DELPHI 2015 Annual Report Download - page 56

Table of Contents
34
appropriate operational flexibility to scale our operations so that we can maintain our profitability as industry production levels
increase or contract.
Advancing and maintaining an efficient capital structure. We actively manage our capital structure in order to maintain
an investment grade credit rating and healthy capital ratios to support our business and maximize shareholder value. We will
continue to make adjustments to our capital structure in light of changes in economic conditions or as opportunities arise to
provide us with additional financial flexibility to invest in our business and execute our strategic objectives going forward.
Pursuing selected acquisitions and strategic investments. In 2015 we completed the acquisition of HellermannTyton, a
leading global manufacturer of high-performance and innovative cable management solutions. This acquisition enhances our
position as a leading supplier of automotive electrical/electronic architecture and expands our product portfolio within the
connected vehicle solutions market. We also completed other selected acquisitions and strategic investments in order to
continue to enhance our product offerings and competitive position in growing market segments. We intend to continue to
pursue selected transactions that leverage our technology capabilities and enhance and expand our product offerings, customer
base, geographic penetration and scale to complement our current businesses.
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 2014 to 2015, and is expected to increase by an additional 2% in
2016, the economic recovery has remained uneven from a regional perspective. Vehicle production increased by 4% in both
North America and Europe as consumer demand for vehicles increased as a result of these economies strengthening in 2015.
Both the North American and European economies are expected to continue to experience moderate improvement, resulting in
vehicle production growth of 3% in North America and 2% in Europe in 2016 as compared to 2015. However, despite the
continuing strengthening in North America and Europe, 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. As a result of this volatility in China, there was a significant reduction in vehicle production during the
third quarter of 2015; however, production recovered strongly in the fourth quarter of 2015. Although automotive production in
China increased by 4% for the full year of 2015 as compared to 2014, and is expected to increase by an additional 4% in 2016,
this represents a reduction from the overall level of long-term automotive market growth in the country. Additionally, vehicle
production in South America, our smallest region, decreased by 19% in 2015 as compared to 2014, and is expected to decrease
by an additional 10% in 2016.
Economic volatility in China, continued weakness in South America, or weakness in Europe or North America 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, economic 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. Despite the recent moderation in the level of economic growth in China, rising income levels
in China and other emerging markets have resulted and are expected to result in stronger growth rates in these markets over the
long term. Our strong global presence, and presence in these markets, have positioned us to experience above-market growth
rates over the long term. We continue to expand our established presence in emerging markets, positioning us to benefit from
the expected continued long term 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, including a major manufacturing base,
which has included investments in 6 new manufacturing facilities since 2012. 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. Our business in China
remains sensitive to economic and market conditions that drive automotive sales volumes in China, and may be impacted if
there are reductions in vehicle demand in China. However, we continue to believe there is long term growth potential in this
market based on increasing long term automotive and vehicle content demand.
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