Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

1 Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and include Autoliv, Inc. and all companies in which Autoliv, Inc., directly or indirectly exercises control, which generally means that Autoliv owns more than 50% of the voting rights ("the Company"). Consolidation is also required when the Company is subject to a majority of the risk of loss from or is entitled to receive a majority of the residual returns or both from a variable interest entity’s activities.

All intercompany accounts and transactions within the Company have been eliminated from the consolidated financial statements.

Investments in affiliated companies in which the Company exercises significant influence over the operations and financial policies, but does not control, are reported according to the equity method of accounting. Generally, the Company owns between 20 and 50 percent of such investments.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Policies

New accounting policies issued by the Financial Accounting Standards Board (FASB) and FASB Staff Positions (FSP) which are effective on or after January 1, 2005 are the following:

Statement No. 151 Inventory Cost, an amendment of ARB No. 42, Chapter 4, was issued in November 2004 and is effective for fiscal years beginning after June, 2005. FAS-151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The application of FAS-151 is not expected to have any significant impact on earnings and financial position.

Revised statement No. 123 Share-Based Payment was issued in December 2004 and becomes effective at the beginning of the first interim or annual period beginning after June 15, 2005. Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro-forma disclosure is no longer an alternative to financial statement recognition). The application of FAS-123 (R) is not expected to have a materially different impact than the pro-forma earnings disclosed in the note to the Stock Incentive Plan.

Statement No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. The Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The application of FAS-153 is not expected to have any impact on earnings and financial position.

The American Jobs Creation Act of 2004 (the "Jobs Act"), enacted in October 2004, provides for an 85% dividends received deduction on certain non-U.S. earnings repatriated during 2004 or 2005. FSP 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004, provides guidance with respect to the impact of the Jobs Act on income tax expense and deferred tax liabilities. The Company has not yet completed its analysis of the impact of the Jobs Act repatriation provisions and therefore, as provided by FSP 109-2, the Company has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act.

Stock-Based Compensation

Employee stock-based compensation is recognized using the intrinsic value method. For disclosure purposes, pro forma net income and earnings per share impacts are provided as if the fair value method had been applied.

Translation of non-U.S. Subsidiaries

The balance sheets of non-U.S. subsidiaries are translated into U.S. dollars using year-end rates of exchange. Income statements are translated into U.S. dollars at the average rates of exchange for the year. Translation differences are reflected in other comprehensive income as a separate component of shareholders’ equity.

Revenue Recognition

Revenues are recognized when there is evidence of a sales agreement, delivery of goods has occurred, the sales price is fixed and determinable and the collectibility of revenue is reasonably assured.

The Company records revenue from the sale of manufactured products upon shipment. Accruals are made for retroactive price adjustments if probable and can be reasonably estimated.

Net sales include the sales value exclusive of added tax.

Cost of Sales

Shipping and handling costs are included in cost of sales. Contracts to supply products which extend for periods in excess of one year are reviewed when conditions indicate that costs may exceed selling prices, resulting in losses. Losses on long-term supply contracts are recognized when estimable.

Warranties and Recalls

The Company records liabilities for product recalls when probable claims are identified and it is possible to reasonably estimate costs. Recall costs are costs incurred when the customer decides to formally recall a product due to a known or suspected safety concern. Product recall costs typically include the cost of the product being replaced as well as the customer cost of the recall, including labor to remove and replace the defective part. Provisions for warranty claims are estimated based on prior experience and likely changes in performance of newer products and the mix and volume of products sold. The provisions are recorded on an accrual basis.

Research, Development and Engineering (R,D&E)

Research and development expenses are charged to income as incurred. Engineering expenses are normally charged to income as incurred.

These expenses are reported net of royalty income and income from contracts to perform engineering design and product development services. Such income is not significant in any period presented. In addition, certain engineering expenses related to long-term supply arrangements are capitalized when the defined criteria, such as the existence of a contractual guarantee for reimbursement, are met. The aggregate amount of such assets is not significant in any period presented.

Insurance deposits

The Company has entered liability and recall insurance contracts to mitigate the risk of costs associated with product recalls. This is accounted for under the deposit method of accounting based on the existing contractual terms.

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. Construction in progress generally involves short-term projects for which capitalized interest is not significant. The Company provides for depreciation of property, plant and equipment by annual charges to income, computed under the straight-line method over the assets estimated useful lives, ranging from 3 to 40 years. Repairs and maintenance are expensed as incurred.

Goodwill and Other Intangible Assets

Intangible assets are recorded at historical cost. Until the end of the financial year ended December 31, 2001, goodwill was amortized on a straight-line basis over periods ranging from 5 to 40 years.

Since January 2002, in accordance with FAS-142, goodwill is no longer amortized. Other intangible assets, principally related to acquired technology, are amortized over their useful lives which range from 5 to 25 years.

Impairment of Goodwill and Long-lived Assets

The Company evaluates the carrying value of goodwill and long-lived assets for potential impairment when indications of impairment appear and for goodwill in addition at least annually. Impairment testing is primarily done using the cash flow method, using discounted cash flows for goodwill and undiscounted cash flows for long-lived assets other than goodwill. See guidance in Paragraph B88 of SFAS 142.

The Company discounts projected operating cash flows using its weighted average cost of capital. The impairment testing of goodwill is based on four different product groups. The product groups Electronics, Textiles, Seat Sub-Systems and Other are separated for testing.

Income Taxes

Current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current year. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to temporary differences and carry-forwards that result from events that have been recognized in either the financial statements or the tax returns, but not both. The measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws. Deferred tax assets are reduced by the amount of any tax benefits that are not expected to be realized. Tax assets and liabilities are not offset unless attributable to the same tax jurisdiction and netting is possible according to law and expected to take place in the same period.

