Delphi Corp – IPO: ‘424B4’ on 2/5/99

As of:  Friday, 2/5/99   ·   Accession #:  950124-99-739   ·   File #:  333-67333

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                           198   1.02M 

Document Table of Contents

424B4
1st Page of 198
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
                                      Filed Pursuant to Rule 424(b)4
                                            Registration Statement No. 333-67333

PROSPECTUS                                                                      

100,000,000 Shares

[LOGO]
Delphi Automotive Systems Corporation 

COMMON STOCK

------------------------
DELPHI AUTOMOTIVE SYSTEMS CORPORATION IS OFFERING 100,000,000 SHARES OF ITS 
COMMON STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET EXISTS 
FOR OUR SHARES. 

------------------------

OUR COMMON STOCK HAS BEEN APPROVED FOR LISTING ON THE NEW YORK STOCK EXCHANGE 
UNDER THE TRADING SYMBOL "DPH," SUBJECT TO NOTICE OF ISSUANCE.

------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. 
SEE "RISK FACTORS" BEGINNING ON PAGE 12.

------------------------

PRICE $17 A SHARE 

------------------------

                                                                [Download Table]

                                                       UNDERWRITING                
                                         PRICE TO     DISCOUNTS AND   PROCEEDS TO  
                                          PUBLIC       COMMISSIONS       DELPHI    
                                         --------     -------------   -----------  
                                                                                   
Per Share............................    $17.0000         $.7888        $16.2112   
Total................................ $1,700,000,000   $78,880,000   $1,621,120,000

The Securities and Exchange Commission and state securities regulators have not 
approved or disapproved these securities, or determined if this prospectus is   
truthful or complete. Any representation to the contrary is a criminal offense. 

Delphi has granted the U.S. underwriters an option to purchase an additional    
15,000,000 shares to cover over-allotments. Morgan Stanley & Co. Incorporated   
expects to deliver the shares to purchasers on February 10, 1999.               

------------------------

MORGAN STANLEY DEAN WITTER

GOLDMAN, SACHS & CO.                                         MERRILL LYNCH & CO.

DONALDSON, LUFKIN & JENRETTE                                 SCHRODER & CO. INC.

February 4, 1999                                                                

424B4
2nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 2nd
PROSPECTUS COVER GATEFOLD                                                       
INSIDE FRONT - PAGE 1                                                           

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 
(DPH) 
A global automotive supplier. 

WORLDWIDE LOCATIONS 

[WORLD MAP] 

North America:        India        Europe:              Romania 
Canada              Indonesia      Austria            Russia
Mexico              Japan          Belgium            Spain 
United States       Malaysia       Czech Republic     Sweden

      South America:        Saudi Arabia   France             United Kingdom
Argentina           Singapore      Germany                  
Brazil              South Korea    Hungary          Africa: 
 Venezuela           Taiwan         Ireland            Morocco
                          Thailand       Luxembourg         South Africa
Asia:                 Turkey         Poland             Tunisia 
China                              Portugal                 
                                                     Australia

[PEOPLE - DELPHI BUILDING IN BACKGROUND]

OPERATIONS                                             PEOPLE/FACILITIES        
Headquartered in Troy,                                 Delphi operates 169      
Michigan, USA, Delphi                                  manufacturing sites,     
Automotive Systems                                     27 technical centers     
has operations in 36                                   and 51 customer service  
countries.  We have                                    centers and sales        
regional headquarters in                               activity offices         
Sao Paulo, Brazil; Paris,                              around the world.        
France; and Tokyo,                                     We employ over 200,000   
Japan.                                                 individuals and are      
                                                 engaged in 40 joint
                                       ventures.

424B4
3rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 3rd
PROSPECTUS COVER GATEFOLD                                                       
INSIDE FRONT - PAGE 2                                                           

DELPHI IS THE WORLD'S LARGEST                                                   
AND MOST DIVERSIFIED SUPPLIER OF                                                
COMPONENTS, INTEGRATED                                                          
SYSTEMS AND MODULES TO THE                                                      
AUTOMOTIVE INDUSTRY.                                                            

[AUTOMOBILE WITH HIGHLIGHTED DIAGRAM OF COMPONENT PARTS VISIBLE]

SAFETY, THERMAL &                                                               
ELECTRICAL ARCHITECTURE                                                         
- Interior Products                                                             

Safety/Airbag Systems                                                       

Door Modules                                                                

Power Product Systems                                                       

Modular Cockpits                                                            

- Thermal Products                                                              

Thermal Management Systems                                                  

Climate Control Systems                                                     

HVAC Systems and Modules                                                    

Powertrain Cooling Systems                                                  

Front End Modules                                                           

- Power and Signal Distribution                                                 

Products                                   ELECTRONICS & MOBILE             

Electrical/Electronic (E/E) Systems        COMMUNICATION                    

Centers                                 Audio Systems                 

Connection Systems                         Communication Systems            

Electronic Products                        Advanced Controllers             

Advanced Data Communication                Powertrain and Engine            

Systems                                    Control Modules            

Fiber Optic Lighting Systems               Collision Warning                

Ignition Wiring Systems                       Systems                       

Sensors                                    Security Systems                 

Switch Products                            Safety Systems                   

424B4
4th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 4th
PROSPECTUS COVER GATEFOLD                                                       
INSIDE FRONT - PAGE 3                                                           

[AUTOMOBILE WITH HIGHLIGHTED DIAGRAM OF COMPONENT PARTS VISIBLE]

DYNAMICS & PROPULSION                                                           

- Energy and Engine Management                                                  
Products                                                                    
Air/Fuel Management                                                         
Energy Storage and Conversion                                               
Valve Train                                                                 
Exhaust After-Treatment                                                     
Sensors and Solenoids                                                       
Ignition                                                                    
Fuel Handling                                                               
Controls                                                                    
Advanced Propulsion Systems                                                 

- Chassis Products                                                              
Intelligent Chassis Control                                                 
Systems                                                                   
Advanced Ride Control                                                       
Suspension Systems                                                        
Chassis Systems and Modules                                                 
Brake Systems                                                               
Suspension and Brake                                                        
Components                                                                

- Steering Products                                                             
Steering Systems                                                            
Columns and Intermediate                                                    
Shafts                                                                    
Driveline Systems                                                           
Fuel Efficiency and                                                         
Performance Steering                                                      
Systems                                                                   

424B4
5th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 5th

TABLE OF CONTENTS 

                                                                [Download Table]

                                         PAGE
                                         ----
                                             
Prospectus Summary...................      4 
Risk Factors.........................     12 
Delphi and Its Separation from               
  General Motors.....................     26 
Use of Proceeds......................     30 
Dividends............................     30 
Capitalization.......................     31 
Selected Financial Data..............     32 
Unaudited Pro Forma Condensed                
  Consolidated Financial                     
  Statements.........................     34 
Management's Discussion and Analysis         
  of Financial Condition and Results         
  of Operations......................     39 
Business of Delphi...................     63 

                                                                [Download Table]

                                         PAGE
                                         ----
                                             
Management...........................     94 
Arrangements Between Delphi and              
  General Motors.....................    112 
Principal Stockholder................    134 
Description of Capital Stock.........    135 
Shares Eligible for Future Sale......    145 
Material United States Federal Tax           
  Consequences to Non-United States          
  Holders............................    147 
Underwriters.........................    150 
Legal Matters........................    155 
Experts..............................    155 
Where You Can Find More Information..    155 
Index to Consolidated Financial              
  Statements.........................    F-1 

------------------------- 

In this prospectus, "Delphi," the "company," "we," "us" and "our" each
refers to Delphi Automotive Systems Corporation and "General Motors" and "GM"   
each refers to General Motors Corporation.                                      
------------------------- 

  You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that  
contained in this prospectus. We are offering to sell, and seeking offers to    
buy, shares of common stock only in jurisdictions where offers and sales are    
permitted. The information contained in this prospectus is accurate only as of  
the date of this prospectus, regardless of the time of delivery of this         
prospectus or of any sale of common stock.                                      
------------------------- 

  Until March 2, 1999, all dealers that buy, sell or trade Delphi's common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a       
prospectus when acting as underwriters and with respect to their unsold         
allotments or subscriptions.                                                    

 3

424B4
6th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 6th

PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information that you should consider    
before deciding to invest in our common stock. We urge you to read this entire  
prospectus carefully, including the "Risk Factors" section and the consolidated 
financial statements and the notes to those statements.                         

DELPHI

OUR COMPANY                                                                     

   Delphi is the world's largest and most diversified supplier of automotive
parts, with 1997 revenues of $31.4 billion. Based on the latest Fortune 500     
survey, Delphi on an independent basis would have ranked as the 25th largest    
industrial corporation in the United States based on 1997 revenues.             

   As an automotive parts supplier, Delphi manufactures and sells individual
component parts for automotive vehicles as well as groups of components that are
arranged either as modules based on physical proximity within a vehicle, such as
an instrument panel, or as integrated systems that operate throughout a vehicle 
to provide a specific function, such as audio and braking. We sell these        
components, systems and modules to automotive vehicle manufacturers, including  
General Motors, which is the world's largest manufacturer of automotive vehicles
and by far our largest customer.                                                

Let us tell you more about our company:                               

  - RELATIONSHIP WITH GM. We have become a leader in the global automotive
       parts industry by capitalizing on the extensive experience we have gained
      as the principal supplier of automotive parts to General Motors. General
      Motors currently owns all of our stock. After this offering, GM will own
       about 82.3% of our common stock and will continue to control our company.
 GM has announced that it intends to complete its divestiture of our
 company later in 1999, which we believe will enhance our ability to
increase sales to other vehicle manufacturers over time.          

- EXPANDED CUSTOMER BASE. Several years ago, we began to transform our
      company from a North America-based, captive supplier to GM into a global
     supplier of components, integrated systems and modules for a wide range
   of customers. We now sell our products to every major manufacturer of
    light vehicles in the world. Our sales to customers other than GM have
      grown from 13.3% of our total sales in 1993 to 18.3% in 1997. As used in
  this calculation, our "total sales" include all sales by entities in
which we have a minority interest.                                

    - GLOBAL PRESENCE. We have an expansive global presence, with a network of
      manufacturing sites, technical centers, sales offices and joint ventures
    located in every major region of the world. About 59% of our employees
    and, based on square footage, about 30% of our wholly owned and leased
      manufacturing sites were located outside the United States and Canada as
   of September 30, 1998. About 28% of our total 1997 sales were derived
       from products manufactured at sites located outside the United States and
Canada.                                                           

  - VEHICLE KNOWLEDGE. Through our experience with GM, we have developed a
     sophisticated understanding of the design, engineering, manufacture and
operation of all aspects of the automotive vehicle. We have both  
 extensive technical expertise in a broad range of product lines and
strong systems integration skills, which enable us to provide     
comprehensive, systems-based solutions for our customers.         

 4

424B4
7th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 7th

  - PRODUCTS. We are primarily a "Tier 1" supplier, providing our products
  directly to vehicle manufacturers. We believe that we are one of the
leading Tier 1 suppliers in each of our major product sectors:    

- Electronics & Mobile Communication, which includes our automotive 
electronics and audio and communication systems;                

     - Safety, Thermal & Electrical Architecture, which includes our interior,
thermal and power and signal distribution products; and         

     - Dynamics & Propulsion, which includes our energy and engine management,
chassis and steering products.                                  

      We also supply our products to the worldwide aftermarket for replacement
parts and to customers other than vehicle manufacturers.              

OUR INDUSTRY                                                                    

     We operate in the highly competitive global automotive parts industry. Many
vehicle manufacturers are continuing to reduce their reliance on their own      
internal captive component operations and are moving towards a competitive      
sourcing process for automotive parts. As a result, independent suppliers are   
becoming a more important part of the automotive parts industry and many captive
suppliers no longer sell their products exclusively to their parent company. The
global automotive parts industry is being further reshaped by a number of other 
key trends, including the following:                                            

- Suppliers are becoming increasingly involved in vehicle design and  
      assembly processes as customers source more fully-engineered, integrated
systems and modules.                                              

   - Suppliers are establishing a broader geographic presence to satisfy the
   needs of customers as they produce and sell more vehicles on a global
basis.                                                            

    - The electronic content of vehicles is increasing in response to changing
regulatory requirements and consumer demand.                      

  - Suppliers are consolidating globally as they seek to achieve operating
   synergies, shift production to lower-cost manufacturing locations and
      acquire complementary technologies. Consolidation also enables suppliers
       to build new customer relationships and to follow their customers as they
expand around the world.                                          

    - Product development cycles are becoming shorter as vehicle manufacturers
    seek to respond more quickly to changes in regulatory requirements and
consumer preferences.                                             

OUR BUSINESS OBJECTIVE                                                          

  Our core business objective is to increase our earnings by expanding our
sales globally while improving our operating performance. We have entered into a
supply agreement with General Motors that we believe will provide us with a     
substantial base of future business well into the next decade. We will strive to
maintain our important relationship with GM and expect that it will remain our  
largest customer for a significant period of time. However, we expect that our  
sales to GM's North American operations will decline over time, and our strategy
accordingly focuses on increasing sales to other customers. We believe that our 
ability to achieve this sales growth over the long term will be enhanced by our 
complete separation from GM.                                                    

Our business objective emphasizes continuing operational improvements.
Since 1991, when GM organized its various automotive parts operations into a    
separate business group, we have been evolving from a                           

 5

424B4
8th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 8th

fully captive collection of automotive parts operations into an independently   
managed supplier of components, integrated systems and modules to GM and all of 
the other major vehicle manufacturers. During this transitional period, our     
financial results have at times been adversely affected by a variety of factors 
which we are continuing to address through initiatives to improve our operating 
performance. These adverse factors include significant price reductions as GM   
implemented its global sourcing initiative, labor disruptions at both GM and    
Delphi, and certain unprofitable manufacturing operations.                      

OUR STRATEGY                                                                    

     Our business strategy is designed to leverage our competitive strengths and
capitalize on key trends in the global automotive parts industry. The key       
elements of our business strategy are:                                          

- SUPPLY HIGH-QUALITY, INNOVATIVE COMPONENTS, SYSTEMS AND MODULES. We 
    believe that our technical expertise, breadth of product offerings and
  manufacturing scale allow us to compete successfully on a component,
      system and module basis. We have developed significant system and module
capabilities in a number of key product areas, including power and
  propulsion systems, ride and handling systems, passenger environment
     systems, and control and communication systems. In addition, we believe
     that our substantial in-house electronics integration capabilities give
  us a significant competitive advantage across all our product areas,
       particularly since we believe that electronics integration will drive the
next generation of successful products in our industry.           

  - PURSUE BUSINESS WITH CUSTOMERS OTHER THAN GM-NORTH AMERICA. We believe
     that our product portfolio, global presence and customer responsiveness
  will allow us to increase our sales to customers other than GM-North
      America. We have established customer-supplier relationships with all of
       the major vehicle manufacturers. However, we believe that our status as a
    captive supplier to GM has historically been a major impediment to the
expansion of our business with other customers, as they have shown
      varying degrees of reluctance to source from a supplier owned by a major
       competitor. We believe that, as an independent company no longer owned by
  General Motors, we will have significant opportunities to expand our
business with other customers around the world.                   

     - LEVERAGE GLOBAL PRESENCE. Our operations, including joint ventures, in 36
      countries position us well to pursue new business, especially as vehicle
       manufacturers increasingly favor suppliers that can deliver products with
       consistent technology and quality for vehicles which are manufactured and
sold in markets around the world. We also believe that our global 
       presence allows us to leverage sales to a customer in one location or for
      one product into sales to that customer in other locations and for other
products.                                                         

- IMPROVE OPERATING PERFORMANCE. We are executing several strategic   
 initiatives to improve our operating performance. These include our
     Delphi Manufacturing System, which focuses on achieving lean operations
     through operating flexibility, as well as a management process aimed at
   streamlining our product portfolio, a "fix/sell/close" plant-by-plant
     analysis through which we seek to improve our cost competitiveness, and
various other sourcing, labor and cost reduction initiatives.     

    - COMPLETE STRATEGIC ACQUISITIONS, JOINT VENTURES AND ALLIANCES. We pursue
    strategic acquisitions and alliances to complement or fill gaps in our
  product portfolio, enhance our design, engineering and manufacturing
      capabilities, improve our geographic presence and increase our access to
   new customers. We believe that our separation from GM will provide us
 with greater planning flexibility, the ability to use our stock for
   acquisitions and the opportunity to form alliances with companies not
willing to partner with a supplier owned by GM.                   

  Our ability to implement our business strategy is subject to a number of
uncertainties and risks. In particular, we cannot assure you that we will       
capture significant business with customers other than GM, that we will realize 
the labor relations benefits that we expect from the separation or that we will 
be able to continue to improve our operating performance. For more information, 
see "Risk Factors--Risk Factors Relating to Separating Our Company from General 
Motors" and "--Risk Factors Relating to Our Business."                          

 6

424B4
9th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 9th

RELATIONSHIP WITH GENERAL MOTORS

 We are currently a wholly owned subsidiary of General Motors. After the
completion of this offering, GM will own about 82.3% of the outstanding shares  
of our common stock, or about 80.2% if the U.S. underwriters exercise their     
over-allotment option in full. GM has announced that it currently plans to      
complete its divestiture of Delphi later in 1999 by distributing all of its     
shares of Delphi common stock to the holders of GM's $1 2/3 common stock. GM    
expects to accomplish this distribution through the following:                  

- Split-Off--such as an exchange offer by GM in which holders of GM's 
     $1 2/3 common stock would be invited to tender their shares in exchange
for shares of our common stock; or                                

     - Spin-Off--a pro rata distribution by GM of its shares of our common stock
to holders of GM's $1 2/3 common stock; or                        

    - Combined Split-Off/Spin-Off--some combination of the above transactions.

     GM has the sole discretion to determine the timing, structure and all terms
of its distribution of our common stock. We have agreed to cooperate with GM in 
all respects to complete the divestiture because we believe that our complete   
separation from GM will enhance our ability to pursue our business strategy. GM 
has received a private letter ruling from the IRS to the effect that its        
distribution of its shares of Delphi common stock to the holders of its $1 2/3  
common stock would be tax-free to GM and its stockholders for U.S. federal      
income tax purposes. However, GM is not obligated to complete the divestiture   
and we cannot assure you as to whether or when it will occur. For a discussion  
of the risks associated with GM not completing the divestiture, see "Risk       
Factors--Risk Factors Relating to Separating Our Company from General Motors--  
Our Business May Be Adversely Affected if General Motors Does Not Complete Its  
Divestiture of Our Company."                                                    

    We have entered into agreements with GM that provide for the separation of
our business operations from GM. These agreements are not conditioned on the    
divestiture and provide for, among other things, the transfer from GM to Delphi 
of assets comprising the business of Delphi and the assumption by Delphi of     
liabilities relating to its business. Substantially all of these transfers have 
been or will be completed prior to the closing of this offering.                

The agreements between us and GM also govern our various interim and  
ongoing relationships. In particular, our supply agreement with GM is intended  
to provide us with a substantial base of business with GM well into the next    
decade. All of the agreements providing for our separation from GM were made in 
the context of a parent-subsidiary relationship and were negotiated in the      
overall context of our separation from GM. The terms of these agreements may be 
more or less favorable to us than if they had been negotiated with unaffiliated 
third parties. See "Risk Factors--Risk Factors Relating to Separating Our       
Company from General Motors" and "Arrangements Between Delphi and General       
Motors."                                                                        
------------------

 Our principal executive offices are located at 5725 Delphi Drive, Troy,
Michigan 48098 and our telephone number is (248) 813-2000.                      

 7

424B4
10th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 10th

THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                                    
Common stock offered:                                                                               
  U.S. offering.................................... 85,000,000 shares                               
  International offering........................... 15,000,000 shares                               
                                                    ------------------------------------------------
     Total......................................... 100,000,000 shares                              
                                                    ================================================
Common stock to be outstanding immediately after                                                    
  the offering..................................... 565,000,000 shares                              
Common stock to be held by General Motors                                                           
  immediately after the offering................... 465,000,000 shares                              
Use of proceeds.................................... Our net proceeds from the offering will be about
                                                    $1.621 billion. We will use the net proceeds    
                                                    from the offering for general corporate         
                                                    purposes, including working capital and the     
                                                    temporary pay-down of amounts borrowed under our
                                                    revolving credit facilities. See "Use of        
                                                    Proceeds."                                      
Dividends.......................................... Subject to our financial results and action by  
                                                    our board of directors, we currently intend to  
                                                    pay dividends on a quarterly basis, at an       
                                                    initial rate of $0.07 per share, commencing with
                                                    the first declaration in June 1999 for payment  
                                                    in July 1999. See "Dividends."                  
Proposed NYSE symbol............................... DPH                                             
Preferred share purchase rights.................... One preferred share purchase right will be      
                                                    attached to each share of common stock sold in  
                                                    the offering and thus the rights are also being 
                                                    offered hereby. The rights would cause          
                                                    substantial dilution to any person or group who 
                                                    attempts to acquire a significant interest in   
                                                    our company without advance approval from our   
                                                    board of directors and thus could make an       
                                                    acquisition of control of our company more      
                                                    difficult. See "Description of Capital          
                                                    Stock--Rights Plan."                            

    Unless we specifically state otherwise, the information in this prospectus
does not take into account the issuance of up to 15,000,000 shares of common    
stock which the U.S. underwriters have the option to purchase solely to cover   
over-allotments. If the U.S. underwriters exercise their over-allotment option  
in full, 580,000,000 shares of common stock will be outstanding after the       
offering.                                                                       

The number of shares of our common stock to be outstanding immediately
after the offering listed above does not take into account about 26,000,000     
shares of our common stock that will be issuable upon exercise by our employees 
of "founders grant" stock options and restricted stock units and about          
23,231,000 shares of our common stock that will be issuable upon exercise by our
employees of stock options that will be substituted for GM stock options at the 
time of GM's divestiture of its shares of our common stock. The actual number of
substituted awards will be determined at the time of such divestiture, primarily
based on the ratio of the price of our common stock to the price of GM's stock. 
For a discussion of these stock options and employee benefits awards, see       
"Management--Incentive Plans--Founders Grants" and "Arrangements Between Delphi 
and General Motors--Employee Matters--Shares of Delphi's Common Stock Subject to
Substitute Awards."                                                             

 8

424B4
11th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 11th

SUMMARY FINANCIAL AND OPERATING DATA

   The following table presents summary financial and operating data for our
company, including our Delco Electronics Corporation subsidiary, the electronics
and mobile communication business that GM transferred to us in December 1997.   
The data presented in this table are derived from "Selected Financial Data,"    
"Unaudited Pro Forma Condensed Consolidated Financial Statements," and the      
consolidated financial statements and notes thereto which are included elsewhere
in this prospectus. You should read those sections for a further explanation of 
the financial data summarized here. You should also read "Risk Factors--Risk    
Factors Relating to Separating Our Company from General Motors--Our Historical  
Financial Information May Not Be Representative of Our Results As a Separate    
Company." You should also read the "Management's Discussion and Analysis of     
Financial Condition and Results of Operations" section, which describes a number
of factors which have affected our financial results, including significant     
price reductions as GM implemented its global sourcing initiative, labor        
disruptions at both GM and Delphi and charges associated with certain           
competitiveness initiatives.                                                    

The summary pro forma condensed financial data are derived from the   
application of pro forma adjustments related to this offering and the terms of  
the agreements governing our separation from GM. The pro forma balance sheet    
data give effect to:                                                            

- this offering;                                                      

    - a change in intracompany accounts receivable payment terms from GM prior
to the separation; and                                            

- the settlement of certain GM intracompany accounts receivable and an
intracompany note payable.                                        

The pro forma statement of income data give effect to:                          

- this offering;                                                      

     - decreased employee benefit costs due to GM's retention of certain benefit
obligations; and                                                  

     - certain incremental costs associated with operating Delphi as a separate,
public company.                                                   

     For a more detailed explanation of the calculation of the pro forma amounts
in this table, see "Unaudited Pro Forma Condensed Consolidated Financial        
Statements." The pro forma operating results and financial position shown in    
this table are not necessarily indicative of what our results or financial      
position would have been had the separation of our business from GM been        
completed and had this offering occurred at the beginning of the earliest pro   
forma period presented or on September 30, 1998, as applicable.                 

 9

424B4
12th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 12th

                                                        [Enlarge/Download Table]

                                                                                                NINE MONTHS ENDED      
                                                YEAR ENDED DECEMBER 31,                           SEPTEMBER 30,        
                               ---------------------------------------------------------   --------------------------- 
                                                                                   PRO                           PRO   
                                                                                  FORMA                         FORMA  
                                1993      1994      1995      1996      1997      1997      1997      1998      1998   
                                ----      ----      ----      ----      ----      -----     ----      ----      -----  
                                                       (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)                         
                                                                                                                       
STATEMENT OF INCOME DATA:                                                                                              
  Net sales................... $29,327   $31,044   $31,661   $31,032   $31,447   $31,447   $23,368   $20,679   $20,679 
  Operating income (loss).....   1,763     2,084     2,138    1,273       352        687    1,229      (284)      (201)
  Net income (loss)...........     948       975     1,307      853       215        423      736      (181)      (130)
  Basic and diluted earnings                                                                                           
    (loss) per share..........    2.04      2.10      2.81     1.83      0.46       0.75     1.58     (0.39)     (0.23)
STATEMENT OF CASH FLOWS DATA:                                                                                          
  Cash provided by (used in)                                                                                           
    operating activities......     n/a       n/a     1,370    2,701     2,918        n/a    1,812       (51)       n/a 
  Cash used in investing                                                                                               
    activities................     n/a       n/a    (1,141)    (995)   (1,320)       n/a     (860)     (699)       n/a 
  Cash (used in) provided by                                                                                           
    financing activities......     n/a       n/a      (263)  (1,686)   (1,549)       n/a     (903)      741        n/a 
OTHER FINANCIAL DATA:                                                                                                  
  EBITDA......................   2,378     2,603     2,959    2,182     2,459      2,794    1,877       530        613 

                                                        [Enlarge/Download Table]

                                                                           YEAR ENDED DECEMBER 31,               
                                                             ----------------------------------------------------
                                                               1993       1994       1995       1996       1997  
                                                               ----       ----       ----       ----       ----  
                                                                                                                 
OPERATING DATA:                                                                                                  
  Net sales per employee (U.S.)............................. $185,000   $208,000   $237,000   $234,000   $247,000
  Customer rejected/returned parts per million..............      n/a        n/a        812        462        355
  Lost work day cases per hundred employees.................     3.29       3.04       2.27       1.62       1.24

                                                        [Enlarge/Download Table]

                                                                                        AT SEPTEMBER 30,       
                                                AT DECEMBER 31,                   -----------------------------
                                -----------------------------------------------                       PRO FORMA
                                 1993      1994      1995      1996      1997      1997      1998       1998   
                                 ----      ----      ----      ----      ----      ----      ----     ---------
                                                                  (IN MILLIONS)                                
                                                                                                               
BALANCE SHEET DATA:                                                                                            
  Total assets................. $14,803   $14,494   $15,635   $15,390   $15,026   $15,863   $14,930    $18,051 
  Total debt...................   3,500     3,500     3,500     3,500     3,500     3,500     3,500      3,500 
  Equity (deficit).............    (476)      120     1,354       922      (413)      816       (39)     3,082 

  We adopted Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Postemployment Benefits," effective January 1, 1994. 
The adoption had an unfavorable cumulative effect of $258 million after-tax,    
which is reflected in 1994 net income. For information on special items         
impacting 1996 through 1998 operating results, see "Management's Discussion and 
Analysis of Financial Condition and Results of Operations--Results of           
Operations--Special Items and Work Stoppages."                                  

 "EBITDA" is defined as income before provision for interest expense and
interest income, income taxes, depreciation and amortization. EBITDA is not     
presented as an alternative measure of operating results or cash flow from      
operations, as determined in accordance with generally accepted accounting      
principles, but because we believe it is a widely accepted indicator of our     
ability to incur and service debt. EBITDA does not give effect to cash used for 
debt service requirements and thus does not reflect funds available for         
dividends, reinvestment or other discretionary uses. In addition, EBITDA as     
presented herein may not be comparable to similarly titled measures reported by 
other companies.                                                                

Net sales per employee data for 1993 and 1994 do not include sales or 
headcount information for our Delco Electronics subsidiary.                     

10

424B4
13th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 13th

SUMMARY RECENT FINANCIAL RESULTS

   We reported consolidated net income of $88 million for the fourth quarter
of 1998 and a net loss of $93 million for the year ended December 31, 1998. Our 
fourth quarter 1998 results include a charge of $310 million, or $192 million   
after-tax, recorded as a result of our ongoing evaluation of the competitiveness
of our business. The charge primarily related to underperforming assets,        
voluntary early retirements and the closure of certain unprofitable joint       
ventures. In addition, our full year results were impacted by other special     
items, including work stoppages. Excluding the charge associated with the       
ongoing evaluation of our business, income was $280 million for the fourth      
quarter of 1998. Excluding special items and work stoppages, our income was $820
million for the year ended December 31, 1998. For more information, see         
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Overview--Recent Financial Results."                                

11

424B4
14th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 14th

RISK FACTORS

  You should carefully consider each of the following risks and all of the
other information set forth in this prospectus before deciding to invest in     
shares of our common stock. Some of the following risks relate principally to   
our company's separation from General Motors. Other risks relate principally to 
our business in general and the industry in which we operate. Finally, other    
risks relate principally to the securities markets and ownership of our stock,  
including limitations on our ability to complete certain business combinations  
and change of control transactions. The risks and uncertainties described below 
are not the only ones facing our company. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also    
adversely affect our business.                                                  

     If any of the following risks and uncertainties develop into actual events,
our business, financial condition or results of operations could be materially  
adversely affected. In such case, the trading price of our common stock could   
decline, and you may lose all or part of your investment.                       

    This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including   
the risks faced by us described below and elsewhere in this prospectus.         

RISK FACTORS RELATING TO SEPARATING OUR COMPANY FROM GENERAL MOTORS             

 We are subject to the following risks in connection with our separation
from General Motors.                                                            

    OUR BUSINESS MAY BE ADVERSELY AFFECTED IF GENERAL MOTORS DOES NOT COMPLETE
ITS DIVESTITURE OF OUR COMPANY                                                  

If General Motors fails to complete its divestiture of our company    
substantially within the time contemplated, our business would be adversely     
affected. Specifically, we would likely not realize the increased non-GM sales, 
improved labor relations, capital planning flexibility and other benefits we    
expect to achieve in connection with the divestiture, all of which are important
to our business strategy. Although GM has advised us that it currently plans to 
complete its divestiture of our company later in 1999, it is not obligated to do
so and we cannot assure you as to whether or when the divestiture will occur.   
This means that we cannot assure you that we will obtain the expected benefits  
or as to the timing of any such benefits. For information about GM's plan to    
divest Delphi and the benefits we expect to achieve in connection with the      
divestiture, see "Delphi and Its Separation from General Motors--Separation from
General Motors."                                                                

In addition, until the divestiture occurs, the risks discussed below  
relating to GM's control of our company, the potential business conflicts of    
interest between our company and GM and the potential conflicts of interest of  
the three members of our board of directors who are also directors or executive 
officers of GM will continue to be relevant to our stockholders.                

    OUR CLOSE RELATIONSHIP WITH GENERAL MOTORS COULD LIMIT OUR POTENTIAL TO DO
BUSINESS WITH ITS COMPETITORS                                                   

 We cannot assure you that we will realize the benefits of the increased
non-GM sales that we expect from our separation from GM. GM will remain our     
largest customer for a significant period of time and we will continue to have a
variety of contractual relationships with GM, including the supply agreement    
that we have entered into with GM in connection with our separation. We believe 
that some of GM's competitors have been concerned that awarding contracts to us 
would benefit GM and that GM might obtain access through us to confidential     
information regarding their vehicle design and manufacturing processes. Whether 
or not GM completes its divestiture of our common stock, our close relationship 
with GM will continue for a significant period of time. Accordingly, we cannot  
assure you as to the amount or timing of our sales to customers other than GM.  
In addition, although we have had discussions with all of our major non-GM      
customers regarding our separation from GM, we do not currently intend to seek  
consent from such customers to the assignment of                                

12

424B4
15th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 15th

their existing contracts from GM to us or to enter into new contracts to replace
these existing contracts. See "Business of Delphi--Customers--Other VMs."       

    WE MAY BE UNABLE TO INCREASE OUR COMPETITIVENESS IF WE FAIL TO IMPROVE OUR
LABOR RELATIONS AND ESTABLISH MORE FLEXIBLE LOCAL WORK RULES AND PRACTICES      
FOLLOWING OUR SEPARATION FROM GENERAL MOTORS                                    

     One of the principal benefits that we expect to achieve from our separation
from General Motors is increased competitiveness over time as a result of       
improving our labor relations and establishing more flexible local work rules   
and practices, which are very important to our business because our workforce is
highly unionized. However, we cannot assure you as to when or the extent to     
which we will be able to achieve these benefits. In this regard, our largest    
union, the UAW, which represents about 29% of our unionized employees, has      
stated that it is on record as opposing the separation of Delphi from GM and    
that, should GM decide to proceed with the transaction, the UAW can and will    
aggressively work to protect the rights and interests of its members who would  
be impacted by GM's distribution of Delphi common stock to the holders of its   
$1 2/3 common stock. Since that time, GM and the UAW have agreed that any of our
employees who are members of the UAW and who retire on or before October 1, 1999
will be treated as GM retirees. GM and Delphi have been working with the UAW and
the other unions representing our employees to address the best interests of    
their members regarding these matters. However, we cannot assure you as to the  
outcome of these efforts to work with the unions. See "Business of              
Delphi--Strategy--Improve Operating Performance--Labor Relations."              

    WE MAY INCUR MATERIAL COSTS IN CONNECTION WITH OUR SEPARATION FROM GENERAL
MOTORS                                                                          

     We may incur costs and expenses, potentially including additional taxes and
employee costs, greater than those we have planned for in connection with our   
separation from GM. We cannot assure you that these costs will not be material  
to our business. See "--Risk Factors Relating to Our Business--Making Payments  
of Pensions and Other Postretirement Employee Benefits Could Adversely Affect   
Our Liquidity" and "Management's Discussion and Analysis of Financial Condition 
and Results of Operations."                                                     

  WE WILL BE CONTROLLED BY GENERAL MOTORS AS LONG AS IT OWNS A MAJORITY OF
OUR COMMON STOCK AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME
OF STOCKHOLDER VOTING DURING SUCH TIME                                          

After the completion of this offering, GM will own about 82.3% of our 
outstanding shares of common stock, or about 80.2% if the U.S. underwriters     
exercise their over-allotment option in full. As long as GM owns a majority of  
our outstanding common stock, GM will continue to be able to elect our entire   
board of directors and to remove any director, with or without cause, and       
generally to determine the outcome of all corporate actions requiring           
stockholder approval. As a result, GM will be in a position to continue to      
control all matters affecting our company, including:                           

- the composition of our board of directors and, through it, any      
      determination with respect to the direction and policies of our company,
including the appointment and removal of officers;                

     - any determinations with respect to mergers or other business combinations
involving our company;                                            

- the acquisition or disposition of assets by our company;            

- future issuances of common stock or other securities of our company;

- the incurrence of debt by our company;                              

     - amendments, waivers and modifications to our supply agreement with GM and
other agreements providing for our separation from GM;            

- the payment of dividends on our common stock; and                   

13

424B4
16th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 16th

     - certain determinations with respect to treatment of items in those of our
   tax returns which are consolidated or combined with GM's tax returns.

After the closing of this offering, we expect that three of our eleven
directors will be directors and/or officers of GM. Under our certificate of     
incorporation, our bylaws and board policies established thereunder, so long as 
GM owns at least a majority of our outstanding common stock, many actions by our
board of directors require the approval of 80% of all our directors. Thus, in   
order to take any such action, the approval of one or more of our directors who 
are also directors and/or officers of GM will be required. See "Description of  
Capital Stock--Certain Provisions of the Restated Certificate of Incorporation  
and Bylaws."                                                                    

     THREE OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
DIRECTORS OR EXECUTIVE OFFICERS OF GENERAL MOTORS                               

  We currently anticipate that, until after GM's divestiture of our common
stock, three members of our board of directors will be executive officers of GM.
Two of these GM officers are also directors of GM. Our directors who are also   
directors or executive officers of GM will have obligations to both companies   
and may have conflicts of interest with respect to matters potentially or       
actually involving or affecting us, such as acquisitions, financings and other  
corporate opportunities that may be suitable for both us and GM. Our certificate
of incorporation contains provisions designed to facilitate resolution of these 
potential conflicts which we believe will assist the directors of our company in
fulfilling their fiduciary duties to our stockholders. These provisions do not, 
however, alter the fiduciary duty of loyalty of our directors under applicable  
Delaware law. Subject to applicable Delaware law, by becoming a stockholder in  
our company, you will be deemed to have notice of and have consented to these   
provisions of our certificate of incorporation. Although these provisions are   
designed to resolve such conflicts between us and General Motors fairly, we     
cannot assure you that any conflicts will be so resolved. See "Description of   
Capital Stock--Certain Provisions of the Restated Certificate of Incorporation  
and Bylaws."                                                                    

     FIVE OF OUR DIRECTORS AND MANY OF OUR EXECUTIVE OFFICERS MAY HAVE CONFLICTS
OF INTEREST BECAUSE OF THEIR OWNERSHIP OF GENERAL MOTORS STOCK                  

  Five of our directors and many of our executive officers own substantial
amounts of GM stock and options on GM stock because of their relationships with 
General Motors prior to the separation of our company from GM. Such ownership   
could create, or appear to create, potential conflicts of interest when         
directors and officers are faced with decisions that could have different       
implications for our company and GM. See "Management--Stock Ownership of        
Directors and Executive Officers."                                              

  WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH GENERAL MOTORS
WITH RESPECT TO OUR PAST AND ONGOING RELATIONSHIPS                              

 GM will continue to be our largest customer for a significant period of
time. Unless and until GM completes its divestiture of our common stock, it will
continue to be our controlling stockholder. In addition, we currently have, and 
after this offering and the divestiture will continue to have, contractual      
arrangements with GM which require GM and its affiliates to provide various     
transitional and other services to us. As a result, conflicts of interest may   
arise between us and GM in a number of areas relating to our past and ongoing   
relationships, including:                                                       

  - the nature, quality and pricing of products and services we provide to
GM;                                                               

     - the nature, quality and pricing of transitional services GM has agreed to
provide us;                                                       

- labor, tax, employee benefit and other matters arising from the     
separation of our company from GM;                                

    - the incurrence of debt by our company and major business combinations by
our company;                                                      

- sales or distributions by GM of all or any portion of its ownership 
interest in our company;                                          
14

424B4
17th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 17th

     - business opportunities that may be attractive to both GM and our company;
and                                                               

- GM's ability to control the management and affairs of our company.  

We cannot assure you that we will be able to resolve any potential conflicts or 
that, if resolved, we would not be able to receive more favorable resolution if 
we were dealing with an unaffiliated party. Our supply agreement with GM and the
other agreements we have entered into with GM may be amended from time to time  
upon agreement between the parties. For so long as we are controlled by GM, we  
cannot assure you that GM would not require us to agree to an amendment to the  
supply agreement or any other agreement that may be more or less favorable to us
than the current terms of the agreement. Furthermore, our ability to eliminate  
product lines, close plants and divest businesses is subject to certain         
restrictions set forth in our supply agreement with General Motors as described 
elsewhere in this prospectus. In addition, our ability to incur indebtedness,   
make acquisitions and dispositions and issue stock is subject to the terms of   
another agreement that we have entered into with General Motors described       
elsewhere herein. See "Arrangements Between Delphi and General Motors--IPO and  
Distribution Agreement" and "--Supply Agreement."                               

OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR 
RESULTS AS A SEPARATE COMPANY                                                   

  The historical financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash     
flows would have been had we been a separate, stand-alone entity during the     
periods presented or what our results of operations, financial position and cash
flows will be in the future. This is because:                                   

     - we have made certain adjustments and allocations since GM did not account
       for us as, and we were not operated as, a single stand-alone business for
all periods presented; and                                        

     - the information does not reflect many significant changes that will occur
      in our funding and operations as a result of our separation from General
Motors, including employee and tax matters.                       

We cannot assure you that the adjustments and allocations we have made in       
preparing our historical consolidated financial statements appropriately reflect
our operations during such period as if we had in fact operated as a stand-alone
entity or what the actual effect of our separation from GM will be. Accordingly,
we cannot assure you that our historical results of operations are indicative of
our future operating or financial performance. For additional information, see  
"Selected Financial Data," "Unaudited Pro Forma Condensed Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."                                                         

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL AND LIQUIDITY REQUIREMENTS

   A substantial portion of our cash flows from operations will be dedicated
to meet our pension funding obligations and to the payment of principal and     
interest on our indebtedness from time to time. As a result of these            
obligations, our liquidity position may be adversely affected if we fail to     
realize our expected cash flows from operations. In addition, under our supply  
agreement with GM, the timing of payments from GM to us under existing contracts
changed as of January 1, 1999. For a discussion of these and other factors      
affecting our liquidity, you should read "Management's Discussion and Analysis  
of Financial Condition and Results of Operations--Liquidity and Capital         
Resources." See also "--Risk Factors Relating to Our Business--Making Payments  
of Pensions and Other Postretirement Employee Benefits Could Adversely Affect   
Our Liquidity."                                                                 

Our working capital requirements and cash flow provided by operating  
activities can vary greatly from quarter to quarter, depending on the volume of 
production, the payment terms with our customers and suppliers and the build-up 
of inventories. We cannot assure you that we will be able to meet our future    
capital requirements in the same manner and on the same terms as we did when we 
were a part of GM. Until recently, our working capital needs were managed by GM 
pursuant to its company-wide cash management policies. However, effective       
January 1, 1999, General Motors stopped providing funds to finance our          

15

424B4
18th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 18th

operations and we began to manage our own working capital needs. Since our      
credit rating is lower than GM's, we expect that we will not be able to obtain  
financing with interest rates and terms as favorable as those obtained by GM.   

 WE ARE SUBJECT TO CERTAIN CONTRACTUAL LIMITATIONS WHICH COULD LIMIT THE
CONDUCT OF OUR BUSINESS AND OUR ABILITY TO PURSUE OUR BUSINESS OBJECTIVE        

  In connection with this offering, we have entered into an agreement with
General Motors that contains a number of restrictive covenants that,            
individually or in the aggregate, could materially limit the way in which we    
conduct our business and our ability to pursue our business objective. These    
covenants will, among other things, limit our ability to complete acquisitions  
and divestitures, incur indebtedness and issue capital stock. These covenants   
generally expire either at such time, if any, as GM completes its divestiture of
our common stock or two years after the divestiture. In addition, our supply    
agreement with GM limits our ability to eliminate product lines, close plants   
and divest businesses. These restrictions could have a material adverse effect  
on our company and your investment in our company. For more information about   
these restrictions, see "Arrangements Between Delphi and General Motors--IPO and
Distribution Agreement" and "--Supply Agreement."                               

     THE TRANSITIONAL SERVICES BEING PROVIDED TO US BY GENERAL MOTORS MAY NOT BE
SUFFICIENT TO MEET OUR NEEDS                                                    

  We have never operated as a stand-alone company. While General Motors is
contractually obligated to provide us with certain transitional services, we    
cannot assure you that such services will be sustained at the same level as when
we were part of General Motors or that we will obtain the same benefits. We will
also lease and sub-lease certain office and manufacturing facilities from GM. We
cannot assure you that, after the expiration of these various arrangements, we  
will be able to replace the transitional services or enter into appropriate     
leases in a timely manner or on terms and conditions, including cost, as        
favorable as those we will receive from GM.                                     

These agreements were made in the context of a parent-subsidiary      
relationship and were negotiated in the overall context of our separation from  
GM. The prices charged to us under these agreements may be higher or lower than 
the prices that may be charged by unaffiliated third parties for similar        
services. For more information about these arrangements, see "Arrangements      
Between Delphi and General Motors."                                             

RISK FACTORS RELATING TO OUR BUSINESS                                           

Our business is subject to the following risks, which include risks   
relating to the industry in which we operate. These risks do not principally    
relate to our separation from General Motors.                                   

 WE ARE DEPENDENT ON MAINTAINING OUR CURRENT BUSINESS AND WINNING FUTURE
BUSINESS WITH GENERAL MOTORS                                                    

 We are highly dependent on GM as our largest customer. GM accounted for
about 84.1%, 83.5% and 81.7% of our total sales in 1995, 1996 and 1997,         
respectively. For this purpose, total sales include all of the sales from joint 
ventures and other investments in which we own a minority interest that are not 
reflected in our consolidated sales. Although we expect that GM will continue to
be our largest customer for a significant period of time, our ability to realize
future sales to GM is subject to a number of risks. These risks include         
uncertainties relating to our business under the supply agreement that we have  
entered into with GM. In addition, the uncertainties that we identify in this   
prospectus as being generally applicable to supplier-customer relationships in  
our industry will be heightened in the case of our relationship with GM because 
it is our largest customer. Accordingly, we cannot assure you as to the amount  
of our future business with GM. See "--We May Be Unable to Realize All of the   
Sales Represented by Our Awarded Business."                                     

 Under the terms of our supply agreement with GM, our existing contracts
with GM as of January 1, 1999 will generally remain in effect, although GM has  
certain rights to move business from us to other suppliers. The supply agreement
also requires GM to provide us the opportunity to supply on competitive terms   
the first                                                                       
16

424B4
19th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 19th

replacement cycle of certain product programs. However, in order to utilize this
ability to secure next generation business, we must be competitive in a number  
of areas. Other suppliers' bids to provide particular products may include      
offers of price reductions to GM on other current or future products, and GM may
under the supply agreement consider the overall economic effect of such package 
proposals in assessing our competitiveness. For information about our supply    
agreement with GM, see "Arrangements Between Delphi and General Motors--Supply  
Agreement."                                                                     

    Except for the arrangements with respect to the first replacement cycle of
certain product programs, if we elect to bid for GM's business, we will do so on
the same basis as all other suppliers. While we intend to continue to focus on  
retaining and winning GM's business and we believe that we will continue to be  
able to compete effectively for this business, we cannot assure you in this     
regard. See "Business of Delphi--Customers--General Motors."                    

  OUR BUSINESS MAY BE ADVERSELY IMPACTED BY WORK STOPPAGES AND OTHER LABOR
RELATIONS MATTERS                                                               

We are subject to a risk of work stoppages and other labor relations  
matters because our hourly workforce is highly unionized. These work stoppages  
have historically had significant adverse impacts on our net income. As of      
September 30, 1998, about 96% of our hourly workforce was represented by unions.
These employees are represented by about 53 unions, including the UAW, which is 
our largest union. The national labor agreements negotiated by GM with the      
unions currently apply to our workforce and will continue to apply to our       
workforce after the offering. This means that, in the United States, the        
majority of our workers are currently paid at hourly wage rates similar to those
paid to GM workers rather than the lower rates we believe are generally         
prevailing in the automotive parts industry. We will assume the terms of these  
national agreements for our employees in connection with GM's distribution of   
its shares of our common stock to the holders of its $1 2/3 common stock.       

     We experienced work stoppages at certain of our facilities in each of 1996,
1997 and 1998. The 1996 and 1998 work stoppages each had a significant adverse  
impact on our net income. These work stoppages and work stoppages at GM's       
facilities had an unfavorable impact of $281 million on our 1996 net income and 
$560 million on our net income for the nine months ended September 30, 1998. The
1997 work stoppage lasted only one day. We cannot assure you that issues with   
our labor unions will be resolved favorably to us in the future, that we will   
not experience significant work stoppages in future years or that we will not   
record significant charges related to those work stoppages.                     

     In the past we have been adversely affected by work stoppages that have led
to the shutdown of GM's assembly plants. Strikes by the UAW, including at one of
our facilities, led to the shutdown of most of GM's North American assembly     
plants in June and July 1998. In the event that one or more of our customers,   
including GM, experiences a material work stoppage, such work stoppage may have 
a resulting effect on our company, including the possible shutdown of our       
production lines related to such customers, which could have a material adverse 
effect on our business.                                                         

For more information about our labor relations, see "--Risk Factors   
Relating to Separating Our Company from General Motors--We May Be Unable to     
Increase Our Competitiveness if We Fail to Improve Our Labor Relations and      
Establish More Flexible Local Work Rules and Practices Following Our Separation 
from General Motors," "Management's Discussion and Analysis of Financial        
Condition and Results of Operations" and "Business of Delphi--Employees; Union  
Representation."                                                                

 WE MAY BE UNABLE TO REALIZE ALL OF THE SALES REPRESENTED BY OUR AWARDED
BUSINESS                                                                        

 We believe that we currently have a solid foundation of future business
that has been awarded to us by GM and other customers at various stages of the  
vehicle development cycle. However, the realization of future sales from awarded
business is inherently subject to a number of important risks and uncertainties,
including as to the number of vehicles that our customers will actually produce,
the timing of that production and the mix of options that our customers and     
consumers may choose. In addition, our customers generally have the right to    
replace us with another supplier at any time for a variety of reasons.          
Accordingly, we cannot assure you that we will in fact realize any or all of the
future sales represented by our awarded business. For more                      
17

424B4
20th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 20th

information, see "Business of Delphi--Overview--Our Sales and Awarded Business" 
and "--Industry--Awarded Business."                                             

  WE MAY BE UNABLE TO INCREASE OUR SALES TO VEHICLE MANUFACTURERS OTHER THAN
GM-NORTH AMERICA                                                        

An important part of our business strategy is to increase our sales to
vehicle manufacturers other than GM's North American operations, including,     
among others, GM's international operations. We will need to do this in order to
offset the expected decline in our sales to GM's North American operations.     
While we believe that our complete separation from GM will enhance our ability  
to expand our revenue base through additional sales to customers other than GM, 
we cannot assure you that this will happen. Our ability to achieve significant  
growth through sales to these customers will depend on the success of our       
separation from GM and on several other factors, including:                     

- our ability to provide high-quality products at competitive prices, 
 including integrated components, systems and modules, which vehicle
manufacturers are increasingly seeking from their suppliers;      

- our ability to develop technologically advanced products;           

- our ability to develop new products to meet changing regulatory     
requirements and consumer preferences;                            

 - our ability to exploit and expand our global presence to meet vehicle
     manufacturers' needs for products in many geographic markets around the
world;                                                            

    - our ability to meet changing vehicle manufacturer supply requirements on
      a timely and cost-efficient basis through lean, flexible operations; and

  - other vehicle manufacturers' willingness to share with us confidential
      information necessary for us to provide them with more fully-engineered,
     integrated systems and modules that require longer lead times to design
and manufacture.                                                  

Even if we successfully increase our sales to other customers, such sales, if   
any, will likely not be realized, if at all, for several years because the      
majority of vehicle manufacturer parts purchases for the next several years have
already been sourced.                                                           

WE MAY BE UNABLE TO REALIZE OUR BUSINESS STRATEGY OF IMPROVING OUR    
OPERATING PERFORMANCE                                                           

 We have implemented several important strategic initiatives designed to
improve our operating performance. We cannot assure you that we will be able to 
successfully implement or realize the expected benefits of any of these         
initiatives or that we will be able to sustain improvements made to date. Such  
failure could have a material adverse effect on our business, particularly since
we rely on these initiatives to offset pricing pressures from our customers.    
These initiatives are subject in many cases to participation by labor unions and
other third parties, including GM, which under our agreements has certain       
contractual rights with respect to our plant closures, product line eliminations
and divestitures of businesses. See "Business of Delphi--Strategy--Improve      
Operating Performance."                                                         

  WE MAY BE UNABLE TO COMPETE FAVORABLY IN THE HIGHLY COMPETITIVE AUTOMOTIVE
PARTS INDUSTRY                                                          

The automotive parts industry is highly competitive. We compete with a
number of independent automotive parts suppliers and units of major vehicle     
manufacturers in the United States and internationally that produce components, 
systems and modules for sale to vehicle manufacturers and in the aftermarket as 
replacement parts. Although the overall number of our competitors has decreased 
due to ongoing industry consolidation, we face significant competition within   
each of our major product areas, including some competitors which have          
substantial size and scale and some of which have lower cost structures,        
particularly lower hourly wage structures, than our company. In addition, there 
is no contractual prohibition preventing GM from competing with us in the       
future. For more information about the automotive parts industry and our        
competitors, see "Business of Delphi--Industry" and "--Competition."            

18

424B4
21st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 21st

We principally compete for business at the beginning of the sourcing  
process for vehicle models that vehicle manufacturers plan to introduce to the  
market in later years and upon the redesign of existing vehicle models. Vehicle 
manufacturers rigorously evaluate suppliers on the basis of product quality,    
price competitiveness, reliability and timeliness of delivery, product design   
capability, technical expertise and development capability, new product         
innovation, leanness of facilities, operational flexibility, customer service   
and overall management. We cannot assure you that we will be able to compete    
favorably based on these or other criteria or that increased competition in our 
markets will not have a material adverse effect on our business.                

 THE CYCLICALITY OF AUTOMOTIVE PRODUCTION AND SALES COULD ADVERSELY AFFECT
OUR BUSINESS                                                            

Almost all of our business is directly related to automotive sales and
production by our customers, which are highly cyclical and depend on general    
economic conditions and other factors, including consumer spending and          
preferences. Any significant economic decline which resulted in a reduction in  
automotive production and sales by our customers would have a material adverse  
effect on our business.                                                         

REGIONAL ECONOMIC ISSUES COULD ADVERSELY AFFECT OUR BUSINESS          

We have substantial operations in every major region of the world and 
economic conditions in these regions often differ. The recent economic downturn 
in Asia and in Brazil and other regions of Latin America, including Mexico, has 
led to a reduction in demand for automotive vehicles and their component parts  
in those areas and has had an adverse effect on our financial results in 1998.  
To the extent that these conditions continue or worsen, or spread to other      
regions, particularly the United States, our business will continue to be       
adversely affected. See "Management's Discussion and Analysis of Financial      
Condition and Results of Operations--Overview--Recent Financial Results" and    
"--Results of Operations."                                                      

MAKING PAYMENTS OF PENSIONS AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS
COULD ADVERSELY AFFECT OUR LIQUIDITY                                            

  In connection with our separation from General Motors, we have agreed to
assume certain obligations relating to pensions and other postretirement        
employee benefits--principally medical benefits--for our employees as well as   
for certain employees associated with prior divestitures. We expect that our    
pension contributions will be material to our results of operations and         
financial condition, and, under certain circumstances, we could be required to  
make a significant payment to GM in connection with the allocation of other     
postretirement employee benefits.                                               

We will receive from GM certain assets and liabilities related to GM  
salaried and hourly pension plans. Our pension obligations are based on these   
pension plans' assets, the expected investment return on those assets and the   
plans' expected liabilities. Under current economic conditions and the financial
assumptions required by federal government regulations, our pension obligations 
would be considered to be "underfunded." Because of the underfunded nature of   
our pension plans, federal regulations will require that our contributions over 
time meet certain minimum funding requirements. In addition, although we are not
required to do so, we have commenced discussions with the Pension Benefit       
Guaranty Corporation regarding the underfunded nature of our pension plans. In  
connection with these discussions, the Pension Benefit Guaranty Corporation may 
request that we take actions in excess of federal regulatory minimum            
requirements. The outcome of these discussions is as yet uncertain, but if any  
actions in excess of federal regulatory minimum requirements are discussed, we  
intend to seek to maintain sufficient financial flexibility in order to execute 
our business strategy. In any event, regardless of the outcome of our           
discussions with the Pension Benefit Guaranty Corporation, we expect these      
contributions to be material to our results of operations and financial         
condition, and they are discussed in greater detail under "Management's         
Discussion and Analysis of Financial Condition and Results of Operations--Our   
Other Postretirement Employee Benefits and Underfunded Pension Obligations."    

19

424B4
22nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 22nd

  In addition, we and GM have agreed with two of our principal unions that
any of our hourly employees who are members of such unions and who retire on or 
before October 1, 1999 will be treated as GM employees for purposes of          
postretirement benefit obligations. The allocation of pension and other         
postretirement benefit obligations between us and GM assumes certain levels of  
employee retirements prior to October 1, 1999, based on historical experience   
and conditions surrounding GM's divestiture of our company. We have agreed with 
GM to recalculate the allocation of those liabilities based on the actual level 
of retirements on or before October 1, 1999. Accordingly, if and to the extent  
that greater than the assumed number of our employees retire on or before       
October 1, 1999, we would be required to make a payment to GM. Depending on the 
amount of such a payment, if any, it could have a material adverse effect on our
short-term liquidity. See "Management's Discussion and Analysis of Financial    
Condition and Results of Operations--Liquidity and Capital Resources" and "--Our
Other Postretirement Employee Benefits and Underfunded Pension Obligations."    

     OUR GROSS MARGINS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO OFFSET ALL
OF THE COST REDUCTIONS WE MUST PROVIDE TO OUR CUSTOMERS                         

    There is substantial and continuing pressure from vehicle manufacturers to
reduce costs, including the cost of products purchased from outside suppliers   
such as our company. As a result, we are forced to reduce prices both in the    
initial bidding process and during the term of the contractual arrangements. We 
cannot assure you that we will be able to generate cost savings and operational 
improvements in the future sufficient to offset contractually required price    
reductions, price reductions necessary to win additional business and increases 
in raw material costs. As a result, our gross margins could be adversely        
affected.                                                                       

     Certain of our products are sold under long-term agreements that require us
to provide certain percentage cost reductions each year. These annual cost      
reductions are made directly through price reductions and/or indirectly through 
suggestions regarding manufacturing efficiencies or other cost savings. Our     
contracts with General Motors generally contain these types of provisions. Price
reductions as a percentage of net sales were 1.8%, 3.0% and 2.3% in 1995, 1996  
and 1997, respectively. Also, vehicle manufacturers often seek further price    
reductions on existing contracts with a supplier in the context of awarding new 
business to that supplier. In addition, our ability to pass increased raw       
material costs on to our customers is limited, with cost recovery generally less
than 100% and often on a delayed basis. For more information, see "Management's 
Discussion and Analysis of Financial Condition and Results of                   
Operations--Overview--Net Sales."                                               

WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS

   We have significant operations outside the United States, including joint
ventures and other strategic alliances. Certain risks are inherent in           
international operations, including:                                            

     - the difficulty of enforcing agreements and collecting receivables through
certain foreign legal systems;                                    

  - foreign customers may have longer payment cycles than customers in the
United States;                                                    

 - tax rates in certain foreign countries may exceed those of the United
       States and foreign earnings may be subject to withholding requirements or
 the imposition of tariffs, exchange controls or other restrictions;

- general economic and political conditions in the countries where we 
      operate may have an adverse effect on our operations in those countries;

 - the difficulties associated with managing a large organization spread
throughout various countries;                                     

   - required compliance with a variety of foreign laws and regulations; and

 - the potential difficulty in enforcing intellectual property rights in
certain foreign countries.                                        

As we continue to expand our business globally, our success will be dependent,  
in part, on our ability to anticipate and effectively manage these and other    
risks. We cannot assure you that these and other factors will not have a        
material adverse effect on our international operations or on our business as a 
whole.                                                                          
20

424B4
23rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 23rd

 EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

As a result of our international operations, we generate a significant
portion of our revenues and incur a significant portion of our expenses in      
currencies other than U.S. dollars. To the extent we are unable to match        
revenues received in foreign currencies with costs paid in the same currency,   
exchange rate fluctuations in any such currency could have a material adverse   
effect on our business. For example, in Mexico, we have significantly more costs
than revenues generated in Mexican pesos since much of our production in Mexico 
is sold in the United States. In contrast, in many European countries, we have  
more revenues denominated in local currencies than costs. Thus, we are at risk  
with respect to our Mexican operations in the event of the depreciation of the  
U.S. dollar against the Mexican peso and with respect to our European operations
in the event of the appreciation of the U.S. dollar against various local       
currencies or the euro. We seek to mitigate the effect of exchange rate         
fluctuations through the use of foreign currency borrowings and derivative      
financial instruments, such as forward exchange contracts, although we have not 
engaged in any hedging transactions with respect to the Mexican peso. We cannot 
assure you that our efforts to mitigate these effects will be successful in the 
future. At present, fluctuations in the U.S. dollar, Mexican peso, French franc,
Spanish peseta, German mark and South Korean won have the greatest impact on our
financial performance. As our business grows in China and other countries, we   
will become subject to greater risks related to the local currencies. The impact
on our financial performance is affected not only by the currency fluctuations  
but also by the terms of our agreements with customers and any joint venture    
partners. In many foreign jurisdictions, we have minority interests and other   
investments such that the financial results of our activities are not           
consolidated in our financial statements.                                       

The financial condition and results of operations of certain of our   
operating entities are reported in various foreign currencies and then          
translated into U.S. dollars at the applicable exchange rate for inclusion in   
our consolidated financial statements. As a result, appreciation of the U.S.    
dollar against these foreign currencies will have a negative impact on our      
reported revenues and operating profits. Conversely, depreciation of the U.S.   
dollar against these foreign currencies will have a positive impact on our      
reported revenues and operating profit. We generally do not seek to mitigate    
this translation effect through the use of derivative financial instruments. For
information about the impact of foreign currency translation on our financial   
condition, see "Management's Discussion and Analysis of Financial Condition and 
Results of Operations" and Note 2 to our audited consolidated financial         
statements included elsewhere in this prospectus.                               

   WE MAY BE UNABLE TO REALIZE OUR BUSINESS STRATEGY OF COMPLETING STRATEGIC
ACQUISITIONS, JOINT VENTURES AND ALLIANCES                                      

There are risks associated with our business strategy to acquire, make
investments in, or enter into joint ventures or other strategic alliances with, 
companies whose businesses complement our business. We may not be able to       
identify suitable candidates to acquire or enter into joint ventures or other   
arrangements with or we may not be able to obtain financing on satisfactory     
terms for such activities. In addition, if we acquire a company, we could have  
difficulty assimilating the personnel and operations of the acquired company,   
which would prevent us from realizing expected synergies. This could disrupt our
ongoing business and distract our management and other resources. We cannot     
assure you that we would succeed in overcoming these risks or any other problems
in connection with any acquisitions we may make or joint ventures we may enter  
into.                                                                           

For a period generally ending two years after such time, if any, as GM
completes its divestiture of our common stock, we are subject to certain        
contractual restrictions which may limit our ability to make acquisitions or    
enter into joint ventures or other strategic alliances. In addition, in         
connection with several of our past divestitures, we have entered into covenants
not to compete in areas generally related to the divested product line for      
limited periods of time. For a discussion of the principal contractual          
restrictions to which we are subject, see "Arrangements Between Delphi and      
General Motors--IPO and Distribution Agreement--Preservation of the Tax-Free    
Status of the Distribution" and "--Other Delphi Covenants."                     

21

424B4
24th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 24th

 WE MAY INCUR MATERIAL LOSSES AND COSTS AS A RESULT OF PRODUCT LIABILITY
CLAIMS THAT MAY BE BROUGHT AGAINST US                                           

   We face an inherent business risk of exposure to product liability claims
in the event that the failure of our products results, or is alleged to result, 
in bodily injury and/or property damage. We cannot assure you that we will not  
experience any material product liability losses in the future or that we will  
not incur significant costs to defend such claims. We are currently covered by  
GM's insurance against product liability claims, which coverage will continue   
until the earlier of GM's divestiture of our common stock and January 1, 2000.  
We expect to purchase product liability insurance coverage to be effective at   
the time such GM coverage ceases. However, we cannot assure you that such       
coverage will be adequate for liabilities ultimately incurred or that it will   
continue to be available on terms acceptable to us. In addition, if any of our  
products are or are alleged to be defective, we may be required to participate  
in a recall involving such products. Each vehicle manufacturer has its own      
policy regarding product recalls and other product liability actions relating to
its suppliers. However, as suppliers become more integrally involved in the     
vehicle design process and assume more of the vehicle assembly functions,       
vehicle manufacturers are increasingly looking to their suppliers for           
contribution when faced with product liability claims. A successful claim       
brought against us in excess of our available insurance coverage or a           
requirement to participate in a product recall may have a material adverse      
effect on our business.                                                         

Although General Motors has agreed to retain all product liability    
responsibility for products we manufactured prior to January 1, 1999 and sold or
otherwise supplied to GM either before or after that date, we will be           
responsible for all product liability actions relating to products we sold at   
any time or sell in the future to customers other than GM. In addition,         
responsibility for product liability actions relating to products we manufacture
on or after January 1, 1999 and sell to GM shall be determined in accordance    
with the agreements for such sales. For more information, see "Arrangements     
Between Delphi and General Motors--Separation Agreement--Claims and             
Litigation--Product Liability."                                                 

WE MAY INCUR MATERIAL PRODUCT WARRANTY COSTS                          

     Vehicle manufacturers are increasingly requiring their outside suppliers to
guarantee or warrant their products and to bear the costs of repair and         
replacement of such products under new vehicle warranties. Because this is a new
trend in our industry and we have only limited experience in this regard, we    
cannot assure you that our costs associated with providing product warranties   
will not be material. See "Business of Delphi--Legal Proceedings." For a        
description of our warranty arrangements with GM with respect to both existing  
contracts and new business, see "Arrangements Between Delphi and General        
Motors--Warranty Matters."                                                      

     WE MAY BE ADVERSELY AFFECTED BY THE ENVIRONMENTAL AND SAFETY REGULATIONS TO
WHICH WE ARE SUBJECT                                                            

We are subject to the requirements of federal, state and local        
environmental and occupational safety and health laws and regulations in the    
United States and other countries. We cannot assure you that we have been or    
will be at all times in complete compliance with all such requirements or that  
we will not incur material costs or liabilities in connection with such         
requirements in excess of amounts we have reserved. In addition, these          
requirements are complex, change frequently and have tended to become more      
stringent over time, and we cannot assure you that these requirements will not  
change in the future in a manner that could have a material adverse effect on   
our business. We have made and will continue to make capital and other          
expenditures to comply with environmental requirements. For more information    
about our environmental compliance and potential environmental liabilities, see 
"Business of Delphi--Environmental Matters."                                    

   WE MAY BE ADVERSELY AFFECTED IF OUR YEAR 2000 REMEDIATION EFFORTS ARE NOT
SUCCESSFUL                                                                      

   Our business could be adversely impacted by information technology issues
related to the Year 2000. We use software and related computer technologies     
essential to our operations that use two digits rather than four                

22

424B4
25th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 25th

to specify the year, which could result in a date recognition problem with the  
transition to the year 2000. We have established a plan to identify and         
remediate potential Year 2000 problems in our business information systems,     
infrastructure and production and manufacturing sites. We have substantially    
completed an inventory of potentially date-sensitive systems and we are         
currently focused on the remediation and testing phases of our Year 2000        
program. We have also begun surveying our suppliers and service providers for   
Year 2000 compliance. The implementation of new enterprise software that will   
avoid the need for remediation of certain software is not scheduled to be       
completed until July 1999 at one of our principal product group sites. For more 
information regarding our Year 2000 program, see "Management's Discussion and   
Analysis of Financial Condition and Results of Operations--Year 2000."          

     We currently believe that the most reasonably likely worst case scenario is
that there will be some localized disruptions of systems that will affect       
individual business processes, facilities or suppliers for a short time rather  
than systemic or long-term problems affecting our business operations as a      
whole. Our contingency planning will continue to identify systems, or other     
aspects of our business or that of our suppliers, that we believe would be most 
likely to experience Year 2000 problems, as well as those business operations in
which a localized disruption could have the potential for causing a wider       
problem by interrupting the flow of products, materials or data to other        
operations. Because there is uncertainty as to which activities may be affected 
and the exact nature of the problems that may arise, our contingency planning   
will focus on minimizing the scope and duration of any disruptions by having    
sufficient personnel, inventory and other resources in place to permit a        
flexible, real-time response to specific problems as they may arise at          
individual locations around the world.                                          

   There is still uncertainty about the broader scope of the Year 2000 issue
as it may affect our company and third parties, including our suppliers and     
customers, that are critical to our operations. For example, lack of readiness  
by electrical and water utilities, financial institutions, governmental agencies
or other providers of general infrastructure could, in some geographic areas,   
pose significant impediments to our ability to carry on our normal operations in
the area or areas so affected. In the event that we are unable to complete our  
remedial actions and are unable to implement adequate contingency plans in the  
event that problems are encountered, there could be a material adverse effect on
our business, results of operations or financial condition.                     

     WE MAY BE UNABLE TO SUCCESSFULLY IMPLEMENT OR REALIZE COST SAVINGS FROM OUR
NEW ENTERPRISE SOFTWARE SYSTEM                                                  

   We are in the process of implementing throughout our global operations on
an incremental basis a new enterprise software system that will replace our     
existing software systems. We believe this new system will provide us           
opportunities to realize cost savings throughout our operations and we expect   
multi-phase implementation of this system to be completed within about five     
years. In the event we are unable to successfully implement this new system, it 
could have a material adverse effect on our business. Also, we cannot assure you
that we will be able to achieve the cost savings we expect to result from the   
implementation of this new software system. For more information about this new 
software system, see "Business of Delphi--Information Technology."              

RISK FACTORS RELATING TO SECURITIES MARKETS                                     

    There are risks relating to securities markets that you should consider in
connection with your investment in and ownership of our stock. These risks      
include limitations on our ability to execute certain business combinations and 
change of control transactions.                                                 

   THE MARKET PRICE OF OUR COMMON STOCK COULD BE ADVERSELY AFFECTED BY SALES
OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK IN THE PUBLIC MARKET                 

 Sales by GM or others of substantial amounts of our common stock in the
public market or the perception that such sales might occur could have a        
material adverse effect on the price of our common stock.                       

23

424B4
26th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 26th

After this offering, GM will own 465,000,000 shares of our common stock. If GM  
distributes these shares to the holders of its $1 2/3 common stock, they would  
be eligible for immediate resale in the public market, other than any shares    
held by affiliates of Delphi. We cannot predict whether substantial amounts of  
our common stock will be sold in the open market in anticipation of, or         
following, any distribution of our shares by GM to holders of its $1 2/3 common 
stock. GM has the sole discretion to determine the timing, structure and all    
terms of its distribution of our common stock, all of which may also affect the 
level of market transactions in our common stock. In addition, if GM does not   
distribute to the holders of its $1 2/3 common stock all of the shares of Delphi
common stock that GM owns, GM and its transferees will have the right to require
us to register such shares of our common stock under the U.S. federal securities
laws for sale into the public market. See "Arrangements Between Delphi and      
General Motors--Registration Rights Agreement."                                 

