DELPHI 2014 Annual Report Download - page 57

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long and typically exceed start of production by one to two years. Substantial advantages exist for suppliers that can leverage
their prior investments in capital equipment or amortize the investment over higher volume global customer programs.
Industry consolidation. Consolidation among worldwide suppliers is expected to continue as suppliers seek to achieve
operating synergies and value stream efficiencies, acquire complementary technologies, and build stronger customer
relationships as OEMs continue to expand globally. We believe companies with strong balance sheets and financial discipline
are in the best position to take advantage of the industry consolidation trend.
Our History and Structure
On August 19, 2009, Delphi Automotive LLP, a limited liability partnership organized under the laws of England and
Wales, was formed for the purpose of acquiring certain assets and subsidiaries of Old Delphi (“the Acquisition”), which, along
with certain of its U.S. subsidiaries, had filed voluntary petitions for bankruptcy in October 2005. On October 6, 2009, Delphi
Automotive LLP acquired the major portion of the business of Old Delphi and issued membership interests to a group of
investors consisting of certain lenders to Old Delphi, General Motors Company ("GM") and the Pension Benefit Guaranty
Corporation (the “PBGC”). On March 31, 2011, all of the outstanding Class A and Class C membership interests held by GM
and the PBGC were redeemed, respectively, for approximately $4.4 billion.
On May 19, 2011, Delphi Automotive PLC was formed as a Jersey public limited company, and had nominal assets, no
liabilities and had conducted no operations prior to its initial public offering. On November 22, 2011, in conjunction with the
completion of its initial public offering by the selling shareholders, all of the outstanding equity of Delphi Automotive LLP was
exchanged for ordinary shares by its equity holders in Delphi Automotive PLC. As a result, Delphi Automotive LLP became a
wholly-owned subsidiary of Delphi Automotive PLC.
Consolidated Results of Operations
In 2014, total global OEM production volumes increased 2% from 2013. Although total global OEM production volumes
increased, indicating continued stabilization of the global economy, the economic recovery was uneven from a regional
perspective. While OEM vehicle production increased by 6% in China and 5% in North America in 2014, production in Europe
and South America continues to be impacted by the economic uncertainties in those regions. European production increased
only 2% in 2014, and declined by 17% in South America. In light of the continued economic uncertainties in these regions, we
have initiated restructuring actions as appropriate in order to align our manufacturing capacity and footprint with the current
automotive production levels. As we continue to operate in a cyclical industry that is impacted by movements in the global
economy, we continually evaluate opportunities to further adjust our cost structure. However, we believe our strong balance
sheet coupled with our flexible cost structure will position us to capitalize on any strengthening of the global economy and
improvements in OEM production volumes.
Our total net sales during the year ended December 31, 2014 were $17.0 billion, or 3% higher compared to 2013. This
compares to total global OEM production increases of 2% in 2014. The increase in our total net sales is primarily attributable to
increased sales in North America and Asia Pacific. Although our net sales in Europe also increased modestly in 2014, our sales
continue to be impacted by persisting economic uncertainties in the region, which have resulted in limited growth in OEM
production. Partially offsetting these increases were reduced sales in our smallest region, South America, due to continuing
economic weakness, resulting in continued reductions in OEM production schedules in the region. Our overall lean cost
structure, along with improving sales in North America, and above-market sales growth in the Asia Pacific region, specifically
China, enabled us to improve gross margins in the year ended December 31, 2014 as compared to the prior year.
The increase in our total net sales of 6% during the year ended December 31, 2013 as compared to 2012 was attributable
to the fourth quarter 2012 acquisition and successful integration of MVL, as well as due to increased sales in North America
and Asia Pacific, offset by OEM production volume reductions in Europe.
Delphi typically experiences fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and
the net of new and lost business (which we refer to collectively as volume), increased prices attributable to escalation clauses in
our supply contracts for recovery of increased commodity costs (which we refer to as commodity pass-through), fluctuations in
foreign currency exchange rates (which we refer to as FX), contractual reductions of the sales price to the OEM (which we
refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or
unfavorable impacts on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as
well as shifts in consumer demand related to vehicle segment purchases and content penetration. For instance, a shift in sales
demand favoring a particular OEM’s vehicle model for which we do not have a supply contract may negatively impact our
revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of those of our customers
that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.