Tax benefits associated with tax positions taken in the Company’s income tax returns are initially recognized in the financial statements when it is probable that those tax positions will be sustained upon examination by the relevant taxing authorities. The Company’s evaluation of its tax benefits is based on the probability of the tax position being upheld if challenged by the taxing authorities (including through negotiation, appeals, settlement and litigation). Whenever a tax position does not meet the initial recognition criteria, the tax benefit is subsequently recognized if there is a substantive change in the facts and circumstances that cause a change in judgment that the tax position is probable of being sustained upon examination by the relevant taxing authorities. In cases where tax benefits meet the initial recognition criterion, the Company continues, in subsequent periods, to assess its ability to sustain those positions. In the event that the facts and circumstances supporting a previously recognized tax benefit change, and subsequently it becomes probable that the Company will lose the tax position, the Company recognizes a loss contingency equal to its best estimate (or low end of the range of loss) when that loss is both probable and estimable.

The Company’s effective tax rate includes the impact of undistributed non-U.S. earnings for which no U.S. tax has been provided because such earnings are indefinitely reinvested outside the U.S. As described in Note 4, the effective tax rate does not reflect the impact of the Jobs Act passed in October 2004. The Company is in the process of evaluating whether it will repatriate foreign earnings during 2005 under the temporary repatriation provisions. Non-U.S. earnings remittances are planned based on cash needs in the U.S. and in the Company’s non-U.S. subsidiaries. The Company more or less continuously reviews its balance sheet, financing structure, business plans, expected cash flows and tax position. As a result of this ongoing review, the Company may in the future revise its assumptions with regard to the reinvestment of non-U.S. earnings.

Earnings per Share

The Company calculates earnings per share (EPS) by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period (net of treasury shares). The EPS also reflects the potential dilution that could occur if common stock were issued.

There is no material difference between basic and diluted earnings per share in 2004, 2003 and 2002. The dilutive effect of stock options was immaterial in all periods presented.

Cash Equivalents

The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents.

Financial Instruments

The Company uses derivative financial instruments, ("derivatives"), as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not utilize financial instruments for trading or other speculative purposes. The use of such derivatives is in accordance with the strategies contained in the Company’s overall financial policy. The derivatives outstanding at year-end are either interest swaps, cross-currency interest rate swaps or foreign exchange swaps.

The Company adopted FAS-133, as amended by FAS-138, effective January 1, 2001. The cumulative transition adjustment was not significant.

The Company’s criteria for a derivative to achieve hedge accounting under FAS 133 include the following four elements: 1) the hedge transaction is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk, 2) the effectiveness of the hedge can be reliably measured, 3) adequate documentation of the hedging relationships has been prepared at the inception of the hedge, and 4) for cash flow hedges, the forecasted transaction that is subject to the hedge must be highly probable.

The changes in the fair values of the hedges are recognized in the income statement at each balance sheet date if certain criteria are not met. The fair value of the Company’s derivatives are estimated based on dealer quotes or on pricing models using current assumptions.

When the following three criteria are met, any change in the fair value of the hedge is not recognized in the income statement for the period but recorded in equity as a component of Other Comprehensive Income, (OCI): 1) an anticipated future cash flow is hedged, 2) the derivative used achieves hedge-accounting, and 3) the underlying position has not been recognized in the financial statements. There has been no material reclassifications from OCI to the income statement in 2004 and likewise, no material reclassifications are expected in 2005. When a hedge is classified as a fair value hedge, the change in the fair value of the hedge is recognized in the income statement along with the offsetting change in the fair value of the hedged item.

The use of derivatives is only related to hedges. These hedges are designated either as cash flow hedges or fair value hedges with certain exceptions, i.e. achieving hedge accounting under US GAAP. Some hedge transactions, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates, do not qualify for hedge accounting under US GAAP. The mark-to-market value of these derivatives was immaterial at year-end. As all these exceptions relate to financing, any amount recognized in the income statement is classified as adjustments to "Interest expense".

All swaps principally match the terms and maturity of the underlying debt. For further details on the Company’s debt, see Note 12.

The fair market value of the debt related hedging instruments are reported in "Other current assets", "Investments and other non-current assets", "Other current liabilities" and "Other non-current liabilities" depending on whether they have a positive or a negative value and depending on their maturity.

Receivables

Accounts receivable are evaluated on a specific identification basis. The Company has guidelines for calculating provisions for bad debts based on the age of receivables. In determining the amount of a bad debt reserve, management uses its judgment to consider factors such as, the prior experience of the Company, the experience of other enterprises in the same industry, the debtor’s ability to pay, and/or an appraisal of current economic conditions. Collateral is typically not required. There can be no assurance that the amount ultimately realized for receivables will not be materially different than that assumed in the calculation of the reserves.

Receivables and Liabilities in non-functional currencies

Receivables and liabilities not denominated in functional currencies are converted at year-end rates of exchange. Transaction gains (losses), net reflected in income amounted to $(8.2) million in 2004, $(15.7) million in 2003 and $(3.2) million in 2002.

Inventories

The cost of inventories is computed according to the first-in, first-out method (FIFO). Inventories are evaluated based on individual or, in some cases, groups of inventory items. Reserves are established to reduce the value of inventories to the lower of cost or market, with the market generally defined as net realizable value for finished goods and replacement cost for raw materials and work-in process. Excess inventories are quantities of items that exceed anticipated sales or usage for a reasonable period. The Company has guidelines for calculating provisions for excess inventories based on the number of months of inventories on hand compared to anticipated sales or usage. Management uses its judgment to forecast sales or usage and to determine what constitutes a reasonable period. There can be no assurance that the amount ultimately realized for inventories will not be materially different than that assumed in the calculation of the reserves.

Reclassifications

Certain prior-year amounts have been reclassified to conform to current year presentation, see also Note 4.

2 Significant Business Acquisitions

Business acquisitions generally take place to either gain key technology or strengthen Autoliv’s position in a certain geographical area.

