Annual Report 2008

08 Innovative Vehicle Technology Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.

Financial information in 2009

Contents

February 20, 2009 Year-end Report 2008

Direction and Strategy Highlights of 2008 Report from the CEO Strategic orientation Research and development The vehicle market

March 2009 Annual Report 2008 April 16, 2009 Annual General Meeting April 24, 2009 Interim report January 1 to March 31, 2009 July 17, 2009 Interim report January 1 to June 30, 2009 October 23, 2009 Interim report January 1 to September 30, 2009 Year-end and interim reports are published in Swedish and English and can be downloaded from the Haldex website www.haldex.com. The Annual Report is published in Swedish and English on the Haldex website. Annual General Meeting 2009 Haldex’s 2009 Annual General Meeting will be held at 4 p.m. CET on Thursday, April 16, 2009, at the IVA Conference Center, Grev Turegatan 16, Stockholm. Participation in 2009 Annual General Meeting Shareholders who wish to participate in the Annual General Meeting must be registered in the VPC AB share register no later than Wednesday, April 8, 2009. Notification must be made no later than noon on Wednesday, April 8, 2009, to Haldex AB, Box 7200, 103 88 Stockholm, or by telephone to +46 (0)8-545 049 50, or by e-mail to [email protected]. Guide to reading the Annual Report Haldex is a Swedish company, subject to Swedish laws. All values are expressed in Swedish kronor unless otherwise indicated. Millions of kronor are abbreviated as SEK m. Figures in parentheses refer to 2007. Data concerning markets and the competitive situation represent Haldex’s own assessments unless a specific source is identified. These assessments are based on the best and most recently available factual documentation from published sources in the vehicle industry.

Page 1 2 4 8 10

Haldex divisions Commercial Vehicle Systems Hydraulic Systems Traction Systems Garphyttan Wire

12 16 20 24

Haldex in the society Human Resources Social responsibility Environment

26 27 28

Consolidated and Parent Company Financial Statements Directors’ report Consolidated income statement Consolidated balance sheet Changes in Group equity Consolidated cash flow statement Notes Group Parent company income statement Parent company balance sheet Changes in Parent Company equity Parent Company cash flow statement Notes Parent Company Audit Report

30 34 35 36 37 38 56 57 58 58 59 63

Corporate Governance Corporate Governance Report Board of Directors and Auditors Executive Committee

64 70 71

Other Haldex share Five-year summary and quarterly review Definitions Addresses

72 74 75 76

The Group in brief Mission Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.

We strengthen our competitiveness and develop long-term customer relationships through products that offer high performance and low total costs for the customer throughout the product’s service life, ethical business practices and commitment to long-term partnerships. Vision Haldex will be the global vehicle industry’s first choice as a long-term partner.

We will contribute to social development by providing vehicle technology that satisfies our customers and society. By staying on the cutting edge of technology and developing skilled and motivated employees, we will also achieve profitable growth. Values • Customer first • Respect for the individual • Elimination of waste Strategy The Group should focus on areas in which Haldex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability. This strategy includes evaluating structural opportunities in order to create competitive units with favorable prospects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth:

Haldex divisions

• Create growth and improve our competitive capabilities by developing and commercializing new products • Create growth by sharply strengthening positions in new markets, primarily through determined expansion in China, India, Brazil and Russia • Reduce purchasing costs, in part by continuing to increase the share of purchases from low-cost countries • Improve the cost structure by increasing the share of production in low-cost countries • Improve productivity and quality through intensified use of Haldex Way, our concept for management and process improvement • Develop employee competencies, strengthen the corporate culture and increase the focus on leadership • Acquire companies and establish programs of cooperation that are consistent with the strategic direction • Niche strategy – safety, environment and vehicle dynamics Market Europe accounted for 53% of Group sales, North America for 38% and remaining markets for 9% in 2008. The markets in South America and Asia, particularly China, are showing robust growth, and their importance to the Group is increasing rapidly. Legislation focusing on traffic safety, the environment and vehicle dynamics, combined with demands for continuous cost rationalization measures, is the driving force for product development in today’s automotive industry. Demand is also driven by the increase in vehicle production worldwide. Haldex has a global market presence, with 23 production plants in Sweden, Germany, the UK, Hungary, the US, Mexico, Brazil, India and China.

Net sales by region 2008

Net sales by division 2008

Net sales by customer segment 2008

South America, 3%

Traction Systems, 12%

Other, 3%

Asia and Middle East, 6% North America, 38%

Europe, 53%

Commercial Vehicle Systems (CVs)

Garphyttan Wire, 13% Hydraulic Systems, 25% Commercial Vehicle Systems, 50%

Industrial vehicles, 7% Light vehicles, 12% Engines, 20% Heavy vehicles, 58%

During 2008, Haldex reached an ­agreement with Suzuki Metal Industry Co. to divest its division Garphyttan Wire. The transaction is expected to be completed during the period April to June 2009.

D

Operations

HALDEX 2008

Net sales, share of Group total

Commercial Vehicle Systems; Develops and manufactures brake systems for heavy trucks, trailers and buses. The product offering covers all primary components and subsystems included in complete air brake systems. Operations are divided into five business units: Actuators, Air Management, Brake Controls, Foundation Brake and Friction Products.

sek

Hydraulic Systems; Develops and manufactures gear and georotor pumps, hydraulic power packs and high density power systems; technology for diesel engines, i.e. pumps for lubricating oil, coolants and diesel fuel, and technology for reducing emissions of exhaust gases from engines. Hydraulic lifting systems and drive systems for industrial vehicles and trucks are also supplied.

sek

Traction Systems; Develops and ­ anufactures electronically controllable m systems for all-wheel-drive systems for cars, known as AWD systems. The system software can be customized to meet each carmaker’s particular desires in terms of driving characteristics and ­traction.

sek

Operating income*

Employees, average share of Group total

2,856

4,234 m sek

4

m

48%

2,095 m

2,335

146

m

25%

39%

1,021 m

339 sek

41

Hydraulic is a niche player with about 20% of the market share in its market niches. Business unit Engines is market leader for oil, fuel and water pumps in North America and the rest of the world. Haldex’s global market share in these sectors is slightly more than 30%, and just over 40% for oil pumps in North America.

50%

6%

Garphyttan wire; Develops and ­manufactures advanced spring wire from various alloys for use mainly in combustion engines and transmissions. The main applications are valve springs, transmission springs, ­piston rings and springs for fuel injection systems.

Net sales amounted to SEK 1,053 m in 2008.

Operating income amounted to SEK 59 m in 2008.

Garphyttan had 474 employees in 2008.

Haldex Group

Net sales, Group total

Operating income, Group total*

Employees, average Group total

8,403 m

20–30%

Haldex is a market leader in controllable AWD systems. The market share in Europe exceeds 50%.

m

12%

sek

15%

Haldex market share of the market served with its current product program is about 15%. The market share is substantially higher in individual product areas.

50%

sek

Market share

sek

250 m

6,004

* Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. Operating income amounted to SEK 92 m (289).

The market share of the global market for oil-hardened valve spring wire is about one-third, which gives Garphyttan Wire a leading global position in this product area.

Highlights of 2008

HALDEX 2008

Highlights of 2008 SEK

8,403

m

Sales totaled SEK 8,403 m (7,940). Adjusted for currency exchange rates, sales rose 6%. Order intake totaled SEK 7,923 m (8,098). After adjustments for currency exchange rates, the decrease was 3%

m

Earnings after tax amounted to SEK –43 m, (141). Earnings per share amounted to SEK –1.92 (6.24)

SEK

–43

SEK

250

m

Operating income* and operating margin* amounted to SEK 250 m (339) and 3.0% (4.4) respectively

SEK

857

m

Cash flow from operating activities was strong in the period amounting to SEK 857 m (312)

April 1 SEK

800

m

Haldex completed the acquisition of Concentric on April 1

An agreement was reached with Suzuki Metal Industry to divest the Garphyttan Wire division. The purchase price is estimated to SEK 800 m on a cash and debt free basis

Key figures 3 years

2008

2007

2006

Net sales, SEK m

8,403

7,940

7,890

Operating income*

250

339

403

Earnings after tax, SEK m

–43

141

310

Earnings per share, SEK

–1.92

6.24

13.96

Operating margin*, %

3.0

4.4

5.3

–

4.50

4.50

Return on capital employed, %

2.4

8.3

11.5

Equity/assets ratio, %

29

37

40

857

312

402

Proposed dividend, SEK

Cash flow from operations, SEK m Investments, SEK m Average number of employees

392

453

409

6,004

5,518

4,683

* Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. Operating income amounted to SEK 92 m (289).

1

2

Report from the CEO

HALDEX 2008

Lower costs and greater efficiency create strong position when business conditions recover Haldex endured a challenging and strategically critical year in 2008. The rapid decline in demand during the second half of the year was met by expanded cost-rationalization programs and improvements in operating efficiency. The Group implemented its renewed strategy and strengthened its structure with the completion of the Concentric acquisition and divestment of ­Garphyttan Wire. Haldex is now a more focused company, with a better structure and cost level, competitive products and solutions to meet the recovery when it occurs.

2008 will go down in history as a year of extremes. After favorable development during the first half of the year, demand declined sharply in the second half. It was one of the worst periods the automotive industry has experienced in a very long time, as reflected clearly in our full-year earnings and the results of our competitors. • Sales totaled SEK 8,403 m (7,940). After adjustments for changes in currency exchange rates, sales rose 6%. Order bookings amounted to SEK 7,923 m (8,098), down 3% after currency adjustments. • Operating income* amounted to SEK 250 m (339) and the operating margin* was 3.0% (4.3). • Earnings after tax amounted to SEK –43 m (141). Earnings per share amounted to SEK –1.92 (6.24). • Cash flow from operating activities developed strongly and totaled SEK 857 m (312), a strength factor in these difficult times. Comprehensive cost-reduction program Given these background conditions, we decided in autumn 2008 to make further adjustments in our cost structure and increase our production efficiency to meet the economic decline. These cost-reduction programs call for personnel cutbacks that will affect 1,500 employees from mid-2008 through mid-2009, of whom 1,000 had left the company before year-end. The total reduction in personnel corresponds to 25% of our workforce. The positive impact on earnings is estimated at SEK 425 m per year. The programs will create savings in all divisions which will strengthen the Group structure and reduce working capital. We are closing several production plants and distribution units while increasing the efficiency of our production processes and the way we manage our operating capital. Costs for the programs are estimated at SEK 150 m, of which SEK 85 m was charged against earnings during the fourth quarter and the remainder, SEK 65 m, will be charged against earnings in the first quarter of 2009. We have been working actively with cash-management programs and have reduced working capital by 50%, which has resulted in a strengthening of our cash flow. The measures were necessary adjustments to the rapid economic decline during the second half of 2008 and, combined with more effective capital management, yielded favorable effects on our clearly improved cash flow. However, this also means that we are improving our potential to derive even greater benefits from our strategic structural measures when demand starts to rise. Adjusting the cost structure and adapting the workforce to a lower level of demand is always very painful. As in all such situations, the difficult times have entailed hard work and major efforts on the part of our employees. I would like to express my gratitude for the contributions * Excluding

restructuring costs, nonrecurring items and amortization of acquisition-­ related surplus values. Operating income amounted to SEK 92 m (289).

made and the loyalty shown by Haldex employees both those who have already left the Group and those who remain. Focusing the business Haldex has excellent potential to create value for its stakeholders based on the company’s expertise in vehicle technology that improves safety, the environment and driving characteristics, reflecting some of the global economy’s most important trends. With profitability as the primary priority, Haldex is working on strategies to change the Group’s structure and focus on areas where we can achieve internal synergies and a sustainable market position based on innovative and leading products that provide the best potential for continued business growth and higher profitability. The first step was the acquisition of Concentric, which was finalized in April 2008. The integration of Concentric has progressed extremely well, and we are achieving cost savings and offensive synergies in product development and marketing, in line with expectations. The “New Hydraulics Systems” will be one of the diesel engine market’s largest suppliers of technologies and products that reduce emissions and fuel consumption, which are customer requirements that provide healthy global growth potential. In view of the current market conditions, we see opportunities for strong growth with favorable profitability. The second stage was the sale of Garphyttan Wire to Suzuki Metal for SEK 800 m on a debt-free basis, a transaction that will be finalized in April–June 2009. Garphyttan has a very strong global position in its niche, spring wire for engines and transmissions used in the automotive industry. In our judgment, however, the synergies with other areas of the Haldex Group’s business activities were not strong enough, and Garphyttan has a better future now as part of the global spring wire specialist Suzuki. The divestment of Garphyttan enabled us to reduce Haldex’s net debt to SEK 1,535 m, pro forma, as per December 31, 2008. We also expect to realize a capital gain of about SEK 400 m. Accordingly, Haldex’s financial position will be strengthened and we will be able to repay the bridge financing we raised to acquire Concentric. After renegotiating our syndicated loan, which matures in 2012, combined with private placement loans with various terms of maturity through December 2011, Haldex has secured a stable financing base. Lower investment requirements after the establishment of new business units in low-cost countries during recent years and our ongoing efficiency enhancement programs will contribute favorably to the Group’s cash flow development. Positioned for profitable growth Like the industrial sector in general, we expect a troublesome 2009. The market outlook has seldom been more difficult to forecast. We have some security, however, in knowing that our skills, product development and products are favorably positioned to meet the long-term demand trend and generate profitable growth, efforts that are now gaining support from the actions we have taken to reduce costs and improve our operating efficiency. A brief review of business prospects for our various divisions shows the following: CVS: Although significant efforts have been made over the past two years to improve CVS’s structure and reduce costs, these were not sufficient to offset the exceptionally sharp decline in volume and higher raw material

Report from the CEO

HALDEX 2008

«In the long term perspective, there is no doubt that vehicle transportation comprises a growth segment of an increasingly globalized economy.»

costs during 2008. However, we have completed the restructuring program in the Friction unit and we are now able to see positive results from rationalization measures implemented over the past few years. Combined with the program of measures to consolidate European distribution operations in a single unit and the closure of the production plant in Redditch, UK, as well as price adjustments and lower raw material prices, we will be positioned favorably when demand starts to rise again. Investments in the product development of brake and air suspension systems are now starting to generate market successes, and we have several new concepts in the launch phase that will further strengthen our market position. Hydraulic Systems: Our cost-reduction programs are also yielding effects in this area, and projected synergy gains totaling as much as SEK 70  m annually from the integration of Concentric are being realized. With the exception of the Chinese market, we are now the global market leader for oil, fuel and water pumps for the diesel engine market, with good potential for continued success. Strengthened by a new generation of the successful Alfdex concept, and a broader launch of Varivent, we have two leading product technologies to meet the increasingly stringent environmental demands being imposed on our customers. We are continuing to work on development of a new technology for electronic control of hydraulic systems designed to provide major improvements in engine fuel economy. With a better cost base and lower raw material prices, the “New Hydraulic Systems” concept has good potential to grow with strong profitability when demand recovers and starts to increase. Traction Systems: Haldex technology for all-wheel drive has gone from strength to strength, and we are now the leading source of product development and the leading supplier of electronically controllable ­systems, also known as AWD systems. This was confirmed in 2008 by an order from the manufacturer of one of the world’s most prestigious sports cars, with deliveries scheduled to begin in 2010, and another order for a European manufacturer’s new passenger car platform, with deliveries beginning in 2011. The future of all-wheel drive is secure, particularly in view of growing safety demands. Haldex has a highly prominent position, with prototypes for the next generation that are now

being tested by two major car manufacturers. We are also conducting several research projects, including solutions for hybrid vehicles, which provide exciting potential in existing and new areas of technology. Market outlook for 2009 It has seldom been more difficult to forecast future business trends than it is now during this winter. We do not expect any brightening of the demand trend during the first half year of 2009. In the large flow system that is the automotive industry, inventories are being reduced in all areas, thereby impacting new order bookings. When this process has been completed, there will be some potential for a recovery. In the longterm perspective, there is virtually no doubt that vehicle transportation comprises a growth segment of an increasingly globalized economy, in which more and more countries want to, and will, benefit from more jobs and improved welfare generated through the distribution of international labor. There are also strong indications that more stringent demands will be imposed in terms of environmental and safety considerations, areas of particular importance to Haldex. Positive aspects of the economic situation include falling energy and raw material prices, lower capital costs and the highly comprehensive economic stimulus packages that are now being launched in most countries. Our own intensive work efforts to reduce costs and improve operating efficiency will also yield favorable effects. As a result, Haldex will be well positioned and highly competitive when the market recovers.

Stockholm, March 2009

Joakim Olsson CEO and President

3

4

Strategic orientation

HALDEX 2008

Mission, vision, strategies and objectives Mission

Strategies

Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches. We strengthen our competitiveness and create long-term customer relations through highly skilled employees, high-performance products, low total costs for the customer throughout the product’s service life, ethical business practices and a commitment to longterm partnerships.

The Group should focus on areas in which Haldex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability. This strategy includes evaluating structural opportunities in order to create competitive units with favorable prospects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth: • Product development • Stronger positions in new markets • Reduced purchasing costs • Increased production in low-cost ­countries • Improved productivity – Haldex Way • Development of employee competencies, strengthening of the ­corporate culture and increased focus on management • Strategic acquisitions • Niche strategy – safety, ­environment and ­vehicle dynamics

Vision Haldex will be the global vehicle industry’s first choice as a long-term partner. We shall contribute to social improvements by providing vehicle technology that satisfies both customers and society. We shall also achieve profitable growth by staying at the cutting edge of technology and developing skilled and motivated employees.

Values • Customer first • Respect for the individual • Elimination of waste

Profitability has the highest priority in the Group’s strategy. In parallel, continued robust growth is an important prerequisite for success. Haldex offers proprietary vehicle technology solutions that meet three customer requirements, safety, environment and vehicle

Safety, environment and vehicle dynamics The Haldex Group offers proprietary vehicle technology solutions that meet three primary customer requirements: safety, environment and vehicle dynamics. These customer requirements represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth. The direction of demand is governed by such factors as increasingly stringent safety and environmental requirements from legislators, reflecting global consumer opinion that is becoming progressively pronounced. Growth opportunities are strengthened further by the importance of vehicle dynamics in positioning and differentiating between ­vehicle manufacturer brands. With Haldex’s brake systems, all-wheel drive systems, hydraulic systems and engine products, the Group is able to offer technical solutions of the highest quality to the world’s leading ­vehicle manufacturers. In accordance with the company’s vision of being a reliable, longterm primary choice, our products are often developed in close cooperation with customers to meet their specific requirements and applications. ­Haldex creates value for the world’s leading vehicle manufacturers, which provides opportunities for continued strong growth and expansion.

­ ynamics. These customer requirements d ­represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth combined with healthy profitability.

Objectives Haldex shall create value for the shareholders by focusing on competence, stable growth and increased profitability in a sustainable manner. The goal will be achieved through a distinct customer focus, growth in niche sectors offering higher growth potential than the automotive market in general and determined strategies for cost ­savings and greater efficiency.

Financial objectives

Haldex has two overall objectives: • 15% return on capital employed • 6% annual growth

The secondary goals are: • Operating margin of 7% • Capital turnover rate of 2.5

Optimizing the Group structure To achieve sustainable growth, healthy profitability and increased shareholder value, Haldex focuses on areas in which the Group can secure a strong market position based on innovative market-leading products. The core business is conducted within three divisions: Commercial Vehicle Systems, which is positioning itself for continued growth through ongoing efficiency-enhancement and rationalization programs, Hydraulic Systems, whose growth is mainly generated through the development and launch of new technologies that satisfy future demands arising from environmental legislation, and Traction Systems, a global technology leader in a segment characterized by high growth. As a feature of the Group strategy, Haldex continuously evaluates its operations and a variety of structural opportunities for strengthening the competitiveness of its various units. These could take the form of cooperation with other companies, supplementary acquisitions or divestments. The acquisition of Concentric during 2008 was an initial step in Haldex’s strategic plan for optimizing the Group structure and creating a strong Hydraulic Systems Division. Another step towards a more focused business was taken towards the end of the year when an agreement was entered with Suzuki Metal concerning the divestment of the Garphyttan Wire Division.

Strategic orientation

HALDEX 2008

Product areas

Brake systems

Products for

Haldex largest customers

Heavy vehicles

Daewoo Bus, Daimler, Dongfeng Motor, Eicher, Ford, First Auto Works, Freightliner, General Motors, Hino, Hyundai, Isuzu, Iveco, Kamaz, MAN, Oshkosh, Paccar, Renault Trucks, Scania, TATA, Volkswagen, Volvo.

Trucks and busses Axles and trailers

Arvin Meritor, Bendix Spicer, Bosch, BPW, CICM, Dana, Gigant, Great Dane, Guerra&Facchini, Hendrickson, Jindo, Kögel, Krone, Randon, SAF, Schmitz, Stoughton, TRW, Utility, Wabash.

Industrial vehicles Forklift trucks Industrial vehicles

Hydraulics and engine ­components

Tailgate lifting devices and bogie axles

Atlet, Crown, Jungheinrich, Linde (Still, OM Pimespo), NACCO (Hyster, Yale), Rocla, Toyota (BT, Raymond, Prime Mover). Agco, Bobcat, Case New Holland, Caterpillar, John Deere, Doosan, Dynapac, Genie, Grove, JCB, JLG, Komatsu, Liebherr, O&K, Pinguely & Haulotte, Manitowoc, Skyjack, Terex, Vögele, Weyhausen, Volvo. Behrens, Bär, Dautel, D’Hollandia, Maxon, Scania, Sorensen, Zepro, Volvo.

Engines

Caterpillar, Cummins, DAF, Daimler, Detroit Diesel, Deutz, Iveco, JCB, John Deere, Scania, Volvo, Tata Cummins.

Passenger cars

Ford (Ford,Volvo), Land Rover, General Motors (SAAB, Opel, Buick, Cadillac), Volkswagen (Audi, Bugatti, SEAT, Skoda, VW).

AWD-systems

Strategies for growth and profitability Profitability has the highest priority in the Group’s strategy. In parallel, continued robust growth is an important prerequisite for success. To achieve its financial objectives for growth and profitability, Haldex applies the following strategies:

Growth:

Profitability:

• Niche strategy for increased growth, through a focus on products with higher growth potential than for the vehicle market as a whole. For Haldex, this involves products that improve safety, the environment and vehicle dynamics. • Increased competitiveness through product development is a central element in Haldex’s strategy. This involves both new product development and efforts to create new applications for our existing products. • Strengthening positions in new markets is essential for growth. This will be achieved through goal-oriented expansion, primarily in China, but also in other countries such as India, Brazil, Russia and countries in ­Eastern Europe. • Haldex continuously analyzes opportunities for strategic company acquisitions, while simultaneously launching other forms of cooperation. Developing new technologies and more rapidly establishing positions in new markets are key goals in Haldex’s acquisition strategy.

• The cost structure is being improved by means of structural and efficiency-­ enhancing measures. An increasing share of production is being located in low-cost countries, thus reducing costs and bringing important parts of production closer to our strategic markets and customers. • In order to increase profitability, Haldex strives to reduce purchasing costs, mainly by increasing the proportion of procurements from low-cost countries. • Productivity is being improved through continued implementation and development of the Haldex Way management system. • The organization’s efficiency is being improved through increased competencies and more distinct lines of control and responsibility. • Making sure that large development projects are profitable. • Synergies in the new Hydraulics Division. • Expanded cost reduction program.

5

6

Strategic orientation

HALDEX 2008

Positioned for growth Haldex is well positioned to meet the demands of the global vehicle industry. Haldex’s mission and strategic orientation position the Group for growth. Asia, Eastern Europe and South America are markets with major requirements and characterized by robust growth. In countries such as China and India, the pace of social development is currently rapid. At the same time, climate issues and other challenges are placing greater demands on all of us to assume a global responsibility for reducing energy consumption and achieving a better and safer environment. In parallel with greater global commerce, which is driving increased transport requirements, the Western World’s infrastructure is being expanded and upgraded. For Haldex, this trend is creating strong driving forces for business growth. We develop and deliver products that improve safety, the environment and the dynamics of vehicles used in the transport and infrastructure sectors. In the world’s new and expansive markets, investments in these sectors are vital for growth and social welfare. In traditional industrialized countries, the transport and vehicle sectors must assume a greater responsibility for improving the environment and increasing safety. As a result of Haldex’s expertise in the form of technologies for satisfying the demands deriving from future legislation and the driving forces underlying improved fuel economy and increased safety, the Group is extremely well positioned to meet the demands of the global vehicle industry. • Global presence and world-leading customers Haldex has a global presence and its customers include world-leading vehicle manufacturers, which is a strategic strength. The Group has production operations distributed among 23 production plants and nine development units in North America, South America, Europe and Asia. We are favorably positioned and able to offer proprietary products that focus on the environment, safety and vehicle dynamics. All of these features and characteristics are strategically important to our customers

and provide considerable growth potential. Haldex is positioned on the cutting edge of technology in all areas, but without being an inventor. We develop and commercialize innovations, often in partnership with our customers, to provide maximum customer value. Serving worldleading customers in all product areas subjects the company to considerable demands, while also signifying recognition of Haldex as a leading global manufacturer and market driver within its market segments. • Product development and world-leading products Product development is a key driving force for organic growth and is a decisive success factor for Haldex. The Group specializes in transforming innovations into profitable, world-leading products in its niches. Investments in product development have increased steadily and led to a pioneering contribution to the vehicle industry’s technological advancement in all-wheel drive and disc brakes and in cleaning and increasing the efficiency of engines and hydraulics. In 2008, development costs accounted for about 4% of sales. Product development is a key factor in Haldex’s strategy for being able to offer products in high-growth niches of the global vehicle market. An important prerequisite is the ability to develop technical solutions that satisfy customer requirements arising several years into the future, while having the product planning that facilitates efficient and profitable sale of new products. With its model for innovative product development, Haldex will be able to offer a series of new and attractive products to the market in the years ahead. • Competencies of managers and other employees Continuously operating at the leading edge of technological development and having world-leading customers exposes the competencies of both individual employees and the organization as a whole to stringent

Financial objectives

Return on capital employed

To better reflect the conditions in Haldex’s markets and the long-term nature of its business, ­financial objectives are expressed as average values over a business cycle.

20

The Group’s overall objectives are:

16

• return on capital employed of 15% • annual growth of 6%

%

12

12.8

12.1

The Group also has the following secondary goals: • profit margin of 7% • capital turnover rate of 2.5

8

The objectives apply to the Group as a whole. Targets for the various business areas may differ depending on capital structure, degree of refinement or other business-­ related conditions. The return on capital employed has been less than 15% in the past five years. Efficiency efforts to strengthen Haldex’s profitability remain one of management’s main priorities.

4

8.3 5.8 6.0

0

12.3 11.5

6.8

2.4

00 01 02 03 04 05 06 07 08 Target 15%

Strategic orientation

HALDEX 2008

«For Haldex, the world’s mega trends are creating strong driving forces for business growth.» requirements. Based on the skills and efforts of its employees, Haldex aims to develop a high-performance, world-class organization that continuously strives to improve operations in accordance with the internal management system, Haldex Way. Determining factors are how well this work is organized and ensuring that each employee is given opportunities to utilize his or her full potential.

• Productivity and Haldex Way In order to capitalize on its excellent growth potential, Haldex must improve is cost-effectiveness and increase its productivity. This work is conducted within the framework of the overall management and process improvement system, Haldex Way. Haldex Way focuses on customer satisfaction and the achievement of world-class production. Haldex Way is based on the lean ­production philosophy, and the objective is to ­create a continuous link in flows between customers, subcontractors, production and product development. Haldex Way is an overall management philosophy for the entire value chain, including products, information and future requirements. Haldex Way creates a shared direction based on active management and a uniform culture, while simultaneously facilitating tangible changes and improvements in the Group’s operations.

Management and HR work is governed by the following aims: • To continuously develop our ability. By constantly raising the competency level of the organization and creating conditions that enable us to remain innovative and by continuously learning and improving our operations, we generate a distinct competitive edge over our competitors. • To continuously improve as managers. By increasing our ability to manage people and the organization, in both the short and the long term and in a generally more complex business, conditions are created for Haldex to become a high-performance company. • To strengthen our corporate culture. By developing a strong corporate culture that encourages performance and responsibility, we create an attractive workplace for our employees and conditions for continuous improvements in our operations and earnings.

The concept for Haldex Way is based on three fundamental values: • Customer first • Respect for the individual • Elimination of waste Customer requirements are the controlling factor for these values. Our customers’ needs form the platform for what we produce – motivated employees are a basic prerequisite for the production of qualitative products – and we strengthen our competitiveness by eliminating all forms of waste. Management within Haldex must go hand-in-hand with the principles of Haldex Way and serve in a manner that provides support, leadership and development.

This can only be achieved through the contribution of each employee in the organization and when each individual: • can act independently, make decisions and act on the basis of his or her ability and in accordance with the company’s norms and values. • is positively committed to and participates in the development of his or her work and has the capabilities to interact with others for the benefit of both the employee and the company.

Annual sales growth

Profit margin*

Capital turnover rate

% 25

% 8

times 3.0

20

7 6

15.0

15

11.0 10 6.0

7.0

5 6.0

5.0

5 1.0 0 –5 –10

5.1

5.2 3.9

4 3

2.5 2.4 2.3

2.5 5.5

2.2 5.1

2.0

1.9 2.0

2.2 2.2

4.3 1.5

3.5 2.9

2.2

3.0 1.0

2

–7.0 00 01 02 03 04 05 06 07 08 Target 6%

0.5

1

–4.0

0

00 01 02 03 04 05 06 07 08 Target 7%

* Excluding restructuring costs, one-off items and ­amortization of acquisition-related surplus values.

0.0

00 01 02 03 04 05 06 07 08 Target 2.5 times

7

8

Research and development

New innovative products generate growth Haldex’s technical solutions for improved safety, environment and vehicle dynamics are based on customer requirements and requests.

