Delphi Corporation Business Report FY2006
Business Highlights
Financial
Overview
Factors
1) Total sales for 2006 decreased $555 million primarily due to lower customer production schedules, unfavorable sales mix, and the net of new and lost business of $648 million, as well as contractual price reductions of $427 million or 1.6%, partially offset by increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs ("commodity pass-through") of $268 million and a favorable foreign currency exchange of $185 million primarily driven by the Euro, Brazilian Real, Korean Won and Chinese Renmenbi.
- GM sales decreased $1.2 billion, principally due to production volumes for GM North America, which declined by approximately 4% compared to the same period in 2005, the wind-down of certain GM product programs and sales mix of $1.2 billion, as well as the migration during the period of certain product programs from sales to GM to sales to Tier I customers. Sales were further decreased due to contractual price reductions and the sale of the global battery product line. The GM sales decrease was partially offset by GM's buildup of inventory for certain parts in the first half of 2006, commodity pass-through of $129 million, particularly copper and to a lesser extent platinum group metals, as well as favorable foreign currency exchange of $44 million, primarily driven by the Euro, Brazilian Real, Korean Won and Chinese Renmenbi.
- Other customer sales increased by $669 million in 2006 to 56% of total sales. This other customer sales increase was primarily due to increased customer production schedules and new business from diversifying our global customer base of $417 million, primarily in Asia Pacific, favorable foreign exchange of $141 million and commodity pass-through of $139 million. Other customer sales in Asia Pacific grew by approximately $625 million or 52%, including effects of foreign currency exchange, compared to 2005. Included in this increase in other customer sales is $96 million of additional sales from the joint venture, SDAAC in the Thermal Systems product segment. Effective July 1, 2006, the Company acquired a controlling position in SDAAC. To a lesser extent, the other customer sales increase was affected by the migration of certain chassis component product programs from sales to GM to sales to Tier I customers of approximately $124 million. Offsetting these increases in other customer sales were contractual price reductions.
2) Gross margin decreased to $976 million or 3.7% in 2006 compared to gross margin of $1.2 billion or 4.6% in 2005. The gross margin decrease was primarily due to lower vehicle production and unfavorable product mix of approximately $567 million, partially attributable to an approximate 4% reduction in GM North America vehicle production. Additionally, contractual price reductions of approximately $427 million caused gross margin decreases. Offsetting these decreases were improvements in operational efficiencies of approximately $678 million, achieved despite increases in commodity prices such as copper, steel and resins/chemicals that could not be fully passed through to the customer. These improvements included approximately $137 million due to lower wage temporary hourly employees hired in the U.S. to replace employees leaving under the UAW Attrition Programs and IUE-CWA Special Attrition Program, and the unfavorable impact of increases in wage and benefit economics for the traditional U.S. legacy workforce of approximately $181 million. Also included in the improvements in operational efficiencies were improvements in both material and manufacturing efficiencies, partially offset by the manufacturing inefficiencies related to the large scale transition of the workforce from traditional employees to temporary labor. In addition, an increase in postemployment benefit accruals for other than temporarily idled employees in 2005 that was not repeated in 2006 resulted in a favorable impact to cost of sales by approximately $204 million.
Electronics and Safety
3) Total sales for 2006 decreased $221 million from 2005 primarily due to lower customer production schedules, unfavorable sales mix, and the net of new and lost business of $69 million and contractual price reductions of $120 million. These decreases were partially offset by the favorable impact of foreign currency exchange rates by $32 million, primarily due to movements in the Euro and Korean Won.
- The GM sales decrease ($211 million) for 2006 as compared to 2005 was primarily due to a decline in GM North America production schedules, unfavorable sales mix, and the net of new and lost business, including design improvements that reduce costs and corresponding sales $197 million, as well as contractual price reductions. GM sales included a slight impact from favorable currency exchange rates, primarily related to the Euro.
- The other customers and inter-segment sales decreased slightly ($10 million) for 2006 as compared to 2005 due to contractual price reductions. Offsetting these decreases were increased customer production schedules and new business wins, primarily in Europe and Asia Pacific, of $127 million, and a favorable impact from currency exchange rates of $27 million, primarily the Euro and the Korean Won.
4) The increased operating income for 2006 as compared to 2005 was impacted by material savings and improved manufacturing and engineering operations performance which increased operating results by $160 million. In addition, operating income for 2006 included a gain on the sale of MobileAria assets of approximately $7 million. Offsetting the increase were a reduction in customer production schedules and unfavorable sales mix of $115 million as well as contractual price reductions of $120 million.
Powertrain Systems
5) Total sales for 2006 decreased $92 million from 2005 primarily due to the sale of the global battery product line in the third quarter of 2005 of $179 million, contractual price reductions of $118 million and design changes that reduced cost and corresponding sales of $52 million. The decrease in sales was partially offset by a $154 million increase in customer production schedules, sales mix, and the net of new and lost business, the favorable impact of foreign currency exchange of $53 million, related to the Brazilian Real, Chinese Renmenbi and Euro, as well as commodity pass-through of $49 million.
- The GM sales decrease ($257 million) for 2006 as compared to 2005 was primarily due to a decline in GM production schedules, sales mix, and the net of new and lost business of $172 million, as well as contractual price reductions. Included in the GM sales decrease during 2006 was the sale of the global battery product line in the third quarter of 2005 of $40 million. Offsetting these sales decreases was a slightly favorable impact from currency exchange rates, primarily the Brazilian Real, and commodity pass-through of $17 million.
- The other customers and inter-segment sales increase （$165 million) for 2006 as compared to 2005 was due to customer production schedule increases, sales mix, and the net of new and lost business of $288 million, primarily in Europe and Asia Pacific, as well as commodity pass-through of $32 million and a favorable $48 million impact from currency exchange rates, primarily driven by the Brazilian Real and the Chinese Renmenbi. Included in the net production schedule increases was a partial reduction to other customer and inter-segment sales from the sale of the global battery product line in the third quarter of 2005 of $139 million. Other customers and inter-segment sales were also unfavorably impacted by contractual price reductions.
6) The operating loss decrease ($318 million) for 2006 as compared to 2005 was primarily attributable to a $368 million goodwill impairment charge recorded in 2005, operational performance improvements, primarily manufacturing and material improvements and a $37 million gain on the sale of the global battery product line recognized in the third quarter of 2005. Offsetting these decreases were reductions in net customer production schedules, primarily GM offset by other customers, sales mix of $50 million and contractual price reductions of $118 million, increased employee termination benefits and other exit costs related to the consolidation of our U.S. locations and the establishment of additional environmental reserves.
Electrical/Electronic Architecture
7) The total sales increase of $55 million for 2006 as compared to 2005 was primarily due to commodity pass-through, primarily copper, of $187 million, as well as favorable foreign currency exchange of $63 million, primarily related to the Euro and the Brazilian Real. These increases in sales were partially offset by customer production schedules, sales mix, and the net of new and lost business of $30 million and contractual price reductions of $147 million.
- The GM sales decrease for 2006 ($138 million) as compared to 2005 was primarily due to a decline in GM North America production schedules, sales mix and the net of new and lost business of $198 million, as well as contractual price reductions. The decrease was somewhat reduced by commodity pass-through and the impact of favorable currency exchange rates of $20 million, primarily related to the Brazilian Real.