As of December 31, 2004, the Chinese airbag company Autoliv (Shanghai) Vehicle Safety Systems is fully consolidated, since Autoliv has completed an agreement to purchase the outstanding 40% shareholding and make it a wholly owned subsidiary. In April 2002, Autoliv (Shanghai) became the first company in China to locally produce airbags and remains the market leader. This subsidiary had external sales in 2004 of nearly $27 million.

As of October 1, 2004, Autoliv started to consolidate its seat belt joint venture in Nanjing, China. Autoliv’s interest remains 50%, but through an amendment in the ownership agreement Autoliv has received a controlling position in the company. This subsidiary had external sales in 2004 of nearly $30 million.

As of April 1, 2004, Autoliv started to consolidate its joint venture in Taiwan with business in both seat belts and airbags. Autoliv’s interest remains 59%, but through an amendment in the ownership agreement Autoliv has received a controlling position in the company. This subsi-diary had external sales in 2004 of $17 million.

As of July 1, 2003 Autoliv acquired 100% of the shares in the German company Protektor which specializes in seat belts for buses, heavy trucks, forklifts and other special-purpose vehicles. The Protektor operations had approximately $10 million in annual sales and have been consolidated since July 1, 2003. In June, 2003 Autoliv acquired the net assets of Nippon Steering Industries (NSI), a joint venture between the privately-held Japanese automotive parts company KIW and Autoliv’s own steering wheel company in Japan, Autoliv-Izumi. Autoliv also acquired KIW’s assets in steering wheels. The operations have been consolidated since June 2003 and had nearly $20 million in annual sales.

In April 2003, Autoliv exercised its options to acquire the remaining 60% of the shares in NSK’s Asian seat belt operations to enhence the Company’s presence among Japanese vehicle manufacturers. The Company accounted for its initial 40% investment in the NSK operations under the equity method. As a result, operations, which had annual sales of approximately $150 million, have been consolidated since April 1, 2003. In March 2003, Autoliv exercised its option and acquired the remaining 17% of the shares in Livbag, Europe’s leading producer of inflators and initiators for automotive safety systems. Livbag and its initiator subsidiary NCS S.A. had approximately $400 million in annual sales mainly to other Autoliv companies.

In September 2002, Autoliv acquired the 10% stake in Autoliv QB Inc., a Philippine company, formerly held by one of two local shareholders. Autoliv has thereby increased its ownership in the company from 75% to 85%. In addition, Autoliv agreed to inject 18 million Philippine Pesos ($0.3 million) into the company as new share capital. The remaining local shareholder did not participate in the equity increase. Thus, Autoliv effectively increased its interest in Autoliv QB, Inc. to 91%.

In April, 2002 the acquisition of the Restraint Electronics Business of Visteon Corporation was completed, mainly to get acess to the North American safety electronics market. The operations that Autoliv acquired had $150 million in annual sales. The Company also sold its French steel component company, Autoliv Composants S.A.S, in the beginning of 2002. The sale of Autoliv Composants did not have a material impact on Autoliv’s consolidated sales or earnings.

The acquisitions have been accounted for using the purchase method of accounting, and accordingly, the results of operations of the entities have been consolidated since the respective dates of acquisition. Investments in which the Company previously exercised significant influence, but did not control prior to these acquisitions, were accounted for using the equity method. The purchase price of the acquisitions amounted to $15 million in 2004, $33 million in 2003 and $25 million in 2002. Goodwill of $11 million, $15 million and $7 million, respectively, was associated with these acquisitions.

There is no goodwill that is expected to be deductible for tax purposes arising from these acquisitions.

3 Fair Values of Financial Instruments

The following methods were used by the Company to estimate its fair value disclosures for financial instruments.

Current Financial Assets and Liabilities

The carrying amounts reported in the balance sheet for current financial assets and liabilities approximate their fair values because of the short maturity of these items.

The only exception is the short-term portion of long-term debt for which the fair value exceeds the carrying value by $2.5 million.

Long-Term Debt and Other Non-Current Financial Assets and Liabilities

The carrying amounts reported in the balance sheet for long-term debt and other non-current financial assets and liabilities, including their respective short-term portion, represent their fair values if they are the hedged item in a fair value hedge or a derivative.

For hedged liabilities in cash flow hedges, the fair value exceeds the carrying value with $10 million. The fair value of unhedged items exceeds the carrying value with $1 million.

The method for establishing the fair value of the debt is based on dealer quotes or on pricing models using current assumptions.

The fair value of these debt instruments and related swaps are summarized in Note 12.

4 Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. On December 31, 2004, the Company had net operating loss carry-forwards ("NOL’s") of approximately $77 million, of which approximately $45 million have no expiration date. The balance expire on various dates through 2019. Valuation allowances have been established which partially offset the related deferred assets. The Company provides valuation allowances against potential future tax benefits when, in the opinion of management, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized. Such allowances are primarily provided against NOL’s of companies that have perennially incurred losses, as well as the NOL’s of companies that are start-up operations and have not established a pattern of profitability.

The Company has reserves for taxes that may become payable in future periods as a result of tax audits. It is the Company’s policy to establish reserves for taxes that may become payable in future years as a result of an examination by tax authorities. The Company establishes the reserves based upon management’s assessment of exposure associated with permanent tax differences, tax credits and interest expense applied to temporary difference adjustments. The tax reserves are analyzed at each balance sheet date and adjustments are made as events occur to warrant adjustment to the reserves. At any given time, the Company is undergoing tax audits in several tax jurisdictions and covering multiple years. The accrual for these reserves was $111.3 million at December 31, 2004 and $103.0 million at December 31, 2003. The increase in the tax reserve was primarily the result of revisions to the best reasonable estimate of the tax exposure liability and interest accrued. This was partially offset by a decline in the tax reserve as a result of the closure of tax audits in non-U.S. jurisdictions, and revisions to the best reasonable estimate of the tax exposure liability. This balance is the Company’s best estimate of the potential liability for tax contingencies. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law, both legislated and concluded through the various jurisdictions’ court systems. It is the opinion of the Company’s management that the possibility is remote that costs in excess of those accrued will have a material adverse impact on the Company’s financial statements. The Company expects the completion of certain of these tax audits in the near term. However, based on currently available information, the Company is not able, at this time, to determine if it is reasonably possible that the final outcome of tax examinations will result in a materially different outcome than assumed in its tax reserves.

