Annual Report 2008

08
Innovative Vehicle Technology
Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.

Financial information in 2009 February 20, 2009 Year-end Report 2008 March 2009 Annual Report 2008 April 16, 2009 Annual General Meeting April 24, 2009 Interim report January 1 to March 31, 2009 July 17, 2009 Interim report January 1 to June 30, 2009 October 23, 2009 Interim report January 1 to September 30, 2009 Year-end and interim reports are published in Swedish and English and can be downloaded from the Haldex website www.haldex.com. The Annual Report is published in Swedish and English on the Haldex website. Annual General Meeting 2009 Haldexs 2009 Annual General Meeting will be held at 4p.m. CET on Thursday, April 16, 2009, at the IVA Conference Center, Grev Turegatan 16, Stockholm. Participation in 2009 Annual General Meeting Shareholders who wish to participate in the Annual General Meeting must be registered in the VPC AB share register no later than Wednesday, April 8, 2009. Notification must be made no later than noon on Wednesday, April 8, 2009, to Haldex AB, Box 7200, 103 88 Stockholm, or by telephone to +46 (0)8-545 049 50, or by e-mail to info@haldex.com. Guide to reading the Annual Report Haldex is a Swedish company, subject to Swedish laws. All values are expressed in Swedish kronor unless otherwise indicated. Millions of kronor are abbreviated as SEK m. Figures in parentheses refer to 2007. Data concerning markets and the competitive situation represent Haldexs own assessments unless a specific source is identified. These assessments are based on the best and most recently available factual documentation from published sources in the vehicle industry.

Contents Direction and Strategy Highlights of 2008 Report from the CEO Strategic orientation Research and development The vehicle market Haldex divisions Commercial Vehicle Systems Hydraulic Systems Traction Systems Garphyttan Wire Haldex in the society Human Resources Social responsibility Environment Consolidated and Parent Company Financial Statements Directors report Consolidated income statement Consolidated balance sheet Changes in Group equity Consolidated cash flow statement Notes Group Parent company income statement Parent company balance sheet Changes in Parent Company equity Parent Company cash flow statement Notes Parent Company Audit Report Corporate Governance Corporate Governance Report Board of Directors and Auditors Executive Committee Other Haldex share Five-year summary and quarterly review Definitions Addresses Page 1 2 4 8 10

12 16 20 24

26 27 28

30 34 35 36 37 38 56 57 58 58 59 63

64 70 71

72 74 75 76

The Group in brief

Mission
Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches.

Haldex divisions
Commercial Vehicle Systems (CVs)

We strengthen our competitiveness and develop long-term customer relationships through products that offer high performance and low total costs for the customer throughout the products service life, ethical business practices and commitment to long-term partnerships. Vision
Haldex will be the global vehicle industrys first choice as a long-term partner.

We will contribute to social development by providing vehicle technology that satisfies our customers and society. By staying on the cutting edge of technology and developing skilled and motivated employees, we will also achieve profitable growth. Values Customer first Respect for the individual Elimination of waste Strategy The Group should focus on areas in which Haldex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability. This strategy includes evaluating structural opportunities in order to create competitive units with favorable prospects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth:

Create growth and improve our competitive capabilities by developing and commercializing new products Create growth by sharply strengthening positions in new markets, primarily through determined expansion in China, India, Brazil and Russia Reduce purchasing costs, in part by continuing to increase the share of purchases from low-cost countries Improve the cost structure by increasing the share of production in low-cost countries Improve productivity and quality through intensified use of Haldex Way, our concept for management and process improvement Develop employee competencies, strengthen the corporate culture and increase the focus on leadership Acquire companies and establish programs of cooperation that are consistent with the strategic direction Niche strategy safety, environment and vehicle dynamics Market Europe accounted for 53% of Group sales, North America for 38% and remaining markets for 9% in 2008. The markets in South America and Asia, particularly China, are showing robust growth, and their importance to the Group is increasing rapidly. Legislation focusing on traffic safety, the environment and vehicle dynamics, combined with demands for continuous cost rationalization measures, is the driving force for product development in todays automotive industry. Demand is also driven by the increase in vehicle production worldwide. Haldex has a global market presence, with 23 production plants in Sweden, Germany, the UK, Hungary, the US, Mexico, Brazil, India and China.

Net sales by region 2008

Net sales by division 2008

Net sales by customer segment 2008

Other, 3% Industrial vehicles, 7% Light vehicles, 12% Engines, 20% Heavy vehicles, 58%

During 2008, Haldex reached an agreement with Suzuki Metal Industry Co. to divest its division Garphyttan Wire. The transaction is expected to be completed during the period April to June 2009.

South America, 3% Asia and Middle East, 6% North America, 38%

Traction Systems, 12% Garphyttan Wire, 13% Hydraulic Systems, 25% Commercial Vehicle Systems, 50%

Europe, 53%

HALDEX 2008

Operations

Net sales, share of Group total

Operating income*

Employees, average share of Group total

Market share

Commercial Vehicle Systems; Develops and manufactures brake systems for heavy trucks, trailers and buses. The product offering covers all primary components and subsystems included in complete air brake systems. Operations are divided into five business units: Actuators, Air Management, Brake Controls, Foundation Brake and Friction Products.

sek

4,234 m
sek

2,856

15%

Haldex market share of the market served with its current product program is about 15%. The market share is substantially higher in individual product areas.

50% 2,095 m
sek

48% 2,335

Hydraulic Systems; Develops and manufactures gear and georotor pumps, hydraulic power packs and high density power systems; technology for diesel engines, i.e. pumps for lubricating oil, coolants and diesel fuel, and technology for reducing emissions of exhaust gases from engines. Hydraulic lifting systems and drive systems for industrial vehicles and trucks are also supplied.

sek

146

2030%

25%

39%

Hydraulic is a niche player with about 20% of the market share in its market niches. Business unit Engines is market leader for oil, fuel and water pumps in North America and the rest of the world. Haldexs global market share in these sectors is slightly more than 30%, and just over 40% for oil pumps in North America.

Traction Systems; Develops and anufactures electronically controllable m systems for all-wheel-drive systems for cars, known as AWD systems. The system software can be customized to meet each carmakers particular desires in terms of driving characteristics and traction.

sek

1,021 m
sek

339

41

50%

Haldex is a market leader in controllable AWD systems. The market share in Europe exceeds 50%.

12%

6%

Garphyttan wire; Develops and manufactures advanced spring wire from various alloys for use mainly in combustion engines and transmissions. The main applications are valve springs, transmission springs, piston rings and springs for fuel injection systems.

Net sales amounted to SEK 1,053 m in 2008.

Operating income amounted to SEK 59 m in 2008.

Garphyttan had 474 employees in 2008.

The market share of the global market for oil-hardened valve spring wire is about one-third, which gives Garphyttan Wire a leading global position in this product area.

Haldex Group

Net sales, Group total

Operating income, Group total*

Employees, average Group total

sek

8,403 m

sek

250 m

6,004

*Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. Operating income amounted to SEK 92 m (289).

HALDEX 2008

Highlights of 2008

Highlights of 2008
SEK

8,403
SEK

Sales totaled SEK 8,403 m (7,940). Adjusted for currency exchange rates, sales rose 6%. Order intake totaled SEK 7,923 m (8,098). After adjustments for currency exchange rates, the decrease was 3%

43 250 857

Earnings after tax amounted to SEK 43 m, (141). Earnings per share amounted to SEK 1.92 (6.24)

SEK

Operating income* and operating margin* amounted to SEK 250 m (339) and 3.0% (4.4) respectively

SEK

Cash flow from operating activities was strong in the period amounting to SEK 857 m (312)

April 1
SEK

Haldex completed the acquisition of Concentric on April 1

800

An agreement was reached with Suzuki Metal Industry to divest the Garphyttan Wire division. The purchase price is estimated to SEK 800 m on a cash and debt free basis

Key figures 3 years Net sales, SEK m Operating income* Earnings after tax, SEK m Earnings per share, SEK Operating margin*, % Proposed dividend, SEK Return on capital employed, % Equity/assets ratio, % Cash flow from operations, SEK m Investments, SEK m Average number of employees

2008 8,403 250 43 1.92 3.0 2.4 29 857 392 6,004

2007 7,940 339 141 6.24 4.4 4.50 8.3 37 312 453 5,518

2006 7,890 403 310 13.96 5.3 4.50 11.5 40 402 409 4,683

*Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. Operating income amounted to SEK 92 m (289).

Report from the CEO

HALDEX 2008

Lower costs and greater efficiency create strong position when business conditions recover
Haldex endured a challenging and strategically critical year in 2008. The rapid decline in demand during the second half of the year was met by expanded cost-rationalization programs and improvements in operating efficiency. The Group implemented its renewed strategy and strengthened its structure with the completion of the Concentric acquisition and divestment of Garphyttan Wire. Haldex is now a more focused company, with a better structure and cost level, competitive products and solutions to meet the recovery when it occurs.

made and the loyalty shown by Haldex employees both those who have already left the Group and those who remain. Focusing the business Haldex has excellent potential to create value for its stakeholders based on the companys expertise in vehicle technology that improves safety, the environment and driving characteristics, reflecting some of the global economys most important trends. With profitability as the primary priority, Haldex is working on strategies to change the Groups structure and focus on areas where we can achieve internal synergies and a sustainable market position based on innovative and leading products that provide the best potential for continued business growth and higher profitability. The first step was the acquisition of Concentric, which was finalized in April 2008. The integration of Concentric has progressed extremely well, and we are achieving cost savings and offensive synergies in product development and marketing, in line with expectations. The New Hydraulics Systems will be one of the diesel engine markets largest suppliers of technologies and products that reduce emissions and fuel consumption, which are customer requirements that provide healthy global growth potential. In view of the current market conditions, we see opportunities for strong growth with favorable profitability. The second stage was the sale of Garphyttan Wire to Suzuki Metal for SEK 800m on a debt-free basis, a transaction that will be finalized in AprilJune 2009. Garphyttan has a very strong global position in its niche, spring wire for engines and transmissions used in the automotive industry. In our judgment, however, the synergies with other areas of the Haldex Groups business activities were not strong enough, and Garphyttan has a better future now as part of the global spring wire specialist Suzuki. The divestment of Garphyttan enabled us to reduce Haldexs net debt to SEK 1,535 m, pro forma, as per December 31, 2008. We also expect to realize a capital gain of about SEK 400 m. Accordingly, Haldexs financial position will be strengthened and we will be able to repay the bridge financing we raised to acquire Concentric. After renegotiating our syndicated loan, which matures in 2012, combined with private placement loans with various terms of maturity through December 2011, Haldex has secured a stable financing base. Lower investment requirements after the establishment of new business units in low-cost countries during recent years and our ongoing efficiency enhancement programs will contribute favorably to the Groups cash flow development. Positioned for profitable growth Like the industrial sector in general, we expect a troublesome 2009. The market outlook has seldom been more difficult to forecast. We have some security, however, in knowing that our skills, product development and products are favorably positioned to meet the long-term demand trend and generate profitable growth, efforts that are now gaining support from the actions we have taken to reduce costs and improve our operating efficiency. A brief review of business prospects for our various divisions shows the following: CVS: Although significant efforts have been made over the past two years to improve CVSs structure and reduce costs, these were not sufficient to offset the exceptionally sharp decline in volume and higher raw material

2008 will go down in history as a year of extremes. After favorable development during the first half of the year, demand declined sharply in the second half. It was one of the worst periods the automotive industry has experienced in a very long time, as reflected clearly in our full-year earnings and the results of our competitors. Sales totaled SEK 8,403m (7,940). After adjustments for changes in currency exchange rates, sales rose 6%. Order bookings amounted to SEK 7,923m (8,098), down 3% after currency adjustments. Operating income* amounted to SEK 250m (339) and the operating margin* was 3.0% (4.3). Earnings after tax amounted to SEK 43 m (141). Earnings per share amounted to SEK 1.92 (6.24). Cash flow from operating activities developed strongly and totaled SEK 857 m (312), a strength factor in these difficult times. Comprehensive cost-reduction program Given these background conditions, we decided in autumn 2008 to make further adjustments in our cost structure and increase our production efficiency to meet the economic decline. These cost-reduction programs call for personnel cutbacks that will affect 1,500 employees from mid-2008 through mid-2009, of whom 1,000 had left the company before year-end. The total reduction in personnel corresponds to 25% of our workforce. The positive impact on earnings is estimated at SEK 425 m per year. The programs will create savings in all divisions which will strengthen the Group structure and reduce working capital. We are closing several production plants and distribution units while increasing the efficiency of our production processes and the way we manage our operating capital. Costs for the programs are estimated at SEK 150m, of which SEK 85 m was charged against earnings during the fourth quarter and the remainder, SEK 65 m, will be charged against earnings in the first quarter of 2009. We have been working actively with cash-management programs and have reduced working capital by 50%, which has resulted in a strengthening of our cash flow. The measures were necessary adjustments to the rapid economic decline during the second half of 2008 and, combined with more effective capital management, yielded favorable effects on our clearly improved cash flow. However, this also means that we are improving our potential to derive even greater benefits from our strategic structural measures when demand starts to rise. Adjusting the cost structure and adapting the workforce to a lower level of demand is always very painful. As in all such situations, the difficult times have entailed hard work and major efforts on the part of our employees. I would like to express my gratitude for the contributions
*Excluding

restructuring costs, nonrecurring items and amortization of acquisition- related surplus values. Operating income amounted to SEK 92 m (289).

HALDEX 2008

Report from the CEO

In the long term perspective, there is no doubt that vehicle transportation comprises a growth segment of an increasingly globalized economy.

costs during 2008. However, we have completed the restructuring program in the Friction unit and we are now able to see positive results from rationalization measures implemented over the past few years. Combined with the program of measures to consolidate European distribution operations in a single unit and the closure of the production plant in Redditch, UK, as well as price adjustments and lower raw material prices, we will be positioned favorably when demand starts to rise again. Investments in the product development of brake and air suspension systems are now starting to generate market successes, and we have several new concepts in the launch phase that will further strengthen our market position. Hydraulic Systems: Our cost-reduction programs are also yielding effects in this area, and projected synergy gains totaling as much as SEK 70 m annually from the integration of Concentric are being realized. With the exception of the Chinese market, we are now the global market leader for oil, fuel and water pumps for the diesel engine market, with good potential for continued success. Strengthened by a new generation of the successful Alfdex concept, and a broader launch of Varivent, we have two leading product technologies to meet the increasingly stringent environmental demands being imposed on our customers. We are continuing to work on development of a new technology for electronic control of hydraulic systems designed to provide major improvements in engine fuel economy. With a better cost base and lower raw material prices, the New Hydraulic Systems concept has good potential to grow with strong profitability when demand recovers and starts to increase. Traction Systems: Haldex technology for all-wheel drive has gone from strength to strength, and we are now the leading source of product development and the leading supplier of electronically controllable systems, also known as AWD systems. This was confirmed in 2008 by an order from the manufacturer of one of the worlds most prestigious sports cars, with deliveries scheduled to begin in 2010, and another order for a European manufacturers new passenger car platform, with deliveries beginning in 2011. The future of all-wheel drive is secure, particularly in view of growing safety demands. Haldex has a highly prominent position, with prototypes for the next generation that are now

being tested by two major car manufacturers. We are also conducting several research projects, including solutions for hybrid vehicles, which provide exciting potential in existing and new areas of technology. Market outlook for 2009 It has seldom been more difficult to forecast future business trends than it is now during this winter. We do not expect any brightening of the demand trend during the first half year of 2009. In the large flow system that is the automotive industry, inventories are being reduced in all areas, thereby impacting new order bookings. When this process has been completed, there will be some potential for a recovery. In the longterm perspective, there is virtually no doubt that vehicle transportation comprises a growth segment of an increasingly globalized economy, in which more and more countries want to, and will, benefit from more jobs and improved welfare generated through the distribution of international labor. There are also strong indications that more stringent demands will be imposed in terms of environmental and safety considerations, areas of particular importance to Haldex. Positive aspects of the economic situation include falling energy and raw material prices, lower capital costs and the highly comprehensive economic stimulus packages that are now being launched in most countries. Our own intensive work efforts to reduce costs and improve operating efficiency will also yield favorable effects. As a result, Haldex will be well positioned and highly competitive when the market recovers.

Stockholm, March 2009

Joakim Olsson CEO and President

Strategic orientation

HALDEX 2008

Mission, vision, strategies and objectives

Mission
Haldex provides proprietary and innovative technology solutions that improve safety, the environment and vehicle dynamics to the global vehicle industry within specific niches. We strengthen our competitiveness and create long-term customer relations through highly skilled employees, high-performance products, low total costs for the customer throughout the products service life, ethical business practices and a commitment to longterm partnerships.

Strategies
The Group should focus on areas in which Haldex can achieve a strong market position based on innovative and leading products with the aim of creating a platform for sustainable growth and healthy profitability. This strategy includes evaluating structural opportunities in order to create competitive units with favorable prospects. The following strategic initiatives are also being pursued in order to increase profitability and secure growth: Product development Stronger positions in new markets Reduced purchasing costs Increased production in low-cost countries Improved productivity Haldex Way Development of employee competencies, strengthening of the corporate culture and increased focus on management Strategic acquisitions Niche strategy safety, environment and vehicle dynamics Profitability has the highest priority in the Groups strategy. In parallel, continued robust growth is an important prerequisite for success. Haldex offers proprietary vehicle technology solutions that meet three customer requirements, safety, environment and vehicle

ynamics. These customer requirements d represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth combined with healthy profitability.

Objectives
Haldex shall create value for the shareholders by focusing on competence, stable growth and increased profitability in a sustainable manner. The goal will be achieved through a distinct customer focus, growth in niche sectors offering higher growth potential than the automotive market in general and determined strategies for cost savings and greater efficiency.

Vision
Haldex will be the global vehicle industrys first choice as a long-term partner. We shall contribute to social improvements by providing vehicle technology that satisfies both customers and society. We shall also achieve profitable growth by staying at the cutting edge of technology and developing skilled and motivated employees.

Financial objectives

Haldex has two overall objectives:

15% return on capital employed 6% annual growth

Values
Customer first Respect for the individual Elimination of waste

The secondary goals are:

Operating margin of 7% Capital turnover rate of 2.5

Safety, environment and vehicle dynamics The Haldex Group offers proprietary vehicle technology solutions that meet three primary customer requirements: safety, environment and vehicle dynamics. These customer requirements represent trends in our business environment that drive development in the vehicle industry and enable Haldex to outperform the vehicle market as a whole in terms of growth. The direction of demand is governed by such factors as increasingly stringent safety and environmental requirements from legislators, reflecting global consumer opinion that is becoming progressively pronounced. Growth opportunities are strengthened further by the importance of vehicle dynamics in positioning and differentiating between vehicle manufacturer brands. With Haldexs brake systems, all-wheel drive systems, hydraulic systems and engine products, the Group is able to offer technical solutions of the highest quality to the worlds leading vehicle manufacturers. In accordance with the companys vision of being a reliable, longterm primary choice, our products are often developed in close cooperation with customers to meet their specific requirements and applications. Haldex creates value for the worlds leading vehicle manufacturers, which provides opportunities for continued strong growth and expansion.

Optimizing the Group structure To achieve sustainable growth, healthy profitability and increased shareholder value, Haldex focuses on areas in which the Group can secure a strong market position based on innovative market-leading products. The core business is conducted within three divisions: Commercial Vehicle Systems, which is positioning itself for continued growth through ongoing efficiency-enhancement and rationalization programs, Hydraulic Systems, whose growth is mainly generated through the development and launch of new technologies that satisfy future demands arising from environmental legislation, and Traction Systems, a global technology leader in a segment characterized by high growth. As a feature of the Group strategy, Haldex continuously evaluates its operations and a variety of structural opportunities for strengthening the competitiveness of its various units. These could take the form of cooperation with other companies, supplementary acquisitions or divestments. The acquisition of Concentric during 2008 was an initial step in Haldexs strategic plan for optimizing the Group structure and creating a strong Hydraulic Systems Division. Another step towards a more focused business was taken towards the end of the year when an agreement was entered with Suzuki Metal concerning the divestment of the Garphyttan Wire Division.

HALDEX 2008

Strategic orientation

Product areas

Products for
Heavy vehicles

Haldex largest customers

Daewoo Bus, Daimler, Dongfeng Motor, Eicher, Ford, First Auto Works, Freightliner, General Motors, Hino, Hyundai, Isuzu, Iveco, Kamaz, MAN, Oshkosh, Paccar, Renault Trucks, Scania, TATA, Volkswagen, Volvo. Arvin Meritor, Bendix Spicer, Bosch, BPW, CICM, Dana, Gigant, Great Dane, Guerra&Facchini, Hendrickson, Jindo, Kgel, Krone, Randon, SAF, Schmitz, Stoughton, TRW, Utility, Wabash.

Brake systems

Trucks and busses Axles and trailers

Industrial vehicles
Forklift trucks Industrial vehicles Tailgate lifting devices and bogie axles

Atlet, Crown, Jungheinrich, Linde (Still, OM Pimespo), NACCO (Hyster, Yale), Rocla, Toyota (BT, Raymond, Prime Mover). Agco, Bobcat, Case New Holland, Caterpillar, John Deere, Doosan, Dynapac, Genie, Grove, JCB, JLG, Komatsu, Liebherr, O&K, Pinguely & Haulotte, Manitowoc, Skyjack, Terex, Vgele, Weyhausen, Volvo. Behrens, Br, Dautel, DHollandia, Maxon, Scania, Sorensen, Zepro, Volvo.

Hydraulics and engine components

Engines

Caterpillar, Cummins, DAF, Daimler, Detroit Diesel, Deutz, Iveco, JCB, John Deere, Scania, Volvo, Tata Cummins.

Passenger cars

Ford (Ford,Volvo), Land Rover, General Motors (SAAB, Opel, Buick, Cadillac), Volkswagen (Audi, Bugatti, SEAT, Skoda, VW).

AWD-systems

Strategies for growth and profitability Profitability has the highest priority in the Groups strategy. In parallel, continued robust growth is an important prerequisite for success. To achieve its financial objectives for growth and profitability, Haldex applies the following strategies:

Growth:
Niche strategy for increased growth, through a focus on products with higher growth potential than for the vehicle market as a whole. For Haldex, this involves products that improve safety, the environment and vehicle dynamics. Increased competitiveness through product development is a central element in Haldexs strategy. This involves both new product development and efforts to create new applications for our existing products. Strengthening positions in new markets is essential for growth. This will be achieved through goal-oriented expansion, primarily in China, but also in other countries such as India, Brazil, Russia and countries in Eastern Europe. Haldex continuously analyzes opportunities for strategic company acquisitions, while simultaneously launching other forms of cooperation. Developing new technologies and more rapidly establishing positions in new markets are key goals in Haldexs acquisition strategy.

Profitability:
The cost structure is being improved by means of structural and efficiency- enhancing measures. An increasing share of production is being located in low-cost countries, thus reducing costs and bringing important parts of production closer to our strategic markets and customers. In order to increase profitability, Haldex strives to reduce purchasing costs, mainly by increasing the proportion of procurements from low-cost countries. Productivity is being improved through continued implementation and development of the Haldex Way management system. The organizations efficiency is being improved through increased competencies and more distinct lines of control and responsibility. Making sure that large development projects are profitable. Synergies in the new Hydraulics Division. Expanded cost reduction program.

Strategic orientation

HALDEX 2008

Positioned for growth

Haldex is well positioned to meet the demands of the global vehicle industry.
Haldexs mission and strategic orientation position the Group for growth. Asia, Eastern Europe and South America are markets with major requirements and characterized by robust growth. In countries such as China and India, the pace of social development is currently rapid. At the same time, climate issues and other challenges are placing greater demands on all of us to assume a global responsibility for reducing energy consumption and achieving a better and safer environment. In parallel with greater global commerce, which is driving increased transport requirements, the Western Worlds infrastructure is being expanded and upgraded. For Haldex, this trend is creating strong driving forces for business growth. We develop and deliver products that improve safety, the environment and the dynamics of vehicles used in the transport and infrastructure sectors. In the worlds new and expansive markets, investments in these sectors are vital for growth and social welfare. In traditional industrialized countries, the transport and vehicle sectors must assume a greater responsibility for improving the environment and increasing safety. As a result of Haldexs expertise in the form of technologies for satisfying the demands deriving from future legislation and the driving forces underlying improved fuel economy and increased safety, the Group is extremely well positioned to meet the demands of the global vehicle industry. Global presence and world-leading customers Haldex has a global presence and its customers include world-leading vehicle manufacturers, which is a strategic strength. The Group has production operations distributed among 23 production plants and nine development units in North America, South America, Europe and Asia. We are favorably positioned and able to offer proprietary products that focus on the environment, safety and vehicle dynamics. All of these features and characteristics are strategically important to our customers Financial objectives
To better reflect the conditions in Haldexs markets and the long-term nature of its business, financial objectives are expressed as average values over a business cycle.

and provide considerable growth potential. Haldex is positioned on the cutting edge of technology in all areas, but without being an inventor. We develop and commercialize innovations, often in partnership with our customers, to provide maximum customer value. Serving worldleading customers in all product areas subjects the company to considerable demands, while also signifying recognition of Haldex as a leading global manufacturer and market driver within its market segments. Product development and world-leading products Product development is a key driving force for organic growth and is a decisive success factor for Haldex. The Group specializes in transforming innovations into profitable, world-leading products in its niches. Investments in product development have increased steadily and led to a pioneering contribution to the vehicle industrys technological advancement in all-wheel drive and disc brakes and in cleaning and increasing the efficiency of engines and hydraulics. In 2008, development costs accounted for about 4% of sales. Product development is a key factor in Haldexs strategy for being able to offer products in high-growth niches of the global vehicle market. Animportant prerequisite is the ability to develop technical solutions that satisfy customer requirements arising several years into the future, while having the product planning that facilitates efficient and profitable sale of new products. With its model for innovative product development, Haldex will be able to offer a series of new and attractive products to the market in the years ahead. Competencies of managers and other employees Continuously operating at the leading edge of technological development and having world-leading customers exposes the competencies of both individual employees and the organization as a whole to stringent
Return on capital employed
% 20

The Groups overall objectives are:

return on capital employed of 15% annual growth of 6%

16 12.1 12.8 12.3 11.5 8.3 5.8 6.0 4 6.8

12

The Group also has the following secondary goals:

profit margin of 7% capital turnover rate of 2.5 The objectives apply to the Group as a whole. Targets for the various business areas may differ depending on capital structure, degree of refinement or other business- related conditions. The return on capital employed has been less than 15% in the past five years. Efficiency efforts to strengthen Haldexs profitability remain one of managements main priorities.
8

2.4

00 01 02 03 04 05 06 07 08 Target 15%

HALDEX 2008

Strategic orientation

For Haldex, the worlds mega trends are creating strong driving forces for business growth.
requirements. Based on the skills and efforts of its employees, Haldex aims to develop a high-performance, world-class organization that continuously strives to improve operations in accordance with the internal management system, Haldex Way. Determining factors are how well this work is organized and ensuring that each employee is given opportunities to utilize his or her full potential. Management and HR work is governed by the following aims: To continuously develop our ability. By constantly raising the competency level of the organization and creating conditions that enable us to remain innovative and by continuously learning and improving our operations, we generate a distinct competitive edge over our competitors. To continuously improve as managers. By increasing our ability to manage people and the organization, in both the short and the long term and in a generally more complex business, conditions are created for Haldex to become a high-performance company. To strengthen our corporate culture. By developing a strong corporate culture that encourages performance and responsibility, we create an attractive workplace for our employees and conditions for continuous improvements in our operations and earnings. This can only be achieved through the contribution of each employee in the organization and when each individual: can act independently, make decisions and act on the basis of his or her ability and in accordance with the companys norms and values. is positively committed to and participates in the development of his or her work and has the capabilities to interact with others for the benefit of both the employee and the company. Productivity and Haldex Way In order to capitalize on its excellent growth potential, Haldex must improve is cost-effectiveness and increase its productivity. This work is conducted within the framework of the overall management and process improvement system, Haldex Way. Haldex Way focuses on customer satisfaction and the achievement of world-class production. Haldex Way is based on the lean production philosophy, and the objective is to create a continuous link in flows between customers, subcontractors, production and product development. Haldex Way is an overall management philosophy for the entire value chain, including products, information and future requirements. Haldex Way creates a shared direction based on active management and a uniform culture, while simultaneously facilitating tangible changes and improvements in the Groups operations. The concept for Haldex Way is based on three fundamental values: Customer first Respect for the individual Elimination of waste Customer requirements are the controlling factor for these values. Our customers needs form the platform for what we produce motivated employees are a basic prerequisite for the production of qualitative products and we strengthen our competitiveness by eliminating all forms of waste. Management within Haldex must go hand-in-hand with the principles of Haldex Way and serve in a manner that provides support, leadership and development.

