin. It was mentioned, even this 1% sort of organic content per vehicle growth above market share. It sounds like we're going to learn a lot more on the CMD in Q4. But do you feel pretty confident that there is a passive safety tech story where there is actually content that could be grown? Obviously, China is still coming up in terms of a lower CPV per vehicle. But do you feel confident that there's a growth story here well past when you hit sort of your eventual market share gains? Obviously, the numbers get pretty big if we start putting on growth to the market and a 13% margin in whatever year that is 2025, et cetera?

Yes, I think I mean, confident. I will say we're making this adjustment based on the best of our knowledge. When we look and analyze the numbers that we have in front of us here; as I said, we see that the content per vehicle is coming in higher, both the development you see in some developing countries where the content per se in terms of features is increasing, but also the more advanced products coming into the vehicles across the board, I would say. So hence the higher value in the CPV coming through above the 1% that we're talking about here, so that is what we see. Then combine that with the strong order book that we have and continue to build on also with this year's order intake, we feel that we can raise the bar with our performance here versus light vehicle production with 1%, so yes, that's what we see.

Thank you. Our next question comes from the line of Joseph Spak from RBC Capital Markets. Please ask your question. Your line is open.

Thank you very much. Maybe just to follow-on and to clarify what you previously talked about hitting that 12% margin target later in the planning period, because of the change in industry volumes, which is understandable. Since you've taken a lot of cost action to right-size for that volume and the outgrowth is a little bit stronger, has the timing of those margin targets shifted at all? Or can we go back to sort of the original planning, or is it still, maybe a little bit later in the planning period?

We have a mid-term target set for three to five years from now, starting from 2020. However, we are facing additional challenges compared to November 2019, particularly with about 40 million fewer vehicles during this period. The impact of operating under COVID-19 and the associated uncertainties have also contributed to this pressure. We are committed to our targets, but it may take a bit longer than initially anticipated. Nonetheless, we remain within the timeframe we previously discussed, and we have always maintained that position.

Thank you. And then just for some of the 2021 guidance, I guess two things. One, you noted in the fourth quarter, you mentioned a couple of times on the higher insurance; it sounds like that's more recent. Is that also a continued headwind into 2021? I didn't see it on your seesaw chart. And then for the first quarter production, you noted IHS at 14%. Maybe you could just talk about what you're seeing from your customer call-offs in light of some of the semi-shortage, etc. where do you think it’s going to be at that level or maybe a little bit below?

If I start with the first one here about outlook for light vehicle production, as we have indicated here, we're leaning on the IHS outlook here. When we look at that, we see here that compared to the second half of 2020, and you transform that into the full-year of 2021, you see actually slightly weaker 2021 compared to the second half of this year of around four percentage there. I think when you look at that, of course, with the start of the year here, when we have the COVID, we have also the semiconductor challenge, as we mentioned here, that is for sure some uncertainty at the beginning of the year, which we're cautious of. But I would say looking at the full number here, we have no other indications or views on what we see on number for 2021. Hence then, our indication here for 2021, but we're very much aware that we’re still in the COVID situation.

Joseph, the question regarding insurance, that's related to the cost of insurance. It's an evolving picture over the last couple of years already, but we don't expect any significant headwinds from the cost of insurance for 2021 versus 2020 that would make it to our seesaw scale.

Thank you. Our next question comes from the line of Victoria Greer from Morgan Stanley. Please ask your question.

Hi there, good afternoon, good morning everyone. I wanted to ask about dividends and cash flow returns, please, and how you'll be thinking about those. You haven't booked a dividend for Q4; when do you think is the right level to think about reinstating your dividend? When you do that, do you think that roughly the split that you've had in the past of around $2.50 a share, about $200 million a year, and then anything incremental so that comes as a buyback? Is that still the right structure that we should be thinking about as you get into your target range? Some commentary about that would be helpful.

