Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Important Trends
The discussions and analysis in this section are focused on the Company’s results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. Discussions of the Company's results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the year ended December 31, 2024, which was filed with the United States Securities and Exchange Commission on February 20, 2025.
Autoliv, Inc. (the “Company”) provides automotive safety systems to the automotive industry with a broad range of product offerings, primarily passive safety systems. In the year ended December 31, 2025, a number of factors influenced the Company’s results of operations, including:
Geopolitical uncertainties and tariffs
Cost inflation moderated but remains somewhat elevated, especially for labor
Growth impacted by LVP, shifting OEM landscape and safety content per vehicle
Order intake impacted by shifts in technology, customer landscape and geopolitics.
Strategic and structural initiatives
Continued focus on operational excellence and quality
YEARS ENDED DEC. 31 (DOLLARS IN MILLIONS, EXCEPT EPS)
Reported 1)
change
Reported 1)
change
Global light vehicle production (in thousands)
Consolidated net sales
Operating income
Operating margin, %
Net income attributable to controlling interest
Earnings per share - diluted 2)
Net cash provided by operating activities
Return on capital employed, %
1) Reported figures impacted by costs for capacity alignments and antitrust related matters. See section Items affecting comparability and Note 13 to the Consolidated Financial Statements included herein.
2) Net of treasury shares.
Geopolitical uncertainties and Tariffs
2025 saw global LVP increase by around 3.9% (according to S&P Global January 2026). Our sales to customers are based on production schedule order quantities and delivery dates that are communicated to us by our customers, which we refer to as “call-off” plans. Despite industry challenges such as chip shortages related to the Nexperia situation and the tariffs imposed in the beginning of 2025, which caused uncertainties regarding costs in the industry, we saw an improvement in call-off volatility in 2025. This improvement supported our improvement in operating efficiency and productivity, including a reduction in direct workforce. However, customer call-off volatility increased in the fourth quarter and remained higher than pre-pandemic levels, and low customer demand visibility and changes to customer call-offs with short notice still had a negative impact on our production efficiency and profitability.
The effects of the new tariffs imposed in 2025 did not have a significant impact on our profitability in 2025, as we achieved customer compensations for more than 80% of tariff costs. Including the dilutive effect of recovered tariffs, operating margin was negatively impacted by around 20 bps. While it is our ambition and expectation to continue passing tariff costs on to our customers, there is significant uncertainty as future recovery levels may vary. Geopolitical developments and the evolving trade environment are likely to continue creating a challenging and unpredictable operating landscape. Any new, increased or modified tariffs or other trade restrictions could materially affect our operations, customer relationships or cost recovery ability as well as contribute to the uncertainty of industry expectations. We continue to closely monitor the tariff policy environment and remain prepared to be agile to adjust our commercial and operational responses to any such developments.
Inflation
Cost pressures from labor, in our own operations and related to our suppliers' labor costs, had a negative impact on our profitability in 2025. Most of the inflationary cost pressure was offset by customer price and other compensations. Changes in raw material costs had a limited impact on our profitability in 2025. The Company expects limited raw material price impact also in 2026. We also expect continued cost pressure from inflation relating mainly to labor, including increased labor costs for our suppliers, especially in Europe and the Americas. The Company continues to execute on productivity and cost reduction activities to offset these cost pressures, and we continue to seek inflation compensation from our customers. The continued uncertainty regarding the effects of tariffs and trade restrictions may lead to a more adverse inflation environment.
GROWTH IMPACTED BY LIGHT VEHICLE PRODUCTION, SHIFTING OEM LANDSCAPE AND SAFETY CONTENT PER VEHICLE
The most important driver for Autoliv’s sales is the LVP. In 2025, global LVP grew by 3.9%.
Light Vehicle Production 1)
Change 2025 vs 2024
units
% global
units
% global
units
Americas
North America
South America
Europe
Asia
China
Japan
South Korea
India
Other Asia
Other
Global Total
1) Source: S&P Global, January 2026
The increase in LVP in China of 10% was significantly more than what was expected in the beginning of the year, driven mainly by a multitude of successful launches of new models by domestic Chinese OEMs and in particular by increased exports, mainly to Asian markets. The LVP decline of 1.0% in Europe was impacted by affordability issues and technology uncertainties. The LVP decline of 0.5% in North America was impacted by the EV market development, U.S. tariffs and growing consumer uncertainty, Japan increased by 1.8%, mainly impacted by domestic demand and US exports, supplemented by Japanese OEM production repatriation. LVP in India increased by 7.4%, driven by reduced sales tax on cars and multiple new model launches.
The different LVP growth rates for different regions in 2025 was dilutive to global safety content per vehicle (CPV), as LVP in several high CPV regions declined while LVP increased in some lower CPV regions. The highest CPV region is North America, and its share of global LVP declined by 0.5pp to 15.5%. The second highest CPV region is Europe, and its share of global LVP declined by 1.0pp, to 18.7%. India, a major region with the lowest CPV, which saw its share of LVP increase from 6.5% to 6.7%. CPV in China is below the global average, and China’s share of global LVP increased from 33.7% to 35.7%. Japan’s share decreased to 8.7% from 8.9%. Additional dilution to global CPV came from the difference in growth within China, where lower CPV models and segments grew strongly while higher CPV models and segments growth was limited or negative. LVP growth for Domestic Chinese OEMs with typically lower CPV was 16% compared to global OEMs with typically higher CPV saw LVP decline by 1.3%. Combined with the regional growth differences, we estimate this shift in LVP mix contributed negatively to our sales growth by between 2 to 3 pp. The Company estimates that its global market share was unchanged at around 44% in 2025 compared to 2024.
The strong growth of Chinese OEMs' LVP in both domestic and export markets is a trend the Company expects to continue. It is therefore instrumental to have a solid position with this customer category. Over the past few years, the Company has taken significant steps to strengthen its position with Chinese OEMs through investments in manufacturing and R,D&E capacities, as well as by signing several strategic co-operation agreements with Chinese OEMs. These efforts have supported an improved performance, as shown by a strong order intake, with 30% of the Company's total order intake value in 2025 coming from Chinese OEMs. Additionally, the Company's sales to Chinese OEMs grew by 23% in 2025.
Another important market trend is the rapid growth of the automotive market in India. In recent years, India's significance for the automotive industry has increased substantially. In 2025, LVP in India represented 6.7% of global LVP. As safety content per vehicle has also grown rapidly over the past few years, India's importance for the Company has risen from around 2% of total sales in 2020 to 5% in 2025. Through timely investments in capacity for both manufacturing and R, D&E, the Company is the clear market leader in India.
Despite macro-economic uncertainties in parts of the world, we expect light vehicle markets to grow both in the medium and long term, driven by pent-up end user demand and a growing GDP/capita.
Due to more stringent crash test rating requirements by institutes such as Euro NCAP, increased government regulations and increasing consumer demand for more safety in emerging markets, the Company sees vehicle manufacturers installing more airbags and more advanced seatbelt systems in vehicles. This generally takes place when new models are introduced. The safety standards of vehicles are increasing in China, India, and other growth markets, partially due to new government regulations and crash test rating programs. This is supporting higher installation rates of airbags and more advanced seatbelts, impacting CPV positively . Commercial customer recoveries compensating for increased labor costs and tariffs also added to CPV in 2025, partly offset by negative effects from continued productivity related pricing pressure from vehicle manufacturers. CPV increased in India, South America, South Korea, Europe and North America, was unchanged in Japan and China and decreased in Other Asia. The changes in regional and model mix diluted global CPV by 2 to 3pp leading to a global CPV that was unchanged compared to 2024. This contributed to an organic growth (Non-GAAP measure) of around 3.4% compared to global LVP growth of around 3.9%. The average global safety CPV (airbags, pedestrian safety, seatbelts, and steering wheels) amounted to around $268 in 2025.
The Company believes that the more stringent crash rating requirements and consumer demand for more safety should enable the global automotive safety market to grow around 1-2 percentage points per year faster than the global LVP in the medium and long term. This excludes the impact from cost inflation related price increases.
The past several years’ high order intake share has supported a strong sales development over time. In the past 5 years, the Company's organic sales development outpaced global LVP on average by around 4.3 percentage points. During 2025, growth was positively affected through recent launches of several new models, including Honda Passport, Ford Expedition, Hyundai Palisade, Onvo L90, Mercedes CLA, Citroen C3 Aircross and Opel Frontera.
The Company estimates that the sales for Electric Vehicles (not including PHEVs) amounted to around $1.7 billion in 2025.
GLOBAL FOOTPRINT WELL ADAPTED TO THE GEOGRAPHIC TREND SHIFT IN AUTOMOTIVE PRODUCTION
The Company's regional sales mix continues to be balanced with 29% of sales in Europe, 32% in the Americas and 20% in Asia, excluding China in 2025, compared to 28%, 33% and 19%, respectively, in 2024. The Company's sales in the important Chinese market was 19% of total sales in 2025 compared to 19% in 2024.
The balanced regional sales mix has been achieved through timely investments and strengthening of technical and support capabilities in growth markets.
ORDER INTAKE IMPACTED BY SHIFTS IN TECHNOLOGY, CUSTOMER LANDSCAPE AND GEOPOLITICS
The Company's order intake in 2025, with high win rates for new platforms with both new and traditional OEMs as well as for both EV and ICE platforms, supports the Company's already strong base, which includes supplying products to more than 1,400 vehicle models and around 100 car brands. The order intake in 2025 supports the Company's ability to defend its around 44% sales market share in the near and medium term. For several years, the automotive industry has faced key trends that impact the industry, notably changes in technologies as well as geographic growth differences, with the emergence of new automakers being particularly visible in China. Autoliv has therefore increasingly focused resources on developing new products and strengthening its position with new automakers to capture the growth opportunities that come with these changes. This includes long-term development agreements with several new automakers in China in recent years, as well as increased investments in capacity and capabilities in India. The order intake from new automakers, mainly in China, accounted for around 1/3 of our total order intake in 2025. We won multiple awards tied to industry trends such as autonomous driving. These include solutions that protect occupants in reclined seating positions, addressing critical safety risks in next‑generation interiors. We strengthened our Mobility Safety Solutions business by winning new orders for our advanced Pyro Safety Switch, supporting the growing segment of 1,000‑volt electric vehicles. We continued to expand our safety offering in India with advanced systems such as seat‑cushion airbags and front‑center airbags. We licensed our Human Body Model solution to our first customer. In China, the Company estimates that around 50% of order intake in 2025 was with domestic Chinese OEMs, which supports our expectation that domestic OEMs in China will continue to increase their share of the Company's sales in China in 2026. New order intake is defined as the sales value of awards for future business received within that year. The lifetime value is calculated using detailed assumptions of price and volumes over the years of production and the exchange rates prevailing at the time of receiving the order.
The lead time from order intake to start of production is typically 1-3 years. During this period the products are engineered into the vehicle to provide the expected protection for occupants in case of a crash and to meet legal and regulatory requirements, as well as other requirements from the vehicle manufacturer. This investment in new products is the main factor of RD&E expenses, net. Additionally, the Company has to build up production capacity, in the form of new lines, to meet future product launches.
In 2025, OEMs sourcing of new business was at a low level for the industry, as OEMs are reconsidering certain future product offerings due to technological and geopolitical uncertainties, including uncertainties regarding costs for tariffs. The Company's order intake share for 2025 continued on a high level. Even so, the low level of OEM sourcing activity in 2025 resulted in an order intake in 2025 that was on the same low level as in 2024. The estimated life-time sales for all orders booked in 2025 is around $7.7 billion, compared to around $7.4 billion in 2024. As sourcing of several large platforms were pushed into 2026, we expect a rebound of OEM sourcing activity and Autoliv order intake in 2026.
STRATEGIC AND STRUCTURAL INITIATIVES
The 2025 light vehicle market was impacted by a technological and geopolitical uncertainties, with continued elevated customer call-off volatility and inflationary pressure on costs for labor. In response, Autoliv management continued to implement strict cost control measures, as well as execute significant structural cost reduction measures. In June 2023, the Company communicated a cost reduction framework that included the intent to reduce its indirect headcount by up to 2,000, and to improve direct labor productivity equivalent to a reduction of up to a 6,000 direct workforce positions. Based on the intended indirect workforce reductions, the Company estimates that total annual cost reductions will amount to around $130 million when fully implemented, with approximately $50 million in savings recorded in 2024, increasing to around $100 million in 2025 and the remaining amount expected in 2026 and 2027. At the end of 2025, around 1,600 of the planned indirect reductions had been completed.
Direct labor efficiency has developed well in both 2024 and 2025, supported by the direct labor workforce reduction program, improved call-off accuracy and a focused automation effort. It is the Company's estimate that the program's target of 6,000 direct labor workforce reduction was achieved by the end of 2025.
The provision, net of reversals, for restructuring activities in 2025 amounted to $8 million compared to $18 million in 2024. As of December 31, 2025, the Company had $82 million reserved in its balance sheet related to restructuring compared to $151 million last year. For more information, see Note 13, Restructuring, to the Consolidated Financial Statements included herein.
In addition to the structural improvements outlined above, the Company continues to implement the strategic initiatives to improve the efficiency of its value chain from end to end, not least through the Autoliv Production System and increased digitalization and automation. The Company has a high pace in the planning and implementation of the strategic initiatives. These initiatives are key drivers to the Company's targets and building the foundation to continue to create shareholder value.
IMPROVED EFFICIENCIES THROUGH OPERATIONAL EXCELLENCE
Pricing pressure is an inherent part of the automotive supplier business. Price reductions are generally higher on newer products with strong volume growth compared to older products, where both the possibilities to re-design the product to reduce costs and market growth are less. Price reductions can also depend on the business cycle and raw material price development. For the five-year period 2017-2021, the Company estimates the average reduction of product prices on existing programs to have been in the range of around 2-4% annually. In 2022, the pricing environment changed to some extent due to high raw material price and cost increases, which led to renegotiations with customers regarding commercial terms. These discussions resulted in a net positive price development, gradually implemented throughout the year. This was also the case in 2023, and for 2024 as well, albeit at a lower level as inflation moderated. In 2025, inflation moderated further, as did customer compensations for excess inflation. Customer recoveries for increased tariff costs impacted net sales positively in 2025.
A key strategy for Autoliv to be and to remain cost competitive is to reduce labor costs, through continuously implementing productivity improvement programs, optimizing the Company's production footprint, and instituting restructuring and capacity alignment activities as well as other actions to address the Company's cost structure.
The Company's productivity improvement target, measured as labor minutes per unit, is to achieve at least 8% savings per year. This is an increase from previous target of 5% savings per year. The increase reflects mainly increased opportunities related to advances in digitalization and automation, including machine learning and AI. To meet this target, Autoliv has developed a set of strategies to reduce costs in manufacturing:
Autoliv production system (APS) is based on lean manufacturing methodology which aims to continuously increase output with less resources. APS provides the target conditions and tools to achieve the delivery of goods and services at the right time, in the right amount, at the required quality and at the lowest cost possible to all the Company's customers.
Autoliv One Product One Process (1P1P) strategy focuses on product and process standardization and reducing cost and complexity. The 1P1P strategy, combined with initiatives to reduce costs for components from external suppliers, ensures that the Company continuously optimizes its supply base footprint, consolidates purchase volumes to fewer suppliers, improves productivity in the Company's supply chain, standardizes components and redesign its products.
Strategic Initiatives, including Automation, Digitalization, Machine Learning and AI, Supply Chain Management Effectiveness and RD&E Effectiveness.
The Company's historical experience is that its continuous improvement strategies have enabled productivity improvements at or above its historic target of 5%. However, the Company has not achieved its 5% productivity target since the COVID-19 pandemic in 2020, due to the decline in LVP in 2020 and the high volatility in customer call-offs in 2021, 2022 and 2023, driven by the industry wide supply chain instability, especially for semiconductors. In 2024, however, the Company achieved its 5% productivity target, as gradual improvement in customer call-off volatility enabled improved operational efficiency. In 2025, the Company achieved its new target of 8% labor minutes per unit productivity.
The Company foresees opportunities for further productivity on organic sales growth and increased call-off stability when global supply chains continue to stabilize further to pre-pandemic levels, but also from increasing use of automation in its assembly for lean manufacturing processes. Additionally, automated cells typically perform the manufacturing process with reduced variability. This results in greater control and consistency of product quality.
FOCUS ON QUALITY
The number of vehicle recalls in the automotive industry continues to be at a relatively high level. The Company expects overall recall numbers to remain high for years to come and, although the Company strives for the highest quality in its processes, it cannot be ruled out that the Company may also be adversely impacted by a future recall.
Quality has been and always will be the Company's number one priority, and the Company continues to sharpen its focus in this area. The Company now holds a global market share in passive safety of around 44%, while the Company has been involved in around 3% of recalls in the industry in the past ten years. This indicates that the Company is delivering on its quality strategy. For more information see product warranty and recalls in Note 14, Product Related Liabilities, to the Consolidated Financial Statements in this Annual Report.
CHANGES IN COMPETITIVE AND CUSTOMER LANDSCAPE
The Company has not noted any significant changes in the competitive landscape in 2025. We consider Joyson Safety Systems, a part of Ningbo Joyson Electronic Corp., and ZF LIFETEC, a part of ZF Friedrichshafen AG, to be global competitors to Autoliv. In addition, there are several smaller regional and product specific competitors, especially in China.
The customer landscape is gradually changing, with a multitude of new OEMs emerging in recent years. This is especially prominent within electric vehicles and in China. In China, domestic OEMs have gained significant market shares and as a group now has larger market share than global OEMs have in China. Autoliv's sales to domestic OEMs in China has grown rapidly. In 2022, this group accounted for 22% of Autoliv's sales in China, and in 2025 their share of Autoliv sales in China was 44%. The fastest growing OEM in China in recent years has been BYD, although its growth slowed significantly in 2025. BYD has a uniquely high degree of vertical integration, with a large proportion of in-house sourcing of products and systems. This includes passive safety systems, which is supplied by its subsidiary FinDreams Technology. Autoliv supplies components, especially inflators, to FinDreams Technology.
CAPITAL STRUCTURE
The Company’s net debt stood at $1,566 million on December 31, 2025. This was an increase of $12 million compared to December 31, 2024. Total interest-bearing debt at December 31, 2025 amounted to $2,153 million, an increase of $244 million compared to December 31, 2024.
Cash flow from operations was $1,157 million in 2025 and $1,059 million in 2024. Capital expenditures, net amounted to $423 million in 2025 and $563 million in 2024. During 2025 and 2024, the Company paid dividends of $238 million and $219 million, respectively.
It is the Company’s policy to maintain a financial leverage commensurate with a “strong investment grade credit rating”. The long-term target is to have a leverage ratio (see section Non-GAAP Performance Measures) not above 1.5x. At December 31, 2025, the leverage ratio was 1.1x. The Company monitors its capital structure and the financial markets closely and intends to maintain a high level of financial flexibility while being shareholder friendly.
As part of the adjustment of the capital structure, the Company has historically repurchased shares of its common stock. During 2025 and 2024, the Company repurchased and retired 3.1 million and 5.1 million shares, respectively. On June 4, 2025, the Company announced that its Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to $2.5 billion of common shares and operates from July 1, 2025 through December 31, 2029.
In 2024, the Company also retired 2 million shares previously held in Treasury stock. As of December 31, 2025, the Company continues to hold around 2.6 million shares of common stock in treasury.
Outlook for 2026
In addition to the assumptions noted below and our business and market update provided herein, the Company's guidance for 2026 is mainly based on its customer call-offs and the achievement of its targeted cost compensation adjustments with its customers, including no material changes to tariffs or trade restrictions, as compared to what is in effect as of January 23, 2026, as well as no significant changes in the macro-economic environment, changes to customer call-off volatility or significant supply chain disruptions.
