DELPHI 2011 Annual Report Download - page 55

Table of Contents
Cost of Sales
Cost of sales is primarily comprised of material, labor, manufacturing overhead, freight, fluctuations in foreign currency exchange rates, product
engineering, design and development expenses, depreciation and amortization, warranty costs and other operating expenses.
Successor Predecessor
Year ended
December 31, 2010
Period from
August 19 to
December 31, 2009
Period from
January 1 to
October 6, 2009
(dollars in millions) (dollars in millions)
Cost of sales $ 11,768 $ 3,047 $ 8,480
Gross margin $ 2,049 $ 374 $ (146)
Percentage of net sales 14.8% 10.9% (1.8)%
Successor
Cost of sales in the year ended December 31, 2010 was impacted by higher volume offset by favorable operational performance and our reduced cost
structure due to previous restructuring actions. Additionally, cost of sales was impacted by the following items:
• Warranty costs of $142 million;
• Depreciation of fixed assets, including tooling, of $323 million; and
• Pension and OPEB costs of $71 million.
Cost of sales in the Successor Period of 2009 was impacted by higher volume offset by favorable operational performance and our reduced cost
structure due to previous restructuring actions. Additionally, cost of sales was impacted by the following items:
• Warranty costs of $24 million;
• Non-recurring $34 million non-cash charge as a result of the sale of inventory acquired from the Predecessor, which was required to be recorded
at fair value as a result of the Acquisition;
• Depreciation of fixed assets, including tooling, of $115 million; and
• Pension and OPEB costs of $23 million.
Predecessor
Cost of sales in the Predecessor Period of 2009 was impacted by the relatively fixed cost nature of the Predecessor's operations that inhibited the
Predecessor's ability to adjust its cost structure appropriately to the reduced volumes resulting from the economic and credit crises of 2008 and 2009 that
adversely impacted OEM production levels. Additionally, cost of sales was impacted by the following items:
• Warranty costs of $114 million;
• Depreciation of fixed assets, including tooling, and including impairments, of $502 million; and
• Pension and OPEB costs of $134 million.
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