Annual sales growth

% 25 20 15 10 6.0 5 1.0 0 5 10 4.0 7.0 00 01 02 03 04 05 06 07 08 Target 6% 15.0 11.0 7.0 5.0 6.0

Profit margin*
% 8 7 6 5 4 3 2 1 0 00 01 02 03 04 05 06 07 08 Target 7% *Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values. 2.9 5.2 3.9 3.5 3.0 5.1 5.5

Capital turnover rate

times 3.0 2.5 2.2 5.1 4.3 1.5 1.0 0.5 0.0 2.0 2.2 1.9 2.0 2.5 2.4 2.3 2.2 2.2

00 01 02 03 04 05 06 07 08 Target 2.5 times

Research and development

HALDEX 2008

New innovative products generate growth

Haldexs technical solutions for improved safety, environment and vehicle dynamics are based on customer requirements and requests.

safety
Products and functions that enhance vehicle safety generate growth exceeding that of the vehicle market as a whole. This trend is being driven by increasing demand from customers and new legislation aimed at improving traffic safety. Haldex adopts a proactive approach and represents innovation in the field of brake technology for trucks and trailers, while advancing development in cooperation with customers. For enhanced safety in passenger cars, Haldex has developed an electronic differential slip based on its all-wheel drive system Haldex XWD. Together with Haldex couplings, this electronically controlled module is integrated into the AWD system for enhanced stability when maneuvering at high speeds. Haldex XWD provides increased safety by offering complete integration of this with the brake and stability systems.
Brake and air suspension In the vehicle trailer segment, Haldex currently occupies a leading position as a supplier of brakeand air suspension systems. In cooperation with Europes leading trailer manufacturers, Haldex has implemented improvements to the EB+ (Gen2)

Research and development represent a fundamental strategy for achieving Haldexs long-term goal of profitable growth. In cooperation with customers, Haldex specializes in developing and commercializing innovations into world-leading products in niches that enhance the vehicles performance in terms of the environment, safety and vehicle dynamics. In 2008, investments in product development totaled 4% of consolidated sales. The basis for research and development is in-depth knowledge of customer requirements, a high level of technical expertise and extensive knowledge of factors affecting the business environment. R&D work is conducted in collaboration with customers and partners, which include worldleading vehicle manufacturers and sub- suppliers to the vehicle industry. The main driving forces for product development in the vehicle industry are legislation aimed at increased traffic safety, satisfying intensified environmental requirements, improved vehicle dynamics and reductions in fuel consumption, combined with demand for continuous cost- rationalization. Products that satisfy these more rigorous demands are also adjudged to generate significantly higher growth than the vehicle market in general, which provides Haldex with favourable prospects for increased value generation. Product development activities are conducted in each division. Haldexs specialist expertise is its ability to industrialize innovations, that is, develop ideas from the concept stage to products and industrial production, and then adapting them to the customers production and use in the market. Haldex satisfies the unique requirements of each customer based on platforms designs, which require solid knowledge of the customers product planning and the correct position in the pro duct development cycle. In parallel with proprietary product development, Haldex also acquires concepts and innovations that are then refined for cost-effective volume production. Cooperation within research and development Haldex cooperates closely with a number of European universities and colleges. Research is conducted in cooperation with the University of Technology in Lule, Sweden. Haldex also engages in programs of cooperation with Chalmers Institute of Technology in Gothenburg and the Royal Institute of Technology (KTH) in Stockholm, both in Sweden, the University of Dresden in Germany and Cambridge University in the UK. During 2008, Haldex together with KTH, another Swedish vehicle supplier and a Swedish vehicle manufacturer jointly received support from the Swedish Foundation for Strategic Research via the ProViking 2 program. The purpose of the project is for universities and industry to cooperate with the aim of improving development methods for mechatronics design. The Program for Automotive Research (PFF) is conducting a Green Car research project to develop more environmentally compatible vehicles. Haldex contributes knowledge and the experience gained through its development of Alfdex and Varivent. Within this project, Haldex is also cooperating with the Faculty of Engineering at Lund University, with the aim of optimizing the life and function of AWD systems.

environment
In recent years, Haldex has pursued a strategy of meeting and exceeding societysincreasingly stringent environ mental requirements and the Group now offers a portfolio of competitive products that contribute to more efficient emission control and superior fuel economy. Some of these products are already available for series production in the market, while others are at various stages of development.
Variable flow pumps Since Haldexs technologies are fully developed for the next generation of engines, the Groups various products can provide improvements in terms of performance, efficiency and

vehicle dynamics
Haldex is one of the worlds leading suppliers of all-wheel drive (AWD) systems. The first generation of Haldexs AWD coupling was introduced in 1998 for Audi TT and Volkswagen Golf. Subsequently, the development of new generations has continued and the fourth gen eration was launched in 2008. Although the mechanical components in Haldexs allwheel drive system are fundamentally the same for the various cars, vehicle dynamics can be customized through a variety of programming and control systems. The combina tion of mechanics and electronics mechatronics provides considerable flexibility, while Haldexs modular approach reduces costs for vehicle manufacturers. In order to broaden the product portfolio, a system with a controllable differential slip has been developed, which improves the vehicles traction and stability when maneuvering at high speeds.
Generation I 1998 The first Haldex coupling comprised a wet multiple disc clutch integrated in the rear axle. Cars equipped with Generation I: Audi A3 TT, VW Golf, Bora, Sharan, Beetle, Seat Leon, Alhambra, Skoda Octavia

HALDEX 2008

Research and development

electronic brake system that provide improved functionality and superior system integration. In addition to brake adjustment, the system also features electronic stability control (ESC), intelligent control of lift axles (ILAS) and a new product generation for raising/ lowering trailer chassis (COLAS+), which also includes a roll-on roll-off function for optimal adaptation and safety in connection with, for example, ferry transports. The system also offers Reset To Ride, Haldexs patented comfort and safety function for automatic repositioning of the chassis level after loading and unloading. Brake by wiRe To meet the demands placed on tomorrows brake systems, including further improvements to brake performance and vehicle dynamics, Haldex has developed brake- by-wire systems, which are completely electronic brake systems for trucks and trailers that feature electromechanical

brakes. This means that each wheel is fitted with a brake that is intelligently regulated by an electric motor, replacing todays compressed-air brakes. The signal to apply or release the brakes is transferred electrically from the drivers pedal to the wheel end. With electromagnetic brakes, the braking distance for heavy trucks is shortened by an average of 15% asa result of a more rapid response and enhanced control, thereby contributing to increased traffic safety.

Other advantages include lower energy onsumption compared with current systems c andmore efficient energy recovery when braking with hybrid vehicles. TRAILER ROLLOVER STABILITY In 2008 Haldex announced the addition of the 2nd Generation Trailer Rollover Stability (TRS) System. The system, built on Haldexs newest 4S/2M ABS platform provides the next generation of high performance braking along with roll stability safety technology. TRS is designed for one to three or more axle trailers using an air suspension. The system delivers superior braking performance by adjusting for the trailer conditions during normal and ABS braking events as well as to intervene with active braking if conditions indicate a rollover is imminent.

emissions, as required by Euro 6 and regulations beyond EPA 10. In addition to normal exhaust emissions, the more stringent legislation for engines includes other types of emissions, such as crankcase gases. By combining Haldexs variable flow pumps for oil and water, fuel savings exceeding 4% can be generated. The pumps adapt the flow of fluid to the vehicles requirements, thus limiting the energy required for operating the pumps. As a result, both CO2 emissions and fuel consumption are reduced, providing significant benefits for both trucks and passenger cars. Varivent The environmental benefits offered by Varivent are similar. The EGR (Exhaust Gas Recirculation) isan established method of reducing nitrous oxide emissions and its efficiency is enhanced by Varivent, which uses variable throat technology

to pump exhaust gases more efficiently. This, in turn, means that less energy is wasted in pumping gas through the EGR circuit and so reduces emissions. fuel consumption and CO2 Extensive engine testing has confirmed fuel savings of 4% for heavy trucks. The technology isparticularly suitable for turbo charging and high EGR (Exhaust Gas Recirculation) flows and can be adapted for individual engine turbocharging and EGR strategies. Naturally, the trend towards reduced fuel consumption also applies to gasoline-powered cars. In terms of volume, the engines of the future will be smaller but will generate the same horsepower as current engines. This will be achieved by means of high boost pressures and applying other turbo- strategies and here Varivent has a major contri bution to make.

Alfdex The Alfdex system offers the market a highly efficient method for separating oil and particu late matter from ventilation gases in the crankcases of diesel engines, also known as crankcase gases. Alfdex is a joint venture based onAlfa Lavals expertise in centrifugal separation and Haldexs position as a supplier to the global vehicle industry. During 2008, a new generation of the Alfdex system was launched, which is up to four times as effective and can handle up to three times the amount of crankcase gases as compared with the current model. The system uses centrifugal technology to remove particles down to 0.1 g/h or lower in normaldriving conditions. With a rotational speed of 7,0008,000 RPM, particles and oil mist are separated from the gas and returned to the oil sump.

Generation II 2002 The second-generation Haldex coupling was equipped with more intelligent software and new valve technology for faster reaction. Cars equipped with Generation II: Audi A3, TT, Bugatti Veyron, Ford Freestyle, 500, Mercury Montego, Seat Altea, Freetracker Skoda Octavia, VW Golf, Passat, Multivan, Volvo S40, V50, S60, V70, XC70, S80, XC90

Generation III 2004 The third generation received more pressure from an electric pump in connection with start, which eliminated wheel spin and in turn improved vehicle dynamics and off-road driving. Cars equipped with Generation III: Land Rover Freelander, Volvo S60, V70, XC70, S80, XC90

Generation IV & XWD 2007/2008 The faster and lighter Generation IV can also be combined with an additional coupling that controls the torque between the left and right rear wheels Haldex XWD Cars equipped with Generation IV: Audi A3, TT Skoda Octavia, Superb, Yeti VW Golf, Passat, Tiguan Land Rover Freelander Volvo S60, XC60, V70, XC70, S80, XC90 Cars equipped with Haldex XWD: Saab 9-3 XWD, Opel Insignia Buick Lacrosse, Cadillac SRX Generation V The development of a fifth generation is under way. Estimated production start: 2012.

10

Vehicle Market

HALDEX 2008

Market trends and forces

Haldexs market Production of heavy trucks and trailers is an indicator of trends in the Haldex market for brake systems. However, several important variations often give rise to a different trend in the market served by Haldex, compared with the vehicle market in general: the aftermarket accounts for about 40% of Haldex sales in this business sector. Since fluctuations in the aftermarket are normally not as volatile as changes in the production of trucks and trailers, the aftermarket has a stabilizing effect on Haldex sales during periods of both economic growth and decline. the market served by Haldex is larger for trucks than for trailers, since trucks are equipped with certain brake products that are not included in trailers. the markets in Europe and North America differ in several respects. In Europe, for example, disc brakes are installed in about 75% of all new trucks. The corresponding figure in North America is less than 5%. Drum brakes continue to dominate this market. Taking all these factors into account, growth in the Haldex market for brake systems declined about 7% during the year (at unchanged sales prices). For other business activities, demand is linked more strongly to factors other than truck production. Industrial vehicle production is a key factor for Hydraulic Systems, as is production of construction machinery, forklift trucks and, to some extent, trucks. Demand in Traction Systems is impacted, naturally, by the production of four-wheeldrive vehicles, but also to a large extent by the rate at which simple systems are replaced by more sophisticated adjustable systems. Trends and forces In addition to the number of vehicles produced, Haldexs market is also affected by changes in vehicle design resulting from new customer demands and requirements mandated by lawmakers. These market trends and driving forces represent the foundation for Haldexs focus and production.
Safety

from diesel engines in a manner that also enables low fuel consumption.
Driving characteristics

Brake systems and four-wheel drive are key elements in terms of vehicle safety. Todays increased demand is being met more than adequately by products developed by Haldex in these areas.
Environmental awareness

Haldex has several products with strong environmental profiles, such as Alfdex, which removes oil particles from crankcase gases in diesel engines, and Varivent, which makes it possible to reduce nitrogen oxide emissions

Driving characteristics and vehicle dynamics are becoming increasingly important competitive tools and differentiation factors for vehicle manufacturers. Four-wheel drive and electronic brake systems are key components in the development of products that match the driving characteristics of different customers and requirements. Other trends that affect Haldex include efforts by vehicle manufacturers to produce lighter vehicles, in order to reduce fuel consumption, for example. Accordingly, lower product weight is an important goal in Haldexs product development work. In markets outside Europe and North America, demand for western technology is growing, which is driven by the markets themselves and new legislation, particularly in large markets such as India and China. As a result, demand for Haldex products in these markets is also expected to grow more rapidly than overall vehicle production. In total, the trends toward improved safety, environmental characteristics and vehicle dynamics are expected to generate more rapid growth in Haldexs market compared with the general vehicle market. These expectations are also supported by development in new,

Truck production
Region 000 of units 1,000 Global 000 of units 2,500

Trailer production
Region 000 of units 350 300 Global 000 of units 1,400 1,200 1,000 800

Air brake wheel ends

Region 000 of units 6,000 5,000 4,000 3,000 Global 000 of units 18,000 15,000 12,000 9,000 6,000 3,000 0

800

2,000 250

600

1,500

200 150 100

400

1,000

600 400 200 0 2,000 1,000 0

200

500 50

2008

2009

2010

2011

2012

2013

2008

2009

2010

2011

2012

2013

2008

2009

2010

2011

2012

2013

North America Europe Asia

South America Global

North America Europe Asia

South America Global

North America Europe Asia

South America Global

HALDEX 2008

Vehicle Market

11

emerging markets in Asia, where demand for advanced products and technology is increasing constantly. Market 2008*
Trucks and trailers

The first half of 2008 showed favorable sales growth. This was followed by a uniquely rapid drop during the second half of the year in Haldexs major markets in Europe and North America. The market slowdown was particularly rapid during November and December, when the global financial crisis was followed by a serious downturn in the economy. Global production of heavy trucks increased 10% in 2008 compared with the preceding year. During the fourth quarter, production declined 13% compared with the corresponding period in 2007. Production of heavy trucks in North America declined in 2008 from 212,000 vehicles to 203,000, down 4% compared with 2007. In Europe, production of heavy trucks increased 8% compared with 2007, and the number of vehicles produced was 600,000. However, production declined 14% during the fourth quarter, compared with the corresponding period in 2007. Global production of trailers declined 13% compared with the preceding year. The weaker economy also impacted the market for trailers in North America. Produc-

tion was down 34%, compared with 2007. The number of trailers produced totaled about 168,000 in 2008. In Europe, the production of trailers was 4% lower than in the preceding year. Total production amounted to 340,000 units. Production during the fourth quarter declined 27%, compared with the year-earlier quarter. The aftermarket for brake systems accounts for about 40% of sales invoiced by the Commercial Vehicles Systems Division. The aftermarket in the US was stable during the first six months of 2008, but showed some decline during the fourth quarter, mainly due to adjustments of inventory levels. In Europe, volume sales in the aftermarket declined compared with 2007, due to stricter credit regulations and extended inventory adjustments.
Construction machinery

Forklift trucks

Production of forklift trucks in the North American market declined 20% during 2008, compared with 2007. During the fourth quarter, the North American market shrank more than 40% compared with the fourth quarter of 2007. The market for forklift trucks in Europe declined about 10% in 2008. Fourth-quarter production was about 20% lower than in the year-earlier quarter.
Passenger cars

The global market for construction machinery remained strong through the third quarter of 2008, but was impacted strongly by the economic slowdown in the fourth quarter, although not as much in North America as in Europe. The decline in North America was about 10%, compared with slightly more than 10% in Europe. Production was down more than 10% in North America during the fourth quarter and more than 20% in Europe, compared with the fourth quarter of 2007.

Global production of passenger cars declined 3% in 2008, compared with 2007. Production in North America was down 16%, compared with a decline of 4% in Europe. During the fourth quarter, production in North America was down 25%, compared with the fourth quarter of 2007, and production in Europe declined 24%.

* All information about trucks and trailers (except for trailers in Europe) and light vehicles are based on JDPower Statistics Q4, 2008.

12

Division: Commercial Vehicle Systems

HALDEX 2008

Commercial Vehicle Systems

Net sales SEK 4,234 m Operating income SEK 4 m Number of employees 2,856 Operations/products
Commercial Vehicle Systems develops and manufactures brake systems for heavy trucks, trailers and buses. Theproduct portfolio comprises all main components and sub-systems included in a complete air brake system. Operations are conducted in five business units: Actuators, Air Management, Brake Controls, Foundation Brake and Friction Products. Actuators manufactures brake cylinders that convert energy in the form of compressed air to the mechanical movement required to activate the wheel brakes. Air Management develops and manufactures products to produce and dehumidify compressed air in brake systems, such as compressors, air dehumidifiers and air purifiers, as well as air suspension systems. Brake Controls manufactures products for regulation of compressed air in brake systems, such as valves and electronically regulated subsystems (ABS, ESP, EBS). Foundation Brake develops and produces the wheel brake products that provide the actual braking effect, such as disc brakes, automatic brake adjusters for drum brakes and electronic sensor systems for indicating wear on brake surfaces. Friction Products sells brake linings for drum brakes for light, medium and heavy trucks. In addition, the Division conducts brake-reconditioning operations in the North American aftermarket. Manufacturing occurs in Brazil, India, China, Mexico, the UK, Sweden, Germany, Hungary and the US.

Strategy
Increasing profitability through improvements in operations and supply chain management. Successfully commercializing disc brakes. Maintaining global leadership in automatic brake adjusters. Business development activity in Asia to capitalize on market growth. Fully exploiting the competitive edge provided by Haldexs strong position in ABS, Air Suspension and Control Valves for trailers. Refining electronic control products by integrating additional functionality to meet future requirements concerning braking function and diagnostics. Build on traditional aftermarket strengths.

Goals/Strategies
To enhance profitability, increase the portion of sales to truck manufacturers and grow in such emerging geographic markets as Eastern Europe and Asia.

Market shares
The share of the market that can be served with Haldexs current product program amounts to about 15%. In individual product areas, Haldex has a significantly higher market share.

Competitors
The principal competitors are Knorr Bremse and Wabco. These two companies have complete product portfolios and, like Haldex, operate globally. An additional competitor is Arvin Meritor within certain product areas.

HALDEX 2008

Division: Commerial Vehicle Systems

13

S-ABA Automatic brake adjuster

ModulAir Air distribution

Air compressor

ModulX Disc brake

ILAS/E Electronic lift axle system

CONSEP Air cleaning system

S-ABA Automatic brake adjuster

ModulD Twin disc brake

ELS Electronically regulated air suspension

Trailer Control Module

EB+ Electronic brake system

Spring brake actuator

TTM/Trailer telematic module

Info centre diagnostic tool

Colas+ Raise/lower valve

Trailer Rollover Stability

The action program to improve productivity and profitability continued during 2008. Actions were taken to optimize the production structure, in order to position the division closer to customers and to reduce the cost of logistics.
Jay Longbottom
Division manager Commercial Vehicle Systems

14

Division: Commercial Vehicle Systems

HALDEX 2008

Improvement work within Commercial Vehicle Systems (CVS) continued, with extensive structural measures implemented during 2008 to create a competitive operation. The work was intensified in pace with the strongly declining market trend at the end of the year.

during the third and fourth quarters when the global financial crisis was followed by a sharp economic decline that intensified towards the end of the year. The normally stable aftermarket activities, which represent approximately 40% of CVS sales, were also impacted to a certain extent.
North America

Latin America and Asia

The comprehensive change to generate growth and profitability in 2007 continued during 2008. The focus was on optimizing structure, production and logistics, and creating a product portfolio with strong earnings potential. The following are notable examples of actions taken to improve competitiveness and profitability: The operations for drum brake lining within the Friction Products business unit at the plant in Prattville, Alabama, were discontinued and outsourced to subcontractors. The production of disc brake lining within Friction Products was divested. The operations had annual sales of SEK 100 m. As part of the Groups cost reduction program, a decision was made to consolidate the divisions European distribution operations. Inventories and logistics functions will be concentrated from four units in different countries to a joint warehouse in Weyers heim, France. A decision was also taken to relocate all manufacturing and distribution at the plant in Redditch, UK, to another plant in the Group. The market decline forced the division to adjust its expenditure, resulting in personnel reductions, which will primarily affect plants in Europe. In addition, several measures were implemented to cut costs, such as shorter work weeks, fewer consulting hours and production stoppages. The production of brake actuators was relocated from the plant in Iola, USA, to Mexico. Market trend in 2008 The market trend in 2008 was dramatic, with the first half of the year characterized by a continuation of the multiyear rising trend. However, this was followed by a uniquely rapid drop during the second half in Haldexs major markets in North America and Europe. Following strong sales in Europe and low but stable growth in North America in the first half of the year, the sales trend slowed rapidly

Until July, truck production in North America was at a low but stable level, compared with 2007. Sales began to decline during the latter part of the year due to the weak conditions in the US economy. Only the major haulers in North America continued to replace old equipment with new. Full-year truck production decreased 4%, compared with 2007. Trailer production also continued to decline during the year. Up to mid-year, nearly 1,000 haulers in North America had declared bankruptcy or left the market. Total trailer production decreased 34% compared with 2007. The aftermarket in North America was stable during the first half of the year, but a decline was reported in the fourth quarter, primarily due to inventory adjustments.
Europe

In Latin America, demand remained strong during most of the year. In Brazil, the market for heavy trucks grew 26%, supported by a strong trend in the mining and agricultural sectors. Demand in China was healthy during the year and the country will soon become the worlds single largest market for heavy trucks. The shift from light and medium-heavy trucks to heavy vehicles is occurring in line with increasing transport needs and improved infrastructure. Production of heavy trucks rose by 13% in 2008. In the Indian market, registrations increased up to August 31, but declined significantly towards the end of the year. Haldex in the market Haldex is market leader in the European trailer segment comprising brake and air-suspension systems, ranked first within air-spring valves and second within EBS systems. The position among the three largest German trailer manufacturers, Schmitz, Krone and Kgel, was strengthened during the year. In the European market, a strong trend towards an increase in system integration is in progress. This will strengthen the Haldex products that can be controlled electrically, such as brake and spring systems, which can largely be centralized to a few products. In response to this trend, Haldex, in cooperation with Europes leading trailer manufacturers, has implemented improvements to its electronic brake system, EB+. One example is the EBS system, ECOtronic, which was launched in 2008. Based on EB+Gen2, the system was developed jointly by Haldex and the German company, BPW (Bergische Achsen), which is Europes largest manufacturer of trailer axles. The cooperation between Haldex and BPW will continue within the framework of electronic brake system and chassis control. Another example of a Haldex product developed to cope with the increasing need for system integration is ModulAir, a modulebased product program for compressed-air treatment and air distribution for trucks and buses. Based on the ModulAir platform, an initial application was introduced at selected customers in North America, where the volume will successively increase during 2009. In the European market, a joint launch with one

Favorable growth was reported for truck production in Europe during the first half of 2008. Around mid-year, the order backlog for truck manufacturers started to decline somewhat and by August delivery times had been cut from 12 to six months. The financial turmoil and credit restrictions, resulted in customers being forced to abstain from investing in new trucks. Towards the end of the year, several manufacturers were forced to implement production standstills. The total market for trucks grew by 8% during 2008, compared with 2007. Trailer manufacturing reported favorable growth in Europe up to midyear when a decline in demand became evident in Germany, the UK, Spain and Italy. As customers cancelled already placed trailer orders, several manufacturers were compelled to discontinue production and adjust inventories to adapt to the lower demand. The production decrease became evident in both Central and Eastern Europe. The decline in the European market for trailers totaled 4% during 2008, the majority in the last half of the year. The aftermarket in Europe declined in volume compared with 2007, due to credit restrictions and the subsequent inventory adjustments.

HALDEX 2008

Division: Commerial Vehicle Systems

15

2008: Continued focus on cost competitiveness

of the major truck manufacturers is planned for 2011. Haldex noted market successes in North America during the year when several manufacturers of axles, special vehicles and trailers selected Haldex products as standard features in their vehicles. Heil Trailer of North America selected the Haldex TRS system (Trailer Roll Stability) as standard equipment. Heil Trailer International is the worlds largest manufacturer of tank trailers. Haldex also supplemented its offering in the North American market with its TRS system with the ILAS-E air spring valve. This monitors the position of the lifting axle on the trailer using electrical control. The Group also defended its strong and global leading position for automatic brake adjusters when the operations secured additional orders in 2008. Research and development The CVS Division has a total of four development centers in Europe and the US. During the year, a competency center was also established in India. Haldex has developed ModulX, a modular system of compressed-air-based disc brakes that can be adapted to various needs. For the customer, this means simpler adaptation and lower maintenance costs. For Haldex, it means more efficient development, since several of the modules can be used in future generations of discbrake systems. In parallel with the development of new product varieties, extensive work is in progress to optimize product family costs. Also under way is the development of a future brake system for trailer trucks and trailers, known as brake-by-wire technology. The principle involves replacing the existing compressed-air system with brakes that use electro-mechanic application and control. The system offers considerably shorter braking distances 15% shorter than with EBS and better vehicle stability. Work on the system will continue in cooperation with European vehicle manufacturers and will also include improved vehicle dynamics. To satisfy legislation concerning vehicle stability and shorter braking distances, the development of ABS/EBS will continue, as will improvement of product properties for existing platforms, as well as new systems for the North American and Chinese markets. Sales and earnings
Sales declined by SEK 295 m, compared with 2007, to SEK 4,234 m (4,529). Sales in the European market were strong during the first half year 2008, which limited the effect of the sales decrease in North America. During the second half, especially in the fourth quarter, demand dropped significantly in Europe, both in the truck and trailer segment. In Europe, sales declined to SEK 1,938m (2,058), while sales in North America decreased to SEK 1,852m (2,022). Currency adjustes sales decreased by 8% and 6% in Europe and North America respectively. Operating income for 2008, excluding restructuring cost and write down of assets, amounted to SEK4m (159). The weak market in North America and the significant drop in demand in Europe in the fourth quarter, especially during November and December, when Haldex customers shut down production for 3to 5 weeks, in combination with high raw material cost during the year, had a highly adversed impact on earnings.

Improvement measures
The action program to improve productivity and profitability continued during 2008. Actions were taken to optimize the production structure, in order to position the division closer to customers and to reduce the cost of logistics. A large part of the program involved making improvements in production within the framework of the Haldex Way efficiency-enhancement program.

Key events in 2008

Restructuring of the Friction Products business unit and decision about consolidation of the European distribution operations into one joint warehouse in France. Cooperation with BPW to develop the EBS ECOtronic system. Intensified work on improving operations via Haldex Way and Six Sigma. Successful launches of ILAS E Valve and increased knowledge of the suspension product line in North America. Growth in Transit and Government markets despite a weak economy. Initiate fleet trials for ModulAir in North American market.

Focus in 2009
Continued work to improve earnings involving quality, reduced costs and increased delivery precision. Lean management. Focused growth through value added suspension and brake control products. Intensified work involving Haldex Way and Six Sigma.

Key data
Net sales Operating income1) 2) Operating income1) Operating margin1) 2), % Operating margin1), % Assets Liabilities Return on capital employed3), % Investments Depreciation Number of employees3)

2008 4,234 4 92 0 2.2 2,546 641 3.9 232 160 2,856

2007 4,529 159 109 3.5 2.4 2,845 672 4.9 259 140 3,149

Net sales by region 2008

South America, 5%
Asia and Middle East, 6%

North America, 44% Europe, 45%

1) Reclassification 2) Excluding

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related surplus values 3) Rolling 12 months

Net sales
SEK m 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008

Operating income
SEK m 250 200 150 100 50 0 2004 2005 2006 2007 2008

16

Division: Hydraulic Systems

HALDEX 2008

Hydraulic Systems
Net sales SEK 2,095 m Operating income SEK 146 m Number of employees 2,335

Operations/products
Hydraulic Systems Division conducts operations in two business units, Hydraulics and Engines. Hydraulics offers a broad product range of both gear and gerotor pumps together with hydraulic power packs and high density power systems for a wide range of industrial vehicle and diesel engine installations, hydraulic pumps, particularly gear pumps and power systems. The applications include hydraulic lifts and drives systems for truck and construction machinery applications. Engines is market leader within pump technology for diesel engines. The pumps are used to pump lubricating oil, coolants and diesel fuel. The engines are used in trucks, buses, construction machinery, agricultural machinery and off-highway machinery. With the two proprietary products Alfdex (joint venture with Alfa Laval) and Varivent, Haldex has unique technology for coping with demands for lower emissions of harmful exhaust gases from engines. Manufacturing occurs in the UK, India, China, Sweden, Germany and the US.

Strategy
To increase sales through new product offerings that focus on environmental technology. To ensure synergies in the integration of Concentric, which was acquired in 2008. To develop the operations in India and China. To pursue the EMS hydraulic hybrid drive to a successful serial production.

Goal/strategies
To offer customers added value in the form of high service levels and system solutions. To be the technology leader, particularly in terms of the environment and energy efficiency. To remain supplier of choice, as the clear market leader.

Market shares
Hydraulic is a niche player with approximately 20% of the market share in its market niches. Engines is market leader for oil, fuel and water pumps in North America and the rest of the world. Haldexs global market share in these sectors is slightly more than 30%, and just over 40% for oil pumps in North America.

Customers
Hydraulics is primarily a supplier to manufacturers of construction machinery, such as Caterpillar, Volvo Construction Equipment, JCB, Terex, Atlas Copco and CNH (19% of sales), forklifts, such as Still, Linde, BT, Nacco (16%), and tail lifts, such as Zepro, Br, Maxxon and Srensen. Engines largest customers are engine manufacturers, for example, Cummins, Deutz and Perkins, and large truck manufacturers, such as IVECO, Volvo, Scania and Caterpillar, which produce diesel engines for their own trucks and construction machinery.

Competitors
Hydraulics largest competitors are Bosch, Rexroth, Parker Hannifin, Eaton and Sauer Danfoss. Engines is a global manufacturer with a number of regional companies as competitors.