Full year 2026 Guidance
Organic sales growth
Around 0%
Adjusted operating margin 1)
Around 10.5-11.0%
Operating cash flow 2)
Around $1.2 billion
Capital expenditures, net, % of sales
Less than 5%
1) Excluding effects from capacity alignments, antitrust related matters and other discrete items. 2) Excluding unusual items.
Full year 2026 Assumptions
LVP growth
Around 1% negative
Foreign currency impact on net sales
Around 1% positive
Tax rate 3)
Around 28%
3) Excluding unusual tax items.
The forward-looking non-GAAP financial measures above are provided on a non-GAAP basis. Autoliv has not provided a GAAP reconciliation of these measures because items that impact these measures, such as costs related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and Autoliv is unable to determine the probable significance of the unavailable information.
Significant Legal Matters
See Item 3. Legal Proceedings and Note 19, Contingent Liabilities, to the Consolidated Financial Statements in this Annual Report.
results of operations
Consolidated net sales in 2025 increased by 4.1% compared to 2024. Excluding positive currency translation effects of 0.7%, the organic sales increased (Non-GAAP measure, see reconciliation table below) by 3.4% compared to the global LVP increase of 3.9% (according to S&P Global, Jan 2026).
Sales by Product
Years ended December 31,
Components of change in net sales
Reported
change
Currency
effects 1)
Organic 3)
Airbags, Steering Wheels and Other 2)
Seatbelt products and Other 2)
Total
1) Effects from currency translations.
2) Including Corporate and Other sales.
Airbags, Steering Wheels and Other
Sales for Airbags, Steering Wheels and Other grew organically (Non-GAAP measure, see reconciliation table above) by 3.4% in 2025. The largest contributor to the increase was side airbags and inflatable curtains, followed by steering wheels, center airbags and driver airbags.
Seatbelt Products and Other
Sales for Seatbelt Products and Other grew organically (Non-GAAP measure, see reconciliation table above) by 3.5% in 2025. Sales growth was mainly driven by Americas and Asia excluding China followed by Europe and China.
Sales by Region
Years ended December 31,
Components of change in net sales
Reported
change
Currency
effects 1)
Organic 3)
Americas
Europe
China
Asia excl. China
Total
1) Effects from currency translations.
Autoliv’s global sales increased organically (Non-GAAP measure, see reconciliation table above) by 3.4% in 2025 compared to 2024, which was around 0.5 percentage points below global LVP growth (according to S&P Global, January 2026). The 0.5pp underperformance was positively impacted by product launches and tariff compensations. This was more than offset by negative effects from the regional and model LVP mix development, which we estimate contributed to about 2.5pp underperformance. This was particularly accentuated in China.
Our organic sales growth (Non-GAAP measure) outperformed LVP growth by 3.4pp in Americas, by 3.3pp in Asia excluding China and by 2.4pp in Europe, while we underperformed by 6.1pp in China. LVP growth in China in 2025 was driven by domestic OEMs with typically lower safety content. LVP for global OEMs declined by 1.3% while it increased by 16% for domestic OEMs. Autoliv's sales to domestic OEMs increased by 23% in 2025 while it decreased by 7.3% to global OEMs in China. We expect continued strong sales growth in China in 2026, driven by our performance with domestic OEMs.
2025 Organic Growth (Non-GAAP measure)
Americas
Europe
China
Asia excl. China
Global
Autoliv
Main growth drivers
Stellantis, Toyota, Ford
Stellantis, BMW, VW
Chery, Great Wall, Nio
Suzuki, Toyota, Hyundai
Stellantis, Suzuki, Toyota
Main decline drivers
EV GOEM, GM, Hyundai
EV GOEM, JLR, Hyundai
EV GOEM, VW, Mercedes
Mitsubishi, Honda, GM
EV GOEM, JLR, Lixiang
Condensed Statement of Income
Years ended December 31,
(Dollars in millions, except per share data)
Change
Net Sales
Gross profit
% of sales
% of sales
R, D&E, net
% of sales
Other income (expense), net
Operating income
% of sales
Adjusted operating income 1)
% of sales
Financial and non-operating items, net
Income before taxes
Income taxes
Tax rate
Net income
Earnings per share, diluted 2)
Adjusted earnings per share, diluted 1,2)
1) Non-GAAP Measure . 2) Net of treasury shares .
Gross Profit
In 2025, gross profit increased by $147 million and the gross margin increased by 0.6pp compared to 2024. The drivers behind the gross profit improvement were mainly improved operational efficiency with lower costs for labor, logistics, premium freight and waste and scrap. We also had positive effects from the organic sales growth and lower material costs partly offset by negative effects from recall and warranty costs, un-recovered tariffs and higher depreciation.
Operating Income
Operating income increased in 2025 by $109 million, mainly due to the higher gross profit, as outlined above and the improvement in Other income (expense), partly offset by higher costs for S,G&A and R,D&E, as outlined below.
Selling, General and Administrative (S,G&A) expenses increased in 2025 by $40 million, mainly due to $20 million in increased personnel costs driven by wage inflation, $13 million in higher IT costs mainly due to higher license costs, $6 million in negative FX translation effects. S,G&A costs in relation to sales increased from 5.1% to 5.3%, a level that is considered to be slightly above normal.
Research, Development & Engineering (R,D&E) expenses, net increased in 2025 by $15 million, mainly due to $18 million in lower engineering income due to timing effects and $7 million in higher personnel costs due to wage inflation partly offset by $5 million from positive FX translation effects. R,D&E, net, in relation to sales was unchanged at 3.8%. The Company consider a level of around 4% to be representative for its business scope.
Other income (expense), net was an expense of $2 million in 2025 compared to an expense of $19 million in 2024. Almost all of the $17 million in lower expense was due to lower restructuring costs in 2025 compared to 2024 .
F inancial and Non-operating Items, net
Financial and non-operating items, net, improved by $3 million in 2025 compared to previous year, mainly due to $5 million in lower interest expense partly offset by $3 million in lower interest income.
Income Taxes
The tax rate for 2025 was 25.4%, compared to 26.0% in 2024. Discrete tax items, net, had a favorable impact of 3.1pp in 2025 compared to 4.8pp favorable impact in 2024. The reported 25.4% tax rate as well as the underlying tax rate excluding discrete items was within our expected normal tax rate range of 25-30%.
Net Income and Earnings Per Share
Net income in 2025 increased by $88 million compared to 2024. Earnings per share, diluted increased by $1.52 compared to a year earlier, where the main drivers were $0.90 from higher operating income and $0.41 from lower number of outstanding shares, diluted, $0.17 from tax and by $0.03 from lower financial and non-operating items, net. The weighted average number of shares outstanding assuming dilution in 2025 was 76.9 million compared to 80.4 million in 2024.
Non-GAAP Performance Measures
In this annual report, the Company sometimes refers to Non-GAAP measures that the Company and securities analysts use in measuring Autoliv’s performance.
The Company believes that these measures assist management and investors in analyzing trends in the Company’s business for the reasons given below. Investors should not consider these Non-GAAP measures as substitutes for, but rather as additions to, financial reporting measures prepared in accordance with GAAP.
These Non-GAAP measures have been identified, as applicable, in each section of this annual report with tabular presentations provided below, reconciling them to GAAP.
It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
Organic Sales
The Company analyzes its sales trends and performance as changes in “organic sales growth” or “organic sales decline” because the Company currently generates approximately three quarters of net sales in currencies other than the reporting currency (i.e. U.S. dollars) and currency rates have proven to be rather volatile. Organic sales present the increase or decrease in the overall U.S. dollar net sales on a comparable basis, allowing separate discussions of the impact of acquisitions/divestitures and exchange rates.
See tabular reconciliations above, that present changes in “organic sales growth” as reconciled to the change in total GAAP net sales.
Net debt
The Company, from time to time enters into “debt-related derivatives” (DRDs) as a part of its debt management and as part of efficiently managing the Company’s overall cost of funds. Creditors and credit rating agencies use net debt adjusted for DRDs in their analyses of the Company’s debt, therefore we provide this Non-GAAP measure. DRDs are fair value adjustments to the carrying value of the underlying debt. Also included in the DRDs is the unamortized fair value adjustment related to a discontinued fair value hedge that will be amortized over the remaining life of the debt. By adjusting for DRDs, the total financial liability of net debt is disclosed without grossing debt up with currency or interest fair values.
Reconciliation of GAAP measure "Total debt" to Non-GAAP measure “Net debt”
DECEMBER 31 (Dollars in millions)
Short-term debt
Long-term debt
Total debt
Cash and cash equivalents
Debt issuance cost/Debt-related derivatives, net
Net debt
Adjusted operating income, adjusted operating margin and adjusted diluted Earnings per share (EPS)
Adjusted operating margin and adjusted diluted EPS are Non-GAAP measures the Company uses to evaluate its business, because the Company believes it assists investors and analysts in comparing the Company's performance across reporting periods on a consistent basis by excluding items that are non-operational or non-recurring in nature (such as costs related to capacity alignments, costs related to antitrust matters and for diluted EPS unusual tax items) and that the Company does not believe are indicative of its core operating performance and underlying business trends. Adjusted operating margin and adjusted diluted EPS, as shown in the table below, should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, including operating margin and diluted EPS.
Reconciliation of GAAP measure "Operating income" to Non-GAAP measure "Adjusted Operating income"
(Dollars in millions)
Operating income (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Total non-GAAP adjustments to operating income
Adjusted Operating income (Non-GAAP)
Reconciliation of GAAP measure "Operating margin" to Non-GAAP measure "Adjusted Operating margin"
(Percentage)
Operating margin (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Total non-GAAP adjustments to operating margin
Adjusted Operating margin (Non-GAAP)
Reconciliation of GAAP measure "Earnings per share - diluted" to Non-GAAP measure "Adjusted Earnings per share - diluted"
(Dollars)
Earnings per share - diluted (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Less: Tax on non-GAAP adjustments
Total non-GAAP adjustments to Earnings per share - diluted
Adjusted Earnings per share - diluted (Non-GAAP)
Weighted average number of shares outstanding - diluted (in millions)
Income before income taxes, Net income, Net income attributable to controlling interest, Capital employed
The following tables reconcile Income before income taxes, Net income, Net income attributable to controlling interest, Capital employed, which are inputs utilized to calculate Return On Capital Employed (“ROCE”), adjusted ROCE, Return On Total Equity (“ROE”) and adjusted ROE. The Company believes this presentation may be useful to investors and industry analysts who utilize these adjusted Non-GAAP measures in their ROCE and ROE calculations to exclude certain items for comparison purposes across periods. Autoliv’s management uses the ROCE, adjusted ROCE, ROE and adjusted ROE measures for purposes of comparing its financial performance with the financial performance of other companies in the industry and providing useful information regarding the factors and trends affecting the Company’s business.
The Company believes ROCE and adjusted ROCE are useful indicators of long-term performance both absolute and relative to the Company's peers as it allows for a comparison of the profitability of the Company’s capital employed in its business relative to that of its peers. The Company’s management believes that ROE and adjusted ROE are a useful indicators of how well management creates value for its shareholders through its operating activities and its capital management.
Accordingly, the tables below reconcile from GAAP to the equivalent Non-GAAP measure.
Reconciliation of GAAP measure "Income before income taxes" to Non-GAAP measure "Adjusted Income before income taxes"
(Dollars in millions)
Income before income taxes (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Total non-GAAP adjustments to Income before income taxes
Adjusted Income before income taxes (Non-GAAP)
Reconciliation of GAAP measure "Net income" to Non-GAAP measure "Adjusted Net income"
(Dollars in millions)
Net income (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Less: Tax on non-GAAP adjustments
Total non-GAAP adjustments to Net income
Adjusted Net income (Non-GAAP)
Reconciliation of GAAP measure "Net income attributable to controlling interest" to Non-GAAP measure "Adjusted Net income attributable to controlling interest"
(Dollars in millions)
Net income attributable to controlling interest (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Less: Tax on non-GAAP adjustments
Total non-GAAP adjustments to Net income attributable to controlling interest
Adjusted Net income attributable to controlling interest (Non-GAAP)
Reconciliation of GAAP measure "Return on Capital Employed" to Non-GAAP measure "Adjusted Return on Capital Employed"
(Percentage)
Return on capital employed 1) (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Total non-GAAP adjustments to Return on capital employed 1)
Adjusted Return on capital employed 1) (Non-GAAP)
Adjustment on Return on capital employed 1) (in millions)
1) The average capital employed amount is calculated as an average of the opening balance amount and the closing balance amounts for each quarter included in the period.
Reconciliation of GAAP measure "Return on Total Equity" to Non-GAAP measure "Adjusted Return on Total Equity"
(Percentage)
Return on total equity 1) (GAAP)
Non-GAAP adjustments:
Less: Capacity alignments
Less: Antitrust related items
Less: Tax on non-GAAP adjustments
Total non-GAAP adjustments to Return on total equity 1)
Adjusted Return on total equity 1) (Non-GAAP)
Adjustment on Return on capital employed 1) (in millions)
1) The average total equity amount is calculated as an average of the opening balance amount and the closing balance amounts for each quarter included in the period.
Liquidity, Capital Resources, and Financial Position
Years ended December 31
(DOLLARS IN MILLIONS)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
NET CASH PROVIDED BY OPERATING ACTIVITIES
Cash flow from operations, together with available financial resources and credit facilities, is expected to be sufficient to fund the Company’s anticipated working capital requirements, capital expenditures and future dividend payments.
Net cash provided by operating activities was $1,157 million in 2025 compared to $1,059 million in 2024. The increase of $98 million in 2025 was mainly due to $88 million in higher net income. The improvement was also supported by more positive effects compared to in 2024 from non-cash items such as $20 million from depreciation and amortization and $55 million from Other non-cash adjustments, which mainly constitutes positive effects from deferred income taxes, pension liabilities and other long term liabilities. This was partly offset by $65 million in less favorable effects from changes in operating working capital compared to 2024.
Receivables, net outstanding in relation to annualized fourth quarter sales was 20% at December 31, 2025, compared to 19% at December 31, 2024. Factoring agreements did not have any material impact on receivables outstanding for 2025 or 2024.
Inventory, net outstanding in relation to annualized fourth quarter sales was 9% at December 31, 2025, compared to 9% at December 31, 2024.
Payables outstanding in relation to annualized fourth quarter sales was 18% at December 31, 2025 compared to 17% at December 31, 2024.
NET CASH USED IN INVESTING ACTIVITIES
In 2025 and 2024, net cash used in investing activities amounted to $423 million and $563 million, respectively. The Company's investing activities primarily consist of investments in property, plant and equipment. Net cash generated by operating activities continued to sufficiently cover capital expenditures for property, plant and equipment.
In relation to net sales, capital expenditures, net (expenditures for property, plant and equipment less proceeds from sale of property, plant and equipment) was 3.9% compared to 5.4% in previous year. The lower level of capital expenditure, net is mainly related to the finalizing of several footprint optimization projects in Europe and Americas and less capacity expansion projects, especially in Asia.
The 3.9% level is slightly below what the Company expects for the longer term, which is to on average be below 5% in relation to sales.
Depreciation and amortization totaled $407 million in 2025 compared to $387 million in 2024.
During the years 2025 and 2024, a majority of the Company's investments were for production capacity to support new product launches, but also for automation projects for improved efficiency.
NET CASH USED IN FINANCING ACTIVITIES
Net cash used in financing activities amounted to $369 million and $680 million for the years 2025 and 2024, respectively. The decrease of $311 million in cash used in financial activities was mainly the result of $201 million less in repurchased shares in 2025 compared to 2024 and a higher net increase in short-term debt by $137 million in 2025 compared to 2024.
The Company's issuance, net of long-term debt was $210 million in 2025 and $220 million in 2024.
In 2025, the Company paid cash dividends of $238 million. In 2024, the Company paid dividends of $219 million. The Company's dividend approach has been the same for several years.
The Company repurchased shares to an amount of $351 million and $552 million in 2025 and 2024, respectively. The Company intends to continue to repurchase shares in accordance with the current authorization until the end of 2029.
INCOME TAXES
The Company has reserves for taxes that may become payable in future periods as a result of tax audits. At any given time, the Company is undergoing tax audits covering multiple years in several tax jurisdictions. Ultimate outcomes are uncertain but could, in future periods, have a significant impact on the Company’s cash flows. See discussions of income taxes under Significant Accounting Policies in this section, Note 2, Summary of Significant Accounting Policies, and Note 5, Income Taxes, to the Consolidated Financial Statements included herein.
PENSION ARRANGEMENTS
The Company has defined benefit pension plans covering nearly half of the U.S. employees. As of December 31, 2021, the main U.S defined benefit plan was frozen for further benefits. Many of the Company’s non-U.S. employees are also covered by pension arrangements.
At December 31, 2025, the Company’s net pension liability (i.e. the actual funded status) for its U.S. and non-U.S. plans was $169 million compared to $153 million at December 31, 2024.
The plans had a total net unamortized actuarial loss before tax of $29 million recorded in Accumulated Other Comprehensive (Loss) Income in the Consolidated Balance Sheets at December 31, 2025, compared to $36 million at December 31, 2024. The amortization of the actuarial loss is expected to be $2 million in 2026.
Total pension expense associated with the defined benefit plans was $22 million in 2025 and $34 million in 2024, and is expected to be $25 million in 2026.
The Company contributed $15 million to its defined benefit plans in 2025 and $29 million in 2024. The Company expects to contribute $16 million to these plans in 2026 and is currently projecting a yearly funding at approximately the same level in the subsequent years.
For further information about retirement plans see Note 20, Retirement Plans, to the Consolidated Financial Statements included herein.
EQUITY
During 2025, total equity increased by $297 million to $2,582 million as of December 31, 2025. The change was mainly due to net income of $736 million and positive currency translation effects of $137 million, offset by share repurchases, including taxes of $355 million and dividends paid of $239 million,
TREASURY ACTIVITES
DEBT AND CREDIT ARRANGEMENTS
The Company's total debt on December 31, 2025 and 2024 was $2,153 million and $1,909 million, respectively. The Company had a net debt position (see section Non-GAAP Performance Measures) on December 31, 2025 and 2024 of $1,566 million and $1,554 million, respectively.
In July 2024, the Company entered into a $125 million bilateral revolving credit facility (Bilateral RCF) with substantially the same terms as the revolving credit facility (RCF) with the 11 banks (see below). In May 2022, the Company refinanced its existing RCF of $1,100 million. The facility was syndicated among 11 banks and matures May 2029. The Company pays a commitment fee on the undrawn amount of 0.10%, representing 35% of the applicable margin, which is 0.275% (given the Company’s ratings of "BBB+" from Fitch and “Baa1” from Moody’s). Borrowings under the facility are unsecured. On December 31, 2025, the Company’s unutilized long-term credit facilities were $1,225 million, represented by the RCF and the Bilateral RCF. These facilities are not subject to any financial covenants nor is any other substantial financing of Autoliv.
In October 2025, the Company priced and issued a 5-year green bond for a total of €300 million in the Eurobond market. The bond carries a coupon of 3.0% and matures in October 2030.
In February 2024, the Company priced and issued a 5.5-year green bond for a total of €500 million in the Eurobond market. The bond carries a coupon of 3.625% and matures in August 2029.
In March 2023, the Company priced and issued a 5-year green bond for a total of €500 million in the Eurobond market. The bond carries a coupon of 4.25% and matures in March 2028.