PROVISIONS IN OUR CORPORATE DOCUMENTS AND DELAWARE LAW COULD DELAY OR 
PREVENT A CHANGE IN CONTROL OF OUR COMPANY, WHICH COULD ADVERSELY AFFECT THE    
PRICE OF OUR COMMON STOCK                                                       

  The existence of some provisions in our corporate documents and Delaware
law could delay or prevent a change in control of our company, which could      
adversely affect the price of our common stock. Our certificate of incorporation
and bylaws contain some provisions that may make the acquisition of control of  
our company more difficult, including provisions relating to the nomination,    
election and removal of directors, limitations on actions by our stockholders   
and restrictions on business combinations with 10% stockholders. In addition,   
our preferred share purchase rights would cause substantial dilution to any     
person or group who attempts to acquire a significant interest in our company   
without advance approval from our board of directors. Delaware law also imposes 
some restrictions on mergers and other business combinations between us and any 
holder of 15% or more of our outstanding common stock. General Motors is        
generally exempted from these provisions and will have special rights so long as
it owns at least a majority of our outstanding common stock. Also, in connection
with this offering, Delphi intends to enter into change in control agreements   
with some of its officers that will provide such officers with monetary         
compensation and other benefits upon a change in control of our company and the 
occurrence of one of several events specified in the agreements within three    
years of the change in control. For a description of these provisions and       
agreements, see "Management--Change in Control Agreements" and "Description of  
Capital Stock."                                                                 

OUR SUPPLY AGREEMENT AND SOME OF OUR UNDERLYING CONTRACTS WITH GENERAL
MOTORS MAY BE TERMINATED IF THERE IS A CHANGE IN CONTROL OF OUR COMPANY         

Our supply agreement with General Motors may be terminated by General 
Motors if 35% or more of our company becomes owned or controlled by a competitor
of General Motors in the business of manufacturing automotive vehicles.         
Termination of the supply agreement, upon which we rely for a substantial       
portion of our future sales, would likely have a material adverse effect on our 
company. For more information, see "Arrangements Between Delphi and General     
Motors--Supply Agreement."                                                      

     In addition to any consequences under our supply agreement with GM, some of
our underlying contracts with GM allow GM to terminate these contracts for      
convenience at any time for any reason. This right could be exercised by GM in  
connection with any change in control of Delphi. The majority of the contracts  
including termination for convenience provisions are shorter-term purchase      
orders. Certain change in control transactions could also give GM the right to  
terminate underlying contracts pursuant to the provisions prohibiting us from   
assigning our contracts to another entity.                                      

    OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY FOLLOWING THE OFFERING AND YOU
COULD LOSE ALL OR PART OF YOUR INVESTMENT AS A RESULT                           

The market price of our common stock could be subject to significant  
fluctuations in response to our operating results, changes in earnings estimated
by securities analysts or our ability to meet those estimates, publicity        
regarding the automotive industry in general or any of our significant          
customers, including General Motors, and other factors. Some or all of these    
factors may be beyond our control. In particular, the realization               

24

424B4
27th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 27th

of any of the risks described in these "Risk Factors," including the possibility
of substantial sales of our common stock and the timing, structure and terms of 
GM's divestiture of its shares of our common stock could have a significant and 
adverse impact on the market price of our common stock. In addition, the stock  
market in general has experienced extreme volatility that has often been        
unrelated to the operating performance of particular companies. These broad     
market fluctuations may adversely affect the trading price of our common stock. 
In particular, we cannot assure you that you will be able to resell your shares 
at or above the initial public offering price, which will be determined through 
negotiations among us, GM and the underwriters. You should read the             
"Underwriters--Pricing of the Offering" section of this prospectus for a more   
complete discussion of the factors to be considered in determining the initial  
public offering price.                                                          

25

424B4
28th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 28th

DELPHI AND ITS SEPARATION FROM GENERAL MOTORS 

DELPHI'S HISTORY                                                                

   We are currently a wholly owned subsidiary of General Motors. Our company
was incorporated in Delaware in late 1998 in preparation for this initial public
offering of our common stock (the "Offering") and our separation from General   
Motors. Effective as of January 1, 1999, we acquired those assets, and assumed  
those liabilities, comprising the business of the Delphi Automotive Systems     
business sector of GM, in each case to the extent agreed to by GM and us and    
described elsewhere in this prospectus.                                         

  Before 1991, Delphi's business was conducted by many separate automotive
parts operations which GM had acquired over time, beginning in the early        
twentieth century, as it increased its vertical integration. GM acquired these  
operations principally to assure itself of a sufficient and high-quality supply 
of automotive parts for the vehicles it produced. These operations were         
generally managed independently from each other within the GM organization.     

In 1991, General Motors organized its components businesses into the  
Automotive Components Group. GM's stated objective was to improve the           
competitiveness of these operations and then, based on this improved competitive
position, increase its business through penetration of new markets. In 1995, the
group was given the name "Delphi Automotive Systems" in order to establish its  
separate identity in the automotive parts industry.                             

In late 1997, in connection with the spin-off by GM of its defense    
electronics business, GM transferred Delco Electronics to its Delphi Automotive 
Systems business sector in order to more closely integrate Delco Electronics'   
expertise in electronics with our capabilities in automotive components and     
systems. Our Electronics & Mobile Communication product sector consists of the  
operations of our Delco Electronics subsidiary. From 1986 through 1997, Delco   
Electronics was operated by GM's Hughes Electronics Corporation subsidiary,     
which is a leader in satellite and wireless communications and space technology 
and was at that time also a leading defense electronics company. Unless we have 
indicated otherwise, the information contained in this prospectus assumes that  
Delco Electronics has been a part of our company for all periods presented.     

SEPARATION FROM GENERAL MOTORS                                                  

   GM'S PLAN TO DIVEST DELPHI. After completion of the Offering, GM will own
about 82.3% of the outstanding shares of our common stock, or about 80.2% if the
U.S. underwriters exercise their over-allotment option in full. GM has announced
that it currently plans to complete its divestiture of our company later in 1999
by distributing all of its shares of Delphi common stock to the holders of GM's 
$1 2/3 common stock. GM expects to accomplish this through a split-off, a       
spin-off or some combination of both transactions. We refer to this             
distribution, in whatever form it may take, as the "Distribution." For more     
information, see "Prospectus Summary--Relationship With General Motors."        

   GM has advised us that it has not yet determined definitively either when
it expects to complete the Distribution or the structure or terms on which it   
would accomplish the Distribution. However, GM has advised us that it believes  
it would be desirable to have an intervening period of several months between   
the Offering and the Distribution, and that GM accordingly does not currently   
expect that it would complete the Distribution prior to mid-1999.               

  GM has also advised us that, based on its current plans, in the event it
decides to effect the Distribution through a split-off exchange offer and not   
enough of its $1 2/3 common stockholders tender their shares to enable GM to    
divest itself of all of its shares of our common stock, it would distribute its 
remaining shares of Delphi common stock to the holders of GM's $1 2/3 common    
stock in a spin-off.                                                            

 As noted above, GM is not obligated to complete the Distribution and we
cannot assure you as to whether or when it will occur. See "Risk Factors--Risk  
Factors Relating to Separating Our Company from General                         

26

424B4
29th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 29th
Motors--Our Business May Be Adversely Affected if General Motors Does Not       
Complete Its Divestiture of Our Company."                                       

   GM has also advised us that it would not complete the Distribution if its
Board of Directors determines that the Distribution is no longer in the best    
interests of General Motors and its stockholders. GM has further advised us that
it currently expects that the principal factors that it would consider in making
this determination, as well as the principal factors that it would consider in  
making the determination as to the timing, structure and terms of the           
Distribution, would be:                                                         

- the market price of the Delphi common stock;                        

- the market price of GM's $1 2/3 common stock;                       

- satisfaction that the Distribution will be tax-free to GM and its   
    stockholders and as to the other tax consequences of the transactions;

     - the absence of any court orders or regulations prohibiting or restricting
the completion of the Distribution; and                           

     - other conditions affecting the businesses of Delphi or GM that make it no
    longer in the best interests of such businesses to be fully separated.

On January 13, 1999, GM received a private letter ruling from the IRS to the    
effect that the Distribution would be tax-free to GM and its stockholders for   
U.S. federal income tax purposes.                                               

   BACKGROUND OF THE SEPARATION. Historically, many large automotive vehicle
manufacturers, which we sometimes refer to as "VMs," have relied on in-house    
components divisions to fill their supply needs. Over the past few decades,     
however, the automotive industry has moved away from such vertical integration. 
Instead, VMs have moved towards sourcing a substantial portion of a vehicle's   
parts from independent suppliers and purchasing more fully-engineered,          
integrated systems and modules rather than individual components. As a result,  
VMs are now requiring their suppliers to perform many of the design, engineering
and assembly functions traditionally executed by VMs. The degree to which VMs   
source from independent, outside suppliers varies by VM.                        

     General Motors began reducing its vertical integration several years ago by
adopting a global sourcing program. We believe that this initiative was designed
to leverage GM's purchasing power and reduce its purchasing costs by enhancing  
competition for its business among its suppliers on the basis of quality,       
service, technology and price. As a result of the completion of the             
Distribution, GM would substantially reduce its vertical integration.           

BENEFITS OF THE SEPARATION. We believe that we will realize certain   
benefits from our complete separation from General Motors. As an independent    
company, we expect to be better able to expand our revenue base through sales to
major VM customers other than GM. We also believe that, as a fully independent  
company after the completion of the Distribution, we will be better able, over  
time, to establish more flexible local work rules and practices through improved
labor relations, thereby increasing our competitiveness. These and other        
benefits of the separation are discussed further below.                         

- Increased Non-GM Sales. We believe that one of the most significant 
       limitations on our ability to expand our sales to major VMs other than GM
    is a general reluctance by such VMs to source from a supplier owned by
    GM. Other major VMs have shown varying degrees of reluctance to source
  extensively from a supplier owned by GM since GM, one of their major
      competitors, may be strengthened by the related profits. In addition, we
    believe that many major VMs remain reluctant to source from us because
they fear that GM might obtain access through us to confidential  
      information regarding their vehicle designs and manufacturing processes.
     This is particularly important as suppliers are increasingly performing
      more of the vehicle design and assembly functions traditionally executed
       by VMs and are thus involved earlier in the design and development stages
of vehicles.                                                      

27

424B4
30th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 30th

 Notwithstanding our strict confidentiality pledge and procedures to
       preserve customer confidentiality, which to our knowledge have never been
       breached, we believe that we will remain at a competitive disadvantage in
    pursuing sales opportunities with major VMs other than GM while we are
       owned by GM. We believe that if we are established as a fully independent
     company, we will, over time, be able to substantially grow our sales to
       VMs other than GM. See "Risk Factors--Risk Factors Relating to Separating
  Our Company from General Motors--Our Close Relationship with General
       Motors Could Limit Our Potential to Do Business with Its Competitors" and
    "--Risk Factors Relating to Our Business--We May Be Unable to Increase
Our Sales to Vehicle Manufacturers Other Than GM-North America."  

  - Improved Labor Relations. We believe that our complete separation from
      General Motors will provide us with the opportunity to improve our labor
    relations and, over time, establish more flexible local work rules and
       practices. While we have been a part of GM, the national labor agreements
   negotiated by GM with the unions have applied to our workforce in the
      United States and Canada. As a fully independent company with control of
      our own labor relations after the Distribution, we believe that we would
    have the right to negotiate regarding our own national and local labor
 agreements directly with the unions representing our employees. Our
    intent is to base such negotiations on a management-union relationship
    focused on sharing information, growing non-GM revenues and satisfying
 the automotive parts supply requirements of multiple VMs around the
world. We further anticipate that by having control of our labor  
     relations we will, over time, be able to negotiate local work rules and
       practices and other terms more consistent with those generally prevailing
      in the automotive parts industry. We believe that this would enhance our
      overall operational competitiveness. However, we cannot assure you as to
when or the extent to which we will realize these benefits.       

     GM has informed us that it has satisfactorily completed discussions
     with the International Union of Electronic, Electrical, Salaried, Machine
& Furniture Workers AFL-CIO (the "IUE"), one of the principal unions
      representing our employees, regarding the effects of the separation on its
   members. As a result of these discussions, the IUE has recognized that,
   upon Delphi's separation from GM, Delphi will be an independent company
    with its own national and local agreements with the IUE. GM has informed
     us that initial discussions with the United Steel Workers of America (the
      "USW") regarding the effects of the separation on its members were held on
    December 8, 1998 and that further discussions will be held with the USW.
Similar discussions are expected to occur with the other unions     
     representing our employees, but we cannot assure you as to when they will
occur or as to the outcome. In this regard, our largest union, the  
International Union, United Automobile, Aerospace and Agricultural  
   Implement Workers of America (the "UAW"), which represents about 29% of
    our unionized employees, has stated that it is on record as opposing the
   separation of Delphi from GM and that, should GM decide to proceed with
   the transactions, the UAW can and will aggressively work to protect the
rights and interests of its members who would be impacted by the    
     Distribution. Since that time, GM and the UAW have agreed that any of our
    employees who are members of the UAW and who retire on or before October
   1, 1999 will be treated as GM retirees. GM and Delphi have been working
      with the UAW to address its concerns and will continue to do so. We intend
   to cooperate with GM in working together with the UAW, the IUE, the USW
and the other unions representing our employees to address the best 
   interests of their members regarding these matters. See "Risk Factors--
   Risk Factors Relating to Separating Our Company from General Motors--We
   May Be Unable to Increase Our Competitiveness if We Fail to Improve Our
Labor Relations and Establish More Flexible Work Rules and Practices
Following Our Separation from General Motors."                      

   - Capital Financing Flexibility. A separation of our company from General
     Motors would also benefit our company by enhancing our capital planning
flexibility. For example, we would be able to use our own stock to
      facilitate growth through acquisitions. Also, we would no longer have to
    compete with other sectors of GM for funding from GM. However, we have
       entered into certain agreements in connection with our separation from GM
  that contain covenants which restrict our ability to issue stock and
  incur indebtedness, including in connection with acquisitions. For a
  description of these covenants, see "Arrangements Between Delphi and
General Motors--IPO and Distribution Agreement."                  

28

424B4
31st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 31st

- Incentivized Management. Our management's focus would also be       
      strengthened by incentive programs tied to the market performance of our
common stock.                                                     

     - Simplified Internal Structure. A separation would allow our management to
    implement simplified organizational and internal reporting structures.

  SEPARATION AND TRANSITIONAL ARRANGEMENTS. We and General Motors, and, in
some cases, our respective affiliates, have entered into or will enter into,    
prior to the completion of the Offering, certain agreements providing for the   
separation of our business from General Motors, including a Master Separation   
Agreement to which we and GM are parties (as amended from time to time, the     
"Separation Agreement"). These agreements generally became effective as of      
January 1, 1999 and provide for, among other things, the transfer from GM to    
Delphi of those assets comprising the business of Delphi and the assumption by  
Delphi of those liabilities relating to its business, in each case to the extent
agreed to by GM and Delphi and described elsewhere in this prospectus. These    
agreements also govern various interim and ongoing relationships between the    
parties. In particular, GM and Delphi have entered into a Component Supply      
Agreement (as amended from time to time, the "Supply Agreement"), which is      
intended to provide Delphi with a substantial base of business with GM well into
the next decade. In addition, pursuant to such agreements, GM will provide      
certain transitional services to us. While GM is contractually obligated to     
provide us with such transitional services, we cannot assure you that such      
services will be sustained at the same level as when we were a part of GM or    
that we will obtain the same benefits.                                          

These agreements were made in the context of a parent-subsidiary      
relationship and were negotiated in the overall context of our separation from  
GM. The prices charged to us under these agreements may be higher or lower than 
the prices that may be charged by unaffiliated third parties for similar        
services and the other terms may be more or less favorable than those we could  
negotiate with unaffiliated third parties. In addition, although we believe that
the terms and conditions of our Supply Agreement with GM generally reflect terms
and conditions comparable to those in purchase contracts negotiated between a   
supplier and an unaffiliated VM, the Supply Agreement was negotiated in a       
similar context and we cannot assure you that its terms are more or less        
favorable than those we could negotiate with an unaffiliated third party.       

On January 1, 1999, General Motors initiated the process of separating
Delphi by transferring to Delphi the assets and liabilities related to Delphi's 
business, in each case to the extent agreed to by GM and Delphi and described   
elsewhere in this prospectus. Delphi believes that the transfers of             
substantially all of these assets and liabilities have been or will be completed
before the closing of the Offering. Certain international, intellectual property
and real property assets relating primarily to the business of Delphi may still 
be held by GM or its affiliates at the time of the completion of the Offering   
pending receipt of consents or approvals or satisfaction of other applicable    
requirements necessary for the transfer of such assets to Delphi. These assets  
and operations are not, individually or in the aggregate, material to Delphi. In
addition, certain information technology assets relating primarily to the       
business of Delphi may still be held by GM or its affiliates at the time of the 
completion of the Offering, pending receipt of consents necessary for the       
transfer of such assets to Delphi, or may be retained by GM if consents to their
transfer cannot be obtained. Also, certain assets and liabilities relating to   
employees working under collective bargaining agreements will be transferred to 
Delphi at the time of the Distribution.                                         

   For more information regarding the separation arrangements, including the
Supply Agreement between us and GM, see "Arrangements Between Delphi and General
Motors."                                                                        

29

424B4
32nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 32nd

USE OF PROCEEDS 

    We will receive net proceeds from the Offering of about $1.621 billion, or
about $1.864 billion if the U.S. underwriters exercise their over-allotment     
option in full. We intend to use such proceeds for general corporate purposes,  
including our working capital requirements which have been impacted by the      
change in payment terms we have granted to GM pursuant to the Supply Agreement. 
For a description of these new payment terms and their effect on our liquidity, 
see "Management's Discussion and Analysis of Financial Condition and Results of 
Operations--Liquidity and Capital Resources."                                   

  Pending use of the net proceeds for other general corporate purposes, we
may manage our cash position by using a substantial portion of the net proceeds 
to temporarily pay down a portion of our borrowings under our revolving credit  
facilities. Our borrowings under these credit facilities, which have due dates  
of January 3, 2000 and January 3, 2004, were about $2 billion as of February 1, 
1999. As of February 1, 1999, the interest rates on our borrowings under the    
credit facilities ranged between about 5.3% and 5.45%. We expect to reborrow    
substantially all amounts repaid under such facilities in the ordinary course   
shortly following such repayment. For more information about our credit         
facilities, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Debt Capitalization and 
Available Financing Resources."                                                 

DIVIDENDS 

  Following the Offering, our dividend practices with respect to our stock
will be determined and may be changed from time to time by our Board of         
Directors. Under Delaware law and our Amended and Restated Certificate of       
Incorporation (the "Restated Certificate of Incorporation"), the Board is not   
required to declare dividends on our common stock. We currently intend to pay   
dividends on a quarterly basis, at an initial rate of $0.07 per share,          
commencing with the first declaration in June 1999 for payment in July 1999. Our
Board is free to change our dividend practices at any time and from time to time
and to decrease or increase the dividend paid, or to not pay a dividend, on the 
common stock on the basis of the results of operations, financial condition,    
cash requirements and future prospects of our company and other factors deemed  
relevant by our Board.                                                          

30

424B4
33rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 33rd

CAPITALIZATION

Set forth below is the historical capitalization of our company at    
September 30, 1998 and as adjusted to give effect to certain pro forma          
adjustments described in "Unaudited Pro Forma Condensed Consolidated Financial  
Statements," including the Offering. You should read the information set forth  
below in conjunction with "Selected Financial Data," "Unaudited Pro Forma       
Condensed Consolidated Financial Statements," our historical consolidated       
financial statements, including the notes thereto, and "Management's Discussion 
and Analysis of Financial Condition and Results of Operations" which appear     
elsewhere in this prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                               AT SEPTEMBER 30, 1998            
                                                    --------------------------------------------
                                                                     (UNAUDITED)                
                                                    HISTORICAL       ADJUSTMENTS       PRO FORMA
                                                    ----------       -----------       ---------
                                                                   (IN MILLIONS)                
                                                                                                
DEBT:                                                                                           
Notes payable and current portion of long-term                                                  
  debt.............................................   $  206           $    --          $  206  
Long-term debt.....................................    3,294            (3,100)                 
                                                                         3,100           3,294  
                                                      ------           -------          ------  
          Total debt...............................    3,500                --           3,500  
EQUITY (DEFICIT):                                                                               
Common stock.......................................       --                 1                  
                                                                             5               6  
Additional paid-in capital.........................       --             1,620                  
                                                                         1,493           3,113  
General Motors' net investment.....................       (2)            1,500                  
                                                                        (1,498)             --  
Accumulated translation adjustments................      (37)               --             (37) 
                                                      ------           -------          ------  
          Total equity (deficit)...................      (39)            3,121           3,082  
                                                      ------           -------          ------  
               Total capitalization................   $3,461           $ 3,121          $6,582  
                                                      ======           =======          ======  

   Certain items above reflect the settlement of a $3.1 billion intracompany
note payable to General Motors and a $1.5 billion increase in GM's net          
investment in Delphi after considering the $1.6 billion settlement of           
intracompany accounts receivable immediately prior to the time of the           
transactions contemplated by the Separation Agreement. It is expected that      
during the first half of 1999, Delphi will finance its operations through       
third-party credit sources, with borrowings that will increase to about $3.1    
billion. In addition, certain other items above reflect the proceeds from the   
Offering and adjustments to equity to reclassify GM's net investment to common  
stock and additional paid-in capital.                                           

31

424B4
34th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 34th

SELECTED FINANCIAL DATA 

The following selected financial data of Delphi reflect the historical
results of operations and cash flows of the businesses that were considered part
of the Delphi Automotive Systems business sector of GM during each respective   
period. In addition, the data for all periods include amounts relating to Delco 
Electronics, the electronics and mobile communication business that was         
transferred by GM from Hughes Electronics to Delphi in December 1997. The       
historical consolidated statement of income data set forth below do not reflect 
many significant changes that will occur in the operations and funding of our   
company as a result of our separation from GM and the Offering. The historical  
consolidated balance sheet data set forth below reflect the assets and          
liabilities that are expected to be transferred to our company in accordance    
with the Separation Agreement.                                                  

   The selected financial data of Delphi should be read in conjunction with,
and are qualified by reference to, "Unaudited Pro Forma Condensed Consolidated  
Financial Statements," "Management's Discussion and Analysis of Financial       
Condition and Results of Operations" and the consolidated financial statements  
and notes thereto included elsewhere in this prospectus. The consolidated       
statement of income and cash flow data set forth below for each of the three    
years in the period ended December 31, 1997, and the consolidated balance sheet 
data as of December 31, 1996 and 1997 are derived from, and qualified by        
reference to, the audited consolidated financial statements included elsewhere  
in this prospectus, and should be read in conjunction with those consolidated   
financial statements and the notes thereto. The consolidated statement of income
and cash flow data for each of the years ended December 31, 1993 and 1994 and   
the consolidated balance sheet data as of December 31, 1993, 1994 and 1995 are  
derived from unaudited consolidated financial statements not included in this   
prospectus, which in our opinion include all adjustments, consisting unless     
otherwise disclosed of only normal recurring adjustments necessary for a fair   
presentation of the results for such periods. The consolidated statement of     
income and cash flow data for the nine months ended September 30, 1997 and 1998 
and the consolidated balance sheet data as of September 30, 1998 are derived    
from, and should be read in conjunction with, the unaudited consolidated        
financial statements included elsewhere in this prospectus, which in our opinion
include all adjustments, consisting of only normal recurring adjustments,       
necessary for a fair presentation of the results for such periods.              

The financial information presented below may not be indicative of our
future performance and does not necessarily reflect what our financial position 
and results of operations would have been had we operated as a separate,        
stand-alone entity during the periods presented. Results for the nine months    
ended September 30, 1998 are not necessarily indicative of results that may be  
expected for the entire year. See "Risk Factors--Risk Factors Relating to       
Separating Our Company from General Motors--Our Historical Financial Information
May Not Be Representative of Our Results As a Separate Company." You should also
read the "Management's Discussion and Analysis of Financial Condition and       
Results of Operations" section, which describes a number of factors which have  
affected our financial results, including significant price reductions as GM    
implemented its global sourcing initiative, labor disruptions at both GM and    
Delphi and charges associated with certain competitiveness initiatives.         

32

424B4
35th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 35th

                                                        [Enlarge/Download Table]

                                                                                               NINE MONTHS    
                                                                                                  ENDED       
                                                      YEAR ENDED DECEMBER 31,                 SEPTEMBER 30,   
                                          -----------------------------------------------   ----------------- 
                                           1993      1994      1995      1996      1997      1997      1998   
                                           ----      ----      ----      ----      ----      ----      ----   
                                                        (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)               
                                                                                                              
STATEMENT OF INCOME DATA:                                                                                     
  Net sales.............................  $29,327   $31,044   $31,661   $31,032   $31,447   $23,368   $20,679 
  Operating expenses:                                                                                         
    Cost of sales, excluding items                                                                            
       listed below.....................   25,754    27,081    27,384    27,471    27,710    20,507    19,220 
    Selling, general and                                                                                      
       administrative...................    1,033     1,157     1,366     1,445     1,415     1,011     1,012 
    Depreciation and amortization.......      777       722       773       843     1,970       621       731 
                                          -------   -------   -------   -------   -------   -------   ------- 
  Operating income (loss)...............    1,763     2,084     2,138     1,273       352     1,229      (284)
  Interest expense......................     (384)     (310)     (293)     (276)     (287)     (206)     (199)
  Other (loss) income, net..............     (124)      103       101       115       194        65       124 
                                          -------   -------   -------   -------   -------   -------   ------- 
  Income (loss) before income taxes.....    1,255     1,877     1,946     1,112       259     1,088      (359)
  Income taxes (tax benefit)............      307       644       639       259        44       352      (178)
                                          -------   -------   -------   -------   -------   -------   ------- 
  Income (loss) before cumulative effect                                                                      
    of change in accounting principle...      948     1,233     1,307       853       215       736      (181)
  Cumulative effect of change in                                                                              
    accounting principle, net of tax....       --      (258)       --        --        --        --        -- 
                                          -------   -------   -------   -------   -------   -------   ------- 
  Net income (loss).....................  $   948   $   975   $ 1,307   $   853   $   215   $   736   $  (181)
                                          =======   =======   =======   =======   =======   =======   ======= 
Basic and diluted earnings (loss) per                                                                         
  share.................................  $  2.04   $  2.10   $  2.81   $  1.83   $  0.46   $  1.58   $ (0.39)
                                          =======   =======   =======   =======   =======   =======   ======= 
STATEMENT OF CASH FLOWS DATA:                                                                                 
  Cash provided by (used in) operating                                                                        
    activities..........................      n/a       n/a   $ 1,370   $ 2,701   $ 2,918   $ 1,812   $   (51)
  Cash used in investing activities.....      n/a       n/a    (1,141)     (995)   (1,320)     (860)     (699)
  Cash (used in) provided by financing                                                                        
    activities..........................      n/a       n/a      (263)   (1,686)   (1,549)     (903)      741 
OTHER FINANCIAL DATA:                                                                                         
  EBITDA................................  $ 2,378   $ 2,603     2,959     2,182     2,459     1,877       530 

                                                        [Enlarge/Download Table]

                                                                                                  AT         
                                                         AT DECEMBER 31,                     SEPTEMBER 30,   
                                         -----------------------------------------------   ----------------- 
                                          1993      1994      1995      1996      1997      1997      1998   
                                          ----      ----      ----      ----      ----      ----      ----   
                                                                    (IN MILLIONS)                            
                                                                                                             
BALANCE SHEET DATA:                                                                                          
  Total assets.......................... $14,803   $14,494   $15,635   $15,390   $15,026   $15,863   $14,930 
  Total debt............................   3,500     3,500     3,500     3,500     3,500     3,500     3,500 
  Equity (deficit)......................    (476)      120     1,354       922      (413)      816       (39)

We adopted SFAS No. 112, "Employers' Accounting for Postemployment    
Benefits," effective January 1, 1994. The adoption had an unfavorable cumulative
effect of $258 million after-tax, which is reflected in 1994 net income.        
Earnings per share before the cumulative effect of the change in accounting     
principle was $2.65 per share. The cumulative effect of the change in accounting
principle was $0.55 per share. For information on special items impacting 1996  
through 1998 operating results, see "Management's Discussion and Analysis of    
Financial Condition and Results of Operations--Results of Operations--Special   
Items and Work Stoppages."                                                      

 "EBITDA" is defined as income before provision for interest expense and
interest income, income taxes, depreciation and amortization. EBITDA is not     
presented as an alternative measure of operating results or cash flow from      
operations, as determined in accordance with generally accepted accounting      
principles, but because we believe it is a widely accepted indicator of our     
ability to incur and service debt. EBITDA does not give effect to cash used for 
debt service requirements and thus does not reflect funds available for         
dividends, reinvestment or other discretionary uses. In addition, EBITDA as     
presented herein may not be comparable to similarly titled measures reported by 
other companies.                                                                

33

424B4
36th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 36th

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

The unaudited pro forma condensed consolidated financial statements of
Delphi were derived from the application of pro forma adjustments to our        
historical consolidated financial statements and give effect to the Offering and
the terms of the Separation Agreement, exclusive of terms relating to the       
transfer of the assets and liabilities to Delphi, as such terms were considered 
in preparing the historical consolidated balance sheets. The unaudited pro forma
condensed consolidated statements of income data for the year ended December 31,
1997 and for the nine months ended September 30, 1998 have been prepared as if  
our separation from GM had been completed and the Offering had occurred at the  
beginning of the earliest pro forma period presented. The unaudited pro forma   
condensed consolidated balance sheet data as of September 30, 1998 have been    
prepared as if our separation from GM had been completed and the Offering had   
occurred as of September 30, 1998.                                              

    The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with, and are qualified by reference to, "Management's   
Discussion and Analysis of Financial Condition and Results of Operations" and   
the audited and unaudited consolidated financial statements and notes thereto   
included elsewhere in this prospectus.                                          

   The unaudited pro forma condensed consolidated balance sheet data are not
necessarily indicative of what our financial position would have been had the   
separation of our business from GM been completed and had the Offering occurred 
on September 30, 1998. The unaudited pro forma condensed consolidated statements
of income data are not necessarily indicative of what our results of operations 
would have been had the separation of our business from GM been completed and   
had the Offering occurred at the beginning of the earliest pro forma period     
presented. In addition, our results for the nine months ended September 30, 1998
are not necessarily indicative of results that may be expected for the entire   
year.                                                                           

 The summary pro forma condensed consolidated financial data are derived
from the application of pro forma adjustments related to the Offering and the   
terms of the Separation Agreement. The unaudited pro forma condensed            
consolidated balance sheet data give effect to:                                 

- the Offering;                                                       

- a change in GM's intracompany accounts receivable payment terms; and

 - the settlement of certain GM intracompany accounts receivable and the
intracompany note payable.                                        

The unaudited pro forma condensed consolidated statement of income data give    
effect to:                                                                      

- the Offering;                                                       

     - decreased employee benefit costs due to GM's retention of certain benefit
obligations; and                                                  

- certain incremental costs associated with operating Delphi as a     
stand-alone publicly traded company.                              

34

424B4
37th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 37th

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME DATA 

FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 

                                                        [Enlarge/Download Table]

                                                   HISTORICAL    ADJUSTMENTS   PRO FORMA  
                                                   ----------    -----------   ---------  
                                                                                          
Net sales.........................................  $31,447            --       $31,447   
Operating expenses:                                                                       
  Cost of sales, excluding items listed below.....   27,710         $(463)(1)    27,247   
  Selling, general and administrative.............    1,415           (19)(1)             
                                                                      147 (2)     1,543   
  Depreciation and amortization...................    1,970            --         1,970   
                                                    -------         -----       -------   
     Total operating expenses.....................   31,095          (335)       30,760   
                                                    -------         -----       -------   
Operating income..................................      352           335           687   
Interest expense..................................     (287)(3)        --          (287)  
Other income, net.................................      194            --           194   
                                                    -------         -----       -------   
Income before income taxes........................      259           335           594   
Income taxes......................................       44           127(4)        171   
                                                    -------         -----       -------   
Net income........................................  $   215         $ 208       $   423   
                                                    =======         =====       =======   
Basic and diluted earnings per share                                                      
  Historical--based on 465,000,000 shares                                                 
     outstanding..................................  $  0.46                               
                                                    =======                               
  Pro forma--based on 565,000,000 shares                                                  
     outstanding..................................                              $  0.75(5)
                                                                                =======   

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 

                                                        [Enlarge/Download Table]

                                                   HISTORICAL    ADJUSTMENTS   PRO FORMA   
                                                   ----------    -----------   ---------   
                                                                                           
Net sales.........................................  $20,679            --       $20,679    
Operating expenses:                                                                        
  Cost of sales, excluding items listed below.....   19,220        $ (186)(1)    19,034    
  Selling, general and administrative.............    1,012            (8)(1)              
                                                                      111 (2)     1,115    
  Depreciation and amortization...................      731            --           731    
                                                    -------        ------       -------    
     Total operating expenses.....................   20,963           (83)       20,880    
                                                    -------        ------       -------    
Operating loss....................................     (284)           83          (201)   
Interest expense..................................     (199)(3)        --          (199)   
Other income, net.................................      124            --           124    
                                                    -------        ------       -------    
Loss before income taxes..........................     (359)           83          (276)   
Income tax benefit................................     (178)           32 (4)      (146)   
                                                    -------        ------       -------    
Net loss..........................................  $  (181)       $   51       $  (130)   
                                                    =======        ======       =======    
Basic and diluted loss per share                                                           
  Historical--based on 465,000,000 shares                                                  
     outstanding..................................  $ (0.39)                               
                                                    =======                                
  Pro forma--based on 565,000,000 shares                                                   
     outstanding..................................                              $ (0.23)(5)
                                                                                =======    

See notes to unaudited pro forma condensed consolidated financial statements. 
35

424B4
38th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 38th

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA 
AS OF SEPTEMBER 30, 1998
(IN MILLIONS) 

                                                        [Enlarge/Download Table]

                                                       HISTORICAL  ADJUSTMENTS     PRO FORMA
                                                       ----------  -----------     ---------
                                                                                            
ASSETS                                                                                      
Current assets:                                                                             
  Cash and marketable securities......................  $ 1,000      $ 1,621 (6)            
                                                                      (2,100)(7)            
                                                                       3,100 (8)            
                                                                      (1,600)(9)    $ 2,021 

  Accounts receivable, net:                                                                 
     General Motors and affiliates....................    1,962        2,100 (7)            
                                                                      (1,600)(8)            
                                                                       1,600 (9)      4,062 
     Other customers..................................    1,288           --          1,288 
  Inventories, net....................................    1,807           --          1,807 
  Deferred income taxes...............................      206           --            206 
  Prepaid expenses and other assets...................       96           --             96 
                                                        -------      -------        ------- 
     Total current assets.............................    6,359        3,121          9,480 
Property, net.........................................    4,878           --          4,878 
Deferred income taxes.................................    2,552           --          2,552 
Other assets..........................................    1,141           --          1,141 
                                                        -------      -------        ------- 
Total assets..........................................  $14,930      $ 3,121        $18,051 
                                                        =======      =======        ======= 
LIABILITIES AND EQUITY (DEFICIT)                                                            
Current liabilities:                                                                        
  Notes payable and current portion of long-term                                            
     debt.............................................  $   206      $    --        $   206 
  Accounts payable:                                                                         
     General Motors and affiliates....................       91           --             91 
     Other suppliers..................................    1,977           --          1,977 
  Accrued liabilities.................................    1,557           --          1,557 
                                                        -------      -------        ------- 
     Total current liabilities........................    3,831           --          3,831 
Long-term debt........................................    3,294       (3,100)(8)            
                                                                       3,100 (8)      3,294 
Pension benefits......................................    1,897           --          1,897 
Postretirement benefits other than pensions...........    4,523           --          4,523 
Other liabilities.....................................    1,424           --          1,424 
                                                        -------      -------        ------- 
     Total liabilities................................   14,969           --         14,969 
Equity (deficit):                                                                           
  Common stock........................................       --            1 (6)            
                                                                           5 (10)         6 
  Additional paid-in capital..........................       --        1,620 (6)            
                                                                       1,493 (10)     3,113 
  General Motors' net investment......................       (2)       1,500 (8)            
                                                                      (1,498)(10)        -- 
  Accumulated translation adjustments.................      (37)          --            (37)
                                                        -------      -------        ------- 
     Total equity (deficit)...........................      (39)       3,121          3,082 
                                                        -------      -------        ------- 
Total liabilities and equity (deficit)................  $14,930      $ 3,121        $18,051 
                                                        =======      =======        ======= 

See notes to unaudited pro forma condensed consolidated financial statements. 
36

424B4
39th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 39th

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

   The following pro forma adjustments were made to reflect the terms of the
Separation Agreement and the Offering:                                          

(1) As set forth under "Arrangements Between Delphi and General               
Motors--Employee Matters," Delphi and General Motors have entered into
  agreements regarding certain employee benefit obligations. The pro forma
    adjustments for the year ended December 31, 1997 and the nine months ended
September 30, 1998 are as follows:                                    

                                                                [Download Table]

                                                                NINE MONTHS 
                                                 YEAR ENDED        ENDED    
                                                DECEMBER 31,   SEPTEMBER 30,
                                                    1997           1998     
                                                ------------   -------------
                                                       (IN MILLIONS)        
                                                                            
Pension related costs..........................    $  84           $ 158    
Postretirement benefits other than pensions....     (569)           (357)   
Other employee benefits........................        3               5    
                                                   -----           -----    
  Total........................................    $(482)          $(194)   
                                                   =====           =====    
Portion attributable to cost of sales..........    $(463)          $(186)   
                                                   =====           =====    
Portion attributable to selling, general and                                
  administrative...............................    $ (19)          $  (8)   
                                                   =====           =====    

(2) Reflects the estimated incremental selling, general and administrative    
 costs associated with operating Delphi as a stand-alone publicly traded
     company. The pro forma adjustments for the year ended December 31, 1997 and
the nine months ended September 30, 1998 are as follows:              

                                                                [Download Table]

                                                                NINE MONTHS 
                                            YEAR ENDED             ENDED    
                                           DECEMBER 31,        SEPTEMBER 30,
                                               1997                1998     
                                           ------------        -------------
                                                      (IN MILLIONS)         
                                                                            
Incremental insurance and risk                                              
  management.........................          $ 34                $ 26     
Incremental corporate costs*.........            48                  36     
Taxes other than income..............            50                  38     
Other................................            15                  11     
                                               ----                ----     
  Total..............................          $147                $111     
                                               ====                ====     

    * Incremental corporate costs include additional personnel and systems costs
 that will be required to operate as a stand-alone entity, and reflect
      transitional service arrangements with General Motors at terms provided in
    the Separation Agreement. Other costs include certain sales tax expenses
associated with separation.                                         

(3) Historical interest expense was calculated using an estimated blend of    
    short-term and long-term weighted-average interest rates commensurate with
    the anticipated overall credit risk of Delphi as a stand-alone entity. See
    Note 1 to our audited consolidated financial statements included elsewhere
  in this prospectus for additional information. A 1/8% change in interest
     rates would have an impact of about $4 million and $3 million on historical
   interest expense for the year ended December 31, 1997 and the nine months
ended September 30, 1998, respectively.                               

(4) Income taxes were determined in accordance with the provisions of SFAS No.
109, "Accounting for Income Taxes." Once our company is a stand-alone 
entity and is no longer included in GM's                              

37

424B4
40th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 40th
consolidated income tax return, we will no longer benefit from GM's   
   consolidated income tax environment. As a result, we expect our effective
income tax rates in future periods generally to be higher than our    
historical effective income tax rates. For purposes of this pro forma 
  presentation only, adjustments necessary to record the income tax effect
 of the pro forma adjustments assume a combined federal and state income
tax rate of 38%.                                                      

 (5) Reflects the sale of 100,000,000 shares of common stock in the Offering. It
 does not include up to 15,000,000 shares of common stock which the U.S.
   underwriters have the option to purchase solely to cover over-allotments.
    If the U.S. underwriters exercise their over-allotment option in full, the
    pro forma earnings per share for the year ended December 31, 1997 would be
    $0.73 and the pro forma loss per share for the nine months ended September
30, 1998 would be $0.22.                                              

 (6) Reflects the sale of 100,000,000 shares of common stock in the Offering. As
  set forth under "Use of Proceeds," Delphi expects to use the proceeds of
the Offering for general corporate purposes, including working capital
requirements which have been impacted by the change in General Motors 
accounts receivable payment terms described in note (7) below and the 
temporary pay-down of amounts borrowed under Delphi's revolving credit
facilities.                                                           

(7) Reflects the change in payment terms for intracompany accounts receivable 
from General Motors in accordance with the terms of the Separation    
Agreement. As set forth under "Arrangements Between Delphi and General
  Motors--Supply Agreement--Payment Terms," payment terms, which generally
 called for payment in the month following shipment by Delphi, have been
modified to require payment by General Motors on the second day of the
second month following shipment by Delphi.                            

 (8) Reflects the settlement of certain intracompany accounts receivable from GM
with the intracompany note payable to GM. Immediately prior to the    
     transactions contemplated by the Separation Agreement, certain intracompany
    accounts receivable from GM estimated at $1.6 billion will be settled with
the $3.1 billion outstanding intracompany note payable to GM with the 
  difference resulting in an increase in GM's net investment in Delphi. We
expect that during the first half of 1999, Delphi will finance its    
operations through a combination of $3.1 billion in borrowings under  
  revolving credit facilities, commercial paper, the issuance of long-term
 debt, structured financing and other short-term financing measures. See
     "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."                         

(9) Reflects the required adjustment, subsequent to the settlement of         
 intracompany accounts receivable described in note (8) above, to adjust
cash and accounts receivable balances to levels that are indicative of
amounts associated with on-going operations.                          

(10) Reflects the adjustment to equity to reclassify GM's net investment as     
common stock and additional paid-in capital.                          

38

424B4
41st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 41st

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 

OVERVIEW                                                                        

HISTORICAL FINANCIAL STATEMENTS                                       

   Our consolidated financial statements, which are discussed below, reflect
the historical results of operations and cash flows of the businesses that were 
considered part of the Delphi Automotive Systems business sector during each    
respective period; however, they do not reflect many significant changes that   
will occur in the operations and funding of our company as a result of our      
separation from GM and the Offering. The historical consolidated balance sheets 
reflect the assets and liabilities that are expected to be transferred to our   
company in accordance with the transactions contemplated by the Separation      
Agreement. Delphi and Delco Electronics were under the common control of GM     
during such periods; therefore, our consolidated financial statements include   
amounts relating to Delco Electronics for all periods presented, although Delco 
Electronics was not integrated with our company until December 1997. See Note 1 
to our audited consolidated financial statements included elsewhere in this     
prospectus for a summary of our organization and significant factors reflected  
in our historical financial statements. See "--Results of Operations" and       
"--Liquidity and Capital Resources" for details on changes in our operations and
funding that are expected to result in connection with our separation from GM   
and the Offering.                                                               

SEPARATION FROM GENERAL MOTORS                                        

     General Motors and Delphi, and, in some cases, their respective affiliates,
have entered into or will enter into, prior to the completion of the Offering,  
certain agreements providing for the separation of our business from General    
Motors and the Distribution, including the Separation Agreement. For more       
information regarding the terms of our separation from GM, including the Supply 
Agreement between the companies, and the Distribution, see "Delphi and Its      
Separation from General Motors--Separation from General Motors" and             
"Arrangements Between Delphi and General Motors."                               

NET SALES                                                             

  Our consolidated net sales increased from $29.3 billion in 1993 to $31.4
billion in 1997, despite the divestiture of various businesses having annual    
sales of about $6 billion. In addition, annual net sales for recent periods have
been unfavorably impacted by increasing price pressures from our VM customers as
well as work stoppages. Price reductions, as a percentage of net sales, were    
3.0%, 2.3% and 1.6% for the years ended December 31, 1996 and 1997 and the nine 
months ended September 30, 1998, respectively, reflecting an overall decline in 
price concessions. We believe that price reductions in 1998 are more indicative 
of future price pressures from VMs, although we cannot assure you in this       
regard. See "Risk Factors--Risk Factors Relating to Our Business--Our Gross     
Margins Will Be Adversely Affected if We Are Unable to Offset All of the Cost   
Reductions We Must Provide to Our Customers." Although net sales for all of our 
product sectors were impacted by price reductions, the percentage impact was the
largest for our Electronics & Mobile Communication product sector, reflecting   
the overall decline in prices throughout the electronics industry. Our net sales
can be impacted by a variety of factors, including divestitures, price          
pressures, actual volume and timing of vehicle production and the mix of options
on vehicles that are produced. Within this "Overview" section, we have included 
certain information that breaks down our consolidated net sales by product      
sector and by principal geographic region. For additional information on our    
consolidated net sales and such break downs, see "--Results of Operations."     

39

424B4
42nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 42nd

   Our consolidated net sales by product sector and in total were as follows
for each respective period:                                                     

                                                        [Enlarge/Download Table]

                                                                                    NINE MONTHS     
                                                                                       ENDED        
                                                   YEAR ENDED DECEMBER 31,         SEPTEMBER 30,    
                                                -----------------------------    ------------------ 
                PRODUCT SECTOR                   1995       1996       1997       1997       1998   
                --------------                   ----       ----       ----       ----       ----   
                                                                   (IN MILLIONS)                    
                                                                                                    
Electronics & Mobile Communication............. $ 5,479    $ 5,315    $ 5,539    $ 4,096    $ 3,412 
Safety, Thermal & Electrical Architecture......  13,433     12,942     12,728      9,424      8,366 
Dynamics & Propulsion..........................  13,142     13,293     13,733     10,208      9,222 
Eliminations...................................    (393)      (518)      (553)      (360)      (321)
                                                -------    -------    -------    -------    ------- 
  Consolidated net sales....................... $31,661    $31,032    $31,447    $23,368    $20,679 
                                                =======    =======    =======    =======    ======= 

   Our net sales by product sector include certain inter-sector sales, which
we eliminate for purposes of determining our total net sales. The following     
table shows the approximate composition by product sector of our net sales for  
the periods presented, after adjusting to account for these eliminations:       

                                                        [Enlarge/Download Table]

                                                                                   NINE MONTHS    
                                                           YEAR ENDED                 ENDED       
                                                          DECEMBER 31,            SEPTEMBER 30,   
                                                   ---------------------------   ---------------- 
                  PRODUCT SECTOR                   1995       1996       1997    1997       1998  
                  --------------                   ----       ----       ----    ----       ----  
                                                                                                  
Electronics & Mobile Communication................  16.5%      16.2%      16.5%   16.6%      15.6%
Safety, Thermal & Electrical Architecture.........  42.0       41.1       39.9    39.7       39.8 
Dynamics & Propulsion.............................  41.5       42.7       43.6    43.7       44.6 
                                                   -----      -----      -----   -----      ----- 
                                                   100.0%     100.0%     100.0%  100.0%     100.0%
                                                   =====      =====      =====   =====      ===== 

    Net Sales by Principal Geographic Region. We have established an expansive
global presence, with sales in every major region of the world. Based on the    
location of the operations producing the sale, our consolidated net sales by    
principal geographic region and in total were as follows for the years ended    
December 31, 1995, 1996 and 1997:                                               

CONSOLIDATED NET SALES BY GEOGRAPHIC REGION 

                                                        [Enlarge/Download Table]

                                                             YEAR ENDED DECEMBER 31,                    
                                           ------------------------------------------------------------ 
                                                 1995                  1996                  1997       
                                           ----------------      ----------------      ---------------- 
            GEOGRAPHIC REGION                 $         %           $         %           $         %   
            -----------------                 -         -           -         -           -         -   
                                                              (DOLLARS IN MILLIONS)                     
                                                                                                        
United States............................. $23,387     73.9%     $22,139     71.3%     $21,925     69.7%
Europe....................................   4,240     13.4        4,655     15.0        4,220     13.4 
Mexico....................................   2,272      7.2        2,714      8.8        3,448     11.0 
Canada....................................   1,211      3.8          719      2.3          806      2.6 
South America.............................     238      0.7          442      1.4          662      2.1 
Other.....................................     313      1.0          363      1.2          386      1.2 
                                           -------    -----      -------    -----      -------    ----- 
       Consolidated net sales............. $31,661    100.0%     $31,032    100.0%     $31,447    100.0%
                                           =======    =====      =======    =====      =======    ===== 

40

424B4
43rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 43rd

OPERATING COSTS                                                       

     Our operating costs include structural costs and material costs. Structural
costs generally consist of our fixed costs, including selling, general and      
administrative and other commercial costs, engineering costs and labor and other
manufacturing costs. Generally, our structural costs are not impacted by        
incremental volume changes in the short-run; however, we continue to focus on   
long-term reductions in our overall structural costs and increasing our         
manufacturing efficiency and flexibility. Material costs generally reflect      
direct materials used in producing our products. Such costs generally vary based
on the volume of production for any given period.                               

Since 1991, when GM organized its various component operations into a 
separate business group, we have been evolving from a fully captive, yet        
separately managed, collection of component operations into an independently    
managed supplier of components, systems and modules to GM and all of the other  
major VMs. During this transitional period, our financial results have at times 
been adversely affected by a variety of factors, such as significant price      
reductions, labor disruptions at both GM and Delphi and certain unprofitable    
manufacturing operations. See "--Results of Operations--Special Items and Work  
Stoppages." In response to these and other factors, we have developed, and are  
implementing, a number of initiatives designed to improve our operating         
performance. See "Business of Delphi--Strategy--Improve Operating Performance"  
for a description of these initiatives.                                         

Although we have made substantial progress in implementing these      
initiatives, we believe that in many cases the full impact of these initiatives 
has not yet been realized. We believe that as we fully implement these          
initiatives throughout our operations and complete our separation from GM, we   
will be able to realize additional benefits. The realization of these benefits  
is important to our ability to realize our business objectives. See "Risk       
Factors--Risk Factors Relating to Our Business--We May Be Unable to Realize Our 
Business Strategy of Improving Our Operating Performance."                      

RECENT FINANCIAL RESULTS                                              

 Our consolidated financial results for the three months and years ended
December 31, 1997 and 1998 are summarized as follows:                           

                                                                [Download Table]

                                           THREE MONTHS                           
                                               ENDED               YEAR ENDED     
                                           DECEMBER 31,           DECEMBER 31,    
                                          ---------------       ----------------- 
                                           1997     1998         1997      1998   
                                           ----     ----         ----      ----   
                                          (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 
                                                                                  
Net sales................................ $8,079   $7,800       $31,447   $28,479 
Operating (loss) income..................   (877)      63           352      (221)
Net (loss) income........................   (521)      88           215       (93)
Basic and diluted (loss) earnings per                                             
  share..................................  (1.12)    0.19          0.46     (0.20)

    Net Sales. Net sales for the fourth quarter of 1998 decreased $279 million
compared to the fourth quarter of 1997. The decrease reflects lost volume       
associated with the divestiture of our seating, lighting and coil spring        
operations during the third quarter of 1998. The sales volume lost from divested
businesses was partially offset by the impact of improved production volumes for
GM-North America and non-GM customers during the fourth quarter of 1998. In     
addition, our sales continue to be impacted by price reductions which amounted  
to about $125 million, or 1.6% of net sales, in the fourth quarter of 1998. Net 
sales for the year ended December 31, 1998 decreased $3.0 billion compared to   
the year ended December 31, 1997. The decrease reflects unfavorable volumes     
associated with work stoppages, divested businesses and economic conditions in  
Asia and Latin America as well as the impact of price reductions during 1998.   

  Operating (Loss) Income. Operating income was $63 million for the fourth
quarter of 1998 compared to an operating loss of $877 million for the fourth    
quarter of 1997. Our operating loss for the year ended                          

41

424B4
44th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 44th

December 31, 1998 was $221 million compared to operating income of $352 million 
for the year ended December 31, 1997. As part of our ongoing evaluation of the  
competitiveness of our business, we recorded a 1998 fourth quarter charge of    
$310 million, or $192 million after-tax. The charge primarily related to        
underperforming assets, voluntary early retirements and the closure of certain  
unprofitable joint ventures. For additional information on other special items  
and work stoppages which impacted our operating results in prior periods, see   
"--Results of Operations--Special Items and Work Stoppages."                    

    Operating income, excluding charges associated with the ongoing evaluation
of the competitiveness of our business, was $485 million and $373 million for   
the fourth quarters of 1997 and 1998, respectively. Our 1998 fourth quarter     
results were unfavorably impacted by continuing worldwide price pressures, the  
economic downturn in Latin America and unfavorable design costs and product mix.
These unfavorable items were significantly offset by the impact of our          
aggressive cost reduction efforts. Operating income, excluding the impact of    
special items and work stoppages, was $1.9 billion and $1.2 billion for the     
years ended December 31, 1997 and 1998, respectively. The reduction in operating
income for the 1998 year, excluding the impact of special items and work        
stoppages, reflects lower volume and the unfavorable impact of economic         
conditions in Asia and Latin America. For the 1998 year, material and           
manufacturing cost savings exceeded the impact of price reductions and          
unrecovered design costs and partially offset the unfavorable impact of lower   
volume.                                                                         

Net (Loss) Income. Our net income totaled $88 million for the fourth  
quarter of 1998 compared to a net loss of $521 million for the comparable period
of 1997. Excluding charges associated with the ongoing evaluation of the        
competitiveness of our business and other special items, our income was $280    
million and $325 million for the fourth quarter of 1998 and 1997, respectively. 
Our net loss was $93 million for the year ended December 31, 1998 compared to   
net income of $215 million in 1997. Excluding the impact of special items and   
work stoppages, our income was $820 million and $1.17 billion for the years     
ended December 31, 1998 and 1997, respectively.                                 

     Net income, as reported, does not reflect the impact of many changes in our
operations that are expected to result from our separation from GM. After giving
effect to the terms of the Separation Agreement and excluding charges associated
with the ongoing evaluation of the competitiveness of our business and other    
special items, our income would have been $298 million for the fourth quarter of
1998 compared to $377 million for the fourth quarter of 1997. Our income,       
excluding the impact of special items and work stoppages, for the years ended   
December 31, 1997 and 1998 would have been $1.38 billion and $889 million,      
respectively, after giving effect to the terms of the Separation Agreement. For 
additional information on our pro forma results of operations, see "Unaudited   
Pro Forma Condensed Consolidated Financial Statements" and "--Results of        
Operations--Pro forma 1997 versus pro forma nine months ended September 30,     
1998."                                                                          

    Our consolidated financial results for the three months ended December 31,
1997 and 1998 and the year ended December 31, 1998 are unaudited and, in the    
opinion of management, include all adjustments, consisting unless otherwise     
disclosed of only normal recurring items which are necessary for a fair         
presentation. The results for interim periods are not necessarily indicative of 
results which may be expected for any other interim period or for the full year.

42

424B4
45th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 45th

RESULTS OF OPERATIONS                                                           

To facilitate analysis, the following table sets forth consolidated   
statement of income data as a percentage of net sales for each of the periods   
presented:                                                                      

                                                        [Enlarge/Download Table]

                                                                                    NINE MONTHS      
                                                                                       ENDED         
                                                 YEAR ENDED DECEMBER 31,           SEPTEMBER 30,     
                                            ---------------------------------   -------------------  
                                            1995          1996          1997    1997          1998   
                                            ----          ----          ----    ----          ----   
                                                                                                     
NET SALES.................................. 100.0%        100.0%        100.0%  100.0%        100.0% 
Operating expenses:                                                                                  
  Cost of sales, excluding items listed                                                              
     below.................................  86.5          88.5          88.1    87.8          92.9  
  Selling, general and administrative......   4.3           4.7           4.5     4.3           4.9  
  Depreciation and amortization............   2.4           2.7           6.3     2.7           3.5  
                                            -----         -----         -----   -----         -----  
OPERATING INCOME (LOSS)....................   6.8           4.1           1.1     5.2          (1.3) 
Interest expense...........................  (0.9)         (0.9)         (0.9)   (0.9)         (1.0) 
Other income, net..........................   0.3           0.4           0.6     0.3           0.6  
                                            -----         -----         -----   -----         -----  
Income (loss) before income taxes..........   6.2           3.6           0.8     4.6          (1.7) 
Income taxes (tax benefit).................   2.0           0.8           0.1     1.5          (0.8) 
                                            -----         -----         -----   -----         -----  
NET INCOME (LOSS)..........................   4.2%          2.8%          0.7%    3.1%         (0.9)%
                                            =====         =====         =====   =====         =====  

In order to more fully understand the fluctuations in the consolidated
statement of income data, you should consider the impact of special items and   
work stoppages as discussed below.                                              

SPECIAL ITEMS AND WORK STOPPAGES                                      

  The global automotive parts industry has become increasingly competitive
and is currently undergoing significant restructuring and consolidation         
activities. All of the major industry competitors are continuing to increase    
their focus on efficiency and cost improvements, while facing increasing price  
pressures from VM customers. As a result, we initiated a study in 1997 to       
evaluate the long-term competitiveness of all facets of our businesses (the     
"Competitiveness Study"). This study was performed in conjunction with the      
business planning cycle and was substantially completed in December 1997.       
Additional information regarding the Competitiveness Study is included below and
in Note 3 to our audited consolidated financial statements included elsewhere in
this prospectus.                                                                

Our operating results for the periods presented were also impacted by 
special items which management views as non-recurring in nature. Such special   
items included divestiture and plant closing charges as well as the impact of   
work stoppages at certain GM and Delphi locations. Although these items are     
considered non-recurring, we cannot provide assurance that other special items  
and/or work stoppages will not occur with greater or lesser effects in future   
periods.                                                                        

The following is a summary of the various factors that impacted our   
operating results during the periods presented:                                 

1998                                                                  

   - During the third quarter of 1998, we recorded an operating loss of $430
       million, or $271 million after-tax, related to divestitures involving our
     seating, lighting and coil spring businesses. The charge had the effect
   of increasing cost of sales and depreciation and amortization by $382
million and $48 million, respectively.                            

    - Work stoppages at GM and Delphi in the United States during 1998 reduced
    operating income by about $468 million, or $290 million after-tax, and
$435 million, or $270 million after-tax, during the               

43

424B4
46th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 46th

second and third quarters of 1998, respectively, after considering
partial recovery of lost production in the third quarter.         

1997                                                                  

- During the first quarter of 1997, we recorded an $80 million plant  
 closing charge, or $50 million after-tax, relating to a facility in
   Trenton, New Jersey. This charge had the effect of increasing cost of
sales by $80 million.                                             

- Work stoppages at certain GM and Delphi locations during the second 
quarter of 1997 had an unfavorable impact of $185 million, or $115
       million after-tax, before considering partial recovery of lost production
      in the third quarter of 1997. The full year impact of work stoppages was
$148 million, or $92 million after-tax, after considering partial 
 recovery of lost production primarily in the third quarter of 1997.

- Other special items included gains aggregating $58 million and $39  
     million, or $36 million and $24 million after-tax, respectively, during
the second and fourth quarters of 1997, respectively. These gains 
       primarily related to the sale of certain businesses and investments, none
of which were material on an individual basis.                    

    - During the fourth quarter of 1997, we recorded a $1.4 billion charge, or
     $870 million after-tax, relating to the Competitiveness Study. Overall,
       the charge had the effect of increasing 1997 fourth quarter and full year
      cost of sales and depreciation and amortization by $262 million and $1.1
billion, respectively.                                            

1996                                                                  

 - During the fourth quarter of 1996, we sold four facilities located in
Flint and Livonia, Michigan and Oshawa and Windsor, Ontario, which
     resulted in a loss of $247 million, or $153 million after-tax. The loss
  had the effect of increasing 1996 cost of sales and depreciation and
amortization by $167 million and $80 million, respectively.       

- During 1996, three major work stoppages at various GM and Delphi    
     facilities in the United States and Canada had an unfavorable impact of
$453 million, or $281 million after-tax, resulting from lower GM  
       production volumes, after considering partial recovery of lost production
    in subsequent periods. The unfavorable impact in the fourth quarter of
1996 totaled $252 million, or $156 million after-tax.             

    - Retiree lump sum benefit payments resulting from U.S. labor negotiations
during 1996 resulted in a charge of $86 million, or $53 million   
after-tax.                                                        

   - Other special charges totaled $50 million, or $31 million after-tax, of
     which $18 million, or $11 million after-tax, was recorded in the fourth
 quarter. These costs primarily reflect the sale of certain business
investments, none of which were material on an individual basis.  

1995                                                                  

  - There were no significant special items or work stoppages during 1995.

Ongoing Evaluation. We periodically evaluate the carrying value of    
long-lived assets to be held and used, when events and circumstances warrant    
such review. This evaluation and review is generally performed in conjunction   
with the annual business planning cycle. In this regard, the 1998 evaluation and
review, which was completed prior to December 31, 1998, resulted in a fourth    
quarter 1998 charge of about $310 million, or $192 million after-tax. The charge
impacted our product sectors on a pre-tax basis as follows: Electronics & Mobile
Communication--$10 million; Safety, Thermal & Electrical Architecture--$66      
million; and Dynamics & Propulsion--$234 million. See "--Overview--Recent       
Financial Results" for further discussion of the charge. We will continue to    
monitor the competitiveness of all aspects of our business. Accordingly,        

44

424B4
47th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 47th

future operating results could be impacted by the sale or disposal of product   
lines or production facilities as we execute our portfolio management and       
"fix/sell/close" processes.                                                     

     NINE MONTHS ENDED SEPTEMBER 30, 1998 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
1997                                                                            

Net Sales. Consolidated net sales and changes in net sales by product 
sector and in total for the nine months ended September 30, 1997 and 1998 were  
as follows:                                                                     

                                                        [Enlarge/Download Table]

                                           NINE MONTHS                               
                                              ENDED                                  
                                          SEPTEMBER 30,                CHANGE        
                                       --------------------      ------------------  
           PRODUCT SECTOR               1997         1998           $           %    
           --------------               ----         ----           -           -    
                                                  (DOLLARS IN MILLIONS)              
                                                                                     
Electronics & Mobile Communication.... $ 4,096      $ 3,412      $  (684)     (16.7)%
Safety, Thermal & Electrical                                                         
   Architecture.......................   9,424        8,366       (1,058)     (11.2) 
Dynamics & Propulsion.................  10,208        9,222         (986)      (9.7) 
Eliminations..........................    (360)        (321)          39        n/a  
                                       -------      -------      -------      -----  
   Consolidated net sales............. $23,368      $20,679      $(2,689)     (11.5)%
                                       =======      =======      =======      =====  

  The decrease in consolidated net sales for each product sector primarily
relates to lower GM-North America vehicle production due to work stoppages at   
certain GM and Delphi plants, after considering partial recovery of lost        
production in subsequent periods, as well as to lower international production  
due to the unfavorable impact of economic conditions in Asia and Latin America. 
In addition, our net sales continue to be impacted by pricing pressures as VMs  
reduce their cost structures through competitive sourcing initiatives and global
vehicle platforms. Specifically, the decrease in consolidated net sales for each
operating sector during the first nine months of 1998 reflects the impact of    
price reductions required by GM and other customers amounting to about $340     
million, or 1.6% of net sales. As a percentage of net sales, price reductions   
declined from 1997 levels to levels which we believe will be more indicative of 
future pricing pressures from VMs, although we cannot assure you in this regard.
Overall, price reductions had the largest impact on our Electronics & Mobile    
Communication product sector, representing 3.0% of net sales, due to the impact 
of GM-North America's continued implementation of its global sourcing strategy  
and reflecting the overall price declines throughout the electronics industry.  
The unfavorable impact of lower GM volumes and price reductions was partially   
offset by additional sales to customers other than GM, which increased about    
$420 million, or 10.4%, compared to the first nine months of 1997.              

  Cost of Sales. Cost of sales represented 92.9% of consolidated net sales
for the first nine months of 1998 compared to 87.8% for the comparable period of
1997. The increase reflects the impact of special items and work stoppages along
with other factors which are described in greater detail in the operating income
(loss) discussion below.                                                        

Selling, General and Administrative and Depreciation and              
Amortization. Selling, general and administrative expenses remained constant    
during the first nine months of 1997 and 1998 while depreciation and            
amortization increased by $62 million, excluding a $48 million charge related to
1998 divestitures. The increase in depreciation and amortization reflected      
incremental depreciation associated with a larger fixed asset base.             

    Operating Income (Loss). Our operating loss was $284 million for the first
nine months of 1998 compared to operating income of $1.2 billion for the first  
nine months of 1997. Excluding the impact of special items and work stoppages in
the respective nine month periods, operating income totaled $1.0 billion and    
$1.5 billion for the nine months ended September 30, 1998 and 1997,             
respectively. The following information on operating income and changes in      
operating income and its components excludes the impact of special items and    
work stoppages. See "--Special Items and Work Stoppages" for additional         
information.                                                                    

45

424B4
48th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 48th

  Operating income by product sector and in total, excluding the impact of
special items and work stoppages, was as follows:                               

                                                                [Download Table]

                                                                NINE MONTHS     
                                                                   ENDED        
                                                               SEPTEMBER 30,    
                                                            ------------------- 
                      PRODUCT SECTOR                         1997         1998  
                      --------------                         ----         ----  
                                                               (IN MILLIONS)    
                                                                                
Electronics & Mobile Communication......................... $  436       $  359 
Safety, Thermal & Electrical Architecture..................    753          641 
Dynamics & Propulsion......................................    386          298 
Other......................................................   (118)        (249)
                                                            ------       ------ 
  Total operating income excluding the impact of special                        
     items and work stoppages.............................. $1,457       $1,049 
                                                            ======       ====== 

  The reduction in operating income, excluding the impact of special items
and work stoppages, primarily reflects lower vehicle volumes due to the timing  
of production for certain of GM's new product introductions and economic        
conditions in Asia and Latin America. The impact of lower customer volumes was  
partially offset by cost savings as we have implemented several strategies to   
reduce our cost structure and maintain our desired level of profitability. Each 
of our product sectors achieved material and manufacturing cost savings which   
totaled about $790 million during the first nine months of 1998, exceeding price
reductions and unrecovered design change costs by $175 million. Unrecovered     
design change costs had a total unfavorable impact on operating income of about 
$275 million, impacting all of our sectors. Such costs represent the cost of    
required product design changes to meet changing customer requirements.         
Sometimes these costs are not recoverable through changes in prices. Cost       
savings achieved primarily reflect the results of our structural cost reduction 
programs including continued implementation of the Delphi Manufacturing System  
and global sourcing initiatives. See "--Overview--Operating Costs" for further  
descriptions of these and our other initiatives.                                

  Interest Expense. Interest expense totaled $199 million and $206 million
for the first nine months of 1998 and 1997, respectively. The decrease in       
interest expense primarily reflects lower interest rates during the first nine  
months of 1998 in comparison to 1997 rates.                                     

 Other Income, Net. Other income, net totaled $124 million for the first
nine months of 1998, compared to $65 million in the first nine months of 1997.  
The increase is primarily due to gains on sales of assets during the first nine 
months of 1998.                                                                 

Taxes. The effective income tax (tax benefit) rate for the first nine 
months of 1998 was (49.6%) compared with 32.4% for the first nine months of     
1997. The effective tax rates for both 1998 and 1997 reflect benefits related to
research and experimentation credits. During the first nine months of 1998,     
certain deductions and tax credits remained constant while taxable income       
decreased substantially, resulting in a greater effective tax benefit as a      
percentage of pretax income.                                                    

 Net Income (Loss). Our net loss totaled $181 million for the first nine
months of 1998 compared to net income of $736 million for the nine months ended 
September 30, 1997. Excluding special items and work stoppages, net income was  
$650 million and $842 million for the nine months ended September 30, 1998 and  
1997, respectively, reflecting the impact of items discussed above.             

46

424B4
49th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 49th

1997 VERSUS 1996                                                      

Net Sales. Consolidated net sales and changes in net sales by product 
sector and in total for the years ended December 31, 1996 and 1997 were as      
follows:                                                                        

                                                                [Download Table]

                                                    YEAR ENDED                      
                                                   DECEMBER 31,          CHANGE     
                                                ------------------    ------------- 
                PRODUCT SECTOR                   1996       1997        $       %   
                --------------                   ----       ----        -       -   
                                                       (DOLLARS IN MILLIONS)        
                                                                                    
Electronics & Mobile Communication............. $ 5,315    $ 5,539    $ 224     4.2%
Safety, Thermal & Electrical Architecture......  12,942     12,728     (214)   (1.7)
Dynamics & Propulsion..........................  13,293     13,733      440     3.3 
Eliminations...................................    (518)      (553)     (35)    n/a 
                                                -------    -------    -----    ---- 
  Consolidated net sales....................... $31,032    $31,447    $ 415     1.3%
                                                =======    =======    =====    ==== 

 The increase in consolidated net sales during 1997 occurred despite the
impact of the 1996 sale of four plants by our Safety, Thermal & Electrical      
Architecture product sector, which had combined historical annual net sales of  
about $1.0 billion. Price reductions from GM and non-GM customers had an        
unfavorable sales impact on all of our product sectors and totaled about $730   
million, or 2.3% of net sales, during 1997. Price reductions reflect the        
continuing pressures from VMs to reduce component and system costs. Price       
reductions, as a percentage of sales, during 1997 were generally higher than we 
anticipate in future years, although we cannot assure you in this regard. Price 
reductions for our Electronics & Mobile Communication product sector,           
representing 3.3% of net sales, exceeded the overall percentage for Delphi on a 
consolidated basis due to the timing of the implementation of GM-North America's
global sourcing as it related to electronics products and the overall price     
declines throughout the electronics industry. The remaining change in net sales 
for each product sector primarily reflects a $260 million increase in sales to  
non-GM customers and improved GM-North America production volumes after         
adjusting for the impact of work stoppages.                                     

  Cost of Sales. Cost of sales, as a percentage of consolidated net sales,
decreased to 88.1% in 1997 from 88.5% in 1996. The decrease as a percentage of  
net sales reflects the lower impact of work stoppages along with other factors  
which are described in greater detail in the operating income discussion below. 

Selling, General and Administrative and Depreciation and              
Amortization. Selling, general and administrative expenses remained constant    
during 1997 and 1996, while depreciation and amortization, excluding the $1.1   
billion charge associated with the Competitiveness Study, increased slightly.   

   Operating Income. Operating income decreased to $352 million in 1997 from
$1.3 billion in 1996. Excluding the impact of special items and work stoppages, 
operating income totaled $1.9 billion in 1997 compared to $2.1 billion in 1996. 
The following information on operating income and changes in operating income   
and its components excludes the impact of special items and work stoppages. See 
"--Special Items and Work Stoppages" for additional information.                

