Autoliv (NYSE:ALV) reported what executives described as a record second quarter for sales and adjusted operating income, while maintaining its full-year outlook despite weaker global vehicle production expectations, raw material headwinds and geopolitical uncertainty.
President and Chief Executive Officer Mikael Bratt said the automotive safety supplier delivered “a record second quarter, both for sales and adjusted operating income,” citing strong customer partnerships, cost efficiency efforts and growth in Asia. He said the company navigated tariffs, supply chain disruptions and raw material volatility during the quarter.
The company said reported operating income was $192 million, which was $78 million below adjusted operating income, mainly due to capacity alignment activities. Gross profit increased by $8 million, while gross margin declined 30 basis points, reflecting a supplier compensation reversal and asset impairments related to restructuring activity.
Asia Drives Sales Outperformance
Autoliv said organic sales grew 1% in the quarter, including a negative impact from tariff-related compensation. Based on S&P Global light vehicle production data, the company outperformed the global market by more than one percentage point.
Bratt highlighted particularly strong performance in Asia. In China, Autoliv outperformed light vehicle production by more than seven percentage points, supported by sales growth with Chinese automakers. Chinese OEMs accounted for 55% of Autoliv’s China sales in the quarter, up from 40% a year earlier. Bratt said the company’s sales to Chinese OEMs outperformed by more than 40 percentage points.
In India, Autoliv’s organic sales grew 36%, which Bratt attributed mainly to increased safety content in vehicles. The company said it outperformed India light vehicle production by about 20 percentage points. Asia excluding China outperformed the market by six percentage points, with Japan and South Korea also contributing.
Autoliv also announced strategic cooperation agreements with Great Wall Motor and XPENG. Bratt said the agreements support the company’s strategy to expand with leading Chinese vehicle manufacturers and create a platform for longer-term growth as those automakers expand globally.
Turkey Closure Part of EMEA Cost Reduction Plan
Autoliv detailed additional structural cost actions in Europe, the Middle East and Africa, including a plan to gradually discontinue manufacturing operations in Turkey. The Turkish operations currently produce steering wheels, airbags and seat belts.
Production will be transferred to existing Autoliv facilities across EMEA. The decision is expected to affect approximately 2,200 employees, with the full closure anticipated during the first half of 2028.
The company expects total restructuring charges of about $142 million, including $90 million recognized in the second quarter of 2026. Cash outflow is expected to total about $129 million, with limited impact on 2026 cash flow. Autoliv expects the action to generate approximately $40 million in annual pretax savings, with benefits beginning in 2027 and reaching full run rate in 2028.
During the question-and-answer session, Bratt said the Turkey decision reflected ongoing efforts to optimize the company’s manufacturing footprint rather than overcapacity at the Turkish site alone. He said production would move to other facilities, including operations in Tunisia and Romania.
Cash Flow Improves as Shareholder Returns Continue
Autoliv reported operating cash flow of $434 million in the second quarter, up $157 million from the prior-year period. Free operating cash flow improved by $177 million to $340 million.
Grama said the operating cash flow improvement was primarily driven by a $240 million positive working capital impact, reflecting normalization after a first-quarter increase tied to high March sales and one-time adverse impacts. She cited improvements in accounts payable, net receivables and accrued severance and restructuring costs.
The company repurchased more than 1.6 million shares for $200 million and paid $64 million in dividends during the quarter. Grama said Autoliv’s leverage ratio improved to 1.2 times from 1.3 times despite $264 million of shareholder returns. Net debt decreased by about $75 million during the quarter.
Guidance Maintained Despite Lower Production Outlook
Autoliv reiterated its full-year 2026 guidance. The company expects organic sales to be flat and global light vehicle production to decline by about 2.5%, implying outperformance of roughly 2.5 percentage points. It expects a positive net currency translation effect on sales of about 2.5%.
The company maintained its adjusted operating margin guidance of around 10.5% to 11%. Operating cash flow is expected to be around $1.2 billion, capital expenditures are expected to be below 5% of sales, and the tax rate is expected to be about 30%.
Bratt said the outlook assumes no material changes to tariffs or trade restrictions in effect as of July 9, 2026, and no significant deterioration in macroeconomic conditions, customer call-off stability or supply chains.
Autoliv’s guidance includes an expected gross raw material headwind of about $110 million. Bratt said geopolitical tension in and around the Persian Gulf could affect supply chains, raw material costs and vehicle demand.
Profitability Expected to Be Back-End Loaded
Executives said third-quarter adjusted operating margin is expected to be similar to the first-half level, with profitability stepping up significantly in the fourth quarter. Bratt said customer compensation, engineering income and other initiatives are expected to be weighted toward the fourth quarter, creating an earnings trajectory similar to 2023 and 2024.
Asked by analysts about raw material recoveries, Bratt said Autoliv would use a combination of supplier negotiations, internal cost reductions and customer price adjustments. He said the process is detailed and typically handled at the component level.
Grama said Autoliv recovered approximately 83% of its U.S. tariff costs in the second quarter, excluding IEPFA-related recoveries, bringing the year-to-date recovery rate to 78%. She also said the company received about $12 million from the government related to IEPFA, passed about $9 million to customers and retained a $3 million positive net impact.
Bratt closed the call by highlighting Autoliv’s new innovation center in Vårgårda, Sweden, which opened in June. He said the facility brings together research, testing, prototyping and pilot production to accelerate innovation and shorten development cycles.
About Autoliv (NYSE:ALV)
Autoliv Inc (NYSE: ALV) is a leading global supplier of automotive safety systems, specializing in the design, development and manufacture of passive and active safety products. Its core product portfolio includes airbags, seatbelts, steering wheels, restraint control modules and pedestrian protection systems. In recent years, the company has also expanded into active safety technologies, offering radar, camera and sensor solutions that support advanced driver assistance systems (ADAS) and autonomous driving applications.
Founded in 1997 following the spin-off of Electrolux’s automotive safety business, Autoliv has evolved into a multinational organization with a presence in over 27 countries.