In order to conform to best practices in its balance sheet presentation, the Company reclassified certain deferred tax amounts, aggregating to $76.3 million of non-current assets and $69.1 million of non-current liabilities in 2003, to current balance sheet captions. Reserves for taxes that may become payable in future years are now included in taxes payable.

U.S. federal income taxes have not been provided on approximately $1.5 billion of undistributed earnings of non-U.S. operations, which are considered to be permanently reinvested. These earnings generally would not be subject to withholding taxes upon distribution to intermediate holding companies. The Company has determined that it is not practicable to calculate the deferred tax liability if the entire $1.5 billion of earnings were to be distributed to the U.S.

The Jobs Act, enacted in October 2004, provides for an 85% dividends received deduction on certain non-U.S. earnings repatriated during 2004 or 2005. The benefit is intended to allow companies to distribute earnings to the U.S. from non-U.S. subsidiaries at an effective tax rate of approximately 5.25% if those earnings are reinvested in the U.S. In addition to meeting numerous statutory and regulatory requirements, the Company must establish a domestic reinvestment plan approved by the Company’s chief executive officer and board of directors in order for a dividend to qualify for the deduction.

The Company is in the process of evaluating whether it will repatriate foreign earnings during 2005 under the temporary repatriation provisions. The range of reasonably possible amounts being considered for repatriation under the Jobs Act is between zero and $1.5 billion. The Company has not completed its analysis, made any decisions concerning the benefit, nor formulated any reinvestment plan. The Company is awaiting the passage of statutory technical corrections as well as detailed regulatory guidance prior to making a determination regarding repatriation under the Jobs Act. The Company expects to complete the evaluation of the benefits of the provision within a reasonable period of time following the issuance of such guidance. If such guidance is favorable, the Company might make qualifying distributions of up to $400 million during 2005. The Company is not yet in a position to calculate the tax impact of a qualifying repatriation. However, since the Company’s non-U.S. earnings, at December 31, 2004 are deemed to be permanently reinvested, the Company estimates that at the special 5.25% effective tax rate, a distribution in this range could result in a financial statement tax cost of up to $20 million.

5 Receivables

6 Inventories

7 Investments and Other Non-current Assets

As of December 31, 2004, the Company has invested in seven affiliated companies which it does not control, but in which it exercises significant influence over operations and financial position. These investments are accounted for under the equity method.

Through an amendment to the ownership agreement Autoliv has during 2004 obtained a controlling position in the companies in Nanjing, China and in Taiwan.

As of December 31, 2003, the Company had nine affiliated companies.

The Company is applying deposit accounting for an insurance arrangement.

8 Property, Plant and Equipment

No significant impairments were recognized during 2004 or 2003. During 2002, impairment provisions totaling $8 million were recognized. They were principally related to the plant closures in Indianapolis and Denver and further asset write-offs in the Seat Sub-System division.

The net book value of Machinery and equipment under capital lease contracts recorded as of December 31, 2004 and 2003, amounted to $0.1 and $1.4 million, respectively. The net book value of Buildings under capital lease contracts recorded as of December 31, 2004 and 2003, amounted to $7.2 and $8.1 million, respectively.

9 Goodwill and Intangible Assets

No significant impairments were recognized during 2004 or 2003. During 2004, Goodwill increased by $10.6 million when Autoliv (Shanghai) Vehicle Safety System was acquired. During 2003, $2 million of intellectual property was acquired as part of the Protektor acquisition. The property is amortized over 5 - 10 years and had at December 31, 2004 a residual value of $2 million. Another $5 million of intellectual property was acquired as part of the Livbag acquisition. That property is amortized over 5 years and had at December 31, 2004 a residual value of $3 million.

At December 31, 2004, goodwill assets net include $1,208 million associated with the 1997 merger of Autoliv AB and the Automotive Safety Products Division of Morton International, Inc.

The aggregate amortization expense on intangible assets other than goodwill was $21.1 million in 2004 and $21.1 million in 2003. The estimated amortization expense is as follows (in millions): 2005: $12.1; 2006: $12.4; 2007: $12.5; 2008: $11.3 and 2009: $10.8

10 Restructuring and Other Liabilities

Restructuring items

During October 2001, a restructuring package was introduced to improve profitability and offset the effects of expected downturn in light vehicle production. The costs and provisions for this package, totaling $65 million, were charged to the third quarter 2001 results and were referred to as Unusual Items. The Unusual Items also included provisions for contractual, warranty and liability issues related to ongoing litigation. The litigation is still ongoing.

The restructuring package mainly included restructuring costs and asset write-offs of the Seat Sub-System division, severance costs related to the U.S. and the Swedish textile operations and additional costs incurred for the partial integration of a former OEA plant into the main U.S. inflator operation. Of the total of $65 million, $24 million was attributable to Impairment, $12 million to Restructuring-employee, $10 million to Warranty, $7 million to Contractual losses and $12 million to Liability.

2002

In 2002, restructuring provisions of $9 million were made for severance costs associated with plant consolidations in the U.S. These severance provisions have been charged against "Other income and expense" in the income statement in the fourth quarter of 2002. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2001 to December 31, 2002.

2003

In 2003, employee related restructuring provisions of $5.9 million were made for severance costs related to plant consolidation in Europe. The provision has been charged against other income and expense in the income statement in the fourth quarter of 2003. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2002 to December 31, 2003.

2004

In 2004, employee–related restructuring provisions of $2.8 million were made for severance costs related to plant consolidation in Europe. The provision has been charged against other income and expense in the income statement during 2004. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2003 to December 31, 2004.

