DELPHI 2015 Annual Report Download - page 40

Table of Contents
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The loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a
significant supplier could adversely affect our financial performance.
Although we receive purchase orders from our customers, these purchase orders generally provide for the supply of a
customer’s requirements for a particular vehicle model and assembly plant, rather than for the purchase of a specific quantity of
products. The loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a
significant supplier could reduce our sales and thereby adversely affect our financial condition, operating results and cash
flows.
We operate in the highly competitive automotive supply industry.
The global automotive component supply industry is highly competitive. Competition is based primarily on price,
technology, quality, delivery and overall customer service. There can be no assurance that our products will be able to compete
successfully with the products of our competitors. Furthermore, the rapidly evolving nature of the markets in which we
compete has attracted, and may continue to attract, new entrants, particularly in low-cost countries such as China or in areas of
evolving vehicle technologies such as automated driving. Additionally, consolidation in the automotive industry may lead to
decreased product purchases from us. As a result, our sales levels and margins could be adversely affected by pricing pressures
from OEMs and pricing actions of competitors. These factors led to selective resourcing of business to competitors in the past
and may also do so in the future. In addition, any of our competitors may foresee the course of market development more
accurately than us, develop products that are superior to our products, have the ability to produce similar products at a lower
cost than us, or adapt more quickly than us to new technologies or evolving customer requirements. As a result, our products
may not be able to compete successfully with their products. These trends may adversely affect our sales as well as the profit
margins on our products.
Increases in costs of the materials and other supplies that we use in our products may have a negative impact on our
business.
Significant changes in the markets where we purchase materials, components and supplies for the production of our
products may adversely affect our profitability, particularly in the event of significant increases in demand where there is not a
corresponding increase in supply, inflation or other pricing increases. In recent periods there have been significant fluctuations
in the global prices of copper and petroleum-based resin products, and fuel charges, which have had and may continue to have
an unfavorable impact on our business, results of operations or financial condition. Continuing volatility may have adverse
effects on our business, results of operations or financial condition. We will continue efforts to pass some supply and material
cost increases onto our customers, although competitive and market pressures have limited our ability to do that, particularly
with domestic OEMs, and may prevent us from doing so in the future, because our customers are generally not obligated to
accept price increases that we may desire to pass along to them. Even where we are able to pass price increases through to the
customer, in some cases there is a lapse of time before we are able to do so. The inability to pass on price increases to our
customers when raw material prices increase rapidly or to significantly higher than historic levels could adversely affect our
operating margins and cash flow, possibly resulting in lower operating income and profitability. We expect to be continually
challenged as demand for our principal raw materials and other supplies, including electronic components, is significantly
impacted by demand in emerging markets, particularly in China. We cannot provide assurance that fluctuations in commodity
prices will not otherwise have a material adverse effect on our financial condition or results of operations, or cause significant
fluctuations in quarterly and annual results of operations.
Our hedging activities to address commodity price fluctuations may not be successful in offsetting future increases in
those costs or may reduce or eliminate the benefits of any decreases in those costs.
In order to mitigate short-term volatility in operating results due to the aforementioned commodity price fluctuations, we
hedge a portion of near-term exposure to certain raw materials used in production. The results of our hedging practice could be
positive, neutral or negative in any period depending on price changes in the hedged exposures. Our hedging activities are not
designed to mitigate long-term commodity price fluctuations and, therefore, will not protect from long-term commodity price
increases. Our future hedging positions may not correlate to actual raw material costs, which could cause acceleration in the
recognition of unrealized gains and losses on hedging positions in operating results.
We may encounter manufacturing challenges.
The volume and timing of sales to our customers may vary due to: variation in demand for our customers’ products; our
customers’ attempts to manage their inventory; design changes; changes in our customers’ manufacturing strategy; and
acquisitions of or consolidations among customers. Due in part to these factors, many of our customers do not commit to long-
term production schedules. Our inability to forecast the level of customer orders with certainty makes it difficult to schedule
production and maximize utilization of manufacturing capacity.
We rely on third-party suppliers for the components used in our products, and we rely on third-party manufacturers to
manufacture certain of our assemblies and finished products. Our results of operations, financial condition and cash flows could