Research and development represent a fundamental strategy for achieving Haldex’s long-term goal of profitable growth. In cooperation with customers, Haldex specializes in developing and commercializing innovations into world-leading products in niches that enhance the vehicles’ performance in terms of the environment, safety and vehicle dynamics. In 2008, investments in product development totaled 4% of consolidated sales. The basis for research and development is ­in-depth knowledge of customer requirements, a high level of technical expertise and extensive knowledge of factors affecting the business environment. R&D work is conducted in collaboration with customers and partners, which include worldleading vehicle manufacturers and sub-­suppliers to the vehicle industry. The main driving forces for product development in the vehicle industry are legislation aimed at increased traffic safety, satisfying intensified environmental requirements, improved vehicle dynamics and reductions in fuel consumption, combined with demand for continuous cost-­rationalization. Products that satisfy these more rigorous demands are also adjudged to generate significantly higher growth than the vehicle market in general, which provides Haldex with favourable prospects for increased value generation. Product development activities are conducted in each division. Haldex’s specialist expertise is its ability to industrialize innovations, that is, develop ideas from the concept stage to products and industrial production, and then adapting them to the customer’s production and use in the market. Haldex satisfies the unique requirements of each customer based on platforms designs, which require solid knowledge of the ­customer’s product planning and the correct position in the pro­duct development cycle. In parallel with proprietary product development, Haldex also acquires concepts and innovations that are then refined for cost-effective volume production. Cooperation within research and development Haldex cooperates closely with a number of European universities and colleges. Research is conducted in cooperation with the University of Technology in Luleå, Sweden. Haldex also engages in programs of cooperation with Chalmers Institute of Technology in Gothenburg and the Royal Institute of Technology (KTH) in Stockholm, both in Sweden, the University of Dresden in Germany and Cambridge University in the UK. During 2008, Haldex together with KTH, another Swedish vehicle supplier and a Swedish vehicle manufacturer jointly received support from the Swedish Foundation for Strategic Research via the ProViking 2 program. The purpose of the project is for universities and industry to cooperate with the aim of improving development methods for mechatronics design. The Program for Automotive Research (PFF) is conducting a Green Car research project to develop more environmentally compatible vehicles. Haldex contributes knowledge and the experience gained through its development of Alfdex and Varivent. Within this project, Haldex is also cooperating with the Faculty of Engineering at Lund University, with the aim of optimizing the life and function of AWD systems.

HALDEX 2008

safety Products and functions that enhance ­vehicle safety generate growth exceeding that of the vehicle market as a whole. This trend is being driven by increasing demand from customers and new legislation aimed at improving traffic safety. Haldex adopts a proactive approach and represents innovation in the field of brake technology for trucks and trailers, while advancing development in cooperation with customers. For enhanced safety in passenger cars, Haldex has developed an electronic differential slip based on its all-wheel drive ­system – Haldex XWD. Together with ­Haldex couplings, this electronically ­controlled mod-

ule is integrated into the AWD system for enhanced stability when maneuvering at high speeds. Haldex XWD provides increased safety by offering ­complete integration of this with the brake and stability ­systems. Brake and air ­suspension In the vehicle trailer segment, Haldex currently occupies a leading position as a supplier of brake and air ­suspension systems. In cooperation with Europe’s leading trailer manufacturers, ­Haldex has implemented improvements to the EB+ (Gen2)

environment In recent years, Haldex has pursued a ­strategy of meeting and exceeding ­society’s increasingly stringent environ­mental requirements and the Group now offers a portfolio of ­competitive products that ­contribute to more efficient emission ­control and superior fuel economy. Some of these products are already available for series production in the market, while ­others are at ­various stages of ­development.

Variable flow pumps Since Haldex’s technologies are fully developed for the next generation of engines, the Group’s various products can provide improvements in terms of performance, efficiency and

vehicle dynamics Haldex is one of the world’s leading ­suppliers of all-wheel drive (AWD) systems. The first generation of Haldex’s AWD ­coupling was introduced in 1998 for Audi TT and Volkswagen Golf. Subsequently, the development of new generations has ­continued and the fourth generation was launched in 2008. Although the mechanical components in Haldex’s allwheel drive system are ­fundamentally the same for the various cars, vehicle dynamics can be customized through a variety of programming and ­control systems. The combination of mechanics and electronics – mechatronics – provides considerable flexibility, while

Haldex’s modular approach reduces costs for vehicle ­manufacturers. In order to broaden the product ­portfolio, a system with a controllable ­differential slip has been developed, which improves the vehicle’s traction and stability when maneuvering at high speeds. Generation I – 1998 The first Haldex coupling comprised a wet ­multiple disc clutch integrated in the rear axle. Cars equipped with Generation I: Audi A3 TT, VW Golf, Bora, Sharan, Beetle, Seat Leon, Alhambra, Skoda Octavia

Research and development

HALDEX 2008

electronic brake system that provide improved functionality and superior system ­integration. In addition to brake adjustment, the system also features electronic stability control (ESC), intelligent control of lift axles (ILAS) and a new product generation for raising/­lowering trailer chassis (COLAS+), which also includes a roll-on roll-off function for optimal adaptation and safety in connection with, for example, ferry transports. The system also offers Reset To Ride, ­Haldex’s patented comfort and safety function for automatic repositioning of the chassis level after loading and unloading. Brake by wiRe To meet the demands placed on tomorrow’s brake systems, including further improvements to brake performance and vehicle dynamics, Haldex has developed brake-­by-wire ­systems, which are completely electronic brake systems for trucks and trailers that feature electromechanical

emissions, as required by Euro 6 and regulations beyond EPA 10. In addition to normal exhaust emissions, the more stringent legislation for engines includes other types of emissions, such as crankcase gases. By combining Haldex’s variable flow pumps for oil and water, fuel savings exceeding 4% can be generated. The pumps adapt the flow of fluid to the vehicle’s requirements, thus limiting the energy required for operating the pumps. As a result, both CO2 emissions and fuel consumption are reduced, providing significant benefits for both trucks and passenger cars. Varivent The environmental benefits offered by Varivent are similar. The EGR (Exhaust Gas Recirculation) is an established method of reducing nitrous oxide ­emissions and its efficiency is enhanced by Varivent, which uses variable throat technology

Generation II – 2002 The second-generation Haldex coupling was equipped with more intelligent software and new valve technology for faster reaction. Cars equipped with Generation II: Audi A3, TT, Bugatti Veyron, Ford Freestyle, 500, Mercury Montego, Seat Altea, Freetracker Skoda Octavia, VW Golf, Passat, Multivan, Volvo S40, V50, S60, V70, XC70, S80, XC90

brakes. This means that each wheel is fitted with a brake that is intelligently regulated by an ­electric motor, replacing today’s compressed-air brakes. The signal to apply or release the brakes is transferred electrically from the driver’s pedal to the wheel end. With electromagnetic brakes, the braking ­distance for heavy trucks is shortened by an ­average of 15% as a result of a more rapid response and enhanced control, thereby ­contributing to increased traffic safety.

Other advantages include lower energy c­ onsumption compared with current systems and more efficient energy recovery when ­braking with hybrid vehicles. TRAILER ROLLOVER STABILITY In 2008 Haldex announced the addition of the 2nd Generation Trailer Rollover Stability (TRS) ­System. The system, built on Haldex’s newest 4S/2M ABS platform provides the next generation of high performance braking along with roll stability safety technology. TRS is designed for one to three or more axle trailers using an air ­suspension. The system delivers superior braking performance by adjusting for the trailer conditions during normal and ABS braking events as well as to intervene with active braking if ­conditions indicate a rollover is imminent.

to pump exhaust gases more efficiently. This, in turn, means that less energy is wasted in pumping gas through the EGR circuit and so reduces fuel consumption and CO2 ­emissions. Extensive engine testing has confirmed fuel savings of 4% for heavy trucks. The technology is particularly suitable for turbo­charging and high EGR (Exhaust Gas ­Recirculation) flows and can be adapted for individual engine turbocharging and EGR strategies. ­Naturally, the trend towards reduced fuel consumption also applies to ­gasoline-powered cars. In terms of volume, the engines of the future will be smaller but will ­generate the same horsepower as current engines. This will be achieved by means of high boost pressures and applying other turbo-­ strategies and here Varivent has a major ­contri­bution to make.

Alfdex The Alfdex system offers the market a highly ­efficient method for separating oil and particulate matter from ventilation gases in the crankcases of diesel engines, also known as ­crankcase gases. Alfdex is a joint venture based on Alfa Laval’s expertise in centrifugal separation and Haldex’s position as a supplier to the global ­vehicle industry. During 2008, a new generation of the Alfdex system was launched, which is up to four times as effective and can handle up to three times the amount of crankcase gases as compared with the current model. The system uses centrifugal technology to remove particles down to 0.1 g/h or lower in ­normal driving conditions. With a rotational speed of 7,000–8,000 RPM, particles and oil mist are ­separated from the gas and returned to the oil sump.

Generation III – 2004 The third generation received more pressure from an electric pump in connection with start, which eliminated wheel spin and in turn improved vehicle dynamics and off-road driving.

Generation IV & XWD– 2007/2008 The faster and lighter Generation IV can also be combined with an additional coupling that controls the torque between the left and right rear wheels – Haldex XWD

Cars equipped with Generation III: Land Rover Freelander, Volvo S60, V70, XC70, S80, XC90

Cars equipped with Generation IV: Audi A3, TT Skoda Octavia, Superb, Yeti VW Golf, Passat, Tiguan Land Rover Freelander Volvo S60, XC60, V70, XC70, S80, XC90 Cars equipped with Haldex XWD: Saab 9-3 XWD, Opel Insignia Buick Lacrosse, Cadillac SRX Generation V The development of a fifth generation is under way. Estimated production start: 2012.

9

10

Vehicle Market

HALDEX 2008

Market trends and forces Haldex’s market Production of heavy trucks and trailers is an indicator of trends in the Haldex market for brake systems. However, several important variations often give rise to a different trend in the market served by Haldex, compared with the vehicle market in general: • the aftermarket accounts for about 40% of Haldex sales in this business sector. Since fluctuations in the aftermarket are normally not as volatile as changes in the production of trucks and trailers, the aftermarket has a stabilizing effect on Haldex sales during periods of both economic growth and decline. • the market served by Haldex is larger for trucks than for trailers, since trucks are equipped with certain brake products that are not included in trailers. • the markets in Europe and North America differ in several respects. In Europe, for example, disc brakes are installed in about 75% of all new trucks. The corresponding figure in North America is less than 5%. Drum brakes continue to dominate this market.

truck production. Industrial vehicle production is a key factor for Hydraulic Systems, as is production of construction machinery, forklift trucks and, to some extent, trucks. Demand in Traction Systems is impacted, naturally, by the production of four-wheeldrive vehicles, but also to a large extent by the rate at which simple systems are replaced by more sophisticated adjustable systems.

from diesel engines in a manner that also enables low fuel consumption. Driving characteristics

Taking all these factors into account, growth in the Haldex market for brake systems declined about 7% during the year (at unchanged sales prices). For other business activities, demand is linked more strongly to factors other than

Haldex has several products with strong environmental profiles, such as Alfdex, which removes oil particles from crankcase gases in ­diesel engines, and Varivent, which makes it possible to reduce nitrogen oxide emissions

Driving characteristics and vehicle dynamics are becoming increasingly important competitive tools and differentiation factors for vehicle manufacturers. Four-wheel drive and ­electronic brake systems are key components in the development of products that match the driving characteristics of different customers and requirements. Other trends that affect Haldex include efforts by vehicle manufacturers to produce lighter vehicles, in order to reduce fuel consumption, for example. Accordingly, lower product weight is an important goal in Haldex’s product development work. In markets outside Europe and North America, demand for western technology is growing, which is driven by the markets themselves and new legislation, particularly in large markets such as India and China. As a result, demand for Haldex products in these markets is also expected to grow more rapidly than overall vehicle production. In total, the trends toward improved safety, environmental characteristics and vehicle dynamics are expected to generate more rapid growth in Haldex’s market compared with the general vehicle market. These expectations are also supported by development in new,

Truck production

Trailer production

Air brake wheel ends

Region ’000 of units

Global ’000 of units

1,000

2,500

800

2,000

600

1,500

400

1,000

200

0

Trends and forces In addition to the number of vehicles produced, Haldex’s market is also affected by changes in vehicle design resulting from new customer demands and requirements mandated by lawmakers. These market trends and driving forces represent the foundation for Haldex’s focus and production. Safety

Brake systems and four-wheel drive are key ­elements in terms of vehicle safety. Today’s increased demand is being met more than adequately by products developed by Haldex in these areas. Environmental awareness

Region ’000 of units

Global ’000 of units

2009

North America Europe Asia

2010

2011

2012

2013

South America Global

0

Global ’000 of units

350

1,400

6,000

18,000

300

1,200

5,000

15,000

250

1,000

4,000

12,000

200

800 3,000

9,000

150

600

100

400

2,000

6,000

50

200

1,000

3,000

500

2008

Region ’000 of units

0

2008

2009

2010

North America Europe Asia

2011

2012

2013

South America Global

0

0

2008

2009

2010

North America Europe Asia

2011

2012

2013

South America Global

0

Vehicle Market

HALDEX 2008

­emerging markets in Asia, where demand for advanced products and technology is increasing constantly. Market 2008* Trucks and trailers

The first half of 2008 showed favorable sales growth. This was followed by a uniquely rapid drop during the second half of the year in ­Haldex’s major markets in Europe and North America. The market slowdown was particularly rapid during November and December, when the global financial crisis was followed by a serious downturn in the economy. Global production of heavy trucks increased 10% in 2008 compared with the preceding year. During the fourth quarter, production declined 13% compared with the corresponding period in 2007. Production of heavy trucks in North America declined in 2008 from 212,000 vehicles to 203,000, down 4% compared with 2007. In Europe, production of heavy trucks increased 8% compared with 2007, and the number of vehicles produced was 600,000. However, production declined 14% during the fourth quarter, compared with the corresponding period in 2007. Global production of trailers declined 13% compared with the preceding year. The weaker economy also impacted the market for trailers in North America. Produc-

tion was down 34%, compared with 2007. The number of trailers produced totaled about 168,000 in 2008. In Europe, the production of trailers was 4% lower than in the preceding year. Total production amounted to 340,000 units. Production during the fourth quarter declined 27%, compared with the year-earlier quarter. The aftermarket for brake systems accounts for about 40% of sales invoiced by the Commercial Vehicles Systems Division. The aftermarket in the US was stable during the first six months of 2008, but showed some decline during the fourth quarter, mainly due to adjustments of inventory levels. In Europe, volume sales in the aftermarket declined compared with 2007, due to stricter credit regulations and extended inventory adjustments. Construction machinery

The global market for construction machinery remained strong through the third quarter of 2008, but was impacted strongly by the economic slowdown in the fourth quarter, although not as much in North America as in Europe. The decline in North America was about 10%, compared with slightly more than 10% in Europe. Production was down more than 10% in North America during the fourth quarter and more than 20% in Europe, compared with the fourth quarter of 2007.

Forklift trucks

Production of forklift trucks in the North American market declined 20% during 2008, compared with 2007. During the fourth quarter, the North American market shrank more than 40% compared with the fourth quarter of 2007. The market for forklift trucks in Europe declined about 10% in 2008. Fourth-quarter production was about 20% lower than in the year-earlier quarter. Passenger cars

Global production of passenger cars declined 3% in 2008, compared with 2007. Production in North America was down 16%, compared with a decline of 4% in Europe. During the fourth quarter, production in North America was down 25%, compared with the fourth quarter of 2007, and production in Europe declined 24%.

* All information about trucks and trailers (except for ­trailers in Europe) and light vehicles are based on JD Power Statistics Q4, 2008.

11

12

Division: Commercial Vehicle Systems

Commercial Vehicle Systems • Net sales SEK 4,234 m • Operating income SEK 4 m • Number of employees 2,856 Operations/products Commercial Vehicle Systems develops and manufactures brake systems for heavy trucks, trailers and buses. The product portfolio comprises all main components and sub-systems included in a complete air brake system. Operations are conducted in five business units: Actuators, Air Management, Brake Controls, Foundation Brake and Friction Products. • Actuators manufactures brake cylinders that convert energy in the form of compressed air to the mechanical movement required to activate the wheel brakes. • Air Management develops and manufactures products to produce and dehumidify compressed air in brake systems, such as compressors, air dehumidifiers and air purifiers, as well as air suspension systems. • Brake Controls manufactures products for regulation of compressed air in brake systems, such as valves and electronically regulated subsystems (ABS, ESP, EBS). • Foundation Brake develops and produces the wheel brake products that provide the actual braking effect, such as disc brakes, automatic brake adjusters for drum brakes and electronic sensor systems for indicating wear on brake surfaces. • Friction Products sells brake linings for drum brakes for light, medium and heavy trucks. In addition, the Division conducts brake-reconditioning operations in the North American aftermarket. Manufacturing occurs in Brazil, India, China, Mexico, the UK, Sweden, Germany, Hungary and the US.

Strategy • Increasing profitability through improvements in operations and supply chain management. • Successfully commercializing disc brakes. • Maintaining global leadership in automatic brake adjusters. • Business development activity in Asia to capitalize on market growth. • Fully exploiting the competitive edge provided by Haldex’s strong position in ABS, Air Suspension and Control Valves for trailers. • Refining electronic control products by integrating additional functionality to meet future requirements concerning braking function and diagnostics. • Build on traditional aftermarket strengths.

Goals/Strategies To enhance profitability, increase the portion of sales to truck manufacturers and grow in such emerging ­geographic markets as Eastern Europe and Asia.

Market shares The share of the market that can be served with Haldex’s current product program amounts to about 15%. In individual product areas, Haldex has a significantly higher market share.

Competitors The principal competitors are Knorr Bremse and Wabco. These two companies have complete product ­portfolios and, like Haldex, operate globally. An additional competitor is Arvin Meritor within certain product areas.

HALDEX 2008

Division: Commerial Vehicle Systems

HALDEX 2008

S-ABA – Automatic brake adjuster

ModulAir – Air ­distribution

Air compressor

ModulX™ – Disc brake

ILAS/E – Electronic lift axle system

CONSEP –­ Air cleaning system

S-ABA – Automatic brake adjuster

ModulD™ – Twin disc brake

ELS – Electronically regulated air suspension

Trailer Control Module

EB+ Electronic brake system

Spring brake actuator

TTM/Trailer telematic module

Info centre – diagnostic tool

Colas+ Raise/lower valve

Trailer Rollover Stability

»The action program to improve productivity and ­profitability continued during 2008. Actions were taken to optimize the production structure, in order to position the division closer to customers and to reduce the cost of logistics.« Jay Longbottom Division manager Commercial Vehicle Systems

13

14

Division: Commercial Vehicle Systems

Improvement work within Commercial Vehicle Systems (CVS) continued, with extensive structural measures implemented during 2008 to create a competitive operation. The work was intensified in pace with the strongly declining market trend at the end of the year.

during the third and fourth quarters when the global financial crisis was followed by a sharp economic decline that intensified towards the end of the year. The normally stable aftermarket activities, which represent approximately 40% of CVS sales, were also impacted to a certain extent.

The comprehensive change to generate growth and profitability in 2007 continued during 2008. The focus was on optimizing structure, production and logistics, and creating a product portfolio with strong earnings potential. The following are notable examples of actions taken to improve competitiveness and profitability: • The operations for drum brake lining within the Friction Products business unit at the plant in Prattville, Alabama, were discontinued and outsourced to subcontractors. • The production of disc brake lining within Friction Products was divested. The operations had annual sales of SEK 100 m. • As part of the Group’s cost reduction program, a decision was made to consolidate the division’s European distribution operations. Inventories and logistics functions will be concentrated from four units in different countries to a joint warehouse in Weyers­ heim, France. • A decision was also taken to relocate all manufacturing and distribution at the plant in Redditch, UK, to another plant in the Group. • The market decline forced the division to adjust its expenditure, resulting in personnel reductions, which will primarily affect plants in Europe. In addition, several measures were implemented to cut costs, such as shorter work weeks, fewer consulting hours and production stoppages. • The production of brake actuators was relocated from the plant in Iola, USA, to Mexico.

North America

Market trend in 2008 The market trend in 2008 was dramatic, with the first half of the year characterized by a continuation of the multiyear rising trend. However, this was followed by a uniquely rapid drop during the second half in Haldex’s major markets in North America and Europe. Following strong sales in Europe and low but stable growth in North America in the first half of the year, the sales trend slowed rapidly

Until July, truck production in North America was at a low but stable level, compared with 2007. Sales began to decline during the latter part of the year due to the weak conditions in the US economy. Only the major haulers in North America continued to replace old equipment with new. Full-year truck production decreased 4%, compared with 2007. Trailer production also continued to decline during the year. Up to mid-year, nearly 1,000 haulers in North America had declared bankruptcy or left the market. Total trailer production decreased 34% compared with 2007. The aftermarket in North America was stable during the first half of the year, but a decline was reported in the fourth quarter, primarily due to inventory adjustments. Europe

Favorable growth was reported for truck production in Europe during the first half of 2008. Around mid-year, the order backlog for truck manufacturers started to decline somewhat and by August delivery times had been cut from 12 to six months. The financial turmoil and credit restrictions, resulted in customers being forced to abstain from investing in new trucks. Towards the end of the year, several manufacturers were forced to implement production standstills. The total market for trucks grew by 8% during 2008, compared with 2007. Trailer manufacturing reported favorable growth in Europe up to midyear when a decline in demand became evident in Germany, the UK, Spain and Italy. As customers cancelled already placed trailer orders, several manufacturers were compelled to discontinue production and adjust inventories to adapt to the lower demand. The production decrease became evident in both Central and Eastern Europe. The decline in the European market for trailers totaled 4% during 2008, the majority in the last half of the year. The aftermarket in Europe declined in volume compared with 2007, due to credit restrictions and the subsequent inventory adjustments.

HALDEX 2008

Latin America and Asia

In Latin America, demand remained strong during most of the year. In Brazil, the market for heavy trucks grew 26%, supported by a strong trend in the mining and agricultural sectors. Demand in China was healthy during the year and the country will soon become the world’s single largest market for heavy trucks. The shift from light and medium-heavy trucks to heavy vehicles is occurring in line with increasing transport needs and improved infrastructure. Production of heavy trucks rose by 13% in 2008. In the Indian market, registrations increased up to August 31, but declined significantly towards the end of the year. Haldex in the market Haldex is market leader in the European trailer segment comprising brake and air-suspension systems, ranked first within air-spring valves and second within EBS systems. The position among the three largest German trailer manufacturers, Schmitz, Krone and Kögel, was strengthened during the year. In the European market, a strong trend towards an increase in system integration is in progress. This will strengthen the Haldex products that can be controlled electrically, such as brake and spring systems, which can largely be centralized to a few products. In response to this trend, Haldex, in cooperation with Europe’s leading trailer manufacturers, has implemented improvements to its electronic brake system, EB+. One example is the EBS system, ECOtronic, which was launched in 2008. Based on EB+Gen2, the system was developed jointly by Haldex and the German company, BPW (Bergische Achsen), which is Europe’s largest manufacturer of trailer axles. The cooperation between Haldex and BPW will continue within the framework of electronic brake system and chassis control. Another example of a Haldex product developed to cope with the increasing need for system integration is ModulAir, a modulebased product program for compressed-air treatment and air distribution for trucks and buses. Based on the ModulAir platform, an initial application was introduced at selected customers in North America, where the volume will successively increase during 2009. In the European market, a joint launch with one

Division: Commerial Vehicle Systems

HALDEX 2008

2008: Continued focus on cost competitiveness of the major truck manufacturers is planned for 2011. Haldex noted market successes in North America during the year when several manufacturers of axles, special vehicles and trailers selected Haldex products as standard features in their vehicles. Heil Trailer of North America selected the Haldex TRS system (Trailer Roll Stability) as standard equipment. Heil Trailer International is the world’s largest manufacturer of tank trailers. Haldex also supplemented its offering in the North American market with its TRS system with the ILAS-E air spring valve. This monitors the position of the lifting axle on the trailer using electrical control. The Group also defended its strong and global leading position for automatic brake adjusters when the operations secured additional orders in 2008. Research and development The CVS Division has a total of four development centers in Europe and the US. During the year, a competency center was also established in India. Haldex has developed ModulX, a modular system of compressed-air-based disc brakes that can be adapted to various needs. For the customer, this means simpler adaptation and lower maintenance costs. For Haldex, it means more efficient development, since several of the modules can be used in future generations of discbrake systems. In parallel with the development of new product varieties, extensive work is in progress to optimize product family costs. Also under way is the development of a future brake system for trailer trucks and trailers, known as brake-by-wire technology. The principle involves replacing the existing compressed-air system with brakes that use electro-mechanic application and control. The system offers considerably shorter braking distances – 15% shorter than with EBS – and better vehicle stability. Work on the system will continue in cooperation with European vehicle manufacturers and will also include improved vehicle dynamics. To satisfy legislation concerning vehicle stability and shorter braking distances, the development of ABS/EBS will continue, as will improvement of product properties for existing platforms, as well as new systems for the North American and Chinese markets.

Sales and earnings • Sales declined by SEK 295 m, compared with 2007, to SEK 4,234 m (4,529). Sales in the European market were strong during the first half year 2008, which limited the effect of the sales decrease in North America. During the second half, especially in the fourth quarter, demand dropped significantly in Europe, both in the truck and trailer segment. In Europe, sales declined to SEK 1,938 m (2,058), while sales in North America decreased to SEK 1,852 m (2,022). Currency adjustes sales decreased by 8% and 6% in Europe and North America respectively. • Operating income for 2008, excluding restructuring cost and write down of assets, amounted to SEK 4 m (159). The weak market in North America and the significant drop in demand in Europe in the fourth quarter, especially during November and December, when Haldex customers shut down production for 3 to 5 weeks, in combination with high raw material cost during the year, had a highly adversed impact on earnings.

Improvement measures • The action program to improve productivity and profitability continued during 2008. Actions were taken to optimize the production structure, in order to position the division closer to customers and to reduce the cost of logistics. A large part of the program involved making improvements in production within the framework of the Haldex Way efficiency-enhancement program.

Key events in 2008 • Restructuring of the Friction Products business unit and decision about consolidation of the European distribution operations into one joint warehouse in France. • Cooperation with BPW to develop the EBS ECOtronic system. • Intensified work on improving operations via Haldex Way and Six Sigma. • Successful launches of ILAS E Valve and increased knowledge of the suspension product line in North America. • Growth in Transit and Government markets despite a weak economy. • Initiate fleet trials for ModulAir in North American market.

Focus in 2009 • Continued work to improve earnings involving quality, reduced costs and increased delivery precision. • Lean management. • Focused growth through value added suspension and brake control products. • Intensified work involving Haldex Way and Six Sigma.

Key data

2008

2007

Net sales

4,234

4,529

4

159

–92

109

Operating income1) 2) Operating income1) Operating margin1) 2), % Operating margin1), % Assets

0

3.5

–2.2

2.4

2,546

2,845

Liabilities

641

672

Return on capital employed3), %

–3.9

–4.9

Investments

232

259

Depreciation Number of employees3)

160

140

2,856

3,149

Net sales by region 2008 South America, 5% Asia and Middle East, 6%

North America, 44% Europe, 45% 1) Reclassification

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related ­surplus values 3) Rolling 12 months 2) Excluding

Net sales

Operating income

SEK m 5,000

SEK m 250

4,000

200

3,000

150

2,000

100

1,000

50

0

2004

2005

2006

2007

2008

0

2004

2005

2006

2007

2008

15

16

Division: Hydraulic Systems

Hydraulic Systems • Net sales SEK 2,095 m • Operating income SEK 146 m • Number of employees 2,335

Operations/products Hydraulic Systems Division conducts operations in two business units, Hydraulics and Engines. • Hydraulics offers a broad product range of both gear and gerotor pumps together with hydraulic power packs and high density power systems for a wide range of industrial vehicle and diesel engine installations, hydraulic pumps, particularly gear pumps and power systems. The applications include hydraulic lifts and drives systems for truck and construction machinery applications. • Engines is market leader within pump technology for diesel engines. The pumps are used to pump ­lubricating oil, coolants and diesel fuel. The engines are used in trucks, buses, ­construction machinery, ­agricultural machinery and off-highway machinery. With the two proprietary ­products Alfdex (joint venture with Alfa Laval) and Varivent, Haldex has unique technology for coping with demands for lower emissions of harmful exhaust gases from engines. Manufacturing occurs in the UK, India, China, Sweden, Germany and the US.

Strategy • To increase sales through new product offerings that focus on environmental technology. • To ensure synergies in the integration of Concentric, which was acquired in 2008. • To develop the operations in India and China. • To pursue the EMS hydraulic hybrid drive to a successful serial production.

Goal/strategies To offer customers added value in the form of high service levels and system solutions. To be the technology leader, particularly in terms of the environment and energy efficiency. To remain supplier of choice, as the clear market leader.

Market shares Hydraulic is a niche player with approximately 20% of the market share in its market niches. Engines is market leader for oil, fuel and water pumps in North America and the rest of the world. Haldex’s global market share in these sectors is slightly more than 30%, and just over 40% for oil pumps in North America.

Customers Hydraulics is primarily a supplier to manufacturers of construction machinery, such as Caterpillar, Volvo ­Construction Equipment, JCB, Terex, Atlas Copco and CNH (19% of sales), forklifts, such as Still, Linde, BT, Nacco (16%), and tail lifts, such as Zepro, Bär, Maxxon and Sörensen. Engines’ largest customers are engine manufacturers, for example, Cummins, Deutz and Perkins, and large truck manufacturers, such as IVECO, Volvo, Scania and Caterpillar, which produce diesel engines for their own trucks and construction machinery.

Competitors Hydraulics’ largest competitors are Bosch, Rexroth, Parker Hannifin, Eaton and Sauer Danfoss. Engines is a global manufacturer with a number of regional companies as competitors.

HALDEX 2008

HALDEX 2008

Division: Hydraulic Systems

»The combination of Concentric’s strong global position in its market segment and ­Haldex’s expertise and enginetechnology products results in an expanded and highly competitive offering.« Ian Dugan Division manager Hydraulic Systems

17

18

Division: Hydraulic Systems

The acquisition of Concentric created a strong hydraulics division with global presence, established positions in growth markets and attractive products in the areas of emission reduction and fuel ­efficiency.

