CEOInterviews.AISupplier Conference 2024 - Autoliv

C

Christian Swan0:46

Hello everyone and a warm welcome to the Autoliv Supplier Conference of 2024. My name is Christian Swan, I am Supply Chain Leader of Autoliv, and with me I also have Gabriela, Head of Global Communication. We are broadcasting today from Gothenburg, Sweden, out to our supply base out there in the world, and thousands of suppliers of you are listening to us today. So again, a warm welcome. The reason why we want to talk to you today is that we want to explain the strategy of the future for Autoliv. We want to talk about what is important for us and of course also what is important for you as a supplier to Autoliv, and what are our expectations on you. As you saw on the movie here, we are introducing the theme of the day of this conference: Smarter, Better, Faster, Leader. That is actually the same theme as we had in our Autoliv conference for Autoliv leaders a couple of months ago. So by that, Gabriela, I think we are ready to get started.

G

Gabriela1:49

Thank you, Christian. We have an agenda filled with useful information for you all today to get an insight in how we work together in the supply chain and also how we stay leaders in our market. But before we go into the short agenda of today, I would like to hand it over to a short word to Brian Kelly, our Associate General Counsel.

B

Brian Kelly2:14

Thank you, Gabriela. During the conference today, the presenters will make certain forward-looking statements, and so we include the Safe Harbor statement as an integrated part of these presentations and any Q&A that follows. Thank you very much for participating today.

G

Gabriela2:31

Thank you, Brian. Looking shortly at our agenda for today, there are a number of different topics that we will be taking you through. First of all, the business outlook and the strong position of Autoliv. We will meet with one of our Chinese customers for a deeper customer insight section. We'll have time to deep dive into our footprint, innovation, sustainability, automation and digitalization, as well as quality and supplier risk management, supply chain risk management. We'll also have time for a short break in the middle. Christian, last time we spoke, we met and spoke, we also handed out supplier awards. What about those this year?

C

Christian Swan3:17

Yes, we did, Gabriela, but we decided actually to have those supplier awards being handed out every second year, a little bit like the Olympics. We have the Winter Olympics, we have the Summer Olympics every second year, and we have the Autoliv awards every second year also, about the same importance for our supply base. Important topic and information to share. I think by that we have all the basics covered. A warm welcome again, Gabriela, let's get started.

G

Gabriela3:46

Let's get started, Christian. So we will start with a movie, a movie that explains who we are, a movie that talks about saving more lives. That's what we are about. Our theme is for our company: saving more lives and more lives lived, more lives saved. So I hope that this movie will explain to the audience a little bit about what we mean with that. Let's have a look.

N

Narrator4:15

Chances are you've never noticed us, but if the unexpected happens, you will. You'll see 70 years of passion and dedication to safe mobility spring into action. This is what Autoliv does. We make safety solutions of all sorts. We make frontal airbags, side airbags, knee airbags, and these external airbags for pedestrians. Doesn't matter if you're rolling on two or four wheels, our solutions work for both alike. We make steering wheels and seat belts and so much more. Simply put, we make the things that save lives. We are pioneers in what we do, and we've been a part of virtually every major breakthrough in automotive safety. We design safety solutions that give people the confidence to travel and explore their world. We are more than 60,000 colleagues who develop, improve, and innovate, passionately challenging the safety standards. 14 global technical centers and 20 crash test tracks, and we're in 28 countries. This is what makes us the world leader in automotive safety systems. Every year we prevent 300,000 severe injuries and even more so, we save 35,000 lives. 35,000 people's hopes and dreams. 35,000 adventurers and loving hearts. When all is said and done, it's about people and our commitment. Every time our products save a life, that is what we see. Not a number, not a statistic, but a person, a life that goes on living.

G

Gabriela6:03

More lives saved, more lives lived. I think that is something that we can all relate to and something that we are all contributing to throughout our supply chain, providing products and solutions that save lives. And here to talk a little bit more about that with us today, we have Autoliv President and CEO, Mikael Bratt. Welcome.

M

Mikael Bratt6:27

Thank you. Nice to be here.

G

Gabriela6:29

Great, Mikael. We have the theme here today of being smarter, better, faster, leader. What does that mean for you?

M

Mikael Bratt6:35

I think, I mean, first of all, Autoliv as a market leader need to make sure that we stay in front of our competition, that we stay in front of the development in our industry related to safety products, and be very close to our customers. And I would say that we have a lot of great collaborations with our customers to secure just that.

G

Gabriela7:00

Great. If we take a little bit more of a broader perspective, our business as such and the outlook for the automotive industry, how do you view that?

M

Mikael Bratt7:11

No, I think, I mean, we are fortunate to be in a part of the automotive industry that is not affected by these mega trends that we see, and in the way we are affected, it is in a positive sense, meaning that our type of products will continue to grow as we move forward. We expect to see an annual average growth of around 2%. So we see first of all that the less developed market when it comes to safety products is on the journey to catch up, but we also see that the mature markets continue to develop in a positive direction, meaning more sophisticated products but also more products. For example, we see more driver airbags coming into the second row, not only in the front row, as an example. So content growth and both in numbers and sophistication is what we have in front of us here, and I'm very optimistic about the underlying market going forward here.

G

Gabriela8:17

And in this market, how are we as Autoliv performing?

M

Mikael Bratt8:20

We're performing well. Last year we showed that we reached our indication of market share of around 45%, and our ambition here is of course to defend that market share and then also see the underlying growth here, both from the content per vehicle but also that light vehicle production is expected to grow in the future here. Then of course, right now, 2024, we are in a flat year, I would say. We have indicated that we believe that the light vehicle market would be minus 1% this year, but midterm, definitely a stronger recovery here is more of a timing question. But LVP and content growth and a lot of new requirements coming our way when it comes to increasing safety in the vehicles.

G

Gabriela9:19

Thank you. If we zoom in even further, Christian, and we take a perspective of the supply chain, how are we performing from that perspective?

C

Christian Swan9:29

Yes, I think if we look on the last years, we have had some instability in the supply chain, driven of course by COVID and also driven by other happenings that have been causing us the last couple of years. It does look a bit more stable. The last year has been definitely a bit more stable. We are expecting that stability to also grow and help us in that sense. But we also see that we don't believe that we will come back to the fixed stability that we had pre-COVID. So we need to prepare for a slightly unstable environment. But we also have seen the last years is the financial instability driven by the interest rates in the world that has been raising quite a lot lately. So a little bit more financial stability and a bit more stability when it comes to supply.

G

Gabriela10:11

All right. Mikael, if we bring all of these perspectives together, what is the focus for Autoliv?

M

Mikael Bratt10:17

I think right now it's much more of the same themes that we have had the last couple of years here, and that is to continue our operational excellence journey going forward. Because I mean, it's all about what I consider to be our customer commitment, and that is to be a robust supplier in delivering of the projects. What we call the AS100 project is leading up to the start of production from award. It is in the daily delivery precision, and it's of course, and even the most important one, quality. And so quality and robustness in supply, and to continue to secure that as we move forward. And then of course also that we together through the whole value chain here make sure that we improve our own profitability and robustness when it comes to the financial performance, because that is very important in order to invest in the future here as well. And I mean, we together with our suppliers, we are really the extended enterprise and industrial footprint of our customers, and as such, of course, we need to make sure that we are competitive in all these dimensions. So we have, I would say, a very strong and robust program to drive operational excellence, and that will continue.

