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Delphi General

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115 views33 pages

Delphi General

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rui zhu
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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January 11, 2017

Deutsche Bank Global Auto Industry Conference


Kevin Clark
President and Chief Executive Officer
Forward-looking statements
This presentation, as well as other statements made by Delphi Automotive PLC (the “Company”), contain
forward-looking statements that reflect, when made, the Company’s current views with respect to current
events, certain investments and acquisitions and financial performance. Such forward-looking statements are
subject to many risks, uncertainties and factors relating to the Company’s operations and business environment,
which may cause the actual results of the Company to be materially different from any future results. All
statements that address future operating, financial or business performance or the Company’s strategies or
expectations are forward-looking statements. Factors that could cause actual results to differ materially from
these forward-looking statements are discussed under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s filings with the
Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible
for us to predict these events or how they may affect the Company. It should be remembered that the price of
the ordinary shares and any income from them can go down as well as up. The Company disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new
information, future events and/or otherwise, except as may be required by law.

2
Strategic priorities
Disciplined revenue growth
• Enhance portfolio of market relevant products
• Balanced regional growth
• Further diversify customer base and platform mix

Cost structure optimization


• On-going footprint rotation to best cost countries
• Continuous improvement of Delphi Enterprise Operating System (EOS)
• Increase leverage in operating model

Increase cash flow


• Continue investment in organic and acquisition growth
• Return cash to shareholders Intelligent Driving
• Maintain investment grade ratings through the cycle

Focused on delivering increased shareholder value

3
Safe, green and connected technology trends
China Emissions: 117 CO2 g/km – 2020 EU Emissions: 95 CO2 g/km – 2021 US Fuel economy: 54.5 mpg – 2025

2010 2015 2020 2025

Assisted ADAS Semi Fully


automation expansion automated automated
Increasing levels of electrification

Electrical architecture is an enabler More…

Increasing levels of software and connectivity

Brought-in Smartphone Full cloud Vehicle as


connectivity integration connectivity a device

Safe, Green and Connected solutions are converging

4
CES highlights
Automated driving Electrification Connected car/Infotainment

• Demonstrated Delphi and • 48V mild hybrids deliver ~70% • Connected car and V2X
Mobileye’s CSLP automated CO2 emissions reductions of full functionality penetration presents
driving platform hybrids at ~30% cost growth opportunity
• Production ready in 2019, fastest • Two programs launching with • Immersive and seamless user
automated system to market in European OEMs in late 2017 experience delivered instantly
the industry through rich, smooth graphics

Showcased industry-leading innovation and expertise

5 Video Link
Active safety evolving to include more automation
100% 10x
80%
Safety benefit

Cost
20% Safety benefit
Cost
1x

Level 0 Level 1 Level 2 Level 3 Level 4 Level 5


Function-specific Combined function Limited self-driving High self-driving Full self-driving
No automation
automation automation automation automation automation
Driver able to cede full Driver able to cede full
Driver is in complete Automation of one or Automation of two or control of all safety- control of all safety-
more control functions No driver required
control of vehicle more control functions critical functions under critical functions for an
certain conditions entire trip

Level 2 automation delivers 80% of the benefit for 20% of the cost of full automation

6
Select Active Safety launches
Volvo XC90 Porsche Cayenne Audi A8
RACam Multi-Domain Controller Multi-Domain Controller

~$400 ~$400 ~$400


Active Active Active
Safety Safety Safety
CPV CPV CPV

Launched 2016 Launching 2017 Launching 2017

Providing integrated intelligent solutions for our customers

7 Note: Delphi active safety content per vehicle


Delphi enables industry technology trends
Advanced computing platforms Active Safety & Infotainment functionality
Multi-Domain Controller (MDC) Integrated Cockpit Controller (ICC) Centralized sensor fusion and user experience control
V2X
Cluster Connectivity
Gesture Controller Head Unit
Controller Controller Controller