In April 2008, Haldex acquired Concentric of the UK, a leading global supplier of oil, water and fuel pumps for medium and large diesel engines. Concentric was consolidated from the second quarter of 2008 and integrated into the Haldex Hydraulic Systems Division, which was simultaneously reorganized to include a hydraulics and engine operation. The acquisition was the first step in the strategy to optimize Haldex’s Group structure. The reasons underlying the acquisition were the strong global driving forces in the form of legislation that is continuously sharpening requirements for the vehicle industry in terms of environmental impact and lower fuel consumption. Haldex responds to these requirements by pursuing distinct strategies for the development of vehicle-technology solutions to improve safety, the environment and vehicle dynamics, which require proprietary development of new technologies and the acquisition of companies with competitive technologies. The combination of Concentric’s strong global position in its market segment and ­Haldex’s expertise and engine-technology products results in an expanded and highly competitive offering to the diesel-engine market, which is increasingly demanding more efficient and environment-friendly products. The acquisition makes Haldex the global market leader in oil, fuel and water pumps, with a global market share of slightly more than 30%. Haldex’s new product portfolio for pumps can generate fuel savings of 5–10%. Customers benefit from the two companies’ strong focus on leading-edge technology, particularly in terms of environmental improvements and greater engine efficiency. The Group recently signed long-term delivery agreements with three large US and several European subsuppliers to international vehicle manufacturers. The acquisition of Concentric is generating synergies within production, purchasing, R&D and technology and are contributing to the transfer of expertise and know-how. Cost synergies are estimated at approximately SEK 70 m

annually and are expected to be generated within three to four years. The integration has progressed more rapidly than planned. To date, synergies have been achieved through more efficient production and improved supplier arrangements. Revenue synergies from, for example, cross sales comprise an additional opportunity for the new operations. With strong strategies and an attractive product portfolio, the division is well equipped to satisfy demands from the business world and customers, and will constitute a competitive operation when the global economy recovers. Market trend 2008 During the year, demand conditions declined successively as the international financial crisis in the autumn was followed by an increasingly rapid global economic decline. In North America, demand in the market segments in which Haldex is active (with the exception of agricultural machinery) was weak during the first six months of 2008, as a result of credit restrictions and the resulting decline in residential construction. When the crisis in the financial sector expanded in the second half year of 2008, demand declined further in line with a continuing erosion of confidence in the economy. In Haldex’s market segments in North America, production declined by 30%. The first signs of a weakening of the European market were noted when a number of countries increased their interest rates around mid-year. Declining demand led to inventory accumulation followed by sales from inventory by many of Haldex’s client companies, a situation that continued into the fourth quarter. During the autumn, the demand situation deteriorated further when the financial crisis deepened and was followed by rapid economic decline. During the fourth quarter, year-on-year demand in Europe fell by approximately 40%. The drastic market decline resulted in many Haldex customers in North America and Europe reducing or entirely closing down their production for three to four weeks at the end of the year. Haldex in the market The rapidly changing demand situation during the second half of the year required an adaptation of production volumes and cost rationalizations. As part of the Haldex Group’s cost reduc-

HALDEX 2008

tion program, a reduction in the number of employees were made at the Division’s plants in North America, Europe and Asia during 2008. Although the market will be weak in the short-term, the long-term assessment is that the need for infrastructure investments in the future will be considerable, since this is a prioritized area for the major stimulus packages launched by governments throughout the world during the autumn and winter of 2008/2009. In addition, many national economies are prioritizing measures to reduce the transport sector’s impact on the environment, which indicates that the long-term demand for Haldex expertise and products is favorable. The focus on environmental efforts includes legislation aimed at reducing emissions, as exemplified by crankcase gases in diesel engines. Such legislation already exists in Korea and Japan, while the North American market received similar demands when “EPA07” came into force in January 2007. In Europe, the new Euro Six regulations are planned to come into effect in 2013. In a joint venture with Alfa Laval, Haldex has developed Alfdex, a unique and world-leading system for highly efficient removal of oil drops and soot particles from ventilation air in crankcases. Since 2005, several of the world’s leading truck and engine manufacturers have chosen the Alfdex system, including Scania, Volvo, Renault, Mack, Mercedes-Benz, Freightliner, Western Star, Sterling Trucks and Navistar. In September 2008, Haldex launched a new Alfdex generation, which is up to four times as efficient as the earlier model. The new generation can handle up to three times more crankcase gases. Varivent is another example of a Haldex product developed to cope with future more stringent legislation aimed at reducing emission levels. The system reduces emissions of nitrogen oxides from diesel engines, while simultaneously reducing fuel consumption. Several major diesel engine manufacturers have tested Varivent on their engine platforms and, in 2008, gasoline engine manufacturers began to show interest in the system. The Division’s business unit for hydraulic products has developed a new concept within hydraulic transmission, in the form of a pointof-use actuator, which is one step further in the integration between Haldex’s hydraulic compo-

Division: Hydraulic Systems

HALDEX 2008

2008: Technology leadership in emission reduction and fuel efficiency nents and customers’ products. The actuator integrates an electric engine, hydraulic pump, electronics, oil tank and cylinders into a single unit, resulting in lower purchasing and administration costs for the customer. The product was launched at the end of the year and serial production can commence in 2010. In Asia, the Division is established with production and sales in India and China. The production plant in Pune, India, has been producing oil and water pumps since 2005. During the year, production capacity was doubled to cope with the growing need for pumps in India and for the export market. Research and development Electric diesel pumps represent the latest step in fuel-transfer pump technology. Since their operation is independent of the engine, many benefits are generated, such as more flexible positioning in the engine compartment, superior starting features and controllable fuel supply. A leading engine manufacturer is currently testing Haldex prototypes for a number of different applications. A new generation of hydraulic pumps was completed in 2008 and will be launched in early 2009. The promising development of new technology for electronic control of hydraulic systems, EMS, continued during the year. EMS technology combines hydraulics and electronics to provide improved efficiency and lower energy consumption. The technology creates opportunities for hydraulic hybrid vehicles. A  major benefit of a hydraulic vehicle is the possibility to save and reuse a much larger share of the energy that is otherwise lost when the vehicle brakes, while utilizing potential energy during load movements. Haldex’s EMS technology is unique in that it can utilize, store and reuse both rotary and linear energy, which could result in fuel savings up to 30–40%. The technology is particularly suitable for special purpose trucks and construction machinery and allows opportunities for ­significant engine downsizing and/or increased vehicle capability.

Sales and earnings • Sales amounted to SEK 2,095 m (1,467). Adjusted for acquisitions and currency-exchange movements, sales were flat compared with 2007. Concentric’s sales amounted to SEK 606 m. • Excluding restructuring costs and amortization of acquisition-related surplus values, operating income and the operating margin amounted to SEK 146 m (86) and 7.0% (5.8), respectively. Concentric‘s ­contribution to operating income amounted to SEK 82 m excluding amortization of acquisitionrelated surplus values, amounting to SEK 31 m, and expenses related to the company’s integration.

Improvement measures • Work to improve the Division’s profitability and cash flow was intensified during the year, with a focus on reducing inventory levels and accounts receivable. Actions to further improve product quality and ­production efficiency continued during 2008, primarily at the US production plant in Rockford, Illinois.

Key events in 2008 • Acquisition and integration of Concentric • Launch of the new Alfdex generation • Production rationalization • Increased focus on improved profitability and cash flow

Focus in 2009 • Continue to reduce cost in line with activity • Working capital reduction and cash management • Variable flow, energy efficiency pumps • Hydraulic hybrid drive

Key data

2008

2007

Net sales

2,095

1,467

Operating income1) 2)

146

86

Operating income1)

105

86

Operating margin1) 2), %

7.0

5.8

Operating margin1), %

5.0

5.8

Assets

2,028

781

Liabilities

628

265

Return on capital employed3), %

8.2

16.6

Investments

88

89

Depreciation Number of employees3)

74

58

2,335

1,591

Net sales by region 2008 South America, 1% Asia and Middle East, 9%

North America, 50% Europe, 40% 1) Reclassification

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related ­surplus values 3) Rolling 12 months 2) Excluding

Net sales

Operating income

SEK m 2,500

SEK m 150

2,000

120

1,500

90

1,000

60

500

30

0

2004

2005

2006

2007

2008

0

2004

2005

2006

2007

2008

19

20

Division: Traction Systems

Traction Systems • Net sales SEK 1,021 m • Operating income SEK 41 m • Number of employees 339

Operations/Products Traction Systems produces electronically controllable systems for four-wheel driven cars, known as AWD s­ ystems. Because these systems are controllable, they can interact better with other subsystems in the car. The system software can be customized to meet each carmaker’s particular wishes in terms of vehicle dynamics and traction. Production takes place in Landskrona, Sweden, and Irapuato, Mexico. The Haldex operation in Hungary engages in some preassembly, spare parts production and low-volume production.

Strategy The Division’s strategies are to: • meet the market’s requirements for cost-effective solutions and premium products based on the modularity inherent in Haldex’s solutions. • strengthen positions in the North American market and, in the long term, secure a position as the global leader in controllable AWD systems. To facilitate these efforts, new production lines were installed in Lands­ krona, Sweden, and the new plant in Irapuato, Mexico, in 2008. • reduce costs by increasing purchases from low-cost countries, combined with technological improvements of products and production. • strengthen our position as the technology leader in controllable AWD systems through continued aggressive investments in product development.

Goals/strategies Haldex aims to strengthen its position in the North American market and broaden its customer base with a long-term view of achieving a position of global market leadership in controllable AWD systems through aggressive product development and reduced costs.

Market shares Haldex is a market leader in controllable AWD systems. In 2008, the market share in Europe exceeded 50%.

Customers Customers include such carmakers as Ford, Volvo and Landrover, the Volkswagen Group with its brands Audi, VW, Seat, Skoda and Bugatti, and General Motors with its global midsize car platform, which includes SAAB, Cadillac, Buick and Opel. The systems are used in regular cars, SUVs and crossover vehicles, which are a combination of regular station wagons and SUVs. The Volvo XC60 is an example of a vehicle in this category. Haldex AWD systems are used in all of Volvo’s AWD models.

Competitors Haldex’s principal competitors are BorgWarner, GKN, Magna Power Train and JTEKT. Haldex’s key competitive advantages are the excellent controllability and reliability of its systems and its highly developed expertise in vehicle dynamics, meaning the ability to give a car the driving characteristics that the customers desires.

HALDEX 2008

HALDEX 2008

Division: Traction Systems

»In the long-term, the market outlook for AWD systems is expected to remain favorable. The trend towards smaller and more fuel-­efficient vehicles will also continue.« Ulf Ahlén Division manager Traction Systems

21

22

Division: Traction Systems

Establishing the production unit in Mexico laid the foundation for a strong position in the North American market and a broadened customer base to strengthen the position as global market leader within controllable AWD systems. Sales growth in 2008 was favorable, despite a weak market.

Haldex in the market Although the underlying market did not develop as expected in 2008, Haldex Traction Systems Division reported healthy full-year sales growth, totaling 20%. The division was able to maintain its position in the tough market because several customers introduced new car models during the year, which generated additional business for Haldex. Ford Kuga, Volvo XC60 and Opel Insignia were some of the new car models launched in 2008. Sales success for VW Tiguan also had a positive impact on volume for a major portion of the year. The division did not experience a noticeable decline in volume until the final two months of the year. In January, a new order was announced for an AWD system for Volkswagen, thus expanding a previous order placed in 2004. The add-on order was for a system based on the fourth generation of Haldex’s coupling and was valued at EUR 8 M. Production occurs in Landskrona, Sweden, and deliveries commenced during the second half of the year. Production and delivery of the all-wheeldrive system for the new Volvo XC60 and Opel Insignia car models commenced during the second half of the year. Later in the year, Haldex received further confirmation of its leading market position when the European manufacturer of one of the world’s

most exclusive sports cars announced that it had selected Haldex to supply AWD systems. Delivery is scheduled to commence in 2010. At the end of the year, Haldex was nominated by an existing customer as supplier of an AWD system for a new platform, with production start scheduled for 2011. Haldex’s AWD system is now found in several fuel-efficient car models, such as Ford Kuga and several of the VW Group’s models. A strategically important event was the opening of a new plant in Mexico, which is manufacturing the most recent generation of the AWD system and electronic differential brakes. The plant is located in Irapuato in the state of Guanajuato, close to the plants of other vehicle manufacturers and subsuppliers for deliveries to a number of General Motor’s platforms. These are global operators and comprise several of General Motors’ car models with manufacturing worldwide. The plant represents a foothold for the Traction Systems Division’s continued expansion and growth in North and Central America. Furthermore, two new production lines were installed in the manufacturing unit in Landskrona, Sweden. Market trend in 2008 The industry’s focus on such long-term issues as fuel economy, the environment and climate issues was further intensified due to the impact of rising energy prices during the first half of the year. The need for more fuel-efficient vehicles with superior environmental performance, in particular lower carbon dioxide emissions, will increase as a result of a number of political decisions taken during the year for the international coordination of more stringent climate goals.

During 2008, Haldex received the prestigious European Automotive Chassis Product Innovation Award for its all-wheel-drive system. The award is presented by the UK ­analyst company, Frost & ­Sullivan, to companies that have demonstrated excellent and pioneering technological product development within their various ­industries.

HALDEX 2008

The first indications that the international credit crisis was beginning to have an impact on the demand trend in the vehicle industry appeared at mid-year 2008. Financing difficulties for companies and households had a negative impact on demand. During the second half of the year, the situation was aggravated and the decline in vehicle sales began to accelerate. Several of the major manufacturers reduced their production volumes to adapt to the weaker market conditions. Towards the end of the year, the situation for major US car manufacturers developed into a crisis requiring public financial support. In the long-term, the market outlook for AWD systems is expected to remain favorable. The trend is to equip more car models with AWD systems, such as in the crossover segment and in smaller car models. In addition, simple AWD systems are being replaced by electronically controllable systems through continuous technical upgrading. The trend towards smaller and more fuel-­ efficient vehicles will also continue, even in the North American market, where the trend is moving from large rear-wheel drive cars to smaller, front-wheel drive models. In Europe, the trend towards fuel-efficient, smaller cars has been clear for several years. It is estimated that the trend in this market will also move towards smaller cars but with the same functionality as existing products, as exemplified by the sales success for VW Tiguan and Ford Kuga. This trend benefits Haldex, whose AWD system is now available in many fuel-efficient car models. The lead time for developing a complete AWD system in a new car model is normally about three years. The development projects

Division: Traction Systems

HALDEX 2008

2008: Preparing for future growth involving the next generation, are creating the conditions for Haldex to continue capturing market shares also during 2010–2015. Through the investments made in Mexico, the foundation is being laid for an increase in market shares in the North American market. The market for AWD systems is highly competitive and, to meet this challenge, ­Haldex’s product development initiatives and purchasing from low-cost countries will continue, with a long-term aim of increasing the current proportion from 30 to 45%. Research and development Prototype installations of Haldex’s Generation V AWD system for two different carmakers were tested during 2008. The development of Generation V commenced in 2006 in cooperation with a car manufacturer, with the aim of continuing to meet future customer requirements for cost-effective AWD systems. Production is expected to begin in 2012. Haldex is at the leading-edge of development of systems for AWD. To meet future ­customer requirements, several research projects are being conducted in cooperation with technical colleges and universities. The objective is to build expertise in existing and new areas of technology. To monitor developments within hybrid technology, a research project has been initiated in cooperation with the Faculty of Engineering at Lund University, Sweden, and with a number of car manufacturers. The aim is to use the new technology to develop competitive future AWD solutions for hybrid vehicles.

Sales and earnings • Sales rose 20% to SEK 1,021 m (848), which was a lower increase than planned. The increase in sales was mainly related to increased volumes to Landrover, the new VW model, Tiguan, for which deliveries started during the second half of 2007 and Ford Kuga for which deliveries started in 2008. • Operating income amounted to SEK 41 m (49). The sharp decrease in volume in December due to ­production shutdowns, led to a loss in December, which affected operating income in the fourth quarter.

Improvement measures • At the division’s plants in Landskrona, Sweden, and Irapuato, Mexico, extensive work was conducted on the installation of three new assembly lines during the year. The full impact of these efforts was not achieved until the second half of the year. • A major improvement program, which had been in progress for one and a half years at the plant in Hungary, was completed in 2008 and resulted in significantly increased productivity. The plant assembles products for several divisions, although primarily for Traction Systems Division.

Key events in 2008 • Series production of XWD to Opel Insignia. • Series production to VW Caddy and Volvo XC60. • Order from an exclusive European sports-car manufacturer. Additional order from VW. • Opening of the new production unit in Mexico for manufacturing AWD systems for the North American market. • Production of the two millionth coupling. • International award for product innovation following the launch of the XWD. • New product generation (Gen IV) introduced to all customers.

Focus in 2009 • Increased production volumes at the plant in Mexico when the new Buick Lacrosse and Cadillac BRX car models from General Motors are introduced. • Investment in business development with a particular focus on new customers. • Series development of Generation V aimed at 2012 launch. • Supplier development in North America and Asia. • Cost rationalization at the Landskrona unit.

Key data

2008

2007

Net sales

1,021

848

41

49

Operating income1) 2) Operating income1)

38

49

Operating margin1) 2), %

4.0

5.8

Operating margin1), %

3.7

5.8

Assets

369

433

Liabilities

231

258

Return on capital employed3), %

16.9

21.3

60

95

Investments Depreciation Number of employees3)

52

40

339

296

Net sales by region 2008 North America, 4%

Europe, 96% 1) Reclassification

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related ­surplus values 3) Rolling 12 months 2) Excluding

Net sales

Operating income

SEK m 1,200

SEK m 50

1,000

40

800

30

600

20

400

10

200 0

2004

2005

2006

2007

2008

0

2004

2005

2006

2007

2008

23

24

Division: Garphyttan Wire

HALDEX 2008

Garphyttan Wire • Net sales SEK 1,053 m • Operating income SEK 59 m • Number of employees 474

Activities/products Garphyttan Wire manufactures advanced spring wire from various alloys for use mainly in combustion engines and transmissions, where demands for quality and performance are meticulous. The main applications are valve springs, transmission springs, piston springs and springs for fuel injection systems. Since extremely pure steel is needed as the basic material for producing spring wire that meets the customers’ stringent requirements, very close cooperation with steel suppliers is essential. The core of the Division’s expertise consists of creating product characteristics that ensure trouble-free end use in the form of springs that have at least the same total service life as the particular vehicle. Our proven ability to achieve a level of stability that always meets these requirements gives us a key competitive edge. In addition to oil-tempered valve spring wire, production includes a significant proportion of stainless steel specialty spring wire, as well as profiles and flat wire for applications in the vehicle industry and the energy and environmental areas. Production is conducted in China, Sweden and the US.

Market shares Haldex has a world-leading position in the product area for oil-tempered valve spring wire, with a global market share of approximately one third.

Customers The customers are primarily spring manufacturers with specialist expertise in the vehicle industry. The Division also engages in small-scale production of springs for in-house use, including valve springs for Swedish engine manufacturers and specialty springs for Haldex’s brake products.

Competitors The primary competitors are Suzuki, Suncall, Kiswire, American Spring Wire and Tokusen.

»Garphyttan Wire now has a strong, established platform for future growth in the Chinese market.«

Jan Pieters Division manager Garphyttan Wire

At the end of 2008, Haldex signed an agreement to sell Garphyttan Wire to the Japanese group Suzuki Metal Industry. The divestment was part of the Haldex Group’s continued strategy of streamlining its business to strengthen long-term growth while maintaining favorable profitability.

In connection with its acquisition of Concentric earlier in the year, ­Haldex announced that an assessment of structural opportunities to optimize Group structure was under way. One result of the assessment was the decision to divest Garphyttan Wire to focus the Group’s operations on areas where Haldex can achieve internal synergies and a sustainable market position on the basis of innovative, leading products. On December 25, 2008, Haldex entered into an agreement to sell Garphyttan Wire to Suzuki Metal Industry, a Japanese manufacturer of steel wire. The purchase price was estimated at SEK 800 m on a debt-free basis. The transaction is expected to be completed during the period April to June 2009, when the final purchase price will be confirmed. As a result of the divestment, Haldex’s pro forma net debt, as at December 31, 2008, decreased to SEK 1,535 m. It is estimated that the transaction will result in a capital gain of approximately SEK 400 m. In addition to customary conditions, the transaction is conditional upon Suzuki Metal obtaining a binding agreement regarding the financing of the transaction, regulatory approval and that no significant adverse changes occur that have a material and disproportionate effect on Garphyttan Wire compared with comparable companies in the industry. Market trend in 2008 During the first half of 2008, demand for ­Garphyttan Wire’s products was very strong, particularly in Europe. Beginning in the second quarter, weakening demand was noted in the US, while other markets remained strong. Extreme price increases

Division: Garphyttan Wire

HALDEX 2008

for iron ore and coking coal resulted in high price increases for steel wire, Garphyttan Wire’s principal raw material. Before the expected price increases for steel wire and wire had become effective, some stockpiling of inventory took place in the second quarter, leading to somewhat weaker demand in the early part of the third quarter. The international financial crisis caused extensive global uncertainty after the summer, leading to a considerable decline in demand beginning in October. During the fourth quarter, some of the order backlog was cancelled and order intake was extremely low, leading to a sharp decline in sales, above all in November and December. The earnings trend was very strong from January to September, but during the final quarter it was reversed to a significant loss. The production facility in Suzhou, China, experienced a positive trend in 2008. A strong volume trend from January to September contributed to a favorable operating profit for 2008. Productivity and quality also developed very well. Garphyttan Wire now has a strong, established platform for future growth in the Chinese market. Improvement measures In 2008, efforts to stabilize and enhance the efficiency of processes and to improve control over the supply chain from supplier to customer contributed to a significant upswing in the yield from material and delivery reliability at the facility in Garphyttan, compared with 2007. At the production facility in Suzhou, China, the favorable volume trend led to a positive productivity trend, and the level of quality and delivery reliability remained very high. Efforts to improve planning systems at the US plant in South Bend resulted in substantially higher delivery reliability during the year, and the unit maintained a high level of inventory turnover.

Sales and earnings • Sales decreased by 4%, compared to previous year, to SEK 1,053 m (1,095). In the fourth quarter, sales decreased 39% year-on-year adjusted for currency-exchange movements. • Due to the steep downturn in sales, a loss of SEK 29 m, excluding restructuring costs, was posted in the fourth quarter bringing the operating income to SEK 59 m (45) in 2008.

Improvement measures • Efforts to stabilize and enchance the efficiency of processes and to improve control over the supply change were made.

Key events in 2008 • Agreement with Suzuki Metal Industry to divest Garphyttan Wire • ISO 14001 certification in China • Continued efforts to improve quality and processes in the Garphyttan facility • Improved control of the supply chain from supplier to customer

Key data

2008

2007

Net sales

1,053

1,095

Operating income1) 2)

59

45

Operating income1)

56

45

Operating margin1) 2), %

5.6

4.1

Operating margin1), %

5.3

4.1

Assets

556

650

Liabilities

169

221

Return on capital employed3), %

12.6

9.9

21

20

Investments Depreciation Number of employees3)

43

44

474

482

Net sales by region 2008 South America, 5% Asia and Middle East, 5%

North America, 22%

Europe, 68% 1) Reclassification

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related ­surplus values 3) Rolling 12 months 2) Excluding

Net sales

Operating income

SEK m 1,200

SEK m 100

1,000

80

800

60

600

40

400

20

200 0

2004

2005

2006

2007

2008

0

2004

2005

2006

2007

2008

25

26

Haldex in the society

HALDEX 2008

Through the contribution of our people … For companies and employees throughout the world, 2008 and early 2009 were a challenging time. Despite rapid and extensive changes in the business environment, Haldex’s long-term process of global expansion continued, and its operations are becoming increasingly multi­faceted. The Group’s success is based on the competencies and abilities of its employees. In good times and bad, Haldex strives continuously to develop its workplaces around the world to attract the best employees. Creating such attractive workplaces is a high priority for Haldex. Employees in different countries, with diverse cultural backgrounds, must be able to work together well to create added value for the company and for customers. This in turn increases the demands on employees and on the organization’s performance readiness. In recent years, Haldex has intensified its Human Resources efforts. In 2006, the company implemented an action plan aimed at the following: • improving leadership qualities • establishing a candidate pool for top management positions • creating a strong corporate culture characterized by personal responsibility and an ability to change • developing a compensation structure that supports performance • successfully implementing Haldex Way In 2007 and 2008, the plan was refined and a long-term strategy for the Group’s human resources efforts was prepared. This strategy was in turn broken down into the following areas of focus: • Competence development • Management & leadership capabilities • Haldex culture Within these three areas, key ratios were defined, targets established for all Haldex units and action

plans prepared. In 2008, Haldex focused on realizing the action plans, and a long list of initiatives was implemented to support the units’ work in these areas. A dominant focus for human resources work in all parts of the Group was to manage the impact of the recession that began in 2008. Measures were concentrated on rapidly reducing the Group’s expenses. This included such actions as temporary production halts and a reduction in working hours. In addition, a large number of temporary and insourced employees were asked to leave the Group late in the year. These initiatives were followed by programs to reduce the number of permanent employees throughout the world, which were implemented locally at units. Cooperation with local trade unions and work councils worked exceptionally well, and Haldex’s employees showed great ­loyalty to the company. Haldex’s HR strategy was applied as a unifying theme during the tough cutbacks. The Group placed great emphasis on precision and consideration in the methods used to carry out the cutbacks, so that a stronger company could be created. Accordingly, a consistent focus on performance, competence and clear leadership was pursued. Young Professional Program Despite the cutbacks, Haldex plans to continue to recruit for the future in 2009. During the year, the Group’s efforts will include the establishment of a Young Professional Program for the recruitment and introduction of a small group of highly qualified employees who will be recruited directly after they graduate. Haldex Management Review A key feature of the Group’s HR efforts is the program established by ­Haldex to evaluate the divisions’ management teams, assess the future need for management competency and evaluate

the management potential ­currently available in the company. The main purpose of the program, which is called Haldex Management Review, is to guarantee the long-term supply of qualified personnel, both at corporate and unit level. The aim of the program is to identify and initiate a series of development efforts. In 2008, several tangible programs and tools were launched to support the work of the units as they implemented the personnel strategy. A tool for long-term resource planning was launched as a key feature of the personnel efforts of all units. The tool allows Haldex’s various organizational units to prepare analyses and action plans to match personnel structure, competencies and organization with the company’s development needs. Personnel survey A Group-wide, Internet-based personnel survey was established. The survey allows all parts of the Group to monitor the organization’s ­performance readiness frequently and with rapid response times. Haldex International Executive Program The Group’s HR development efforts are mainly implemented at the local level, close to employees and operations. As a complement to these efforts and to reinforce the Group’s leadership competency, Haldex operates a number of joint leadership development programs and courses. These are offered in such areas as Leadership, Change Management, Financial Management and Value-Based Selling. Haldex also offers a longer generalist program, the Haldex International Executive Program, an international leadership development program whose purpose is to support the development of future top executives at Haldex.

Haldex in the society

HALDEX 2008

Social responsibility A couple of years ago, Haldex introduced a social policy in the Group. The work focused on implementing the policy as part of the existing procedures and guidelines. The policy has permeated the company, is well received and is now part of several of the Group’s procedures, policies and programs. For example, it is included as part of the introduction to all new employees. It is also integrated into the company’s purchasing manual. However, implementation work is still ongoing, with continued focus on developing and executing action plans. Haldex’s social policy is based on the UN’s Universal Declaration on Human Rights, the UN Global Compact initiative, the International Labor Organization’s (ILO) basic principles on labor law and the OECD’s guidelines for multinational companies. Haldex in society Contribute to improvements in economic, environmental and social conditions through an open dialogue with relevant interest groups in the communities where Haldex operates.

Human rights Support and respect the protection of inter­ nationally decreed human rights. Child labor Ensure that minors are protected in a satisfactory manner and, as a basic principle, refrain from hiring children or supporting child labor unless it occurs in government-approved programs for young people, such as apprentice training. Freedom of contract Ensure that all employees accept positions of employment in the company of their own free will. Health and safety Offer a safe work environment at all workplaces and introduce measures to prevent accidents and work-related injuries by minimizing all work-environment risks to the extent possible.

Equal opportunities Offer all employees equal opportunities, refrain from discriminating on the basis of ethnic or national origin, religion, caste, handicap, gender, age, sexual orientation, affiliation with trade unions or membership of political organizations. Suppliers Use appropriate methods to evaluate and choose suppliers based on their ability to meet the requirements of Haldex’s social policies and other social principles, and document their continuous fulfillment of these requirements. Business ethics Apply high standards in terms of business ­ethics and integrity, and support the efforts of national and international organizations to establish and maintain strict ethical standards for all companies.

Taking care in india

In the city of Nashik in northwest India, ­Haldex is known as a socially responsible company that contributes to the economy of the region while improving the quality of life of its own employees and the surrounding community. At its plant in Nashik, located approximately 200 km outside Bombay, Haldex India manufactures brake adjusters and anti-lock braking systems.

Pai Ganesh, Chief Operating Officer of Haldex India, recruits qualified and educated employees from many regions in India. These employees, who in many cases live far from their home towns, are offered housing in Nashik and provided with other basic needs, such as food and medicine, whenever necessary. Special emphasis is placed on creating job opportunities for women. Haldex India also supports schools and institutions in the nearby area, including a school in a village outside Nashik, where many children live under challenging financial conditions. The company supports the school by distributing books and other study materials to its 115 pupils. Haldex India has also financed a tank that holds fresh water for the school. Haldex India’s commitment also includes caring for the basic needs of people affected by natural disasters, such as drought or flooding in the region. In August 2008, Bihar, one of the states in Northern India, experienced flooding, which left people homeless. In addition, many inhabitants required medical care, food and ­shelter. All of the employees of Haldex India responded to this cause by contributing the equivalent of one day’s salary, as a part of their social responsibility.

27

28

Environment

HALDEX 2008

Haldex products generate environmental value for customers Haldex products help customers to comply with increasingly stringent environmental legislation. The product portfolio strengthens the Haldex brand, while environmental activities result in continuously improved performance.