The decrease in number of employees expected as part of the restructuring activities when the provisions were made in the third quarter 2001, was 521. At December 31, 2001, 104 employees were terminated or had left voluntarily and 417 employees remained to be severed. During 2002, 265 employees were terminated or left voluntarily. As part of the restructuring activities in North America in 2002, for which provisions were made in the fourth quarter of 2002, a decrease of 888 employees was expected. Therefore, at December 31, 2002, 1,040 employees remained to be terminated as part of the restructuring activities covered by the reserves. During 2003, 1,038 employees were terminated or left voluntarily. As part of the restructuring activities in Europe, for which provisions were made in the fourth quarter of 2003, 110 employees are expected to be severed. Therefore, at December 31, 2003, a decrease of 112 employees remained as part of the restructuring activities covered by the reserves. During 2004, as part of restructuring in Europe additional 84 employees are expected to be severed for which provisions were made. Out of those, 74 left during the year. In addition, another 26 employees were terminated or left voluntarily during 2004. Therefore, at December 31, 2004, a decrease of 96 employees remains as part of the restructuring activities covered by the reserves.

11 Product Related Liabilities

Autoliv is exposed to product liability and warranty claims in the event that our products fail to perform as expected and such failure results, or is alleged to result, in bodily injury and/or property damage. The Company has reserves for product risks. Such reserves are related to product performance issues including recall, product liability and warranty issues.

The Company records liabilities for product related risks when probable claims are identified and it is possible to reasonably estimate costs. Provisions for warranty claims are estimated based on prior experience and likely changes in performance of newer products and the mix and volume of the products sold. The provisions are recorded on an accrual basis.

The table below summarizes the change in the balance sheet position of the product related liabilities from December 31, 2001 to December 31, 2003, and to December 31, 2004.

12 Debt and Credit Agreements

As part of its debt management the Company enters into derivatives to achieve economically effective hedges and to minimize the cost of its funding.

The fair market value adjustments associated with these debt-related derivatives ("DRD") are reported in "Other current assets", "Investments and other non-current assets", "Other current liabilities" and "Other non-current liabilities", depending on whether they have a positive or negative value and depending on their maturity.

In the following, short-term debt and long-term debt are discussed including DRD, i.e. debt including cash flow from hedges, but in the "Debt Profile" table it is also shown excluding DRD, i.e. reconciled to debt as reported in the balance sheet.

1) Short- and long-term interest bearing liabilities and related derivatives, less cash and cash equivalents.

Short-Term Debt

The Company has two commercial paper programs: one $1,000 million U.S. program, which at December 31, 2004, had notes of $106 million outstanding at a weighted average interest rate of 2.3%, and one €485 million Swedish program, which at December 31, 2004 was unutilized. All of the notes outstanding were reclassified as long-term debt since they are backed with a committed facility maturing in 2009.

The Company also has credit facilities with a number of banks that manage the subsidiaries’ cash pools. In addition, the Company’s subsidiaries have credit agreements, principally in the form of overdraft facilities, with a number of local banks. Excluding the commercial paper programs, total available facilities as of December 31, 2004, amounted to $397 million, of which $168 million was utilized. The aggregate amount of unused short-term lines of credit at December 31, 2004, was $229 million. Furthermore, $150 million represents the short-term portion of long-term loans, primarily notes under the Swedish medium-term note program; as described below. The weighted average interest rate on total short-term debt outstanding at December 31, 2004 and 2003, was 4.3% and 3.0%, respectively.

Long-Term Debt

The Company issued a €300 million Eurobond in 2001 which matures in May 2006. All proceeds of the issue were swapped into USD, totalling $265 million. Under the Swedish medium-term note program of SEK 4 billion (approximately $605 million), 3- to 7-year notes have been issued in Euro at interest rates of 2.7% to 6.4% and in SEK at interest rates of 3.2% to 6.8%. In total $108 million of notes, with a remaining maturity of more than one year, were outstanding at year-end. Commercial paper borrowings, in the amount of $106 million outstanding at December 31, 2004, are classified as long-term because the Company intends to refinance these borrowings on a long-term basis either through continued commercial paper borrowings or utilization of available credit facilities. The remaining other long-term debt, $30 million, consisted primarily of fixed rate loans and capital leasing.

The Company has an $850 million revolving credit facility, ("RCF"), syndicated among 16 banks. The agreement is divided into two facilities, one long-term part of $570 million, and one 364 day facility of $280 million, which may – but is not guaranteed – to be renewed each March. In 2004, the banks agreed to extend the maturity of the long-term facility to March 2009 and also to renew the short-term facility. The overall commitment of $850 million supports the Company’s commercial paper borrowings as well as being available for general corporate purposes. Borrowings are unsecured and bear interest based on the relevant LIBOR rate. The Company pays a facility fee based on the unused amount of the RCF. Borrowings are prepayable at any time and are due at expiration. In 2004, the banks also agreed to remove the financial covenant requirements of the RCF. The Company therefore no longer has to maintain a certain level of debt to earnings and a certain interest coverage ratio in order to have the facilities available. The RCF was not utilized at year-end.

In the Company’s financial operations, risk arises in connection with the investment of liquid assets and when entering into forward exchange agreements, swap contracts or other financial instruments. In order to reduce this risk, deposits and financial instruments can only be entered with a limited number of banks up to a risk amount of $75 million per bank. In addition, deposits can be made in Swedish government short-term notes as approved by the Company’s Board of Directors. The policy of the Company is to work with banks that have a high credit rating and that participate in the Company’s financing.

For a description of hedging instruments used as part of debt management, see the Financial Instruments section of Note 1. The first table on the next page shows debt maturity as cash flow in the upper part which is reconciled with reported debt in the last row. The third table on the next page shows the fair value of derivatives excluding related debt and will therefore not reconcile with the Fair value of debt table.

Debt Profile – Cash Flow Including Hedge

1) Interest rates will change as rollovers occur prior to final maturity. 2) Debt Related Derivatives, (DRD), i.e. the fair market value adjustments associated with hedging instruments as adjustments to the carrying value of the underlying debt. 3) Primarily denominated in JPY and Euro.