G

Gabriela11:37

If we consider the audience that we have here today and also the topic of collaboration, how do we work together in the best possible way?

M

Mikael Bratt11:45

Now, I think it is very much about sharing improvement opportunities in all these dimensions. And we have, for example, VAVE as a very important part of our operational excellence journey here. And in the VAVE effort, we are working with our customers to find opportunities and get their support for that. And in a similar fashion, we need to work with our suppliers, and our suppliers need to work with us to find great opportunities for all parties involved. So I mean, it's also for us to help our suppliers to be stronger. So good collaboration, tight collaboration, and also making sure that we have a forward-looking perspective on this, and not only here and now, this week and this quarter. It is more a mid to long-term perspective as well.

G

Gabriela12:38

Great. Together we contribute to saving 35,000 lives per year, so that collaboration is really essential.

M

Mikael Bratt12:47

Very important task, absolutely.

G

Gabriela12:49

Thank you, Mikael. We'll talk a little bit more to you a little bit later in our broadcast. Christian, before we move forward, any comments from you after having listened to Mikael?

C

Christian Swan13:03

Yes, a good summary from Mikael on the automotive market. And if we look on the automotive market, we clearly see that there is one country standing out as dominating when it comes to number of vehicles, growth when it comes to number of population using cars even more rapidly, and that's China. China is of course 1.4 billion people, and they will use cars more and more. And we will now deep dive a bit on that market.

M

Mikael Bratt13:27

Actually, we have several of our customers in China. It's a market where things are evolving quickly. It also puts challenging demands on the whole value chain, especially when it comes to working smarter, better, and faster. Right. So Lily Mao, Vice President of Sales in our China team, she met up with Mr. Shilong Chi, Deputy General Manager of Chery Automotive, a Chinese OEM with both a very competitive home market but also large exports. Let's have a look at this.

G

Gabriela23:42

Hi Lily, welcome back. Thank you so much for bringing us such a nice interview with the Chery, Mr. Chi. So we can hear Mr. Chi mentioned a lot of expectations for us and also for the suppliers. For example, like how we can insist and continuously invest in innovation and technology, iteration, faster response, agile response to the market, to the customer needs, also most important, cost competitiveness. So can you give us a little bit more insights and suggestions from the customer?

L

Lily Mao24:24

Thank you, Gabriela. So actually, firstly, I would like to thank Autoliv team to give me the chance that is let me introduce Chery to all of you, because this is also a very good opportunity to let our suppliers to really understand the OEM. So Chery is only one of the representative OEMs in China market. If you listen to Chi, he has a very high expectation, because the internal market is really competitive, competition is huge. I think it's well, you know that. So all the people, all the customer talking about the innovation, faster, and cost. So now I think is the important things is for our partner, our suppliers, that is I think the relationship, the cooperation with OEMs, I think is even more important. You need to understand this market, understand the customer. As Chi mentioned, that is now the relationship between Autoliv and with our OEM no longer is just a sell and buy or partner A and partner B. So actually we are talking about ecosystem, how we can support each other to be success. So I think this is also it's really challenge for Autoliv to work with the OEMs, but I think there is also a lot of opportunity. For example, for the Chery, last year we signed the cooperation with them, and actually we also beneficial, that is we also grow our revenue very fast with them. Just the last year we signed, and this year we have a significant result we already see that. I think it's for our suppliers as well. So take this challenge, I think it is not easy, but I think as you will see that is in the end you can find a lot of business opportunity there. We support your business as well. So I really looking forward to see more our suppliers and willing to cooperate with Chery. And if you are really interested, when you have a chance to China, I can bring you and to visit the customer, same as the way you meet my customer as well. So it's a really, really welcome.

G

Gabriela26:41

Great, seeing is believing. And thank you very much for the generous offer for our supply chain to visit customer in the future. So again, I think it is really beneficial for us to really listen to our customer and understand our customer. Thank you again.

L

Lily Mao26:57

Thank you, thank you.

G

Gabriela27:01

Thank you, Mr. Chi, Lily, and Wallace. A lot of interesting perspectives. Christian, what are your main takeaways?

C

Christian Swan27:09

Certainly a lot of interesting perspectives, a lot of new demands as well. As we heard here, the demand on lead time to find ways to develop cars for the OEMs and car manufacturers in a much faster way also of course put requirements on us and our suppliers, and we need to find ways together with our suppliers to cope with those lead times because we of course want to support our Chinese OEMs out there in the world. So lead time of course extremely important, but never ever to compromise on quality, of course not.

G

Gabriela27:37

Can we expect these trends to continue globally?

C

Christian Swan27:41

Yes, certainly we can. We can already see today that some of the Chinese OEMs are starting to move outside of China. We can see in Europe today car brands that certainly wasn't on the street only 5 years ago, and we expect of course that trend to continue. I mean, certainly we all see that.

G

Gabriela28:00

And what is the Autoliv perspective when it comes to footprint?

C

Christian Swan28:05

When it comes to our footprint, we need to of course follow our customers, we need to follow the OEMs, the car manufacturers, but we also need to find a balance because we need to have cost competitiveness of where we are, and we need to have closeness to our suppliers. And that's of course also what footprint is all about, to make deliberate choices, to make balanced decisions on where to be in the world, and of course also challenging.

G

Gabriela28:28

What are some of the things that we consider in this work?

C

Christian Swan28:33

Yeah, when it comes to finding the right footprint, we need to have the prerequisites not only for us but also for the supply base around us where we have the footprint. So we need to pick choices and places in the world where we can have an infrastructure that supports us with suppliers and also with other types of equipments, etc. Also of course stability, stability when it comes to geopolitics, stability when it comes to currencies and financial situation. So quite a lot of different aspects that we are considering before we carefully select our footprints.

G

Gabriela29:04

And also in the last year for Autoliv, there has also been some recent changes communicated and currently being executed on. Can you give some examples?

C

Christian Swan29:16

Definitely. I mean, we have been taking decisions to close some of our sites in Europe, but we at the same time have taken decisions to open up quite some new sites out there in the world. We actually open up two new sites in India, we open up sites in Japan, a steering wheel plant in China, a cushion plant in Vietnam, and also we will open up plants in North Africa as well. All very vibrant and exciting markets.

G

Gabriela29:43

You mentioned India. Can you elaborate a little bit on that?

C

Christian Swan29:47

Yes, certainly. India has been a market with high volume expectations and increases for quite a while. We haven't seen those increases coming too, to be honest. But now we see clear trends and clear signals that the increased volumes in India is actually coming to truth as well, which is great. And we are happy because we are of course ready to cope with those volume increases.

G

Gabriela30:10

And if we take all of these footprint changes in combination, what does it mean in terms of expectations on our suppliers?

C

Christian Swan30:20

Of course, it's an opportunity for our suppliers because when we set our plans out there in the world and when we are following the market, it's the same possibilities for our suppliers. It's a huge and nice opportunity for them to follow us, to set up sites where we are, but also of course set up sites where it makes sense for them. And we of course are trying to encourage that the suppliers are working with us and moving out with us in the world.

G

Gabriela30:45

Footprint is also important from an inventory management point of view. I know you have a message to our suppliers when it comes to this particular point.