- The other customers and inter-segment sales increase for 2006 ($193 million) as compared to 2005 was due to customer production schedule increases, sales mix, and the net of new and lost business of $168 million, primarily in Europe and Asia Pacific, and commodity pass-through. Further driving the increase was the impact of favorable currency exchange rates of $43 million, primarily related to the Euro and the Brazilian Real. Offsetting the favorable volume, commodity pass-through and currency impacts were contractual price reductions.
8) The operating loss for 2006 as compared to operating income for 2005 was the result of reductions in customer production schedules and sales mix of $136 million and contractual price reductions of $147 million. Results in 2006 were impacted by a challenging environment for the North American business which included a reduction GM North America production schedules and the absence of a competitive labor agreement in the U.S. operations to allow the Company to adjust its cost structure to the lower volume requirements, as well as $40 million increase in employee termination benefits and other exit costs related to its U.S. and selected western European operations. Results were also negatively impacted by global commodities markets, especially copper. Partially offsetting these decreases was minimal long-lived asset impairment charges recorded in 2006 versus $35 million recorded in 2005.
Thermal Systems
9) Total sales for 2006 increased $46 million from 2005 primarily due to the acquisition of a controlling position in SDAAC. SDAAC is a Chinese entity specializing in HVAC and powertrain cooling supply to the Chinese market. SDAAC’s revenue included in Thermal Systems operating results beginning in the third quarter of 2006 was $96 million related to other customers. Additionally, sales increased due to a favorable impact from commodity pass-through of $18 million and favorable foreign currency exchange of $18 million, mostly offset by customer production schedules, sales mix and the net of new and lost business of $61 million and contractual price reductions of $25 million.
- The GM sales decrease for 2006 ($89 million) as compared to 2005 was primarily due to a decline in GM North America production schedules and the net of new and lost business of $103 million, as well as contractual price reductions. The decrease was partially reduced by commodity pass-through of $16 million, related to aluminum and copper, and the slightly favorable impact of currency exchange rates related to the Brazilian Real and Euro.
- The other customer and inter-segment sales increase for 2006 ($135 million) as compared to 2005 was primarily driven by the acquisition of a controlling position in SDAAC discussed above. Excluding the impact of the SDAAC acquisition, other customers and inter-segment sales were further improved by additional customer production schedules and the net of new and lost business of $37 million from increasing business in North and South America. Favorable foreign exchange of $12 million, related to the Brazilian Real and Euro, and commodity pass-through were partially offset by contractual price reductions for a combined net increase to sales of $5 million.
10) The increase in operating loss for 2006 ($90 million) as compared to 2005 was impacted by a reduction in customer production schedules and sales mix of $31 million and contractual price reductions of $25 million. As Thermal Systems continues to transform operations, it incurred costs related to additional employee termination benefit and other exit costs of $61 million, as well as increases to environmental reserves in the U.S. Additionally, during the third quarter of 2006 Thermal Systems began experiencing quality issues regarding parts that were purchased from one of the Company's suppliers and subsequently established warranty reserves to cover the cost of various repairs that may be implemented. Operating income in 2006 was also disproportionately affected by Thermal System's ongoing investments in new markets.
Steering
11) Total sales for 2006 decreased $20 million from 2005 primarily due to reduced customer production schedules, sales mix, the net of new and lost business and design changes of $5 million; and contractual price reductions of $12 million. These decreases were partially offset by a slight favorable foreign currency exchange.
- The GM sales decrease for 2006 ($41 million) as compared to 2005 was primarily due to a decline in customer production schedules, sales mix, and the net of new and lost business of $31 million, including the migration during the period of certain product programs from sales to GM to sales to Tier I customers. GM sales decrease was also due to contractual price reductions and a reduction in commodity pass-through, partially offset by a slightly favorable impact from currency exchange rates.
- The other customers and inter-segment sales increase for 2006 ($21 million) as compared to 2005 was due to changing customer production schedules (non-U.S. improvements offset by reductions in the U.S.), sales mix, and the net of new and lost business of $25 million, including the migration during the period of certain product programs from sales to GM to sales to Tier I customers. The new business growth was driven primarily by opportunities in China. Offsetting this increase were contractual price reductions.
12) The reduction in operating loss for 2006 as compared to 2005 was impacted by operational performance improvements, primarily in material and manufacturing, of $28 million, as well as a reduction in costs for idled U. S. hourly workers who receive nearly full pay and benefits of $42 million. Offsetting these favorable items were reductions in customer production schedules and unfavorable sales mix of $51 million, contractual price reductions of $12 million and employee termination benefit and other exit costs.
Automotive Holdings Group
13) Total sales for 2006 decreased $57 million from 2005 primarily due to customer production schedules, sales mix, and the net of new and lost business of $64 million and contractual price reductions of $31 million, partially offset by a favorable impact from commodity pass-through of $24 million and favorable currency exchange rates of $14 million.
- GM sales decreased for 2006 by $287 million as compared to 2005 primarily due to the migration of certain product programs from direct sales to GM to sales to Tier 1 customers, the exit of certain plants and products (operations other than the Company's chassis products and interiors product operations) and contractual price reductions. The increase in other customer and inter-segment sales in 2006 ($230 million) was substantially impacted by the migration of certain product programs from sales to GM to sales to Tier I customers.
14) The operating loss improvement for 2006 ($206 million) as compared to 2005 was impacted by operational performance improvements, primarily in manufacturing, of $191 million, as well as a reduction in costs for idled U.S. hourly workers who receive nearly full pay and benefits of $69 million. Offsetting these improvements were the impacts of volume reductions and sales mix, long-lived asset impairment charges and the establishment of additional environmental reserves.
Corporate and Other
15) Corporate and Other includes the expenses of corporate administration, other expenses and income of a non-operating or strategic nature, elimination of inter-segment transactions and charges related to U.S. employee special attrition programs. Additionally, Corporate and Other includes the Product and Service Solutions business, which is comprised of independent aftermarket, diesel - aftermarket, original equipment service, consumer electronics and medical systems.
- Corporate and Other sales 2006 were $296 million a decrease of $266 million compared to $562 million in 2005. The decrease is primarily related to the divestiture of the global battery product line, lower sales in GM service parts organization business and a softening in the U.S. retail satellite radio market. Partially offsetting these decreases was a reduction of eliminations of inter-segment sale transactions of approximately $1.4 billion and $1.6 billion in 2006 and 2005, respectively.
16) The operating loss for 2006 for Corporate and Other was $2.8 billion compared to $23 million for 2005. The increased loss was primarily due to U.S. employee special attrition program charges of $3.0 billion in 2006.
Contracts
Electronics and Safety
-In January 2006, the Company announced it has won a substantial portion of the satellite receiver business for Hyundai Motor America. The Company will supply XM Satellite Radio capable receivers for the Hyundai Santa Fe, Azera and Elantra. Hyundai is the first automaker to add standard satellite radio to its full vehicle lineup.
-In January 2006, the Company announced the Audi Q7 will be available in 2006 with the Company's Battery Disconnect Safety Device. Activated during a collision event, the Battery Disconnect Safety Device is designed to help prevent potential short circuits, providing circuit protection for the cables connecting the battery to the vehicle's starter, alternator and electrical centers. It performs this through the utilization of a small pyrotechnic charge that quickly and safely disconnects protected circuits.