13 Shareholders’ Equity

The components of other comprehensive income are net of any related income tax effects.

Share Repurchase Program

Autoliv has since October 21, 2002 reactivated its stock-repurchase program under an existing authorization from May 2000, which authorized management to repurchase up to 10 million Autoliv shares. The Board of Directors has approved an expansion of the Company’s stock repurchase program and authorized the repurchase of an additional 10 million shares in Autoliv, Inc. The decision was taken on April 29, 2003.

In total, Autoliv has repurchased approximately 11.6 million shares since May 2000 for cash of $320.4 million. Of the total amount of repurchased shares, 0.8 million shares have been utilized in the stock incentive plans whereof 0.5 million during 2004.

Shareholder Rights Plan

Autoliv has a shareholder rights plan under which each shareholder of record as of November 6, 1997, received one right for each share of Autoliv common stock held. Each right entitles the registered holder, upon the occurrence of certain events, to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock with a par value of $1 at a price of $150, subject to adjustment.

Initially the rights will be attached to all Common Stock Certificates representing shares then outstanding and upon the occurrence of certain events the rights will separate from the Common Stock, and each holder of a right will have the right to receive, upon exercise, common stock (or in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the right.

Autoliv may redeem the rights in whole at a price of one cent per right.

14 Supplemental Cash Flow Information

The Company’s non-cash investing and financing activities were as follows:

15 Stock Incentive Plan

Under the Autoliv, Inc. 1997 Stock Incentive Plan (the "Plan") adopted by the Shareholders, and as further amended, awards have been made to selected executive officers of the Company and other key employees in the form of stock options and Restricted Stock Units ("RSUs"). All options are granted for 10 year terms, have an exercise price equal to the stock market price on the date of grant, and become exercisable after one year of continued employment following the grant date. Each RSU represents a promise to transfer one of the Company’s shares to the employee after three years of service following the date of grant or upon retirement. The Plan provides for the issuance of up to 3,085,055 common shares for awards under the Plan.

The Company applies APB Opinion 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plan. Accordingly, no compensation cost for stock option grants has been recognized in the Company’s financial statements. The Company is, however, recording compensation expense for the RSUs over the service lives of the employees during the three year vesting period. The total compensation expense for the 2004 and 2003 RSUs will be approximately $4 million and $3 million, respectively.

Had compensation cost for all of the Company’s stock-based compensation awards been determined based on the fair value of such awards at the grant date, consistent with the methods of FAS-123 "Accounting for Stock-Based Compensation", the Company’s total and per share net income would have been as follows:

The weighted average fair value of options granted during 2004, 2003 and 2002 was estimated at $11.11, $5.55 and $5.23, respectively, using the Black-Scholes option-pricing model based on the following assumptions:

The following summarizes information about stock options outstanding on December 31, 2004:

16 Contingent Liabilities

Legal Proceedings

Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters.

Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, it is the opinion of management that litigation to which the Company is currently a party will not have a material adverse impact on the consolidated financial position of Autoliv, but the Company cannot provide assurance that Autoliv will not experience any material product liability or other losses in the future.

In December 2003, a U.S. Federal District Court awarded a supplier of Autoliv ASP, Inc. approximately $27 million plus pre-judgment interest of $ 6 million in connection with a commercial dispute. Autoliv has appealed the verdict and the supplier has cross-appealed in regard to the calculation of the amount of pre-judgment interest. The appeal and the cross-appeal are currently pending before the United States Court of Appeals for the Federal Circuit. Briefing before the court of appeals is completed, but oral argument has not yet been scheduled. While legal proceedings are subject to inherent uncertainty, Autoliv believes that it has meritorious grounds for appeal, which would result in a new trial, and that it is possible that the judgment could be eliminated or substantially altered. Consequently, in the opinion of the Company’s management, it is not possible to determine the final outcome of this litigation at this time. It cannot be assured that the final outcome of this litigation will not result in a loss that will have to be recorded by the Company.

The Company believes that it is currently adequately insured against product and other liability risks, at levels sufficient to cover potential claims, but Autoliv cannot be assured that the level of coverage will be sufficient in the future or that such coverage will be available on the market.

Product Warranty and Recalls

Autoliv is exposed to product liability and warranty claims in the event that our products fail to perform as expected and such failure results, or is alleged to result, in bodily injury and/or property damage. The Company cannot assure that it will not experience any material warranty or product liability losses in the future or that it will not incur significant costs to defend such claims. In addition, if any of our products are or are alleged to be defective, Autoliv may be required to participate in a recall involving such products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. A recall claim or a product liability claim brought against Autoliv in excess of available insurance, may have a material adverse effect on the Company´s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold us responsible for some or all of the repair or replacement costs of defective products under new vehicle warranties, when the product supplied did not perform as represented. Accordingly the future costs of warranty claims by our customers may be material, however, we believe our established reserves are adequate to cover potential warranty settlements. Autoliv´s warranty reserves are based upon our best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the appropriateness of these reserves, and adjusts them when appropriate. However, the final amounts determined to be due related to these matters could differ materially from our recorded estimates.

17 Lease Commitments

Operating Lease

The Company leases certain offices, manufacturing and research buildings, machinery, automobiles and data processing and other equipment under operating lease contracts. The operating leases, some of which are non-cancelable and include renewals, expire at various dates through 2025. The Company pays most maintenance, insurance and tax expenses relating to leased assets. Rental expense for operating leases was $20.6 million for 2004, $21.0 million for 2003 and $17.5 million for 2002.

At December 31, 2004, future minimum lease payments for non-cancelable operating leases total $86.1 million and are payable as follows (in millions): 2005: $17.8; 2006: $14.4; 2007: $11.2; 2008: $9.2; 2009: $6.1; 2010 and thereafter: $27.4.

