(News Bulletin 247) – The automotive supplier has announced 8,000 direct and indirect job cuts and above all affirmed its determination to pass cost increases to its customers. This benefits Valeo, Faurecia and Plastic Omnium.

It is a European value not very well known to the general public but appreciated by the market and investors: Autoliv. This Swedish-American group based in Stockholm specializes in airbags and seat belts.

This Wednesday, the group founded in the 1950s announced that it was cutting its workforce with site closures planned in Europe, and direct and indirect job cuts amounting to 8,000 units in total.

But above all, the Scandinavian company confirmed its outlook for 2023, namely an adjusted operating margin of between 8.5% and 9% as well as cash generation of around 900 million dollars.

Tough negotiations to pass on inflation

Another important phrase slipped into the press release. Group chief executive Mikael Bratt said his company “[travaillait] intensely with [ses] customers to secure price increases and we will not stop until we receive full and fair compensation to ensure inflationary pressures are effectively passed through the value chain.”

This is a strong statement. Remember that equipment manufacturers have fewer levers than manufacturers to raise their prices and thus pass on inflation, their prices being contractually defined, which obliges them to negotiate with their customers. As a result, their margins suffered last year from inflationary pressures on wages and various raw materials.

On the Paris Stock Exchange, automotive equipment manufacturers are progressing sharply in the wake of Autoliv’s announcements, monopolizing the strongest increases in the SBF 120 index. Valeo wins 4.4%, Forvia – Faurecia shares have changed its name last week to become Forvia, the name of the company which brings together Faurecia and the German Hella – takes 3.5% and Plastic Omnium gains 3.2%. For its part Autoliv takes 2.4% in Stockholm.

A more favorable environment

“The confirmation of Autoliv’s objectives but above all the company’s determination not to let go of the impact of price increases on customers can be a positive element for all equipment manufacturers”, judges an analyst specializing in the sector.

In a recent note published at the end of May, the bank Jefferies had estimated that the economic environment had improved sufficiently to be more optimistic on the equipment manufacturers and had thus raised its advice to the purchase on Forvia and Valeo.

The bank believed that all OEMs could still struggle to pass on increases in energy costs and wages, which could potentially lead to disappointments. But, on the other hand, on the demand side, the outlook is encouraging. Since the beginning of the year, sales volumes have surprised positively in Europe and the United States, she noted.