Autoliv: A Safe Drive to Profits
12/14/2017 5:00 am EST
In September 1899, Henry Bliss stepped off a streetcar in New York City and into history; he was the first person killed by a motor vehicle, notes Charles Mizrahi, editor of Park Avenue Investment Club.
Fatalities rose and continued to climb higher. Safety features in cars were non-existent for the first half of the 20th century. In fact, cars didn’t have seatbelts until 1949, when Nash and later Ford in 1955 offered them as options.
In 1945, there were 10.7 fatalities per 100 million vehicle miles traveled (VMT). After more than six decades of safety features added to vehicles, that number has now plunged to 1.1 in 2016, a more than 90% reduction.
Your chances of dying in a car accident have never been lower, thanks in large part to Autoliv (ALV), the world's leading supplier of automotive safety systems.
The company makes passive and active safety systems. Passive safety systems are meant to improve vehicle safety, such as driver-side airbags, side-impact airbag protection systems, and seatbelts.
Active safety systems are designed to make driving easier and more comfortable and include camera-based vision systems, night driving assist, automotive radars, and brake controls. These systems work to prevent collisions and reduce impact. ALV is currently providing, on average, three airbags and three seatbelts per car in every car produced in the world.
However, it is the electronics segment, which produces the active safety systems, that I see experiencing explosive growth. Active safety content is currently about $50 per vehicle and is projected to grow to about $230 in 2025 — an increase of 360%.
ALV recently announced that it is conducting a strategic review on separating the company into two: Passive Safety and Electronics. When that happens, we wouldn’t be surprised to see the Electronics company acquired for a hefty premium by one of the large auto manufactures.
The next time we should get any clue as to how the separation is progressing is at the end of January 2018, when the company announces its Q4 results.
I’m recommending ALV because of the company’s dominant position, healthy balance sheet, and soon-to-be separation into two companies. The market is giving patient investors the opportunity to buy into a company that is dominant in its industry.
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