DELPHI 2011 Annual Report Download - page 41

Table of Contents
with minimal additions to our fixed-cost base. Additionally, we are continuing to use a meaningful amount of temporary workers to ensure we have the
appropriate operational flexibility to scale our operations so that we can maintain our profitability as industry production levels increase or contract.
Pursuing Selected Acquisitions and Strategic Alliances. We intend to pursue selected transactions that leverage our technology capabilities and enhance
our customer base, geographic penetration and scale to complement our current businesses.
Trends, Uncertainties and Opportunities
Rate of economic recovery. Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales
depend on a number of factors, including economic conditions. The economy is recovering slowly from a recession that began in late 2007 and became
increasingly severe with the global credit crisis in 2008 and 2009. The weaker economic conditions led to a substantial industry-wide decline in vehicle sales
in 2008 and 2009. However, global automotive vehicle production increased over 3% from 2010 to 2011 and is expected to increase by an additional 5% to
6% in 2012. Any future economic declines that result in a significant reduction in automotive sales and production by our customers would have an adverse
effect on our business, results of operations and financial condition. Additionally, volatility in oil and gasoline prices negatively impacts consumer confidence
and automotive sales, as well as, the mix of future sales (from trucks and sport utility vehicles toward smaller, fuel-efficient passenger cars). While our
diversified customer and geographic revenue base have well positioned us to withstand the impact of industry downturns and benefit from industry upturns,
shifts to vehicles with less content would adversely impact our profitability.
Emerging markets growth. Rising income levels in the emerging markets of China, Brazil, India and Russia are resulting in stronger growth rates in
these markets. Our strong global presence and presence in these markets have positioned us to experience above-market growth rates. We continue to expand
our established presence in emerging markets, positioning us to benefit from the expected growth opportunities in these regions. We will accomplish this by
capitalizing on our long-standing relationships with the global OEMs and further enhancing our positions with the emerging market OEMs to continue
expanding our worldwide leadership. We will continue to build upon our extensive geographic reach to capitalize on the fast-growing automotive markets,
particularly China, Brazil, India and Russia. We believe that our presence in low cost countries positions us to realize incremental margin improvements as
the global balance of automotive production shifts towards the emerging markets.
We have a strong presence in China, where we have operated for nearly 20 years. All of our business segments have operations and sales in China. As a
result, we have well-established relationships with all of the major OEMs in China. We generated approximately $2 billion in revenue from China in 2011.
With only 21 of our 33 offered products currently locally manufactured, we believe we have the opportunity to expand additional product lines into China,
and as a result, we see further growth potential.
Market driven products. Our product offerings satisfy the OEMs' need to meet increasingly stringent government regulations and fulfill consumer
preferences for products that address the mega trends of Safe, Green and Connected, leading to increased content per vehicle, greater profitability and higher
margins. With these offerings, we believe we are well-positioned to capitalize on demand for increased safety, fuel efficiency, emissions control and
connectivity to the global information network. There has been a substantial increase in vehicle content and electrification requiring a complex and reliable
electrical architecture and systems to operate, such as hybrid power electronics, electrical vehicle monitoring, lane departure warning systems, integrated
electronic displays, navigation systems and consumer electronics. Our ability to design a reliable electrical architecture that optimizes power distribution and/
or consumption is key to satisfying the OEMs' need to reduce emissions while continuing to meet the demands of consumers. Additionally, our Powertrain
Systems and Thermal Systems segments are also focused on addressing the demand for increased fuel efficiency and emission control by controlling fuel
consumption and heat dissipation, which are principal factors influencing fuel efficiency and emissions.
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