Radio
Integrated Controller
Cockpit
Controller

 Scalable software platform


 Reduced architecture complexity
 Faster communication/interconnection
 Multi-processor configurations
Radar
Controller
Camera
Multi-Domain Controller Airbag
Production launch in 2017 & 2018 Controller Controller
Detection
System
Crash
Sensor Controller
Controller

Future system software optimization and upgradeability


8
Electrification dominates the headlines
“Mercedes’ EQ brand plans to build a new electric car
model every year, funneling $7.3bn to fund EV research “Volkswagen announces strategy shift to
and development over next decade.” – Car and Driver build battery packs, EVs and hybrids in
Germany.” – Fortune
“Toyota planning to mass produce battery-powered
long-range electric cars by 2020, changing focus
“Ford will raise $2.8 billion in auto debt to
from hydrogen fuel-cell technology.” – Reuters
boost spending on new technologies
including electrified vehicles.” – Bloomberg
“GM delivers first Chevy Bolt in California, the first
sub-$40,000 long-range electric vehicle.” – Bloomberg “Tesla received 276,000 pre-orders for the
‘mass-market’ Model 3 within two days of
going on sale, making it the most popular
“BMW, Daimler, Ford and Volkswagen team electric car ever produced.” – Newsweek
up to build high-power European electric
vehicle charging network.” – Techcrunch “China set to require New Electric
Vehicles to account for 8% of market
production by 2018.” – Forbes

Accelerating industry trend towards electric vehicles

9
Electrification expected to grow
Electrification increases in the next 10 years: ~27M by 2025
30
Battery Electric
BEVs 25

20

Vehicles (millions)
Plugin Hybrids
PHEVs 15

10
Full Hybrids
HEVs
5

48 Volt -
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Mild Hybrids
48V Mild Full PHEV BEV

Delphi’s electrification portfolio provides innovative customer solutions


10 Source: IHS November 2016
Electrification increases Delphi content per vehicle (CPV)
Delphi technologies Electrification CPV1 2020+ opportunities
Powertrain Management
~$2,400 ~$2,400
• Supervisory controller • Combined inverter/converter
• Supervisory software • 48V Driver module
• Inverter • DC/DC converter
~$1,600 5.0x 5.0x
• Battery pack controller • On-board charger

Electrical/Electronic Architecture 4.0x


~$600
• 48V fusing & distribution • High voltage shielded cable
~$300 3.0x 3.0x
• High power & voltage • Internal battery connections 1.5x
1.0x 1.0x
connectors • 12V battery monitor 0.5x

• Charging inlets and cables ICE 48V HEV PHEV BEV


E/EA Powertrain

Comprehensive portfolio enables vehicle electrification


1 Content per vehicle multiples represent Total Addressable Market (TAM) for electrified vehicles
11 Note: Content per vehicle multiples calculated off ~$300 content on a base gasoline GDi, 2-step variable valvetrain internal combustion engine in 2023 and beyond
Select electrification launches
Tesla Model X Chevrolet Bolt Volvo XC90
Electrical Systems Electrical Systems Battery Management

~1.5x ~1.5x ~4.0x


average average average
CPV CPV CPV

Launched 2015 Launched 2016 Launched 2015

Increased electrification delivers more content for Delphi

12 Note: Content per vehicle multiples calculated off ~$300 content on a base gasoline GDi, 2-step variable valvetrain internal combustion engine in 2023 and beyond
Portfolio evolution continues
Acquisition Divestiture Investment 2017

2016
2015 Over-The-Air update
technology
2015
Multi-layer 3D
2015 display technology
Software-as-a-service for
2015 data management
Reception Enhanced position in
2014 electrical architecture
Systems Software for dynamic
divestiture cylinder deactivation
Refocused 2016
E&S portfolio 2016
Expanded connectivity Mechatronics
products portfolio 2015
Thermal divestiture divestiture
2015
2015 China JV
Refocused
2014 Thermal divestitures Refocused E&S portfolio
2012 Wholly owned and Software for core portfolio
Un Korean JV automated driving
(MVL) Solid state
Refocused LiDAR startup
Expanded connectivity core portfolio
Strengthened leading products portfolio
position in connectors

