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TRW Automotive Holdings Corp. (TRW)

Q3 2009 Earnings Call

November 4, 2009 8:30 am ET


Mark Oswald – IR

John Plant – President & CEO

Joe Cantie – CFO


Himanshu Patel – JPMorgan

Chris Ceraso - Credit Suisse

Rod Lache - Deutsche Bank

John Murphy – Banc of America / Merrill Lynch

Brett Hoselton - KeyBanc

Michael Ward - Soleil



Good morning and welcome to the TRW conference call. (Operator Instructions) I would now like to introduce your host for today’s conference call, Mark Oswald, Director of Investor Relations.

Mark Oswald

Good morning. I would like to welcome everyone to our third quarter 2009 financial results conference call. Joining me this morning are John Plant, our President and Chief Executive Officer and Joe Cantie, our Chief Financial Officer.

Today’s call will follow our usual format. John will provide an overview of the current automotive environment and its impact on TRW. John will also provide a brief summary of the financial results for the quarter and discuss other related business matters. After John’s comments, Joe will provide an expanded review of the financial information. At the conclusion of Joe’s comments, we will open the call to your questions.

There are a few items I would like to cover before getting started. First, today’s conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from the forward-looking statements made on this call.

Please refer to slide two of the presentation for our complete Safe Harbor statement. The Risk Factors section of our 2008 Form 10-K and our second quarter 10-Q contain additional information about risks and uncertainties that could impact our business. You can access a copy of our 2008 10-K and 2009 Quarterly SEC filings by visiting the Investors section on our website at or through the SEC’s website at

On a related matter, we expect to file our third quarter 10-Q within the next day or so. Once we file, the 10-Q you can access that through either website also. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company’s performance.

Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found on the conference call materials, which are posted on the Investors section of our website at And finally, a replay of this call can be accessed via dial-in or through a webcast on our website.

Replay instructions were included in the release this morning. We have not given our permission for any other recording of this call and do not approve or sanction any transcribing of the call. This concludes my comments.

I’ll now turn the call over to John Plant.

John Plant

Thank you Mark and good morning everyone. The positive signs that began to emerge during the second quarter have continued to gain strength. Cautious optimism has emerged and is supported by the increasing levels of vehicle production around the world.

In North America the Cash for Clunkers stimulus program had a significant impact on reducing dealer inventories and the momentary effect, increasing consumer demand. In August for example the light vehicle annualized selling rate was about 14.1 million units, up 3% versus the same month in 2008 and up about 26% from the July levels.

Manufacturers were left with inventories approaching historic lows at the end of August. In fact, August inventories for the Detroit Three manufacturers were more than 30% below normal levels. This shortage contributed to the lower level of sales in September and dealers were left with fewer vehicles to sell.

Manufacturers are now in the process of replenishing their inventories which should translate into increased vehicle production for the remainder of 2009. Stabilization and increased production going forward is essential to the long-term health of the industry.

In fact in North America even without an increased selling rate, TRW will experience a volume increase in the second half compared to the first half due to the non-recurring inventory reduction effects.

Outside of North America scrappage plans in several European countries have helped drive consumer demand. In Germany prior to their scrappage scheme expiring, the Germany market was up about 27% for the first eight months of the year compared to the same period in 2008.

September sales remained robust as consumers took delivery of vehicles ordered prior to the scheme’s termination. In France, Italy, Spain, and the UK, they have experienced consumer demand increases after implementing similar programs.

Certain countries such as the UK and France have announced plans to extend their programs while the countries are contemplating actions which hopefully result in a soft landing when their programs do expire.

There is no doubt that the short-term impact of the scrappage plans has been positive. The longer-term impact of production resulting from pull ahead sales remains uncertain, most notably in Europe. The increasing production schedules around the world reaffirm our belief that the industry is on the road to recovery and that the worst of the economic reckoning that began late last year is behind us.

Based on current projections it appears full recovery will be a long process. In this slow recovery environment the downturn management actions that were taken by TRW are paying significant dividends as was demonstrated in our second quarter results and again today in our third quarter results issued this morning.

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