47

424B4
50th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 50th

  Operating income by product sector and in total, excluding the impact of
special items and work stoppages, was as follows:                               

                                                                [Download Table]

                                                                YEAR ENDED    
                                                               DECEMBER 31,   
                                                             ---------------- 
                       PRODUCT SECTOR                         1996      1997  
                       --------------                         ----      ----  
                                                              (IN MILLIONS)   
                                                                              
Electronics & Mobile Communication.......................... $  810    $  612 
Safety, Thermal & Electrical Architecture...................    955     1,060 
Dynamics & Propulsion.......................................    321       400 
Other.......................................................    (27)     (130)
                                                             ------    ------ 
  Total operating income excluding the impact of special                      
     items and work stoppages............................... $2,059    $1,942 
                                                             ======    ====== 

As a result of strategies implemented to reduce our cost structure, we
realized material and manufacturing cost savings of about $450 million during   
1997. Cost savings were realized by all of our product sectors during 1997;     
however, price reductions and unrecovered design change costs, which together   
totaled about $960 million, more than offset the cost savings. Unrecovered      
design change costs had an unfavorable impact on operating income of about $230 
million in 1997, primarily affecting our Electronics & Mobile Communication     
product sector. In addition, operating income was favorably impacted by greater 
sales penetration of non-GM customers and improved GM-North America production  
volumes after adjusting for the impact of work stoppages.                       

     Interest Expense. Interest expense totaled $287 million and $276 million in
1997 and 1996, respectively. The increase in interest expense in 1997 primarily 
reflected slightly higher interest rates during the period.                     

    Other Income, Net. Other income, net totaled $194 million in 1997 compared
with $115 million in 1996. The amount reported for 1997 includes a gain of $97  
million, or $60 million after-tax, relating to the sale of certain business     
investments. The gain was partially offset by a decline in earnings of          
nonconsolidated affiliates, which decreased to $27 million in 1997 compared with
$57 million in 1996. The decline reflected lower equity earnings due to the sale
of certain minority owned investments and the unfavorable impact of economic    
volatility on overseas joint ventures.                                          

     Taxes. The effective income tax rate for 1997 was 17.0% compared with 23.3%
for 1996. The lower 1997 effective income tax rate primarily reflected the      
favorable impact of state and local income tax rates which were generally lower 
than in 1996. The favorable impact of state and local tax rates was partially   
offset by higher foreign tax rates during 1997.                                 

 Net Income. Net income totaled $215 million in 1997 and $853 million in
1996. Income, excluding the impact of special items and work stoppages, totaled 
$1.2 billion in 1997 compared to $1.4 billion in 1996, reflecting the items     
discussed above.                                                                

48

424B4
51st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 51st

1996 VERSUS 1995                                                      

Net Sales. Consolidated net sales and changes in net sales by product 
sector and in total for the years ended December 31, 1995 and 1996 were as      
follows:                                                                        

                                                                [Download Table]

                                                  YEAR ENDED                     
                                                 DECEMBER 31,         CHANGE     
                                               -----------------   ------------  
                PRODUCT SECTOR                  1995      1996       $      %    
                --------------                  ----      ----       -      -    
                                                    (DOLLARS IN MILLIONS)        
                                                                                 
Electronics & Mobile Communication............ $ 5,479   $ 5,315   $(164)  (3.0)%
Safety, Thermal & Electrical Architecture.....  13,433    12,942    (491)  (3.7) 
Dynamics & Propulsion.........................  13,142    13,293     151    1.1  
Eliminations..................................    (393)     (518)   (125)   n/a  
                                               -------   -------   -----   ----  
  Consolidated net sales...................... $31,661   $31,032   $(629)  (2.0)%
                                               =======   =======   =====   ====  

     The decrease in consolidated net sales during 1996 reflects the unfavorable
impact of price reductions of about $920 million, or 3.0% of net sales. Price   
reductions reflected aggressive efforts of VMs to reduce their vehicle costs.   
Such price pressures were most significant for our Electronics & Mobile         
Communication product sector. Overall, price reductions as a percentage of net  
sales during 1996 were generally higher than those anticipated in future years, 
although we cannot assure you in this regard. Net sales for each product sector 
were also negatively impacted by lower GM-North America vehicle production due  
to work stoppages after considering partial recovery of lost production in      
subsequent periods. The impact of price reductions and work stoppages was       
partially offset by a $240 million increase in aftermarket sales and greater    
penetration of non-GM customers during 1996.                                    

  Cost of Sales. Cost of sales, as a percentage of consolidated net sales,
was 88.5% in 1996 compared to 86.5% in 1995. The increase reflects the impact of
special items and work stoppages in 1996 as well as other factors which are     
discussed in greater detail in the operating income discussion below.           

Selling, General and Administrative and Depreciation and              
Amortization. Selling, general and administrative expenses remained constant    
during 1995 and 1996, while depreciation and amortization, excluding the impact 
of divestiture-related charges, declined slightly.                              

 Operating Income. Operating income was $1.3 billion in 1996 compared to
$2.1 billion in 1995. Excluding the impact of special items and work stoppages, 
operating income totaled $2.1 billion in 1996. The following information on     
operating income and changes in operating income and its components excludes the
impact of special items and work stoppages. See "--Special Items and Work       
Stoppages" for additional information.                                          

  Operating income by product sector and in total, excluding the impact of
special items and work stoppages, was as follows:                               

                                                                [Download Table]

                                                                YEAR ENDED    
                                                               DECEMBER 31,   
                                                             ---------------- 
                       PRODUCT SECTOR                         1995      1996  
                       --------------                         ----      ----  
                                                              (IN MILLIONS)   
                                                                              
Electronics & Mobile Communication.......................... $  871    $  810 
Safety, Thermal & Electrical Architecture...................    924       955 
Dynamics & Propulsion.......................................    341       321 
Other.......................................................      2       (27)
                                                             ------    ------ 
  Total operating income excluding the impact of special                      
     items and work stoppages............................... $2,138    $2,059 
                                                             ======    ====== 

49

424B4
52nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 52nd

Our cost reduction strategies allowed us to achieve total material and
manufacturing cost savings of about $545 million during 1996. Cost savings were 
realized by all of our product sectors but were more than offset by the impact  
of price reductions and unrecovered design change costs, which together totaled 
$1.4 billion. Unrecovered design change costs had a total unfavorable impact of 
about $440 million, primarily affecting our Dynamics & Propulsion product sector
during 1996. Offsetting these reductions, our Safety, Thermal & Electrical      
Architecture and Dynamics & Propulsion product sectors realized improved volumes
through additional aftermarket sales and sales to non-GM customers during 1996. 

     Interest Expense. Interest expense totaled $276 million and $293 million in
1996 and 1995, respectively. The decrease in 1996 interest expense reflects     
lower interest rates during the year.                                           

    Other Income, Net. Other income, net totaled $115 million in 1996 compared
with $101 million in 1995. The increase is primarily due to improved earnings   
from and growth in the number of nonconsolidated affiliates.                    

     Taxes. The effective income tax rate for 1996 was 23.3% compared with 32.8%
for 1995. The effective income tax rate for 1996 reflected overall foreign tax  
rates that were lower than the U.S. statutory rate and the impact of research   
and experimentation credits.                                                    

 Net Income. Net income totaled $853 million in 1996 and $1.3 billion in
1995. Income, excluding the impact of special items and work stoppages, totaled 
$1.4 billion in 1996 and reflected the items discussed above.                   

PRO FORMA 1997 VERSUS PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1998  

    Operating income, as reported, does not reflect the impact of many changes
in our operations that are expected to result from our separation from GM. After
giving effect to the terms of the Separation Agreement, our operating loss would
have been $201 million for the first nine months of 1998 compared to operating  
income of $687 million for the year ended December 31, 1997. Excluding the      
impact of special items and work stoppages and after giving effect to the terms 
of the Separation Agreement, operating income would have been $1.1 billion for  
the first nine months of 1998 compared to $2.3 billion for the year ended       
December 31, 1997.                                                              

Overall, the terms of the Separation Agreement would have a favorable 
impact on operating income of $83 million and $335 million for the nine months  
ended September 30, 1998 and the year ended December 31, 1997, respectively. We 
expect operating income to be favorably impacted by the net effect of lower     
employee benefit costs and higher other costs associated with operating Delphi  
as a stand-alone company.                                                       

  During 1998, the net pro forma impact of employee benefit costs declined
due to changes in pension expense. Pension expense decreased in 1998 due to     
lower interest expense on the pension liability and higher returns on pension   
assets. The obligations and related assets for retired employees will be        
retained by GM; therefore, pro forma expense in 1998 does not reflect the full  
impact of these favorable trends. See "Unaudited Pro Forma Condensed            
Consolidated Financial Statements" for additional information.                  

QUARTERLY DATA                                                        

     Our business is moderately seasonal as our primary North American customers
historically halt operations for about two weeks in July and about one week in  
December. In addition, third quarter automotive production is traditionally     
lower as new models enter production. Accordingly, third and fourth quarter     
results may reflect these trends. Our quarterly results were impacted by a      
number of special factors, including items associated with competitiveness      
initiatives such as divestitures and plant closings, and work stoppages. The    
following table sets forth certain unaudited quarterly historical condensed     
consolidated financial data for each of the eight quarters through the period   
ended September 30, 1998. This unaudited quarterly information adjusts as       
reported data to exclude the impact of special items and work stoppages. The    
operating results for any quarter shown are not necessarily indicative of       
results for any future period. See "--Special Items and Work Stoppages" and Note
18 to the audited consolidated financial statements included elsewhere in this  

50

424B4
53rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 53rd

prospectus. The quarterly data, excluding the impact of special items and work  
stoppages, does not give effect to many significant changes that are expected to
result from our separation from GM.                                             

                                                        [Enlarge/Download Table]

                                                                      THREE MONTHS ENDED                                    
                                   -----------------------------------------------------------------------------------------
                                   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,
                                     1996       1997        1997       1997        1997       1998        1998       1998   
                                   --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                                         (IN MILLIONS)                                      
                                                                                                                            
OPERATING INCOME (LOSS):                                                                                                    
  As reported.....................  $(132)      $497        $587       $145       $ (877)     $334        $111       $(729) 
  Competitiveness Study...........     --         --          --         --        1,362        --          --          --  
  Trenton plant closing...........     --         80          --         --           --        --          --          --  
  Sale of facilities/businesses...    247         --          --         --           --        --          --         430  
  Work stoppages..................    252         --         185        (37)          --        --         468         435  
  Retiree lump sum payments.......     86         --          --         --           --        --          --          --  
                                    -----       ----        ----       ----       ------      ----        ----       -----  
OPERATING INCOME EXCLUDING THE                                                                                              
  IMPACT OF SPECIAL ITEMS AND WORK                                                                                          
  STOPPAGES.......................  $ 453       $577        $772       $108       $  485      $334        $579       $ 136  
                                    =====       ====        ====       ====       ======      ====        ====       =====  
NET INCOME (LOSS):                                                                                                          
  As reported.....................  $ (93)      $287        $373       $ 76       $ (521)     $236        $ 83       $(500) 
  Competitiveness Study...........     --         --          --         --          870        --          --          --  
  Trenton plant closing...........     --         50          --         --           --        --          --          --  
  Sale of facilities/businesses...    153         --          --         --           --        --          --         271  
  Work stoppages..................    156         --         115        (23)          --        --         290         270  
  Retiree lump sum payments.......     53         --          --         --           --        --          --          --  
  Other special items.............     11         --         (36)        --          (24)       --          --          --  
                                    -----       ----        ----       ----       ------      ----        ----       -----  
INCOME EXCLUDING THE IMPACT OF                                                                                              
  SPECIAL ITEMS AND WORK                                                                                                    
  STOPPAGES.......................  $ 280       $337        $452       $ 53       $  325      $236        $373       $  41  
                                    =====       ====        ====       ====       ======      ====        ====       =====  

LIQUIDITY AND CAPITAL RESOURCES                                                 

 Pursuant to the Cash and Debt Management Agreement and the intracompany
note payable, our historical balance sheets reflect cash and marketable         
securities of $1.0 billion and short-term and long-term debt capitalization of  
$3.5 billion at September 30, 1998 and December 31, 1997 and 1996. The          
short-term and long-term debt capitalization included a $3.1 billion            
intracompany note payable to GM and outstanding debt at our international       
subsidiaries. The $3.1 billion intracompany note payable to GM reflects the     
portion of GM's outstanding debt that is specifically related to our operations.

     Our net liquidity was $(2.5) billion at September 30, 1998 and December 31,
1997 and 1996. Our net liquidity consists of cash and marketable securities less
the total of short-term and long-term debt. The ratio of our total debt to our  
total capital, which consists of total debt plus equity, was 101% at September  
30, 1998 compared to 113% at December 31, 1997 and 79% at December 31, 1996.    
Ratios greater than 100% reflect the impact of a net deficit in stockholder's   
equity for certain periods presented. The ratio of total debt to total capital  
increased during 1997, reflecting the lower level of equity that resulted from  
the Competitiveness Study charge that was recorded in 1997. The Offering and    
other related transactions result in a pro forma total debt to total capital    
ratio of 53.2% at September 30, 1998. If the U.S. underwriters exercise their   
over-allotment option in full, the pro forma total debt to total capital ratio  
would decline to 51.3%.                                                         

LIQUIDITY PRIOR TO AND UPON OUR SEPARATION FROM GM AND THE OFFERING   

     The following table sets forth the changes in our net liquidity, certain of
which occurred immediately prior to or upon the transfer of assets and          
liabilities from GM to our company. The extension of payment terms for          
intracompany accounts receivable and the settlement of intracompany accounts    
receivable with the intracompany note payable occurred before assets and        
liabilities were transferred to Delphi Automotive                               

51

424B4
54th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 54th

Systems Corporation. Consequently, these transactions were executed by the      
Delphi businesses, and not by Delphi Automotive Systems Corporation.            

                                                        [Enlarge/Download Table]

                                                                AT SEPTEMBER 30, 1998          
                                                      -----------------------------------------
                                                       CASH AND                                
                                                      MARKETABLE      SHORT- AND         NET   
                                                      SECURITIES    LONG-TERM DEBT    LIQUIDITY
                                                      ----------    --------------    ---------
                                                                    (IN BILLIONS)              
                                                                                               
As reported.........................................    $ 1.0           $ 3.5           $(2.5) 
Extension of payment terms for intracompany accounts                                           
  receivable from GM................................     (2.1)             --            (2.1) 
Settlement of intracompany note payable to GM.......       --            (3.1)            3.1  
Increase in accounts receivable, subsequent to                                                 
  settlement of intracompany accounts receivable....     (1.6)             --            (1.6) 
Proceeds from third party financing.................      3.1             3.1              --  
Proceeds from the Offering..........................      1.6              --             1.6  
                                                        -----           -----           -----  
                                                        $ 2.0           $ 3.5           $(1.5) 
                                                        =====           =====           =====  

  Each of the above changes in our net liquidity is discussed in detail in
the sections that follow.                                                       

EXTENSION OF PAYMENT TERMS                                            

    In accordance with the Supply Agreement, which became effective on January
1, 1999, payment terms for intracompany accounts receivable from GM have been   
modified such that payments are generally due from GM on the second day of the  
second month following the date of shipment by Delphi. These modified payment   
terms are consistent with those GM is currently in the process of introducing to
all of its suppliers. Previous payment terms generally required GM to make      
intracompany accounts receivable payments in the month following shipment by    
Delphi. Overall, Delphi expects this change to increase accounts receivable by  
about $2.1 billion beginning in 1999. While Delphi intends to seek an extension 
of payment terms with its suppliers over time, in most cases it currently pays  
suppliers on the twenty-fifth day of the month following the date a shipment is 
received. The difference in the terms for accounts receivable and accounts      
payable results in a monthly short-term cash flow gap. Delphi expects to finance
this short-term cash flow gap through short-term borrowings, as discussed below.
For more information about the change in payment terms, see "Arrangements       
Between Delphi and General Motors--Supply Agreement--Payment Terms."            

DEBT CAPITALIZATION AND AVAILABLE FINANCING SOURCES                   

Immediately prior to the transactions contemplated by the Separation  
Agreement, approximately $1.6 billion of certain intracompany accounts          
receivable from GM was offset with the $3.1 billion outstanding intracompany    
note payable to GM, with the difference resulting in an increase in GM's net    
investment in Delphi. We expect to finance our operations through draw downs of 
up to $3.1 billion from the $5.0 billion third party revolving credit facilities
described below.                                                                

    In January 1999, we entered into two financing agreements with a syndicate
of lenders providing for an aggregate of $5 billion in revolving credit         
facilities. In general, we may borrow up to $5 billion under the facilities     
through January 3, 2000, after which $1.5 billion will be available through     
January 3, 2004. The amount we may borrow under the facilities will be reduced  
to the extent the aggregate net cash proceeds from issuances of common stock by 
Delphi and our subsidiaries, excluding issuances under our regular employee,    
executive and director stock option plans, exceeds $1.5 billion. This includes  
the net cash proceeds from this Offering. The amount we may borrow will also be 
reduced to the extent of the net cash proceeds from public offerings and private
placements of debt securities, excluding debt securities with a maturity of less
than one year. The total reduction arising from issuances of common stock and   
debt securities will not exceed                                                 

52

424B4
55th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 55th

$2.0 billion. We may borrow under these financing arrangements for general      
corporate purposes. The credit facilities include certain customary affirmative 
and negative covenants, including maintenance of a ratio of consolidated total  
debt to consolidated EBITDA, excluding extraordinary items. The credit          
facilities also provide for certain events of default, including upon a change  
of control, which is defined to include the acquisition of more than 20% of the 
voting power of our common stock by any person other than GM. For additional    
information on the revolving credit facilities, see Note 8 to the audited       
consolidated financial statements included elsewhere in this prospectus.        

We expect the draw-downs from the revolving credit facilities to be   
refinanced with a combination of operating cash flows and the issuance of       
long-term debt during the first half of 1999. Subsequently, it is expected that 
the $5.0 billion revolving credit facilities would be reduced to $3.0 billion in
available funds, generally split between 364-day and five-year tranches.        

  The factors considered in determining the initial capitalization include
our company's prospective financing requirements, expected working capital and  
capital expenditure requirements, desired credit rating and the need for        
adequate debt capacity to pursue strategic initiatives. In reviewing these      
factors, the capitalization and credit ratings of comparable companies in the   
automotive components and systems industry were also considered.                

After the Offering, General Motors will continue to own a significant 
portion of our common stock. As a result, GM will continue to include us as a   
"subsidiary" for various financial reporting, accounting and other purposes.    
Accordingly, we have agreed to certain covenants regarding the incurrence of    
debt. Specifically, so long as GM owns at least 50% of our outstanding shares of
common stock, these covenants limit our maximum indebtedness, including         
indebtedness incurred in connection with acquisitions. See "Arrangements Between
Delphi and General Motors--IPO and Distribution Agreement."                     

     Delphi's intra-year cash fluctuations are impacted by the volume and timing
of worldwide vehicle production. Examples of seasonal effects in the industry   
include the shut-down of operations of our primary North American customers for 
about two weeks in July, the subsequent ramp-up of new model production and the 
additional one-week shut-down in December. We believe that our company has      
sufficient financial flexibility to fund these fluctuations and to access the   
global capital markets on terms and in amounts satisfactory to it, although     
there can be no assurance that that will be the case. In addition, we expect    
cash flows from operations, funding obtained through the Offering, the          
establishment of the revolving credit facilities and other short-term sources to
be sufficient to satisfy future working capital, capital expenditure, research  
and development, pension funding requirements and debt service requirements     
during the next 12 to 18 months. We expect cash flows from operations, the      
establishment of the revolving credit facilities and access to the short-term   
and long-term capital markets to satisfy our funding needs during our five-year 
business planning cycle. See "--Cash Flows--Investing Activities" and "--Our    
Other Postretirement Employee Benefits and Underfunded Pension Obligations."    

CASH FLOWS                                                            

  Operating Activities. Cash flows used in operating activities during the
first nine months of 1998 totaled $51 million compared to cash flows provided by
operating activities of $1.8 billion for the same period in 1997. The decrease  
in 1998 resulted from the impact of work stoppages and the related overall      
decline in net income. In addition, operating cash flow in 1998 reflected cash  
used for other postretirement benefits, as discussed below.                     

 Net cash provided by operating activities was $2.9 billion for the year
ended December 31, 1997 compared to $2.7 billion in 1996 and $1.4 billion in    
1995. The 1997 increase in cash flows from operating activities primarily       
reflects increases in accounts payable, accrued liabilities and other           
liabilities, partially offset by increased accounts receivable and cash used for
other postretirement benefits as discussed below. The changes referenced above  
primarily reflected an increased volume of activity, differences in the timing  
of settlements and amounts accrued in connection with the Competitiveness Study.
The increase in net cash                                                        

53

424B4
56th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 56th

provided by operating activities in 1996 resulted from a decrease in accounts   
receivable and cash contributions to GM's worldwide pension funds. Cash pension 
contributions for 1996 decreased due to the improved funding of GM's U.S. hourly
pension plan.                                                                   

     Operating cash flow for the first nine months of 1998 and for the full year
1997 reflected contributions to a Voluntary Employees' Beneficiary Association  
("VEBA") trust. The contributions, which totaled $615 million in the first nine 
months of 1998 and $925 million in the fourth quarter of 1997, were made in     
connection with GM's pre-funding of a portion of its other postretirement       
benefit liabilities. In accordance with the terms of the Separation Agreement,  
GM will retain 100% of the pre-funding and accordingly, Delphi's other          
postretirement benefit liabilities do not reflect an allocation of the VEBA     
trust assets.                                                                   

    Investing Activities. Cash flows used in investing activities totaled $699
million and $860 million for the nine months ended September 30, 1998 and 1997, 
respectively, and $1.3 billion, $1.0 billion and $1.1 billion for the years     
ended December 31, 1997, 1996 and 1995, respectively. Overall, cash flows used  
in investing activities primarily relate to our capital expenditure program,    
partially offset by proceeds from asset sales. Capital expenditures by product  
sector and geographic region for the periods presented were as follows:         

                                                        [Enlarge/Download Table]

                                                                                     NINE MONTHS  
                                                                                        ENDED     
                                                       YEAR ENDED DECEMBER 31,      SEPTEMBER 30, 
                                                    ------------------------------  --------------
                                                     1995        1996        1997   1997      1998
                                                     ----        ----        ----   ----      ----
                                                                     (IN MILLIONS)                
                                                                                                  
Electronics & Mobile Communication................. $  265      $  195      $  122  $100      $130
Safety, Thermal & Electrical Architecture..........    355         418         464   313       247
Dynamics & Propulsion..............................    532         548         778   504       486
Other..............................................      3          16          19     6         9
                                                    ------      ------      ------  ----      ----
  Total Capital Expenditures....................... $1,155      $1,177      $1,383  $923      $872
                                                    ======      ======      ======  ====      ====
United States...................................... $  773      $  809      $  930  $682      $555
Canada & Mexico....................................     77          65          88    26        73
Other International................................    305         303         365   215       244
                                                    ------      ------      ------  ----      ----
  Total Capital Expenditures....................... $1,155      $1,177      $1,383  $923      $872
                                                    ======      ======      ======  ====      ====

Our capital expenditure program promotes our growth-oriented business 
strategy by investing in existing core areas, where efficiencies and            
profitability can be enhanced, and by targeting funds for new innovative        
technologies, where long-term growth opportunities can be realized.             

Total capital expenditures were $872 million for the nine months ended
September 30, 1998 compared to $923 million for the same period in 1997. The    
lower level of spending for the first nine months of 1998 resulted primarily    
from differences in the timing of project spending for new product programs. As 
discussed in further detail below, full year 1998 capital expenditures totaled  
$1.4 billion. Total capital expenditures for the year ended December 31, 1997   
were $1.4 billion compared to $1.2 billion in each of 1996 and 1995. The        
increased spending for the year ended December 31, 1997 primarily resulted from 
the start-up of several new product programs, increased penetration with non-GM 
customers, and expansion into new market areas primarily outside the United     
States.                                                                         

The decrease in capital expenditures for our Electronics & Mobile     
Communication product sector in 1997, as compared to 1996 and 1995, reflected a 
reduction in tooling and the timing of spending on new product programs. For    
example, the introduction of product designs to ensure customer compliance with 
certain governmental regulations contributed to the higher level of spending in 
1995 and 1996.                                                                  

The higher level of spending for our Safety, Thermal & Electrical     
Architecture product sector during 1997 and 1996 primarily reflected spending to
support expansion into new market areas outside the United States.              

54

424B4
57th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 57th

    The higher level of capital spending for our Dynamics & Propulsion product
sector in 1997 reflected several new major product programs that were initiated 
in late 1996 and carried over to 1997. In addition, 1997 capital expenditures   
were impacted by spending related to increased penetration with non-GM customers
and expansion projects, primarily in Europe and Mexico.                         

  Our capital expenditures totaled $1.4 billion in 1998. About 42% of 1998
capital expenditures were outside the United States. The Electronics & Mobile   
Communication; Safety, Thermal & Electrical Architecture; and Dynamics &        
Propulsion product sectors accounted for 13.0%, 32.5% and 53.7%, respectively,  
of 1998 capital expenditures.                                                   

We expect capital expenditures to total $1.5 billion in 1999. Such    
expenditures will primarily be utilized for equipment, tooling and other        
spending associated with new product programs, including increasing sales to    
non-GM customers. Expenditures will also be used for expansion into new markets 
outside the United States and the continued implementation of lean manufacturing
strategies. About 43% of 1999 capital expenditures are targeted outside the     
United States. The Electronics & Mobile Communication; Safety, Thermal &        
Electrical Architecture; and Dynamics & Propulsion product sectors are expected 
to account for 18.3%, 33.4% and 47.5%, respectively, of 1999 capital            
expenditures.                                                                   

 Financing Activities. Net cash provided by financing activities for the
first nine months of 1998 totaled $741 million compared to $903 million of cash 
used in financing activities during the first nine months of 1997. Net cash used
in financing activities totaled $1.5 billion in 1997 compared with $1.7 billion 
and $263 million in 1996 and 1995, respectively. Cash provided by or used in    
financing activities primarily related to the transfer or assumption of assets  
and liabilities to our company from GM under the terms of the Separation        
Agreement. The period to period change reflects differences in separation       
adjustments for various assets and liabilities, principally pensions and other  
postretirement benefits.                                                        

OUR OTHER POSTRETIREMENT EMPLOYEE BENEFITS AND UNDERFUNDED PENSION OBLIGATIONS  

     In connection with our separation from General Motors, we have entered into
several agreements relating to pensions and other postretirement employee       
benefits for our employees as well as certain employees associated with prior   
divestitures. See "Arrangements Between Delphi and General Motors--Employee     
Matters." Our pension obligations are based on the pension plans' assets, the   
expected investment return on those assets and the plans' expected liabilities. 
Under current economic conditions and federal government regulations, our       
pension obligations would be considered to be "underfunded." The amount of      
underfunding can vary from time to time, depending on factors such as discount  
rates, asset returns, contributions and other factors. As of September 30, 1998,
Delphi's salaried and hourly other postretirement employee benefit obligation   
was about $4.5 billion and the underfunded pension obligation was about $1.9    
billion.                                                                        

     Because of the underfunded nature of our pension plans, federal regulations
will require that our contributions over time meet minimum funding requirements.
Delphi is responsible for assuming the underfunded hourly pension liability     
associated with Delphi hourly employees or paying GM for underfunding relating  
to such employees.                                                              

   Although we are not required to do so, we have commenced discussions with
the Pension Benefit Guaranty Corporation ("PBGC") regarding the underfunded     
nature of our pension plans. In connection with these discussions, the PBGC may 
request that we take actions in excess of federal regulatory minimum            
requirements. The outcome of these discussions is as yet unknown, but if any    
actions in excess of federal regulatory minimum requirements are discussed, we  
intend to seek to maintain sufficient financial flexibility in order to execute 
our business strategy. We may also determine, as part of our capital planning   
process, to make voluntary contributions to our pension plans in excess of      
federal regulatory minimum requirements in order to further address the         
underfunded status of our pension plans.                                        

   In any event, regardless of the outcome of our discussions with the PBGC,
we expect these contributions to be material to our results of operations and   
financial condition. We cannot accurately predict the amount or timing of       
contributions that will be required in the future or the related impact on our  
financial results and                                                           
55

424B4
58th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 58th

financial condition. These amounts may be affected by general economic          
conditions, including anticipated interest rates, the actual investment return  
on plan assets, the retirement rate of our employees, the attrition rate of our 
employees and other factors.                                                    

     In addition, we and GM have agreed with the UAW and the IUE that any of our
hourly employees who are members of such unions and who retire on or before     
October 1, 1999 will be treated as GM employees for purposes of postretirement  
benefit obligations. The allocation of pension and other postretirement benefit 
obligations between us and GM assumes certain levels of employee retirements    
prior to October 1, 1999, based on historical experience and conditions         
surrounding our separation from GM. We have agreed with GM to recalculate the   
allocation of those liabilities based on the actual level of retirements on or  
before October 1, 1999. Accordingly, if and to the extent that greater than the 
assumed number of our employees retire on or before October 1, 1999, we would be
required to make a payment to GM. Depending on the amount of such a payment, if 
any, it could have a material adverse effect on our short-term liquidity.       

INFLATION                                                                       

Inflation generally affects Delphi by increasing the cost of labor,   
equipment and raw materials. We believe that, because rates of inflation in     
countries where we have significant operations have been moderate during the    
periods presented, inflation has not had a significant impact on our results of 
operations.                                                                     

YEAR 2000                                                                       

Many computerized systems and microprocessors that are embedded in a  
variety of products either made or used by Delphi have the potential for        
operational problems if they lack the ability to handle the transition to the   
Year 2000. This issue has the potential to cause disruption to the business of  
Delphi and the companies that it supplies. In our capacity as principal supplier
to and wholly owned subsidiary of GM, we are part of GM's comprehensive         
worldwide Year 2000 program. As part of that program, Delphi is identifying and 
remediating potential Year 2000 problems in its business information systems and
other systems embedded in its engineering and manufacturing operations. Delphi, 
in conjunction with GM's supplier assessment and remediation program, has also  
initiated communications and site assessments with its suppliers and other third
parties in order to assess and reduce the risk that Delphi's operations could be
adversely affected by the failure of these third parties to address adequately  
the Year 2000 issue.                                                            

     One of our first priorities was the analysis of microprocessors used in our
automotive components, integrated systems and modules supplied to VMs, which has
now been completed. Most of the processors reviewed have no date-related        
functionality, and accordingly have no specific Year 2000 issues. Of the vehicle
processors that perform date-related functions, none had any Year 2000 issues.  
However, one indicator light manufactured by us and provided for three 1988 and 
1989 GM vehicle models prematurely indicates the need for an oil change at the  
end of every decade. In addition, one trip computer module supplied by us to    
another VM does not recognize 2000 as a leap year but can be reset without      
affecting performance. Neither of these issues affects vehicle operation or     
occupant safety or is expected to result in material costs to Delphi.           

Our Year 2000 program teams are responsible for remediating all of our
information technology and embedded systems. Information technology principally 
consists of business information systems, such as mainframe and other shared    
computers and associated business application software, and infrastructure, such
as personal computers, operating systems, networks and devices like switches and
routers. Embedded systems include microprocessors used in factory automation and
in systems such as elevators, security and facility management. Delphi's Year   
2000 program includes assessment and remediation services provided by Electronic
Data Systems Corporation ("EDS"), which is a principal supplier of information  
technology services to Delphi.                                                  

56

424B4
59th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 59th

   The Year 2000 program is being implemented in seven phases, some of which
are being conducted concurrently:                                               

  - Inventory. This phase involves the identification and validation of an
     inventory of all systems that could be affected by the Year 2000 issue.
   The inventory phase commenced in earnest in 1997 and is substantially
complete. As a result, we have identified about 1,600 business    
     information systems and about 300,000 infrastructure items and embedded
systems.                                                          

  - Assessment. This phase involves the initial testing, code scanning and
 supplier contacts to determine whether remediation is needed and to
   develop a remediation plan, if applicable. The assessment of business
information systems is substantially complete and included a      
     determination that about one quarter of such systems should be regarded
as "critical" based on criteria such as the potential for business
     disruption. The assessment of infrastructure items and embedded systems
was substantially completed by the end of 1998.                   

- Remediation. This phase involves the design and execution of a      
remediation plan, followed by testing for adherence to the design.
      Although we have substantially completed the remediation of our critical
      systems, we expect to continue to address remediation of these and other
   systems on a selectively prioritized basis in the future. Unimportant
  systems have been and will continue to be removed from our Year 2000
inventory and will not be remediated. We believe that we are      
  substantially on track to meet our remediation targets. Based on our
      ongoing plan to implement new enterprise software incrementally, we will
    replace rather than remediate certain existing information systems. In
       this regard, a number of implementations are scheduled to be completed in
       Europe in the first quarter of 1999. In the United States, implementation
  of the enterprise software at one of our principal product groups is
expected to be completed in July 1999.                            

- System Test. This phase involves the testing of remediated items to 
       ensure that they function normally after being replaced in their original
       operating environment. It is closely related to the remediation phase and
follows essentially the same schedule.                            

- Implementation. This phase involves the return of items to normal   
    operation after satisfactory performance in system testing. It follows
essentially the same schedule as remediation and system testing.  

  - Readiness Testing. This phase involves the planning for and testing of
    integrated systems in a Year 2000-ready environment, including ongoing
   auditing and follow-up. Readiness testing is currently underway. This
   phase commenced in the fourth quarter of 1998 and is expected to be a
major focus of the Year 2000 program throughout 1999.             

   - Contingency Planning. This phase involves the development and execution
     of plans that narrow the focus on specific areas of significant concern
      and concentrate resources to address them. We currently believe that the
   most reasonably likely worst case scenario is that there will be some
   localized disruptions of systems that will affect individual business
      processes, facilities or suppliers for a short time rather than systemic
     or long-term problems affecting our business operations as a whole. Our
     contingency planning will continue to identify systems or other aspects
     of our business or those of our suppliers that we believe would be most
likely to experience Year 2000 problems as well as those business 
     operations in which a localized disruption could have the potential for
     causing a wider problem by interrupting the flow of products, materials
   or data to other operations. Because there is uncertainty as to which
      activities may be affected and the exact nature of the problems that may
    arise, our contingency planning will focus on minimizing the scope and
       duration of any disruptions by having sufficient personnel, inventory and
  other resources in place to permit a flexible, real-time response to
    specific problems as they may arise at individual locations around the
       world. Some of the actions that we may consider include the deployment of
       emergency response teams on a regional or local basis and the development
       of plans for the allocation, stockpiling or re-sourcing of components and
  materials that may be critical to our continued production. Specific
contingency plans and resources for permitting                    

57

424B4
60th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 60th

     the necessary flexibility of response are expected to be identified and
put into place commencing in mid-1999.                            

     The assessment and remediation phases described above include communicating
with our suppliers as part of a broader supplier assessment program in which we 
are participating with GM. As part of that program, an industry trade           
association, the Automotive Industry Action Group, has distributed Year 2000    
compliance questionnaires as well as numerous Year 2000 awareness and assistance
mailings to many of the about 40,000 supplier sites that supply Delphi          
throughout the world. We are not relying entirely on assurances contained in    
those questionnaire responses and we are participating in GM's own further      
assessment of our suppliers. That further assessment includes GM's own on-site  
review of suppliers considered to be critical to GM's operations, including     
Delphi's operations as part of GM. These supplier assessment efforts have been  
substantially completed with respect to our critical supplier sites. Based on   
our participation with GM in this assessment activity to date, we believe that a
substantial majority of our suppliers are making acceptable progress toward Year
2000 readiness. We are also participating in a program that GM has established  
to provide further assistance to suppliers that desire more input or that are   
believed to be at high risk of noncompliance as a result of the foregoing       
assessment efforts. This supplier assistance program currently includes         
providing compliance workshops and remediation consultants to work with         
suppliers on developing and implementing their own remediation programs. We also
expect that our contingency planning efforts described above will address any   
critical suppliers that we still identify as being at high risk of encountering 
Year 2000 problems upon completion of the supplier assistance program. We intend
to enter into appropriate arrangements with GM to provide for continued         
coordination of our respective supplier assessment and assistance efforts after 
the Distribution.                                                               

    In contrast to some Year 2000 programs, we are not relying entirely on the
receipt of written assurances from our suppliers with respect to their Year 2000
compliance; rather, together with GM, we are also evaluating certain suppliers  
on a first-hand basis and are seeking to enhance their likelihood of full Year  
2000 readiness by actively assisting them with training and consultation        
regarding Year 2000 remediation projects. We expect that information from our   
suppliers, written responses and our interactions with them will provide us with
a basis for further contingency planning and risk management.                   

  The cost of our Year 2000 program is being expensed as incurred with the
exception of capitalizable replacement hardware. Total incremental spending by  
Delphi is not expected to be material to the company's operations, liquidity or 
capital resources. We incurred about $7 million of Year 2000 expense during 1997
and about $16 million in the first nine months of 1998. Delphi currently expects
its total Year 2000 spending to be about $125 million, with peak spending       
occurring in late 1998 and early 1999, plus approximately $9 million of         
additional costs associated with information technology projects that were      
already underway or scheduled independently of our Year 2000 program but that   
have been accelerated due to the Year 2000 issue. This total spending also      
includes an additional payment of about $13 million, which is part of GM's      
overall additional payment to EDS of $75 million, at the end of the first       
quarter of 2000 if systems remediated by EDS under its master information       
technology services agreement with GM are capable of continued operation before,
on and after January 1, 2000 without causing a significant business disruption  
that results in a material financial loss to "GM" due to the millennium change. 
For this purpose, "GM" includes Delphi and all other GM units being supported by
EDS as of September 30, 1998, taken in the aggregate, including any such GM unit
which may subsequently be divested but that continues to be supported by the    
remediation services of EDS. The estimated value of the services EDS is required
to provide to Delphi under its master information technology services agreement 
with GM that are included in normal fixed price services and other ongoing      
payments to EDS that are attributable to work being performed in connection with
Delphi's Year 2000 program is about $77 million, which is part of the estimated 
$300 million attributable to GM overall. This does not represent incremental    
spending to Delphi. None of our information technology projects has been delayed
due to Year 2000.                                                               

In view of the foregoing, we do not currently anticipate that we will 
experience a significant disruption of our business as a result of the Year 2000
issue. However, there is still uncertainty about the broader scope of the Year  
2000 issue as it may affect Delphi and third parties, including our customers,  
that are critical to our                                                        

58

424B4
61st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 61st

operations. For example, lack of readiness by electrical and water utilities,   
financial institutions, governmental agencies or other providers of general     
infrastructure could, in some geographic areas, pose significant impediments to 
our ability to carry on our normal operations in the area or areas so affected. 
In the event that we are unable to complete our remedial actions as described   
above and are unable to implement adequate contingency plans in the event that  
problems are encountered, there could be a material adverse effect on our       
business, results of operations or financial condition.                         

EUROPEAN MONETARY UNION                                                         

Within Europe, the European Economic and Monetary Union (the "EMU")   
introduced a new currency, the euro, on January 1, 1999. The new currency is in 
response to the EMU's policy of economic convergence to harmonize trade policy, 
eliminate business costs associated with currency exchange and to promote the   
free flow of capital, goods and services.                                       

   On January 1, 1999, the participating countries adopted the euro as their
local currency, initially available for currency trading on currency exchanges  
and for non-cash transactions such as banking. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning  
on January 1, 2002, euro-denominated bills and coins will be issued for cash    
transactions. For a period of up to six months from this date, both legacy      
currencies and the euro will be legal tender. On or before July 1, 2002, the    
participating countries will withdraw all legacy currencies and use exclusively 
the euro.                                                                       

The introduction of the euro is a significant event with potential    
implications for our existing operations within countries participating in the  
EMU. As such, we have committed resources to conduct risk assessments and to    
take corrective actions, where required, to ensure that we are prepared for the 
introduction of the euro. We have undertaken a review of the euro implementation
and concentrated on areas such as operations, finance, treasury, legal,         
information management, procurement and others, both in participating and non-  
participating European Union countries where we have operations. Also, existing 
legacy accounting and business systems and other business assets have been      
reviewed for euro compliance, including assessing any risks from third parties. 
Progress regarding euro implementation is reported periodically to management.  

     We have not experienced any significant operational disruptions to date and
do not currently expect the continued implementation of the euro to cause any   
significant operational disruptions. In addition, we have not incurred and do   
not expect to incur any significant costs from the continued implementation of  
the euro, including any currency risk, which could materially affect our        
liquidity or capital resources.                                                 

DEFERRED INCOME TAXES                                                           

  At December 31, 1997, Delphi's consolidated balance sheet included a net
deferred tax asset of approximately $3.2 billion. This net deferred tax asset   
relates to temporary differences between amounts of assets and liabilities for  
financial reporting purposes and the basis of such assets and liabilities as    
measured by tax laws. For more information, see Note 5 to our audited           
consolidated financial statements included elsewhere in this prospectus. About  
$1.7 billion of the net deferred tax asset balance is related to the obligation 
for postretirement benefits other than pensions. Realization of the net deferred
tax asset is dependent upon profitable operations in the United States and      
future reversals of existing taxable temporary differences. Although realization
is not assured, we believe that it is more likely than not that such benefits   
will be realized through the reduction of future taxable income. Management has 
carefully considered various factors in assessing the probability of realizing  
these deferred tax assets including:                                            

 - Delphi's operating results over the most recent three year period and
      overall financial forecasts of book and taxable income for the 1998-2003
period.                                                           

   - The ability to utilize tax planning, such as capitalization of research
 and experimentation costs for tax purposes, so that Delphi does not
generate any significant U.S. federal tax net operating loss      
carryforwards.                                                    

59

424B4
62nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 62nd

  - The extended period of time over which the tax assets can be utilized.
 Postretirement benefits become tax deductions over periods up to 50
years.                                                            

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                     

     Delphi is exposed to market risks from changes in foreign currency exchange
rates and certain commodity prices. In order to manage these risks, we          
participated in GM's risk management program, which includes entering into a    
variety of foreign exchange and commodity forward contracts and options. The    
commodity price hedging programs have been managed on a centralized basis by GM,
foreign currency risks have historically been managed by both GM and certain    
foreign locations.                                                              

    A discussion of Delphi's accounting policies for derivative instruments is
included in Note 2 to the audited consolidated financial statements included    
elsewhere in this prospectus and further disclosure is provided in Note 17 to   
those financial statements. Delphi and GM maintain risk management control      
systems to monitor foreign exchange and commodity risks, and related hedge      
positions. Positions are monitored using a variety of analytical techniques     
including market value, sensitivity analysis, and value-at-risk models. The     
following analyses are based on sensitivity analysis tests which assume         
instantaneous, parallel shifts in exchange rates and commodity prices. For      
options and instruments with non-linear returns, appropriate models are utilized
to determine the impact of sensitivity shifts.                                  

FOREIGN CURRENCY EXCHANGE RATE RISK                                         

Delphi has foreign currency exposures related to buying, selling and  
financing in currencies other than the local currencies in which it operates.   
More specifically, Delphi is exposed to foreign currency risk related to        
uncertainty to which future earnings or assets and liability values are exposed 
due to operating cash flows and various financial instruments that are          
denominated in foreign currencies. Currently, Delphi's most significant foreign 
currency exposures relate to Mexico, Germany, France, Spain and South Korea. As 
of December 31, 1997, the net fair value liability of financial instruments with
exposure to foreign currency risk was about $49 million. The potential loss in  
fair value liability for such financial instruments from a hypothetical 10%     
adverse change in quoted foreign currency exchange rates would be about $5      
million. The model assumes a parallel shift in foreign currency exchange rates; 
however, exchange rates rarely move in the same direction. The assumption that  
exchange rates change in a parallel fashion may overstate the impact of changing
exchange rates on assets and liabilities denominated in a foreign currency.     

COMMODITY PRICE RISK                                                        

Until January 1, 1999, GM entered into commodity forward and option   
contracts on behalf of our company. Such contracts were executed to offset our  
exposure to the potential change in prices mainly for various non-ferrous metals
used in the manufacturing of automotive components. The net fair value liability
of such contracts, excluding the underlying exposures, as of December 31, 1997  
was about $11 million. The potential change in the fair value of commodity      
forward and option contracts, assuming a 10% change in the underlying commodity 
price, would be about $27 million at December 31, 1997. This amount excludes the
offsetting impact of the price risk inherent in the physical purchase of the    
underlying commodities.                                                         

INTEREST RATE RISK                                                          

Due to limited borrowings from third party credit sources, Delphi's   
historical interest rate risk was generally not significant. Subsequent to our  
separation from GM, we may manage our exposure to interest rate risk through the
use of derivative instruments designed to manage risk and minimize interest     
expense.                                                                        

60

424B4
63rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 63rd

ENVIRONMENTAL MATTERS                                                           

Delphi is subject to various laws governing the protection of the     
environment, including laws regulating air emissions, water discharges and waste
management. Delphi has made and will continue to make capital and other         
expenditures to comply with environmental requirements. However, such           
expenditures were not material during the years ended December 31, 1998, 1997,  
1996 and 1995 and are not expected to be material in 1999 or 2000. Environmental
requirements are complex, change frequently and have tended to become more      
stringent over time. Accordingly, we cannot assure you that these requirements  
will not change or become more stringent in the future in a manner that could   
have a material adverse effect on our business.                                 

  Delphi is also subject to environmental laws requiring investigation and
cleanup of environmental contamination and is in various stages of investigation
and cleanup at its manufacturing sites where contamination has been alleged. At 
September 30, 1998, our reserve for such environmental investigation and cleanup
totaled about $19 million. For a description of the environmental liabilities   
allocated to our business as part of our separation from General Motors, see    
"Arrangements Between Delphi and General Motors--Real Estate and Environmental."

     The process of estimating environmental clean-up liabilities is complex and
dependent primarily on the nature and extent of historical information and      
physical data relating to a contaminated site, the complexity of the site, the  
uncertainty as to what remedy and technology will be required, the outcome of   
discussions with regulatory agencies and, at multi-party sites, other           
potentially responsible parties. In future periods, new laws or regulations,    
advances in cleanup technologies and additional information about the ultimate  
cleanup remedy that is used could significantly change our estimates.           
Accordingly, we cannot assure you that our environmental cleanup costs and      
liabilities will not exceed the current amount of our reserve.                  

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                                       

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133    
requires recognition of all derivative financial instruments as either assets or
liabilities in consolidated balance sheets at fair value and determines the     
method(s) of gain/loss recognition. We are required to adopt SFAS No. 133 with  
our fiscal year ending December 31, 2000 and are currently assessing the effect 
that it may have on our consolidated financial statements.                      

     SFAS No. 133 provides that, if certain conditions are met, a derivative may
be specifically designated as:                                                  

- a hedge of the exposure to changes in the fair value of a recognized
  asset or liability or an unrecognized firm commitment (a "fair value
hedge");                                                          

- a hedge of the exposure to variable cash flows of a forecasted      
transaction (a "cash flow hedge"); or                             

     - a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale 
  security or a foreign-currency-denominated forecasted transaction (a
"foreign currency hedge").                                        

Under SFAS No. 133, the accounting for changes in the fair value of a 
derivative depends on its intended use and designation. For a fair value hedge, 
the gain or loss is recognized in earnings in the period of change together with
the offsetting loss or gain on the hedged item. For a cash flow hedge, the      
effective portion of the derivative's gain or loss is initially reported as a   
component of other comprehensive income and subsequently reclassified into      
earnings when the forecasted transaction affects earnings. For a foreign        
currency hedge, the gain or loss is reported in other comprehensive income as   
part of the cumulative translation adjustment. For all other items not          
designated as hedging instruments, the gain or loss is recognized in earnings in
the period of change.                                                           

  In March 1998, the Accounting Standards Executive Committee ("ASEC") for
the American Institute of Certified Public Accountants released Statement of    
Position ("SOP") 98-1, "Accounting for the Costs of                             

61

424B4
64th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 64th

Computer Software Developed for Internal Use." SOP 98-1 requires the            
capitalization of certain expenditures for software that is purchased or        
internally developed once certain criteria are met. Currently, we generally     
expense the costs of developing or obtaining internal use software as incurred. 
We adopted SOP 98-1 on January 1, 1999, as required. We expect that about $30 to
$40 million of spending that would have otherwise been expensed as incurred will
be capitalized in 1999 in accordance with the provisions of SOP 98-1.           

In April 1998, the ASEC released SOP 98-5, "Reporting on the Costs of 
Start-Up Activities." SOP 98-5 generally requires costs of start-up activities  
to be expensed instead of being capitalized and amortized. We were required to  
adopt the pronouncement on January 1, 1999. We have not concluded at this time  
on the applicability or impact of this SOP on our consolidated financial        
statements.                                                                     

FORWARD-LOOKING STATEMENTS                                                      

 Delphi is subject to various risks and uncertainties, many of which are
outside of its control, that could cause actual results to differ from those    
expressed in forward-looking statements throughout "Management's Discussion and 
Analysis of Financial Condition and Results of Operations." See "Risk Factors"  
for additional information about such risks and uncertainties.                  

62

424B4
65th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 65th

BUSINESS OF DELPHI

OVERVIEW                                                                        

     OUR COMPANY. Delphi is the world's largest and most diversified supplier of
components, integrated systems and modules to the automotive industry, with 1997
revenues of $31.4 billion. Based on the latest Fortune 500 survey, Delphi on an 
independent basis would have ranked as the 25th largest industrial corporation  
in the United States based on 1997 revenues. We have become a leader in the     
global automotive parts industry by capitalizing on the extensive experience we 
have gained as the principal supplier of automotive parts to General Motors, the
world's largest manufacturer of automotive vehicles. We are primarily a "Tier 1"
supplier, which means that we generally provide our products directly to        
automotive vehicle manufacturers ("VMs"). We also sell our products to the      
worldwide aftermarket for replacement parts and to non-VM customers.            

About five years ago, we began to transform our company from a North  
America-based, captive component supplier to GM into a global supplier of       
components, integrated systems and modules for a wide range of customers. We now
sell our products to every major manufacturer of light vehicles in the world.   
Since 1993, our sales to customers other than GM have grown from 13.3% of our   
total sales to 18.3% in 1997. For this purpose, our total sales include all     
sales by entities in which we own a minority interest.                          

  We have also established an expansive global presence, with a network of
manufacturing sites, technical centers, sales offices and joint ventures located
in every major region of the world. About 59% of our employees and, based on    
square footage, about 30% of our wholly owned and leased manufacturing sites    
were located outside the United States and Canada as of September 30, 1998.     
About 28% of our total 1997 sales were derived from products manufactured at    
sites located outside the United States and Canada.                             

Through our experience with General Motors, we have developed a       
sophisticated understanding of the design, engineering, manufacture and         
operation of all aspects of the automotive vehicle. We have both extensive      
technical expertise in a broad range of product lines and strong systems        
integration skills, which enable us to provide comprehensive, systems-based     
solutions for our customers. We believe that we are one of the leading Tier 1   
suppliers in each of our focused product areas. We operate our business along   
three major product sectors which work closely together to coordinate our       
product development and marketing efforts. Our three product sectors are:       
Electronics & Mobile Communication, which includes our automotive electronics   
and audio and communication systems; Safety, Thermal & Electrical Architecture, 
which includes our interior, thermal and power and signal distribution products;
and Dynamics & Propulsion, which includes our energy and engine management,     
chassis and steering products.                                                  

  Our core business objective is to increase our earnings by expanding our
sales globally while improving our operating performance. We believe that our   
comprehensive vehicle knowledge and expansive global presence provide a solid   
foundation for our continued growth, particularly as VMs increasingly seek      
suppliers with technical expertise who can provide competitively-priced systems 
solutions to meet consumers' requirements for ride and handling performance,    
safety, security, communications, convenience and entertainment and who can     
deliver products and offer customer service on a worldwide basis. Although we   
expect that GM will remain our largest customer for a significant period of     
time, we also expect that our sales to GM's North American operations will      
decline over time. Accordingly, our strategy focuses on increasing sales to     
other customers while maintaining our strong relationship with GM. We believe   
that our ability to achieve this sales growth over time will be enhanced by our 
complete separation from GM.                                                    

The principal elements of our business strategy are:                  

     - to supply our customers with high-quality, innovative components, systems
and modules;                                                      

- to pursue business with customers other than GM-North America while 
 maintaining our significant customer-supplier relationship with GM;

- to leverage our global presence to meet our customers' needs;       

- to improve our operating performance; and                           

- to complete strategic acquisitions, joint ventures and alliances.   

63

424B4
66th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 66th

  OUR SALES AND AWARDED BUSINESS. We currently sell our products to all of
the major VMs. While we expect our business with customers other than GM to     
increase over time, we also expect that GM will remain our largest customer by  
far for a significant period of time due to the long-term nature of sales       
contracts in our industry, our strong customer-supplier relationship with GM and
the Supply Agreement with GM. We supply parts to each regional sector of GM's   
Automotive Operations, including its automotive operations in the United States,
Canada and Mexico ("GM-North America"), and to GM's automotive operations       
throughout the rest of the world ("GM-International"). In addition, we sell our 
products to the worldwide aftermarket for replacement parts. Currently, most of 
our aftermarket sales are to GM's Service Parts Operations ("GM-SPO") for       
distribution principally to the North American aftermarket.                     

    The following table shows how our total sales were derived for each of the
last three years and for the nine months ended September 30, 1997 and 1998. The 
percentages for the nine months ended September 30, 1998 were affected by work  
stoppages in the United States in June and July 1998.                           

                                                        [Enlarge/Download Table]

                                                         TOTAL SALES                     
                                     --------------------------------------------------- 
                                                                          NINE MONTHS    
                                             YEAR ENDED                      ENDED       
                                            DECEMBER 31,                 SEPTEMBER 30,   
                                     ---------------------------       ----------------- 
              CUSTOMER               1995       1996       1997        1997        1998  
              --------               ----       ----       ----        ----        ----  
                                                                                         
GM-North America....................  69.3%      66.6%      65.4%       66.0%       61.3%
GM-International....................  10.3       11.7       11.2        11.6        11.5 
GM-SPO..............................   4.5        5.2        5.1         5.2         5.7 
                                     -----      -----      -----       -----       ----- 
  Total GM..........................  84.1       83.5       81.7        82.8        78.5 
Other Customers.....................  15.9       16.5       18.3        17.2        21.5 
                                     -----      -----      -----       -----       ----- 
                                     100.0%     100.0%     100.0%      100.0%      100.0%
                                     =====      =====      =====       =====       ===== 

     For purposes of the foregoing table, "total sales" include all of the sales
from joint ventures and other investments in which we own a minority interest   
even though these sales are not reflected in our sales as reported in our       
consolidated financial statements included elsewhere in this prospectus. This is
how we have historically tracked our sales by customer for internal purposes. We
include our minority joint venture sales for this purpose because, among other  
things, they principally relate to our joint ventures outside the United States 
where we frequently have significant influence over product design and          
technology and customer relationships but do not own more than 50%. If we owned 
50% or more of these joint ventures, in most cases, we would include these sales
in our consolidated sales. In addition, many of these joint ventures use our    
technologies. If we did not include these sales, the percentages set forth above
for GM would be higher.                                                         

    We have a substantial base of awarded business from vehicle manufacturers,
including business with GM-North America under arrangements that are governed by
the Supply Agreement. We track as "awarded business" the future sales that we   
have a strong expectation of realizing based on various types of VM awards to us
and various assumptions we make regarding, among other things, the timing and   
volume of vehicle production, option mix and product pricing. On that basis, we 
believe that we currently have a solid foundation of awarded business upon which
to grow our company. We cannot assure you, however, that we will in fact realize
any specific amount of awarded business because it remains in all cases subject 
to a number of important risks and uncertainties, including the volume and      
option mix of vehicles actually produced, the timing of such production, the    
determination by our VM customers to delay, cancel or redesign vehicle programs 
and price reductions negotiated in connection with a VM customer's sourcing of  
new business with us. In addition, our VM customers generally have a contractual
right to replace us with another supplier throughout the duration of a contract 
for a variety of reasons, although the impact of this contractual right is      
mitigated to some extent by the substantial re-engineering costs that a VM      
typically would need to incur in order to introduce a new supplier to an        
established vehicle platform.                                                   

 Subject to the foregoing risks and uncertainties, we currently estimate
revenues from our existing awarded business to be about $28 billion for 1999 and
about $22 billion for 2003. The amount of our awarded                           

64

424B4
67th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 67th

business declines over time as the vehicle programs in which we are currently   
participating mature and eventually terminate. However, particularly in the     
later years, we expect that we will be awarded additional business from GM and  
other customers. In estimating our awarded business, we use our own assumptions 
about the volume and timing of vehicle production and option mix and product    
pricing, except that for business under the Supply Agreement with GM we have    
generally used production and mix assumptions used in GM's internal business    
planning process and provided to us by GM. While we believe our assumptions to  
be reasonable and the methodology by which we track our awarded business to be  
appropriate, we continuously evaluate and from time to time make modifications  
to such assumptions and methodology. In this regard, we currently anticipate    
that, following the Distribution, we will change our methodology so that in     
tracking our awarded business with GM we will use our own production and mix    
assumptions rather than GM's internal assumptions.                              

   For more information about these matters, see "Risk Factors--Risk Factors
Relating to Our Business--We May Be Unable to Realize All of the Sales          
Represented by Our Awarded Business" and "--Industry--Awarded Business."        

    REALIZATION OF OUR BUSINESS OBJECTIVE. We believe that our ability to grow
our business with major VMs other than General Motors will be significantly     
enhanced by our complete separation from GM. Other VMs have been, to varying    
degrees, reluctant to purchase components extensively from a supplier owned by  
GM. We believe that this is attributable in part to concerns that the related   
profits would strengthen GM and that GM might obtain access through Delphi to   
confidential information regarding the other VMs' vehicle designs and           
manufacturing processes, despite our strict confidentiality pledge and          
procedures. We believe that our complete separation from GM will address these  
customer concerns and thereby provide growth opportunities for our company.     
However, we cannot assure you as to whether or when our complete separation from
GM will occur or as to whether we will be able to realize the benefits we expect
from separation. For more information, see "Risk Factors--Risk Factors Relating 
to Separating Our Company from General Motors--Our Business May Be Adversely    
Affected if General Motors Does Not Complete Its Divestiture of Our Company" and
"--Our Close Relationship with General Motors Could Limit Our Potential to Do   
Business with Its Competitors" and "Delphi and Its Separation from General      
Motors."                                                                        

     Our business objective also emphasizes continuing operational improvements.
Since 1991, when GM organized its various component operations into a separate  
business group, Delphi has been evolving from a fully captive collection of     
component operations into an independently managed supplier of components,      
integrated systems, and modules to GM and all of the other major VMs. During    
this transitional period, our financial results have at times been adversely    
affected by a variety of factors. These factors include significant price       
reductions, more recently with respect to our automotive electronics products,  
as GM implemented its global sourcing initiative, labor disruptions at both GM  
and Delphi, and certain unprofitable manufacturing operations. In response to   
these and other factors, we have developed, and are implementing, initiatives to
improve our operating performance. We describe many of these initiatives below  
under "--Strategy--Improve Operating Performance." Although we have made        
substantial progress in implementing these initiatives, we believe that in many 
cases the full impact of these initiatives has not yet been realized. We believe
that, as we fully implement these initiatives throughout our operations and     
complete our separation from GM, we will be able to realize additional benefits.
See "Risk Factors--Risk Factors Relating to Separating Our Company from General 
Motors--We May Be Unable to Increase Our Competitiveness if We Fail to Improve  
Our Labor Relations and Establish More Flexible Work Rules and Practices        
Following Our Separation from General Motors" and "--Risk Factors Relating to   
Our Business--We May Be Unable to Realize Our Business Strategy of Improving Our
Operating Performance."                                                         

INDUSTRY                                                                        

GENERAL. We operate in a highly competitive industry. Our industry    
generally provides components, systems, subsystems and modules to VMs for the   
manufacture of new vehicles, as well as to the aftermarket for use as           
replacement parts for current production and older vehicles.                    

65

424B4
68th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 68th

     Today, suppliers offer their component products to VMs individually as well
as in a variety of more fully engineered forms, such as modules and systems:    

- "Modules" are groups of component parts arranged in close physical  
    proximity to each other within a vehicle, which are often assembled by
   the supplier and shipped to the VM for installation in a vehicle as a
   unit. Modular instrument panels, cockpit modules and door modules are
examples.                                                         

- "Systems" and "subsystems" are groups of component parts located    
 throughout the vehicle which operate together to provide a specific
vehicle function. Braking systems, electrical systems and steering
systems are examples.                                             

    Historically, many large VMs have operated internal divisions to provide a
wide range of component parts for their vehicles. Over the past few decades,    
however, VMs have moved towards a competitive sourcing process for automotive   
parts, including increased purchases from independent suppliers, as they seek   
lower-priced and/or higher-technology products. These independent parts         
suppliers, which often have lower cost structures than in-house component       
operations, have become an important part of the automotive parts industry. Many
captive suppliers no longer provide their products exclusively to their parent  
VM.                                                                             

Our industry is generally divided into several groups or "tiers:"     

    - "Tier 1" suppliers such as Delphi sell their products principally to VMs
       directly and often offer a broad range of product capabilities, including
design, engineering and assembly services.                        

   - "Tier 2" suppliers sell their products principally to Tier 1 suppliers,
    who then combine these parts into their own product offerings. Smaller
Tier 2 suppliers are sometimes referred to as "Tier 3" suppliers. 

CONTRACTS FOR VM BUSINESS. Contract durations for automotive parts    
generally range from one year to the entire life of the vehicle model, about    
three to seven years for cars and six to ten years for trucks. Tier 1 suppliers 
such as Delphi generally compete for new VM business at the beginning of the    
development of new vehicle models and upon the redesign of existing vehicle     
models, at which time a supplier would bid for the "replacement cycle" of an    
existing product program. New vehicle model development generally begins at     
least two to five years before the marketing of such models to consumers. As a  
result, a significant portion of a supplier's annual sales are generated        
pursuant to arrangements entered into about two to five years before the        
revenues related to such arrangements begin to be realized.                     

     The Tier 1 sourcing process for vehicle programs, which varies according to
VM, is typically initiated when a VM seeks requests for quotations from several 
suppliers at least three to six years before anticipated vehicle production.    
Based on these quotations, VMs in many cases then select and work with a        
supplier on specific component design and development projects related to the   
new vehicle program. At varying points during this process, VMs may issue       
"nomination letters," letters of intent or other representations to the supplier
that, based on the supplier's quotation and subject to a number of conditions   
established by the VM, the VM intends to award specific business relating to the
vehicle program to the supplier. By the time the design and development of the  
vehicle program is nearly complete, the VM will typically have evaluated the    
supplier's performance to date and its ability to meet the VM's specific        
production and service requirements. The VM will then develop a proposed        
production timetable, including current vehicle volume and option mix estimates 
based on its own assumptions, and then source business with the supplier        
pursuant to written contracts, purchase orders or other firm commitments,       
provided that the supplier can meet the VM's designated conditions.             

    AWARDED BUSINESS. Awarded business generally covers the supply of all or a
portion of a VM's production and service requirements of a particular product   
program rather than the supply of a specific quantity of products. Accordingly, 
in estimating awarded business over the life of a contract or other commitment, 
a supplier must make various assumptions as to the estimated amount of vehicles 
expected to be produced, the timing of such production, the mix of options on   
the vehicles produced and product pricing.                                      

66

424B4
69th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 69th

    The realization of sales based on awarded business is subject in all cases
to a number of important risks and uncertainties, which generally include the   
following:                                                                      

- the volume of vehicle models and specific vehicle options actually  
produced by the VM, which, in turn, are subject to a number of    
significant risks outlined below;                                 

- the determination by the VM to delay or cancel a particular vehicle 
      program for which it has sourced business with the supplier or to change
the option mix within the program;                                

- the VM's contractual right to replace the supplier throughout the   
 duration of the contract for a variety of reasons, including if the
supplier does not remain competitive in terms of quality, service,
design, technology and, in certain circumstances, price;          

     - the VM's contractual right to terminate the contract altogether: although
   this right varies by contract, some contracts--generally shorter-term
   purchase orders--are terminable by the VM at any time for any reason;

- the VM's decision to redesign a vehicle model and not to select the 
     supplier to supply any or all of the same parts it was providing on the
previous vehicle model; and                                       

- product pricing, including price reductions on existing contracts   
      negotiated in connection with the VM's sourcing of new business with the
supplier.                                                         

 The actual production volumes and option mix of vehicles produced by VM
customers depend on a number of factors that are beyond a supplier's control.   
These include:                                                                  

- general economic conditions;                                        

- consumer preferences for particular vehicles or vehicle features;   

- labor difficulties or work stoppages and any related recoveries of  
production; and                                                                 

- capital planning and other factors specific to a particular VM.     

   INDUSTRY TRENDS. Delphi has been at the forefront of five key trends that
have been reshaping the automotive parts industry over the past several years:  

    - Increased Emphasis on Systems and Modules Sourcing. In order to simplify
   the vehicle design and assembly processes and reduce their costs, VMs
increasingly look to their suppliers to provide fully engineered, 
pre-assembled combinations of components rather than individual   
   components. By offering sophisticated systems and modules rather than
      individual components, Tier 1 suppliers have assumed many of the design,
engineering, research and development and assembly functions      
traditionally performed by VMs. In addition, suppliers now often  
    manufacture and ship component parts to the general location of a VM's
   assembly line and then provide local assembly of systems and modules.
  This process allows VMs to realize cost savings by reducing in-house
 assembly functions and eliminating the need to maintain significant
     inventory levels on an ongoing basis. As suppliers play a more integral
       role in the vehicle design and manufacturing process, they typically need
  greater access to confidential planning information regarding a VM's
future vehicle designs and manufacturing processes.               

    - Globalization of Suppliers. The globalization of VMs, which reflects the
       broader global market for vehicle sales and the desire of VMs to increase
     vehicle production in low-cost markets, has driven the globalization of
   suppliers as they follow their customers. In 1997, about 70% of total
    worldwide passenger vehicle production occurred outside North America,
      according to Ward's 1998 Automotive Yearbook. In order to serve multiple
     markets in a more cost effective manner, many VMs are turning to global
     vehicle platforms such as "world cars," which typically are designed in
     one location but produced and sold in many different geographic markets
  around the world. With these vehicles, VMs can better serve multiple
     markets and address local consumer preferences while controlling design

67

424B4
70th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 70th

       costs and taking advantage of low-cost manufacturing locations. Suppliers
    for a specific world car are often required by the VM to provide their
  services in all global locations where that vehicle is manufactured.

    - Increasing Electronic Content. We believe that the electronic content of
       vehicles has been increasing and will continue to increase in the future.
     This increase in electronic content is largely driven by continued, and
often increasingly stringent, regulatory standards for automotive 
   emissions and safety as well as consumer demand for increased vehicle
   performance and functionality at lower cost. Electronics integration,
       which generally refers to replacing mechanical with electronic components
and integration of mechanical and electrical functions within the 
    vehicle, allows VMs to achieve substantial reduction in the weight and
       complexity of automotive vehicles, resulting in easier assembly, enhanced
      fuel economy, improved emissions control and better vehicle performance.
  Electronics integration also enables VMs to offer more sophisticated
vehicle features at lower cost. Through electronics integration,  
    suppliers can link systems and subsystems within the vehicle to reduce
the physical mass of components and improve vehicle performance.  
Electronic content varies significantly among vehicle models, with
    higher-end vehicles having more sophisticated and extensive electronic
controls and systems. As consumers, particularly in more developed
      markets such as North America and Europe, seek more competitively-priced
ride and handling performance, safety, security, communications,  
      convenience, entertainment and environment-friendly options in vehicles,
such as air bags, keyless entry, global positioning systems, audio
 systems and advanced emission control systems, Delphi believes that
      electronic content per vehicle will continue to increase but will remain
    subject to technology-driven price declines and pricing pressures from
VMs.                                                              

   - Ongoing Industry Consolidation. The worldwide automotive parts industry
       is consolidating as suppliers seek to achieve operating synergies through
     business combinations, shift production to locations with more flexible
       local work rules and practices, acquire complementary technologies, build
       stronger customer relationships and follow their customers as they expand
     globally. According to U.S. Industry and Trade Outlook 1998: Automotive
    Parts, the overall number of Tier 1 suppliers worldwide decreased from
3,000 to 1,500 between 1990 and 1996, primarily due to industry   
    consolidation. The need for suppliers to provide VMs with single-point
     sourcing of integrated systems and modules on a global basis has helped
    fuel industry consolidation. Furthermore, the cost focus of most major
  VMs has forced suppliers to reduce their prices, both in the initial
      bidding process and throughout the term of the contract. Consequently, a
      supplier's viability depends upon its continuing ability to maintain and
     increase operating margins by reducing costs and improving productivity
    on an ongoing basis, including by achieving economies of scale through
consolidation.                                                    

     - Shorter Product Development Cycles. Suppliers are under pressure from VMs
       to respond more quickly with new designs and product innovations in order
      to support rapidly changing consumer tastes and regulatory requirements.
       Vehicle demand in North America has shifted from cars to light trucks and
   vans over the last several years, requiring suppliers to modify their
   operations to focus on parts for these vehicles. In North America and
 Europe, consumers have been increasingly seeking vehicles with more
lower-cost ride and handling performance, safety, security,       
   communications, convenience and entertainment options, such as global
      positioning systems, air conditioning, anti-lock brakes, air bags, power
steering, keyless entry and advanced emissions control systems. In
       developing countries, as broad economic improvements are made, demand has
increased for smaller, less expensive vehicles that satisfy basic 
   transportation needs. Additionally, increasingly stringent government
       regulations regarding vehicle safety and environmental standards, such as
those mandating the use of airbags in new vehicles and emissions  
standards, are driving new product development.                   

STRATEGY                                                                        

  Our core business objective is to increase our earnings by expanding our
sales globally while improving our operating performance. We believe that our   
principal opportunity for future earnings growth will be increased sales to     
customers other than GM-North America. Although we expect that our business with

68

424B4
71st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 71st

customers other than GM will increase, we also expect that GM-North America will
remain our largest customer by far for a significant period of time due to the  
long-term nature of sales contracts in our industry, our strong                 
customer-supplier relationship with GM and the Supply Agreement with GM. In     
addition, although we have historically supplied a lower percentage of          
GM-International's automotive parts requirements than the percentage we have    
supplied to GM-North America, we believe that we are and will continue to be    
able to compete effectively for GM-International business as a result of, among 
other things, our substantially expanded global presence over the last several  
years.                                                                          

     Our business strategy is designed to leverage our competitive strengths and
capitalize on the key trends in the global automotive parts industry. We believe
that our key competitive strengths include our system and module capabilities,  
our electronics integration expertise, our global presence, our technological   
innovation and our highly skilled management team. In implementing our business 
strategy, we maintain a focus on our customers and product quality and strive to
enhance our competitiveness through continuous operational improvements.        

