DELPHI 2014 Annual Report Download - page 55

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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 global and regional economic conditions. Although
global automotive vehicle production increased 2% from 2013 to 2014 and is expected to increase by an additional 1% to 2% in
2015, the economic recovery has been uneven from a regional perspective. While the North American and certain Asia Pacific
economies have continued to strengthen in 2014, economic uncertainties continue to persist in Europe and South America,
resulting in lower consumer demand for vehicles in those markets as compared to North America. Vehicle production increased
by only 2% in Europe, and decreased by 17% in South America in 2014 as compared to 2013, and is expected to increase by
1% in Europe in 2015 as compared to 2014, and remain essentially flat with 2014's reduced volumes in South America.
Continued economic weakness in Europe or South America, or weakness in North America or Asia Pacific, could result in a
significant reduction in automotive sales and production by our customers, which would have an adverse effect on our business,
results of operations and financial condition. Additionally, weakness may result in shifts in the mix of future automotive sales
(from vehicles with more content such as luxury vehicles, trucks and sport utility vehicles toward smaller passenger cars).
While our diversified customer and geographic revenue base, along with our flexible cost structure, 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, principally China, 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 are 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 continue to build upon our extensive geographic reach to capitalize on fast-growing automotive markets. 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 over 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
have expanded the number of our 33 offered products locally manufactured in China to 25 in 2014. We believe we have the
opportunity to expand additional product lines into China in the future, as well as continuing to grow our existing localized
product lines, and as a result, we see further growth potential in this market.
Market driven products. Our product offerings satisfy the OEMs’ need to meet increasingly stringent government
regulations and meet 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 benefit from the growing demand for vehicle content related to safety, fuel efficiency, emissions control, automated features
and connectivity to the global information network. Our Electrical/Electronic Architecture and Electronics and Safety segments
are benefiting from the substantial increase in vehicle content and electrification requiring a complex and reliable electrical
architecture and systems to operate, such as hybrid power electronics, automated driver assistance technologies, electrical
vehicle monitoring, active safety systems, 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 through products such as gasoline direct injection (GDi) fuel systems and brushless fuel
pumps.
Global capabilities. Many OEMs are continuing to adopt global vehicle platforms to increase standardization, reduce per
unit cost and increase capital efficiency and profitability. As a result, OEMs are selecting suppliers that have the capability to
manufacture products on a worldwide basis, as well as, the flexibility to adapt to regional variations. Suppliers with global
scale and strong design, engineering and manufacturing capabilities, are best positioned to benefit from this trend. Our global
footprint enables us to serve the global OEMs on a worldwide basis as we gain market share with the emerging market OEMs.
This regional model principally services the North American market out of Mexico, the South American market out of Brazil,
the European market out of Eastern Europe and North Africa and the Asia Pacific market out of China.
Product development. The automotive component supply industry is highly competitive, both domestically and
internationally. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and
introduce new and enhanced products on a timely and cost competitive basis will be a significant factor in our ability to remain
competitive. To compete effectively in the automotive supply industry, we must be able to launch new products to meet our
customers’ demands in a timely manner. Our innovative technologies and robust global engineering and development
capabilities have well positioned us to meet the increasingly stringent vehicle manufacturer demands.