C

Christian Swan30:54

Yes, I know. And certainly inventory management and inventory turnover rate has been a challenge for the whole automotive industry the last years because of the instability, and it started with COVID with that great instability that created. And we actually not back to the stability pre-COVID levels when it comes to stability in demand. So we get signals from our customers on how many parts to produce, but that stability, when that stability is not there, it's also a bit hard for us to be stable ourselves. It's also a bit hard for us to inform our supply base about that stability. We believe that a certain point of instability will be here to stay. So that means that we and our suppliers need to prepare for that instability.

G

Gabriela31:36

What does that mean in practice?

C

Christian Swan31:37

Yeah, we need to find our ways to in this slightly more unstable environment be predictable and also work with our inventory turnover rates and inventory with this slight higher instability that we have versus some years ago.

G

Gabriela31:48

Anything else that it means for our audience here today to consider and think about?

C

Christian Swan31:53

Yeah, I think we work in new ways and communicate. I think communication is key, not only with our customers but certainly also with our suppliers, to communicate about the challenges we have, have open dialogues about them and solve them together. So cooperation is of course key.

G

Gabriela32:09

Great, thank you for sharing, Christian. To summarize, we will continue to work actively with our footprint, and we expect our suppliers to do the same. Right. So changing from the footprint topic, turning to innovation. Chery also spoke about innovation, and this is an important topic for Autoliv, both for our core products to the automotive industry but also for new business. How is innovation linked to our strategy, Christian?

C

Christian Swan32:43

Innovation is of course core to Autoliv's strategy. We have been innovating in the core industry for many, many years, and then we have talked about four-wheeler products. We have decided now to move into other types of products as well. That means that it opens up for our technology to be present in other types of products than in four-wheeler cars. We are looking into commercial vehicles, which is again four-wheeler cars but on the heavy-duty side. We're looking into the two-wheeler environment for motorcycles and bikes, and we're also looking into the electrical power area. So really interesting areas for us to use our technology and take that into new kind of products, and with that also innovate of course.

G

Gabriela33:22

Great. I think we have something to share with our audience here, right?

C

Christian Swan33:28

We do. We have been occupying ourselves the last years of taking innovation in the two-wheeler area, so we actually have the possibility to show some of our products live here today on the conference to the audience when it comes to the powered two-wheeler area. And if I'm not mistaken, I think we will start with a film. There you go.

G

Gabriela35:24

Here to describe how we work with innovation in Autoliv, we have Philip Vat. Welcome.

P

Philip Vat35:29

Thank you, thank you.

G

Gabriela35:31

Great to see you, Philip. You joined Autoliv a year or so ago, and you have a career that is marked with experience from digital innovation from a number of different industries: automotive, transportation, consumer electronics. What does this mean in practice? What do you do in practice?

P

Philip Vat35:48

What do I do? Well, I have the awesome and humbling responsibility to create the right conditions for our talented teams of talented people to drive and enable growth for Autoliv in two specific areas. The first one is our Autoliv Innovation Center in Vårgårda in Sweden, where we make innovation efforts smarter, better, and faster. And the second area is our new global function where we have dedicated solution teams that are identifying, validating, and unlocking new growth in areas strategic to Autoliv, for example, motorcycles.

G

Gabriela36:34

Great. So our journey and our strategy takes us beyond safety for light vehicles and into MSS, or as we say, safety for mobility and society. And for a couple of years now, we've been talking about two-wheelers, motorcycles, and bikes. How are we doing? Where are we today?

P

Philip Vat36:56

Where are we? I would say that our world-leading R&D has taken us to the starting line when it comes to safety solutions for the motorcycle but also for the rider. Last year we made a big splash at the EICMA motorcycle show in Milano, world-renowned, where we unveiled some of the innovations that we've been working on in the Innovation Center. This year we are intensifying our customer engagement and accelerating our go-to-market in order to make sure that we truly transform the motorcycle industry. And I'm proud to say that we are in many late-stage discussions with several motorcycle and gear companies so that we can launch these safety solutions in the market in the next coming years. And I know that some might say, well, why motorcycles out of all the things that we could possibly do? Well, according to the World Health Organization, motorcycles actually represent almost a third of all road fatalities. We see that the market awareness for safety in the motorcycle industry is increasing and growing a lot, but there's no single solution that prevents all motorcycle fatalities and injuries for all types of crash situations. So what we've done is that we've taken our expertise and our experience in safety in mobility and already identified the most severe crash situations and started to develop state-of-the-art countermeasures based upon real-world data for motorcycles. And with our Innovation Center, we have strong capabilities within simulation and testing, so we can now achieve in hours and days what would normally take weeks and months to achieve. And we're applying all of this to the development of motorcycle safety solutions. As a company, we will take a system provider position that includes the electronic control unit, so-called ECU, crash detection algorithms, airbag module, but also digital services. And today, not many if any of our competitors have this capability to do what we're aiming to do. And we see also that the motorcycle industry is crying out for a global safety leader like Autoliv to step in and consolidate the market around proven safety solutions that have that Autoliv safety and quality seal of approval. So it's truly exciting times ahead, but we're only just getting started.

G

Gabriela40:02

I think it sounds like many good opportunities not only for us but also for our existing supplier base. So how can they expect to benefit from this?

P

Philip Vat40:09

Well, in three ways specifically. So the first one is that they will see more opportunities to grow their existing and new business with Autoliv. Second one is that they will have the opportunity to work more upstream, earlier in the development phases with Autoliv, not just as a trusted supplier but as a preferred partner. And third, they will see more opportunities to invest in and develop new capabilities and technologies as they move with us into new markets and adapt to the needs of those markets. We strongly believe that innovation through an ecosystem of partners is fundamental in today's business environment. And I will also add that no company, no person is an island. We have started this journey, but we can't go it alone. We are all part of a bigger picture, and many of the most intractable challenges to saving more lives can only be solved through collective action and collaboration across traditional borders. So unlocking all of these new opportunities within safety for mobility and for society will present us with a new set of challenges to overcome, and no one company can solve them all on their own. So our open invitation to all of our suppliers is to come and work with us as partners to unlock these new growth opportunities. Come and work with us.

G

Gabriela41:52

Thank you so much, Philip. Thank you. New markets, new products, a lot of exciting opportunities, right, Christian?

C

Christian Swan42:04

Indeed, Gabriela. Yes.

G

Gabriela42:07

But can you tell us more about your reflections on what you just heard?

C

Christian Swan42:09

Yeah, my reflection is one element of our theme is smarter, and for us it's of course very good and smart if we can use our technology in new markets and in new products. And we are confident that we can fulfill a market need in the area of powered two-wheelers, as we said, in motorcycles and bikes, and also in some other areas. But specifically for us, we are ready to support the market that is now growing in the powered two-wheeler area.

G

Gabriela42:35

Great, many great insights. As we move into our next topic of sustainability, this is an area where Autoliv have a lot of ambitious targets and commitments, right?

C

Christian Swan42:48

Yes, certainly. We have committed to be Net Zero in 2040. For us, it connects very well to our vision of saving more lives, because that's actually another way of saving lives. So it goes very much in hand with who we are, why we exist. But we also need our suppliers to take along with us on that journey. And here to explain how we can work better together on this, we have Linda Lundgren, Linda, Director of Supply Chain Sustainability. Welcome.

L

Linda Lundgren43:19

Thank you, Gabriela.

G

Gabriela43:21

What will you be talking about today?

