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Autoliv Inc (NYSE:ALV)
Q1 2020 Earnings Call
Apr 24, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you all for standing by, and welcome to today's Q1 2020 Autoliv Incorporated Earnings Conference Call. [Operator Instructions]. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you all that this conference is being recorded today, Friday 24th of April 2020. And without any further delay, I would like to hand the conference over to your first speaker for today, Autoliv's Head of Investor Relations, Mr. Anders Trapp, please go ahead.

Anders Trapp -- Vice President Investor Relations

Thank you, Gino. Welcome everyone to our first quarter 2020 financial results earnings presentation. Here in Stockholm, we have our President and CEO, Mikael Bratt; our new Chief Financial Officer, Fredrik Westin; and myself, Anders Trapp. During today's earnings call, our CEO will provide a brief overview of our first quarter results as well as provide an update on our general business and short-term market conditions. Following Mikael, Fredrik will provide further details and commentary around the financials.

At the end of our presentation, we will remain available to respond to your questions. And as usual, the slides are available through a link on the homepage of our corporate website. Turning to the next slide, we have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During this presentation, we will reference some non-US GAAP measures. The reconciliation of historical US GAAP to non-US GAAP measures are disclosed in our quarterly press release, and the 10-Q that will be filed with the SEC.

Lastly, I should mention that this call is intended to conclude at 3:00 PM Central European Time, so please follow the limit of two questions per person. I will now turn it over to our CEO, Mikael Bratt.

Mikael Bratt -- President and Chief Executive Officer

Thank you, Anders. Looking now into the Q1 2020 key events on the next slide. Before we start with the formal presentation, I would like to acknowledge our employees for their continued actions and commitment to quality, delivery and safety during these exceptional times.

During the quarter, global light vehicle production fell close to 25%, as production in China, and part of other markets in Asia came to a stop in early February. And as most vehicle manufacturing plants in Europe and North America closed down in mid-March. We continued to outperform against global light vehicle production, as our sales declined organically by 11 percentage points less than global light vehicle production declined. We outperformed light vehicle production significantly in all regions.

Despite the exceptional weak light vehicle production, we are able to report a strong first quarter. I'm especially pleased with our sales outperformance and that our gross margin was slightly higher than a year ago, and the adjusted operating margin was only 30 basis points lower.

Our cash flow was actually at somewhat higher than Q1 last year. The task force we set up to initially manage the situation in China has been expanded to global scale, and have been able to act promptly with timely cost reduction actions to offset much of the headwinds from the weaker light vehicle production in the quarter.

We were able to safeguard our supply chain and made sure that no customer was affected by lack of Autoliv products. We have undertaken a number of actions to manage the evolving situation, including adjusting production and shorter work week hours to meet lower demand.

We have also reduced or suspended investments and spending that are not critical for daily operations, accelerated cost savings initiatives, furloughed personnel, often in government sponsored programs, and reduced compensation for executive officers and Board members. We have intensified working capital control through strict inventory control, closed monitoring of receivables and closed collaboration with suppliers.

In addition, we have cancelled the dividend, drawn fully our revolving credit facility, and thereby secured the liquidity of $1.5 billion in early April. So far, we have not seen any changes to the sourcing behavior of our customers. During the quarter, our order intake share remained high and supportive of a prolonged sales outperformance.

Given the uncertainty in the market, we have withdrawn our full year guidance, until the effects of COVID-19 pandemic can be better assessed. Looking now on the adjusted sales performance on the next slide. Our sales declined organically by $283 million or by 13%, which was a 11 percentage points better than the light vehicle production decline of almost 25%. As a result of a positive model mix, and new launches over the last 12 months, we were able to outperform light vehicle production in all regions.

The overall sales decline was driven by China, followed by Europe and North America. The only areas with organic growth were ASEAN and South America. The most impact from the coronavirus outbreak was in China where sales fell organically by almost 37%.

However, this compares favorably with the light vehicle production decline of nearly 50%. The outperformance was mainly coming from global OEMs. Sales in North America decreased organically by 9%, 2 percentage points better than the light vehicle production decrease. Almost half of the organic decline can be attributed to lower inflator sales.

The decline was partly mitigated by organic growth with a multiple of OEMs mainly with Tesla, but also with Subaru, Mazda and BMW. In South America, our sales increased by 7% organically, despite a 17% decline in light vehicle production. The growth was mainly driven by sales to FCA. In Europe, we continue the trend from fourth quarter and outperformed light vehicle production by around 8 percentage points, impacted by recent launches of high volume models at PSA, VW, and Renault.

As vehicle production came to a stop, amid the spread of the coronavirus, our sales dropped by close to 30% in the month of March. Sales in Japan decreased organically by 4% compared to the light vehicle production decline of 8%. Decreasing inflator replacements impacted sales negatively with 1.3 percentage points.

Rest of Asia organic sales declined by 4%, which was almost 14 percentage points better than light vehicle production. Within the region, sales in South Korea, India fell, while sales in ASEAN increased despite lower light vehicle production. Looking at our recent model launches on the next slide. We continued to have a high level of launch activities in the quarter.

The models shown on this slide are well distributed across the globe and most of them will be available with some sort of electrified powertrain, for example, pure EV, mild hybrid or plug-in hybrid. The Autoliv content per vehicle is between $100 to almost $500.