-In February 2006, the Company announced that it will provide its "Forewarn" Smart Cruise Control, Forward Collision Warning (with audible and visible warnings) and Collision Mitigation (by pre-charging the braking system) for Ford of Europe's all-new Galaxy and S-MAX family vehicles. Ford will market the optional system to customers as Adaptive Cruise Control (ACC) with Forward Alert (FA).
-In May 2006, the Company is supplying its Forewarn(R) Back-Up Aid, DVD rear seat entertainment system and satellite radio receiver for the all new Ford Explorer. It's Forewarn dual-beam radar back-up aid helps drivers avoid back-up accidents by audibly alerting the driver of objects in the rear vehicle path. These alerts - beeps - vary in intensity and rate to indicate how close the driver is to an object.
-In September 2006, Recent studies have confirmed electronic stability control (ESC) technology is one of the more significant safety advancements since the seat belt. Now, Saturn is equipping versions of its latest sedan, the Aura, with StabiliTrak electronic stability control by the Company. This ESC is a vehicle stability enhancement system that helps reduce vehicle spins and excessive understeer. Using a yaw rate sensor, lateral accelerometer, steering angle sensor, electrohydraulic control unit and wheel speed sensors this integrated ESC system modulates brake pressures and adjusts engine torque to help enhance safety, improve vehicle performance and improve ride comfort and control. Saturn is offering StabiliTrak as standard equipment on the uplevel Aura XR, available at retailers now.
Thermal Systems
-In February 2006, the Company announced it is supplying the climate control system on Ford 2006 Fusion mid-size sedan. The Company supplies the compact HVAC module, air conditioning compressor, air conditioning lines, heater hoses, and HVAC control heads and sensors for the vehicle. The Fusion utilizes the same architecture as the Mercury Milan and Lincoln Zephyr to which the Company supplies the same content. Its estimated sales revenue for the business is approximately $345 million over the life of the contract.
-In June 2006, the Company announced that it will supply its MagneRide Semi-Active Suspension with the Audi's new TT coupe. Drivers will notice something different about the new version of this sports car -- better transient handling and road isolation along with increased driver comfort and the ability to select the level of suspension damping with a console-mounted two-position driver preference switch. It uses magneto-rheological fluid to provide continuously variable real-time suspension damping control. Named Audi Magnetic Ride on the TT, MagneRide responds in real time to road and driving conditions based on input from sensors that monitor vehicle body and wheel motion.
-In June 2006, Audi's first luxury sport utility vehicle, the Q7, hits showrooms this year able to offer something most others in its class do not -- a four-zone fully-automatic climate control system. The unique system, designed and engineered by the Company and Audi, and manufactured by the Company, uses separate front and rear heating, ventilation and air conditioning (HVAC) modules with independent air controls for each zone. The Audi Q7 is now available in both the United States and Europe. The four-zone system is optional content on the Audi Q7. For this vehicle, the Company also manufactures HVAC modules with dual-zone automatic air conditioning control for both driver and passenger.
-In September 2006, Bosal Delphi Complete Exhaust Systems won its first contract since the Company and Bosal Group entered into an alliance last year, the companies announced. The contract for a complete exhaust system, which includes a Delphi- supplied "hot end" and a Bosal-supplied "cold end" is worth $235 million over its lifetime. Distribution of the complete exhaust system in North America is expected to begin in 2009. Further details of the bookings remain confidential at the customer's request.
Electrical & Electronic Architecture
-In June 2006, the Company is offering the industry's first automotive application of its patented Flexible Beam Technology (FBT), which will create cost-effective and versatile solutions for its connection systems customers around the world. Building on its successful lineup of GT 150 and 280 unsealed series connectors, this Connection Systems has modified the series of female connectors to expand its United States Consortium for Automotive Research (USCAR) portfolio of products. This standardization improves cost and complexity by delivering a small, more compact system that saves space and reduces the total number of required assembly parts. At the same time, FBT also improves quality, reliability and serviceability.
Steering
-In December 2006, the Company has booked $3.3 billion in new steering and halfshaft business to date in 2006, and expects additional new business awards prior to year-end, company officials said. Sixteen global customers are included among the new business awards, with no single customer representing more than 50 percent of the total business. More than half of the new business is for vehicles produced in Europe, Asia and South America. The products sold include electric and hydraulic power steering systems, steering columns, gears, hoses and halfshafts. The Company's Steering now supports 64 customers worldwide.
Module and other
-In February 2006, the Company announced it will assume full cockpit module design and build responsibility on the new Mercedes GL-Class full-size SUV, which is scheduled to launch in the U.S. and Europe later this year. The instrument panel and console are manufactured in its Gadsden, Ala. plant and the entire cockpit assembly is performed at the Cottondale, Ala. facility. Both operations are in close proximity to Mercedes' Tuscaloosa, Ala. vehicle assembly plant where the GL-Class will be built alongside the M- and R-Class models.
-In March 2006, the Company announced that it is supplying the complete climate control system and MagneRide controlled suspension technology, as well as the electrical/electronic (E/E) system including electrical centers, to Ferrari's newest luxury vehicle, the 599 GTB, the replacement to the 575 Maranello. The Climate Control System is managed by an electronic control unit and receives and processes data on external and internal temperature through newly enhanced software and a solar load sensor. The system components include a carbon anti-pollution and anti-particle filter and a compact variable displacement compressor (7CVC) modified to meet the car's high performance needs.
-In May 2006, the Company announced it will supply new Jaguar XK model with its center console module. This integrated central console module helps reduce complexity, makes on-board operation easier, and helps improve driving safety. The driver can concentrate better on the driving without being taxed by complicated and confusing switches and buttons. The console module from the Company integrates switch functions for the centrally mounted touch screen that allows for intuitive selection of climate, audio, navigation, telephone and vehicle personalization settings. The Company is scheduled to assemble approximately 10,000 integrated center console units annually for Jaguar, which will be produced in Castle Bromwich production facility located in the West Midlands, Great Britain. The new consoles are to be fitted as standard on all 2007 XK models.
Partnership
- In March 2006, the Company announced it has established a joint venture with a European brake system supplier, Roland Brake Systems, to produce brake lining in India. The new company, named "Alliance Friction Technologies," will start full operation in the second half of 2006 to produce 1.1million sets annually and will raise the volume to 2 million sets in 2007, which will be marketed in Europe through Delphi network. Although the two partners have their own brake lining production companies in India, the joint venture will establish its own plant in the suburbs of New Delhi.
Acquisition
-In the second quarter 2006, the Company's Thermal Systems segment made an additional investment in Shanghai Delphi Automotive Air Conditioning Co. ("SDAAC") for approximately $14 million, which increased its equity ownership interest in SDAAC from 34 percent to 50 percent. SDAAC’s annual revenues for 2005 were approximately $133 million. In the third quarter of 2006 the Company obtained a controlling management interest in SDAAC and began consolidating the entity.
-In August 2006, Ashimori Industry Co., Ltd. announced that it will dissolve a seatbelt joint venture with the Company. Ashimori intends to transfer its shares in the joint venture plant in North America to the Company. Ashimori and the Company formed business alliances for seatbelts in 2000 and for airbag systems in 2001. As the plant mainly supplies to the U.S. Big Three automakers, whose orders have been low, Ashimori will dissolve the partnership so as to invest mainly in Asia, particularly in China, where the company is expanding operations.
