DELPHI 2014 Annual Report Download - page 27

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• Electronics and Safety—This segment provides critical components, systems and advanced software for passenger
safety, security, comfort and infotainment, as well as vehicle operation, including body controls, reception systems,
infotainment and connectivity systems, hybrid vehicle power electronics, passive and active safety electronics,
displays and mechatronics. Our products integrate and optimize electronic content, which improves fuel economy,
reduces emissions, increases safety and provides occupant infotainment and connectivity.
• Thermal Systems—This segment provides powertrain cooling and heating, ventilating and air conditioning
(“HVAC”) systems, such as compressors, systems and controls, and heat exchangers for the vehicle markets. Our
products improve the efficiency by which the powertrain and cabin temperatures are managed, which are critical
factors in achieving increased fuel economy, reduced emissions and occupant comfort.
Financial Information about Business Segments
We operate our core business along four operating segments, which are grouped on the basis of similar product, market,
and operating factors.
Net Sales by Segment
Year Ended December 31, 2014 Year Ended December 31, 2013 Year Ended December 31, 2012
Net Sales % of Total Net Sales % of Total Net Sales % of Total
(in millions, excluding percentages)
Electrical/Electronic Architecture........................ $ 8,274 48 % $ 7,972 48 % $ 6,815 44 %
Powertrain Systems.............................................. 4,575 27 % 4,424 27 % 4,656 30 %
Electronics and Safety.......................................... 2,859 17 % 2,830 17 % 2,732 18 %
Thermal Systems.................................................. 1,556 9 % 1,468 9 % 1,541 10 %
Eliminations and Other......................................... (241) (1)% (231) (1)% (225) (2)%
Total................................................................... $ 17,023 $ 16,463 $ 15,519
Refer to Results of Operations by Segment in Item 7. Management’s Discussion and Analysis and Note 23. Segment
Reporting of the notes to the consolidated financial statements, included in Item 8. Financial Statements and Supplementary
Data of this Annual Report for further financial information about business segments.
Our business is diversified across end-markets, regions, customers, vehicle platforms and products. Our customer base
includes all 25 of the largest automotive OEMs in the world, and in 2014, 23% of our net sales came from the Asia Pacific
region, which we have identified as a key market likely to experience substantial growth. Our eight largest platforms in 2014
were with five different OEMs. In addition, in 2014 our products were found in 19 of the 20 top-selling vehicle models in the
United States, in 18 of the 20 top-selling vehicle models in Europe and in 17 of the 20 top-selling vehicle models in China. We
have diversified our business into the commercial vehicle market, which is typically on a different business cycle than the light
vehicle market. In addition, approximately 6% of our 2014 net sales were to the aftermarket, which meets the ongoing need for
replacement parts required for vehicle servicing.
We have established a worldwide design and manufacturing footprint with a regional service model that enables us to
efficiently and effectively serve our global customers from low cost countries. This regional model is structured primarily to
service the North American market from Mexico, the South American market from Brazil, the European market from Eastern
Europe and North Africa, and the Asia Pacific market from China. Our global scale and regional service model enables us to
engineer globally and execute regionally to serve the largest OEMs, which are seeking suppliers that can serve them on a
worldwide basis. Our footprint also enables us to adapt to the regional design variations the global OEMs require and serve the
emerging market OEMs.
Our Industry
The automotive parts industry provides components, systems, subsystems and modules to OEMs for the manufacture of
new vehicles, as well as to the aftermarket for use as replacement parts for current production and older vehicles. Overall, we
expect long-term growth of vehicle sales and production in the OEM market. In 2013 and 2014, the industry saw increased
global customer sales and production schedules. However, while OEM vehicle production in North America and Asia Pacific
has continued to grow, production in Europe and South America continues to be impacted by the economic uncertainties in
these regions. Vehicle production increased by only 2% in Europe, and decreased by 17% in South America in 2014 as
compared to 2013. Demand for automotive parts in the OEM market is generally a function of the number of new vehicles
produced, which is primarily driven by macro-economic factors such as credit availability, interest rates, fuel prices, consumer
confidence, employment and other trends. Although OEM demand is tied to actual vehicle production, participants in the
automotive parts industry also have the opportunity to grow through increasing product content per vehicle by further
penetrating business with existing customers and in existing markets, gaining new customers and increasing their presence in