The Company has a €3,000 million Euro Medium Term Note Program in place for being able to issue notes to be traded on the Global Exchange Market of Euronext Dublin. On December 31, 2025, €1,300 million had been issued under this program.
In 2014, the Company issued and sold long-term debt securities in a U.S. Private Placement pursuant to a Note Purchase and Guaranty Agreement dated April 23, 2014, by and among Autoliv ASP Inc., the Company and the purchasers listed therein. On December 31,2025, $470 million remains outstanding from the 2014 issuance, of which $185 is long-term.
On December 31, 2025 Autoliv’s long-term credit rating from Moody’s was Baa1, and from Fitch BBB+. All ratings with stable outlook. As of February 7, 2025, S&P Global Ratings withdrew the ratings for Autoliv on the Company’s request. The company aims to maintain a strong investment grade credit rating.
For additional information about the Company's debt and credit arrangements, see Note 15, Debt and Credit Agreements, to the Consolidated Financial Statements included herein.
FACTORING
During 2025 and 2024, the Company sold receivables and discounted notes related to selected customers. These factoring arrangements increase cash while reducing accounts receivable and customer risks. On December 31, 2025, the Company had received $258 million for sold receivables without recourse and discounted notes with a discount cost of $2 million during the year, compared to $211 million on December 31, 2024 with a discount cost of $3 million recorded in Other non-operating items, net.
NUMBER OF SHARES
At December 31, 2025, 74.7 million shares were outstanding (net of 2.6 million treasury shares), a 3.9% decrease from 77.7 million one year earlier.
The number of shares outstanding is expected to increase by 0.6 million when all RSUs and PSUs vest, see Note 18, Stock Incentive Plans, to the Consolidated Financial Statements included herein.
During 2025, the Company repurchased and retired approximately 3.1 million shares equal to $351 million. During 2024 the Company repurchased and retired approximately 5.1 million shares equal to $552 million. In addition, the Company also retired 2,000,000 treasury shares in December 2024. On June 4, 2025, the Company announced that its Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to $2.5 billion of common shares and operates from July 1, 2025 through December 31, 2029.
Contractual Obligations and Commitments
Contractual obligations include debt, sponsored defined benefit plans, lease and purchase obligations that are enforceable and legally binding on the Company.
For material contractual debt obligations as of December 31, 2025, see Note 15, Debt and Credit Agreements, to the Consolidated Financial Statements included herein.
Operating lease obligations represent the payment obligations (undiscounted cash flows) under leases classified as operating leases. Capital lease obligations are not material. See Note 3, Leases, to the Consolidated Financial Statements included herein.
There are no unconditional purchase obligations other than short-term obligations related to inventory, services, tooling, and property, plant and equipment purchased in the ordinary course of business. Purchase agreements with suppliers entered into in the ordinary course of business do not generally include fixed quantities. Quantities and delivery dates are established in “call off plans” accessible electronically for all customers and suppliers involved. Communicated “call off plans” for production material from suppliers are normally reflected in equivalent commitments from Autoliv customers.
The Company sponsors defined benefit plans that cover a significant portion of the Company's U.S. employees and certain non-U.S. employees. The pension plans in the U.S. are funded in conformity with the minimum funding requirements of the Pension Protection Act of 2006. Funding for the Company's pension plans in other countries is based upon plan provisions, actuarial recommendations and/or statutory requirements. Due to volatility associated with future changes in interest rates and plan asset returns, the Company cannot predict with reasonable reliability the timing and amounts of future funding requirements. The Company may elect to make contributions in excess of the minimum funding requirements for the U.S. plans in response to investment performance and changes in interest rates, or when the Company believes that it is financially advantageous to do so and based on other capital requirements. See Note 20, Retirement Plans, to the Consolidated Financial Statements included herein.
COMMITMENTS
The Company has entered into a number of unrecognized unconditional purchase agreements relating to Solar Farms in US and China during 2024, of which none is individually significant for disclosure. Together these agreements have an aggregated termination fee (discounted) of approximately $51 million as of December 31, 2025. These Solar Farm agreements have a contract period ranging from 20-25 years. The future payments (undiscounted) relating to these unrecognized unconditional purchase agreements are in total $60 million to be paid over the following years: 1-3 years: $6 million; 4-5 years: $4 million and; more than 5 years: $50 million.
During 2025 the Company has entered into a global 5-year Enterprise Subscription Agreement. The subscription fees for the software licenses will be paid annually in advance. The future payments (undiscounted) relating to this unrecognized software subscription agreement are in total approximately $42 million to be paid over the following years: Less than 1 year: $12 million; 2-3 years: $25 million; 4-5 years: $5 million.
Additionally, the Company has entered into a number of software license agreements, mainly during 2025, of which none is individually significant for disclosure. The future payments (undiscounted) for these unrecognized software license agreements are in total $26 million to be paid as follows: Less than 1 year: $8 million; 2-3 years: $12 million and 4-5 years: $6 million.
Risks and Risk Management
The Company is exposed to several categories of risks. They can broadly be categorized as operational risks, strategic risks and financial risks. Some of the major risks in each category are described below. There are also other risks that could have a material effect on the Company’s results and financial position, and the description below is not complete but should be read in conjunction with the discussion of risks described in Item 1A above, which contains a description of the Company's material risks.
As described below, the Company has taken several mitigating actions, applied numerous strategies, adopted policies, and introduced control and reporting systems to reduce and mitigate these risks. In addition, the Company from time to time identifies and evaluates emerging or changing risks to the Company in order to ensure that identified risks and related risk management are updated in this fast-moving environment.
Operational Risks
LIGHT VEHICLE PRODUCTION
Around 35% of Autoliv’s costs are fixed; therefore, short-term earnings are dependent on sales volumes and highly dependent on capacity utilization in the Company’s plants.
Global LVP is an indicator of the Company’s sales development. Ultimately, however, sales are determined by the production levels for the individual vehicle models for which Autoliv is a supplier (see Dependence on Customers). The Company’s sales are split over several hundred contracts covering more than 1,300 vehicle models. This moderates the effect of changes in vehicle demand of individual countries and regions as well as production issues. The risk of fluctuating sales has also been mitigated by Autoliv’s rapid expansion in Asia and other growth markets, which has reduced the Company’s former high dependence on sales in Europe to a diversified mix with Europe, the Americas and Asia, each accounting for approximately 29%, 32% and 39%, respectively, of the Company's 2025 total sales.
It is the Company’s strategy to reduce the risks associated with fluctuating LVP by using temporary personnel in direct production, when appropriate. During 2025 and 2024, the level of temporary personnel in relation to total personnel in direct production increased to 12% from 11%. To reduce the potential impact of unusual fluctuations in the production of vehicle models supplied by the Company such as during the financial crisis in 2008-2009 and the COVID-19 pandemic in 2020-2021 – it is also necessary for the Company to be prepared to quickly adapt the level of permanent employees as well as fixed cost production capacity.
PRICING PRESSURE
Pricing pressure from customers is an inherent part of the automotive components business. The historical extent of price reductions varies from year to year and takes the form of one time give backs, reductions in direct sales prices and/or discounted reimbursements for engineering work.
In response, Autoliv is continuously engaged in efforts to reduce costs and to provide customers added value by developing new products. Generally, the speed by which these cost-reduction programs generate results will, to a large extent, determine the future profitability of the Company. The various cost-reduction programs are, to a considerable extent, interrelated. This interrelationship makes it difficult to isolate the impact of costs on any single program; therefore, the Company monitors key measures such as costs in relation to sales and productivity.
In 2025, due to cost pressures from labor and other items the Company engaged in extensive negotiations with its customers regarding compensations.
COMPONENT COSTS AND RAW MATERIAL PRICES
The cost of direct materials was approximately 54% of sales in 2025 (55% in 2024).
The main raw materials being used as input material for the Company's operations are steel, textiles, plastic and non-ferrous metals.
The Company still sees effects coming from import tariffs and trade barriers across borders. These barriers are impacting the raw material market and creating pricing and availability uncertainties. There is also volatility in the sea freight rates driven by geopolitical events.
In 2025, raw material inflation was limited. Cost inflation remained significant and related primarily to labor. The Company took actions, including pricing discussions with customers and suppliers, competitive sourcing and exploring alternative materials.
LEGAL
The Company is involved from time to time in regulatory, commercial, and contractual legal proceedings that may be significant, and the Company’s business may suffer as a result of adverse outcomes of current or future legal proceedings. These claims may include, without limitation, commercial or contractual disputes, including disputes with the Company’s suppliers and customers, intellectual property matters, alleged violations of laws, rules or regulations, governmental investigations, personal injury claims, product liability claims, environmental issues, tax and customs matters, and employment matters.
A substantial legal liability or adverse regulatory outcome and the substantial cost to defend the litigation or regulatory proceedings may have an adverse effect on the Company’s business, operating results, financial condition, cash flows and reputation.
No assurances can be given that such proceedings and claims will not have a material adverse impact on the Company’s profitability and consolidated financial position, or that reserves or insurance will mitigate such impact. See Note 19, Contingent Liabilities, to the Consolidated Financial Statements included herein and Item 3 – Legal Proceedings.
PRODUCT WARRANTY AND RECALLS
If our products are alleged to fail to perform as expected or are defective, the Company may be exposed to various claims for damages and compensation. Such claims may result in costs and other losses to the Company even where the relevant product is eventually found to have functioned properly. If a product (actually or allegedly) fails to perform as expected or is defective, we may face warranty and recall claims. If such actual or alleged failure or defect results, or is alleged to result, in bodily injury and/or property damage, we may also face product liability and other claims. The Company may experience material warranty, recall, product or other liability claims or losses in the future, and the Company may incur significant cost to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. Government safety regulators also have policies and practices with respect to recalls. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. In addition, with global platforms and procedures, vehicle manufacturers are increasingly evaluating our quality performance on a global basis. Any one or more quality, warranty or other recall issue(s), including the ones affecting few units and/or having a small financial impact, may cause a vehicle manufacturer to implement measures which may have a severe impact on the Company’s operations, such as a temporary or prolonged suspension of new orders or the Company’s ability to bid for new business.
In addition, over time, there is a risk that the number of vehicles affected by a failure or defect will increase significantly (as would the Company’s costs), since our products often use global designs and are increasingly based on or utilize the same or similar parts, components, or solutions.
Although quality has always been a central focus in the automotive industry, especially for safety products, our customers and regulators have become increasingly attentive to quality with even less tolerance for any deviations, which has resulted in an increase in the number of automotive recalls. This trend is likely to continue as automobile manufacturers introduce even stricter quality requirements and regulating agencies and other authorities increase the level of scrutiny given to vehicle safety issues. A warranty recall or a product liability claim brought against the Company in excess of the Company’s insurance may have a material adverse effect on its business and/or financial results. Vehicle manufacturers are also increasingly requiring their external suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some or all of the repair or replacement costs of defective products under new vehicle warranties when the product supplied did not perform as represented. Additionally, a customer may not allow us to bid for expiring or new business until certain remedial steps have been taken. Accordingly, the future costs of warranty claims by the Company’s customers may be material.
The Company’s warranty reserves are based upon management’s best estimates of amounts necessary to settle future and existing claims. Management regularly evaluates the appropriateness of these reserves and adjusts them when we believe it is appropriate to do so. However, the final amounts determined to be due could differ materially from the Company’s recorded estimates. We believe our established reserves are adequate to cover potential warranty settlements typically seen in our business.
The Company’s strategy is to follow a stringent procedure when developing new products and technologies and to apply a proactive “zero-defect” quality policy (see section Quality Management). In addition, the Company maintains a program of insurance, which includes commercial insurance, self-insurance, or a combination of both approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent based on our prior claims experience. However, such insurance may not be sufficient to cover every possible claim that can arise in the Company’s businesses, now or in the future, or may not always be available should the Company, now or in the future, wish to extend, renew, increase or otherwise adjust such insurance. In recent years, the cost of recall and product liability insurance as well as the Company’s level of self-insurance and deductibles has increased. Management’s decision regarding what insurance to procure is also impacted by the cost for such insurance. As a result, the Company may face material losses in excess of the insurance coverage procured. A substantial recall or liability in excess of coverage levels could therefore have a material adverse effect on the Company.
ENVIRONMENTAL
Most of the Company’s manufacturing processes consist of the assembly of components. As a result, the environmental impact from the Company’s plants is generally modest. While the Company’s businesses from time to time are subject to environmental investigations, there are no material environmental-related cases pending against the Company. Therefore, Autoliv does not incur (or expect to incur) any material costs or capital expenditures associated with maintaining facilities compliant with U.S. or non-U.S. environmental requirements. To reduce environmental risk, the Company has implemented an environmental management system in all plants globally and has adopted an environmental policy (see corporate website www.autoliv.com).
Autoliv is subject to a number of environmental and occupational health and safety laws and regulations. Such requirements are complex and are generally becoming more stringent over time. There can be no assurance that these requirements will not change in the future, or that the Company will at all times be in compliance with all such requirements and regulations, despite its intention to be. The Company may also find itself subject, possibly due to changes in legislation or other regulation, to environmental liabilities based on the activities of its predecessor entities or of businesses acquired. Such liability could be based on activities which are not related to the Company’s current activities.
TRADE AND TARIFFS
Autoliv is subject to various international trade regulations and regimes and changes in these regimes could lead to increased compliance costs and costs of raw materials and other components. In addition, political conditions leading to trade conflicts and the imposition of tariffs or other trade barriers between countries in which the Company does business could increase its costs of doing business. The effects of the new tariffs imposed in 2025 did not have a material impact on our profitability in 2025, as we achieved customer compensations for more than 80% of tariff costs. Including the dilutive effect of recovered tariffs, operating margin was negatively impacted by around 20 basis points in 2025.
Strategic Risks
REGULATIONS
In addition to vehicle production, the Company’s market is driven by the safety CPV, which is affected by new regulations and new vehicle rating programs, in addition to consumer demand for new safety technologies.
The most important regulations are the seatbelt installation laws that exist in all vehicle-producing countries. Many countries also have strict enforcement laws on the wearing of seatbelts. Another significant vehicle safety regulation is the U.S. federal law that, since 1997, requires frontal airbags for both the driver and the front-seat passenger in all new vehicles sold in the U.S. In 2007, the U.S. adopted new regulations for head impact and enhanced thorax protection in side impact crashes, which now have been fully phased-in.
The United States upgraded its vehicle rating program, US NCAP, in 2011 and again in 2024. In December 2024, NHTSA issued the Final Notice for the U.S. NCAP, outlining mid‑ and long‑term updates across the VRU Safety Program, Crash Avoidance Program, and Crashworthiness Program, including the adoption of advanced ATDs such as the THOR‑05F. The U.S. Department of Transportation also signaled regulatory modernization efforts, including potential use of negotiated rulemaking, and emphasized priorities such as transparency, vehicle affordability, and improved female occupant protection.
Europe upgraded the Euro NCAP rating system during 2018, and is updating its rating protocol for cars in 2026, and then plans further enhancements on a three-year rolling schedule. Euro NCAP established a rating program for heavy goods vehicles in 2024, which will add assessment of occupant protection in a 2030-timeframe.
China introduced a vehicle rating program in 2006, and together with the C-IASI, a rating program established in 2017 by CAERI, they drive the Chinese vehicle safety market and are beginning to influence developments in other regions. The next major upgrades to China NCAP will be phased in from 2027 through 2030. Both Euro NCAP and China NCAP are considering the use of virtual crash testing with virtual human body models as a new method to evaluate the robust safety performance of passenger vehicles, taking into account a wider number of load cases and variations in occupant weight, sex and age.
Japan and South Korea are continuously upgrading their vehicle rating programs, JNCAP and KNCAP, respectively. Latin America introduced a basic rating program in 2010 followed by ASEAN NCAP in Southeast Asia in 2011. Global NCAP advocates for vehicle standards, and its programs are addressing less regulated markets in Latin America, Africa, India, and South east Asia to promote government and industry action. Several newly industrialized countries, such as Malaysia and Thailand, are increasingly adopting the UN Regulations regarding vehicle safety under the UN 1958 agreement, and Malaysia started the world's first motorcycle safety rating program in 2021. India has required frontal airbags for the driver since July 2019, and passenger airbags since 2021 for all new passenger vehicles. In addition, India started its Bharat NCAP in October 2023 and is working on an upgrade for the next four-year cycle with implementation in October 2027.
Vehicles with automated driving systems are expected to provide additional opportunities through integration of protective safety systems with advanced driver assistance system technologies, as well as new opportunities and challenges related to its impact on vehicle interior layouts, steer-by-wire steering systems, and seating configurations. These developments are expected to be subject to legal requirements and addressed in safety rating assessments.
There are also other plans for improved automotive safety through new or revised regulations, both in the countries mentioned above and in others regions, which could affect the Company’s market. However, there can be no assurance that changes in regulations will not adversely affect the demand for the Company’s products or, at least, result in a slower increase in the demand for them.
DEPENDENCE ON CUSTOMERS
As a result of this highly consolidated market, the Company is dependent on a relatively small number of customers with strong purchasing power. In 2025, the Company's five largest customers accounted for around 40% of global LVP and the ten largest accounted for around 56% of global LVP. In 2025, the Company’s five largest customers accounted for around 44% of consolidated sales and the ten largest customers accounted for around 70% of consolidated sales. The Company's largest customer contract accounted for around 2% of consolidated sales in 2025.
Customer
% of Autoliv sales
% of Global LVP 1)
Stellantis
Toyota
Honda
Hyundai
Ford
Nissan
General Motors
Mercedes Benz
BMW
1) Source: S&P Global January 2026
Although business with every major customer is split into at least several contracts (usually one contract per vehicle platform) and although the customer base has become more balanced and diversified as a result of the Company's significant expansion in China and other rapidly-growing markets, the loss of all business from a major customer (whether by a cancellation of existing contracts or not awarding Autoliv new business), the consolidation of one or more major customers or a bankruptcy of a major customer could have a material adverse effect on the Company. In addition, a quality issue, shortcomings in the Company's service to a customer or uncompetitive prices or products could result in the customer not awarding the Company new business, which will gradually have a negative impact on the Company's sales when current contracts start to expire.
See also Note 21, Segment Information, to the Consolidated Financial Statements included herein.
CUSTOMER PAYMENT RISK
Another risk related to the Company's customers is the risk that one or more of its customers will be unable to pay their invoices that become due. The Company seeks to limit this customer payment risk by invoicing its major customers through their local subsidiaries in each country, even for global contracts. By invoicing this way, the Company attempts to avoid having the receivables with a multinational customer group exposed to the risk that a bankruptcy or similar event in one country would put all receivables with such customer group at risk. In each country, the Company also monitors invoices becoming overdue.
Even so, if a major customer is unable to fulfill its payment obligations, it is likely that the Company would be forced to record a substantial loss on such receivables.
DEPENDENCE ON SUPPLIERS
The Company relies on internal and/or external suppliers in order to meet its delivery commitments to the customers. In some cases, suppliers are dictated by the customers. The Company's supply chain organization continually reviews sourcing risks and actively works on mitigating related supply chain risks.
The Company’s ambition is to maintain an optimal number of suppliers in all significant component technologies.
NEW COMPETITION
Increased competition may result in price reductions, reduced margins and the Company's inability to gain or hold market share. OEMs rigorously evaluate suppliers on the basis of product quality, price, reliability and delivery as well as engineering capabilities, technical expertise, product innovation, financial viability, application of lean principles, operational flexibility, customer service, and overall management. To maintain the Company's competitiveness and position as a market leader, it is important to focus on all these aspects of supplier evaluation and selection.