L

Linda Lundgren43:23

I will talk about the importance of our suppliers and partners in the sustainability agenda. As Autoliv, we have very ambitious targets and ambitions for the coming years.

G

Gabriela43:35

Right. Yes, in Autoliv we have four focus areas in sustainability, and the first one is saving more lives. That is our vision and what we do, and it's also the foundation of our sustainability agenda. The others are safe and inclusive workplace, climate and environmental action, and also to ensure a respectful and responsible business. And in supply chain, we have set ambitions and targets related to all these focus areas, and the achievements in supply chain is important to ensure and strengthen Autoliv's position as market leader.

L

Linda Lundgren44:09

Great. Perhaps you can start by telling us a little bit more about our ambitions in the climate area.

G

Gabriela44:14

Yes, for sure. As Christian mentioned, we have set an ambition of being Net Zero across our supply chain by 2040. And to have Net Zero means that no additional greenhouse gas emissions is released to the atmosphere, not only from our own operations, also to eliminate the emissions in the supply chain activities. And the supply chain importance of the Net Zero ambition is key since it represents approximately 80% of all Autoliv's greenhouse gas emissions.

L

Linda Lundgren44:49

So considering these challenges, what would you say is the most important activity to reach Net Zero across our supply chain by 2040?

G

Gabriela44:56

Yes, for Autoliv, the biggest opportunity and also what is most important is the collaboration along the sustainability topics and the climate. And yes, collaboration along the value chain with OEMs and also with the suppliers and partners along the value chain. And it's only in strong collaboration that we can achieve our net emissions. And taking an active part in the climate journey is also a competitive advantage for new business opportunities for all of us.

L

Linda Lundgren45:28

Great. Could you share some more examples of where these collaborations are particularly important?

G

Gabriela45:36

Yes, I would be pleased to. We have many examples on collaborations in the supply chain and in the company. And it starts really with the research and development of new materials and new components, and then also in the sourcing and utilization of raw materials, where Autoliv recently has established collaborations with two new suppliers in the steel, in addition to the partnership with SSAB. Then transportation and packaging utilization is also a very important area of collaboration. It is to establish circular business models both for the indirect suppliers and direct material suppliers. And finally, the collaborations in our suppliers to shift towards renewable electricity is a very important area, and also as well the process optimization in production to reduce the electricity consumption as well as reduce the waste and scrap in the production.

L

Linda Lundgren46:32

It sounds like a lot of great opportunities to make a real impact together.

G

Gabriela46:37

Yes, I know that we have recently performed the annual climate survey to our direct material supply base. Can you share a little bit more about this and where we are?

L

Linda Lundgren46:47

Yes, you're correct, thank you. And in the beginning of April we launched the climate survey to the direct material suppliers, and we are right now analyzing the results and also planning for the next steps. And the first results to the response shows that 53% of our suppliers has responded, and 72% of our roadmap suppliers. So a big thanks, I would like to address a big thanks to all the suppliers that has responded to the survey. And the survey is continuously open to be responded on, so I encourage everyone to respond, and also if you have any improvements to also send in updated responses.

G

Gabriela47:28

Great. And if I can add on that, the purpose of the climate survey is really to understand the climate maturity at our supply base. It means in terms of target setting and implementation of greenhouse gas emissions reductions. And the first result of the survey shows that 45% of our suppliers has set a roadmap to also be Net Zero by 2040. So 45% of our suppliers, and 61% of our suppliers have set targets for minimum 30% reduction of the greenhouse gas emissions by 2030. This is encouraging, but it also confirms that we still have a lot of things to work on together to reach our ambition. But still, thanks for sharing the first results, Linda. And as we analyze and plan for the next steps here, can you tell us what is coming next on the climate collaboration with our direct material suppliers?

L

Linda Lundgren48:27

Thank you, I will be pleased to. Yes, what we do now is that we plan for, I would say, a tailored engagement approach related to the needs and priorities. And it means that we can then prioritize our common collaboration where we see the needs. It can be in the shift towards renewable electricity, it can be in terms of target setting, it can also be how you perform a life cycle and product carbon footprint analysis. So that is what we plan for. And we will also activate a supplier climate status that is related to the supplier climate maturity, and this will be transparent to our suppliers in the Autoliv Partner Portal. And this climate status is also to be considered in sourcing decisions for new business. And another thing we plan for, that we have started, is to on part number level request CO2 declarations from the suppliers. And that has been started for a few segments. It is something that we plan to emphasize further and also to digitalize.

G

Gabriela49:32

Perfect, thank you. We have deep dived a little bit now into climate actions in the supply chain. What are some of the broader sustainability activities that you would like to highlight?

L

Linda Lundgren49:43

Yes, I would like to stress what is going on in the indirect purchasing area. And here we plan by the end of the year to release the Autoliv Sustainable Sourcing Requirements to the indirect purchasing suppliers. And these are tangible requirements and expectations related to our supply code of conduct. And this will be released, as said, before the end of the year. And we will also work on further strengthening the sustainability requirement in our strategies as well as the sourcing process for indirect purchasing suppliers.

G

Gabriela50:15

Thank you. Finally, if we move to the area of responsible business and safe and inclusive workplace, what comes next?

L

Linda Lundgren50:23

Yes, and to meet up with the, I would say, the emerging regulations on the social responsibility and human rights, we see an increasing need of transparency in our supply chain. And this is something we have piloted now for a scope of suppliers with a self-assessment questionnaire to gather social responsibility risk data. And this will help us to identify the need in terms of when we do need to go on-site audits at suppliers, and it will also trigger a social responsibility status that will be transparent to the supply base, yes, as the climate status that I told you about. And it will also be considered in sourcing. So this is what is ongoing in this area.

G

Gabriela51:09

Any other things we should be aware about?

L

Linda Lundgren51:11

Yes, I also want to emphasize as part of the responsible business area, we have the conflict minerals due diligence, and that is a very, very important area of collaboration with our suppliers. And in 2024 cycle, we will emphasize the extended minerals due diligence on cobalt and mica. But I would like to take the opportunity also here to thank all the suppliers for the great collaboration in this area. So good, thank you to all our suppliers for collaborating.

G

Gabriela51:40

And thank you, Linda, for this thorough presentation. Thank you. Christian, any closing words from you regarding our extensive sustainability agenda?

C

Christian Swan51:52

Yes, Gabriela. Sustainability for Autoliv is, as I said, very much linked to our vision. It's actually about saving lives in a new context. With sustainability, we have the fantastic possibility to make our planet more sustainable, and that's why we want to do this. We don't do this because someone told us to do it. We are doing this because it's the right thing to do. At the same time, as Linda explained, we need to do these things together with our suppliers and our supply base, and also of course together with our customers. Our goal is to be in the lead of sustainability.

G

Gabriela52:28

Good, strong last words. Thank you. Now it's time for a short break. Autoliv celebrated 70 years last year, and here is a little bit of a summary of those 70 years.

N

Narrator52:50

For 70 years, we've played a major part in the evolution of automotive safety. And last year, our products saved 35,000 lives and reduced more than 450,000 injuries on roads across the world. Seven decades of flawless quality, innovation, and sustainability, working our way up to becoming a global key figure in automotive safety. Can you believe that? But let's take it from the beginning. It's the 1950s, post-war, an age of optimism. Babies were booming, people raced to space, and the automobile surged in popularity. Only one...