HALDEX 2008

Division: Hydraulic Systems

17

The combination of Concentrics strong global position in its market segment and Haldexs expertise and enginetechnology products results in an expanded and highly competitive offering.
Ian Dugan
Division manager Hydraulic Systems

18

Division: Hydraulic Systems

HALDEX 2008

The acquisition of Concentric created a strong hydraulics division with global presence, established positions in growth markets and attractive products in the areas of emission reduction and fuel efficiency.

In April 2008, Haldex acquired Concentric of the UK, a leading global supplier of oil, water and fuel pumps for medium and large diesel engines. Concentric was consolidated from the second quarter of 2008 and integrated into the Haldex Hydraulic Systems Division, which was simultaneously reorganized to include a hydraulics and engine operation. The acquisition was the first step in the strategy to optimize Haldexs Group structure. The reasons underlying the acquisition were the strong global driving forces in the form of legislation that is continuously sharpening requirements for the vehicle industry in terms of environmental impact and lower fuel consumption. Haldex responds to these requirements by pursuing distinct strategies for the development of vehicle-technology solutions to improve safety, the environment and vehicle dynamics, which require proprietary development of new technologies and the acquisition of companies with competitive technologies. The combination of Concentrics strong global position in its market segment and Haldexs expertise and engine-technology prod ucts results in an expanded and highly competitive offering to the diesel-engine market, which is increasingly demanding more efficient and environment-friendly products. The acquisition makes Haldex the global market leader in oil, fuel and water pumps, with a global market share of slightly more than 30%. Haldexs new product portfolio for pumps can generate fuel savings of 510%. Customers benefit from the two companies strong focus on leading-edge technology, particularly in terms of environmental improvements and greater engine efficiency. The Group recently signed long-term delivery agreements with three large US and several European subsuppliers to international vehicle manufacturers. The acquisition of Concentric is generating synergies within production, purchasing, R&D and technology and are contributing to the transfer of expertise and know-how. Cost synergies are estimated at approximately SEK 70m

annually and are expected to be generated within three to four years. The integration has progressed more rapidly than planned. To date, synergies have been achieved through more efficient production and improved supplier arrangements. Revenue synergies from, for example, cross sales comprise an additional opportunity for the new operations. With strong strategies and an attractive product portfolio, the division is well equipped to satisfy demands from the business world and customers, and will constitute a competitive operation when the global economy recovers. Market trend 2008 During the year, demand conditions declined successively as the international financial crisis in the autumn was followed by an increasingly rapid global economic decline. In North America, demand in the market segments in which Haldex is active (with the exception of agricultural machinery) was weak during the first six months of 2008, as a result of credit restrictions and the resulting decline in residential construction. When the crisis in the financial sector expanded in the second half year of 2008, demand declined further in line with a continuing erosion of confidence in the economy. In Haldexs market segments in North America, production declined by 30%. The first signs of a weakening of the European market were noted when a number of countries increased their interest rates around mid-year. Declining demand led to inventory accumulation followed by sales from inventory by many of Haldexs client companies, a situation that continued into the fourth quarter. During the autumn, the demand situation deteriorated further when the financial crisis deepened and was followed by rapid economic decline. During the fourth quarter, year-on-year demand in Europe fell by approximately 40%. The drastic market decline resulted in many Haldex customers in North America and Europe reducing or entirely closing down their production for three to four weeks at the end of the year. Haldex in the market The rapidly changing demand situation during the second half of the year required an adaptation of production volumes and cost rationalizations. As part of the Haldex Groups cost reduc-

tion program, a reduction in the number of employees were made at the Divisions plants in North America, Europe and Asia during 2008. Although the market will be weak in the short-term, the long-term assessment is that the need for infrastructure investments in the future will be considerable, since this is a prioritized area for the major stimulus packages launched by governments throughout the world during the autumn and winter of 2008/2009. In addition, many national economies are prioritizing measures to reduce the transport sectors impact on the environment, which indicates that the long-term demand for Haldex expertise and products is favorable. The focus on environmental efforts includes legislation aimed at reducing emissions, as exemplified by crankcase gases in diesel engines. Such legislation already exists in Korea and Japan, while the North American market received similar demands when EPA07 came into force in January 2007. In Europe, the new Euro Six regulations are planned to come into effect in 2013. In a joint venture with Alfa Laval, Haldex has developed Alfdex, a unique and world-leading system for highly efficient removal of oil drops and soot particles from ventilation air in crankcases. Since 2005, several of the worlds leading truck and engine manufacturers have chosen the Alfdex system, including Scania, Volvo, Renault, Mack, Mercedes-Benz, Freightliner, Western Star, Sterling Trucks and Navistar. In September 2008, Haldex launched a new Alfdex generation, which is up to four times as efficient as the earlier model. The new generation can handle up to three times more crankcase gases. Varivent is another example of a Haldex product developed to cope with future more stringent legislation aimed at reducing emission levels. The system reduces emissions of nitrogen oxides from diesel engines, while simultaneously reducing fuel consumption. Several major diesel engine manufacturers have tested Varivent on their engine platforms and, in 2008, gasoline engine manufacturers began to show interest in the system. The Divisions business unit for hydraulic products has developed a new concept within hydraulic transmission, in the form of a pointof-use actuator, which is one step further in the integration between Haldexs hydraulic compo-

HALDEX 2008

Division: Hydraulic Systems

19

2008: Technology leadership in emission reduction and fuel efficiency

nents and customers products. The actuator integrates an electric engine, hydraulic pump, electronics, oil tank and cylinders into a single unit, resulting in lower purchasing and administration costs for the customer. The product was launched at the end of the year and serial production can commence in 2010. In Asia, the Division is established with production and sales in India and China. The production plant in Pune, India, has been producing oil and water pumps since 2005. During the year, production capacity was doubled to cope with the growing need for pumps in India and for the export market. Research and development Electric diesel pumps represent the latest step in fuel-transfer pump technology. Since their operation is independent of the engine, many benefits are generated, such as more flexible positioning in the engine compartment, superior starting features and controllable fuel supply. A leading engine manufacturer is currently testing Haldex prototypes for a number of different applications. A new generation of hydraulic pumps was completed in 2008 and will be launched in early 2009. The promising development of new technology for electronic control of hydraulic systems, EMS, continued during the year. EMS technology combines hydraulics and electronics to provide improved efficiency and lower energy consumption. The technology creates opportunities for hydraulic hybrid vehicles. A major benefit of a hydraulic vehicle is the possibility to save and reuse a much larger share of the energy that is otherwise lost when the vehicle brakes, while utilizing potential energy during load movements. Haldexs EMS technology is unique in that it can utilize, store and reuse both rotary and linear energy, which could result in fuel savings up to 3040%. The technology is particularly suitable for special purpose trucks and construction machinery and allows opportunities for significant engine downsizing and/or increased vehicle capability. Sales and earnings
Sales amounted to SEK 2,095m (1,467). Adjusted for acquisitions and currency-exchange movements, sales were flat compared with 2007. Concentrics sales amounted to SEK 606m. Excluding restructuring costs and amortization of acquisition-related surplus values, operating income and the operating margin amounted to SEK 146m (86) and 7.0% (5.8), respectively. Concentrics contribution to operating income amounted to SEK 82m excluding amortization of acquisitionrelated surplus values, amounting to SEK 31m, and expenses related to the companys integration.

Improvement measures
Work to improve the Divisions profitability and cash flow was intensified during the year, with a focus on reducing inventory levels and accounts receivable. Actions to further improve product quality and production efficiency continued during 2008, primarily at the US production plant in Rockford, Illinois.

Key events in 2008

Acquisition and integration of Concentric Launch of the new Alfdex generation Production rationalization Increased focus on improved profitability and cash flow

Focus in 2009
Continue to reduce cost in line with activity Working capital reduction and cash management Variable flow, energy efficiency pumps Hydraulic hybrid drive

Key data
Net sales Operating income1) 2) Operating income1) Operating margin1) 2), % Operating margin1), % Assets Liabilities Return on capital employed3), % Investments Depreciation Number of employees3)

2008 2,095 146 105 7.0 5.0 2,028 628 8.2 88 74 2,335

2007 1,467 86 86 5.8 5.8 781 265 16.6 89 58 1,591

Net sales by region 2008

South America, 1%
Asia and Middle East, 9%

North America, 50% Europe, 40%

1) Reclassification 2) Excluding

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related surplus values 3) Rolling 12 months

Net sales
SEK m 2,500 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008

Operating income
SEK m 150 120 90 60 30 0 2004 2005 2006 2007 2008

20

Division: Traction Systems

HALDEX 2008

Traction Systems
Net sales SEK 1,021 m Operating income SEK 41 m Number of employees 339

Operations/Products
Traction Systems produces electronically controllable systems for four-wheel driven cars, known as AWD ystems. Because these systems are controllable, they can interact better with other subsystems in the car. s Thesystem software can be customized to meet each carmakers particular wishes in terms of vehicle dynamics and traction. Production takes place in Landskrona, Sweden, and Irapuato, Mexico. The Haldex operation in Hungary engages in some preassembly, spare parts production and low-volume production.

Strategy
The Divisions strategies are to: meet the markets requirements for cost-effective solutions and premium products based on the modularity inherent in Haldexs solutions. strengthen positions in the North American market and, in the long term, secure a position as the global leader in controllable AWD systems. To facilitate these efforts, new production lines were installed in Lands krona, Sweden, and the new plant in Irapuato, Mexico, in 2008. reduce costs by increasing purchases from low-cost countries, combined with technological improvements of products and production. strengthen our position as the technology leader in controllable AWD systems through continued aggressive investments in product development.

Goals/strategies
Haldex aims to strengthen its position in the North American market and broaden its customer base with a long-term view of achieving a position of global market leadership in controllable AWD systems through aggressive product development and reduced costs.

Market shares
Haldex is a market leader in controllable AWD systems. In 2008, the market share in Europe exceeded 50%.

Customers
Customers include such carmakers as Ford, Volvo and Landrover, the Volkswagen Group with its brands Audi, VW, Seat, Skoda and Bugatti, and General Motors with its global midsize car platform, which includes SAAB, Cadillac, Buick and Opel. The systems are used in regular cars, SUVs and crossover vehicles, which are a combination of regular station wagons and SUVs. The Volvo XC60 is an example of a vehicle in this category. Haldex AWD systems are used in all of Volvos AWD models.

Competitors
Haldexs principal competitors are BorgWarner, GKN, Magna Power Train and JTEKT. Haldexs key competitive advantages are the excellent controllability and reliability of its systems and its highly developed expertise in vehicle dynamics, meaning the ability to give a car the driving characteristics that the customers desires.

HALDEX 2008

Division: Traction Systems

21

In the long-term, the market outlook for AWD systems is expected to remain favorable. The trend towards smaller and more fuel- efficient vehicles will also continue.
Ulf Ahln
Division manager Traction Systems

22

Division: Traction Systems

HALDEX 2008

Establishing the production unit in Mexico laid the foundation for a strong position in the North American market and a broadened customer base to strengthen the position as global market leader within controllable AWD systems. Sales growth in 2008 was favorable, despite a weak market.

Haldex in the market Although the underlying market did not develop as expected in 2008, Haldex Traction Systems Division reported healthy full-year sales growth, totaling 20%. The division was able to maintain its position in the tough market because several customers introduced new car models during the year, which generated additional business for Haldex. Ford Kuga, Volvo XC60 and Opel Insignia were some of the new car models launched in 2008. Sales success for VW Tiguan also had a positive impact on volume for a major portion of the year. The division did not experience a noticeable decline in volume until the final two months of the year. In January, a new order was announced for an AWD system for Volkswagen, thus expanding a previous order placed in 2004. The add-on order was for a system based on the fourth generation of Haldexs coupling and was valued at EUR 8 M. Production occurs in Landskrona, Sweden, and deliveries commenced during the second half of the year. Production and delivery of the all-wheeldrive system for the new Volvo XC60 and Opel Insignia car models commenced during the second half of the year. Later in the year, Haldex received further confirmation of its leading market position when the European manufacturer of one of the worlds

most exclusive sports cars announced that it had selected Haldex to supply AWD systems. Delivery is scheduled to commence in 2010. At the end of the year, Haldex was nominated by an existing customer as supplier of an AWD system for a new platform, with production start scheduled for 2011. Haldexs AWD system is now found in several fuel-efficient car models, such as Ford Kuga and several of the VW Groups models. A strategically important event was the opening of a new plant in Mexico, which is manufacturing the most recent generation of the AWD system and electronic differential brakes. The plant is located in Irapuato in the state of Guanajuato, close to the plants of other vehicle manufacturers and subsuppliers for deliveries to a number of General Motors platforms. These are global operators and comprise several of General Motors car models with manufacturing worldwide. The plant represents a foothold for the Traction Systems Divisions continued expansion and growth in North and Central America. Furthermore, two new production lines were installed in the manufacturing unit in Landskrona, Sweden. Market trend in 2008 The industrys focus on such long-term issues as fuel economy, the environment and climate issues was further intensified due to the impact of rising energy prices during the first half of the year. The need for more fuel-efficient vehicles with superior environmental performance, in particular lower carbon dioxide emissions, will increase as a result of a number of political decisions taken during the year for the international coordination of more stringent climate goals.

The first indications that the international credit crisis was beginning to have an impact on the demand trend in the vehicle industry appeared at mid-year 2008. Financing difficulties for companies and households had a negative impact on demand. During the second half of the year, the situation was aggravated and the decline in vehicle sales began to accelerate. Several of the major manufacturers reduced their production volumes to adapt to the weaker market conditions. Towards the end of the year, the situation for major US car manufacturers developed into a crisis requiring public financial support. In the long-term, the market outlook for AWD systems is expected to remain favorable. The trend is to equip more car models with AWD systems, such as in the crossover segment and in smaller car models. In addition, simple AWD systems are being replaced by electronically controllable systems through continuous technical upgrading. The trend towards smaller and more fuel- efficient vehicles will also continue, even in the North American market, where the trend is moving from large rear-wheel drive cars to smaller, front-wheel drive models. In Europe, the trend towards fuel-efficient, smaller cars has been clear for several years. It is estimated that the trend in this market will also move towards smaller cars but with the same functionality as existing products, as exemplified by the sales success for VW Tiguan and Ford Kuga. This trend benefits Haldex, whose AWD system is now available in many fuel-efficient car models. The lead time for developing a complete AWD system in a new car model is normally about three years. The development projects

During 2008, Haldex received the prestigious European Automotive Chassis Product Innovation Award for its all-wheel-drive system. The award is presented by the UK analyst company, Frost & Sullivan, to companies that have demonstrated excellent and pioneering technological product development within their various industries.

HALDEX 2008

Division: Traction Systems

23

2008: Preparing for future growth

involving the next generation, are creating the conditions for Haldex to continue capturing market shares also during 20102015. Through the investments made in Mexico, the foundation is being laid for an increase in market shares in the North American market. The market for AWD systems is highly competitive and, to meet this challenge, Haldexs product development initiatives and purchasing from low-cost countries will continue, with a long-term aim of increasing the current proportion from 30 to 45%. Research and development Prototype installations of Haldexs Generation V AWD system for two different carmakers were tested during 2008. The development of Generation V commenced in 2006 in cooperation with a car manufacturer, with the aim of continuing to meet future customer requirements for cost-effective AWD systems. Production is expected to begin in 2012. Haldex is at the leading-edge of development of systems for AWD. To meet future customer requirements, several research proj ects are being conducted in cooperation with technical colleges and universities. The objective is to build expertise in existing and new areas of technology. To monitor developments within hybrid technology, a research project has been initiated in cooperation with the Faculty of Engineering at Lund University, Sweden, and with a number of car manufacturers. The aim is to use the new technology to develop competitive future AWD solutions for hybrid vehicles. Sales and earnings
Sales rose 20% to SEK 1,021m (848), which was a lower increase than planned. The increase in sales was mainly related to increased volumes to Landrover, the new VW model, Tiguan, for which deliveries started during the second half of 2007 and Ford Kuga for which deliveries started in 2008. Operating income amounted to SEK 41m (49). The sharp decrease in volume in December due to production shutdowns, led to a loss in December, which affected operating income in the fourth quarter.

Improvement measures
At the divisions plants in Landskrona, Sweden, and Irapuato, Mexico, extensive work was conducted on the installation of three new assembly lines during the year. The full impact of these efforts was not achieved until the second half of the year. A major improvement program, which had been in progress for one and a half years at the plant in Hungary, was completed in 2008 and resulted in significantly increased productivity. The plant assembles products for several divisions, although primarily for Traction Systems Division.

Key events in 2008

Series production of XWD to Opel Insignia. Series production to VW Caddy and Volvo XC60. Order from an exclusive European sports-car manufacturer. Additional order from VW. Opening of the new production unit in Mexico for manufacturing AWD systems for the North American market. Production of the two millionth coupling. International award for product innovation following the launch of the XWD. New product generation (Gen IV) introduced to all customers.

Focus in 2009
Increased production volumes at the plant in Mexico when the new Buick Lacrosse and Cadillac BRX car models from General Motors are introduced. Investment in business development with a particular focus on new customers. Series development of Generation V aimed at 2012 launch. Supplier development in North America and Asia. Cost rationalization at the Landskrona unit.

Key data
Net sales Operating income1) 2) Operating income1) Operating margin1) 2), % Operating margin1), % Assets Liabilities Return on capital employed3), % Investments Depreciation Number of employees3)

2008 1,021 41 38 4.0 3.7 369 231 16.9 60 52 339

2007 848 49 49 5.8 5.8 433 258 21.3 95 40 296

Net sales by region 2008

North America, 4%

Europe, 96%
1) Reclassification 2) Excluding

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related surplus values 3) Rolling 12 months

Net sales
SEK m 1,200 1,000 800 600 400 200 0 2004 2005 2006 2007 2008

Operating income
SEK m 50 40 30 20 10 0 2004 2005 2006 2007 2008

24

Division: Garphyttan Wire

HALDEX 2008

Garphyttan Wire
Net sales SEK 1,053 m Operating income SEK 59 m Number of employees 474
At the end of 2008, Haldex signed an agreement to sell Garphyttan Wire to the Japanese group Suzuki Metal Industry. The divestment was part of the Haldex Groups continued strategy of streamlining its business to strengthen long-term growth while maintaining favorable profitability.

Activities/products
Garphyttan Wire manufactures advanced spring wire from various alloys for use mainly in combustion engines and transmissions, where demands for quality and performance are meticulous. The main applications are valve springs, transmission springs, piston springs and springs for fuel injection systems. Since extremely pure steel is needed as the basic material for producing spring wire that meets the customers stringent requirements, very close cooperation with steel suppliers is essential. The core of the Divisions expertise consists of creating product characteristics that ensure trouble-free end use in the form of springs that have at least the same total service life as the particular vehicle. Our proven ability to achieve a level of stability that always meets these requirements gives us a key competitive edge. In addition to oil-tempered valve spring wire, production includes a significant proportion of stainless steel specialty spring wire, as well as profiles and flat wire for applications in the vehicle industry and the energy and environmental areas. Production is conducted in China, Sweden and the US.

Market shares
Haldex has a world-leading position in the product area for oil-tempered valve spring wire, with a global market share of approximately one third.

Customers
The customers are primarily spring manufacturers with specialist expertise in the vehicle industry. The Division also engages in small-scale production of springs for in-house use, including valve springs for Swedish engine manufacturers and specialty springs for Haldexs brake products.

Competitors
The primary competitors are Suzuki, Suncall, Kiswire, American Spring Wire and Tokusen.

In connection with its acquisition of Concentric earlier in the year, Haldex announced that an assessment of structural opportunities to optimize Group structure was under way. One result of the assessment was the decision to divest Garphyttan Wire to focus the Groups operations on areas where Haldex can achieve internal synergies and a sustainable market position on the basis of innovative, leading products. On December 25, 2008, Haldex entered into an agreement to sell Garphyttan Wire to Suzuki Metal Industry, a Japanese manufacturer of steel wire. The purchase price was estimated at SEK 800 m on a debt-free basis. The transaction is expected to be completed during the period April to June 2009, when the final purchase price will be confirmed. As a result of the divestment, Haldexs pro forma net debt, as at December 31, 2008, decreased to SEK 1,535 m. It is estimated that the transaction will result in a capital gain of approximately SEK 400 m. In addition to customary conditions, the transaction is conditional upon Suzuki Metal obtaining a binding agreement regarding the financing of the transaction, regulatory approval and that no significant adverse changes occur that have a material and disproportionate effect on Garphyttan Wire compared with comparable companies in the industry. Market trend in 2008 During the first half of 2008, demand for Garphyttan Wires products was very strong, particularly in Europe. Beginning in the second quarter, weakening demand was noted in the US, while other markets remained strong. Extreme price increases

Garphyttan Wire now has a strong, established platform for future growth in the Chinese market.

Jan Pieters
Division manager Garphyttan Wire

HALDEX 2008

Division: Garphyttan Wire

25

for iron ore and coking coal resulted in high price increases for steel wire, Garphyttan Wires principal raw material. Before the expected price increases for steel wire and wire had become effective, some stockpiling of inventory took place in the second quarter, leading to somewhat weaker demand in the early part of the third quarter. The international financial crisis caused extensive global uncertainty after the summer, leading to a considerable decline in demand beginning in October. During the fourth quarter, some of the order backlog was cancelled and order intake was extremely low, leading to a sharp decline in sales, above all in November and December. The earnings trend was very strong from January to September, but during the final quarter it was reversed to a significant loss. The production facility in Suzhou, China, experienced a positive trend in 2008. A strong volume trend from January to September contributed to a favorable operating profit for 2008. Productivity and quality also developed very well. Garphyttan Wire now has a strong, established platform for future growth in the Chinese market. Improvement measures In 2008, efforts to stabilize and enhance the efficiency of processes and to improve control over the supply chain from supplier to customer contributed to a significant upswing in the yield from material and delivery reliability at the facility in Garphyttan, compared with 2007. At the production facility in Suzhou, China, the favorable volume trend led to a positive productivity trend, and the level of quality and delivery reliability remained very high. Efforts to improve planning systems at the US plant in South Bend resulted in substantially higher delivery reliability during the year, and the unit maintained a high level of inventory turnover.

Sales and earnings

Sales decreased by 4%, compared to previous year, to SEK 1,053 m (1,095). In the fourth quarter, sales decreased 39% year-on-year adjusted for currency-exchange movements. Due to the steep downturn in sales, a loss of SEK 29 m, excluding restructuring costs, was posted in the fourth quarter bringing the operating income to SEK 59 m (45) in 2008.

Improvement measures
Efforts to stabilize and enchance the efficiency of processes and to improve control over the supply change were made.

Key events in 2008

Agreement with Suzuki Metal Industry to divest Garphyttan Wire ISO 14001 certification in China Continued efforts to improve quality and processes in the Garphyttan facility Improved control of the supply chain from supplier to customer

Key data
Net sales Operating income1) 2) Operating income1) Operating margin1) 2), % Operating margin1), % Assets Liabilities Return on capital employed3), % Investments Depreciation Number of employees3)

2008 1,053 59 56 5.6 5.3 556 169 12.6 21 43 474

2007 1,095 45 45 4.1 4.1 650 221 9.9 20 44 482

Net sales by region 2008

South America, 5%
Asia and Middle East, 5%

North America, 22%

Europe, 68%
1) Reclassification 2) Excluding

of financial income from Other operating income to Financial items restructuring costs, one-off items and amortization of acquisition-related surplus values 3) Rolling 12 months

Net sales
SEK m 1,200 1,000 800 600 400 200 0 2004 2005 2006 2007 2008

Operating income
SEK m 100 80 60 40 20 0 2004 2005 2006 2007 2008

26

Haldex in the society

HALDEX 2008

Through the contribution of our people

For companies and employees throughout the world, 2008 and early 2009 were a challenging time. Despite rapid and extensive changes in the business environment, Haldexs long-term process of global expansion continued, and its operations are becoming increasingly multi faceted. The Groups success is based on the competencies and abilities of its employees. In good times and bad, Haldex strives continuously to develop its workplaces around the world to attract the best employees. Creating such attractive workplaces is a high priority for Haldex. Employees in different countries, with diverse cultural backgrounds, must be able to work together well to create added value for the company and for customers. This in turn increases the demands on employees and on the organizations performance readiness. In recent years, Haldex has intensified its Human Resources efforts. In 2006, the company implemented an action plan aimed at the following: improving leadership qualities establishing a candidate pool for top management positions creating a strong corporate culture characterized by personal responsibility and an ability to change developing a compensation structure that supports performance successfully implementing Haldex Way In 2007 and 2008, the plan was refined and a long-term strategy for the Groups human resources efforts was prepared. This strategy was in turn broken down into the following areas of focus: Competence development Management & leadership capabilities Haldex culture Within these three areas, key ratios were defined, targets established for all Haldex units and action plans prepared. In 2008, Haldex focused on realizing the action plans, and a long list of initiatives was implemented to support the units work in these areas. A dominant focus for human resources work in all parts of the Group was to manage the impact of the recession that began in 2008. Measures were concentrated on rapidly reducing the Groups expenses. This included such actions as temporary production halts and a reduction in working hours. In addition, a large number of temporary and insourced employees were asked to leave the Group late in the year. These initiatives were followed by programs to reduce the number of permanent employees throughout the world, which were implemented locally at units. Cooperation with local trade unions and work councils worked exceptionally well, and Haldexs employees showed great loyalty to the company. Haldexs HR strategy was applied as a unifying theme during the tough cutbacks. The Group placed great emphasis on precision and consideration in the methods used to carry out the cutbacks, so that a stronger company could be created. Accordingly, a consistent focus on performance, competence and clear leadership was pursued. Young Professional Program Despite the cutbacks, Haldex plans to continue to recruit for the future in 2009. During the year, the Groups efforts will include the establishment of a Young Professional Program for the recruitment and introduction of a small group of highly qualified employees who will be recruited directly after they graduate. Haldex Management Review A key feature of the Groups HR efforts is the program established by Haldex to evaluate the divisions management teams, assess the future need for management competency and evaluate the management potential currently available in the company. The main purpose of the program, which is called Haldex Management Review, is to guarantee the long-term supply of qualified personnel, both at corporate and unit level. The aim of the program is to identify and initiate a series of development efforts. In 2008, several tangible programs and tools were launched to support the work of the units as they implemented the personnel strategy. A tool for long-term resource planning was launched as a key feature of the personnel efforts of all units. The tool allows Haldexs various organizational units to prepare analyses and action plans to match personnel structure, competencies and organization with the companys development needs. Personnel survey A Group-wide, Internet-based personnel survey was established. The survey allows all parts of the Group to monitor the organizations performance readiness frequently and with rapid response times. Haldex International Executive Program The Groups HR development efforts are mainly implemented at the local level, close to employees and operations. As a complement to these efforts and to reinforce the Groups leadership competency, Haldex operates a number of joint leadership development programs and courses. These are offered in such areas as Leadership, Change Management, Financial Management and Value-Based Selling. Haldex also offers a longer generalist program, the Haldex International Executive Program, an international leadership development program whose purpose is to support the development of future top executives at Haldex.

HALDEX 2008

Haldex in the society

27

Social responsibility
A couple of years ago, Haldex introduced a social policy in the Group. The work focused on implementing the policy as part of the existing procedures and guidelines. The policy has permeated the company, is well received and is now part of several of the Groups procedures, policies and programs. For example, it is included as part of the introduction to all new employees. It is also integrated into the companys purchasing manual. However, implementation work is still ongoing, with continued focus on developing and executing action plans. Haldexs social policy is based on the UNs Universal Declaration on Human Rights, the UN Global Compact initiative, the International Labor Organizations (ILO) basic principles on labor law and the OECDs guidelines for multinational companies. Haldex in society Contribute to improvements in economic, environmental and social conditions through an open dialogue with relevant interest groups in the communities where Haldex operates. Human rights Support and respect the protection of inter nationally decreed human rights. Child labor Ensure that minors are protected in a satisfactory manner and, as a basic principle, refrain from hiring children or supporting child labor unless it occurs in government-approved programs for young people, such as apprentice training. Freedom of contract Ensure that all employees accept positions of employment in the company of their own free will. Health and safety Offer a safe work environment at all workplaces and introduce measures to prevent accidents and work-related injuries by minimizing all work-environment risks to the extent possible. Equal opportunities Offer all employees equal opportunities, refrain from discriminating on the basis of ethnic or national origin, religion, caste, handicap, gender, age, sexual orientation, affiliation with trade unions or membership of political organizations. Suppliers Use appropriate methods to evaluate and choose suppliers based on their ability to meet the requirements of Haldexs social policies and other social principles, and document their continuous fulfillment of these requirements. Business ethics Apply high standards in terms of business ethics and integrity, and support the efforts of national and international organizations to establish and maintain strict ethical standards for all companies.

Taking care in india

Pai Ganesh, Chief Operating Officer of Haldex India, recruits qualified and educated employees from many regions in India. These employees, who in many cases live far from their home towns, are offered housing in Nashik and provided with other basic needs, such as food and medicine, whenever necessary. Special emphasis is placed on creating job opportunities for women. Haldex India also supports schools and institutions in the nearby area, including a school in a village outside Nashik, where many children live under challenging financial conditions. The company supports the school by distributing books and other study materials to its 115 pupils. Haldex India has also financed a tank that holds fresh water for the school. Haldex Indias commitment also includes caring for the basic needs of people affected by natural disasters, such as drought or flooding in the region. In August 2008, Bihar, one of the states in Northern India, experienced flooding, which left people homeless. In addition, many inhabitants required medical care, food and shelter. All of the employees of Haldex India responded to this cause by contributing the equivalent of one days salary, as a part of their social responsibility.

