TRW Automotive Holdings (NYSE: TRW) makes auto parts and is the world's second-largest producer of auto safety components, with a significant share of global sales in 2009. TRW is a leader in the auto safety industry, and it supplies parts to many large auto companies including General Motors (GMGMQ), Ford Motor Company (F), and Volkswagen (VLKAY). In 2009, TRW had total revenues of $11.6 billion, posting a net income of $73 million.
Rising prices for raw materials such as steel can have significant impact on TRW's cost of goods sold (COGS) and can significantly impact earnings. On the other hand, a government mandate that all passenger cars have side airbags by 2012 has given TRW's revenues a boost in its Occupant Safety Systems segment. Likewise, a weak U.S. dollar gives TRW's non-U.S. customers more incentive to buy their products, because they are relatively cheaper with a weak dollar.
For 2009, TRW posted total revenues of $11.6 billion, a sharp decline from its 2008 total revenues of $15 billion. Although sales were down across the board for TRW, the biggest difference came in its Chassis segment, where total sales declined $1.7 billion.
Despite the declining revenues, TRW was able to post a net income in 2009 of $73 million in 2009, as opposed to a $780 million loss in 2008. This was largely due to a one time $787 million impairment to TRW's goodwill that was incurred in 2008.
TRW breaks its operations into four segments: i) Chassis, ii) Occupant Safety Systems, iii) Electronics, and iv) Automotive Components.
This segment manufactures products for steering, braking, suspension and other applications. Total sales for this segment declined $1.7 billion in 2009 to $6.9 billion. The decrease in sales was driven mostly by lower volume and price reductions provided to customers, which combined totaled $1,246 million. Foreign currency exchange also had a net unfavorable impact on sales of $443 million.
Occupant Safety Systems produces safety products related to air bags, seat belts, and vehicle security. This segment's main products include airbags, seat belts, and safety electronics. In 2009, this segment's net sales decreased $901 million to $2.9 billion.
The electronics segment had its net revenues decline $320 million in 2009 to $864 million.
Automotive Components produces components for engines, controls, and fasteners. The company's engine components consist mostly of engine valves. In 2009, total net sales declined by $320 million in to $864 million.
In 2007, the National Highway Traffic Safety Administration announced a new regulation under which all cars sold in the United States must have side airbags by 2012. As a result, TRW's Occupant Safety Systems revenue jumped over 9% from $4,326 million in 2006 to $4,714 million in 2007.
TRW is heavily dependent on a few key Auto Makers, as its three largest customers accounted for 45.7% of its 2009 revenue. Volkswagen (VLKAY), Ford Motor Company (F), and General Motors (GM) accounted for 19.1%, 15.6%, and 11.1% of TRW's 2009 revenue, respectively. If any of these customers were to order fewer of TRW's products, go out of business, or start ordering components from a new supplier, TRW would find itself losing a large percentage of its revenue. Sluggish conditions in the U.S. auto market are of particular concern to GM and Ford, two of TRW's largest customers.