It is particularly interesting to see Front Center Airbags on three of these vehicles. We expect to continue to see strong growth coming from Front Center Airbags as Euro NCAP cap has introduced a far-side load case in the updated rating program.

Four of the vehicles are equipped with knee airbags from Autoliv on the driver side, Tesla Model Y has a knee airbag also on the passenger side. Currently, we see limited effects from the COVID-19 on the OEM's 2020 launch plans, and we continue to support them with engineering, testing and by setting up new production lines.

However, we believe that some projects that have planned launch dates closer to the year-end or later may be delayed. Vehicle facelifts in other areas where the automakers may change their plans. Now it's my pleasure to introduce our new Chief Financial Officer, Fredrik Westin. Fredrik joined our executive leadership team in early March, and he will now speak to the financials on the next slide.

Fredrik Westin -- Chief Financial Officer

Thank you, Mikael. This slide highlights our key figures for the first quarter. Our net sales were $1.8 billion, which is a 15% decline compared to the same quarter last year. Despite the lower sales and lower utilization of our assets from the decline in LVP, our gross margin improved by 50 basis points as it was positively impacted by the absence of costs related to the social unrest in Mexico, savings from indirect and direct workforce adjustments, lower raw material costs and also positive currency effects.

While the gross margin improved, the lower sales led to a decline of $48 million in gross profit. The adjusted operating income declined by around $30 million to $136 million, mainly as a result of the lower sales. Reported earnings per share declined by $0.41 to $0.86. The main drivers behind the decrease were $0.53 from lower operating income, and $0.05 from financial items, partially offset by $0.16 favorable impact from lower tax.

Our adjusted ROCE and ROE were both at 15%. Dividend paid in the quarter was $0.62. Looking now on the adjusted operating margin development on the next slide, our adjusted operating margin of 7.4% was 30 basis points lower than in the first quarter 2019.

Q1 2019 was however negatively affected by temporary costs for the social unrest in Matamoros, in Mexico. Excluding this cost, our adjusted operating margin would have been 8.7%, a year ago. As illustrated by the chart, the adjusted operating margin was positively impacted by lower cost for raw materials of 30 basis points, lower cost for SG&A and RD&E of 50 basis points, and positive FX effects. These positive developments were more than offset by the effects of lower sales.

The lower organic sales negatively affected the margins by around 370 basis points. However, we managed to mitigate some of the negative operating leverage effects from the lower sales by a number of activities such as accelerated cost-saving initiatives that started in previous quarters, by adjusting production and workweek hours and by furlouging personnel.

Looking on the next slide for the first quarter of 2020, the operating cash flow was $156 million compared to $154 million, a year earlier. As the lower net income was more than offset by less negative effect from changes in operating assets and liabilities, and increased deferred income tax. Capital expenditures amounted to $88 million in the first quarter, which is about 4.8% in relation to sales.

Compared to last year, capital expenditure decreased by $20 million as we suspended or delayed some investments. As a result, our free cash flow improved by $22 million to $68 million compared to the same quarter last year. Cash conversion improved to 90%, this quarter compared to 41%, the same quarter a year earlier.

Looking on the next slide, we have as you know, a long history of a prudent financial policy. Our balance sheet focus and long-term shareholder-friendly capital allocation policy remains unchanged despite the current market conditions. The leverage ratio at March 31st, 2020, was unchanged at 1.7 since the beginning of the year. The lower net debt was offset by lower last 12 months EBITDA.

At the next slide, you can see our liquidity position and the maturities. As illustrated, our liquidity position is strong. We had around $1.5 billion in liquidity after drawing fully on our revolving credit facility on April 2nd. We have very limited amount of maturities in the next three years with around $320 million in debt maturities in 2020 and around $275 million in 2021. We have no need for any major refinancing of existing debt until 2023. Therefore, we believe that we have secured a significant liquidity cushion to manage our business successfully in this challenging environment.

I will now hand back to Mikael.

Mikael Bratt -- President and Chief Executive Officer

Thank you, Fredrik. I'm proud on how Autoliv employees have been creative in finding ways that we can use Autoliv resources and competence in supporting society's battle against the COVID-19 crisis.

On the next slide, we show some examples of initiatives taken by Autoliv associates around the world. In Poland, we have worked with local hospitals to manufacture and deliver masks. In North America, we are using our laser cutting machines to cut materials for local sewing companies that manufactures masks. In India, we have provided food to migrants that have become stranded and have no income to feed their families or themselves.

Looking at the market situation on the next slide. You can see that our industry is in a downturn of historic proportions. March is typically one of the busiest months of the year for the car industry. This year, however, the automotive industry has seen its worst March for decades. As consumers were unable to visit car showrooms due to social distancing and government enforced closures as well as the shutdown of partial society, light vehicle sales declined roughly by 38% in the US and by 55% in Europe in March.

There is a great uncertainty in light vehicle sales and production, due to the evolution of the pandemic. Government actions and policies changes as well as end-consumer demand for new vehicles. Therefore, it's currently not possible to estimate the light vehicle production run rate, we will reach post the COVID-19 pandemic. Regardless of what level of light vehicle production that will be the new normal, we will have to adapt.

