DELPHI 2011 Annual Report Download - page 100

Table of Contents
environmental remediation liabilities is complex and dependent primarily on the nature and extent of historical information and physical data relating to a
contaminated site, the complexity of the site, the uncertainty as to what remediation and technology will be required, and the outcome of discussions with
regulatory agencies and, if applicable, other responsible parties at multi-party sites. In future periods, new laws or regulations, advances in remediation
technologies and additional information about the ultimate remediation methodology to be used could significantly change estimates by Delphi. Refer to Note
14. Commitments and Contingencies for more information.
Asset retirement obligations—Asset retirement obligations are recognized in accordance with FASB ASC 410, Asset Retirement and Environmental
Obligations. Conditional retirement obligations have been identified primarily related to asbestos abatement at certain sites. To a lesser extent, conditional
retirement obligations also exist at certain sites related to the removal of storage tanks and polychlorinated biphenyl disposal costs. Asset retirement
obligations were $3 million and $4 million at December 31, 2011 and 2010, respectively.
Customer concentrations—Sales to GM were approximately 19%, 21%, 20% and 26% of Delphi's and the Predecessor's total net sales for the years
ended December 31, 2011 and 2010, and the period from August 19, 2009 to December 31, 2009, and the period from January 1, 2009 to October 6, 2009,
respectively. Accounts and other receivables due from GM were $382 million and $393 million as of December 31, 2011 and 2010, respectively. No other
single customer accounted for more than 10% of Delphi's consolidated net sales in any period presented.
Derivative financial instruments—All derivative instruments are required to be reported on the balance sheet at fair value unless the transactions
qualify and are designated as normal purchases or sales. Changes in fair value are reported currently through earnings unless they meet hedge accounting
criteria.
Exposure to fluctuations in currency exchange rates, interest rates and certain commodity prices are managed by entering into a variety of forward
contracts and swaps with various counterparties. Such financial exposures are managed in accordance with the policies and procedures of Delphi. Delphi did
not enter into derivative transactions for speculative or trading purposes. As part of the hedging program approval process, Delphi identifies the specific
financial risk which the derivative transaction will minimize, the appropriate hedging instrument to be used to reduce the risk and the correlation between the
financial risk and the hedging instrument. Purchase orders, sales contracts, letters of intent, capital planning forecasts and historical data are used as the basis
for determining the anticipated values of the transactions to be hedged. Delphi does not enter into derivative transactions that do not have a high correlation
with the underlying financial risk. Hedge positions, as well as the correlation between the transaction risks and the hedging instruments, are reviewed on an
ongoing basis.
Foreign exchange forward contracts are accounted for as hedges of firm or forecasted foreign currency commitments to the extent they are designated
and assessed as highly effective. All foreign exchange contracts are marked to market on a current basis. Commodity swaps are accounted for as hedges of
firm or anticipated commodity purchase contracts to the extent they are designated and assessed as effective. All other commodity derivative contracts that are
not designated as hedges are either marked to market on a current basis or are exempted from mark to market accounting as normal purchases. At
December 31, 2011 and 2010, the exposure to movements in interest rates was not hedged with derivative instruments. Refer to Note 17. Fair Value of
Financial Instruments, Derivatives and Hedging Activities for additional information.
Extended disability benefits—Costs associated with extended disability benefits provided to inactive employees are accrued throughout the duration of
their active employment. Workforce demographic data and historical experience are utilized to develop projections of time frames and related expense for
postemployment benefits. Pursuant to the Amended MRA (as defined in Note 3. Elements of Predecessor Transformation Plan), GM reimbursed the
Predecessor for extended disability benefits paid by the Predecessor from January 1 to October 6, 2009 in relation to all current and former UAW-represented
hourly active, inactive, and retired employees. Refer to Note 3. Elements of Predecessor Transformation Plan for more information.
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