Capital Lease

The Company leases certain property, plant and equipment under capital lease contracts. The capital leases expire at various dates through 2015. At December 31, 2004, future minimum lease payments for non-cancelable capital leases total $8.1 million and are payable as follows (in millions): 2005: $2.0; 2006: $1.3; 2007: $1.2; 2008: $0.8; 2009: $0.7; 2010 and thereafter: $2.1.

18 Retirement Plans

Defined Contribution Plans

Many of the Company’s employees are covered by government sponsored pension and welfare programs. Under the terms of the programs, the Company makes periodic payments to various government agencies. In addition, in some countries the Company sponsors or participates in certain non-governmental defined contribution plans. Contributions to multi-employer plans for the year ended December 31, 2004, 2003 and 2002 were $2.8 million, $2.5 million and $2.6 million respectively. Contributions to defined contribution plans for the years ended December 31, 2004, 2003, and 2002 were $15.4 million, $13.1 million and $7.4 million, respectively.

Defined Benefit Plans: U.S. Defined Benefit Pension Plans

The Company has non-contributory defined benefit pension plans covering employees at most U.S. operations. The benefits are based on an average of the employee’s earnings in the years preceding retirement and on credited service. Certain supplemental unfunded plan arrangements also provide retirement benefits to specified groups of participants. The funding policy for U.S. plans is to contribute amounts sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended, plus any additional amounts that the Company determines to be appropriate.

The Company has frozen participation in the Autoliv ASP, Inc. Pension Plan to include only those employees hired as of December 31, 2003; consequently the Company amended the Autoliv ASP, Inc. Employee Savings and Investment Plan to provide an additional company contribution on behalf of participants in the plan. Each participant who is excluded from participation in the Autoliv ASP, Inc. Pension Plan will receive an additional employer contribution to the Autoliv ASP, Inc. Employee Savings and Investment Plan equal to two percent of such participant’s defined compensation for the plan year.

The measurement date used to determine benefit measurements corresponds to the fiscal year end, December 31.

The components of net benefit cost associated with the U.S. non-contributory defined benefit retirement plans are as follows:

The amortization of the net actuarial loss is expected to increase pension expense by $0.7 million per year over the ten year estimated remaining service lives of the plan participants. Pension expense associated with these plans was $12.4 million in 2004 and is expected to be around $11.9 million in 2005.

The changes in benefit obligations and plan assets for the U.S. non-contributory defined benefit plans for the periods ended December 31, are as follows:

The accumulated benefit obligation for the U.S. non-contributory defined benefit pension plans were $106.6 million and $82.3 million at December 31, 2004 and 2003, respectively.

The weighted averages of assumptions used to determine the U.S. benefit obligation as per December 31, are as follows:

The weighted averages of assumptions used to determine the U.S. net periodic benefit cost for years ended December 31, are as follows:

The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the Projected Benefit Obligation and annual pension expense. The discount rate has been set based on the rates of return on high-quality fixed-income investments currently available at the measurement date and expected to be available during the period the benefits will be paid. In particular, the yields on bonds rated AA or better on the measurement date have been used to set the discount rate. The U.S. Plans have, for a number of years, invested more than 85% of plan assets in equities and nearly 15% in debt securities. The investment objective is to provide an attractive risk-adjusted return that will insure the payment of benefits while protecting against the risk of substantial investment losses. Correlations among the asset classes are used to identify an asset mix that Autoliv believes will provide the most attractive returns. Long-term return forecasts for each asset class using historical data and other qualitative considerations to adjust for projected economic forecasts are used to set the expected rate of return for the entire portfolio. The Company has assumed a long-term rate of return on plan assets of 8.5%.

The major categories of plan assets as a weighted average percentage of the fair value of total plan assets for years ended December 31, are as follows:

The Company expects to contribute $13.6 million to its pension plan in 2005 and is currently projecting a funding level of $8.0 million in the years thereafter.

The estimated future benefit payments for the U.S. pension benefits, which reflect expected future service, as appropriate, are disclosed in the table below. The amount of benefit payments in a given year may vary from the projected amount, especially since this plan pays the majority of benefits as a lump sum.

U.S. Post-retirement Benefits Other than Pensions

The Company currently provides post-retirement health care and life insurance benefits to most of its U.S. retirees. In general, the terms of the plans provide that U.S. employees who retire after attaining age 55, with five years of service, are eligible for continued health care and life insurance coverage. Dependent health care and life insurance coverage is also available. Most retirees contribute toward the cost of health care coverage with the contributions generally varying based on service. In June 1993, a provision was adopted which caps the level of the Company’s subsidy at the amount in effect as of the year 2000 for most employees who retire after December 31, 1992. Additionally the plan was further amended in 2003 to restrict participation to retirees who were eligible retirees or active participants in the Autoliv ASP, Inc. Pension Plan as of December 31, 2003. No plan assets have been provided to this benefit plan.

At present, there is no pre-funding of the post-retirement benefits recognized under FAS-106. The Company has reviewed the impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 on its financial statements under FAS-106 and has determined that there is no impact since the prescription portion of the benefit is not segregated and the Company subsidy of the program is fixed and frozen.

The changes in benefit obligations and plan assets for the U.S. post-retirement benefit plan as of December 31 are as follows:

The measurement date used to determine post-retirement benefit measurements corresponds with the fiscal year end, December 31.

For measurement purposes, the assumed annual rate of increase of per capita cost of health care benefits was 9.0% for 2004 and assumed to grade to 5% in 2012 and remain constant thereafter. As noted above, for U.S. employees retiring after December 31, 1992, the Company’s policy is to increase retiree contributions so that the annual per capita cost contribution remains constant at the level incurred in the year 2000.

The weighted average discount rate to determine post-retirement benefit obligation was 6.00% in 2004 and 6.25% in 2003. The average discount rate used in determining the post-retirement benefit cost was 6.25% in 2004, 6.75% in 2003 and 7.25% in 2002.

A 1% increase or decrease in the annual health care cost trend rates would have had no significant impact on the Company’s net benefit cost for the current period or on the accumulated post-retirement benefit obligation at December 31, 2004.

