DELPHI 2011 Annual Report Download - page 46

Table of Contents
We typically experience fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and the net of new and lost business
(which we refer to collectively as volume), increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity
costs (which we refer to as commodity pass-through), fluctuations in foreign currency exchange rates (which we refer to as FX), contractual reductions of the
sales price to the OEM (which we refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or
unfavorable impact on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as well as shifts in consumer demand
related to vehicle segment purchases and content penetration. For instance, a shift in sales demand favoring a particular OEM's vehicle model for which we do
not have a supply contract may negatively impact our revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of
those of our customers that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.
We typically experience (as described below) fluctuations in operating income due to:
• Volume, net of contractual price reductions—changes in volume offset by contractual price reductions (which typically range from 1% to 3% of
net sales);
• Operational performance—changes to costs for materials and commodities or manufacturing variances; and
• Other—including restructuring costs and any remaining variances not included in Volume, net of contractual price reductions or Operational
performance.
The automotive component supply industry is subject to inflationary pressures with respect to raw materials and labor which have placed and will
continue to place operational and profitability burdens on the entire supply chain. We will continue to work with our customers and suppliers to mitigate the
impact of these inflationary pressures in the future. In addition, we expect commodity cost volatility, particularly related to copper, aluminum and petroleum-
based resin products, to have a continual impact on future earnings and/or operating cash flows. As such, we continually seek to mitigate both inflationary
pressures and our material-related cost exposures using a number of approaches, including combining purchase requirements with customers and/or other
suppliers, using alternate suppliers or product designs, negotiating cost reductions and/or commodity cost contract escalation clauses into our vehicle
manufacturer supply contracts, and hedging.
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