Distinct environmental value at the user level Haldex’s business concept includes a focus on products that improve the environment. During 2008, the UK company Concentric was acquired, providing the Group with innovative variable-flow oil, water and fuel pumps, which improve energy efficiency and reduce energy consumption. Other products included in the Haldex customer offering also generate distinct environmental benefits, such as Varivent, which recirculates exhaust gases in diesel engines, thus reducing fuel consumption and emissions of nitrogen oxides. Another example is Alfdex, a system for the separation of oil particles in crankcase ventilation air in diesel engines, also known as crankcase gases. The crankcases in diesel-operated truck engines normally emit between six and nine liters of oil mist per 1,000 hours. With Alfdex, these emissions are reduced to nearly zero. In combination, Haldex’s product portfolio, which comprises variable flow pumps for oil, water and fuel for diesel engines, Alfdex, Varivent and electric fuel feed pumps could entail fuel savings of up to 10%. Environmental work supported by Haldex’s values One of the Group’s fundamental values is the elimination of all waste, which in the field of environmental efforts ensures effective resource husbandry. Based on a lifecycle perspective, the total environmental load is investigated and improvement work focuses on the various phases of the production, use and recycling of the company’s products. In its business operations, Haldex strives to: • utilize natural resources as carefully as possible • reduce the environmental impact by further developing products and manufacturing processes • design products with a view to efficient recycling

Systematic work yields results The vast majority of Haldex’s production plants have environmental management systems that are ISO 14001 certified. At the end of 2008, 86% of the total number of plants were certified, including 80% of the plants in Mexico, South America, China and India. All Haldex facilities are either subject to licensing requirements or regulated under the environmental laws of the country where they are located. All units have the requisite licenses and agreements, and also meet the established reporting and inspection requirements. A key feature of environmental efforts is reducing energy consumption and the emissions this gives rise to, which is in line with Haldex Way. Each plant establishes improvement goals and continuously examines and measures greenhouse gases in accordance with the guidelines specified in the World Resource Institute’s Greenhouse Gas Protocol (GHG). In 2008, Haldex reduced its emissions by 11%, in terms of CO2 in relation to every SEK m of sales. The calculation has been adjusted to take into account the divestment of brake lining operations and the acquisition of Concentric. Emissions of CO2 from Haldex’s operations (Scope 1 and 2 emissions according to the GHG Protocol) were reduced by 6.4%, or a total of 55,865 metric tons. In total, CO2 emissions amounted to 67,702 metric tons, a decrease of 6.2%. High ratings for environmental efforts Folksam’s latest Climate Index ranks Haldex as best in its industry and third best in Sweden in reporting its environmental impact. The Climate Index, which provides a quantitative measure of the climate effects resulting from the production of listed companies, bases its assessment on the Carbon Disclosure Project (CDP), an international survey. Folksam’s index for Responsible Enterprise in 2008 also gave ­Haldex good rankings for its environmental efforts, with an especially high ­rating for its environmental management.

Financial reports – contents

HALDEX 2008

Financial reports – contents directors’ report

30

notes group

38

Sales and operating income

30

Note 1

38

Acquisitions and restructuring

31

Cost-reduction program

General information

parent company balance sheet

57

changes in parent company equity 58

31

Note 2 Summary of important accounting principles

38

Earnings

31

Note 3

Risks & Risk management

41

Cash flow

32

Investments

32

Note 4 Important estimations and assumptions

44

Product development

32

Note 5

44

Financial position

32

Profitability

Segment reporting

parent company income statement 56

parent company cash flow statement

58

notes parent company

59

Note 1

59

General information

Note 6 Costs distributed by type

45

Note 2 Summary of important accounting principles

32

Note 7 Average number of employees

46

Note 3 Average number of employees and sickness absence 59

Risks, uncertainties and financial risks

32

Note 8 Salaries and other remuneration

46

Note 4 Salaries and other remuneration

59

Environmental impact

32

Note 9

Note 5

Auditing fees

60

Guidelines for remuneration

32

Note 6

Depreciation

60

Future trends

33

Note 10 Auditing fees

48

Parent Company

33

Note 11 Depreciation

48

Note 7 Interest income and interest expenses

60

Events after the balance-sheet date

33

Consolidated income statement

34

consolidated balance sheet

35

changes in group equity

36

consolidated cash flow statement

37

Information on Remuneration of executive committee 47

59

Note 12 Taxes

48

Note 8 Tangible fixed assets

60

Note 13 Intangible assets

49

Note 9

60

Note 14 Tangible fixed assets

50

Note 10 Long-term receivables

61

Note 15 Operational leases

50

Note 11 Other current receivables

61

Note 16 Deferred income tax

51

Note 12 Derivate instruments

61

Note 17 Derivative instruments

51

Note 13 Cash and cash equivalents 61

Note 18 Inventories

52

Note 14 Untaxed reserves

61

Note 19 Other current receivables

52

Note 15 Taxes

61

Note 16 Pensions and similar obligations

61

Note 20 Cash and cash equivalents 52 Note 21 Assets and liabilities held for sale

52

Note 22 Long-term interest-bearing liabilities 52 Note 23 Pensions and similar obligations

53

Note 24 Other provisions

55

Note 25 Current liabilities

55

Note 26 Corporate acquisitions

55

Note 27 Related-party transactions 55

Shares and participations

Note 17 Long-term interest-bearing liabilities 62 Note 18 Other current liabilities

62

Note 19 Contingent liabilities and collateral pledged

62

audit report

63

29

30

Directors’ Report

HALDEX 2008

Directors’ Report The Board of Directors and President of Haldex AB (publ), Corp. Reg. No. 556010-1155, hereby issue the Annual Report and Consolidated Financial Statements for 2008. Haldex offers innovative proprietary solutions to the global vehicle industry. The main focus is on products related to vehicle dynamics, safety and the environment. Haldex AB is the Parent Company of the Haldex Group. The company mainly conducts corporate functions, including the central finance function. Amounts are stated in millions of kronor (SEK m), unless otherwise indicated. Amounts in parentheses refer to figures for the preceding year. “Haldex” refers to the Haldex Group, meaning Haldex AB and its subsidiaries. Operations during the year Sales and operating income

During the first half of 2008, the demand trend in Europe was strong while the North American market remained weak in almost all segments. During the second half of the year, the demand trend weakened. The decline began during the third quarter and continued at an intensified rate during the fourth quarter, especially during November and December when many of Haldex’s customers shut down their production for three to five weeks. All segments were affected, and the major decline was related to the European market. Consolidated net sales amounted to SEK 8,403 m (7,940). In nominal terms and when adjusted for currency-exchange movements, net sales rose 6%, due mainly to the acquisition of Concentric. Organic growth, adjusted for currency-exchange movements, declined 2%, with Europe declining 3% and North America declining 2%. The Group’s operating income amounted to SEK 92 m (289). The Group’s operating income, excluding restructuring cost, one-off items and amortization of acquisition-related surplus value, amounted to SEK 250 m (339). The rapid deterioration in market conditions during the fourth quarter and the resulting decrease in sales had a sharply adverse impact on operating income. Operating income within Commercial Vehicle Systems, excluding

Equity/assets ratio and debt-to-equity ratio % 150

restructuring cost and write down of assets, amounted to SEK 4  m (159). The operating margin, excluding restructuring costs, declined from 3.5% to 0%. The weak conditions in the North American market and the sharply reduced demand in Europe during the fourth quarter, particularly in November and December when Haldex’s customers suspended ­production for three to five weeks, in combination with high prices for raw materials, had a severely adverse impact on earnings. Sales declined SEK 295 m to SEK 4,234 m (4,529) compared with the preceding year. Sales in the European market were strong during the first half of the year, which limited the impact of the sales decline in North America. During the second half of the year, primarily during the fourth quarter, demand decreased significantly in Europe, in both the truck and the trailer segments. The aftermarket, which accounted for about 40% of CVS’s total sales, was also affected to some extent. In Europe, sales declined to SEK 1,938 m (2,058), while sales in North America dropped to SEK 1,852  m (2,022). Adjusted for currency­-exchange movements, sales declined 8% in Europe and 6% in North America. The program in the disc brake market continued during the period. The cost-reduction program proceeded and cost improvement versus the preceding quarter was achieved. Due to the higher raw material costs during the year and the reduced volume during the second half of the year, the negative impact on earnings for 2008 was about the same as in the preceding year (approx. SEK 100 m). In the future, a gradual improvement is expected. In common with other major projects, the disc brake project is being reviewed continuously to secure value ­generation. In the Hydraulic Systems division, operating income and the operating margin, excluding restructuring cost and amortization of acquisition-related surplus value, amounted to SEK 146 m (86) and 7% (5.8), respectively. Concentric, the company that was acquired in 2008 and has been consolidated since April 1, contributed SEK 82 m to operating income, excluding amortization of acquisition-related surplus value of SEK 31 m and costs connected to the company’s integration.

Cash flow and self-financing rate SEK m 500

% 250

400

200

300

150

200

100

100

50

120

90

60

0 30

0

0

–100

2004

2005

2006

Equity/assets ratio

2007

2008

Debt-to-equity ratio

–200

–50

2004

2005

2006

Cash flow, SEK m

2007

2008

–100

Self-financing rate, %

Directors’ Report

HALDEX 2008

Sales amounted to SEK 2,095 m (1,467). Adjusted for acquisitions and currency-exchange movements, sales were unchanged compared with the preceding year. Concentric’s sales amounted to SEK 606 m. Operating income in the Garphyttan Wire division amounted to SEK 59 m (45). Sales declined 4% to SEK 1,053 m (1,095). In the fourth quarter, sales decreased by 39% year over year currency adjusted. The operating margin was 10.0% during the period January to September. Due to the sharply reduced sales, a loss of SEK 29 m, excluding restructuring costs, was reported during the fourth quarter. Operating income in the Traction Systems division amounted to SEK 41 m (49). Sales increased 20% to SEK 1,021 m (848), which was a lower rise than planned. The sharp downturn in volume during December, due to production stoppages, gave rise to a loss in December, which had an adverse impact on operating income during the fourth quarter. The increase in sales was primarily attributable to higher volumes resulting from deliveries to Landrover and VW’s new model, Tiguan, which started in the second half of 2007 and to Ford Kuga, which commenced during 2008. Acquisitions and restructuring

On December 25, 2008, Haldex reached an agreement with Suzuki Metal Industry Co, a Japanese manufacturer of steel wire products, concerning the divestment of the Garphyttan Wire division. The cash purchase price is estimated at SEK 800  m on a debt-free basis. The transaction is expected to be completed during the period April to June 2009 when the final purchase price will be confirmed. Haldex also completed the acquisition of Concentric, a world-leading supplier of oil, water and fuel pumps for large and medium-sized diesel engines for trucks and construction equipment. Restructuring of the Friction Products business unit, which manufactures and sells pads for disc brakes and linings for drum brakes in North America, was completed in 2008. As part of the restructuring program, production of drum brake linings was outsourced and the disc brake lining business was sold. The latter business had annual sales of

approximately SEK 100 m. The Friction Products business unit reported a loss of about SEK 25 m. Cost-reduction program

During the third quarter of 2008, Haldex launched a cost reduction program involving all divisions that included a decrease in the number of employees by about 700 by mid 2009. During the fourth quarter, additional actions were taken in order to adapt to the lower demand, and the reduction in the number of jobs ­represents a reduction in the number of employees by approximately 1,500 (from mid-2008 to mid-2009). The expanded program includes structural measures, such as consolidation of CVS’s European distribution operations by concentrating warehouses and logistics functions from four units in different ­countries to a joint distribution center, and the discontinuation of all manufacturing and distribution operations at the plant in Redditch, UK. The cost of the program is estimated at approximately SEK 150 m, of which SEK 85 m was expensed in 2008. The remaining costs will be expensed during the first quarter of 2009. Total annual savings are estimated at about SEK 425 m. The cost-reduction program will be evaluated continuously and adjusted to facilitate any changes in demand. Earnings

Consolidated earnings before tax totaled SEK –55 m (222). Financial net amounted to SEK –147  m (67). Financial expenses increased during 2008, primarily due to financing of the acquisition of Concentric and higher interest rates. Earnings after tax totaled SEK –43 m (141). A tax revenue of SEK 12 m (charge: 81) was recognized in 2008, as a result of a valuation of tax-loss carryforwards valued at the tax rates applicable in the countries concerned. The operating margin, excluding restructuring cost, one-off items and amortization of acquisition-related surplus value, declined from 4.3% in the preceding year to 3.0%. The return on capital employed was 2.4% (8.3).

Product development costs

Investments

SEK m

SEK m 500

400

375

425

350 350 325 275

300

275

2004

2005

2006

2007

2008

200

2004

2005

2006

2007

2008

31

32

Directors’ Report

HALDEX 2008

Cash flow

Risks, uncertainties and financial risks

Cash flow from operating activities amounted to SEK 857 m (312) and cash flow after net investments to SEK 465 m (–141). The strong cash flow was attributable to the good working capital performance in combination with lower sales volumes, enabling a reduction by SEK 576 m (–152) to SEK 758 m, including the sale of certain accounts receivable totaling about SEK 170 m.

A complete presentation of relevant risks and uncertainties is provided in Note 3.

Investments

The Group’s net investments amounted to SEK 392 m (453), of which capitalized development costs accounted for SEK 60 m. Investments have primarily been made in production equipment. Product development

Every year, substantial investments in development projects are made within the Group to ensure the creation of market-leading products and to strengthen market positions. This development work comprises the creation of completely new products, both in-house and in some cases in cooperation with partners, and updates of existing product solutions. Group development costs during fiscal year 2008 totaled SEK 339 m (335), of which SEK 60 m (66) was capitalized. At December 31, 2008, capitalized development costs amounted to SEK 282 m (241), of which the largest single item, the disc-brake project, accounted for SEK 53 m. Financial position

The Group’s net debt amounted to SEK 2,335 m (1,600). Cash and cash equivalents amounted to SEK 431 m (182). At year-end, granted but as yet unutilized credit limits totaled about SEK 1,217 m. Interest-bearing liabilities amounted to SEK 2,766 m (1,782), including pension liabilities of SEK 440 m. Haldex’s principal source of financing is a syndicated revolving credit facility of USD 250 m, maturing in 2012. At present, a large part of the facility is unutilized. According to the terms of the agreement with the creditors, certain key rations must be fulfilled. Haldex did not fulfill these at the end of 2008. The terms were renegotiated in February 2009 and Haldex has thus secured its need of financing. In addition to the revolving credit facility, Haldex’s sources of financing comprise a private placements totaling SEK 600 m, a bridging loan of GBP 65 m for the acquisition of Concentric and other short-term facilities. The bridging loan has been extended and now matures on August 31, 2009. The loan will be repaid by the cash consideration from the divestiture of the Wire division. Two of the private placements totaling SEK 250 m mature in May and June 2009, respectively. Shareholders’ equity amounted to SEK 1,823 m (1,871), resulting in an equity-assets ratio of 29% (37). Share capital at year-end amounted to SEK 111  m (111), divided among 21,919,730 shares. Holdings of own shares at year-end totaled 376,470. All shares, with the exception of treasury shares, carry one vote each and provide equal entitlement to the Company’s assets and earnings. Loss for the year reduced shareholders’ equity by SEK –43 m. Equity is also decreased with dividend payments totaling SEK 99 m. Translation ­differences related to foreign net assets increased equity with SEK 143. The change in fair market value of derivatives in the hedging reserve decreased by SEK 53 m and impacted equity in a corresponding amount. The derivatives pertain to projected future deliveries of goods, and the results are recognized in the Income Statement as deliveries are made, at which time the unrealized result is transferred from equity. Profitability

The return on capital employed was 2.4% (8.3). The Group’s profitability target is a 15% return on capital employed, averaged over a complete business cycle. The capital turnover rate was 2.2 (2.2). The return on equity decreased from 7.3% to minus 2.3%.

Environmental impact

The Group is engaged through four Swedish subsidiaries in business activities that are subject to license requirements pursuant to the Swedish Environmental Code. The Group’s Swedish operations that are subject to license and reporting requirements impact the natural environment mainly through two subsidiaries, Haldex Brake Products AB and Haldex Garphyttan AB. These companies are involved in surface-treatment and the painting of brake systems for highway vehicles as well as the production of specialty wire from steel alloys, activities that mainly impact the natural environment in terms of air and water emissions and noise. For additional information concerning the environment, see page 28. Guidelines concerning adoption of guidelines for remuneration of senior executives

In common with the motion submitted to the 2008 Annual General Meeting, the Board of Directors proposes that the following guidelines apply for the period up to the 2010 Annual General Meeting. Remuneration of the President and CEO and other senior executives shall consist of a well-balanced combination of fixed salary, annual bonus, long-term incentive programs, pension and other benefits and conditions concerning termination of employment/severance payment. The total remuneration shall be competitive in the market and based on performance. The fixed remuneration shall be determined individually and based on each individual’s responsibility, role, competence and position. The annual bonus shall be based on outcomes of predetermined financial and individual objectives and not exceed 30–50% of the fixed annual salary. In exceptional situations, special remuneration may be paid to attract and retain key competence or to induce individuals to move to new places of service or accept new positions. Such remuneration may not be paid out for periods exceeding 36 months and may not exceed the equivalent of twice the remuneration the executive would otherwise have received. The Board of Directors may propose that the General Meeting resolve on long-term incentive programs. Pension benefits shall be based on defined-contribution plans and (for Swedish citizens) shall provide entitlement to pension at age 65. Upon termination of employment by the company, the notice period for the President and CEO is 12 months and for other senior executives six months. In addition, when entering into new employment contracts, agreement may be made on severance pay not exceeding the equivalent of 12 months’ fixed salary. The Board shall be entitled to depart from the guidelines if there are specific reasons for doing so in individual cases. The company’s application of the guidelines

The Board of Directors utilized it’s rights to make an exception from the guidelines as a consequence of the assumption of terms of employment in connection with the acquisition of a company during the past year. Accordingly, the right to a variable remuneration increment, the maximum permissible level of which is 80 percent of fixed salary, was included in the employment terms of one of the company’s senior executives. This exceeds the maximum level of 50 percent of fixed salary specified in the guidelines, that apply to the other senior executives. In accordance with the guidelines, decisions have been taken concerning extra remuneration for a number of Haldex’s senior executives, and the President and CEO, which is estimated to total SEK 1,560 k (where of SEK 780 k concern the President and CEO). This extra remuneration is linked to the divestment of the Wire Division and will be disbursed when this transaction has been finalized.

Directors’ Report

HALDEX 2008

Historically, paid bonus remuneration has corresponded to about half of the maximum bonus levels. For further information on remuneration of senior executives, refer to Note 9.

33

this include developments in rapidly growing, emerging markets in Asia, where demand for leading-edge products and technologies is increasing continuously. Parent Company

Future trends

In addition to the number of vehicles produced, Haldex’s market is affected by requirements from customers and legislators. These requirements will create trends and driving forces, such as an increased emphasis on safety and environmental awareness, combined with the everincreasing importance of vehicle dynamics. Other trends that affect Haldex are vehicle manufacturers’ endeavors to build lighter vehicles in order to reduce fuel consumption. In markets outside Europe and North America, a distinct trend towards increased demand for western technologies is noticeable. This applies particularly to large markets, such as India and China. On the whole, the trends involving safety, environmental aspects and vehicle dynamics are resulting in expectations that Haldex’s market will grow faster than the vehicle market in general. Other indications of

The Group’s parent company, Haldex AB, carries out the main office functions, including the central financial function. In 2008, Haldex AB reported a negative operating income of SEK 34 m (–40), but earnings before changes in allocations reserve and taxes amounted to SEK 265 m (201). Including, dividends from group companies of SEK 373 m (117), group contribution of SEK 35 m (117) and a financial net of SEK –109 m (7). During 2008, the company’s net investments and divestments in shares and participations amounted to SEK 619 m. Cash and cash equivalents at year-end were SEK 178 m (44). Events after the balance-sheet date

After the close of 2008, renegotiations of a number of the Group’s loans began. The negotiations are still in progress and relate to loans totaling approximately SEK 400 m.

Distribution of earnings

 

As stated in the Parent Company Balance Sheet, the Annual General Meeting has the following funds at its disposal

 

Profit brought forward

445

Net income for the year

332 777

The board of Directors and the President propose the following distribution of earnings:

 

Dividend to the shareholders

–

To be carried forward

777

Net sales by division and region SEK m

2008

2007

Nominal, %

Commercial Vehicle Systems

4,234

4,529

–7

Currency adjusted, % –6

Hydraulic Systems

2,095

1,467

43

46

Garphyttan Wire

1,053

1,095

–4

–4

Traction Systems

1,021

848

20

20

Haldex Group

8,403

7,940

6

6

North America

3,189

2,997

6

9

Europe

4,423

4,255

4

3

Asia and Middle East

510

443

15

14

South America

281

245

15

12

Haldex Group

8,403

7,940

6

6

2008

2007

Nominal, %

Currency adjusted, %

232

259

–10

–10

Hydraulic Systems

88

89

–1

1

Garphyttan Wire

21

20

5

5

Investments by division SEK m Commercial Vehicle Systems

Traction Systems

60

95

–37

–37

Haldex Group

402

463

–13

–12

2008

2007

Nominal, %

Currency adjusted, %

160

140

14

16

Hydraulic Systems

74

58

28

29

Garphyttan Wire

43

44

–2

–2

Traction Systems

52

40

30

30

Haldex Group

329

281

17

18

Depreciation by division SEK m Commercial Vehicle Systems

Group

34

HALDEX 2008

Consolidated income statement 2008 Amounts in SEK m

Note

Net sales Cost of goods sold

11

Gross income

2007

Continuing operations

Discontinuing operations

Continuing operations

Discontinuing operations

7,337

1,066

8,403

6,829

1,111

–5,772

7,940

–843

–6,615  

–5,309

–882

–6,191

1,565

223

1,788

1,520

229

1,749

Haldex  

Haldex

Selling expenses

11

–643

–93

–736

–634

–112

–746

Administrative expenses

11

–622

–66

–688

–481

–44

–525

Product development costs

11

–271

–14

–285

–218

–15

–233

Other operating income and expenses

 

Operating income Interest income Interest expense Other financial items

 

Earnings before tax Taxes Net income for the year

12

1

41

51

13   92

44

0

44

231

58

289

5

1

6

7

3

10

–122

–3

–125

–69

–3

–72

–27

–1

–28  

–103

48

–55

–3

–2

–5

166

56

222

12

17

–5

12  

–74

–7

–81

 

–86

43

–43  

92

49

141

–87

–

–44

88

–

137

1 

– 

4 

– 

Attributable to: Parent Company shareholders Minority interests  

   

 

 

Earnings per share before dilution, SEK

–3:92

Earnings per share after dilution, SEK Dividend per share, SEK Average number of shares, thousands

 

1     

   

141

–

6:24

–

–1:92

–3:92

–

–1:92

3:97

–

6:24

–

–

–

4:50

–

4:50

21,920

–

21,980

–

21,980

21,920  

3:97

4

 

Group

HALDEX 2008

Consolidated balance sheet Amounts in SEK m

Note

2008

2007

Intangible fixed assets

13

1,761

711

Tangible fixed assets

14

1,315

1,501

16

143

112

ASSETS Fixed assets

Financial fixed assets    Deferred tax assets    Long-term receivables

 

Total fixed assets Inventories

18

31

30

3,250

2,354

940

1,055

Current receivables 770

1,189

   Other current receivables

   Accounts receivable from customers 19

278

282

Derivative instruments

17

45

20

Cash and cash equivalents

20

431

182

2,464

2,728

Total current assets Assets held for sale

21

Total assets

576

–

6,290

5,082

SHAREHOLDERS’ EQUITY AND LIABILITIES Equity Share capital

111

111

Capital contributions

455

455

Other reserves Retained earnings

 

Attributable to Parent Company shareholders Minority interests

 

Total equity

88

–3

1,151

1,294

1,805

1,857

18

14

1,823

1,871

Long-term liabilities Long-term interest-bearing liabilities

22

1,097

1,293

Pensions and similar obligations

23

396

334

Deferred taxes

16

84

90

 

30

24

1,607

1,741

Other long-term liabilities Total long-term liabilities Current liabilities Short-term loans Debts to suppliers

1,229

155

769

842 22

Derivative instruments

17

99

Other provisions

24

127

76

Other current liabilities

25

341

375

2,565

1,470

Total current liabilities Liabilities held for sale

21

Total equity and liabilities Collateral pledged Contingent liabilities

 

295

–

6,290

5,082

None

None

10

13

35

36

Group

HALDEX 2008

Changes in Group equity Attributable to Parent Company shareholders  

Opening balance at January 1, 2007

Share capital

Capital contribution

Other reserves

Retained earnings

Subtotal

Minority interest

Total

111

455

72

1,256

1,894

4

1,898

Income-statement items recognized directly in equity Change in hedging reserve, after tax Hedges of net investments Translation difference Net items recognized directly in equity

–19

–19

13

13

–19

–45

–45

0

–45

0

–51

13

–

–

–51

–

–51

137

137

4

141

–

–

–51

137

86

4

90

–

7

Net income for the year Net income for 2007 Total revenues and costs Transactions with shareholders Increase in minority share of equity Repurchase of shares

–24

Dividends paid to owners of the Parent Company

–24 –99

Dividends paid to minority shareholders in subsidiaries

7 –24

–99

–99

–

–1

–1

Closing balance, December 31, 2007

111

455

–3

1,294

1,857

14

1,871

Opening balance, January 1, 2008

111

455

–3

1,294

1,857

14

1,871

Income-statement items recognized directly in equity Change in hedging reserve, after tax

–53

–53

–53

Hedging of net investment

–39

–39

–39

Translation difference Net items recognized directly in equity

183

–1

182

–

–

183 91

–

91

–1

90

–44

–44

1

–43

–

–

91

–44

47

0

47

4

4

Net income for the year Net income for 2008 Total revenues and costs Transactions with shareholders Increase in minority share of equity Repurchase of shares Dividends paid to owners of the Parent Company

–99

–99

88

1,151

1,805

 

 

Hedging reserve

 

 

–19

–99

Dividends paid to minority shareholders in subsidiaries Closing balance, December 31, 2008

Other reserves include hedging reserves and exchange rate differences:

111

455

 

 

 

 

Opening balance at January 1, 2007 Change during the year

18

Exchange–rate differences

36

Closing balance at December 31, 2007

–57  

17

Opening balance at January 1, 2008

1,823

–32 –89

17

–89

Change during the year

 

 

 

 

–53

 

143

Closing balance at December 31, 2008

 

 

 

 

–36

 

54

Group

HALDEX 2008

37

Consolidated cash flow statement Amounts in SEK m

2008

2007

Cash Flow from operating activities Operating income1), 2) Reversal of depreciation, amortization and impairment losses Interest paid1) Capital gain on sale of shares in subsidiaries

92

289

392

300

–143

–66

1

–

Taxes paid

–61

–59

Cash flow from operating activities before changes in working capital

281

464

Change in working capital Current receivables Inventories

22

–108

142

–133

Opearating liabilities

412

89

Change in working capital

576

–152

Cash flow from operating activities3)

857

312

Net investments

–392

–453

Acquisitions

–554

–49

Cash flow from investments

Sale of shares in subsidiaries Cash flow from investments4)

4

–

–942

–502

–99

–99

Cash flow from financing Dividend to Haldex AB’s shareholders Dividend to minority shareholders

–

–1

Buyback of own shares

–

–24

409

249

Change in loans Change in long-term receivables Cash flow from financing5)

15

–9

325

116

Change in cash and bank assets, excl. exchange-rate difference

240

–74

Cash and bank assets, opening balance

182

250

Exchange-rate difference in cash and bank assets Cash and bank assets, closing balance 1) 

9

6

431

182

Reclassification of financial income from Other operating income to Financial items. Operating income from continuing operations of the Haldex group was SEK 41 (231) and from discontinued operations SEK 51 (58). 3)  Cash flow from operating activities from continuing operations of the Haldex group was SEK 730 (260) and from discontinued operations 127 (52). 4)  Cash flow from investments from continuing operations of the Haldex group was SEK –922 (–484) and from discontinued operations –20 (–18). 5)  Cash flow from financing activities from continuing operations of the Haldex group was SEK 325 (116) and from discontinued operations – (–). 2) The

38

Notes Group

HALDEX 2008

Notes Group NOTE 1  General information Haldex AB (Parent Company) and its subsidiaries build the Haldex Group. Haldex supplies proprietary and innovative solutions developed in-house to the global vehicle industry. The main focus is on products related to vehicle dynamics, safety and the environment. Haldex AB (publ), Corp. Reg. No. 556010-1155, is a registered limited liability corporation with its registered office in Stockholm, Sweden. The address of the Head Office is Haldex AB, Box 7200, SE-103 88 Stockholm. Haldex AB is listed on the OMX Exchange in Stockholm, Mid Cap.

Note 2  Summary of important accounting principles

The Consolidated Financial Statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU. In addition, the Swedish Annual Accounts Act and the Swedish Financial Accounting Standards Council RFR 1.1 “Supplementary accounting regulations for Groups” were applied. The Parent Company’s function currency is Swedish kronor (SEK), which is also the reporting currency for the Parent Company and the Group. This means that the financial reports are presented in SEK. All amounts are recognized in SEK m unless otherwise indicated. Assets and liabilities are recognized in accordance with the acquisition value method, apart from certain financial assets and liabilities that are recognized at fair value. The income statement has been prepared in functional format in accordance with IAS 1, which reflects the internal reporting and provides an accurate picture of the Company’s income. 2.1 Consolidated financial statements

as payment for the acquired net assets, as well as transaction costs that are directly attributable to the acquisition. If the purchase price for the shares exceeds the fair value of the acquired net assets, the difference is recorded as goodwill. If the purchase price falls below the fair value of the acquired net assets, the difference is recognized directly in the income statement. Intra-Group transactions, balance sheet items and unrealized gains and losses from intra-Group transactions are eliminated. Alfdex AB, in which Haldex and Alfa Laval own 50% each, is consolidated in accordance with the proportional method. 2.2 Translation of foreign currency The functional currency for the Haldex Group and the presentation currency is Swedish kronor (SEK). Transactions and balance sheet items

Transactions in foreign currency are translated into SEK using the exchange rates from the day of the transaction. Exchange gains and losses resulting from these transactions and the translation of monetary assets and liabilities at the closing rate are recognized in the consolidated income statement exchange rate gains or losses from transactions that fulfill the requirements for hedge accounting are recognized under Equity. Subsidiaries

The balance sheets and income statements of non-Swedish subsidiaries are translated by translating assets and liabilities at the closing rate and income and expenses at the average rate during the year. Translation differences resulting from the translation of foreign subsidiaries’ net assets at different rates on the opening and the closing dates are recognized directly in the translation reserves in Equity. Exchange rate differences on loans and other currency instruments that are recognized as hedges for net investments in foreign currency are recognized directly in the translation reserves in Equity.