We are therefore working with different scenarios and preparing for the new normal. Some of them significantly lower than the current IHS estimate. Keeping a high degree of flexibility and agility is therefore essential to be an even stronger Company post the COVID-19 pandemic.

Moving to the next page. The situation for major light vehicle markets is very uncertain and changes day by day. OEMs in China are gradually coming back to their previous production levels and China Passenger Car Association reported that the retail sales were 14% above last year's level in the second week in April. However, the situation remains fluid and OEMs will be adjusting their pace of production according to inventory levels and market demands. Production disruption in other regions, which supply components to automakers in China can potentially slow down the recovery.

A number of European automotive plants have restarted or are preparing to start again after more than a month of coronavirus-related shutdowns. The production rate will likely be volatile with reduced ships to adapt to uncertain demand, development -- demand development and availability of components. In US and Canada, most OEM plants plans to resume production at their facilities by early May.

Production disruption of components in Mexico can potentially slow down the rest of the region as there is uncertainty around the start up for plants in Mexico due to the government's stay-at-home measures. Most OEMs in Japan have announced closures and slowdowns in April and May. The Golden Week holiday is expected to be extended by a couple of days.

Looking on the next slide. We have summarized the situation for Autoliv operations in our major regions. In China, our production has gradually recovered to around 100% compared to this time last year. However, the automotive industry has been particularly hard hit during the pandemic, and it will take months for the industry to recover to full efficiency and to reach a stable demand.

In Europe, our plants are resuming and ramping up production in line with our customers' needs. All tech centers are back in operation, however with lower than normal capacity. In North America, ten of our 13 sites are fully shut down, in the three sites that are open, we run limited production for overseas customers.

In Japan, 70% of our plants are running, in South Korea, our airbag plant is producing at near-normal rates while the seat belt plant is open, but not running full shifts. Looking on the next slide. We show our response to the challenging market conditions. This includes much more than just headcount and workweek hour reductions.

Firstly, in response to the new working situation brought by the coronavirus, we have stepped up our efforts to secure health and safety for our employees through new policies and procedures for increased awareness and changed behavior as well as protective equipment.

In addition to securing a strong liquidity position of $1.5 billion, we have also intensified our capital management through strict inventory control, reduced or suspended investments, and spending that are not critical for daily operations, close monitoring of receivables, and close collaboration with suppliers.

We have undertaken a number of cost reduction activities such as adjusted production and workweek hours, accelerated cost savings initiatives, furloughed personnel, often in government supported programs, and accelerated the redesign of products for lower cost.

In addition, we have for the time being suspended our dividend payments, and reduced the executive salary levels. While we continue to focus on further cost reduction actions, we are also planning and preparing to restart production, as shown on the next slide.

We are preparing for restarting and ramping up in coordination with our customers and suppliers. We are deeply focused on keeping our employees, customers, and suppliers safe when we restart production at our facilities. To navigate this new normal, we have developed a playbook that lays out processes to raise awareness of new health protocols and to support execution in a challenging situation. The Smart Start guideline includes practical recommendations based on guidelines from World Health Organization and our lessons learned from our recent ramp up in China. We are providing personal protection equipment such as masks and visors, and making redesign of production environment. For instance, setting up protective screens. Our first focus is now on Europe, which is starting to ramp up as of this week.

Turning the page. We have summarized the business environment in Q1 and Q2. The pandemic's impacts on the consumer demand, supply chain and OEM production cannot be forecasted with a satisfactory degree of confidence. Consequently, we withdrew our full year guidance, and it is not possible to determine when a new full-year outlook can be made. The situation is however more challenging currently than it was in the first quarter.

Customer closures are now affecting the majority of our operations for an unclear period of time, compared to the more limited, but significant scope in the first quarter. It is currently difficult to estimate how large the second quarter light vehicle production decline will be. The regional mix will have a more negative impact on sales in the second quarter due to higher safety content in vehicles in Europe and North America.

In the first quarter we had a positive impact on sales from regional mix. IHS latest outlook dated April 16, indicates the global light vehicle production decline of 45% in the second quarter. A decline of such magnitude would of course have a significant negative impact on our sales, and we do not expect to be able to offset the effects of the lower sales with cost reduction activities while planning for production restarts.

We are therefore expecting the detrimental margin in the second quarter to be significantly higher than it was in the first quarter. When it comes to capex, we are scrutinizing everything, delaying what can be delayed. Typically, 70% of our capex is related to new production lines, which very much is driven by the plans of our customers and are difficult for us to postpone.

On to the next slide. We have to manage the current challenges post COVID-19 pandemic without losing focus on the long-term opportunities. Autoliv is operating from a position of strength in terms of available liquidity, flexible structure, and not at least dedicated and experienced employees. This exceptional situation requires tough decisions that we will make as necessary.

It is of outmost importance to ensure that we have an adequate cost structure that supports our profitability targets regardless of what level of light vehicle production that will be the new normal. The strategic initiatives and structural improvement projects we outlined on our Capital Markets Day in 2019 remain key priorities. Although some projects maybe somewhat delayed. We will continue our efforts for flawless execution of new launches, improving customer satisfaction further, and thereby supporting our stronger market position.

I will now hand back to Anders.

Anders Trapp -- Vice President Investor Relations

Thank you, Mikael. Turning the page. This concludes our formal comments for today's earnings call and we would like to now open up the line for questions. So I turn it back to Gino.