Problem back then, people had a different view of the safety that we have today. Enter the Lin Blood Brothers. Lennard and Ste Lenard wanted to make auto travel safer for his family, so he came up with a new idea for a seat belt, which led to the improved two-point belt system named Leave Belted.

And in 1953, Lin Blood's auto service was born, which later became Autoliv. And it turns out people were really on board with the idea of safer auto travel. So the two-point seat belt became the latest in fashion, and from that moment on, creative innovation and quality in all dimensions became Autoliv's signature.

We made the three-point seat belts, the belt retractor, and the airbag. As the decades went by and automotive travel escalated, so did the demand for safety solutions. We kept growing, attracting some of the best and most dedicated employees in the world with passion for research and development and making auto travel safer.

In 1994, after several acquisitions and mergers of important component manufacturers, we got listed on the stock exchange. We also perfected the art of crash test dummies, which to this day gives us invaluable information about car crashes and makes our solutions incredibly reliable. And reliability is a key pillar of life-saving solutions. Just ask one of our first hardworking heroes.

The world started driving more and more, and we responded by coming up with even more safety solutions. Our curiosity for innovation never stopped. I know we say that word a lot, but we really do innovate a lot. We came up with the side airbags. Yes, that was us.

We even tested a self-driving car as far back as in the 1990s. Our belief in autonomous cars eventually spun off into its own company, Veoneer. Combine this with our unwavering dedication to quality and sustainability, and you have the reason why we collaborate with some of the world's leading car manufacturers.

Now we've talked about the past, what about the future? The number of traffic fatalities and injured people has been reduced, but it's still not zero. So we're going to continue to innovate. We're putting safety systems on other things than just cars, and we might even put them on people. Why not, right? And as our future becomes both electric and autonomous, the possibilities are endless.

But right now, together with everyone at Autoliv, let's take a moment and celebrate what has been 70 years of making the journey safer for all. 70 years of letting people explore this wonderful world safely on their own terms. Because as we say at Autoliv, saving a life is only half the story. More life saved, more life lived.

I'm going to shout it all out, turn it right up, and never back down. We're going to make it happen today. Shout it out.

G

Gabriela58:16

Welcome back. We will now focus on the area of automation and digitalization. In previous conferences, Christian, we've talked about operational efficiency. Why is this so important?

C

Christian Swan58:28

Yes, operational efficiency is actually about also making our production environment stable. We are in a high-volume environment. We are producing hundreds of millions of safety parts every year, and in order to make that efficient, it's extremely important for us to work with these methodologies. And one of these methodologies is actually automation.

G

Gabriela58:49

It is indeed. And for this section, I would like to welcome our head of operations, Staffan Olsson, to explain a little bit more about what Autoliv has been up to when it comes to efficiency and automation of our production. Welcome, Staffan.

S

Staffan Olsson59:07

Thank you. Why is automation and digitalization such an important topic for Autoliv? We are targeting 8 to 10% productivity improvement year-over-year on direct labor, and this is to stay competitive and offset inflation, but also to manage the annual price reduction that our customers are asking for.

We are achieving this through APS, our Autoliv Production System, by applying lean principles like standardized work, 5S, line balancing, TPM, total productive maintenance. Automation is becoming more and more important, not only to improve productivity but also to eliminate variation on safety, quality, and ergonomics.

G

Gabriela59:53

Great. Yeah, what would you say is the main challenges in this area from your point of view?

S

Staffan Olsson1:00:01

One of our main challenges with automation is the footprint environment that we are operating in, where we need to find more cost-efficient solutions to get a reasonable payback. We need to build flexible lines where we can produce future programs as well in the same process. Fast ramp-up and high uptime is essential as well.

And here we have some breakthrough when it comes to digitalization. By monitoring our production more in real-time, we can identify disturbances and act on those much, much faster. TPM is of course an important focus area where we continue to need to invest in and prioritize.

G

Gabriela1:00:40

What can our suppliers do to support this journey?

S

Staffan Olsson1:00:45

Good question. First of all, I believe our suppliers, they have the same opportunities and challenges as Autoliv. We are operating in the same environment where safe quality delivery and year-over-year productivity are more expected rather than being a competitive advantage.

Autoliv is not only investing in automation for new launches, but you also need to address existing programs and lines. Here the challenges are different. For new launches, we can work more with design for assembly where we have more flexibility to address problems looking both at product and process design. And here I think the supplier will be expected to be involved earlier to share input to us.

Not only because it's easier to make product changes early, but also we see, and we talked about it earlier here as well, our customers are asking for shorter and shorter lead times. So we need to work much more in parallel in the early phases.

And what about the existing lines? The challenge, as I said, is different. We have less flexibility to work with design changes. Our customer, they don't really expect any design changes, and our manual processes are normally more forgiving. Which means that dimensions that we perhaps not have really paid attention to in our dialogue with you suppliers will become more critical when we go into more automated processes. So here we need the collaboration from the suppliers and find the most cost-efficient solutions.

G

Gabriela1:02:33

A lot of important takeaways. If you were to summarize the main highlights, what would they be?

S

Staffan Olsson1:02:38

What they first of all is, I think, yeah, the suppliers will be used to be involved much earlier in our product and development process. And I think it's two ways. It is to optimize both the supplier processes but also to optimize our own production processes.

And then second, our experience when you do the automation journey is to secure first of all that we have a good workflow. And when you have that established, then it's easy for you to understand where it makes sense to automate and to what level to automate.

G

Gabriela1:03:20

Great, thank you Staffan. Thank you. We will invite Christian back to get some comments on automation and digitalization. What's your view after having listened to Staffan, Christian?

C

Christian Swan1:03:35

Yes, thank you. Automation is actually a really good tool and foundation for us to create process stability in a high-volume environment as we talked about. Process stability is key. Process stability is the foundation for quality. That goes of course hand in hand with our suppliers because if we are in a high-volume environment, so is our suppliers. So it means also that for our suppliers, I'm sure that automation will be key for them as well.

It also creates a competitive advantage because if you have a stable environment, which you will get if you use automation, you will be better in quality but also better in productivity and also cost.

G

Gabriela1:04:14

Thank you for that bridge, Christian. Reliability in our output is an important outcome of automation, and this leads us to the next topic of quality.

C

Christian Swan1:04:26

It does. And quality of course is key for Autoliv. We are quality. Why? Because our products never get a second chance. Our product needs to work every single time because if they don't, we jeopardize people's lives in the cars and out in the vehicles, in the streets, out in the world. So quality is definitely key for us. It is our brand name, I would say, and number one for us always.

G

Gabriela1:04:53

Yeah, we stand and fall with our ability to deliver on this essential topic of quality. And together with us today, we have BJ Swad leading our supplier quality team. But first, we have a short message from our global head of quality, Jonas Yir.

J

Jonas Yir1:05:13

Dear suppliers, partners. My name is Jonas Yir and I'm head of quality and program management since January last year. Autoliv is in the business of saving lives because that's what our products do. Every day, 100 lives are saved by our products, and every day our products save more than 1,000 people from severe injuries. For these people, their families and friends, every millisecond makes a difference.

Our products never get a second chance. They just have to do the job they are developed for every time. And that's why quality means so much more to us than it usually does to other companies. At Autoliv, quality comes first, always. And our mindset and the desired state is zero defects.