    The key elements of our business strategy are to supply our customers with
high-quality, innovative components, systems and modules; to pursue business    
with customers other than GM-North America while maintaining our significant    
customer-supplier relationship with GM; to leverage our global presence to meet 
our customers' needs; to improve our operating performance; and to complete     
strategic acquisitions, joint ventures and alliances. Each of these elements is 
discussed more fully below:                                                     

 SUPPLY HIGH-QUALITY, INNOVATIVE COMPONENTS, SYSTEMS AND MODULES. Delphi
believes that the current industry trend towards increased system and module    
sourcing by VMs creates a substantial competitive advantage for our company. We 
believe that our extensive operating history as a vertically integrated supplier
to the world's largest VM provides us with the electronics integration and other
technical expertise, breadth of product offerings and manufacturing scale needed
to compete successfully on a system and module basis while continuing to supply 
high-quality components. We have developed significant systems capabilities in a
number of key product areas, including power and propulsion systems, ride and   
handling systems, passenger environment systems, and control and communication  
systems. We also have substantial in-house electronics integration capabilities.
We coordinate our product development and marketing efforts across all of our   
product groups and sectors. As a result, we believe that we are well positioned 
to be an industry leader in developing and selling high-quality electronically  
integrated products capable of meeting our customers' needs.                    

   - System and Module Capabilities and Breadth of Product Offerings. Delphi
  has an extremely broad range of product lines, including substantial
    system and module capabilities. Our extensive experience across a wide
     portfolio of diverse products has enabled us to develop a broad base of
    comprehensive vehicle knowledge and has given us many opportunities to
combine products previously sold separately, including through the
     application of electronics to link systems and subsystems. We have been
       the first to market with a wide variety of integrated automotive systems,
   subsystems and modules. For example, we have developed TRAXXAR(TM), a
     vehicle stability enhancement system which integrates all major chassis
 control functions--steering, braking, suspension and powertrain--to
   provide optimum ride and handling performance. We have also developed
sophisticated electrical/electronic systems which coordinate all  
     electrically operated, sensed, controlled or monitored functions within
      the vehicle. We have developed instrument panel and cockpit modules that
offer fully integrated interior systems featuring sophisticated   
      electrical/electronic systems, structure and trim, steering, thermal and
 safety subsystems. Our modular door system integrates door hardware
    systems with various features of power and signal distribution, safety
 and security, thermal control, electronic control and interior trim
systems.                                                          

    - Electronics Integration Expertise. We believe that we have a significant
competitive advantage over many other suppliers by virtue of our  
     substantial in-house electronics integration capabilities, particularly
since we believe that electronics integration will drive the next 
  generation of successful products in our industry. Our Electronics &
Mobile Communication product sector is one of the global          

69

424B4
72nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 72nd

       leaders in automotive electronics. This sector consists of the operations
of our Delco Electronics subsidiary. From 1986 through 1997, Delco
       Electronics was operated by GM through its Hughes Electronics Corporation
  subsidiary. Hughes Electronics is a leader in satellite and wireless
     communications and space technology and was at that time also a leading
defense electronics company. In late 1997, in connection with the 
    spin-off of the defense electronics business of Hughes Electronics, GM
      transferred Delco Electronics' operations to us in order to more closely
integrate Delco Electronics' expertise in electronics with our    
   capabilities in automotive components and systems. As described below
      under "--Product Technology and Development," we have many product lines
       currently under development which rely heavily on our technical expertise
       and innovation in electronics integration, including those which we refer
to as our "Next Century Winners."                                 

By building on our electronics integration expertise, our systems     
capabilities and the breadth of our product offerings, we are working to develop
high-quality product offerings which will provide our customers with the ability
to offer consumers enhanced vehicle control, superior occupant protection,      
collision avoidance systems, onboard communications systems, advanced energy and
engine management systems, advanced electrical and electronic vehicle           
architecture and passenger entertainment and convenience features at competitive
prices.                                                                         

     PURSUE BUSINESS WITH CUSTOMERS OTHER THAN GM-NORTH AMERICA. We are pursuing
increased business with customers other than GM-North America and we believe    
that our principal opportunity for future earnings growth will be increased     
sales to these customers. Although we intend to pursue new business with GM and 
expect to continue to be a principal supplier to GM and its GM-North America    
operations for a significant period of time, our strategy focuses on growing our
business with customers other than GM-North America in order to offset the      
expected decline in our sales to GM-North America and to make us less dependent 
on the volume of vehicles produced by GM-North America.                         

Our goal has been and continues to be to increase our total sales to  
customers other than GM-North America to at least 50% of our total sales by the 
end of 2002. We caution you, however, that this goal is a "forward-looking      
statement" that may turn out not to be attainable. We cannot give you any       
assurance that we will achieve this goal, including within the time period      
indicated. For more information about the numerous risks and uncertainties which
could impair our ability to achieve this goal, you should read carefully each of
the "Risk Factors" set forth elsewhere in this prospectus, particularly "Risk   
Factors--Risk Factors Relating to Our Business--We May Be Unable to Increase Our
Sales to Vehicle Manufacturers Other Than GM-North America."                    

We have made progress towards achieving this goal. Our customers now  
include every major manufacturer of light vehicles in the world. Recent examples
of our successes in winning new business include our contracts with two non-GM  
VMs to provide our all-electric E-STEER(R) power steering system and our        
recently announced agreement to provide products featuring our Adaptive Cruise  
Control technologies, which are part of our FOREWARN(TM) collision avoidance    
product line, to Jaguar Cars, a unit of Ford Motor Company.                     

    In establishing and measuring our progress towards achieving this goal, we
include in "total sales" all of the sales from minority joint ventures and other
investments even though these sales are not reflected in our sales as reported  
in our consolidated financial statements included elsewhere in this prospectus. 
On this basis, in 1997, 65.4% of our total sales were to GM-North America and   
34.6% of our total sales were to other customers, as compared to 73.7% and 26.3%
of our total sales, respectively, in 1993. Excluding these sales, the           
percentages for GM-North America are higher.                                    

We believe that, as an independent company no longer owned by General 
Motors, we will have significant opportunities to expand our business with other
VMs around the world. We believe that our status as a part of GM has            
historically been a major impediment to the expansion of our business with      
customers other than GM, as other VMs have shown varying degrees of reluctance  
to source extensively from a supplier owned by a major competitor. We believe   
that this is attributable in part to concerns that the related profits would    
strengthen GM and that GM might obtain access through us to confidential        
information regarding the other                                                 
70

424B4
73rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 73rd

VMs' vehicle designs and manufacturing processes. These concerns have persisted 
even though we have given each of our customers a strict confidentiality pledge 
and implemented procedures to preserve customer confidentiality. To our         
knowledge, we have never experienced a breach of our confidentiality pledge or  
procedures.                                                                     

    We believe that our focus on customer satisfaction, as demonstrated by our
technology leadership, product quality, cost control and customer               
responsiveness, positions us well as we strive to increase our sales to         
customers other than GM-North America. This focus also enhances our ability to  
execute our business with GM-North America. In order to better serve our        
customers, our sales and marketing personnel are organized into 25 dedicated    
customer service teams, 19 of which work with customers other than GM. Each of  
our major customers is served by its own team which has responsibility for      
satisfying that customer's needs. Each team is lead by one of our managers and  
functions as a single point of contact within the company to represent the      
interests of the customer throughout our organization. These teams are supported
by our network of manufacturing facilities and engineering and technical        
resources worldwide.                                                            

We believe that the quality of our products is also important to our  
ability to increase sales since quality is a key criteria used by VMs in        
selecting and reviewing suppliers. Since 1996, we have received 163 customer    
quality and service awards, including, among others, the following awards in    
1998:                                                                           

                                                                [Download Table]

CUSTOMER                                              AWARD                 
--------                                              -----                 
                                                                            
General Motors                       GM Worldwide Supplier of the Year Award
DaimlerChrysler AG                   Gold Pentastar Award                   
Volkswagen AG                        VW Formal Q Award                      
Toyota Motor Corp./NUMMI             NUMMI Triple Crown "Gold" Award        

    We have demonstrated a commitment to product quality by making substantial
improvements during recent years, including a significant reduction in customer 
rejected/returned parts per million since 1992. We recognize that our quality   
levels are important to our customers and we intend to continue to seek         
substantial quality improvements in order to remain competitive, especially     
through the further implementation of our operating performance initiatives     
described below.                                                                

    Our ability to increase our sales to customers other than GM-North America
is also enhanced by our broad geographic presence, as discussed below. In       
addition, our acquisition strategy, discussed below, includes the pursuit of key
acquisitions and alliances which can increase our access to certain major non-GM
customers.                                                                      

 LEVERAGE GLOBAL PRESENCE. We believe that our expansive global presence
will provide us with a substantial competitive advantage as we pursue new       
business around the world. We can provide significant manufacturing,            
engineering, technical and other support to our customers in every major market 
in which they operate. We believe that our geographic presence is one of the    
broadest in the industry. As of September 30, 1998, we had 169 wholly owned and 
leased manufacturing sites, 27 technical centers, 51 customer service centers   
and sales activity offices and 40 joint ventures or other strategic alliances in
36 countries on six continents. We are continuously evaluating and enhancing our
engineering and technical resources, which currently include over 15,000        
engineers, scientists and technicians, to provide an efficient, customer-focused
global network of engineering and technology customer centers that we believe   
will better serve our customers around the world.                               

   We believe that we are particularly well positioned as VMs turn to global
vehicle platforms, such as world cars, that are manufactured and sold in        
numerous markets around the world. Since we have manufacturing sites located in 
every major region around the world, we are often able to capitalize on these   
world car opportunities to gain access to new customers. Delphi currently       
supplies parts for a number of global vehicle platforms, including GM's Astra   
and Corsa and Fiat's Punto/Palio. In addition, we believe that our global       
presence also provides us opportunities by allowing us to leverage sales to a   
customer in one location or for one product into sales in other locations and   
for other products.                                                             

71

424B4
74th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 74th

   From 1992 to 1997, the percentage, based on square footage, of our wholly
owned and leased manufacturing sites located outside the United States and      
Canada has increased from about 20% to about 28%, reflecting the globalization  
of our VM customers. During the same period, the percentage of our employees    
located outside the United States and Canada has increased from about 38% to    
about 56%. This has had the effect of reducing our average hourly wage rate,    
including benefits, from about $27 in 1992 to about $20 in 1997, representing a 
decrease of about 26%. About 28% of our total 1997 sales were derived from      
products manufactured at sites located outside the United States and Canada.    

    Excluding our joint ventures and other investments, our global presence as
of September 30, 1998 is shown below:                                           

                                                                [Download Table]

                                                            CUSTOMER               
                                MANUFACTURING  TECHNICAL   CENTERS AND     TOTAL   
                                    SITES       CENTERS   SALES OFFICES  EMPLOYMENT
                                -------------  ---------  -------------  ----------
                                                                                   
United States/Canada...........       48          14           11          82,794  
Europe/Middle East/Africa......       65           7           20          37,243  
Mexico/South America...........       41           4            6          75,922  
Asia/Pacific...................       15           2           14           4,504  
                                     ---          --           --         -------  
  Total........................      169          27           51         200,463  
                                     ===          ==           ==         =======  

We also have a large number of joint ventures and other strategic     
partnerships in various locations throughout the world, with the largest number 
located in the Asia/Pacific region, including China and Korea. Our joint        
ventures and other investments as of September 30, 1998 are shown below by      
geographic region:                                                              

                                                                [Download Table]
                                                                 
United States/Canada......................................      5
Europe/Middle East/Africa.................................      7
Mexico/South America......................................      9
Asia/Pacific..............................................     19
                                                              ---
  Total...................................................     40
                                                              ===

     For financial information regarding the principal geographic areas in which
we operate and our export sales, see Note 15 to the audited consolidated        
financial statements included elsewhere in this prospectus.                     

IMPROVE OPERATING PERFORMANCE. We seek to maximize our operating      
performance in order to enhance our financial performance. Operational          
improvements have enabled Delphi to achieve significant cost reductions and     
improve productivity in the face of an increasingly aggressive cost focus by    
most major VMs. Our continued ability to realize operating performance          
improvements is important to our ability to achieve our business objective. We  
have implemented several important strategic initiatives in this regard:        

- Delphi Manufacturing System. Delphi has achieved substantial        
      manufacturing efficiencies over the last several years by implementing a
     number of manufacturing performance initiatives. We have also been able
      to consolidate our manufacturing sites, improve inventory management and
       reduce scrap. The following table shows information about the improvement
in our manufacturing performance from 1993 to 1997.               

                                                        [Enlarge/Download Table]

                                               1993      1994      1995      1996      1997  
                                               ----      ----      ----      ----      ----  
                                                                                             
Net sales per employee (U.S.)*.............. $185,000  $208,000  $237,000  $234,000  $247,000
Customer rejected/returned parts per                                                         
  million**.................................      n/a       n/a       812       462       355
Lost work day cases per hundred employees...     3.29      3.04      2.27      1.62      1.24

------------------                                                              
     * Net sales per employee data for 1993 and 1994 do not include sales or
headcount information for our Delco Electronics subsidiary.   

    ** This measurement was not tracked on a consistent basis prior to 1995.

72

424B4
75th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 75th

        In 1997, we developed and began the process of implementing the Delphi
      Manufacturing System throughout our global operations. This process, which
      is based, in part, on the systems employed by Toyota and other world class
manufacturers, involves reorganizing the workplace and improving the
     production process in order to maximize manufacturing flexibility, reduce
     total manufacturing costs and achieve "leanness" in our operations. Under
 the Delphi Manufacturing System, traditional manufacturing production
  lines are replaced by more flexible manufacturing cells which focus on
utilizing one-piece production flow rather than traditional batch   
processing. These flexible manufacturing cells typically consist of 
clusters of individual manufacturing operations and efficient work  
stations, with the operators placed centrally within each cellular  
configuration to increase operational availability. This cell design
  provides flexibility by varying the number of operations each operator
   performs. The Delphi Manufacturing System has allowed us to improve our
product quality and be more responsive to the changing needs of our 
      customers. By implementing the Delphi Manufacturing System, we can improve
  our manufacturing productivity, increase our daily inventory turns and
reduce our production lead times.                                   

     Through implementing the Delphi Manufacturing System at many of our
  facilities to date, often with the cooperation of our local unions, we
have achieved significant productivity improvements and inventory   
     reductions as a result of improved materials flow through our facilities.
   The application of the Delphi Manufacturing System at our manufacturing
sites is resulting in substantial performance improvements at both  
unionized and non-unionized facilities. These improvements are      
contributing directly to our cost savings. Through the further      
implementation of the Delphi Manufacturing System on a global basis,
     particularly at our operations in the United States and Europe, we expect
   to further reduce our manufacturing expenses, increase our productivity
and improve our inventory management.                               

- Structural Cost Reductions. We continuously seek to achieve savings 
       through reducing our structural costs. Structural costs generally consist
       of our fixed costs, including our selling, general and administrative and
other commercial costs, engineering costs and labor and other     
       manufacturing costs. Excluding Delco Electronics, our structural costs as
       a percentage of net sales declined from about 50% in 1993 to 47% in 1997.
We have accomplished this principally through infrastructure      
    improvements, such as combining operations whenever possible to reduce
our overhead, administrative and related costs, and eliminate     
    redundancies. Separately, in connection with the recent integration of
     Delco Electronics into our operations, we expect to continue to realize
     structural cost savings. We also seek to reduce our structural costs by
  implementing a unified, common approach to operations throughout our
 global facilities, including a common organizational and management
     structure, application of the Delphi Manufacturing System at all of our
    manufacturing plants, common training programs and a common set of key
metrics for measuring actual performance in comparison to common  
standards and goals.                                              

- Global Sourcing. We use global sourcing in order to obtain the best 
       prices for our direct and indirect materials, machinery and equipment and
services. Global sourcing is a competitive bidding process among  
prospective suppliers located throughout the world. Our purchasing
   process is organized by commodity groups for each major region of the
   world and focuses on advance, long-term sourcing through long-term or
     lifetime contracts. In order to ensure a consistent high-quality supply
       of goods and services, we utilize common systems, policies and procedures
 across our company, including a common supplier quality improvement
process. Due to our size, we believe we have sufficient scale and 
       purchasing leverage to enable us to continue to secure significant volume
     discounts after our separation from GM. On average, since 1993, we have
      reduced our materials costs by about 3% per year based on a year-to-year
actual price comparison excluding Delco Electronics.              

  - Labor Relations. We emphasize the sharing of relevant information with
     our international and local union leadership worldwide and working with
      the unions to jointly develop local work rules and practices. We believe
  that, as a fully independent company with control over our own labor
    relations after the Distribution, we would have the right to negotiate
     regarding our own national and local labor agreements directly with the
unions representing our employees. We believe that our complete   
       separation from General Motors will enable us, over time, to increase our
competitiveness by                                                

73

424B4
76th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 76th

    establishing local work rules and practices more consistent with those
       generally prevailing in the automotive parts industry. However, we cannot
     assure you as to when or the extent to which we will be able to achieve
these benefits.                                                   

      GM has informed us that it has satisfactorily completed discussions with
the IUE, one of the principal unions representing our employees,  
    regarding the effects of the separation on its members. As a result of
      these discussions, the IUE has recognized that, upon Delphi's separation
      from GM, Delphi will be an independent company with its own national and
local agreements with the IUE. GM has informed us that initial    
     discussions with the USW regarding the effects of the separation on its
     members were held on December 8, 1998 and that further discussions will
      be held with the USW. Similar discussions are expected to occur with the
     other unions representing our employees, but we cannot assure you as to
    when they will occur or as to the outcome. In this regard, our largest
    union, the UAW, which represents about 29% of our unionized employees,
       has stated that it is on record as opposing the separation of Delphi from
    GM and that, should GM decide to proceed with the transaction, the UAW
       can and will aggressively work to protect the rights and interests of its
    members who would be impacted by the Distribution. Since that time, GM
      and the UAW have agreed that any of our employees who are members of the
   UAW and who retire on or before October 1, 1999 will be treated as GM
   retirees. GM and Delphi have been working with the UAW to address its
    concerns and will continue to do so. We intend to cooperate with GM in
  working together with the UAW, the IUE, the USW and the other unions
       representing our employees to address the best interests of their members
regarding these matters.                                          

- Product Portfolio Management. Delphi has implemented a portfolio    
       management process designed to streamline and focus our product portfolio
   to facilitate our emphasis on comprehensive, integrated systems-based
   solutions for customers. Under this process, our management regularly
       evaluates all of our company's product lines in order to analyze how each
product supports our overall vision and strategic objectives. This
      process enables us to focus our engineering, capital and human resources
 on those businesses which best fit our overall product strategy and
       increase our profitability. Since 1992, our portfolio management process,
together with our "fix/sell/close" initiative described below, has
       resulted in the sale of businesses with annual sales of about $6 billion,
    resulting in our remaining product lines being more focused, strategic
   and profitable. Excluding Delco Electronics, which was not integrated
     into our company until December 1997, we streamlined our portfolio as a
  result of this process to about 151 product lines in 1997, down from
 about 210 in 1992. Our current product portfolio includes about 190
       product lines and reflects the integration of about 30 product lines from
 Delco Electronics as well as new product development activities. We
       expect to continue to review and refine our product portfolio in light of
    industry trends, with an emphasis on integrated systems and modules as
well as products featuring electronics integration.               

    - Fix/Sell/Close Process. Delphi has adopted a "fix/sell/close" process to
       improve the company's cost competitiveness. Under this process, we review
     our global operations and investments, including our joint ventures, on
      an ongoing basis to identify operations or investments not performing at
desired levels. These operations or investments are placed into a 
category to be fixed, sold or closed. With input from our unions, 
       management then develops a specific plan to deal with each operation in a
     timely manner. With respect to many of our operations in North America,
     both our local and international unions have cooperated with management
      in initiatives to improve the viability of our operations. As operations
   are improved or eliminated, they are removed from the category. Since
       1995, this process, together with the product portfolio process described
  above, has resulted in the closing, sale or consolidation of over 50
       operations worldwide as well as the substantial improvement of many other
    operations. We will continue to monitor our operations and investments
   and we believe that this ongoing process will continue to improve our
   cost competitiveness in the future. However, our ability to eliminate
     product lines, close plants and divest businesses is subject to certain
   restrictions in our Supply Agreement with General Motors as described
elsewhere in this prospectus.                                     

74

424B4
77th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 77th

     COMPLETE STRATEGIC ACQUISITIONS, JOINT VENTURES AND ALLIANCES. We intend to
participate actively in the industry trend towards consolidation by pursuing    
strategic acquisitions and alliances in order to complement or fill gaps in our 
existing product portfolio, enhance our design and manufacturing capabilities,  
improve our geographic presence in selected areas and increase our access to new
customers. A number of our key product areas, including chassis, thermal and    
automotive electronics, represent segments of the industry that are in the midst
of global consolidation. We believe that our separation from General Motors will
provide us with increased capital planning flexibility, the ability to use our  
own securities in strategic acquisitions and the opportunity to form beneficial 
alliances with other leading companies not willing to partner with a supplier   
owned by GM. We will be restricted from executing certain types of transactions 
for a period of time following the Offering and the Distribution as a result of 
covenants arising from our separation from GM as described elsewhere in this    
prospectus. In addition, we are bound for limited periods of time by certain    
covenants not to compete which we entered into in connection with some of our   
past divestitures. We do not believe that these restrictions will materially    
impair our ability to execute this business strategy.                           

     While we currently believe that we will be able to successfully execute the
business strategies outlined above, we cannot assure you in this regard. Our    
ability to execute each of the business strategies discussed above is subject to
numerous risks and uncertainties. For more information, you should read         
carefully each of the "Risk Factors" set forth elsewhere in this prospectus.    

MANAGEMENT                                                                      

     We believe that our experienced and highly skilled management team provides
us with a significant competitive advantage. Our 21 most senior managers have an
average of about 25 years of experience in the automotive industry, including in
many cases extensive experience with GM in the areas of vehicle design,         
engineering and manufacturing. We have also been successful in hiring a         
significant number of managers from several of our other VM and non-VM customers
as well as from our competitors, which has enhanced our understanding of and    
ability to serve our customers' needs.                                          

 We have developed an organizational structure for the management of our
company which utilizes a lean, multi-functional matrix approach. Our chief      
operating decision-making group is the Delphi Strategy Board, which is comprised
of the Chief Executive Officer and 20 senior executives representing all three  
of our product sectors as well as our world and regional headquarters staff.    
Each product sector is managed by a strategy board or equivalent managing       
committee comprised of individuals that have responsibility for the             
profitability and cash flow of the sector's various product lines and           
businesses. Our three product sectors are managed separately because of         
differences in the nature of the respective product groupings.                  

   Our world headquarters staff, located in Troy, Michigan, consisted of 135
persons as of September 30, 1998. While we expect our staff to increase         
substantially in connection with our separation from GM and the establishment of
our company as an independent organization, this will be offset partially by the
elimination of allocations of general corporate overhead expenses from GM. Our  
staff is led by our Chief Executive Officer and other senior executives who have
responsibility in the areas of finance, operations, purchasing, strategic       
planning, communications, production control and logistics, information systems,
legal affairs and human resources. We also have three executives responsible for
our principal geographic regions outside the United States and Canada:          
Europe/Middle East/Africa, South America and Asia/Pacific. Many of our senior   
managers have multiple areas of responsibility within our organization,         
including with respect to the leadership of our customer service teams.         

   In connection with the Offering, we have established incentive plans tied
to the market performance of our common stock. We believe that these programs   
will strengthen our management's focus. See "Management--Incentive Plans."      

75

424B4
78th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 78th

PRODUCT TECHNOLOGY AND DEVELOPMENT                                              

     We have substantial technical and vehicle integration expertise as a result
of our extensive operating history as the in-house supplier to the world's      
largest VM. We have worked directly with GM's vehicle design engineers to       
develop innovative products and complete automotive systems for GM's vehicles.  
We were the first supplier to produce a number of new products, including the   
first electric self-starter, in-dash radio, turn signal, catalytic converter,   
airbag, tilt steering column, independent front-wheel suspension,               
energy-absorbing steering column, electric power sliding door and integrated    
child safety seat. More recently, we were the first supplier to produce         
brake-by-wire systems and computer-controlled engine management systems. As a   
result, we have developed a comprehensive knowledge of the design, engineering, 
manufacture and operation of all aspects of the automotive vehicle.             

    We believe that our engineering and technical expertise, together with our
emphasis on continuing research and development, allows us to use the latest    
technologies, materials and processes to solve problems for our customers and to
bring new, innovative products to market. Delphi maintains technical engineering
centers in every major region of the world to develop and provide advanced      
products, processes and manufacturing support for all of our manufacturing sites
and to provide our customers with local engineering capabilities and design     
development on a global basis. As of September 30, 1998, we employed more than  
15,000 engineers, scientists and technicians around the world. We continuously  
evaluate and enhance our engineering and technical resources and are currently  
considering plans to reorganize our worldwide engineering and technical         
resources into a more efficient, customer-focused global network.               

    We believe that continued research and development activities are critical
to maintaining our leadership position in the industry. Over 300 patents were   
awarded to our business during 1997. Our total expenditures for research,       
development and engineering activities are expected to be about $1.4 billion in 
1998, and were $1.5 billion in 1997 and $1.6 billion in each of 1996 and 1995.  
We have introduced over 50 new products and processes during each of the last   
several years.                                                                  

     In addition, we have been actively studying key industry trends and working
with our customers to develop several important technological capabilities for  
future product offerings. We believe that our electronics integration expertise 
and systems capabilities will enable us to provide innovative, systems-based    
solutions for our customers in the future. Many of these capabilities are being 
jointly developed by all three of our product sectors and each involves the     
electronics integration expertise of our Electronics & Mobile Communication     
product sector. We have started to employ some of these capabilities in our     
products and expect to continue to introduce products featuring these           
capabilities throughout the next decade. We refer to these technological        
capabilities as our "Next Century Winners":                                     

   - Mobile Multi-Media. We are developing new systems and software products
      that enable advanced communication, entertainment and information access
      in vehicle cockpits. Examples include reception systems for AM/FM radio,
     television and direct broadcast satellite transmission, cell phones and
global positioning systems. Other examples include advanced user  
       interface devices such as flat panel displays, voice recognition and head
       up displays; open common standard computing platforms for navigation; and
advanced audio components such as DVD and compact disc players and
      digital intelligent amplifier/speakers. All components are integrated by
       Delphi's high-speed optical-fiber serial data link that provides multiple
  channels of digital video and audio. Delphi has worked with one team
      consisting of IBM(TM), Sun Microsystems, Netscape Communications(TM) and
Hughes Electronics and another team consisting of Microsoft, Saab 
Automobile AB and Hughes Electronics to produce two vehicles      
demonstrating these advanced products. One of these, the "Network 
Vehicle," has received the InfoVision Award from the International
Engineering Consortium.                                           

   - Advanced Thermal Management Systems. We are developing fully integrated
      thermal management systems to increase driver and passenger comfort in a
     more energy efficient manner. These systems, subsystems and modules are
 designed to manage and control vehicle cabin climate and powertrain
      cooling at reduced costs to VMs and consumers. Our emerging technologies
    include individual adaptive comfort control to achieve enhanced driver
and passenger comfort. Our thermal management                     

76

424B4
79th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 79th

systems are designed to meet increasingly stringent environmental 
requirements and to improve material recyclability.               

- Advanced Safety Interior. We are developing technologies designed to
       provide enhanced occupant protection in frontal, side and rear collisions
and vehicle rollover situations. These include anticipatory crash 
    detection systems, adaptive belt restraints, rollover sensing systems,
   active knee bolsters, adaptive energy-absorbing pedals, adaptive load
 steering columns and distributed restraint system architecture. Our
    Adaptive Restraint Technologies(TM) are designed to monitor driver and
      passenger characteristics and the severity of a crash in order to tailor
airbag deployment to provide optimized occupant protection.       

- Collision Avoidance. We are developing collision avoidance systems  
    consisting of adaptive cruise control, collision warning and collision
    intervention. These systems are designed to help avoid vehicle crashes
  through the use of object detection sensors and automatic control of
brakes, throttle, steering and suspension.                        

    - "X-By-Wire" Control Systems. We are developing new drive-by-wire systems
       consisting of braking, steering, throttle and suspension systems designed
   to provide greater vehicle control. A modular design features reduced
  mass, simplified assembly and increased packaging flexibility. These
    systems function without conventional mechanical hardware connections,
  such as conventional steering columns mounted onto rack and pinions.
  Instead, each system receives inputs such as the depression of brake
      pedal or a bump in the road and then communicates that information to an
       electronic control module. This control module then provides input to the
      appropriate localized, motorized actuator, which performs the mechanical
   function of the system such as application of brakes or engagement of
   shock absorbers. The lack of direct mechanical connections allows for
increased customization of the "feel" of these systems.           

- Modular Chassis Systems. We are developing modular chassis systems  
    featuring various levels of integration of knuckles, bearings, brakes,
       suspension, steering and other components assembled into modules. Modular
      product offerings include front and rear brake corner modules, front and
    rear chassis corner modules, engine cradle modules, powertrain-chassis
      modules and front and rear damper modules. These modular chassis systems
     are intended to enable VMs to significantly reduce their assembly plant
costs and product lead time.                                      

- Advanced Engine Management Systems. VMs typically must create many  
   different engine management systems to accommodate varying government
 regulations, consumer preferences and driving conditions around the
     world. To simplify this situation, we are developing an advanced engine
     management system, which features a "building block" approach that uses
 modular systems architecture, rapid algorithm development tools and
controls as a base. Depending upon a VM's requirements, we can add
      interchangeable hardware, software and "plug-and-play" tools to minimize
 recalibration work. This system is designed to save fuel and reduce
     emissions while helping VMs cut costs and achieve fast-to-market goals.

  - ENERGEN(TM) Advanced Energy Systems. We are developing advanced energy
    management systems designed to enable VMs to expand vehicle electronic
       content and better address global warming concerns. These systems include
    a 200-volt AC induction integrated motor/generator, a multiple-voltage
   battery system and high-power electronics which permit the vehicle to
  operate in three different modes--internal combustion, electric or a
combination of the two. This optimization of energy is designed to
      provide increased power to support advanced electrical/electronic needs,
 while also delivering substantial savings in fuel economy, which is
critical to the reduction of carbon dioxide exhaust emissions.    

  - Integrated Vehicle Electrical/Electronic (E/E) Systems. Our integrated
    E/E system combines electrical and electronic content into one system,
   which includes network communications, fiber-optic data transmission,
multi-drop wiring, controllers and electronic integrated switches,
connectors, sensors and                                           

77

424B4
80th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 80th

      actuators. These systems feature smaller, easier-to-package controllers;
smaller easier-to-install wiring harnesses and connectors; fewer  
     electrical interfaces; reduced mass; increased function flexibility and
system reliability; and simplified assembly.                      

     - INTELLEK(TM) Smart Sensors and Actuators. We are developing sophisticated
   sensors and actuators which feature integrated processing and digital
    communication bus interfaces. These higher value sensors and actuators
      are designed to offer VMs reduced mass due to fewer parts, reduced cycle
  and assembly time and improved system performance, while helping VMs
lower their costs for higher content vehicles.                    

CUSTOMERS                                                                       

GENERAL MOTORS. General Motors is our largest customer and we are its 
largest automotive parts supplier. GM is the world's largest VM, having a market
share of about 16% of all light vehicles produced throughout the world in 1997  
according to Standard & Poor's DRI 1998 World Car Industry Forecast Report. Most
of our sales to GM are to GM-North America, although we also sell to            
GM-International and to GM-SPO. In 1997, our sales to GM accounted for about    
81.7% of our total sales as set forth below. For this purpose, "total sales"    
include all sales from joint ventures and other investments in which we own a   
minority interest.                                                              

                                                                [Download Table]

                                                       PERCENTAGE OF DELPHI'S
                     CUSTOMER                             1997 TOTAL SALES   
                     --------                          ----------------------
                                                                             
GM-North America...................................             65.4%        
GM-International...................................             11.2         
GM-SPO.............................................              5.1         
                                                                ----         
     Total GM......................................             81.7%        
                                                                ====         

Sales to General Motors. In 1992, General Motors launched a major     
reorganization of its automotive business to streamline its business practices  
and downsize its North American automotive operations. At that time, GM         
announced its intention to begin filling its procurement needs on a global      
basis. GM strives through this global sourcing strategy to leverage its         
purchasing power by sourcing its products on a global basis and to increase     
competition for its business among its suppliers on the basis of quality,       
service, technology and price. Pursuant to this initiative, GM has provided     
suppliers worldwide with the opportunity to bid for GM-North America business   
historically sourced with us. As a result, our share of GM-North America's      
automotive parts requirements has declined over this period.                    

    We believe that we are and will continue to be able to compete effectively
for GM-North America business because of the high quality of our products, our  
ongoing cost reduction efforts and our product and technological innovations. As
a principal supplier to GM, we periodically have discussions with GM relating to
its future vehicle programs and our long-term technology and product            
development. Although we have no commitments to GM in this regard, we expect to 
continue these discussions for some period of time after our separation from GM 
based on our strong customer-supplier relationship. However, we do expect the   
portion of GM-North America's automotive parts requirements which we supply and 
the prices we charge to GM-North America to continue to decline over the next   
several years. As a result, we also expect that our total sales to GM will      
decline over the next several years. Through our strategy of aggressively       
pursuing increased business with customers other than GM-North America,         
including additional sales to GM-International, however, we will strive to      
mitigate these effects and increase our total sales.                            

We have historically supplied a lower percentage of GM-International's
automotive parts requirements than the percentage of parts we have supplied to  
GM-North America. Until the last several years, we were operated by GM as a     
captive, North America-based supplier to GM's North American operations. As a   
result, we did not focus heavily on our global business opportunities, including
those with GM-International. We also did not have the global presence to compete
effectively for GM-International business. As noted above, we                   

78

424B4
81st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 81st

have substantially expanded our global presence over the last several years. We 
believe that we are and will continue to be able to compete effectively for     
GM-International business.                                                      

  Supply Agreement. The Supply Agreement we have entered into with General
Motors in connection with our separation provides that all existing contracts   
between General Motors and our company as of January 1, 1999 will generally     
remain in effect, including the pricing, duration and purchase order terms and  
conditions. This includes existing contracts under which we have not yet begun  
to supply products. However, the timing of payments from GM to us under the     
existing contracts will change. For a description of these payment terms and the
effect on our liquidity, see "Management's Discussion and Analysis of Financial 
Condition and Results of Operations--Liquidity and Capital Resources--Extension 
of Payment Terms."                                                              

 Under the Supply Agreement, we have the right to provide on competitive
terms the first replacement cycle of all product programs in the United States  
and Canada which we were providing to GM as of January 1, 1999, provided that GM
sources such replacement programs prior to January 1, 2002 and we are           
competitive in terms of design, quality, price, service and technology as these 
factors relate to all aspects of bid packages that may be submitted by other    
suppliers. Other suppliers' bids to provide particular products may include     
offers of price reductions to GM on other current or future products, and GM may
under the Supply Agreement consider the overall economic effect of such package 
proposals in assessing our competitiveness. Given the general duration of most  
vehicle programs of about five to eight years, depending on the vehicle model,  
we expect that this ability to secure next generation business from GM-North    
America, together with our existing contracts and other commitments, will       
provide us with the opportunity to maintain substantial business with GM-North  
America well into the next decade. We will also have the opportunity to bid on  
the same basis as other suppliers for other new GM-North America business as    
well as for GM-International business. Our ability to realize revenues on all GM
business, including business awarded pursuant to existing contracts, is in all  
cases subject to a variety of factors, including the volume and option mix of   
vehicles actually produced by GM, the timing of such production and our         
continuing competitiveness. For more information about the uncertainties and    
risks related to the Supply Agreement and to realizing awarded business, see    
"--Industry--Awarded Business."                                                 

   The Supply Agreement specifies that GM has the right to move its existing
business with us to other suppliers in the event that we are not competitive in 
terms of quality, service, design or technology. In addition, GM has the right  
at all times to adopt new technology, whether or not such technology is         
available through us. If we are unable to provide the new technology or an      
equivalent technology acceptable to GM on a competitive basis, GM is free to    
move the business from us to another supplier. For more information regarding   
the terms of the Supply Agreement, see "Arrangements Between Delphi and General 
Motors--Supply Agreement."                                                      

  OTHER VMS. Although General Motors is by far our largest customer, we do
business with all of the other major VMs worldwide. These relationships have    
enabled us to develop an understanding of global customer needs and business    
opportunities. Based on 1997 worldwide market shares, the next five largest VMs 
after GM are Ford Motor Company, Toyota Motor Corp., Volkswagen AG,             
DaimlerChrysler AG and Fiat S.p.A., who collectively had an aggregate market    
share of about 43% of all light vehicles produced throughout the world in 1997  
according to Standard & Poor's DRI 1998 World Car Industry Forecast Report. We  
currently do business with each of these VMs as well as all other major VMs. Our
top five VM customers other than GM accounted for about 5.8% of our total 1997  
revenues, and our top ten VM customers other than GM accounted for about 8.5% of
our total 1997 revenues. In determining these percentages, we have not included 
sales of entities in which we have a minority interest.                         

  Substantially all of our existing contracts with these non-GM customers,
which we entered into while we were a business sector of GM, require the consent
of the customer in order to assign or transfer the contract. We have had        
discussions with all of our major non-GM customers regarding our separation from
GM and our intent to continue to perform under these existing contracts. Given  
the extremely large number of existing contracts with our non-GM customers and  
the positive feedback received during discussions with our major non-GM         
customers, we do not currently intend either to seek consents from or to enter  
into new contracts with                                                         

79

424B4
82nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 82nd

these customers in connection with our separation from GM. Based on these       
discussions, we do not believe that our separation from GM will adversely affect
our business with these customers. However, we cannot assure you in this regard.

   AFTERMARKET. We sell products to the worldwide aftermarket as replacement
parts for current production and older vehicles. In 1997, our aftermarket       
revenues of $2 billion represented 6.5% of our total revenues. We currently sell
most of these products into the North American aftermarket under arrangements   
with GM-SPO, the principal aftermarket sales organization of GM. GM-SPO         
distributes replacement parts to the aftermarket primarily through GM automobile
dealerships and independent distributors, including warehouse distributors and  
direct retailers. Outside North America, we principally sell into the           
aftermarket through independent distributors.                                   

Under the terms of our separation from GM, we and GM have agreed that,
subject to certain exceptions, GM-SPO will be the exclusive distributor of our  
products into the U.S. aftermarket and we will be the exclusive supplier of     
these products to GM-SPO through at least December 31, 2000. GM-SPO currently   
markets our products under a number of brand names, including ACDelco(R),       
Freedom(R) and Voyager(R). In connection with our separation from GM, we have   
agreed with GM-SPO to split the ownership of these aftermarket brands. GM-SPO   
will own the ACDelco brand and any AC and Delco derivatives and formatives.     
However, as described further under "Arrangements Between Delphi and General    
Motors--Intellectual Property," we have been granted a perpetual, worldwide,    
royalty-free license to use the trade name "Delco Electronics" and the          
trademarks "DELCO" and "DELCO ELECTRONICS" in connection with certain of our    
products as well as a worldwide license to use the trademarks "AC," "DELCO" and 
"AC Delco" until January 1, 2000. We will own the Freedom brand, although we may
not use the brand in the United States until the expiration of our arrangement  
with GM-SPO. GM-SPO will own the Voyager battery brand, but may only use it on  
batteries it purchases from us. For more information about these arrangements,  
see "Arrangements Between Delphi and General Motors--Aftermarket Sales."        

     We have historically derived our principal aftermarket revenues through our
relationship with GM-SPO. We believe that there exist opportunities to increase 
our revenues from sales in the aftermarket and augment the "Delphi" brand       
presence in the aftermarket over time by establishing new supply relationships  
with various participants along the aftermarket distribution channel. We believe
that our ability to sell products developed for the VM market to aftermarket    
customers can reduce the impact of adverse changes in demand for new vehicles.  
With respect to the aftermarket in the United States, we intend to continue to  
sell products through GM-SPO until the expiration of the transitional           
arrangements described above. Outside the United States, we are initially       
focusing on the aftermarket business in Europe and South America.               

We believe that incremental aftermarket sales opportunities will be   
available to us following our complete separation from GM. However, growth in   
the highly competitive aftermarket business will take time to achieve in light  
of the significant investment in an aftermarket distribution infrastructure that
is required.                                                                    

NON-VM CUSTOMERS. We are also diversifying by supplying certain of our
products, including connection systems, flex-circuits wiring, instrumentation   
and map sensors, to new customer areas, such as the aerospace, motorcycle and   
computer industries. Our non-VM customers include Boeing Company,               
Harley-Davidson Inc. and Silicon Graphics Inc. We are also building             
relationships with Tandem Computers Inc., Storage Technologies and Lucent       
Technologies Inc. These non-VM sales accounted for only a nominal amount of our 
total 1997 revenues. We believe that opportunities exist to increase our sales  
in this area and we intend to continue to work to expand our sales to non-VM    
customers.                                                                      

SALES AND MARKETING                                                             

Delphi has established an expansive sales and marketing organization  
consisting of 25 dedicated customer service teams that provide a consistent     
interface between key customers and the company. These teams are currently      
staffed by Delphi sales and marketing personnel located in every major region   
around the world. Nineteen of these customer teams currently focus on customers 
other than GM. We maintain this extensive                                       

80

424B4
83rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 83rd

worldwide customer network in order to better represent individual customers'   
interests within our organization, promote customer programs and coordinate     
global customer strategies with the goal of enhancing overall customer service  
and satisfaction. Our ability to support our customers around the world is      
further enhanced by our expansive global presence in terms of manufacturing     
sites, customer service centers and sales activity offices and technical and    
engineering support.                                                            

  In order to address confidentiality concerns, each customer service team
functions completely independently from the others. We believe that we have     
implemented very effective procedures to preserve customer confidentiality. To  
our knowledge, we have never experienced a breach of our confidentiality pledge 
or procedures. Nevertheless, we believe that our complete separation from       
General Motors should eliminate any remaining VM concerns about providing       
confidential information to a supplier owned by one of its competitors. As noted
above, access to such information is necessary for the design, engineering and  
production of integrated systems tailored to a customer's individual needs.     

Our sales and marketing activities are designed to create overall     
awareness, consideration and purchase of our components, integrated systems and 
modules. To further this objective, we participate in international trade shows 
in Paris, Frankfurt, Tokyo and Detroit. We also provide on-site technology      
demonstrations at each of our major VM customers on a regular basis. We         
advertise in a variety of trade publications and offer an Internet site at      
http://www.delphiauto.com. Our website and the information contained therein or 
connected thereto shall not be deemed to be incorporated into this prospectus or
the registration statement of which it forms a part. We also maintain a         
17,000-square foot customer center at our world headquarters in Troy, Michigan, 
where we have hosted over 13,000 visitors since its opening in August 1997. In  
addition, we provide key products to several of the leading motorsports series  
around the world, including Formula 1, NASCAR Winston Cup, Indy Racing League   
and Championship Auto Racing Teams.                                             

PRODUCTS                                                                        

  Delphi designs, engineers and manufactures a wide variety of components,
integrated systems and modules on a worldwide basis. We provide our VM customers
with global, single-point sourcing capability and systems tailored to meet their
specific needs. As the largest and most diversified supplier of automotive      
parts, we have a diversified portfolio of products. Each of our product lines   
includes many individual product offerings, most of which we can configure to   
interact with specific vehicle characteristics in order to meet our customers'  
needs. Given the breadth of our product portfolio and our significant systems   
integration capabilities, we have focused on offering our customers highly      
engineered, value-added products.                                               

     Our product offerings are organized in three product sectors: Electronics &
Mobile Communication; Safety, Thermal & Electrical Architecture; and Dynamics & 
Propulsion. We believe that each of our three product sectors is a leading      
supplier of automotive parts in its principal areas of focus. The following     
table shows our net sales by product sector and in total for the last three     
years:                                                                          

                                                                [Download Table]

                                                          YEAR ENDED        
                                                         DECEMBER 31,       
                                                    ----------------------- 
                  PRODUCT SECTOR                    1995     1996     1997  
                  --------------                    ----     ----     ----  
                                                         (IN BILLIONS)      
                                                                            
Electronics & Mobile Communication................. $ 5.5    $ 5.3    $ 5.5 
Safety, Thermal & Electrical Architecture..........  13.4     12.9     12.7 
Dynamics & Propulsion..............................  13.2     13.3     13.7 
Eliminations.......................................  (0.4)    (0.5)    (0.5)
                                                    -----    -----    ----- 
  Total............................................ $31.7    $31.0    $31.4 
                                                    =====    =====    ===== 

81

424B4
84th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 84th

   Our net sales by product sector include certain inter-sector sales, which
we eliminate for purposes of determining our total net sales. After adjusting to
account for these eliminations, the following table shows the approximate       
composition by product sector and in total of our net sales for the last three  
years:                                                                          

                                                                [Download Table]

                                                          YEAR ENDED        
                                                         DECEMBER 31,       
                                                    ----------------------- 
                  PRODUCT SECTOR                    1995     1996     1997  
                  --------------                    ----     ----     ----  
                                                                            
Electronics & Mobile Communication.................  16.5%    16.2%    16.5%
Safety, Thermal & Electrical Architecture..........  42.0     41.1     39.9 
Dynamics & Propulsion..............................  41.5     42.7     43.6 
                                                    -----    -----    ----- 
  Total............................................ 100.0%   100.0%   100.0%
                                                    =====    =====    ===== 

 Many of our product offerings combine the expertise and capabilities of
more than one product sector. Since our customers increasingly seek more        
fully-engineered, integrated systems and modules rather than individual         
components, our significant systems integration capabilities play an            
increasingly key role in the successful marketing and sales of our products. We 
believe that electronics integration will drive the next generation of          
successful products in our industry. All of our major vehicle systems and       
subsystems utilize the electronics integration capabilities of our Electronics &
Mobile Communication product sector. Within our three product sectors, our      
numerous product lines are organized into various sub-categories for which a    
product sector strategy board or equivalent managing committee has principal    
responsibility. For more information, see "--Management." For more information  
about our product sectors, see Note 15 to the audited consolidated financial    
statements included elsewhere in this prospectus.                               

    ELECTRONICS & MOBILE COMMUNICATION. Our Electronics & Mobile Communication
product sector accounted for $5.2 billion, or 16.5%, of our 1997 net sales,     
excluding inter-sector sales. This sector is one of the leading global providers
of automotive electronics products. The sector also offers a wide variety of    
audio and communication systems for the vehicle. The automotive electronics     
capabilities of this sector are utilized in connection with many of the product 
offerings of Delphi's two other product sectors to produce systems, subsystems  
and modules designed to enhance vehicle safety, comfort, security and           
efficiency. Our principal electronics and mobile communication product lines    
include the following:                                                          

                                                                [Download Table]

         PRODUCT LINE                               DESCRIPTION                     
         ------------                               -----------                     
                                                                                    
Audio Systems                  A wide range of audio systems and components ranging 
                               from AM radios to integrated compact disc players,   
                               including the Monsoon(R) Audio System, which is      
                               customized for each vehicle.                         
Communication Systems          A wide range of communication and information        
                               systems, including the EyeCue(R) head up display     
                               system and mobile multimedia.                        
Advanced Controllers           Microprocessor-based engine management controllers   
                               and anti-lock brake controllers.                     
Powertrain and Engine Control  Modules designed to optimize engine and transmission 
Modules                        performance while improving reliability and cost     
                               efficiency.                                          
Collision Warning              FOREWARN(R) collision warning systems are            
Systems                        microwave-based forward, rear and side object        
                               detection systems which present warning signals to   
                               drivers in a wide range of formats and warning       
                               levels.                                              
Security Systems               Products include sounders, inclination sensors, glass
                               breakage sensors, remote key actuation products and  
                               vehicle immobilization products, some of which are   
                               sold under the TEXALARM(R) brand.                    

82

424B4
85th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 85th

                                                                [Download Table]

         PRODUCT LINE                       DESCRIPTION                   
         ------------                       -----------                   
                                                                          
Safety Systems         Products include frontal inside airbag controllers,
                       occupant positioning, adaptive restraints and      
                       roll-over sensing.                                 

     SAFETY, THERMAL & ELECTRICAL ARCHITECTURE. Our Safety, Thermal & Electrical
Architecture product sector accounted for $12.5 billion, or 39.9%, of our 1997  
net sales, excluding inter-sector sales. This sector offers a wide range of     
products relating to the vehicle interior as well as the expertise to integrate 
them into individual vehicle designs to simplify manufacturer assembly and      
enhance vehicle marketability. The sector also offers thermal products,         
including powertrain cooling systems and climate control systems that meet      
global mandates for alternative refrigerant capabilities. The sector is also a  
global leader in the production of wiring harnesses and connectors for          
electrical power and signal distribution.                                       

   - Interior Products. These products accounted for $4.4 billion, or 35.2%,
    of the Safety, Thermal & Electrical Architecture product sector's 1997
     net sales, excluding inter-sector sales. Our principal interior product
lines include the following:                                      

                                                                [Download Table]

         PRODUCT LINE                       DESCRIPTION                     
         ------------                       -----------                     
                                                                            
Safety/Airbag Systems  Airbag systems and modules and adaptive restraint    
                       technologies, including driver and passenger airbag  
                       modules, side airbag modules and integral steering   
                       wheels.                                              
Door Modules           Integrated door hardware systems with various        
                       features of power and signal distribution, safety and
                       security, heating, ventilation and air conditioning  
                       ("HVAC"), electronic control and interior trim       
                       systems.                                             
Power Product Systems  Systems include power sliding doors, power liftgates 
                       and power decklids.                                  
Modular Cockpits       Fully integrated interior systems, featuring         
                       electrical/electronic systems, structure and trim    
                       systems, steering systems, thermal systems and       
                       entertainment and safety systems.                    

     - Thermal Products. These products accounted for $2.8 billion, or 22.4%, of
     the Safety, Thermal & Electrical Architecture product sector's 1997 net
      sales, excluding inter-sector sales. Our principal thermal product lines
include the following:                                            

                                                                [Download Table]

         PRODUCT LINE                            DESCRIPTION                     
         ------------                            -----------                     
                                                                                 
Thermal Management Systems  Systems designed to optimize total vehicle thermal   
                            management functions, efficiently maintain passenger 
                            comfort and powertrain cooling in all climates and   
                            driving conditions.                                  
Climate Control Systems     Systems which include HVAC modules, compressors and  
                            condensors and are designed to efficiently maintain  
                            passenger comfort in all climates and weather        
                            conditions.                                          
HVAC Systems and Modules    HVAC systems and modules regulate airflow,           
                            temperature, humidity and air direction and include  
                            evaporators, lightweight aluminum heater cores,      
                            blower motor fans and compressors.                   
Powertrain Cooling          Systems designed to optimize powertrain cooling for  
Systems                     various driving conditions, including radiators, fans
                            and hoses.                                           
Front End Modules           Modules feature a single-part concept, resulting in  
                            reduced product weight and size and higher system    
                            performance at lower cost.                           

83

424B4
86th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 86th

     - Power and Signal Distribution Products. These products accounted for $5.3
 billion, or 42.4%, of the Safety, Thermal & Electrical Architecture
product sector's 1997 net sales, excluding inter-sector sales. Our
principal power and signal distribution product lines include the 
following:                                                        

                                                                [Download Table]

         PRODUCT LINE                               DESCRIPTION                     
         ------------                               -----------                     
                                                                                    
Electrical/Electronic ("E/E")  A wide range of products and services relating to E/E
Systems Centers                system design and production, including E/E centers  
                               designed in a variety of configurations and tailored 
                               to meet customer-specific applications.              
Connection Systems             Wiring connection systems with current-carrying      
                               capacity ranging from signal-level to over 300 amps, 
                               including the GT Connection System(TM), and a variety
                               of fiberoptic data network and point-to-point        
                               connection systems.                                  
Electronic Products            Electronic products featuring micro-processor based  
                               designs with custom integrated circuits and          
                               analog/digital/ microcomputer/mixed design           
                               capabilities.                                        
Advanced Data Communication    Products include an optical star coupler, which      
Systems                        distributes data in real time via plastic optical    
                               fiber throughout an expandable network; and          
                               customized multiplex systems and components.         
Fiber Optic Lighting Systems   DELight(TM) fiber optic lighting systems utilize     
                               centrally located light sources to provide lighting  
                               throughout the vehicle.                              
Ignition Wiring Systems        A wide range of ignition wiring systems and          
                               components.                                          
Sensors                        A wide range of temperature sensors and multifunction
                               sensors that integrate electronics into the          
                               packaging. Some of these sensors are sold under the  
                               brand name INTELLEK(TM).                             
Switch Products                A wide range of pushbutton switches, elastomer       
                               switches incorporating integrated electronics and    
                               miscellaneous specialty switches.                    

   DYNAMICS & PROPULSION. Our Dynamics & Propulsion product sector accounted
for $13.7 billion, or 43.6%, of our 1997 net sales, excluding inter-sector      
sales. This sector offers a wide range of energy and engine management systems  
designed to optimize engine performance and emissions control through precise   
management of vehicle air intake, fuel delivery, combustion and exhaust         
after-treatment. The sector also offers all major chassis control               
systems--steering, braking, suspension and engine, with a focus on providing    
superior ride and handling performance, high reliability, reduced mass and      
improved fuel efficiency. The sector's steering products feature vehicle control
and driveline technologies and advanced electronic controls to improve          
performance.                                                                    

    - Energy and Engine Management Products. These products accounted for $6.4
       billion, or 46.7%, of the Dynamics & Propulsion product sector's 1997 net
  sales, excluding inter-sector sales. Our principal energy and engine
management product lines include the following:                   

                                                                [Download Table]

         PRODUCT LINE                       DESCRIPTION                  
         ------------                       -----------                  
                                                                         
Air/Fuel Management    Subsystems measure, control, manage and deliver a 
                       precise combustible mixture of fuel and air to the
                       combustion chamber.                               

84

424B4
87th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 87th

                                                                [Download Table]

         PRODUCT LINE                               DESCRIPTION                     
         ------------                               -----------                     
                                                                                    
Energy Storage and Conversion  The generator and battery comprise the principal     
                               electrical system in the vehicle. The battery stores 
                               energy for transfer to the starter during engine     
                               start-up; once the engine is running, the generator  
                               supplies the vehicle's electrical power requirements.
                               Among other products, we sell batteries into the     
                               aftermarket under the FREEDOM(TM) brand, as described
                               under "--Customers--Aftermarket."                    
Valve Train                    Systems manage engine timing and performance to      
                               improve fuel economy, reduce emissions and increase  
                               torque and power.                                    
Exhaust After-Treatment        Subsystems carry gas away from the engine and removes
                               harmful chemical compounds through catalytic reaction
                               of contaminants.                                     
Sensors and Solenoids          Sensors, including our INTELLEK(TM) brand sensors,   
                               monitor conditions such as presence, speed and       
                               chemical content within the vehicle. Solenoids are   
                               actuators that control mechanical movement and the   
                               flow of fluids within the vehicle.                   
Ignition                       Subsystems provide spark energy for precise and      
                               robust combustion initiation of the air/fuel mixture.
                               Coils, electronics, wires/boots and spark plugs      
                               generate and deliver a high voltage charge to the    
                               combustion chamber.                                  
Fuel Handling                  Subsystems contain and deliver fuel to the air/fuel  
                               architecture and control evaporative emissions.      
Controls                       Subsystems consist of the electronic control module  
                               and related software and algorithms which are        
                               customized to meet VM needs.                         
Advanced Propulsion Systems    New propulsion technologies include different vehicle
                               system approaches--from powertrain integration to    
                               advanced electro-chemical fuel cell engines.         

     - Chassis Products. These products accounted for $4.1 billion, or 29.9%, of
  the Dynamics & Propulsion product sector's 1997 net sales, excluding
 inter-sector sales. Our principal chassis product lines include the
following:                                                        

                                                                [Download Table]

         PRODUCT LINE                             DESCRIPTION                    
         ------------                             -----------                    
                                                                                 
Intelligent Chassis Control  TRAXXAR(TM) vehicle stability enhancement system    
Systems                      integrates all major chassis control                
                             systems--steering, braking, suspension and          
                             powertrain--to provide optimum ride and handling    
                             performance.                                        
                             GALILEO(TM) intelligent brake-by-wire control system
                             combines power assist, anti-lock braking functions, 
                             traction control and tunable pedal feel in a modular
                             design to deliver high-quality brake balance        
                             regardless of vehicle loading or brake pad wear.    

85

424B4
88th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 88th

                                                        [Enlarge/Download Table]

         PRODUCT LINE                                 DESCRIPTION                    
         ------------                                 -----------                    
                                                                                     
Advanced Ride Control            Manual Selectable Ride System is a controlled       
Suspension Systems               suspension system designed with two independent     
                                 driver-selectable levels of damping.                
                                 Continuously Variable Real-Time Damping System      
                                 provides full car modal control with continuously   
                                 variable independent damping control at each corner.
Chassis Systems and Modules      Systems and modules include complete wheel-to-wheel 
                                 modules, chassis corner modules, brake corner       
                                 modules, damper modules and bearings.               
Brake Systems                    Anti-lock brake systems feature precision solenoid  
                                 technology and can accommodate traction control,    
                                 variable effort steering and other vehicle          
                                 enhancements.                                       
Suspension and Brake Components  Components include calipers, rotors, drums, master  
                                 cylinders, boosters, drum brake assemblies, shock   
                                 absorbers and leveling height sensors.              

   - Steering Products. These products accounted for $3.2 billion, or 23.4%,
     of the Dynamics & Propulsion product sector's 1997 net sales, excluding
  inter-sector sales. Our principal steering product lines include the
following:                                                        

                                                        [Enlarge/Download Table]

         PRODUCT LINE                                 DESCRIPTION                     
         ------------                                 -----------                     
                                                                                      
Steering Systems                 A wide range of steering components and fully        
                                 integrated systems. Components include hydraulic     
                                 pumps, steering gears and steering hoses.            
Columns and Intermediate Shafts  A wide range of steering columns, including TILT     
                                 WHEEL(TM), LUXURY-TILT(TM) power adjustable wheel    
                                 function and manual tilt and telescope. Intermediate 
                                 shaft offerings include cardan joint, flexible       
                                 couplings, pot-style joint, spline shaft and         
                                 concentric isolator.                                 
Driveline Systems                Halfshafts that transmit the power of the vehicle's  
                                 engine to the wheels. Integrated halfshaft designs in
                                 a wide variety of joint types and sizes.             
Fuel Efficiency and Performance  E-STEER(TM) Electric Power Steering is an            
Steering Systems                 all-electric, engine independent system featuring    
                                 space efficiency, environmental compatibility and    
                                 fuel efficiency.                                     
                                 E-H-STEER(TM) Electro-Hydraulic Power Steering       
                                 features optional variable-assist steering.          
                                 QUADRASTEER(TM) Four Wheel Steering features a short 
                                 turning radius, enhanced control and improved        
                                 handling.                                            
                                 MAGNASTEER(TM) Magnetic Variable Assist Steering     
                                 features variable effort power steering.             

COMPETITION                                                                     

GENERAL. We conduct our business in a highly competitive industry. The
global automotive parts industry principally involves the supply of components, 
systems and modules to VMs for the manufacture of new vehicles, to other        
suppliers for use in their product offerings and to the aftermarket for use as  
replacement parts for older vehicles.                                           

86

424B4
89th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 89th

     Although the overall number of our competitors has decreased due to ongoing
industry consolidation, the automotive parts industry remains extremely         
competitive. VMs rigorously evaluate suppliers on the basis of product quality, 
price competitiveness, reliability and timeliness of delivery, product design   
capability, technical expertise and development capability, new product         
innovation, leanness of facilities, operational flexibility, customer service   
and overall management. Some of our competitors have substantial size and scale 
and some have lower cost structures, particularly lower hourly wage structures, 
than our company.                                                               

 Our overall product portfolio is extremely broad by industry standards.
Very few other Tier 1 suppliers compete across the full range of our product    
areas. However, we do face significant competition across all three of our      
principal product sectors from each of the following major Tier 1 suppliers:    
Robert Bosch GmbH, Denso Inc. and Visteon Automotive Systems, a unit of Ford    
Motor Company.                                                                  

     We also face significant competition within each of our three major product
sectors. In addition to the competitors identified above, our most significant  
competitors within each product sector are described below.                     

ELECTRONICS & MOBILE COMMUNICATION. Our principal competitors in the  
Electronics & Mobile Communication product sector include the following: Siemens
AG, Mannesman VDO AG and Motorola, Inc.                                         

     SAFETY, THERMAL & ELECTRICAL ARCHITECTURE. Our principal competitors in the
Safety, Thermal & Electrical Architecture product sector include the following: 
Yazaki Corp., Valeo SA, Autoliv Inc. and TRW Inc.                               

DYNAMICS & PROPULSION. Our principal competitors in the Dynamics &    
Propulsion product sector include the following: LucasVarity PLC, NSK Ltd.,     
Siemens AG and TRW Inc.                                                         

MANUFACTURING                                                                   

    GLOBAL FOOTPRINT. Delphi has an extensive world manufacturing presence, as
well as the related engineering and technical support. As of September 30, 1998,
Delphi operated 169 wholly owned and leased manufacturing sites and 40 joint    
ventures in 36 countries, representing every major region of the world. We also 
maintain a network of technical centers, including engineers and technicians, in
every major region around the world to provide related engineering and technical
support. We believe that our manufacturing presence is one of the most expansive
in the global automotive parts industry.                                        

     DELPHI MANUFACTURING SYSTEM. Over the last several years, we have initiated
several important programs designed to increase manufacturing efficiencies and  
reduce our costs. Most recently, we have developed and are currently in the     
process of implementing the Delphi Manufacturing System. This lean manufacturing
system focuses on reducing total manufacturing costs and driving toward         
"one-piece flow" by utilizing cell manufacturing techniques and value stream    
mapping. Compared to the more traditional, less flexible mass production line   
design, the Delphi Manufacturing System enables us to maintain our product      
output consistent with our customers' requirements in a more efficient manner.  
The lean manufacturing cells utilized under this system have enhanced our       
ability to facilitate changes to product design requirements in response to     
changing customer needs and regulatory requirements and to respond more quickly 
to changes in our customer's volume requirements.                               

Our strategy for achieving company-wide lean manufacturing involves a 
careful assessment of all manufacturing plants against industry benchmark       
performance standards. This is followed by the creation of an action plan to    
improve each facility by implementing the Delphi Manufacturing System. Lean     
manufacturing concepts which have been applied to our manufacturing operations  
under this system include synchronous operations, a plan to produce every part  
every day, low-volume production to meet the different demands of several       
customers and one-piece flow. To date, the Delphi Manufacturing System has      
resulted in significant cost savings, including reduction in plant-floor costs  
in many of our manufacturing facilities. We expect to continue to implement the 
Delphi Manufacturing System in all of our operations on a worldwide basis. For  
more information about the Delphi Manufacturing System, see "--Strategy--Improve
Operating Performance."                                                         

SUPPLY-IN-LINE SEQUENCE. Principally as a result of lean manufacturing
initiatives designed to reduce assembly costs, VMs often require their suppliers
to provide just-in-time delivery of pre-assembled systems or modules directly to
their production lines. Just-in-time delivery provides multiple, small-batch    
deliveries on an as-needed basis compared to traditional large-batch deliveries 
which increase inventory levels and reduce the                                  

87

424B4
90th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 90th

VM's assembly efficiency. Just-in-time delivery generally requires that the     
supplier have a local presence where some sub-assembly functions are performed  
in close proximity to the VM's manufacturing facility. As a result, the         
supplier's facility becomes, in effect, an extension of the VM's manufacturing  
process.                                                                        

    Our "supply-in-line sequence" process takes just-in-time delivery one step
further by providing our products not only when the VM needs them, but also in  
the correct assembly sequence. For example, one of our supply-in-line-sequence  
customers is Mercedes-Benz. Currently, we assemble and deliver cockpit modules  
for the Mercedes sports utility vehicle that are sequentially unloaded from the 
container, with the correct color and options, for attachment directly onto the 
vehicle as it moves down the assembly line. Our supply-in-line sequence process 
enables us to better service our VM customers' needs through the coordination of
our own manufacturing processes with those of our customers.                    

PURCHASING                                                                      

We use global purchasing to obtain globally competitive prices for our
direct and indirect materials, machinery and equipment and services, as well as 
for parts we purchase from other suppliers for use in our product offerings. We 
believe that our size enables us to have sufficient scale and purchasing        
leverage to avoid incurring incremental purchasing costs following our          
separation from General Motors. In 1997, our total purchases were about $15     
billion. This amount covered our purchases of parts from other suppliers for use
in our product offerings, as well as raw materials and associated freight and   
production-related services.                                                    

We purchase from suppliers who offer us the best products in terms of 
quality, service, technology and price. We intend to continue using certain     
information technology systems used by GM's purchasing program during a         
transitional period following our separation from GM. For more information, see 
"Arrangements Between Delphi and General Motors--Purchasing." Our purchasing    
organization is organized according to commodity groups and global regions and  
focuses on global sourcing through multi-year contracts. Through leveraging our 
economics of scale and global purchasing needs, we seek to develop and maintain 
an extensive base of suppliers capable of servicing our supply needs on a       
worldwide basis.                                                                

To ensure a consistent high-quality supply of goods and services, our 
purchasing organization uses a common supplier development and quality process. 
We have instituted common purchasing systems, policies and procedures throughout
our global operations to leverage our economies of scale in the purchasing area.
The organizational structure of our purchasing system includes commodity        
directors responsible for purchasing strategy, purchasing directors who execute 
specific purchases and regional directors to insure consistent purchasing       
behavior on a global basis. We have also established purchasing creativity teams
which meet on a regular basis to evaluate and focus our available market        
information to develop strategies for the team's product.                       

  We purchase a wide variety of raw materials for use in our manufacturing
processes. The principal raw materials we purchase include platinum group       
metals, copper, aluminum, steel, lead and resins. With respect to raw materials,
we typically negotiate our purchases on the terms and conditions of our standard
purchase orders or long-term contracts. Our positive relationships with our     
suppliers generally allow us to schedule precise quantities and types of raw    
materials on short notice, thereby enabling us to maintain relatively low       
inventories.                                                                    

All of these raw materials, except the platinum group metals we use to
produce our catalytic converters, are available from numerous sources.          
Currently, all of the platinum group metals used by Delphi for catalytic        
converters produced for GM are purchased by GM directly from suppliers of these 
metals which are located principally in Russia and South Africa. In light of the
potential political instability in these areas, Delphi maintains a three to four
month inventory of platinum group metals. Delphi purchases the platinum group   
metals it uses in catalytic converters manufactured for its customers other than
GM directly from suppliers. Delphi has not experienced any significant shortages
of raw materials and normally does not carry inventories of raw materials or    
finished products in excess of those reasonably required to meet production and 
shipping schedules, except for the three to four month supply of platinum group 
metals.                                                                         

88

424B4
91st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 91st

We procure a wide variety of products and machinery for use in our    
manufacturing operations, including, among other things, airbags, machined      
parts, active and passive electrical components, stampings, fasteners, castings,
die cuts, bearings, motors, audio and communication products, displays, sensors 
and electronic assembly. We believe that we maintain strong relationships with a
sufficient number of suppliers to ensure a reliable supply of such products and 
machinery to accommodate our production schedule.                               

     We have not experienced any significant shortages of raw materials or other
products and normally do not carry inventories of raw materials or finished     
products in excess of those reasonably required to meet our production and      
shipping schedules, except for a three to four month supply of platinum group   
metals as described above.                                                      

INFORMATION TECHNOLOGY                                                          

     In the operation of our business, we utilize information technology systems
and services to support our company's infrastructure through the management and 
processing of information essential to our operations. "Information technology" 
principally consists of business information systems, such as computer          
application software, and infrastructure, such as personal computers, operating 
systems, networks and devices like switches and routers. These information      
technology systems and services manage and process information relating to a    
broad range of our company's infrastructure functions, including financial,     
engineering, environmental, human resources, manufacturing, legal, logistics,   
purchasing, warranty and service as well as many other key functions.           

   We have historically relied largely on information technology systems and
services provided through General Motors. These information technology systems  
utilize GM-developed computer software systems and information technology       
services provided by GM's former subsidiary, Electronic Data Systems Corporation
("EDS"), pursuant to a master information technology services agreement between 
GM and EDS. The systems provided through GM support our human resources,        
purchasing, finance, tax, customs, planning and material management functions.  

   We are in the process of implementing throughout our global operations on
an incremental basis new enterprise software that will replace the existing     
software systems provided through GM. This system is based on the SAP AG system.
We expect that this enterprise software will provide us with enhanced           
information technology systems capabilities, including with respect to Year 2000
issues at certain of our operations. For more information about Year 2000 issues
and our remediation efforts relating thereto, see "Management's Discussion and  
Analysis of Financial Condition and Results of Operations--Year 2000."          

We expect that the new enterprise software will enable us to run many 
internal, interdependent processes contemporaneously so that we can serve our   
customers in a more effective and cost-efficient manner by allowing different   
computer platforms at multiple locations to share information on a real-time    
basis. We believe that this will facilitate the sharing of information more     
freely among our operating units and functions and thus improve our operating   
performance. As a result of the full implementation of this new system, we      
expect to realize cost savings throughout our operations.                       

     Until our new enterprise software system is fully implemented, we intend to
continue to utilize certain common systems and services provided by GM pursuant 
to transitional arrangements entered into in connection with our separation. For
more information, see "Arrangements Between Delphi and General                  
Motors--Purchasing" and "--Interim Services." As our new software system is     
implemented throughout our operations, we will migrate services from the        
existing GM system to the new system. In the interim, we have implemented       
security measures between the GM software and our data for the purpose of       
eliminating potential access by GM to confidential information, particularly    
proprietary information regarding our non-GM customers. We expect the           
multi-phase implementation of the new system to be completed within about five  
years. We are currently in the process of completing the initial implementation 
phase, which principally involves certain of our operations in Europe and North 
America.                                                                        

We believe that these information technology systems and services are 
adequate to support our company's information infrastructure.                   