First of all, we normally don't communicate the dividends in connection with our quarters because, as you know, we have quarterly dividends taken by the board on a quarterly basis. So not connected to Q reports. Secondly, I think it may be too early to pose that question. I think we're still in an uncertain period here, and we're still outside the range. But with that said, I also want to reiterate here that our clear ambition on target here is to have a shareholder-friendly approach to how we return cash to our shareholders. Timing and also in which way and form we'll do that, we have to come back to, I mean, as I said, it's a decision to be made by the board eventually, but we need to get into a more stable territory in terms of the business cycle before we order.

Okay. So you think the market uncertainty is still too high for that to be a realistic discussion right now?

Yes, I think the business cycle is too uncertain. And also, we still have some way to go until we're within our range. But we said also that we have a pragmatic view. We don't need to be within the range. But we need to see that we have a good track through there and a more stable business cycle.

Thank you. And our next question comes from the line of Mattias Holmberg from DNB. Please ask your question. Your line is open.

Hi, thank you, Mattias Holmberg from DNB here. You made some comments on a slight headwind in the quarter from lower sales of inflator replacements. I believe that you said about a year ago that more or less, the last of that replacement will be made during 2020 and that we should expect this slight headwind that we are now seeing. Can you just briefly update us on the status of these replacements? I noted, for instance, Ford just a couple of days ago announced a significant recall still related to the inflators?

Yes, I think we're still where we communicated before; we see diminishing sales connected to that replacement. When it comes to what you saw latest, I don't see that we have any upside coming from that to us here. I would say that the diminishing trend continues here. So no change to repeated statement.

Great. And could you give us an idea of how much of 2020 sales roughly were relating to the replacement?

It's around $55 million of sales in 2020 and probably half of that in 2021, so it continues to diminish.

Thank you. And our next question comes from the line of Ryan Brinkman from JPMorgan. Please ask your question. Your line is open.

Great, thank you. I appreciate your comments on the dividend too. Maybe just another capital allocation question, as you return this year to your targeted leverage range, how should we think about the level of gross cash that you hold? I think it's still toward the high end of what you've had on the balance sheet historically, at least since the time of the Veoneer spin. And then what is the first debt to be paid down? I don't know some of the sovereign debt you’ve taken on there if that needs to be prioritized and how should we think about debt pay down versus other uses of capital?

Yes, we still have a comfortable cash position. In more stable times, we've typically maintained about half of our current cash on the balance sheet. However, we believe there are risks in the market, so it's wise to keep a slightly higher cash position right now. If conditions normalize, we could reduce that cash position. We have very few maturities due this year and next year, with the next significant one being the repayment of the SEK loan we took out in 2020. That will be the first major maturity next year.

Okay, great. Thanks. Just last question on things that you might contemplate doing in the future, apart from passive safety. For example, this battery disconnect switch, I don't know if you've got any update there. If that means that you see opportunities in addressable markets beyond airbags, seatbelts, etc.

I think when it comes to electrical vehicles, for example, this power safety switch is a component that we're selling and where we see opportunities to further grow. Wherever you need to have a power safety switch, there are good opportunities there. We continue to explore what we have called adjacencies and our calling adjacent business opportunities where we're building on our core competencies here. But right now, I have no more details to give you around that other than we have working progress there. We will come back to Q1; we have more to say on that.

Thank you. And our next question comes from the line of Vijay Rakesh from Mizuho. Please ask your question. Your line is open.

Hi, Mikael and Fredrik, just on the order intake. I was wondering, you highlighted EVs; do you see any difference in content between ICE and EV? Anything structurally there, or is it kind of similar?

I think when it comes to electrical vehicles, it's neutral to positive in terms of sales value from our side here. We have a good presence in the EV segment here, and it reflects very much our overall market position here. So it's interesting and good development from our perspective to see the EV development there.

Got it. On the LVP and demand outlook, just wondering if you drill down as you look at dealership levels, where do you see dealership inventories in North America versus China versus Europe, etc.?