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of James Picariello. Please go ahead, the line is now open.

James Picariello -- KeyBanc Capital Markets -- Analyst

Hey, hi, guys.

Mikael Bratt -- President and Chief Executive Officer

Hi.

James Picariello -- KeyBanc Capital Markets -- Analyst

Just on your -- you know, the quarter's significant market outperformance. Within your guidance framework last quarter and I know obviously a lot has changed since then, but you know, you talked about stronger growth over market position for the second half.

Now, was that a factor of better mix in the quarter, favorable customer exposure or was there really just a delay in your ramp down which maybe gets caught up in the second quarter?

Mikael Bratt -- President and Chief Executive Officer

I would say that the outperformance in the first quarter was to a large extent contributed by favorable regional mix in the quarter where we saw China light vehicle production falling close to 50% and that we have lower content in that sense. And then you had high, let's call it, value like content per vehicle in Europe and US still at high level for the most of the quarter. It was not until the last two weeks, basically where you saw the effects in Americas and Europe. So a favorable regional mix in the quarter contributed to the outperformance.

James Picariello -- KeyBanc Capital Markets -- Analyst

Got it. Have you -- did you also benefit from any competitor issues, maybe competitors struggling more so than Autoliv in the quarter?

Mikael Bratt -- President and Chief Executive Officer

No. I mean, in the quarter, it's purely, I would say the mathematics of the run rate in the OEMs -- on the OEM side here and there you had the effects, which I just mentioned regionally.

James Picariello -- KeyBanc Capital Markets -- Analyst

Okay. Got it. And then just on Mexico, can you remind us what percentage of your North America sales mix is tied to your production operations in Mexico? And then just, given what's going on with the peso, will there be a sizable FX transactional benefit potentially this year? Just if you could help us walk -- help us walk through how to think about that flow through. Thank you.

Mikael Bratt -- President and Chief Executive Officer

Now, I think, when it comes to the Mexico-US relationship there, I would say, you should more see that the total automotive industry that is very connected. So I think for us, of course, we have a high portion of production in Mexico. I mean, that's one of our biggest production countries. So of course that is important, that goes hand in hand with what's happening in the US. But I think the question is much broader than Autoliv specific here. It's the whole automotive industry that needs to be in sync between Mexico and the US to actually get into a ramp up that is sustainable.

James Picariello -- KeyBanc Capital Markets -- Analyst

And just the pace -- just your thoughts on the FX transactional?

Mikael Bratt -- President and Chief Executive Officer

No, it is not -- you shouldn't count on anything that I would say. It's not -- I mean, first of all, we have no guidance as you know for the -- either the quarter or the year here. And I think the FX is in that category here as well. I mean, we have no indications for the quarter on that.

James Picariello -- KeyBanc Capital Markets -- Analyst

Okay, thanks, guys.

Operator

Thank you. Your next question comes from the line of Rod Lache from Wolfe Research. Please go ahead, the line is now open, Rod.

Rod Lache -- Wolfe Research -- Analyst

Great, thank you. Just a few questions. First, you've historically demonstrated a lot of agility in terms of adjusting your cost structure. Pretty -- you have a very variable cost structure compared to most other auto suppliers. Can you just maybe give us a sense of how that could come into play here? For example, obviously not in Q2, but longer term, if revenue stayed below historical levels, maybe if it stayed at levels that you saw in the first quarter, and you're giving enough time, is there any way to characterize the magnitude of cost adjustment and margin that you would ultimately believe you could achieve?

Mikael Bratt -- President and Chief Executive Officer

I think, I mean what you're mentioning here about the time is the critical here. I think we have stated for long time when it comes to our medium to long term targets here that the critical question there is not that we need to get back to some kind of all-time high levels that we have seen in the past year, it's stability that is critical. But that's over time. And since we're not giving any guidance here, I don't want to get into any time horizons when we talk about this.

But we have a structure that provides good flexibility, and I would say here that I mean if you look at our total cost base, I mean, around half of our sales is purchase components, another 10% is connected more to direct labor, and then another 10% other flexible type of cost flexibility. So it leaves around 30% as fixed costs roughly there. But as we all know, long-term, you can also work with that. But then that's kind of the ballpark you should think about.

And then when you have a situation like we have right now where it comes to a definite stop in just a few couple of days, it looks very differently. And also when we're looking into the quarter here, it's a very steep stock. So I would say, normal calculation there is maybe not feasible here, but over time, that's the ballpark figures you should think about.

Rod Lache -- Wolfe Research -- Analyst

Okay. And do you have any views on -- obviously, every company in the world is putting in place new operational protocols for safety, social distancing. Does that, in your view, have any long-term consequences for productivity or how we think about just operationally the inefficiency that's introduced there?

And then lastly, can you comment just on what you're hearing about the trajectory of these restarts? So Europe seems like that's under way. Is it just a few plants, are your customers telling you anything about the level of production and how that is expected to ramp over the next weeks?

Mikael Bratt -- President and Chief Executive Officer

I think, all in all, I mean, if you start with the last question, I think when it comes to the visibility here, it is of course very, very low under the circumstances. And as we have mentioned and you also have seen, some OEMs are starting some of their plants. So it's more side by side, I would say, and model by model that they are starting and the levels are very low and -- at this point in time.

