DELPHI 2011 Annual Report Download - page 22

Table of Contents
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, aluminum 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,
Brazil, India and Russia, and by the anticipated global economic recovery. 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 face 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 be adversely affected if our third party suppliers lack
sufficient quality control or if there are significant changes in their financial or business condition. If our third-party manufacturers fail to deliver products,
parts and components of sufficient quality on time and at reasonable prices, we could have difficulties fulfilling our orders, sales and profits could decline, and
our commercial reputation could be damaged.
From time to time, we have underutilized our manufacturing lines. This excess capacity means we incur increased fixed costs in our products relative to
the net revenue we generate, which could have an adverse effect
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