After seemingly ignoring a whole host of a negative data points over the past several months, from collapsing sales volumes and soaring inventories levels to crashing used car prices, auto investors apparently couldn’t see their way to ignoring Autoliv’s abysmal earnings this morning. 

A maker of automotive safety systems for various light vehicle platforms around the world, the $9 billion market cap Autoliv missed 2Q 2017 on both revenue ($2.54bn actual vs. $2.57bn expected) and earnings ($1.44 actual vs. $1.49 expected) as shares dropped over 9% in early trading.

Of course, it was Autoliv’s rather cautious outlook on North American production volumes in 2H 2017 that likely caught investors off-guard. Speaking on their conference call earlier, Autoliv management noted increasing uncertainty on the stability of auto markets in North America and China and expressed growing concerns on inventory levels in those two markets.

We continue to see some uncertainty in the light vehicle market in particular in North America and in China. During the second quarter, the inventories remained above normal levels in China and the U.S. due to softer demand than the underlying light vehicle production, while the inventory levels in Europe remained stable based on our internal estimates.

This prompted them to slash their top line growth forecast for the entire year from their previous guidance of 4% organic growth to just 2%.

Looking now up on the full year on the next slide. Our full year 2017 indications remains unchanged from February 2 for adjusted operating margin. However, we lowered our organic sales growth indication to about 2% from about 4% mainly due to lower demand in China and North America during the second quarter and the second half of 2017.

And summarizing our outlook on the next slide. Our outlook excludes cost for capacity alignment and anti-trust-related matters, and assume mid-July exchange rates. Our net consolidated sales for the third quarter expected to increase up to 2% as the currency translation effect is minimal. The full year 2017 indication is for a net consolidated sales increase of around 3% which remains unchanged from April 20. The lower organic sales growth of around 2% from the 4% earlier indication is offset by a lower currency translation effect of around 2 percentage points. Based on these sales assumptions, we expect an adjusted operating margin in the range of 7.5% to 8% for the third quarter and around 8.5% for the full year 2017.