Divestitures
-In June 2006, Freudenberg NOK Mechatronics is to buy the Berlin-based production plant for large flexible printed circuits (large FPCs) and a large share of the associated business from Delphi Deutschland GmbH, a wholly-owned subsidiary of the Company. The Berlin plant generated sales of 27 million euros in 2005 and employs 160 people. The significance of large FPCs will continue to grow due to the increased use of electrical and electronic technology in cars.
-In October 2006, the Company announced that it has identified its power products business as a non-core operation. Management responsibility for the power products business -- which develops and manufactures power lift gates, power deck lids, power sliding doors, and power cinching latches and strikers -- will be transitioned to Delphi's Automotive Holdings Group. As a result of this decision, the Company will begin evaluating strategic alternatives for the Power Products business, including the potential sale of this business.
| (in million $) | FY2006 | FY2005 | Rate of change (%) | Factors |
| Net Sales | 26,392 | 26,947 | (0.2) | See factor 1) below |
| Operating Income | (4,858) | (2,171) | (123.8) | See factor 2) below |
|
Electronics and Safety |
||||
|
Net Sales |
4,899 | 5,120 | (4.3) | See factor 3) below |
|
Operating profit |
197 | 177 | 11.3 | See factor 4) below |
|
Powertrain Systems |
||||
|
Net Sales |
5,218 | 5,310 | (1.7) | See factor 5) below |
|
Operating Income |
(240) | (558) | 56.9 | See factor 6) below |
|
Electrical/Electronic Architecture |
||||
|
Net Sales |
5,365 | 5,310 | 1.0 | See factor 7) below |
|
Operating profit |
（267） | 127 | (310.2) | See factor 8) below |
| Thermal Systems | ||||
|
Net Sales |
2,387 | 2,341 | 2.0 | See factor 9) below |
|
Operating profit |
(236) | (146) | (61.6) | See factor 10) below |
| Steering | ||||
|
Net Sales |
2,592 | 2,612 | (0.8) | See factor 11) below |
|
Operating profit |
(356) | (374) | 4.8 | See factor 12) below |
| Automotive Holdings Group | ||||
|
Net Sales |
5,635 | 5,692 | (1.0) | See factor 13) below |
|
Operating profit |
(1,168) | (1,374) | 15.0 | See factor 14) below |
| Corporate and Other | ||||
|
Net Sales |
296 | 562 | (47.3) | See factor 15) below |
|
Operating profit |
(2,788) | (23) | - | See factor 16) below |
Factors
1) Total sales for 2006 decreased $555 million primarily due to lower customer production schedules, unfavorable sales mix, and the net of new and lost business of $648 million, as well as contractual price reductions of $427 million or 1.6%, partially offset by increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs ("commodity pass-through") of $268 million and a favorable foreign currency exchange of $185 million primarily driven by the Euro, Brazilian Real, Korean Won and Chinese Renmenbi.
- GM sales decreased $1.2 billion, principally due to production volumes for GM North America, which declined by approximately 4% compared to the same period in 2005, the wind-down of certain GM product programs and sales mix of $1.2 billion, as well as the migration during the period of certain product programs from sales to GM to sales to Tier I customers. Sales were further decreased due to contractual price reductions and the sale of the global battery product line. The GM sales decrease was partially offset by GM's buildup of inventory for certain parts in the first half of 2006, commodity pass-through of $129 million, particularly copper and to a lesser extent platinum group metals, as well as favorable foreign currency exchange of $44 million, primarily driven by the Euro, Brazilian Real, Korean Won and Chinese Renmenbi.
- Other customer sales increased by $669 million in 2006 to 56% of total sales. This other customer sales increase was primarily due to increased customer production schedules and new business from diversifying our global customer base of $417 million, primarily in Asia Pacific, favorable foreign exchange of $141 million and commodity pass-through of $139 million. Other customer sales in Asia Pacific grew by approximately $625 million or 52%, including effects of foreign currency exchange, compared to 2005. Included in this increase in other customer sales is $96 million of additional sales from the joint venture, SDAAC in the Thermal Systems product segment. Effective July 1, 2006, the Company acquired a controlling position in SDAAC. To a lesser extent, the other customer sales increase was affected by the migration of certain chassis component product programs from sales to GM to sales to Tier I customers of approximately $124 million. Offsetting these increases in other customer sales were contractual price reductions.
2) Gross margin decreased to $976 million or 3.7% in 2006 compared to gross margin of $1.2 billion or 4.6% in 2005. The gross margin decrease was primarily due to lower vehicle production and unfavorable product mix of approximately $567 million, partially attributable to an approximate 4% reduction in GM North America vehicle production. Additionally, contractual price reductions of approximately $427 million caused gross margin decreases. Offsetting these decreases were improvements in operational efficiencies of approximately $678 million, achieved despite increases in commodity prices such as copper, steel and resins/chemicals that could not be fully passed through to the customer. These improvements included approximately $137 million due to lower wage temporary hourly employees hired in the U.S. to replace employees leaving under the UAW Attrition Programs and IUE-CWA Special Attrition Program, and the unfavorable impact of increases in wage and benefit economics for the traditional U.S. legacy workforce of approximately $181 million. Also included in the improvements in operational efficiencies were improvements in both material and manufacturing efficiencies, partially offset by the manufacturing inefficiencies related to the large scale transition of the workforce from traditional employees to temporary labor. In addition, an increase in postemployment benefit accruals for other than temporarily idled employees in 2005 that was not repeated in 2006 resulted in a favorable impact to cost of sales by approximately $204 million.
Electronics and Safety
3) Total sales for 2006 decreased $221 million from 2005 primarily due to lower customer production schedules, unfavorable sales mix, and the net of new and lost business of $69 million and contractual price reductions of $120 million. These decreases were partially offset by the favorable impact of foreign currency exchange rates by $32 million, primarily due to movements in the Euro and Korean Won.
- The GM sales decrease ($211 million) for 2006 as compared to 2005 was primarily due to a decline in GM North America production schedules, unfavorable sales mix, and the net of new and lost business, including design improvements that reduce costs and corresponding sales $197 million, as well as contractual price reductions. GM sales included a slight impact from favorable currency exchange rates, primarily related to the Euro.
- The other customers and inter-segment sales decreased slightly ($10 million) for 2006 as compared to 2005 due to contractual price reductions. Offsetting these decreases were increased customer production schedules and new business wins, primarily in Europe and Asia Pacific, of $127 million, and a favorable impact from currency exchange rates of $27 million, primarily the Euro and the Korean Won.
4) The increased operating income for 2006 as compared to 2005 was impacted by material savings and improved manufacturing and engineering operations performance which increased operating results by $160 million. In addition, operating income for 2006 included a gain on the sale of MobileAria assets of approximately $7 million. Offsetting the increase were a reduction in customer production schedules and unfavorable sales mix of $115 million as well as contractual price reductions of $120 million.
Powertrain Systems
5) Total sales for 2006 decreased $92 million from 2005 primarily due to the sale of the global battery product line in the third quarter of 2005 of $179 million, contractual price reductions of $118 million and design changes that reduced cost and corresponding sales of $52 million. The decrease in sales was partially offset by a $154 million increase in customer production schedules, sales mix, and the net of new and lost business, the favorable impact of foreign currency exchange of $53 million, related to the Brazilian Real, Chinese Renmenbi and Euro, as well as commodity pass-through of $49 million.