In the city of Nashik in northwest India, Haldex is known as a socially responsible company that contributes to the economy of the region while improving the quality of life of its own employees and the surrounding community. At its plant in Nashik, located approximately 200 km outside Bombay, Haldex India manufactures brake adjusters and anti-lock braking systems.

28

Environment

HALDEX 2008

Haldex products generate environmental value for customers

Haldex products help customers to comply with increasingly stringent environmental legislation. The product portfolio strengthens the Haldex brand, while environmental activities result in continuously improved performance.

Distinct environmental value at the user level Haldexs business concept includes a focus on products that improve the environment. During 2008, the UK company Concentric was acquired, providing the Group with innovative variable-flow oil, water and fuel pumps, which improve energy efficiency and reduce energy consumption. Other products included in the Haldex customer offering also generate distinct environmental benefits, such as Varivent, which recirculates exhaust gases in diesel engines, thus reducing fuel consumption and emissions of nitrogen oxides. Another example is Alfdex, a system for the separation of oil particles in crankcase ventilation air in diesel engines, also known as crankcase gases. The crankcases in diesel-operated truck engines normally emit between six and nine liters of oil mist per 1,000 hours. With Alfdex, these emissions are reduced to nearly zero. In combination, Haldexs product portfolio, which comprises variable flow pumps for oil, water and fuel for diesel engines, Alfdex, Varivent and electric fuel feed pumps could entail fuel savings of up to 10%. Environmental work supported by Haldexs values One of the Groups fundamental values is the elimination of all waste, which in the field of environmental efforts ensures effective resource husbandry. Based on a lifecycle perspective, the total environmental load is investigated and improvement work focuses on the various phases of the production, use and recycling of the companys products. In its business operations, Haldex strives to: utilize natural resources as carefully as possible reduce the environmental impact by further developing products and manufacturing processes design products with a view to efficient recycling

Systematic work yields results The vast majority of Haldexs production plants have environmental management systems that are ISO 14001 certified. At the end of 2008, 86% of the total number of plants were certified, including 80% of the plants in Mexico, South America, China and India. All Haldex facilities are either subject to licensing requirements or regulated under the environmental laws of the country where they are located. All units have the requisite licenses and agreements, and also meet the established reporting and inspection requirements. A key feature of environmental efforts is reducing energy consumption and the emissions this gives rise to, which is in line with Haldex Way. Each plant establishes improvement goals and continuously examines and measures greenhouse gases in accordance with the guidelines specified in the World Resource Institutes Greenhouse Gas Protocol (GHG). In 2008, Haldex reduced its emissions by 11%, in terms of CO2 in relation to every SEK m of sales. The calculation has been adjusted to take into account the divestment of brake lining operations and the acquisition of Concentric. Emissions of CO2 from Haldexs operations (Scope 1 and 2 emissions according to the GHG Protocol) were reduced by 6.4%, or a total of 55,865 metric tons. In total, CO2 emissions amounted to 67,702 metric tons, a decrease of 6.2%. High ratings for environmental efforts Folksams latest Climate Index ranks Haldex as best in its industry and third best in Sweden in reporting its environmental impact. The Climate Index, which provides a quantitative measure of the climate effects resulting from the production of listed companies, bases its assessment on the Carbon Disclosure Project (CDP), an international survey. Folksams index for Responsible Enterprise in 2008 also gave Haldex good rankings for its environmental efforts, with an especially high rating for its environmental management.

HALDEX 2008

Financial reports contents

29

Financial reports contents

directors report 30 notes group 38 parent company income statement 56 parent company balance sheet 57

Sales and operating income Acquisitions and restructuring Cost-reduction program Earnings Cash flow Investments Product development Financial position Profitability  Risks, uncertainties and financial risks Environmental impact Guidelines for remuneration Future trends Parent Company  Events after the balance-sheet date

30 31 31 31 32 32 32 32 32 32 32 32 33 33 33

Note 1

General information

38 38 41 44 44 45 46 46

Note 2  Summary of important accounting principles Note 3 Risks & Risk management Note 4  Important estimations and assumptions Note 5 Segment reporting Note 6  Costs distributed by type Note 7  Average number of employees Note 8  Salaries and other remuneration Note 9

changes in parent company equity 58 parent company cash flow statement notes parent company 58 59

Note 1

General information

59 59

Note 2  Summary of important accounting principles

Note 3  Average number of employees and sickness absence 59 Note 4  Salaries and other remuneration Note 5 Note 6 Auditing fees Depreciation 59 60 60 60 60 60 61 61 61 61 61 61

nformation on Remuneration I of executive committee 47 48 48 48 49 50 50 51 51 52 52

Note 10 Auditing fees Note 11 Depreciation Note 12 Taxes Note 13 Intangible assets Note 14 Tangible fixed assets Note 15 Operational leases Note 16 Deferred income tax Note 17 Derivative instruments Note 18 Inventories Note 19 Other current receivables Note 21  Assets and liabilities held for sale

Note 7  Interest income and interest expenses Note 8  Tangible fixed assets Note 9 Shares and participations Note 10 Long-term receivables Note 11 Other current receivables Note 12 Derivate instruments Note 14 Untaxed reserves Note 15 Taxes Note 16  Pensions and similar obligations

Consolidated income statement consolidated balance sheet changes in group equity

34 35 36

consolidated cash flow statement

Note 13 Cash and cash equivalents 61

37

Note 20 Cash and cash equivalents 52 52

Note 22  Long-term interest-bearing liabilities 52 Note 23  Pensions and similar obligations Note 24 Other provisions Note 25 Current liabilities Note 26 Corporate acquisitions 53 55 55 55

Note 17  Long-term interest-bearing liabilities 62 Note 18  Other current liabilities Note 19  Contingent liabilities and collateral pledged 62 62

audit report

63

Note 27 Related-party transactions 55

30

Directors Report

HALDEX 2008

Directors Report
The Board of Directors and President of Haldex AB (publ), Corp. Reg. No. 556010-1155, hereby issue the Annual Report and Consolidated Financial Statements for 2008. Haldex offers innovative proprietary solutions to the global vehicle industry. The main focus is on products related to vehicle dynamics, safety and the environment. Haldex AB is the Parent Company of the Haldex Group. The company mainly conducts corporate functions, including the central finance function. Amounts are stated in millions of kronor (SEK m), unless otherwise indicated. Amounts in parentheses refer to figures for the preceding year. Haldex refers to the Haldex Group, meaning Haldex AB and its subsidiaries. Operations during the year
Sales and operating income

During the first half of 2008, the demand trend in Europe was strong while the North American market remained weak in almost all segments. During the second half of the year, the demand trend weakened. The decline began during the third quarter and continued at an intensified rate during the fourth quarter, especially during November and December when many of Haldexs customers shut down their production for three to five weeks. All segments were affected, and the major decline was related to the European market. Consolidated net sales amounted to SEK 8,403m (7,940). In nominal terms and when adjusted for currency-exchange movements, net sales rose 6%, due mainly to the acquisition of Concentric. Organic growth, adjusted for currency-exchange movements, declined 2%, with Europe declining 3% and North America declining 2%. The Groups operating income amounted to SEK 92m (289). The Groups operating income, excluding restructuring cost, one-off items and amortization of acquisition-related surplus value, amounted to SEK 250m (339). The rapid deterioration in market conditions during the fourth quarter and the resulting decrease in sales had a sharply adverse impact on operating income. Operating income within Commercial Vehicle Systems, excluding

restructuring cost and write down of assets, amounted to SEK 4 m (159). The operating margin, excluding restructuring costs, declined from 3.5% to 0%. The weak conditions in the North American market and the sharply reduced demand in Europe during the fourth quarter, particularly in November and December when Haldexs customers suspended production for three to five weeks, in combination with high prices for raw materials, had a severely adverse impact on earnings. Sales declined SEK 295m to SEK 4,234m (4,529) compared with the preceding year. Sales in the European market were strong during the first half of the year, which limited the impact of the sales decline in North America. During the second half of the year, primarily during the fourth quarter, demand decreased significantly in Europe, in both the truck and the trailer segments. The aftermarket, which accounted for about 40% of CVSs total sales, was also affected to some extent. In Europe, sales declined to SEK 1,938m (2,058), while sales in North America dropped to SEK 1,852 m (2,022). Adjusted for currency -exchange movements, sales declined 8% in Europe and 6% in North America. The program in the disc brake market continued during the period. The cost-reduction program proceeded and cost improvement versus the preceding quarter was achieved. Due to the higher raw material costs during the year and the reduced volume during the second half of the year, the negative impact on earnings for 2008 was about the same as in the preceding year (approx. SEK 100m). In the future, a gradual improvement is expected. In common with other major projects, the disc brake project is being reviewed continuously to secure value generation. In the Hydraulic Systems division, operating income and the operating margin, excluding restructuring cost and amortization of acquisition-related surplus value, amounted to SEK 146m (86) and 7% (5.8), respectively. Concentric, the company that was acquired in 2008 and has been consolidated since April 1, contributed SEK 82m to operating income, excluding amortization of acquisition-related surplus value of SEK 31m and costs connected to the companys integration.

Equity/assets ratio and debt-to-equity ratio

% 150

Cash flow and self-financing rate

SEK m 500 400 % 250 200 150 100 50 0 50 100

120 300 90 200 100 0 30 100 200

60

2004

2005

2006

2007

2008

2004

2005

2006

2007

2008

Equity/assets ratio

Debt-to-equity ratio

Cash ow, SEK m

Self-nancing rate, %

HALDEX 2008

Directors Report

31

Sales amounted to SEK 2,095m (1,467). Adjusted for acquisitions and currency-exchange movements, sales were unchanged compared with the preceding year. Concentrics sales amounted to SEK 606m. Operating income in the Garphyttan Wire division amounted to SEK 59m (45). Sales declined 4% to SEK 1,053m (1,095). In the fourth quarter, sales decreased by 39% year over year currency adjusted. The operating margin was 10.0% during the period January to September. Due to the sharply reduced sales, a loss of SEK 29m, excluding restructuring costs, was reported during the fourth quarter. Operating income in the Traction Systems division amounted to SEK 41m (49). Sales increased 20% to SEK 1,021m (848), which was a lower rise than planned. The sharp downturn in volume during December, due to production stoppages, gave rise to a loss in December, which had an adverse impact on operating income during the fourth quarter. The increase in sales was primarily attributable to higher volumes resulting from deliveries to Landrover and VWs new model, Tiguan, which started in the second half of 2007 and to Ford Kuga, which commenced during 2008.
Acquisitions and restructuring

approximately SEK 100m. The Friction Products business unit reported a loss of about SEK 25m.
Cost-reduction program

On December 25, 2008, Haldex reached an agreement with Suzuki Metal Industry Co, a Japanese manufacturer of steel wire products, concerning the divestment of the Garphyttan Wire division. The cash purchase price is estimated at SEK 800 m on a debt-free basis. The transaction is expected to be completed during the period April to June 2009 when the final purchase price will be confirmed. Haldex also completed the acquisition of Concentric, a world-leading supplier of oil, water and fuel pumps for large and medium-sized diesel engines for trucks and construction equipment. Restructuring of the Friction Products business unit, which manufactures and sells pads for disc brakes and linings for drum brakes in North America, was completed in 2008. As part of the restructuring program, production of drum brake linings was outsourced and the disc brake lining business was sold. The latter business had annual sales of

During the third quarter of 2008, Haldex launched a cost reduction program involving all divisions that included a decrease in the number of employees by about 700 by mid 2009. During the fourth quarter, additional actions were taken in order to adapt to the lower demand, and the reduction in the number of jobs represents a reduction in the number of employees by approximately 1,500 (from mid-2008 to mid-2009). The expanded program includes structural measures, such as consolidation of CVSs European distribution operations by concentrating warehouses and logistics functions from four units in different countries to a joint distribution center, and the discontinuation of all manufacturing and distribution operations at the plant in Redditch, UK. The cost of the program is estimated at approximately SEK 150m, of which SEK 85m was expensed in 2008. The remaining costs will be expensed during the first quarter of 2009. Total annual savings are estimated at about SEK 425m. The cost-reduction program will be evaluated continuously and adjusted to facilitate any changes in demand.
Earnings

Consolidated earnings before tax totaled SEK 55m (222). Financial net amounted to SEK 147 m (67). Financial expenses increased during 2008, primarily due to financing of the acquisition of Concentric and higher interest rates. Earnings after tax totaled SEK 43m (141). A tax revenue of SEK 12m (charge: 81) was recognized in 2008, as a result of a valuation of tax-loss carryforwards valued at the tax rates applicable in the countries concerned. The operating margin, excluding restructuring cost, one-off items and amortization of acquisition-related surplus value, declined from 4.3% in the preceding year to 3.0%. The return on capital employed was 2.4% (8.3).

Product development costs

SEK m 400

Investments
SEK m 500

375

425

350 350 325 275

300

275

2004

2005

2006

2007

2008

200

2004

2005

2006

2007

2008

32

Directors Report
Cash flow Risks, uncertainties and financial risks

HALDEX 2008

Cash flow from operating activities amounted to SEK 857m (312) and cash flow after net investments to SEK 465m (141). The strong cash flow was attributable to the good working capital performance in combination with lower sales volumes, enabling a reduction by SEK 576m (152) to SEK 758m, including the sale of certain accounts receivable totaling about SEK 170m.
Investments

A complete presentation of relevant risks and uncertainties is provided in Note 3.

Environmental impact

The Groups net investments amounted to SEK 392m (453), of which capitalized development costs accounted for SEK 60m. Investments have primarily been made in production equipment.
Product development

Every year, substantial investments in development projects are made within the Group to ensure the creation of market-leading products and to strengthen market positions. This development work comprises the creation of completely new products, both in-house and in some cases in cooperation with partners, and updates of existing product solutions. Group development costs during fiscal year 2008 totaled SEK 339m (335), of which SEK 60m (66) was capitalized. At December 31, 2008, capitalized development costs amounted to SEK 282m (241), of which the largest single item, the disc-brake project, accounted for SEK 53m.
Financial position

The Group is engaged through four Swedish subsidiaries in business activities that are subject to license requirements pursuant to the Swedish Environmental Code. The Groups Swedish operations that are subject to license and reporting requirements impact the natural environment mainly through two subsidiaries, Haldex Brake Products AB and Haldex Garphyttan AB. These companies are involved in surface-treatment and the painting of brake systems for highway vehicles as well as the production of specialty wire from steel alloys, activities that mainly impact the natural environment in terms of air and water emissions and noise. For additional information concerning the environment, see page 28.
Guidelines concerning adoption of guidelines for remuneration of senior executives

The Groups net debt amounted to SEK 2,335m (1,600). Cash and cash equivalents amounted to SEK 431m (182). At year-end, granted but as yet unutilized credit limits totaled about SEK 1,217m. Interest-bearing liabilities amounted to SEK 2,766m (1,782), including pension liabilities of SEK 440m. Haldexs principal source of financing is a syndicated revolving credit facility of USD 250 m, maturing in 2012. At present, a large part of the facility is unutilized. According to the terms of the agreement with the creditors, certain key rations must be fulfilled. Haldex did not fulfill these at the end of 2008. The terms were renegotiated in February 2009 and Haldex has thus secured its need of financing. In addition to the revolving credit facility, Haldexs sources of financing comprise a private placements totaling SEK 600m, a bridging loan of GBP 65m for the acquisition of Concentric and other short-term facilities. The bridging loan has been extended and now matures on August 31, 2009. The loan will be repaid by the cash consideration from the divestiture of the Wire division. Two of the private placements totaling SEK 250m mature in May and June 2009, respectively. Shareholders equity amounted to SEK 1,823m (1,871), resulting in an equity-assets ratio of 29% (37). Share capital at year-end amounted to SEK 111 m (111), divided among 21,919,730 shares. Holdings of own shares at year-end totaled 376,470. All shares, with the exception of treasury shares, carry one vote each and provide equal entitlement to the Companys assets and earnings. Loss for the year reduced shareholders equity by SEK 43m. Equity is also decreased with dividend payments totaling SEK 99m. Translation differences related to foreign net assets increased equity with SEK 143. The change in fair market value of derivatives in the hedging reserve decreased by SEK 53m and impacted equity in a corresponding amount. The derivatives pertain to projected future deliveries of goods, and the results are recognized in the Income Statement as deliveries are made, at which time the unrealized result is transferred from equity.
Profitability

In common with the motion submitted to the 2008 Annual General Meeting, the Board of Directors proposes that the following guidelines apply for the period up to the 2010 Annual General Meeting. Remuneration of the President and CEO and other senior executives shall consist of a well-balanced combination of fixed salary, annual bonus, long-term incentive programs, pension and other benefits and conditions concerning termination of employment/severance payment. The total remuneration shall be competitive in the market and based on performance. The fixed remuneration shall be determined individually and based on each individuals responsibility, role, competence and position. The annual bonus shall be based on outcomes of predetermined financial and individual objectives and not exceed 3050% of the fixed annual salary. In exceptional situations, special remuneration may be paid to attract and retain key competence or to induce individuals to move to new places of service or accept new positions. Such remuneration may not be paid out for periods exceeding 36 months and may not exceed the equivalent of twice the remuneration the executive would otherwise have received. The Board of Directors may propose that the General Meeting resolve on long-term incentive programs. Pension benefits shall be based on defined-contribution plans and (for Swedish citizens) shall provide entitlement to pension at age 65. Upon termination of employment by the company, the notice period for the President and CEO is 12 months and for other senior executives six months. In addition, when entering into new employment contracts, agreement may be made on severance pay not exceeding the equivalent of 12 months fixed salary. The Board shall be entitled to depart from the guidelines if there are specific reasons for doing so in individual cases.
The companys application of the guidelines

The return on capital employed was 2.4% (8.3). The Groups profitability target is a 15% return on capital employed, averaged over a complete business cycle. The capital turnover rate was 2.2 (2.2). The return on equity decreased from 7.3% to minus 2.3%.

The Board of Directors utilized its rights to make an exception from the guidelines as a consequence of the assumption of terms of employment in connection with the acquisition of a company during the past year. Accordingly, the right to a variable remuneration increment, the maximum permissible level of which is 80 percent of fixed salary, was included in the employment terms of one of the companys senior executives. This exceeds the maximum level of 50 percent of fixed salary specified in the guidelines, that apply to the other senior executives. In accordance with the guidelines, decisions have been taken concerning extra remuneration for a number of Haldexs senior executives, and the President and CEO, which is estimated to total SEK 1,560k (where of SEK 780k concern the President and CEO). This extra remuneration is linked to the divestment of the Wire Division and will be disbursed when this transaction has been finalized.

HALDEX 2008

Directors Report
this include developments in rapidly growing, emerging markets in Asia, where demand for leading-edge products and technologies is increasing continuously.
Parent Company

33

Historically, paid bonus remuneration has corresponded to about half of the maximum bonus levels. For further information on remuneration of senior executives, refer to Note 9.
Future trends

In addition to the number of vehicles produced, Haldexs market is affected by requirements from customers and legislators. These requirements will create trends and driving forces, such as an increased emphasis on safety and environmental awareness, combined with the everincreasing importance of vehicle dynamics. Other trends that affect Haldex are vehicle manufacturers endeavors to build lighter vehicles in order to reduce fuel consumption. In markets outside Europe and North America, a distinct trend towards increased demand for western technologies is noticeable. This applies particularly to large markets, such as India and China. On the whole, the trends involving safety, environmental aspects and vehicle dynamics are resulting in expectations that Haldexs market will grow faster than the vehicle market in general. Other indications of Distribution of earnings

The Groups parent company, Haldex AB, carries out the main office functions, including the central financial function. In 2008, Haldex AB reported a negative operating income of SEK 34m (40), but earnings before changes in allocations reserve and taxes amounted to SEK 265m (201). Including, dividends from group companies of SEK 373m (117), group contribution of SEK 35m (117) and afinancial net of SEK 109m (7). During 2008, the companys net investments and divestments in shares and participations amounted to SEK 619m. Cash and cash equivalents at year-end were SEK 178m (44).
Events after the balance-sheet date

After the close of 2008, renegotiations of a number of the Groups loans began. The negotiations are still in progress and relate to loans totaling approximately SEK 400m.
445 332 777

As stated in the Parent Company Balance Sheet, the Annual General Meeting has the following funds at its disposal Profit brought forward Net income for the year

The board of Directors and the President propose the following distribution of earnings: Dividend to the shareholders To be carried forward

777

Net sales by division and region

SEK m Commercial Vehicle Systems Hydraulic Systems Garphyttan Wire Traction Systems Haldex Group North America Europe Asia and Middle East South America Haldex Group 2008 4,234 2,095 1,053 1,021 8,403 3,189 4,423 510 281 8,403 2007 4,529 1,467 1,095 848 7,940 2,997 4,255 443 245 7,940 Nominal, % 7 43 4 20 6 6 4 15 15 6 Currency adjusted, % 6 46 4 20 6 9 3 14 12 6

Investments by division
SEK m Commercial Vehicle Systems Hydraulic Systems Garphyttan Wire Traction Systems Haldex Group 2008 232 88 21 60 402 2007 259 89 20 95 463 Nominal, % 10 1 5 37 13 Currency adjusted, % 10 1 5 37 12

Depreciation by division
SEK m Commercial Vehicle Systems Hydraulic Systems Garphyttan Wire Traction Systems Haldex Group 2008 160 74 43 52 329 2007 140 58 44 40 281 Nominal, % 14 28 2 30 17 Currency adjusted, % 16 29 2 30 18

34

Group

HALDEX 2008

Consolidated income statement

2008 Amounts in SEK m Net sales Cost of goods sold Gross income Selling expenses Administrative expenses Product development costs Other operating income and expenses Operating income Interest income Interest expense Other financial items Earnings before tax Taxes Net income for the year Attributable to: Parent Company shareholders Minority interests Earnings per share before dilution, SEK Earnings per share after dilution, SEK Dividend per share, SEK Average number of shares, thousands 87 1 44 1 88 4 137 4 141 12 11 11 11 11 Note Continuing operations 7,337 5,772 1,565 643 622 271 12 41 5 122 27 103 17 86 Discontinuing operations 1,066 843 223 93 66 14 1 51 1 3 1 48 5 43 Haldex 8,403 6,615 1,788 736 688 285 13 92 6 125 28 55 12 43 Continuing operations 6,829 5,309 1,520 634 481 218 44 231 7 69 3 166 74 92 2007 Discontinuing operations 1,111 882 229 112 44 15 0 58 3 3 2 56 7 49 Haldex 7,940 6,191 1,749 746 525 233 44 289 10 72 5 222 81 141

3:92 3:92 21,920

1:92 1:92 21,920

3:97 3:97 4:50 21,980

6:24 6:24 4:50 21,980

HALDEX 2008

Group

35

Consolidated balance sheet

Amounts in SEK m ASSETS Fixed assets Intangible fixed assets Tangible fixed assets Financial fixed assets Deferred tax assets Long-term receivables Total fixed assets Inventories Current receivables Accounts receivable from customers Other current receivables Derivative instruments Cash and cash equivalents Total current assets Assets held for sale Total assets 21 19 17 20 770 278 45 431 2,464 576 6,290 1,189 282 20 182 2,728 5,082 18 16 143 31 3,250 940 112 30 2,354 1,055 13 14 1,761 1,315 711 1,501 Note 2008 2007

SHAREHOLDERS EQUITY AND LIABILITIES Equity Share capital Capital contributions Other reserves Retained earnings Attributable to Parent Company shareholders Minority interests Total equity Long-term liabilities Long-term interest-bearing liabilities Pensions and similar obligations Deferred taxes Other long-term liabilities Total long-term liabilities Current liabilities Short-term loans Debts to suppliers Derivative instruments Other provisions Other current liabilities Total current liabilities Liabilities held for sale Total equity and liabilities Collateral pledged Contingent liabilities 21 17 24 25 1,229 769 99 127 341 2,565 295 6,290 None 10 155 842 22 76 375 1,470 5,082 None 13 22 23 16 1,097 396 84 30 1,607 1,293 334 90 24 1,741 111 455 88 1,151 1,805 18 1,823 111 455 3 1,294 1,857 14 1,871

36

Group

HALDEX 2008

Changes in Group equity

Attributable to Parent Company shareholders Share capital 111 Capital contribution 455 Other reserves 72 19 13 45 51 Retained earnings 1,256 Subtotal 1,894 19 13 45 51 0 0 Minority interest 4 Total 1,898 19 13 45 51 Opening balance at January 1, 2007 Income-statement items recognized directly in equity Change in hedging reserve, after tax Hedges of net investments Translation difference Net items recognized directly in equity Net income for the year Net income for 2007 Total revenues and costs Transactions with shareholders Increase in minority share of equity Repurchase of shares Dividends paid to owners of the Parent Company Dividends paid to minority shareholders in subsidiaries Closing balance, December 31, 2007 Opening balance, January 1, 2008 Income-statement items recognized directly in equity Change in hedging reserve, after tax Hedging of net investment Translation difference Net items recognized directly in equity Net income for the year Net income for 2008 Total revenues and costs Transactions with shareholders Increase in minority share of equity Repurchase of shares Dividends paid to owners of the Parent Company Dividends paid to minority shareholders in subsidiaries Closing balance, December 31, 2008 111 455 88 1,151 1,805 18 1,823 99 99 99 4 4 91 44 44 44 47 1 0 43 47 53 39 183 91 53 39 183 91 1 1 53 39 182 90 111 111 455 455 3 3 1,294 1,294 24 99 24 99 1,857 1,857 1 14 14 7 7 24 99 1 1,871 1,871 51 137 137 137 86 4 4 141 90

Other reserves include hedging reserves and exchange rate differences: Opening balance at January 1, 2007 Change during the year Closing balance at December 31, 2007 Opening balance at January 1, 2008 Change during the year Closing balance at December 31, 2008

Hedging reserve 36 19 17 17

Exchangerate differences 57 32 89 89 143 54

53 36

HALDEX 2008

Group

37

Consolidated cash flow statement

Amounts in SEK m Cash Flow from operating activities Operating income1), 2) Reversal of depreciation, amortization and impairment losses Interest paid1) Capital gain on sale of shares in subsidiaries Taxes paid Cash flow from operating activities before changes in working capital Change in working capital Current receivables Inventories Opearating liabilities Change in working capital Cash flow from operating activities3) Cash flow from investments Net investments Acquisitions Sale of shares in subsidiaries Cash flow from investments4) Cash flow from financing Dividend to Haldex ABs shareholders Dividend to minority shareholders Buyback of own shares Change in loans Change in long-term receivables Cash flow from financing5) Change in cash and bank assets, excl. exchange-rate difference Cash and bank assets, opening balance Exchange-rate difference in cash and bank assets Cash and bank assets, closing balance
1) 2)The

2008 92 392 143 1 61 281

2007 289 300 66 59 464

22 142 412 576 857

108 133 89 152 312

392 554 4 942

453 49 502

99 409 15 325 240 182 9 431

99 1 24 249 9 116 74 250 6 182

Reclassification of financial income from Other operating income to Financial items. Operating income from continuing operations of the Haldex group was SEK 41 (231) and from discontinued operations SEK 51 (58). 3) Cash flow from operating activities from continuing operations of the Haldex group was SEK 730 (260) and from discontinued operations 127 (52). 4) Cash flow from investments from continuing operations of the Haldex group was SEK 922 (484) and from discontinued operations 20 (18). 5) Cash flow from financing activities from continuing operations of the Haldex group was SEK 325 (116) and from discontinued operations ().

