DELPHI 2012 Annual Report Download - page 108

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86
The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit
obligation for the U.S. and non-U.S. pension plans were:
Assumptions used to determine benefit obligations at December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2012 2011 2012 2011
Weighted-average discount rate................................................................... 2.40% 3.30% 4.41% 5.24%
Weighted-average rate of increase in compensation levels......................... N/A N/A 3.50% 3.66%
Assumptions used to determine net expense for years ended December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2012 2011 2010 2012 2011 2010
Weighted-average discount rate....................... 3.30% 4.10% 5.00% 5.24% 5.69% 5.97%
Weighted-average rate of increase in
compensation levels......................................... N/A N/A N/A 3.66% 3.88% 3.89%
Expected long-term rate of return on plan
assets ................................................................ N/A N/A N/A 6.43% 6.65% 7.14%
Delphi selects discount rates by analyzing the results of matching each plan’s projected benefit obligations with a
portfolio of high-quality fixed income investments rated AA-or higher by Standard and Poor’s.
Delphi does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary for 2012 or
2011. The primary funded non-U.S. plans are in the United Kingdom and Mexico. For the determination of 2012 expense,
Delphi assumed a long-term asset rate of return of approximately 6.25% and 8.5% for the United Kingdom and Mexico,
respectively. Delphi evaluated input from local actuaries and asset managers, including consideration of recent fund
performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the United
Kingdom and Mexico are primarily long-term, prospective rates.
Delphi’s pension expense for 2013 is determined at the 2012 year end measurement date. For purposes of analysis, the
following table highlights the sensitivity of the Company’s pension obligations and expense to changes in key assumptions:
Change in Assumption Impact on Pension
Expense Impact on PBO
25 basis point (“bp”) decrease in discount rate ................................................................. + $5 million + $ 86 million
25 bp increase in discount rate .......................................................................................... - $3 million - $ 81 million
25 bp decrease in long-term return on assets..................................................................... + $3 million —
25 bp increase in long-term return on assets ..................................................................... - $3 million —
The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors
and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not
necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring
programs.