All of you, our suppliers, partners, are part of Autoliv's value chain. This means that also your products save lives every day. It also means that your quality standards must be as high as ours, always. Please keep this in your hearts and minds every day. Thank you.

G

Gabriela1:06:33

Quality is of the essence. Very clear message from Jonas. Thank you. BJ, welcome. How do we ensure this, that our products always work?

B

BJ Swad1:06:43

Yeah, thank you Gabriela. Straightforward answer would be that we have to have a flawless quality execution in all steps of our processes. And in the end, producing parts with zero defects sounds very easy when you say it like that.

G

Gabriela1:07:00

What is the quality trend from our supply base currently?

B

BJ Swad1:07:06

Yes, as we hopefully all know, we at Autoliv introduced NCM, non-conforming material measure, in 2013, replacing the PPM approach. And since we did that, we had a steady, I would say, NCM reduction trend for a couple of years until 2018, 2019. And then we all know what happened. We had COVID, a lot of turbulence in the supply base and so on. And unfortunately, since then, we have a flat but even an upwards going trend on NCMs.

We are working very hard, of course, to try to improve. And we must, together with our suppliers, break the trend and get into an improvement path again.

G

Gabriela1:07:55

And where would you say that we currently are? Are we seeing positive or negative signals here?

B

BJ Swad1:08:00

I think we see both. Unfortunately, we have the positive side. We have our NCMs split up in three different severities: NCM A, B, and C, where A is the most severe. And we actually have a slight downwards trend on the NCM A and B, so that's a positive. We also have quite many suppliers still keeping quite low levels of NCMs during these turbulent times.

But on the negative side, we have seen a couple of very severe NCMs also that is generating high cost, extra workload, and actually big risk here that we are not saving this life out in the market in some cases. We also see that some suppliers have not been able to be stable during these turbulent times and have very high number of NCMs overall.

G

Gabriela1:08:56

So considering this, is there anything in particular that the suppliers should focus on to mitigate the risk for high costs?

B

BJ Swad1:09:02

Yes, absolutely. And I always want to enforce this: you must focus on trying to produce parts with zero defects. Which means in your own production, you should have very low scrap rates. Measure your scrap in PPM, and now we come to PPM again, right? But don't measure it in percent, measure in PPM and try to reduce.

The other part that is very, very important here is that you must make sure you have a station-to-station tracking. It comes back to traceability, especially if you send it out to special process of some kind, right? And keep those batches as small as possible. It's not okay that today we have two, three failed samples or products made by a supplier and we have a scope of hundreds of thousands of parts on the market. That's not okay anymore.

G

Gabriela1:10:00

Very clear. What can be done to improve?

B

BJ Swad1:10:04

Many things. We're trying to have this continuous improvement mindset, right? But some things we do and have done for some years is those very severe topics for us, we call them Category A issues. We have a Yokoten model, so we are working with one single failure by one supplier. We analyze what it's coming from and so on. Trying to, when we close that 8D again, we are trying to find ways of what can we do with other suppliers with similar processes to prevent them from having the same problem again. We're actually helping them to not end up in the same situation.

We are taking it a step further now. We are introducing something we call systemic defect elimination, which means that we will look at common problems in the supply base, certain commodities or segments, and we do the analysis on what we have seen as weaknesses in the supply base. And then we can implement that in similar processes with the most severe ones in the supply base, so widening that scope of doing supply yokoten.

G

Gabriela1:11:12

Good. You came back to yokoten a couple of times, sharing knowledge and best practice. How do we do that today and in the best way going forward?

B

BJ Swad1:11:23

Yeah, a good point. Because the way we've been working until today is that the supplier is, let's say, corresponding with the segment SQEs. Quite manual process, so it's Excel files, mails going back and forth and so on. Not so transparent, maybe not so easy for suppliers. But now we have actually finally got this Yokoten module in our SPSI, the Supplier Problem Solving Interface we call it. And now we can actually put actions in the system and we can distribute it to a number of suppliers that we select based on the similarities in process. And we can work with them interactively in the system in a very similar way as we do with 8Ds already, and most of our suppliers know the 8D process quite well.

G

Gabriela1:12:14

Are there any other areas you would like to highlight and what we can do in terms of continuous improvements?

B

BJ Swad1:12:20

Absolutely. And I mean, during those years we have all struggled in different ways, right? And I'm really, really happy to see that we're now able to start supply development programs on a broader scale than we have been able to do for some years again. And I think this supply development is one thing of our end-to-end concept thinking. And I mean, it's really essential that we improve the chain all the way. And we hear from time to time that from some suppliers that we are one of the few customers or companies actually helping suppliers to be better, not only tell them to be better. So I think that's a good thing.

G

Gabriela1:13:05

Sounds really, really good. What expectations do we have in return?

B

BJ Swad1:13:11

In return, of course. First of all, I would say that it's each and every supplier's responsibility to improve themselves, their own operations, of course, in quality and efficiency leading to better cost and so on to stay competitive, right? But for those suppliers that we give trainings, that we bring into supplier development programs and so on, of course they should learn, embrace, implement those kind of tools, methods, and things in their own operations. And I mean, that's really important. Of course, we are spending time, they should also use that time spent. So the base is lean, I would say, lean methods, Staffan said APS, right? It's lean for everybody. We are adding digitalization and automation into our zero defect model now also because we see it's important for the future.

G

Gabriela1:14:04

So great. I mean, continuous improvements, continuous learnings. Anything else of importance that we should keep in mind when it comes to supplier quality?

B

BJ Swad1:14:16

I think I would like to mention one more thing actually, and it's about labels. We have a standard called AS244. And since this traceability is getting more and more important, I mean, we must have the right labels, the right format, the readable labels in order to keep this traceability chain, let's say, unbroken. So that would be another part that is very connected to good quality.

G

Gabriela1:14:41

So that will conclude the session on quality. Thank you, BJ. Thank you. Christian, any additional comments from your side?

C

Christian Swan1:14:51

Yes. As we've heard, quality is key for us. Our product never get a second chance. We talked about that many times. For us, in the high-volume environment we are in, to create stability, to create stable processes is key. That is how we get quality. And also, quality is not a project. Quality is a journey. You can never set a start and an end. It means that you need to bury it in your daily way of working and almost bury it in your culture.

I would also like to point out that quality is a way to get competitiveness because quality also drives your cost. It drives down your cost if you have quality in place. So I think many, many good reasons for really focusing on quality and treating it like a never-ending process.

G

Gabriela1:15:43

Sounds good, thank you. And to have this stable process, we must also deal with risks sometimes. So we will now be turning to the topic of supply chain risk management. And we start off with a short video.

N

Narrator1:16:01

Today's supply chain knows no borders, stretching across continents and oceans. But with this global reach comes an array of risks. Disruptions like earthquakes, tsunamis, volcano eruptions, hurricanes, and flooding. And obstacles like pandemics, trade barriers, bankruptcies, cyber attacks, and even wars. Every link in the supply chain must be prepared, from manufacturers to logistics companies. Precautions must be taken, contingencies planned to ensure goods flow uninterrupted.

It's not enough to react to disruptions. We must anticipate and mitigate them, building resilience into every step of the journey. Being able to cope and address these questions will have a great impact on business success. The question is, how should we navigate these challenges and ensure the resilience of our global supply chain?