38

Notes Group

HALDEX 2008

Notes Group
NOTE 1 General information
Haldex AB (Parent Company) and its subsidiaries build the Haldex Group. Haldex supplies proprietary and innovative solutions developed in-house to the global vehicle industry. The main focus is on products related to vehicle dynamics, safety and the environment. Haldex AB (publ), Corp. Reg. No. 556010-1155, is a registered limited liability corporation with its registered office in Stockholm, Sweden. The address of the Head Office is Haldex AB, Box 7200, SE-103 88 Stockholm. Haldex AB is listed on the OMX Exchange in Stockholm, Mid Cap. as payment for the acquired net assets, as well as transaction costs that are directly attributable to the acquisition. If the purchase price for the shares exceeds the fair value of the acquired net assets, the difference is recorded as goodwill. If the purchase price falls below the fair value of the acquired net assets, the difference is recognized directly in the income statement. Intra-Group transactions, balance sheet items and unrealized gains and losses from intra-Group transactions are eliminated. Alfdex AB, in which Haldex and Alfa Laval own 50% each, is consolidated in accordance with the proportional method. 2.2 Translation of foreign currency The functional currency for the Haldex Group and the presentation currency is Swedish kronor (SEK).
Transactions and balance sheet items

Note 2  Summary of important accounting

principles
The Consolidated Financial Statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU. In addition, the Swedish Annual Accounts Act and the Swedish Financial Accounting Standards Council RFR 1.1 Supplementary accounting regulations for Groups were applied. The Parent Companys function currency is Swedish kronor (SEK), which is also the reporting currency for the Parent Company and the Group. This means that the financial reports are presented in SEK. All amounts are recognized in SEK m unless otherwise indicated. Assets and liabilities are recognized in accordance with the acquisition value method, apart from certain financial assets and liabilities that are recognized at fair value. The income statement has been prepared in functional format in accordance with IAS 1, which reflects the internal reporting and provides an accurate picture of the Companys income. 2.1 Consolidated financial statements
Subsidiaries

Transactions in foreign currency are translated into SEK using the exchange rates from the day of the transaction. Exchange gains and losses resulting from these transactions and the translation of monetary assets and liabilities at the closing rate are recognized in the consolidated income statement exchange rate gains or losses from transactions that fulfill the requirements for hedge accounting are recognized under Equity.
Subsidiaries

The balance sheets and income statements of non-Swedish subsidiaries are translated by translating assets and liabilities at the closing rate and income and expenses at the average rate during the year. Translation differences resulting from the translation of foreign subsidiaries net assets at different rates on the opening and the closing dates are recognized directly in the translation reserves in Equity. Exchange rate differences on loans and other currency instruments that are recognized as hedges for net investments in foreign currency are recognized directly in the translation reserves in Equity. 2.3 Revenue reporting Income from the sale of goods and services is recognized when the goods/services are delivered in accordance with the terms of delivery with the customer, as soon as the principal rights and rights associated with ownership are adjudged to have been transferred to the purchaser. The income is reported at fair value and, where applicable, is reduced by the value of discounts granted and returned goods. Income for development projects is recognized progressively in pace with the rate of completion, assuming that the financial outcome of the development assignment can be calculated reliably (percentage-of-completion profit recognition). The completion rate is determined on the basis of outlaid expenses in relation to total estimated costs for the assignment. Intra-Group transactions are eliminated. 2.4 Leasing Leasing is classified in the consolidated financial statements as either financial leasing or operational leasing, depending on whether the Company retains all the risks and benefits associated with ownership of

The Consolidated Financial Statements include the Parent Company and those companies in which the Parent Company directly or indirectly owns more than 50% of the voting rights or exerts controlling influence in some other way. The subsidiaries are included in the Group as of the day the controlling influence is transferred to the Group. Divested companies are included in the Groups consolidated accounts up to and including the date of sale. Companies acquired during the year are included in the Groups consolidated accounts as of the date of acquisition. The minority share of equity is recognized as a separate line item under Equity. The Consolidated Financial Statements were prepared using the purchase method. This means that the subsidiaries assets and liabilities are recognized at their fair value on the day of acquisition based on an acquisition analysis. In the analysis, the acquisition value of share holdings or operations is established, as if the fair value on the date of acquisition of acquired identifiable assets and assumed liabilities and contingent liabilities. The acquisition value of shares in subsidiaries or operations comprises the fair value on the date of transfer of assets, accruing or assumed liabilities and issued equity instruments provided

HALDEX 2008

Notes Group
acquired instrument. Management determines the classification of the instruments when they are first recognized and reassess the classi fication at each reporting event. During the fiscal year, the Group had financial instruments belonging to financial assets measured at fair value through profit or loss, as well as loans and receivables.
Financial assets measured at fair value through profit or loss

39

the underlying asset. A requirement for the reporting of financial leasing is that the fixed asset be posted as an asset item in the balance sheet and that the leasing obligation be recognized as a liability in the balance sheet. Fixed assets are depreciated according to plan over their useful life, while lease payments are recognized as interest expenses and amortization of debt. No asset or liability items are recognized in the balance sheet in the case of operational leasing. The leasing fee is expensed in the income statement on a straightline basis over the term of the lease. 2.5 Tangible fixed assets Tangible fixed assets consist of buildings (offices, factories, warehouses), land and land improvements, machines, tools and installations. These assets are valued at their acquisition cost less scheduled depreciation. Scheduled depreciation is based on the acquisition value and estimated economic life of the assets. Buildings are depreciated over 2550 years. Machinery and equipment are usually depreciated over 310 years, while heavier machinery, such as furnaces, has an economic life of 20 years. Land is not depreciated. The assets residual values and useful lives are reassessed every closing day and adjusted if needed. 2.6 Intangible assets
Product development

This category has two sub-categories: financial assets held for trading and assets that from the very beginning are attributed to the category measured at fair value through profit or loss. A financial asset is classified in this category if it has been acquired primarily with a view to being resold in the near future or if this classification is determined by company management. Derivative instruments are also categorized as being held for sale, assuming that they have not been identified as hedging instruments.
Loans and receivables

Loans and receivables are non-derivative financial assets with established or determinable payments that are not listed on an active market. They occur when the Group supplies money, products or services directly to the customer without intending to trade the resulting claim. They are included in current assets, with the exception of items with due dates more than 12 months after the closing day, which are classified as fixed assets.
Reporting derivative instruments

According to IAS 38, product development costs are recognized as intangible fixed assets when the following criteria are met: it is likely that the asset will result in future financial benefits to the company; the purchase value can be calculated reliably; the company intends to finish the asset and has technical and financial resources to complete its development. The documentary basis for capitalizing product development costs can consist of business plans, budgets or the companys forecasts of future results. The purchase value is the sum of the expenses accruing from the point in time the intangible asset fulfills the above criteria. Intangible assets are recognized as their acquisition value less accumulated depreciation from the completion date plus any impairment losses. Amortization begins when the asset becomes usable and is applied in line with the estimated useful life and in relation to the financial benefits that are expected to be generated by the product development. The useful life is not normally assessed as exceeding five years.
Licenses and patents

Derivative instruments are recognized in the balance sheet as of the trade date and are measured at fair value, both initially and during subsequent revaluations. The method used for recognizing the profit or loss arising at every revaluation occasion depends on whether the derivative has been identified as a hedging instrument and, if this is the case, the nature of the hedged item. The Group identifies certain derivatives as either: 1) hedging of the fair value of assets or liabilities; 2) hedging of forecast flows (cash flow hedging) or 3) hedging of net investment in a foreign operation. To qualify for hedge accounting, certain documentation is required concerning the hedging instrument and its relation to the hedged item. The Group also documents goals and strategies for risk management and hedging measures, as well as an assessment of the hedging relationships effectiveness in terms of countering changes in fair value or cash flow for hedged items, both when the hedging is first entered into and subsequently on an ongoing basis.
Fair value hedges

Licenses and patents are recognized at acquisition cost less accumulated depreciation and any impairment losses. Straight-line depreciation is applied over the expected useful life (315 years).
Software and IT systems

Acquired software licenses and costs for development of software that are expected to generate future financial benefits for the Group for more than three years are capitalized and amortized over the expected useful life (35 years).
Goodwill

Changes in fair value of derivatives that are classified as fair value hedges and fulfill the conditions for hedge accounting are recognized in the income statement with the changes in the fair value of the asset or liability that caused the hedged risk.
Cash flow hedging

Goodwill is the amount that the acquisition cost for an asset exceeds the assets fair value. Goodwill in conjunction with the acquisition of a subsidiary is recognized at an intangible asset. Goodwill is not amortized but tested annually during the third quarter to identify any need to impair the asset and is recognized at acquisition cost less accumulated impairment losses. 2.7 Financial instruments The Group classifies its financial instruments in the following categories: financial assets valued at fair value through profit or loss, loans and receivables, financial instruments held to maturity and financial assets available for sale. The classifications are based on the purpose of the

Cash flow hedging is applied for future flows from sales. The portion of changes in the value of derivatives that satisfy the conditions for hedge accounting is recognized directly in shareholders equity. The ineffective portion of profit or loss is recognized directly in the income statement, among financial items. The unrealized profit or loss that is accumulated in equity is reversed and recognized in the income statement when the hedged item affects profit or loss (for example, when the forecast sale that has been hedged actually occurs). If a derivative instrument no longer meets the requirements for hedge accounting, is sold or terminated, what remains is any accumulated profit or loss in equity, which is recognized in the income statement at the same time as the forecast transaction is finally recognized in the income statement. When a forecast transaction is no longer expected to occur, the accumulated profit or loss recognized in equity is immediately transferred to the income statement.

40

Notes Group
Hedging of net investments

HALDEX 2008

Accumulated gains/losses from re-evaluation of hedges of net investments that fulfill the conditions for hedge accounting are recognized under Equity. When operations are divested, the accumulated effects are transferred to the Income Statement and affect the Companys net profit/loss from the divestment.
Calculation of fair value

Fair value of financial instruments that are traded on an active market (for example, publicly quoted derivative instruments, financial assets that are held for trade and financial assets that are held for sale) is based on the quoted market rate on the closing day. The quoted market rates used for the Companys financial assets are the actual bid prices; quoted market rates used for financial liabilities are the actual asked prices. The instruments held by the Group are traded 100% in an active market. 2.8 Inventories Inventories are valued at the lowest of the acquisition cost in accordance with the first-in first-out principle and the net realizable value. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). 2.9 Accounts receivable from customers After individual valuation, receivables are valued in the amounts in which they are expected to be paid. 2.10 Cash and cash equivalents Cash and cash equivalents includes cash, cash in banks, other shortterm investments that fall due in less than three months and bank overdraft facilities. Bank over draft facilities are recognized in the balance sheet as borrowing under current liabilities. 2.11 Receivables and liabilities Receivables and liabilities in foreign currencies are valued at the year-end rate. Exchange gains and losses pertaining to operational currency flows are recognized in operating income. Current and long-term interestbearing liabilities are recognized in the balance sheet to amortized cost. 2.12 Provisions Provisions are recognized in the balance sheet when the Group has future obligations resulting from an event that is likely to result in expenses that can be reasonably estimated. Provisions for restructuring costs are recognized when the Group has presented a plan for carrying out the measures and the plan has been communicated to all affected parties. 2.13 Employee benefits The Group has both defined-benefit and defined-contribution pension plans. Administration is handled by a third party at e.g. a fund management company, an insurance company, or a bank. The plans are fee- financed and the financing is recognized in the income statement. The size of the fee is dependent on actuarial estimations that are made once a year. Defined-benefit plans state which amount an employee can expect to receive after retirement and is calculated from factors such as age, work life and future salary. The actual debt, net any plan assets and non-reported actuarial gains/losses, is recognized in the balance sheet. Defined-contribution plans include mainly retirement pensions, disability pensions and family pensions, and a defined contribution normally expressed as a percentage of current salary, is paid to a separate legal entity. The employee is responsible for the risk inherent in these plans and the Group does not have any further obligations if the funds assets fall in value. No debt is recognized in the balance sheet.

The debt reported in the balance sheet pertaining to defined-benefit pension plans is the present value of the defined-benefit obligation on the closing day less the fair value of the plan assets, adjusted for nonreported actuarial gains/losses. Defined-benefit pension obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of the obligations is determined through discontinuation of the estimated future cash flow. Actuarial gains/losses from experience-based adjustments and changes in actuarial assumptions exceeding the higher of 10% of the value of the plan assets and 10% of the defined-benefit obligation, is recognized as an expense or revenue over the employees average remaining work life in accordance with the corridor method. Accordingly, no debt is recognized in the balance sheet. Swedish group companies apply UFR 4 which means that tax on pension cost is calculated on the difference between pension cost in accordance with IAS 19 and pension cost determind in accordance with local regulations. 2.14 Taxes Income taxes consist of current tax and deferred tax. Income taxes are reported in the income statement, apart from when underlying transactions are recognized directly in equity, whereby the related tax effect must also be recognized in equity. Current tax is the tax to be paid or received for the current year based on current tax rates. Adjustment of current tax attributable to previous periods is also included here. Deferred tax is calculated on the basis of the temporary differences between the recognized and tax-assessment value of assets and liabilities. The valuation of deferred tax is based on the recognized amounts for assets and liabilities that are expected to be sold or settled. A valuation is performed based on the tax rates and tax regulations that have been decided or announced at year-end. Deferred tax assets pertaining to loss carry forwards are recognized insofar as it is probable that the losses will be used to offset future tax. 2.15 Cash flow statement The Cash Flow Statement is prepared using the indirect method. This means that the operating income is adjusted for transactions that do not entail receipts or disbursements during the period, and for any income and expenses referable to cash flows for investing or financing activities. 2.16 Government assistance Government assistance connected to the acquisition of fixed assets has reduced the acquisition value of the particular assets. This means that the asset has been recognized at a net acquisition value, on which the size of depreciation has been based. 2.17 Discontinued operations On December 25, Haldex reached an agreement with Suzuki Metal Industry Co Ltd, a Japanese manufacturer of steel wire, to divest its division Garphyttan Wire. Haldex year-end report has therefore been prepared according to the IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The consolidated income statement separates continued and discontinued operations. In the consolidated balance sheet, assets and liabilities held for sale is broke out and reported on separate lines. It is not possible to compare the figures presented for the discon tinued operations with the figures presented for the Garphyttan Wire division since the divisional figures include different group allocations. 2.18 Introduction of new accounting principles When preparing the consolidated financial statements at December 31, 2008, a large number of standards and statements of interpretation had been published that have yet to become effective. Because of the large

HALDEX 2008

Notes Group
be made. The group will apply the required disclosures where applicable for impairment tests from January 1, 2009.
IAS 38 Amendment Intangible assets

41

number of changes the focus has been to give a preliminary assessment of the standards and statements that could have an impact on Haldex ABs financial reports.
IAS 1 Revised Presentation of financial reports

The revised standard of IAS 1 will become effective from January 1, 2009. The revised standard will require all non-owner changes in equity, income and expenses, to be shown in a separate performance statement. The current assessment is that the amendment of this standard will result in changes in the presentation format and in designations in the consolidated financial statements.
IFRS 2 Amendment Share-based payment

The amendment deletes the wording that states that there is rarely, if ever support of use a method that results in lower rate of amortization than the straight-line method. The amendment will not have an impact on the group as all intangible assets are amortized using the straight-line method.
IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction

This amendment will be applied as of January 1, 2009. The amendment affects the definition of vesting conditions and introduces a new concept, non-vesting conditions (conditions that are not defined as vesting conditions). The standard states that non-vesting conditions must be considered when assessing the fair value of equity instruments. Haldex AB has option programs with elements of non-vesting conditions. The impact of the amendment of this standard is not expected to be considerable.
IFRS 3 Revised Business Combinations

IFRIC 14 provides guidance when determining the limitation stipulated in IAS 19 for the amount of a surplus that may be reported as an asset. It also explains how pension assets and/or liabilities can be affected by statutory or contractual requirements for minimum financing. The interpretation will be applied by the Group from 1 January 2009. At present, however, it is not estimated to have any major impact on the Groups financial position.

Note 3 Risks & Risk management

3.1 Operational risks
Market risks

This amendment will affect the reporting of future acquisitions, in part in terms of the reporting of transaction costs, any conditional purchase considerations and successive acquisitions. The Group will apply the standard as of the fiscal year that starts on January 1, 2010. The amendment will not have any impact on previous acquisitions but will impact the consolidated financial statements in respect of future transactions. The IFRS 3 (revised) still undergoing the EUs approval process and, if approved, will be applied as of July 1, 2010.
IFRS 8 Operating segments

IFRS 8 replaces IAS 14 and is to be applied as of January 1, 2009. The new standard requires that segment reporting be presented on the basis of company managements perspective. The current estimation is that the new standard will not affect the consolidated financial statements to any major extent, since both internal and external reporting is based primarily on the Groups operating segments (divisions) and secondarily on the Groups geographical markets.
IAS 23 Amendment Borrowing Costs

Haldex is mainly active in the markets for trucks, trailers, construction machinery and cars. Demand for the companys products is dependent on demand for transportation, which is in turn driven by increases in global trading, infrastructure construction, increased traffic safety awareness, environmental and safety legislation, as well as economic growth on the particular continent. Haldexs main geographical markets are North America and Europe, but the Group is also active in the Asian and South American markets. Market risks are handled in the strategy process, which encompasses all Group units. The Board participates in this process and makes decisions concerning the Groups strategy and direction.
Customers

Since Haldex is active in several different market segments, its dependence on individual customers is limited. However, a loss of a customer or a major contract could have a major impact on an individual division.
Price trend

This amendment has been approved and will be applied as of January 1, 2009. The amendment requires that borrowing costs that are directly attributable to the purchase, design or production of an asset that will take considerable time to complete for use or sale must be capitalized as part of the acquisition value acquisition of the asset. The alternative allowing immediate expensing of borrowing costs will be removed. At present, the amendment of IAS 23 does not affect consolidated financial statements because the Group has no borrowing costs that can be capitalized.
IAS 27 Revised Consolidated and Separate Financial Statements

Price pressure is a natural feature in the competitive market in which Haldex is active. To manage this, Haldex focuses continuously on reducing its costs and increasing the value it provides to customers by developing new products and technologies.
Raw materials prices

The revised standard entails, for example, that earnings attributable to minority shareholders must always be recognized, even if the minority share is negative, that transactions with minority shareholders must always be recognized in equity and, in the event that the Parent loses controlling influence, any remaining share must be revalued at fair value. The revised standard of IAS 27 will affect the consolidated financial statements. However, it has yet to be approved by the EU and, if it is, it will not be applied until July 1, 2010.
IAS 36 Amendment Impairment of assets

Fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in use calculation should
* Based on purchases 2008, including Concentric 12 months.

The Group depends on a number of raw materials and intermediates. Haldex has defined its exposure to raw materials in terms of both the Groups own purchasing of raw materials and of Haldexs sub-suppliers purchasing of raw materials. Exposure* is greatest towards various grades of steel, where annual volumes amount to approximately SEK 1,400m, of which wire rod accounts for about SEK 500m. Annual exposure to aluminum and cast iron amounts to about SEK 180m and SEK 130m, respectively. The Group also has some exposure to copper. To limit the risk of an adverse impact on earnings, a process is launched to some extent introducing price clauses for raw materials in customer agreements. In cases where we have not negotiated price clauses, Haldex to large extent renegotiate agreements in the event that the price trend for raw materials has resulted in a considerable increase in costs. To a large extent, the short-term effects of price increases for raw materials are limited by the fact that price agreements with the Groups raw materials suppliers extend over an average period of six months.

42

Notes Group
Production

HALDEX 2008

Damage to production plants, caused, for example, by fire could have an adverse impact in the form of direct damage to property and of business disruption that impedes the potential to live up to commitments to customers. This in turn could result in customers choosing other suppliers. Because Haldex has production at several plants for a particular product line, it has the potential to reduce the consequences of such business disruption by increasing production at other plants. However, this normally results in additional costs. Haldex is continuously developing various damage-prevention measures. The Group has adequate insurance cover against both business disruption and damage to property.
Product development

products and processes, Haldex also works in cooperation with customers to achieve optimal results.
Human capital risk

Requirements from users and legislators for increased safety and improved environmental and vehicle dynamics are resulting in increased demand for the products provided by Haldex. Accordingly, it is essential that the Group continuously develop new products or improve existing products that satisfy this demand so that markets shares are not lost to competitors. Consequently, a key part of Haldexs strategy involves developing new products in those areas that the Group regards as important for continued growth and/or for defending market shares. In 2008, the Groups expenditure for product development amounted to 4.0% of sales (4.2). The development of new products always entails the risk that a product launch will fail for some reason. Because the Group capitalizes costs for major product development projects, a failed launch would give rise to an impairment requirement. The Groups capitalized investments in product development amounted to SEK 282m (241) at December 31, 2008. An impairment loss of SEK 5m was taken during 2008, see note 4.
Patents

It is of fundamental importance to the company in the short and the long-term perspective that favorable conditions are created in the Group to attract and retain skilled employees and managers. To achieve this, the Groups HR efforts focus on three main areas: skills development, development of leadership and management efforts and a strengthened corporate culture. A series of Group-wide processes have been implemented in these three areas, in order, for example, to assess performance and identify and develop skills and potential, salaries and rewards, thus ensuring consistent management of personnel-related matters and minimizing human capital risks. 3.2 Financial risks The Group is exposed to financial risks such as market, credit, liquidity and financing risks. To reduce the impact of these risks, Haldex works in accordance with a policy that regulates their management. This policy has been adopted by Haldexs Board of Directors. Follow-up and control occurs continuously in each particular company and at the corporate level.
Exchange rate risks

Through its international operations, Haldex is exposed to exchange rate risks. Exchange rate changes affect the consolidated income statement and balance sheet in part in the form of transaction risks and in part translation risks. Transaction risks The Groups net flows of payments in foreign currencies give rise to transaction risk. The value of net flows in foreign currencies totaled in 2008 approximately SEK 870m (885). The currency flows with the largest impact on earnings are the inflows of USD and EUR into SEK. An exchange rate difference of 10% between EUR and SEK affects the Groups earnings by approximately SEK 43m (43), and between USD and SEK by some SEK 10m (12), after tax. In accordance with the current finance policy, 70% of anti cipated net flows for the estimated volumes for the forthcoming 12-month period are hedged, with a permissible deviation of +/10%. At December 31, 2008, 77% (72) were hedged via derivative instruments. The Groups finance policy governs which types of derivative instruments can be used for hedging purposes as well as counterparties with whom contracts can be signed. Currency forward contracts were used in 2008 to hedge invoiced and forecasted currency flows. At December 31, these contracts had a value of SEK 531m net (545). They had a negative market value of SEK 69m (neg. 4). In special cases, the Board may decide that currency flows need hedging over longer time horizons. In 2006, hedging was used to cover forecast inflows during 20092010 in a nominal amount of SEK 155m at December 31, 2008. At the same date, these had an accrued positive value of SEK 0.4m.
Outstanding currency contracts at December 31, 2008
SEK m Nominal amount Year of maturity 2009 Average rate Hedging of flows >12 months Average rate USD Net Sold 183 7.49 39 7.78 EUR Net Sold 490 9.64 Other Net Sold 31

The risks pertain in part to cases whereby competitors infringe on the Groups patents and in part to cases where Haldex accidentally infringes upon the patents held by competing companies. The risk of the marketing of unlicensed copies of the Groups products has increase din recent years, particularly in the Asian markets. To minimize these risks, the patent situation is thoroughly monitored on a continuous basis. Haldexs own innovations are protected by patents to the extent possible.
Complaints, product recalls and product liability

Haldex is exposed to complaints in the event that the Groups products fail to function the way they should. In such cases, the Group is obliged to rectify or replace the defective products. Recalls pertain to cases where an entire production series or a large part has to be recalled from customers in order to rectify deficiencies. This occurs occasionally in the vehicle industry. The Group has no insurance covering recalls. The assessment is that the cost of such insurance would not be proportionate to the risk covered by the insurance. Haldex has historically not been affected by any major recalls of products. There is always a risk that our customers demand that suppliers cover costs in addition to replacing the product, such as the cost of dismounting, assembly and other ancillary costs. To the extent possible, Haldex endeavors to be exempted from such liability. If a product causes damage to a person or property, the Group could be liable to pay damages. Haldex is insured against such product liability. In the past decade, no major product liability claims have occurred. In 2008, costs for complaints and product recalls corresponded to 1.3% (1.1) of total sales. Haldex endeavors to minimize its risks in respect of complaints, product recalls and product liability by means of comprehensive long-term tests in the development process and through quality controls and checks in the production process. With the aim of improving the quality of

Translation risks The net assets (i.e. equity) of the non-Swedish subsidiaries represent investments in foreign currencies which, when translated into SEK,

HALDEX 2008

Notes Group
Accounts receivable
Due but not impaired 130 days 3060 days >60 days 2008 63 14 7 2007 93 22 14

43

give rise to a translation difference. In its finance policy, the Group has established a framework for how the translation exposure that arises shall be managed in order to control the translation differences impact on the Groups capital structure. The finance policy stipulates that the Groups net debt shall be distributed in proportion to the capital employed per currency. Wherever necessary, this goal can be achieved by raising loans in the various currencies used by the subsidiaries. Gains and losses on such loans that are adjudged as effective hedging of translation differences are recognized directly in shareholders equity, while gains and losses on loans that cannot be adjudged as effective hedging are recognized in the income statement as a financial item. In 2008, the value of the Groups net assets, meaning the difference between capital employed and net debt, totaled SEK 1,823m (1,871) and was distributed among the following currencies:
SEK USD EUR GBP Other 2008 85 723 293 336 386 2007 300 834 233 128 376

The years net cost for doubtful accounts receivable amounted to SEK 3m (12).
The provision for doubtful receivables was changed as follows:
Provision for doubtful receivables Provision on January 1 Provision for anticipated losses Confirmed losses Reversal of provision Exchange-rate effect Provision on December 31 2008 30 3 2 6 2 33 2007 18 21 3 6 0 30

This distribution was achieved in 2008 through loan of USD 28m (44) and in 2008 through a loan in GBP of 29m (0), which were designated as hedges of net investments, in foreign subsidiaries.
Interest rate risk

Interest rate risk is the risk that changes in the interest rate level will have a negative impact on Group earnings. Since the Group has no significant holdings of interest-bearing assets, revenues and cash flow from operating activities are, in all significant respects, independent of changes in market interest rates. The Groups interest rate risk arises through its borrowing. According to the finance policy, the average fixed interest term must be between 1 and 12 months. The risk must also be spread over time so that interest on a lesser part of the total debt is renegotiated at the same time. Through the acquisition of Concentric, interest-rate swaps in the amount USD 8.2m and GBP 13.7m were taken over. These mature in 2009 and had a market value of SEK 4m at year-end 2008. The average fixed interest term as of year-end 2008 was two months, meaning that most of the Groups financial liabilities were subject to variable interest; in other words, that the interest rate will be reset within one year. As of December 31, 2008, SEK 2,051m (1,118) of the loan liability was subject to an average variable interest rate of 3.87% (5.06). A one percentage point change in the interest rate affects the cost of the Groups borrowing by approximately SEK 16m (10) after tax.
Credit risk

The credit risk associated with financial assets is managed in accordance with the finance policy. The risk is minimized through such measures as limiting investments to interest-bearing instruments with lower risk and high liquidity by using minimum credit ratings and by limiting the maximum amount that can be invested in any given counterparty. A framework agreement is signed with most counterparties for right of set-off to further reduce risks. The credit risk in foreign currency and interest rate contracts corresponds to their positive market value, i.e. potential gains on these contracts. The credit risk for foreign exchange contracts was SEK 16m (16) at December 31. The corresponding risk for investments in credit institutions was SEK 430m (182), without taking possible offsetting opportunities into account.
Financing risk

The Groups financing risk is the risk that an excessive portion of Haldexs liabilities fall due for payment within a limited period of time when financing is expensive and/or in short supply. This risk is reduced by a stipulation in the finance policy stating that the total liability must have a remaining maturity of at least two years and that the maturities in the borrowing portfolio must be spread out over several years. On December 31, 2008, 62% (72) of borrowing had a maturity longer than two years. The maturity structure was as follows: 2009 38%, 2010 4%, 2011 5% and 2012 53%.
Liquidity risk

Credit risk is when a party in a transaction cannot fulfill their obligations and thereby creates a loss for the other party. The risk that customers will default on payment for delivered products is minimized by conducting thorough control reviews of new customers and following up with payment behavior reviews of existing customers, according to the Groups finance policy. The Groups accounts receivable totaled SEK 832m (1,189) on December 31 and the amounts that are expected to be paid are recognized. Haldex customers are primarily vehicle manufacturers, other system and component producers and aftermarket distributors within the vehicle industry. The geographic distribution of receivables from customers corresponds to a large extent to the division of sales per region. No single customer represents more than 5% (6) of sales. The Groups customer losses nor mally total less than 0.1% of sales.

Liquidity risk, meaning the risk the Groups capital requirements will not be met, is limited by holding sufficient cash and cash equivalents and granted but unused credit facilities that can be utilized without qualifications. The goal according to the finance policy is that cash and cash equivalents and available credit facilities must total at least 5% of net sales. These funds totaled SEK 1,647m (1,344) at year-end 2008, which corresponds to 20% (17) of net sales.
Haldexs main sources of financing December 31, 2008, Nominal value (millions)
Syndicated loan Bond loans Bridge loan 2008 USD 250 SEK 600 GBP 65 2007 USD 250 USD 600

Capital risk

The Groups objective in respect of the capital structure is to secure Haldexs ability to continue to conduct its operations so that it can generate a return for shareholders and value for other stakeholders and in order to maintain an optimal capital structure so that the cost of capital can be reduced.

44
To manage the capital structure, the Group could change the dividend paid to the shareholders, repay capital to the shareholders, issue new shares or sell assets in order to reduce debt.

HALDEX 2008

Note 4  Important estimations and

assumptions
The Consolidated Financial Statements contain estimations and assumptions about the future. These are based on both historical experience and expectations for the future. The areas with the highest risk for future adjustments of carrying amounts are mentioned below. Goodwill With the implementation of IFRS 3 goodwill are not amortized, instead tested for impairment both annually and when there is an indication of a decrease in value. IFRS 3 was introduced January 1, 2005 and the impact on the profit can be considerable for the Haldex group if the profitability goes down. During 2008 the Groups goodwill has been tested for impairment. The impairment test on goodwill is carried out on a divisional level (Commercial Vehicle Systems and Hydraulic Systems), which is the cash generating unit that is expected to benefit from the goodwill. The test is performed by discounting future cash flows and thus calculating the value in use. Calculated value in use has been placed in relation to and tested against carrying amounts for the two divisions goodwill. Haldex net sale and return has historically a very strong correlation to the number of produced units of trucks and trailers. Future cash flow is therefore calculated on the basis of official market data for future production of trucks and trailers, consideration is also taken for Haldex historical financial performance and future benefits from current improvement programs. When discounting expected future cash flows, a weighted average cost of capital after tax (WACC) is used, currently 11%. The weighted average cost of capital has been calculated on the basis of the following assumptions: Risk-free interest rate: Ten-year Swedish government bond rate. Markets risk premium: 5%. Beta: Established beta value for Haldex. Interest expense: Has been calculated as a weighted interest rate on the basis of the Groups financing structure in various currencies, and taking a loan premium into account. Tax rate: According to the tax rate applying in the specific country. The impairment tests performed in 2008 did not reveal any need to impair goodwill. A 1% change in the discount rate or a 10% decrease of cash flow does not change the outcome of the assessment. Development projects Haldex capitalize costs concerning development projects. These capitalized development projects are tested for impairment each year or when there is an indication of decrease in value. The tests are based on future prediction of revenue and corresponding production costs. In case the future volumes, prices or costs diverge negatively from the predictions, an impairment loss may arise. Development projects are considered to be a normal part of Haldex business. Generally impairment tests are carried out with the same assumptions (i.e. WACC) as the impairment test on goodwill. However, individual risk assessment point out different risks in the different projects why the WACC is adjusted to consider the estimated risk in each individual project. Development projects considered a higher risk is tested with a higher WACC than a project with a considered lower risk. An impairment loss of SEK 5m is booked in the income statement in

2008 as a result of performed impairment test. A 1% change in the discount rate or a 10% decrease of cash flow does not change the out come of the assessment. However, under the prevailing market conditions the uncertainty concerning forecast future cash flow is naturally greater than usual. Income taxes The Group pays tax in many different countries. Detailed calculations of future tax obligations are completed for each tax object within the Group. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that where initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Warranty reserves The Group continuously assesses the value of the reserves in relation to the estimated need. The warranty reserve represented 0.9% (0.7) of net sales as of December 31, 2008. Pensions The pension liabilities reported in the balance sheet are actuary- estimated and are based on annual assumptions. These assumptions are described in Note 23. A 0.25% average change in the utilized discount rate affects the present value of the Groups pension obligations by approximately SEK 68m.

