Delphi 2Q16 Earnings Call Notes

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Delphi Automotive Plc (DLPH) Q2 2016 Results

Kevin P. Clark – President, CEO, Chief Operating Officer & Director

Customers increasingly seeing need for electrification

” As we’ve discussed previously, our customers are increasingly seeing the need for further electrification of the powertrain to close regulatory gaps on CO2 emissions and fuel economy. 48-volt mild hybrids deliver roughly a 70% reduction in CO2 emissions compared to full hybrids at about 30% of the cost. Given our strength in Electrical Architecture and power electronics, Delphi has competitive advantage in the intelligent electrification of the vehicle.”

Large increases in demand for active safety technologies

” with almost 80% of the safety benefits of Level 4 automation coming for just 20% of the cost at Level 2 automation, we see the near-term demand for active safety technologies only growing. As a result, we expect our active safety revenues to increase roughly 50% annually over the next few years.”

Singapore is farthest along in launching robo-taxis

“Yeah, Singapore’s the most advanced from a plan to get to, use your term, robot taxis, and we’ve been working with them or planning with them for about the past year. There are several other cities that are talking about it at this point in time, that we’re talking with, providing the same sort of service and solution. But when you look at Singapore in terms of actually executing, we’re in a situation now where we’ve launched a program. We’ll have piloted vehicles for two years through the end of 2018 and actually pilotless vehicles beginning in 2019. And their plan is to have pilotless vehicles, a fleet of pilotless vehicles in the areas that we’re currently testing beyond 2020 servicing consumers. So they, by far and away, are the further along. But when you look at other U.S. cities, there certainly are examples. London’s talking about it, Amsterdam’s talking about it. They’re looking at it where we’re located outside of Shanghai in Anting, so there’s a lot of dialogue, but Singapore’s first.”

Better margins where it’s tougher to integrate

“We’re now at a point, we’ve talked previously, we talked specifically to active safety, about an investing mode. We’re in profit mode now. It’s not where E&S margins are, but we’re clearly making money. I think with respect to price pressure with specifically as it relates to active safety, it really somewhat depends on what sort of active safety solution you’re talking about, right? If it’s Level 1 where it’s just a camera or just a radar right? As you know, we’re in an industry that commoditizes itself very, very quickly. And to Joe’s point, we’re really good at getting cost out when we get volume and leveraging the manufacturing plant as well as getting material savings. As you get into integrated solution where you’re fusing sensors, that’s a much different scenario, and there are only a few players that can actually do that, we being one of them. And I think in those sorts of scenarios, and that’s where this space is headed. In those sort of scenarios, the pricing pressure is actually very reasonable. It’s there. It’s always there but it’s much more reasonable.

Joseph R. Massaro – Chief Financial Officer & Senior Vice President

We’re watching north America closely but at this point have not seen any softening

Yeah, David, we’re obviously watching it very closely. There was obviously an announcement last week with Ford and such. At this point, what we see is in the forecast. We haven’t had any updates or we have not seen any softening at this point beyond the volume estimates that we have provided.