Although the market for occupant restraint systems has undergone a significant consolidation during the past ten years, the passive safety market remains very competitive. It cannot be excluded that additional competitors, both global and local, will seek to enter the market or grow beyond their current Keiretsu group or traditional customer base. Particularly in China, South Korea, and Japan there are numerous domestic competitors often supplying just one OEM group.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company’s strategy is to protect its innovations with patents, and to vigorously protect and defend its patents, trademarks, and know-how against infringement and unauthorized use. At the end of 2025, the Company held more than 6,600 patents and patents applications. These patents expire on various dates during the period from 2026 to 2045. The expiration of any single patent is not expected to have a material adverse effect on the Company’s financial results.
Although the Company believes that its products and technology do not infringe upon the proprietary rights of others, there can be no assurance that third parties will not assert infringement claims against the Company in the future. Also, there can be no assurance that any patent now owned by the Company will afford protection against competitors that develop similar technology. As the Company continues to expand its products and expand into new businesses, it will increase its exposure to intellectual property claims.
Financial Risks
The Company is exposed to financial risks through its operations. To reduce the financial risks and to take advantage of economies of scale, the Company has a central treasury department supporting operations and management. The treasury department handles external financial transactions and functions as the Company’s in-house bank for its subsidiaries.
The Board of Directors monitors compliance with the financial risk policy on an on-going basis. For information about specific financial risks, see Item 7A – Quantitative and Qualitative Disclosures about Market Risk.
Significant Accounting Policies and Critical Accounting Estimates
NEW ACCOUNTING STANDARDS
The Company has considered all applicable recently issued accounting standards. The Company has summarized in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements each of the recently issued accounting standards and stated the impact or whether management is continuing to assess the impact.
CRITICAL ACCOUNTING ESTIMATES
The Company’s significant accounting policies are disclosed in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included herein. The application of accounting policies necessarily requires judgments and the use of estimates by a Company’s management. Actual results could differ from these estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on the Company's historical experience, terms of existing contracts, and management’s evaluation of trends in the industry, information provided by the Company's customers and information available from other outside sources, as appropriate. The Company considers an accounting estimate to be critical if:
It requires management to make assumptions about matters that were uncertain at the time of the estimate, and
Changes in the estimate or different estimates that could have been selected would have had a material impact on the Company's financial condition or results of operations. The accounting estimates that require management’s most significant judgments include the estimation of variable considerations, estimation of pension benefit obligations based on actuarial assumptions, estimation of accruals for warranty and recalls, uncertain tax positions, valuation allowances and legal proceedings.
The Company has summarized its critical accounting policies requiring judgment below. These might change over time based on the current facts and circumstances.
REVENUE RECOGNITION
In accordance with ASC 606, Revenue from Contracts with Customers , revenue is measured based on consideration specified in a contract with a customer, adjusted for any variable consideration (i.e., price concessions) and estimated at contract inception. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. The estimated amount of variable consideration that will be received or paid by the Company is based on historical experience and trends, management's understanding of the status of negotiations with customers and including pricing strategies. Negotiations with customers is an ongoing process and the recognition of variable considerations is impacted by the outcome and timing of these negations. Estimating variable consideration to be received or paid related to price concessions requires significant judgments by management that affect the amount of revenue recorded in the financial statements due to the unique facts and circumstances in each of the customer agreements and the on-going commercial negotiations with the customers. For the year-end 2025 the Company recognized an accrual amounting to $242 million net for variable considerations to be received or paid for variable considerations versus $185 million the year before.
In addition, from time to time, the Company may make payments to customers in connection with ongoing and future business. These payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments unless the payment concession can be clearly linked to the future business award. If the payments are capitalized, the amounts are amortized to revenue as the related goods are transferred. In the year-end 2025 and 2024 respectively the capitalized amount has been insignificant.
CONTINGENT LIABILITIES
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability or other matters.
The Company diligently defends itself in such matters and, in addition, carries insurance coverage to the extent reasonably available against insurable risks.
The Company records liabilities for claims, lawsuits and proceedings when they are probable and it is possible to reasonably estimate the cost of such liabilities. Legal costs expected to be incurred in connection with a loss contingency are expensed as such costs are incurred.
A loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued management evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact the Company's consolidated financial statements.
The Company continuously assesses the relevant facts and circumstances for on-going litigation matters in its determination of whether it is probable that an asset has been impaired or a liability has been incurred. The Company also considers its historical experience of similar matters using significant judgement to make its estimates . For the years ended December 31, 2025 and 2024 management's estimation process has been consistent and there have not been any material changes to the contingent liabilities recorded during 2025.
For further information regarding the significant on-going claims and lawsuits the Company is involved in, see Note 19 Contingent Liabilities, to the Consolidated Financial Statements.
RECALL PROVISIONS AND WARRANTY OBLIGATIONS
The Company records liabilities for product recalls when probable claims are identified and when it is possible to reasonably estimate costs. Recall costs are costs incurred when the customer decides to formally recall a product due to a known or suspected safety concern. Product recall costs are estimated based on the expected cost of replacing the product and the customers' cost of carrying out the recall, which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove and replace the defective product. The Company maintains a program of insurance, which may include commercial insurance, self-insurance, or a combination of both approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent based on our prior claims experience. The Company’s insurance policies generally include coverage of the costs of a recall, although costs related to replacement parts are generally not covered. Actual costs incurred could differ from the amounts estimated, requiring adjustments to these reserves in future periods. It is possible that changes in our assumptions or future product recall issues could materially affect our financial position, results of operations or cash flows.
Estimating warranty obligations requires the Company to forecast the resolution of existing claims and expected future claims on products sold. The Company bases the estimate on historical trends of units sold and payment amounts, combined with our current understanding of the status of existing claims and discussions with our customers. These estimates are re-evaluated on an ongoing basis. Actual warranty obligations could differ from the amounts estimated requiring adjustments to existing reserves in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing these estimates, changes in our assumptions could materially affect our results of operations.
The provision recorded for product liabilities for the years ended December 31, 2025 and 2024 were $87 million and $65 million respectively. The Company continuously assesses the relevant facts and circumstances for on-going product recall matters and considers its historical experience of similar matters using significant judgement to make its estimates, which are generally supported by external counsel expertise. For the years ended December 31, 2025 and 2024 respectively, management’s estimation process has been consistent and the ultimate outcome for settled product recall matters during the years ended December 31, 2025 have been in line with estimates and for December 31, 2024 were favorable compared to Management’s estimate. The reversal of the reserve in 2024 was related to certain recall issues that were settled with a favorable outcome.
For further information, see Note 14 Product Related Liabilities and Note 19 Contingent Liabilities, to the Consolidated Financial Statements.
DEFINED BENEFIT PENSION PLANS
The Company has defined benefit pension plans in thirteen countries. The most significant plans exist in the U.S. These U.S. plans represent approximately 46% of the Company’s total pension benefit obligation. See Note 20 Retirement Plans to the Consolidated Financial Statements.
The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the projected benefit obligation and annual pension expense. For the U.S. plans, the assumptions used for calculating the 2025 pension expense were a discount rate of 5.60% and an expected long-term rate of return on plan assets of 5.61%.
The assumptions used in calculating the U.S. benefit obligations disclosed, as of December 31, 2025 were a discount rate of 5.22%. The discount rate for the U.S. plans has been set based on the rates of return of high-quality fixed-income investments currently available at the measurement date and are expected to be available during the period the benefits will be paid. The expected rate of long-term return on plan assets are determined based on several factors and must consider long-term expectations and reflect the financial environment in the respective local markets. At December 31, 2025, 27% of the U.S. plan assets were invested in equities, which is close to the target of 32%.
The table below illustrates the sensitivity of the U.S. net periodic benefit cost and projected U.S. benefit obligation to a 1pp change in the discount rate and decrease in return on plan assets for the U.S. plans (in millions). The use of actuarial assumptions is an area of management’s estimate.
Assumption
(in millions)
Change
2025 net
periodic
benefit
cost increase
(decrease)
2025 projected
benefit
obligation
increase
(decrease)
Discount rate
1pp increase
Discount rate
1pp decrease
Return on plan assets
1pp decrease
INCOME TAXES
Significant judgment is required in determining the worldwide provision for income taxes. In the ordinary course of a global business, there are many transactions for which the ultimate tax outcome is uncertain. Many of these uncertainties arise because of intercompany transactions. The measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws. Deferred tax assets are reduced by the amount of any tax benefits that are not expected to be realized. A valuation allowance is recognized if, based on the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. Evaluation of the realizability of deferred tax assets is subject to significant judgment requiring careful consideration of all facts and circumstances, including key factors such as projected future profitability including tax planning strategies, interpretation of applicable tax laws and on-going or anticipated tax audits. Deferred net tax assets amounted to $446 million for the year 2025 including a valuation allowance of $109 million. For 2024, the deferred net tax assets amounted to $394 million including a valuation allowance of $126 million.
The Company evaluates its uncertain tax positions based on enacted tax laws and consideration of all facts and circumstances, including key factors such as interpretation of applicable tax laws, on-going tax audits or anticipated tax controversies. The unrecognized tax benefits amounted to $36 million and $35 million respectively for the year 2025 and 2024.
See also the discussion of reserves for uncertain tax positions, and the determination of valuation allowances on the Company's deferred tax assets in Note 5, Income Taxes, to the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk
The Company is exposed to several markets risks in the ordinary course of business including risks related to currencies, interest rates, financing, capital structure, credit ratings and impairment. See also Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included with this Annual Report for information about how these risks are quantified.
CURRENCY RISKS
1. Transaction Exposure and Revaluation effects
Transaction exposure arises because the cost of a product originates in one currency and the product is sold in another currency. Revaluation effects come from valuation of assets and liabilities denominated in other currencies than the reporting currency of each unit.
The Company's net transaction exposure in 2025 was approximately $2.9 billion. The four largest net exposures are U.S. dollars (sell) against the Mexican Peso, Romanian Lei (buy) against the Euro, U.S. dollars (buy) against Korean Won and Thai Baht (buy) against Japanese Yen. Together these currencies accounted for approximately 43% of the Company’s net currency transaction exposure.
Since the Company can only effectively hedge these currency flows in the short term, periodic hedging would only reduce the impact of fluctuations temporarily. Over time, periodic hedging would postpone but not reduce the impact of fluctuations. In addition, the net exposure is limited to only around one quarter of net sales and is made up of around 45 different currency pairs with exposures of more than $1 million each. The Company generally does not hedge these flows.
2. Translation Exposure in the Income Statement and Balance Sheet
Another effect of exchange rate fluctuations arises when the income statements of non-U.S. subsidiaries are translated into U.S. dollars. Outside the U.S., the Company’s most significant currency is the Euro. The Company estimates that 27% of its consolidated net sales will be denominated in Euro or other European currencies during 2026, while 16% of its consolidated net sales are estimated to be denominated in U.S. dollars.
The Company estimates that a 1% increase in the value of the U.S. dollar versus European currencies will decrease reported U.S. dollar annual net sales in 2026 by $30 million, while operating income for 2026 will decline by $3 million, assuming reported corporate average margin.
The Company’s policy is not to hedge this type of translation exposure.
A translation exposure also arises when the balance sheets of non-U.S. subsidiaries are translated into U.S. dollars. The policy of the Company is to finance major subsidiaries in the country’s local currency and to minimize the amounts held by subsidiaries in foreign currency accounts.
Consequently, changes in currency rates relating to funding and foreign currency accounts normally have a small impact on the Company’s income. In 2025 and 2024, the impact from the Company’s currency exposure were not material.
INTEREST RATE RISK
Interest rate risk refers to the risk that interest rate changes will affect the Company’s borrowing costs. The Company's interest rate risk policy states that the average interest rate fixing period should be minimum 1 year and maximum 5 years.
On December 31, 2025, the average interest rate fixing period for the Company’s outstanding debt was 2.9 years, and on December 31, 2024, the average interest rate fixing period for the Company’s outstanding debt was 2.8 years.
Given the Company’s current capital structure, we estimate that a one-percentage point interest rate increase would increase net interest income by approximately $4.7 million on an annual basis. This is based on the capital structure at the end of 2025 when the gross fixed-rate debt was $1,734 million while the Company had a net debt position of $1,566 million (see section Non-GAAP Performance Measures). Thus, a change in the interest rate environment would not have a notable impact on the Company’s interest expense. On December 31, 2025, the Company had $604 million in cash and cash equivalents of which the majority was subject to a floating interest rate.
Fixed interest rate debt may be achieved both by issuing fixed rate notes and through interest rate swaps. The most notable debt carrying fixed interest rates are the €500 million bond issued in 2023, the €500 million bond issued in 2024, the €300 million bond issued in 2025 and the U.S. private placement notes totaling $470 million. See Note 15, Debt and Credit Agreements, to the Consolidated Financial Statements.
FINANCING RISK
Financing risk refers to the risk that it will be difficult and/or expensive to finance new or existing debt to meet the financing needs of the Autoliv Group.
The management of the financing risk ensures access to funding in a cost-efficient way by diversification of funding sources and debt maturities.
Autoliv has diversified its long-term funding sources by issuing notes in the USPP and Eurobond markets, and by signing long-term credit agreements with 12 banks.
The Company has a Euro Medium Term Note Program in place for being able to issue notes to be listed at Euronext Dublin. The Company has established programs for short-term issuance of commercial papers in the Swedish and US markets and short-term credit agreements, e.g. bank overdrafts and money market loans.
To ensure diversification of debt maturities no more than 20% of the Autoliv Group’s total debt may mature the next 12 months, unless such maturities (in excess of 20%) are covered by unutilized committed credit facilities with maturity in excess of 12 months. On December 31, 2025, 19% corresponding to $419 million of the Autoliv Group’s total debt had maturity less than 12 months. This amount was fully covered by unutilized committed credit facilities with maturity in excess of 12 months.
CAPITAL STRUCTURE AND CREDIT RATING
The overall objective relating to Autoliv’s target capital structure and credit rating is to provide the Company with sufficient flexibility to manage the inherent risks and cyclicality in Autoliv’s business and allow the Company to realize strategic opportunities and fund growth initiatives while creating shareholder value.
Autoliv is committed to maintain a “strong investment grade credit rating." As of December 31, 2025, the Company had a long-term credit rating from Moody’s of Baa1 and from Fitch of BBB+. As of February 7, 2025, S&P Global Ratings withdrew the ratings for Autoliv on the company’s request.
The amount of interest-bearing debt impacts future financial flexibility as well as the credit rating. Management uses the non-GAAP measure “Leverage Ratio” to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. It is Autoliv’s target to operate with a leverage ratio (sum of net debt plus pension liabilities divided by EBITDA) of 1.5x or below. On December 31, 2025, the leverage ratio (Non-GAAP measure, see calculation table below) was 1.1x. For details and calculation of leverage ratio, refer to the table below.
CALCULATION OF NON-GAAP MEASURE LEVERAGE RATIO
December 31,
Net debt 1)
Pension liabilities
Debt per the Policy
Net income 2)
Income taxes 2)
Interest expense, net 2,3)
Other non-operating items, net 2)
Income from equity method investments 2)
Depreciation and amortization of intangibles 2)
Capacity alignments costs 2)
Antitrust related matters 2)
Other items 2)
EBITDA per the Policy (Adjusted EBITDA)
Leverage ratio
1) Net debt is short- and long-term debt and debt-related derivatives less cash and cash equivalents (non-GAAP measure).
2) Latest 12 months.
3) Interest expense, net is interest expense including cost for extinguishment of debt, if any, less interest income.
CREDIT RISK IN FINANCIAL MARKETS
Credit risk refers to the risk of a financial counterparty being unable to fulfill an agreed-upon obligation.
In the Company’s financial operations, credit risk arises when cash is deposited with banks and when entering into forward exchange agreements, swap contracts or other financial instruments.
The policy of the Company is to work with banks that have a high credit rating and that participate in Autoliv’s financing.
To further reduce credit risk, deposits and financial instruments can only be entered into with core banks up to a calculated risk amount of $250 million per bank for banks rated A- or above and up to $50 million for banks rated BBB+. In addition, deposits can be made in U.S. and Swedish government short-term notes and certain AAA rated money market funds, as approved by the Company’s Board of Directors. On December 31, 2025, the Company held $267 million in AAA rated money market funds.
IMPAIRMENT RISK
Impairment risk refers to the risk that the Company will write down a material amount of its goodwill of close to $1.4 billion as of December 31, 2025. This risk is assessed at least annually in the fourth quarter each year when the Company performs its impairment testing.
It has been concluded that presently the Company's goodwill is not “at risk”. However, there can be no assurance that goodwill will not be impaired due to future significant declines in LVP, due to the Company's technologies or products becoming obsolete or for any other reason. The Company could also acquire companies where goodwill could turn out to be less resilient to deteriorations in external conditions.
See also discussion under Goodwill and Intangible Assets in Note 2, Summary of Significant Accounting Policies, and Note 10, Goodwill and Intangible Assets, to the Consolidated Financial Statements included herein.
Item 8. Financial Statemen ts and Supplementary Data
The Consolidated Balance Sheets of Autoliv as of December 31, 2025 and 2024 and the Consolidated Statements of Income, Comprehensive Income, Cash Flows and Total Equity for each of the three years in the period ended December 31, 2025, the Notes to the Consolidated Financial Statements, and the Reports of the Independent Registered Public Accounting Firm are included below.
All of the schedules specified under Regulation S-X to be provided by Autoliv have been omitted either because they are not applicable, are not required or the information required is included in the financial statements or notes thereto.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Autoliv, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Autoliv, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, total equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2026 expressed an unqualified op inion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue recognition
Description of the
Matter
As discussed in Note 2 and 12 to the consolidated financial statements, the Company measures revenue based on consideration specified in a contract with a customer, adjusted for any variable consideration, including price concessions. Revenue is recognized based on the agreed-upon price at the time of shipment, and sales incentives, allowances and certain customer payments are recognized as a reduction to revenue at the time of the commitment to provide such incentives or make such payments.
Auditing revenue recorded for customer contracts containing variable consideration, that are subject to on-going commercial negotiations for price concessions, was complex and judgmental due to the difficulty in evaluating the sufficiency of evidence available to assess the existence of and likely outcome of on-going commercial negotiations.
How We
Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over management’s review of customer contracts containing variable consideration. This included testing controls over management’s process to identify and evaluate the accounting of customer contracts that contain sales incentives, allowances, and customer payments that impact revenue recognition.
Our audit procedures to assess the Company’s identification of and accounting for customer contracts containing variable consideration that are subject to on-going commercial negotiations for price concessions, included, among others, interviewing and obtaining written representations from executives within the Company, responsible for such negotiations with customers, regarding the accuracy and completeness of the Company’s accounting for price concessions and testing a sample of payments and credit memos issued to customers for agreed price concessions. Our procedures also included inspecting a sample of customer contracts, and other related supporting documentation, evaluating the terms therein and assessing the appropriateness of the accounting treatment applied by management, considering the status of the on-going commercial negotiations.
Product recall liabilities
Description of the
Matter
As discussed in Notes 2, 12, 14 and 19 to the consolidated financial statements, the Company is exposed to product liability claims in the event its products fail to perform as represented and such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company records liabilities for product recalls when probable claims are identified and when it is possible to reasonably estimate costs. Provisions for product recalls are estimated based on the expected cost of replacing the product and the customer’s cost of carrying out the recall, which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove and replace the defective product.
Auditing product recall liabilities was complex due to the uncertainty inherent in identifying product recalls, as well as the assumptions and estimates management uses to calculate the provisions for product recalls. These significant assumptions and estimates include the nature, likelihood, timing, and anticipated cost of known and potential claims.
How We
Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s product recall liabilities process. This included testing controls over management’s process to search for product recalls and determine the assumptions and estimates used to record product recall liabilities.