NOTE 5 Segment reporting

Segment reporting is compiled for the Groups divisions and geographical areas. Since the Groups operations are followed up on the basis of the divisions earnings, this should be viewed as the primary basis for division. The segments earnings, assets and liabilities include items that are directly attributable to the particular segment, as well as items that can be allocated to the segments in a reasonable and reliable manner. The assets and liabilities that have not been allocated to the segments are deferred tax assets and deferred tax liabilities, as well as financial investments, financial receivables and financial liabilities. Market-based pricing has been applied for intra-Group transactions. Divisions Divisions are the Groups primary segment. The Group comprises the following divisions: Commercial Vehicle Systems develops, manufactures and sells brake systems for heavy vehicles, trailers and buses. Hydraulic Systems develops, manufactures and sells hydraulic lifting systems and drive systems for industrial vehicles, and tail-lifts for trucks and personal lifts. Garphyttan Wire manufactures state-of-the-art specialty spring wire made of various alloys for use primarily in combustion engines and transmissions, where the demands for quality and performance are meticulous. Traction Systems manufactures AWD systems, which are electronically controllable systems for four-wheel-drive vehicles. Geographical areas Geographical areas are the Groups secondary segment. The customers location serves as the foundation for sales per segment. Information pertaining to the segments assets and investments during the period are based on geographical areas grouped in accor dance with where the assets are located.

HALDEX 2008

Notes Group

45

Cont. Note 5Segment Reporting

SEK m Commercial Vehicle Systems Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees ** Garphyttan Wire Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees** Unallocated Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees** 792 2,799 372 1,796 1,053 59 56 5.6 5.3 556 169 12.6 21 43 474 1,095 45 45 4.1 4.1 650 221 9.9 20 44 482 4,234 4 92 0.0 2.2 2,546 641 3.9 232 160 2,856 4,529 159 109 3.5 2.4 2,845 672 4.9 259 140 3,149 Full year 2008 Full year 2007

Hydraulic Systems Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees** Traction Systems Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees** Group Net sales Operating income* Operating income Operating margin*, % Operating margin, % Assets Liabilities Return on capital employed**, % Investments Depreciation No. of employees**

Full year 2008 2,095 146 105 7.0 5.0 2,028 628 8.2 88 74 2,335 1,021 41 38 4.0 3.7 369 231 16.9 60 52 339 8,403 250 92 3.0 1.1 6,290 4,467 2.4 402 329 6,004

Full year 2007 1,467 86 86 5.8 5.8 781 265 16.6 89 58 1,591 848 49 49 5.8 5.8 433 258 21.3 95 40 296 7,940 339 289 4.3 3.6 5,082 3,211 8.3 463 281 5,518

*Excluding restructuring costs, one-off items and amortization of acquisition-related surplus values ** Rolling 12 months

Breakdown by geographic area

2008 Net sales Assets Investments North America 3,189 1,775 94 Europe 4,423 3,634 243 Asia and The Middle East 510 732 11 South America 281 149 54 Group 8,403 6,290 402

2007 Net sales Assets Investments

North America 2,997 1,262 94

Europe 4,255 3,190 302

Asia and the Middle East 443 490 58

South America 245 140 9

Group 7,940 5,082 463

Note 6 Costs distributed by type

Direct material costs Personnel costs Depreciation Other operating costs Total operating costs 2008 4,573 2,040 360 1,338 8,311 2007 4,204 1,965 281 1,201 7,651

46

Notes Group
NOTE 7 Average number of employees
Sweden USA China Germany Mexico Hungary Great Britain Brazil India France Canada Italy Poland Spain Austria South Korea Belgium Russia Women 262 501 379 64 53 99 75 40 19 19 9 9 4 9 6 1 2 1,551 Men 1,018 1,140 825 356 160 88 363 138 234 48 19 19 13 8 9 8 4 3 4,453 Total 2008 1,280 1,641 1,204 420 213 187 438 178 253 67 28 28 17 17 15 9 6 3 6,004 Women 256 571 322 67 55 98 77 38 48 22 6 8 4 6 3 2 2 1,585 Men 993 1,196 663 335 201 104 114 122 81 37 22 18 13 10 11 6 4 3 3,933

HALDEX 2008

Total 2007 1,249 1,767 985 402 256 202 191 160 129 59 28 26 17 16 14 8 6 3 5,518

NOTE 8 Salaries and other remuneration

2008 Sweden USA China Germany Mexico Hungary Great Britain Brazil India France Canada Italy Poland Spain Austria South Korea Belgium Russia Salaries and remuneration 433 495 51 170 14 21 77 14 4 24 7 10 3 4 7 4 5 1 1,343 Of which Board of Directors, President and other senior executives 18 6 5 6 1 1 6 2 1 1 0 0 0 0 0 0 0 0 47 Social security costs 213 168 0 70 7 6 11 11 0 13 3 4 0 1 2 1 0 0 510 Of which, pension costs 50 6 0 10 0 0 4 0 0 0 0 4 0 0 0 1 0 0 75

The Board of Directors, President and other senior executives comprised 31 people (27). Variable remuneration to the President and other senior executives amounted to SEK 7m (5). Pension costs for the President and other senior executives accounted SEK 8m (8) of the gruops total pension costs. For further information concerning wages, salaries and remuneration, refer to Note 9 of the Groups notes and Note 4 of the Parent companys notes.

HALDEX 2008

Notes Group

47

Cont. Note 8Salaries and other remuneration

Salaries and remuneration 430 525 28 161 16 15 76 13 5 25 8 10 2 5 7 4 4 0 1,334 Of which Board of Directors, President and other senior executives 18 3 2 5 0 1 3 2 0 3 0 0 0 0 2 1 0 0 40 Social security costs 246 185 9 73 7 5 19 10 0 10 4 4 0 1 3 1 0 0 577 Of which, pension costs 52 9 0 6 0 0 8 0 0 0 1 3 0 0 1 0 0 0 80

2007 Sweden USA China Germany Mexico Hungary Great Britain Brazil India France Canada Italy Poland Spain Austria South Korea Belgium Russia

Note 9 Information on Remuneration of executive committee

2008 Amounts in SEK 000 Board of Directors (7 members, of whom 2 women) Lars-Gran Moberg (Chairman) Dr Reiner Beutel (took office in 2008) Anders Bs Arne Karlsson Caroline Sundewall Anders Thelin Cecila Vieweg Sune Karlsson (retired in 2008) President Joakim Olsson Other senior executives (Group Management) (6 people, of whom 0 women) 4,000 1,260 795 3,740 764 766 Basic salary/ Director fees 1,925 525 300 175 225 275 200 225 Variable remuneration Pension Basic salary/ Director fees 1,650 175 200 250 200 150 200 475 2007 Variable remuneration Pension

12,500

3,030

3,050

11,300

2,000

2,900

Serevance pay

In addition to a mutual period of notice of 12 months, the President is entitled to servance pay corresponding to 12 months salary if notice is served by the company. If notice is served by the President, servance pay cannot be demanded. For members of the Group Management, servance pay is provided in accordance with the guidelines established by the Board of Directors for remuneration of senior executives, see Directors Report, page 32.
Incentive program

The Annual General Meeting resolved in April 2007 to introduce a long-term performance-based incentive program under which senior executives and key personnel would be allotted employee stock options on condition that the participants become shareholders by making

their own investment in Haldex shares in the stock market. Each share aquired in the market provides entitlement, free of charge, to an allotment of ten employee stock options, whereby each option provides entitlement to the acquisition of one Haldex share. A condition for allotment is that Haldexs pretax income has increased in relation to the preceding fiscal year by more than 7%. Maximum allotment occurs on condition that pretax income has increased in relation to the preceding fiscal year by 20% or more. Employee stock options are issued in three series and, in accordance with decisions by the Board of Directors, will be allotted during 2008, 2009 and 2010. No allotment of the 2008 or 2009 options will occur on the basis of the companys earnings outcome. For detailed information about the program, reference is made to Haldexs website, www.haldex.com.

48

Notes Group
Note 10 Auditing fees
PricewaterhouseCoopers Audit assignments Other assignments 8 4 12 2008

HALDEX 2008

2007 7 3 10

Note 11 Depreciation
Cost of goods sold Selling costs Administrative costs Product development costs 2008 243 9 40 37 329 2007 221 7 32 21 281

Note 12Taxes
Current tax on profits for the year Adjustments in respect of prior years Total current tax Deferred tax related to temporary differences Change in value of deferred tax in loss carry forward Impact of change in Swedish tax rate Total deferred tax Total income tax 2008 62 5 57 5 65 1 69 12 2007 57 2 59 4 26 22 81

The tax on the groups profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
Reconciliation of effective tax rate Earnings before tax Tax at applicable tax rate in Sweden Differences in tax rates of different countries of operation Non-deductible expenses Non-taxable revenues Tax attributable to prior years Remeasurement of deferred tax, change in Swedish tax rate Revaluation of deferred tax expense in subsidiaries Reported effective tax rate 2008 55 28% 2% 13% 13% 9% 1% 12% 22% 2007 221 28% 2% 3% 1% 1% 3% 36%

As per January 1, 2009, the Swedish corporate tax rate will change from 28% to 26,3%. As a result of the change deferred tax balances have been remeasured. The net effect from the remeasurement of the deferred taxes has not had any material impact on the groups total tax. The income tax charged/credited to equity during the year is as follows:
Deferred tax: Hedging reserve Hedges of net investments 19 14 33 7 5 2 2008 2007

HALDEX 2008

Notes Group

49

NOTE 13 Intangible assets

At January 1, 2007 Acquisition value Accumulated depreciation Carrying amount January 1December 31, 2007 Opening carrying amount Exchange rate differences Investments Corporate acquisitions Sales/scrappage Depreciation Carrying amount At December 31, 2007 Acquisition value Accumulated depreciation Carrying amount January 1December 31 2008 Opening carrying amount Exchange rate differences Investments Corporate acquisitions (note 26) Sales/scrappage Depreciation Write-down Amortization on acquisition-related surplus values Closing carrying amount At December 31, 2008 Acquisition value Accumulated depreciation Accumulated write-down Accumulated amortization on acquisition-related surplus values Carrying amount Goodwill 414 414 414 6 17 425 425 425 425 20 562 967 967 967 Patents and other intangible assets 66 40 26 26 1 8 17 2 5 45 88 43 45 45 15 4 511 9 24 512 595 59 24 512 Capitalized development costs 197 16 181 181 2 66 4 241 266 25 241 241 7 60 21 5 282 335 48 5 282 Total 677 56 621 621 7 74 34 2 9 711 779 68 711 711 28 64 1,073 30 5 24 1,761 1,897 107 5 24 1,761

Impairment testing of goodwill Commercial Vehicle Systems Hydraulic Systems

2008 402 565 967

2007 398 27 425

No goodwill is attributable to the Traction Systems and Garphyttan Wire divisions.

50

Notes Group
NOTE 14Tangible fixed assets
Land and land improvements 49 6 43 43 1 4 1 1 44 51 7 44 44 1 0 1 1 43 53 9 1 43 Machinery and other technological investments 2,170 1,351 819 819 10 252 16 21 181 875 2,396 1,521 875 875 75 268 65 44 206 21 280 732 2,904 1,871 21 280 732 Equipment, tools and installations 758 548 210 210 2 59 6 72 189 775 586 189 189 23 78 10 5 75 18 202 946 726 18 202 Construction in progress and advances to suppliers 130 0 130 130 0 51 2 0 179 179 0 179 179 25 24 15 4 6 11 144 161 6 11 144

HALDEX 2008

As per January 1, 2007 Acquisition value Cumulative depreciation Book value January 1December 31, 2007 Opening book value Exchange rate difference Investments Corporate acquisitions Sales/discards Depreciation Book value As per December 31, 2007 Acquisition value Cumulative depreciation Book value January 1December 31, 2008 Opening book value Exchange rate difference Investments Corporate acquisitions (note 26) Sales/discards Depreciation Write-down Assets held for sale (note 21) Book value As per December 31, 2008 Acquisition value Accumulated depreciation Accumulated write-down Assets held for sale (note 21) Book value

Buildings 408 204 204 204 5 15 22 4 18 214 428 214 214 214 23 20 1 32 17 15 194 436 227 15 194

Total 3,515 2,109 1,406 1,406 18 381 38 34 272 1,501 3,829 2,328 1,501 1,501 145 342 61 85 299 27 325 1,315 4,500 2,833 27 325 1,315

Note 15Operational leases

The groups operational lease contracts fall due as follows:
2009 20102013 2014 and beyond Premises 51 168 190 Machinery and other equipment 25 54 8 Total 76 222 198

Expensed leasing fees during 2008 totaled SEK 86 m (91).

HALDEX 2008

Notes Group

51

NotE 16 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforcable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The gross movement on deferred income tax account is as follows:
At 1 January Income statement charge (note 12) Acquisition of subsidiary (note 27) Tax charged directly to equity (note 12) Re-classification from current taxes Exchange differences Assets held for sale (note 21) Liabilities held for sale (note 21) At 31 December 2008 22 69 113 33 30 22 4 60 59 2007 44 22 3 2 1 22

Deferred income tax assets and liabilities, without taking into consideration to the offsetting of balances within the same tax jurisdiction, is as follows:
Assets Tax loss carry-forwards Tangible fixed assets Intangible assets Provisions Tax allocation reserves Pension and similar obligations Acquisition related surplus values Other Assets/Liabilities held for sale (note 21) Net deferred tax assets/tax liability 46 4 379 35 260 84 48 128 60 320 17 238 26 33 25 15 69 92 2008 194 2007 137 105 78 67 62 Liabilities 2008 2007 2008 194 105 52 33 69 84 128 46 56 59 18 22 Net 2007 137 67 37 15 92 48

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future axable profits is probable. t All recognized tax loss carry-forwards have an expiry day exceeding ten years.

Note 17 Derivative instruments

2008 Short-term Interest rate swaps Forward exchange contracts cash flow hedges Forward exchange contracts at fair value through profit or loss Currency swaps at fair value through profit or loss Assets/Liabilities held for sale (note 21) 9 1 35 45 4 75 5 25 10 99 12 4 4 20 10 4 8 22 Assets Liabilities Assets 2007 Liabilities

Equity gains and losses in short-term currency forward contracts will be transfered to the income statement at different points during 2009.
Hedging of net investments in foreign operations

Parts of the Groups borrowing in USD and GBP is identified as hedging of net assets (see exchange-rate risks, on page 4243). At December 31, 2008, the amortizied cost/book value of this borrowing was SEK 539m (284). Exchange-rate losses during the year, amounting to SEK 39 m (+13) after tax on translation into SEK on the balance sheet date, are recognized in Other reserves within shareholders equity.

52

Notes Group
NOTE 18 Inventories
Raw materials Semi-manufactured products Finished products Assets held for sale (note 21) 2008 582 103 420 165 940 2007 572 136 347 1,055

HALDEX 2008

NOTE 21 Assets and liabilities held for sale

Assets held for sale Tangible fixed assets Deferred tax assets Inventories Accounts receivables from customers Other current receivables Total assets held for sale Liabilities held for sale 44 60 71 10 3 107 295 325 4 165 62 20 576

Note 19Other current receivables

Tax receivables Prepaid expenses and accrued income Rents and insurance Accrued income Other prepaid expenses Other current receivables Assets held for sale (note 21) 19 52 63 101 20 278 18 57 63 116 282 2008 63 2007 28

Pension and similiar obligations Deferred taxes Debts to suppliers Derivative instruments Other provisions Other current liabilities Total liabilities held for sale

Note 22Long-term interest-bearing

liabilities
2008 2007 649 600 4 32 8 1,293

Note 20 Cash and cash equivalents

Bank accounts and cash Bank certificates and special loans 2008 425 6 431 2007 178 4 182

Multicurrency Revolving Credit Facility Bond loans Other promissory notes and secured loans Capitalized financial rental agreements Financial leasing Total

720 350 20 7 1,097

Cont. Note 22Long-term interest-bearing liabilities

Maturity structure, years
SEK GBP EUR USD INR BRL Total, SEK Calculated interest Total Total 620 7 109 341 15 5 1,097 103 1,200 01 0 36 36 13 350 7 12 4 373 56 429 35 270 109 341 3 1 724 11 735 >5 years Average rate 3.4 7.8 5.4 2.3 14.3 9.8 3.3

Because loans under Multicurrency Revolving Credit Facility and Bond loans are subjects to a fixed interest term of 36 months, the fair values corresponds to the carrying amounts. Available unused credit facilities at year-end totaled SEK 1,217m (1,162). Calculated interest comprises the counter-value in SEK based on exchange rates at December 31, 2008 and the current interest rates on the liability.

HALDEX 2008

Notes Group

53

NotE 23Pensions and similar obligations

Pension liabilities in the balance sheet FPG/PRI-pensions Defined-benefit healthcare benefits Other defined-benefit plans
* Including liabilities held for sale of SEK 44 m (note 21)

2008 146 42 252 440*

2007 128 35 171 334

Haldex has defined-benefit plans for pensions for certain units in Sweden, Germany, France, Great Britain and USA. The pensions under these plans are based mainly on final salary. Contribution-based plans are also found in these countries. Subsidiaries in other countries within the Group use mainly contribution-based plans. Net actuarial losses on pension obligations and plan assets declined during the year by SEK 18 m and at year-end totaled 1% (4) of the present value of the pension obligations. The return on plan assets recognized in the income statement totaled SEK 68 m, while the actual return was SEK 93 m. The plan assets consist primarily of shares, interest-bearing securities and shares in mutual funds.
Group Pension obliagations, funded plans, present value as of December 31 Plan assets, fair value as of December 31 Total Pension obligations, unfunded plans, present values as of December 31 Unreported actuarial gains (+), losses () Net liability in the balance sheet 2008 1,167 1,023 144 312 16 440 2007 487 431 56 312 34 334

Total pension costs

Group Pensions vested during the period Interest on obligations Expected return on plan assets Amortization of unreported actuarial gains (+), losses () Pension costs, defined-benefit plans Pension costs, defined-contribution plans Total pension costs 2008 29 78 68 0 39 46 85 2007 45 38 30 4 57 35 92

Pension obligations
Group Opening balance Acquired pension liability Pensions vested during the period Interest on obligation Benefit paid Unreported actuarial gains (+), losses (), pension obligations Exchange rate differences Pension obligations, current value 2008 799 804 29 78 59 182 10 1,479 2007 818 45 38 23 60 19 799

Plan assets
Group Opening balance Acquired plan assets Expected return on plan assets Contributions from employers Disbursement of pension payments Unreported actuarial gains (+), losses (), plan assets Exchange rate differences Plan assets, fair value 2008 431 698 68 53 49 161 17 1,023 2007 407 30 36 17 11 14 431

54

Notes Group
Cont. Note 23Pensions and similar obligations
Reconciliation of interest-bearing pension liabilities
Group Opening balance, pension liablities (net) Acquired pension liability (note 26) Pension costs Benefits paid Contributions from employers Compensation from plan assets Exchange rate difference According to balance sheet 2008 334 106 39 59 53 49 24 440

HALDEX 2008

2007 319 57 23 36 17 0 334

Actuarial assumptions
Percent Discount rate, January 1 Discount rate, December 31 Expected return on plan assets Expected salary increase Expected inflation Sweden 4.50 3.75 4.80 3.00 2.00 Germany 5.65 6.25 4.80 3.00 2.00 France 5.65 6.50 3.00 2.00 Great Britain 5.95 6.85 6.807.00 3.50 2.70 USA 6.25 5.80 8.00 3.80 2.50

Experience-based change in unrecognized actuarial gains (+)/losses ()

Group Present value of defined benefit obligations Plan assets Surplus (+)/deficit () Experience-based adjustment of obligation Experience-based adjustment of plan assets 2008 1,479 1,023 456 19 161 2007 799 431 368 4 11 2006 818 407 411 8 13 2005 841 373 468 15 34

The information provided will be expanded gradually over a period of five years. The transitional rules state that such expansion does not require information on periods prior to the comparative year. This means that a complete five-year period will be included in the annual report for 2009. What is meant by experience-based adjustments of obligations is any deviation from the basic assumptions made in the calculation of the pension obligation. This could, for example, pertain to changes in expectations concerning employee turnover, premature retirement, pay increases and length of life. What is meant by experience-based adjustments of plan assets is any discrepancy between the expected return and the real return on the plan assets.

HALDEX 2008

Notes Group
Assets and liabilities at April 1, 2008 due to the acquisition were as follows:
Restruct uring reserves 24 112 80 1 57 Acquired carrying amount 61 27 87 151 66 83 369 2 236 298

55

Note 24Other provisions

Opening balance January 1, 2008 Provisions Reversals Requisitions Translation differences Liabilities held for sale (note 21) December 31, 2008 Warranty reserves 52 107 0 92 6 3 70 Total 76 219 0 172 7 3 127

Intangible assets Value of customer relationships Value of brands Value of technology Tangible fixed assets Deferred taxes Inventories Accounts receivable and other receivables Cash and cash equivalents Pension liabilities Long-term loans Deferred taxes Accounts payable and other liabilities Net assets Goodwill Total purchase consideration Cash paid Acquired Cash and Cash Equivalents The Groups change in Cash and Cash Equivalents

Fair value 511 318 112 81 61 34 93 151 66 106 369 147 236 58 562 620 620 66 554

NotE 25 Current liabilities

Tax liabilities Accrued expenses Personnel costs Other accrued expenses Other current liabilities Liabilities held for sale (note 21) 226 75 107 107 341 209 15 102 375 2008 40 2007 49

Note 26 Corporate acquisitions

Concentric

Note 27 Related party transactions

The Parent Company is a related party to its subsidiaries. Transactions with subsidiaries occur on commercial market terms. Remuneration to senior executives is presented in Note 9.

On April 1, Haldex completed the acquisition of Concentric. The purchase consideration totaled GBP 75 m, excluding pension obligations and financed through raising new loans. The cash consideration was reduced with the net of loans and cash in the acquired company. The companys intangible assets, net of deferred tax, amounted to SEK 930m, which comprised goodwill in the amount of SEK 562m, other assets totaling SEK 511m, including customer relations, technology and brands, and a deferred tax liability of SEK 143m. The assets, except goodwill, are amortized over the different assets estimated service life. Amortization of these assets amounted to SEK 24m during the period. In addition, nonrecurring expenses totaling SEK 7m during the year pertaining to acquired profits in inventories. Concentric has been consolidated into the Groups income statement and balance sheet since April 1, 2008. Since then Concentric contributed to the net sales by SEK 606m and to the operating income by SEK 82 m, excluding amortization of acquisition related surplus values.
Information about acquired net assets

The acquisition analysis is established in accordance with current accounting standard, IFRS 3.
Preliminary acquisition calculation
Purchase consideration: Cash paid Costs directly connected to the acquisition Total purchase consideration Fair value of acquired net assets Goodwill 573 47 620 58 562

56

Parent Company

HALDEX 2008

Parent Company income statement

Amount in SEK m Net sales Administrative costs Operating income Dividends from Group companies Group contribution Interest income Interest expenses Other financial items Earnings before tax Change in allocations reserve Taxes Net income for the year 14 15 7 7 6 Note 2008 49 83 34 373 35 87 127 69 265 57 10 332 2007 43 83 40 117 117 66 83 24 201 7 13 181

HALDEX 2008

Parent Company

57

Parent Company balance sheet

Amounts in SEK m ASSETS Fixed assets Tangible fixed assets Financial fixed assets Shares and participations Long-term receivables Total fixed assets Current assets Account receivables from subsidiaries Other current receivables Derivative instruments Cash and cash equivalents Total current assets Total assets SHAREHOLDERS EQUITY AND LIABILITIES Equity Restricted equity Share capital Restricted reserves Unrestricted equity Retained earnings Net income for the year Total equity Untaxed reserves Provisions Pensions and similar obligations Other provisions Total provisions Long-term liabilities Long-term interest-bearing liabilities Debts to subsidiaries Total long-term liabilities Current liabilities Debts to suppliers Debts to subsidiaries Short-term interest-bearing liabilities Derivative instruments Other current liabilities Total current liabilities Total equity and liabilities Collateral pledged Contingent liabilities 19 12 18 9 794 981 149 21 1,954 4,659 None 548 5 582 45 23 655 3,231 None 378 17 1,070 141 1,211 1,249 5 1,254 16 11 9 20 13 11 24 14 445 332 1,343 131 363 181 1,110 188 111 455 111 455 11 12 13 1,876 50 147 178 2,251 4,659 1,335 26 47 44 1,452 3,231 9 10 2,380 24 2,408 1,761 15 1,779 8 4 3 Note 2008 2007

58

Parent company

HALDEX 2008

Changes in Parent Company equity

Amounts in SEK m Opening balance at January 1, 2007 Net income for the year Dividend Repurchase of shares Group contribution granted Closing balance at December 31, 2007 Opening balance at January 1, 2008 Net income for the year Dividend Closing balance at December 31, 2008 Restricted equity Share capital 111 111 111 111 Statutory reserve 455 455 455 455 Unrestricted equity Retained earnings 501 181 99 24 15 544 544 332 99 777 Total 1,067 181 99 24 15 1,110 1,110 332 99 1,343

Parent Company cash flow statement

Amounts in SEK m Cash flow from operations Income after financial items Adjustment for non-cash items Taxes paid Cash flow from operations before change in working capital Change in working capital Current receivables Operating liabilities Change in working capital Cash flow from operations Cash flow from investments Investments in fixed assets Investments in shares and participations Cash flow from investments Cash flow from financing Dividend to shareholders Repurchase of own shares Interest-bearing liabilities Cash flow from financing Change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at year-end 99 802 703 134 44 178 99 24 131 8 66 110 44 2 619 621 2 49 51 611 454 157 52 10 94 84 23 229 3 17 209 84 6 29 61 2008 2007

HALDEX 2008

Notes Parent Company

59

Notes Parent Company

NOTE 1 General information
Haldex AB is the Parent Company in the Haldex Group. The main office functions, including the central financial function, are carried out within the Parent Company. Haldex AB (publ), Corp. Reg. No. 556010-1155, is a registered limited liability corporation with its registered office in Stockholm, Sweden. The address of the Head Office is Haldex AB, Box 7200, SE-103 88 Stockholm. Haldex shares are traded on the Mid Cap list at the Stockholm Stock Exchange. entity, the rules of FAR SRSs accounting recommendation, RedR 4, are applied, in accordance with Act on the Safeguarding of Pension Commitments and the Swedish Financial Supervisory Authoritys regulations. For defined-benefit pension plans, the current value is reported as a liability in the Balance Sheet, based on actuarial calculations. The change in the liability is carried in the income statement. For defined-contribution pension plans, fees paid to pension institutions are expensed in the income statement a current account basis. Pension obligations are recognized at fair value and are based on annual actuarial calculations. Change in the pension liabilities are recognized in the Income Statement. Endowment insurance is reported at market value under Financial fixed assets and Other provisions. The cost is recognized on an ongoing basis in the income statement. In addition, the company has pension commitments that are secured through two pension foundations. The assets and thereby the liabilities for these obligations are handled by a third party and are not reported in the balance sheet. The calculated cost for providing the insurance is recognized in the income statement. 2.2 Deferred taxes Tax legislation in Sweden and certain other countries allows for deferral of tax payments through transfers to untaxed reserves. The Parent Company has tax allocation reserves that are transferred for taxation at the most six years after the year of allocation. In addition, deferred taxes are calculated for temporary differences between reported income and expense items and fiscal values.