- The GM sales decrease ($257 million) for 2006 as compared to 2005 was primarily due to a decline in GM production schedules, sales mix, and the net of new and lost business of $172 million, as well as contractual price reductions. Included in the GM sales decrease during 2006 was the sale of the global battery product line in the third quarter of 2005 of $40 million. Offsetting these sales decreases was a slightly favorable impact from currency exchange rates, primarily the Brazilian Real, and commodity pass-through of $17 million.
- The other customers and inter-segment sales increase （$165 million) for 2006 as compared to 2005 was due to customer production schedule increases, sales mix, and the net of new and lost business of $288 million, primarily in Europe and Asia Pacific, as well as commodity pass-through of $32 million and a favorable $48 million impact from currency exchange rates, primarily driven by the Brazilian Real and the Chinese Renmenbi. Included in the net production schedule increases was a partial reduction to other customer and inter-segment sales from the sale of the global battery product line in the third quarter of 2005 of $139 million. Other customers and inter-segment sales were also unfavorably impacted by contractual price reductions.
6) The operating loss decrease ($318 million) for 2006 as compared to 2005 was primarily attributable to a $368 million goodwill impairment charge recorded in 2005, operational performance improvements, primarily manufacturing and material improvements and a $37 million gain on the sale of the global battery product line recognized in the third quarter of 2005. Offsetting these decreases were reductions in net customer production schedules, primarily GM offset by other customers, sales mix of $50 million and contractual price reductions of $118 million, increased employee termination benefits and other exit costs related to the consolidation of our U.S. locations and the establishment of additional environmental reserves.
Electrical/Electronic Architecture
7) The total sales increase of $55 million for 2006 as compared to 2005 was primarily due to commodity pass-through, primarily copper, of $187 million, as well as favorable foreign currency exchange of $63 million, primarily related to the Euro and the Brazilian Real. These increases in sales were partially offset by customer production schedules, sales mix, and the net of new and lost business of $30 million and contractual price reductions of $147 million.
- The GM sales decrease for 2006 ($138 million) as compared to 2005 was primarily due to a decline in GM North America production schedules, sales mix and the net of new and lost business of $198 million, as well as contractual price reductions. The decrease was somewhat reduced by commodity pass-through and the impact of favorable currency exchange rates of $20 million, primarily related to the Brazilian Real.
- The other customers and inter-segment sales increase for 2006 ($193 million) as compared to 2005 was due to customer production schedule increases, sales mix, and the net of new and lost business of $168 million, primarily in Europe and Asia Pacific, and commodity pass-through. Further driving the increase was the impact of favorable currency exchange rates of $43 million, primarily related to the Euro and the Brazilian Real. Offsetting the favorable volume, commodity pass-through and currency impacts were contractual price reductions.
8) The operating loss for 2006 as compared to operating income for 2005 was the result of reductions in customer production schedules and sales mix of $136 million and contractual price reductions of $147 million. Results in 2006 were impacted by a challenging environment for the North American business which included a reduction GM North America production schedules and the absence of a competitive labor agreement in the U.S. operations to allow the Company to adjust its cost structure to the lower volume requirements, as well as $40 million increase in employee termination benefits and other exit costs related to its U.S. and selected western European operations. Results were also negatively impacted by global commodities markets, especially copper. Partially offsetting these decreases was minimal long-lived asset impairment charges recorded in 2006 versus $35 million recorded in 2005.
Thermal Systems
9) Total sales for 2006 increased $46 million from 2005 primarily due to the acquisition of a controlling position in SDAAC. SDAAC is a Chinese entity specializing in HVAC and powertrain cooling supply to the Chinese market. SDAAC’s revenue included in Thermal Systems operating results beginning in the third quarter of 2006 was $96 million related to other customers. Additionally, sales increased due to a favorable impact from commodity pass-through of $18 million and favorable foreign currency exchange of $18 million, mostly offset by customer production schedules, sales mix and the net of new and lost business of $61 million and contractual price reductions of $25 million.
- The GM sales decrease for 2006 ($89 million) as compared to 2005 was primarily due to a decline in GM North America production schedules and the net of new and lost business of $103 million, as well as contractual price reductions. The decrease was partially reduced by commodity pass-through of $16 million, related to aluminum and copper, and the slightly favorable impact of currency exchange rates related to the Brazilian Real and Euro.
- The other customer and inter-segment sales increase for 2006 ($135 million) as compared to 2005 was primarily driven by the acquisition of a controlling position in SDAAC discussed above. Excluding the impact of the SDAAC acquisition, other customers and inter-segment sales were further improved by additional customer production schedules and the net of new and lost business of $37 million from increasing business in North and South America. Favorable foreign exchange of $12 million, related to the Brazilian Real and Euro, and commodity pass-through were partially offset by contractual price reductions for a combined net increase to sales of $5 million.
10) The increase in operating loss for 2006 ($90 million) as compared to 2005 was impacted by a reduction in customer production schedules and sales mix of $31 million and contractual price reductions of $25 million. As Thermal Systems continues to transform operations, it incurred costs related to additional employee termination benefit and other exit costs of $61 million, as well as increases to environmental reserves in the U.S. Additionally, during the third quarter of 2006 Thermal Systems began experiencing quality issues regarding parts that were purchased from one of the Company's suppliers and subsequently established warranty reserves to cover the cost of various repairs that may be implemented. Operating income in 2006 was also disproportionately affected by Thermal System's ongoing investments in new markets.
Steering
11) Total sales for 2006 decreased $20 million from 2005 primarily due to reduced customer production schedules, sales mix, the net of new and lost business and design changes of $5 million; and contractual price reductions of $12 million. These decreases were partially offset by a slight favorable foreign currency exchange.
- The GM sales decrease for 2006 ($41 million) as compared to 2005 was primarily due to a decline in customer production schedules, sales mix, and the net of new and lost business of $31 million, including the migration during the period of certain product programs from sales to GM to sales to Tier I customers. GM sales decrease was also due to contractual price reductions and a reduction in commodity pass-through, partially offset by a slightly favorable impact from currency exchange rates.
- The other customers and inter-segment sales increase for 2006 ($21 million) as compared to 2005 was due to changing customer production schedules (non-U.S. improvements offset by reductions in the U.S.), sales mix, and the net of new and lost business of $25 million, including the migration during the period of certain product programs from sales to GM to sales to Tier I customers. The new business growth was driven primarily by opportunities in China. Offsetting this increase were contractual price reductions.
12) The reduction in operating loss for 2006 as compared to 2005 was impacted by operational performance improvements, primarily in material and manufacturing, of $28 million, as well as a reduction in costs for idled U. S. hourly workers who receive nearly full pay and benefits of $42 million. Offsetting these favorable items were reductions in customer production schedules and unfavorable sales mix of $51 million, contractual price reductions of $12 million and employee termination benefit and other exit costs.
Automotive Holdings Group
13) Total sales for 2006 decreased $57 million from 2005 primarily due to customer production schedules, sales mix, and the net of new and lost business of $64 million and contractual price reductions of $31 million, partially offset by a favorable impact from commodity pass-through of $24 million and favorable currency exchange rates of $14 million.
- GM sales decreased for 2006 by $287 million as compared to 2005 primarily due to the migration of certain product programs from direct sales to GM to sales to Tier 1 customers, the exit of certain plants and products (operations other than the Company's chassis products and interiors product operations) and contractual price reductions. The increase in other customer and inter-segment sales in 2006 ($230 million) was substantially impacted by the migration of certain product programs from sales to GM to sales to Tier I customers.