Core portfolio focused on profitable growth

13
Broadening business model
Recent announcements Future opportunities

• Broadens our “Big Data” capabilities • Scalable vehicle software, programming and OTA
updates enhances Services business revenues
• Leverages real-time data and the cloud to • Expanding usage with global OEMs via integration
identify and solve issues across product portfolio

• Accelerating Powertrain development cycle

• Provider of OTA update technologies

• Compliments Control Tec’s data analytics for • Measure on vehicle


MOVIMENTO
complete connected services
• Send to cloud
• Process in the cloud
• Opportunity to drive market adoption
• Send back to vehicle

Strengthening our software capabilities

14
Returning value to shareholders
Share repurchase history TSR since IPO
($ billions) (Total shareholder return)

$1.2 235%
~$5.0B
cash $1.0
returned to
shareholders 180%
2011 – 2016

~$0.6
$0.5
$0.4

2012 2013 2014 2015 2016E Auto peers DLPH

Significant return to shareholders


Total shareholder return (TSR) is from 11/17/11 to 12/31/16
15 Auto peers: Aisin Seiki, Autoliv, BorgWarner, Continental AG, Denso, Federal-Mogul, Harman, Lear, Magna, Sumitomo, Tenneco, Valeo, Visteon
Key takeaways
• Advanced technology driving above market growth
– Product portfolio uniquely aligned to safe, green and connected megatrends
– Automation and electrification create additional growth opportunities

• Strategic partnerships and accelerating product innovation


– Aligning with industry leaders to shape the future of transportation
– Developing key technology enablers, executing strategic priorities

• Portfolio modification and efficient capital deployment continues


– Continue to optimize cost structure yielding more income and cash
– Pursuing additional inorganic opportunities and returning excess cash flow to shareholders

Delphi responding to opportunities with end-to-end solutions

16
Deutsche Bank Global Auto Industry Conference
Joe Massaro
Chief Financial Officer and Senior Vice President
Performance highlights 2010-2016
Revenue Operating income2 EPS3
($ billions) ($ billions)

~$16.5 ~$2.2 ~$6.05

$12.3
13.2%
$1.1

8.8%
$0.84

2010 2016E 2010 2016E 2010 2016E

Track record of strong financial performance


1 Adjusted for FX, commodities and significant acquisitions and divestitures
2. Operating income adjusted for restructuring and other special items; see appendix for detail
18 3 2016E adjusted for restructuring and other special items; see appendix for detail
Note: 2016E represents prior guidance midpoints, all financial results contained within this presentation exclude Thermal
2016 revenue bridge
2016E vs. 2015
($ billions)

$1.0 ~$16.5
~$16.2
($0.3)
$0.7
$15.2

($0.4)

2015 FX/ M&A Organic 2016 Planned 2016


commodities growth guidance divestiture baseline

Organic growth more than offsets macro headwinds


19
19
Bookings growth
Continued bookings growth 2011 – 2016 key technologies
($ billions)
Infotainment &
Active Safety User Experience
$26 ~$26
$25
$24 $24
$22 ~40% ~15%
$21 $21
$20 $20 CAGR2 CAGR2
$17
~$5B ~$13B

48V / EV / HEV GDi & Valve Train

~35% ~15%
CAGR2 CAGR2
2011 2012 2013 2014 2015 2016
1
~$5B ~$7B
Reported bookings Adjusted bookings

Consistently strong bookings in key technologies


1 Adjusted for divestitures, foreign exchange, and commodities
2 Revenue CAGR from 2015 – 2020 estimates
20 Note: Bookings represent lifetime gross program revenues awarded, based upon expected volumes and pricing
Further improving cost structure
Manufacturing expense % of revenue Net engineering spend1
($ billions)

