Jan Carlson: "We saw an opportunity to increase our focus on the area of active safety toward autonomous driving."
As CEO of Autoliv, Jan Carlson spearheaded the spinoff of the Swedish supplier’s active-safety business into a new publicly traded company, Veoneer. In March, he was named Veoneer’s first CEO. Carlson talked with Automotive News Europe Correspondent Peter Sigal about why he believes Veoneer is ideally positioned to take advantage of the technology-heavy trends driving the automotive industry.
How would you describe Veoneer to someone who doesn't know anything about the company?
We're probably the world's biggest pure-play supplier in the area of sensors and decision-making software. We are clearly a technology company based on what we will do, but we are a technology company with the heritage of being a safety company. That is probably a unique position.
When you sat down with the leaders of Autoliv 18 months ago and said, 'What does our future look like?', how did you decide to spin off Veoneer?
Mainly, we saw a difference in development for the two companies. We had a company that was extremely successful, taking more than 50 percent of available orders in passive safety for three years. We saw an opportunity to increase our focus on the area of active safety toward autonomous driving. That was giving us different focuses.
One focus is to execute on an order book that is quite thick, meaning that you have a lot of orders going into production. It takes a lot of management attention. We had brought on board engineers skilled in application engineering for seat belts and airbag products, but they are different from engineers skilled in artificial intelligence or software.
The technology is different, and we saw this increasing rather than coming together. The other reason is the shareholder base had different expectations on returns. On the one hand you have a business that is very solid, very stable but growing. On the other hand, you have a very investment-intensive business with a huge opportunity.
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What are Veoneer's main families of products?
Our core products are vision systems, radar systems, fusion controllers, as well as brake controllers that we do together with Nissin Kogyo, and decision-making software that we do with Zenuity.
We also have a little bit more of a niche-oriented product, which is night vision, where we are the market leader. Nobody will able to do all systems for Level 4 or Level 5 autonomous driving, so you will be forced to collaborate with various partners. But you need to always focus on what will be your core contributions to the collaboration or clusters.
Who are your competitors right now?
It's a dynamic landscape. The obvious ones are traditional parts suppliers such as Continental, Bosch, Aptiv or Valeo. You can also see companies such as Waymo or Uber as competitors, customers and cooperation partners, all at the same time. You can also see competitors being smaller startups with great ideas that could be acquired by us.
Going back to where I started, being a tech company in this dynamic environment, if you follow the rules of robustness, quality and reliability, you have a great chance for success. Because at the end of the day, that is what this company will depend on. The products that Veoneer makes need to work 100 percent of the time. We used to say at Autoliv that over the lifetime of the car, the airbag will work in less than 100 milliseconds, but a Level 4 autonomous drive system will be working 100 percent of the time. And that's the difference.
Is it fair to describe Veoneer's products as active safety?
I don't think it's purely active safety. What's important is that the electronic architecture of the vehicle is changing, and it will continue to do so. The structure of the products will continue to change going from – as an example – rule-based algorithms to AI [artificial intelligence]-based algorithms. There's also the hardware side. The hardware will go from distributed control units to more central domain units. Therefore, the connection between the software development changes and the hardware changes is an important part of what we stand for. The hardware plays an important role because if it doesn't work 100 percent of the time the software won't run.
Autoliv's main products – seat belts and airbags, primarily – will be in demand for a very long time. What will it mean for Autoliv when Veoneer is listed separately?
Autoliv will increase the focus on the tasks it has. It will be able to seek partnerships and develop its business in protection systems. For example, with autonomous driving, you might see different seating positions, so Autoliv can go full force in working together with other companies to develop products along those lines, with the full focus from the CEO down to engineering and production.
Are there any technology-transfer or -sharing agreements?
There is very little or no overlap. We have been trying to make this a clear cut between the two units. You would think intuitively that passive safety and electronics, like airbag controllers, would go together, but the triggering architecture is what is changing now. The triggering signal, whether it's coming from a domain controller or an electronic control unit, doesn't really matter for the company producing the airbag parts.
What is the relationship between Zenuity, the software venture between Autoliv and Volvo, and Veoneer?
The 50 percent ownership on Autoliv's side will now be held by Veoneer. Autoliv will have no relationship with Zenuity going forward. Other collaborations in electronics such as with Nvidia are also being transferred to Veoneer.
If Veoneer was a stand-alone company today, would it be profitable?
We have said that Veoneer will be profitable in 2020, with an EBIT margin in a range of 0 percent to 5 percent. From there it will be improving the EBIT margin.
How big will Veoneer be?
It will have about 7,500 employees, with 50 percent in r&d and engineering. We are continuing to expand on the engineering side. We are increasing r&d spend in 2018 by up to $70 million, and that's predominantly headcount and salary costs.
How will you get to that point?
We are capitalizing Veoneer with up to $1 billion to be able to sustain its business plan and technological development. That capitalization will cover the time from going live up until Veoneer is generating its own cash and funding its own development. This will continue to be an engineering-intensive area for a long time, so our way going forward is to grow the company and take leverage out of it to deliver sustainable profits, but also to sustain an engineering effort.
Will you be investing in new production at the same time?
Autoliv production facilities that are related to camera units, radar units, brake control and restraint control will be turned over to Veoneer. We have no plans to build new plants. The Autoliv tradition is to put more lines within existing walls, which means increasing density, improving production concepts, et cetera.
What are your regional expectations for growth?
All regions are promising, with different horizons. We're big in Europe, we have a foothold in the U.S., and in China, we have taken orders from Geely, as we communicated recently. If you look to relative growth opportunities, China is interesting. Self-driving together with electrification is going to be big in China. It’s prioritized higher up.
Looking at Europe, where are the growth opportunities?
Our cooperation with Volvo in Zenuity is a natural area for growth. We are seeing opportunities with all the European automakers. We aren't shying away from any of the OEMs, but we are very well established with Daimler and BMW, for example.
Is it a question of higher content per vehicle in Europe, given that the overall market is expected to be relatively flat?
That's absolutely right. It's content per vehicle, it's take rates, it's products that are coming from the top version of the automakers' platforms moving down to the volume segment.
What are your main r&d targets?
That is a good question. Looking at the technology clusters that are forming, you have to continue to spend and refine your product portfolio to be a world leader in doing what you want to do, the part of the pie that you want to own.
NAME: Jan Carlson
TITLE: Veoneer CEO
AGE: 58
MAIN CHALLENGE: Turn Veoneer, Autoliv's active-safety division spinoff, into a profitable stand-alone company.
What about future partnerships or acquisitions?
We will have to accept and acknowledge that we will not be able to do all of it by ourselves. The important part is that you can one way or another offer your customer a complete set of services.
Will being CEO of such a tech-focused company require a different management style?
To produce a million parts every day, as Autoliv factories do, requires a different management style and incentives than an engineering pool developing new advanced AI systems, for instance. But one or the other is not better or worse, it is just different. There are world class teams on both sides.
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