Subsidiaries

The Consolidated Financial Statements include the Parent Company and those companies in which the Parent Company directly or indirectly owns more than 50% of the voting rights or exerts controlling influence in some other way. The subsidiaries are included in the Group as of the day the controlling influence is transferred to the Group. Divested companies are included in the Group’s consolidated accounts up to and including the date of sale. Companies acquired during the year are included in the Group’s consolidated accounts as of the date of acquisition. The minority share of equity is recognized as a separate line item under Equity. The Consolidated Financial Statements were prepared using the purchase method. This means that the subsidiaries’ assets and liabilities are recognized at their fair value on the day of acquisition based on an acquisition analysis. In the analysis, the acquisition value of share­ holdings or operations is established, as if the fair value on the date of acquisition of acquired identifiable assets and assumed liabilities and contingent liabilities. The acquisition value of shares in subsidiaries or operations comprises the fair value on the date of transfer of assets, accruing or assumed liabilities and issued equity instruments provided

2.3 Revenue reporting Income from the sale of goods and services is recognized when the goods/services are delivered in accordance with the terms of delivery with the customer, as soon as the principal rights and rights associated with ownership are adjudged to have been transferred to the purchaser. The income is reported at fair value and, where applicable, is reduced by the value of discounts granted and returned goods. Income for development projects is recognized progressively in pace with the rate of completion, assuming that the financial outcome of the development assignment can be calculated reliably (percentage-of-completion profit recognition). The completion rate is determined on the basis of outlaid expenses in relation to total estimated costs for the assignment. Intra-Group transactions are eliminated. 2.4 Leasing Leasing is classified in the consolidated financial statements as either financial leasing or operational leasing, depending on whether the Company retains all the risks and benefits associated with ownership of

Notes Group

HALDEX 2008

the underlying asset. A requirement for the reporting of financial leasing is that the fixed asset be posted as an asset item in the balance sheet and that the leasing obligation be recognized as a liability in the balance sheet. Fixed assets are depreciated according to plan over their useful life, while lease payments are recognized as interest expenses and amortization of debt. No asset or liability items are recognized in the balance sheet in the case of operational leasing. The leasing fee is expensed in the income statement on a straightline basis over the term of the lease. 2.5 Tangible fixed assets Tangible fixed assets consist of buildings (offices, factories, warehouses), land and land improvements, machines, tools and installations. These assets are valued at their acquisition cost less scheduled depreciation. Scheduled depreciation is based on the acquisition value and estimated economic life of the assets. Buildings are depreciated over 25–50 years. Machinery and equipment are usually depreciated over 3–10 years, while heavier machinery, such as furnaces, has an economic life of 20 years. Land is not depreciated. The assets’ residual values and useful lives are reassessed every closing day and adjusted if needed. 2.6 Intangible assets Product development

According to IAS 38, product development costs are recognized as intangible fixed assets when the following criteria are met: it is likely that the asset will result in future financial benefits to the company; the purchase value can be calculated reliably; the company intends to finish the asset and has technical and financial resources to complete its development. The documentary basis for capitalizing product development costs can consist of business plans, budgets or the company’s forecasts of future results. The purchase value is the sum of the expenses accruing from the point in time the intangible asset fulfills the above criteria. Intangible assets are recognized as their acquisition value less accumulated depreciation from the completion date plus any impairment losses. Amortization begins when the asset becomes usable and is applied in line with the estimated useful life and in relation to the financial benefits that are expected to be generated by the product development. The useful life is not normally assessed as exceeding five years. Licenses and patents

Licenses and patents are recognized at acquisition cost less accumulated depreciation and any impairment losses. Straight-line depreciation is applied over the expected useful life (3–15 years). Software and IT systems

Acquired software licenses and costs for development of software that are expected to generate future financial benefits for the Group for more than three years are capitalized and amortized over the expected useful life (3–5 years). Goodwill

Goodwill is the amount that the acquisition cost for an asset exceeds the asset’s fair value. Goodwill in conjunction with the acquisition of a subsidiary is recognized at an intangible asset. Goodwill is not amortized but tested annually during the third quarter to identify any need to impair the asset and is recognized at acquisition cost less accumulated impairment losses. 2.7 Financial instruments The Group classifies its financial instruments in the following categories: financial assets valued at fair value through profit or loss, loans and receivables, financial instruments held to maturity and financial assets available for sale. The classifications are based on the purpose of the

acquired instrument. Management determines the classification of the instruments when they are first recognized and reassess the classi­fication at each reporting event. During the fiscal year, the Group had financial instruments belonging to financial assets measured at fair value through profit or loss, as well as loans and receivables. Financial assets measured at fair value through profit or loss

This category has two sub-categories: financial assets held for trading and assets that from the very beginning are attributed to the category measured at fair value through profit or loss. A financial asset is classified in this category if it has been acquired primarily with a view to being resold in the near future or if this classification is determined by company management. Derivative instruments are also categorized as being held for sale, assuming that they have not been identified as hedging instruments. Loans and receivables

Loans and receivables are non-derivative financial assets with established or determinable payments that are not listed on an active market. They occur when the Group supplies money, products or services directly to the customer without intending to trade the resulting claim. They are included in current assets, with the exception of items with due dates more than 12 months after the closing day, which are classified as fixed assets. Reporting derivative instruments

Derivative instruments are recognized in the balance sheet as of the trade date and are measured at fair value, both initially and during subsequent revaluations. The method used for recognizing the profit or loss arising at every revaluation occasion depends on whether the derivative has been identified as a hedging instrument and, if this is the case, the nature of the hedged item. The Group identifies certain derivatives as either: 1) hedging of the fair value of assets or liabilities; 2) hedging of forecast flows (cash flow hedging) or 3) hedging of net investment in a foreign operation. To qualify for hedge accounting, certain documentation is required concerning the hedging instrument and its relation to the hedged item. The Group also documents goals and strategies for risk management and hedging measures, as well as an assessment of the hedging relationship’s effectiveness in terms of countering changes in fair value or cash flow for hedged items, both when the hedging is first entered into and subsequently on an ongoing basis. Fair value hedges

Changes in fair value of derivatives that are classified as fair value hedges and fulfill the conditions for hedge accounting are recognized in the income statement with the changes in the fair value of the asset or liability that caused the hedged risk. Cash flow hedging

Cash flow hedging is applied for future flows from sales. The portion of changes in the value of derivatives that satisfy the conditions for hedge accounting is recognized directly in shareholders’ equity. The ineffective portion of profit or loss is recognized directly in the income statement, among financial items. The unrealized profit or loss that is accumulated in equity is reversed and recognized in the income statement when the hedged item affects profit or loss (for example, when the forecast sale that has been hedged actually occurs). If a derivative instrument no longer meets the requirements for hedge accounting, is sold or terminated, what remains is any accumulated profit or loss in equity, which is recognized in the income statement at the same time as the forecast transaction is finally recognized in the income statement. When a forecast transaction is no longer expected to occur, the accumulated profit or loss recognized in equity is immediately transferred to the income statement.

39

40

Notes Group Hedging of net investments

Accumulated gains/losses from re-evaluation of hedges of net investments that fulfill the conditions for hedge accounting are recognized under Equity. When operations are divested, the accumulated effects are transferred to the Income Statement and affect the Company’s net profit/loss from the divestment. Calculation of fair value

Fair value of financial instruments that are traded on an active market (for example, publicly quoted derivative instruments, financial assets that are held for trade and financial assets that are held for sale) is based on the quoted market rate on the closing day. The quoted market rates used for the Company’s financial assets are the actual bid prices; quoted market rates used for financial liabilities are the actual asked prices. The instruments held by the Group are traded 100% in an active market. 2.8 Inventories Inventories are valued at the lowest of the acquisition cost in accordance with the first-in first-out principle and the net realizable value. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). 2.9 Accounts receivable from customers After individual valuation, receivables are valued in the amounts in which they are expected to be paid. 2.10 Cash and cash equivalents Cash and cash equivalents includes cash, cash in banks, other shortterm investments that fall due in less than three months and bank overdraft facilities. Bank over draft facilities are recognized in the balance sheet as borrowing under current liabilities. 2.11 Receivables and liabilities Receivables and liabilities in foreign currencies are valued at the year-end rate. Exchange gains and losses pertaining to operational currency flows are recognized in operating income. Current and long-term interestbearing liabilities are recognized in the balance sheet to amortized cost. 2.12 Provisions Provisions are recognized in the balance sheet when the Group has future obligations resulting from an event that is likely to result in expenses that can be reasonably estimated. Provisions for restructuring costs are recognized when the Group has presented a plan for carrying out the measures and the plan has been communicated to all affected parties. 2.13 Employee benefits The Group has both defined-benefit and defined-contribution pension plans. Administration is handled by a third party at e.g. a fund management company, an insurance company, or a bank. The plans are fee-­ financed and the financing is recognized in the income statement. The size of the fee is dependent on actuarial estimations that are made once a year. Defined-benefit plans state which amount an employee can expect to receive after retirement and is calculated from factors such as age, work life and future salary. The actual debt, net any plan assets and non-reported actuarial gains/losses, is recognized in the balance sheet. Defined-contribution plans include mainly retirement pensions, disability pensions and family pensions, and a defined contribution normally expressed as a percentage of current salary, is paid to a separate legal entity. The employee is responsible for the risk inherent in these plans and the Group does not have any further obligations if the fund’s assets fall in value. No debt is recognized in the balance sheet.

HALDEX 2008

The debt reported in the balance sheet pertaining to defined-benefit pension plans is the present value of the defined-benefit obligation on the closing day less the fair value of the plan assets, adjusted for nonreported actuarial gains/losses. Defined-benefit pension obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of the obligations is determined through discontinuation of the estimated future cash flow. Actuarial gains/losses from experience-based adjustments and changes in actuarial assumptions exceeding the higher of 10% of the value of the plan assets and 10% of the defined-benefit obligation, is recognized as an expense or revenue over the employees’ average remaining work life in accordance with the “corridor method”. Accordingly, no debt is recognized in the balance sheet. Swedish group companies apply UFR 4 which means that tax on pension cost is calculated on the difference between pension cost in accordance with IAS 19 and pension cost determind in accordance with local regulations. 2.14 Taxes Income taxes consist of current tax and deferred tax. Income taxes are reported in the income statement, apart from when underlying transactions are recognized directly in equity, whereby the related tax effect must also be recognized in equity. Current tax is the tax to be paid or received for the current year based on current tax rates. Adjustment of current tax attributable to previous periods is also included here. Deferred tax is calculated on the basis of the temporary differences between the recognized and tax-assessment value of assets and liabilities. The valuation of deferred tax is based on the recognized amounts for assets and liabilities that are expected to be sold or settled. A valuation is performed based on the tax rates and tax regulations that have been decided or announced at year-end. Deferred tax assets pertaining to loss carry forwards are recognized insofar as it is probable that the losses will be used to offset future tax. 2.15 Cash flow statement The Cash Flow Statement is prepared using the indirect method. This means that the operating income is adjusted for transactions that do not entail receipts or disbursements during the period, and for any income and expenses referable to cash flows for investing or financing activities. 2.16 Government assistance Government assistance connected to the acquisition of fixed assets has reduced the acquisition value of the particular assets. This means that the asset has been recognized at a net acquisition value, on which the size of depreciation has been based. 2.17 Discontinued operations On December 25, Haldex reached an agreement with Suzuki Metal Industry Co Ltd, a Japanese manufacturer of steel wire, to divest its division Garphyttan Wire. Haldex year-end report has therefore been prepared according to the IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The consolidated income statement separates continued and discontinued operations. In the consolidated balance sheet, assets and liabilities held for sale is broke out and reported on separate lines. It is not possible to compare the figures presented for the discon­ tinued operations with the figures presented for the Garphyttan Wire division since the divisional figures include different group allocations. 2.18 Introduction of new accounting principles When preparing the consolidated financial statements at December 31, 2008, a large number of standards and statements of interpretation had been published that have yet to become effective. Because of the large

Notes Group

HALDEX 2008

number of changes the focus has been to give a preliminary assessment of the standards and statements that could have an impact on Haldex AB’s financial reports.

be made. The group will apply the required disclosures where applicable for impairment tests from January 1, 2009. IAS 38 Amendment – Intangible assets

IAS 1 Revised – Presentation of financial reports

The revised standard of IAS 1 will become effective from January 1, 2009. The revised standard will require all non-owner changes in equity, income and expenses, to be shown in a separate performance statement. The current assessment is that the amendment of this standard will result in changes in the presentation format and in designations in the consolidated financial statements. IFRS 2 Amendment – Share-based payment

This amendment will be applied as of January 1, 2009. The amendment affects the definition of vesting conditions and introduces a new concept, “non-vesting conditions” (conditions that are not defined as vesting conditions). The standard states that “non-vesting conditions” must be considered when assessing the fair value of equity instruments. Haldex AB has option programs with elements of “non-vesting conditions.” The impact of the amendment of this standard is not expected to be considerable.

The amendment deletes the wording that states that there is “rarely, if ever” support of use a method that results in lower rate of amortization than the straight-line method. The amendment will not have an impact on the group as all intangible assets are amortized using the straight-line method. IFRIC 14, IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction

IFRIC 14 provides guidance when determining the limitation stipulated in IAS 19 for the amount of a surplus that may be reported as an asset. It also explains how pension assets and/or liabilities can be affected by statutory or contractual requirements for minimum financing. The interpretation will be applied by the Group from 1 January 2009. At present, however, it is not estimated to have any major impact on the Group’s financial position.

Note 3  Risks & Risk management

IFRS 3 Revised – Business Combinations

3.1 Operational risks

This amendment will affect the reporting of future acquisitions, in part in terms of the reporting of transaction costs, any conditional purchase considerations and successive acquisitions. The Group will apply the standard as of the fiscal year that starts on January 1, 2010. The amendment will not have any impact on previous acquisitions but will impact the consolidated financial statements in respect of future transactions. The IFRS 3 (revised) still undergoing the EU’s approval process and, if approved, will be applied as of July 1, 2010.

Market risks

IFRS 8 – Operating segments

IFRS 8 replaces IAS 14 and is to be applied as of January 1, 2009. The new standard requires that segment reporting be presented on the basis of company management’s perspective. The current estimation is that the new standard will not affect the consolidated financial statements to any major extent, since both internal and external reporting is based primarily on the Group’s operating segments (divisions) and secondarily on the Group’s geographical markets.

Haldex is mainly active in the markets for trucks, trailers, construction machinery and cars. Demand for the company’s products is dependent on demand for transportation, which is in turn driven by increases in global trading, infrastructure construction, increased traffic safety awareness, environmental and safety legislation, as well as economic growth on the particular continent. Haldex’s main geographical markets are North America and Europe, but the Group is also active in the Asian and South American markets. Market risks are handled in the strategy process, which encompasses all Group units. The Board participates in this process and makes decisions concerning the Group’s strategy and direction. Customers

Since Haldex is active in several different market segments, its dependence on individual customers is limited. However, a loss of a customer or a major contract could have a major impact on an individual division.

IAS 23 Amendment – Borrowing Costs

Price trend

This amendment has been approved and will be applied as of January 1, 2009. The amendment requires that borrowing costs that are directly attributable to the purchase, design or production of an asset that will take considerable time to complete for use or sale must be capitalized as part of the acquisition value acquisition of the asset. The alternative allowing immediate expensing of borrowing costs will be removed. At present, the amendment of IAS 23 does not affect consolidated financial statements because the Group has no borrowing costs that can be capitalized.

Price pressure is a natural feature in the competitive market in which Haldex is active. To manage this, Haldex focuses continuously on reducing its costs and increasing the value it provides to customers by developing new products and technologies.

IAS 27 Revised – Consolidated and Separate Financial Statements

The revised standard entails, for example, that earnings attributable to minority shareholders must always be recognized, even if the minority share is negative, that transactions with minority shareholders must always be recognized in equity and, in the event that the Parent loses controlling influence, any remaining share must be revalued at fair value. The revised standard of IAS 27 will affect the consolidated financial statements. However, it has yet to be approved by the EU and, if it is, it will not be applied until July 1, 2010. IAS 36 Amendment – Impairment of assets

Fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in use calculation should *  Based on purchases 2008, including Concentric 12 months.

Raw materials prices

The Group depends on a number of raw materials and intermediates. Haldex has defined its exposure to raw materials in terms of both the Group’s own purchasing of raw materials and of Haldex’s sub-suppliers’ purchasing of raw materials. Exposure* is greatest towards various grades of steel, where annual volumes amount to approximately SEK 1,400 m, of which wire rod accounts for about SEK 500 m. Annual exposure to aluminum and cast iron amounts to about SEK 180 m and SEK 130 m, respectively. The Group also has some exposure to copper. To limit the risk of an adverse impact on earnings, a process is launched to some extent introducing price clauses for raw materials in customer agreements. In cases where we have not negotiated price clauses, Haldex to large extent renegotiate agreements in the event that the price trend for raw materials has resulted in a considerable increase in costs. To a large extent, the short-term effects of price increases for raw materials are limited by the fact that price agreements with the Group’s raw materials suppliers extend over an average period of six months.

41

42

Notes Group Production

Damage to production plants, caused, for example, by fire could have an adverse impact in the form of direct damage to property and of business disruption that impedes the potential to live up to commitments to customers. This in turn could result in customers choosing other suppliers. Because Haldex has production at several plants for a particular product line, it has the potential to reduce the consequences of such business disruption by increasing production at other plants. However, this normally results in additional costs. Haldex is continuously developing various damage-prevention measures. The Group has adequate insurance cover against both business disruption and damage to property. Product development

Requirements from users and legislators for increased safety and improved environmental and vehicle dynamics are resulting in increased demand for the products provided by Haldex. Accordingly, it is essential that the Group continuously develop new products or improve existing products that satisfy this demand so that markets shares are not lost to competitors. Consequently, a key part of Haldex’s strategy involves developing new products in those areas that the Group regards as important for continued growth and/or for defending market shares. In 2008, the Group’s expenditure for product development amounted to 4.0% of sales (4.2). The development of new products always entails the risk that a product launch will fail for some reason. Because the Group capitalizes costs for major product development projects, a failed launch would give rise to an impairment requirement. The Group’s capitalized investments in product development amounted to SEK 282 m (241) at December 31, 2008. An impairment loss of SEK 5 m was taken during 2008, see note 4. Patents

The risks pertain in part to cases whereby competitors infringe on the Group’s patents and in part to cases where Haldex accidentally infringes upon the patents held by competing companies. The risk of the marketing of unlicensed copies of the Group’s products has increase din recent years, particularly in the Asian markets. To minimize these risks, the patent situation is thoroughly monitored on a continuous basis. Haldex’s own innovations are protected by patents to the extent possible. Complaints, product recalls and product liability

Haldex is exposed to complaints in the event that the Group’s products fail to function the way they should. In such cases, the Group is obliged to rectify or replace the defective products. Recalls pertain to cases where an entire production series or a large part has to be recalled from customers in order to rectify deficiencies. This occurs occasionally in the vehicle industry. The Group has no insurance covering recalls. The assessment is that the cost of such insurance would not be proportionate to the risk covered by the insurance. Haldex has historically not been affected by any major recalls of products. There is always a risk that our customers demand that suppliers cover costs in addition to replacing the product, such as the cost of dismounting, assembly and other ancillary costs. To the extent possible, Haldex endeavors to be exempted from such liability. If a product causes damage to a person or property, the Group could be liable to pay damages. Haldex is insured against such product liability. In the past decade, no major product liability claims have occurred. In 2008, costs for complaints and product recalls corresponded to 1.3% (1.1) of total sales. Haldex endeavors to minimize its risks in respect of complaints, product recalls and product liability by means of comprehensive long-term tests in the development process and through quality controls and checks in the production process. With the aim of improving the quality of

HALDEX 2008

products and processes, Haldex also works in cooperation with ­customers to achieve optimal results. Human capital risk

It is of fundamental importance to the company in the short and the long-term perspective that favorable conditions are created in the Group to attract and retain skilled employees and managers. To achieve this, the Group’s HR efforts focus on three main areas: skills development, development of leadership and management efforts and a strengthened corporate culture. A series of Group-wide processes have been implemented in these three areas, in order, for example, to assess performance and identify and develop skills and potential, salaries and rewards, thus ensuring consistent management of personnel-related matters and minimizing human capital risks. 3.2 Financial risks The Group is exposed to financial risks such as market, credit, liquidity and financing risks. To reduce the impact of these risks, Haldex works in accordance with a policy that regulates their management. This policy has been adopted by Haldex’s Board of Directors. Follow-up and control occurs continuously in each particular company and at the corporate level. Exchange rate risks

Through its international operations, Haldex is exposed to exchange rate risks. Exchange rate changes affect the consolidated income statement and balance sheet in part in the form of transaction risks and in part translation risks. Transaction risks The Group’s net flows of payments in foreign currencies give rise to transaction risk. The value of net flows in foreign currencies totaled in 2008 approximately SEK 870 m (885). The currency flows with the largest impact on earnings are the inflows of USD and EUR into SEK. An exchange rate difference of 10% between EUR and SEK affects the Group’s earnings by approximately SEK 43 m (43), and between USD and SEK by some SEK 10 m (12), after tax. In accordance with the current finance policy, 70% of anti­cipated net flows for the estimated volumes for the forthcoming 12-month period are hedged, with a permissible deviation of +/–10%. At December 31, 2008, 77% (72) were hedged via derivative instruments. The Group’s finance policy governs which types of derivative instruments can be used for hedging purposes as well as counterparties with whom contracts can be signed. Currency forward contracts were used in 2008 to hedge invoiced and forecasted currency flows. At December 31, these contracts had a value of SEK 531 m net (545). They had a negative market value of SEK 69 m (neg. 4). In special cases, the Board may decide that currency flows need hedging over longer time horizons. In 2006, hedging was used to cover forecast inflows during 2009–2010 in a nominal amount of SEK 155 m at December 31, 2008. At the same date, these had an accrued positive value of SEK 0.4 m. Outstanding currency contracts at December 31, 2008 SEK m Nominal amount

USD Net Sold

EUR Net Sold

Other Net Sold 31

Year of maturity 2009

183

490

Average rate

7.49

9.64

–

39

–

–

7.78 

– 

– 

Hedging of flows >12 months Average rate

Translation risks The net assets (i.e. equity) of the non-Swedish subsidiaries represent investments in foreign currencies which, when translated into SEK,

Notes Group

HALDEX 2008

give rise to a translation difference. In its finance policy, the Group has established a framework for how the translation exposure that arises shall be managed in order to control the translation differences’ impact on the Group’s capital structure. The finance policy stipulates that the Group’s net debt shall be distributed in proportion to the capital employed per currency. Wherever necessary, this goal can be achieved by raising loans in the various currencies used by the subsidiaries. Gains and losses on such loans that are adjudged as effective hedging of translation differences are recognized directly in shareholders’ equity, while gains and losses on loans that cannot be adjudged as effective hedging are recognized in the income statement as a financial item. In 2008, the value of the Group’s net assets, meaning the difference between capital employed and net debt, totaled SEK 1,823 m (1,871) and was distributed among the following currencies:

Accounts receivable Due but not impaired

2008

2007

1–30 days

63

93

30–60 days

14

22

7

14

>60 days

The year’s net cost for doubtful accounts receivable amounted to SEK 3 m (12). The provision for doubtful receivables was changed as follows: Provision for doubtful receivables

2008

2007

Provision on January 1

30

18

Provision for anticipated losses

–3

21

Confirmed losses

–2

–3

6

–6

Reversal of provision  

2008

2007

SEK

85

300

USD

723

834

EUR

293

233

GBP

336

128

Other

386 

376 

This distribution was achieved in 2008 through loan of USD 28 m (44) and in 2008 through a loan in GBP of 29 m (0), which were designated as hedges of net investments, in foreign subsidiaries. Interest rate risk

Interest rate risk is the risk that changes in the interest rate level will have a negative impact on Group earnings. Since the Group has no significant holdings of interest-bearing assets, revenues and cash flow from operating activities are, in all significant respects, independent of changes in market interest rates. The Group’s interest rate risk arises through its borrowing. According to the finance policy, the average fixed interest term must be between 1 and 12 months. The risk must also be spread over time so that interest on a lesser part of the total debt is renegotiated at the same time. Through the acquisition of Concentric, interest-rate swaps in the amount USD 8.2 m and GBP 13.7 m were taken over. These mature in 2009 and had a market value of SEK –4 m at year-end 2008. The average fixed interest term as of year-end 2008 was two months, meaning that most of the Group’s financial liabilities were subject to variable interest; in other words, that the interest rate will be reset within one year. As of December 31, 2008, SEK 2,051 m (1,118) of the loan liability was subject to an average variable interest rate of 3.87% (5.06). A one percentage point change in the interest rate affects the cost of the Group’s borrowing by approximately SEK 16 m (10) after tax. Credit risk

Credit risk is when a party in a transaction cannot fulfill their obligations and thereby creates a loss for the other party. The risk that customers will default on payment for delivered products is minimized by conducting thorough control reviews of new customers and following up with payment behavior reviews of existing customers, according to the Group’s finance policy. The Group’s accounts receivable totaled SEK 832 m (1,189) on December 31 and the amounts that are expected to be paid are recognized. Haldex customers are primarily vehicle manufacturers, other system and component producers and aftermarket distributors within the vehicle industry. The geographic distribution of receivables from customers corresponds to a large extent to the division of sales per region. No single customer ­represents more than 5% (6) of sales. The Group’s customer losses normally total less than 0.1% of sales.

Exchange-rate effect Provision on December 31

2

0

33

30

The credit risk associated with financial assets is managed in accordance with the finance policy. The risk is minimized through such measures as limiting investments to interest-bearing instruments with lower risk and high liquidity by using minimum credit ratings and by limiting the maximum amount that can be invested in any given counterparty. A framework agreement is signed with most counterparties for right of set-off to further reduce risks. The credit risk in foreign currency and interest rate contracts corresponds to their positive market value, i.e. potential gains on these contracts. The credit risk for foreign exchange contracts was SEK 16 m (16) at December 31. The corresponding risk for investments in credit institutions was SEK 430 m (182), without taking possible offsetting opportunities into account. Financing risk

The Group’s financing risk is the risk that an excessive portion of Haldex’s liabilities fall due for payment within a limited period of time when financing is expensive and/or in short supply. This risk is reduced by a stipulation in the finance policy stating that the total liability must have a remaining maturity of at least two years and that the maturities in the borrowing portfolio must be spread out over several years. On December 31, 2008, 62% (72) of borrowing had a maturity longer than two years. The maturity structure was as follows: 2009 38%, 2010 4%, 2011 5% and 2012 53%. Liquidity risk

Liquidity risk, meaning the risk the Group’s capital requirements will not be met, is limited by holding sufficient cash and cash equivalents and granted but unused credit facilities that can be utilized without qualifications. The goal according to the finance policy is that cash and cash equivalents and available credit facilities must total at least 5% of net sales. These funds totaled SEK 1,647 m (1,344) at year-end 2008, which corresponds to 20% (17) of net sales. Haldex’s main sources of financing December 31, 2008, Nominal value (millions)  

2008

2007

Syndicated loan

USD 250

USD 250

Bond loans

SEK 600

USD 600

Bridge loan

GBP 65

–

Capital risk

The Group’s objective in respect of the capital structure is to secure Haldex’s ability to continue to conduct its operations so that it can generate a return for shareholders and value for other stakeholders and in order to maintain an optimal capital structure so that the cost of capital can be reduced.

43

44

HALDEX 2008

To manage the capital structure, the Group could change the dividend paid to the shareholders, repay capital to the shareholders, issue new shares or sell assets in order to reduce debt.

Note 4  Important estimations and assumptions

The Consolidated Financial Statements contain estimations and assumptions about the future. These are based on both historical experience and expectations for the future. The areas with the highest risk for future adjustments of carrying amounts are mentioned below. Goodwill With the implementation of IFRS 3 goodwill are not amortized, instead tested for impairment both annually and when there is an indication of a decrease in value. IFRS 3 was introduced January 1, 2005 and the impact on the profit can be considerable for the Haldex group if the profitability goes down. During 2008 the Group’s goodwill has been tested for impairment. The impairment test on goodwill is carried out on a divisional level ­(Commercial Vehicle Systems and Hydraulic Systems), which is the cashgenerating unit that is expected to benefit from the goodwill. The test is performed by discounting future cash flows and thus calculating the value in use. Calculated value in use has been placed in relation to and tested against carrying amounts for the two divisions’ goodwill. Haldex net sale and return has historically a very strong correlation to the number of produced units of trucks and trailers. Future cash flow is therefore calculated on the basis of official market data for future production of trucks and trailers, consideration is also taken for Haldex historical financial performance and future benefits from current improvement programs. When discounting expected future cash flows, a weighted average cost of capital after tax (WACC) is used, currently 11%. The weighted average cost of capital has been calculated on the basis of the following assumptions: Risk-free interest rate: Ten-year Swedish government bond rate. Markets risk premium: 5%. Beta: Established beta value for Haldex. Interest expense: Has been calculated as a weighted interest rate on the basis of the Group’s financing structure in various currencies, and taking a loan premium into account. Tax rate: According to the tax rate applying in the specific country. The impairment tests performed in 2008 did not reveal any need to impair goodwill. A 1% change in the discount rate or a 10% decrease of cash flow does not change the outcome of the assessment. Development projects Haldex capitalize costs concerning development projects. These capitalized development projects are tested for impairment each year or when there is an indication of decrease in value. The tests are based on future prediction of revenue and corresponding production costs. In case the future volumes, prices or costs diverge negatively from the predictions, an impairment loss may arise. Development projects are considered to be a normal part of Haldex business. Generally impairment tests are carried out with the same assumptions (i.e. WACC) as the impairment test on goodwill. However, individual risk assessment point out different risks in the different projects why the WACC is adjusted to consider the estimated risk in each individual project. Development projects considered a higher risk is tested with a higher WACC than a project with a considered lower risk. An impairment loss of SEK 5 m is booked in the income statement in

2008 as a result of performed impairment test. A 1% change in the ­discount rate or a 10% decrease of cash flow does not change the outcome of the assessment. However, under the prevailing market conditions the uncertainty concerning forecast future cash flow is naturally greater than usual. Income taxes The Group pays tax in many different countries. Detailed calculations of future tax obligations are completed for each tax object within the Group. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that where initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Warranty reserves The Group continuously assesses the value of the reserves in relation to the estimated need. The warranty reserve represented 0.9% (0.7) of net sales as of December 31, 2008. Pensions The pension liabilities reported in the balance sheet are actuary-­ estimated and are based on annual assumptions. These assumptions are described in Note 23. A 0.25% average change in the utilized discount rate affects the present value of the Group’s pension obligations by approximately SEK 68 m.