89

424B4
92nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 92nd

INTELLECTUAL PROPERTY                                                           

     We have generated a large number of patents and trademarks in the operation
of our business. Our separation arrangements with General Motors generally      
provide that we will own all patents, patent applications and records of        
invention that are primarily related to components produced or sold by us and   
any other patents that would be more valuable to us than to GM. Accordingly, GM 
has transferred to us full or partial ownership of about 2,800 patents, 640 U.S.
patent applications and 620 records of invention as well as the corresponding   
foreign patents and patent applications. In addition, we and GM have agreed to  
license certain of our existing patents to each other. For more information     
regarding the separation arrangements relating to intellectual property, see    
"Arrangements Between Delphi and General Motors--Intellectual Property." While  
we believe that these patents, inventions and licenses are, in the aggregate,   
important to the conduct of our business, none is individually considered       
material to our business.                                                       

Although we do not rely on material "patent-protected" technology, our
ability to continue to generate technological innovations is important to ensure
our long-term success as well as the competitiveness of our business. Our focus 
on innovation is evidenced by the 586 patents relating to our business which    
were recorded in 1996 and 1997. We intend to continue to actively pursue        
technological innovation.                                                       

   GM has transferred to us ownership of about 1,170 trademark registrations
and applications, including about 70 in the United States, as well as           
unregistered trademarks. Our trademarks include the following: E-STEER(TM),     
FOREWARN(TM), Freedom(TM), Gold Dot(TM), INTELLEK(TM), Monsoon(TM),             
QUADRASTEER(TM) and TRAXXAR(TM).                                                

EMPLOYEES; UNION REPRESENTATION                                                 

   GENERAL. As of September 30, 1998, excluding our joint ventures and other
investments, we employed 200,463 persons, including 33,310 salaried employees   
and 167,153 hourly employees. Of our hourly employees, about 96% are represented
by about 53 unions, including the UAW, the IUE and the USW. The UAW is our      
largest union, representing about 29% of our unionized employees. Our union     
representation by major region as of September 30, 1998 is indicated in the     
table below:                                                                    

                                                                [Download Table]

                                                     NUMBER OF    NUMBER OF
                     REGION                           UNIONS      EMPLOYEES
                     ------                          ---------    ---------
                                                                           
United States                                                              
  UAW............................................        1          46,214 
  IUE............................................        1          14,505 
  USW............................................        1           2,078 
  Other unions...................................        3             500 
                                                        --         ------- 
     Total United States.........................        6          63,297 
                                                        --         ------- 

Canada...........................................        2             968 
Mexico...........................................        6          58,391 
Europe...........................................       32          30,558 
South America....................................        5           6,578 
Asia/Pacific.....................................        2             431 
                                                        --         ------- 
     Total.......................................       53         160,223 
                                                        ==         ======= 

 The national collective bargaining agreements negotiated by GM with the
unions currently apply to our workforce and will continue to apply to our       
workforce after the Offering. GM's national agreement with the UAW expires in   
September 1999, GM's national agreement with the IUE expires in November 1999   
and GM's national agreement with the USW expires in September 2002. We will     
assume the terms of the existing collective bargaining agreements for our       
employees in connection with the Distribution.                                  

90

424B4
93rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 93rd

The percentage of our employees located outside the United States and 
Canada has increased from about 38% in 1992 to about 56% in 1997. We expect that
the percentage of our employee population located outside the United States and 
Canada will continue to increase over time as we continue to expand our         
operations globally.                                                            

LABOR RELATIONS. In the past we have been adversely affected by work  
stoppages that have led to the shutdown of our plants. We experienced work      
stoppages at certain of our facilities in 1996, 1997 and 1998. Strikes by the   
UAW at a GM metal-fabricating operation and at one of our component             
manufacturing facilities led to the shutdown of most of GM's North American     
assembly plants in June and July 1998. Our lost production due to this shutdown 
had an unfavorable after-tax impact on our net income of about $560 million in  
the nine months ended September 30, 1998. Work stoppages at GM in the United    
States in 1997 and in the United States and Canada in 1996, including at one of 
our facilities, had an unfavorable after-tax impact on our net income of $92    
million and $281 million, respectively, after considering partial recovery of   
lost production. None of these work stoppages, however, affected our deliveries 
to our non-GM customers.                                                        

  We also recognize that a key element of our long-term competitiveness is
developing a constructive working relationship with our unions. We emphasize the
sharing of relevant information with our local and international union          
leadership worldwide and working with the unions to jointly develop local work  
rules and practices. We have actively engaged our unions in major initiatives   
designed to improve the viability of our operations. Both our local and         
international unions have cooperated with our management in developing plans to 
improve certain uncompetitive operations as part of our "fix/sell/close"        
process.                                                                        

    As discussed above under "--Strategy--Improve Operating Performance--Labor
Relations," we believe that our separation from General Motors and establishment
as a fully independent company with control over our own labor relations will   
provide us certain labor relations benefits which will enable us, over time, to 
increase our competitiveness. However, we cannot assure you as to when or the   
extent to which we will achieve these benefits.                                 

 See "Risk Factors--Risk Factors Relating to Separating Our Company from
General Motors--We May Be Unable to Increase Our Competitiveness if We Fail to  
Improve our Labor Relations and Establish More Flexible Work Rules and Practices
Following Our Separation from General Motors" and "--Risk Factors Relating to   
Our Business--Our Business May Be Adversely Impacted by Work Stoppages and Other
Labor Relations Matters."                                                       

PROPERTIES                                                                      

Our world headquarters is located in Troy, Michigan and occupies about
264,000 square feet. We occupy this facility, as well as certain other          
facilities, pursuant to certain arrangements described under "Arrangements      
Between Delphi and General Motors--Real Estate and Environmental." We expect to 
purchase our headquarters upon the expiration of our agreement with GM with     
respect thereto.                                                                

We also maintain regional headquarters for our Asia/Pacific region in 
Tokyo, Japan, for our Europe/ Africa/Middle East region in Paris, France and for
our South America region in Sao Paulo, Brazil. Excluding our joint ventures and 
other investments, we currently maintain a total of 244 sites in 36 countries   
throughout the world. The following table, which gives full effect to the       
international asset transfers described under "Arrangements Between Delphi and  
General Motors--International Agreements" but excludes our joint ventures and   
other investments, shows our principal facilities as of September 30, 1998:     

                                                                [Download Table]

                                 NUMBER OF     TOTAL OWNED       TOTAL LEASED 
           REGION                  SITES      SQUARE FOOTAGE    SQUARE FOOTAGE
           ------                ---------    --------------    --------------
                                                                              
United States/Canada.........        78         44,837,322        13,448,992  
Europe/Middle East/Africa....        93          6,058,025         4,942,674  
Mexico/South America.........        47          7,919,242         3,752,457  
Asia/Pacific.................        26          1,392,501           723,502  
                                    ---         ----------        ----------  
     Total...................       244         60,207,090        22,867,625  
                                    ===         ==========        ==========  

91

424B4
94th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 94th

     In some cases, several of our manufacturing sites, technical centers and/or
customer service centers and sales activity offices are located at a single     
multiple-purpose site. We also maintain a limited number of miscellaneous       
facilities. The following table, which gives full effect to the international   
asset transfers described under "Arrangements Between Delphi and General        
Motors--International Agreements," but does not reflect our joint ventures and  
other investments, shows our capabilities as of September 30, 1998:             

                                                                [Download Table]

                                                           CUSTOMER  
                              MANUFACTURING  TECHNICAL   CENTERS AND 
           REGION                 SITES       CENTERS   SALES OFFICES
           ------             -------------  ---------  -------------
                                                                     
United States/Canada.........       48          14            11     
Europe/Middle East/Africa....       65           7            20     
Mexico/South America.........       41           4             6     
Asia/Pacific.................       15           2            14     
                                   ---          --            --     
     Total...................      169          27            51     
                                   ===          ==            ==     

  We are currently evaluating long-term plans to consolidate our worldwide
engineering and technical resources, including our technical centers, into a    
more efficient, customer-focused global engineering support network. While we   
believe that this consolidation will enhance our ability to provide engineering 
and technical support to our customers around the world, we also expect that it 
will have the effect of reducing the overall number of our technical centers.   

We believe that our facilities are suitable and adequate, and have    
sufficient productive capacity, to meet our current and currently anticipated   
needs.                                                                          

ENVIRONMENTAL MATTERS                                                           

    Delphi is subject to the requirements of federal, state, local and foreign
environmental and occupational safety and health laws and regulations. These    
include laws regulating air emissions, water discharge and waste management. We 
have an environmental management structure designed to facilitate and support   
our compliance with these requirements. We cannot assure you, however, that we  
are at all times in complete compliance with all such requirements. Although we 
have made and will continue to make capital and other expenditures to comply    
with environmental requirements, we do not expect capital or other expenditures 
for environmental compliance to be material in 1999 or 2000. Environmental      
requirements are complex, change frequently and have tended to become more      
stringent over time. Accordingly, we cannot assure you that these requirements  
will not change or become more stringent in the future in a manner that could   
have a material adverse effect on our business.                                 

  Delphi is also subject to environmental laws requiring the investigation
and cleanup of environmental contamination. We are in various stages of         
investigation and cleanup at our manufacturing sites where contamination has    
been alleged. At September 30, 1998, Delphi had recorded a reserve of about $19 
million for such environmental investigation and cleanup. We cannot assure you  
that our environmental cleanup costs and liabilities will not exceed the current
amount of our reserve.                                                          

     We have entered into certain arrangements with General Motors regarding the
allocation of environmental liabilities relating to our business as part of our 
separation from General Motors. For more information, see "Arrangements Between 
Delphi and General Motors--Real Estate and Environmental."                      

    On December 17, 1998, General Motors entered into a consent order with the
New York Department of Environmental Conservation to settle a notice of         
violation the Department issued to our Lockport, New York facility on November  
24, 1998. The notice alleged that the facility had installed thermal degreasers 
without obtaining an air emission permit or complying with certain requirements 
for volatile organic compound emissions from new emission sources. The consent  
order requires payment of a civil penalty of $110,000 to the Department. We     
intend to pay the penalty on behalf of GM and then seek reimbursement from GM   
pursuant to the separation arrangements.                                        

92

424B4
95th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 95th

LEGAL PROCEEDINGS                                                               

We are involved in routine litigation incidental to the conduct of our
business. We do not believe that any of the litigation to which we are currently
a party will have a material adverse effect on our business or financial        
condition.                                                                      

Although we do not believe any current litigation will have a material
adverse effect on our business or financial condition, we face an inherent      
business risk of exposure to product liability claims in the event that the     
failure of our products results or is alleged to result in personal injury or   
death, and we cannot assure you that we will not experience any material product
liability losses in the future. In addition, if any Delphi-designed products are
or are alleged to be defective, we may be required to participate in a recall   
involving such products. Each VM has its own policy regarding product recalls   
and other product liability actions relating to its suppliers. However, as      
suppliers become more integrally involved in the vehicle design process and     
assume more of the vehicle assembly functions, VMs are increasingly looking to  
their suppliers for contribution when faced with product liability claims.      
Because this is a new trend in our industry and we have only limited experience 
in this regard, we cannot assure you that our costs associated with providing   
product warranties will not be material.                                        

 In connection with our separation from General Motors, GM has agreed to
retain responsibility for all product liability actions relating to products we 
manufactured prior to January 1, 1999 and sold or otherwise supplied to GM      
either before or after that date. We will be responsible for all product        
liability actions relating to products we sold at any time or sell in the future
to customers other than GM. Responsibility for product liability actions        
relating to products we manufacture on or after January 1, 1999 and sell to GM  
shall be determined in accordance with the agreements for such sales.           

From time to time, in the ordinary course of business, Delphi receives
notices from customers that products may not be properly functioning. Our       
warranty responsibility for our products is generally governed by the terms and 
conditions of the applicable contract, which vary from contract to contract.    
Most of our contracts require that we make certain warranties to our customers  
regarding, among other things, conformity to specifications and freedom from    
defect. For information regarding our warranty responsibility for products      
supplied to General Motors, see "Arrangements Between Delphi and General        
Motors--Warranty Matters."                                                      

  VMs generally offer warranties to new vehicle purchasers which cover the
repair and replacement of defective parts on their vehicles for a specified     
period of time. Traditionally, VMs have borne the cost associated with such     
warranty programs, including costs related to the repair and replacement of     
parts supplied to the VM by the supplier. VMs are increasingly requiring their  
outside suppliers to guarantee or warrant their products and to bear the costs  
of repair and replacement of such products under new vehicle warranties. Because
this is a new trend in our industry and we have only limited experience in this 
regard, we cannot assure you that our costs associated with providing product   
warranties will not be material.                                                

We believe that we are adequately insured, including with respect to  
product liability coverage, at levels sufficient to cover the claims described  
above, subject to commercially reasonable deductible amounts. Delphi is an      
"insured" under all of GM's property and liability insurance programs worldwide.
We will remain insured under those programs, subject to the same limitations and
conditions of coverage applicable to all GM operations, until the earlier of the
Distribution and January 1, 2000. We expect to purchase product liability       
insurance to be effective at the time such GM coverage ceases in amounts        
determined at that time to be adequate, with reasonable deductibles or          
self-insured retentions that will allow for the most effective financing of     
predictable losses. We have also established reserves in amounts we believe are 
reasonably adequate to cover any adverse judgments. However, any adverse        
judgment in excess of our insurance coverage and such reserves could have a     
material adverse effect on our business.                                        

93

424B4
96th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 96th

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF DELPHI                       

  Set forth below is certain information concerning the executive officers
and key employees of our company, the individuals who are serving on our Board  
of Directors and the individuals who are expected to be elected to our Board of 
Directors in connection with the closing of the Offering. Our Board currently   
has five members. Three of our directors, Messrs. Losh, Pearce and Smith, are   
currently executive officers and/or directors of General Motors, and one of our 
directors, Mr. Wyman, was a director of General Motors until October 1998. In   
connection with the closing of the Offering, the persons listed below as        
director nominees will join the Board. We expect to add an additional           
independent Board member in the several months following the Offering. The three
directors who are currently executive officers and/or directors of GM have      
advised us that they will resign from our Board effective as of the completion  
of the Distribution. The ages listed below are as of January 1, 1999.           

                                                        [Enlarge/Download Table]


NAME                                  AGE                     POSITION                       
----                                  ---                     --------                       
                                                                                             
J.T. Battenberg III.................. 55   Chairman of the Board, Chief Executive Officer and
                                             President                                       
Alan S. Dawes........................ 44   Chief Financial Officer and Vice President        
Volker J. Barth...................... 51   Vice President                                    
William A. Ebbert.................... 56   Vice President                                    
Guy C. Hachey........................ 43   Vice President                                    
David R. Heilman..................... 54   Vice President                                    
Rodney O'Neal........................ 45   Vice President                                    
Ronald M. Pirtle..................... 44   Vice President                                    
Donald L. Runkle..................... 53   Vice President                                    
Paul J. Tosch........................ 58   Vice President                                    
Hans J. Weiser....................... 60   Vice President                                    
David B. Wohleen..................... 48   Vice President                                    
John P. Arle......................... 51   Vice President, Mergers, Acquisitions and Planning
James A. Bertrand.................... 41   Vice President, Operations                        
John G. Blahnik...................... 44   Vice President and Treasurer                      
Ray C. Campbell...................... 56   Vice President, Purchasing                        
Karen L. Healy....................... 44   Vice President, Corporate Affairs                 
Peter H. Janak....................... 59   Vice President and Chief Information Officer      
Mark C. Lorenz....................... 48   Vice President, Production Control and Logistics  
Logan G. Robinson.................... 49   Vice President and General Counsel                
Mark R. Weber........................ 50   Vice President, Human Resources Management        
Thomas H. Wyman...................... 69   Director (Lead Independent Director)              
John F. Smith, Jr.................... 60   Director                                          
Harry J. Pearce...................... 56   Director                                          
J. Michael Losh...................... 52   Director                                          
Oscar De Paula Bernardes Neto........ 52   Director Nominee                                  
Virgis W. Colbert.................... 59   Director Nominee                                  
Shoichiro Irimajiri.................. 58   Director Nominee                                  
Susan A. McLaughlin.................. 46   Director Nominee                                  
John D. Opie......................... 61   Director Nominee                                  
Roger S. Penske...................... 61   Director Nominee                                  

     Our Board will be divided into three classes serving staggered terms. After
an initial transition period following the Offering, directors in each class    
will be elected to serve for three-year terms and until their successors are    
elected and qualified. Each year, the directors of one class will stand for     
election as their terms                                                         

94

424B4
97th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 97th

of office expire. We expect that, after the Offering, Messrs. Battenberg,       
Colbert and Irimajiri and Ms. McLaughlin will be designated as Class I          
directors, with their terms of office expiring in 2000; Messrs. Bernardes Neto, 
Opie and Penske will be designated as Class II directors, with their terms of   
office expiring in 2001; and Messrs. Losh, Pearce, Smith and Wyman will be      
designated as Class III directors, with their terms of office expiring in 2002. 

   Our Board is permitted to appoint a non-employee director to serve as its
"lead independent director." The lead independent director serves as a liaison  
between the Board and members of management and chairs the executive sessions of
the Board. Mr. Wyman will initially serve as the lead independent director.     

    Mr. Battenberg has led Delphi and its precursor, the Automotive Components
Group Worldwide ("ACG Worldwide"), since 1992. In July 1995, he was named       
President of Delphi. He was named Chief Executive Officer of Delphi in August   
1998 and Chairman of the Board of Delphi in November 1998. Mr. Battenberg also  
serves as the Chairman of the Delphi Strategy Board. Mr. Battenberg held various
positions with General Motors beginning in 1961, including Superintendent of    
Industrial Engineering, Comptroller, Production Manager and Plant Manager. In   
1986, he was appointed Product Manager for the former Buick-Oldsmobile-Cadillac 
Group's Flint Automotive Division. He later served as Vice President of the     
division, and then Vice President and Group Executive for the                   
Buick-Oldsmobile-Cadillac Group. Mr. Battenberg was named Vice President and    
Group Executive of ACG Worldwide in 1992. Two years later, he was elected a     
Senior Vice President and President of ACG Worldwide. In July 1995, he was      
elected Executive Vice President of GM and President of Delphi Automotive       
Systems, formerly ACG Worldwide. Mr. Battenberg is on the Board of Trustees of  
Kettering University, formerly known as General Motors Institute ("GMI"), and   
the National Advisory Board for Chase Manhattan Corp. He is also a member of the
Council on Competitiveness.                                                     

    Mr. Dawes was named Chief Financial Officer of Delphi in August 1998 and a
Delphi Automotive Systems Vice President in November 1998. Previously, Mr. Dawes
served as General Manager of Delphi Chassis Systems, formerly Delco Chassis     
Systems, a position to which he was named in 1994. From 1992 to 1994, he was    
appointed Executive-in-Charge of Operations for ACG Worldwide. Mr. Dawes joined 
General Motors in 1981, originally as a financial analyst with its Treasurer's  
Office, and held a number of positions including Assistant Treasurer in 1988 and
Assistant Comptroller in 1991.                                                  

    Mr. Barth was named a Delphi Automotive Systems Vice President in November
1998 and President of Delphi South America in November 1996. He had been        
Executive Director of Worldwide Purchasing for Delphi since 1994. From 1993 to  
1994, he was Executive Director of Worldwide Purchasing-Metallic. From 1992 to  
1993, he was Director of Materials Management for GM do Brasil in Sao Paulo, and
from 1991 to 1992, he was Director of Purchasing for the same. Prior thereto, he
held several purchasing assignments for GM's Adam Opel subsidiary since joining 
GM in 1963.                                                                     

     Mr. Ebbert was named a Delphi Automotive Systems Vice President in November
1998 and President of Delphi Asia Pacific in July 1993. He had been Chairman and
Managing Director of Vauxhall Motors Limited, UK, since 1988. Previously, Mr.   
Ebbert had been Group Director of Business Operations for Delphi Automotive     
Systems. Prior thereto, he held a number of senior assignments with Delphi      
Saginaw Steering Systems' central office. He joined GM in 1965.                 

Mr. Hachey was named a Delphi Automotive Systems Vice President and   
President of Delphi Chassis Systems in November 1998. He had been General       
Manager of Delphi Chassis Systems since August 1998. Previously, Mr. Hachey had 
been Manufacturing Manager, Worldwide Operations, for the former Delphi Interior
& Lighting Systems since 1995. From 1994 to 1995, he was Director of            
Manufacturing Operations for Delphi Automotive Systems and, from 1992 to 1994,  
he was Director of Manufacturing Operations for the heating, ventilation and air
conditioning/heat exchangers business unit of what is now Delphi Harrison       
Thermal Systems. Prior thereto, Mr. Hachey held several manufacturing positions 
with GM since 1978.                                                             

Mr. Heilman was named a Delphi Automotive Systems Vice President and  
President of Delphi Packard Electric Systems in November 1998. He had been      
General Manager of Delphi Packard Electric Systems since                        

95

424B4
98th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 98th

October 1994. From 1993 to 1994, Mr. Heilman served as Director of Delphi       
Packard Electric Systems' North American Business Unit and from 1991 to 1993, he
was Director of Packard International. Prior thereto, Mr. Heilman served in     
numerous engineering, manufacturing and product-related positions since joining 
Delphi Packard Electric Systems in 1964.                                        

Mr. O'Neal was named a Delphi Automotive Systems Vice President and   
President of Delphi Interior Systems in November 1998. He had been General      
Manager of the former Delphi Interior & Lighting Systems since May 1997.        
Previously, Mr. O'Neal had been General Director of Warehousing and Distribution
for GM-SPO since 1994. From late 1992 to 1994, Mr. O'Neal served as Director of 
Manufacturing for ACG Worldwide. From 1991 to late 1992, Mr. O'Neal was first   
Director of Industrial Engineering for Chevrolet-Pontiac-GM of Canada ("C-P-C") 
and later was named Director of Manufacturing Engineering with GM. Prior        
thereto, Mr. O'Neal held numerous engineering and manufacturing positions with  
GM since 1971.                                                                  

Mr. Pirtle was named a Delphi Automotive Systems Vice President and   
President of Delphi Harrison Thermal Systems in November 1998. He had been      
General Manager of Delphi Harrison Thermal Systems since November 1996.         
Previously, Mr. Pirtle had been Director of North American Operations at Delphi 
Packard Electric Systems since 1994. From 1992 to 1994, Mr. Pirtle was Finance  
Director for AC Delco Systems and, from 1990 to 1992, he was Executive-in-Charge
of GM's Corporate Strategic Planning Group. Prior thereto, Mr. Pirtle held      
various engineering and financial and planning positions with GM since 1972. Mr.
Pirtle is a Board member of the Alumni Association of Kettering University,     
formerly GMI, and a Board member of the University of Pittsburgh School of      
Engineering.                                                                    

Mr. Runkle was named a Delphi Automotive Systems Vice President and   
President of Delphi Energy and Engine Management Systems in November 1998. He   
had been General Manager of Delphi Energy & Engine Management Systems since May 
1996. Previously, Mr. Runkle had been General Manager of Delphi Saginaw Steering
Systems since August 1993. From 1992 to 1993, Mr. Runkle was in charge of GM's  
North American Advanced Engineering Center and, from 1988 to 1992, he was in    
charge of GM's former Advanced Engineering Staff. Prior thereto, Mr. Runkle     
served in a series of engineering positions with GM since 1968.                 

Mr. Tosch was named a Delphi Automotive Systems Vice President and    
President of Delphi Saginaw Steering Systems in November 1998. He had been      
General Manager of Delphi Saginaw Steering Systems since May 1997. Previously,  
Mr. Tosch had been General Manager of the former Delphi Interior & Lighting     
Systems since October 1994. From 1991 to 1994, Mr. Tosch was General Manager of 
Delphi Harrison Thermal Systems. From 1987 to 1991, he was Managing Director of 
Vauxhall Motors Limited. Prior thereto, Mr. Tosch held various engineering and  
managerial positions with GM since 1963.                                        

     Mr. Weiser was named a Delphi Automotive Systems Vice President in November
1998 and has been President of Delphi Automotive Systems Europe, formerly ACG   
Europe, since 1993. He became Managing Director of Packard Electric Europa in   
Wuppertal, Germany, in 1990 and was appointed Chairman of the Supervisory Board 
of all Corporate Subsidiaries of Packard Electric Europa, a position he held    
until his current assignment. Mr. Weiser was appointed Chairman of the Executive
Board of Kabelwerke Reinshagen GmbH in 1986. Mr. Weiser had been with Kabelwerke
Reinshagen GmbH since 1974, which was acquired by Delphi Packard Electric in    
1981.                                                                           

Mr. Wohleen was named a Delphi Automotive Systems Vice President and  
President of Delphi Delco Electronics in November 1998. He had been General     
Manager of Delphi Delco Electronics since August 1998. Prior to his current     
position, he had been a General Director of Engineering with Delco Electronics, 
which is now Delphi Delco Electronics, since February 1997. In 1994, Mr. Wohleen
was named Director of Electrical, Interior and HVAC for GM's Midsize Car        
Division in Warren, Michigan, and in 1995, he assumed additional responsibility 
for general assembly, tools and process and powertrain coordination for GM's    
MidLux Car Division in Warren. Prior thereto, Mr. Wohleen held a series of      
engineering and manufacturing positions with GM since 1978.                     

     Mr. Arle was named Vice President of Mergers, Acquisitions and Planning for
Delphi Automotive Systems in November 1998. He had been Executive Director of   
Planning for Delphi since February 1998.                                        

96

424B4
99th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 99th

Previously, he was Vice President and Chief Financial Officer for Saab          
Automobile AB since 1993. From 1992 to 1993, he was Vice President and Finance  
Manager for GM of Canada, Ltd. From 1988 to 1992, he was General Manager and    
Comptroller for the GM/Toyota NUMMI joint venture. Prior thereto, he held       
several finance and human resources positions at GM since 1975.                 

   Mr. Bertrand was named Vice President of Operations for Delphi Automotive
Systems in November 1998. He had been Executive Director of Operations for      
Delphi since June 1997. Previously, he was Executive Director of Development for
small cars at GM's International Operations since 1995. From 1992 until 1995, he
was Comptroller at Adam Opel AG in Russelsheim, Germany. From 1989 to 1992, he  
was Director of Financial Analysis and Planning for GM Europe. Prior thereto, he
held finance, business and engineering positions for GM since 1979.             

     Mr. Blahnik was named Treasurer of Delphi Automotive Systems in August 1998
and a Delphi Vice President in November 1998. He had been Executive Director of 
Finance for Delphi since June 1996. Previously, he was Senior Vice President and
Chief Financial Officer at Delco Electronics since 1995. From 1994 to 1995, he  
was Director of Finance for GM's Lansing Automotive Division. From 1991 to 1994,
he was Executive Director for GM's Latin American Operations and President of   
Banco General Motors, and from 1988 until 1991, he was a Comptroller of GM do   
Brasil. Prior thereto, he held several finance positions at GM since 1978.      

   Mr. Campbell was named Vice President of Purchasing for Delphi Automotive
Systems in November 1998. He had been Executive Director of Worldwide Purchasing
for Delphi since November 1996. Previously, he was Executive Director of        
Worldwide Purchasing, Quality/Supplier Development, at GM's North American      
Operations since 1995. From 1994 to 1995, he was Executive Director of Worldwide
Purchasing, Strategic and Metallic Activities. Prior thereto, he held a variety 
of managerial and purchasing positions at GM since 1964.                        

Ms. Healy was named Vice President of Corporate Affairs for Delphi    
Automotive Systems in November 1998. She had been Executive Director of         
Communications for Delphi since June 1997. Previously, she was Manufacturing    
Manager for Delphi's Flint East Operations, Plants 6 and 7, since July 1996.    
From June 1995 to July 1996, she was Director of Corporate Communications at    
GM's central office. From January 1995 to June 1995, she was Director of        
Communications for Delphi. Prior thereto, Ms. Healy held several personnel,     
labor relations and communications positions at GM since 1976. She serves on the
Board of Trustees for the Music Hall Center for the Performing Arts in Detroit  
and the Executive Board for the Troy Chamber of Commerce.                       

     Mr. Janak was named Chief Information Officer for Delphi Automotive Systems
in April 1998 and a Delphi Vice President in November 1998. He had been a Vice  
President and Chief Information Officer at TRW Inc., since February 1995.       
Previously, he was Vice President and General Manager of TRW's Information      
Services Division. Prior thereto, he worked in propulsion engineering for NASA's
Apollo program and worked for Chrysler Corporation, Teledyne Brown Engineering, 
Planning Research Corporation and the German firm, Technologieforshung.         

     Mr. Lorenz was named Vice President of Production Control and Logistics for
Delphi Automotive Systems in November 1998. He had been Director of Production  
Control and Logistics for Delphi since March 1996. Previously, he had been      
Director of Materials Management for GM's North American Operations Prototype   
Shops since June 1993. From 1991 to 1993, he was Director of Materials          
Management, Experimental Manufacturing. From 1990 to 1991, he was Manager of    
Synchronous Organization, and from 1989 to 1990, he was Advisor, C-P-C          
production systems. Prior thereto, he held various manufacturing and materials  
management positions at GM since 1973.                                          

     Mr. Robinson was named General Counsel and a Delphi Automotive Systems Vice
President in December 1998. Previously, he was Of Counsel to the Corporate,     
Securities and Business Law group at Dickinson Wright PLLC, a Michigan law firm 
headquartered in Detroit, since April 1998. From February 1996 to April 1998, he
was Senior Vice President, Secretary and General Counsel for ITT Automotive,    
Inc.                                                                            

97

424B4
100th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 100th

From April 1987 to February 1996, he was a lawyer for Chrysler Corporation      
serving, among other positions, as Vice President and General Counsel for       
Chrysler International Corporation, a subsidiary of Chrysler Corporation, and   
Geschaftsfuhrer, or Managing Director, of Chrysler Austria GmbH. Prior thereto, 
he held positions at TRW, Inc. in Cleveland, Ohio, and at Coudert Brothers and  
Wender, Murase & White in New York City.                                        

     Mr. Weber was named Vice President of Human Resources Management for Delphi
Automotive Systems in November 1998. He had been Executive Director of Human    
Resources Management for Delphi since January 1995. Previously, he was General  
Director of Personnel and Public Affairs at the former Inland Fisher Guide since
1993. From 1991 to 1993, he was General Director of Personnel for the same. From
1988 to 1991, he was Director of Industrial Relations at C-P-C, and from 1986 to
1988, he served as Director of Human Resources for Salaried Personnel at C-P-C. 
From 1985 to 1986, he was Director of General Offices Personnel at C-P-C. Prior 
thereto, he held a number of human resource and personnel positions at GM since 
1966.                                                                           

     Mr. Wyman was named Lead Independent Director for Delphi Automotive Systems
in October 1998. Mr. Wyman had served on the Board of Directors of General      
Motors from 1985 until October 1998. Mr. Wyman was formerly Chairman, President 
and Chief Executive Officer of CBS, Inc., New York. Mr. Wyman was Senior Advisor
of SBC Warburg Inc. from 1996 to 1997 and Chairman of S.G. Warburg & Co. Inc.   
from 1992 to 1996. Mr. Wyman is also a Director of AT&T Corporation and of AGCO 
Corporation. Mr. Wyman is a member of the Advisory Board of Nestle USA, Inc.,   
the International Advisory Group of Toshiba Corporation (Tokyo) and The Business
Council. Mr. Wyman is Trustee Emeritus of The Ford Foundation and The Aspen     
Institute and Chairman Emeritus of Amherst College.                             

    Mr. Smith has been associated with General Motors since 1961 and was named
a Director of Delphi Automotive Systems in October 1998. On January 1, 1996, Mr.
Smith became Chairman of the Board of Directors of GM and in October 1998, Mr.  
Smith's title was changed from Chief Executive Officer and President to Chief   
Executive Officer of GM. Effective November 1992, Mr. Smith was elected as GM's 
Chief Executive Officer and President. Effective August 1990, Mr. Smith was     
elected Vice Chairman of the Board of Directors of GM and, on April 6, 1992, he 
was elected President and Chief Operating Officer of GM. Mr. Smith was elected  
Executive Vice President in charge of International Operations for GM in 1988.  
He is also a Director of Hughes Electronics and The Procter & Gamble Company.   
Mr. Smith is Co-Chairman of The Business Roundtable and a member of The Business
Council, the U.S.-Japan Business Council, Catalyst and The Chancellor's         
Executive Committee of the University of Massachusetts. Mr. Smith is a member of
the Board of Trustees, Boston University; the Board of Overseers of Memorial    
Sloan-Kettering Cancer Center; the Board of Governors of The Nature Conservancy;
and the Board of Polish-American Enterprise Fund.                               

     Mr. Pearce has been associated with General Motors since 1985 and was named
a Director of Delphi Automotive Systems in October 1998. Effective January 1,   
1996, Mr. Pearce was elected a Director and became Vice Chairman of the Board of
Directors of GM. In July 1994, Mr. Pearce assumed responsibility for GM's       
Strategic Decision Center, Corporate Communications, Allison Transmission       
Division, Electro-Motive Division, Urban and Community Affairs, Executive       
Compensation and Corporate Governance and the Corporate Services Staff.         
Effective November 1992, he was elected Executive Vice President of GM. In May  
1987, Mr. Pearce was elected Vice President and General Counsel of General      
Motors, a position he retained through August 1, 1994. Mr. Pearce is also a     
Director of Hughes Electronics, Marriott International, Inc. and MDU Resources  
Group, Inc. Mr. Pearce is a member of The Conference Board, Northwestern        
University School of Law Dean's Advisory Council and the Board of Visitors of   
the United States Air Force Academy. Mr. Pearce is also a Trustee of Howard     
University.                                                                     

     Mr. Losh has been associated with General Motors since 1964 and was named a
Director of Delphi Automotive Systems in October 1998. In July 1994, Mr. Losh   
was elected Executive Vice President and Chief Financial Officer of GM.         
Effective May 1992, Mr. Losh was elected Group Executive in charge of North     
American Vehicle Sales, Service and Marketing of GM. He was named General       
Manager of GM's                                                                 

98

424B4
101st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 101st

Oldsmobile Division in June 1989. In July 1984, Mr. Losh was elected Vice       
President of General Motors and General Manager of its Pontiac Division.        

 Mr. Bernardes Neto was elected Chief Executive Officer in 1996 of Bunge
International, a Bermuda holding company headquartered in Sao Paulo, Brazil,    
which controls a number of food, agribusiness and fertilizer companies around   
the world. Before joining Bunge, he was a Senior Partner with Booz-Allen &      
Hamilton where he specialized in strategy and organization consulting to        
industry in Latin America. His 15 years of consulting experience include several
projects related to the automotive industry in South America. Mr. Bernardes is a
Director for RBS and Alcoa in Brazil. He is also a member of the Advisory Board 
for Booz-Allen & Hamilton.                                                      

 Mr. Colbert was appointed an Executive Vice President of Miller Brewing
Company in July 1997. He is responsible for all plant operations, brewing,      
research, quality assurance, engineering, purchasing, corporate operations      
planning and improvement and information systems. He had been a Senior Vice     
President, Worldwide Operations since 1995. In 1993, he was elected to the      
Miller Board of Directors and Executive Committee. Also in 1993, he was named   
Senior Vice President in charge of operations, a position he held until 1995.   
From 1990 to 1993, he was Vice President of plant operations, and from 1989 to  
1990 he was Vice President of materials manufacturing. Prior thereto he held    
several manufacturing and production positions at Miller since joining the      
company in 1979. Mr. Colbert is a Director for Aeroquip-Vickers, Inc., Milwaukee
County Council, Boy Scouts of America, Columbia Health Systems and Greater      
Milwaukee Open. He is Chairman of the Board of the Thurgood Marshall Scholarship
Fund and he is a member of the Board of Trustees of Fisk University, Nashville, 
Tennessee. Mr. Colbert also serves on the Board of Regents of the Milwaukee     
School of Engineering, is a member of the Executive Advisory Committee for the  
National Urban League's Black Executive Exchange Program, and serves on the     
Opportunities Industrialization Centers of America's National Industrial        
Council.                                                                        

 Mr. Irimajiri was elected President and Representative Director of Sega
Enterprises, Ltd. in February 1998. He had been responsible for the CS Business 
Group, Quality Assurance Division and Intellectual Property Rights Department   
since August 1997. Previously, he was Co-Chairman of Sega America, Inc., since  
July 1996. From April 1996 to July 1996, he was responsible for CS Research &   
Development Group, Overseas Consumer Business Group, Quality Assurance Division,
Multimedia Office and Intellectual Property Department. Prior thereto, he held  
various positions at Sega since 1993. Before joining Sega, Mr. Irimajiri had    
been an Executive Vice President at Honda Motor Co. Ltd. since June 1990. He was
responsible for directing Honda's development and production activities. He had 
been associated with Honda since 1963.                                          

Ms. McLaughlin is President, Consumer Services for BellSouth          
Telecommunications, Inc., a position she has held since March 1998. From 1987 to
1998, Ms. McLaughlin held numerous financial and marketing management positions 
at Eastman Kodak in Rochester, N.Y. Her most recent position was Vice President 
and Chief Operating Officer of Kodak Professional, where she managed that       
division's worldwide operations, including sales and marketing. Before joining  
Kodak, Ms. McLaughlin spent 13 years in corporate banking with Citibank and     
Chase. Ms. McLaughlin serves on the Board of Directors of Dayton Hudson         
Corporation.                                                                    

  Mr. Opie was elected Vice Chairman of the Board and an Executive Officer
for General Electric Company in 1995. He had been President and Chief Executive 
Officer of GE Lighting and a GE Senior Vice President since 1986. Previously, he
had been Vice President of GE's distribution equipment business since 1983. From
1982 to 1983 he was President of the Specialty Plastics Division. From 1980 to  
1982 he was Vice President of the Lexan Products Division of GE Plastics, and   
from 1977 to 1980 he was General Manager of the division. In 1975, Mr. Opie     
became General Manager of the battery business, a position he held until moving 
to GE Plastics. He has been associated with General Electric since 1961.        

 Mr. Penske is the founder and Chairman of Penske Corporation, which was
established in 1969 and is comprised of three business groups: Transportation   
Services, Automotive and Performance. In the Transportation Services Group, Mr. 
Penske serves as the Chairman and Chief Executive Officer of Detroit Diesel     
Corporation. He is Chairman of the Board of Penske Truck Leasing Corporation and
Penske                                                                          
99

424B4
102nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 102nd

Motorsports, Inc. and a Director of General Electric Company and Gulfstream     
Aerospace Corporation. He is Chairman of the Detroit Investment Fund, which was 
created by Detroit Renaissance, of which he is also a Director. Mr. Penske is   
also a member of the Robert Bosch International AG Advisory Board and a Trustee 
of the Henry Ford Museum & Greenfield Village and a member of the Business      
Council.                                                                        

COMMITTEES OF THE BOARD OF DIRECTORS                                            

We will have four standing committees: an executive committee (the    
"Executive Committee"), an audit committee (the "Audit Committee"), an executive
development and compensation committee (the "Compensation Committee") and a     
public policy and corporate governance committee (the "Corporate Committee").   
Messrs. Battenberg, Losh, Pearce, Smith and Wyman have been appointed as the    
initial members of the Executive Committee. Mr. Wyman has been appointed as the 
initial member of the Audit Committee. Messrs. Pearce, Smith and Wyman have been
appointed as the initial members of the Compensation Committee. As additional   
persons join our Board in connection with and following the Offering, we expect 
that membership on some of these committees will be modified and that we will   
complete the appointment of other members to some of these committees. We expect
that, so long as GM owns a majority of our outstanding common stock, the        
majority of the members of the Executive Committee and the Compensation         
Committee will be directors who are also directors and/or officers of GM.       

    The Executive Committee is authorized to exercise, between meetings of our
Board, all of the powers and authority of the Board in the direction and        
management of Delphi, except as prohibited by applicable law or our Restated    
Certificate of Incorporation and except to the extent another committee shall   
have been accorded authority over the matter. The Audit Committee will select   
the independent public accountants to audit our annual financial statements and 
will establish the scope and oversee the annual audit. The Corporate Committee  
is responsible for matters relating to service on our Board, including the size 
of our Board and the recommendation of nominees for our Board, and for matters  
related to corporate governance and the company's business activities as they   
relate to matters of public policy. The Compensation Committee will determine   
the compensation for employee directors and, after receiving and considering the
recommendation of our Chief Executive Officer and the President, all officers of
the company and any other employee that the Compensation Committee may designate
from time to time and will approve and administer employee benefit plans. Our   
Board may establish other committees from time to time to facilitate the        
management of the business and affairs of our company.                          

COMPENSATION OF DIRECTORS                                                       

Directors who are also employees of GM or Delphi will receive no      
remuneration for serving as directors or committee members. Non-employee        
directors will receive compensation consisting of a cash retainer and common    
stock units. Non-employee directors other than the lead independent director    
will receive total compensation of $110,000 per year, equally divided between   
the two components, and the lead independent director will receive total        
compensation of $300,000 per year, $100,000 of which will be cash and $200,000  
of which will be common stock units. Non-employee directors other than the lead 
independent director will receive an additional fee of $5,000 per year for      
serving as chairperson of a board committee.                                    

    The stock portion of each non-employee director's annual compensation will
automatically be deferred in units until such person no longer serves on our    
Board. Under Delphi's Deferred Compensation Plan for Non-Employee Directors,    
non-employee directors, at their option, may convert the cash portion of their  
compensation into common stock units. Dividend equivalents on any common stock  
units will accrue quarterly and be converted into additional common stock units.
Directors will receive the cash value of all of their accumulated common stock  
units following their departure from the Board.                                 

 100

424B4
103rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 103rd

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS                             

    All of our stock is currently owned by General Motors and thus none of our
officers, directors or director nominees own any of our common stock. To the    
extent directors and officers of Delphi own shares of GM $1 2/3 common stock at 
the time of the Distribution, they will participate in the Distribution on the  
same terms as other holders of GM $1 2/3 common stock. In connection with the   
Offering, certain executives, including the executive officers named in the     
Summary Compensation Table in the "--Executive Compensation" section below, will
be awarded options to purchase shares of Delphi common stock and will be awarded
restricted stock units. See "--Incentive Plans--Founders Grants." In addition,  
certain awards of GM $1 2/3 common stock, including the stock options and awards
reflected in the tables set forth in the "--Grants of Stock Options,"           
"--Exercises of Stock Options" and "--Long Term Incentive Plan Awards" sections 
below, will be replaced with comparable awards under Delphi's incentive plans in
connection with the completion of the Distribution. See "--Incentive            
Plans--Substitute Awards."                                                      

 The following table sets forth the number of shares of GM $1 2/3 common
stock beneficially owned on December 31, 1998 by each director, each director   
nominee, each of the executive officers named in the Summary Compensation Table 
in the "--Executive Compensation" section below, and all directors, director    
nominees and executive officers of Delphi as a group. Except as otherwise noted,
the individual director or executive officer or their family members had sole   
voting and investment power with respect to such securities.                    

                                                        [Enlarge/Download Table]

                                               SHARES                                        
                                            BENEFICIALLY     DEFERRED      TOTAL     STOCK   
                   NAME                       OWNED(1)    STOCK UNITS(2)  SHARES   OPTIONS(3)
                   ----                     ------------  --------------  ------   ----------
                                                                                             
J.T. Battenberg III........................    22,067         14,271       36,338    159,115 
Alan S. Dawes..............................     7,926          2,812       10,738     69,876 
David R. Heilman...........................    12,193          1,547       13,740     11,739 
Donald L. Runkle...........................     9,250          3,247       12,497     52,792 
Paul J. Tosch(4)...........................     7,331          3,547       10,878     30,015 
Thomas H. Wyman............................     1,000          6,796(5)     7,796      2,084 
John F. Smith, Jr. ........................   117,152         52,507      169,659    934,689 
Harry J. Pearce............................    29,960         23,772       53,732    321,837 
J. Michael Losh............................    25,518         13,387       38,905    312,508 
Oscar De Paula Bernardes Neto..............         0              0            0          0 
Virgis W. Colbert..........................         0              0            0          0 
Shoichiro Irimajiri........................         0              0            0          0 
Susan A. McLaughlin........................         0              0            0          0 
John D. Opie...............................         0              0            0          0 
Roger S. Penske............................         0              0            0          0 
All directors, director nominees and                                                         
  executive officers of Delphi as a group                                                    
  (31 persons).............................   286,881        127,257      414,138  2,161,183 

------------------                                                              
(1) No individual director, director nominee or executive officer beneficially  
owns 1% or more of the GM $1 2/3 common stock, nor do the directors,    
director nominees and executive officers as a group.                    

(2) Deferred Stock Units for all persons other than Mr. Wyman include shares    
    under the General Motors Benefit Equalization Plan-Savings (the "GM BEP-S").
    This plan is a non-qualified "excess benefit" plan that is exempt from ERISA
 and the Code limitations and provides GM executives with full GM matching
    contributions without regard to limitations imposed by the Code. The amounts
 credited under the plan are maintained in share units of GM $1 2/3 common
stock. Following termination of employment an employee may, at any time,
    elect to receive a complete distribution of amounts in the GM BEP-S account,
   which will be paid in cash. Delphi has adopted its BEP-S in connection with
  its separation from GM and the amounts in the GM BEP-S will be transferred
to Delphi's BEP-S. Deferred Stock Units also includes undelivered GM    
  incentive awards which will vest upon the occurrence of certain events and
which are subject to forfeiture under certain circumstances.            

(3) Includes the number of shares of GM $1 2/3 common stock that may be acquired
    through the exercise of stock options exercisable within 60 days of December
   31, 1998. The shares reported in this column reflect the adjustments to the
  original option grants to reflect the effect of the recapitalization of GM
 in connection with transactions completed by General Motors in connection
with the 1997 spin-off of the defense electronics business of its Hughes
  Electronics subsidiary and the related transfer of Delco Electronics to us
from Hughes Electronics.                                                

(4) Data for Mr. Tosch include 2,009 shares owned by, and 3,285 shares          
acquirable pursuant to options held by, his spouse.                     

(5) Includes amounts under the General Motors Deferred Compensation Plan for    
Non-Employee Directors and the General Motors Director's Long-Term Stock
Incentive Plan. These amounts relate to compensation deferred while Mr. 
Wyman was a member of the Board of Directors of GM.                     

 101

424B4
104th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 104th

EXECUTIVE COMPENSATION                                                          

 The following table sets forth certain compensation information for the
chief executive officer and the four other executive officers of Delphi who,    
based on salary and bonus compensation from General Motors and its subsidiaries,
were the most highly compensated officers of Delphi for the year ended December 
31, 1998. All information set forth in this table reflects compensation earned  
by such individuals for services with General Motors and its subsidiaries.      

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                              LONG-TERM COMPENSATION                
                                                                            --------------------------              
                                                                              AWARDS        PAYOUTS                 
                                           ANNUAL COMPENSATION              ----------   -------------              
                               -------------------------------------------  SECURITIES                              
                                                              OTHER ANNUAL  UNDERLYING     LONG-TERM     ALL OTHER  
     NAME AND PRINCIPAL                SALARY       BONUS     COMPENSATION   OPTIONS       INCENTIVE    COMPENSATION
          POSITION             YEAR      ($)       ($)(1)         ($)         (#)(2)     PAYOUTS($)(3)     ($)(4)   
     ------------------        ----    ------      ------     ------------  ----------   -------------  ------------
                                                                                                                    
J.T. Battenberg III..........  1998   1,000,000     450,000      50,624      100,000        750,000        49,215   
    Chairman, Chief Executive  1997     887,000   1,020,000      53,448      108,495        475,000        38,112   
      Officer and President                                                                                         
Donald L. Runkle.............  1998     458,000     235,000         n/a       16,000        198,000        19,250   
    Vice President             1997     391,000     325,000         n/a       17,359        111,000        14,085   
David R. Heilman.............  1998     369,000     211,000         n/a       16,000        198,000        15,488   
    Vice President             1997     350,000     295,000         n/a       17,359        111,000        12,600   
Paul J. Tosch................  1998     395,000     202,000         n/a       14,000        198,000        16,590   
    Vice President             1997     372,000     262,000         n/a       15,189        111,000        13,380   
Alan S. Dawes................  1998     398,000     210,000         n/a       14,000        198,000        16,730   
    Chief Financial Officer    1997     360,000     262,000         n/a       15,189        111,000        12,960   
      and Vice President                                                                                            

------------------                                                              
(1) These awards are based on performance for 1997 and 1998. General Motors     
 management recommended and the Executive Compensation Committee concurred
   that 1998 annual awards for GM Named Executive Officers, which included Mr.
    Battenberg, would be reduced to reflect the year-to-year decline in reported
earnings.                                                               

(2) 1997 options are adjusted to reflect the effect of the recapitalization of  
    GM in connection with transactions completed by General Motors in connection
with the 1997 spin-off of the defense electronics business of its Hughes
  Electronics subsidiary and the related transfer of Delco Electronics to us
from Hughes Electronics.                                                

(3) Reflects long-term incentive payouts in the form of GM $1 2/3 common stock  
and GM Class H common stock under the General Motors 1992 Performance   
 Achievement Plan. The performance period for such awards was 1995 through
   1997 and 1996 through 1998. The awards to Mr. Battenberg vest in four equal
installments. The first installment vests on the date the final award is
    determined, the second installment vests at the end of the year in which the
  final award was determined, the third installment vests one year after the
second installment vests. The fourth installment of the 1996-1998 grant 
    vests one year after the third installment and the fourth installment of the
1995-1997 grant vests subsequent to retirement. The awards to the other 
named executive officers vest in one or two equal annual installments,  
    depending on the value of the award payout. Dividend equivalents are paid on
  unvested shares. The following table sets forth the number of GM shares of
such award that were vested and paid to the executive officers and the  
number of shares that remained unvested and unpaid:                     

                                                        [Enlarge/Download Table]

                                                         FIRST AND SECOND INSTALLMENT OF                  
                                                             1995-97 GRANT AND THIRD                      
                                                           INSTALLMENT OF 1994-96 GRANT                   
                                1996-98 GRANT           ----------------------------------                
                        ------------------------------      SHARES           VALUE OF           SHARES    
                           SHARES                           VESTED         SHARES VESTED       UNVESTED   
                           VESTED                           AS OF              AS OF            AS OF     
                           JANUARY          SHARES       DECEMBER 31,      DECEMBER 31,      DECEMBER 31, 
                           1999(#)       UNVESTED(#)       1998(#)           1998($)*          1998(#)    
                        -------------   --------------  --------------   -----------------  --------------
                        $1 2/3   CL.H   $1 2/3   CL.H   $1 2/3   CL.H    $1 2/3     CL.H    $1 2/3   CL.H 
                        ------   ----   ------   ----   ------   ----    ------     ----    ------   ---- 
                                                                                                          
J.T. Battenberg III.... 2,037    946    6,111    2,836  6,487    2,718   464,210   107,877  6,487    2,717
D.L. Runkle............   915      0    1,774        0  3,293        0   235,647         0      0        0
D.R. Heilman...........   915      0    1,774        0  1,858        0   132,958         0      0        0
P.J. Tosch.............   915      0    1,774        0  3,178        0   227,418         0      0        0
A.S. Dawes.............   915      0    1,774        0  3,178        0   227,418         0      0        0

-------------------------                                         
       * Based on the $71.56 closing price of GM $1 2/3 common stock and the
    $39.69 closing price of GM Class H common stock on the NYSE on
December 31, 1998.                                        

 102

424B4
105th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 105th

(4) Reflects contributions by General Motors on behalf of each executive officer
under various savings plans. The amount for Mr. Battenberg also includes
imputed income of $7,215 for 1998 and $6,162 for 1997 for endorsement   
    split-dollar life insurance. In the event of Mr. Battenberg's death, General
Motors would be reimbursed for its premiums paid on such life insurance 
policy.                                                                 

As a separate company, Delphi will establish executive compensation   
practices that will link compensation with the performance of Delphi as well as 
Delphi's common stock. On average, a greater portion of the executive's         
long-term incentive pay will be linked to the performance of Delphi's common    
stock through the grant of stock options. Delphi will continually review its    
executive compensation programs to ensure they are competitive with those       
generally prevailing in its industry.                                           

GRANTS OF STOCK OPTIONS                                                         

 The following table shows all grants of options to acquire shares of GM
$1 2/3 common stock granted to the executive officers named in the Summary      
Compensation Table in the "--Executive Compensation" section above under the    
General Motors 1997 Stock Incentive Plan in the year ended December 31, 1998.   
Unless exercised prior thereto, the options to purchase GM $1 2/3 common stock  
reflected below will be replaced with options to purchase Delphi common stock in
connection with the completion of the Distribution. See "--Incentive            
Plans--Substitute Awards."                                                      

                                                        [Enlarge/Download Table]

                                NUMBER OF     % OF TOTAL                                            
                               SECURITIES      OPTIONS                                              
                               UNDERLYING     GRANTED TO   EXERCISE OR                   GRANT DATE 
                                 OPTIONS     EMPLOYEES IN  BASE PRICE                      PRESENT  
            NAME              GRANTED(#)(1)  FISCAL YEAR     ($/SH.)    EXPIRATION DATE  VALUE($)(2)
            ----              -------------  ------------  -----------  ---------------  -----------
                                                                                                    
J.T. Battenberg III..........    100,000         0.71         56.00         1/13/08       1,232,000 
Donald L. Runkle.............     16,000         0.11         56.00         1/13/08         197,000 
David R. Heilman.............     16,000         0.11         56.00         1/13/08         197,000 
Paul J. Tosch................     14,000         0.10         56.00         1/13/08         172,000 
Alan S. Dawes................     14,000         0.10         56.00         1/13/08         172,000 

------------------                                                              
(1) These options were granted on January 12, 1998 and consist of a combination 
of non-qualified and incentive stock options. These options become      
exercisable to the extent of one-third of the grant on January 12, 1999,
January 12, 2000 and January 12, 2001, respectively. The incentive stock
options expire ten years from the date of grant and the non-qualified   
options expire two days later.                                          

(2) These values were determined based on the Black-Scholes option pricing      
  model. The following assumptions were made for purposes of calculating the
Grant Date Present Value: that the option is exercised in the fifth year
after its grant, expected price volatility of 25%, an interest rate of  
5.58%, a dividend yield of 3.57% and no adjustments were made for       
    non-transferability. Our use of this model does not necessarily mean that we
believe that this model accurately determines the value of options. The 
ultimate value of the options in this table depends upon each holder's  
individual investment decisions and the actual performance of GM $1 2/3 
common stock and, following the Distribution, Delphi's common stock.    

 103

424B4
106th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 106th

EXERCISES OF STOCK OPTIONS                                                      

 The following table shows aggregate exercises of options to purchase GM
$1 2/3 common stock in the year ended December 31, 1998 by the executive        
officers named in the Summary Compensation Table in the "--Executive            
Compensation" section above. Unless exercised prior thereto, the unexercised    
options reflected below will be replaced with options to purchase Delphi common 
stock in connection with the completion of the Distribution. See "--Incentive   
Plans--Substitute Awards."                                                      

                                                        [Enlarge/Download Table]

                                                          NUMBER OF SECURITIES       VALUE OF UNEXERCISED   
                                                         UNDERLYING UNEXERCISED          IN-THE-MONEY       
                                                         OPTIONS AT FY-END(#)(1)    OPTIONS AT FY-END($)(2) 
                          SHARES ACQUIRED     VALUE     -------------------------  -------------------------
          NAME            ON EXERCISE(#)   REALIZED($)  EXERCISABLE/UNEXERCISABLE  EXERCISABLE/UNEXERCISABLE
          ----            ---------------  -----------  -------------------------  -------------------------
                                                                                                            
J.T. Battenberg III......     60,513        1,605,951         67,918/194,027          1,193,555/3,351,195   
Donald L. Runkle.........         --               --          41,673/27,570              890,393/454,906   
David R. Heilman.........     44,089        1,289,493             620/27,570               11,036/205,946   
Paul J. Tosch............     13,019          271,837          17,001/24,122              294,383/398,012   
Alan S. Dawes............      3,309           99,369          60,147/24,122            1,684,322/398,012   

------------------                                                              
(1) No SARs may be granted under GM's stock incentive plans.                    

(2) Based on the closing price of GM $1 2/3 common stock of $71.56 on the NYSE  
on December 31, 1998.                                                   

LONG TERM INCENTIVE PLAN AWARDS                                                 

  The following table shows long term incentive plan awards made under the
General Motors 1997 Performance Achievement Plan in the year ended December 31, 
1998 to the executive officers named in the Summary Compensation Table in the   
"--Executive Compensation" section above.                                       

                                                        [Enlarge/Download Table]

                                                                         ESTIMATED FUTURE PAYOUTS UNDER 
                                         NUMBER OF     PERFORMANCE OR    NON-STOCK PRICE-BASED PLANS(1) 
                                       SHARES, UNITS    OTHER PERIOD    --------------------------------
                                         OR OTHER     UNTIL MATURATION  THRESHOLD   TARGET     MAXIMUM  
                 NAME                    RIGHTS(#)       OR PAYOUT         ($)        ($)        ($)    
                 ----                  -------------  ----------------  ---------   ------     -------  
                                                                                                        
J.T. Battenberg III...................      n/a          1998-2000       320,000    800,000   1,600,000 
Donald L. Runkle......................      n/a          1998-2000        84,000    210,000     420,000 
David R. Heilman......................      n/a          1998-2000        80,000    200,000     400,000 
Paul J. Tosch.........................      n/a          1998-2000        80,000    200,000     400,000 
Alan S. Dawes.........................      n/a          1998-2000        80,000    200,000     400,000 

------------------                                                              
(1) These awards relate to performance during 1998 through 2000. If the minimum 
or threshold performance level is met or exceeded, the percentage of the
    target award that will eventually be paid to participants will depend on the
extent to which the established performance target for the three year   
    performance period is achieved. If the minimum performance level is not met,
no awards will be paid.                                                 

 104

424B4
107th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 107th

CHANGE IN CONTROL AGREEMENTS                                                    

  In connection with this Offering, Delphi intends to enter into change in
control agreements ("Change in Control Agreements") with certain of its officers
(each, a "Participant"). The Change in Control Agreements will generally provide
monetary compensation and other benefits to each Participant upon the occurrence
of certain triggering events involving a change in control of Delphi.           

The Change in Control Agreements specify two triggering events:       

   (1) a change in control occurs within three years after the Distribution;
and                                                           

  (2) within three years after the change in control, one of the following
events occur:                                                 

(a) the Participant's employment is terminated without cause;   

        (b) a negative fundamental, material change is made in the Participant's
duties or responsibilities;                             

      (c) the Participant's salary, annual or other material compensation or
            benefits are decreased (and such decrease is unrelated to company or
individual performance);                                

 (d) the Participant is required to materially relocate his or her
          residence or principal office location against his or her will; or

 (e) the Participant is not offered a comparable position with the
successor entity.                                       

  Change in control is defined in the Change in Control Agreements to mean
the acquisition by any person, other than the company or any subsidiary of the  
company, of the beneficial ownership of 50 percent or more of the outstanding   
common stock; certain mergers, consolidations, other reorganizations of the     
company in which the company is not the surviving corporation; or any sale,     
lease, exchange or other transfer of 50% or more of the assets of the company.  

   Each Participant is entitled to the following benefits at the time of the
change in control:                                                              

- all of the Participant's unvested options will vest and become      
immediately exercisable in accordance with their terms;           

   - all of the Participant's long-term incentive awards will become payable
      immediately on a pro-rated basis, calculated based on current forecasted
payouts;                                                          

    - any compensation previously deferred at the election of the Participant,
     together with accrued interest or earnings thereon, will be distributed
as a lump sum payout;                                             

     - the Participant's Supplemental Executive Retirement Program benefits will
      be funded through a trust or other mechanism which is protected from the
     persons controlling Delphi after the occurrence of a change in control;
and                                                               

- the Participant's medical coverage under the company's then existing
medical plan will remain in force for thirty-six months.          

    Upon the occurrence of both triggering events described above, in addition
to the payments and benefits described above, Participants will receive monetary
compensation and certain other benefits. Each Participant is entitled to receive
in addition to their base salary through the date of their termination and any  
accrued vacation pay the following amount of monetary compensation:             

                                                                [Download Table]
                                                                         
Chairman and CEO..............    Three times base salary and three times
                                  target bonus                           

Certain Vice Presidents.......    Two times base salary and two times    
                                  target bonus                           

All other Vice Presidents.....    One times base salary and one times    
                                  target bonus                           

 105

424B4
108th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 108th

In addition, at the time of the second triggering event:              

- the Participant's life-insurance coverage will be continued and the 
premiums will be paid for thirty-six months;                      

   - the Participant may receive reimbursement of up to $50,000 for expenses
related to outplacement services;                                 

   - the Participant's legal fees and expenses will be paid if litigation is
required to enforce these change in control rights;               

  - the Participant will be able to retain his or her company car, if any,
for one year thereafter; and                                      

- the Participant will no longer be subject to the non-competition    
provisions of the Change in Control Agreement.                    

 The Change in Control Agreements provide that for a period of two years
immediately following the Participant's voluntary termination of employment with
us or any of our subsidiaries, the Participant agrees not to, without the prior 
written consent of our Chairman and Chief Executive Officer, engage in or       
perform any services of a similar nature to those performed at our company for  
any other corporation or business engaged in the design, manufacture,           
development, promotion, sale or financing of automobile or truck components,    
within North America, Latin America, Asia, Australia or Europe in competition   
with us, any of our subsidiaries or affiliates, or any joint ventures to which  
we or any of our subsidiaries are a party. The Change in Control Agreements also
provide that the Participant shall not disclose any knowledge, information or   
materials, whether tangible or intangible, regarding proprietary matters        
relating to the company. We expect that we will enter into Change in Control    
Agreements with 21 of our officers.                                             

INCENTIVE PLANS                                                                 

    Delphi has adopted, with the approval of General Motors in its capacity as
the sole stockholder of Delphi, the Delphi Automotive Systems Annual Incentive  
Plan (the "Annual Incentive Plan"), the Delphi Automotive Systems Stock         
Incentive Plan (the "Stock Incentive Plan") the Delphi Automotive Systems       
Performance Achievement Plan (the "Performance Achievement Plan") and the Delphi
Automotive Systems Classified Salary and Hourly Stock Option Plan (the          
"Classified Plan"). The Annual Incentive Plan, the Stock Incentive Plan and the 
Performance Achievement Plan will be administered by the Compensation Committee 
and the Delphi Strategy Board will administer the Classified Plan.              

   FOUNDERS GRANTS. In connection with the Offering, certain executives will
be awarded "founders grant" options to purchase shares of Delphi common stock   
and will be awarded "founders grant" restricted stock units. In addition, other 
employees of Delphi will be awarded "founders grant" options to purchase shares 
of Delphi common stock. The founders grants to executives will be made pursuant 
to the Stock Incentive Plan and the founders grants to other employees will be  
made pursuant to the Classified Plan. Stock options awarded to executives as    
founders grants will vest in equal annual installments over the four years      
following the date on which they are granted and restricted stock units awarded 
to executives as founders grants will vest in full four years from the date on  
which they are granted. Stock options awarded to all other employees as founders
grants will vest in full two years from the date on which they are granted. The 
exercise price per share for these stock options will be equal to the average of
the high and low prices of the common stock on the first day of trading of the  
common stock as reported in The Wall Street Journal and the assumed grant price 
per share of these restricted stock units will be equal to the price per share  
at which the common stock is sold in the Offering.                              

  A total of about 26,000,000 shares of common stock will be issuable upon
exercise of these options or vesting of these restricted stock units.           

   SUBSTITUTE AWARDS. In connection with the completion of the Distribution,
substitute awards relating to Delphi common stock will be issued to employees of
Delphi in exchange for GM $1 2/3 common stock awards.                           

 106

424B4
109th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 109th

The terms and conditions of each substitute award, including, without           
limitation, the time or times when, and the manner in which, each option        
constituting a substitute award will be exercisable, the duration of the        
exercise period, the permitted method of exercise, settlement and payment, the  
rules that will apply in the event of the termination of employment of the      
employee, the events, if any, that may give rise to an employee's right to      
accelerate the vesting or the time or exercise thereof and the vesting          
provisions of any restricted stock unit or performance achievement award        
constituting substitute awards, will be the same as those of the replaced GM    
$1 2/3 common stock award. See "Arrangements Between Delphi and General         
Motors--Employee Matters--Employee Benefits."                                   

  STOCK INCENTIVE PLAN. All officers and certain other employees of Delphi
will be eligible to participate in the Stock Incentive Plan. The Stock Incentive
Plan provides for the grant of stock options and/or Restricted Stock Units      
("RSUs"). An aggregate of 85,000,000 shares of common stock will be reserved for
issuance under the Stock Incentive Plan; however, the maximum number of shares  
that can be granted as RSUs is 8,000,000. It is anticipated that about 650      
employees annually will participate in the Stock Incentive Plan, including about
25 officers. Subject to adjustments as set forth in the Stock Incentive Plan,   
the maximum stock option grant to any individual in any calendar year may not   
exceed 1,000,000 shares and the maximum RSU grant to any individual in any      
calendar year may not exceed 500,000 shares.                                    

Options granted under the Stock Incentive Plan may be either incentive
stock options ("ISOs") or such other forms of non-qualified stock options       
("NQSOs") as the Compensation Committee may determine. ISOs are intended to     
qualify as "incentive stock options" within the meaning of Section 422 of the   
Internal Revenue Code of 1986, as amended (the "Code"). With certain limited    
exceptions, the exercise price of any stock option generally shall not be less  
than 100% of the fair market value of the common stock on the date the option is
granted. Payment of the purchase price upon exercise must be made in cash or,   
unless determined otherwise by the Compensation Committee, by delivery of       
previously acquired shares of common stock. In the case of shares acquired      
pursuant to the exercise of an option to acquire such shares, such shares must  
be held for six months before they may be used in payment of the exercise price 
for additional stock options.                                                   

  The term of any option will be determined by the Compensation Committee,
but no ISO may be exercised later than ten years after the date of grant, and no
NQSO may be exercised later than ten years and two days after the date of grant.
Except as otherwise determined by the Compensation Committee, no option shall   
become exercisable prior to the first anniversary date of the date of the option
grant or such later date as may be established by the Compensation Committee.   
After such date, the option shall be exercisable only in accordance with the    
terms and conditions established by the Compensation Committee at the time of   
the grant.                                                                      

   The Stock Incentive Plan provides that, except as otherwise determined by
the Compensation Committee, following termination of an employee's employment   
and contingent upon satisfaction of certain conditions, options held by each    
employee will expire not later than five years from the date of termination of  
employment, subject to earlier termination by the terms of the option. However, 
if termination is due to death, the options will expire three years from the    
date of death, subject to earlier termination pursuant to the terms of the      
option.                                                                         

     If required by the Compensation Committee, by accepting an option grant, an
employee will agree to remain employed by Delphi for a period of six months     
following the exercise of any option granted under the Stock Incentive Plan. If 
the employee retires or terminates employment without the consent of Delphi for 
any reason other than death within six months of the date of exercise of a stock
option, the employee will be required to pay to Delphi the amount of any gain   
realized upon such exercise.                                                    

The Compensation Committee may grant RSUs to such individuals, at such
times, and in such amounts as it may determine. Each RSU relates to one share of
Delphi's common stock, subject to certain adjustments as described in the Stock 
Incentive Plan. RSUs will be awarded without consideration other than the       
rendering of services, unless the Compensation Committee decides otherwise. RSUs
shall vest, subject to the satisfaction of certain conditions, at the time or   
times determined by the Compensation Committee. In                              

 107

424B4
110th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 110th

addition, the Compensation Committee may establish performance vesting criteria 
with respect to all or any portion of a grant of RSUs based on certain business 
criteria set forth in the Stock Incentive Plan.                                 

 Upon termination of the participant's employment without the consent of
Delphi, all RSUs shall be forfeited subject to such exceptions, if any, as are  
authorized by the Compensation Committee as to termination of employment by     
retirement, disability, death or under special circumstances. Awards of RSUs to 
participants subject to Section 162(m) of the Code are intended to qualify under
that section of the Code and the provisions of such awards will be interpreted  
in a manner consistent with that intent to the extent appropriate.              

    The Compensation Committee generally has the power and authority to amend,
modify, suspend or terminate the Stock Incentive Plan at any time without the   
approval of Delphi's stockholders, subject to applicable federal securities and 
tax law limitations and NYSE regulations.                                       

    ANNUAL INCENTIVE PLAN. Officers and certain other employees of Delphi will
be eligible to participate in the Annual Incentive Plan. The Compensation       
Committee may delegate authority to the Delphi Strategy Board to determine      
individual awards to employees who are not officers of Delphi. The Annual       
Incentive Plan provides for the grant of cash awards based upon the achievement 
of certain target levels of performance. Under the Annual Incentive Plan no     
individual may be granted an award in excess of $7,500,000 in any calendar year.
We anticipate that about 600 employees annually will participate in the Annual  
Incentive Plan, including about 25 officers.                                    

Pursuant to the Annual Incentive Plan, at the beginning of each year, 
commencing in 1999, the Compensation Committee will establish a targeted        
performance level at which a target performance award may be earned, with a     
threshold or minimum performance level below which no award will be paid, and a 
maximum level beyond which no additional amounts will be paid, and will         
establish the corresponding minimum and maximum awards. In determining the      
performance criteria applicable to any grant of awards, the Compensation        
Committee may use one or more of the business criteria set forth in the Annual  
Incentive Plan.                                                                 

   The percentage of each target performance award which will become a final
award and be paid to the employee will be determined by the Compensation        
Committee on the basis of the performance goals established and the related     
performance achieved, as well as the employee's individual performance during   
the period. Final awards actually paid to an employee may be less than or       
greater than 100% of the target award. Final awards will be subject to a vesting
schedule established by the Compensation Committee. At the Compensation         
Committee's discretion, interest may be paid on final awards during or at the   
end of the vesting period. The Compensation Committee may delegate authority to 
the Delphi Strategy Board to determine individual final awards for employees who
are not officers of the company, subject to a maximum amount approved by the    
Compensation Committee.                                                         

     Subject to certain exceptions, the Compensation Committee generally has the
power and authority to amend, modify, suspend or terminate the Annual Incentive 
Plan.                                                                           

    PERFORMANCE ACHIEVEMENT PLAN. Employees are eligible to participate in the
Performance Achievement Plan only upon recommendation of the Chief Executive    
Officer and with the approval of the Compensation Committee, except that the    
Compensation Committee alone may determine which officers are eligible to       
participate in such plan. The Performance Achievement Plan provides for the     
grant of awards based on certain target levels of performance. We anticipate    
that about 100 employees annually will participate in the Performance           
Achievement Plan, including about 25 officers.                                  