And I think also when you look at the ramp, it will go relatively slow. But what it all depends on is, of course, how the virus is developing here. If it's stabilizing, if it's declining, or if it's continue to spread and increase. So that's the million-dollar question on how that is developing, because that's how we will be able to restart across the continent here, and that visibility is of course very low for everybody in the industry.

So I think we will have -- not -- it will be required to have a lot of flexibility here. And that's what we're focusing on here, because you could very well see it increasing and coming down a little bit again and so on. So uncertainty is very, very high and very low visibility. And I think that's also this feeling and the signals we get from our customers for sure.

Looking at the consequences, if I understood your question right, on the new measures that we need to implement to keep our employees safely under current circumstances, if that have a long-term negative impact on productivity and so on, and I would say, I guess, it's too early to say that, but I don't expect it, because the measures we are taking is under these current circumstances, I don't see that it to a large extent continue beyond the virus situation, so it's more connected once again to how the COVID-19 pandemic evolves here.

Of course, there is some more cumbersome procedures there in terms of the equipment and so on that you need. But I don't see any problem for us to keep up with our productivity work and securing quality and deliveries according to customer expectations here. So it's something we are well equipped to manage.

Rod Lache -- Wolfe Research -- Analyst

Great. Thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from the line of Mattias Holmberg from DNB. Please go ahead, Mattias.

Mattias Holmberg -- DNB -- Analyst

Thank you. You show a quite decent decline year-on-year in capex spend. And I'm just trying to understand, sort of assuming that there are no changes or delays to your customers, launch schedule activities, if there's still any room to further scale down the capex level from what you reported in Q1?

Mikael Bratt -- President and Chief Executive Officer

I mean, well, that's an ongoing work, of course, to see how we can optimize the timing of the things that needs to be invested. So I think here is the usual scrubbing of the campus that has been ongoing and will continue to go on and that's why it's so important here to stay very close to our customers to understand if there is any changes to their own schedule or so when it comes to launches, etc on how that could impact us in the way that we could delay some of the investments.

But all the start of production commitments that we have with our customers of course can never be jeopardized. So that's the bottom line in terms of what type of capex investments we need to stay on with, but we continue to scrub the numbers here absolutely.

Mattias Holmberg -- DNB -- Analyst

Thank you. One more question from my side. Talking about the regional mix again, which you explained here, how it impacted you positively in Q1. Given the dynamics of how the sector has been impacted throughout the year so far, would it be reasonable to assume that you then would have a negative regional mix impact in the second quarter?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I mean, going into the second quarter with what we also described around the volumes in Europe, North America and that China is ramping up. So I would say it should be assumed that we should see the reversed in the second quarter here. But it's a very dynamic situation here, but based on that, yes.

Mattias Holmberg -- DNB -- Analyst

Understood. Thank you.

Operator

Thank you. The next question comes from the line of Sascha Gommel from Jefferies. Please go ahead. Your line is now open.

Sascha Gommel -- Jefferies -- Analyst

Hi, good afternoon. Thank you for taking my questions. The first one would be on working capital and how this is going to unwind in the second quarter, because your absolute level of receivables was higher than payables. So is it fair to assume that from that side, we should expect a little bit of an inflow? And then similarly from inventory, it ticked up a bit Q1 versus full-year numbers. So do you also expect from an inventory side that you get some support?

Mikael Bratt -- President and Chief Executive Officer

Yeah, let me take that question. So if I start with the inventory side. The background is of course at end of March we were ramping up in China while ramping down in Europe and in the US. And this was done with a very, very steep curves at the same time. So we need to make sure that we have the material on the one hand side to be prepared for the ramp up, but also that we don't -- and not jeopardize that.

But on the -- at the same time of course also do what we can do to take out the necessary -- or the unnecessary inventory. It's a very difficult balancing act at the moment. And with the uncertainty on the volumes, it will remain so. So it's very difficult to then predict where the inventory development will be in the second quarter. I mean, our plan is to, of course, take out as much as we can, but it is this balancing act that I described.

On the receivable side, it will follow the sales development. And we expect that to pick up during the second quarter. So with that, you should expect then also build up off receivables in the second quarter and that then will have a negative development on cash from working capital. But there the key is to manage then the overdue part of that and make sure that we don't run late on collecting.

But it is -- I think it will be -- it will follow the mathematics of the ramp up and that's the very, very difficult part to explain or to forecast at the moment.

Sascha Gommel -- Jefferies -- Analyst

Understood, very clear. And then my second question would be on your -- the detrimental margin. We touched it multiple times already, and would you be willing to give a number of, like if we would exclude product and regional mix, how much your underlying operating leverage is, just to get a better understanding of how much of that is actually mix and how much of it is actually volumes?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I think, I mean, I was a little bit touching that in the previous question here when I talked about the fixed and flexible cost. And what we said here is that around 30% are fixed. So with the short stop like we see right now, it may be worse -- most likely a much worse situation than normal rule of thumbs here of around 30%. So I would say, we'll see, but it depends on a lot of things here. As we said, it's fluid situation, but with short stops like this, it's very, very challenging.

Mattias Holmberg -- DNB -- Analyst

Understood. Thank you very much. Have a good weekend.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Your next question comes from the line of Chris McNally from Evercore. Please go ahead, Chris.

