Year Ended December 31, 2003 versus
Year Ended December 31, 2002

Net sales

Net sales for 2003 increased by 19%. In reported dollars, the increase was $857 million. The weakening of the U.S. dollar increased reported sales by approximately 11%. Acquisitions made during 2002 and 2003 added incremental sales of $165 million or just over 3%.
  Organic sales increased by slightly under 5%. At the same time, production of light vehicles in the Triad is estimated to have declined by about 2%. Organic sales increased in every quarter compared to the corresponding quarter in 2002. Organic sales grew by 5% in the first quarter, 2% in the second and third quarters and then accelerated to 9% in the fourth quarter. A 3% organic increase in sales of airbag products was principally due to the continuing rollout of Autoliv's Inflatable Curtain, as well as gains in market share in steering wheels and electronics in Europe and North America. An 8% organic growth in sales of seat belt products was primarily due to continued gains in market share, especially in Europe and Korea. The market share gains in Europe were mainly due to a favorable sales mix.
  Sales in North America declined by 3%, while acquisitions added 2% to revenues. Therefore, organic sales decreased by 5% compared to a 3% decline in light vehicle production. Production by the "Big 3" (i.e. GM, Ford and Chrysler), which accounts for most of Autoliv's sales, decreased by 6%, while the North American production of the Asian and European manufacturers rose by 7%. Therefore, the customer mix was unfavorable. Organic sales of airbag products decreased by 6%, partly as a result of the continued phase-out of low-margin inflators. Organic sales of seat belt products increased by 3%. Organic sales of seat belts declined in 2002 due to contracts having expired during the autumn. However, these contracts were replaced by new seat belt orders, starting in 2003.
  Sales in Europe rose by 26%. Organic growth added 6% compared to a 2% decline in European light vehicle production. Currency effects added 19% and acquisitions 1%. Autoliv's market share gains were mainly driven by a favorable vehicle mix.
  Sales growth in the rest of the world, led by Japan (where light vehicle production was flat) and Korea, accelerated throughout the year. Organic sales from companies in these countries rose by 32%. Currency effects increased reported sales by 10%. Strong demand for the Inflatable Curtain was the biggest growth driver. The acquisition of NSK in April 2003 increased reported sales in this region by 26%.

Gross margin

The pressure on sales prices continued, but was more than offset by higher volumes and the beneficial effect of ongoing cost reduction programs which reduced per unit product costs. The gross margin improved in 2003 to 18.9% from 18.1%. The cost reduction programs include the shifting of production to low-labor-cost countries, product redesigns, product standardization, efficiencies from global purchasing activities and improvements in manufacturing productivity. Some of the productivity improvements are the result of the consolidation of production into fewer facilities.

Operating Income

Operating income was $427 million or 8.1% of sales. This compares with operating income of $323 million in 2002, which was 7.3% of sales. The operating margin was boosted in 2003 by 0.6% due to the $31 million one-time license revenue. Selling, General & Administrative expense ("SG&A")was 5.2% of sales in 2003 compared to 4.9% of sales in 2002. Amortization of intangibles, at 0.4% of sales, was unchanged. Research, Development & Engineering ("RD&E") increased to 5.8% of sales from 5.2% in 2002. RD&E is expected to continue to increase, as it is necessary to incur engineering expense to support the growth of order intake. It is also expected that the level of customer reinbursements for engineering work will decrease. These reductions will be partially offset by piece price amortization in sale prices.
  Other income (expense), net was approximately $24 million of income, or 0.4% of sales, compared to approximately $12 million of expense, or 0.3% of sales, in 2002. The one-time license revenue of $31 million was partially offset by expenses of $7 million, primarily due to provisions for contractual issues.
  The expense in 2002 was principally related to severance costs associated with plant consolidations.

Interest Expense, Net

Interest expense, net was $44 million compared to $49 million in 2002. Net debt at December 31, 2003, decreased by $79 million to $785 million from $864 million at December 31, 2002. Average net debt decreased by $67 million during 2003. Strong cash flows from the Company´s operations reduced borrowing requirements. This cash generation was partially offset by higher spending on capital expenditures, acquisitions and the cost of the Company's share repurchase program. The weighted average interest rate, net was 5.0% compared to 5.2% in 2002. Lower interest rates, therefore, along with the lower borrowing requirement contributed to the reduction in interest expense, net.

Income Taxes

The effective tax rate was 30.3% versus 33% in 2002. The decrease in the effective tax rate is primarily the result of a reduced level of losses being generated without any tax benefit, recognition of tax benefits associated with prior years' losses and of tax credits available in the U.S. These benefits were partially offset by increases in reserves for taxes that may become payable in future years as a result of tax audits.

Net Income and Earnings per Share

As a result of the higher operating profit and the lower interest cost, net income was $268 million compared to $176 million in 2002. Net income as a percentage of sales increased to 5.1% from 3.9% in 2002. Earnings per share were $2.81 compared to $1.79 during 2002. The one-time license revenue added 0.5% to the net margin and contributed 27 cents to earnings per share. Currency effects (including both translation and transaction effects) added 19 cents to per share earnings. The Company's share repurchase program improved earnings per share by seven cents. The reduction in the effective tax rate improved earnings per share by 11 cents.