To audit product recall liabilities, our procedures included, among others, obtaining and reviewing source documentation, used by the Company to estimate the liability and assessing the reasonableness of assumptions used, by performing independent calculations and sensitivity analyses to determine the existence of contrary evidence. We evaluated the Company’s ability to estimate the product recall liabilities by performing retrospective reviews of management’s estimates and comparing actual results to previous estimates made by management. We also obtained letters from the Company’s internal and external legal counsel addressing material claims against the Company, if any, and examined relevant third-party automotive safety regulatory information to identify potential unrecorded product recall liabilities.
/s/ Ernst & Young AB
We have served as the Company's auditor since 1984.
Stockholm, Sweden
February 19, 2026
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Autoliv, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Autoliv, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Autoliv, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, total equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 19, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young AB
Stockholm, Sweden
February 19, 2026
Consolidated Statem ents of Income
Years ended December 31,
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales
Note 21
Cost of sales 1)
Gross profit
Selling, general and administrative expenses
Research, development and engineering expenses, net
Note 2
Other income (expense), net 2)
Notes 13, 19
Operating income
Income from equity method investment
Note 8
Interest income
Interest expense
Note 15
Other non-operating items, net
Income before income taxes
Income tax expense
Note 5
Net income 3)
Less: Net income attributable to non-controlling interest
Net income attributable to controlling interest
Earnings per share - basic
Earnings per share - diluted
Weighted average number of shares outstanding, net of
treasury shares (in millions)
Weighted average number of shares outstanding, assuming
dilution and net of treasury shares (in millions)
Cash dividend per share - declared
Cash dividend per share - paid
1) Including a gain on sale of property in China of $ 6 million and a supplier compensation of $ 13 million in 2025.
2) Including a cumulative translation gain of $ 11 million related to the sale of the Russian entity in 2025 and a cumulative translation loss of $ 12 million in relation to the liquidation of the entities in Netherlands and Italy in 2025.
3) The aggregate transaction gain (loss) included in net income for the 2025, 2024 and 2023 was a loss of $ 27 million, a gain of $ 1 million and a loss of $ 30 million, respectively.
See Notes to the Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
Years ended December 31,
(DOLLARS IN MILLIONS)
Net income
Other comprehensive income (loss)before tax:
Change in cumulative translation adjustments 1)
Net change in unrealized components of defined benefit plans
Other comprehensive income (loss), before tax
Tax effect allocated to other comprehensive income (loss)
Other comprehensive income (loss), net of tax
Comprehensive income
Less: Comprehensive income attributable to non-controlling interest
Comprehensive income attributable to controlling interest
1) See Note 16 for further details.
See Notes to the Consolidated Financial Statements.
Consolidated B alance Sheets
At December 31,
(DOLLARS AND SHARES IN MILLIONS)
Assets
Cash and cash equivalents
Receivables, net
Note 6
Inventories, net
Note 7
Income tax receivable
Prepaid expenses and accrued income
Other current assets
Note 14
Total current assets
Property, plant and equipment, net
Note 9
Operating lease right-of-use assets
Note 3
Goodwill and intangible assets, net
Note 10
Other non-current assets
Note 8, 14, 19
Total non-current assets
Total assets
Liabilities and equity
Short-term debt
Note 15
Accounts payable
Note 11
Accrued liabilities
Notes 12, 13, 14
Income tax payable
Operating lease liabilities, current
Note 3
Other current liabilities
Total current liabilities
Long-term debt
Note 15
Pension liability
Note 20
Operating lease liabilities, non-current
Note 3
Other non-current liabilities
Total non-current liabilities
Commitments and contingencies
Note 19
Common stock 1)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Note 16
Treasury stock ( 2.6 and 2.7 million shares, respectively)
Total controlling interest’s equity
Non-controlling interest
Total equity
Total liabilities and equity
1) Number of shares: 350 million authorized for both year s, 77.3 and 80.4 million issued, and 74.7 and 77.7 million outstanding, net of treasury shares, for 2025 and 2024 , respectively.
See Notes to the Consolidated Financial Statements.
Consolidated Statem ents of Cash Flows
Years ended December 31,
(DOLLARS IN MILLIONS)
Operating activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Gain on divestiture of property
Deferred income taxes
Undistributed earnings from equity method investments, net of dividends
Other, net
Net change in operating assets and liabilities:
Receivables, gross
Other operating assets
Inventories, gross
Accounts payable 1)
Accrued expenses
Income taxes
Net cash provided by operating activities
Investing activities
Expenditures for property, plant and equipment 1)
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Financing activities
Net increase (decrease) in other short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Dividends paid
Stock repurchases
Common stock options exercised
Dividends paid to non-controlling interest
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
1) See Note 17 for further details
See Notes to the Consolidated Financial Statements.
Consolidated Stateme nts of Total Equity
Accumulated
Additional
other com-
Total parent
Non-
(DOLLARS AND SHARES
Number of
Common
paid in
Retained
prehensive
Treasury
shareholders’
controlling
Total
IN MILLIONS)
shares
stock
capital
earnings
(loss) income 1)
stock
equity
interest
equity
Balance at December 31, 2022
Comprehensive Income:
Net income
Foreign currency translation
Pension liability
Total Comprehensive Income
Retired and repurchased shares
Stock-based compensation
Cash dividends declared
Dividends paid to non-controlling
interest on subsidiary shares
Balance at December 31, 2023
Comprehensive Income:
Net income
Foreign currency translation
Pension liability
Total Comprehensive Income
Retired and repurchased shares
Stock-based compensation
Cash dividends declared
Dividends paid to non-controlling
interest on subsidiary shares
Balance at December 31, 2024
Comprehensive Income:
Net income
Foreign currency translation
Pension liability
Total Comprehensive Income
Retired and repurchased shares
Stock-based compensation
Cash dividends declared
Dividends paid to non-controlling
interest on subsidiary shares
Other
Balance at December 31, 2025
1) Se e Note 16 f or further details – includes tax effects where applicable.
See Notes to the Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1. Basis of Presentation
NATURE OF OPERATIONS
Through its operating subsidiaries, the Company is a leading developer, manufacturer and supplier of passive safety systems to the automotive industry with a broad range of product offerings.
Passive safety systems are primarily meant to improve safety for occupants in a vehicle. Passive safety systems include modules and components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels and inflator technologies.
The Company also develops and manufactures mobility safety solutions such as pedestrian protection, battery cut-off switches, connected safety services, and safety solutions for riders of powered two-wheelers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in accordance with United States (U.S.) Generally Accepted Accounting Principles (GAAP) and include Autoliv, Inc. and all companies over which Autoliv, Inc. directly or indirectly exercises control, which as a general rule means that the Company owns more than 50 % of the voting rights.
Consolidation is also required when the Company has both the power to direct the activities of a variable interest entity (VIE) and the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.
All intercompany accounts and transactions within the Company have been eliminated from the consolidated financial statements.
Investments in affiliated companies in which the Company exercises significant influence over the operations and financial policies, but does not control, are reported using the equity method of accounting. Generally, the Company owns between 20 - 50 % of such investments.
SEGMENT REPORTING
In accordance with ASC 280, Segment Reporting , the operating segments are determined based on the information provided to the Chief Operating Decision Maker (CODM) on a regular basis and used for the purpose of assessing performance and allocating resources within the Company. The CEO is deemed to be the CODM of Autoliv since he is the person who makes all major decisions on how to allocate the resources and assess the performance of the Company for both strategic and operational initiatives.
ASC 280 indicates that a component is an operating segment if it meets the following criteria:
It engages in business activities from which it may earn revenues and incur expenses.
Its operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the segment and assess its performance.
Its discrete financial information is available.
The Company as a whole has met the definition of an operating segment as it engages in business activities from which it may earn revenues and incur expenses, and its consolidated operating results are regularly reviewed by the CEO/CODM to allocate resources and assess performance. Additionally, as Autoliv supplies customers on a global basis it also manages the business on a global basis. Therefore, based on the above analysis, the Company has concluded that the Company is the single operating and reportable segment under ASC 280, Segment Reporting . For more information on the Company's segment, see Note 21.
RECLASSIFICATIONS AND ROUNDINGS
Certain prior-year amounts have been reclassified to conform to current year presentation.
Certain amounts in the consolidated financial statements and associated notes may not reconcile due to rounding. All percentages have been calculated using unrounded amounts.
2. Summary of Significant Accounting Policies
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. The accounting estimates that require management’s most significant judgments include the estimation of variable consideration for the Company's contracts with customers, assessment of recoverability of goodwill and intangible assets, estimation of pension benefit obligations based on actuarial assumptions, estimation of accruals for warranty and recalls, restructuring charges, uncertain tax positions, valuation allowances and legal proceedings. Actual results could differ from those estimates.
REVENUE RECOGNITION
In accordance with ASC 606, Revenue from Contracts with Customers , revenue is measured based on consideration specified in a contract with a customer, adjusted for any variable consideration (i.e., price concessions) and estimated at contract inception. The estimated amount of variable consideration that will be received or paid by the Company is based on historical experience and trends, management's understanding of the status of negotiations with customers and anticipated future pricing strategies. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is recorded to the agreed-upon price at the time of shipment, and sales incentives, allowances and certain payments to customers are recognized as a reduction to revenue at the time of the commitment to provide such incentives or make these payments are made by the Company.
In addition, from time to time, the Company may make payments to or receive additional consideration from customers in connection with ongoing and future business. These payments to or cash receipts from customers are generally recognized to revenue at the time of the commitment unless the payments to customers can be clearly linked to the future business. If the payments to customers are capitalized, the amounts are amortized to revenue as the related goods are transferred to a customer. Capitalized payments from customers are included in prepaid expenses and accrued income in the Consolidated Balance Sheets.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer, are excluded from revenue.
The Company records compensation for Tariff expenses from customers as sales.
Shipping and handling costs associated with outbound freight before control of a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.
Nature of goods and services
The Company generates revenue from the sale of parts, which includes airbag, including steering wheels, and seatbelt products and components, to original equipment manufacturers (“OEMs”).
The Company accounts for individual products separately if they are distinct (i.e., if a product is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration for each of the products, including any price concessions, is based on their stand-alone selling prices. The stand-alone selling prices are determined based on the cost-plus margin approach.
The Company recognizes revenue for parts primarily at a point in time. For parts with revenue recognized at a point in time, the Company generally recognizes revenue upon shipment to the customers and transfer of title and risk of loss under standard commercial terms (typically Free On Board shipping point).
There are certain contracts where the criteria to recognize revenue over time have been met (e.g., there is no alternative use to the Company and the Company has an enforceable right to payment). In such cases, at period end, the Company recognizes revenue and a related asset and associated cost of goods sold and reduction in inventory. However, the financial impact of these contracts is immaterial considering the very short production cycles and limited inventory days on hand. The contract asset balances with customers, included in other current assets, amounted to $ 20 million as of December 31, 2025 and 2024.
The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., price concessions). Customers typically pay for the parts based on customary business practices.
RESEARCH, DEVELOPMENT AND ENGINEERING, NET (R,D & E)
Research and development and most engineering expenses are expensed as incurred. These expenses are reported net of expense reimbursements from contracts to perform engineering design and product development fulfillment activities related to the production of parts. For the years 2025, 2024 and 2023 total reimbursements from customers were $ 202 million, $ 213 million and $ 192 million, respectively.
Certain engineering expenses related to long-term supply arrangements are capitalized when defined criteria in accordance with ASC 340-10, such as the existence of a contractual guarantee for reimbursement, are met.
Tooling is generally agreed upon as a separate contract or a separate component of an engineering contract, as a pre-production project. Capitalization of tooling costs is made only when the specific criteria for capitalization of customer funded tooling in accordance with ASC 340-10 is met. As of December 31, 2025 and 2024,the Company's capitalized costs for customer owned tooling reported as prepaid expenses in the Consolidated Balance Sheets amounted to $ 94 million and $ 74 million, respectively. Tools owned by the Company that fulfills the criteria for capitalization is reported as Property, Plant & Equipment (P ,P&E). Depreciation on the Company’s owned tooling is recognized in the Consolidated Statements of Income within Cost of sales.
STOCK-BASED COMPENSATION
The compensation costs for all of the Company’s stock-based compensation awards are determined based on the fair value method as defined in ASC 718, Compensation –Stock Compensation . The Company records the compensation expense for awards under the Stock Incentive Plan, including Restricted Stock Units (RSUs) and Performance Shares (PSUs) over the respective vesting period. For further details, see Note 18 .
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current year. In certain circumstances, payments or refunds may extend beyond twelve months, in such cases amounts would be classified as non-current taxes payable or receivable. The Company accounts for Global Intangible Low-Taxed Income (GILIT) as a current period expense when incurred. Therefore the Company has not recorded deferred taxes for basis differences expected to reverse in future periods. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to temporary differences and carryforwards that result from events that have been recognized in either the financial statements or the tax returns, but not both. The measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws. Deferred tax assets are reduced by the amount of any tax benefits that are not expected to be realized. A valuation allowance is recognized if, based on the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. Evaluation of the realizability of deferred tax assets is subject to significant judgment requiring careful consideration of all facts and circumstances. The Company classifies deferred tax assets and liabilities as non-current in the Consolidated Balance Sheet. Tax assets and liabilities are not offset unless attributable to the same tax jurisdiction and netting is possible according to law and, as it relates to payables and receivables, expected to take place in the same period.
Tax benefits associated with tax positions taken in the Company’s income tax returns are initially recognized when it is more likely than not that those tax positions will be sustained upon examination by the relevant taxing authorities. The Company’s evaluation of its tax benefits is based on the probability of the tax position being upheld if challenged by the taxing authorities (including through negotiation, appeals, settlement and litigation). Whenever a tax position does not meet the initial recognition criteria, the tax benefit is subsequently recognized if there is a substantive change in the facts and circumstances that cause a change in judgment concerning the sustainability of the tax position upon examination by the relevant taxing authorities. In cases where tax benefits meet the initial recognition criterion, the Company continues, in subsequent periods, to assess its ability to sustain those positions. A previously recognized tax benefit is derecognized when it is no longer more likely than not that the tax position would be sustained upon examination. Liabilities for unrecognized tax benefits are classified as non-current unless the payment of the liability is expected to be made within the next 12 months. For further d etails, see Note 5.
EARNINGS PER SHARE
The Company calculates basic earnings per share (EPS) by dividing net income attributable to controlling interest by the weighted-average number of shares of common stock outstanding for the period (net of treasury shares). The Company’s unvested RSUs and PSUs, of which some include the right to receive non-forfeitable dividend equivalents, are considered participating securities. The diluted EPS reflects the potential dilution that could occur if common stock was issued for awards under the Stock Incentive Plan and is calculated using the treasury stock method. The treasury stock method assumes that the Company uses the proceeds from the exercise of stock option awards to repurchase ordinary shares at the average market price during the period. For unvested restricted stock, assumed proceeds under the treasury stock method will include unamortized compensation cost and windfall tax benefits or shortfalls. For fu rther details, see Notes 18 and 22.
CASH EQUIVALENTS
The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents.
RECEIVABLES AND ALLOWANCE FOR EXPECTED CREDIT LOSSES
Receivables are recorded at the invoice amount, which represents the fair value of the consideration received or receivable.
In addition to individually assess overdue customer balances for expected credit losses, the Company also calculates an allowance that reflects the expected credit losses on receivables considering both historical experience and forward-looking assumptions. The method calculates the expected credit loss for a group of customers by using the customer groups’ average short-term default rates based on officially published credit ratings and the Company’s historical experience. These default rates are considered the Company’s best estimate of the customer’s ability to pay. The Company regularly reassesses the customer groups and the applied customer group’s default rates by using its best judgment when considering changes in customer’s credit ratings, customer’s historical payments and loss experience, current market and economic conditions and the Company’s expectations of future market and economic conditions.
There can be no assurance that the amount ultimately realized for receivables will not be materially different from that assumed in the calculation of the allowance for expected credit losses.
INVENTORIES
The cost of inventories is computed according to the first-in first-out method (FIFO). Cost includes the cost of materials, direct labor and the applicable share of manufacturing overhead. Inventories are evaluated based on individual or, in some cases, groups of inventory items. Reserves are established to reduce the value of inventories to the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Excess inventories are quantities of items that exceed anticipated sales or usage for a reasonable period. The Company calculates provisions for excess and obsolete inventories based on the number of months of inventories on hand compared to anticipated sales or usage. Management uses its judgment to forecast sales or usage and to determine what constitutes a reasonable period. There can be no assurance that the amount ultimately realized for inventories will not be materially different from that assumed in the calculation of the reserves.
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment is recorded at historical cost. Construction in progress generally involves short-term projects for which capitalized interest is not significant. The Company provides for depreciation of property, plant and equipment computed under the straight-line method over the assets’ estimated useful lives, or in the case of leasehold improvements over the shorter of the useful life or the lease term. Amortization on finance leases is recognized with depreciation expense in the Consolidated Statements of Income over the shorter of the assets’ expected life or the lease contract term. Repairs and maintenance are expensed as incurred.
LEASES
In accordance with ASC 842, Leases , the Company recognizes contracts that is, or contains, a lease when the contract conveys the right to control the use of a physically identified asset for a period of time in exchange for consideration in the balance sheet as a right-of-use asset and lease liability. The Company recognizes a right-of-use asset and a lease liability at lease commencement. The lease liability for both finance and operating leases is measured at the present value of the remaining lease payments, discounted at the implicit interest rate in the lease and if it is not readily determinable, the Company uses its incremental borrowing rate. The right-of-use asset (ROU) for finance and operating leases is initially measured at the sum of the initial lease liability plus initial direct costs plus prepaid lease payments minus lease incentives received. Lease payments include undiscounted fixed payments plus optional payments that are reasonably certain to be owed. Lease payments do not include variable lease payments other than those that depend on an index or rate. Variable lease payments that depend on an index or a rate are included in the calculation of lease payments and in the measurement of the lease liability.
If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.
The Company has elected the practical expedient of not separating lease components from non-lease components for all its classes of underlying assets. The Company has also elected to recognize the lease payments for short-term leases in its consolidated statement of income on a straight-line basis over the lease term and recognize the variable lease payments in the period in which the obligation for those payments is incurred.
Finance lease right-of-use assets are presented together with other property, plant and equipment assets and finance lease liabilities are presented together with other current and non-current liabilities in the Consolidated Balance Sheets. Finance leases were not material as of December 31, 2025 or December 31, 2024.
For further details on the Company’s leases, see Note 3.
LONG-LIVED ASSET IMPAIRMENT
The Company evaluates the carrying value and useful lives of long-lived assets, other than goodwill and intangible assets, when indications of impairment are evident, or it is likely that the useful lives have decreased, in which case the Company depreciates the assets over the remaining useful lives. Impairment testing is primarily done by using the cash flow method based on undiscounted future cash flows. Estimated undiscounted cash flows for a long-lived asset being evaluated for recoverability are compared with the respective carrying amount of that asset. If the estimated undiscounted cash flows exceed the carrying amount of the assets, the carrying amounts of the long-lived asset are considered recoverable, and an impairment should not be recorded. However, if the carrying amount of a group of assets exceeds the undiscounted cash flows, an entity must then measure the long-lived assets’ fair value to determine whether an impairment loss should be recognized, generally using a discounted cash flow model. Generally, the lowest level of cash flows for impairment assessment is customer platform level.
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the fair value of consideration transferred over the fair value of net assets of businesses acquired. Goodwill is not amortized but subject to at least an annual review for impairment. Other definite-lived intangible assets, principally related to acquired technology, are amortized over their useful lives which range from 3 to 25 years .