Chris McNally -- Evercore -- Analyst

Thanks, gentlemen. I'm just going to follow on the topic of detrimental margins. So you had a great raw material benefit in the quarter looking at sort of the drag over the last year or two. Could you put some parameters around either maybe the benefit going forward or when the peak benefit should be, should it sort of be in Q2 and Q3 somewhat offsetting the pure volume detrimental margin?

Mikael Bratt -- President and Chief Executive Officer

I think, as I said, we can't give any guidance and we are not giving any guidance here. So I think it's -- we cannot basically give you any time horizon on this. So I think -- what we said in the beginning of the year was the direction we saw at this time. I think what is happening right now is impacting so many things in our industry, but also other industries that it's all moving parts right now. So I think we would like to -- we need to refrain from giving any indications there, because it's too fluid basically.

Chris McNally -- Evercore -- Analyst

That's fair. And then maybe just more of a follow-on to Rod's question about a more longer term view to variable margins. In previous downturns we've seen significant restructuring, you took a good amount of restructuring last year as sort of we were already at production levels that were well below the $100 million to $110 million that we all thought a couple of years ago. Is there a level of production or sort of a trigger that would cause the next round of restructuring? I'm thinking more about permanent cuts to production capacity and white-collar workforce?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I mean, of course, we are working with a number of scenarios here. And as we had indicated here, I mean, the rule and normal rule of thumb is what we have stated before, and I think beyond that this is all depending on how the development is coming through here. And we are of course working with a number of scenarios here and we will need to do whatever we need to do to make sure that we come out in a strong way. And I'm convinced that we have the tools and also the measures available here for whatever we need to do. So it all depends on the overall situation and we will execute accordingly. But we can't give any more details in terms of time and the size.

Chris McNally -- Evercore -- Analyst

Absolutely. Thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Erik Golrang from SEB. Please go ahead, Eric.

Erik Golrang -- SEB -- Analyst

Hi, everyone. Thanks. And one question that hasn't been asked more or less. Again, I understand you don't want to give a full-year guidance here on sales, even though there is more of sales, there are vehicle projections to relate to. But on the topic about outperformance then for the full year, is it fair to assume if the second quarter regional mix in terms of auto production continues for the second half that your previous indication of around 6 percentage points of outperformance would be lower?

Mikael Bratt -- President and Chief Executive Officer

I think... [Speech Overlap]

Erik Golrang -- SEB -- Analyst

In spite of the good mix in Q1?

Mikael Bratt -- President and Chief Executive Officer

Yeah. I think, I mean, we know what kind of orders we have taken over the past couple of years. I think, the long-term direction that we have indicated as a result of these orders is still -- of course, the basis for looking forward here.

But what is happening right now with the very volatile movements in our industry regionally, but also I mean, in terms of size. It's of course changes the short-term measurements here. And as you heard the explanation for the first quarter, we believe that it's what we have described now current situation is you could expect it to reverse.

But it all depends also of course on beyond that on how the market is coming back and how it's synchronized back to some kind of normal relationship there. But of course, those things impacting, so therefore it's very difficult to give you any and that's why we are refraining from the whole guidance altogether, because it's so many moving parts, including this one.

Erik Golrang -- SEB -- Analyst

Okay, thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from the line of Victoria Greer from Morgan Stanley. Please go ahead.

Victoria Greer -- Morgan Stanley -- Analyst

Afternoon. Yeah, just just a few please. And firstly, I understand how much the raw material situation is moving around, but could you give us an indication of how much that contribution just in Q1? The second thing, on the geographic mix, you've outlined the differences in terms of content per vehicle, that's clear on the top-line, but is there any difference in margin there?

And then the last thing on the Matamoros impact. Thanks for quantifying that in the bridge. Should we think about any ongoing year-over-year impact or was that really just a Q1 '19 issue that doesn't repeat for the rest of the year?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I think, I mean, first question, raw material impact in the first quarter, as you see from the bridge there, we're talking about a 30 basis points positive contribution for our raw materials. So starting the year [Speech Overlap]

Victoria Greer -- Morgan Stanley -- Analyst

Sorry, and on the top-line, sorry, that's what I meant. What did it do on the top-line?

Mikael Bratt -- President and Chief Executive Officer

The raw material impact on the top-line? I don't -- I can't give you a number there. Unfortunately, I don't have that.

Victoria Greer -- Morgan Stanley -- Analyst

Okay.

Mikael Bratt -- President and Chief Executive Officer

On the ongo -- if Matamoros was a one-time from last year that we're reversing this year. If your question was, do we have ongoing -- for the rest of the year that would have the same effect, was that the question?

Victoria Greer -- Morgan Stanley -- Analyst

Yeah. Is there anything more to come out for the remaining quarters or it was just a Q1 '19 effect that's been this one-off impact on the margin, because it doesn't repeat?

Mikael Bratt -- President and Chief Executive Officer

No, almost nothing. So this was the big one. And then, sorry, the third question was?

Victoria Greer -- Morgan Stanley -- Analyst

On the geographic mix and the difference in content per car in the different regions you've been clear about that impact on the top-line, that will reverse in Q2. Should we think about any different margins there or it's just a content issue?