NOTE 2  Summary of important accounting

principles
The Annual Report for the Parent Company was prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Accounting Standard Councils Recommendation RFR 2.1 Financial reporting for legal entities. According to the rules stated in RFR 2.1, the Parent Company, in the annual report for the legal entity, must apply all EU-approved IFRS and statements to the extent possible within the framework of the Annual Accounts Act, and taking into account the relationship between reporting and taxation. This recommendation specifies the exceptions from IFRS that are permissible and the necessary supplementary information. The Parent Companys accounting principles correspond to those for the Group with the exceptions listed below. 2.1 Pensions and similar obligations Haldex AB has defined-benefit pension plans and defined-contribution pension plans. In accordance with RR 32.37, the Act on the Safeguarding of Pension Commitments and the Swedish Financial Supervisory Authority contain rules that entail reporting for defined-benefit plans other than stated in IAS 19. For a tax-deduction right to be permissible, the requirements is that Act on the Safeguarding of Pension Commitments rules must be applied, which means that the rules of IAS 19 for defined-benefit plans need not be applied in the legal entity. In the legal

Note 3  Average number of employees

and sickness absence
2008 Men Total 13 18 Average number Women of employees Sweden Total sickness absence 2008 (2007) Total sickness absence, % of which > 60 days 5 Women 4 Men 13 2007 Total 17

Women

Men

Age <29

Age 3049 0.6 (0.0)

Age >50

Total 0.4 (0.0)

0.1 (0.0)

Note 4 Salaries and other remuneration

2008 Of which Salaries and Board of Directors, remuner- President and other ation senior executives 23 12 Social security costs 13 Of which pension costs 6 2007 Of which Salaries and Board of Directors, remuner- President and other ation senior executives 19 10 Of which pension costs 6

Sweden

Social security costs 13

The Board of Directors consists of seven members (7); for information on the individual remuneration paid to them and the President, refer to note 9 on the consolidated financial statements. Remuneration to other senior executives, two people (2) amounted to SEK 4m (4), of which variable remuneration amounted SEK 1m (1). Pension payments for other senior executives accounted for SEK 1m (1) of total pension costs.

60

Notes Parent Company

Note 5 Auditing fees
PricewaterhouseCoopers AB Audit assignments Other assignments 2 1 3 1 1 2 2008 2007

HALDEX 2008

note 8 Tangible fixed assets

January 1December 31, 2007 Opening carrying amount Investments Depreciation Closing carrying amount At December 31, 2007 2 2 1 3

Note 6 Depreciation
Administrative costs 2008 2 2 2007 1 1

Acquisition value Accumulated depreciation Carrying amount

6 3 3

January 1December 31, 2008 Opening carrying amount 3 3 2 4 Investments Depreciation Closing carrying amount

Note 7  Interest income and interest

expenses
Interest income External interest income Interest income from Group companies Total Interest expense External interest expenses Interest expenses to Group companies Total 111 16 127 66 17 83 2 85 87 4 62 66 2008 2007

At December 31, 2007 Acquisition value Accumulated depreciation Carrying amount 9 5 4

Note 9 Shares and participations

Shares in subsidiaries Haldex Brake Prod AB Haldex Garphyttan AB Haldex Hydraulics AB Haldex Traction AB Haldex Halmstad AB Haldex GmbH Haldex Vehicle Products Co Ltd Haldex Europ S.A Haldex Ltd Haldex do Brasil Indstria e Comrcio Ltda. Haldex Sp.z o.o. Haldex N.V. Haldex Int Trading Co Ltd Haldex Italia Srl Haldex Korea Ltd Haldex Financial Services Holding AB Haldex Hungary Kft Haldex Wien Ges mbH Haldex India Ltd JSB Hesselman AB OOO Haldex Rus Haldex Holding AB Haldex Hydraulics Hong Kong Haldex Garphyttan Hong Kong Concentric Plc 556560-8220 556546-1844 556633-6136 Corp. Reg. No 556068-2758 556030-2886 556105-8941 556040-2736 556053-6780 Regd. office Landskrona rebro rkelljunga Landskrona Halmstad Germany China France Canada Brazil Poland Belgium China Italy South Korea Stockholm Hungary Austria India Stockholm Russia Stockholm Hong Kong Hong Kong UK 23,079,394 1,000 10,400 79,046 1,000 185,099 30,000 4,035 418,119 Participations 127,000 150,000 30,000 3,501 30,000 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 60 100 100 100 100 97.1 100 2008 142 47 22 7 4 106 42 0 6 3 1 0 0 0 0 74 7 7 992 0 165 49 85 621 2,380 2007 142 47 22 7 4 106 42 0 6 3 1 0 0 0 0 74 7 7 992 0 165 49 87 1,761

HALDEX 2008

Notes Parent Company

61

Cont. Note 9Shares and participations

Shares in subsidiaries Associated companies Alfdex Change in shares and participations Anglo Scandinavian Aircraft Leasing KB Altra Technologies Inc. Swedish Aircraft Two KB 48 1.000.000 10 4,8 18.1 10 0 0 0 0 0 0 556647-7278 Tumba 50 0 0 Corp. Reg. No Regd. office Participations % 2008 2007

Change in shares and participations

2008 2007 Opening balance 1,761 1,757 Acquisition 621 49 Reclassifications 45 Divestments 2 Closing balance 2,380 1,761

During 2008, 100% of Concentric was acquired. During the year 2.9% of the Shares in Haldex Garphyttan Hong Kong were sold. JSB Hesselman AB is the parent company of the wholly owned English subsidiary Haldex Ltd and the U.S. subsidiary Haldex Inc. Haldex Ltd. is the parent company for the wholly owned English subsidiary Haldex Brake Products Ltd. and the Spanish subsidiary Haldex Espaa SA. Haldex Inc. is the holding company for the wholly owned U.S. subsidiaries Haldex Brake Corp, Haldex Brake Products Corp, Haldex

Garphyttan Corp., Haldex Hydraulics Corp. and the Mexican subsidiary Haldex de Mexico S.A. De C.V. Haldex GmbH is the holding company for the wholly owned German subsidiaries Haldex Brake Products GmbH, Haldex Garphyttan GmbH and Haldex Hydraulics GmbH. Haldex do Brasil Indstria e Comrcio Ltda. is the parent company of the wholly owned Brazilian subsidiary Fabrica Brasileira de Freios S.A.

Note 10Long-term receivables

Deferred tax assets Other long-term receivables 2008 15 9 24 2007 4 11 15

Note 13 Cash and cash equivalents

2008 178 178 2007 44 44 Cash and bank balances Bank certificates and special loans

Note 11Other current receivables

Tax assets Prepaid expenses Rents and insurances Other prepaid expenses Other current receivables 6 2 6 50 1 3 3 26 2008 36 2007 19

Note 14Untaxed reserves

2008 188 57 131 2007 181 7 14 188 Opening balance Reversals during the year Provisions during the year Closing balance

Note 15Taxes Note 12 Derivative instruments

2008 Short-term Forward exchange contracts at fair value through profit or loss Currency swaps at fair value through profit or loss Assets Liabilities 2007 Assets Liabilities Current tax expense for year Deferred tax related to temporary differences 2008 10 10 2007 13 13

122

122

40

40

Note 16Pensions and similar obligations

Pension obligations attributable to defined-benefit plans Pensions vested during the period Interest on obligtion Total pension cost 2008 2 1 3 2007 3 3

25 147

27 149

7 47

5 45

Gains and losses from current currency forward contracts and currency swaps are reconized on a ongoing basis in the income statement.

62

Notes Parent Company

Cont. Note 16Pensions and similar obligations
Reconciliation of interest-bearing pension liabilities Opening balance, pension liablities Benefits paid Pension costs According to balance sheet 2008 13 5 3 11 2007 10 3 13 Accrued expenses Personnel costs Other accrued expenses Other current liabilities 11 10 21

HALDEX 2008

Note 18Other current liabilities

2008 2007 9 12 2 23

Note 17Long-term interest-bearing

liabilities
2008 Multicurrency Revolving Credit Facility Bond loans Total 720 350 1,070 2007 649 600 1,249

Note 19 Contingent liabilities and

collateral pledged
2008 548 2007 378

Sureties and guarantees for subsidiaries

Cont. Note 17Long-term interest-bearing liabilities

Maturity structure, years
Liabilities SEK EUR USD Total Calculated interest Total Total 620 109 341 1,070 103 1,173 01 0 35 35 13 350 350 57 407 35 270 109 341 720 11 731 >5 years 0 0 Average rate 3.4 5.4 2.3 3.3

Because loans under Multicurrency Revolving Credit Facility and Bond loans are subjects to a fixed interest term of 36 months, the fair values corresponds to the carrying amounts. Available unused credit facilities at year-end totaled SEK 1,217 m (1,162). Calculated interest comprises the counter-value in SEK based on exchange rates at December 31, 2008 and the current interest rates on the liability. The Board of Directors and the President and CEO certify that the annual financial report has been prepared in accordance with generally accepted accounting principles and that the consolidated accounts have been prepared in accordance with the international set of accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, and give a true and fair view of the position and profit or loss of the Company and the Group, and that the management report for the Company and for the Group gives a fair review of the development and performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face. Stockholm, March 23, 2009

Lars-Gran Moberg, Chairman of the Board

Reiner Beutel Board member

Anders Bs Board member

Arne Karlsson Board member

Caroline Sundewall Board member

Anders Thelin Board member

Cecilia Vieweg Board member

Bjrn Cederlund Board member

Jonas Esbjrnsson Board member

Joakim Olsson, President & CEO Our audit report was issued on March 23, 2009. Michael Bengtsson Liselott Stenudd Authorized Public Accountant Authorized Public Accountant PricewaterhouseCoopers AB PricewaterhouseCoopers AB

HALDEX 2008

Audit report

63

Audit report
To the Annual General Meeting of Haldex AB (publ) Corporate identity number 556010-1155 We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of Haldex AB for the year 2008. The Companys annual accounts and the consolidated accounts are included in the printed version on pages 3062. The board of directors and the managing director are responsible for these accounts and the administration of the Company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated financial accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director and significant estimates made by the board of directors and managing director when preparing the annual accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the companys financial position and results of operations in accordance with generally accepted accounting principals in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fait view of the groups financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm, March 23, 2009

Michael Bengtsson Authorized Public Accountant PricewaterhouseCoopers AB

Liselott Stenudd Authorized Public Accountant PricewaterhouseCoopers AB

64

Corporate Governance Report

HALDEX 2008

Corporate Governance Report

Haldex complies with no exceptions to the Swedish Code of Corporate Governance hereinafter called the Code and prepares a Corporate Governance Report in accordance with the Code. The Corporate Governance Report is unaudited.

Corporate governance in Haldex Haldex is a publicly traded Swedish limited liability company. Responsibility for the governance and control of the Haldex Group is divided among the shareholders, the Board of Directors, its selected committees and the President, in accordance with the Swedish Companies Act, applicable regulations for publicly traded companies (including the Swedish Code of Corporate Governance), other relevant laws and regulations, Haldexs Articles of Association and the internal rules of the Board of Directors. An overview of Haldex Corporate Governance is illustrated below. For information about Haldex shareholders, refer to a specific section on page 72. Annual General Meeting 2008 The 2008 Annual General Meeting was held on Tuesday, April 15 in Stockholm. Sune Karlsson, Chairman of the Board, was elected Chairman of the Annual General Meeting, as proposed by the Nomination Committee. The Annual General Meeting resolved that: In accordance with the Board of Directors proposal to pay dividend of SEK 4.50 per share for 2007 (unchanged dividend). The Board shall comprise seven members with no deputies. The Meeting re-elected Lars-Gran Moberg, Arne Karlsson, Caroline Sundewall, Cecilia Vieweg, Anders Thelin and Anders Bs. Dr Reiner Beutel were newly elected. Lars-Gran Moberg was elected Chairman and Dr Reiner Beutel Vice Chairman of the Board.
Haldex control structure

Fees for the Board of Directors shall be paid totaling SEK 1,925,000 including fees for committee work, of which SEK 450,000 pertains to the Chairman, SEK 300,000 to the Vice Chairman and SEK 175,000 to other Board members who are not employed by the Company. Fees to auditors will be paid as invoiced. The Board was authorized, during the period up to the next ordinary Annual General Meeting, to acquire/repurchase up to 10% of all shares in the Company. Such treasury shares may be used for transfer in connection with possible future acquisitions and to cover costs for the longterm incentive program LTI 2007. The resolutions passed by the Meeting are presented in the minutes from the 2008 Annual General Meeting, which are available at www.haldex.com. Appointment of the Nomination Committee for the 2009 Annual General Meeting The 2008 Annual General Meeting resolved that the Nomination Committee for the 2009 Annual General Meeting shall have four members, representing each of the four largest shareholders in terms of voting rights. The names of these four representatives, and the names of the shareholders that they represent, must be disclosed at least six months before the Annual General Meeting and be based on shareholdings immediately prior to such disclosure. The assignment of such members will cease when a new Nomination Committee has been appointed. Assuming that the members do not agree to an alternative course of action, the member representing the largest shareholder in terms of voting rights shall be appointed chairman of the Nomination Committee. The composition of the Nomination Committee was disclosed through a press release and on Haldexs website on October 16, 2008. Following ownership changes that occurred at the end of the year, the composition of

Haldex shareholders

Nomination Committee

Annual General Meeting

Haldex auditors

Board of Directors

Remuneration Committee

Audit Committee

President

Executive Committee

HALDEX 2008

Corporate Governance Report

65

the Nomination Committee changed, as disclosed through a press release and on Haldexs website on February 13, 2009. The Nomination Committee ahead of the 2009 Annual General Meeting comprises representatives of the three largest and the seventh largest shareholders, jointly representing 20.74% of the voting rights. Stefan Dahlbo, Investment AB resund, Tomas Ramslv, Odin Fonder, Carl Rosn, Second AP Fund and Bjrn Cederlund, Unionen comprise the Nomination Committee prior to the 2009 Haldex Annual General Meeting. The Nomination Committees assignments include preparation and presentation of proposals for the election of Chairman of the General Meeting, members of the Board of Directors, Chairman of the Board of Directors, auditors and proposals for decisions regarding remuneration to the Board of Directors and fees to the auditors. The companys shareholders have the opportunity to raise comments and suggestions with the Nomination Committee via the instructions listed on the companys website. Once the proposals that fall under the responsibility of the Nomination Committee are finalized, they are presented in the notification to the Annual General Meeting and on Haldexs website, www.haldex.com. An account of the procedures followed by the Nomination Committee is also published on the webpage. The Nomination Committee will present its proposals and report its activities at the Annual General Meeting 2009. Shareholders wishing to make proposals to the Nomination Committee may do so by e-mail. Addresses are available on Haldex website under the headings Invest ors Corporate Governance Annual General Meeting 2009 Annual General Meeting. The Board of Directors
Chairman of the Board

urrently members of the Board. However, the President makes regular c reports to the Board and the Groups CFO serves as the Boards secretary. Other salaried employees participate in Board meetings in connection with presentations of particular issues. In addition to the elected members, the Board consists of two employee representatives and two deputy representatives appointed by the employees. The Board members are presented in the Annual Report, page 70. The table below shows remuneration to Board members, attendance at Board meetings and committee participation. Independence The Nasdaq OMX Nordic Exchange and the Swedish Code for Corporate Governance state that the majority of the Boards members should be independent in relation to the company and its Group Management and that at least two of the independent members must be independent in relation to the companys largest shareholders. The Board of Haldex is deemed to have fulfilled this requirement since all Board members are independent in relation to Haldex, its management and Haldexs largest shareholders. Board Activities 2008 The Board of Directors held a statutory meeting immediately following the Annual General Meeting. During 2008, the Board met 17 times. The Board visited a number of the Groups subsidiaries in different constellations during 2008 to gain deeper insight into the Groups operations. The Boards activities during the year included the following: January/February Financial accounts, Annual Report, meetings with auditors, evaluation of the Presidents administration. Spring/autumn Establishment of the Board of Directors work procedures and the instructions for the President, as well as strategic and organizational issues, long-term investment plans November/December Finance policy, budget review. Time schedule for forthcoming year.
Comprehensive information about Corporate Governance at Haldex is available on the www.haldex.com website:
Articles of Association Information about Annual General Meeting o Time and place o Registration procedure for participation o  Registration procedure for reporting business to be addressed by the Annual General Meeting o Notice convening the Meeting o Agenda o Minutes o Presidents address Information about the Nomination Committee o Summary o Contact details  The Members of the Board (updated continuously in terms of changes that occur during the year)  Members of Executive Management (updated continuously in terms of changes that occur during the year)  Preceding years corporate governance reports

The Annual General Meeting 2008 elected Lars-Gran Moberg as Chairman until the 2009 Annual General Meeting. Lars-Gran Moberg has been a Member of the Haldex Board since 2007. The Chairman directs the Boards activities, promotes efficiency in these activities, ensures that they are conducted in accordance with the Swedish Companies Act and other applicable laws and regulations and ensures that the resolutions of the Board are implemented. The Chairman ensures that the Board members receive the required education and is responsible for evaluating the Boards activities and sharing the evaluations with the Nomination Committee. The Chairman proposes the agenda for Board meetings in consultation with the President. The Chairman has regular communication with the President, relays opinions from the shareholders to other Board members and acts as spokesperson on behalf of the Board. The Chairman also represents a vital link to the Nomination Committee and reports the results of the years evaluation of Board work to the Nomination Committee. Members of the Board The Board of Directors consists of seven members elected by the Annual General Meeting. There are no deputy members. The 2008 Annual General Meeting elected Lars-Gran Moberg, Reiner Beutel, Anders Bs, Arne Karlsson, Caroline Sundewall, Anders Thelin and Cecilia Vieweg as members. None of the representatives for Group Management are

66

Corporate Governance Report

HALDEX 2008

In connection with the springs strategy reviews, the various division managers are given an opportunity for a more in-depth presentation of their operations. Board committees
Compensation Committee

The Board appoints from among its members a Compensation Committee to formulate issues concerning remuneration. The members of the Compensation Committee are appointed annually at the statutory Board meeting immediately following the Annual General Meeting. The Compensation Committee issues to the Board proposals concerning the Presidents salary and other employment terms. The Compensation Committee shall also establish the salary and other employment terms for the other members of Group Management. Prior to each Annual General Meeting, the Compensation Committee shall also assist the Board in preparing a motion concerning guidelines for the remuneration of senior executives for the forthcoming year. The purpose of these guidelines shall be to determine the salary and other employment terms in respect of the President and other senior executives of the company. During 2008, Lars-Gran Moberg, Anders Thelin and Cecilia Vieweg were members of the Committee. Cecilia Vieweg was its Chairman. The Committee held 7 meetings during the year. The Chairman of the Compensation Committee was paid a fee of SEK 50,000 and the members received a fee of SEK 25,000 each.
Audit Committee

guidelines for the procurement of services other than auditing from the Companys auditors. The Committee meets regularly with the auditors during the year to discuss audit reports and audit plans. The Committee is responsible for the evaluation of the auditors work and the auditors efficiency, qualifications, fees and independence. The Audit Committee must also assist the Nomination Committee with proposals for potential auditors. The Committee also assists Haldex management in determining how identified risks will be handled in order to ensure good internal control and risk management. During 2008, its members were Lars-Gran Moberg, Arne Karlsson and Caroline Sundewall. Caroline Sundewall was the Committees Chairman. The Committee held 6 meetings during 2008. The Chairman of the Audit Committee received a fee of SEK 100,000 and members received a fee of SEK 50,000. Evaluation of Board activities in 2008 Annual evaluations are conducted of the Boards collective work. The Chairman is evaluated on his ability to prepare and lead the Board activities and his ability to motivate and cooperate with the President. The evaluation of the Boards activities as a whole is conducted via an internal review of its activities. The result of the evaluation process for 2008 was discussed in conjunction with the Board meeting in December 2008. Remuneration to the Board of Directors In accordance with the resolution from the 2008 Annual General Meeting, director fees shall total SEK 1,925,000, including remuneration for committee participation. All remuneration to the Board comprises fixed payments and does not contain any variable parts. In accordance with the resolution of the General Meeting, the Chairman of the Board received SEK 450,000, the Vice Chairman of the Board received SEK 300,000 and the other Board members received SEK 175,000 each. Fees for a total of SEK 300,000 were paid for committee participation and were divided among the Committee members in the manner shown in the table below. Auditors
Auditors assignment

The Board of Directors appoints from its members an Audit Committee that formulates issues concerning accounting, financial reporting, auditing and internal control. The members of the Audit Committee are appointed annually at the statutory Board meeting immediately following the Annual General Meeting. The Audit Committee is responsible for the preparation of the Boards activities by a system for auditing, internal control and risk management that fulfills the requirements of applicable laws and regulations and for ensuring that this system promotes operational efficiency, generates accurate accounting documents and provides reli able financial information. The Committee reviews the principles for accounting and financial control and the auditors work and establishes
Board of Directors during 2008
Name Lars-Gran Moberg Reiner Beutel* Anders Bs Sune Carlsson** Arne Karlsson Caroline Sundewall Anders Thelin Cecilia Vieweg
*Elected **

The auditors follow an audit schedule that was set in consultation with the Audit Committee. In connection with the audit, the auditors shall report their observations to Group Management for reconciliation and

Board member since 2007 2008 2007 2004 2003 2003 2007 2000

Nationality Swedish German Swedish Swedish Swedish Swedish Swedish Swedish

Board meetings 17 8 17 8 15 17 15 15

Compensation Committee 6

Audit Committee 5 1

Board fees 450,000 300,000 175,000 175,000 175,000 175,000 175,000

Committee fees 75,000

2 5 6 3 7 50,000 100,000 25,000 50,000

to the Board at the Annual General Meeting on April 15, 2008 Retired from the Board at the Annual General Meeting on April 15, 2008

HALDEX 2008

Corporate Governance Report

67

then to the Audit Committee. The report to the Audit Committee takes place after the conclusion of the audit of the administration and the review of the hard-close accounts and after the Annual Report is adopted. The Board of Directors as a whole meets with the auditors once a year, during the February Board meeting where the auditors report their observations directly to the Board of Directors partly without the presence of Group Management. Finally, the auditors participate in the Annual General Meeting and briefly describe their auditing work and summarize for the shareholders the recommendations in the Auditors Report. Auditors 2008 The Annual General Meeting elects two ordinary auditors and two deputy auditors for a period of three to four years at a time. At the 2007 Annual General Meeting, Authorized Public Accountants Liselott Stenudd and Michael Bengtsson from Pricewaterhouse Coopers AB were elected as auditors until the 2010 Annual General Meeting. Authorized Public Accountants Christine Rankin-Johansson and Ronnie Ekman were newly elected as deputy auditors. Liselott Stenudd has been an Authorized Public Accountant since 1986, and is the elected auditor of such companies as SinterCast AB, Eltel AB, the Swedish Cargotec companies and Diamyd Medical AB. Michael Bengtsson has been an Authorized Public Accountant since 1988, and is the elected auditor of such companies as Enea, Onoff, Perstorp Holding AB and Morphic Technologies. Neither Liselott Stenudd nor Michael Bengtsson has assignments in other companies that are associated with Haldexs largest owners or President. Between 2004 and 2008, the auditors had extra assignments outside the scope of the ordinary audit. These assignments included consultations in tax and accounting issues and other company issues. These assignments are not considered to be in violation of the Codes regulations. Group Management
Members of Executive Committee

tive Committee and makes decisions in consultation with other senior executives. The Executive Committee met on 6 occasions in 2008.
Remuneration of senior executives

On an annual basis, the Annual General Meeting establishes guidelines for determining the remuneration to be paid to the President and other senior executives of the company, including Heads of Divisions and Group Staff units. The Board and its Compensation Committee decide, based on the guidelines adopted by the Meeting, on the design of remuneration systems and the size of structures for the remuneration of senior executives.
Remuneration of the President

In 2008, the Board of Directors Compensation Committee prepared issues related to remuneration of the President, with decisions made by the Board. The President receives a fixed salary and a variable salary. The variable salary is based on a target bonus that is established annually. In addition to a reciprocal twelve-month period of notice, the President will, in the event of termination of employment by the company, receive severance pay equivalent to twelve months salary. In the event of resignation by the President, no severance pay may be claimed. The Presidents pension benefits are premium-based and consist of an ITP scheme and an annual provision for 25% of fixed salary exceeding 20 basic amounts (base figure for Swedish social security). Retirement age is 65.
Other senior executives

In addition to the President, Haldexs Executive Committee comprises the managers of each division, the CFO and the Executive Vice President Human Resources. The President manages the Company within the framework established by the Board of Directors. The President is responsible for the leadership and development of the Company. The President, in consultation with the Chairman of the Board, prepares and formulates objective, detailed and relevant informational documents and the documentary basis for the Board meetings, presents the agenda items and explains proposed resolutions. The President leads the work of the Execu-

According to Guidelines for remuneration to Senior Executives as resolved by the Annual General Meeting, the President, in consultation with the Boards Compensation Committee, prepares remuneration issues concerning the Executive Committee and divisional management, which are subject to resolution by the Annual General Meeting. Remuneration consists of a fixed and variable part. The variable part is based on goals established by the President and the Compensation Committee on a yearly basis and may amount to 3050% of the fixed annual salary. All members of the Executive Committee have a reciprocal six-month period of notice and, in the event of termination of employment by the company, will receive severance pay equivalent to between 12 and 24 months salary. The pension benefits are regulated in pension plans adapted to local practice in the countries in question, with the retirement age starting at 65. See Note 9 for a more detailed description of the remuneration of the President and other members of the Executive Committee.

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Corporate Governance Report

HALDEX 2008

Board of Directors report regarding internal control Internal control within Haldex is a process that is regulated by the Board of Directors and the Audit Committee and performed by the President and Group Management. It is designed to ensure that to the extent possible Haldexs reporting is appropriate and reliable and that the company complies with applicable legislation and regulations. The process is based on a control environment that provides structure for other parts of the process, including risk assessment, control activities, information, communication and follow-ups. It is based on the framework for internal control published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board of Directors is responsible for internal control. This report was prepared in accordance with Sections 3.7.2 and 3.7.3 of the Swedish Code of Corporate Governance and is thus limited to a description of Haldexs internal control with regard to financial reporting. This report is not a part of the formal annual report documents. The Board of Directors report on internal control regarding financial reporting has not been examined by the companys auditors. The Board of Directors monitors and ensures the quality of external financial reporting in the manner documented in the working procedure for the Board of Directors, the instructions for the President and the Groups financial policy. It is the responsibility of the President together with the CFO to review and quality-assure all external financial reporting, such as interim reports, year-end reports, annual reports, press releases containing financial information and presentation material in conjunction with meetings with the media, the owners and financial institutions. The President presents all interim reports, year-end reports and annual reports to the Board of Directors for review. The reports are then approved and published by the Board of Directors. The Board of Directors is responsible for ensuring that the companys financial reports are prepared according to law, accounting standards and other requirements concerning listed companies. The Board of Directors instructions for the President also include requirements that the Board of Directors must be continuously provided with internal summary reports on financial matters. These reports, which must include income statements, balance sheets, valuation issues, assessments, forecasts, any changes and their consequences, possible changes of accounting rules, legal matters and disputes, are reviewed by the Audit Committee and thereafter submitted to the Board of Directors. With regard to the Board of Directors communication with the companys auditors, see below.
Control environment

Meeting: Arne Karlsson. Lars-Gran Moberg and Caroline Sundewall. The Audit Committee, which prepares matters for the Board of Directors, considers issues concerning the internal control process, follows up reporting issues and discusses accounting principles and the consequences of changes of these principles. Furthermore, the Audit Committee maintains regular contact with the external auditors. The committee is responsible for evaluating auditing work and the auditors efficiency, qualifications, fees and independence. In addition, the Audit Committee must assist the Nomination Committee in nominating auditors and procuring their services.
Risk assessment

Haldexs risk assessment with respect to financial reporting, meaning the identification and evaluation of the principal risks in terms of financial reporting in the Groups companies, divisions and processes, provides the foundation for risk management. The risks may be man aged by accepting the risks or by reducing or eliminating them, subject to the controls and control levels within the framework established by the Board of Directors, the Audit Committee, the President and Group management.
Control activities

Work to enhance internal control activities and governance continued during the year. The main focus of this work was on documentation of the financial processes and evaluation and improvement of existing controls.
Information and communication

The Board of Directors has adopted a number of control documents for the companys internal control and governance. Within the Board of Directors, there is an Audit Committee consisting of three Board members elected by the Annual General

The company has a system for information and communication that is intended to result in complete and correct financial reporting. The company has a reporting system in which all Group companies report monthly according to an established format and to fixed accounting principles. In conjunction with reporting, the reporting units perform risk assessments and decide on the need for any provisions. The central finance department produces reports from the Group-wide system, which is structured according to the Groups established reporting format. Responsible managers and controllers at various levels in the Group have access to the information in this system relating to their area of responsibility. The companys financial reporting is followed up continuously, in part by business management at various levels in the company and in part by the finance organization and controllers in the various divisions and business units. Follow-ups take place each month in conjunction with reporting and consist of both analysis and reviews by the relevant controllers and meetings between the relevant business managers and the reporting units. The CEO and the CFO have monthly meetings with divisional managers and divisional controllers. At these meetings, the divisions income statement, balance sheet, cash flow statement and other financial key data are discussed.

HALDEX 2008

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Follow-ups

The Audit Committee communicates constantly with the companys external auditors and the CFO, both at and between meetings. The Board of Directors receives a monthly report on business development. More detailed reporting is provided primarily by the President at all Board meetings. The Board of Directors constantly assesses the risks relating to financial reporting based on significant and qualitative factors. Each year, the Board of Directors evaluates the need to establish a special internal audit function. In 2008, the Board did not consider

this necessary. The Board considered that internal control is primarily exercised by: operative managers at various levels, local and central finance functions and through Group managements supervisory control. Due to this, in combination with the companys size, the Board of Directors currently does not consider it financially defensible to establish yet another function.