    Employees selected to participate in the Performance Achievement Plan will
be granted target performance awards. The performance period for an award must  
be at least two and not more than five years. It is anticipated that target     
performance awards will be granted annually commencing in 1999, and will be for 
a three-year performance period. At the beginning of each performance period,   
the Compensation Committee will establish a targeted performance level at which 
a target performance award may be earned, with a                                

 108

424B4
111th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 111th

threshold or minimum performance level below which no award will be paid, and a 
maximum level beyond which no additional amounts will be paid. In determining   
the performance criteria applicable to any grant of awards, the Compensation    
Committee may use one or more of the business criteria provided in the          
Performance Achievement Plan.                                                   

   The percentage of each target performance award which will become a final
award and be paid to the employee will be determined by the Compensation        
Committee on the basis of the performance goals established and the related     
performance achieved, as well as the employee's individual performance during   
the period. Final awards actually granted to an employee may be less than or    
greater than 100% of the target award. The Performance Achievement Plan provides
that no individual shall be granted a final award in excess of $7,500,000 for   
any performance period.                                                         

     Final awards may be paid in the form of common stock, in cash, or partly in
common stock and partly in cash, as the Compensation Committee may determine.   
Each final award will be subject to a vesting schedule as determined by the     
Compensation Committee. At the Compensation Committee's discretion, dividend    
and/or interest equivalents may be paid on final awards during or at the end of 
the vesting period. In the event that the participant's employment with Delphi  
is terminated, other than as a result of the participant's death, prior to      
payment of the final award in full, such payment will be further contingent upon
satisfaction of certain conditions, including that the participant refrain from 
activity that is competitive with the business of Delphi, unless such conditions
are waived by the Compensation Committee. The Performance Achievement Plan      
provides that final awards to be paid in common stock shall be made from shares 
reacquired by the company, including shares purchased on the open market.       

     Subject to certain exceptions, the Compensation Committee generally has the
power and authority to amend, modify, suspend or terminate the Performance      
Achievement Plan.                                                               

CLASSIFIED PLAN. The Classified Plan provides for the grant of stock  
options to all non-executive employees of Delphi. An aggregate of 26,000,000    
shares of common stock will be reserved for issuance under the Classified Plan. 
Approximately 200,000 Delphi employees are eligible to participate in the       
Classified Plan. No individual may be granted options in any calendar year      
covering more than the target amount of shares granted to the lowest level      
executive under the Stock Incentive Plan for that year.                         

Options granted under the Classified Plan will be in the form of      
non-qualified options. The exercise price of any stock option generally shall   
not be less than 100% of the fair market of the common stock on the date the    
option is granted. Payment of the purchase price upon exercise must be made in  
cash.                                                                           

     The term of options granted under the Classified Plan will be determined by
the Delphi Strategy Board, but no option may be exercised later than 10 years   
and two days after the date of grant. Except as determined by the Delphi        
Strategy Board, no option shall become exercisable prior to the first           
anniversary of the date of the option grant, and after such date shall be       
exercisable only in accordance with the terms and conditions established by the 
Delphi Strategy Board at the time of the grant.                                 

  The Classified Plan provides that, except as otherwise determined by the
Delphi Strategy Board, following termination of an employee's employment and    
contingent upon satisfaction of certain conditions, options held by each        
employee will expire not later than five years from the date of termination of  
employment, subject to earlier termination by the terms of the option. However, 
if termination is due to death, the options will expire three years from the    
date of death, subject to earlier termination pursuant to the terms of the      
options.                                                                        

PENSION PLANS                                                                   

    The retirement program for Delphi executives in the United States consists
of the Delphi Retirement Program for Salaried Employees (the "Retirement        
Program") as well as two non-qualified plans. Together, these plans are referred
to here as the "Delphi Salaried Program." For all purposes under the Delphi     
Salaried Program, the terms "service" and "credited service" refer to combined  
service with General Motors that is                                             

 109

424B4
112th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 112th

taken into account under the General Motors Retirement Program for Salaried     
Employees (the "GM Retirement Program") and Delphi.                             

    The Retirement Program is a tax-qualified plan subject to the requirements
of the Employee Retirement Income Security Act ("ERISA"). In general, the       
Retirement Program consists of "Part A" and "Part B" benefits. The              
non-contributory portion (referred to as "Part A") of the Retirement Program    
provides benefits under a formula based on years of credited service and an     
applicable benefit rate. The contributory portion (referred to as "Part B") of  
the Retirement Program provides benefits under a formula based on years of Part 
B credited service and upon the average of the highest five years of base salary
received during the final ten years of service, subject to certain limitations  
imposed by the Code, which may change from time to time. Part B of the          
Retirement Program also provides employees with an annual retirement benefit    
which is equal to the sum of 100% of the Part B contributions they made to the  
GM Retirement Program after October 1, 1979, or the Delphi Retirement Program   
after January 1, 1999, and lesser percentages of their contributions made to the
GM Retirement Program before that date. If employees elect not to contribute to 
Part B of the Retirement Program, they are entitled to receive only basic       
retirement benefits equal to a flat dollar amount per year of credited service. 
Benefits under the Retirement Program vest after five years of credited service 
and are payable at age 65, either in the form of a single life annuity or in a  
reduced amount in the form of a joint and survivor annuity.                     

   If an executive makes Part B contributions to the Retirement Program, the
executive may also be eligible to receive a non-qualified Regular Supplemental  
Executive Retirement Program ("SERP") benefit. The sum of the Retirement        
Program's benefits plus the Regular SERP benefit will provide an eligible       
executive with total annual retirement benefits under the Delphi Salaried       
Program that are equal to 2% times years of Part B credited service times       
average annual base salary, less 2% times years of Part A credited service times
the maximum annual Social Security benefit in the year of retirement payable to 
a person retiring at age 65. For example, a 65 year old executive retiring in   
1999 would be entitled to $16,476.                                              

The table below shows the regular form of the estimated total annual  
retirement benefit payable under the Delphi Salaried Program, based on average  
annual base salary as of December 31, 1998, assuming the executive qualifies for
Regular SERP benefits. Such amount would be paid in 12 equal monthly            
installments per year as a single life annuity to executives retiring in 1999 at
age 65. If the executive elects to receive such benefits in the form of a 60%   
joint and survivor annuity, the single life annuity amounts shown would         
generally be reduced from 5% to 11%, depending upon the age differential between
spouses.                                                                        

                                                                [Download Table]

                      YEARS OF PART B CREDITED SERVICE      
AVERAGE ANNUAL   -------------------------------------------
BASE SALARY(A)      15         25         35          45    
--------------      --         --         --          --    
                                                            
  $  300,000     $ 85,057   $141,762   $198,467   $  255,172
     480,000      139,057    231,762    324,467      417,172
     660,000      193,057    321,762    450,467      579,172
     840,000      247,057    411,762    576,467      741,172
   1,020,000      301,057    501,762    702,467      903,172
   1,200,000      355,057    591,762    828,467    1,065,172

--------------------------------                                  
(a) Average annual base salary means the average of the highest   
  five years of base salary paid during the final ten years of
service.                                                  

 The average annual base salary and the years of Part B credited service
which may be considered in the Regular SERP calculation as of December 31, 1998 
for each of the Named Executive Officers were as follows: J.T. Battenberg       
III--$767,500--36 years; Donald L. Runkle--$366,583--30 years; Paul J. Tosch--  
$349,000--40 years; Alan S. Dawes--$333,667--17 years; and David R.             
Heilman--$304,717--33 years. The annual base salary for the most recent year(s) 
considered in the calculation reported here are shown in the "Salary" column of 
the Summary Compensation Table in "--Executive Compensation" above.             

   Executives may be eligible to receive an Alternative SERP benefit in lieu
of the Regular SERP benefit if they satisfy certain criteria, including not     
working for any competitor or otherwise acting in any manner which              

 110

424B4
113th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 113th

is not in the best interests of Delphi. An eligible executive will receive the  
greater of the Regular SERP benefit or the Alternative SERP benefit. The sum of 
the Retirement Program's benefits plus the Alternative SERP benefit will provide
an eligible executive with total annual retirement benefits under the Delphi    
Salaried Program that are equal to 1.5% times eligible years of Part B credited 
service up to a maximum of 35 years, times the executive's average annual total 
direct compensation, less 100% of the maximum annual Social Security benefit in 
the year of retirement payable to a person retiring at age 65.                  

The following table shows the alternative form of the estimated total 
annual retirement benefit payable under the Delphi Salaried Program, based upon 
average annual total direct compensation as of December 31, 1998, assuming the  
executive qualifies for Alternative SERP benefits. Such amount would be paid in 
12 equal monthly installments per year as a single life annuity to executives   
retiring in 1999 at age 65. The amounts shown would be reduced in the same way  
as under the regular form if the executive were to elect joint and survivor     
benefits.                                                                       

                                                                [Download Table]

AVERAGE ANNUAL           ELIGIBLE YEARS OF PART B CREDITED SERVICE        
 TOTAL DIRECT     --------------------------------------------------------
COMPENSATION(A)      15         20         25          30           35    
---------------      --         --         --          --           --    
                                                                          
  $  525,000      $101,649   $141,024   $180,399   $  219,774   $  259,149
     905,000       187,149    255,024    322,899      390,774      458,649
   1,285,000       272,649    369,024    465,399      561,774      658,149
   1,665,000       358,149    483,024    607,899      732,774      857,649
   2,045,000       443,649    597,024    750,399      903,774    1,057,149
   2,425,000       529,149    711,024    892,899    1,074,774    1,256,649

--------------------------------                                  
(a) Average annual total direct compensation means the sum of     
average annual base salary plus the average of the highest
 five annual incentive awards earned in respect of the final
ten calendar years of service prior to an executive's     
retirement.                                               

     The average annual total direct compensation and the eligible years of Part
B credited service which may be considered in the Alternative SERP calculation  
as of December 31, 1997 for each of the Named Executive Officers was as follows:
J.T. Battenberg III--$1,453,900--35 years; Donald L. Runkle--$642,583--30 years;
Paul J. Tosch--$603,400--35 years; Alan S. Dawes--$563,067--17 years; and David 
R. Heilman--$542,917--33 years. The annual total direct compensation for the    
most recent year(s) considered in the calculation reported here are reported in 
the "Salary" and "Bonus" columns of the Summary Compensation Table in           
"--Executive Compensation" above.                                               

   In addition, the Delphi Board is expected to delegate to the Compensation
Committee discretionary authority to grant additional eligible years of credited
service to selected key executives under such terms and conditions as the       
Compensation Committee shall determine for purposes of computing the regular and
alternative forms of SERP for such executives. The Regular or Alternative form  
of the SERP benefit is provided under a program which is non-qualified for tax  
purposes and not pre-funded. SERP benefits under the Regular and Alternative    
form can be reduced or eliminated for both retirees and active employees by the 
Compensation Committee and/or the Board of Directors.                           

 111

424B4
114th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 114th

ARRANGEMENTS BETWEEN DELPHI AND GENERAL MOTORS

 The separation of Delphi from General Motors and the transactions being
undertaken in connection therewith are being effected pursuant to a Master      
Separation Agreement, dated December 22, 1998, to which Delphi and General      
Motors are parties (as amended from time to time, the "Separation Agreement").  
In addition, we have entered into or will enter into certain ancillary          
agreements contemplated by the Separation Agreement (collectively, as amended   
from time to time, the "Ancillary Agreements") and certain other agreements     
which govern various interim and ongoing relationships between us and GM. The   
Ancillary Agreements to be entered into prior to or in connection with the      
closing of the Offering include, among others, agreements relating to the       
Offering and the Distribution, our sale of products to GM, employee matters, tax
matters, intellectual property, real estate and environmental matters, product  
liability and the provision of certain interim services. The Ancillary          
Agreements also require us to cooperate with GM in all respects to complete the 
Distribution and provide for registration rights for GM in the event the        
Distribution is not completed or is completed without GM divesting itself of all
of its Delphi common stock.                                                     

Certain international, intellectual property and real property assets 
relating primarily to the business of Delphi may still be held by GM or its     
affiliates at the time of the completion of the Offering, pending receipt of    
consents or approvals or satisfaction of other applicable requirements necessary
for the transfer of such assets to Delphi. These assets and operations are not, 
individually or in the aggregate, material to our company. However, the         
information included in this prospectus, including our consolidated financial   
statements, assumes the completion of all such transactions. See                
"--International Agreements." In addition, certain information technology assets
relating primarily to the business of Delphi may still be held by GM or its     
affiliates at the time of the completion of the Offering, pending receipt of    
consents necessary for the transfer of such assets to Delphi, or may be retained
by GM if consents to their transfer cannot be obtained. Also, certain assets and
liabilities relating to employees working under collective bargaining agreements
will be transferred to Delphi in connection with the Distribution. Capitalized  
terms which we use in this section but do not otherwise define in the section   
"--Separation Agreement--Certain Definitions Relating to the Separation         
Agreement" below or elsewhere herein have their respective meanings as set forth
in the Separation Agreement.                                                    

   WE HAVE SET FORTH BELOW A SUMMARY DESCRIPTION OF THE SEPARATION AGREEMENT
AND CERTAIN OF THE ANCILLARY AGREEMENTS. THIS DESCRIPTION, WHICH SUMMARIZES THE 
MATERIAL TERMS OF SUCH AGREEMENTS, DOES NOT PURPORT TO BE COMPLETE AND IS       
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH AGREEMENTS.     
CERTAIN OF THESE AGREEMENTS, INCLUDING THE SEPARATION AGREEMENT, THE FORMS OF   
THE IPO AND DISTRIBUTION AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT, THE   
SUPPLY AGREEMENT, THE BUSINESS RELATIONSHIP AGREEMENT, THE U.S. EMPLOYEE MATTERS
AGREEMENT AND CERTAIN TAX ALLOCATION AGREEMENTS, HAVE BEEN FILED WITH THE SEC AS
EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.      

SEPARATION AGREEMENT                                                            

   The Separation Agreement, which became effective on January 1, 1999, sets
forth our agreements with GM with respect to the principal corporate            
transactions required to effect the transfers of assets and assumptions of      
liabilities necessary to separate our company from GM and certain other         
agreements governing our relationship thereafter.                               

TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. General Motors has  
transferred, or agreed to transfer, or to cause its subsidiaries and            
representatives to transfer, the Delphi Assets to our company and our           
subsidiaries, and we and our subsidiaries have assumed, or agreed to assume, and
have agreed to pay, perform, satisfy and discharge on a timely basis the Delphi 
Liabilities in accordance with their respective terms. Except as expressly set  
forth in the Separation Agreement or in any Ancillary Agreement, GM is not      
making any representation or warranty with respect to any Delphi Asset and the  
Delphi Assets are being transferred on an "as is, where is" basis.              

 112

424B4
115th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 115th

    TRANSITION SERVICES. The Separation Agreement provides that if we identify
any services that GM, or its affiliates or their suppliers, were providing to us
immediately prior to the Contribution Date and any of such services is not being
provided to us pursuant to any of the Ancillary Agreements, GM agrees, upon our 
written request, to use its reasonable best efforts to provide that service to  
us for a period of twelve months following the Contribution Date. GM is not     
required to provide any service which GM would not be legally permitted to      
provide to a third party. We must use all commercially reasonable efforts to    
obtain any transition services provided pursuant to this provision of the       
Separation Agreement from a source other than GM prior to the date that is      
twelve months from the Contribution Date. If we cannot obtain such transition   
service from a source other than GM and such service is necessary to operate the
Delphi Automotive Systems Business in substantially the same manner as it was   
conducted immediately before the Contribution Date, GM has agreed to provide    
such transition service to us for an additional period not to exceed six months.

For all such transition services provided to us by GM pursuant to the 
Separation Agreement and for services provided to us by GM pursuant to the      
Ancillary Agreements, except as described below, we must pay GM on or prior to  
the fifteenth day following receipt of an invoice:                              

(1) in the case of any transition service provided pursuant to the    
       Separation Agreement or pursuant to an Ancillary Agreement in which a
      payment amount or formula has not been set forth, an amount equal to
         the cost historically allocated to our business for such services as of
       the Contribution Date, adjusted to reflect any changes in the nature,
   cost or level of services provided; provided that, if no cost has
       historically been allocated to us for such service, then we shall pay
to GM:                                                        

       (a) that portion of the total costs borne by GM which GM would have
           allocated to Delphi under its internal allocation formula; plus

      (b) any direct user charges provided for in clause (a) above; plus

       (c) any other reasonable charges necessary to make GM whole for the
provision of such services; or                      

(2) in the case of any service to be provided pursuant to an Ancillary
        Agreement in which a payment amount or formula has been set forth, the
amount owed pursuant to the terms of such Ancillary Agreement.

If we make payment later than the forty-fifth day after the date we receive an  
invoice, we must pay interest on the amount due based on the Prime Rate.        

     For any such services that are provided to us directly by third parties, we
will pay such third party directly where such direct payment is permissible.    

   These payment provisions do not apply to services provided to us pursuant
to the Financial Services Supply Agreement, the Commercial Travel Services      
Supply Agreement, any real estate leases and any health care services pursuant  
to the Employee Matters Agreement.                                              

     In addition, we are responsible for providing certain transitional services
to GM with respect to certain businesses retained by GM.                        

ANCILLARY AGREEMENTS. Except with respect to the provisions regarding 
payment for transition services described above, to the extent that any         
Ancillary Agreement expressly addresses any matters addressed by the Separation 
Agreement, the terms and conditions of the Ancillary Agreement will govern the  
rights and obligations of the parties regarding such matters. We must use all   
commercially reasonable efforts to obtain services provided to us by GM under   
the terms of those Ancillary Agreements relating to transition services from a  
source other than GM. Certain of the Ancillary Agreements provide that the      
transition service may be extended beyond the termination of the transition     
periods provided for therein and we expect that after the Distribution we would 
negotiate with GM at arm's length the terms of any such extension, including    
fair market value pricing for all such services.                                

 113

424B4
116th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 116th

INDEMNIFICATION. We have agreed to indemnify, defend and hold harmless
General Motors and each of its subsidiaries and their respective                
successors-in-interest, and each of their respective past and present           
representatives against any losses, claims, damages, liabilities or actions     
arising, whether prior to or after the Contribution Date, out of or in          
connection with the Delphi Liabilities and/or our conduct of our business and   
affairs after the Contribution Date. Certain of the Ancillary Agreements provide
for indemnification between us and GM relating to the substance of such         
agreements. The Separation Agreement and certain of the Ancillary Agreements    
specify certain procedures with respect to claims thereunder subject to         
indemnification and related matters.                                            

     CLAIMS AND LITIGATION. The Separation Agreement provides for the allocation
of the liability between us and GM for certain claims and litigation relating to
or arising out of the Delphi Automotive Systems Business.                       

- Product Liability. GM has retained responsibility for all product   
     liability actions relating to products we manufactured prior to January
      1, 1999 and sold or otherwise supplied to GM either before or after that
     date. Responsibility for product liability actions relating to products
we manufacture on or after January 1, 1999 and sell to GM shall be
     determined in accordance with the agreements for such sales. We will be
       responsible for liability relating to all products we sold at any time or
     sell in the future to customers other than GM. In connection therewith,
       we will indemnify GM against, and reimburse GM for costs associated with,
       the claims for which we are liable, and GM will indemnify us against, and
 reimburse us for costs associated with, the claims for which GM has
retained liability.                                               

  - General Litigation. With respect to general litigation claims, we have
       assumed the liability for all new claims related to the Delphi Automotive
 Systems Business and for certain specified claims. GM has agreed to
      defend certain other specified claims at our expense and GM has retained
the liability for certain other specified claims. In connection   
 therewith, we will indemnify GM against, and reimburse GM for costs
associated with, the claims for which we are liable, and GM will  
   indemnify us against, and reimburse us for costs associated with, the
claims for which GM has retained liability.                       

- Employment-Related Claims. We have assumed the liability for certain
      specified employment-related claims and we will indemnify GM against any
     such claims and reimburse GM for any legal or other expenses reasonably
     incurred by GM in connection with such claims. Certain other employment
     related claims will be jointly defended by us and GM. We have financial
responsibility for employment related claims regarding all Delphi 
  Employees and Delphi Terminated Employees whether incurred before or
     after the Contribution Date. We will mutually determine with GM how new
   claims shall be treated. However, U.S. claims for pension and welfare
       benefits from salaried employees who retire on or before the Contribution
    Date and hourly employees who retire on or before October 1, 1999 will
remain the responsibility of GM.                                  

We have agreed with GM to cooperate with each other in the defense of any and   
all claims covered by these provisions of the Separation Agreement.             

INSURANCE. The Separation Agreement provides that during the period   
beginning on the Contribution Date and ending on the earlier of the date of the 
completion of the Distribution or the first anniversary of the Contribution Date
(the "Insurance Transition Period"), GM shall, subject to certain conditions and
exceptions, maintain policies of insurance, including for the benefit of Delphi 
or any of its affiliates, directors, officers or other covered parties, which   
are comparable to those generally maintained by GM. The Separation Agreement    
sets forth procedures we must follow for asserting claims, reimbursing GM for   
premium expenses and other insurance related matters during the Insurance       
Transition Period. Following the expiration of the Insurance Transition Period, 
except as provided in the Separation Agreement, we will be responsible for      
obtaining and maintaining our own insurance programs.                           

DISPUTE RESOLUTION. The Separation Agreement contains provisions that 
govern, except as provided in any Ancillary Agreement, the resolution of        
disputes, controversies or claims that may arise between us and GM. The         
Separation Agreement provides that the parties will use all commercially        
reasonable efforts to settle all disputes arising in connection with the        
Separation Agreement without resorting to mediation, arbitration or             

 114

424B4
117th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 117th

otherwise. If these efforts are not successful, any party may submit the dispute
for non-binding mediation by delivering notice to the other party of the dispute
and expressly requesting mediation of the dispute. If, after mediation, the     
parties disagree regarding the mediator's recommendation, the dispute will be   
submitted to binding arbitration in accordance with the terms of the Separation 
Agreement. The Separation Agreement contains procedures for the selection of a  
three-arbitrator panel to act by majority vote and the conduct of the           
arbitration hearing, including certain limitations on the discovery rights of   
the parties. We and GM have agreed that all disputes or other matters related to
the Supply Agreement and certain of the other Ancillary Agreements are exempt   
from the dispute resolution procedures established in the Separation Agreement. 

   CERTAIN DEFINITIONS RELATING TO THE SEPARATION AGREEMENT. Set forth below
are certain defined terms contained in the Separation Agreement:                

"Contribution Date" means January 1, 1999.                            

   "Delphi Assets" means all of GM's right, title and interest in and to all
assets, excluding cash and cash equivalents, that:                              

 (1) except as set forth on a schedule to the Separation Agreement or as
   otherwise provided in the Separation Agreement or in an Ancillary
     Agreement, are reflected in the Delphi Financial Statements and not
      disposed of by GM after the date thereof and before the Contribution
         Date, including assets written off or expensed but still used by Delphi
        which Delphi can demonstrate to GM's reasonable satisfaction were paid
for by the Delphi Automotive Systems Sector of GM; or         

 (2) are to be transferred pursuant to Section 2.01(c) of the Separation
      Agreement, which relates to assets relating to certain international
operations; or                                                

   (3) are acquired by the Delphi Automotive Systems Business after the date
  of the Delphi Financial Statements and would be reflected in the
    financial statements of Delphi as of the Contribution Date if such
         financial statements were prepared using the same accounting principles
under which the Delphi Financial Statements were prepared; or 

 (4) are expressly provided by the Separation Agreement or any Ancillary
Agreement to be transferred to Delphi; or                     

    (5) are listed on the schedule to the Separation Agreement that sets forth
the facilities to be transferred to Delphi; or                

     (6) except as otherwise provided in an Ancillary Agreement or other express
         agreement of the parties, are used exclusively by the Delphi Automotive
Systems Business as of the Contribution Date;                 

provided, unless the parties otherwise expressly agree, that if the accounting  
principles under which the Delphi Financial Statements were prepared would have 
required any asset described in the clause (6) above to be reflected in the     
Delphi Financial Statements as of the date thereof, then such asset shall be    
included in the "Delphi Assets" only if so reflected.                           

  "Delphi Automotive Systems Business" means the business conducted by the
Delphi Automotive Systems business sector of General Motors at any time on or   
before the Contribution Date, including:                                        

     (1) all business operations whose financial performance is reflected in the
Delphi Financial Statements;                                  

    (2) all business operations initiated or acquired by the Delphi Automotive
      Systems business sector of GM after the date of the Delphi Financial
Statements; and                                               

    (3) all business operations that were conducted at any time in the past by
the Delphi Automotive Systems business sector of GM or by any 
         predecessor of such business sector, including, without limitation, the
      GM Automotive Components Group, but were discontinued or disposed of
prior to                                                      

 115

424B4
118th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 118th

       the date of the Delphi Financial Statements other than by transfer or
disposition to any other business sector of GM.               

   "Delphi Financial Statements" means the consolidated financial statements
and the notes thereto of Delphi for the nine months ended September 30, 1998 as 
set forth in the registration statement of which this prospectus forms a part,  
as amended at December 22, 1998, which is the date of the Separation Agreement. 
Such financial statements are substantially similar to the financial statements 
for such period included elsewhere in this prospectus.                          

   "Delphi Liabilities" means all of the Liabilities of General Motors that:

     (1) except as otherwise set forth on a schedule to the Separation Agreement
         or as otherwise provided in the Separation Agreement or in an Ancillary
        Agreement, are reflected in the Delphi Financial Statements and remain
outstanding at the Contribution Date; or                      

 (2) are to be transferred pursuant to Section 2.01(c) of the Separation
      Agreement, which relates to assets relating to certain international
operations; or                                                

   (3) arise in connection with the Delphi Automotive Systems Business after
       the date of the Delphi Financial Statements and would be reflected in
    financial statements of Delphi as of the Contribution Date if such
         financial statements were prepared using the same accounting principles
under which the Delphi Financial Statements were prepared; or 

 (4) are expressly provided by the Separation Agreement or any Ancillary
Agreement to be transferred to and assumed by Delphi; or      

     (5) except as otherwise provided in an Ancillary Agreement or other express
     agreement between the parties, are related to or arise out of or in
connection with the Delphi Assets; or                         

     (6) except as otherwise provided in an Ancillary Agreement or other express
agreement of the parties, are related to or arose out of or in
        connection with the Delphi Automotive Systems Business, including, but
         not limited to the covenants not to compete entered into by GM prior to
 the Contribution Date set forth on a schedule to the Separation
     Agreement, whether before or after the date of the Delphi Financial
Statements;                                                   

provided, unless the parties otherwise expressly agree, that if the accounting  
principles under which the Delphi Financial Statements were prepared would have 
required any liabilities described in clause (6) above to be reflected in the   
Delphi Financial Statements as of the date thereof, then such liabilities shall 
be considered to be "Delphi Liabilities" only if so reflected.                  

     "Liabilities" means any and all debts, liabilities, guarantees, assurances,
commitments and obligations, whether fixed, contingent or absolute, asserted or 
unasserted, matured or unmatured, liquidated or unliquidated, accrued or not    
accrued, known or unknown, due or to become due, whenever or however arising,   
including, without limitation, whether arising out of any contract or tort based
on negligence or strict liability, and whether or not the same would be required
by generally accepted accounting principles to be reflected in financial        
statements or disclosed in the notes thereto.                                   

IPO AND DISTRIBUTION AGREEMENT                                                  

   GENERAL. We have entered into an Initial Public Offering and Distribution
Agreement (as amended from time to time, the "IPO and Distribution Agreement")  
with GM which governs our respective rights and duties with respect to this     
Offering and the Distribution, and sets forth certain covenants we have agreed  
to for various periods following the Offering and the Distribution. Although GM 
has announced that it currently plans to complete the Distribution, and we have 
agreed to cooperate with GM in all respects to complete the Distribution, it is 
not obligated to do so. We cannot assure you as to whether or when the          
Distribution will occur. See "Risk Factors--Risk Factors Relating to Separating 
Our Company from General Motors--Our                                            

 116

424B4
119th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 119th

Business May Be Adversely Affected if General Motors Does Not Complete Its      
Divestiture of Our Company."                                                    

THE DISTRIBUTION. We have agreed that we will cooperate with GM in all
respects to accomplish the Distribution and, at GM's direction, promptly take   
all actions necessary or desirable to effect the Distribution, including the    
registration under the Securities Act of 1933, as amended (the "Securities      
Act"), of GM's shares of our capital stock. General Motors has the sole         
discretion to determine whether to proceed with all or part of the Distribution 
and all terms of the Distribution, including the form, structure and terms of   
any transaction(s) and/or offering(s) to effect the Distribution and the timing 
of and conditions to the consummation of the Distribution. In the event that GM 
determines that it no longer intends to proceed with or complete the            
Distribution, GM must provide us notice to such effect. Upon such notification, 
GM's rights and our obligations under the Registration Rights Agreement         
described below become immediately effective.                                   

 PRESERVATION OF THE TAX-FREE STATUS OF THE DISTRIBUTION. General Motors
intends for the Distribution to qualify as a tax-free distribution under Section
355 of the Code to GM and its stockholders. On January 13, 1999, GM received    
from the IRS a private letter ruling (the "IRS Ruling") to such effect. In      
connection with GM's request for the IRS Ruling, we made certain representations
and warranties to GM regarding our company and our business. We have also agreed
to certain covenants in the IPO and Distribution Agreement intended to preserve 
the tax-free status of the Distribution. We may take any action otherwise       
prohibited by these covenants only if GM has determined, in its sole and        
absolute discretion, that such action would not jeopardize the tax-free status  
of the Distribution. See "--Cooperation on Tax Matters." Certain of these       
covenants are described in greater detail below:                                

- Stock Issuance. Prior to the completion of the Distribution, we have
     agreed not to issue or agree to issue shares of our capital stock in an
       amount that would result in GM owning less than 80% of the total combined
    voting power of all outstanding shares of our voting stock and/or less
     than 80% of any other class and/or series of Delphi capital stock. This
     covenant will not prohibit us from issuing stock options and restricted
      stock awards to our employees so long as we repurchase sufficient shares
 of our capital stock prior to the date when such options and awards
   become exercisable to ensure that GM's ownership remains at or higher
      than 80% and GM approves of our procedures to comply with this covenant.

     - Certain Acquisition Transactions. Until two years after the completion of
      the Distribution, or, if GM determines not to complete the Distribution,
the last date on which GM distributed any Delphi common stock in  
   connection with the Distribution, we have agreed not to enter into or
      permit any transaction or series of transactions which would result in a
      person or persons acquiring or having the right to acquire shares of our
      capital stock that would comprise 50% or more of either the value of all
  outstanding shares of our capital stock or the total combined voting
power of our outstanding voting stock.                            

- Continuation of Active Trade or Business. Until two years after the 
      completion of the Distribution, or, if GM determines not to complete the
   Distribution, the last date on which GM distributed any Delphi common
      stock in connection with the Distribution, we have agreed to continue to
     conduct the active trade or business, within the meaning of Section 355
   of the Code, of our company as we conduct it immediately prior to the
      completion of the Distribution. During such time, we have agreed not to:

 - liquidate, dispose of or otherwise discontinue the conduct of any
        portion of our active trade or business with a value in excess of $2.0
billion; or                                                   

    - dispose of any business or assets that would cause our company to be
    operated in a manner inconsistent in any material respect with the
       business purposes for the Distribution as described to the IRS or tax
counsel in connection with GM's request for the IRS Ruling.   

   Also, until two years after the completion of the Distribution, we have
     agreed not to liquidate, dispose of, or otherwise discontinue the conduct
of any portion of the active trade or business of our company if    

 117

424B4
120th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 120th

     such liquidation, disposition or discontinuance would breach the covenant
described below regarding our continuity of business.               

- Continuity of Business. Until two years after the completion of the 
      Distribution, or, if GM determines not to complete the Distribution, the
     last date on which GM distributed any Delphi common stock in connection
with the Distribution, we have agreed that:                       

- we will not voluntarily dissolve or liquidate; and              

    - except in the ordinary course of business, neither we nor any of our
   direct or indirect subsidiaries will sell, transfer, or otherwise
   dispose of or agree to dispose of assets, including any shares of
       capital stock of our subsidiaries, that, in the aggregate, constitute
more than:                                                    

(x) 60% of our gross assets; or                               

      (y) 60% of the consolidated gross assets of us and our subsidiaries.

     For this purpose, we are not deemed to directly or indirectly control a
    subsidiary unless we own, directly or indirectly, shares constituting:

 - 80% or more of the total combined voting power of all outstanding
shares of voting stock of such subsidiary; and                

      - 80% or more of the total number of outstanding shares of each class or
     series of capital stock of such subsidiary other than voting stock.

- Discharge of Intracompany Debt. Prior to the first date on which GM 
      distributes any Delphi common stock in connection with the Distribution,
    we have agreed to fully discharge and satisfy all debt that we owe GM.
      For such purpose, debt does not include payables arising in the ordinary
course of business. Until two years after the completion of the   
      Distribution, or, if GM determines not to complete the Distribution, the
     last date on which GM distributed any Delphi common stock in connection
      with the Distribution, we will not be able to have any such indebtedness
with GM.                                                          

  These covenants will not prohibit us from implementing or complying with
our Rights Plan or any transaction permitted by an IRS ruling or a tax opinion. 
In the event that GM notifies us that it no longer intends to proceed with or   
complete the Distribution and GM has not yet distributed any of its Delphi      
common stock, these covenants to preserve the tax-free status of the            
Distribution will terminate.                                                    

     OTHER COVENANTS REGARDING TAX TREATMENT OF THE TRANSACTIONS. General Motors
intends the transfer of assets and liabilities from GM to our company as        
contemplated by the Separation Agreement (the "Contribution") to qualify as a   
reorganization under Section 368(a)(1)(D) of the Code (a "D Reorganization").   
Until two years after the completion of the Distribution, we have agreed not to 
take, or permit any of our subsidiaries to take, any actions or enter into any  
transaction or series of transactions that would be reasonably likely to        
jeopardize the tax-free status of the Distribution or the qualification of the  
Contribution as a D Reorganization, including any action or transaction that    
would be reasonably likely to be inconsistent with any representation made to   
the IRS or tax counsel. We may take any action that would otherwise violate this
covenant only if GM has determined, in its sole and absolute discretion, that   
such action or transaction would not jeopardize the tax-free status of the      
Distribution or the qualification of the Contribution as a D Reorganization.    

 COOPERATION ON TAX MATTERS. We and GM have agreed to certain procedures
with respect to the tax-related covenants in the IPO and Distribution Agreement.
We are required to notify GM if we desire to take any action prohibited by the  
tax-related covenants described above. Upon such notification, if GM determines 

 118

424B4
121st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 121st

that such action might jeopardize the tax-free status of the Distribution or the
qualification of the Contribution as a D Reorganization, GM has agreed to elect 
either to:                                                                      

     - use all commercially reasonable efforts to obtain a private letter ruling
    from the IRS or a tax opinion that would permit us to take the desired
      action, and we have agreed to cooperate in connection with such efforts;
or                                                                

     - provide all reasonable cooperation to us in connection with our obtaining
such an IRS ruling or tax opinion.                                

In either case, GM has agreed to bear its reasonable costs and expenses of      
obtaining such an IRS ruling or tax opinion.                                    

    INDEMNIFICATION FOR TAX LIABILITIES. We have generally agreed to indemnify
GM and its affiliates against any and all tax-related losses incurred by GM in  
connection with any proposed tax assessment or tax controversy with respect to  
the Distribution or the Contribution to the extent caused by any breach by us of
any of our representations, warranties or covenants made in the IPO and         
Distribution Agreement. This indemnification does not apply to actions which GM 
permits us to take as a result of a determination under the tax-related         
covenants as described above.                                                   

     OTHER DELPHI COVENANTS. After the Offering, General Motors will continue to
own a significant portion of our common stock. As a result, GM will continue to 
include us as a "subsidiary" for various financial reporting, accounting and    
other purposes. Accordingly, we have agreed to certain covenants in the IPO and 
Distribution Agreement. Certain of these covenants are described below:         

- Covenants Regarding the Incurrence of Debt. So long as GM is a      
    significant stockholder of our company, the amount of our indebtedness
   for borrowed money will affect GM's financial position. Thus, we have
agreed to certain limitations on our ability to incur debt:       

  - For so long as GM continues to own at least 50% of our outstanding
         common stock, without GM's prior written consent, which it may withhold
       in its sole and absolute discretion, we will not, and will not permit
any of our subsidiaries to:                                   

       - create, incur, assume or suffer to exist any Indebtedness in excess
        of an aggregate of $5.0 billion outstanding at any time; provided,
       however, that we may make an acquisition as a result of which our
Indebtedness would exceed $5.0 billion so long as both the
         acquisition target has an FFO to Debt Ratio of at least 20% and our
     Indebtedness after giving effect to the acquisition, including,
           without duplication, any Indebtedness incurred in connection with the
          acquisition and any indebtedness of the acquisition target that will
           become our Indebtedness as a result of such acquisition, would not be
greater than $6.0 billion; and                            

- consummate, or agree to consummate, any acquisition of any  
           acquisition target with an FFO to Debt Ratio less than 20% unless our
Adjusted Indebtedness would not exceed $5.0 billion.      

 For purposes of these covenants, the following terms have the
following meanings:                                                   

"Adjusted Indebtedness" means, with respect to any proposed 
acquisition, the sum of:                                              

(1) our Indebtedness immediately after giving effect to such
         acquisition, including, without duplication, any Indebtedness
            incurred in connection with the acquisition and any indebtedness
            of the acquisition target that will become our Indebtedness as a
result of such acquisition; and                     

     (2) the amount by which the number described in clause (2) of the
         definition of "FFO to Debt Ratio" would need to be reduced in
            order for the acquisition target's FFO to Debt Ratio to be equal
to 20%.                                             

 119

424B4
122nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 122nd

"Indebtedness" means the sum of:                            

         (1) the aggregate principal amount of our and our subsidiaries' total
             long-term and short-term liabilities for borrowed money including
              capitalized leases, as determined for purposes of our consolidated
financial statements; and                           

(2) the aggregate amount attributable to all factoring or   
          securitization of receivables and other financial assets by us
and our subsidiaries in excess of $1.2 billion.     

"FFO to Debt Ratio" means, for any acquisition target, as of
     immediately prior to the proposed acquisition, the percentage determined by
dividing:                                                             

         (1) the sum of such acquisition target's net income plus depreciation
       and amortization for the last four full fiscal quarters, as
             determined for purposes of its consolidated financial statements;
by                                                  

        (2) the additional Indebtedness that would be incurred in connection
             with such proposed acquisition, including any indebtedness of the
            acquisition target that will become our Indebtedness as a result
of such proposed acquisition.                       

   - Other Covenants. For so long as GM continues to own at least 50% of our
outstanding common stock, we have agreed that:                    

      - we will not, without GM's prior written consent, which it may withhold
    in its sole and absolute discretion, take any action which has the
     effect of limiting GM's ability to freely sell, pledge or otherwise

     - dispose of shares of our common stock or limiting the legal rights of
      or denying any benefit to GM as a Delphi stockholder in a manner not
     applicable to Delphi stockholders generally; this means that, among
         other things, we will not, without GM's prior written consent, which it
    may withhold in its sole and absolute discretion, alter our Rights
        Plan, or any successor stockholder rights plan, in a manner that would
    result in GM's ownership of our common stock causing the rights to
         detach or become exercisable as described under "Description of Capital
Stock--Rights Plan;"                                          

      - we will not, without GM's prior written consent, which it may withhold
       in its sole and absolute discretion, issue any shares of common stock
    or any rights, warrants or options to acquire our common stock, if
        after giving effect to such issuance GM would own less than 50% of the
then outstanding shares of our common stock; and              

   - to the extent that GM is a party to, or enters into, any agreements
         that provide that certain actions of GM's subsidiaries may result in GM
    being in breach or default under such agreements, and we have been
   advised of the existence of such agreements, we will not take any
         actions that may result in GM being in breach or default under any such
agreement.                                                    

     - Financial Information. We have agreed that, for so long as GM is required
to consolidate our results of operations and financial position or
   account for its investment in our company, we will provide GM certain
       financial information regarding our company and our subsidiaries; provide
   GM copies of all quarterly and annual financial information and other
reports and documents we intend to file with the SEC prior to such
     filings, as well as final copies upon filing; provide GM with copies of
       our budgets and financial projections, as well as the opportunity to meet
       with our management to discuss such budgets and projections; consult with
     GM regarding the timing and content of earnings releases; and cooperate
fully, and cause our accountants to cooperate fully, with GM in   
    connection with any of its public filings. This covenant is subject to
   appropriate confidentiality provisions to protect the confidentiality
commitments we have made to our customers.                        

 - Auditors and Audits; Annual Statements and Accounting. We have agreed
that, for so long as GM is required to consolidate our results of 
    operations and financial position or account for its investment in our
 company, we will not change our auditors without GM's prior written
     consent, which will not be unreasonably withheld, and will use our best
     efforts to enable our auditors to complete their audit of our financial
       statements such that they will date their opinion the same date that they
date their                                                        

 120

424B4
123rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 123rd

      opinion on GM's financial statements; provide to GM and its auditors all
 information required for GM to meet its schedule for the filing and
    distribution of its financial statements; make available to GM and its
     auditors work papers related to the annual audit of our company as well
     as access to the personnel who perform the annual audit and our and our
     subsidiaries' books and records so that GM and its auditors may conduct
       reasonable audits relating to our financial statements; adhere to certain
      specified accounting standards; and notify and consult with GM regarding
   any changes to our accounting principles; and make any changes to our
accounting estimates and principles requested by GM.              

 We have generally agreed to indemnify General Motors and its affiliates
against all liabilities arising out of any incorrect, inaccurate or   
     incomplete financial and other information we provide to GM pursuant to the
terms of the IPO and Distribution Agreement.                          

INDEMNIFICATION RELATING TO THE OFFERING. We have generally agreed to 
indemnify General Motors and its affiliates against all liabilities arising out 
of any material untrue statements and omissions in this prospectus and the      
registration statement of which it is a part. However, our indemnification of GM
does not apply to information relating to General Motors, excluding information 
relating to Delphi. GM has agreed to indemnify us for this information.         

   INDEMNIFICATION RELATING TO THE DISTRIBUTION. We have generally agreed to
indemnify General Motors and its affiliates against all liabilities arising out 
of any material untrue statements and omissions in any and all registration     
statements, information statements and/or other documents filed with the SEC in 
connection with the Distribution. However, our indemnification of GM does not   
apply to information relating to General Motors, excluding information relating 
to Delphi. GM has agreed to indemnify us for this information.                  

EXPENSES. In general, unless otherwise provided for in the IPO and    
Distribution Agreement or any other agreement, we and GM will pay our respective
costs and expenses incurred in connection with the Contribution, the Offering   
and the Distribution.                                                           

 - Expenses Relating to the Offering. GM has generally agreed to pay all
  costs and expenses relating to the Offering, other than the costs of
 certain of our advisors. We will pay the underwriting discounts and
   commissions and our internal costs and expenses. In addition, we have
agreed that GM will be entitled to all amounts received from the  
underwriters for reimbursement of Offering expenses.              

     - Expenses Relating to the Distribution. GM has generally agreed to pay all
    costs and expenses relating to the Distribution. We will, however, pay
      for the costs and expenses of our financial, legal, accounting and other
     advisers, if any, incurred in connection with the Distribution. We will
also pay for our internal costs and expenses.                     

REGISTRATION RIGHTS AGREEMENT                                                   

 As noted above, General Motors has announced its current plan to divest
itself of ownership of our stock through the Distribution and we have agreed to 
cooperate with GM in all respects to complete the Distribution. We cannot,      
however, assure you as to whether or when the Distribution will occur. See "Risk
Factors--Risk Factors Relating to Separating Our Company from General           
Motors--Our Business May Be Adversely Affected if General Motors Does Not       
Complete Its Divestiture of Our Company." In the event that GM does not divest  
itself of all of its shares of Delphi common stock in the Distribution, GM could
not freely sell all of such shares without registration under the Securities    
Act. Accordingly, we have entered into a Registration Rights Agreement (as      
amended from time to time, the "Registration Rights Agreement") with GM to      
provide it with certain registration rights relating to the shares of our common
stock which it holds. These registration rights generally become effective at   
such time as GM informs us that it no longer intends to proceed with or complete
the Distribution.                                                               

  SHARES COVERED. The Registration Rights Agreement covers those shares of
our common stock that are held by GM immediately following this Offering and    
continue to be held by GM on the date on which GM notifies us that it no longer 
intends to proceed with or complete the Distribution.                           

 121

424B4
124th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 124th

DEMAND REGISTRATIONS. GM may request registration (each, a "Demand    
Registration") under the Securities Act of all or any portion of our shares     
covered by the Registration Rights Agreement and we will be obligated to        
register such shares as requested by GM.                                        

   - Terms of Each Offering. General Motors will designate the terms of each
     offering effected pursuant to a Demand Registration, which may take any
form, including:                                                  

(1) an underwritten public offering;                              

(2) a shelf registration;                                         

       (3) a registration in connection with the distribution of, or exchange of
         or offer to exchange, shares of our common stock to holders of debt
          or equity securities of GM, a subsidiary or affiliate thereof or any
other person; or                                          

(4) a distribution in connection with the registration by GM or a 
     subsidiary or affiliate thereof of securities convertible into,
       exercisable for or otherwise related to such shares of our common
stock.                                                    

 Except for an offering described in clauses (3) and (4) above, each
Demand Registration must meet a certain minimum aggregate expected
offering price.                                                   

     - Timing of Demand Registrations. We are not required to undertake a Demand
    Registration within 90 days of the effective date of a previous Demand
   Registration, other than a Demand Registration that was effected as a
   shelf registration. Also, we have the right to postpone the filing or
  effectiveness of any Demand Registration for up to 90 days if in the
 reasonable judgement of our General Counsel such registration would
      reasonably be expected to have a material adverse effect on any existing
proposal or plans by our company to engage in certain material    
   transactions; provided, however, that we may exercise this right only
once in any 12-month period.                                      

  - Priority on Demand Registrations. Other parties, including Delphi, can
     participate in any Demand Registration only if all of the securities GM
proposes to include in such registration are so included.         

 - Selection of Professionals. General Motors will select the investment
      banker(s) and manager(s), subject to our reasonable objection in certain
  circumstances, as well as any financial printer, solicitation and/or
 exchange agent and counsel for the Offering. We will select our own
outside counsel and independent auditors.                         

  PIGGYBACK REGISTRATIONS. The Registration Rights Agreement also provides
for certain "piggyback" registration rights for General Motors. Whenever we     
propose to register any of our securities under the Securities Act for ourselves
or others, subject to certain customary exceptions, we must provide prompt      
notice to GM and include in such registration all shares of our stock which GM  
requests to be included (each, a "Piggyback Registration").                     

     - Priority on Piggyback Registrations. If a Piggyback Registration is being
 made on our behalf and the underwriters advise us that cutbacks are
necessary, we must include in such registration:                  

- first, the securities we propose to offer;                          

- second, the securities requested to be included by GM; and          

- third, any other securities requested to be included in such        
registration.                                                   

     If a Piggyback Registration is being made on behalf of other holders of our
   securities and the underwriters advise us that cutbacks are necessary, we
must include in such registration:                                    

 - first, the securities requested to be included therein by the holders
      requesting such registration and the securities requested to be included
   therein by GM, pro rata among such holders and GM on the basis of the
number of securities owned by each such holder; and               

 122

424B4
125th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 125th

- second, any other securities requested to be included in such     
registration.                                                   

   - Selection of Underwriters. In certain circumstances, General Motors has
the right to reasonably object to our selection of any investment 
   banker(s) and manager(s) in connection with a Piggyback Registration.

  HOLDBACKS. The Registration Rights Agreement contains customary holdback
provisions.                                                                     

 REGISTRATION PROCEDURES AND EXPENSES. The Registration Rights Agreement
sets forth customary registration procedures, including a covenant by us to make
available our senior management for road show presentations. All registration   
expenses incurred in connection with the Registration Rights Agreement,         
including all filing fees, fees and expenses of compliance with securities      
and/or blue sky laws, financial printing expenses, fees and disbursements of    
custodians, transfer agents, exchange agents and/or information agents, and fees
and disbursements of counsel for our company and all independent certified      
public accountants, underwriters, excluding discounts and commissions, and other
persons retained by us will be paid by us. In addition, we must reimburse GM for
the fees and disbursements of its outside counsel as well as out-of-pocket      
expenses incurred in connection with any such registration.                     

INDEMNIFICATION. The Registration Rights Agreement contains customary 
indemnification and contribution provisions by us for the benefit of General    
Motors and any underwriters and by General Motors for the benefit of us and any 
underwriters with respect to information provided by GM.                        

TRANSFER. GM may transfer shares covered by the Registration Rights   
Agreement and the holders of such transferred shares will be entitled to the    
benefits of the Registration Rights Agreement; provided that each such          
transferee agrees to be bound by the terms of the Registration Rights Agreement.
Such transferees will be entitled to the rights available to GM described above;
provided, however, that the holder or holders of a majority of the shares       
covered by the Registration Rights Agreement will be entitled to exercise       
certain of such rights. Any successor entities to our company will be bound by  
the terms of the Registration Rights Agreement.                                 

   DURATION. The registration rights under the Registration Rights Agreement
will remain in effect with respect to any shares of Delphi common stock until:  

- such shares have been sold pursuant to an effective registration    
statement under the Securities Act;                               

   - such shares have been sold to the public pursuant to Rule 144 under the
Securities Act, or any successor provision;                       

  - such shares have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been 
       delivered by the company and subsequent public distribution of them shall
      not require registration of them under the Securities Act or any similar
state law;                                                        

- such shares have ceased to be outstanding; and                      

     - in the case of shares held by a transferee of GM, when such shares become
    eligible for sale pursuant to Rule 144(k) under the Securities Act, or
any successor provision.                                          

SUPPLY AGREEMENT                                                                

GENERAL. We have entered into a Component Supply Agreement with GM (as
amended from time to time, the "Supply Agreement") which we believe will provide
us with a substantial base of future business with GM-North America well into   
the next decade. GM currently sources a significant amount of its automotive    
parts requirements from us pursuant to certain existing contractual commitments.
Except as described below, the Supply Agreement between GM and Delphi provides  
that all existing contracts as of January 1, 1999 will generally remain in      
effect--even if we have not yet begun to supply products under such contracts,  
including the pricing, duration and purchase order terms and conditions. The    
Supply Agreement also provides that, subject to certain exceptions as described 
below, we have the right to provide on                                          
 123

424B4
126th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 126th

competitive terms the first replacement cycle of all product programs in the    
United States and Canada which we were providing to GM as of January 1, 1999,   
provided that GM sources such replacement cycle business prior to January 1,    
2002. We expect these programs will cover specific vehicle models introduced    
from 1999 well into the next decade. We will also have the opportunity to bid on
other new GM business on the same basis as other suppliers.                     

Our ability to realize revenues on all GM business, including business
awarded pursuant to existing contracts, is in all cases subject to a variety of 
factors, including the volume and option mix of vehicles actually produced by   
GM. The Supply Agreement provides that General Motors has the right to move its 
business with us to other suppliers in the event that we are not competitive in 
terms of quality, service, design and technology. In addition, GM has the right 
at all times to adopt new technology, whether or not such technology is         
available through us. If we are unable to provide the new technology or an      
equivalent technology acceptable to GM on a competitive basis, GM is free to    
move the business from us to another supplier.                                  

EXISTING CONTRACTS. Under the terms of the Supply Agreement, except as
provided below, all existing contractual commitments between us and GM relating 
to the purchase and supply of motor vehicle-related components and systems as of
January 1, 1999 will generally remain in effect, including the existing pricing,
duration and purchase order terms and conditions. This includes existing        
contracts under which we have not yet begun to supply products. These           
contractual commitments relate to the purchase of automotive parts by General   
Motors for specific General Motors vehicle programs and fall into three         
principal categories:                                                           

 - short-term purchase orders, usually covering purchases for a one-year
term;                                                             

 - long-term contracts, covering purchases for a period of more than one
year but less than the life of a vehicle program; and             

     - lifetime contracts, covering either the actual or anticipated life of the
      vehicle program, which is generally five to six years for cars and seven
to eight years for trucks.                                        

Long-term and lifetime contracts with GM typically incorporate the terms and    
conditions set forth in the standard GM purchase order form, which we believe   
are generally consistent with those prevailing in the automotive industry. All  
existing contracts are subject to the volume and option mix of vehicles actually
produced by General Motors and other factors. See "Business of                  
Delphi--Industry--Awarded Business."                                            

 Under the terms of the Supply Agreement, Delphi and General Motors have
agreed to honor all "nomination letters" in place as of January 1, 1999         
regardless of whether formal purchase orders or other contractual commitments   
have been issued with respect to such business. Nomination letters refer to     
letters from General Motors informing a supplier that it has been awarded       
specific business to supply a product for a particular vehicle program. In light
of the long product development cycles in the automotive industry, General      
Motors typically issues its nomination letters and other new business           
commitments about three years in advance of actual production of the vehicle    
program. These nomination letters commit GM, subject to certain conditions, to  
source products for a particular vehicle program from a supplier. However, if GM
determines for any reason not to proceed with the vehicle program covered by a  
nomination letter, it is under no obligation to such supplier. Also, as with    
other purchase arrangements, nomination letters do not require any minimum      
purchase and are subject to actual production volumes, supplier competitiveness 
and other factors.                                                              

PAYMENT TERMS. Until recently, most of our existing contracts with GM 
required payment by GM in the month following GM's receipt of our invoice.      
Except as described below, payment terms on all existing contracts have been    
modified by the Supply Agreement to generally require payment from GM to us     
under such contracts on the second day of the second month following the date of
shipment by Delphi. For more information regarding the impact of these modified 
payment terms on our financial condition, see "Management's Discussion and      
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Extension of Payment Terms." The modified payment terms became       
effective on January 1, 1999 and also apply to future contracts with GM. These  
modified payment terms are consistent with the new payment terms that GM is     
currently in the process of introducing to its other suppliers.                 

 124

424B4
127th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 127th

The Supply Agreement also provides that certain contracts relating to 
purchases of parts for Saturn vehicle models will retain the consumption        
methodology currently in place, which generally provides that Saturn pays only  
for the actual amount of product used rather than the amount of product         
delivered. Also, certain existing contracts relating to purchases by GM's       
international automotive operations will retain the existing payment terms.     

OUR ABILITY TO SECURE CERTAIN NEXT GENERATION BUSINESS. The Supply    
Agreement is intended to provide us the opportunity to capture future GM        
business that replaces current GM business over the next several years. Through 
December 31, 2001, we will have the ability to secure under competitive purchase
order terms the first replacement cycle of all product programs in the United   
States and Canada which we were providing to General Motors as of January 1,    
1999, and certain other product programs as described below. Thus, we will have 
the opportunity to match competitive bids from other suppliers on the next      
generation of the product programs we provided to GM in the United States and   
Canada as of January 1, 1999, provided those programs are sourced by GM prior to
January 1, 2002. However, in order to utilize this ability to secure next       
generation business, we must be competitive in terms of design, quality, price, 
service and technology. Other suppliers' bids to provide particular products may
include offers of price reductions to GM on other current or future products,   
and GM may under the Supply Agreement consider the economic effect of such      
package proposals in assessing our competitiveness.                             

  As noted above, General Motors generally sources its product needs about
three years in advance of the start of production for each vehicle program.     
Since many of these contractual commitments cover a significant period of time  
due to the duration of many vehicle programs of about five to eight years,      
depending on the vehicle model, we expect that this ability to secure next      
generation business, together with our existing contracts and nomination        
letters, will provide us with the opportunity to maintain substantial business  
with GM well into the next decade.                                              

     Our ability to secure next generation business as described above, which is
sometimes referred to as a "right of last refusal," includes production in the  
United States and Canada of common global vehicle platforms to the extent that  
we can provide or execute designs that comply with the required form and        
function specifications determined by GM, as well as production in Mexico of    
vehicles intended for sale in the United States or Canada; provided that in all 
cases such programs must meet all of the other necessary criteria, including    
that such programs were programs in the United States and Canada which we were  
providing to GM as of January 1, 1999. Other than as described immediately      
above, our ability to secure next generation business will not apply to any     
programs of GM's international automotive operations or to GM vehicle production
in Mexico.                                                                      

The Supply Agreement also expressly provides that GM will not be      
responsible under any circumstances for any supplemental or compensatory        
payments to us in the event that we fail to exercise our ability to secure any  
next generation business or if we cannot provide our products on a competitive  
basis.                                                                          

NEW BUSINESS. All new business awarded to us by General Motors will be
governed by the specific terms of the contracts under which such new business is
awarded. Other than with respect to next generation business as described above,
if we elect to bid for GM business, we will do so on the same basis as all other
suppliers. General Motors will award any such business in its sole discretion.  

GM'S RIGHT TO RE-SOURCE. Consistent with GM's contracts with other    
suppliers, the Supply Agreement provides General Motors the right to re-source  
its business with us in the event that we are not competitive in terms of       
quality, service, design and technology. Competitiveness is defined by          
demonstrable product and performance levels available to GM from other          
suppliers. The term "re-sourcing" refers to the process of moving existing      
business from Delphi to another supplier.                                       

In the event that we are non-competitive with respect to a particular 
product, General Motors is required to notify us of any such non-competitiveness
and provide us with a reasonable period of time during which to correct any such
non-competitiveness before GM may re-source the business. With respect to non-  
competitiveness in terms of quality and service, the parties will follow GM's   
Supplier Quality Improvement                                                    

 125

424B4
128th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 128th

Process, which is also known as the "16-Step Process", in order to identify and 
remedy quality and service problems. With respect to non-competitiveness in     
terms of design and technology, the parties will work together to identify      
acceptable solutions and GM will be permitted to re-source the business only if 
these efforts are unsuccessful within a reasonable period of time.              

    GM'S RIGHT TO ADOPT NEW TECHNOLOGIES. The Supply Agreement permits General
Motors at all times to adopt new technology, whether or not any such new        
technology is available through us. In the event that GM wishes to introduce a  
technological change to a product covered by a then existing contract with us,  
we have a right of last refusal to implement the new technology or an equivalent
technology acceptable to GM and continue production through the remaining term  
of the existing contractual commitment. If we are unable to provide the new     
technology or equivalent technology on a competitive basis, General Motors is   
free to re-source the business to another supplier. Disputes regarding new      
technology under this process will be resolved by a senior engineer from each of
GM and Delphi plus a third-party facilitator mutually acceptable to both sides. 

TECHNICAL INFORMATION. Consistent with general practice within our    
industry, we have agreed under the Supply Agreement to cooperate with GM to     
share with GM technical information about the products we supply to GM and their
manufacture, without restriction as to use.                                     

    USE OF GM'S TOOLING. We will not use tooling to produce products for other
customers if such tooling is used to produce products for GM; provided, however,
that we will be allowed to continue the use of such tooling to the extent       
necessary to satisfy contracts with other customers where the tooling has been  
used for this purpose before January 1, 1999 and extensions of such contracts.  
We have agreed not to use tooling owned by GM to compete against GM-SPO in the  
aftermarket.                                                                    

DELPHI PLANT CLOSURES AND PRODUCT ELIMINATIONS. In the event that we  
propose to close a plant or eliminate a product line, we must keep General      
Motors informed on a timely basis of our decision-making process and in good    
faith reasonably consider modifying our plans in order to accommodate GM's      
timing requirements with respect to re-sourcing the business. Additionally, the 
Supply Agreement provides that in the event of an extension of production by    
General Motors of an existing product, which is covered by a contract with a    
fixed term, beyond the term of the original anticipated program life, General   
Motors has the right to require us to continue production and sale of that      
product to GM for a reasonable period of time on commercially reasonable terms  
to be negotiated between the parties.                                           

    DELPHI DIVESTITURES. In the event that we propose to divest a business, we
must keep General Motors informed on a timely basis of our decision-making      
process and in good faith reasonably consider GM's input and concerns. Upon our 
selection of a qualified buyer, existing contracts with GM relating to the      
business being sold may be assigned to the buyer upon GM's prior written        
consent, which will not be unreasonably withheld. In such cases, General Motors 
will negotiate a new supply agreement with the buyer which will contain         
substantially the same terms as our existing arrangements with General Motors   
with respect to the business being sold. Any deviations from the terms of the   
existing arrangements, including with respect to price, must be mutually agreed 
upon by us and GM. During the term of the assigned contract, Delphi and General 
Motors have agreed to dedicate appropriate resources and efforts to ensure that 
General Motors receives comparable levels of quality, service, delivery, price  
and technology.                                                                 

SERVICE PARTS. The Supply Agreement also applies to service parts we  
provide to General Motors for sale to GM-authorized dealers worldwide. In       
general, unless otherwise provided in our existing contracts with GM, the unit  
pricing on service parts that are not "past model" will continue at the prices  
charged to General Motors until three years after such service parts go past    
model. The term "past model" refers to parts which are used on vehicle models   
which are no longer in production. Thereafter, unit prices for such service     
parts will be negotiated between the parties.                                   

     QUALITY IMPROVEMENT. In order to facilitate quality improvement, the Supply
Agreement provides that we will participate in all GM supplier quality and      
development programs. General Motors is entitled to require us to achieve       
reasonable increased quality standards. All increased quality standards         
established by General Motors must be comparable to then existing industry      
standards.                                                                      

 126

424B4
129th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 129th

 TERMINATION. Unless terminated in accordance with its terms, the Supply
Agreement will remain in effect as long as any existing agreement is in effect, 
including any extensions of any such existing agreement. Either Delphi or       
General Motors may terminate the Supply Agreement for:                          

- material breach by the other party;                                 

- insolvency or bankruptcy of the other party; or                     

- attachment, embargo or expropriation of a significant portion of the
   other party's assets necessary in order for that party to perform its
obligations under the Supply Agreement.                           

In addition, General Motors can terminate the Supply Agreement if:    

- 35% or more of our company becomes owned or controlled, directly or 
indirectly, by a competitor of General Motors in the business of  
manufacturing automotive vehicles; or                             

   - all of the underlying contracts governed by the Supply Agreement become
subject to termination or cancellation pursuant to their terms.   

     Underlying contracts become subject to termination or cancellation by GM as
the result of a variety of factors, such as our non-competitiveness, cause,     
expiration and, in some cases, termination for convenience. Termination for     
convenience means GM can terminate the contract at any time for any reason. The 
majority of underlying contracts having termination for convenience provisions  
are shorter-term purchase orders. This right to terminate for convenience could 
be exercised by GM in connection with any change in control of Delphi. Certain  
change in control transactions could also give GM the right to terminate        
underlying contracts pursuant to the provisions prohibiting us from assigning   
our contracts to another entity.                                                

In the event that a competitor of GM in the business of manufacturing 
automotive vehicles acquires, directly or indirectly, a significant interest in 
our company, we must provide GM with reasonable assurances that we will use our 
best efforts to preserve the confidentiality of all information relating to     
products supplied to General Motors and GM vehicle programs.                    

Termination of the Supply Agreement would be likely to have a material
adverse effect on our company.                                                  

DISPUTE RESOLUTION. The Supply Agreement provides that all disputes or
other matters related to the Supply Agreement will be exempt from the dispute   
resolution process set forth in the Separation Agreement or in any other        
agreement related to the transactions contemplated therein.                     

AFTERMARKET SALES                                                               

  We are currently party to a Business Relationship Agreement (as modified
and as amended from time to time, the "Business Relationship Agreement") with   
GM-SPO regarding aftermarket sales in the United States. This agreement does    
not, however, cover the service parts provided to General Motors pursuant to the
Supply Agreement for sale to GM-authorized dealers and distributors. The        
Business Relationship Agreement becomes subject to termination by either party  
on or after December 31, 1999 upon twelve months prior notice to the other      
party. This means the Business Relationship Agreement cannot be terminated any  
earlier than December 31, 2000. Until such time, in return for certain royalties
and fees it pays to us, GM-SPO generally has the right to act as the exclusive  
distributor of our aftermarket parts in the United States. The pricing under the
Business Relationship Agreement is being benchmarked in an effort to ensure     
market based pricing with respect to ACDelco(R) branded products. Pursuant to an
Aftermarket Agreement dated as of January 1, 1999, the payment terms between us 
and GM-SPO are being modified so that GM-SPO will pay us on the second day of   
the second month following our shipment of a product. Under the Business        
Relationship Agreement, if we can meet the market price for a particular        
aftermarket product, GM-SPO must buy such aftermarket product from us.          
Alternatively, we may choose not to meet the market price for a particular      
aftermarket product and cease supplying such product in the aftermarket in the  
United States. Until January 1, 2001, we are obligated to offer all new         
technology with respect to aftermarket products to GM-SPO on a non-exclusive    

 127

424B4
130th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 130th

basis, under terms no less favorable than those offered to our other customers. 
Following the termination of the Business Relationship Agreement, we may begin  
distributing our own products in the aftermarket in the United States.          

Outside the United States, we distribute our own aftermarket products 
independently of General Motors and, with certain exceptions related to         
batteries, we are free to seek any aftermarket sales opportunities.             

  We have agreed with GM-SPO to split the ownership of current aftermarket
brands. As a result, we own the Freedom(R) brand, but may not use the brand in  
the United States until after the expiration of the Business Relationship       
Agreement; GM-SPO owns the ACDelco(R) brand and any AC and Delco derivatives and
formatives; and GM-SPO owns the Voyager(R) battery brand, but may only use it on
batteries sourced from us. There will be a transition period for us and our     
licensees to wind down our use of the brands owned by GM or brands owned by     
Delphi but currently used by GM.                                                

PURCHASING                                                                      

    We have entered into agreements with GM pursuant to which we will continue
to purchase productive materials under existing contracts that were entered into
by General Motors on our behalf, until those contracts expire. Such agreements  
provide that we are entitled to continue to use the purchasing systems currently
used by GM's purchasing organization until such time as we establish our own    
purchasing system, which we estimate will not take more than five years. In     
addition, in certain international operations, we may continue to operate in a  
shared purchasing arrangement with GM for up to five years.                     

EMPLOYEE MATTERS                                                                

     We have entered into several agreements (collectively, as amended from time
to time, the "Employee Matters Agreements") with GM to allocate responsibility  
and liability for certain employee related matters. However, GM is obligated to 
bargain in good faith with the unions representing our hourly employees         
regarding the effects of the separation of Delphi from GM on their members. As a
result, the understandings between us and GM related to the effect of the       
separation on our hourly employees represented by unions may be affected by     
negotiations with the unions representing these employees. GM has advised us    
that it intends to work with such unions in this regard. For more information   
about the status of GM's discussions with the unions, see "Business of          
Delphi--Strategy--Improve Operating Performance--Labor Relations." The Employee 
Matters Agreements generally provide for the following:                         

EMPLOYEE TRANSFERS. As of January 1, 1999, all GM salaried employees, 
active and inactive, that are employees in our operations were transferred to   
Delphi. GM U.S. hourly employees, active and inactive, that are employees in our
operations were transferred to Delphi as of January 1, 1999 and will remain     
under the applicable national collective bargaining agreement, and incorporated 
employee benefit plans, until the Distribution. However, the transfer of        
salaried and hourly employees at certain of our international operations, and of
certain related pension and employee benefits plans, may not take place until   
the receipt of consents or approvals or the satisfaction of other applicable    
requirements. For all U.S. salaried employees who retired on or before January  
1, 1999, GM is retaining responsibility for pension obligations and for other   
postretirement employee benefits ("OPEB") obligations, consisting primarily of  
retiree medical obligations. GM has had discussions with certain of the unions  
that represent the GM hourly employees transferred to us regarding the effect of
the separation on the employees. For information regarding these discussions,   
see "Business of Delphi--Strategy--Improve Operating Performance--Labor         
Relations." With regard to our hourly employees and the employees of divested   
Delphi units, GM generally will retain postretirement benefit obligations for   
U.S. hourly employees who retire on or before October 1, 1999. We have reached  
agreements with the UAW and the IUE to this effect. We anticipate that we will  
assume OPEB obligations and pension obligations for such employees who retire   
after October 1, 1999.                                                          

     As between GM and Delphi, the allocation of these obligations has been made
based on certain estimated levels of employee retirement prior to October 1,    
1999 based on historical experience and conditions                              

 128

424B4
131st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 131st

surrounding Delphi's separation from GM. We have agreed with GM to recalculate  
the allocation of these liabilities based on the actual level of retirements on 
or before October 1, 1999. Accordingly, if and to the extent that greater than  
the assumed number of employees retire on or before October 1, 1999, we would be
required to make a payment to GM. Depending on the amount of such a payment, if 
any, it could have a material adverse effect on our short-term liquidity.       
Similarly, if and to the extent that fewer than the assumed number of employees 
retire on or before October 1, 1999, GM would be required to make a payment to  
us. The amount of postretirement benefits varies from time to time, depending on
factors such as discount rate, asset returns, contributions and other factors.  
As of September 30, 1998, Delphi's salaried and hourly OPEB obligation was about
$4.5 billion and the underfunded pension obligation was about $1.9 billion.     

    CERTAIN FLOW-BACK RIGHTS. It is anticipated that the union discussions may
result in some of our hourly employees in the United States being provided with 
certain opportunities to transfer to GM as appropriate job openings become      
available at GM and GM employees in the United States having similar            
opportunities to transfer to our company to the extent job openings become      
available at our company. In general, if an employee transfers from our company 
to GM and then retires from GM, or transfers from GM to our company and retires 
from our company, both our company and GM will be responsible for pension       
payments which in total reflect such employee's entire years of service.        
Responsibility for such pension payments will generally be allocated between the
companies based on such employee's entire pre-transfer or post-transfer service,
respectively. In the case of employees transferring from Delphi to GM,          
pre-transfer service will include service with GM prior to our separation from  
GM and thus will be reflected in the portion of the pension payments we must    
bear. It is not currently anticipated that there will be any transfer of pension
assets or liabilities between us and GM with respect to such employees that     
transfer between our companies.                                                 

With respect to OPEB obligations for such transferring employees, the 
company to which an employee transfers will provide the OPEB benefits for such  
employee. We have entered into an agreement with GM which provides for a        
mechanism for determining a cash settlement amount for OPEB obligations         
associated with employees that transfer between our company and GM during any   
year. Pursuant to this agreement, upon identification of the employees that     
transferred between GM and our company during the past year, an actuarial       
analysis will be done to determine an estimated pattern of employment cessation,
including from retirement, death, or voluntary termination, of such employees.  
This estimated pattern of employment cessation will determine the timing of     
payments due between us and GM for the employees that transferred between our   
companies in a given year.                                                      

  Separate actuarial analysis will be done for employees transferring from
our company to GM and from GM to our company. The actuarial assumptions to be   
used in valuing the OPEB obligations associated with transferring employees will
be based on those used in conjunction with the receiving company's annual OPEB  
valuation for the given period. The liability with respect to such transferring 
employees will be retained by the company from which the employee transferred   
until the cash settlement with respect thereto has been made, upon which such   
liability will be recognized by the company to which the employee transferred.  