Overall, the inventory situation is good, I would say. If you look at the U.S., the inventory levels are relatively low; we're around 48 days, which is to be compared with 60 days. Some kind of normalized inventory level, so there is still some backfill needed there. China is very much imbalanced, I would say, and also Europe may be on the high side in terms of balanced definition. Overall, I would say they are in healthy positions, so nothing there that I would say is a concern in the U.S., and maybe the opposite actually.

Thank you. Our next question comes from the line of Sascha Gommel from Jefferies. Please ask your question.

Yes, good afternoon or good morning. I have a couple of questions. The first question is in your introductory remarks; you said you continue to evaluate measures for shareholder value generation. Was that basically related to your capital allocation or how should I interpret that statement?

I would say it's all of the above. I mean, yes, when it comes to, as I said before, we’re a shareholder-friendly company returning cash to our shareholders over time. But then also our focus is to drive towards our mid-term targets, and here we have done all those strategic roadmaps that we have talked about. So it's what we do here.

So nothing specific in terms of further measures you could highlight today that haven't been discussed in the past?

No, not more on a level here. I mean, it's really connected to our improvement on our earnings capabilities and capital return.

I have just two very quick model questions. The first one, the warranty provisions you booked, when do you expect that to be cash effective? Is that kind of a $50 million cash-out this year? Or is it in fact over longer periods?

There are two components within the Toyota part, which is one larger part of the $55 million. Their expectation is that would be settled within this year. For the other part, it's more uncertain to say in terms of timing. So that's as much as I can say at this point.

Okay, perfect. And then very lastly, on the D&A headwind, do you have a rough number, how much you expect D&A to be a headwind in 2021?

If you look at the year-over-year development in Q4 2020 versus 2019, I think that gives you some indication, based on quarter then for next year.

Thank you. Our next question comes from the line of Brian Johnson from Barclays. Please ask your question.

Thank you. In relation to the quest for new business and that 45% to 50% share discussed earlier, how would you characterize the pricing environment in the passive safety business? I've always been struck by the enormous costs that competitive products are inflicting upon their OEMs. With the kind of ongoing cost-cutting and price reductions OEMs seem to push, at least historically in the passive safety business, with this massive recall activity, which keeps going on mostly going forward, has there been any change in procurement attitudes towards price?

No, I think I mean it's the same here. I mean, it is a very competitive industry. There are 2% to 4% price reduction expectations year-over-year; no changes to auto savings. So I can't really confirm that it's the same; so no changes.

Okay. And then, similar to the D&A question. Yes, how should we think about modeling R&D both their lumpiness in the quarters in 2021, as well as should we be thinking about 4.5% as the mid-term run rate now?

As we indicated in the guidance, we expect R&D to be below 5%, around 4.5%. We anticipate benefiting from this in our top line. Our goal is to achieve efficiency improvements in gross engineering costs that we have already demonstrated, as well as in ongoing activities. We also have activities related to our assumptions on engineering recoveries, which tend to have some uncertainty. However, we are guiding for 4.5%. Over time, we expect this to decrease to below 4% as costs become more efficient with continued top-line growth.

Thank you. Our next question comes from the line of Erik Golrang from SEB. Please ask your question.

Thank you. I have two questions and a follow-up. Firstly, regarding the expected cost development in 2021, you mentioned that you don't anticipate any additional recall-related costs. Does this mean you expect the costs to be similar to 2020, around $55 million? Secondly, about order intake, was there a regional mix factor that might explain the lower share, such as more awards being given in China compared to the Western world? Could you also comment on your market share in sales for 2020? Thanks.

On the recall costs, we do not at this point in time that the provisions that we booked in the fourth quarter is what we see as the time to raise costs on recall. And sorry, 2020 I mean. That is what we see up there at the moment. Of course, we cannot rule out any further potential actions. But the forecast is not based on any significant recall cost in the same magnitude.

And share in sales, as we said, we had a 42% market share of sales in 2020. It is one percentage point higher than what it was in 2019, so the market share growth continued as we deliver on the order book. When it comes to order intake, I wouldn't say there is anything that sticks out into that; we had fairly even distribution in terms of how we continue to build on our different positions in different regions.