17.6% ~$1.3
~17.3%
<17% ~$1.2
$1.2

2015 2016E 2017E

Material cost % of revenue

49.1%
~48.0% <48%
2015 2016E 2017E
% advanced
engineering ~18% ~20%
2015 2016E 2017E

Lean cost structure allows for investment in engineering to drive growth

21 1 Represents gross engineering expenditures less rebills to customers and government agencies; 2015 gross engineering was $1.5B
Breakeven analysis
2017E cash flow breakeven summary Management priorities
Actual
Breakeven
• Manufacturing footprint rotation

• Strategic portfolio realignment


35%

• Enhanced sourcing activities


90%
• Maintain flexible workforce

• Corporate overhead reductions


1
Revenue Operating Income

Constant focus on cost structure improves resilience in downturn scenarios

22 1 Adjusted for restructuring and other special items, see appendix for details
Capital structure
WeightedDec
($ millions) average
31, 2015 maturity
Dec 31, 2016E Weighted average maturity Free cash flow4
(years) ($ millions)
Cash1 $536 ~$800 ~3 year
9.4
increase
6.6
Debt $4,008 ~$4,000
~$1,100

Net debt $3,472 ~$3,200

Before refinancing After refinancing $963


Debt-to-
2.1x 2.0x
EBITDA2 Interest expense
Net debt-to- ($ millions)
~$20M
1.9x 1.8x ~$40
EBITDA3 annual
savings
~$20
S&P BBB BBB
Moody’s Baa3(pos) Baa3 (pos)
Fitch BBB BBB 2015 2016E
Interest on prior notes Interest on new issuance

Capital allocation strategy remains unchanged


1 Includes restricted cash of $1M on Dec 31, 2015 and Dec 31, 2016
2 Represents Moody’s adjusted ratios
23 3 Represents Moody’s adjusted debt less cash
4 See Appendix for detail and reconciliation to US GAAP
Capital allocation track record
2011-2016E capital allocation Capital deployment
($ billions)
• Advanced engineering, including automated driving,
~$2.3B Growth R&D
~$4.4 net M&A faster computing platforms, infotainment and electrification
~$5.0B outflow
cash 2011 – 2016
returned to
shareholders • Supporting customer launches
2011 – 2016 Capital
• Technology tools for increasing business efficiency
~$2.8 Expenditures
• Further optimizing global footprint
~$2.3 ~$2.3

~$1.7
• Increased dividend payout to ~15% of operating cash flow
Dividends
~$1.0 • Increased annual dividend to $1.16

M&A and • Portfolio modifications strengthen competitive position


2011 2012 2013 2014 2015 2016E share • Pursue strategic transactions that enhance value
Capex Growth R&D R Cash Dividends Share repurchases M&A repurchases • $1.4B share repurchase authorization

Capital deployment drives shareholder returns

24
Portfolio realignment
Acquisition/ 2015-2018 2015-2018 Synergy
Explanation
divestiture date revenue CAGR EBITDA Margins achievement

EBITDA margins over plan


Q4 2012 ~5% ~30% 1.5x
Synergies in excess of plan
Bookings ahead of plan
Q4 2014 ~30% ~20% 1.5x Revenue growth well over plan
Synergies in excess of plan
Bookings ahead of plan
Q4 2014 ~20% ~40% 1.1x
Synergies in line with plan
Non-core divestiture to focus
Thermal1 Q2 2015 ~10% ~10% N/A
on higher margin segments
Reception Systems1 Q3 2015 ~(25%) ~5% N/A Divestiture refocuses E&S portfolio
Penetrating new customers and
Q4 2015 ~40% ~45% N/A2
expanding into new lines of business
Bookings ahead of plan
Q4 2015 ~10% ~20% 1.1x
Revenue growth over plan