The Company performs its annual impairment testing in the fourth quarter of each year. Impairment testing is required more often than annually if an event or circumstance indicates that an impairment, or decline in value, may have occurred. The Company uses either a qualitative assessment or a quantitative calculation for its impairment testing. The qualitative assessment permits the Company to assess whether it is more than likely than not (i.e., a likelihood of greater than 50%) that goodwill is impaired. If the Company concludes based on the qualitative assessment that it is not more likely than not that the fair value of goodwill is less than its carrying amount, it would not have to quantitatively determine the asset’s fair value. The Company also considers external factors that could affect the significant inputs used to determine fair value.
In 2025, the Company performed a quantitative impairment test by calculating the fair value of its goodwill. The estimated fair market value of goodwill is determined by the discounted cash flow method.
There were no impairments of goodwill from 2023 through 2025 .
WARRANTIES AND RECALLS
The Company records liabilities for product recalls when probable claims are identified and when it is possible to reasonably estimate costs. Recall costs are costs incurred when the customer decides to formally recall a product due to a known or suspected safety concern. Product recall costs are estimated based on the expected cost of replacing the product and the customers' cost of carrying out the recall, which is affected by the number of vehicles subject to recall and the cost of labor and materials to remove and replace the defective product. Insurance receivables, related to recall issues covered by the insurance, are included within other current and non-current assets in the Consolidated Balance Sheets. Provisions for warranty claims are estimated based on prior experience, likely changes in performance of newer products and the mix and volume of products sold. The provisions are recorded on an accrual basis. For further details, see Note 14.
RESTRUCTURING PROVISIONS
The Company defines restructuring expense to include costs directly associated with rightsizing, exit or disposal activities. Estimates of restructuring charges are based on information available at the time such charges are recorded. In general, management anticipates that restructuring activities will be completed within a timeframe such that significant changes to the exit plan are not likely. Due to inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially estimated. For further deta ils, see Note 13.
PENSION OBLIGATIONS
The Company provides for both defined contribution plans and defined benefit plans. A defined contribution plan generally specifies the periodic amount that the employer must contribute to the plan and how that amount will be allocated to the eligible employees who perform services during the same period. A defined benefit pension plan is one that contains pension benefit formulas, which generally determine the amount of pension benefits that each employee will receive for services performed during a specified period of employment.
The amount recognized as a defined benefit liability is the net total of projected benefit obligation (PBO) minus the fair value of plan assets (if any). For further details, see Note 20.
CONTINGENT LIABILITIES
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability or other matters (see Note 14). The Company diligently defends itself in such matters and, in addition, carries insurance coverage to the extent reasonably available against insurable risks. The Company records liabilities for claims, lawsuits and proceedings, when they are probable and it is possible to reasonably estimate the cost of such liabilities. Legal costs expected to be incurred in connection with a loss contingency are expensed as such costs are incurred.
The Company believes, based on currently available information, that the resolution of outstanding matters, other than any antitrust related matters described in Note 19 after takin g into account recorded liabilities and available insurance coverage, should not have a material effect on the Company’s financial position or results of operations. However, due to the inherent uncertainty associated with such matters, there can be no assurance that the final outcomes of these matters will not be materially different from current estimates.
TRANSLATION OF NON-U.S. SUBSIDIARIES
The assets and liabilities of subsidiaries with functional currency other than U.S. dollars are translated into U.S. dollars based on the current exchange rate prevailing at each balance sheet date and any resulting translation adjustments are included in accumulated other comprehensive loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured from their local currency to their functional currency and then translated to U.S. dollars. Revenues and expenses are translated into U.S. dollars using the average exchange rates prevailing for each period presented.
RECEIVABLES AND LIABILITIES IN NON-FUNCTIONAL CURRENCIES
Receivables and liabilities not denominated in functional currencies are converted at year-end exchange rates. Net transaction (losses) gains, reflected in the Consolidated Statements of Income, amounted to $( 27 ) million in 2025, $ 1 million in 2024 and $( 30 ) million in 2023, a nd are recorded in operating income if they relate to operational receivables and liabilities or are recorded in other non-operating items, net if they relate to financial receivables and liabilities.
NEW ACCOUNTING STANDARDS
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (ASC). The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements.
Adoption of New Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , to enhance the transparency and decision usefulness of income tax disclosures as well as improve the effectiveness of income tax disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update also require that all entities disclose on an annual basis certain detailed information about income taxes paid. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in ASU 2023-09 updated should be applied on a prospective basis. Retrospective application is permitted. The Company adopted ASU 2023-09 prospectively as of December 31, 2025. The adoption of ASU 2023-09 resulted in incremental disclosures in the Company's financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832), Accounting for Government Grants Received by Business Entities , to improve GAAP by establishing authoritative guidance on the accounting for government grants received by a business entity. The amendments in ASU 2025-10 establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The amendments in ASU 2025-10 require that a government grant received by a business entity should not be recognized until: 1) It is probable that (a) a business entity will comply with the conditions attached to the grant and (b) the grant will be received. 2) A business entity meets the recognition guidance for a grant related to an asset or a grant related to income. The amendments in ASU 2025-10 also require that a business entity provide disclosures, including the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and condition of the grant. The amendments in ASU 2025-10 are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The amendments in ASU 2025-10 should be applied using one of the following transition approaches: 1) A modified prospective approach to both: (a) Government grants that are entered into on or after the effective date (b) Government grants that are not complete as of the effective date. 2) A modified retrospective approach to both: (a) Government grants that are entered into on or after the beginning of the earliest period presented (b) Government grants that are not complete as of the beginning of the earliest period presented. 3) A retrospective approach to all government grants through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented. The Company adopted ASU 2025-10 using the modified retrospective as of December 31, 2025. No material adjustments were required as a result of the retrospective adoption of ASU 2025-10.
Accounting Standards Issued But Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses , to improve financial reporting by requiring additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. The amendments in ASU 2024-03 do not change or remove current expense disclosure requirements. The amendments require that at each interim and annual reporting period an entity should disclose the amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization included in each relevant expense caption. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in ASU 2024-03 should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or (2) retrospectively to any or all periods presented in the financial statements. The adoption of ASU 2024-03 is expected to result in incremental disclosures in the Company’s financial statements. The Company will adopt the amendments in ASU 2024-03 prospectively upon the effective date.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Targeted improvements to the Accounting for Internal-Use Software , to modernize the accounting for software costs that are accounted for under Subtopic 350-40. ASU 2025-06 removes all references to prescriptive and sequential software development stages throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when both of the following occur: 1) Management has authorized and committed to funding the software project and 2) It is probable that the project will be completed, and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in ASU 2025-06 permits entities to use either 1) a prospective transition approach, 2) a modified transition approach, or 3) a retrospective transition approach. The Company is currently assessing the impact that ASU 2025-06 will have on its financial statements and expects to adopt the amendments in ASU 2025-06 using the prospective transition approach. The Company expects that its capitalization of internal-use software costs will not change significantly under the amendments in ASU 2025-06.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements, to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in ASU 2025-11 also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in ASU 2025-11 can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented i n the financial statements. The Company expects to early adopt ASU 2025-11 prospectively to all prior periods presented in the first quarter of 2026. The Company expects that the adoption of ASU 2025-11 will not have a significant impact on its interim disclosures.
3. Leases
The Company has operating leases for offices, manufacturing and research buildings, machinery, cars, data processing and other equipment. The Company’s leases have remaining lease terms of 1 to 43 years , some of which include options to extend the leases for up to 25 years , and some of which include options to terminate the leases within one year .
As of December 3 1, 2025 , the Company has no additional material operating leases that have not yet commenced.
The following tables provide information about the Company’s operating leases. The Company has not identified any material finance leases as of December 31, 2025; therefore, the finance lease components have not been disclosed in the tables below.
Lease cost
(Dollars in millions)
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost
Other information
Year ended or as of
December 31,
(Dollars in millions)
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted-average remaining lease term - operating leases
8.7 years
8.9 years
Weighted-average discount rate - operating leases
Maturities of operating lease liabilities (undiscounted cash flows) are as follows:
(Dollars in millions)
Maturities
Thereafter
Total operating lease payments
Less imputed interest
Total operating lease liabilities
4. Fair Value Measurements
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities and short-term debt approximate their fair value because of the short-term maturity of these instruments.
The Company uses derivative financial instruments, “derivatives”, as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. All derivatives are recognized in the consolidated financial statements at fair value. Certain derivatives are from time to time designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates.
The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability. Pricing observability is impacted by several factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Instruments with readily active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value.
Under U.S. GAAP, there is a disclosure framework hierarchy associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by the hierarchy are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
Level 3 - Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
The Company’s derivatives are all classified as Level 2 of the fair value hierarchy.
The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024. The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (ISDA agreements) with all derivative counterparties, the fair values in the tables below and in the Consolidated Balance Sheets at December 31, 2025 and December 31, 2024 have been presented on a gross basis. According to the close-out netting agreements, transaction amounts payable to a counterparty on the same date and in the same currency can be netted. The amounts subject to netting agreements that the Company choose not to offset are presented below.
DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS
There were no derivatives designated as hedging instruments as of December 31, 2025 and December 31, 2024.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Derivatives not designated as hedging instruments relate to economic hedges and are marked to market with all amounts recognized in the Consolidated Statements of Income. The derivatives not designated as hedging instruments outstanding at December 31, 2025 and December 31, 2024 were foreign exchange swaps.
For 2025, the Company recognized a gain of $ 8 million in other non-operating items, net for derivative instruments not designated as hedging instruments. For 2024, the Company recognized a loss of $ 27 million. For 2023, the Company recognized a loss of $ 2 million. The realized part of the losses referred to above are reported under financing activities in the statement of cash flows . For 2025 the gains and losses, net recognized as interest expense were a loss of $ 5 million. For 2024 and 2023, the gains and losses, net recognized as interest expense were immaterial.
DECEMBER 31, 2025
DECEMBER 31, 2024
Fair Value Measurements
Fair Value Measurements
Derivative asset
Derivative liability
Derivative asset
Derivative liability
Nominal
(Other current
(Other current
Nominal
(Other current
(Other current
(Dollars in millions)
volume
assets)
liabilities)
volume
assets)
liabilities)
DERIVATIVES NOT DESIGNATED
AS HEDGING INSTRUMENTS
Foreign exchange swaps, less
than 6 months
TOTAL DERIVATIVES NOT
DESIGNATED AS HEDGING
INSTRUMENTS
1) Net nominal amount after deducting for offsetting swaps under ISDA agree ments is $ 3,294 million.
2) Net amount after deducting for offsetting swaps under ISDA agreements is $ 12 million.
3) Net amount after deducting for offsetting swaps under ISDA agreements is $ 24 million.
4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $ 2,916 million.
5) Net amount after deducting for offsetting swaps under ISDA agreements is $ 22 million.
6) Net amount after deducting for offsetting swaps under ISDA agreements is $ 42 million.
FAIR VALUE OF DEBT
The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current borrowing rates for similar types of financing. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy.
During the fourth quarter of 2025, the Company issued a 5-year € 300 million green Eurobond. During the first quarter of 2024 and first quarter of 2023, the Company issued its first green Eurobonds, of € 500 million each.
The fair value and carrying value of debt are summarized in the table below.
DECEMBER 31, 2025
DECEMBER 31, 2024
(Dollars in millions)
CARRYING
VALUE 1)
FAIR
VALUE
CARRYING
VALUE 1)
FAIR
VALUE
LONG-TERM DEBT
Bonds
Loans
TOTAL
SHORT-TERM DEBT
Short-term portion of long-term debt
Overdrafts and other short-term debt
TOTAL
1) Debt as reported in balance sheet.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A NON-RECURRING BASIS
In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis including certain long-lived assets, including equity method investments, goodwill and other intangible assets, typically as it relates to impairment.
The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets as of the reporting date, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets.
For the period 2023 to 2025, the Co mpany did no t record any material impairment charges on its long-lived assets for its continuing operations.
5. Income Taxes
INCOME BEFORE INCOME TAXES (Dollars in millions)
Non-U.S.
Total
PROVISION (BENEFIT) FOR INCOME TAXES (Dollars in millions)
Current
U.S. federal
Non-U.S.
U.S. state and local
Deferred
U.S. federal
Non-U.S.
U.S. state and local
Total income tax expense
EFFECTIVE INCOME TAX RATE (AFTER ADOPTION OF ASU 2023-09)
(Dollars in millions)
YEAR ENDED DECEMBER 31, 2025
US Federal Statutory Tax Rate
State and Local Income Taxes, Net of Federal Income Tax Effect
Effect of Changes in Tax Laws or Rates Enacted in the Current Period
Effect of Cross Border Tax Laws
Global Intangible Low Taxed Income
Tax Credits
Changes in Valuation Allowances
Non-taxable or Non-deductible items
Other Domestic Federal Tax Items
Foreign Tax Effects
China
Statutory tax rate difference between China and United States
Withholding Taxes
Changes in Valuation Allowances
Other
Germany
Changes in Valuation Allowances
Other
India
Changes in Valuation Allowances
Settlement of Tax Audits
Other
Mexico
Other
Sweden
Foreign Tax Credit
Other
Turkey
Other Deferred Tax Adjustments
Other
Other Foreign Jurisdictions
Enacted changes in tax laws or rates
Change in Valuation Allowances
Other Adjustments
Worldwide Changes in unrecognized tax benefits
Other Adjustments
Total
State and local income taxes in Alabama, Texas, Tennessee and Indiana comprise the majority of the state and local income taxes, net of federal effect category.
EFFECTIVE INCOME TAX RATE (PRIOR TO ADOPTION OF ASU 2023-09) (%)
U.S. federal income tax rate
Non-Deductible Expenses
Foreign tax rate variances
Tax credits
Change in Valuation Allowances
Changes in tax reserves
Provision to Return
Earnings of equity investments
Withholding taxes
State taxes, net of federal benefit
Tax Audits
Other Deferred Tax Adjustments 1)
U.S. FDII Deduction
U.S. GILTI Tax
Impact of Translation Rates
Other, net
Effective income tax rate
1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company's restructuring activities.
The following table summarizes the Company’s income tax payments net of tax refunds by jurisdiction:
INCOME TAXES PAID (Dollars in millions)
US Federal
US State and Local
Foreign:
China
India
Japan
Korea
Mexico
Romania
Thailand
Other 1)
Foreign Subtotal
Total cash paid for income taxes (net of refunds)
Total cash paid for income taxes (Prior to ASU 2023-09)
1) Includes jurisdictions below the threshold for the period presented.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. On December 31, 2025, the Company had net operating loss carryforwards (NOL’s) of approximately $ 329 million, of which approximately $ 311 million have no expiration date. The remaining losses expire on various dates through 2035 .
Valuation allowances have been established which partially offset the related deferred assets. Such allowances are primarily provided against NOL’s of companies that have perennially incurred losses, as well as the NOL’s of companies that are start-up operations and have not established a pattern of profitability. The Company assesses all available evidence, both positive and negative, to determine the amount of any required valuation allowance. During 2024, the Company recorded valuation allowances against deferred tax assets of tax losses in certain companies and a partial valuation allowance against the deferred tax asset recognized due to the transfer of certain assets and operations as part of the Company’s restructuring activities, on the basis of management’s assessment of the amount of the related deferred tax assets that are not more likely than not to be realized.
The foreign tax rate variance reflects the fact that approximately two-thirds of the Company’s non-U.S. pre-tax income is generated by business operations located in tax jurisdictions where the tax rate is between 20 - 30 %. The tax rate from quarter to quarter and from year to year is also impacted by the mix of earnings and tax rates in various jurisdictions compared to the same periods or prior years.
The Company has reserves for income taxes that may become payable in future periods as a result of tax audits. These reserves represent the Company’s best estimate of the potential liability for tax exposures. Inherent uncertainties exist in estimates of tax exposures due to changes in tax law, both legislated and concluded through the various jurisdictions’ court systems. The Company files income tax returns in the United States federal jurisdiction, and various states and non-U.S. jurisdictions.
The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. At any given time, the Company is undergoing tax audits in several tax jurisdictions, covering multiple years. The Company is no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2022. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2016. The Company is undergoing tax audits in several non-U.S. jurisdictions and several U.S. state jurisdictions, covering multiple years. As of December 31, 2025, as a result of those tax examinations, the Company is not aware of any proposed income tax adjustments that would have a material impact on the Company’s financial statements, however, other audits could result in additional increases or decreases to the unrecognized tax benefits in some future period or periods.
The following table summarizes the activity related to the Company’s unrecognized tax benefits.
UNRECOGNIZED TAX BENEFITS (Dollars in millions)
Unrecognized tax benefits at beginning of year
Increases as a result of tax positions taken during a prior period
Increases as a result of tax positions taken during the current period
Decreases as a result of tax positions taken during a prior period
Decreases relating to settlements with taxing authorities
Decreases resulting from the lapse of the applicable statute of limitations
Translation Difference
Total unrecognized tax benefits at end of year
The Company recognizes interest and potential penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2024, the Company recorded $ 43 million of taxes payable for unrecognized tax benefits, including $ 11 million accrued for interest and penalties. In addition, $ 3 million of unrecognized tax benefits reported above are offset by valuation allowances. During 2025, the Company recorded a net increase of $ 14 million to income tax reserves for unrecognized tax benefits related to tax positions taken in current year. Also, during 2025, the Company recorded a net decrease of $ 15 million to income tax reserves for unrecognized tax benefits due to settlement of audits and expiration of statutes of limitations.
As of December 31, 2025, the Company has recorded $ 42 million of taxes payable for unrecognized tax benefits, including $ 9 million accrued for interest and penalties. In addition, $ 3 million of unrecognized tax benefits reported above are offset by valuation allowances. Of the total unrecognized tax benefits of $ 42 million recorded as taxes payable at December 31, 2025, $ 6 million is classified as current income tax payable, and $ 36 million is classified as non-current tax payable included in Other Non-Current Liabilities on the Consolidated Balance Sheets. Substantially all of these reserves would impact the effective tax rate if released into income.
The tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities were as follows.
DEFERRED TAXES (Dollars in millions)
December 31,
Assets
Provisions
Costs capitalized for tax
Other Deferred Tax Asset 1)
Property, plant and equipment
Retirement Plans
Tax receivables, principally NOL’s
Deferred tax assets before allowances
Valuation allowances
Total
Liabilities
Distribution taxes
Other
Total
Net deferred tax asset
1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company’s restructuring activities,
and is partially offset by the increased valuation allowances.
The following table summarizes the activity related to the Company’s valuation allowances (dollars in millions):
VALUATION ALLOWANCES AGAINST DEFERRED TAX ASSETS (Dollars in millions)
December 31,
Allowances at beginning of year
Benefits reserved current year
Benefits recognized current year 1)
Translation difference
Allowances at end of year
1) Benefits reserved in 2023 include the partial reserve against deferred tax assets recognized in 2023 due to the transfer of certain assets and operations as part of the Company's restructuring activitie s.
As of December 31, 2025, the Company did not record U.S. income taxes on undistributed earnings in some foreign subsidiaries because those earnings were indefinitely reinvested in the operation of those subsidiaries. Most of these undistributed earnings are not subject to withholding taxes upon distribution to intermediate holding companies. However, when appropriate, the Company provides for the cost of such distribution taxes. Determining the unrecognized deferred tax liability on those unremitted earnings is not practicable because of the complexity of the hypothetical calculation and the inherent uncertainty regarding the timing and manner of any potential future repatriation. If such earnings were to be distributed, the Company could be subject to additional U.S. federal and state income taxes, foreign withholding taxes, and other tax consequences.
