DELPHI 2011 Annual Report Download - page 111

Table of Contents
Other long-term liabilities consisted of the following:
December 31,
2011 2010
(in millions)
Environmental (Note 14) $ 17 $ 18
Executive long-term incentive plan 107 31
Extended disability benefits 10 8
Warranty obligations (Note 10) 133 119
Restructuring (Note 11) 41 54
Payroll-related obligations 10 11
Accrued income taxes 46 52
Deferred income taxes (Note 15) 134 178
Derivative financial instruments (Note 17) 26 —
Other 51 45
Total $ 575 $ 516
10. WARRANTY OBLIGATIONS
Expected warranty costs for products sold are recognized principally at the time of sale of the product based on estimates of the amount that will
eventually be required to settle such obligations. These accruals are based on factors such as past experience, production changes, industry developments and
various other considerations. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. Delphi
has recognized its best estimate for its total aggregate warranty reserves across all of its operating segments as of December 31, 2011. The estimated
reasonably possible amounts to ultimately resolve all matters are not materially different from the recorded reserves as of December 31, 2011.
The table below summarizes the activity in the product warranty liability for the years ended December 31, 2011 and 2010:
Year Ended
December 31,
2011
Year Ended
December 31,
2010
(in millions)
Accrual balance at beginning of period $ 362 $ 332
Provision for estimated warranties incurred during the period 68 62
Provision for changes in estimate for preexisting warranties 84 80
Settlements made during the period (in cash or in kind) (205) (99)
Foreign currency translation and other 6 (13)
Accrual balance at end of period $ 315 $ 362
In 2009, Delphi received information regarding potential warranty claims related to certain components supplied by Delphi's Powertrain segment. In
2010, Delphi recorded a change in the previous estimate of probable loss related to this matter by recognizing warranty expense in cost of sales of $75
million. This adjustment resulted in a corresponding $75 million decrease in net income attributable to Delphi and a corresponding unfavorable earnings per
share impact of $0.11. In March 2011, Delphi reached a settlement with its customer related to this matter and reflected a change in its previous estimate of
probable loss as a result of the settlement agreement by recognizing $76 million of warranty expense in cost of sales. This adjustment resulted in a
corresponding $76 million decrease in net income attributable to Delphi and a corresponding unfavorable earnings per share impact of $0.18. In April 2011, in
accordance with the terms of the settlement agreement, Delphi made a payment of €90 million (approximately $133 million at April 30, 2011 exchange rates)
related to this matter. On April 30, 2012, Delphi is required to make a €60 million (approximately $78 million at December 31, 2011 exchange rates) payment
related to this matter.
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