G

Gabriela1:17:04

Klaus Neber, welcome back. Last time we met was the supplier conference at the end of 2022, so quite a few years ago. Risk management is as important as ever, as we also saw from the video. It would be interesting to hear from you where you see the hotspots currently in supply chain risk management. What would you like to address here today?

K

Klaus Neber1:17:27

Okay, hello Gabriela, nice to see you again. And the video addresses the importance of supply chain risk management in the environment we all operate in. Many things evolved since we have met last time. But to answer your question, today I would like to highlight three topics, which is financials, cybersecurity, and the third is reporting and collaboration.

G

Gabriela1:17:49

Great. So why don't we kick right into it and start with financials. Why do we have concern here and where do we see the risks?

K

Klaus Neber1:17:57

Yes, I would like to guide our attention first to the global and regional insolvency index. This development chart was released by Allianz Research earlier in February this year and shows a significant increase of insolvencies in nearly all regions of the world. I mentioned our related initiative already in '22, but the trend continues and it's not going back to normal soon.

Next you see is the related heat map also from Allianz Research. And here we can see the red zone of countries in turbulences. We expect further acceleration actually of insolvencies in '24 before it probably stabilizes at a high level in '25.

G

Gabriela1:18:37

And in this area, we work together with a service provider called RapidRatings to evaluate these financial risks, right?

K

Klaus Neber1:18:46

That's correct. We're still working with RapidRatings. But first of all, I would like to thank all the suppliers that connected so far, that collaborated with us and sharing their financial data. I mentioned in '22 already that we get here a professional, reliable, and global comparable assessment of the financials of the privately owned companies we have in our portfolio. Or the public companies we have in our portfolio of suppliers are anyhow frequently reported and assessed at RapidRatings.

So to the suppliers that had not been connected so far, please expect to be connected and contacted sooner than later. And we encourage you to collaborate as all the others did before with us and our service provider RapidRatings.

For all future and already existing business relationships, it is fundamental that our suppliers support these financial assessments because it is mandatory to become or persist as a roadmap supplier. The evaluation of the financial healthfulness of our suppliers is an essential cornerstone in our proactive supply chain risk management.

G

Gabriela1:19:55

So this in essence means that we have seen good results from the RapidRatings reports already, and we continue or even increase the focus on financials of our suppliers?

K

Klaus Neber1:20:09

Correct. We consider the trends that we have seen just in the graphs before, and we will do even more reportings in '24, '25, and beyond as a constant measurement of risk identification.

At Autoliv and supply chain risk management, we follow the ISO 31000 risk management approach, which is a constant identification, assessment, mitigation, and management of risks. Doing this and using the reports from RapidRatings, we have identified a certain number of suppliers in the red zone, which means high to even very high risks. According to procedures, these suppliers have to assess and mitigate their own financial health in communication with us.

And to improve our transparency further, as mentioned, we're doing even more reports now. And the suppliers again that had not been contacted, don't be surprised that we will reach out to you and request you to collaborate with us and RapidRatings. I have to say, uncooperative or unresponsive supplier reactions will lead to an escalation at Autoliv and also trigger consequences because we have seen examples in the past that had led to challenging scenarios for us.

G

Gabriela1:21:22

So what would you say are the main highlights of the financial risk area here?

K

Klaus Neber1:21:27

I think for us it's collaborate, please collaborate with us and RapidRatings. So these financial reports you get here is a professional report for free, gives you an outside view on your own company, and can support you in building more resilience to your own company. And logically, what we expect our suppliers also to do is to have the same focus and monitoring of your own supplier base in a similar way.

G

Gabriela1:22:02

So collaboration really being a key word in that respect. Yes. The second topic of this session is focusing on cybersecurity. It's a topic that no one can solve by our own and where we really need to collaborate with our supplier base. Particularly, is this a risk that increased further since we last met in 2022, would you say?

K

Klaus Neber1:22:25

Yes. So the attackers get more and more professionalized. The hacking groups have an increased interest in attacking supply chains, and they exhibit, for example, an increased capability of using suppliers as entry points. So indeed, they consider supply chains as poorly secured and even the employees as probably the weakest point in the security chain.

G

Gabriela1:22:47

We do hear a lot about this every day, and it seems that the related costs are also increasing. Is this a correct assumption and impression?

K

Klaus Neber1:22:59

Yes. So there are many, many examples. But for example, in the past, in 2017 already, we have seen Maersk, a giant cargo transporter, that was hit by a cyber attack of approximately at the end $300 million USD. In 2020, there was one of the first reported attacks where Russian hackers modified a software code that was actually used for security software, affecting even the US defense agencies and so on.

So earlier this year, we have seen that a cyber attack stopped TSMC's automotive division. And interesting was also an attack against supplier Yanfeng related to Stellantis, and a serious lawsuit is ongoing here. The related costs are enormous, as you can see here on a report done in 2021.

So today, cybercrime is a multi-trillion dollar business, and manufacturing industry is a clear target, even maybe the target number one for these hackers. And last year, in '23, even the World Economic Forum stated we need global rules to break cybercrime.

G

Gabriela1:24:04

Yes. And due to supply chains with reduced stock levels, highly complex supply chains, every attack on one of our suppliers might affect the whole value chain and the whole supply chain, right?

K

Klaus Neber1:24:16

Yes, that's correct. We rely on each other in the supply chains, and every attack to one of our suppliers or even your sub-suppliers can stop all of us, so all our customers and all our other suppliers in a worst-case scenario. Also, the IT interfaces that we're sharing with our suppliers to exchange the data with you should not be used as an attack vector into Autoliv. So cyber protection is in our core interest, and it must have a very high focus at our suppliers too.

G

Gabriela1:24:45

So what can we do to step up and increase resilience?

K

Klaus Neber1:24:52

Yes, let's start with the step up. So we have onboarded further cybersecurity expertise to our team. We will develop a detailed cybersecurity strategy this year. In our approach, we will categorize suppliers by risk exposure, which means we do a thorough security assessment of our suppliers and will insist in compliance by '25. We consider here currently security standards like TISAX, ISO 27001, but might be also others.

And this is also an opportunity and responsibility for you as automotive supplier to make a difference and stay ahead of your competitors. And if not, it will have consequences because also we have to protect our own business and our customers together. And we need to define clear cybersecurity and privacy requirements and will request our suppliers to implement if not already done.

G

Gabriela1:25:51

You say if not already done. So we do assume that the supplier base has already some kind of cybersecurity in place. And if not already, there is probably no time to wait?

K

Klaus Neber1:26:03

Exactly. There is no more time to wait for anything. And the companies that have not realized that cybersecurity is a huge threat to them need to invest, need to protect their own business, and need to protect all the partners like us in the supply chains. And this is again a job and duty that we can just do in collaboration.

G

Gabriela1:26:22

Collaboration is a keyword that we keep coming back to today. And it kind of guides us into the third topic that you wanted to touch upon today: reporting and collaboration. What do you mean by this?

K

Klaus Neber1:26:37

Yes. It's roughly four years post the pandemic, COVID impact to all of us. Two years ago that Russia started the war. And these are milestones that changed all of us and our companies obviously in many perspectives. Examples that we see is an increased request for frequent reporting coming from customers, adjusted legislation, newer regulations, for example.

G

Gabriela1:27:03

And how does this then affect the reporting that we are expecting or need from our suppliers? And also connected to the request to collaborate?

