Air bag maker Au­to­liv picks up where Takata failed

The Swedish-Amer­i­can com­pany looks to ex­pand its busi­ness “The in­dus­try saw that Au­to­liv would ben­e­fit” from Takata’s cri­sis

Bloomberg Businessweek (Asia) - - CONTENTS - −Craig Trudell and Ni­clas Rolan­der

When the deadly prob­lems with Takata air bag in­fla­tors sent the world’s ma­jor au­tomak­ers search­ing for a new sup­plier, they didn’t have to look far. Au­to­liv, the largest au­to­mo­tive-safety parts com­pany in the world, sup­plies seat belts, steer­ing wheels, and air bags to vir­tu­ally ev­ery ma­jor man­u­fac­turer. A mas­sive pro­duc­tion net­work— the com­pany has 78 fac­to­ries in 27 coun­tries—means Au­to­liv has been able to step in and fill the vac­uum

41% Au­to­liv’s share of the air bag mar­ket in 2015

cre­ated by Takata’s woes. “Ev­ery­one in the in­dus­try saw that Au­to­liv would ben­e­fit” from Takata’s cri­sis, says An­dreas Brock, a Stock­holm-based fund man­ager at Coeli As­set Man­age­ment.

In­ci­dents of Takata in­fla­tors rup­tur­ing and spray­ing plas­tic and metal shards at pas­sen­gers have re­sulted in at least nine deaths in the U.S. since 2009. About 28 mil­lion Takata air bag in­fla­tors have been re­called in the U.S. in the past few years; re­calls of 60 mil­lion are in progress world­wide. “We’re com­mit­ted to be­ing part of the so­lu­tion to this highly com­plex mat­ter and ap­pre­ci­ate the sup­port we’ve re­ceived from other in­fla­tor man­u­fac­tur­ers,” says Dan Un­der­wood, a Takata spokesman.

Au­to­liv, mean­while, ex­pects to make 20 mil­lion re­place­ment in­fla­tors; some or­ders are still be­ing fi­nal­ized. Pro­duc­tion be­gan in 2015 and is ex­pected to con­tinue through 2017 and pos­si­bly into 2018. The com­pany is adding a dozen pro­duc­tion lines at sev­eral fac­to­ries to han­dle the work. “This was some­thing that we not only had to do … this is some­thing we want to do,” says Au­to­liv Chief Ex­ec­u­tive Of­fi­cer Jan Carl­son. “Air bags, we should re­mem­ber, are a life­sav­ing prod­uct.” More than half of the com­pany’s $9.2 bil­lion in over­all sales came from air bags in 2015. The com­pany says it won about half of all frontal air bag or­ders for new cars last year.

This isn’t a new busi­ness for Au­to­liv, based in Stock­holm and Auburn Hills, Mich. Founded as a car and trac­tor re­pair shop in the 1950s, it started pro­duc­ing air bags in 1980. For decades it’s made air bags and in­fla­tors for lead­ing car­mak­ers. Takata first started sup­ply­ing air bags in 1983 for po­lice agen­cies and U.S. test fleets, with pro­duc­tion ramp­ing up in 1987.

Amid the rash of safety re­calls, Au­to­liv has emerged rel­a­tively un­scathed. In 2015 more than 40 mil­lion ve­hi­cles were re­called to fix seat belts, elec­tronic com­po­nents, or air bags—three of Au­to­liv’s big­gest busi­nesses. Yet its prod­ucts have been in­volved in only about 1 per­cent of those re­calls since 2010.

Car­mak­ers have also turned to Ja­pan’s Dai­cel and Ger­many’s

ZF Friedrichs­hafen for re­place­ment in­fla­tors. And China’s

Joyson Elec­tronic, a lead­ing global auto parts sup­plier, sees an open­ing: It’s buy­ing air bag maker

Sys­tems for $920 mil­lion. While Au­to­liv pre­dicts over­all sales will grow about 7 per­cent an­nu­ally through the end of the decade, CEO Carl­son says it’s too soon to tell how sus­tain­able the gains will be. “That we pro­vide a qual­ity prod­uct that is ro­bust and can do the job may put cus­tomers’ views on mar­ket share, at least for the time be­ing, in a dif­fer­ent light,” he says.

Au­to­liv is also com­mit­ting more re­sources to tech­nol­ogy to pre­vent or mit­i­gate crashes in au­ton­o­mous cars. Radar, vi­sion sen­sors, and other sys­tems in mod­els rang­ing from the Chevro­let Mal­ibu to the Mercedes-Benz E-Class could gen­er­ate about $3 bil­lion in elec­tron­ics sales an­nu­ally by the end of 2019, Au­to­liv pre­dicts, with to­tal rev­enue reach­ing $12 bil­lion a year.

“We will have crash-avoid­ance sys­tems that we’ll be able to trust … in the same way that we trust seat belts and air bags to save our lives,” Carl­son says. “They have to be fully re­li­able. They will have to be qual­i­ty­first prod­ucts.”

The bot­tom line In the wake of Takata’s re­calls, Au­to­liv says it will pro­duce about 20 mil­lion re­place­ment air bag in­fla­tors through 2017.

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