The components of net benefit cost associated with the post-retirement benefit plan are as follows:

Non-U.S. Defined Benefit Pension Plans

The Company has a number of defined benefit pension plans, both contributory and non-contributory, in Australia, Canada, France, Germany, Japan, Mexico, Sweden, Turkey and the United Kingdom.

The Company’s main non-U.S. defined benefit plan is the U.K. plan. The Company has frozen participation in the U.K. defined benefit plan for all employees hired after April 30, 2003. Benefits are based on an average of the employee’s earnings in the last three years preceding retirement and on credited service. Members in the U.K. plan contribute to the plan at the rate 9% of pensionable salaries.

The measurement dates for the non-U.S. plans used to determine benefit measurements are between September 30 and December 31 for the years 2004, 2003 and 2002. The components of net benefit cost for 2004 associated with the non-U.S. retirement plans are as follows:

Total benefit cost associated with the non-U.S. plans for the years ended December 31, 2003 and 2002 were $6.8 million and $5.0 million, respectively. The increase in minimum pension liability included in other comprehensive income amounted to $6.6. million and $0 million for the periods ended December 31, 2003, and 2002, respectvely. For these non-U.S. plans, details on benefit cost are not available for the years ended December 31, 2003 and 2002.

The amortization of the net actuarial loss is made over the 8-19 years estimated remaining service lives of the plan participants, varying between the different countries depending on the age of the work force. Pension expense associated with these plans was $9.6 million in 2004 and is not expected to deviate materially from this level in 2005.

The changes in benefit obligations and plan assets for the non-U.S. defined benefit plans for the period ended December 31, 2004, are as follows:

The projected benefit obligation at year end for the non-U.S. plans for the years ended December 31, 2004 and 2003 were $91.6 million and $69.7 million, respectively. The fair value of plan assets for these plans for the years ended December 31, 2004 and 2003 were $36.2 million and $26.6 million, respectively. Furthermore the accrued retirement benefit cost recognized in the balance sheet for the years ended December 31, 2004 and 2003 were $48.3 million $34.9 million, respectively. For these non-U.S. plans, details are not available for the year ended December 31, 2003.

The accumulated benefit obligation for the non-U.S defined benefit pension plans was $69.2 million and $58.7 million at December 31, 2004 and 2003, respectively.

The range of weighted averages of assumptions used by the non-U.S. defined benefit plans to determine the benefit obligation as at December 31 are as follows:

The range of weighted averages of assumptions used by the non-U.S. defined benefit plans to determine the net periodic benefit cost for years ended December 31, are as follows:

The high rate of increase in compensation level, 18%, in 2003 relates to a high-inflationary country, while the second highest rate is 5%. The high discount rate for the same year relates to the same country, where the second highest rate is 6.5%. For these non-U.S. plans, key assumption details are not available for the year ended December 31, 2002, in relation to discount rates and increases in compensation levels.

The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the Projected Benefit Obligation and annual pension expense. The expected rate of increase in compensation levels and long-term rate of return on plan assets are determined based on a number of factors and must take into account long-term expectations and reflect the financial environment in the respective local market. The Company has assumed a long-term rate of return on plan assets in a range of 2.5-8.5% for 2004. The main plan is the U.K. plan which has, for a number of years, invested approximately 80% of Plan assets in equities and 20% in debt securities. The discount rate for the U.K. plan has been set based on the weighted average yields on long-term high-grade corporate bonds and is determined by reference to financial markets on the measurement date.

The major categories of plan assets as a weighted average percentage of the fair value of total plan assets for years ended December 31, are as follows:

For these non-U.S. plans, asset category details are not available for the year ended December 31, 2003.

For the UK plan, which is the most significant non-U.S. pension plan, the Company expects to contribute $1.4 million in 2005 and is currently projecting a funding level unchanged at $1.4 million in the years thereafter.

The estimated future benefit payments for the non-U.S. post-retirement benefits, which reflect expected future service, as appropriate, are disclosed in the table below.

19 Segment Information

Autoliv, Inc. is a U.S. registered company where the revenues are generated by sales of safety systems to the automotive industry. The automotive industry is made up of a relatively small number of customers. A significant disruption in the industry, a significant change in demand or pricing or a dramatic change in technology could have a material adverse effect on the Company. Automotive safety products (mainly various airbag and seat belt products and components) are integrated complete systems that function together under a common electronic and sensing system, and hence are considered as one business segment. The customers consist of all major European, U.S. and Asian automobile manufacturers. Sales to individual customers representing 10% or more of net sales were:
In 2004: Ford 23% (incl. Volvo Cars with 8%, Mazda, etc.); Renault 15% (incl. Nissan) and GM 12% (incl. Opel, Holden, SAAB, etc.)
In 2003: Ford 24% (incl. Volvo Cars with 8%, Mazda, etc.); Renault 14% (incl. Nissan) and GM 12% (incl. Opel, Holden, SAAB, etc.)
In 2002: Ford 23%, GM 15% and Renault 13%.

The Company has concluded that its operating segments meet the criteria, stated in FAS-131, "Disclosures about Segments of an Enterprise and Related Information", for aggregation for reporting purposes into a single operating segment.

The Company’s operations are located primarily in Europe and the United States. Exports to other regions amounted to approximately $315 million in 2004. Net sales in the U.S. amounted to $1,558 million , $1,542 million and $1,598 million for 2004, 2003 and 2002, respectively.

Long-lived assets in the U.S. amounted to $1,982 million, $1,979 million and $1,911 million for 2004, 2003 and 2002, respectively. For 2004, $1,548 million of the long-lived assets in the U.S. refers to intangible assets, principally from acquisition goodwill.

The Company has attributed net sales to the geographic area based on the location of the entity selling the final product.

1) Includes sales of Steering Wheels, Electronics, Inflators and Initiators 2) Includes sales of Seat components

20 Quarterly Financial Data (unaudited)