K

Klaus Neber1:27:12

So everybody strives for an efficient risk management, which means to identify the weakest part in the supply chain, to assess the likelihood and impact of these potential weak points, to mitigate, which means to reduce the likelihood and/or reduce the impact associated with these potential risks, considering your risk appetite, and to manage the situation in a proactive way instead of waiting for the surprises that nobody likes to have naturally.

This requests a very close communication with each other, plus honest sharing of information between all of us. And this is what we expect our suppliers to do: to have more frequent reporting with us using the professionalized third parties that we have chosen. And this will increase the resiliency for the entire supply chain.

G

Gabriela1:28:06

So this increased collaboration, more and frequent information exchange, it sounds like that in itself could imply more risks?

K

Klaus Neber1:28:17

Yes and no. Yes, we will get aware much more in advance of risks and can act on them proactively. And no, because already all these risks had been there in the past and we haven't acted on them in due time because the intransparency forced us to wait for the event and crisis. So finally, it's not really more risks that we have. Together we can build the entry and transparency, and this will enable us in communication and collaboration to plan and advance proactively for the risks instead of waiting for the bad news.

And what we need our suppliers to do is please also have the right contacts in our supplier board so that we can communicate to the right people on your side. So everyone in the supply chain are in this together, and collaboration is a key word and will protect us all.

G

Gabriela1:29:08

Right. Yes, that's correct.

K

Klaus Neber1:29:10

So, and this is also the final message that I also addressed in '22 already. This is not a sole Autoliv responsibility, and we clearly expect our suppliers to support this as we jointly need to master the current and future challenges to come. We aim to secure our current business and have a resilient foundation for the future partnership.

G

Gabriela1:29:34

Crystal clear. Thank you, Klaus. Thank you very much. Turning back to Christian and moving into the summary part of today.

C

Christian Swan1:29:50

Thank you, Gabriela. We have covered a lot of aspects of the Autoliv value chain here today, and I think it's time for a little bit of a recap. So if you're ready for it, Christian, we start with the customer input from Cherry.

Yes. And if we listen to Cherry, they talked a lot about doing things in a new way, to do things faster. And faster being one of our themes today, so speed will become a competitive edge. Working with the Chinese OEMs today, that will also impact the other OEMs and our customers. That will need to be done in a speedier manner. It means that we need to find ways to do things quicker. It needs to be done in more collaboration with the customers and in more collaboration with our suppliers, because that's where we find the potential of being speedier. And as said before, of course, never on the compromise of quality.

And that brought us to the topic of footprint and innovation, right?

Yes, it did indeed. And footprint is, as we explained, a topic which we are working extensively with within Autoliv, of course, to be close to our customers but also to be in the world where it does make sense from a cost point of view to be present. When it comes to then also innovation, we talked about innovation in some new areas. We have displayed today our ambitions in the area to power two-wheeler safety, and we have many new innovations there to come to support the market growth in that area as one example of our innovation journey.

And then we deep-dived with Linda on sustainability and really explaining what the value chain needs to sort of, what challenges we need to take on to leave a sustainable world behind to future generations.

Exactly. And as we said, sustainability is very close to our heart. Sustainability goes very much hand-in-hand with our vision of saving more lives. We are doing sustainability because it's the right thing to do, not because someone tells us to do so. And that is the right driver. And I think I would urge all our suppliers to think in the same manner, because at the end of the day, of course, we go to work every day, but we do it for a purpose. We need to be purposeful, you know, in everything we do. And to work with sustainability is an excellent purpose of going to work.

It is indeed. And what about summarizing the topics of automation, digitalization, and quality?

Yeah, and truly they go hand-in-hand as we explained today. To have a stable environment in a high-volume pace of production as we have, then stability becomes of essence. And automation is a lever for stability. Then it becomes also a lever for quality, will become a lever for productivity, that will become a lever for being competitive and to produce good parts. So we strongly believe that automation is a key, not because it's a standalone initiative as an automation, but because to improve quality goes hand-in-hand with automation.

And finally, we had an informative chat with Klaus on risk management.

Yes, we did. And risk management, of course, the last four or five years have taught us that risk management has come to a new dimension. I mean, if you go back five years in time, whoever thought that we would end up in a pandemic as one example being one risk. Klaus also talked about other types of risks that have risen the last years. Cybersecurity is one risk that we need to protect ourselves against. And of course, all our suppliers and partners need to do the same. Financial risk is another type of risk, especially now in the environment where we have higher interest rates upon us, is another type of risk that we all need to manage. And when I say we, it's the broader collective demand and supply chain, because we cannot do it on our own. Again, it's back to us treating the whole demand and supply chain as one team.

G

Gabriela1:33:47

We have shared a lot of information here today. Thank you all for listening. We're approaching the end of our day together. Mikael, welcome back. Would you like to highlight and emphasize some of the key messages that you take out from this conference?

M

Mikael Bratt1:34:07

No, I mean, let me first start to say that this is a very important event and day here together with our supply chain partners. It is very important that we are working very closely together in order to strengthen our competitiveness. I mean, we are operating in a very competitive industry, and we all know that we have a lot of competition around us that we need to make sure that we are better and staying ahead of.

And as we have been alluding to here today, we have a broad set of activities and initiatives here to secure our competitiveness and driving operational excellence across the whole value chain here. I mean, more than 50% of our value-add here is coming from our supply chain partners, and therefore it's extremely important that we have the same agenda and have calibrated the priorities together here. And I think this has been a great day to do exactly that. So good job, everybody.

G

Gabriela1:35:17

Thank you. I think we can all sign off on that and agree. And what about you, Christian? How would you comment and conclude on this day?

C

Christian Swan1:35:25

Yeah, I think we have had our themes, of course, but it's also one underlying component that has gone hand-in-hand with all our speakers here, and that is collaboration. Collaboration through supply and demand chain is key because in our communication together, that is how we solve things. So when we have issues, then they are always solved by communication because we together are the ones with our suppliers and customers that can solve issues. So collaboration, collaboration, and together we are the world leaders in the area of automotive safety.

How do we maintain this lead? We are maintaining this lead by using these different methodologies that we have talked about. We talked about automation, we talked about safety, we talked about quality. We also talked about how to being more secure from Klaus as he talked about the different areas on making our environment protected. So all in all, using these examples that we have talked about today will end up in us becoming a more productive, more safe company. It also will end up us together being more competitive in the end, together with our suppliers and our customers.

And if we tie it back to better, smarter, and faster ways of developing and producing and shaping our industry, how do we communicate and collaborate to stay ahead together?

Well, I think again, we have certainly different areas where we have to come together as one team. Sustainability is one area we have to come together to discuss. That quality is one area that we have to come together and discuss. And again, it goes hand-in-hand with collaborating, reaching out, and also having robust dialogues with each other.

G

Gabriela1:37:11

So in summary, how would you, you know, tie the knot on this conference?

C

Christian Swan1:37:17

Yeah, I would like to say to all of our listeners, to all our suppliers today: partnership and collaboration is key. We do this together. We are dependent on each other in the full demand and supply chain. We would like to reach out to you today to really state that partnership is the future. Partnership is the new leadership.

G

Gabriela1:37:41

Thank you, Christian. And with those words, we conclude the supplier conference of 2024. Thank you very much for joining us. Stay safe and see you soon again.

Supplier Conference 2024 - Autoliv

About Mikael Bratt