DELPHI 2015 Annual Report Download - page 58

Table of Contents
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response to changes in the global and regional automotive markets, as evidenced by our on-going restructuring programs
focused on aligning our manufacturing capacity and footprint with the current automotive production levels in Europe and
South America and the continued rotation of our manufacturing footprint to low cost locations within these regions. As we
continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually
evaluate opportunities to further refine our cost structure. Assuming constant product mix and pricing, based on our 2015
results, we estimate that our EBITDA breakeven level would be reached if we experienced a 45% downturn to current product
volumes.
We have a strong balance sheet with gross debt of approximately $4.0 billion and substantial liquidity of approximately
$2.0 billion of cash and cash equivalents and available financing under our Revolving Credit Facility (as defined below in
Liquidity and Capital Resources) as of December 31, 2015, and no significant U.S. defined benefit or workforce postretirement
health care benefits and employer-paid postretirement basic life insurance benefits (“OPEB”) liabilities. We intend to maintain
strong financial discipline targeting industry-leading earnings growth, cash flow generation and return on invested capital and
to maintain sufficient liquidity to sustain our financial flexibility throughout the industry cycle.
OEM product recalls. There was a significant increase in the number of vehicles recalled globally by OEMs in 2014 and
2015. In the U.S., a record number of vehicle recalls were initiated in 2014, and recalls in 2015 continued to remain above
historical levels. These recalls can either be initiated by the OEMs or influenced by regulatory agencies. Although there are
differing rules and regulations across countries governing recalls for safety issues, the overall transition towards global vehicle
platforms may also contribute to increased recalls outside of the U.S., as automotive components are increasingly standardized
across regions. Given the sensitivity to safety issues in the automotive industry, including increased focus from regulators and
consumers, we anticipate the number of automotive recalls may remain above historical levels in the near future. Additionally,
in 2015, our second-largest customer, Volkswagen Group (“VW”), initiated a process to recall certain diesel vehicles that were
found to violate vehicle emissions standards. Although we supplied engine controllers for a limited number of affected vehicles
manufactured and sold outside of North America, we do not currently expect any adverse impacts directly resulting from this
matter. However, we are dependent on the continued growth, viability and financial stability of our customers. Although we
engage in extensive product quality programs and processes, and have not experienced any significant impacts to date as a
result of the recalls that have been initiated, it is possible that we may be adversely affected in the future if the pace of these
recalls continues.
Efficient use of capital. The global vehicle components industry is generally capital intensive and a portion of a supplier’s
capital equipment is frequently utilized for specific customer programs. Lead times for procurement of capital equipment are
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. As further described below, on December 18,
2015, we completed the acquisition of HellermannTyton, a leading global manufacturer of high-performance and innovative
cable management solutions, which expands our product portfolio within the connected vehicle solutions market and will help
us capitalize on the connected car megatrend. We are integrating HellermannTyton into our Electrical/Electronic Architecture
segment. Given the timing of the acquisition it is not fully reflected in our 2015 results.
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.