Mechatronics1 Q4 2016 ~(15%) ~30% N/A Divestiture refocuses E&S portfolio

Delivering incremental value through seamless execution


Note: FCI (MVL) includes Connection Systems product line results
1. Thermal, Reception Systems and Mechatronics represent projection estimates prior to divestiture
25
2. Cost synergies not included in investment thesis; revenue synergies not quantified at time of transaction
2017 business outlook
Tailwinds Neutral Headwinds

Consumer & Global vehicle Diesel market


regulatory demands production
High-growth products:
ADAS, GDi, Electrification and Pricing Exchange rates
Infotainment (EUR, GBP and CNY)

Cost structure Portfolio modifications


Cu Commodities
optimization Mechatronics divestiture

Targeting mid-single digit adjusted growth on flat vehicle production

26
Exchange rate sensitivity
Key exchange rate index Absolute rate changes Revenue 1% ∆ sensitivity
105 1.40
1.30
100 1.20 ~$50mn
1.10
95 1.00
Jan-14 Jan-15 Jan-16 Jan-17
90
1.80
85 1.60
~$5mn
1.40
80
1.20
75 Jan-14 Jan-15 Jan-16 Jan-17
7.00
70 6.75
6.50 ~$30mn
6.25
6.00
EUR GBP CNY Jan-14 Jan-15 Jan-16 Jan-17

Strengthening USD impacts revenue translation

27
Delphi investment thesis

Portfolio Organic growth Margin Capital


management acceleration expansion allocation

• Portfolio aligned to • Targeted market • Optimized cost structure • Balanced, predictable


megatrends penetration cash deployment
• Enterprise operating
• Increasing exposure to • Well positioned for key system advancements • Laser-focused on
key technologies customers in region shareholder return
• Flexible global footprint
• Global scale and reach • Track record of growing adaptation • Essential, accretive
for key markets >2x the market portfolio enhancements

Delivering value is at the core of what we do

28
Making it possible.
Appendix
Non-US GAAP financial metrics
($ millions) 2015 2010

Net income attributable to Delphi $1,450 $631


Income tax expense $263 $226
Interest expense $127 $30
Other (income) expense, net $88 ($35)
Noncontrolling interest $85 $72
Equity income, net of tax ($16) ($6)
Income from discontinued operations, net of tax ($274) ($64)
Operating income $1,723 $854
Restructuring $177 $173
Other acquisition and portfolio project costs $47 -
Asset impairments $16 $9
(Gain) loss on business divestitures, net $8 -
Other transformation and rationalization costs - $48
Adjusted operating income $1,971 $1,084
The company’s guidance was determined using a consistent manner and methodology

31
Non-US GAAP financial metrics
($ millions) 2015
Net income attributable to Delphi $1,450
Income from discontinued operations attributable to Delphi, net of tax ($262)
Income from continuing operations attributable to Delphi $1,188
Adjusting items:
Restructuring $177
Other acquisition and portfolio project costs $47
Asset impairments $16
(Gain) loss on business divestitures, net $8
Debt extinguishment costs $58
Transaction and related costs associated with acquisitions $43
Contingent consideration liability fair value adjustment ($7)
Tax impact of adjusting items (a) ($35)
Adjusted net income attributable to Delphi $1,495
Weighted average number of diluted shares outstanding 286.64
Diluted net income per share from continuing operations attributable to Delphi $4.14
Adjusted net income per share $5.22
(a) Represents the income tax impacts of the adjustments made for restructuring and other special items, as well as the elimination of the net impact of deferred tax
asset valuation allowance changes in estimates of $12 million in 2015.

The company’s guidance was determined using a consistent manner and methodology
32
Non-US GAAP financial metrics
(millions) 2015
Net cash provided by operating activities from continuing operations $1,667
Capital expenditures ($704)
Free cash flow $963
The company’s guidance was determined using a consistent manner and methodology

33

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