6. Receivables
(Dollars in millions)
December 31,
Receivables
Allowance for credit losses at beginning of year
Reversal of (addition to) allowance
Write-off against allowance
Translation difference
Allowance for credit losses at end of year
Total receivables, net of allowance
7. Inventories
(Dollars in millions)
December 31,
Raw material
Work in progress
Finished products
Inventories gross
Inventory reserve at beginning of year
Change in reserve, net
Translation difference
Inventory reserve at end of year
Total inventories, net of reserve
8. Investments and Other Non-Current Assets
(Dollars in millions)
December 31,
Equity method investments
Deferred tax assets
Income tax receivables
Insurance receivables
Other non-current assets
Total other non-current assets
As of December 31, 2025 and 2024, the Company had one equity method investment . The Company owns 49 % of Autoliv-Hirotako Safety Sdn, Bhd (parent and subsidiaries) in Malaysia which it currently does not control, but in which it exercises significant influence over operations and financial position.
9. Property, Plant and Equipment
(Dollars in millions)
December 31,
Estimated life
Land and land improvements
Buildings
Machinery and equipment
Construction in progress
Property, plant and equipment
Less accumulated depreciation
Net of depreciation
DEPRECIATION INCLUDED IN (Dollars in millions)
Cost of sales
Selling, general and administrative expenses
Research, development and engineering expenses, net
Total
No significant fixed asset i mpairments related to the Company’s operations were recognized during 2025, 2024 or 2023.
The net book value of machinery and equipment and buildings and land under finance lease contracts recorded at December 31, 2025 and December 31, 2024 and included in the table above were immaterial. The amortization expense related to finance leases is included with depreciation expenses disclosed in the table above.
10. Goodwill and Intangible Assets
December31,
GOODWILL (Dollars in millions)
Carrying amount at beginning of year
Translation differences
Carrying amount at end of year
Approximat ely $ 1.2 billion of the Company’s goodwill is associated with the 1997 merger of Autoliv AB and the Automotive Safety Products Division of Morton International, Inc. No goodwill impairment charges were recognized during 2025, 2024 or 2023.
December 31,
AMORTIZABLE INTANGIBLES (Dollars in millions)
Gross carrying amount
Accumulated amortization
Carrying value
At December 31, 2025, intangible assets subject to amortization mainly relate to acquired technology. No significant impairments of intangible assets were recognized during 2025, 2024 or 2023.
Amortization expense related to intangible assets for the years 2025, 2024 and 2023 were immaterial and e stimated future amortization expense is immaterial for all future periods.
11. Supplier Finance Program Obligations
The Company has an agreement with an external payment service provider to facilitate the payments to certain suppliers. The outstanding obligations confirmed towards the external payment service provider are recorded in Accounts Payable in the Consolidated Balance Sheet until payment has been effected. The Company has undertaken to make sure the payment is effected on the original invoice maturity date. The average payment terms during 2025 was 116 days compared to 117 days during 2024.
The roll-forward of the Company's outstanding obligations confirmed as valid under its supplier finance program for the year ended December 31, 2025 is as follows (dollars in millions):
As of December 31,
(Dollars in millions)
Confirmed obligations outstanding at beginning of the period
Invoices confirmed during the period
Confirmed invoices paid during the period
Confirmed obligations outstanding at end of the period
12. Accrued liabilities
December 31,
(Dollars in millions)
Employee-related liabilities
Variable considerations to customers
Restructuring reserve
Product related liabilities
Other accrued liabilities
Total accrued liabilities
13. Restructuring
Restructuring provisions are made on a case-by-case basis and primarily include severance costs incurred in connection with employee reductions and plant consolidations. Restructuring costs other than employee related costs are immaterial for all periods presented and are included in the table below. The Company expects to finance restructuring programs over the next several years through cash generated from its ongoing operations or through cash available under its existing credit facilities. The Company does not expect that the execution of these programs will have an adverse impact on its liquidity position. The changes in the employee-related reserves in the table below have been charged against Other income (expense), net in the Consolidated Statements of Income. The restructuring reserve balance is included within Accrued liabilities in the Consolidated Balance Sheet (see Note 12).
December 31,
(Dollars in millions)
Reserve at beginning of the period
Provision - charge
Provision - reversal
Cash payments
Translation difference
Reserve at end of the period
The restructuring charges in 2025 of $ 10 million mainly related to the global structural cost reduction program activities initiated in 2023 in Europe. The cash payments of $ 91 million in 2025 mainly related to restructuring activities in Europe. As of December 31, 2025, the majority of the restructuring reserve balance was attributed to global structural cost reduction program activities in Europe. The Company does not expect to recognize additional material restructuring charges during 2026 related to ongoing restructuring programs. The main part of the remaining balance for the activities initiated in Europe in 2023 is expected to be concluded in 2026.
The restructuring charges in 2024 of $ 20 million mainly related to the global structural cost reduction program activities initiated in 2023 in Europe. The cash payments of $ 69 million in 2024 mainly related to restructuring activities in Europe.
The restructuring charges in 2023 of $ 212 million related to the global structural cost reduction program activities initiated in 2023, primarily in Europe. Cash payments of $ 35 million in 2023 ma inly related to restructuring activities in Europe.
14. Product Related Liabilities
Autoliv is exposed to product liability and warranty claims in the event that the Company’s products fail to perform as represented and such failure results, or is alleged to result, in bodily injury, and/or property damage or other loss. The Company has reserves for product risks. Such reserves are related to product performance issues including recall, product liability and warranty issues. The reserve for product related liabilities is included in accrued expenses on the Consolidated Balance Sheet. For further information, see Note 19.
The Company records liabilities for product related risks when probable claims are identified and when it is possible to reasonably estimate costs. Changes in reserve for warranty claims are estimated based on prior experience, likely changes in performance of newer products, and the mix and volume of the products sold. The changes in reserve are recorded on an accrual basis.
In 2025, the additions to the reserve mainly related to warranty related issues. Cash payments were also mainly related to warranty related issues. None of these matters were individually material during 2025.
In 2024, the additions to the reserve mainly related to warranty related issues. The reversal of the reserve was related to certain recall issues that were settled with a favorable outcome. Cash payments were related to warranty and recall related issues. None of these matters were individually material during 2024.
In 2023, the change in reserve and cash payments mainly related to the Andrews litigation settlement with the reserve partly offset by reversal of recall related issues.
The Company’s recall related issues as of December 31, 2025 are partly covered by insurance. Insurance receivables are included within other current and non-current assets on the Consolidated Balance Sheet. As of December 31, 2025, the Company had total insurance receivables related to recall issues of $ 14 million ( $ 54 million as of December 31, 2024).
The table below summarizes the change in the balance sheet position of the product related liabilitie s (dollars in millions).
December 31,
(Dollars in millions)
Reserve at beginning of the year
Addition to reserve
Reversal of preexisting reserve
Cash payments
Translation difference
Reserve at end of the year
15. Debt and Credit Agreements
SHORT-TERM DEBT
On December 31, 2025 and 2024 , total short-term debt was $ 419 million and 387 million, respectively. In 2014, the Company issued long-term debt securities in a U.S. Private Placement. On December 31, 2025, the total short-term debt outstanding from the 2014 issuance was $ 285 million, with maturity in April 2026.
The Company’s subsidiaries have credit agreements, including but not limited to, overdraft facilities with several local banks. Total available short-term facilities on December 31, 2025, excluding commercial paper facilities as described below , amounted to $ 601 million, of which approximately $ 112 million was utilized. The weighted average interest rate on total short-term debt outstanding on December 31, 2025 and 2024, excluding the short-term portion of long-term debt, was 4 % and 5 %, respectively.
LONG-TERM DEBT
As of December 31, 2025 and 2024, total long-term debt was 1,734 million and 1,522 million, respectively.
In October 2025, the Company priced and issued a 5 -year green bond for a total of € 300 million in the Eurobond market. The bond carries a coupon of 3.0 % and matures in October 2030.
In February 2024, the Company priced and issued a 5.5 -year green bond for a total of € 500 million in the Eurobond market. The bond carries a coupon of 3.625 % and matures in August 2029.
In March 2023, the Company priced and issued a 5 -year green bond for a total of € 500 million in the Eurobond market. The bond carries a coupon of 4.25 % and matures in March 2028.
In 2014, the Company issued long-term debt securities in a U.S. Private Placement. On December 31, 2025, the total long-term debt outstanding from the 2014 issuance was $ 185 million aggregate principal amount of 15 -year senior notes with an interest rate of 4.44 %.
CREDIT FACILITIES
In July 2024, the Company entered into an $ 125 million bilateral revolving credit facility (Bilateral RCF) with substantially the same terms as the RCF with the 11 banks (see below). On December 3 1, 2025, this facility was not utilized.
In May 2022, the Company refinanced its existing revolving credit facility (RCF) of $ 1,100 million. The facility was syndicated among 11 banks and matures in May 2029 . The Company pays a commitment fee on the undrawn amount of 0.10 %, representing 35 % of the applicable margin, which is 0.275 % (giv en the Company’s ratings of “BBB+ from Fitch and “Baa1” from Moody’s). Borrowings under the facility are unsecured. On December 31, 2025, this facility was not utilized.
The Company has a € 3,000 million Euro Medium Term Note Program in place for being able to issue notes to be traded on the Global Exchange Market of Euronext Dublin. On December 3 1, 2025 , € 1,300 million had been issued under this program (se e long-term debt above).
The Company has a $ 1.0 billion US commercial paper program and a SEK 7 billion ( approx. $ 763 million) Swedish commercial paper program. On December 31, 2025, there were no amounts outstanding under these respective facilities.
The Company is not subject to any financial covenants, i.e., performance related restrictions, in any of its significant long-term borrowings or commitments.
CREDIT RISK
In the Company’s financial operations, credit risk arises in connection with cash deposits with banks and when entering into forward exchange agreements, swap contracts or other financial instruments. In order to reduce this risk, deposits and financial instruments are only entered with a limited number of banks up to a calculated risk amount of $ 250 million per bank for banks rated A- or above and up to $ 50 million for banks rated BBB+. The policy of the Company is to work with banks that have a strong credit rating and that participate in the Company’s financing. In addition to this, deposits of up to an aggregate amount of $ 2 billion can be placed in U.S. and Swedish government paper and in certain AAA rated money market funds. On December 31, 2025 , the Company had placed $ 267 million in money market funds.
The table below shows debt maturity as cash flow. For a description of hedging instruments used as part of debt management, see the Financial Instruments section of Note 2 and Note 4.
DEBT PROFILE
Total
PRINCIPAL AMOUNT BY EXPECTED MATURITY
(dollars in millions)
Thereafter
long-
term
Total
Bonds
Loans
Other short-term debt
Total principal amount
16. Shareholders’ Equity
The number of shares outstanding as of December 31, 2025 was 74,705,356 .
DIVIDENDS
Cash dividend paid per share
Cash dividend declared per share
OTHER COMPREHENSIVE LOSS / ENDING BALANCE 1) (Dollars in millions)
Cumulative translation adjustments
Net pension liability
Total (ending balance)
Deferred taxes on the pension liability
1) The components of Other Comprehensive Loss are net of any related income tax effects.
In 2025, a cumulative translation gain of $ 11 million related to the sale of the Russian entity and a cumulative translation loss of $ 12 million related to the liquidation of the entities in Netherlands and Italy have been recycled and reported as part of the net change of cumulative translation adjustment in the Comprehensive Income Statement and Equity Statement. In the Statement of Income these gains and losses have been reported as part of Other income (expense), net. In 2024, a cumu lative translation gain of $ 1 million related to liquidated entities was recycled and reported as part of the net change of cumulative translation adjustment in the Comprehensive income statement and Equity statement .
SHARE REPURCHASE PROGRAM
On June 4, 2025, the Company announced that its Board of Directors approved a new stock repurchase program that authorizes the Company to repurchase up to $ 2.5 billion of common shares and operates from July 1, 2025 through December 31, 2029.
During 2025, 2024 and 2023 the Company repurchased and retired 3,141,947 shares, 5,052,938 shares and 3,671,252 shares for $ 351 million, $ 552 million and $ 352 million, respectively.
17. Supplemental Cash Flow Information
Payments for interest and income taxes were as follows:
(Dollars in millions)
Interest
Income taxes
As of December 31, 2025, $ 104 million of the Company's capital expenditures for property, plant and equipment during 2025 was included in Accounts Payable balance, and therefore represents a noncash investing activity.
18. Stock Incentive Plan
The Company maintains the Autoliv, Inc. 1997 Stock Incentive Plan, as amended (the “Stock Incentive Plan”), pursuant to which it has granted to eligible employees and non-employee directors restricted stock units (RSUs) and performance shares (PSUs).
The fair value of the RSUs and PSUs is calculated as the grant date fair value of the shares expected to be issued. The RSUs and PSUs granted in 2025, 2024 and 2023 entitle the grantee to receive dividend equivalents in the form of additional RSUs and PSUs subject to the same vesting conditions as the underlying RSUs and PSUs. For the grants made during 2025, 2024 and 2023, the fair value of a RSU and a PSU was calculated by using the closing stock price on the grant date and, with respect to a PSU, estimated target performance. The grant date fair value for the RSUs and PSUs granted during 2025 was approximately $ 9 million and approximately $ 10 million, respectively.
Pursuant to the Company’s non-employee director compensation policy effective May 1, 2024, the Company’s non-employee directors receive an annual RSU grant having a grant date value equal to $ 162,500 and the Chairman of the Board of Directors also receives an additional annual RSU grant having a grant date value equal to $ 90,000 . All RSUs granted to non-employee directors vest in one installment on the earlier of the next AGM or the first anniversary of the grant date, in each case subject to the grantee’s continued service as a non-employee director on the vesting date with limited exceptions. The RSUs granted to the Company’s non-employee directors entitle the grantee to receive dividend equivalents in the form of additional RSUs subject to the same vesting conditions as the underlying RSUs. The grant date fair value for the RSUs granted in 2025 to the Company’s non-employee directors was approximately $ 2 million.
The source of the shares issued upon vesting of awards is generally from treasury shares. The Stock Incentive Plan provides for the issuance of up to 9,585,055 common shares for awards. At December 31, 2025, 7,339,781 of these shares have been issued for awards and 2,245,274 shares remain available for future grants.
All Stock Options (SOs) were granted for 10 -year terms, had an exercise price equal to the fair market value per share of common stock at the date of grant, and became exercisable after one year of continued employment following the grant date. As of December 31, 2025, all SOs have been exercised or expired.
The Company recorded approximately $ 20 million, $ 16 million and $ 14 million stock-based compensation expense related to RSUs and PSUs for 2025, 2024 and 2023, respectively. The compensation expense is included in the same lines as cash compensation paid to the same employees and nonemployees for all periods presented. The total compensation cost related to non-vested awards not yet recognized is $ 19 million for RSUs and PSUs and the weighted average period over which this cost is expected to be recognized is approximately 1.8 years. There are no remaining unrecognized compensation costs associated with SOs.
Information on the number of RSUs, PSUs and SOs related to the Stock Incentive Plan during the perio d of 2023 to 2025 is as follows.
RSUs
Weighted average fair value at grant date
Outstanding at beginning of year
Granted
Shares issued
Cancelled/Forfeited/Expired
Outstanding at end of year
The aggregate intrinsic value for RSUs outstanding at December 31, 2025 was approximately $ 23 million.
PSUs
Weighted average fair value at grant date
Outstanding at beginning of year
Change in performance conditions
Granted
Shares issued
Cancelled/Forfeited/Expired
Outstanding at end of year
The PSUs granted include assumptions regarding the ultimate number of shares that will be issued based on the probability of achievement of the performance conditions. Changes in those assumptions result in changes in the estimated shares to be issued which is reflected in the “Change in performance conditions” line above.
SOs
Number
of options
Weighted
average
exercise
price
Outstanding at December 31, 2022
Exercised
Cancelled/Forfeited/Expired
Outstanding at December 31, 2023
Exercised
Cancelled/Forfeited/Expired
Outstanding at December 31, 2024
Exercised
Cancelled/Forfeited/Expired
Outstanding at December 31, 2025
OPTIONS EXERCISABLE
At December 31, 2023
At December 31, 2024
At December 31, 2025
19. Contingent Liabilities
LEGAL PROCEEDINGS
Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability, and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, and with the exception of losses resulting from the antitrust proceedings described below, it is the opinion of management that the various legal proceedings and investigations to which the Company currently is a party will not have a material adverse impact on the consolidated financial position of Autoliv, but the Company cannot provide assurance that Autoliv will not experience material litigation, product liability or other losses in the future.
ANTITRUST MATTERS
Authorities in several jurisdictions have conducted broad, and in some cases, long-running investigations of suspected anti-competitive behavior among parts suppliers in the global automotive vehicle industry. These investigations included, but are not limited to, the products that the Company sells. In addition to concluded matters, authorities of other countries, with significant light vehicle manufacturing or sales may initiate similar investigations. As a result of the outcome of the European Commission investigation of anti-competitive behavior among suppliers of occupant safety systems that the Company resolved in 2019 (the "EC investigation"), the Company is subject to multiple subsequent civil disputes with non-governmental third parties stemming from the same facts and circumstances underlying the EC investigation. The Company is involved in civil litigation in the UK and Germany with respect to alleged anti-competitive behavior that occurred over a decade ago.
The trial associated with the lawsuit in the UK concluded and a ruling in the proceeding was in favor of the Company. On February 21, 2025, the United Kingdom Competition Appeal Tribunal unanimously dismissed plaintiffs' claims against the Company.
On October 31, 2024, BMW filed a complaint against the Company in Germany claiming damages of € 63 million plus interest (for a total claim of approximately € 95 million) related to the conduct at issue in the EC investigation (the "BMW Complaint"). BMW is one of two European OEMs for which the Company pled guilty in 2017 in relation to the EC investigation. The Company has a period of six months to respond to the complaint and is currently assessing the viability of the complaint. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the BMW Complaint. However, the Company continues to evaluate this matter, no accrual has been recorded, and the estimated range of potential loss is between € 0 and € 95 million. The Company cannot predict the ultimate outcome of the BMW Complaint. This dispute could result in significant expenses as well as an unfavorable outcome that could have a material adverse impact on our customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and our insurance would likely not mitigate such impact. The Company cannot predict the duration, scope, or ultimate outcome of any such disputes.
PRODUCT WARRANTY, RECALLS AND INTELLECTUAL PROPERTY
Autoliv is exposed to various claims for damages and compensation if its products fail to perform as expected. Such claims can be made, and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a product (actually or allegedly) fails to perform as expected or is defective, the Company may face warranty and recall claims. Where such (actual or alleged) failure or defect results, or is alleged to result, in bodily injury and/or property damage, the Company may also face product liability and other claims. There can be no assurance that the Company will not experience material warranty, recall or product (or other) liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. Government safety regulators may also play a role in warranty and recall practices. Recall decisions regarding the Company’s products may require a significant amount of judgment by us, our customers and safety regulators and are influenced by a variety of factors. Once a recall has been made, the cost of a recall is also subject to a significant amount of judgment and discussions between the Company and its customers. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer in either a warranty or a recall situation. Accordingly, the future costs of warranty or recall claims by the customers may be material. However, the Company believes its established reserves are adequate. Autoliv’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves, and adjusts them when appropriate. However, the final amounts actually due related to these matters could differ materially from the Company’s recorded estimates.
In addition, as vehicle manufacturers increasingly use global platforms and procedures, quality performance evaluations are also conducted on a global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Company’s results of operations.