NOTE 5  Segment reporting Segment reporting is compiled for the Group’s divisions and geographical areas. Since the Group’s operations are followed up on the basis of the divisions’ earnings, this should be viewed as the primary basis for division. The segment’s earnings, assets and liabilities include items that are directly attributable to the particular segment, as well as items that can be allocated to the segments in a reasonable and reliable manner. The assets and liabilities that have not been allocated to the segments are deferred tax assets and deferred tax liabilities, as well as financial investments, financial receivables and financial liabilities. Market-based pricing has been applied for intra-Group transactions. Divisions Divisions are the Group’s primary segment. The Group comprises the following divisions: Commercial Vehicle Systems – develops, manufactures and sells brake systems for heavy vehicles, trailers and buses. Hydraulic Systems – develops, manufactures and sells hydraulic lifting systems and drive systems for industrial vehicles, and tail-lifts for trucks and personal lifts. Garphyttan Wire – manufactures state-of-the-art specialty spring wire made of various alloys for use primarily in combustion engines and transmissions, where the demands for quality and performance are meticulous. Traction Systems – manufactures AWD systems, which are electronically controllable systems for four-wheel-drive vehicles. Geographical areas Geographical areas are the Group’s secondary segment. The customers’ location serves as the foundation for sales per segment. Information pertaining to the segments’ assets and investments ­during the period are based on geographical areas grouped in accordance with where the assets are located.

Notes Group

HALDEX 2008

Cont. Note 5 Segment Reporting

 

Full year 2008

Full year 2007

4,234

4,529

4

159

Operating income*

Operating income

–92

109

Operating income

105

86

Operating margin*, %

0.0

3.5

Operating margin*, %

7.0

5.8

Operating margin, %

SEK m Commercial Vehicle Systems

 

Full year 2008

Full year 2007

2,095

1,467

146

86

Hydraulic Systems

Net sales Operating income*

Operating margin, %

Net sales

–2.2

2.4

2,546

2,845

Liabilities

641

672

Liabilities

628

265

Return on capital employed**, %

–3.9

4.9

Return on capital employed**, %

8.2

16.6

Investments

232

259

Investments

88

89

Depreciation

160

140

Depreciation

74

58

2,856

3,149

2,335

1,591

1,053

1,095

1,021

848

Operating income*

59

45

Operating income*

41

49

Operating income

56

45

Operating income

38

49

Operating margin*, %

5.6

4.1

Operating margin*, %

4.0

5.8

Assets

No. of employees **

Assets

 

Garphyttan Wire

No. of employees**

5.0

5.8

2,028

781

Traction Systems

Net sales

Net sales

Operating margin, %

5.3

4.1

Operating margin, %

3.7

5.8

Assets

556

650

Assets

369

433

Liabilities

169

221

Liabilities

231

258

Return on capital employed**, %

12.6

9.9

Return on capital employed**, %

16.9

21.3

Investments

21

20

Investments

60

95

Depreciation

43

44

Depreciation

52

40

474

482

339

296

Net sales

–

–

Net sales

8,403

7,940

Operating income*

–

–

Operating income*

250

339

Operating income

–

–

Operating income

92

289

Operating margin*, %

–

–

Operating margin*, %

3.0

4.3

Operating margin, %

–

–

Operating margin, %

1.1

3.6

792

372

Assets

6,290

5,082

Liabilities

4,467

3,211

No. of employees**

 

Unallocated

No. of employees** Group

Assets Liabilities

2,799

1,796

Return on capital employed**, %

–

–

Return on capital employed**, %

2.4

8.3

Investments

–

–

Investments

402

463

Depreciation

–

–

No. of employees**

–

–

 

Depreciation No. of employees**

329

281

6,004

5,518

* Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values **  Rolling 12 months

Breakdown by geographic area North America

Europe

Asia and The Middle East

South America

Net sales

3,189

4,423

510

281

8,403

Assets

1,775

3,634

732

149

6,290

94

243

11

54

402

North America

Europe

Asia and the Middle East

South America

Group

Net sales

2,997

4,255

443

245

7,940

Assets

1,262

3,190

490

140

5,082

94

302

58

9

463

2008

Investments

2007

Investments

Group

Note 6  Costs distributed by type  

2008

2007

Direct material costs

–4,573

–4,204

Personnel costs

–2,040

–1,965

Depreciation

–360

–281

Other operating costs

–1,338

–1,201

Total operating costs

–8,311

–7,651

45

Notes Group

46

HALDEX 2008

NOTE 7  Average number of employees  

Total   2008

Men

Total 2007

256

993

1,249

571

1,196

1,767

1,204

322

663

985

356

420

67

335

402

160

213

55

201

256

187

98

104

202

438

77

114

191

38

122

160

Women

Men

Sweden

262

1,018

1,280

USA

501

1,140

1,641

China

379

825

Germany

64

Mexico

53

Hungary

99

88

Great Britain

75

363

Brazil

40

138

178

Women

India

19

234

253

48

81

129

France

19

48

67

22

37

59

Canada

9

19

28

6

22

28

Italy

9

19

28

8

18

26

Poland

4

13

17

4

13

17

Spain

9

8

17

6

10

16

Austria

6

9

15

3

11

14

South Korea

1

8

9

2

6

8

Belgium

2

4

6

2

4

6

Russia

–

3

3  

–

3

3

1,551

4,453

6,004  

1,585

3,933

5,518

 

NOTE 8  Salaries and other remuneration Salaries and remuneration

Of which Board of Directors, President and other senior executives

Sweden

433

USA

495 51

2008

China Germany

Social security costs

Of which, pension costs

18

213

50

6

168

6

5

0

0 10

170

6

70

Mexico

14

1

7

0

Hungary

21

1

6

0

Great Britain

77

6

11

4

Brazil

14

2

11

0

India France Canada Italy

4

1

0

0

24

1

13

0

7

0

3

0

10

0

4

4

Poland

3

0

0

0

Spain

4

0

1

0

Austria

7

0

2

0

South Korea

4

0

1

1

Belgium

5

0

0

0

Russia

1

0

0

0

1,343

47

510

75

 

The Board of Directors, President and other senior executives comprised 31 people (27). Variable remuneration to the President and other senior executives amounted to SEK 7 m (5). Pension costs for the President and other senior executives accounted SEK 8 m (8) of the gruop’s total ­pension costs. For further information concerning wages, salaries and remuneration, refer to Note 9 of the Group’s notes and Note 4 of the Parent company’s notes.

Notes Group

HALDEX 2008

Cont. Note 8 Salaries and other remuneration Salaries and remuneration

Of which Board of Directors, President and other senior executives

Sweden

430

USA

525 28

2007

China Germany Mexico

Social security costs

Of which, pension costs

18

246

52

3

185

9

2

9

0

161

5

73

6

16

0

7

0

Hungary

15

1

5

0

Great Britain

76

3

19

8

Brazil

13

2

10

0

India

5

0

0

0

France

25

3

10

0

Canada

8

0

4

1

Italy Poland

10

0

4

3

2

0

0

0

Spain

5

0

1

0

Austria

7

2

3

1

South Korea

4

1

1

0

Belgium

4

0

0

0

Russia  

0

0

0

0

1,334

40

577

80

Note 9 Information on Remuneration of executive committee 2008

2007

Basic salary/ Director fees

Variable remuneration

Basic salary/ Director fees

Variable remuneration

Board of Directors (7 members, of whom 2 women)

Pension

1,925

–

Lars-Göran Moberg (Chairman)

525

–

–

1,650

–

–

–

175

–

Dr Reiner Beutel (took office in 2008)

300

–

–

–

–

–

–

Anders Böös Arne Karlsson

175

–

–

200

–

–

225

–

–

250

–

–

Caroline Sundewall

275

–

–

200

–

–

Anders Thelin

200

–

–

150

–

–

Cecila Vieweg

225

–

–

200

–

–

–

–

–

475

–

–

4,000

1,260

795

3,740

764

766

12,500

3,030

3,050  

11,300

2,000

2,900

Amounts in SEK ’000

Sune Karlsson (retired in 2008)

Pension  

President Joakim Olsson Other senior executives (Group Management) (6 people, of whom 0 women)

Serevance pay

In addition to a mutual period of notice of 12 months, the President is entitled to servance pay corresponding to 12 months’ salary if notice is served by the company. If notice is served by the President, servance pay cannot be demanded. For members of the Group Management, servance pay is provided in accordance with the guidelines established by the Board of Directors for remuneration of senior executives, see Directors’ Report, page 32. Incentive program

The Annual General Meeting resolved in April 2007 to introduce a long-term performance-based incentive program under which senior executives and key personnel would be allotted employee stock options on condition that the participants become shareholders by making

their own investment in Haldex shares in the stock market. Each share aquired in the market provides entitlement, free of charge, to an allotment of ten employee stock options, whereby each option provides entitlement to the acquisition of one Haldex share. A condition for allotment is that Haldex’s pretax income has increased in relation to the preceding fiscal year by more than 7%. Maximum allotment occurs on condition that pretax income has increased in relation to the preceding fiscal year by 20% or more. Employee stock options are issued in three series and, in accordance with decisions by the Board of Directors, will be allotted during 2008, 2009 and 2010. No allotment of the 2008 or 2009 options will occur on the basis of the company’s earnings outcome. For detailed information about the program, reference is made to Haldex’s website, www.haldex.com.

47

Notes Group

48

HALDEX 2008

Note 10  Auditing fees  

2008

2007

Audit assignments

8

7

Other assignments

4

3

12

10

2008

2007

243

221

PricewaterhouseCoopers

 

Note 11  Depreciation   Cost of goods sold Selling costs Administrative costs Product development costs  

9

7

40

32

37

21

329

281

2008

2007

–62

–57

Note 12 Taxes   Current tax on profits for the year Adjustments in respect of prior years Total current tax Deferred tax related to temporary differences Change in value of deferred tax in loss carry forward

5

–2

–57

–59

5

4

65

–26

Impact of change in Swedish tax rate

–1

–

Total deferred tax

69

–22

Total income tax

12

–81

The tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to ­profits of the consolidated entities as follows: Reconciliation of effective tax rate Earnings before tax Tax at applicable tax rate in Sweden Differences in tax rates of different countries of operation Non-deductible expenses Non-taxable revenues Tax attributable to prior years Remeasurement of deferred tax, change in Swedish tax rate Revaluation of deferred tax expense in subsidiaries Reported effective tax rate

2008

2007

–55

221

28%

28%

–2%

2%

–13%

3%

13%

–1%

9%

1%

–1%

–

–12%

3%

22%

36%

As per January 1, 2009, the Swedish corporate tax rate will change from 28% to 26,3%. As a result of the change deferred tax balances have been remeasured. The net effect from the remeasurement of the deferred taxes has not had any material impact on the group’s total tax. The income tax charged/credited to equity during the year is as follows:  

2008

2007

Deferred tax: Hedging reserve

19

7

Hedges of net investments

14

–5

 

33

2

Notes Group

HALDEX 2008

NOTE 13  Intangible assets At January 1, 2007 Acquisition value Accumulated depreciation Carrying amount January 1–December 31, 2007

Goodwill

Patents and other intangible assets

Capitalized development costs

Total

414

66

197

677

–

–40

–16

–56

414

26

181

621

 

 

 

 

Opening carrying amount

414

26

181

621

Exchange rate differences

–6

1

–2

–7

–

8

66

74

Investments

17

17

–

34

Sales/scrappage

Corporate acquisitions

–

–2

–

–2

Depreciation

–

–5

–4

–9

425

45

241

711

Carrying amount At December 31, 2007 Acquisition value Accumulated depreciation Carrying amount January 1–December 31 2008

 

 

 

 

425

88

266

779

–

–43

–25

–68

425

45

241

711

 

 

 

 

Opening carrying amount

425

45

241

711

Exchange rate differences

–20

–15

7

–28

–

4

60

64

562

511

–

1,073

Investments Corporate acquisitions (note 26) Sales/scrappage

–

–

–

–

Depreciation

–

–9

–21

–30

Write-down

–

–

–5

–5

Amortization on acquisition-related surplus values

–

–24

–

–24

967

512

282

1,761

Closing carrying amount At December 31, 2008 Acquisition value

 

 

 

 

967

595

335

1,897 –107

Accumulated depreciation

–

–59

–48

Accumulated write-down

–

–

–5

–5

Accumulated amortization on acquisition-related surplus values

–

–24

– 

–24

967

512

282

1,761

Carrying amount

Impairment testing of goodwill

 

 

2008

2007

Commercial Vehicle Systems

 

 

402

398

Hydraulic Systems

 

 

565

27

 

 

 

967

425

No goodwill is attributable to the Traction Systems and Garphyttan Wire divisions.

49

Notes Group

50

HALDEX 2008

NOTE 14 Tangible fixed assets

As per January 1, 2007

Buildings

Land and land improvements

Machinery and other technological investments

408

49

2,170

758

–204

–6

–1,351

–548

0

–2,109

204

43

819

210

130

1,406

Acquisition value Cumulative depreciation Book value January 1–December 31, 2007 Opening book value

Equipment, tools and installations

Construction in progress and advances to suppliers

Total

130

3,515

 

 

 

 

 

 

204

43

819

210

130

1,406

Exchange rate difference

–5

–1

–10

–2

0

–18

Investments

15

4

252

59

51

381

Corporate acquisitions

22

–

16

–

–

38

Sales/discards

–4

–1

–21

–6

–2

–34

Depreciation

–18

–1

–181

–72

0

–272

Book value

214

44

875

189

179

1,501

As per December 31, 2007 Acquisition value Cumulative depreciation Book value January 1–December 31, 2008

 

 

 

 

 

 

428

51

2,396

775

179

3,829

–214

–7

–1,521

–586

0

–2,328

214

44

875

189

179

1,501

 

 

 

 

 

 

214

44

875

189

179

1,501

Exchange rate difference

23

1

75

23

25

145

Investments

20

0

268

78

–24

342

1

–

65

10

–15

61

Sales/discards

–32

–

–44

–5

–4

–85

Depreciation

–17

–1

–206

–75

–

–299

Write-down

–

–

–21

–

–6

–27

Assets held for sale (note 21)

–15

–1

–280

–18

–11

–325

Book value

194

43

732

202

144

1,315

Opening book value

Corporate acquisitions (note 26)

As per December 31, 2008

 

 

 

 

 

 

436

53

2,904

946

161

4,500

–227

–9

–1,871

–726

–

–2,833

–

–

–21

–

–6

–27

Assets held for sale (note 21)

–15

–1

–280

–18

–11

–325

Book value

194

43

732

202

144

1,315

Acquisition value Accumulated depreciation Accumulated write-down

Note 15 Operational leases The group’s operational lease contracts fall due as follows:  

Premises

Machinery and other equipment

51

25

76

2010–2013

168

54

222

2014 and beyond

190

8

198

2009

Expensed leasing fees during 2008 totaled SEK 86 m (91).

Total

Notes Group

HALDEX 2008

NotE 16 Deferred income tax Deferred income tax assets and liabilities are offset when there is a legally enforcable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The gross movement on deferred income tax account is as follows:  

2008

2007

At 1 January

22

44

Income statement charge (note 12)

69

–22

–113

–3

33

2

Acquisition of subsidiary (note 27) Tax charged directly to equity (note 12) Re-classification from current taxes Exchange differences

–30

–

22

1

Assets held for sale (note 21)

–4

–

Liabilities held for sale (note 21)

60

–

At 31 December

59

22

Deferred income tax assets and liabilities, without taking into consideration to the offsetting of balances within the same tax jurisdiction, is as follows: Assets   Tax loss carry-forwards

Liabilities

2008

2007

194

137

 

2008

Tangible fixed assets Intangible assets

26

25

Provisions

33

15

Tax allocation reserves Pension and similar obligations

Net 2007

2007

194

137

67

–105

–67

78

62

–52

–37

92

48

Acquisition related surplus values

2008

105

69 84

 

128

33

15

–69

–92

84

48

–128

Other

46

35

 

 

17

 

46

Assets/Liabilities held for sale (note 21)

–4

–

 

–60

–

 

56

18 –

Net deferred tax assets/tax liability

379

260

 

320

238

 

59

22

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future t­ axable profits is probable. All recognized tax loss carry-forwards have an expiry day exceeding ten years.

Note 17  Derivative instruments 2008  

Assets

2007 Liabilities

 

Assets

Liabilities

Short-term Interest rate swaps

–

4

–

–

Forward exchange contracts – cash flow hedges

9

75

12

10

Forward exchange contracts – at fair value through profit or loss Currency swaps – at fair value through profit or loss Assets/Liabilities held for sale (note 21)  

1

5

4

4

35

25

 

4

8

–

–10

 

–

–

45

99

 

20

22

Equity gains and losses in short-term currency forward contracts will be transfered to the income statement at different points during 2009. Hedging of net investments in foreign operations

Parts of the Group’s borrowing in USD and GBP is identified as hedging of net assets (see exchange-rate risks, on page 42–43). At December 31, 2008, the amortizied cost/book value of this borrowing was SEK 539 m (284). Exchange-rate losses during the year, amounting to SEK 39 m (+13) after tax on translation into SEK on the balance sheet date, are recognized in Other reserves within shareholders’ equity.

51

Notes Group

52

HALDEX 2008

NOTE 18  Inventories

NOTE 21  Assets and liabilities held for sale 2008

2007

Assets held for sale

Raw materials

 

582

572

Tangible fixed assets

Semi-manufactured products

103

136

Deferred tax assets

Finished products

420

347

Inventories

Assets held for sale (note 21)  

–165

–

940

1,055

  325 4 165

Accounts receivables from customers

62

Other current receivables

20

Total assets held for sale

576

Liabilities held for sale

Note 19 Other current receivables   Tax receivables

 

Pension and similiar obligations

2008

2007

63

28

Prepaid expenses and accrued income

44

Deferred taxes

60

Debts to suppliers

71

Derivative instruments

10

Other provisions

3

   Rents and insurance

19

18

Other current liabilities

107

   Accrued income

52

57

Total liabilities held for sale

295

   Other prepaid expenses

63

63

Other current receivables

101

116

Assets held for sale (note 21)

–20

–

278

282

 

Note 22 Long-term interest-bearing liabilities

Note 20  Cash and cash equivalents   Bank accounts and cash Bank certificates and special loans  

2008

2007

425

178

6

4

431

182

2008

2007

Multicurrency Revolving Credit Facility

720

649

Bond loans

350

600

Other promissory notes and secured loans Capitalized financial rental agreements Financial leasing Total

20

4

–

32

7

8

1,097

1,293

Cont. Note 22 Long-term interest-bearing liabilities Maturity structure, years Total

0–1

1–3

3–5

>5 years

SEK

 

620

–

350

270

–

3.4

GBP

7

–

7

–

–

7.8

EUR

109

–

–

109

–

5.4

USD

341

–

–

341

–

2.3

INR

15

–

12

3

–

14.3

BRL Total, SEK Calculated interest Total

Average rate

5

–

4

1

–

9.8

1,097

0

373

724

–

3.3

103

36

56

11

–

– 

1,200

36

429

735

–

– 

Because loans under Multicurrency Revolving Credit Facility and Bond loans are subjects to a fixed interest term of 3–6 months, the fair values corresponds to the carrying amounts. Available unused credit facilities at year-end totaled SEK 1,217 m (1,162). Calculated interest comprises the counter-value in SEK based on exchange rates at December 31, 2008 and the current interest rates on the liability.

Notes Group

HALDEX 2008

NotE 23 Pensions and similar obligations Pension liabilities in the balance sheet FPG/PRI-pensions Defined-benefit healthcare benefits

2008

2007

146

128

42

35

Other defined-benefit plans

252

171

 

440*

334

*  Including liabilities held for sale of SEK 44 m (note 21)

Haldex has defined-benefit plans for pensions for certain units in Sweden, Germany, France, Great Britain and USA. The pensions under these plans are based mainly on final salary. Contribution-based plans are also found in these countries. Subsidiaries in other countries within the Group use mainly contribution-based plans. Net actuarial losses on pension obligations and plan assets declined during the year by SEK 18 m and at year-end totaled 1% (4) of the present value of the pension obligations. The return on plan assets recognized in the income statement totaled SEK 68 m, while the actual return was SEK –93 m. The plan assets consist primarily of shares, interest-bearing securities and shares in mutual funds. Group

2008

Pension obliagations, funded plans, present value as of December 31

1,167

487

–1,023

–431

Total

144

56 312

Plan assets, fair value as of December 31

2007

Pension obligations, unfunded plans, present values as of December 31

312

Unreported actuarial gains (+), losses (–)

–16

–34

Net liability in the balance sheet

440

334

Total pension costs Group

2008

2007

Pensions vested during the period

–29

–45

Interest on obligations

–78

–38

68

30

Expected return on plan assets Amortization of unreported actuarial gains (+), losses (–)

0

–4

Pension costs, defined-benefit plans

–39

–57

Pension costs, defined-contribution plans

–46

–35

Total pension costs

–85

–92

Pension obligations Group

2008

2007

Opening balance

799

818

Acquired pension liability

804

–

29

45

Pensions vested during the period Interest on obligation Benefit paid Unreported actuarial gains (+), losses (–), pension obligations Exchange rate differences Pension obligations, current value

78

38

–59

–23

–182

–60

10

–19

1,479

799

Plan assets 2008

2007

Opening balance

Group

431

407

Acquired plan assets

698

–

68

30

Expected return on plan assets Contributions from employers Disbursement of pension payments Unreported actuarial gains (+), losses (–), plan assets Exchange rate differences Plan assets, fair value

53

36

–49

–17

–161

–11

–17

–14

1,023

431

53

54

Notes Group

HALDEX 2008

Cont. Note 23 Pensions and similar obligations Reconciliation of interest-bearing pension liabilities 2008

2007

Opening balance, pension liablities (net)

Group

334

319

Acquired pension liability (note 26)

106

–

39

57

Pension costs Benefits paid

–59

–23

Contributions from employers

–53

–36

Compensation from plan assets

49

17

Exchange rate difference

24

0

440

334

According to balance sheet

Actuarial assumptions Percent Discount rate, January 1

Sweden

Germany

France

Great Britain

USA

4.50

5.65

5.65

5.95

6.25

Discount rate, December 31

3.75

6.25

6.50

6.85

5.80

Expected return on plan assets

4.80

4.80

–

6.80–7.00

8.00

Expected salary increase

3.00

3.00

3.00

3.50

3.80

Expected inflation

2.00

2.00

2.00

2.70

2.50

2005

Experience-based change in unrecognized actuarial gains (+)/losses (–) Group

 

2008

2007

2006

Present value of defined benefit obligations

 

1,479

799

818

841

Plan assets

 

1,023

431

407

373

Surplus (+)/deficit (–)

 

–456

–368

–411

–468

Experience-based adjustment of obligation

 

–19

4

–8

–15

Experience-based adjustment of plan assets

 

–161

–11

13

34

The information provided will be expanded gradually over a period of five years. The transitional rules state that such expansion does not require information on periods prior to the comparative year. This means that a complete five-year period will be included in the annual report for 2009. What is meant by experience-based adjustments of obligations is any deviation from the basic assumptions made in the calculation of the pension obligation. This could, for example, pertain to changes in expectations concerning employee turnover, premature retirement, pay increases and length of life. What is meant by experience-based adjustments of plan assets is any discrepancy between the expected return and the real return on the plan assets.

Notes Group

HALDEX 2008

Assets and liabilities at April 1, 2008 due to the acquisition were as follows:

Note 24 Other provisions  

Warranty reserves

Restruct­uring reserves

Total

52

24

76

107

112

219

0

–

0

–92

–80

–172

6

1

7

Opening balance January 1, 2008 Provisions Reversals Requisitions Translation differences Liabilities held for sale (note 21)

–3

–

–3

December 31, 2008

70

57

127

Fair value

Acquired carrying amount

Intangible assets

511

–

   Value of customer relationships

318

–

   Value of brands

112

–

 

   Value of technology

81

–

Tangible fixed assets

61

61

Deferred taxes

34

27

Inventories

93

87

151

151

Accounts receivable and other receivables Cash and cash equivalents

NotE 25  Current liabilities  

2008

2007

40

49

Tax liabilities Accrued expenses    Personnel costs

226

   Other accrued expenses Other current liabilities Liabilities held for sale (note 21)  

209

75

15

107

102

–107

–

341

375

Concentric

On April 1, Haldex completed the acquisition of Concentric. The purchase consideration totaled GBP 75 m, excluding pension obligations and financed through raising new loans. The cash consideration was reduced with the net of loans and cash in the acquired company. The company’s intangible assets, net of deferred tax, amounted to SEK 930 m, which comprised goodwill in the amount of SEK 562 m, other assets totaling SEK 511 m, including customer relations, technology and brands, and a deferred tax liability of SEK 143 m. The assets, except goodwill, are amortized over the different assets estimated service life. Amortization of these assets amounted to SEK 24 m during the period. In addition, nonrecurring expenses totaling SEK 7 m during the year pertaining to acquired profits in inventories. Concentric has been consolidated into the Group’s income statement and balance sheet since April 1, 2008. Since then Concentric contributed to the net sales by SEK 606 m and to the operating income by SEK 82  m, excluding amortization of acquisition related surplus values. Information about acquired net assets

The acquisition analysis is established in accordance with current accounting standard, IFRS 3. Preliminary acquisition calculation

– Cash paid – Costs directly connected to the acquisition Total purchase consideration Fair value of acquired net assets Goodwill

66 –83

Long-term loans

–369

–369

Deferred taxes

–147

–2

Accounts payable and other liabilities

–236

–236

Net assets

58

–298

Goodwill

562

 

Total purchase consideration

620

Cash paid

620

Acquired Cash and Cash Equivalents

–66

 

The Group’s change in Cash and Cash Equivalents

554

 

Note 27  Related party transactions

Note 26 Corporate acquisitions

Purchase consideration:

66 –106

Pension liabilities

  573 47 620 58 562

The Parent Company is a related party to its subsidiaries. Transactions with subsidiaries occur on commercial market terms. Remuneration to senior executives is presented in Note 9.

55

56

Parent Company

HALDEX 2008

Parent Company income statement Amount in SEK m

Note

Net sales

2008

2007

49

43

–83

–83

Operating income

–34

–40

Dividends from Group companies

373

117

35

117

Administrative costs

6

Group contribution Interest income

7

87

66

Interest expenses

7

–127

–83

Other financial items

 

Earnings before tax

–69

24

265

201

Change in allocations reserve

14

57

–7

Taxes

15

10

–13

332

181

Net income for the year

 

Parent Company

HALDEX 2008

Parent Company balance sheet Amounts in SEK m

Note

2008

2007

8

4

3

Shares and participations

9

2,380

1,761

Long-term receivables

10

ASSETS Fixed assets Tangible fixed assets Financial fixed assets

Total fixed assets

24

15

2,408

1,779

1,876

1,335

Current assets Account receivables from subsidiaries Other current receivables

11

50

26

Derivative instruments

12

147

47

Cash and cash equivalents

13

178

44

2,251

1,452

4,659

3,231

Share capital

111

111

Restricted reserves

455

455

445

363

Total current assets Total assets

 

SHAREHOLDERS’ EQUITY AND LIABILITIES Equity Restricted equity

Unrestricted equity Retained earnings Net income for the year

 

332

181

1,343

1,110

14

131

188

Pensions and similar obligations

16

11

13

Other provisions

 

9

11

20

24

1,070

1,249

Total equity Untaxed reserves Provisions

Total provisions Long-term liabilities Long-term interest-bearing liabilities

17

Debts to subsidiaries

 

Total long-term liabilities

141

5

1,211

1,254

Current liabilities Debts to suppliers Debts to subsidiaries Short-term interest-bearing liabilities Derivative instruments

12

Other current liabilities

18

Total current liabilities Total equity and liabilities

 

Collateral pledged Contingent liabilities

19

9

5

794

582

981

–

149

45

21

23

1,954

655

4,659

3,231

None

None

548

378

57

Parent company

58

HALDEX 2008

Changes in Parent Company equity   Amounts in SEK m Opening balance at January 1, 2007

Restricted equity

Unrestricted equity

Share capital

Statutory reserve

Retained earnings

Total

111

455

501

1,067 181

Net income for the year

–

–

181

Dividend

–

–

–99

–99

Repurchase of shares

–

–

–24

–24

Group contribution granted

–

–

–15

–15

Closing balance at December 31, 2007

111

455

544

1,110

Opening balance at January 1, 2008

111

455

544

1,110

Net income for the year

–

–

332

332

Dividend

–

–

–99

–99

111

455

777

1,343

Closing balance at December 31, 2008

Parent Company cash flow statement Amounts in SEK m

2008

2007

229

84

Cash flow from operations Income after financial items Adjustment for non-cash items

–3

6

Taxes paid

–17

–29

Cash flow from operations before change in working capital

209

61

Change in working capital Current receivables

–611

10

Operating liabilities

454

–94

–157

–84

Change in working capital   Cash flow from operations

 

 

52

–23

Cash flow from investments Investments in fixed assets

–2

–2

Investments in shares and participations

–619

–49

Cash flow from investments

–621

–51

Cash flow from financing Dividend to shareholders Repurchase of own shares

–99

–99

–

–24

Interest-bearing liabilities

802

131

Cash flow from financing

703

8

Change in cash and cash equivalents

134

–66

44

110

178

44

Cash and cash equivalents at beginning of year Cash and cash equivalents at year-end

Notes Parent Company

HALDEX 2008

Notes Parent Company NOTE 1  General information Haldex AB is the Parent Company in the Haldex Group. The main office functions, including the central financial function, are carried out within the Parent Company. Haldex AB (publ), Corp. Reg. No. 556010-1155, is a registered limited liability corporation with its registered office in Stockholm, Sweden. The address of the Head Office is Haldex AB, Box 7200, SE-103 88 Stockholm. Haldex shares are traded on the Mid Cap list at the Stockholm Stock Exchange.

