DELPHI 2015 Annual Report Download - page 37

Table of Contents
15
ITEM 1A. RISK FACTORS
Set forth below are certain risks and uncertainties that could adversely affect our results of operations or financial
condition and cause our actual results to differ materially from those expressed in forward-looking statements made by the
Company. Also refer to the Cautionary Statement Regarding Forward-Looking Information in this annual report.
Risks Related to Business Environment and Economic Conditions
The cyclical nature of automotive sales and production can adversely affect our business.
Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive
sales and production are highly cyclical and, in addition to general economic conditions, also depend on other factors, such as
consumer confidence and consumer preferences. Lower global automotive sales would be expected to result in substantially all
of our automotive OEM customers lowering vehicle production schedules, which has a direct impact on our earnings and cash
flows. In addition, automotive sales and production can be affected by labor relations issues, regulatory requirements, trade
agreements, the availability of consumer financing and other factors. Economic declines that result in a significant reduction in
automotive sales and production by our customers have in the past had, and may in the future have, an adverse effect on our
business, results of operations and financial condition.
Our sales are also affected by inventory levels and OEMs’ production levels. We cannot predict when OEMs will decide
to increase or decrease inventory levels or whether new inventory levels will approximate historical inventory levels.
Uncertainty and other unexpected fluctuations could have a material adverse effect on our business and financial condition.
A prolonged economic downturn or economic uncertainty could adversely affect our business and cause us to require
additional sources of financing, which may not be available.
Our sensitivity to economic cycles and any related fluctuation in the businesses of our customers or potential customers
may have a material adverse effect on our financial condition, results of operations or cash flows. While the North American
and European economies strengthened in 2015, resulting in increased vehicle production in these regions, there has been a
recent moderation in the level of economic growth and an increase in market volatility in China, which has resulted in lower
automotive production growth rates in China than those previously experienced. Although automotive production in China
increased by 4% in 2015 as compared to 2014, this represents a reduction from the overall level of long-term automotive
market growth in the country. Additionally, vehicle production in South America decreased by 19% in 2015 as compared to
2014, which follows a 17% decrease in that region in 2014. As a result, we have experienced and may continue to experience
reductions in orders from OEM customers in these regions. A prolonged downturn in the global or regional automotive
industry, or a significant change in product mix due to consumer demand, could require us to shut down plants or result in
impairment charges, restructuring actions or changes in our valuation allowances against deferred tax assets, which could be
material to our financial condition and results of operations. Continued uncertainty relating to the economic conditions in China
or South America may continue to have an adverse impact on our business. If global economic conditions deteriorate or
economic uncertainty increases, our customers and potential customers may experience deterioration of their businesses, which
may result in the delay or cancellation of plans to purchase our products. If vehicle production were to remain at low levels for
an extended period of time or if cash losses for customer defaults rise, our cash flow could be adversely impacted, which could
result in our needing to seek additional financing to continue our operations. There can be no assurance that we would be able
to secure such financing on terms acceptable to us, or at all.
Any changes in consumer credit availability or cost of borrowing could adversely affect our business.
Declines in the availability of consumer credit and increases in consumer borrowing costs have negatively impacted
global automotive sales and resulted in lower production volumes in the past. Substantial declines in automotive sales and
production by our customers could have a material adverse effect on our business, results of operations and financial condition.
A drop in the market share and changes in product mix offered by our customers can impact our revenues.
We are dependent on the continued growth, viability and financial stability of our customers. Our customers generally are
OEMs in the automotive industry. This industry is subject to rapid technological change, vigorous competition, short product
life cycles and cyclical and reduced consumer demand patterns. When our customers are adversely affected by these factors, we
may be similarly affected to the extent that our customers reduce the volume of orders for our products. As a result of changes
impacting our customers, sales mix can shift which may have either favorable or unfavorable impact on revenue and would
include 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 OEMs' 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.