Autoliv Inc. (ALV), the world's largest maker of seat belts and airbags, Tuesday reported a smaller-than-expected quarterly net loss and said it expects to return to operating profitability in the third quarter.

Investors welcomed the news. At 1017 GMT, Autoliv's shares traded up 16.50 kronor ($2.15), or 6.9%, at SEK255, outperforming the broader Stockholm market, which traded up 0.6%.

The Swedish-American company said it expects consolidated sales, including negative currency effects, to fall between 20% and 25% in the third quarter, which began July 1, due to global car production remaining at comparatively low levels.

Despite this decline, Autoliv aims to return to making an operating profit, excluding restructuring costs, due to its far-reaching cost-cutting efforts. It has laid off more than 10,000 workers over the past year, almost a quarter of its workforce.

Net loss in the three-month period ended June 30 was $20.7 million, compared to a net profit of $90.4 million in the same period a year earlier. Eleven analysts polled by Dow Jones and FactSet on average had forecast a net loss of $56 million.

Sales fell 38% to $1.19 billion from $1.91 billion a year ago, beating analysts' forecasts of $1.16 billion.

Autoliv also reported a $12 million operating loss, compared to a $148 million operating profit a year ago. Analysts had forecast an operating loss of $69 million.

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-By Ola Kinnander, Dow Jones Newswires; +46-8-5451-3097;