14) The operating loss improvement for 2006 ($206 million) as compared to 2005 was impacted by operational performance improvements, primarily in manufacturing, of $191 million, as well as a reduction in costs for idled U.S. hourly workers who receive nearly full pay and benefits of $69 million. Offsetting these improvements were the impacts of volume reductions and sales mix, long-lived asset impairment charges and the establishment of additional environmental reserves.
Corporate and Other
15) Corporate and Other includes the expenses of corporate administration, other expenses and income of a non-operating or strategic nature, elimination of inter-segment transactions and charges related to U.S. employee special attrition programs. Additionally, Corporate and Other includes the Product and Service Solutions business, which is comprised of independent aftermarket, diesel - aftermarket, original equipment service, consumer electronics and medical systems.
- Corporate and Other sales 2006 were $296 million a decrease of $266 million compared to $562 million in 2005. The decrease is primarily related to the divestiture of the global battery product line, lower sales in GM service parts organization business and a softening in the U.S. retail satellite radio market. Partially offsetting these decreases was a reduction of eliminations of inter-segment sale transactions of approximately $1.4 billion and $1.6 billion in 2006 and 2005, respectively.
16) The operating loss for 2006 for Corporate and Other was $2.8 billion compared to $23 million for 2005. The increased loss was primarily due to U.S. employee special attrition program charges of $3.0 billion in 2006.
Contracts
Electronics and Safety
-In January 2006, the Company announced it has won a substantial portion of the satellite receiver business for Hyundai Motor America. The Company will supply XM Satellite Radio capable receivers for the Hyundai Santa Fe, Azera and Elantra. Hyundai is the first automaker to add standard satellite radio to its full vehicle lineup.
-In January 2006, the Company announced the Audi Q7 will be available in 2006 with the Company's Battery Disconnect Safety Device. Activated during a collision event, the Battery Disconnect Safety Device is designed to help prevent potential short circuits, providing circuit protection for the cables connecting the battery to the vehicle's starter, alternator and electrical centers. It performs this through the utilization of a small pyrotechnic charge that quickly and safely disconnects protected circuits.
-In February 2006, the Company announced that it will provide its "Forewarn" Smart Cruise Control, Forward Collision Warning (with audible and visible warnings) and Collision Mitigation (by pre-charging the braking system) for Ford of Europe's all-new Galaxy and S-MAX family vehicles. Ford will market the optional system to customers as Adaptive Cruise Control (ACC) with Forward Alert (FA).
-In May 2006, the Company is supplying its Forewarn(R) Back-Up Aid, DVD rear seat entertainment system and satellite radio receiver for the all new Ford Explorer. It's Forewarn dual-beam radar back-up aid helps drivers avoid back-up accidents by audibly alerting the driver of objects in the rear vehicle path. These alerts - beeps - vary in intensity and rate to indicate how close the driver is to an object.
-In September 2006, Recent studies have confirmed electronic stability control (ESC) technology is one of the more significant safety advancements since the seat belt. Now, Saturn is equipping versions of its latest sedan, the Aura, with StabiliTrak electronic stability control by the Company. This ESC is a vehicle stability enhancement system that helps reduce vehicle spins and excessive understeer. Using a yaw rate sensor, lateral accelerometer, steering angle sensor, electrohydraulic control unit and wheel speed sensors this integrated ESC system modulates brake pressures and adjusts engine torque to help enhance safety, improve vehicle performance and improve ride comfort and control. Saturn is offering StabiliTrak as standard equipment on the uplevel Aura XR, available at retailers now.
Thermal Systems
-In February 2006, the Company announced it is supplying the climate control system on Ford 2006 Fusion mid-size sedan. The Company supplies the compact HVAC module, air conditioning compressor, air conditioning lines, heater hoses, and HVAC control heads and sensors for the vehicle. The Fusion utilizes the same architecture as the Mercury Milan and Lincoln Zephyr to which the Company supplies the same content. Its estimated sales revenue for the business is approximately $345 million over the life of the contract.
-In June 2006, the Company announced that it will supply its MagneRide Semi-Active Suspension with the Audi's new TT coupe. Drivers will notice something different about the new version of this sports car -- better transient handling and road isolation along with increased driver comfort and the ability to select the level of suspension damping with a console-mounted two-position driver preference switch. It uses magneto-rheological fluid to provide continuously variable real-time suspension damping control. Named Audi Magnetic Ride on the TT, MagneRide responds in real time to road and driving conditions based on input from sensors that monitor vehicle body and wheel motion.
-In June 2006, Audi's first luxury sport utility vehicle, the Q7, hits showrooms this year able to offer something most others in its class do not -- a four-zone fully-automatic climate control system. The unique system, designed and engineered by the Company and Audi, and manufactured by the Company, uses separate front and rear heating, ventilation and air conditioning (HVAC) modules with independent air controls for each zone. The Audi Q7 is now available in both the United States and Europe. The four-zone system is optional content on the Audi Q7. For this vehicle, the Company also manufactures HVAC modules with dual-zone automatic air conditioning control for both driver and passenger.
-In September 2006, Bosal Delphi Complete Exhaust Systems won its first contract since the Company and Bosal Group entered into an alliance last year, the companies announced. The contract for a complete exhaust system, which includes a Delphi- supplied "hot end" and a Bosal-supplied "cold end" is worth $235 million over its lifetime. Distribution of the complete exhaust system in North America is expected to begin in 2009. Further details of the bookings remain confidential at the customer's request.
Electrical & Electronic Architecture
-In June 2006, the Company is offering the industry's first automotive application of its patented Flexible Beam Technology (FBT), which will create cost-effective and versatile solutions for its connection systems customers around the world. Building on its successful lineup of GT 150 and 280 unsealed series connectors, this Connection Systems has modified the series of female connectors to expand its United States Consortium for Automotive Research (USCAR) portfolio of products. This standardization improves cost and complexity by delivering a small, more compact system that saves space and reduces the total number of required assembly parts. At the same time, FBT also improves quality, reliability and serviceability.
Steering
-In December 2006, the Company has booked $3.3 billion in new steering and halfshaft business to date in 2006, and expects additional new business awards prior to year-end, company officials said. Sixteen global customers are included among the new business awards, with no single customer representing more than 50 percent of the total business. More than half of the new business is for vehicles produced in Europe, Asia and South America. The products sold include electric and hydraulic power steering systems, steering columns, gears, hoses and halfshafts. The Company's Steering now supports 64 customers worldwide.
Module and other
-In February 2006, the Company announced it will assume full cockpit module design and build responsibility on the new Mercedes GL-Class full-size SUV, which is scheduled to launch in the U.S. and Europe later this year. The instrument panel and console are manufactured in its Gadsden, Ala. plant and the entire cockpit assembly is performed at the Cottondale, Ala. facility. Both operations are in close proximity to Mercedes' Tuscaloosa, Ala. vehicle assembly plant where the GL-Class will be built alongside the M- and R-Class models.
-In March 2006, the Company announced that it is supplying the complete climate control system and MagneRide controlled suspension technology, as well as the electrical/electronic (E/E) system including electrical centers, to Ferrari's newest luxury vehicle, the 599 GTB, the replacement to the 575 Maranello. The Climate Control System is managed by an electronic control unit and receives and processes data on external and internal temperature through newly enhanced software and a solar load sensor. The system components include a carbon anti-pollution and anti-particle filter and a compact variable displacement compressor (7CVC) modified to meet the car's high performance needs.
