DELPHI 2015 Annual Report Download - page 33

Table of Contents
11
Research, Development and Intellectual Property
We maintain technical engineering centers in major regions of the world to develop and provide advanced products,
processes and manufacturing support for all of our manufacturing sites, and to provide our customers with local engineering
capabilities and design development on a global basis. As of December 31, 2015, we employed over 19,000 scientists,
engineers and technicians around the world. Our total investment in research and development, including engineering, was
approximately $1.5 billion, $1.6 billion and $1.6 billion or the years ended December 31, 2015, 2014 and 2013, respectively,
which includes approximately $300 million, $400 million and $400 million of co-investment by customers and government
agencies. Each year we share some engineering expenses with OEMs and government agencies. While this amount varies from
year-to-year, it is generally in the range of 20% to 30% of engineering expenses.
We utilize a Technology Advisory Council, a panel of prominent global technology thought leaders, which guides our
product strategies and investments in technology with a focus on developing advanced technologies to drive growth. We believe
that our engineering and technical expertise, together with our emphasis on continuing research and development, allow us to
use the latest technologies, materials and processes to solve problems for our customers and to bring new, innovative products
to market. We believe that continued engineering activities are critical to maintaining our pipeline of technologically advanced
products. Given our strong financial discipline, we seek to effectively manage fixed costs and efficiently rationalize capital
spending by critically evaluating the profit potential of new and existing customer programs, including investment in innovation
and technology. We maintain our engineering activities around our focused product portfolio and allocate our capital and
resources to those products with distinctive technologies. We expect expenditures for research and development activities,
including engineering, net of co-investment, to be approximately $1.2 billion for the year ended December 31, 2016.
We maintain a large portfolio of patents in the operation of our business. While no individual patent or group of patents,
taken alone, is considered material to our business, taken in the aggregate, these patents provide meaningful protection for our
products and technical innovations. Similarly, while our trademarks (particularly those protecting the Delphi brand) are
important to identify our position in the industry, we do not believe that any of these are individually material to our business.
We are actively pursuing marketing opportunities to commercialize and license our technology to both automotive and non-
automotive industries and we have selectively taken licenses from others to support our business interests. These activities
foster optimization of intellectual property rights.
Materials
We procure our raw materials from a variety of suppliers around the world. Generally, we seek to obtain materials in the
region in which our products are manufactured in order to minimize transportation and other costs. The most significant raw
materials we use to manufacture our products include copper and resins. As of December 31, 2015, we have not experienced
any significant shortages of raw materials and normally do not carry inventories of such raw materials in excess of those
reasonably required to meet our production and shipping schedules.
Commodity cost volatility, most notably related to copper, petroleum-based resin products and fuel, is a challenge for us
and our industry. We are continually seeking to manage these and other material-related cost pressures using a combination of
strategies, including working with our suppliers to mitigate costs, seeking alternative product designs and material
specifications, combining our purchase requirements with our customers and/or suppliers, changing suppliers, hedging of
certain commodities and other means. In the case of copper, which primarily affects our Electrical/Electronic Architecture
segment, contract clauses have enabled us to pass on some of the price increases to our customers and thereby partially offset
the impact of increased commodity costs on operating income for the related products. However, other than in the case of
copper, our overall success in passing commodity cost increases on to our customers has been limited. We will continue our
efforts to pass market-driven commodity cost increases to our customers in an effort to mitigate all or some of the adverse
earnings impacts, including by seeking to renegotiate terms as contracts with our customers expire.
Seasonality
Our business is moderately seasonal, as our primary North American customers historically reduce production during the
month of July and halt operations for approximately one week in December. Our European customers generally reduce
production during the months of July and August and for one week in December. Shut-down periods in the rest of the world
generally vary by country. In addition, automotive production is traditionally reduced in the months of July, August and
September due to the launch of parts production for new vehicle models. Accordingly, our results reflect this seasonality.
Employees
As of December 31, 2015, we employed approximately 139,000 people (5,000 in the U.S., and 134,000 outside of the
U.S.); 27,000 salaried employees and 112,000 hourly employees. In addition, we maintain an alternative workforce of 34,000
contract and temporary workers. Our employees are represented worldwide by numerous unions and works councils, including