NOTE 2  Summary of important accounting principles

The Annual Report for the Parent Company was prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Accounting Standard Council’s Recommendation RFR 2.1 – Financial reporting for legal entities. According to the rules stated in RFR 2.1, the Parent Company, in the annual report for the legal entity, must apply all EU-approved IFRS and statements to the extent possible within the framework of the Annual Accounts Act, and taking into account the relationship between reporting and taxation. This recommendation specifies the exceptions from IFRS that are permissible and the necessary supplementary information. The Parent Company’s accounting principles correspond to those for the Group with the exceptions listed below. 2.1 Pensions and similar obligations Haldex AB has defined-benefit pension plans and defined-contribution pension plans. In accordance with RR 32.37, the Act on the Safeguarding of Pension Commitments and the Swedish Financial Supervisory Authority contain rules that entail reporting for defined-benefit plans other than stated in IAS 19. For a tax-deduction right to be permissible, the requirements is that Act on the Safeguarding of Pension Commitments’ rules must be applied, which means that the rules of IAS 19 for defined-benefit plans need not be applied in the legal entity. In the legal

entity, the rules of FAR SRS’s accounting recommendation, RedR 4, are applied, in accordance with Act on the Safeguarding of Pension Commitments and the Swedish Financial Supervisory Authority’s regulations. For defined-benefit pension plans, the current value is reported as a liability in the Balance Sheet, based on actuarial calculations. The change in the liability is carried in the income statement. For defined-contribution pension plans, fees paid to pension institutions are expensed in the income statement a current account basis. Pension obligations are recognized at fair value and are based on annual actuarial calculations. Change in the pension liabilities are recognized in the Income Statement. Endowment insurance is reported at market value under Financial fixed assets and Other provisions. The cost is recognized on an ongoing basis in the income statement. In addition, the company has pension commitments that are secured through two pension foundations. The assets and thereby the liabilities for these obligations are handled by a third party and are not reported in the balance sheet. The calculated cost for providing the insurance is recognized in the income statement. 2.2 Deferred taxes Tax legislation in Sweden and certain other countries allows for deferral of tax payments through transfers to untaxed reserves. The Parent Company has tax allocation reserves that are transferred for taxation at the most six years after the year of allocation. In addition, deferred taxes are calculated for temporary differences between reported income and expense items and fiscal values.

Note 3  Average number of employees and sickness absence

Average number Women of employees Sweden

2008 Men Total

Women

Men

2007 Total

4

13

17

5

13

18

Women

Men

Age 50

Total

Total sickness absence, %

– 0.1 (0.0)

–

0.6 (0.0)

–

0.4 (0.0)

of which > 60 days

–

–

–

–

–

Total sickness absence 2008 (2007)

–

Note 4  Salaries and other remuneration 2008

  Sweden

Of which Salaries and Board of Directors, remuner- President and other ation senior executives 23

12

2007 Social security costs

Of which pension costs  

13

6  

Of which Salaries and Board of Directors, remuner- President and other ation senior executives 19

10

Social security costs

Of which pension costs

13

6

The Board of Directors consists of seven members (7); for information on the individual remuneration paid to them and the President, refer to note 9 on the consolidated financial statements. Remuneration to other senior executives, two people (2) amounted to SEK 4 m (4), of which variable remuneration amounted SEK 1 m (1). Pension payments for other senior executives accounted for SEK 1 m (1) of total pension costs.

59

Notes Parent Company

60

HALDEX 2008

Note 5  Auditing fees  

note 8  Tangible fixed assets 2008

2007

Audit assignments

2

1

Other assignments

1

1

 

3

2

PricewaterhouseCoopers AB

January 1–December 31, 2007 Opening carrying amount

2

Investments

2

Depreciation

–1

Closing carrying amount

3

At December 31, 2007

Note 6  Depreciation  

Acquisition value

6

Accumulated depreciation 2008

2007

Administrative costs

2

1

 

2

1

–3

Carrying amount

3

January 1–December 31, 2008 Opening carrying amount

Note 7  Interest income and interest expenses

 

3

Depreciation

–2

Closing carrying amount 2008

2007

2

4

Interest income from Group companies

85

62

Total

87

66

–111

–66

–16

–17

–127

–83

Interest income External interest income

3

Investments

4

At December 31, 2007 Acquisition value

9

Accumulated depreciation

–5

Carrying amount

4

Interest expense External interest expenses Interest expenses to Group companies Total

Note 9  Shares and participations Shares in subsidiaries

Corp. Reg. No

Reg´d. office

Participations

%

2008

2007

Haldex Brake Prod AB

556068-2758

Landskrona

127,000

100

142

142

Haldex Garphyttan AB

556030-2886

Örebro

150,000

100

47

47

Haldex Hydraulics AB

556105-8941

Örkelljunga

30,000

100

22

22

Haldex Traction AB

556040-2736

Landskrona

3,501

100

7

7

Haldex Halmstad AB

556053-6780

Halmstad

30,000

100

4

4 106

Haldex GmbH

Germany

100

106

Haldex Vehicle Products Co Ltd

China

100

–

–

Haldex Europé S.A

France

100

42

42

100

0

0 6

Haldex Ltd

Canada

Haldex do Brasil Indústria e Comércio Ltda. Haldex Sp.z o.o. Haldex N.V. Haldex Int Trading Co Ltd Haldex Korea Ltd 556633-6136

Haldex Hungary Kft Haldex Wien Ges mbH Haldex India Ltd JSB Hesselman AB

556546-1844

OOO Haldex Rus Haldex Holding AB

Brazil

185,099

100

6

Poland

30,000

100

3

3

Belgium

4,035

100

1

1

100

0

0

Italy

10,400

100

0

0

South Korea

79,046

100

0

0

Stockholm

1,000

100

0

0

Hungary

100

74

74

Austria

100

7

7

India

60

7

7

100

992

992

100

0

0

100

165

165

China

Haldex Italia Srl Haldex Financial Services Holding AB

418,119

Stockholm

1,000

Russia 556560-8220

Stockholm

23,079,394

Haldex Hydraulics Hong Kong

Hong Kong

100

49

49

Haldex Garphyttan Hong Kong

Hong Kong

97.1

85

87

100

621

–

2,380

1,761

Concentric Plc

 

UK

 

Notes Parent Company

HALDEX 2008

Cont. Note 9 Shares and participations Shares in subsidiaries

Corp. Reg. No

Reg´d. office

556647-7278

Tumba

Participations

%

2008

2007

50

0

0

Associated companies Alfdex Change in shares and participations Anglo Scandinavian Aircraft Leasing KB

48

4,8

0

0

1.000.000

18.1

0

0

 

10

10

0

0

Altra Technologies Inc. Swedish Aircraft Two KB

 

Change in shares and participations Opening balance

Acquisition

Reclassifications

Divestments

Closing balance

2008

 

1,761

621

–

–2

2,380

2007

1,757

49

–45

–

1,761

During 2008, 100% of Concentric was acquired. During the year 2.9% of the Shares in Haldex Garphyttan Hong Kong were sold. JSB Hesselman AB is the parent company of the wholly owned ­English subsidiary Haldex Ltd and the U.S. subsidiary Haldex Inc. Haldex Ltd. is the parent company for the wholly owned English subsidiary Haldex Brake Products Ltd. and the Spanish subsidiary Haldex España SA. Haldex Inc. is the holding company for the wholly owned U.S. ­subsidiaries Haldex Brake Corp, Haldex Brake Products Corp, Haldex

Garphyttan Corp., Haldex Hydraulics Corp. and the Mexican subsidiary Haldex de Mexico S.A. De C.V. Haldex GmbH is the holding company for the wholly owned German subsidiaries Haldex Brake Products GmbH, Haldex Garphyttan GmbH and Haldex Hydraulics GmbH. Haldex do Brasil Indústria e Comércio Ltda. is the parent company of the wholly owned Brazilian subsidiary Fabrica Brasileira de Freios S.A.

Note 10 Long-term receivables   Deferred tax assets

Note 13  Cash and cash equivalents

2008

2007

15

4

9

11

Bank certificates and special loans

24

15

 

Other long-term receivables  

 

2007

36

19

Prepaid expenses    Rents and insurances

6

–

178

44

2008

2007

Opening balance

188

181

Reversals during the year

–57

–7

–

14

131

188

2008

2007

–

–13

 

1

Provisions during the year Closing balance

   Other prepaid expenses

2

3

Other current receivables

6

3

50

26

 

44

Note 14 Untaxed reserves

2008

Tax assets

2007

178 –

Note 11 Other current receivables  

2008

Cash and bank balances

Note 15 Taxes Note 12  Derivative instruments 2008  

  Current tax expense for year 2007

Assets Liabilities

 

Assets Liabilities

Short-term Forward exchange contracts – at fair value through profit or loss Currency swaps – at fair value through profit or loss  

122

122

40

Deferred tax related to temporary differences

10

–

 

10

–13

40

25

27

 

7

5

147

149

 

47

45

Gains and losses from current currency forward contracts and currency swaps are reconized on a ongoing basis in the income statement.

Note 16 Pensions and similar obligations Pension obligations attributable to defined-benefit plans  

2008

2007

Pensions vested during the period

–2

–3

Interest on obligtion

–1

–

Total pension cost

–3

–3

61

Notes Parent Company

62

HALDEX 2008

Cont. Note 16 Pensions and similar obligations

Note 18 Other current liabilities

Reconciliation of interest-bearing pension liabilities  

2008

2007

Opening balance, pension liablities

13

10

Benefits paid

–5

–

Pension costs According to balance sheet

3

3

11

13

 

2007

Personnel costs

11

9

Other accrued expenses

10

12

Other current liabilities  

–

2

21

23

Note 19 Contingent liabilities and

Note 17 Long-term interest-bearing

collateral pledged

liabilities

2008

2007

Multicurrency Revolving Credit Facility

720

649

Bond loans

350

600

1,070

1,249

Total

2008

Accrued expenses

  Sureties and guarantees for subsidiaries

2008

2007

548

378

Cont. Note 17 Long-term interest-bearing liabilities Maturity structure, years Total

0–1

1–3

3–5

>5 years

Average rate

SEK

Liabilities

620

–

350

270

–

3.4

EUR

109

–

–

109

–

5.4

USD

341

–

–

341

–

2.3

1,070

0

350

720

0

3.3

103

35

57

11

–

 

1,173

35

407

731

0

 

Total Calculated interest Total

Because loans under Multicurrency Revolving Credit Facility and Bond loans are subjects to a fixed interest term of 3–6 months, the fair values corresponds to the carrying amounts. Available unused credit facilities at year-end totaled SEK 1,217 m (1,162). Calculated interest comprises the counter-value in SEK based on exchange rates at December 31, 2008 and the current interest rates on the liability. The Board of Directors and the President and CEO certify that the annual financial report has been prepared in accordance with generally accepted accounting principles and that the consolidated accounts have been prepared in accordance with the international set of accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, and give a true and fair view of the position and profit or loss of the Company and the Group, and that the management report for the Company and for the Group gives a fair review of the development and performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face. Stockholm, March 23, 2009

Lars-Göran Moberg, Chairman of the Board



Reiner Beutel Board member

Anders Böös Board member

Arne Karlsson Board member

Caroline Sundewall Board member



Anders Thelin Board member

Cecilia Vieweg Board member

Björn Cederlund Board member

Jonas Esbjörnsson Board member

Joakim Olsson, President & CEO Our audit report was issued on March 23, 2009. Michael Bengtsson Liselott Stenudd Authorized Public Accountant Authorized Public Accountant PricewaterhouseCoopers AB PricewaterhouseCoopers AB

Audit report

HALDEX 2008

Audit report To the Annual General Meeting of Haldex AB (publ) Corporate identity number 556010-1155 We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of Haldex AB for the year 2008. The Company’s annual accounts and the consolidated accounts are included in the printed version on pages 30–62. The board of directors and the managing director are responsible for these accounts and the administration of the Company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated financial accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director and significant estimates made by the board of directors and managing director when preparing

the annual accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company’s financial position and results of operations in accordance with generally accepted accounting principals in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fait view of the group’s financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm, March 23, 2009



Michael Bengtsson Authorized Public Accountant PricewaterhouseCoopers AB

Liselott Stenudd Authorized Public Accountant PricewaterhouseCoopers AB

63

64

Corporate Governance Report

HALDEX 2008

Corporate Governance Report Haldex complies with no exceptions to the Swedish Code of Corporate Governance – hereinafter called “the Code” – and prepares a Corporate Governance Report in accordance with the Code. The Corporate Governance Report is unaudited.

Corporate governance in Haldex Haldex is a publicly traded Swedish limited liability company. Responsibility for the governance and control of the Haldex Group is divided among the shareholders, the Board of Directors, its selected committees and the President, in accordance with the Swedish Companies Act, applicable regulations for publicly traded companies (including the Swedish Code of Corporate Governance), other relevant laws and regulations, Haldex’s Articles of Association and the internal rules of the Board of Directors. An overview of Haldex Corporate Governance is illustrated below. For information about Haldex shareholders, refer to a specific section on page 72. Annual General Meeting 2008 The 2008 Annual General Meeting was held on Tuesday, April 15 in Stockholm. Sune Karlsson, Chairman of the Board, was elected Chairman of the Annual General Meeting, as proposed by the Nomination Committee. The Annual General Meeting resolved that: • In accordance with the Board of Directors’ proposal to pay dividend of SEK 4.50 per share for 2007 (unchanged dividend). • The Board shall comprise seven members with no deputies. The Meeting re-elected Lars-Göran Moberg, Arne Karlsson, Caroline Sundewall, Cecilia Vieweg, Anders Thelin and Anders Böös. Dr Reiner Beutel were newly elected. Lars-Göran Moberg was elected Chairman and Dr Reiner Beutel Vice Chairman of the Board.

• Fees for the Board of Directors shall be paid totaling SEK 1,925,000 including fees for committee work, of which SEK 450,000 pertains to the Chairman, SEK 300,000 to the Vice Chairman and SEK 175,000 to other Board members who are not employed by the Company. Fees to auditors will be paid as invoiced. • The Board was authorized, during the period up to the next ordinary Annual General Meeting, to acquire/repurchase up to 10% of all shares in the Company. Such treasury shares may be used for transfer in connection with possible future acquisitions and to cover costs for the longterm incentive program LTI 2007. The resolutions passed by the Meeting are presented in the minutes from the 2008 Annual General Meeting, which are available at www.haldex.com. Appointment of the Nomination Committee for the 2009 Annual General Meeting The 2008 Annual General Meeting resolved that the Nomination Committee for the 2009 Annual General Meeting shall have four members, representing each of the four largest shareholders in terms of voting rights. The names of these four representatives, and the names of the shareholders that they represent, must be disclosed at least six months before the Annual General Meeting and be based on shareholdings immediately prior to such disclosure. The assignment of such members will cease when a new Nomination Committee has been appointed. Assuming that the members do not agree to an alternative course of action, the member representing the largest shareholder in terms of voting rights shall be appointed chairman of the Nomination Committee. The composition of the Nomination Committee was disclosed through a press release and on Haldex’s website on October 16, 2008. Following ownership changes that occurred at the end of the year, the composition of

Haldex control structure Haldex shareholders

Nomination Committee

Annual General Meeting

Board of Directors

Remuneration Committee

Audit Committee

President

Executive Committee

Haldex auditors

HALDEX 2008

the Nomination Committee changed, as disclosed through a press release and on Haldex’s website on February 13, 2009. The Nomination Committee ahead of the 2009 Annual General Meeting comprises representatives of the three largest and the seventh largest shareholders, jointly representing 20.74% of the voting rights. Stefan Dahlbo, Investment AB Öresund, Tomas Ramsälv, Odin Fonder, Carl Rosén, Second AP Fund and Björn Cederlund, Unionen comprise the Nomination Committee prior to the 2009 Haldex Annual General Meeting. The Nomination Committee’s assignments include preparation and presentation of proposals for the election of Chairman of the General Meeting, members of the Board of Directors, Chairman of the Board of Directors, auditors and proposals for decisions regarding remuneration to the Board of Directors and fees to the auditors. The company’s shareholders have the opportunity to raise comments and suggestions with the Nomination Committee via the instructions listed on the company’s website. Once the proposals that fall under the responsibility of the Nomination Committee are finalized, they are presented in the notification to the Annual General Meeting and on Haldex’s website, www.haldex.com. An account of the procedures followed by the Nomination Committee is also published on the webpage. The Nomination Committee will present its proposals and report its activities at the Annual General Meeting 2009. Shareholders wishing to make proposals to the Nomination Committee may do so by e-mail. Addresses are available on Haldex website under the headings Invest­ ors – Corporate Governance – Annual General Meeting – 2009 Annual General Meeting. The Board of Directors Chairman of the Board

The Annual General Meeting 2008 elected Lars-Göran Moberg as Chairman until the 2009 Annual General Meeting. Lars-Göran Moberg has been a Member of the Haldex Board since 2007. The Chairman directs the Board’s activities, promotes efficiency in these activities, ensures that they are conducted in accordance with the Swedish Companies Act and other applicable laws and regulations and ensures that the resolutions of the Board are implemented. The Chairman ensures that the Board members receive the required education and is responsible for evaluating the Board’s activities and sharing the evaluations with the Nomination Committee. The Chairman proposes the agenda for Board meetings in consultation with the President. The Chairman has regular communication with the President, relays opinions from the shareholders to other Board members and acts as spokesperson on behalf of the Board. The Chairman also represents a vital link to the Nomination Committee and reports the results of the year’s evaluation of Board work to the Nomination Committee. Members of the Board The Board of Directors consists of seven members elected by the Annual General Meeting. There are no deputy members. The 2008 Annual General Meeting elected Lars-Göran Moberg, Reiner Beutel, Anders Böös, Arne Karlsson, Caroline Sundewall, Anders Thelin and Cecilia Vieweg as members. None of the representatives for Group Management are

Corporate Governance Report

c­ urrently members of the Board. However, the President makes regular reports to the Board and the Group’s CFO serves as the Board’s secretary. Other salaried employees participate in Board meetings in connection with presentations of particular issues. In addition to the elected members, the Board consists of two employee representatives and two deputy representatives appointed by the employees. The Board members are presented in the Annual Report, page 70. The table below shows remuneration to Board members, attendance at Board meetings and committee participation. Independence The Nasdaq OMX Nordic Exchange and the Swedish Code for Corporate Governance state that the majority of the Board’s members should be independent in relation to the company and its Group Management and that at least two of the independent members must be independent in relation to the company’s largest shareholders. The Board of Haldex is deemed to have fulfilled this requirement since all Board members are independent in relation to Haldex, its management and Haldex’s largest shareholders. Board Activities 2008 The Board of Directors held a statutory meeting immediately following the Annual General Meeting. During 2008, the Board met 17 times. The Board visited a number of the Group’s subsidiaries in different constellations during 2008 to gain deeper insight into the Group’s operations. The Board’s activities during the year included the following: • January/February – Financial accounts, Annual Report, meetings with auditors, evaluation of the President’s administration. • Spring/autumn – Establishment of the Board of Director’s work ­procedures and the instructions for the President, as well as strategic and organizational issues, long-term investment plans • November/December –Finance policy, budget review. Time schedule for forthcoming year. Comprehensive information about Corporate Governance at Haldex is available on the www.haldex.com website: •  Articles of Association •  Information about Annual General Meeting o Time and place o Registration procedure for participation o Registration procedure for reporting business to be addressed by the Annual General Meeting o Notice convening the Meeting o Agenda o Minutes o President’s address •  Information about the Nomination Committee o Summary o Contact details • The Members of the Board (updated continuously in terms of changes that occur during the year) • Members of Executive Management (updated continuously in terms of changes that occur during the year) • Preceding year’s corporate governance reports

65

66

Corporate Governance Report

HALDEX 2008

In connection with the spring’s strategy reviews, the various division managers are given an opportunity for a more in-depth presentation of their operations. Board committees Compensation Committee

The Board appoints from among its members a Compensation Committee to formulate issues concerning remuneration. The members of the Compensation Committee are appointed annually at the statutory Board meeting immediately following the Annual General Meeting. The Compensation Committee issues to the Board proposals concerning the President’s salary and other employment terms. The Compensation Committee shall also establish the salary and other employment terms for the other members of Group Management. Prior to each Annual General Meeting, the Compensation Committee shall also assist the Board in preparing a motion concerning guidelines for the remuneration of senior executives for the forthcoming year. The purpose of these guidelines shall be to determine the salary and other employment terms in respect of the President and other senior executives of the company. During 2008, Lars-Göran Moberg, Anders Thelin and Cecilia Vieweg were members of the Committee. Cecilia Vieweg was its Chairman. The Committee held 7 meetings during the year. The Chairman of the Compensation Committee was paid a fee of SEK 50,000 and the members received a fee of SEK 25,000 each. Audit Committee

The Board of Directors appoints from its members an Audit Committee that formulates issues concerning accounting, financial reporting, auditing and internal control. The members of the Audit Committee are appointed annually at the statutory Board meeting immediately following the Annual ­General Meeting. The Audit Committee is responsible for the preparation of the Board’s activities by a system for auditing, internal control and risk management that fulfills the requirements of applicable laws and regulations and for ensuring that this system promotes operational ­efficiency, generates accurate accounting documents and provides reliable financial information. The Committee reviews the principles for accounting and financial control and the auditors’ work and establishes

guidelines for the procurement of services other than auditing from the Company’s auditors. The Committee meets regularly with the auditors during the year to discuss audit reports and audit plans. The Committee is responsible for the evaluation of the auditors’ work and the auditors’ efficiency, qualifications, fees and independence. The Audit Committee must also assist the Nomination Committee with proposals for potential auditors. The Committee also assists Haldex management in determining how identified risks will be handled in order to ensure good internal control and risk management. During 2008, its members were Lars-Göran Moberg, Arne Karlsson and Caroline Sundewall. Caroline Sundewall was the Committee’s Chairman. The Committee held 6 meetings during 2008. The Chairman of the Audit Committee received a fee of SEK 100,000 and members received a fee of SEK 50,000. Evaluation of Board activities in 2008 Annual evaluations are conducted of the Board’s collective work. The Chairman is evaluated on his ability to prepare and lead the Board activities and his ability to motivate and cooperate with the President. The evaluation of the Board’s activities as a whole is conducted via an internal review of its activities. The result of the evaluation process for 2008 was discussed in conjunction with the Board meeting in December 2008. Remuneration to the Board of Directors In accordance with the resolution from the 2008 Annual General Meeting, director fees shall total SEK 1,925,000, including remuneration for committee participation. All remuneration to the Board comprises fixed payments and does not contain any variable parts. In accordance with the resolution of the General Meeting, the Chairman of the Board received SEK 450,000, the Vice Chairman of the Board received SEK 300,000 and the other Board members received SEK 175,000 each. Fees for a total of SEK 300,000 were paid for committee participation and were divided among the Committee members in the manner shown in the table below. Auditors Auditors’ assignment

The auditors follow an audit schedule that was set in consultation with the Audit Committee. In connection with the audit, the auditors shall report their observations to Group Management for reconciliation and

Board of Directors during 2008 Board member since

Nationality

Board meetings

Compensation Committee

Audit Committee

Lars-Göran Moberg

2007

Swedish

17

6

5

Reiner Beutel*

2008

German

8

Anders Böös

2007

Swedish

17

Sune Carlsson**

2004

Swedish

8

Arne Karlsson

2003

Swedish

Caroline Sundewall

2003

Swedish

Anders Thelin

2007

Swedish

15

3

Cecilia Vieweg

2000

Swedish

15

7

Name

* Elected ** 

to the Board at the Annual General Meeting on April 15, 2008 Retired from the Board at the Annual General Meeting on April 15, 2008

Board fees

Committee fees

450,000

75,000

300,000 1

175,000

15

5

175,000

50,000

17

6

175,000

100,000

175,000

25,000

175,000

50,000

2

 

HALDEX 2008

then to the Audit Committee. The report to the Audit Committee takes place after the conclusion of the audit of the administration and the review of the hard-close accounts and after the Annual Report is adopted. The Board of Directors as a whole meets with the auditors once a year, during the February Board meeting where the auditors report their observations directly to the Board of Directors partly without the presence of Group Management. Finally, the auditors participate in the Annual General Meeting and briefly describe their auditing work and summarize for the shareholders the recommendations in the Auditor’s Report. Auditors 2008 The Annual General Meeting elects two ordinary auditors and two ­deputy auditors for a period of three to four years at a time. At the 2007 Annual General Meeting, Authorized Public ­Accountants Liselott Stenudd and Michael Bengtsson from Pricewaterhouse­Coopers AB were elected as auditors until the 2010 Annual General Meeting. Authorized Public Accountants Christine Rankin-Johansson and Ronnie Ekman were newly elected as deputy auditors. Liselott Stenudd has been an Authorized Public Accountant since 1986, and is the elected auditor of such companies as SinterCast AB, Eltel AB, the Swedish Cargotec companies and Diamyd Medical AB. Michael Bengtsson has been an Authorized Public Accountant since 1988, and is the elected auditor of such companies as Enea, Onoff, ­Perstorp Holding AB and Morphic Technologies. Neither Liselott ­Stenudd nor Michael Bengtsson has assignments in other companies that are associated with Haldex’s largest owners or President. Between 2004 and 2008, the auditors had extra assignments outside the scope of the ordinary audit. These assignments included consultations in tax and accounting issues and other company issues. These assignments are not considered to be in violation of the Code’s regulations. Group Management Members of Executive Committee

In addition to the President, Haldex’s Executive Committee comprises the managers of each division, the CFO and the Executive Vice President Human Resources. The President manages the Company within the framework established by the Board of Directors. The President is responsible for the leadership and development of the Company. The President, in consultation with the Chairman of the Board, prepares and formulates objective, detailed and relevant informational documents and the documentary basis for the Board meetings, presents the agenda items and explains proposed resolutions. The President leads the work of the Execu-

Corporate Governance Report

tive Committee and makes decisions in consultation with other senior executives. The Executive Committee met on 6 occasions in 2008. Remuneration of senior executives

On an annual basis, the Annual General Meeting establishes guidelines for determining the remuneration to be paid to the President and other senior executives of the company, including Heads of Divisions and Group Staff units. The Board and its Compensation Committee decide, based on the guidelines adopted by the Meeting, on the design of remuneration systems and the size of structures for the remuneration of senior executives. Remuneration of the President

In 2008, the Board of Director’s Compensation Committee prepared issues related to remuneration of the President, with decisions made by the Board. The President receives a fixed salary and a variable salary. The variable salary is based on a target bonus that is established annually. In addition to a reciprocal twelve-month period of notice, the President will, in the event of termination of employment by the company, receive severance pay equivalent to twelve months’ salary. In the event of resignation by the President, no severance pay may be claimed. The President’s pension benefits are premium-based and consist of an ITP scheme and an annual provision for 25% of fixed salary exceeding 20 “basic amounts” (base figure for Swedish social security). Retirement age is 65. Other senior executives

According to Guidelines for remuneration to Senior Executives as resolved by the Annual General Meeting, the President, in consultation with the Board’s Compensation Committee, prepares remuneration issues concerning the Executive Committee and divisional management, which are subject to resolution by the Annual General Meeting. Remuneration consists of a fixed and variable part. The variable part is based on goals established by the President and the Compensation Committee on a yearly basis and may amount to 30–50% of the fixed annual salary. All members of the Executive Committee have a reciprocal six-month period of notice and, in the event of termination of employment by the company, will receive severance pay equivalent to between 12 and 24 months’ salary. The pension benefits are regulated in pension plans adapted to local practice in the countries in question, with the retirement age starting at 65. See Note 9 for a more detailed description of the remuneration of the President and other members of the Executive Committee.

67

68

Corporate Governance Report

Board of Directors’ report regarding internal control Internal control within Haldex is a process that is regulated by the Board of Directors and the Audit Committee and performed by the President and Group Management. It is designed to ensure that to the extent possible Haldex’s reporting is appropriate and reliable and that the company complies with applicable legislation and regulations. The process is based on a control environment that provides structure for other parts of the process, including risk assessment, control activities, information, communication and follow-ups. It is based on the framework for internal control published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board of Directors is responsible for internal control. This report was prepared in accordance with Sections 3.7.2 and 3.7.3 of the Swedish Code of Corporate Governance and is thus limited to a description of Haldex’s internal control with regard to financial reporting. This report is not a part of the formal annual report documents. The Board of Directors’ report on internal control regarding financial reporting has not been examined by the company’s auditors. The Board of Directors monitors and ensures the quality of external financial reporting in the manner documented in the working procedure for the Board of Directors, the instructions for the President and the Group’s financial policy. It is the responsibility of the President together with the CFO to review and quality-assure all external financial reporting, such as interim reports, year-end reports, annual reports, press releases containing financial information and presentation material in conjunction with meetings with the media, the owners and financial institutions. The President presents all interim reports, year-end reports and annual reports to the Board of Directors for review. The reports are then approved and published by the Board of Directors. The Board of Directors is responsible for ensuring that the company’s financial reports are prepared according to law, accounting standards and other requirements concerning listed companies. The Board of Directors’ instructions for the President also include requirements that the Board of Directors must be continuously provided with internal summary reports on financial matters. These reports, which must include income statements, balance sheets, valuation issues, assessments, forecasts, any changes and their consequences, possible changes of accounting rules, legal matters and disputes, are reviewed by the Audit Committee and thereafter submitted to the Board of Directors. With regard to the Board of Directors’ communication with the company’s auditors, see below. Control environment

The Board of Directors has adopted a number of control documents for the company’s internal control and governance. Within the Board of Directors, there is an Audit Committee ­consisting of three Board members elected by the Annual General

HALDEX 2008

Meeting: Arne Karlsson. Lars-Göran Moberg and Caroline Sundewall. The Audit Committee, which prepares matters for the Board of Directors, considers issues concerning the internal control process, follows up reporting issues and discusses accounting principles and the consequences of changes of these principles. Furthermore, the Audit Committee maintains regular contact with the external auditors. The committee is responsible for evaluating auditing work and the auditors’ efficiency, qualifications, fees and independence. In addition, the Audit Committee must assist the Nomination Committee in nominating auditors and procuring their services. Risk assessment

Haldex’s risk assessment with respect to financial reporting, meaning the identification and evaluation of the principal risks in terms of financial reporting in the Group’s companies, divisions and processes, ­provides the foundation for risk management. The risks may be managed by accepting the risks or by reducing or eliminating them, subject to the controls and control levels within the framework established by the Board of Directors, the Audit Committee, the President and Group management. Control activities

Work to enhance internal control activities and governance continued during the year. The main focus of this work was on documentation of the financial processes and evaluation and improvement of existing controls. Information and communication

The company has a system for information and communication that is intended to result in complete and correct financial reporting. The company has a reporting system in which all Group companies report monthly according to an established format and to fixed accounting principles. In conjunction with reporting, the reporting units perform risk assessments and decide on the need for any provisions. The central finance department produces reports from the Group-wide system, which is structured according to the Group’s established reporting format. Responsible managers and controllers at various levels in the Group have access to the information in this system relating to their area of responsibility. The company’s financial reporting is followed up continuously, in part by business management at various levels in the company and in part by the finance organization and controllers in the various divisions and business units. Follow-ups take place each month in conjunction with reporting and consist of both analysis and reviews by the relevant controllers and meetings between the relevant business managers and the reporting units. The CEO and the CFO have monthly meetings with divisional managers and divisional controllers. At these meetings, the division’s income statement, balance sheet, cash flow statement and other financial key data are discussed.