-In May 2006, the Company announced it will supply new Jaguar XK model with its center console module. This integrated central console module helps reduce complexity, makes on-board operation easier, and helps improve driving safety. The driver can concentrate better on the driving without being taxed by complicated and confusing switches and buttons. The console module from the Company integrates switch functions for the centrally mounted touch screen that allows for intuitive selection of climate, audio, navigation, telephone and vehicle personalization settings. The Company is scheduled to assemble approximately 10,000 integrated center console units annually for Jaguar, which will be produced in Castle Bromwich production facility located in the West Midlands, Great Britain. The new consoles are to be fitted as standard on all 2007 XK models.
Partnership
- In March 2006, the Company announced it has established a joint venture with a European brake system supplier, Roland Brake Systems, to produce brake lining in India. The new company, named "Alliance Friction Technologies," will start full operation in the second half of 2006 to produce 1.1million sets annually and will raise the volume to 2 million sets in 2007, which will be marketed in Europe through Delphi network. Although the two partners have their own brake lining production companies in India, the joint venture will establish its own plant in the suburbs of New Delhi.
Acquisition
-In the second quarter 2006, the Company's Thermal Systems segment made an additional investment in Shanghai Delphi Automotive Air Conditioning Co. ("SDAAC") for approximately $14 million, which increased its equity ownership interest in SDAAC from 34 percent to 50 percent. SDAAC’s annual revenues for 2005 were approximately $133 million. In the third quarter of 2006 the Company obtained a controlling management interest in SDAAC and began consolidating the entity.
-In August 2006, Ashimori Industry Co., Ltd. announced that it will dissolve a seatbelt joint venture with the Company. Ashimori intends to transfer its shares in the joint venture plant in North America to the Company. Ashimori and the Company formed business alliances for seatbelts in 2000 and for airbag systems in 2001. As the plant mainly supplies to the U.S. Big Three automakers, whose orders have been low, Ashimori will dissolve the partnership so as to invest mainly in Asia, particularly in China, where the company is expanding operations.
Divestitures
-In June 2006, Freudenberg NOK Mechatronics is to buy the Berlin-based production plant for large flexible printed circuits (large FPCs) and a large share of the associated business from Delphi Deutschland GmbH, a wholly-owned subsidiary of the Company. The Berlin plant generated sales of 27 million euros in 2005 and employs 160 people. The significance of large FPCs will continue to grow due to the increased use of electrical and electronic technology in cars.
-In October 2006, the Company announced that it has identified its power products business as a non-core operation. Management responsibility for the power products business -- which develops and manufactures power lift gates, power deck lids, power sliding doors, and power cinching latches and strikers -- will be transitioned to Delphi's Automotive Holdings Group. As a result of this decision, the Company will begin evaluating strategic alternatives for the Power Products business, including the potential sale of this business.
R&D
R&D Expenditure
| (in billion USD) | 2006 | 2005 | 2004 |
| R&D Expenditures | 2.1 | 2.2 | 2.1 |
R&D Structure
-As of December 31, 2006, the Company employed approximately 20,000 engineers, scientists and technicians around the world, including 17,000 at the Company's technical centers and customer centers, with over one-third focused on electronic and high technology products, including software algorithm development.
-The Company celebrated on April 19, 2006 opening of "China Technical Center (CTC)," the new R&D base in Shanghai, China. The center will conduct research and development of electronic control units and safety systems for automotive engines and others, targeting at transplant automakers from Japan expanding production in China. The company plans to increase CTC employees to 1,200 by 2009 and to establish it as the largest technical center in the Asia/Pacific region.
New Product Development
Electronics and Safety
-In January 2006, the Company announced it will provide its Collision Mitigation system for a near-term European platform. The system includes its “Forewarn” Smart Cruise Control & Stop and Go, Forward Collision Warning (with pre-crash functionality that includes autonomous braking) and Lane Departure Warning. The system also has capabilities to add IR (infrared) Active Night Vision.
-In May 2006, the Company announced that it supplies its power sliding door for Mercedes' light duty commercial vehicle, the 2006 Vito, and multi passenger vehicle, the 2006 Viano. With just the touch of a button, a dedicated electronic control unit will automatically open and close each side door.
-In June 2006, the Company introduces the Delphi TNR800 (Touch Screen Navigation Radio) to the consumer market, combining advanced DVD-based navigation with AM/FM/CD without giving up the convenience, control and functionality of other connected accessories.
The Delphi TNR800 is designed for seamless integration and functionality in most 2003-2006 GM light trucks and SUVs including the Chevy Tahoe, Suburban, Trailblazer, Avalanche, Silverado; Hummer H2; GMC Envoy, Yukon, Denali; Buick Rainier; and, Cadillac Escalade. Collectively, these North American vehicles are the best selling in their class, but less than 10 percent were equipped with factory navigation. The TNR800 has nearly all the advantages of the original equipment navigation system for these vehicles, including a large, 6.5" easy-to-read touch-screen display. Plus, it provides intelligent map and voice-prompt navigation cues to effortlessly help drivers and passengers get from point A to point B. In fact, drivers can control key entertainment functions of the TNR800 through the steering wheel controls they have come to rely on for both safety and convenience.
-In October 2006, to meet growing consumer demand for ever-increasing data exchange within their automobiles, the Company has introduced a Universal Serial Bus (USB) consumer port that serves as an interface between the vehicle's electrical system and external consumer equipment. This introduction represents its first high-volume USB automotive application in Europe. This USB consumer port, which was on display at the 2006 Convergence conference in Detroit, is installed in the glove compartment or on the dashboard and enables passengers to download MP3 music files and listen to them through the vehicle's audio system. Long-term applications will include multiple ports to also accommodate audio/video, telematics and global positioning exchange.
-In November 2006, the Company announced the upcoming retail introduction of the newest satellite radio receiver, the SKYFi3. As the latest successor in the best-selling SKYFi family, the SKYFi3 is 65% smaller, yet maintains nearly every benefit of the previous generation product. In addition, SKYFi3 can also store and manage up to 10 hours of XM programming through non-removable internal memory, as well as an unlimited number of MP3 files through optional and removable Micro SD cards. Along with the largest 9 line display in its class and low-profile car dock that mounts vertically or horizontally, the SKYFi3 sets a new standard for plug-and-play systems.
-In November 2006, the Company showcased how up-integrating safety systems can add significant value to customers and OEMs at the 2006 International Convergence Conference in Detroit. The Company demonstrated how a single integrated CMOS (Complementary Metal Oxide Semiconductor) camera provides multiple safety enhancements at a lower cost than independent systems. The Company's expertise and intellectual properties in vision systems hardware and algorithms enables a single camera to function as lane departure warning, intelligent head light control, active night vision, and pedestrian recognition. The system also enables feature and functional growth in areas like road sign recognition, rain sensing, headlight rotation and integration with side alert. The Company's unique approach provides a scalable architecture that allows for a customized feature set using common hardware for the automakers. In addition, a single camera also simplifies vehicle packaging while providing multi-system functionality. It also eliminates standalone products that can clutter the windshield or instrument panel.
Powertrain Systems
-In May 2006, the Company has introduced cylinder deactivation valve-train technology which can improve vehicle fuel economy by up to 8 percent based on federal testing procedures.