Mikael Bratt -- President and Chief Executive Officer

I mean, what we are referred to here is the content issue and the top-line impact here, but and of course in terms of EBIT mix here, we don't go into the details per product and region here.

Victoria Greer -- Morgan Stanley -- Analyst

All right, thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from the line of Agnieszka Vilela from Nordea. Please go ahead.

Agnieszka Vilela -- Nordea -- Analyst

Thank you. I have a couple of questions, starting with the kind of cost side of your business and what you can do there. We know that the program you announced last year was supposed to bring about $60 million in yearly savings. How is that proceeding and do you already see need for extending restructuring because of what's happening now? Thank you.

Mikael Bratt -- President and Chief Executive Officer

I think when it comes to the structural efficiency program, we launched last year and saw some effects last year, but the full effect should be reached during this year. I would say we are on track on that and we are expecting to see the full delivery of that during this year. I think, we have indicated in the past year that fully executed is not until we come into the second quarter here.

Agnieszka Vilela -- Nordea -- Analyst

And do you plan anything above of that?

Mikael Bratt -- President and Chief Executive Officer

I think, going forward here, I mean we are working through all types of cost reductions over, let's call it short-term nature right now, then I think the scenario planning we are working will give additional more long-term effects that is needed potentially, but it all comes down to what will be the new normal so to speak beyond the current short-term challenge where we are all dependent on the result of the COVID-19.

So to get to the new normal, we need to leave COVID-19 behind us.

Agnieszka Vilela -- Nordea -- Analyst

And if you could, quantify any cost benefit that you see from the support from the governments and states in different region? And also just tell us if you believe that it's in anyway different from what's happened during the financial crisis.

Mikael Bratt -- President and Chief Executive Officer

I think the governmental support and programs, it's too early to give any effects, talk about any numbers there. So broad range of programs and we are also in different phases of these different programs. And I would say also some -- much is similar to -- so far similar to what we saw in the financial crisis. I think some countries here have added some initiatives that was not there. So it's a little bit mixed picture, but in many places, especially in the bigger ones, we see similar kind of activities here, but I would say it's too early to give a number on it.

Agnieszka Vilela -- Nordea -- Analyst

Yeah. And then the last question from me is really, if you could elaborate why you felt the urge to draw down on all your revolver given the fact that you have quite limited maturities in both 2020 and 2021. So what was the reason really behind that?

Mikael Bratt -- President and Chief Executive Officer

I think you should see it as just very cautious and proactive activity here for what is a very challenging time. And as we have alluded to here during the call here is and also in our report is that the uncertainty is very, very high. We are talking about restarts here in Europe and the intention of restarting in North America in early May.

But as we are dependent on these pandemic situation, meaning we need to get that behind us in order to get back to where we all should be in the industry so to speak, we don't know how it will develop, if it's improving or if it's stabilizing or if it's diminishing. So very, very uncertain. So we think that's the prudent way to manage the Company.

Agnieszka Vilela -- Nordea -- Analyst

Okay, thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Hampus Engellau from Handelsbanken. Please go ahead, Hampus.

Hampus Engellau -- Handelsbanken -- Analyst

Thank you very much. Two questions from me, and I apologize if it's already been asked, because I was a bit late on this call. But in the 11 percentage point outperformance organic growth during the quarter, would it be possible for you to maybe split how much is sales mix on China and how much is market share gains? And referring back to the 6 percentage points that you referenced about outperformance for the year. When you talked about it previously, was that figure back-end loaded? That's my first question.

Mikael Bratt -- President and Chief Executive Officer

When we talked about it in the beginning of the year where we said we will have an outperformance of 6%, yes, it was back-end loaded. So what we see here now in the first quarter is to the fullest extent regional mix effect, as we said here where China with lower content per vehicle falling with 50%, while Europe and North America was holding up well, that was the consequences of that [Indecipherable].

Hampus Engellau -- Handelsbanken -- Analyst

Fair enough. Yeah. And then on -- I know that you're not giving any guidance, but if I look at the IHS numbers, with a 45% drop second quarter minus 7% Q3, minus 8% Q4. From your talks to the OEMs and like you indicated and even if it's like a really early stage planning for second half, is that in the ballpark of what type of the discussions you're having with car OEMs when it comes to that, etc?

Mikael Bratt -- President and Chief Executive Officer

I think, what we are saying here about uncertainties reflecting our discussion with the OEM, because I think no one have a clear view on how this will develop. Hence the situation here where we are dependent on the virus basically here and the uncertainty is high also among our customers on how it actually would play out. So I think, there is, of course, some plans, some expectations and hopes, but very few knows, of course.

Hampus Engellau -- Handelsbanken -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of Emmanuel Rosner from Deutsche Bank. Please go ahead, Emmanuel.

Emmanuel Rosner -- Deutsche Bank Securities -- Analyst

Hi. Thanks for taking the question. One more clarification on the decremental. So when I look at your margin progression year-over-year, you sort of helpfully break down sort of like the volumes and other business impact versus some of the offsetting cost savings. Looks like your decremental margins would have been a certain amount and then about a-third of it is offset through cost savings. Any indication you can give us around the magnitude of potential cost saving as you move into Q2 and the rest of the year? Could it be kept up at the level of Q1 or even step back, I guess, how do you think about that?