HALDEX 2008

Corporate Governance Report

Follow-ups

The Audit Committee communicates constantly with the company’s external auditors and the CFO, both at and between meetings. The Board of Directors receives a monthly report on business development. More detailed reporting is provided primarily by the President at all Board meetings. The Board of Directors constantly assesses the risks relating to financial reporting based on significant and qualitative factors. Each year, the Board of Directors evaluates the need to establish a special internal audit function. In 2008, the Board did not consider

this necessary. The Board considered that internal control is primarily exercised by: • operative managers at various levels, • local and central finance functions and • through Group management’s supervisory control. Due to this, in combination with the company’s size, the Board of Directors currently does not consider it financially defensible to establish yet another function.

69

70

Board and Executive

HALDEX 2008

Board of Directors and Auditors

Lars-Göran Moberg

Reiner Beutel

Anders Böös

Arne Karlsson

Anders Thelin

Cecilia Vieweg

Björn Cederlund

Jonas Esbjörnsson

Lars-Göran Moberg* Chairman of the Board Born 1943. Member since 2007. ­Elected Chairman 2008. M.Sc. ME.

Member of the Board of Investment AB Latour, Niscayah AB and East ­Capital ­Baltic Property Fund AB.

Shareholding: 1,500 via Caroline ­Sundewall AB.

Shareholding: 0

Previously President of Volvo Powertrain Corporation and Senior Vice President Technology and member of Volvo’s Group Management. Previously active within AB Bofors, President of VME Industries Sweden AB and President of Volvo Car Component Corporation.

Arne Karlsson* Born 1944. Member since 2003. M.Sc. Economics.

Anders Thelin* Born 1950. Member of the Board since 2007. M.Sc. ME.

Has held several executive positions in Scania both in Sweden and abroad. Most recently responsible for Commercial Systems, Scania AB, London and Executive Vice President Scania AB.

President of Sandvik Tooling AB since 2000. Member of Sandvik’s Group Management. Previously held several senior executive positions within Sandvik, such as President of Sandvik Coromant.

Chairman of the Board and Board member of a number of companies in the Scania Group.

Chairman of the Board and Board member of a number of companies in the Sandvik Group.

Shareholding: 2,000

Shareholding: 1,000

Shareholding: 0

Reiner Beutel* Deputy Chairman Born 1959. Elected 2008. MBA and PhD.

Caroline Sundewall* Born 1958. Member of the Board since 2003. M.Sc. Economics.

Cecilia Vieweg* Born 1955. Member of the Board since 2000. Lawyer.

Has worked at Chase Manhattan Bank and Handelsbanken, and as stock exchange and business columnist at Dagens Industri (business daily), Affärsvärlden (business weekly) and Finanstidningen (business daily), and as business controller at Ratos (private equity company), and manager of the business editorial staff and stock exchange columnist at Sydsvenska Dagbladet. Since 2001, independent consultant at Caroline Sundewall AB.

Head of Group Legal Affairs, Immaterial Rights and Risk Management, AB Electrolux since 1999. Previously partowner of two law firms and General Counsel at Volvo Cars.

Member of the Board of Volvo Aero AB, Volvo Construction Equipment Corporation, Cross Country Systems AB and Deutz AG.

Consultant for a number of leading private equity companies. Former CEO of Scheffenacker AG. Previously held several senior executive positions within Bosch Gmbh, such as EVP for corporate planning, CEO of Bosch Power Tool in the US and CFO of Bosch Telecom and Communication Division. Chairman of the Board of Mirror ­Controls Int. Member of the Board of KUKA AG. Shareholding: 1,000 Anders Böös* Born 1964. Elected 2007. Previously President of Hagströmer & Qviberg AB and Drott AB. Chairman of the Board of Industrial and Financial Systems IFS AB and Cision AB.

Member of the Board of Ahlsell AB (chairman of the audit committee) Aktiemarknadsbolagens Förening, Electrolux (member of the audit committee), Lifco AB, Pågengruppen AB, and TeliaSonera (chairman of the audit committee).

Chairman of the Board of Equinox, Inc. Board member of Electrolux North America Inc. and other companies in the Electrolux Group, as well as the Stockholm Chamber of Commerce’s Arbitration Tribunal. Shareholding: 500 Björn Cederlund Born 1942. Member since 1994. Represents the Federation of Salaried Employees in Industry and Services in the Haldex Group. Shareholding: 0

Caroline Sundewall

Jonas Esbjörnsson Born 1974. Member since 2008. Represents IF Metall in the Haldex Group. Shareholding: 0 Deputy members: Ulrika Granberg Born 1967. Deputy member since 2007. Represents the Federation of Salaried Employees in Industry and Services in the Haldex Group. Shareholding: 0 Stefan Atterling Born 1971. Deputy member since 2006. Represents the Trade Union Confederation in the Haldex Group. Shareholding: 0

Auditors:

PricewaterhouseCoopers AB Liselott Stenudd Authorized Public Accountant. Company auditor since 2006. Assignments: Eltel AB, SinterCast AB, the Swedish Cargotec companies and Diamyd Medical AB. Michael Bengtsson Authorized Public Accountant. Company auditor since 2007. Assignments: Enea, Onoff, Perstorp Holding AB and Morphic Technologies * Independent in relation to the company, Group Management and largest shareholders.

Board and Executive

HALDEX 2008

Executive Committee



Ian Dugan

Stefan Johansson

Joakim Olsson President and CEO Born 1965. Employed since 2005. M.Sc.ME and MBA, INSEAD. Has held several executive positions in ABB. Most recently country manager in Brazil, before this global manager for the Power Transformers business area. Shareholding: 2,000 shares and 50,000 call options Ulf Ahlén Division manager Traction Systems. Born 1948. Employed since 1998. Upper Secondary Economics Major. Has held several executive positions in Volvo Cars. Most recently with total responsibility for car production. Shareholding: 1,000 shares and 3,430 call options

Per Ericson

Ulf Ahlén

Jay C. Longbottom

Jan Pieters

Ian Dugan Division manager Hydraulic Systems

Stefan Johansson Chief Financial Officer (CFO)

Jan Pieters Division manager Garphyttan Wire

Born 1956. Employed since 2008.

Born 1958. Employed since 2005.

Born 1957. Employed since 2007.

C. Eng. MIMechE.

M.Sc. Economics.

M.Sc. Economics.

Has headed a number of engineering businesses in both listed and private equity environments, most recently as CEO of Concentric Plc and prior to that, ran Alstom’s UK based Train Renovation, Service and Manufacturing business.

Has held positions as CFO within both listed and private equity companies, most recently at Duni.

Has held several senior executive positions within Avesta Sandvik Tube and AST, most recently as president of Fagersta Stainless.

Shareholding: 1,000 shares Per Ericson Executive Vice President Human Resources Born 1963. Employed since 2006. Forest engineer, UC Forestry Studies. Studies in Change Management in Organizations and Social Systems. Has held several executive positions in Stora Enso, most recently as Executive Vice President Human Resources. Shareholding: 1,000 shares

Shareholdings as of March 20, 2009.

Joakim Olsson

Shareholding: 5,100 shares Jay C. Longbottom Division manager Commercial Vehicles Systems Born 1953. Employed since 2002. BA, MBA. Has held several senior executive ­positions within SKF involving ­placement in both North America and Europe. Shareholding: 1,500 shares

Haldex has reached an agreement with Suzuki Metal Industry Co. to divest its division Garphyttan Wire. The transaction is expected to be completed during the period April to June 2009 and, in this connection, Jan Pieters will leave the Haldex Group. Shareholding: 1,000 shares

71

72

Haldex share

HALDEX 2008

Haldex share The share capital in Haldex AB totals SEK 111  m, represented by 22,296,220 shares. Each share confers one voting right and all shares carry equal entitlement to dividends. Haldex has been listed on the Nasdaq OMX Stockholm Stock Exchange since 1960. The company is currently included in the list of Mid Cap companies, under the ticker symbol HLDX. A trading lot is one share. Price trends and trading The OMXS (OMX Stockholm index) declined 42% in 2008. The OMX Stockholm Industrial Index (industrial goods and services), which includes the Haldex share, declined 47%. The price of the Haldex share declined 77% during the year, closing at SEK 26:50 (113.50) on December 30, 2008. The year’s highest share price, SEK 122.25, was posted on May 12, while the year’s lowest share price, SEK 21.20 was noted on December 23. Total market capitalization at year-end was SEK595,3 m (2,530.6). The average daily trading volume was 55,895 shares (38,044). A total of 14.1 million shares (25.9) were traded for the entire year. The shares traded corresponded to 63% (116) of the total number of shares.

that the participants became shareholders through their own investment in Haldex shares in the marketplace. Each share acquired in the marketplace provides entitlement to the allotment, free of charge, of 10 employee stock options, whereby each option provides entitlement to the acquisition of one Haldex share. Another condition for allotment is that Haldex’s pretax income has increased by more than 7% in relation the preceding fiscal year. Maximum allotment occurs on condition that pretax income has increased by 20% or more in relation to the preceding fiscal year. The employee stock options will be issued in three series and be allotted in accordance with decisions made by the Board during 2008, 2009 and 2010, respectively. No allotment occurred in 2008, and no allotment of the 2009 options will occur. Shareholders The number of Haldex shareholders increased 2% during 2008, totaling 8,576 (8,382) at year-end. Swedish ownership rose from 54% to 69% at year-end 2008. Swedish Institutions accounted for about 42% of ownership (42).

Incentive program The 2007 Annual General Meeting resolved to introduce a long-term performance-based incentive program under which senior executives and key personnel were allotted employee stock options on condition

Dividend policy The Company’s unrestricted reserves can be distributed to the shareholders in the form of stock dividends and buybacks. When determining the dividend paid to shareholders, the Board of Directors takes into account the Company’s future growth opportunities, investment needs and financial situation. The aim is for dividends and buybacks of own shares to correspond to at least one-third of the Group’s after-tax profit over the course of a business cycle. For the 2008 fiscal year, the Board of Directors proposes that no dividend will be paid, in order to strengthen the company’s financial position, considering the current market and the company’s financial engagements.

Haldex share price trend, 2008

Haldex share price trend, 2004–2008

Beta value Beta value is a risk ratio that indicates the fluctuation of a stock compared with that of the stock exchange as a whole. The beta value for the Haldex share at year-end, as calculated over 48 months, was 1.58 (1.24), which means the price of the Haldex share fluctuated 58% more than the market average.

No. of shares traded, thousands

Haldex OMX Stockholm_PI SX20 Industrials_PI

SEK 120

Haldex OMX Stockholm_PI SX20 Industrials_PI

SEK 300

No. of shares traded, thousands

250

100

200

80 150

60

100

1,400 1,200 1,000 800 600 400 200

40

20

Jan 2008

Feb Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec © NASDAQ OMX

4,000 3,000

50

2,000 1,000 25

2004

2005

2006

2007

2008

© NASDAQ OMX

Haldex share

HALDEX 2008

Data per share

Ownership structure, December 30, 2008 2008

2007

2006

2005

2004

Earnings, SEK

–1.92

6.24

13.96

12.19

9.50

Dividend, SEK

–

4.50

4.50

4.00

3.00

1,075,189

4.82

766,664

3.44

1,001–5,000

621

1,438,073

6.45

5,001–10,000

89

680,554

3.05

14

10,001–15,000

30

373,726

1.68

13

12

15,001–20,000

19

339,004

1.52

32

33

32

20,001–

102

17,623,010

79.04

Total

8,576

22,296,220

100.00

83.15

85.36

86.02

85.64

64.60

12

12

11

11

neg

18

12

–

72

Payout ratio, % Dividend yield, % Total return, %

113.50 163.50 158.00 116.50

–

4.0

2.8

2.5

2.6

–76

–28

6

38

16

32

133

190

184

180

2006

2005

2004

Market price/equity, %

Percent of total

911

Equity, SEK P/E ratio

No.of shares

6,804

26.70

1–500

No. of shareholders

501–1,000

Market price at year-end, SEK EBIT multiple

Shareholding

Shareholders and number of shares 2008

2007

8,576

8,382 10,305 11,654 14,099

Average number of shares1)

21,920

21,980 22,065 22,065 22,065

Number of shares at year-end1)

21,920

21,920 22,065 22,065 22,065

Number of shareholders

1) 

thousands

Ownership structure, December 30, 2008 Other, 13%

Geographic distribution of ownership

Swedish financial companies, 31%

Swedish private persons, 13% Foreign owners, 31%

Other countries, 31%

Sweden, 69%

Swedish social insurance funds, 7% Swedish county councils and municipalities, 5%

Ten largest shareholders, February 28, 2009 No. of Shares

Percent of votes and capital

Öresund, Investment AB

1,440,534

6.46

Second AP Fund

1,243,290

5.58

Odin Fonder

1,131,119

5.07

Afa Försäkring

1,000,000

4.49

Danske Capital Sverige AB

921,518

4.13

Name

Dub-Non-Resident Domestic Rates

816,891

3.66

Confederation of Swedish Enterprise

800,000

3.59

Unionen

769,900

3.45

SEB Private Bank S.A., NQI

737,100

3.31

Skandia fonder

609,691

2.73

9,470,043

42.20%

12,449,707

56.11%

Total ten largest shareholders Total other shareholders Haldex AB – treasury shares Total

376,470

1.69%

22,296,220

100.00%

Read more: www.haldex.com/en/investors/The_share/

73

74

HALDEX 2008

Five-year summary and quarterly review Multi-year review

2008

2007

2006

2005

2004

Order intake, SEK m

7,923

8,098

7,883

7,592

6,923

Net sales, SEK m

8,403

7,940

7,890

7,486

6,759

91

90

91

89

89

1,714

1,598

2,001

1,834

1,651

250

339

403

411

346

92

289

374

383

346

Earnings before tax, excl. non-recurring items, SEK m

195

272

315

341

290

Earnings before tax, SEK m

–55

222

315

370

290

Profit margin, excl. non-recurring items, %

3.0

4.3

5.1

5.5

5.1

Profit margin, %

1.1

3.6

4.8

5.1

5.1

Interest coverage ratio, multiple

0.7

3.7

5.2

7.9

5.6

Return on capital employed, %

2.4

8.3

11.5

12.3

12.8

–2.3

7.3

16.6

15.9

14.8

1.6

5.8

7.9

8.9

9.3

6,290

5,082

4,733

4,662

3,934

Share of net sales outside Sweden, % Exports from Sweden, SEK m Operating income, excl. non-recurring items, SEK m Operating income, SEK m

Return on equity, % Return on total assets, % Total assets, SEK m Capital turnover rate Equity, SEK m Equity/assets ratio, % Net debt, SEK m

2.20

2.20

2.34

2.36

2.46

1,823

1,871

1,898

1,890

1,425

29

37

40

40

36

2,335

1,600

1,254

1,241

1,171

Debt/equity ratio, %

128

85

66

66

82

Cash flow, SEK m

465

–141

–7

139

–36

Investments, SEK m

402

463

420

357

313

Product development costs, SEK m

339

335

349

343

321

Average no of employees

6,004

5,518

4,683

4,606

4,317

– of whom, outside Sweden

4,724

4,269

3,516

3,454

3,218

Quarterly data, SEK m   Net sales Cost of goods sold Gross earnings

2008

2007

Q1

Q2

Q3

Q4

Full year

2,131

2,342

2,066

1,864

8,403

–1,635

–1,815

–1,624

–1,541

–6,615

   

Q1

Q2

Q3

Q4

2,060

2,030

1,895

1,955

Full year 7,940

–1,591

–1,568

–1,505

–1,527

–6,191

496

527

442

323

1,788

469

462

390

428

1,749

23.3%

22.5%

21.4%

17.3%

21.3%

22.8%

22.8%

20.6%

21.9%

22.0%

–392

–415

–370

–532

–1,709

–391

–382

–337

–394

–1,504

8

–2

7

0

13

9

12

10

13

44

Operating income

112

110

79

–209

92

87

92

63

47

289

Financial income and expense

–19

–35

–40

–53

–147

–17

–14

–21

–15

–67

93

76

39

–262

–55

70

78

42

32

222

–30

–23

–13

78

12

–23

–28

–5

–25

–81

63

52

26

–184

–43

47

50

37

7

141

0

0

0

1

1

1

0

2

1

4

2.85

2.35

1.22

–8.34

–1.92

2.12

2.24

1.61

0.27

6.24

Sales, administrative & prod. development costs Other operating income & expenses

Earnings before tax Taxes Earnings for the period    of which minority interests Earnings per share, SEK

     

Operating margin, %1)

5.3

5.3

4.2

–4.0

3.0

4.2

4.5

3.3

4.9

4.3

Operating margin,%

5.3

4.7

3.8

–11.2

1.1

4.2

4.5

3.3

2.3

3.6

Cash-flow after net investments

52

263

52

98

465

–72

–88

–126

145

–141

Return on capital employed,%2)

8.9

8.9

8.9

2.4

2.4

10.4

10.3

9.6

8.3

8.3

Return on equity,%2)

8.1

8.4

7.9

–2.3

–2.3

15.0

14.7

13.9

7.3

7.3

Equity/assets ratio,%

36

28

29

29

29

40

37

37

37

37

Investments

79

100

98

125

402

94

109

103

157

463

R&D,% Number of employees2) 1) Excluding 2) 

4.3

3.8

3.6

4.5

4.0

5,747

6,107

6,121

6,004

6,004

restructuring costs, one-off items and amortization on surplus values Rolling 12 months

 

4.4

4.2

4.1

4.2

4.2

4,702

4,997

5,263

5,519

5,519

75

HALDEX 2008

Definitions Capital turnover rate

Return on total assets

Net sales divided by average total assets less non-interest-­ bearing liabilities.

Operating income plus interest income as a percentage of ­average total assets.

Debt/equity ratio

Self-financing rate

Net debt as a percentage of shareholders’ equity.

Cash flow from operations as a percentage of net investments excluding ­acquisitions.

Direct yield

Dividend divided by market price at year-end.

Total return

Earnings per share

Market price at year-end, including dividend, divided by ­market price at ­beginning of year.

Net income for the year divided by average number of shares.

Abbreviations

EBIT multiple

ABA

Market value at year-end plus net debt divided by operating income.

Automotive Brake Adjuster.

Equity/assets ratio

ABS

Shareholders’ equity as a percentage of total assets.

Antilock Brake System.

Gross margin

ADB

Gross profit, i.e. net sales less cost of goods sold, as a percentage of net sales.

Air Disc Brake. AWD

Interest coverage ratio

All Wheel Drive.

Operating income plus interest income divided by interest expenses. CVS Net debt

Commercial Vehicle Systems

Interest-bearing debt less liquid assets. EBS Operating margin

Electronic Brake System.

Operating income as a percentage of net sales. EMB P/E ratio

Electronic Mechanical (Disc) Brake.

Market price at year-end divided by earnings per share. ESP Payout ratio

Electronic Stability Protocol.

Dividend divided by earnings per share. FBF Profit margin

Fabrica Brasileira de Freios.

Operating income plus interest income as a percentage of net sales.

ModulAir

Air dryer product range with modular design. R&D, %

Costs for research and development as a percentage of net sales.

TCM

Trailer Control Module. Return on capital employed

Operating income plus interest income as a percentage of ­average total assets less non-interest-bearing liabilities. Return on equity

Net income for the year as a percentage of shareholders’ equity on a­ verage.

TTM

Trailer Control Module.

76

Addresses

HALDEX 2008

Addresses Austria Haldex Wien Ges.m.b.H. Carlbergergasse 38/Top 13 AT - 1230 Wien Tel: +43 (0)1 8 69 27 97 Fax: +43 (0)1 8 69 27 97 27 E-Mail: [email protected]

Haldex Vehicle Products (Suzhou) Co. Ltd. 6# Long-Pu Road SIP, Suzhou Jiangsu Province PRC 215123 Tel: +86 (0)512 8765 6068 Fax: +86 (0)512 8765 6066

Haldex N.V./S.A. Molenstraat 5 Bus 1 BE - 9860 Balegem (Ghent) Tel: +32 (0)9 363 90 00 Fax: +32 (0)9 363 90 09 E-Mail: [email protected]

Haldex Hydraulics (Qingzhou) Co. Ltd. 1789# Shi Dai Yi Road Qingzhou Economic Development Zone Shandong Province PRC 262500 Tel: +86 (0)536 329 5789 Fax: +86 (0)536 329 5818

Brazil

France

Belgium

Haldex do Brasil Ind. E Com. Ltda Rua Carlos Pinto Alves 29 Jardim Aeroporto BR - 04630-030 São Paulo – SP Tel: +55 11 2135-5000 Fax: +55 (0)11 5034 9515 E-Mail: [email protected]

Haldex Europe SAS 30, rue du Ried Weyersheim FR - 67728 Hoerdt Cedex Tel: +33 (0)3 88 68 22 00 Fax: +33 (0)3 88 68 22 09 E-Mail: [email protected]

Haldex do Brasil Ind. E Com. Ltda Rua Anequirá, 167 Cordovil BR - 212 15-440 Rio de Janeiro - RJ Tel: +55 (0)21 2139 5000 Fax: +55 (0)21 2139 5004 E-Mail: [email protected]

Haldex Hydraulics France 30, rue du Ried Weyersheim FR - 67728 Hoerdt Cedex Tel: +33 (0)3 88 68 22 00 Fax: +33 (0)3 88 68 22 09 E-Mail: [email protected]

Haldex do Brasil Ind. e Com. Ltda Estrada Antônio Soldatelli, 2310 BR - 95270-000 Flores da Cunha - SP Tel: +55 (0)54 3297 3530 Fax: +55 (0)54 3297 3548 E-Mail: [email protected]

Germany

Canada Haldex Ltd. 525 Southgate Drive, Unit 1 CA - Guelph, Ontario N1G 3W6 Tel: +1 (0)519 826 7723 Fax: +1 (0)519 826 9497 E-Mail: [email protected]

China Haldex Concentric (Suzhou) Co. Ltd. 47 Dong Jing Industrial Park Dong Fu Road Loufeng East SIP, Suzhou Jiangsu Province PRC 215123 Tel: +86 (0)512 62653502 E-Mail: [email protected] Haldex International Trading Co. Ltd. 16 A-H, Zhao Feng World Trade Building No. 369 Jiang Su Road Shanghai PRC 200050 Tel: +86 (0)21 5240 0338 Fax: +86 (0)21 5240 0177 E-Mail: [email protected]

Haldex Brake Products GmbH Mittelgewannweg 27 DE - 69123 Heidelberg Postfach 10 25 60 DE - 69015 Heidelberg Tel: +49 (0)6221 7030 Fax: +49 (0)6221 703400 E-Mail: [email protected] Haldex Garphyttan GmbH Neumannstrasse 2 Postfach 10 25 41 DE - 40016 Düsseldorf Tel: +49 (0)211 92 30 40 Fax: +49 (0)211 23 65 17 E-Mail: [email protected] Haldex Hydraulics GmbH Seligenweg 12 DE-95028 Hof Postfach 15 07 DE - 95014 Hof Tel: +49 (0)9281 8950 Fax: +49 (0)9281 87133 E-Mail: [email protected]

Hungary Haldex Hungary Kft Dòzsa György ut 93 HU - 2255 Szentlörinckáta Tel: +36 (0)29 631 300 Fax: +36 (0)29 631 301 E-Mail: [email protected]

India Haldex Concentric Pumps (India) Pvt Ltd Gat No 26/1, 27 & 28 (Part) Off Pune-Nagar Road Lonikand, PO Lonikand Taluka: Haveli IN - Pune 412 216 Tel: +91 20 66 14 2300 Fax: +91 20 66 14 2301 E-Mail: [email protected] Haldex India Limited B 71, MIDC, AMBAD IN - Nashik 422 010 Tel: +91 (0)253 2380094 Fax: +91 (0)253 2380729 E-Mail: [email protected] Haldex India Limited (COO Office) S-304, LBS Marg, Mulund (W), IN - Mumbai – 400080 Tel: +91 (0)22 25645453

Italy Haldex Italia Srl. Via Trento Trieste 116/118 IT - 20046 Biassono (MI) Tel: +39 039 47 17 02 Fax: +39 039 27 54 309 E-Mail: [email protected]

Korea Haldex Korea Ltd. ACE Hitech City #2-305, 54-66, Mullae-dong 3-ga Youngdeungpo-gu KR - Seoul 150-972 Tel: +82 (0)2 2636 7545-7 Fax: +82 (0)2 2636 7548 E-Mail: [email protected]

Mexico Haldex de Mexico S.A. De C.V. Blvd. Pote Carlos Salinas de Gorari KM 7.5 Apartado Postal 108 MX - Apodaca, N.L. C.P. 66600 (Monterrey) Tel: +52 (0)81 8156 9500 Fax: +52 (0)81 8313 7090 Haldex Products de México Calle Río Danubio nº 303 Parque Tecnoindustrial Castro del Río MX - 36810, Irapuato, Gto. Tel: +52 462 606 7501 Fax: +52 462 636 0612

Poland Haldex Sp. z. o.o. Ul. Wodna 2 Kowale PL - 46-320 Praszka Tel: +48 (0)34 350 11 00 Fax: +48 (0)34 350 11 11 E-Mail: [email protected]

Addresses

HALDEX 2008

Russia OOO “HALDEX RUS” Warszawskoe shosse 17, building 2 RU - 117 105 Moscow Tel: + 7 495 747 59 56 Fax: +7 495 786 39 70 E-Mail: [email protected]

Haldex Brake Products AB Telematics Förrådsvägen 18 SE - 141 46 Huddinge Tel: +46 (0)8-756 42 40 Fax: +46 (0)8-756 42 38 E-Mail: [email protected]

Spain

UK

Haldex España S.A. Poligono Industrial « Can Volart » C/Garbi n° 6, nave 3-5 Carretera C-17 Km 15.5 ES - 08150 Parets del Valles (Barcelona) Tel: +34 (0)93 573 10 30 Fax: +34 (0)93 573 07 28 E-Mail: [email protected]

Haldex Hydraulic Systems Division 3 The Archway Radford Road Alvechurch Birmingham GB - B48 7LD Tel: +44 (0)121 445 6545 Fax: +44 (0)121 445 7780

Sweden

Haldex Concentric Pumps Ltd Unit 10, Gravelly Park Tyburn Road Erdington Birmingham GB - B24 8HW Tel: +44 (0)121 327 2081 Fax: +44 (0)121 327 6187 E-Mail: [email protected]

Haldex AB Headquarters Biblioteksgatan 11 Box 7200 SE - 103 88 Stockholm Tel: +46 (0)8-545 049 50 Fax: +46 (0)8-678 89 40 E-Mail: [email protected] Haldex Brake Products AB Instrumentgatan 15 Box 501 SE - 261 24 Landskrona Tel: +46 (0)418-47 60 00 Fax: +46 (0)418-47 60 01 E-Mail: [email protected] Haldex Hydraulics AB Ringvägen 3 SE - 280 40 Skånes Fagerhult Tel: +46 (0)433-324 00 Fax: +46 (0)433-305 46 E-Mail: [email protected] Haldex Hydraulics AB Box 511 Nymärsta Gränd 6 SE - 195 25 Märsta Tel: +46 (0)8-591288 50 Fax: +46 (0)8-591288 60 Mob: +46 (0)70-51897 33 E-Mail: [email protected] Haldex Traction AB Instrumentgatan 15 Box 505 SE - 261 24 Landskrona Tel: +46 (0)418-47 60 00 Fax: +46 (0)418-47 60 01 E-Mail: [email protected] Haldex Garphyttan AB Bruksvägen 3 SE - 719 80 Garphyttan Tel: +46 (0)19-29 51 00 Fax: +46 (0)19-29 51 01 E-Mail: [email protected]

Haldex Ltd. Hilton Road Aycliffe Industrial Park Newton Aycliffe Co. Durham GB - DL5 6SX Tel: +44 (0)1325 310 110 Fax: +44 (0)1325 311 834 E-Mail: [email protected] Haldex Brake Products Ltd. Moons Moat Drive Moons Moat North Redditch, Worcestershire GB - B 98 9HA Tel: +44 (0)1527 499 499 Fax: +44 (0)1527 499 500 E-Mail: [email protected]

USA Haldex Brake Products Corp. 10930 North Pomona Avenue US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 891 9447 E-Mail: [email protected] Air Management 10930 North Pomona Avenue US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 891 9447

Braking Controls 2702 North State Street US - Iola, KS 66749 Tel: +1 (0)620 365 6911 Fax: +1 (0)620 365 5275 Foundation Brake 2400 N.E. Coronado Drive US – Grain Valley, MO 64029 Tel: +1 (0)816 229 7582 Fax: +1 (0)816 224 7090 Friction Products 10715 NW Airworld Drive US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 880 9766 Remanufacturing 5334 Highway 221 South PO Box 1129 US - Marion, NC 28752 Tel: +1 (0)828 652 9308 Fax: +1 (0)828 652 7487 Haldex Garphyttan Corp. 4404 Nimtz Parkway US - South Bend, IN 46628 Tel: +1 (0)574 232 8800 Fax: +1 (0)574 232 2565 Haldex Hydraulics Corp. 2222 15th Street US - Rockford, IL 61104-7313 Tel: +1 (0)815 398 4400 Toll Free: +1 (0)800 572 7867 Fax: +1 (0)815 398 5977 E-Mail: [email protected] Haldex Hydraulics Corp. 214 James Farm Road US - Statesville, NC 28625 Tel: +1 (0)704 873 2587 Fax: +1 (0)704 878 0530 E-Mail: [email protected] Haldex Concentric Inc 800 Hollywood Avenue US – Itasca, IL 60143-1353 Tel: +1 630 773 3355 Fax: +1 630 773 1119 E-Mail: [email protected] Haldex Traction Systems Detroit Office 44712 Helm Street US - Plymouth, MI 48170 Tel: +1 (0)737 734 0435 Fax: +1 (0)737 734 0436 E-Mail: [email protected]

Air Management 1811-B-Hayes Road US - Grand Haven, MI 49417 Tel: +1 (0)616 846 4447 Fax: +1 (0)616 846 3123

Production: Haldex in cooperation with n3 Kommunikation. Print: Elanders Gummesons. Photo: Victor Brott, Anders Eliasson, Magnus Fond, Lisa Wikstrand, Svante Örnberg and others. Illustrations: RCB2.

77

www.haldex.com