For the 2006 model year, cylinder deactivation is available on the Pontiac Grand Prix, Chevrolet Monte Carlo and Chevrolet Impala passenger cars. Additionally, it is standard equipment on the 5.3L V-8 GMC Envoy XL and Chevrolet Trailblazer EXT and optional on other engines.
-In June 2006, the Company has reached an important milestone in bringing solid oxide fuel cell (SOFC) technology to market by 2011, according to the U.S. Department of Energy (DOE). Delphi-led team working jointly with DOE's Office of Fossil Energy has achieved all Phase 1 goals of the Solid State Energy Conversion Alliance (SECA). The Phase 1 test, completed by the Company in April and validated by the DOE in May, included four key performance and cost goals. The DOE determined that the Company's SOFC unit met them all : Peak Power Performance (produced peak power of 4.24 kW on methane, the primary constituent of natural gas, achieving the goal of 3-10 kW) ; Peak Efficiency (a peak efficiency of 37 percent, exceeding the Phase 1 goal of 35 percent) ; Power Degradation (matched the durability goal with power degradation of just 7 percent over 1,500 hours of operation) ; Factory Cost (For factory cost, met the Phase 1 goal of $800 per kW for the total power unit, assuming volume production, by achieving an estimated $770 per kW)
-In July 2006, with the U.S. automotive industry facing calls to develop environmentally friendly vehicles that decrease dependency on foreign oil, the Company is continuing its commitment to alternative fuels with its family of ethanol-friendly products. The Company now manufactures products that can run on pure ethanol (E100) or any blend of gasoline and ethanol, including the E85 now increasingly available throughout the United States. The technologies can be found on nine vehicles sold in the United States and South America. (Further details remain confidential at the customer's request.) In the United States, the Company has supplied E85-compatible technology to more than 2 million vehicles. In South America, it has produced systems and components for more than 430,000 ethanol compatible vehicles since 1991.
-In October 2005, the Company has been selected by Ford Motor Company to provide hybrid electrical powertrain systems technologies for two Ford hybrid vehicle platforms, company officials announced at the 2006 Convergence Conference. The Company will provide the battery pack systems and cooling systems for the 2008 Ford Fusion Hybrid and Mercury Milan Hybrid vehicles. It will also provide hybrid vehicle electronics for several other yet-to-be announced vehicle customers.
Electrical & Electronic Architecture
-In November 2006, the Company's new electrical grounding system reduces the need for several grounding assemblies to one. The new system was on display at the 2006 Electronica show in Munich. In a single step, multiple wiring harnesses are attached to one centrally located grounding base with virtually no limit on the number of terminals that can be attached. A unique ring terminal design provides for the installation of terminals that are stacked onto the grounding bolt and automatically lock into place, preventing rotation and ensuring the integrity of the pre-assembled harnesses while optimizing the electrical and mechanical interfaces. Unlike most grounding systems, which are limited by the number of parts that can be pre-assembled, the Company's new electrical grounding system and the number of terminals that may be attached is limited only by the length of the grounding bolt. One to five terminals can be assembled on a standard bolt, but the length of the grounding bolt can vary based on OEM specifications, the electrical harness design and the number of terminals to be attached.
-In November 2006, the Company's Battery Disconnect Safety Device (BDSD) is becoming standard equipment on vehicles produced by many German automakers known for their leadership in technology. This technology could also be used in hybrids, trains, boats and commercial vehicles. Featuring the pyrotechnic safety switch technology, BDSD could also be applied to industrial machines and high-voltage switches to protect both equipment operators and the machinery, and to high-voltage harnesses used in hybrid vehicles. BDSD pyrotechnically disconnects high currents or voltages in less than one millisecond after an electric signal is triggered. In automobiles, an electric signal from the airbag control unit triggers activation, severing the current that flows through the cable connecting the battery with the starter and alternator. High currents that flow through this cable while starting the vehicle prohibit the use of fuses. If this cable, the largest electrical cable in an automobile, is not protected, current that continues to flow through it following a vehicle crash poses the threat of high-temperature short circuits and arcing, which could lead to a fire.
Steering
-In April 2006, the Company announced it has developed the new One Touch Adjustable Column, drivers can experience luxury convenience without the luxury cost. The One Touch Adjustable system replaces a traditional manual lever with a button located on or near the steering wheel. The driver uses the button to control an electromechanical actuator that locks and unlocks an adjustable column. When the button is pressed, drivers can control rake (up and down placement of the entire column), tilt (up and placement of the wheel) and telescoping (column length) position. The system will be ready to enter the market in 2008.
Other
-In March 2006, the Company announced it developed a product that brings, for the first time, together components of five highly technical vehicle subsystems into one convenient package to help save space, reduce mass, improve warranty and lower costs by up to an estimated 15 percent for vehicle manufacturers. The Steel Hybrid Cross-car Beam integrates the cross-car structure, heating, ventilation, and air conditioning (HVAC) ducting and case support, airbag system, steering column and electrical component supports into one beam made of steel overmolded with plastic. The Steel Hybrid Cross-car Beam is production ready and targeted for the 2009 model year.
Technological Alliance
-In November 2006, TTI, Inc., the world's leading passive and connector specialist has signed an agreement with Delphi Connection Systems. This agreement provides consumers of the Company's products in North America a proven channel solution to support the ever growing needs of this expanding market.
Investment Activities
Capital Expenditure
|
(in million USD) |
2006 | 2005 | 2004 |
| By product sector | |||
| Electronics & Safety | 181 | 282 | 249 |
| Thermal Systems | 25 | 37 | 70 |
| Powertrain Systems | 158 | 227 | 224 |
| Electrical & Electronic Architecture | 182 | 206 | 148 |
| Steering | 85 | 109 | 66 |
| Automotive Holdings Group | 65 | 180 | 157 |
| Corporate and Other | 25 | *142 | 53 |
| Total capital expenditures | 721 | 1,183 | 967 |
| By Geographic Area | |||
| North America | 324 | *696 | 553 |
| Europe, Middle East & Africa | 291 | 356 | 277 |
| Asia-Pacific | 83 | 108 | 115 |
| South America | 23 | 23 | 22 |
| Total capital expenditures | 721 | 1,183 | 967 |
Overseas Investments
-In September 2006, the Company and Bosal Group announced their intention to undertake investments in India to provide OEMs with both cold- and hot-end exhaust systems. The non-equity based alliance, known as Bosal-Delphi Complete Exhaust Systems, brings together the specific expertise, facilities and resources of each party to offer a total customer solution around the globe for any vehicle program and all current fuel options.
-In November 2006, the Company announced that it will reinforce its sales operations in central Japan. The company will set up a new office in Toyota City, Aichi Prefecture, which will integrate the functions of its existing customer service center and engineering office that are currently located separately in the same prefecture. The plan will also include a 30 percent staff increase to some 100 employees by the end of 2007. By strengthening technical solutions proposals and engineering supports in the area, the Company aims to double its sales to Japanese customers by 2010 from the 2005 record.
Domestic Investments
-In July 2006, Delphi Furukawa Wiring Systems LLC-a joint venture company between the Company and Furukawa Electric Company, Ltd. to supply wiring harnesses -announced that it opened a new customer service center in Michigan, the U.S.A. The new center, built across the street from Toyota Technical Center (TTC), will allow the company to make close contact and coordination with TTC, so that the company can better support Toyota''s R&D and manufacturing divisions. Delphi Furukawa Wiring Systems was established in December 2004 in order to supply wiring harnesses for Toyota plants in the U.S.