The Company maintains a program of insurance, which may include commercial insurance, self-insurance, or a combination of both approaches, for potential recall and product liability claims in amounts and on terms that it believes are reasonable and prudent based on our prior claims experience. The Company’s insurance policies generally include coverage of the costs of a recall, although costs related to replacement parts are generally not covered. In addition, a number of the agreements entered into by the Company, including the agreements related to the spin-off of Veoneer, require Autoliv to indemnify the other parties for certain claims. Autoliv cannot assure that the level of coverage will be sufficient to cover every possible claim that can arise in our businesses or with respect to other obligations, now or in the future, or that such coverage always will be available should we, now or in the future, wish to extend, increase or otherwise adjust our insurance.
As noted in Note 14 above, as of December 31, 2025, the Company has accrued $ 87 million for total product related liabilities. The majority of the total product liability accrual as of December 31, 2025, relates to recalls, which are partly covered by insurance. Insurance receivables for such recall related liabilities total $ 14 million as of December 31, 2025.
Product Liability :
Autoliv and some of its subsidiaries have been named as one of several defendants in a consolidated class action lawsuit in a multi-district litigation (In Re: ARC Airbag Inflators Products Liability Litigation MDL, No. 3051) in the Northern District of Georgia. The plaintiffs in the multi-district litigation (the "ARC Inflator Class Action") brought claims for fraud, breach of warranty, and violations of consumer protection and trade practices stemming from ARC inflators included in airbag modules that Autoliv or its subsidiaries allegedly supplied after Autoliv acquired certain Delphi assets (the “Delphi Acquisition”) in December 2009. The Company denies these allegations. Autoliv is not aware of any performance issues regarding ARC inflators included with its airbags at the directions of its customers that it shipped following the Delphi Acquisition. The proceedings remain ongoing. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the ARC Inflator Class Action. However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate outcome of the ARC Inflator Class Action.
On September 5, 2023, the National Highway Traffic Safety Administration (“NHTSA”) issued an initial decision to recall approximately 52 million frontal driver and passenger airbag inflators manufactured by ARC and Delphi Automotive Systems because NHTSA determined that the airbag inflators contain a safety defect resulting in field ruptures. Some of the ARC inflators included in the airbag modules that Autoliv or its subsidiaries supplied after the Delphi Acquisition were included in such initial decision. NHTSA has yet to release its final decision. If NHTSA's final decision results in a recall, it is anticipated that such decision will be challenged in US federal court. The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the NHTSA ARC recall. However, the Company continues to evaluate this matter, no accrual has been made, and no estimated range of potential loss can be determined at this time. The Company cannot predict the ultimate outcome of the NHTSA ARC recall.
Specific Recalls:
In the second quarter of 2025, Stellantis initiated a recall of approximately 250,000 vehicles in the U.S. equipped with a certain model of the Company’s side curtain airbag (the “Stellantis Recall”). The Company has determined pursuant to ASC 450 that a loss is reasonably possible with respect to the Stellantis Recall. The Company is cooperating with Stellantis and continues to evaluate this matter with Stellantis. In December 2025, Stellantis provided its calculations for the cost of the Stellantis Recall to the Company. The Company now currently estimates a range of $ 0 to $ 123 million with respect to this potential loss, expects a substantial portion of a potential loss would be covered by insurance, and no accrual has been recorded. The ultimate amount of the potential loss to the Company cannot be estimated. However, the ultimate costs of a recall, could be significantly different than our current estimate. The main variables affecting the possible costs are the number of vehicles ultimately determined to be affected by the issue, the cost per vehicle associated with a recall, the determination of proportionate responsibility among the customer, the Company, and any relevant sub-suppliers, as well as the actual insurance recoveries. The Company’s insurance policies generally cover the costs of a recall, although costs related to the replacement parts are not covered under its insurance policies. Another customer has contacted the Company to inquire about the details of these incidents of nonconformance and are investigating whether its vehicles may generate similar tests results. If this customer or others generate similar nonconformance test results, it is possible that there may be recalls of additional vehicles in future quarters.
In the fourth quarter of 2020, the Company was made aware of a potential recall by American Honda Motor Co. of approximately 449,000 vehicles relating to the malfunction of front seat belt buckles was announced on March 9, 2023 (the “Honda Buckle Recall”). The Company determined pursuant to ASC 450 that a loss with respect to the Honda Buckle Recall is probable and accrued an amount that is reflected in the total product liability accrual in the fourth quarter of 2020, increased the accrual in the fourth quarter of 2021, and reduced the accrual in the fourth quarter of 2023 based on vehicle repair cost data. Following the accrual increase in the third quarter of 2024, the amount by which the product liability accrual exceeds the product liability insurance receivable with respect to the Honda Buckle Recall is approximately $ 12 million and includes self-insurance retention costs and deductibles. The ultimate loss to the Company of the Honda Buckle Recall could be materially different from the amount the Company has accrued.
Volvo Car USA, LLC (together with its affiliates, “Volvo”) has recalled approximately 762,000 vehicles relating to the malfunction of inflators produced by ZF (the “ZF Inflator Recall”). The recalled ZF inflators were included in airbag modules supplied by the Company only to Volvo. The recall commenced in November 2020 and later expanded in September 2021. In August 2025, Volvo irrevocably discharged all potential claims against the Company relating to this recall.
Intellectual Property:
In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result thereof. Such claims could be material.
The table in Note 14 above summarizes the change in the balance sheet position of the product related liabilities for the fiscal year ended December 31, 2025 .
20. Retirement Plans
DEFINED CONTRIBUTION PLANS
Many of the Company’s employees are covered by government sponsored pension and welfare programs. Under the terms of these programs, the Company makes periodic payments to various government agencies. In addition, in some countries the Company sponsors or participates in certain non-governmental defined contribution plans. Contributions to defined contribution plans for the years ended December 31, 2025, 2024 and 2023 were $ 28 million, $ 25 million, and $ 26 million, respectively.
MULTIEMPLOYER PLANS
The Company participates in a multiemployer plan in Sweden. This ITP-2 plan is funded through Alecta and covers employees born before 1979, for whom it provides a final pay pension benefit based on all service with participating employers. The Company must pay for wage increases in excess of inflation on service earned with previous employers. The plan also provides disability and family benefits and is more than 100 % funded. The Company's contributions to this multiemployer plan for the years ended December 31, 2025, 2024 and 2023 were $ 4 million, $ 4 million and $ 4 million, respectively.
DEFINED BENEFIT PLANS
The Company has a number of defined benefit pension plans, both contributory and non-contributory, in the U.S., France, Germany, India, Japan, Mexico, Philippines, Poland, Sweden, South Korea, Thailand, Turkey and the United Kingdom. There are funded as well as unfunded plan arrangements which provide retirement benefits to both U.S. and non-U.S. participants.
The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings and on credited service earned through December 31, 2021. In a prior year, the Company closed participation in the Autoliv ASP, Inc. Pension Plan to exclude those employees hired after December 31, 2003. Within the U.S. there is also a non-qualified restoration plan that provides benefits to employees whose benefits in the primary U.S. plan are restricted by limitations on the compensation that can be considered in calculating their benefits. Effective December 31, 2021, the Autoliv ASP, Inc. Pension Plan is frozen to new accruals and, by extension, the non-qualified restoration plan is also frozen. Settlement accounting has been recognized each quarter in 2025, 2024 and 2023 for the U.S. plans because the lump-sum payments made to plan participants during 2025, 2024 and 2023 exceeded the sum of service cost and interest cost.
For the Company’s non-U.S. defined benefit plans the most significant individual plan is in the U.K. The Company has closed participation in the U.K. defined benefit plan to exclude all employees hired after April 30, 2003 with few members currently accruing benefits.
CHANGES IN BENEFIT OBLIGATIONS AND PLAN ASSETS FOR THE YEARS ENDED DECEMBER 31
Non-U.S.
(Dollars in millions)
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Plan settlements/curtailments
Plan amendments
Plan combinations
Other
Translation difference
Benefit obligation at end of year
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Plan settlements
Plan combinations
Translation difference
Fair value of plan assets at end of year
Pension liability recognized in the balance sheet
The U.S. plan provides that benefits may be paid in the form of a lump sum, if so elected by the participant. In order to more accurately reflect a market-derived pension obligation, Autoliv adjusts the assumed lump sum interest rate to reflect market conditions as of each December 31. This methodology is consistent with the approach required under the Pension Protection Act of 2006, which provides the rules for determining minimum funding requirements in the U.S.
COMPONENTS OF NET PERIODIC BENEFIT COST ASSOCIATED WITH THE DEFINED BENEFIT RETIREMENT PLANS FOR THE YEARS ENDED DECEMBER 31
(Dollars in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Settlement loss
Net periodic benefit cost
Non-U.S.
(Dollars in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service costs
Amortization of actuarial loss
Settlement/curtailment (gain) loss
Net periodic benefit cost
The service cost component is reported as an operating expense among other employee compensation costs in the Consolidated Statements of Income. The remaining components, interest cost, expected returns on plan assets, amortization of prior service costs, amortization of actuarial loss and settlement/curtailment gains (losses), are reported as Other non-operating items, net in the Consolidated Statements of Income.
Amortization of the net actuarial loss from accumulated other comprehensive income is made over the estimated average remaining lifetime of the plan participants (25 to 29 years) for the U.S. plans, and the estimated average remaining service lives or lifetimes of the plan participants for the non-U.S. plans, the periods varying over a wide range between the different countries depending on the age of the population concerned.
COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS BEFORE TAX AS OF DECEMBER 31
Non-U.S.
(Dollars in millions)
Net actuarial loss
Prior service cost
Total accumulated other comprehensive loss
recognized in the balance sheet
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BEFORE TAX FOR THE YEARS ENDED DECEMBER 31
Non-U.S.
(Dollars in millions)
Total retirement benefit recognized in accumulated
other comprehensive loss at beginning of year
Net actuarial loss (gain)
Prior service cost
Amortization or curtailment recognition of prior service credit (cost)
Amortization or settlement recognition of net gain (loss)
Translation difference
Total retirement benefit recognized in accumulated
other comprehensive loss at end of year
The accumulated benefit obligation for the U.S. non-contributory defined benefit pension plans was $ 206 million and $ 205 million at December 31, 2025 and 2024, respectively. The accumulated benefit obligation for the non-U.S. defined benefit pension plans was $ 194 million and $ 161 million at December 31, 2025 and 2024, respectively.
Pension plans for which the accumulated benefit obligation (ABO) is in excess of the plan assets reside in the following countries: U.S., India, Mexico, France, Germany, Japan, Poland, South Korea, Sweden, Switzerland, Thailand and Turkey.
PENSION PLANS FOR WHICH ABO EXCEEDS THE FAIR VALUE OF PLAN ASSETS AS OF DECEMBER 31
Non-U.S.
(Dollars in millions)
Projected Benefit Obligation (PBO)
Accumulated Benefit Obligation (ABO)
Fair value of plan assets
The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the projected benefit obligation and annual net periodic benefit cost.
ASSUMPTIONS USED TO DETERMINE THE BENEFIT OBLIGATIONS AS OF DECEMBER 31
Non-U.S. 1)
(% Weighted average / % Weighted average range)
Discount rate
Rate of increases in compensation level
1) The % weighted average ranges in the tables above represent significant non-U.S. plans only.
ASSUMPTIONS USED TO DETERMINE THE NET PERIODIC BENEFIT COST FOR THE YEARS ENDED DECEMBER 31
(% Weighted average)
Discount rate
Rate of increases in compensation level
Expected long-term rate of return on assets
Non-U.S. 1)
(% Weighted average range)
Discount rate
Rate of increases in compensation level
Expected long-term rate of return on assets
1) The % weighted average ranges in the tables above represent significant non-U.S. plans only.
The discount rate for the U.S. plans has been set based on the rates of return on high-quality fixed-income investments currently available at the measurement date and expected to be available during the period the benefits will be paid. The expected timing of cash flows from the plan has also been considered in selecting the discount rate. In particular, the yields on bonds rated AA or better on the measurement date have been used to set the discount rate. The discount rate for the U.K. plan has been set based on the weighted average yields on long-term high-grade corporate bonds and is determined by reference to financial markets on the measurement date.
The expected rate of increase in compensation levels and long-term rate of return on plan assets are determined based on a number of factors and must take into account long-term expectations and reflect the financial environment in the respective local market. The expected return on assets for the U.S. and U.K. plans are based on the fair value of the assets as of December 31.
The level of equity exposure is currently targeted at approxim ately 32 % for the primary U.S. plan. The investment objective is to provide an attractive risk-adjusted return that will ensure the payment of benefits while protecting against the risk of substantial investment losses. Correlations among the asset classes are used to identify an asset mix that Autoliv believes will provide the most attractive returns. Long-term return forecasts for each asset class using historical data and other qualitative considerations to adjust for projected economic forecasts are used to set the expected rate of return for the entire portfolio. The Company has assumed a long-term rate of return on the U.S. plan assets of 5.61 % for calculating the 2025 expense and 6.20 % for the 2026 expense.
The Company has assumed a long-term rate of return on the non-U.S. plan assets in a range of 3.00 - 5.90 % for 2025. The closed U.K. plan, which has a targeted allocation of almost 100 % debt instrum ents, accounts for approximately 67 % of the total non-U.S. plan assets.
Autoliv made contributions to the U.S. plans during 2025 and 2024 amounting to $ 1 million and $ 2 million, respectively. Contributions to the U.K plan, which is the most significant non-U.S. plan, during 2025 and 2024 amounted to $ 2 million and $ 2 million, respectively. The Company's contributions to its U.S. pension plans as well as to its U.K. plan, are expected to be immaterial in 2026 and the years thereafter.
FAIR VALUE OF TOTAL PLAN ASSETS FOR THE YEARS ENDED DECEMBER 31
Non-U.S.
ASSETS CATEGORY (% Weighted average)
Target
allocation
Equity securities %
Debt instruments %
Other assets %
Total %
The following table summarizes the fair value of the Company’s U.S. and non-U.S. defined benefit pension plan assets:
Fair value measurement at December 31,
(Dollars in millions)
Assets at fair value Level 2
Equity instruments
U.S. Large Cap
U.S. Mid Cap
U.S. Small Cap
Non-U.S. All Cap
Debt instruments
U.S. Government bonds
U.S Aggregate bonds
Non-U.S. Government bonds
Non-U.S. Corporate bonds
Insurance Contracts
Managed investment funds
Other Investments
Total assets at fair value Level 2
The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. After further analysis of the characteristics of certain investments (e.g. fair values based on net asset values held by common collective trusts) we have evaluated the fair value of plan assets should be reported as Level 2.
The estimated future benefit payments for the pension benefits reflect expected future service, as appropriate. The amount of benefit payments in a given year may vary from the projected amount, especially for the U.S. plan since historically this plan pays the majority of benefits as a lump sum, where the lump sum amounts vary with market interest rates.
PENSION BENEFITS EXPECTED PAYMENTS (dollars in millions)
Non-U.S.
Years 2031-2035
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides postretirement health care and life insurance benefits to a limited group of U.S. retirees.
In general, the terms of the plans provide that U.S. employees who retire after attaining age 55, with 15 years of service (5 years before December 31, 2006), are reimbursed for qualified medical expenses up to a maximum annual amount. Spouses for certain retirees are also eligible for reimbursement under the plan. Life insurance coverage is available for those who elect coverage under the retiree health plan. During 2014, the plan was amended to move from a self-insured model where employees were charged an estimated premium based on anticipated plan expenses for continued coverage, to a plan where retirees are provided a fixed contribution to a Health Retirement Account (HRA). Retirees can use the HRA funds to purchase insurance through a private exchange. Employees hired on or after January 1, 2004 are not eligible to participate in the plan. As of December 31, 2025 and 2024, the benefit obligation for postretirement benefit plans other than pensions were $ 13 million and $ 12 million, respectively. The liability for postretirement benefits other than pensions is classified as other non-current liabilities in the balance sheet. The components of the net periodic benefit costs associated with these plans were immaterial for the years 2025, 2024 and 2023.
The average discount rate used to determine the U.S. postretirement benefit obligation was 5.64 % in 2025 and 5.73 % in 2024. The average discount rate used in determining the postretirement benefit cost was 5.73 % in 2025, 5.16 % in 2024 and 5.39 % in 2023.
The accumulated other comprehensive income before tax associated with the postretirement benefit plans other than pensions recognized in the balance sheet as of December 31, 2025 and 2024 were $ 5 million and $ 6 million, respectively. The accumulated other comprehensive income consisted only of a net actuarial gain component for the years 2025 and 2024.
The estimated future benefit payments for the postretirement benefits, which reflect expected future service as appropriate, are expected to be immaterial f or all the future years.
21. Segment Information
The Company has a single operating and reportable segment which includes Autoliv’s airbag and steering wheels and seatbelt products and components. The determination of a single operating segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (“CODM”).
The Company’s CEO, as the CODM, uses consolidated, single-segment financial information for purposes of evaluating performance, making operating decisions and allocating resources.
The Company’s customers consist of all major European, U.S. and Asian automobile manufacturers. Sales to individual customers representing 10% or more of net sales were:
In 2025 : No individual customer representing 10 % or more.
In 2024 : No individual customer representing 10 % or more.
In 2023: Renault 10 % (including Nissan and Mitsubishi) and Stellantis 10 %.
NET SALES BY REGION (Dollars in millions)
China
Asia, excl. China
Americas
Europe
Total
The Company has attributed net sales to the geographic area based on the location of the entity selling the final product.
External sales in the U.S. amounted to $ 1,953 million, $ 2,075 million and $ 2,342 million in 2025, 2024 and 2023, respectively. Of the external sales, exports from the U.S. to other regions amounted to approximately $ 267 million, $ 292 million and $ 343 million in 2025, 2024 and 2023, respectively.
NET SALES BY PRODUCT (Dollars in millions)
Airbag, Steering Wheels 1)
Seatbelt Products 1)
Total net sales
1) Including Corporate and Other sales.
LONG-LIVED ASSETS (Dollars in millions)
China
Asia, excl China
Americas
Europe
Total
Long -lived assets in the table above consists of Property, Plant and Equipment and Operating Lease right-of-use asset. Long-lived assets in the U.S. amounted to $ 280 million and $ 272 million for 2025 and 2024, respectively.
The CODM assesses the Company's performance and decides how to allocate resources based on consolidated net income (loss) in the Consolidated Statements of Income, which is assessed to be the segment measure of profit or loss. This measure is used to monitor actual results to evaluate the performance of the segment versus the strategic targets. The segment assets are equal to the assets presented in the Consolidated Balance Sheets.
The significant expenses that are regularly provided to the CODM are disclosed in the Consolidated Statements of Net Income as a part of the consolidated net income and are as follows.
Significant segment expenses / income (Dollars in millions)
Total direct costs
Total production overhead costs
Cost of sales
Research, development and engineering expenses (gross)
Engineering income
Research, development and engineering expenses, net
Our other significant segment items that are regularly provided to the CODM include selling, general and administrative expenses, and other income (expense) which are disclosed as separate line items in the Consolidated Statements of Income. Other expenses consist of Income from equity method investments, Interest income, Interest expense, Other non-operating items, net and Income taxes, which are disclosed as separate line items in the Consolidated Statement of income .
22. Earnings Per Share
The computation of basic and diluted earnings per share were as follows (dollars and shares in millions):
Numerator:
Basic and diluted:
Net income attributable to common shareholders
Denominator:
Basic weighted average common stock
Added: Weighted average share awards
Diluted weighted average common stock
Net earnings per share - basic
Net earnings per share - diluted
Anti-dilutive shares outstanding for the years ended December 31, 2025, 2024 and 2023 were immaterial.
23. Subsequent Events
There were no reportable events subsequent to December 31, 2025 .
