Delphi Automotive 1Q16 Earnings Call Notes

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Delphi Automotive Plc (DLPH) Q1 2016 Results

Steady growth in vehicle production in CHina, NA and EU

” Regulatory trends and consumer demands continue to influence fuel economy, emissions, and vehicle safety standards, driving content per vehicle growth. And we continue to expect steady growth in global vehicle production, driven by continued growth in China, North America, and Western Europe.”

Declines in SA and Eastern EU though

” We’ve seen further declines in vehicle production in both South America and Eastern Europe and increased weakness in the global commercial vehicle market, now expected to be down low-single digits driven by double-digit declines in the North American off-highway market.”

Customer interest in electrification is gaining momentum

“As we highlighted at our Investor Day and was reinforced in Beijing last week, customer interest in electrification is gaining momentum. Our customers increasingly see the need for electrification of the power train to close the regulatory gaps on CO2 emissions and fuel economy. ”

Automakers are exploring moving to a 48-volt system

“If you look at HIS, and based on conversations with customers, that mix of EV and hybrids out in 2025 has actually increased over the last 6 months. And listen, I’d say there’s maybe an opportunity that it accelerates further. Clearly there’s more dialogue and more interest from our customers, as they focus on solutions to reducing CO2 emissions and increasing fuel economy. And things like 48-volt, where you can get a significant benefit at a fraction of the cost, it’s a great value proposition. It’s a terrific value proposition.”

Cost and regulation are the current hurdles to autonomous driving

“Yeah. We can certainly offer a turn-key solution from a technology standpoint. And we are having dialogues with various parties with respect to that. I think the challenge for both customers as well as folks like ourselves are kind of two-fold. Near term it’s cost…And it’s how you sell commercially effective solution. And then second, it’s the regulatory/legal environment. And how you cross those various bridges. I mean as we said in the past the biggest challenge to get to fully automated is not going to be the technology or the cost. It’s really going to be regulation and legal liability.”

Autonomous is an extension of active safety

“I think the important thing from our perspective as we said, we look at automated driving as quite frankly the far end of the spectrum on active safety. And what excites us most is getting to level two automated driving, which is fully commercialize-able today. You can get to 80% of the active safety benefits, so really at a fraction of the cost. And that is really why we’re seeing the tremendous demand for active safety solutions.”

Engineering growth is in software and systems, it can be done in foreign countries though

“When you think about it from the most rapid growth from an engineering standpoint, it’s clearly on software and systems. They’re 25% of our – those engineers are 25% of our engineering work force to date. And I think we expected – Jeff [Owens] talked about it in our Investor Day – close to doubling that number over the next 5 years. And that doesn’t mean you need to do it in Silicon Valley. You can do it in places like Bangalore, where we’re located, in places like Shanghai. We’re looking at other locations to actually recruit and put those people. And quite frankly where it makes sense, we partner with outside service providers and leverage their capabilities.”