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Board and Executive

HALDEX 2008

Board of Directors and Auditors

Lars-Gran Moberg

Reiner Beutel

Anders Bs

Arne Karlsson

Caroline Sundewall

Anders Thelin Lars-Gran Moberg* Chairman of the Board Born 1943. Member since 2007. Elected Chairman 2008. M.Sc. ME. Previously President of Volvo Powertrain Corporation and Senior Vice President Technology and member of Volvos Group Management. Previously active within AB Bofors, President of VME Industries Sweden AB and President of Volvo Car Component Corporation. Member of the Board of Volvo Aero AB, Volvo Construction Equipment Corporation, Cross Country Systems AB and Deutz AG. Shareholding: 2,000 Reiner Beutel* Deputy Chairman Born 1959. Elected 2008. MBA and PhD. Consultant for a number of leading private equity companies. Former CEO of Scheffenacker AG. Previously held several senior executive positions within Bosch Gmbh, such as EVP for corporate planning, CEO of Bosch Power Tool in the US and CFO of Bosch Telecom and Communication Division. Chairman of the Board of Mirror Controls Int. Member of the Board of KUKA AG. Shareholding: 1,000 Anders Bs* Born 1964. Elected 2007. Previously President of Hagstrmer & Qviberg AB and Drott AB. Chairman of the Board of Industrial and Financial Systems IFS AB and Cision AB.

Cecilia Vieweg

Bjrn Cederlund

Jonas Esbjrnsson Jonas Esbjrnsson Born 1974. Member since 2008. Represents IF Metall in the Haldex Group. Shareholding: 0 Deputy members: Ulrika Granberg Born 1967. Deputy member since 2007. Represents the Federation of Salaried Employees in Industry and Services in the Haldex Group. Shareholding: 0 Stefan Atterling Born 1971. Deputy member since 2006. Represents the Trade Union Confederation in the Haldex Group. Shareholding: 0

Member of the Board of Investment AB Latour, Niscayah AB and East Capital Baltic Property Fund AB. Shareholding: 0 Arne Karlsson* Born 1944. Member since 2003. M.Sc. Economics. Has held several executive positions in Scania both in Sweden and abroad. Most recently responsible for Commercial Systems, Scania AB, London and Executive Vice President Scania AB. Chairman of the Board and Board member of a number of companies in the Scania Group. Shareholding: 1,000 Caroline Sundewall* Born 1958. Member of the Board since 2003. M.Sc. Economics. Has worked at Chase Manhattan Bank and Handelsbanken, and as stock exchange and business columnist at Dagens Industri (business daily), Affrsvrlden (business weekly) and Finanstidningen (business daily), and as business controller at Ratos (private equity company), and manager of the business editorial staff and stock exchange columnist at Sydsvenska Dagbladet. Since 2001, independent consultant at Caroline Sundewall AB. Member of the Board of Ahlsell AB (chairman of the audit committee) Aktiemarknadsbolagens Frening, Electrolux (member of the audit committee), Lifco AB, Pgengruppen AB, and TeliaSonera (chairman of the audit committee).

Shareholding: 1,500 via Caroline Sundewall AB. Anders Thelin* Born 1950. Member of the Board since 2007. M.Sc. ME. President of Sandvik Tooling AB since 2000. Member of Sandviks Group Management. Previously held several senior executive positions within Sandvik, such as President of Sandvik Coromant. Chairman of the Board and Board member of a number of companies in the Sandvik Group. Shareholding: 0 Cecilia Vieweg* Born 1955. Member of the Board since 2000. Lawyer. Head of Group Legal Affairs, Immaterial Rights and Risk Management, AB Electrolux since 1999. Previously partowner of two law firms and General Counsel at Volvo Cars. Chairman of the Board of Equinox, Inc. Board member of Electrolux North America Inc. and other companies in the Electrolux Group, as well as the Stockholm Chamber of Commerces Arbitration Tribunal. Shareholding: 500 Bjrn Cederlund Born 1942. Member since 1994. Represents the Federation of Salaried Employees in Industry and Services in the Haldex Group. Shareholding: 0

Auditors:

PricewaterhouseCoopers AB Liselott Stenudd Authorized Public Accountant. Company auditor since 2006. Assignments: Eltel AB, SinterCast AB, the Swedish Cargotec companies and Diamyd Medical AB. Michael Bengtsson Authorized Public Accountant. Company auditor since 2007. Assignments: Enea, Onoff, Perstorp Holding AB and Morphic Technologies
* Independent in relation to the company, Group Management and largest shareholders.

HALDEX 2008

Board and Executive

71

Executive Committee

Ian Dugan

Stefan Johansson

Per Ericson

Joakim Olsson

Ulf Ahln

Jay C. Longbottom

Jan Pieters

Joakim Olsson President and CEO Born 1965. Employed since 2005. M.Sc.ME and MBA, INSEAD. Has held several executive positions in ABB. Most recently country manager in Brazil, before this global manager for the Power Transformers business area. Shareholding: 2,000 shares and 50,000 call options Ulf Ahln Division manager Traction Systems. Born 1948. Employed since 1998. Upper Secondary Economics Major. Has held several executive positions in Volvo Cars. Most recently with total responsibility for car production. Shareholding: 1,000 shares and 3,430 call options

Ian Dugan Division manager Hydraulic Systems Born 1956. Employed since 2008. C. Eng. MIMechE. Has headed a number of engineering businesses in both listed and private equity environments, most recently asCEO of Concentric Plc and prior tothat, ran Alstoms UK based Train Renovation, Service and Manufacturing business. Shareholding: 1,000 shares Per Ericson Executive Vice President Human Resources Born 1963. Employed since 2006. Forest engineer, UC Forestry Studies. Studies in Change Management in Organizations and Social Systems. Has held several executive positions in Stora Enso, most recently as Executive Vice President Human Resources. Shareholding: 1,000 shares

Stefan Johansson Chief Financial Officer (CFO) Born 1958. Employed since 2005. M.Sc. Economics. Has held positions as CFO within both listed and private equity companies, most recently at Duni. Shareholding: 5,100 shares Jay C. Longbottom Division manager Commercial Vehicles Systems Born 1953. Employed since 2002. BA, MBA. Has held several senior executive positions within SKF involving placement in both North America andEurope. Shareholding: 1,500 shares

Jan Pieters Division manager Garphyttan Wire Born 1957. Employed since 2007. M.Sc. Economics. Has held several senior executive positions within Avesta Sandvik Tube and AST, most recently as president ofFagersta Stainless. Haldex has reached an agreement with Suzuki Metal Industry Co. to divest its division Garphyttan Wire. The transaction is expected to be completed during the period April to June 2009 and, in this connection, Jan Pieters will leave the Haldex Group. Shareholding: 1,000 shares

Shareholdings as of March 20, 2009.

72

Haldex share

HALDEX 2008

Haldex share
The share capital in Haldex AB totals SEK 111 m, represented by 22,296,220 shares. Each share confers one voting right and all shares carry equal entitlement to dividends. Haldex has been listed on the Nasdaq OMX Stockholm Stock Exchange since 1960. The company is currently included in the list of Mid Cap companies, under the ticker symbol HLDX. A trading lot is one share. Price trends and trading The OMXS (OMX Stockholm index) declined 42% in 2008. The OMX Stockholm Industrial Index (industrial goods and services), which includes the Haldex share, declined 47%. The price of the Haldex share declined 77% during the year, closing at SEK 26:50 (113.50) on December 30, 2008. The years highest share price, SEK 122.25, was posted on May 12, while the years lowest share price, SEK 21.20 was noted on December 23. Total market capitalization at year-end was SEK595,3 m (2,530.6). The average daily trading volume was 55,895 shares (38,044). A total of 14.1 million shares (25.9) were traded for the entire year. The shares traded corresponded to 63% (116) of the total number of shares. Beta value Beta value is a risk ratio that indicates the fluctuation of a stock compared with that of the stock exchange as a whole. The beta value for the Haldex share at year-end, as calculated over 48 months, was 1.58 (1.24), which means the price of the Haldex share fluctuated 58% more than the market average. Incentive program The 2007 Annual General Meeting resolved to introduce a long-term performance-based incentive program under which senior executives and key personnel were allotted employee stock options on condition that the participants became shareholders through their own investment in Haldex shares in the marketplace. Each share acquired in the marketplace provides entitlement to the allotment, free of charge, of 10 employee stock options, whereby each option provides entitlement to the acquisition of one Haldex share. Another condition for allotment is that Haldexs pretax income has increased by more than 7% in relation the preceding fiscal year. Maximum allotment occurs on condition that pretax income has increased by 20% or more in relation to the preceding fiscal year. The employee stock options will be issued in three series and be allotted in accordance with decisions made by the Board during 2008, 2009 and 2010, respectively. No allotment occurred in 2008, and no allotment of the 2009 options will occur. Shareholders The number of Haldex shareholders increased 2% during 2008, totaling 8,576 (8,382) at year-end. Swedish ownership rose from 54% to 69% at year-end 2008. Swedish Institutions accounted for about 42% of ownership (42). Dividend policy The Companys unrestricted reserves can be distributed to the shareholders in the form of stock dividends and buybacks. When determining the dividend paid to shareholders, the Board of Directors takes into account the Companys future growth opportunities, investment needs and financial situation. The aim is for dividends and buybacks of own shares to correspond to at least one-third of the Groups after-tax profit over the course of a business cycle. For the 2008 fiscal year, the Board of Directors proposes that no dividend will be paid, in order to strengthen the companys financial position, considering the current market and the companys financial engagements.

Haldex share price trend, 2008

SEK 120 100 80 Haldex OMX Stockholm_PI SX20 Industrials_PI No. of shares traded, thousands

Haldex share price trend, 20042008

SEK 300 250 200 150

Haldex OMX Stockholm_PI SX20 Industrials_PI

No. of shares traded, thousands

60

100

40

1,400 1,200 1,000 800 600 400 200 Jan 2008 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec NASDAQ OMX

4,000
50

3,000 2,000 1,000

20

25

2004

2005

2006

2007

2008

NASDAQ OMX

HALDEX 2008

Haldex share

73

Data per share

2008 Earnings, SEK Dividend, SEK Market price at year-end, SEK Equity, SEK EBIT multiple P/E ratio Payout ratio, % Dividend yield, % Total return, % Market price/equity, % 1.92 26.70 83.15 12 neg 76 32 2007 6.24 4.50 2006 13.96 4.50 2005 12.19 4.00 2004 9.50 3.00

Ownership structure, December 30, 2008

Shareholding 1500 5011,000 1,0015,000 5,00110,000 10,00115,000 15,00120,000 20,001 Total No. of shareholders 6,804 911 621 89 30 19 102 8,576 No.of shares 1,075,189 766,664 1,438,073 680,554 373,726 339,004 17,623,010 22,296,220 Percent of total 4.82 3.44 6.45 3.05 1.68 1.52 79.04 100.00

113.50 163.50 158.00 116.50 85.36 12 18 72 4.0 28 133 86.02 11 12 32 2.8 6 190 85.64 11 13 33 2.5 38 184 64.60 14 12 32 2.6 16 180

Shareholders and number of shares

2008 Number of shareholders Average number of shares1) Number of shares at year-end1)
1)

2007

2006

2005

2004

8,576 21,920 21,920

8,382 10,305 11,654 14,099 21,980 22,065 22,065 22,065 21,920 22,065 22,065 22,065

thousands

Ownership structure, December 30, 2008

Other, 13% Swedish private persons, 13% Foreign owners, 31% Swedish social insurance funds, 7% Swedish county councils and municipalities, 5% Swedish nancial companies, 31%

Geographic distribution of ownership

Other countries, 31%

Sweden, 69%

Ten largest shareholders, February 28, 2009

Name resund, Investment AB Second AP Fund Odin Fonder Afa Frskring Danske Capital Sverige AB Dub-Non-Resident Domestic Rates Confederation of Swedish Enterprise Unionen SEB Private Bank S.A., NQI Skandia fonder Total ten largest shareholders Total other shareholders Haldex AB treasury shares Total No. of Shares 1,440,534 1,243,290 1,131,119 1,000,000 921,518 816,891 800,000 769,900 737,100 609,691 9,470,043 12,449,707 376,470 22,296,220 Percent of votes and capital 6.46 5.58 5.07 4.49 4.13 3.66 3.59 3.45 3.31 2.73 42.20% 56.11% 1.69% 100.00% Read more: www.haldex.com/en/investors/The_share/

74

HALDEX 2008

Five-year summary and quarterly review

Multi-year review Order intake, SEK m Net sales, SEK m Share of net sales outside Sweden, % Exports from Sweden, SEK m Operating income, excl. non-recurring items, SEK m Operating income, SEK m Earnings before tax, excl. non-recurring items, SEK m Earnings before tax, SEK m Profit margin, excl. non-recurring items, % Profit margin, % Interest coverage ratio, multiple Return on capital employed, % Return on equity, % Return on total assets, % Total assets, SEK m Capital turnover rate Equity, SEK m Equity/assets ratio, % Net debt, SEK m Debt/equity ratio, % Cash flow, SEK m Investments, SEK m Product development costs, SEK m Average no of employees of whom, outside Sweden 2008 7,923 8,403 91 1,714 250 92 195 55 3.0 1.1 0.7 2.4 2.3 1.6 6,290 2.20 1,823 29 2,335 128 465 402 339 6,004 4,724 2007 8,098 7,940 90 1,598 339 289 272 222 4.3 3.6 3.7 8.3 7.3 5.8 5,082 2.20 1,871 37 1,600 85 141 463 335 5,518 4,269 2006 7,883 7,890 91 2,001 403 374 315 315 5.1 4.8 5.2 11.5 16.6 7.9 4,733 2.34 1,898 40 1,254 66 7 420 349 4,683 3,516 2005 7,592 7,486 89 1,834 411 383 341 370 5.5 5.1 7.9 12.3 15.9 8.9 4,662 2.36 1,890 40 1,241 66 139 357 343 4,606 3,454 2004 6,923 6,759 89 1,651 346 346 290 290 5.1 5.1 5.6 12.8 14.8 9.3 3,934 2.46 1,425 36 1,171 82 36 313 321 4,317 3,218

Quarterly data, SEK m Net sales Cost of goods sold Gross earnings Q1 2,131 1,635 496 23.3% Sales, administrative & prod. development costs Other operating income & expenses Operating income Financial income and expense Earnings before tax Taxes Earnings for the period of which minority interests Earnings per share, SEK Operating margin, %1) Operating margin,% Cash-flow after net investments Return on capital employed,%2) Return on equity,%2) Equity/assets ratio,% Investments R&D,% Number of employees2)
1)Excluding 2)

2008 Q2 2,342 1,815 527 22.5% 415 2 110 35 76 23 52 0 2.35 5.3 4.7 263 8.9 8.4 28 100 3.8 6,107 Q3 2,066 1,624 442 21.4% 370 7 79 40 39 13 26 0 1.22 4.2 3.8 52 8.9 7.9 29 98 3.6 6,121 Q4 1,864 1,541 323 17.3% 532 0 209 53 262 78 184 1 8.34 4.0 11.2 98 2.4 2.3 29 125 4.5 6,004 Full year 8,403 6,615 1,788 21.3% 1,709 13 92 147 55 12 43 1 1.92 3.0 1.1 465 2.4 2.3 29 402 4.0 6,004 Q1 2,060 1,591 469 22.8% 391 9 87 17 70 23 47 1 2.12 4.2 4.2 72 10.4 15.0 40 94 4.4 4,702 Q2 2,030 1,568 462 22.8% 382 12 92 14 78 28 50 0 2.24 4.5 4.5 88 10.3 14.7 37 109 4.2 4,997

2007 Q3 1,895 1,505 390 20.6% 337 10 63 21 42 5 37 2 1.61 3.3 3.3 126 9.6 13.9 37 103 4.1 5,263 Q4 1,955 1,527 428 21.9% 394 13 47 15 32 25 7 1 0.27 4.9 2.3 145 8.3 7.3 37 157 4.2 5,519 Full year 7,940 6,191 1,749 22.0% 1,504 44 289 67 222 81 141 4 6.24 4.3 3.6 141 8.3 7.3 37 463 4.2 5,519

392 8 112 19 93 30 63 0 2.85 5.3 5.3 52 8.9 8.1 36 79 4.3 5,747

restructuring costs, one-off items and amortization on surplus values Rolling 12 months

HALDEX 2008

75

Definitions
Capital turnover rate Return on total assets

Net sales divided by average total assets less non-interest- bearing liabilities.
Debt/equity ratio

Operating income plus interest income as a percentage of average total assets.

Self-financing rate

Net debt as a percentage of shareholders equity.

Direct yield

Cash flow from operations as a percentage of net investments excluding acquisitions.

Total return

Dividend divided by market price at year-end.

Earnings per share

Market price at year-end, including dividend, divided by marketprice at beginningof year. Abbreviations
ABA

Net income for the year divided by average number of shares.

EBIT multiple

Market value at year-end plus net debt divided by operating income.

Equity/assets ratio

Automotive Brake Adjuster.

ABS

Shareholders equity as a percentage of total assets.

Gross margin

Antilock Brake System.

ADB

Gross profit, i.e. net sales less cost of goods sold, as a percentage of net sales.
Interest coverage ratio

Air Disc Brake.

AWD

All Wheel Drive.

CVS

Operating income plus interest income divided by interest expenses.

Net debt

Commercial Vehicle Systems

EBS

Interest-bearing debt less liquid assets.

Operating margin

Electronic Brake System.

EMB

Operating income as a percentage of net sales.

P/E ratio

Electronic Mechanical (Disc) Brake.

ESP

Market price at year-end divided by earnings per share.

Payout ratio

Electronic Stability Protocol.

FBF

Dividend divided by earnings per share.

Profit margin

Fabrica Brasileira de Freios.

ModulAir

Operating income plus interest income as a percentage of net sales.

R&D, %

Air dryer product range with modular design. Costs for research and development as a percentage of net sales.
Return on capital employed TCM

Trailer Control Module. Operating income plus interest income as a percentage of average total assets less non-interest-bearing liabilities.
Return on equity TTM

Trailer Control Module.

Net income for the year as a percentage of shareholders equity on verage. a

76

Addresses

HALDEX 2008

Addresses
Austria
Haldex Wien Ges.m.b.H. Carlbergergasse 38/Top 13 AT - 1230 Wien Tel: +43 (0)1 8 69 27 97 Fax: +43 (0)1 8 69 27 97 27 E-Mail: info.AT@Haldex.com Haldex Vehicle Products (Suzhou) Co. Ltd. 6# Long-Pu Road SIP, Suzhou Jiangsu Province PRC 215123 Tel: +86 (0)512 8765 6068 Fax: +86 (0)512 8765 6066 Haldex Hydraulics (Qingzhou) Co. Ltd. 1789# Shi Dai Yi Road Qingzhou Economic Development Zone Shandong Province PRC 262500 Tel: +86 (0)536 329 5789 Fax: +86 (0)536 329 5818

India
Haldex Concentric Pumps (India) Pvt Ltd Gat No 26/1, 27 & 28 (Part) Off Pune-Nagar Road Lonikand, PO Lonikand Taluka: Haveli IN - Pune 412 216 Tel: +91 20 66 14 2300 Fax: +91 20 66 14 2301 E-Mail: general@concentric.co.in Haldex India Limited B 71, MIDC, AMBAD IN - Nashik 422 010 Tel: +91 (0)253 2380094 Fax: +91 (0)253 2380729 E-Mail: info.IN@Haldex.com Haldex India Limited (COO Office) S-304, LBS Marg, Mulund (W), IN - Mumbai 400080 Tel: +91 (0)22 25645453

Belgium
Haldex N.V./S.A. Molenstraat 5 Bus 1 BE - 9860 Balegem (Ghent) Tel: +32 (0)9 363 90 00 Fax: +32 (0)9 363 90 09 E-Mail: info.BE@Haldex.com

Brazil
Haldex do Brasil Ind. E Com. Ltda Rua Carlos Pinto Alves 29 Jardim Aeroporto BR - 04630-030 So Paulo SP Tel: +55 11 2135-5000 Fax: +55 (0)11 5034 9515 E-Mail: info.BR@Haldex.com Haldex do Brasil Ind. E Com. Ltda Rua Anequir, 167 Cordovil BR - 212 15-440 Rio de Janeiro - RJ Tel: +55 (0)21 2139 5000 Fax: +55 (0)21 2139 5004 E-Mail: info.BR@Haldex.com Haldex do Brasil Ind. e Com. Ltda Estrada Antnio Soldatelli, 2310 BR - 95270-000 Flores da Cunha - SP Tel: +55 (0)54 3297 3530 Fax: +55 (0)54 3297 3548 E-Mail: info.BR@Haldex.com

France
Haldex Europe SAS 30, rue du Ried Weyersheim FR - 67728 Hoerdt Cedex Tel: +33 (0)3 88 68 22 00 Fax: +33 (0)3 88 68 22 09 E-Mail: info.EUR@Haldex.com Haldex Hydraulics France 30, rue du Ried Weyersheim FR - 67728 Hoerdt Cedex Tel: +33 (0)3 88 68 22 00 Fax: +33 (0)3 88 68 22 09 E-Mail: info.EUR@Haldex.com

Italy
Haldex Italia Srl. Via Trento Trieste 116/118 IT - 20046 Biassono (MI) Tel: +39 039 47 17 02 Fax: +39 039 27 54 309 E-Mail: info.IT@Haldex.com

Korea
Haldex Korea Ltd. ACE Hitech City #2-305, 54-66, Mullae-dong 3-ga Youngdeungpo-gu KR - Seoul 150-972 Tel: +82 (0)2 2636 7545-7 Fax: +82 (0)2 2636 7548 E-Mail: info.KR@Haldex.com

Germany
Haldex Brake Products GmbH Mittelgewannweg 27 DE - 69123 Heidelberg Postfach 10 25 60 DE - 69015 Heidelberg Tel: +49 (0)6221 7030 Fax: +49 (0)6221 703400 E-Mail: info.DE@Haldex.com Haldex Garphyttan GmbH Neumannstrasse 2 Postfach 10 25 41 DE - 40016 Dsseldorf Tel: +49 (0)211 92 30 40 Fax: +49 (0)211 23 65 17 E-Mail: info@hgde.haldex.com Haldex Hydraulics GmbH Seligenweg 12 DE-95028 Hof Postfach 15 07 DE - 95014 Hof Tel: +49 (0)9281 8950 Fax: +49 (0)9281 87133 E-Mail: info.hydraulics.eu@haldex.com

Canada
Haldex Ltd. 525 Southgate Drive, Unit 1 CA - Guelph, Ontario N1G 3W6 Tel: +1 (0)519 826 7723 Fax: +1 (0)519 826 9497 E-Mail: info.CA@Haldex.com

Mexico
Haldex de Mexico S.A. De C.V. Blvd. Pote Carlos Salinas de Gorari KM 7.5 Apartado Postal 108 MX - Apodaca, N.L. C.P. 66600 (Monterrey) Tel: +52 (0)81 8156 9500 Fax: +52 (0)81 8313 7090 Haldex Products de Mxico Calle Ro Danubio n 303 Parque Tecnoindustrial Castro del Ro MX - 36810, Irapuato, Gto. Tel: +52 462 606 7501 Fax: +52 462 636 0612

China
Haldex Concentric (Suzhou) Co. Ltd. 47 Dong Jing Industrial Park Dong Fu Road Loufeng East SIP, Suzhou Jiangsu Province PRC 215123 Tel: +86 (0)512 62653502 E-Mail: general@concentric-pumps.com.cn Haldex International Trading Co. Ltd. 16 A-H, Zhao Feng World Trade Building No. 369 Jiang Su Road Shanghai PRC 200050 Tel: +86 (0)21 5240 0338 Fax: +86 (0)21 5240 0177 E-Mail: info.CN@Haldex.com

Poland
Haldex Sp. z. o.o. Ul. Wodna 2 Kowale PL - 46-320 Praszka Tel: +48 (0)34 350 11 00 Fax: +48 (0)34 350 11 11 E-Mail: info.PL@Haldex.com

Hungary
Haldex Hungary Kft Dzsa Gyrgy ut 93 HU - 2255 Szentlrinckta Tel: +36 (0)29 631 300 Fax: +36 (0)29 631 301 E-Mail: info.HU@Haldex.com

HALDEX 2008

Addresses

77

Russia
OOO HALDEX RUS Warszawskoe shosse 17, building 2 RU - 117 105 Moscow Tel: + 7 495 747 59 56 Fax: +7 495 786 39 70 E-Mail: info.RU@Haldex.com

Haldex Brake Products AB Telematics Frrdsvgen 18 SE - 141 46 Huddinge Tel: +46 (0)8-756 42 40 Fax: +46 (0)8-756 42 38 E-Mail: Paul.woolford@Haldex.com

Braking Controls 2702 North State Street US - Iola, KS 66749 Tel: +1 (0)620 365 6911 Fax: +1 (0)620 365 5275 Foundation Brake 2400 N.E. Coronado Drive US Grain Valley, MO 64029 Tel: +1 (0)816 229 7582 Fax: +1 (0)816 224 7090 Friction Products 10715 NW Airworld Drive US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 880 9766 Remanufacturing 5334 Highway 221 South PO Box 1129 US - Marion, NC 28752 Tel: +1 (0)828 652 9308 Fax: +1 (0)828 652 7487 Haldex Garphyttan Corp. 4404 Nimtz Parkway US - South Bend, IN 46628 Tel: +1 (0)574 232 8800 Fax: +1 (0)574 232 2565 Haldex Hydraulics Corp. 2222 15th Street US - Rockford, IL 61104-7313 Tel: +1 (0)815 398 4400 Toll Free: +1 (0)800 572 7867 Fax: +1 (0)815 398 5977 E-Mail: info.hydraulics.us@haldex.com Haldex Hydraulics Corp. 214 James Farm Road US - Statesville, NC 28625 Tel: +1 (0)704 873 2587 Fax: +1 (0)704 878 0530 E-Mail: info.hydraulics.us@haldex.com Haldex Concentric Inc 800 Hollywood Avenue US Itasca, IL 60143-1353 Tel: +1 630 773 3355 Fax: +1 630 773 1119 E-Mail: general@concentricinc.com Haldex Traction Systems Detroit Office 44712 Helm Street US - Plymouth, MI 48170 Tel: +1 (0)737 734 0435 Fax: +1 (0)737 734 0436 E-Mail: info.traction.se@haldex.com

Spain
Haldex Espaa S.A. Poligono Industrial Can Volart C/Garbi n 6, nave 3-5 Carretera C-17 Km 15.5 ES - 08150 Parets del Valles (Barcelona) Tel: +34 (0)93 573 10 30 Fax: +34 (0)93 573 07 28 E-Mail: info.ES@Haldex.com

UK
Haldex Hydraulic Systems Division 3 The Archway Radford Road Alvechurch Birmingham GB - B48 7LD Tel: +44 (0)121 445 6545 Fax: +44 (0)121 445 7780 Haldex Concentric Pumps Ltd Unit 10, Gravelly Park Tyburn Road Erdington Birmingham GB - B24 8HW Tel: +44 (0)121 327 2081 Fax: +44 (0)121 327 6187 E-Mail: general@concentric-pumps.co.uk Haldex Ltd. Hilton Road Aycliffe Industrial Park Newton Aycliffe Co. Durham GB - DL5 6SX Tel: +44 (0)1325 310 110 Fax: +44 (0)1325 311 834 E-Mail: info.GBAy@Haldex.com Haldex Brake Products Ltd. Moons Moat Drive Moons Moat North Redditch, Worcestershire GB - B 98 9HA Tel: +44 (0)1527 499 499 Fax: +44 (0)1527 499 500 E-Mail: info.GBRe@Haldex.com

Sweden
Haldex AB Headquarters Biblioteksgatan 11 Box 7200 SE - 103 88 Stockholm Tel: +46 (0)8-545 049 50 Fax: +46 (0)8-678 89 40 E-Mail: info@Haldex.com Haldex Brake Products AB Instrumentgatan 15 Box 501 SE - 261 24 Landskrona Tel: +46 (0)418-47 60 00 Fax: +46 (0)418-47 60 01 E-Mail: info.SE@Haldex.com Haldex Hydraulics AB Ringvgen 3 SE - 280 40 Sknes Fagerhult Tel: +46 (0)433-324 00 Fax: +46 (0)433-305 46 E-Mail: info.hydraulics.eu@haldex.com Haldex Hydraulics AB Box 511 Nymrsta Grnd 6 SE - 195 25 Mrsta Tel: +46 (0)8-591288 50 Fax: +46 (0)8-591288 60 Mob: +46 (0)70-51897 33 E-Mail: info.hydraulics.eu@haldex.com Haldex Traction AB Instrumentgatan 15 Box 505 SE - 261 24 Landskrona Tel: +46 (0)418-47 60 00 Fax: +46 (0)418-47 60 01 E-Mail: info.traction.se@haldex.com Haldex Garphyttan AB Bruksvgen 3 SE - 719 80 Garphyttan Tel: +46 (0)19-29 51 00 Fax: +46 (0)19-29 51 01 E-Mail: info.wire.se@haldex.com

USA
Haldex Brake Products Corp. 10930 North Pomona Avenue US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 891 9447 E-Mail: info.US@Haldex.com Air Management 10930 North Pomona Avenue US - Kansas City, MO 64153 Tel: +1 (0)816 891 2470 Fax: +1 (0)816 891 9447 Air Management 1811-B-Hayes Road US - Grand Haven, MI 49417 Tel: +1 (0)616 846 4447 Fax: +1 (0)616 846 3123

Production: Haldex in cooperation with n3 Kommunikation. Print: Elanders Gummesons. Photo: Victor Brott, Anders Eliasson, Magnus Fond, Lisa Wikstrand, Svante rnberg and others. Illustrations: RCB2.

www.haldex.com