Autoliv initiating actions to minimise pandemic impact
April 06, 2020 - Sweden
Autoliv, leader in vehicle safety systems, is monitoring the evolving COVID-19 pandemic and taking measures to minimise its impact on customers and on the company. Autoliv has tapped $500 million from its revolving credit facility to pay existing short-term debt and for general corporate purposes. The pandemic will have a negative effect on its operations.
Autoliv is continuously monitoring the evolving COVID-19 pandemic and proactively taking measures to minimise any consequences for customers and mitigate the impact on the company.
“The COVID-19 outbreak is now impacting our customers in Europe and there have been several announcements by our customers of plant closures in eg France, Italy, Spain and Germany. Based on our most recent information from our customers, media and other sources, we estimate that 63 customer plants in Europe will close or have already closed. A number of our customers announced shut down of all plants in the US as well as closures in other countries. How long these plants will be closed, or to what extent more will follow is highly uncertain,” the company said.
The company is taking cost reduction actions to mitigate the impacts and will adjust its production in accordance with the development of the demand situation. Temporary Autoliv plant closures may become necessary, it said.
Management focus is currently on strategic planning for various scenarios, which includes the potential there is a significant decline in light vehicle demand. In the event of such scenarios, the company will take corresponding actions. At this point, it is impossible to predict the overall operational and financial impact this pandemic will have on Autoliv although it will likely to lead to negative effects on its operations.
“Our actions to mitigate the effects of lower business activity include expanding our existing structural efficiency programme, balancing our labour force and the sourcing of direct materials, reducing discretionary spending and securing funding availability to support our business activities,” it said.
Additionally, the company has drawn down $500 million of its existing committed $1.1 billion Revolving Credit Facility. The facility is with 14 international banks and matures in July 2023. The company intends to use $300 million of the draw down to pay existing short-term debt maturities for the next three months. It plans to use the remaining amounts for general corporate purposes. The remaining $600 million of the facility is still available to the company for further potential drawdown. The availability of the facility is not subject to any financial covenants nor is any other substantial financing of Autoliv subject to any financial covenants. For the remainder of 2020, the company's only major debt maturity is €100 million in December.
Since early February, Autoliv has been taking decisive actions at both the group and local levels to mitigate the impacts of the COVID-19 outbreak, firstly to ensure the health and wellbeing of its employees and also to establish the right balance of capacity and cost. It has been able to secure a well-functioning supply chain so far, and its operations in China have gradually recovered over the past few weeks, and is well tuned to customer demand as it gradually recovers.
"I feel confident we have the experience, organisation and people to navigate through this challenging situation" said Mikael Bratt, president and CEO. "Our task force for different workstreams, that initially was set up in January to manage the COVID-19 outbreak in China and later in South Korea and Japan, is now managing the situation on a global level, which has allowed us to act promptly as the situation continues to develop.”