Mikael Bratt -- President and Chief Executive Officer

No, I don't think we can give any more details surrounding that than what we have got yet -- got so far here, because as we said, the uncertainty is high and I think that's the visibility we can give you what we already stated, unfortunately.

Emmanuel Rosner -- Deutsche Bank Securities -- Analyst

Okay. So then on a different topic, so obviously over time your growth above market is heavily driven by sort of the market share gains. I think you also indicated that your win rate has stayed pretty high. Can you maybe talk about new discussion recent discussion with automakers around timing of those launches, are there any important or major delays, just sort of like know how are things sort of like looking for the rest of this year, I think is being pushed out? And any notable differences between the regions?

Mikael Bratt -- President and Chief Executive Officer

No. As we indicated it before, I mean, so far we don't see any delays here. Of course, that's something we are cautious of considering the uncertain development here. But so far, nothing is indicated in that direction. So in that sense, business as usual.

Emmanuel Rosner -- Deutsche Bank Securities -- Analyst

Okay. Thank you.

Mikael Bratt -- President and Chief Executive Officer

We have time for one last question.

Operator

Thank you, sir. And that comes from the line of Joseph Spak from RBC. Please go ahead.

Joseph Spak -- RBC Capital Markets -- Analyst

Thanks so much for squeezing me in. Maybe one more quick one on the outgrowth. I know it is a pretty sort of just-in-time industry, but is it possible there were sort of any shipments, maybe like the second week of March like right ahead of sort of the last two weeks shut down in North America and Europe, that sort of contributed to some of the outgrowth that could reverse in the second quarter?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I mean, longer we had Europe and North America running here in the quarter it supported that the mix effect. So yes.

Joseph Spak -- RBC Capital Markets -- Analyst

So it's possible that they took some orders assuming that they would continue to produce and then they sort of a probably had to shutdown?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I think, I mean, our customers starting to pick up. So I mean, we don't have any insight that looks like there, but that's reasonable to think. Yes.

Joseph Spak -- RBC Capital Markets -- Analyst

Okay. And then maybe just one on some of the risks you called out in the newsletter. You talked about maybe potential some demand or even part shortages in China uncertainty in Mexico. I mean, the UAW is coming out now and saying they're not sort of comfortable with sort of an early May restart. And also just what are you seeing in your supply chain, because if I go back to some, some very old notes from the financial crisis, I think, you said back then you guys sort of helped to support like maybe ten or so of your suppliers, and are you seeing anything there or needing to take any action there? Thank you.

Mikael Bratt -- President and Chief Executive Officer

I mean, we are of course very close to our supplier base and working together with them to have all the restart activities lined up and so on and including that of course monitoring also the health of the suppliers. And I must say, so far, it looks good. We are not currently in any way close to the situation where we were in the financial crisis. So I will say healthier positions now. But you should also remember that we are only basically two months into this crisis here also. So of course that's something we need to continue to look carefully at. But I would say, so far so good. And we haven't needed to do anything yet.

Operator

Yes. Joseph, any follow-up question?

Joseph Spak -- RBC Capital Markets -- Analyst

Yeah, sorry. And just on some -- on like maybe Mexico or some of the risks in China that you pointed out?

Mikael Bratt -- President and Chief Executive Officer

Yeah, I think, I mean, just to reiterate again the uncertainty here and I mean to get US going full again you need to have Mexico with you on that. And I think we see different status in terms of how the stay-at-home policy is looking like and so on, and also the ambitions to restart in terms of timing and so on.

So there is a lot of unknowns surrounding all this, and that's why we are very cautious here of giving any indications on where we think we are going, because it's so many things that -- it's outside the normal industry judgments, you could say, because we are once again dependent on, how the virus develops and also the regional and country governments are reacting to that.

Joseph Spak -- RBC Capital Markets -- Analyst

Thank you.

Mikael Bratt -- President and Chief Executive Officer

Thank you.

Operator

Thank you all for your questions, I'll hand back the call now to the President and CEO, Mr. Mikael Bratt for closing remarks. Please go ahead, sir.

Mikael Bratt -- President and Chief Executive Officer

Thank you, Gino. Before we end today's call, I would like to say that while preparing for restarting, we will continue to managing the effects of the sharp light vehicle production decline with a never-ending focus on quality and operational excellence.

Our second quarter earnings call is scheduled for Friday, July, the 17th, 2020. And thank you everyone for participating on today's call. We sincerely appreciate your continued interest in Autoliv. Until next time, stay safe.

Operator

[Operator Closing Remarks].

Duration: 72 minutes

Call participants:

Anders Trapp -- Vice President Investor Relations

Mikael Bratt -- President and Chief Executive Officer

Fredrik Westin -- Chief Financial Officer

James Picariello -- KeyBanc Capital Markets -- Analyst

Rod Lache -- Wolfe Research -- Analyst

Mattias Holmberg -- DNB -- Analyst

Sascha Gommel -- Jefferies -- Analyst

Chris McNally -- Evercore -- Analyst

Erik Golrang -- SEB -- Analyst

Victoria Greer -- Morgan Stanley -- Analyst

Agnieszka Vilela -- Nordea -- Analyst

Hampus Engellau -- Handelsbanken -- Analyst

Emmanuel Rosner -- Deutsche Bank Securities -- Analyst

Joseph Spak -- RBC Capital Markets -- Analyst

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