Thank you. Our next question comes from the line of Hampus Engellau from Handelsbanken. Please ask your question.

Thank you very much. I'm sorry to come back on the order intake. You've been reporting 50% for so long, so I guess we're starting to get used to that. If I know for some time, we've been discussing pricing versus market share, I’m sure you don't have a market share goal unless you highlight it. But are you starting to see some rising competition, which means that you're more relaxed and focusing lately on profitability? Is that something that has impacted your market share? So that's my first question. The second question is on the range and outperformance on organic growth 4% to 5% instead of 3% to 4%. I guess my question is that this is based on your backlog, and that you had your backlog at some time each model and you know how much you specified on that model. So how has that changed going forward? Is there a mix issue? Or have you been given additional business on existing contracts that you've had in your backlog? Or how should we think about that?

First, on the order intake; we’re focusing on doing both, driving growth and doing that in a healthy and effective way when it comes to the bottom line. We have been very clear that we don't have a market share target per se. Our focus is to defend the market share that we are growing and do that in a healthy way. This year, we came in around 45%, which I think is a very strong year and supports our long-term direction. Regarding the outperformance, I think that’s a very good indication that the theory holds because it comes down from how our order book has been built and is being built as we move forward depending on which platforms you're on, and we see then how the contents are increasing on top of that. The combination makes us profitable; we can adjust that target to one percentage point higher.

Thank you. And our last question comes from the line of Agnieszka Vilela from Nordea. Please ask your question, your line is open.

Thank you. Could you help us with the EBIT bridge for 2021 and especially touch upon the savings components? It would be helpful if you could quantify the kind of short-term savings that you had in 2020. You said that probably some of those will turn permanent. What's the delta that you expect for 2021? And also on the permanent cost savings side, you obviously you're running your projects there. But you also say that you could have some scope for further improvement when it comes to the footprints. Could you please elaborate on that and whether you included that in your margin outlook for 2021? Thanks.

On the outlook, if you look at the contribution of the structural efficiency programs, the first one that was started in 2019 will have its last contribution in a year-over-year effect of around $10 million. We expect around $40 million from the second that we initiated last year, so overall $50 million impact from that. When you look at the footprint, these will take longer time; we're talking about time periods of 2023, 2024 when they will be finalized. So there will not be any contribution from them in the 2021 EBIT walk. We've not disclosed the savings from discretionary spending, and it's difficult to forecast how exactly they will phase in 2021. At the moment, they are running at the same run rate as they were in the third and fourth quarter. Our assumption was that they would normalize, but that's also of course connected to how the pandemic evolves and how quickly we go back to a more normal way of working.

Okay, perfect. And then just lastly, what kind of operational leverage do you assume for the full-year?

I think you can check it yourself from the guidance; you have the top-line, you have the adjusted operating margin and from that you can look at what the leverage will be.

Yes, all right. And then, just the very last one, on the recalls. Are you sure that you will not see any kind of spreading impact from that with further products being recalled? What do you think about that?

I think you need to look at this quarter as a very exceptional quarter in terms of recall cost savings that have been booked before. This is an old situation combined with another case that comes up in the same quarter. This is not a new level you should expect with our focus on driving quality being high always. We have also a history of around 2% of the recall share considering our total market shares, and I think that's the performance we intend to continue to secure as we move forward.

One comment is also that the recalls are not related to each other. It's not a systemic issue or anything. They are just two recalls where we have to book the charges in the same quarter based on the recent developments.

Thank you. We have no further questions at this time. Please go ahead.

Thank you, Alicia. Before we end today's call, I would like to say that we are operating from a position of strength in many aspects, including market position, growth and dedicated employees. We'll continue to improve efficiency and continue to implement our strategic roadmap to support 2021 being a solid stepping stone on the journey to our 2022, 2024 targets. Our first quarter earnings call is scheduled for Friday, April 23, 2021. Thank you everyone for participating in today's call. We sincerely appreciate your continued interest in Autoliv. Until next time, stay safe.

Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may now all disconnect. Thanks.