Autoliv to Acquire Delphi Assets

Autoliv ( ALV - Analyst Report ) will enhance its vertical integration capability by acquiring the Occupant Protection Safety (OPS) assets from Michigan-based auto parts manufacturer, Delphi Corporation, formerly a subsidiary of General Motors (MTLQQ - Analyst Report).

Earlier this year, Delphi has announced its plan to exit from its OPS business in North America , Europe and Asia by the end of the year. The transaction is expected to close by Dec 31.

After the acquisition, Autoliv will take control of Delphi ’s airbag and seatbelt assets in North America , which will be consolidated into the former’s existing facilities. Autoliv will also gain control of Delphi ’s steering wheel operations in Matamoros , Mexico .

The OPS business has customers such as General Motors, Hyundai, Ford (F - Analyst Report), Daimler (DAI - Analyst Report) and Navistar (NAV - Analyst Report), with expected combined sales of $125 million in 2010.

In the third quarter, Autoliv returned to profitability with a net income of $33.7 million or 37 cents per share after reporting losses for the preceding three quarters. With this, the Sweden-based supplier of automotive safety systems has also beaten the Zacks Consensus Estimate profit of 24 cents per share.

Autoliv credited higher light vehicle production from the “Cash for Clunkers” program and other stimulus packages to have boosted its earnings. The company expects its organic sales for the upcoming quarter to grow by more than 10% due to an expected rebound in the European light vehicle production mix following the expiration of many incentive programs that favored small vehicles with low safety value.

We continue to recommend the shares of Autoliv as Outperform, driven by better-than-expected earnings and growth-oriented acquisition strategy.

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