DELPHI 2011 Annual Report Download - page 50

Table of Contents
Income Taxes
Year ended December 31,
2011 2010
Favorable/
(unfavorable)
(in millions)
Income tax expense $ 305 $ 258 $ (47)
The effective tax rate was 20% and 27% in 2011 and 2010, respectively. The Company's tax rate is affected by the tax rates in the jurisdictions in which
the Company operates, the relative amount of income earned by jurisdiction, and the relative amount of losses or income for which no tax benefit or expense
was recognized due to a valuation allowance. In 2011, tax incentives of $64 million were obtained in various non-U.S. countries, primarily Hi-Tech Enterprise
status in China and the Maquiladora regime in Mexico, and a $65 million tax benefit for income earned in jurisdictions where a valuation allowance has been
recorded, primarily in France.
We recognized a $52 million, primarily Germany, and $21 million tax benefit in 2011 and 2010, respectively, related to changes in judgment of
valuation allowances for the realization of deferred tax assets. During 2011, the Company recorded a withholding tax of $10 million related to the funding of
the redemption of all the outstanding Class A and Class C membership interests and $27 million related to changes in our assertion with respect to our intent
to repatriate foreign earnings in certain countries.
Our annual effective tax rate may be impacted by future events including changes in tax laws, geographic income mix, cash requirements, tax audits,
closure of tax years, legal entity restructuring and changes in valuation allowances on deferred tax assets. Our effective tax rate can potentially have wide
variances from quarter to quarter, resulting from interim reporting requirements and the recognition of discrete events.
Equity Income
Year ended December 31,
2011 2010
Favorable/
(unfavorable)
(in millions)
Equity income, net of tax $ 22 $ 17 $ 5
Equity income reflects our interest in the results of ongoing operations of entities accounted for as equity-method investments. Equity income increased
during the year ended December 31, 2011 as compared to 2010 partially due to the recognition of $8 million of gain on the sale of our 49.5% interest in
Daesung Electric, Co., Ltd as well as improved performance at our Mexican and Korean joint ventures. These increases were partially offset by a $7 million
impairment charge related to a European joint venture.
Results of Operations by Segment
We operate our core business along the following operating segments, which are grouped on the basis of similar product, market and operating factors:
• Electrical/Electronic Architecture, which includes complete electrical architecture and component products.
• Powertrain Systems, which includes extensive systems integration expertise in gasoline, diesel and fuel handling and full end-to-end systems
including fuel injection, combustion, electronics controls, exhaust handling, test and validation capabilities, diesel and automotive aftermarket,
and original equipment service.
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