  EMPLOYEE BENEFITS. We have established or will establish our own pension
and employee benefit plans, which generally will be the same as GM's pension and
employee benefit plans. Our U.S. salaried employees began participating in these
plans on January 1, 1999 and our U.S. hourly employees will begin participating 
in these plans at the time of the Distribution.                                 

Our plans generally will assume all liabilities under GM's plans to   
employees assigned to us. Certain pension assets funding pension liabilities    
will be transferred from trusts and other funding vehicles associated with GM's 
plans to the corresponding trusts for our plans.                                

GENERAL MOTORS STOCK AWARDS. In connection with the completion of the 
Distribution, awards (collectively, "GM Awards") held by our employees as of    
such date under GM's incentive and variable pay plans will be replaced with     
awards under our incentive and variable pay plans. With certain exceptions, GM  
Awards held by individuals employed by General Motors as of the date of the     
completion of the Distribution and by individuals who have retired prior to     
replacement of such GM Award, will remain outstanding as GM Awards, with an     
appropriate revaluation to reflect the Distribution.                            

 129

424B4
132nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 132nd

   In the case of GM Awards consisting of stock options, such awards will be
replaced with options to acquire a number of shares of our common stock equal to
the number of shares of GM $1 2/3 common stock subject to such GM Award as of   
the date of the completion of the Distribution, multiplied by the Ratio         
described below, rounded down to the nearest whole share. The per share exercise
price of such converted award will equal the per share exercise price of such GM
Award divided by the Ratio.                                                     

In the case of awards under the GM Performance Achievement Plan, any  
unvested installments of final awards which are in the form of GM $1 2/3 common 
stock or GM Class H common stock, will be converted into shares of Delphi common
stock using a ratio similar to the one described below for converting GM Awards 
consisting of stock options into options to acquire shares of Delphi's common   
stock.                                                                          

The "Ratio" means the amount determined by dividing:                  

   - the average of the daily high and low per share prices of the GM $1 2/3
      common stock, or the Class H common stock if Class H common stock awards
     are being converted, as reported in The Wall Street Journal, during the
       three trading days ending on a date of record established by the GM Board
of Directors in connection with the Distribution; by              

- the average of the daily high and low per share prices of the Delphi
 common stock, as reported by The Wall Street Journal, for the three
trading days commencing on the day after such date of record.     

 SHARES OF DELPHI'S COMMON STOCK SUBJECT TO SUBSTITUTE AWARDS. It is not
possible at this time to specify how many shares of our common stock will be    
subject to substitute awards for GM Awards. We expect that some GM Awards       
consisting of stock options held by our employees will be exercised, other GM   
Awards will vest and other GM Awards could be granted, prior to the date of the 
completion of the Distribution. In addition, the remaining balance of           
unexercised options pursuant to GM Awards will be replaced with options to      
acquire shares of our common stock by reference to the Ratio, which will not be 
known until the time of the Distribution. Our stockholders, are, however, likely
to experience some dilutive impact from the above-described adjustments.        

 As of February 2, 1999, our employees held about 4,416,000 shares of GM
$1 2/3 common stock subject to options pursuant to GM Awards, about 1,457,000 of
which were exercisable as of February 2, 1999. If the Ratio were determined     
using the $89.44 per share closing price of the GM $1 2/3 common stock on       
February 2, 1999, as reported in The Wall Street Journal and the offering price 
of $17.00 per share of our common stock, the foregoing number of shares of GM   
$1 2/3 common stock subject to GM stock options would be replaced with options  
on about 23,231,000 shares of our common stock. As of February 2, 1999, there   
were less than 5,600 shares of GM's Class H common stock subject to GM Awards   
held by our employees which will be replaced with awards of our common stock.   

TAX MATTERS                                                                     

     We have entered into two income tax allocation agreements with GM to govern
the allocation of U.S. income tax liabilities and to set forth agreements with  
respect to certain other tax matters. The first tax allocation agreement is     
effective from the Contribution Date until such time as we cease to be a member 
of the General Motors consolidated group. The second tax allocation agreement,  
which supersedes and replaces the first agreement, is effective on the day after
we cease to be a member of the General Motors consolidated group. Under the     
Code, we would cease to be a member of the General Motors consolidated group    
upon the completion of the Distribution or if GM owns less than 80% of our      
outstanding capital stock. The first tax allocation agreement is only effective 
from January 1, 1999 until tax deconsolidation. Unless otherwise noted, the     
provisions described below are contained in both agreements.                    

GM generally will pay all income taxes attributable to Delphi and its 
subsidiaries for tax periods before the Contribution Date. For tax periods      
during which we are a member of the General Motors consolidated group, we will  
calculate our tax liability as if we were a separate affiliated group of        
corporations filing a consolidated return, but we will pay our calculated taxes 
to General Motors, which will then file a consolidated                          

 130

424B4
133rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 133rd

or combined return with the appropriate tax authorities. There may be certain   
U.S. state or local jurisdictions in which we will file a separate income tax   
return, not combined or consolidated with GM, for tax periods before tax        
deconsolidation. In that circumstance, we would file the income tax return with 
the appropriate tax authorities, and pay the tax directly to the tax authority. 
Tax benefits generated by our company for tax periods before tax deconsolidation
will reduce our tax liability, but not below zero, and we will not be           
compensated for tax benefits generated by our company and used by the General   
Motors consolidated group. Except for tax elections, which are defined for      
purposes of allocating taxes as the treatment of items in tax returns and       
filings, that may have an adverse impact on the General Motors consolidated     
group or tax elections that must be made by the parent corporation of a         
consolidated group, we will determine all tax elections for tax periods during  
which we are a member of the GM consolidated group. We will prepare and file all
tax returns, and pay all income taxes due with respect to all tax returns       
required to be filed by us for all tax periods after we cease to be a member of 
the GM consolidated group or for U.S. state or local jurisdictions in which our 
return is not combined or consolidated with GM's return.                        

   GM is responsible for most U.S. tax adjustments related to Delphi for all
periods prior to tax deconsolidation, other than adjustments related to Delco   
Electronics, which previously had been a separate entity in the General Motors  
consolidated group, or related to certain tax elections made by Delphi. In      
addition, we and GM have agreed to cooperate in any tax audits, litigation or   
appeals that involve, directly or indirectly, periods prior to the time that we 
cease to be a member of the General Motors consolidated group. We and GM have   
agreed to indemnify each other for tax liabilities resulting from the failure to
cooperate in such audits, litigation or appeals, and for any tax liability      
resulting from the failure to maintain adequate records. The second tax         
allocation agreement also provides that with respect to our foreign taxes, we   
may be required to indemnify General Motors in certain situations where we      
receive a refund of foreign tax related to a tax period prior to tax            
deconsolidation and GM's foreign tax credit is reduced as a result of the       
refund. With a few exceptions, Delphi's subsidiaries outside the United States  
will generally be responsible for foreign tax adjustments relating to Delphi's  
businesses for all periods prior to the Contribution Date.                      

INTELLECTUAL PROPERTY                                                           

     We have entered into agreements with GM to govern the division and transfer
of certain intellectual property. Pursuant to these agreements, General Motors  
has assigned, or agreed to transfer, to us all patents, patent applications and 
invention records that are primarily related to components produced or sold by  
us and any other patents that are more valuable to us than to General Motors.   
Accordingly, GM has transferred to us full or partial ownership of about 2,800  
patents, 640 U.S. patent applications and 620 records of invention as well as   
the corresponding foreign patent and patent applications. We have agreed with GM
to enter into royalty-free cross-licenses for certain intellectual property and 
we believe that the aggregate values of the cross-licenses are about equal. We  
have also agreed with GM that each of us can collect reasonable royalties or    
damages under certain patents from the other's suppliers with whom the other    
does not have or extend an existing supply commitment. Also, GM has transferred 
to us ownership of about 1,170 trademark registrations and applications, about  
70 of which are U.S. and the balance of which are foreign, as well as           
unregistered trademarks. Certain other intellectual property agreements relating
to our business have been transferred to us, and with respect to intellectual   
property agreements entered into for the benefit of both parties, GM will use   
reasonable efforts to have us made party to such agreements.                    

    We have entered into agreements with GM that place restrictions on the use
of certain technologies. For example: GM will have a right of first access and  
limited exclusivity for certain of OnStar-related vehicle information management
technology; each party is restricted from disclosing certain powertrain, vehicle
control, collision avoidance and other software algorithms to third parties     
without the consent of the other party; and General Motors will retain ownership
of certain fuel cell propulsion system and related technologies, although we    
will have the right to supply a minimum of 25% of the volume of components for  
GM's first two major vehicle programs to utilize the fuel cell technology,      
provided we can meet certain conditions, including competitive benchmarks on    
quality, service and price.                                                     

 131

424B4
134th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 134th

  There are certain restrictions on our use of some of the trademarks that
have been assigned to us. In addition, certain trademarks and trade names have  
been licensed, rather than transferred, to us, and there are restrictions on the
geographical territory, duration and/or scope of our use of such licensed       
trademarks and trade names. Our Delco Electronics subsidiary has a perpetual,   
worldwide, royalty-free license to use the trade name "Delco Electronics" and   
the trademarks "DELCO" and "DELCO ELECTRONICS" in connection with several of our
business units, but we must wind down our use of that trade name and those      
trademarks to include only automotive audio products by January 1, 2001. We have
a worldwide license to use the trademarks "AC," "DELCO" and "AC Delco," but we  
must wind down all use of these marks, including such use by our dealers and    
distributors by January 1, 2000. This license is royalty-free, except that under
certain circumstances relating to joint ventures and third-party relationships  
that have been assigned to us, we may be required to pay GM a royalty.          

REAL ESTATE AND ENVIRONMENTAL                                                   

     We have entered into agreements with GM and executed certain instruments to
assign or sub-lease GM's real estate portfolio related to the Delphi Automotive 
Systems Business, consisting of both owned and leased property, between our     
companies as follows:                                                           

 - With respect to the facilities that were owned by GM and used only in
    connection with our business, such facilities have been transferred to
our company.                                                      

    - With respect to facilities owned by GM and used by both GM and us, GM is
    leasing to us the portion of such facilities which we use. Such leases
are generally for a term of three years and the rent thereunder   
approximates prevailing market rates.                             

- With respect to facilities that were leased by GM and used only in  
       connection with our business, GM has assigned such leases to us. Pursuant
      to these assignments, we have assumed all of GM's obligations under each
       assigned lease and agreed to indemnify GM against all obligations arising
under such leases after their assignment.                         

  - With respect to facilities leased by GM and used by both GM and us, GM
    has sub-leased to us the portion of such facilities which we use. Such
    sub-leases are generally for the then remaining term of GM's lease for
    such facilities, less one day, and the rent thereunder shall generally
   equal the occupancy cost per square foot payable under GM's lease for
such facility.                                                    

   - GM has also assigned to us its interest in the facilities held by joint
 ventures in which GM was a party and which facilities we utilize or
operate.                                                          

     Under the lease and sub-lease arrangements described above, the lessor will
retain responsibility for releases of hazardous materials at the facility before
the closing of the real estate transactions and for certain identified          
environmental non-compliance matters relating to pre-closing operations. The    
lessee will be responsible for releases of hazardous materials at the facility  
after the closing and for all other environmental non-compliance matters during 
the lease term.                                                                 

With respect to the facilities transferred to us, we have assumed all 
operating costs thereof and applicable financial and environmental reserves with
respect thereto. With respect to facilities that are not transferred to us,     
including all facilities closed or sold prior to January 1, 1999, General Motors
has retained all operating costs thereof and applicable financial and           
environmental reserves with respect thereto, whether or not such facilities were
previously used by Delphi.                                                      

     Pursuant to the separation arrangements between our company and GM, GM will
be responsible for environmental liabilities at the GM facilities that are not  
transferred to us, including all facilities closed or sold prior to January 1,  
1999, except that we will be responsible for any environmental liabilities at   
such facilities that we cause after January 1, 1999. We will be responsible for 
environmental liabilities at the facilities that                                

 132

424B4
135th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 135th

are transferred to us, except that GM will be responsible for any environmental 
liabilities at such facilities that GM causes after January 1, 1999.            

    In addition, with respect to liability for offsite waste disposal, GM will
retain responsibility for sites where GM's liability is known or alleged prior  
to January 1, 1999, except that we will be responsible for any wastes Delphi    
contributes to these sites after January 1, 1999. We will not, however, be      
responsible for any contributions to these sites from the facilities transferred
to us that occurred prior to January 1, 1999. At other waste disposal sites,    
GM's and Delphi's respective liability will be allocated based on each party's  
respective contribution of wastes to such sites. In particular, GM's liability  
will be based on contributions from the facilities it retains and any other     
facility owned or operated by GM, except the facilities transferred to us.      
Delphi's liability will be based on contributions from the facilities           
transferred to us and any other facility owned or operated by Delphi.           

TOOLING, CONTAINERS AND DUNNAGE                                                 

We have entered into agreements with GM to allocate the ownership of  
tooling, containers and dunnage. GM and Delphi will each own the tooling that   
was reflected on their respective balance sheets as of January 1, 1999. The term
"tooling" refers to all tools, jigs, dies, gauges, fixtures, molds, patterns and
similar items necessary for the production of automotive parts. We will not use 
tooling to produce products for other customers if such tooling is used to      
produce products for GM; provided, however, that we will be allowed to continue 
the use of such tooling to the extent necessary to satisfy existing contracts,  
and extensions of such contracts, where we have previously used such tooling to 
produce products for other customers. For more information, see "--Supply       
Agreement--Use of GM's Tooling."                                                

     Containers and dunnage used for the transportation of our products from our
facilities to GM facilities or other Tier 1 suppliers to GM will be owned by    
General Motors. The term "dunnage" refers to the materials, such as padding,    
wrappings and other loose materials, used to protect automotive parts during    
shipment. We will own containers and dunnage used for the transportation of our 
products within our facilities. Finally, we will own containers and dunnage used
for the transportation of products between us and our suppliers.                

WARRANTY MATTERS                                                                

   Our warranty responsibility for products supplied to General Motors under
existing contractual arrangements will be governed by the terms and conditions  
of those contracts. Generally, those terms and conditions provide that Delphi   
expressly warrants to GM that all goods and services covered by the contract    
will conform to the specifications, drawings, samples or descriptions furnished 
to or by General Motors, and will be merchantable, of good material and         
workmanship and free from defect. In addition, Delphi acknowledges that it knows
of GM's intended use for the products and expressly warrants that the products  
have been selected, designed, manufactured or assembled based on GM's stated use
and will be fit and sufficient for the purposes intended by General Motors.     

     We have agreed with GM pursuant to the Supply Agreement to work together in
good faith to reduce warranty costs, including through participation in GM      
warranty programs. In addition, the Supply Agreement provides that our warranty 
responsibility for products supplied under new contracts will be governed by the
terms and conditions negotiated between the parties in those contracts.         

INTERIM SERVICES                                                                

     The Ancillary Agreements provide that General Motors will furnish us with a
number of interim services, which services will generally be provided to us at  
cost. In addition to any services discussed above, such services include, among 
others:                                                                         

- certain treasury, accounting, which includes accounts payable and   
receivable, tax, travel, customs and payroll services;            

 133

424B4
136th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 136th

   - certain information systems services, including financial, engineering,
   environmental, human resources, manufacturing, communications, legal,
logistics, purchasing and warranty and service systems;           

    - a variety of employee-related administrative support services, including
  human resource planning and employee placement and medical services;

- certain legal services;                                             

- certain audit services; and                                         

- managed access to proving grounds, test facilities, research and    
   development and engineering centers and the services provided at such
sites by General Motors personnel.                                

These agreements were made in the context of a parent-subsidiary      
relationship and were negotiated in the overall context of our separation from  
GM. The prices charged to us under these agreements may be higher or lower than 
the prices that may be charged by unaffiliated third parties for similar        
services and the services provided may not be the same, in scope and level, as  
those provided before our separation from GM.                                   

INTERNATIONAL AGREEMENTS                                                        

We have entered into a series of agreements with GM similar to those  
discussed above with respect to those Delphi Assets located outside the United  
States. In most countries, GM's vehicle and component businesses are operated by
separate legal entities. In such countries, the entities that operate the       
components business will be transferred to Delphi. Where certain facilities or  
functions are shared by such separate legal entities, the shared functions or   
facilities will generally be separated in accordance with the principles set    
forth in the corresponding Ancillary Agreement in the United States. In those   
countries in which the vehicle and components businesses are owned by one legal 
entity, new entities have been or will be formed in order to separate the Delphi
business from the GM business.                                                  

     Agreements have been or will be entered into in each of the countries where
operations are to be transferred to Delphi. Although the agreements for most    
countries have or will have different terms than the Ancillary Agreements in the
United States, in general they are or will be similar in scope to the Ancillary 
Agreements.                                                                     

   Certain international assets relating primarily to our business may still
be held by General Motors or its affiliates following the Offering pending      
receipt of consents or approvals or satisfaction of other applicable            
requirements necessary for the transfer of such assets to Delphi. These assets  
and operations are not, individually or in the aggregate, material to our       
company. For example, certain assets and operations located in Brazil, Germany  
and Canada are subject to such restrictions. However, the information included  
in this prospectus regarding our company and our facilities and operations,     
including the information set forth in the "Business of Delphi" section and our 
consolidated financial statements presented elsewhere in this prospectus,       
assumes and gives effect to the completion of these transactions.               

PRINCIPAL STOCKHOLDER 

  Prior to the Offering, all of the outstanding shares of our common stock
will be owned by General Motors. After the Offering, GM will own about 82.3%, or
about 80.2% if the U.S. underwriters exercise their over-allotment option in    
full, of our outstanding common stock. Except for General Motors, we are not    
aware of any person or group that will beneficially own more than 5% of the     
outstanding shares of our common stock following the Offering.                  

 134

424B4
137th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 137th

DESCRIPTION OF CAPITAL STOCK

Under Delphi's Restated Certificate of Incorporation, the authorized  
capital stock of Delphi is 2,000,000,000 shares, of which 1,350,000,000 shares  
are common stock, par value $0.01 per share, and 650,000,000 shares are         
preferred stock, par value $0.10 per share. Immediately following the Offering, 
565,000,000 shares of common stock, or 580,000,000 shares if the U.S.           
underwriters exercise their over-allotment option in full, will be outstanding. 

THE FOLLOWING DESCRIPTIONS ARE SUMMARIES OF THE MATERIAL TERMS OF OUR 
RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS. REFERENCE IS MADE TO THE MORE 
DETAILED PROVISIONS OF, AND SUCH DESCRIPTIONS ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO, THE RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS OF DELPHI,   
COPIES OF WHICH ARE FILED WITH THE SEC AS EXHIBITS TO THE REGISTRATION STATEMENT
OF WHICH THIS PROSPECTUS IS A PART, AND APPLICABLE LAW.                         

COMMON STOCK                                                                    

     Holders of common stock will be entitled to one vote per share with respect
to each matter presented to our stockholders on which the holders of common     
stock are entitled to vote. Except as may be provided in connection with any    
preferred stock in a certificate of designation filed pursuant to the Delaware  
General Corporation Law ("DGCL"), or as may otherwise be required by law or the 
Restated Certificate of Incorporation, the common stock will be the only capital
stock of Delphi entitled to vote in the election of directors and on all other  
matters presented to the stockholders of Delphi; provided that holders of common
stock, as such, will not be entitled to vote on any matter that solely relates  
to the terms of any outstanding series of preferred stock or the number of      
shares of such series and does not affect the number of authorized shares of    
preferred stock or the powers, privileges and rights pertaining to the common   
stock. The common stock will not have cumulative voting rights.                 

    Subject to the prior rights of holders of preferred stock, if any, holders
of common stock are entitled to receive such dividends as may be lawfully       
declared from time to time by the Board of Directors of Delphi. Upon any        
liquidation, dissolution or winding up of Delphi, whether voluntary or          
involuntary, holders of common stock will be entitled to receive such assets as 
are available for distribution to stockholders after there shall have been paid 
or set apart for payment the full amounts necessary to satisfy any preferential 
or participating rights to which the holders of each outstanding series of      
preferred stock are entitled by the express terms of such series.               

  The outstanding shares of our common stock are, and the shares of common
stock being offered hereby will be, upon payment therefor, validly issued, fully
paid and nonassessable. The common stock sold in the Offering will not have any 
preemptive, subscription or conversion rights. Additional shares of authorized  
common stock may be issued, as determined by the Delphi Board from time to time,
without stockholder approval, except as may be required by applicable stock     
exchange requirements.                                                          

 Delphi common stock has been approved for listing on the NYSE under the
symbol "DPH," subject to official notice of issuance.                           

PREFERRED STOCK                                                                 

Our Board is empowered, without approval of the stockholders, to cause
shares of preferred stock to be issued from time to time in one or more series, 
with the numbers of shares of each series and the designation, powers,          
privileges, preferences and rights of the shares of each such series and the    
qualifications, limitations and restrictions thereof as fixed by our Board.     
Among the specific matters that may be determined by the Board are:             

- the designation of each series;                                     

- the number of shares of each series;                                

- the rate of dividends, if any;                                      
 135

424B4
138th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 138th

- whether dividends, if any, shall be cumulative or non-cumulative;   

- the terms of redemption, if any;                                    

- the amount payable in the event of any voluntary or involuntary     
liquidation, dissolution or winding up of the affairs of Delphi;  

- rights and terms of conversion or exchange, if any;                 

  - restrictions on the issuance of shares of the same series or any other
series, if any; and                                               

- voting rights, if any.                                              

The Series A Preferred Stock described under "Rights Plan" below is a series of 
preferred stock that has been authorized by our Board.                          

    Although no shares of preferred stock are currently outstanding and Delphi
has no current plans to issue preferred stock, the issuance of shares of        
preferred stock, or the issuance of rights to purchase such shares, could be    
used to discourage an unsolicited acquisition proposal. For example, a business 
combination could be impeded by the issuance of a series of preferred stock     
containing class voting rights that would enable the holder or holders of such  
series to block any such transaction. Alternatively, a business combination     
could be facilitated by the issuance of a series of preferred stock having      
sufficient voting rights to provide a required percentage vote of the           
stockholders. In addition, under certain circumstances, the issuance of         
preferred stock could adversely affect the voting power and other rights of the 
holders of the common stock. Although Delphi's Board is required to make any    
determination to issue any such stock based on its judgment as to the best      
interests of the stockholders of Delphi, it could act in a manner that would    
discourage an acquisition attempt or other transaction that some, or a majority,
of the stockholders might believe to be in their best interests or in which     
stockholders might receive a premium for their stock over prevailing market     
prices of such stock. Delphi's Board does not at present intend to seek         
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law or applicable stock exchange requirements.            

LIMITATION ON LIABILITY OF DIRECTORS                                            

   Delphi's Restated Certificate of Incorporation provides, as authorized by
Section 102(b)(7) of the DGCL, that a director of Delphi will not be personally 
liable to Delphi or its stockholders for monetary damages for breach of         
fiduciary duty as a director, except for liability imposed by law, as in effect 
from time to time:                                                              

- for any breach of the director's duty of loyalty to Delphi or its   
stockholders;                                                     

   - for any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law;                         

- for unlawful payments of dividends or unlawful stock repurchases or 
redemptions as provided in Section 174 of the DGCL; or            

    - for any transaction from which the director derived an improper personal
benefit.                                                          

The inclusion of this provision in the Restated Certificate of        
Incorporation may have the effect of reducing the likelihood of derivative      
litigation against directors, and may discourage or deter stockholders or       
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefited 
Delphi and its stockholders.                                                    

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW                             

  Delphi is a Delaware corporation and subject to Section 203 of the DGCL.
Generally, Section 203 prohibits a publicly held Delaware corporation from      
engaging in a "business combination" with an "interested                        

 136

424B4
139th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 139th

stockholder" for a period of three years after the time such stockholder became 
an interested stockholder unless, as described below, certain conditions are    
satisfied. Thus, it may make acquisition of control of our company more         
difficult. See "--Certain Limitations on Changes of Control on Our Company"     
below. The prohibitions in Section 203 of the DGCL do not apply if:             

   - prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
       combination or the transaction which resulted in the stockholder becoming
an interested stockholder;                                        

  - upon consummation of the transaction which resulted in the stockholder
     becoming an interested stockholder, the interested stockholder owned at
      least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or                                     

- at or subsequent to the time the stockholder became an interested   
stockholder, the business combination is approved by the board of 
     directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested  
stockholder.                                                      

Under Section 203 of the DGCL, a "business combination" includes:     

- any merger or consolidation of the corporation with the interested  
stockholder;                                                      

     - any sale, lease, exchange or other disposition, except proportionately as
      a stockholder of such corporation, to or with the interested stockholder
    of assets of the corporation having an aggregate market value equal to
       10% or more of either the aggregate market value of all the assets of the
       corporation or the aggregate market value of all the outstanding stock of
the corporation;                                                  

- certain transactions resulting in the issuance or transfer by the   
    corporation of stock of the corporation to the interested stockholder;

   - certain transactions involving the corporation which have the effect of
       increasing the proportionate share of the stock of any class or series of
the corporation which is owned by the interested stockholder; or  

- certain transactions in which the interested stockholder receives   
financial benefits provided by the corporation.                   

 Under Section 203 of the DGCL, an "interested stockholder" generally is

   - any person that owns 15% or more of the outstanding voting stock of the
corporation;                                                      

   - any person that is an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the   
       corporation at any time within the three-year period prior to the date on
      which it is sought to be determined whether such person is an interested
stockholder; and                                                  

- the affiliates or associates of any such person.                    

  Because General Motors owned more than 15% of our voting stock before we
became a public company in the Offering, Section 203 of the DGCL by its terms is
currently not applicable to business combinations with GM even though GM owns   
15% or more of our outstanding stock. If any other person acquires 15% or more  
of our outstanding stock, such person will be subject to the provisions of      
Section 203 of the DGCL.                                                        

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS      

     Our Bylaws contain provisions requiring that advance notice be delivered to
Delphi of any business to be brought by a stockholder before an annual or       
special meeting of stockholders and providing for certain procedures to be      
followed by stockholders in nominating persons for election to the Delphi Board.
Generally,                                                                      

 137

424B4
140th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 140th

such advance notice provisions require that the stockholder must give written   
notice to the Secretary of Delphi:                                              

     - in the case of an annual meeting, not less than 90 days nor more than 120
      days before the first anniversary of the preceding year's annual meeting
of stockholders; and                                              

     - in the case of a special meeting, not less than 90 days, or, if later, 10
 days after the first public announcement of the date of the special
 meeting, nor more than 120 days prior to the scheduled date of such
special meeting.                                                  

For our first annual meeting, which will be held in 2000, notice must be given  
no earlier than November 2, 1999 and no later than December 2, 1999. In each    
case, the notice must set forth specific information regarding such stockholder 
and each director nominee or other business proposed by the stockholder, as     
applicable, as provided in the Bylaws. Notwithstanding the foregoing, any common
stockholder, including General Motors, who together with its affiliates owns    
common stock entitled to exercise a majority of the voting power in an election 
of directors may nominate one or more individuals for election as directors by  
giving notice to Delphi not later than five days before the scheduled date for  
the election of directors. Generally, only such business may be conducted at a  
special meeting of stockholders as is set forth in the notice for such meeting. 

Our Bylaws provide, in accordance with our Restated Certificate of    
Incorporation, that except as may be provided in connection with the issuance of
any series of preferred stock, the number of directors shall be fixed from time 
to time exclusively pursuant to a resolution adopted by a majority of the Whole 
Board (as such term is defined in our Restated Certificate of Incorporation),   
but shall not be less than three, provided that before the Trigger Date (as     
defined below) such resolution shall be adopted by 80% of the Whole Board.      
Delphi's Restated Certificate of Incorporation provides for a classified Board  
of Directors, consisting of three classes as nearly equal in size as            
practicable. Each class holds office until the third annual stockholders'       
meeting for election of directors following the most recent election of such    
class, except that the initial terms of the three classes expire in 2000, 2001  
and 2002, respectively. See "Management--Directors, Executive Officers and Key  
Employees of Delphi."                                                           

  Subject to the rights of the holders of any series of preferred stock to
elect and remove additional directors under specified circumstances, on or after
the time when General Motors and its affiliates own less than a majority of     
Delphi's then outstanding common stock (the "Trigger Date"), a director of      
Delphi may be removed only for cause by affirmative vote of the holders of at   
least a majority of the voting power of all outstanding shares of Delphi        
generally entitled to vote in the election of directors (the "Voting Stock"),   
voting together as a single class, and vacancies on our Board may only be filled
by the affirmative vote of a majority of the remaining directors. Prior to the  
Trigger Date, subject to the rights of holders of any series of preferred stock,
a director of Delphi may be removed, with or without cause, by the affirmative  
vote of the holders of at least a majority of the voting power of all Voting    
Stock then outstanding, voting together as a single class, and vacancies on our 
Board may be filled only by the affirmative vote of at least 80% of the         
remaining directors then in office. Also, prior to the Trigger Date, the        
affirmative vote of 80% of the Whole Board is required to establish committees  
of the Board and to fill committee memberships.                                 

  Our Bylaws provide that our Board may establish policies with respect to
the categories of matters which require prior approval of our Board or a        
committee thereof and that any such policy may provide that particular matters  
require approval of up to 80% of the Whole Board. Prior to the Trigger Date, the
affirmative vote of 80% of the Whole Board is required to rescind or amend any  
such policy. Pursuant to this provision of our Bylaws and policies adopted by   
our Board thereunder, the approval of 80% of the Whole Board is presently       
required, until the Trigger Date, for:                                          

     - significant corporate transactions, including acquisitions, divestitures,
  mergers, equity injections, capital expenditures, restructurings and
reorganizations;                                                  

    - significant financing transactions, including borrowings, guarantees and
other financial support arrangements;                             

 138

424B4
141st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 141st

     - all issuances, redemptions and reclassifications of Delphi securities and
any other change in the rights of holders of Delphi securities;   

- declarations of dividends;                                          

- settlements of significant patent and litigation matters; and       

- approval of all budgets and business plans.                         

Based on the expected composition of our Board following the Offering, an       
affirmative vote of 80% of the Whole Board would require the affirmative vote of
at least one of our directors who is also a director and/or officer of GM.      

    Our Restated Certificate of Incorporation provides that, after the Trigger
Date, stockholders may not act by written consent in lieu of a meeting. After   
the Trigger Date, special meetings of the stockholders may be called only by a  
majority of the Whole Board, but may not be called by stockholders. Before the  
Trigger Date, Delphi's Secretary is required to call a special meeting of the   
stockholders at the request of GM or its affiliates and stockholder action may  
be taken by written consent in lieu of a meeting.                               

Our Restated Certificate of Incorporation also contains a "fair price"
provision that applies to certain business combination transactions involving   
any person or group that is or has announced or publicly disclosed a plan or    
intention to become the beneficial owner of at least 10% of our outstanding     
Voting Stock, other than General Motors until immediately following the date on 
which General Motors shall cease to be a beneficial owner of 10% of the         
outstanding Voting Stock (an "Interested Stockholder"). The "fair price"        
provision requires that, except as described below, the affirmative vote of the 
holders of at least 66 2/3% of the Voting Stock not beneficially owned by the   
Interested Stockholder is required to approve a business combination transaction
with Delphi and its subsidiaries involving or proposed by an Interested         
Stockholder, or its affiliates and associates, or to approve any agreement or   
other arrangement providing for any such business combination transaction. For  
such purpose, "business combination" includes:                                  

- any merger or consolidation;                                        

- any of the following:                                               

    - sale, lease, exchange, mortgage, pledge, transfer or other disposition
        of assets of Delphi or any of its subsidiaries to or for the benefit of,

- purchase by Delphi or any of its subsidiaries from,               

- issuance of securities by Delphi or any of its subsidiaries to,   

    - investment, loan, advance, guarantee, participation or other extension
       of credit by Delphi or any of its subsidiaries to, from, in or with, or

     - establishment of a partnership, joint venture or other joint enterprise
with or for the benefit of, the Interested Stockholder having an
aggregate fair market value of $25 million or more;             

   - the adoption of any plan or proposal for the liquidation or dissolution
of Delphi; and                                                    

   - certain reclassifications of securities or recapitalizations of Delphi.

 This voting requirement will not apply to any transaction approved by a
majority of Delphi's Continuing Directors (as such term is defined in Delphi's  
Restated Certificate of Incorporation). This voting requirement will also not   
apply to any transaction involving the payment of consideration to holders of   
Delphi's outstanding capital stock in which the following "fair price"          
conditions, among others, are met:                                              

    - the consideration to be received by the holders of each class of capital
stock of Delphi is at least equal to the greater of:              

    (x) the highest per share price paid for shares of such class by the
     Interested Stockholder in the two years prior to the proposed
        business combination or in the transaction in which it became an
Interested Stockholder, whichever is higher, or         

 139

424B4
142nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 142nd

    (y) the fair market value of the shares of such class on the date of the
          announcement of the proposed business combination or the date on which
 it became an Interested Stockholder, whichever is higher; and

    - the consideration to be received by the holders of each class of capital
stock of Delphi is the same form and amount as that paid by the   
     Interested Stockholder in connection with its acquisition of such class
of capital stock.                                                 

This provision could have the effect of delaying or preventing a change in      
control of Delphi in a transaction or series of transactions that did not       
satisfy the "fair price" criteria.                                              

     The provisions of our Restated Certificate of Incorporation relating to our
Board, the limitation of actions by stockholders taken by written consent, the  
calling of special stockholder meetings and other stockholder actions and       
proposals may be amended only by the affirmative vote of the holders of at least
80% of the Voting Stock. The "fair price" provisions of our Restated Certificate
of Incorporation may be amended by the affirmative vote of the holders of at    
least 66 2/3% of the Voting Stock, excluding the Interested Stockholder, unless 
such amendment is unanimously recommended by Delphi's Board of Directors, a     
majority of whom are Continuing Directors.                                      

     In general, our Bylaws may be altered or repealed and new Bylaws adopted by
the holders of a majority of the Voting Stock or by a majority of the Whole     
Board. However, certain provisions, including those relating to the limitation  
of actions by stockholders taken by written consent, the calling of special     
stockholder meetings, other stockholder actions and proposals and certain       
matters related to our Board, may be amended only by the affirmative vote of    
holders of at least 80% of the Voting Stock. In addition, until the Trigger     
Date, the affirmative vote of 80% of the Whole Board is required to alter or    
repeal the Bylaws or adopt any new Bylaw.                                       

CERTAIN LIMITATIONS ON CHANGES OF CONTROL ON OUR COMPANY                        

    The foregoing provisions of Delphi's Restated Certificate of Incorporation
and Bylaws, together with the stockholder rights plan described below and the   
provisions of Section 203 of the DGCL, could have the following effects, among  
others:                                                                         

- delaying, deferring or preventing a change in control;              

 - delaying, deferring or preventing the removal of existing management;

- deterring potential acquirors from making an offer to Delphi's      
stockholders; and                                                 

 - limiting any opportunity of Delphi's stockholders to realize premiums
       over prevailing market prices of Delphi's common stock in connection with
offers by potential acquirors.                                    

This could be the case notwithstanding that a majority of Delphi's stockholders 
might benefit from such a change in control or offer.                           

CERTAIN TRANSACTIONS AND CORPORATE OPPORTUNITIES                                

 Our Restated Certificate of Incorporation sets forth certain provisions
which regulate and define the conduct of certain business and affairs of Delphi 
from the time of the completion of the Offering until the time General Motors   
ceases to be a significant stockholder of Delphi. These provisions serve to     
determine and delineate the respective rights and duties of Delphi, GM,         
including its Affiliated Companies, as defined in Delphi's Restated Certificate 
of Incorporation, and of certain directors and/or officers of Delphi, in        
anticipation that:                                                              

- directors, officers and/or employees of GM may serve as directors of
Delphi;                                                           

    - GM engages in and is expected to continue to engage in lines of business
   that are the same, similar or related to, overlap or compete with the
lines of business of Delphi; and                                  

   - Delphi and GM will engage in material business transactions, including,
without limitation, pursuant to the Supply Agreement.             

 140

424B4
143rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 143rd

Delphi may, from time to time, enter into and perform agreements with 
General Motors to engage in any transaction, and to agree to compete or not to  
compete with each other, including to allocate, or to cause their respective    
directors, officers and employees to allocate, corporate opportunities between  
themselves. The Restated Certificate of Incorporation provides that no such     
agreement, or the performance thereof, shall be considered contrary to any      
fiduciary duty of GM, as the controlling stockholder of Delphi, or of any such  
director, officer and/or employee, if:                                          

 (1) such agreement was entered into before Delphi ceased to be a wholly
     owned subsidiary of General Motors and is continued in effect after
such time; or                                                 

   (2) such agreement or transaction was approved, after being made aware of
      the material facts of the relationship between Delphi and GM and the
material terms and facts of the agreement or transaction, by: 

      (a) Delphi's Board, by affirmative vote of a majority of directors who
   are not Interested Persons (as defined in Delphi's Restated
Certificate of Incorporation),                          

      (b) by a committee of Delphi's Board consisting of members who are not
     Interested Persons, by affirmative vote of a majority of such
members, or                                             

(c) by one or more officers or employees of Delphi who is not an
     Interested Person and who was authorized by Delphi's Board or
          committee thereof as specified in clauses (a) and (b) above or, in
          the case of an employee, to whom such authority has been delegated
           by an officer to whom the authority to approve such action has been
so delegated; or                                        

    (3) such agreement or transaction was fair to Delphi as of the time it was
entered into by Delphi; or                                    

 (4) such agreement or transaction was approved by affirmative vote of a
      majority of the shares of capital stock entitled to vote thereon and
        who do vote thereon, excluding GM and any Interested Person in respect
of such agreement or transaction.                             

    The provisions of our Restated Certificate of Incorporation with regard to
such transactions and/or corporate opportunities shall terminate at such time as
when GM, together with its affiliates, shall cease to be the owner of Voting    
Stock representing 25% or more of the votes entitled to be cast by the holders  
of all the then outstanding Voting Stock; provided, however, that such          
termination shall not terminate the effect of such provisions with respect to   
any agreement between Delphi and GM that was entered into before such time or   
any transaction entered into in the performance of such agreement, whether      
entered into before or after such time, or any transaction entered into between 
Delphi and GM or the allocation of any opportunity between them before such     
time. These provisions do not alter the fiduciary duty of loyalty of our        
directors under applicable Delaware law. Subject to applicable Delaware law, by 
becoming a stockholder in our company, you will be deemed to have notice of and 
have consented to these provisions of our Restated Certificate of Incorporation.
These provisions may be amended only with the affirmative vote of the holders of
at least 80% of the voting power of all shares of Voting Stock then outstanding,
voting together as a single class.                                              

TRANSFER AGENT AND REGISTRAR                                                    

 BankBoston, N.A. will serve as the Transfer Agent and Registrar for our
common stock. Shares of our common stock will be issued under the direct        
registration system pursuant to which the interests of holders of our common    
stock are registered with the transfer agent and registrar. Stock certificates  
will not be delivered to a stockholder unless a stockholder requests such       
delivery in lieu of registration.                                               

RIGHTS PLAN                                                                     

   Delphi's Board has adopted a Stockholder Rights Plan (the "Rights Plan").
Pursuant to the Rights Plan, one Right (a "Right") will be issued and attached  
to each outstanding share of common stock. Each Right                           

 141

424B4
144th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 144th

will entitle the holder, in circumstances as described below, to purchase from  
Delphi a unit consisting of one one-hundredth of a share of Series A Junior     
Preferred Stock, par value $0.10 per share (the "Series A Preferred Stock"), at 
an exercise price of $65 per Right, subject to adjustment in certain events (the
"Exercise Price"). The following description of the Rights is a summary and is  
qualified in its entirety by reference to the Rights Plan, the form of which has
been filed with the SEC as an exhibit to the registration statement of which    
this prospectus is a part.                                                      

 Initially, the Rights will be attached to all certificates representing
outstanding shares of common stock and will be transferred with and only with   
such certificates. The Rights will become exercisable and separately            
certificated only upon the "Distribution Date," which will occur upon the       
earlier of:                                                                     

- ten days following a public announcement that a person or group (an 
   "Acquiring Person") other than certain exempt persons has acquired or
      obtained the right to acquire beneficial ownership of 15% or more of the
      outstanding shares of common stock and any other shares of capital stock
      entitled to vote generally in the election of directors or together with
      the common stock in respect of mergers and similar transactions ("Rights
      Plan Voting Stock") then outstanding (the date of the announcement being
the "Stock Acquisition Date"); or                                 

  - ten business days, or later if determined by the Delphi Board prior to
    any person becoming an Acquiring Person, following the commencement or
       announcement of an intention to commence a tender offer or exchange offer
  that would result in a person or group becoming an Acquiring Person.

  As soon as practicable after the Distribution Date, certificates will be
mailed to holders of record of common stock as of the close of business on the  
Distribution Date. From and after the Distribution Date, the separate           
certificates alone will represent the Rights. Prior to the Distribution Date,   
all shares of common stock issued will be issued with Rights. Shares of common  
stock issued after the Distribution Date will not be issued with Rights, except 
that shares issued pursuant to any of the following that exist prior to the     
Distribution Date may be issued with Rights:                                    

- the exercise of stock options;                                      

- under employee plans or arrangements;                               

- upon exercise, conversion or exchange of certain securities; or     

- a contractual obligation of Delphi.                                 

  The Rights will expire at the close of business on January 31, 2009 (the
"Final Expiration Date"), unless earlier redeemed or exchanged by Delphi as     
described below.                                                                

     In the event (a "Flip-In Event") that a person becomes an Acquiring Person,
except pursuant to any action or transaction approved by Delphi's Board before  
the person becomes an Acquiring Person, (a "Permitted Offer"), each holder of a 
Right other than any Acquiring Person and certain related parties, whose Rights 
will automatically become null and void, will thereafter have the right to      
receive, upon exercise of such Right, a number of shares of Series A Preferred  
Stock, or, in certain circumstances, cash, property or other securities of      
Delphi, having a "fair market value" (as defined in the Rights Plan) equal to   
two times the Exercise Price of the Right.                                      

   In the event (a "Flip-Over Event") that, at any time on or after a person
becomes an Acquiring Person, Delphi effects a merger or other business          
combination in which it is not the surviving entity, or any shares of its common
stock are changed into or exchanged for other securities, or 50% or more of its 
assets or earning power is sold or transferred, then each holder of a Right,    
except Rights owned by any Acquiring Person or certain related parties, which   
will have become void as set forth above, shall thereafter have the right to    
receive, upon exercise, a number of shares of common stock of the acquiring     
company having a fair market value equal to two times the Exercise Price of the 
Right. Flip-In Events and Flip-Over Events are collectively referred to as      
"Triggering Events."                                                            

 142

424B4
145th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 145th

   The Exercise Price payable, and the number of units of Series A Preferred
Stock, shares of common stock or other securities or property issuable, upon    
exercise of the Rights are subject to adjustment from time to time to prevent   
dilution in the event of a stock dividend or distribution on the common stock, a
grant or distribution to holders of the common stock of certain subscription    
rights, warrants, evidence of indebtedness, cash or other assets, or other      
similar events.                                                                 

    No fractional units will be issued; in lieu thereof, an adjustment in cash
will be made based on the market price of the common stock on the last trading  
date prior to the date of exercise. Pursuant to the Rights Plan, Delphi reserves
the right to require prior to the occurrence of a Triggering Event that, upon   
any exercise of Rights, a number of Rights be exercised so that only whole      
shares of Series A Preferred Stock will be issued.                              

 Delphi will also have the option, at any time after a person becomes an
Acquiring Person and before the person becomes, or simultaneously with such     
person becoming, the beneficial owner of 50% or more or the shares of Rights    
Plan Voting Stock then outstanding, to exchange the Rights, other than Rights   
owned by an Acquiring Person or certain related parties, which will have become 
void, in whole or in part, at an exchange ratio of one share of common stock,   
and/or other equity securities deemed to have the same value as one share of    
common stock, per Right, subject to adjustment.                                 

   At any time prior to the close of business on the tenth day following the
Stock Acquisition Date, Delphi, by vote of a majority of our Board, may redeem  
the Rights in whole, but not in part, at a price of $0.01 per Right, payable, at
the option of Delphi, in cash, shares of common stock or such other             
consideration as our Board may determine. This majority of the Board is         
determined as if there were no vacancies on the Board. The redemption of the    
Rights may be made effective at such time after the Board's action to redeem the
Rights, and on such basis and subject to such conditions, as our Board may in   
its absolute discretion establish. The Rights will terminate at the time so     
designated by our Board and thereafter the only right of the holders of Rights  
will be to receive the redemption price.                                        

   For as long as the Rights are redeemable, Delphi may, except with respect
to the redemption price, amend the Rights Plan in any manner, including to      
extend the time period in which the Rights may be redeemed. After the time the  
Rights cease to be redeemable, Delphi may amend the Rights in any manner that   
does not materially adversely affect the interests of holders of the Rights as  
such. Until a Right is exercised, the holder thereof, as such, will have no     
rights as a stockholder of Delphi, including, without limitation, the right to  
vote or to receive dividends.                                                   

The Certificate of Designations of the Series A Preferred Stock (the  
"Certificate of Designations") provides that each share of Series A Preferred   
Stock that may be issued upon exercise of the Rights will be entitled to        
receive, when, as and if declared, cash and non-cash dividends equal to:        

(1) 100 times the aggregate per share amount of all cash and non-cash 
dividends declared or paid on the common stock (the "Dividend 
Multiple"); and                                               

 (2) preferential quarterly cash dividends of $16.25 per share, less any
dividends received pursuant to clause (1) above.              

Holders of Series A Preferred Stock will have 100 votes per share (the
"Vote Multiple") and, except as otherwise provided by the Certificate of        
Designations, our Restated Certificate of Incorporation or applicable law, shall
vote together with holders of common stock as a single class. In the event that 
the preferential quarterly cash dividends are in arrears for four or more       
quarterly dividend payment periods, holders of Series A Preferred Stock will    
have the right to elect two additional members to our Board, to serve until the 
next annual meeting of our company or until such earlier time as all accrued and
unpaid preferential quarterly cash dividends are paid in full.                  

    In the event of the liquidation, dissolution or winding up of our company,
after provision for liabilities and any preferential amounts payable with       
respect to any preferred stock ranking senior to the Series A Preferred         

 143

424B4
146th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 146th

Stock, the holders of any Series A Preferred Stock will be entitled to receive  
liquidation payments per share in an amount equal to the greater of:            

- $650 plus an amount equal to accrued and unpaid dividends and       
distributions thereon to the date of payment; and                 

    - 100 times the aggregate amount to be distributed per share to holders of
common stock (the "Liquidation Multiple").                        

The rights of the Series A Preferred Stock as to dividends, voting and
liquidation are protected by antidilution provisions.                           

   In the event of a consolidation, merger or other transaction in which the
shares of common stock are exchanged, holders of shares of Series A Preferred   
Stock will be entitled to receive the amount and type of consideration equal to 
the per share amount received by the holders of the common stock, multiplied by 
the highest of the Dividend Multiple, the Vote Multiple or the Liquidation      
Multiple as in effect immediately prior to the event.                           

 Except for the acquisition of shares of Series A Preferred Stock in any
other manner permitted by law, the Certificate of Designations or our Restated  
Certificate of Incorporation, the shares of Series A Preferred Stock are not    
redeemable at the option of Delphi or any holder thereof.                       

   The Rights will have certain anti-takeover effects. The Rights will cause
substantial dilution to any person or group that attempts to acquire Delphi     
without the approval of the Delphi Board. As a result, the overall effect of the
Rights may be to render more difficult or discourage any attempt to acquire     
Delphi, even if such acquisition may be in the interest of Delphi's             
stockholders. Because Delphi's Board can redeem the Rights or approve a         
Permitted Offer, the Rights will not interfere with a merger or other business  
combination approved by the Board.                                              

  The Rights Plan excludes GM and its affiliates and associates from being
considered Acquiring Persons until GM first ceases to beneficially own 15% or   
more of the Rights Plan Voting Stock of Delphi then outstanding.                

 144

424B4
147th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 147th

SHARES ELIGIBLE FOR FUTURE SALE 

GENERAL                                                                         

The 100,000,000 shares of our common stock sold in the Offering, or   
115,000,000 shares if the U.S. underwriters exercise their over-allotment option
in full, will be freely tradable without restriction under the Securities Act,  
except for any such shares which may be acquired by an "affiliate" of Delphi (an
"Affiliate") as that term is defined in Rule 144 promulgated under the          
Securities Act, which shares will remain subject to the resale limitations of   
Rule 144.                                                                       

 The shares of our common stock that will continue to be held by General
Motors after the Offering constitute "restricted securities" within the meaning 
of Rule 144, and will be eligible for sale by General Motors in the open market 
after the Offering, subject to certain contractual lockup provisions and the    
applicable requirements of Rule 144, both of which are described below. Delphi  
has granted certain registration rights to GM. See "--Registration Rights of    
General Motors."                                                                

Generally, Rule 144 provides that a person who has beneficially owned 
"restricted" shares for at least one year will be entitled to sell on the open  
market in brokers' transactions within any three month period a number of shares
that does not exceed the greater of:                                            

- 1% of the then outstanding shares of common stock; and              

    - the average weekly trading volume in the common stock on the open market
during the four calendar weeks preceding such sale.               

Sales under Rule 144 are also subject to certain post-sale notice requirements  
and the availability of current public information about Delphi.                

    In the event that any person other than General Motors who is deemed to be
an Affiliate purchases shares of our common stock pursuant to the Offering or   
acquires shares of our common stock pursuant to an employee benefit plan of     
Delphi, the shares held by such person are required under Rule 144 to be sold in
brokers' transactions, subject to the volume limitations described above. Shares
properly sold in reliance upon Rule 144 to persons who are not Affiliates are   
thereafter freely tradable without restriction.                                 

     Sales of substantial amounts of our common stock in the open market, or the
availability of such shares for sale, could adversely affect the price of our   
common stock. GM has announced that it currently plans to complete its          
divestiture of Delphi by distributing all of the shares of Delphi common stock  
which it owns to the holders of GM's $1 2/3 common stock. See "Delphi and Its   
Separation from General Motors--Separation from General Motors--GM's Plan to    
Divest Delphi" and "Risk Factors--Risk Factors Relating to Separating Our       
Company from General Motors--Our Business May Be Adversely Affected if General  
Motors Does Not Complete Its Divestiture of Our Company." Any shares distributed
by GM will be eligible for immediate resale in the public market without        
restrictions by persons other than Affiliates of Delphi. Affiliates of Delphi   
would be subject to the restrictions of Rule 144 described above other than the 
one-year holding period requirement.                                            

Each of Delphi and General Motors has agreed that, without the prior  
written consent of Morgan Stanley & Co. Incorporated on behalf of the           
underwriters, it will not, during the period ending 180 days after the date of  
this prospectus, sell or otherwise dispose of any shares of our common stock,   
subject to certain exceptions. The Distribution is specifically exempted from   
this agreement. See "Underwriters."                                             

 An aggregate of 111,000,000 shares of our common stock are reserved for
issuance under the Stock Incentive Plan and the Classified Plan. We intend to   
file registration statements on Form S-8 covering the issuance of shares of our 
common stock pursuant to the Stock Incentive Plan and the Classified Plan.      
Accordingly, the shares issued pursuant to the Stock Incentive Plan and the     
Classified Plan will be freely tradable, subject to the restrictions on resale  
by Affiliates under Rule 144.                                                   

 145

424B4
148th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 148th

REGISTRATION RIGHTS OF GENERAL MOTORS                                           

 Pursuant to the Registration Rights Agreement we have entered into with
General Motors, at any time after GM informs us that it no longer intends to    
proceed with or complete the Distribution or that the Distribution was completed
without GM divesting itself of 100% of our common stock that it held, GM may    
require us to register under the Securities Act all or any portion of our common
stock that it holds. Any of GM's shares of our common stock registered pursuant 
to the Registration Rights Agreement would be eligible for immediate resale in  
the public market without restrictions by persons other than Affiliates of      
Delphi. For more information regarding the Registration Rights Agreement, see   
"Arrangements Between Delphi and General Motors--Registration Rights Agreement."

    Any sales of substantial amounts of our common stock in the public market,
whether as a result of the Distribution, GM's registration rights or otherwise, 
or the perception that such sales might occur, could have a material adverse    
effect on the market price of our common stock. See "Risk Factors--Risk Factors 
Relating to Securities Markets--The Market Price of Our Common Stock Could Be   
Adversely Affected by Sales of Substantial Amounts of Our Common Stock in the   
Public Market."                                                                 

 146

424B4
149th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 149th

MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES 
TO NON-UNITED STATES HOLDERS

GENERAL                                                                         

    The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of common stock by 
a Non-U.S. Holder. For this purpose, the term "Non-U.S. Holder" is defined as   
any person or entity that is, for U.S. federal income tax purposes, a foreign   
corporation, a non-resident alien individual, a foreign partnership or a foreign
estate or trust. This discussion is based on currently existing provisions of   
the Code, existing, temporary and proposed Treasury regulations promulgated     
thereunder, and administrative and judicial interpretations thereof, all as in  
effect or proposed on the date hereof and all of which are subject to change,   
possibly with retroactive effect, or different interpretations. This discussion 
is limited to Non-U.S. Holders who hold shares of common stock as capital assets
within the meaning of Section 1221 of the Code. Moreover, this discussion is for
general information only and does not address all of the tax consequences that  
may be relevant to particular Non-U.S. Holders in light of their personal       
circumstances, nor does it discuss certain tax provisions which may apply to    
individuals who relinquish their U.S. citizenship or residence.                 

An individual may, subject to certain exceptions, be deemed to be a   
resident alien, as opposed to a nonresident alien, by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar  
year. For such purposes all of the days present in the current year, one-third  
of the days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year are counted. Resident aliens are subject to
U.S. federal income tax as if they were U.S. citizens.                          

   On January 13, 1999, General Motors received a private letter ruling from
the IRS to the effect that the Distribution would be tax-free to GM and its     
stockholders for U.S. federal income tax purposes. This ruling does not address 
the tax consequences of the purchase, ownership and disposition of Delphi common
stock.                                                                          

EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF         
PURCHASING, OWNING AND DISPOSING OF DELPHI COMMON STOCK AS WELL AS ANY TAX      
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR   
OTHER TAXING JURISDICTION.                                                      

DIVIDENDS                                                                       

   In the event that dividends are paid on shares of common stock, dividends
paid to a Non-U.S. Holder of common stock will be subject to withholding of U.S.
federal income tax at a 30% rate or such lower rate as may be specified by an   
applicable income tax treaty. To claim the benefit of a lower rate under an     
income tax treaty, a Non-U.S. Holder of common stock must properly file with the
payor an IRS Form 1001, or successor form, claiming an exemption from or        
reduction in withholding under such tax treaty.                                 

    Any dividends paid on shares of common stock to a Non-U.S. Holder will not
be subject to withholding tax, but instead are subject to U.S. federal income   
tax on a net basis at applicable graduated individual or corporate rates if:    

- dividends are effectively connected with the conduct of a trade or  
       business by the Non-U.S. Holder within the United States and, where a tax
treaty applies, will be attributable to a United States permanent 
establishment of the Non-U.S. Holder; and                         

- an IRS Form 4224, or successor form, is filed with the payor.       

Any such effectively connected dividends received by a foreign corporation may, 
under certain circumstances, be subject to an additional "branch profits tax" at
a rate of 30% or such lower rate as may be specified by an applicable income tax
treaty.                                                                         

 147

424B4
150th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 150th

 Unless the payer has knowledge to the contrary, dividends paid prior to
January 1, 2000 to an address outside the United States are presumed to be paid 
to a resident of such country for purposes of the withholding discussed above   
and for purposes of determining the applicability of a tax treaty rate. However,
recently finalized Treasury Regulations pertaining to U.S. federal withholding  
tax (the "Final Withholding Tax Regulations") provide that a Non-U.S. Holder    
must comply with certification procedures, or, in the case of payments made     
outside the United States with respect to an offshore account, certain          
documentary evidence procedures, directly or under certain circumstances through
an intermediary, to obtain the benefits of a reduced rate under an income tax   
treaty with respect to dividends paid after December 31, 1999. In addition, the 
Final Withholding Tax Regulations will require a Non-U.S. Holder who provides an
IRS Form 4224 or successor form, as discussed above, also to provide its U.S.   
taxpayer identification number.                                                 

A Non-U.S. Holder of common stock eligible for a reduced rate of U.S. 
withholding tax pursuant to an income tax treaty may obtain a refund of any     
excess amounts withheld by filing an appropriate claim for refund with the IRS. 

GAIN ON DISPOSITION OF COMMON STOCK                                             

    A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of common stock  
unless:                                                                         

(1) the gain is effectively connected with a trade or business of the 
       Non-U.S. Holder in the United States and, where a tax treaty applies,
   is attributable to a United States permanent establishment of the
Non-U.S. Holder;                                              

 (2) in the case of a Non-U.S. Holder who is an individual and holds the
   common stock as a capital asset, such holder is present in United
      States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met; or          

 (3) Delphi is or has been a "U.S. real property holding corporation" (a
     "USRPHC") for U.S. federal income tax purposes, as discussed below.

     An individual Non-U.S. Holder who falls under clause (1) above will, unless
an applicable treaty provides otherwise, be taxed on his or her net gain derived
from the sale under regular graduated United States federal income tax rates. An
individual Non-U.S. Holder who falls under clause (2) above will be subject to a
flat 30% tax on the gain derived from the sale, which may be offset by certain  
United States capital losses.                                                   

  A Non-U.S. Holder that is a foreign corporation falling under clause (1)
above will be taxed on its gain under regular graduated U.S. federal income tax 
rates and may be subject to an additional branch profits tax equal to 30% of its
effectively connected earnings and profits within the meaning of the Code for   
the taxable year, as adjusted for certain items, unless it qualifies for a lower
rate under an applicable income tax treaty.                                     

A corporation is a USRPHC if the fair market value of the U.S. real   
property interests held by the corporation is 50% or more of the aggregate fair 
market value of its U.S. and foreign real property interests and any other      
assets used or held for use by the corporation in a trade or business. Based on 
its current and anticipated assets, Delphi believes that it is not currently,   
and is likely not to become, a USRPHC. However, since the determination of      
USRPHC status is based upon the composition of the assets of Delphi from time to
time, and because there are uncertainties in the application of certain relevant
rules, there can be no assurance that Delphi will not become a USRPHC. If Delphi
were to become a USRPHC, then gain on the sale or other disposition of common   
stock by a Non-U.S. Holder generally would be subject to U.S. federal income tax
unless both:                                                                    

- the common stock was "regularly traded" on an established securities
market within the meaning of applicable Treasury regulations; and 

  - the Non-U.S. Holder actually or constructively owned 5% or less of the
    common stock during the shorter of the five-year period preceding such
disposition or the Non-U.S. Holder's holding period.              

 148

424B4
151st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 151st

Non-U.S. Holders should consult their tax advisors concerning any U.S. tax      
consequences that may arise if Delphi were to become a USRPHC.                  

FEDERAL ESTATE TAX                                                              

    Common stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be included in such holder's gross estate for U.S.       
federal estate tax purposes, and may be subject to U.S. federal estate tax      
unless an applicable estate tax treaty provides otherwise.                      

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX                                

Delphi must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to    
such dividends, regardless of whether withholding was required. Copies of the   
information returns reporting such dividends and withholding may also be made   
available to the tax authorities in the country in which the Non-U.S. Holder    
resides under the provisions of an applicable income tax treaty or certain other
agreements.                                                                     

 Backup withholding is imposed at the rate of 31% on certain payments to
persons that fail to furnish certain identifying information to the payer.      
Backup withholding generally will not apply to dividends paid prior to January  
1, 2000 to a Non-U.S. Holder at an address outside the United States, unless the
payer has knowledge that the payee is a U.S. person. In the case of dividends   
paid after December 31, 1999, the Final Withholding Tax Regulations provide that
a Non-U.S. Holder generally will be subject to withholding tax at a 31% rate    
unless certain certification procedures, or, in the case of payments made       
outside the United States with respect to an offshore account, certain          
documentary evidence procedures, are complied with, directly or under certain   
circumstances through an intermediary. Backup withholding and information       
reporting generally will also apply to dividends paid on common stock at        
addresses inside the United States to Non-U.S. Holders that fail to provide     
certain identifying information in the manner required. The Final Withholding   
Tax Regulations provide certain presumptions under which a Non-U.S. Holder would
be subject to backup withholding and information reporting unless certification 
from the holder of the Non-U.S. Holder's Non-U.S. status is provided.           

    Payment of the proceeds of a sale of common stock effected by or through a
U.S. office of a broker is subject to both backup withholding and information   
reporting unless the beneficial owner provides the payer with its name and      
address and certifies under penalties of perjury that it is a Non-U.S. Holder,  
or otherwise establishes an exemption. In general, backup withholding and       
information reporting will not apply to a payment of the proceeds of a sale of  
common stock by or through a foreign office of a broker. If, however, such      
broker is, for U.S. federal income tax purposes, a U.S. person, a controlled    
foreign corporation, or a foreign person that derives 50% or more of its gross  
income for certain periods from the conduct of a trade or business in the United
States, or, in addition, for periods after December 31, 1999, a foreign         
partnership that at any time during its tax year either is engaged in the       
conduct of a trade or business in the United States or has as partners one or   
more U.S. persons that, in the aggregate, hold more than 50% of the income or   
capital interest in the partnership, such payments will be subject to           
information reporting, but not backup withholding, unless such broker has       
documentary evidence in its records that the beneficial owner is a Non-U.S.     
Holder and certain other conditions are met or the beneficial owner otherwise   
establishes an exemption.                                                       

   Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the Non-U.S. Holder's U.S. federal      
income tax liability provided the required information is furnished in a timely 
manner to the IRS.                                                              

 149

424B4
152nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 152nd

UNDERWRITERS

    Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.        
underwriters named below, for whom Morgan Stanley & Co. Incorporated, Goldman,  
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson,     
Lufkin & Jenrette Securities Corporation and Schroder & Co. Inc. are acting as  
U.S. representatives, and the international underwriters named below for whom   
Morgan Stanley & Co. International Limited, Goldman Sachs International, Merrill
Lynch International, Donaldson, Lufkin and Jenrette International and J. Henry  
Schroder & Co. Limited are acting as international representatives, have        
severally agreed to purchase, and Delphi has agreed to sell to them, severally, 
the respective number of shares of our common stock set forth opposite the names
of such underwriters below:                                                     

                                                                [Download Table]

                                                                 NUMBER OF 
                            NAME                                  SHARES   
                            ----                                 --------- 
                                                                           
U.S. underwriters:                                                         
  Morgan Stanley & Co. Incorporated.........................     15,950,000
  Goldman, Sachs & Co.......................................     15,950,000
  Merrill Lynch, Pierce, Fenner & Smith Incorporated........     15,950,000
  Donaldson, Lufkin & Jenrette Securities Corporation.......      7,975,000
  Schroder & Co. Inc........................................      7,975,000
  Robert W. Baird & Co. Incorporated........................        500,000
  Bear, Stearns & Co. Inc. .................................        900,000
  Sanford C. Bernstein & Co., Inc. .........................        500,000
  Blaylock & Partners, L.P. ................................        500,000
  BNY Capital Markets, Inc. ................................        900,000
  Chase Securities Inc. ....................................        900,000
  CIBC Oppenheimer Corp. ...................................        900,000
  Deutsche Bank Securities Inc. ............................        900,000
  Doley Securities, Inc. ...................................        500,000
  A.G. Edwards & Sons, Inc. ................................        900,000
  Fahnestock & Co. Inc. ....................................        500,000
  Gabelli & Company Inc. ...................................        500,000
  Guzman & Company..........................................        500,000
  ING Baring Furman Selz LLC................................        900,000
  Janney Montgomery Scott Inc. .............................        500,000
  Edward D. Jones & Co., L.P. ..............................        500,000
  Legg Mason Wood Walker, Incorporated......................        500,000
  Lehman Brothers Inc. .....................................        900,000
  McDonald Investments Inc.                                                
     a Keycorp Company......................................        500,000
  J.P. Morgan Securities Inc. ..............................        900,000
  NationsBanc Montgomery Securities LLC.....................        900,000
  Neuberger & Berman, LLC...................................        500,000
  PaineWebber Incorporated..................................        900,000
  Raymond James & Associates, Inc. .........................        500,000
  Roney Capital Markets                                                    
     a Division of First Chicago Capital Markets, Inc. .....        500,000
  Scotia Capital Markets (USA) Inc. ........................        500,000
  SG Cowen Securities Corporation...........................        900,000
  Muriel Siebert & Co., Inc. ...............................        500,000
  Smith Barney Inc. ........................................        900,000
  TD Securities (USA) Inc. .................................        500,000
  Wheat First Securities, Inc. .............................        500,000
  The Williams Capital Group, L.P. .........................        500,000
                                                                -----------
     Subtotal...............................................     85,000,000
                                                                -----------

 150

424B4
153rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 153rd

                                                                [Download Table]

                                                                 NUMBER OF 
                            NAME                                  SHARES   
                            ----                                 --------- 
                                                                           
International underwriters:                                                
  Morgan Stanley & Co. International Limited................      3,225,000
  Goldman Sachs International...............................      3,225,000
  Merrill Lynch International...............................      3,225,000
  Donaldson, Lufkin & Jenrette International................      1,612,500
  J. Henry Schroder & Co. Limited...........................      1,612,500
  Banco Santander de Negocios, S.A. ........................        300,000
  Banque Nationale de Paris.................................        300,000
  COMMERZBANK AKTIENGESELLSCHAFT............................        300,000
  Credit Lyonnais Securities................................        300,000
  HSBC Investment Bank Plc..................................        300,000
  Kleinwort Benson Limited..................................        300,000
  Nomura International plc..................................        300,000
                                                                -----------
     Subtotal...............................................     15,000,000
                                                                -----------
       Total................................................    100,000,000
                                                                ===========

The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively referred
to as the "underwriters" and the "representatives," respectively. The           
Underwriting Agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of our common stock offered hereby 
are subject to the approval of certain legal matters by their counsel and to    
certain other conditions. The underwriters are obligated to take and pay for all
of the shares of our common stock offered hereby, other than those covered by   
the U.S. underwriters' over-allotment option described below, if any such shares
are taken.                                                                      

     Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented and agreed that, with certain exceptions:      

  - it is not purchasing any shares (as defined herein) for the account of
       anyone other than a United States or Canadian Person (as defined herein);
and                                                               

- it has not offered or sold, and will not offer or sell, directly or 
 indirectly, any shares or distribute any prospectus relating to the
  shares outside the United States or Canada or to anyone other than a
United States or Canadian person.                                 

Pursuant to the Agreement between U.S. and International Underwriters, each     
international underwriter has represented and agreed that, with certain         
exceptions:                                                                     

   - it is not purchasing any shares for the account of any United States or
Canadian person; and                                              

- it has not offered or sold, and will not offer or sell, directly or 
 indirectly, any shares or distribute any prospectus relating to the
       shares in the United States or Canada or to any United States or Canadian
person.                                                           

With respect to any underwriter that is a U.S. underwriter and an international 
underwriter, the foregoing representations and agreements made by it in its     
capacity as a U.S. underwriter apply only to it in its capacity as a U.S.       
underwriter and made by it in its capacity as an international underwriter apply
only to it in its capacity as an international underwriter. The foregoing       
limitations do not apply to stabilization transactions or to certain other      
transactions specified in the Agreement between U.S. and International          
Underwriters. As used herein, "United States or Canadian person" means any      
national or resident of the United States or Canada, or any corporation,        
pension, profit-sharing or other trust or other entity organized under the laws 
of the United States or Canada or of any political subdivision thereof, other   
than a branch located outside the United States and Canada of any United States 
or Canadian person, and includes any United States or Canadian branch of a      
person who is otherwise not a United States or Canadian person. All shares of   
common stock to be purchased by the underwriters under the Underwriting         
Agreement are referred to herein as the "shares."                               

 151

424B4
154th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 154th

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. underwriters and international underwriters  
of any number of shares as may be mutually agreed. The per share price of any   
shares so sold shall be the public offering price set forth on the cover page   
hereof, in United States dollars, less an amount not greater than the per share 
amount of the concession to dealers set forth below.                            

     Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares, directly or indirectly, in any province or    
territory of Canada or to, or for the benefit of, any resident of any province  
or territory of Canada in contravention of the securities laws thereof and has  
represented that any offer or sale of shares in Canada will be made only        
pursuant to an exemption from the requirement to file a prospectus in the       
province or territory of Canada in which such offer or sale is made. Each U.S.  
underwriter has further agreed to send to any dealer who purchases from it any  
of the shares a notice stating in substance that, by purchasing such shares,    
such dealer represents and agrees that it has not offered or sold, and will not 
offer or sell, directly or indirectly, any of such shares in any province or    
territory of Canada or to, or for the benefit of, any resident of any province  
or territory of Canada in contravention of the securities laws thereof and that 
any offer or sale of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any   
other dealer to whom it sells any of such shares a notice containing            
substantially the same statement as is contained in this sentence.              

     Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has represented and agreed that:                      

  - it has not offered or sold and, prior to the date six months after the
closing date for the sale of the shares to the international      
       underwriters, will not offer or sell, any shares to persons in the United
 Kingdom except to persons whose ordinary activities involve them in
       acquiring, holding, managing or disposing of investments, as principal or
       agent, for the purposes of their businesses or otherwise in circumstances
      which have not resulted and will not result in an offer to the public in
      the United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995;                                                 

 - it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the shares in, from or otherwise involving the United 
Kingdom; and                                                      

 - it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the 
      offering of the shares to a person who is of a kind described in Article
  11(3) of the Financial Services Act 1986 (Investment Advertisements)
       (Exemptions) Order 1996 (as amended) or is a person to whom such document
may otherwise lawfully be issued or passed on.                    

     Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has further represented that it has not offered or    
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or  
to or for the account of any resident thereof, any of the shares acquired in    
connection with the distribution contemplated hereby, except for offers or sales
to Japanese international underwriters or dealers and except pursuant to any    
exemption from the registration requirements of the Securities and Exchange Law 
and otherwise in compliance with applicable provisions of Japanese law. Each    
international underwriter has further agreed to send to any dealer who purchases
from it any of the shares a notice stating in substance that, by purchasing such
shares, such dealer represents and agrees that it has not offered or sold, and  
will not offer or sell, any of such shares, directly or indirectly, in Japan or 
to or for the account of any resident thereof except for offers or sales to     
Japanese international underwriters or dealers and except pursuant to any       
exemption from the registration requirements of the Securities and Exchange Law 
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such shares a 
notice containing substantially the same statement as is contained in this      
sentence.                                                                       

 152

424B4
155th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 155th

  The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession 
not in excess of $.46 a share under the public offering price. Any underwriter  
may allow, and such dealers may reallow, a concession not in excess of $.10 a   
share to other underwriters or to certain other dealers. After the initial      
offering of the shares of common stock, the offering price and other selling    
terms may from time to time be varied by the representatives.                   

   Delphi has granted to the U.S. underwriters an option, exercisable for 30
days from the date of this prospectus, to purchase up to an aggregate of        
15,000,000 additional shares of common stock at the public offering price set   
forth on the cover page hereof, less underwriting discounts and commissions. The
U.S. underwriters may exercise such option solely for the purpose of covering   
over-allotments, if any, made in connection with the offering of the shares of  
common stock offered hereby. To the extent such option is exercised, each U.S.  
underwriter will become obligated, subject to certain conditions, to purchase   
about the same percentage of such additional shares of common stock as the      
number set forth next to such U.S. underwriter's name in the preceding table    
bears to the total number of shares of common stock set forth next to the names 
of all U.S. underwriters in the preceding table. If the U.S. underwriters'      
option is exercised in full, the total price to the public for this Offering    
would be $1,955,000,000, the total underwriters' discounts and commissions would
be $90,712,000 and total proceeds to Delphi would be $1,864,288,000.            

  The underwriters have informed Delphi that each principal underwriter in
this Offering may, subject to the approval of Morgan Stanley & Co. Incorporated,
sell to discretionary accounts over which such principal underwriter exercises  
discretionary authority. The underwriters have further informed Delphi that they
estimate that such sales will not exceed in the aggregate five percent of the   
total number of shares of common stock offered by them.                         

 Delphi common stock has been approved for listing on the NYSE under the
symbol "DPH," subject to official notice of issuance. The underwriters intend to
sell shares of the common stock to a minimum of 2,000 beneficial owners in lots 
of 100 or more so as to meet the distribution requirements of such listing.     

 At the request of Delphi, the underwriters will reserve about 8,000,000
shares of common stock to be issued by Delphi and offered hereby for sale, at   
the initial public offering price, to directors, officers and employees of      
Delphi and others, generally in the United States, who will agree to hold their 
shares for at least 180 days after the date of this prospectus. This directed   
share program will be administered by Salomon Smith Barney Inc. and Morgan      
Stanley & Co. Incorporated. The number of shares of common stock available for  
sale to the general public will be reduced to the extent such individuals       
purchase such reserved shares. Any reserved shares which are not so purchased   
will be offered by the underwriters to the general public on the same basis as  
the other shares offered hereby.                                                

Each of Delphi and General Motors has agreed that, without the prior  
written consent of Morgan Stanley & Co. Incorporated on behalf of the           
underwriters, it will not, during the period ending 180 days after the date of  
this prospectus:                                                                

 - offer, pledge, sell, contract to sell, sell any option or contract to
  purchase, purchase any option or contract to sell, grant any option,
      right or warrant to purchase, lend, or otherwise transfer or dispose of,
  directly or indirectly, any shares of common stock or any securities
  convertible into or exercisable or exchangeable for common stock; or

  - enter into any swap or other arrangement that transfers to another, in
    whole or in part, any of the economic consequences of ownership of the
common stock;                                                     

whether any such transaction described above is to be settled by delivery of    
common stock or such other securities, in cash or otherwise.                    

 153

424B4
156th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 156th

The restrictions described in the previous paragraph do not apply to: 

- the sale of the shares to the underwriters;                         

    - the issuance by Delphi of shares of common stock upon the exercise of an
    option or a warrant or the conversion of a security outstanding on the
    date of this prospectus of which the underwriters have been advised in
writing;                                                          

   - the granting of stock options and/or restricted stock units pursuant to
       existing Delphi employee benefit plans, provided that such options do not
       become exercisable and such units do not vest during such 180-day period;

     - transactions by any person other than Delphi relating to shares of common
     stock or other securities acquired in open market or other transactions
after the completion of the Offering;                             

- transactions in shares of General Motors common stock;              

- the Distribution; or                                                

- the substitution of GM Awards with replacement awards under Delphi's
    incentive plans and other transactions under Delphi's incentive plans.

In order to facilitate the Offering, the underwriters may engage in   
transactions that stabilize, maintain or otherwise affect the price of the      
common stock. Specifically, the underwriters may agree to sell, or allot, more  
shares than the 100,000,000 shares of common stock Delphi has agreed to sell to 
them. This over-allotment would create a short position in the common stock for 
the underwriters' account. To cover any over-allotments or to stabilize the     
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the  
common stock in the offering, if the syndicate repurchases previously           
distributed common stock in transactions to cover syndicate short positions, in 
stabilization transactions or otherwise. The underwriters have reserved the     
right to reclaim selling concessions in order to encourage underwriters and     
dealers to distribute the common stock for investment, rather than for          
short-term profit taking. Increasing the proportion of the Offering held for    
investment may reduce the supply of common stock available for short-term       
trading. Any of these activities may stabilize or maintain the market price of  
the common stock above independent market levels. The underwriters are not      
required to engage in these activities, and may end any of these activities at  
any time.                                                                       

From time to time, certain of the underwriters have provided, and may 
continue to provide, investment banking services to each of Delphi and General  
Motors.                                                                         

    General Motors has generally agreed to pay the costs and expenses relating
to the Offering. For more information, see "Arrangements Between Delphi and     
General Motors--IPO and Distribution Agreement." The underwriters have agreed to
reimburse GM for certain of its expenses incurred in connection with the        
Offering.                                                                       

 Delphi and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.            

PRICING OF THE OFFERING                                                         

Prior to this Offering, there has been no public market for the common
stock. The initial public offering price has been determined by negotiations    
among Delphi, General Motors and the U.S. representatives. Among the factors    
considered in determining the initial public offering price were the future     
prospects of Delphi and its industry in general, sales, earnings and certain    
other financial and operating information of Delphi in recent periods, and the  
price-earnings ratios, price-sales ratios, market prices of securities and      
certain financial and operating information of companies engaged in activities  
similar to those of the company.                                                

 154

424B4
157th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 157th

LEGAL MATTERS 

 The validity of the common stock offered hereby and certain other legal
matters will be passed upon for us by Kirkland & Ellis. Certain legal matters   
will be passed upon for the underwriters by Davis Polk & Wardwell.              

EXPERTS 

   Our financial statements as of December 31, 1996 and 1997 and for each of
the three years in the period ended December 31, 1997 included in this          
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as 
stated in their report appearing herein, and are included in reliance on the    
report of that firm given upon their authority as experts in accounting and     
auditing.                                                                       

WHERE YOU CAN FIND MORE INFORMATION 

We have filed with the SEC, Washington, D.C. 20549, a registration    
statement on Form S-1 under the Securities Act with respect to the common stock 
offered hereby. This prospectus does not contain all of the information set     
forth in the registration statement and the exhibits and schedules thereto.     
Certain items are omitted in accordance with the rules and regulations of the   
SEC. For further information with respect to the company and its common stock,  
reference is made to the registration statement and the exhibits and any        
schedules filed therewith. Statements contained in this prospectus as to the    
contents of any contract or other document referred to are not necessarily      
complete and in each instance, if such contract or document is filed as an      
exhibit, reference is made to the copy of such contract or other documents filed
as an exhibit to the registration statement, each statement being qualified in  
all respects by such reference. A copy of the registration statement, including 
the exhibits and schedules thereto, may be read and copied at the SEC's Public  
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on
the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains an Internet site at              
http://www.sec.gov, from which interested persons can electronically access the 
registration statement, including the exhibits and any schedules thereto.       

As a result of the Offering, we will become subject to the full       
informational requirements of the Securities Exchange Act of 1934, as amended.  
We will fulfill our obligations with respect to such requirements by filing     
periodic reports and other information with the SEC. We intend to furnish our   
shareholders with annual reports containing consolidated financial statements   
certified by an independent public accounting firm. We also maintain an Internet
site at http://www.delphiauto.com. Our website and the information contained    
therein or connected thereto shall not be deemed to be incorporated into this   
prospectus or the registration statement of which it forms a part.              

 155

424B4
158th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 158th

(This page intentionally left blank)

424B4
159th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 159th

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
INTERIM CONSOLIDATED FINANCIAL STATEMENTS:                        

     Consolidated Balance Sheets at December 31, 1997 and         
      September 30, 1998 (Unaudited)........................  F-2 

     Consolidated Statements of Income (Unaudited) for the        
      nine months ended September 30, 1997 and 1998.........  F-3 

     Consolidated Statements of Equity (Deficit) for the          
      year ended December 31, 1997 and the nine months ended      
      September 30, 1998 (Unaudited)........................  F-4 

     Consolidated Statements of Cash Flows (Unaudited) for        
      the nine months ended September 30, 1997 and 1998.....  F-5 

     Notes to Interim Consolidated Financial Statements           
      (Unaudited)...........................................  F-6 

AUDITED CONSOLIDATED FINANCIAL STATEMENTS:                        

     Independent Auditors' Report...........................  F-11

     Consolidated Balance Sheets at December 31, 1996 and         
      1997..................................................  F-12

     Consolidated Statements of Income for each of the three      
      years in the period ended December 31, 1997...........  F-13

     Consolidated Statements of Equity (Deficit) and              
      Comprehensive Income for each of the three years in         
      the period ended December 31, 1997....................  F-14

     Consolidated Statements of Cash Flows for each of the        
      three years in the period ended December 31, 1997.....  F-15

     Notes to Consolidated Financial Statements.............  F-16

 F-1

424B4
160th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 160th

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                             DECEMBER 31,    SEPTEMBER 30,
                                                                 1997            1998     
                                                             ------------    -------------
                                                                     (IN MILLIONS)        
                                                                              (UNAUDITED) 
                                                                                          
                           ASSETS                                                         
Current assets:                                                                           
  Cash and cash equivalents.................................   $   989          $   980   
  Other marketable securities...............................        11               20   
                                                               -------          -------   
       Total cash and marketable securities.................     1,000            1,000   
  Accounts receivable, net:                                                               
     General Motors and affiliates..........................     2,284            1,962   
     Other customers........................................       982            1,288   
  Inventories, net (Note 3).................................     1,868            1,807   
  Deferred income taxes.....................................       183              206   
  Prepaid expenses and other assets.........................        61               96   
                                                               -------          -------   
       Total current assets.................................     6,378            6,359   
Property, net...............................................     4,600            4,878   
Deferred income taxes.......................................     3,007            2,552   
Other assets................................................     1,041            1,141   
                                                               -------          -------   
Total assets................................................   $15,026          $14,930   
                                                               =======          =======   
                  LIABILITIES AND DEFICIT                                                 
Current liabilities:                                                                      
  Notes payable and current portion of long-term debt.......   $   159          $   206   
  Accounts payable:                                                                       
     General Motors and affiliates..........................        86               91   
     Other suppliers........................................     2,157            1,977   
  Accrued liabilities.......................................     1,664            1,557   
                                                               -------          -------   
       Total current liabilities............................     4,066            3,831   
Long-term debt, including intracompany note payable with                                  
  General Motors............................................     3,341            3,294   
Pension benefits............................................     1,799            1,897   
Postretirement benefits other than pensions.................     4,788            4,523   
Other liabilities...........................................     1,445            1,424   
                                                               -------          -------   
       Total liabilities....................................    15,439           14,969   
                                                               -------          -------   
Commitments and contingencies (Note 7)                                                    
Deficit:                                                                                  
  General Motors' net investment............................      (335)              (2)  
  Accumulated translation adjustments.......................       (78)             (37)  
                                                               -------          -------   
       Total deficit........................................      (413)             (39)  
                                                               -------          -------   
Total liabilities and deficit...............................   $15,026          $14,930   
                                                               =======          =======   

See notes to interim consolidated financial statements. 
 F-2

424B4
161st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 161st

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 

                                                                [Download Table]

                                                               NINE MONTHS ENDED   
                                                                 SEPTEMBER 30,     
                                                             --------------------- 
                                                              1997          1998   
                                                              ----          ----   
                                                             (IN MILLIONS, EXCEPT  
                                                              PER SHARE AMOUNTS)   
                                                                                   
Net sales:                                                                         
  General Motors and affiliates............................. $19,307       $16,195 
  Other customers...........................................   4,061         4,484 
                                                             -------       ------- 
     Total net sales........................................  23,368        20,679 
                                                             -------       ------- 
Operating expenses:                                                                
  Cost of sales, excluding items listed below...............  20,507        19,220 
  Selling, general and administrative.......................   1,011         1,012 
  Depreciation and amortization.............................     621           731 
                                                             -------       ------- 
     Total operating expenses...............................  22,139        20,963 
                                                             -------       ------- 
Operating income (loss).....................................   1,229          (284)
Interest expense............................................    (206)         (199)
Other income, net...........................................      65           124 
                                                             -------       ------- 
Income (loss) before income taxes...........................   1,088          (359)
Income taxes (tax benefit)..................................     352          (178)
                                                             -------       ------- 
Net income (loss)........................................... $   736       $  (181)
                                                             =======       ======= 
Earnings (loss) per share (Note 4):                                                
  Basic and diluted......................................... $  1.58       $ (0.39)
                                                             =======       ======= 

See notes to interim consolidated financial statements. 
 F-3

424B4
162nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 162nd

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                         ACCUMULATED      GENERAL      TOTAL  
                                                         TRANSLATION    MOTORS' NET   EQUITY  
                                                         ADJUSTMENTS    INVESTMENT   (DEFICIT)
                                                         -----------    -----------  ---------
                                                                      (IN MILLIONS)           
                                                                                              
Balance at January 1, 1997..............................    $  5          $   917     $   922 
  Net income............................................                      215         215 
  Foreign currency translation adjustments..............     (83)                         (83)
  Net effect of assets and liabilities transferred to                                         
     General Motors.....................................      --           (1,467)     (1,467)
                                                            ----          -------     ------- 
Balance at December 31, 1997............................     (78)            (335)       (413)
  Net loss..............................................                     (181)       (181)
  Foreign currency translation adjustments..............      41                           41 
  Net effect of assets and liabilities transferred from                                       
     General Motors.....................................      --              514         514 
                                                            ----          -------     ------- 
Balance at September 30, 1998...........................    $(37)         $    (2)    $   (39)
                                                            ====          =======     ======= 

See notes to interim consolidated financial statements. 
 F-4

424B4
163rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 163rd

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                NINE MONTHS ENDED    
                                                                  SEPTEMBER 30,      
                                                                -----------------    
                                                              1997             1998  
                                                              ----             ----  
                                                                  (IN MILLIONS)      
                                                                                     
Cash flows from operating activities:                                                
  Net income (loss)......................................... $  736            $(181)
  Adjustments to reconcile net income (loss) to net cash                             
     provided by (used in) operating activities:                                     
     Depreciation and amortization..........................    621              731 
     Pension expense, net of contributions..................   (154)             (67)
     Postretirement benefits other than pensions, net of                             
      payments and VEBA contributions.......................    305             (388)
     Deferred income taxes..................................    399               75 
     Pre-tax loss on disposal of business units (Note 2)....     --              430 
  Changes in operating assets and liabilities:                                       
     Accounts receivable, net...............................   (378)             101 
     Inventories, net.......................................    (26)             266 
     Prepaid expenses and other assets......................    102              (32)
     Accounts payable.......................................     92             (299)
     Accrued liabilities....................................     58             (159)
     Other liabilities......................................     42             (328)
  Other.....................................................     15             (200)
                                                             ------            ----- 
       Net cash provided by (used in) operating                                      
        activities..........................................  1,812              (51)
                                                             ------            ----- 
Cash flows from investing activities:                                                
  Capital expenditures......................................   (923)            (872)
  Investment in joint ventures and affiliates, net of cash                           
     acquired...............................................     (3)            (152)
  Proceeds from disposal of business units (Note 2).........     --              217 
  Acquisition of marketable securities......................    (27)            (531)
  Liquidation of marketable securities......................     46              522 
  Other.....................................................     47              117 
                                                             ------            ----- 
       Net cash used in investing activities................   (860)            (699)
                                                             ------            ----- 
Cash flows from financing activities:                                                
  Cash effect of assets and liabilities transferred (to)                             
     from General Motors....................................   (903)             741 
                                                             ------            ----- 
       Net cash (used in) provided by financing                                      
        activities..........................................   (903)             741 
                                                             ------            ----- 
Effect of exchange rate fluctuations on cash and cash                                
  equivalents...............................................    (30)              -- 
                                                             ------            ----- 
Increase (decrease) in cash and cash equivalents:...........     19               (9)
  Cash and cash equivalents at beginning of period..........    971              989 
                                                             ------            ----- 
  Cash and cash equivalents at end of period................ $  990            $ 980 
                                                             ======            ===== 

See notes to interim consolidated financial statements. 
 F-5

424B4
164th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 164th

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BACKGROUND AND BASIS OF PRESENTATION                                         

BACKGROUND--Delphi Automotive Systems Corporation ("Delphi") was      
incorporated in late 1998 and is currently a wholly owned subsidiary of General 
Motors Corporation ("GM"). During 1998, GM announced its intention to create a  
separate company comprised of the GM businesses and operations that now comprise
Delphi and the associated assets and liabilities of such businesses and         
operations (the "Separation"). The divestiture is expected to occur in two      
stages, the first of which involves an offering to the public of approximately  
100 million common shares of Delphi currently held by GM (the "Offering"). The  
second stage involves GM distributing to holders of its $1 2/3 common stock in  
1999, all of its interest in Delphi (the "Distribution") through one of the     
following transactions:                                                         

- A split-off transaction, such as one in which Delphi shares would be
     offered in exchange for GM $1 2/3 common stock to those GM stockholders
who elect to participate in an exchange offer; or                 

     - A spin-off transaction in which the shares of Delphi would be distributed
to GM $1 2/3 common stockholders on a pro-rata basis; or          

- Some combination of the above.                                      

BASIS OF PRESENTATION--The consolidated financial statements of Delphi
reflect the historical results of operations and cash flows of the businesses   
that were considered part of the Delphi business sector during each respective  
period; however, they do not reflect many significant changes that will occur in
the operations and funding of Delphi as a result of the Separation and the      
Offering. The historical consolidated balance sheets reflect the assets and     
liabilities that are expected to be transferred to Delphi in accordance with the
terms of the Master Separation Agreement (the "Separation Agreement"). Delphi   
and Delco Electronics Corporation ("Delco Electronics"), the electronics and    
mobile communication business that was transferred to Delphi in December 1997,  
were under the common control of GM during such periods; therefore, the         
consolidated financial statements include amounts relating to Delco Electronics 
for all periods presented, although Delco Electronics was not integrated with   
Delphi until December 1997.                                                     

The following significant factors are reflected in the consolidated   
financial statements:                                                           

CAPITAL ARRANGEMENTS                                                  

   - Delphi has operated under a Cash and Debt Management Agreement with GM,
  and an intracompany note payable to GM. The Cash and Debt Management
    Agreement established Delphi's combined cash and marketable securities
      balance at $1.0 billion. Delphi's total debt is $3.5 billion, reflecting
    a $3.1 billion intracompany note payable to GM and outstanding debt at
     Delphi's international subsidiaries. The $3.1 billion intracompany note
 payable to GM reflects the portion of GM's outstanding debt that is
      specifically related to Delphi's operations. The historical consolidated
financial statements give effect to the terms of the Cash and Debt
      Management Agreement and the intracompany note payable, and accordingly,
    reflect cash and marketable securities and the combined short-term and
   long-term debt capitalization totaling $1.0 billion and $3.5 billion,
respectively, at December 31, 1997 and September 30, 1998.        

  - Interest expense reflects interest associated with the historical debt
   capitalization discussed above, primarily using a blend of prevailing
   short-term and long-term weighted-average interest rates commensurate
with the overall credit risk of the Delphi business sector.       

 F-6

424B4
165th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 165th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED 

EMPLOYEE BENEFITS ARRANGEMENTS                                        

    - The Separation Agreement provides generally that pension plan assets and
liabilities related to Delphi's U.S. salaried active and inactive 
 employees retiring after January 1, 1999 will be assumed by Delphi.
    Delphi will establish and administer defined benefit pension plans for
       its salaried employees under the same terms that existed for the GM plans
    at the time of separation, subject to all plan terms. The consolidated
     financial statements reflect the assets and liabilities related to U.S.
   salaried employees that Delphi will assume pursuant to the Separation
       Agreement, and exclude employee benefit obligations and assets related to
 salaried employees retired on or before January 1, 1999. Generally,
Delphi's U.S. hourly employees will continue to participate in the
      defined benefit pension plan for hourly workers administered by GM until
     the Distribution. Generally, Delphi will assume the pension obligations
    for U.S. hourly employees who retire after October 1, 1999 and GM will
   retain pension obligations for U.S. hourly employees who retire on or
      before October 1, 1999. The amount of such obligations vary depending on
    factors such as discount rates, asset returns, contribution levels and
  other factors. On December 31, 1997, the obligations attributable to
     Delphi were $1.7 billion. Delphi intends to work with GM to ensure that
    any plan transfers are accomplished in accordance with applicable laws
and regulations.                                                  

  - The Separation Agreement provides in general that GM will retain other
  postretirement benefit liabilities related to Delphi's U.S. salaried
employees retiring on or prior to January 1, 1999. The liabilities
      related to Delphi's U.S. salaried active and inactive employees retiring
   after January 1, 1999 will be assumed by Delphi. Delphi's U.S. hourly
employees will continue to participate in the postretirement plans
     administered by GM until the Distribution, and GM generally will retain
     postretirement benefit obligations for U.S. hourly employees retired on
or before October 1, 1999.                                        

   - The liabilities set forth in Delphi's consolidated financial statements
     include employee benefit obligations related to its active and inactive
    employees only; however, the consolidated statements of income include
     benefit costs for Delphi's active, inactive and retired employees. Such
     accrued obligations and employee benefit costs are based upon actuarial
methods and assumptions.                                          

OPERATING COSTS                                                       

 - Operating costs and expenses include allocations of general corporate
 overhead expenses related to GM's corporate headquarters and common
    support activities, including payroll administration, employee medical
     coverage and property and casualty insurance, financial, legal, tax and
       human resources. These costs have been allocated to Delphi based on usage
     or allocation methodologies primarily based on total net sales, certain
tangible assets and payroll expenses. Although Delphi believes the
      allocations and charges for such services to be reasonable, the costs of
   these services charged to Delphi are not indicative of the costs that
would have been incurred if Delphi had been a stand-alone entity. 

INCOME TAXES                                                          

- Income taxes were determined in accordance with the provisions of   
       Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
     for Income Taxes." Once Delphi is a stand-alone entity and is no longer
included in GM's consolidated income tax return, it will no longer
benefit from its position within GM's consolidated income tax     
     environment. As a result, Delphi expects its effective income tax rates
    in future periods generally to be higher than its historical effective
income tax rates.                                                 

 F-7

424B4
166th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 166th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED 

CASH FLOWS                                                            

- The consolidated statements of cash flows present the historical    
     operating cash flows of Delphi's businesses. The net cash effect of the
   adjustments specified in the Separation Agreement is included in cash
    flows from financing activities. The net cash effect of the separation
adjustments exceeded the net equity effect of such adjustments by 
   approximately $128 million and $227 million for the nine months ended
   September 30, 1997 and 1998, respectively. This was caused by changes
   during these periods in separation adjustments for various assets and
       liabilities, principally pension and other postretirement benefits, which
affected net equity, but did not necessarily affect cash.         

  In the opinion of management, all adjustments, consisting of only normal
recurring items, except those disclosed in Note 2, which are necessary for a    
fair presentation have been included. The results for interim periods are not   
necessarily indicative of results which may be expected for any other interim   
period or for the full year and may not necessarily reflect the consolidated    
results of operations, financial position, changes in equity and cash flows of  
Delphi in the future or what they would have been had Delphi been a separate,   
stand-alone entity during the periods presented.                                

2. COMPETITIVENESS INITIATIVES                                                  

  The global automotive parts industry has become increasingly competitive
and is currently undergoing significant restructuring and consolidation         
activities. All of the major industry competitors are continuing to increase    
their focus on efficiency and cost improvements, while facing continuing price  
pressures.                                                                      

  Accordingly, during 1997, Delphi recognized a charge to cost of sales of
$80 million, or $50 million after-tax, to provide for postemployment benefits   
and other site-related closure costs in connection with the decision to cease   
production at its Trenton, New Jersey plant. During the third quarter of 1998,  
Delphi signed divestiture agreements for its seating, lighting and coil spring  
businesses resulting in a loss of $430 million, or $271 million after-tax. The  
loss had the effect of increasing cost of sales and depreciation and            
amortization by $382 million and $48 million, respectively.                     

3. INVENTORIES, NET                                                             

Inventories, net consisted of the following:                          

                                                                [Download Table]

                                                  DECEMBER 31,    SEPTEMBER 30,
                                                      1997            1998     
                                                  ------------    -------------
                                                          (IN MILLIONS)        
                                                                               
Productive material, work-in-process and                                       
  supplies.......................................    $2,035          $1,942    
Finished goods...................................       264             285    
                                                     ------          ------    
     Total inventories at FIFO...................     2,299           2,227    
Less allowances to adjust the carrying value of                                
  certain inventories to LIFO....................      (431)           (420)   
                                                     ------          ------    
     Total inventories, net......................    $1,868          $1,807    
                                                     ======          ======    

 F-8

424B4
167th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 167th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED 

4. EARNINGS PER SHARE                                                           

   Basic and diluted earnings (loss) per share attributable to Delphi common
stock was determined based on net income (loss) divided by the 465 million      
shares outstanding prior to the Offering. For purposes of the earnings (loss)   
per share calculation, the shares outstanding prior to the Offering are treated 
as outstanding for all periods presented. There were no potentially dilutive    
securities outstanding during the periods presented.                            

5. COMPREHENSIVE INCOME (LOSS)                                                  

Delphi's comprehensive income (loss) was as follows:                  

                                                                [Download Table]

                                                               NINE MONTHS    
                                                                  ENDED       
                                                              SEPTEMBER 30,   
                                                             ---------------- 
                                                             1997       1998  
                                                             ----       ----  
                                                              (IN MILLIONS)   
                                                                              
Net income (loss)........................................... $736       $(181)
Other comprehensive income (loss)--foreign currency                           
  translation adjustments, net of tax.......................  (67)         41 
                                                             ----       ----- 
Comprehensive income (loss)................................. $669       $(140)
                                                             ====       ===== 

6. SEGMENT REPORTING                                                            

Selected information regarding Delphi's product sectors is as follows:

                                                        [Enlarge/Download Table]

                                                    SAFETY,                                    
                                   ELECTRONICS &   THERMAL &                                   
                                      MOBILE       ELECTRICAL    DYNAMICS &                    
                                   COMMUNICATION  ARCHITECTURE   PROPULSION  OTHER(A)   TOTAL  
                                   -------------  ------------   ----------  --------   -----  
                                                          (IN MILLIONS)                        
                                                                                               
For the Nine Months Ended:                                                                     
September 30, 1997                                                                             
  Net sales to GM and                                                                          
     affiliates...................    $3,463         $7,276       $ 8,568     $  --    $19,307 
  Net sales to other customers....       419          2,008         1,634        --      4,061 
  Inter-sector net sales..........       214            140             6      (360)        -- 
                                      ------         ------       -------     -----    ------- 
     Total net sales..............    $4,096         $9,424       $10,208     $(360)   $23,368 
                                      ======         ======       =======     =====    ======= 
  Operating income (loss).........    $  388         $  625       $   334     $(118)   $ 1,229 
                                      ======         ======       =======     =====    ======= 
September 30, 1998                                                                             
  Net sales to GM and                                                                          
     affiliates...................    $2,764         $6,030       $ 7,401     $  --    $16,195 
  Net sales to other customers....       467          2,202         1,815        --      4,484 
  Inter-sector net sales..........       181            134             6      (321)        -- 
                                      ------         ------       -------     -----    ------- 
     Total net sales..............    $3,412         $8,366       $ 9,222     $(321)   $20,679 
                                      ======         ======       =======     =====    ======= 
  Operating income (loss).........    $  178         $ (108)      $  (105)    $(249)   $  (284)
                                      ======         ======       =======     =====    ======= 

------------------                                                              
(a) Other includes activity not allocated to the product sectors and the        
elimination of inter-sector transactions.                               

 F-9

424B4
168th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 168th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED 

7. COMMITMENTS AND CONTINGENCIES                                                

 Delphi is from time to time subject to various legal actions and claims
incidental to its business, including those arising out of alleged defects,     
product warranties, employment-related matters and environmental matters.       
Litigation is subject to many uncertainties, and the outcome of individual      
litigated matters is not predictable with assurance. After discussions with     
counsel, it is the opinion of management that the outcome of such matters will  
not have a material adverse impact on the consolidated financial position,      
results of operations or cash flows of Delphi.                                  

8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                                    

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133    
requires recognition of all derivative financial instruments as either assets or
liabilities in consolidated balance sheets at fair value and determines the     
method(s) of gain/loss recognition. Delphi is required to adopt SFAS No. 133    
with its fiscal year ending December 31, 2000 and is currently assessing the    
effect that it may have on its consolidated financial statements.               

     SFAS No. 133 provides that, if certain conditions are met, a derivative may
be specifically designated as:                                                  

- a hedge of the exposure to changes in the fair value of a recognized
  asset or liability or an unrecognized firm commitment (a "fair value
hedge");                                                          

- a hedge of the exposure to variable cash flows of a forecasted      
transaction (a "cash flow hedge"); or                             

     - a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale 
  security or a foreign-currency-denominated forecasted transaction (a
"foreign currency hedge").                                        

Under SFAS No. 133, the accounting for changes in the fair value of a 
derivative depends on its intended use and designation. For a fair value hedge, 
the gain or loss is recognized in earnings in the period of change together with
the offsetting loss or gain on the hedged item. For a cash flow hedge, the      
effective portion of the derivative's gain or loss is initially reported as a   
component of other comprehensive income and subsequently reclassified into      
earnings when the forecasted transaction affects earnings. For a foreign        
currency hedge, the gain or loss is reported in other comprehensive income as   
part of the cumulative translation adjustment. For all other items not          
designated as hedging instruments, the gain or loss is recognized in earnings in
the period of change.                                                           

  In March 1998, the Accounting Standards Executive Committee ("ASEC") for
the American Institute of Certified Public Accountants released Statement of    
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed 
for Internal Use." SOP 98-1 requires the capitalization of certain expenditures 
for software that is purchased or internally developed once certain criteria are
met. Currently, Delphi generally expenses the costs of developing or obtaining  
internal use software as incurred. Delphi adopted SOP 98-1 on January 1, 1999,  
as required. Delphi expects that about $30 to $40 million of spending that would
have otherwise been expensed as incurred will be capitalized in 1999 in         
accordance with the provisions of SOP 98-1.                                     

In April 1998, the ASEC released SOP 98-5, "Reporting on the Costs of 
Start-Up Activities." SOP 98-5 generally requires costs of start-up activities  
to be expensed instead of being capitalized and amortized. Delphi was required  
to adopt the pronouncement on January 1, 1999. Delphi management has not        
concluded at this time on the applicability or impact of this SOP on Delphi's   
consolidated financial statements.                                              

F-10

424B4
169th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 169th

INDEPENDENT AUDITORS' REPORT

Delphi Automotive Systems Corporation:                                          

We have audited the accompanying consolidated balance sheets of Delphi
Automotive Systems Corporation ("Delphi"), a subsidiary of General Motors       
Corporation, as of December 31, 1996 and 1997, and the related consolidated     
statements of income, of equity (deficit) and comprehensive income, and of cash 
flows for each of the three years in the period ended December 31, 1997. These  
financial statements are the responsibility of the management of Delphi. Our    
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

   In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Delphi as of December 31, 1996 
and 1997 and the results of its operations and its cash flows for each of the   
three years in the period ended December 31, 1997, in conformity with generally 
accepted accounting principles.                                                 

/s/ DELOITTE & TOUCHE LLP                                                       
Detroit, Michigan                                                               
January 14, 1999                                                                

F-11

424B4
170th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 170th

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED BALANCE SHEETS 

                                                                [Download Table]

                                                                DECEMBER 31,    
                                                             ------------------ 
                                                              1996       1997   
                                                              ----       ----   
                                                               (IN MILLIONS)    
                                                                                
ASSETS                                                                          
Current assets:                                                                 
  Cash and cash equivalents................................. $   971    $   989 
  Other marketable securities...............................      29         11 
                                                             -------    ------- 
       Total cash and marketable securities.................   1,000      1,000 
  Accounts receivable, net:                                                     
     General Motors and affiliates..........................   1,872      2,284 
     Other customers........................................     980        982 
  Inventories, net (Note 4).................................   2,013      1,868 
  Deferred income taxes (Note 5)............................     175        183 
  Prepaid expenses and other assets.........................     164         61 
                                                             -------    ------- 
       Total current assets.................................   6,204      6,378 
Property, net (Note 6)......................................   5,241      4,600 
Deferred income taxes (Note 5)..............................   2,560      3,007 
Other assets................................................   1,385      1,041 
                                                             -------    ------- 
Total assets................................................ $15,390    $15,026 
                                                             =======    ======= 
LIABILITIES AND EQUITY (DEFICIT)                                                
Current liabilities:                                                            
  Notes payable and current portion of long-term debt (Note                     
     8)..................................................... $   148    $   159 
  Accounts payable:                                                             
     General Motors and affiliates..........................     102         86 
     Other suppliers........................................   2,101      2,157 
  Accrued liabilities (Note 7)..............................   1,404      1,664 
                                                             -------    ------- 
       Total current liabilities............................   3,755      4,066 
Long-term debt, including intracompany note payable with                        
  General Motors (Note 8)...................................   3,352      3,341 
Pension benefits (Note 9)...................................   1,526      1,799 
Postretirement benefits other than pensions (Note 10).......   4,649      4,788 
Other liabilities...........................................   1,186      1,445 
                                                             -------    ------- 
       Total liabilities....................................  14,468     15,439 
                                                             -------    ------- 
Commitments and contingencies (Note 11)                                         
Equity (deficit):                                                               
  General Motors' net investment............................     917       (335)
  Accumulated translation adjustments.......................       5        (78)
                                                             -------    ------- 
       Total equity (deficit)...............................     922       (413)
                                                             -------    ------- 
Total liabilities and equity (deficit)...................... $15,390    $15,026 
                                                             =======    ======= 

See notes to consolidated financial statements. 
F-12

424B4
171st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 171st

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF INCOME 

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED DECEMBER 31,    
                                                             ----------------------------- 
                                                              1995       1996       1997   
                                                              ----       ----       ----   
                                                               (IN MILLIONS, EXCEPT PER    
                                                                    SHARE AMOUNTS)         
                                                                                           
Net sales:                                                                                 
  General Motors and affiliates............................. $26,656    $25,748    $25,907 
  Other customers...........................................   5,005      5,284      5,540 
                                                             -------    -------    ------- 
     Total net sales........................................  31,661     31,032     31,447 
                                                             -------    -------    ------- 
Operating expenses:                                                                        
  Cost of sales, excluding items listed below...............  27,384     27,471     27,710 
  Selling, general and administrative.......................   1,366      1,445      1,415 
  Depreciation and amortization.............................     773        843      1,970 
                                                             -------    -------    ------- 
     Total operating expenses...............................  29,523     29,759     31,095 
                                                             -------    -------    ------- 
Operating income............................................   2,138      1,273        352 
Interest expense (Note 8)...................................    (293)      (276)      (287)
Other income, net (Note 13).................................     101        115        194 
                                                             -------    -------    ------- 
Income before income taxes..................................   1,946      1,112        259 
Income taxes................................................     639        259         44 
                                                             -------    -------    ------- 
Net income.................................................. $ 1,307    $   853    $   215 
                                                             =======    =======    ======= 
Earnings per share (Note 2):                                                               
  Basic and diluted......................................... $  2.81    $  1.83    $  0.46 
                                                             =======    =======    ======= 

See notes to consolidated financial statements. 
F-13

424B4
172nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 172nd

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND COMPREHENSIVE INCOME

                                                        [Enlarge/Download Table]

                                                          ACCUMULATED      GENERAL      TOTAL  
                                           COMPREHENSIVE  TRANSLATION    MOTORS' NET   EQUITY  
                                              INCOME      ADJUSTMENTS    INVESTMENT   (DEFICIT)
                                           -------------  -----------    -----------  ---------
                                                              (IN MILLIONS)                    
                                                                                               
Balance at January 1, 1995................                   $ 10          $   110     $   120 
Comprehensive income:                                                                          
  Net income..............................    $1,307                         1,307       1,307 
  Other comprehensive income (Note 12):                                                        
     Foreign currency translation                                                              
       adjustments........................        26           26                           26 
                                              ------                                           
Comprehensive income......................    $1,333                                           
                                              ======                                           
Net effect of assets and liabilities                                                           
  transferred to General Motors...........                                     (99)        (99)
                                                             ----          -------     ------- 
Balance at December 31, 1995..............                     36            1,318       1,354 
Comprehensive income:                                                                          
  Net income..............................    $  853                           853         853 
  Other comprehensive loss (Note 12):                                                          
     Foreign currency translation                                                              
       adjustments........................       (31)         (31)                         (31)
                                              ------                                           
Comprehensive income......................    $  822                                           
                                              ======                                           
Net effect of assets and liabilities                                                           
  transferred to General Motors...........                                  (1,254)     (1,254)
                                                             ----          -------     ------- 
Balance at December 31, 1996..............                      5              917         922 
Comprehensive income:                                                                          
  Net income..............................    $  215                           215         215 
  Other comprehensive loss (Note 12):                                                          
     Foreign currency translation                                                              
       adjustments........................       (83)         (83)                         (83)
                                              ------                                           
Comprehensive income......................    $  132                                           
                                              ======                                           
Net effect of assets and liabilities                                                           
  transferred to General Motors...........                                  (1,467)     (1,467)
                                                             ----          -------     ------- 
Balance at December 31, 1997..............                   $(78)         $  (335)    $  (413)
                                                             ====          =======     ======= 

See notes to consolidated financial statements. 
F-14

424B4
173rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 173rd

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED DECEMBER 31,    
                                                             ----------------------------- 
                                                              1995       1996       1997   
                                                              ----       ----       ----   
                                                                     (IN MILLIONS)         
                                                                                           
Cash flows from operating activities:                                                      
  Net income................................................ $ 1,307    $   853    $   215 
  Adjustments to reconcile net income to net cash provided                                 
     by operating activities:                                                              
     Depreciation and amortization..........................     773        843      1,970 
     Pension expense, net of contributions..................    (778)        94        (29)
     Postretirement benefits other than pensions, net of                                   
       payments and VEBA contributions......................     466        403       (551)
     Deferred income taxes..................................     298        391        196 
  Changes in operating assets and liabilities:                                             
     Accounts receivable, net...............................    (243)       688       (557)
     Inventories, net.......................................    (170)       (67)        92 
     Prepaid expenses and other assets......................      12        (19)        95 
     Accounts payable.......................................    (424)      (361)       149 
     Accrued liabilities....................................    (633)       138        618 
     Other liabilities......................................     439       (506)     1,038 
  Other.....................................................     323        244       (318)
                                                             -------    -------    ------- 
       Net cash provided by operating activities............   1,370      2,701      2,918 
                                                             -------    -------    ------- 
Cash flows from investing activities:                                                      
  Capital expenditures......................................  (1,155)    (1,177)    (1,383)
  Investment in joint ventures and affiliates, net of cash                                 
     acquired...............................................    (136)       (54)       (24)
  Acquisition of marketable securities......................    (152)      (153)      (303)
  Liquidation of marketable securities......................     124        168        321 
  Other.....................................................     178        221         69 
                                                             -------    -------    ------- 
       Net cash used in investing activities................  (1,141)      (995)    (1,320)
                                                             -------    -------    ------- 
Cash flows from financing activities:                                                      
  Cash effect of assets and liabilities transferred to                                     
     General Motors.........................................    (263)    (1,686)    (1,549)
                                                             -------    -------    ------- 
       Net cash used in financing activities................    (263)    (1,686)    (1,549)
                                                             -------    -------    ------- 
Effect of exchange rate fluctuations on cash and cash                                      
  equivalents...............................................       6         (5)       (31)
                                                             -------    -------    ------- 
Increase (decrease) in cash and cash equivalents:...........     (28)        15         18 
  Cash and cash equivalents at beginning of year............     984        956        971 
                                                             -------    -------    ------- 
  Cash and cash equivalents at end of year.................. $   956    $   971    $   989 
                                                             =======    =======    ======= 

See notes to consolidated financial statements. 
F-15

424B4
174th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 174th

DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND BASIS OF PRESENTATION                                         

BACKGROUND--Delphi Automotive Systems Corporation ("Delphi") was      
incorporated in late 1998 and is currently a wholly owned subsidiary of General 
Motors Corporation ("GM"). During 1998, GM announced its intention to create a  
separate company comprised of the GM businesses and operations that now comprise
Delphi and the associated assets and liabilities of such businesses and         
operations (the "Separation"). The divestiture is expected to occur in two      
stages, the first of which involves an offering to the public of approximately  
100,000,000 million common shares of Delphi currently held by GM (the           
"Offering"). The second stage involves GM distributing to holders of its $1 2/3 
common stock in 1999, all of its interest in Delphi (the "Distribution") through
one of the following transactions:                                              

- A split-off transaction, such as one in which Delphi shares would be
     offered in exchange for GM $1 2/3 common stock to those GM stockholders
who elect to participate in an exchange offer; or                 

     - A spin-off transaction in which the shares of Delphi would be distributed
to GM $1 2/3 common stockholders on a pro-rata basis; or          

- Some combination of the above.                                      

BASIS OF PRESENTATION--The consolidated financial statements of Delphi
reflect the historical results of operations and cash flows of the businesses   
that were considered part of the Delphi business sector during each respective  
period; however, they do not reflect many significant changes that will occur in
the operations and funding of Delphi as a result of the Separation and the      
Offering. The historical consolidated balance sheets reflect the assets and     
liabilities that are expected to be transferred to Delphi in accordance with the
terms of the Master Separation Agreement (the "Separation Agreement"). Delphi   
and Delco Electronics Corporation ("Delco Electronics"), the electronics and    
mobile communication business that was transferred to Delphi in December 1997,  
were under the common control of GM during such periods; therefore, the         
consolidated financial statements include amounts relating to Delco Electronics 
for all periods presented, although Delco Electronics was not integrated with   
Delphi until December 1997.                                                     

The following significant factors are reflected in the consolidated   
financial statements:                                                           

CAPITAL ARRANGEMENTS                                                  

   - Delphi has operated under a Cash and Debt Management Agreement with GM,
  and an intracompany note payable to GM. The Cash and Debt Management
    Agreement established Delphi's combined cash and marketable securities
      balance at $1.0 billion. Delphi's total debt is $3.5 billion, reflecting
    a $3.1 billion intracompany note payable to GM and outstanding debt at
     Delphi's international subsidiaries. The $3.1 billion intracompany note
 payable to GM reflects the portion of GM's outstanding debt that is
      specifically related to Delphi's operations. The historical consolidated
financial statements give effect to the terms of the Cash and Debt
      Management Agreement and the intracompany note payable, and accordingly,
    reflect cash and marketable securities and the combined short-term and
   long-term debt capitalization totaling $1.0 billion and $3.5 billion,
respectively, at December 31, 1996 and 1997.                      

  - Interest expense reflects interest associated with the historical debt
   capitalization discussed above, primarily using a blend of prevailing
   short-term and long-term weighted-average interest rates commensurate
with the overall credit risk of the Delphi business sector.       

EMPLOYEE BENEFITS ARRANGEMENTS                                        

    - The Separation Agreement provides generally that pension plan assets and
liabilities related to Delphi's U.S. salaried active and inactive 
 employees retiring after January 1, 1999 will be assumed by Delphi.
    Delphi will establish and administer defined benefit pension plans for
its salaried employees under the                                  

F-16

424B4
175th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 175th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

 same terms that existed for the GM plans at the time of separation,
      subject to all plan terms. The consolidated financial statements reflect
       the assets and liabilities related to U.S. salaried employees that Delphi
    will assume pursuant to the Separation Agreement, and exclude employee
     benefit obligations and assets related to salaried employees retired on
       or before January 1, 1999. Generally, Delphi's U.S. hourly employees will
    continue to participate in the defined benefit pension plan for hourly
       workers administered by GM until the Distribution. Generally, Delphi will
       assume the pension obligations for U.S. hourly employees who retire after
    October 1, 1999 and GM will retain pension obligations for U.S. hourly
   employees who retire on or before October 1, 1999. The amount of such
 obligations vary depending on factors such as discount rates, asset
       returns, contribution levels and other factors. On December 31, 1996, the
   obligations attributable to Delphi were $1.5 billion. On December 31,
 1997 the amount was $1.7 billion. Delphi intends to work with GM to
ensure that any plan transfers are accomplished in accordance with
applicable laws and regulations.                                  

  - The Separation Agreement provides in general that GM will retain other
  postretirement benefit liabilities related to Delphi's U.S. salaried
employees retiring on or prior to January 1, 1999. The liabilities
      related to Delphi's U.S. salaried active and inactive employees retiring
   after January 1, 1999 will be assumed by Delphi. Delphi's U.S. hourly
employees will continue to participate in the postretirement plans
     administered by GM until the Distribution, and GM generally will retain
     postretirement benefit obligations for U.S. hourly employees retired on
or before October 1, 1999.                                        

   - The liabilities set forth in Delphi's consolidated financial statements
     include employee benefit obligations related to its active and inactive
    employees only; however, the consolidated statements of income include
     benefit costs for Delphi's active, inactive and retired employees. Such
     accrued obligations and employee benefit costs are based upon actuarial
methods and assumptions.                                          

OPERATING COSTS                                                       

 - Operating costs and expenses include allocations of general corporate
 overhead expenses related to GM's corporate headquarters and common
    support activities, including payroll administration, employee medical
     coverage and property and casualty insurance, financial, legal, tax and
     human resources. These costs amounted to $111 million, $124 million and
$130 million in 1995, 1996 and 1997, respectively, and have been  
      allocated to Delphi based on usage or allocation methodologies primarily
     based on total net sales, certain tangible assets and payroll expenses.
       Although Delphi believes the allocations and charges for such services to
  be reasonable, the costs of these services charged to Delphi are not
      indicative of the costs that would have been incurred if Delphi had been
a stand-alone entity.                                             

INCOME TAXES                                                          

- Income taxes were determined in accordance with the provisions of   
       Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
     for Income Taxes." Once Delphi is a stand-alone entity and is no longer
included in GM's consolidated income tax return, it will no longer
benefit from its position within GM's consolidated income tax     
     environment. As a result, Delphi expects its effective income tax rates
    in future periods generally to be higher than its historical effective
income tax rates.                                                 

CASH FLOWS                                                            

- The consolidated statements of cash flows present the historical    
     operating cash flows of Delphi's businesses. The net cash effect of the
   adjustments specified in the Separation Agreement is included in cash
    flows from financing activities. The net cash effect of the separation
adjustments exceeded the net                                      

F-17

424B4
176th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 176th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

   equity effect of such adjustments by approximately $164 million, $432
    million and $82 million in 1995, 1996 and 1997, respectively. This was
caused by changes during these years in separation adjustments for
various assets and liabilities, principally pension and other     
postretirement benefits, which affected net equity, but did not   
necessarily affect cash.                                          

   The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in equity       
(deficit) and cash flows of Delphi in the future or what they would have been   
had Delphi been a separate, stand-alone entity during the periods presented.    

2. SIGNIFICANT ACCOUNTING POLICIES                                              

   CONSOLIDATION--The consolidated financial statements include the accounts
of Delphi and domestic and foreign subsidiaries that are majority-owned.        
Delphi's share of the earnings or losses of associates, in which at least 20% of
the voting securities is owned, is included in the consolidated operating       
results using the equity method of accounting. All significant intercompany     
transactions and balances between the Delphi businesses have been eliminated.   

 USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make       
estimates and assumptions that affect amounts reported therein. Due to the      
inherent uncertainty involved in making estimates, actual results reported in   
future periods may be based upon amounts that differ from those estimates.      

EARNINGS PER COMMON SHARE--Basic and diluted earnings per share       
attributable to Delphi common stock was determined based on net income divided  
by the 465 million shares outstanding prior to the Offering. For purposes of the
earnings per share calculation, the shares outstanding prior to the Offering are
treated as outstanding for all periods presented. There were no potentially     
dilutive securities outstanding during the periods presented.                   

REVENUE RECOGNITION--Sales are recorded upon shipment of product to   
customers and transfer of title under standard commercial terms.                

   RESEARCH AND DEVELOPMENT--Delphi incurs costs in connection with research
and development programs that are expected to contribute to future earnings.    
Such costs are charged against income as incurred. Research and development     
expenses recognized by Delphi were $1.6 billion in each of 1995 and 1996, and   
$1.5 billion in 1997.                                                           

CASH AND CASH EQUIVALENTS--Cash and cash equivalents are defined as   
short-term, highly liquid investments with original maturities of 90 days or    
less. In addition, pursuant to the Cash and Debt Management Agreement, GM       
provides Delphi access to cash and cash equivalents in an amount which          
fluctuates based on Delphi's other balances, such that total cash and marketable
securities at each period end was $1.0 billion. Income taxes paid by Delphi     
totaled $719 million and $132 million in 1995 and 1996, respectively. Income    
taxes paid during 1997 were not significant. Interest paid by Delphi totaled    
$296 million, $267 million and $299 million in 1995, 1996 and 1997,             
respectively.                                                                   

MARKETABLE SECURITIES--Marketable securities are classified as        
available-for-sale. The fair value of such marketable securities approximates   
book value, with cost determined on the specific identification basis.          

     Proceeds from sales and maturities of marketable securities attributable to
Delphi totaled $124 million, $168 million and $321 million in 1995, 1996 and    
1997, respectively. The gross gains and losses related to sales of marketable   
securities were not significant to Delphi.                                      

F-18

424B4
177th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 177th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

 INVENTORIES--Inventories in the U.S. are stated at the lower of cost or
market, as determined substantially by the last-in, first-out ("LIFO") method,  
while inventories in countries other than the U.S., and at Delco Electronics,   
are stated under the first-in, first-out ("FIFO") method. Delphi's inventory    
data is combined with similar data from other GM businesses for purposes of     
applying the LIFO method of accounting. Delphi has been allocated a pro rata    
portion of GM's LIFO reserve based on the relative inventory levels of Delphi   
before application of such reserve. The effect of the LIFO method of accounting 
was to increase Delphi's operating income by $47 million, $21 million, and $73  
million, in 1995, 1996 and 1997, respectively.                                  

    DEPRECIATION AND AMORTIZATION--Depreciation is provided based on estimated
useful lives of groups of property generally using accelerated methods, which   
accumulate depreciation of approximately two-thirds of the depreciable cost     
during the first half of the estimated useful lives. Leasehold improvements are 
amortized over the period of the lease or the life of the property, whichever is
shorter, with the amortization applied directly to the asset account.           
Expenditures for repairs and maintenance are charged to expense as incurred.    

ENVIRONMENTAL LIABILITIES--Delphi recognizes environmental cleanup    
liabilities when a loss is probable and can be reasonably estimated. Such       
liabilities are generally not subject to insurance coverage. The cost of each   
environmental cleanup is estimated by engineering, financial, and legal         
specialists within Delphi based on current law. Such estimates are based        
primarily upon the estimated cost of investigation and remediation required and 
the likelihood that other potentially responsible parties ("PRPs") will be able 
to fulfill their commitments at the sites where Delphi may be jointly and       
severally liable. For closed or closing plants owned by Delphi and properties   
being sold, an estimated liability is typically recognized at the time the      
closure decision is made or sale is recorded and is based on an environmental   
assessment of the plant property.                                               

    The process of estimating environmental cleanup liabilities is complex and
dependent primarily on the nature and extent of historical information and      
physical data relating to a contaminated site, the complexity of the site, the  
uncertainty as to what remedy and technology will be required, the outcome of   
discussions with regulatory agencies and other PRPs at multi-party sites. In    
future periods, new laws or regulations, advances in cleanup technologies and   
additional information about the ultimate cleanup remedy that is used could     
significantly change Delphi's estimates.                                        

   Pursuant to the separation arrangements between Delphi and GM, GM will be
responsible for environmental liabilities at the GM facilities that are not     
transferred to Delphi, including all facilities closed or sold prior to January 
1, 1999, except that Delphi will be responsible for any environmental           
liabilities at such facilities that Delphi causes after January 1, 1999. Delphi 
will be responsible for environmental liabilities at the facilities that are    
transferred to Delphi, except that GM will be responsible for any environmental 
liabilities at such facilities that GM causes after January 1, 1999.            

    In addition, with respect to liability for offsite waste disposal, GM will
retain responsibility for sites where GM's liability is known or alleged prior  
to January 1, 1999, except that Delphi will be responsible for any wastes Delphi
contributes to these sites after January 1, 1999. Delphi will not, however, be  
responsible for any contributions to these sites from the facilities transferred
to Delphi that occurred prior to January 1, 1999. At other waste disposal sites,
GM's and Delphi's respective liability will be allocated based on each party's  
respective contribution of wastes to such sites. In particular, GM's liability  
will be based on contributions from the facilities retained by GM and any other 
facility owned or operated by GM, except the facilities transferred to Delphi.  
Delphi's liability will be based on contributions from the facilities           
transferred to Delphi and any other facility owned or operated by Delphi.       

FOREIGN CURRENCY TRANSLATION--Assets and liabilities of foreign       
subsidiaries generally are translated to U.S. dollars at end-of-period exchange 
rates. The effects of translation for most foreign subsidiaries are reported in 
a separate component of equity. The effect of remeasurement of assets and       
liabilities of foreign subsidiaries that use the U.S. dollar as their functional
currency is included in income. Income statement                                

F-19

424B4
178th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 178th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

elements of all foreign subsidiaries are translated to U.S. dollars at          
average-period exchange rates and are recognized as part of revenues, costs and 
expenses. Also included in income are gains and losses arising from transactions
denominated in a currency other than the functional currency of a particular    
subsidiary.                                                                     

    Net transaction gains and losses, as described above, decreased net income
by $55 million during 1995, and increased net income by $21 million and $68     
million during 1996 and 1997, respectively.                                     

     VALUATION OF LONG-LIVED ASSETS--Management of Delphi periodically evaluates
the carrying value of long-lived assets to be held and used, including          
intangible assets, when events or circumstances warrant such a review. The      
carrying value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such an asset is separately identifiable and is less
than the carrying value of the asset. In that event, a loss is recognized based 
on the amount by which the carrying value exceeds the fair market value of the  
long-lived asset. Fair market value is determined primarily using the           
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar       
manner, except that fair market values are reduced for the cost to dispose of   
the assets.                                                                     

     ACCRUED COMMITMENTS UNDER LOSS CONTRACTS--Management periodically evaluates
the profitability of contractual commitments on a customer basis, and will      
establish a reserve whenever expected costs exceed related revenues, based upon 
a reasonable estimate of the costs and product pricing expected to exist over   
the course of the contract period. Such reserves would be recorded only to the  
extent the total estimated losses exceeded any related impairment reserves      
separately recognized on related long-lived assets.                             

  DERIVATIVE FINANCIAL INSTRUMENTS--During the periods presented, Delphi's
exposure to fluctuations in foreign exchange rates and certain commodities      
prices was managed by GM. GM is party to a variety of foreign exchange, interest
rate, and commodity forward contracts and options entered into in connection    
with the management of its exposure to fluctuations in foreign exchange rates,  
interest rates, and certain commodities prices, including foreign exchange and  
certain commodities price exposures relating to Delphi. These financial         
exposures were managed in accordance with GM's corporate policies and           
procedures.                                                                     

GM established a Risk Management Committee to develop and monitor its 
financial risk strategies, policies and procedures. The GM Risk Management      
Committee reviews and approves all new risk management strategies, establishes  
approval authority guidelines for approved programs and monitors compliance and 
performance of existing risk management programs. GM does not enter into        
derivative transactions for trading purposes.                                   

   As part of the hedging program approval process, as it relates to Delphi,
GM and Delphi management representatives are required to identify the specific  
financial risk which the derivative transaction will minimize, the appropriate  
hedging instrument to be used to reduce the risk, and the correlation between   
the financial risk and the hedging instrument. Purchase orders, letters of      
intent, vehicle production forecasts, capital planning forecasts, and historical
data are used as the basis for determining the anticipated values of the        
transactions to be hedged. Generally, GM does not enter into derivative         
transactions that do not have a high correlation with the underlying financial  
risk. In the infrequent instances in which a derivative transaction is entered  
into that does not have a high correlation with the underlying exposure, then   
the derivative is marked to market for accounting purposes. The hedge positions 
related to Delphi as well as the correlation between the transaction risks and  
the hedging instruments, are reviewed by GM and Delphi management on an ongoing 
basis.                                                                          

     Subsequent to the Separation, Delphi will assume management of its exposure
to fluctuations in foreign exchange rates, interest rates, and certain commodity
prices. GM will assign to Delphi certain derivative contracts from its foreign  
exchange and commodities portfolio, based on Delphi's level of exposure at the  
time of the Separation. This assignment will not alter the original terms of the
contracts being transferred. In                                                 

F-20

424B4
179th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 179th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

addition, Delphi will not be required to pay any fee in order to assume the     
contracts. GM did not manage any interest rate contracts on behalf of Delphi    
during the periods presented, and no such contracts will be assumed by Delphi as
part of the Separation.                                                         

   Foreign exchange forward and option contracts are accounted for as hedges
to the extent they are designated, and are effective, as hedges of firm foreign 
currency commitments. Additionally, certain foreign exchange option contracts   
receive hedge accounting treatment to the extent such contracts hedge certain   
anticipated foreign currency transactions. Other such foreign exchange contracts
and options are marked to market on a current basis.                            

GM, on behalf of Delphi, also enters into commodity forward and option
contracts. Since GM has the discretion to settle these transactions either in   
cash or by taking physical delivery, these contracts are not considered         
financial instruments for accounting purposes. Commodity forward contracts and  
options are accounted for as hedges to the extent they are designated, and are  
effective, as hedges of firm or anticipated commodity purchase contracts. Other 
commodity forward contracts and options are marked to market on a current basis.

POSTEMPLOYMENT BENEFITS AND EMPLOYEE TERMINATION BENEFITS--Delphi's   
postemployment benefits primarily relate to Delphi's extended-disability benefit
program in the United States and supplemental unemployment compensation         
benefits, mainly pursuant to union or other contractual agreements. Extended-   
disability benefits are accrued on a service-driven basis and supplemental      
unemployment compensation benefits are accrued on an event-driven basis.        
Accruals for postemployment benefits represent the discounted future cash       
expenditures expected during the period between the idling of affected employees
and the time when such employees are redeployed, retire or otherwise terminate  
their employment.                                                               

  Voluntary termination benefits are accrued when the employees accept the
offer. Involuntary termination benefits are accrued when management has         
committed to a termination plan and the benefit arrangement is communicated to  
affected employees.                                                             

    LABOR FORCE--On a worldwide basis, Delphi has a concentration of employees
working under union collective bargaining agreement representing approximately  
96% of its hourly workforce. Of these represented employees, a significant      
number of hourly employees are working under agreements that will expire in     
1999. Certain customers of Delphi also have represented work forces. Future work
stoppages by Delphi's employees or by employees of Delphi's customers could     
disrupt Delphi's production of automotive components and systems.               

During the years ended December 31, 1996 and 1997, work stoppages at  
certain GM and Delphi facilities had an estimated unfavorable impact on net     
income of $281 million and $92 million, respectively. Delphi generally estimates
the impact of work stoppages by multiplying standard contribution margins by the
estimated decline in vehicle production that is directly attributable to the    
work stoppages, after considering partial recovery, if any, in subsequent       
periods.                                                                        

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative      
Instruments and Hedging Activities." SFAS No. 133 requires recognition of all   
derivative financial instruments as either assets or liabilities in consolidated
balance sheets at fair value and determines the method(s) of gain/loss          
recognition. Delphi is required to adopt SFAS No. 133 with its fiscal year      
ending December 31, 2000 and is currently assessing the effect that it may have 
on its consolidated financial statements.                                       

F-21

424B4
180th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 180th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

     SFAS No. 133 provides that, if certain conditions are met, a derivative may
be specifically designated as:                                                  

- a hedge of the exposure to changes in the fair value of a recognized
  asset or liability or an unrecognized firm commitment (a "fair value
hedge");                                                          

- a hedge of the exposure to variable cash flows of a forecasted      
transaction (a "cash flow hedge"); or                             

     - a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale 
  security or a foreign-currency-denominated forecasted transaction (a
"foreign currency hedge").                                        

Under SFAS No. 133, the accounting for changes in the fair value of a 
derivative depends on its intended use and designation. For a fair value hedge, 
the gain or loss is recognized in earnings in the period of change together with
the offsetting loss or gain on the hedged item. For a cash flow hedge, the      
effective portion of the derivative's gain or loss is initially reported as a   
component of other comprehensive income and subsequently reclassified into      
earnings when the forecasted transaction affects earnings. For a foreign        
currency hedge, the gain or loss is reported in other comprehensive income as   
part of the cumulative translation adjustment. For all other items not          
designated as hedging instruments, the gain or loss is recognized in earnings in
the period of change.                                                           

  In March 1998, the Accounting Standards Executive Committee ("ASEC") for
the American Institute of Certified Public Accountants released Statement of    
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed 
for Internal Use." SOP 98-1 requires the capitalization of certain expenditures 
for software that is purchased or internally developed once certain criteria are
met. Currently, Delphi generally expenses the costs of developing or obtaining  
internal use software as incurred. Delphi adopted SOP 98-1 on January 1, 1999,  
as required. Delphi expects that about $30 to $40 million of spending that would
have otherwise been expensed as incurred will be capitalized in 1999 in         
accordance with the provisions of SOP 98-1.                                     

In April 1998, the ASEC released SOP 98-5, "Reporting on the Costs of 
Start-Up Activities." SOP 98-5 generally requires costs of start-up activities  
to be expensed instead of being capitalized and amortized. Delphi was required  
to adopt the pronouncement on January 1, 1999. Delphi management has not        
concluded at this time on the applicability or impact of this SOP on Delphi's   
consolidated financial statements.                                              

3. COMPETITIVENESS INITIATIVES                                                  

  The global automotive parts industry has become increasingly competitive
and is currently undergoing significant restructuring and consolidation         
activities. All of the major industry competitors are continuing to increase    
their focus on efficiency and cost improvements, while facing continuing price  
pressures. As a result, Delphi initiated a study in 1997 to evaluate the        
long-term competitiveness of all facets of its business ("Competitiveness       
Study"). This study was performed in conjunction with the business planning     
cycle and was substantially completed in December 1997.                         

     Based on the results of the Competitiveness Study, Delphi recorded a charge
of approximately $1.4 billion, or $870 million after-tax, during the fourth     
quarter of 1997. This charge was comprised of the following:                    

                                                                [Download Table]

  PRE-TAX      AFTER-TAX                            
  -------      ---------                            
                                                    
$791 million  $506 million  Underperforming assets  
 $55 million   $34 million  Capacity reductions     
$516 million  $330 million  Assets held for disposal

F-22

424B4
181st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 181st
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

Overall, these charges had the effect of increasing cost of sales and 
depreciation and amortization by $262 million and $1.1 billion, respectively.   

    The amount included for underperforming assets represents charges pursuant
to Delphi's policy for the valuation of long-lived assets. Delphi re-evaluated  
the carrying value of its long-lived assets as events and circumstances of the  
industry changed. The re-evaluation was performed using product specific cash   
flow information refined in connection with the separation of Delphi from GM's  
North American Automotive Operations and the transfer of Delco Electronics to   
Delphi in December 1997. As a result, the carrying values of certain long-lived 
assets were determined to be impaired as the separately identifiable,           
undiscounted future cash flows from such assets were less than their respective 
carrying values. The resulting impairment charge represented the amount by which
the carrying value of such assets exceeded their estimated fair market value.   

The amount included for capacity reductions represents postemployment 
benefits payable to employees pursuant to contractual agreements.               

     Assets held for disposal primarily relate to Delphi's seating, lighting and
coil spring businesses, which were announced for sale during 1997, and certain  
other losses on assets subject to disposal. The related pre-tax charges         
represented the amount by which the carrying value of such assets exceeded the  
estimated fair value, net of related costs to dispose of the assets.            

    Separately, during 1997 Delphi recognized a charge to cost of sales of $80
million, or $50 million after-tax, to provide for postemployment benefits and   
other site-related closure costs in connection with the decision to cease       
production at its Trenton, New Jersey, plant. In 1996, Delphi sold four         
facilities located in Flint and Livonia, Michigan and Oshawa and Windsor,       
Ontario, which resulted in a loss of $247 million, or $153 million after-tax.   
The loss had the effect of increasing cost of sales and depreciation and        
amortization by $167 million and $80 million, respectively.                     

4. INVENTORIES, NET                                                             

Inventories, net consisted of the following:                          

                                                                [Download Table]

                                                                DECEMBER 31,     
                                                             ------------------- 
                                                              1996         1997  
                                                              ----         ----  
                                                                (IN MILLIONS)    
                                                                                 
Productive material, work-in-process and supplies........... $2,274       $2,035 
Finished goods..............................................    243          264 
                                                             ------       ------ 
     Total inventories at FIFO..............................  2,517        2,299 
Less allowance to adjust the carrying value of certain                           
  inventories to LIFO.......................................   (504)        (431)
                                                             ------       ------ 
     Total inventories, net................................. $2,013       $1,868 
                                                             ======       ====== 

F-23

424B4
182nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 182nd
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

5. INCOME TAXES                                                                 

    Income before income taxes for U.S. and foreign operations was as follows:

                                                        [Enlarge/Download Table]

                                                         YEAR ENDED DECEMBER 31,     
                                                      ------------------------------ 
                                                       1995         1996        1997 
                                                       ----         ----        ---- 
                                                              (IN MILLIONS)          
                                                                                     
U.S. income (loss)................................... $1,293       $  584       $(99)
Foreign income.......................................    653          528        358 
                                                      ------       ------       ---- 
     Total........................................... $1,946       $1,112       $259 
                                                      ======       ======       ==== 

The provision for income taxes was as follows:                        

                                                                [Download Table]

                                                         YEAR ENDED DECEMBER 31,    
                                                      ----------------------------- 
                                                      1995       1996        1997   
                                                      ----       ----        ----   
                                                              (IN MILLIONS)         
                                                                                    
Income taxes estimated to be payable (refundable):                                  
  U.S. federal....................................... $ 54       $(107)     $   849 
  Foreign............................................  191         108          203 
  U.S. state and local...............................   (8)         50           32 
                                                      ----       -----      ------- 
     Total payable currently.........................  237          51        1,084 
Deferred income tax expense (benefit), net                                          
  U.S. federal.......................................  346         244         (915)
  Foreign............................................   (3)         (3)         (47)
  U.S. state and local...............................   66         (26)         (71)
                                                      ----       -----      ------- 
     Total deferred..................................  409         215       (1,033)
Investment tax credits...............................   (7)         (7)          (7)
                                                      ----       -----      ------- 
     Total income tax provision...................... $639       $ 259      $    44 
                                                      ====       =====      ======= 

A reconciliation of the provision for income taxes compared with the  
amounts at the U.S. federal statutory rate was as follows:                      

                                                                [Download Table]

                                                        YEAR ENDED DECEMBER 31,    
                                                      ---------------------------- 
                                                      1995         1996       1997 
                                                      ----         ----       ---- 
                                                             (IN MILLIONS)         
                                                                                   
Tax at U.S. federal statutory income tax rate........ $681         $389       $ 91 
U.S. state and local income taxes....................   58           25        (39)
Foreign rates other than 35%.........................  (41)         (80)        31 
Research and experimentation credits.................   --          (49)       (50)
Other adjustments....................................  (59)         (26)        11 
                                                      ----         ----       ---- 
     Total income tax provision...................... $639         $259       $ 44 
                                                      ====         ====       ==== 

  Deferred income tax assets and liabilities for 1996 and 1997 reflect the
impact of temporary differences between amounts of assets and liabilities for   
financial reporting purposes and the bases of such assets and liabilities as    
measured by tax laws. Such deferred tax balances are based on the assets and    
liabilities transferred to Delphi pursuant to the Separation Agreement.         

F-24

424B4
183rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 183rd
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

     Temporary differences that gave rise to deferred tax assets and liabilities
included the following:                                                         

                                                        [Enlarge/Download Table]

                                                    YEAR ENDED DECEMBER 31,              
                                       --------------------------------------------------
                                                1996                       1997          
                                       -----------------------    -----------------------
                                       DEFERRED     DEFERRED      DEFERRED     DEFERRED  
                                         TAX           TAX          TAX           TAX    
                                        ASSETS     LIABILITIES     ASSETS     LIABILITIES
                                       --------    -----------    --------    -----------
                                       (IN MILLIONS)                                     
                                                                                         
Postretirement benefits other than                                                       
  pensions............................  $1,626        $ --         $1,677        $ --    
Postemployment benefits...............     175          --            170          --    
Depreciation..........................      --         289             54          83    
Employee benefits.....................     701          29            886          --    
Tax on unremitted profits.............      --         165             --          36    
U.S. state and local taxes............     176          --            134          --    
Other U.S. ...........................      82          99            247          57    
Other foreign.........................      --          90             45          85    
                                        ------        ----         ------        ----    
     Total............................   2,760         672          3,213         261    
Valuation allowances..................     (25)         --            (23)         --    
                                        ------        ----         ------        ----    
     Total deferred taxes.............  $2,735        $672         $3,190        $261    
                                        ======        ====         ======        ====    

     Realization of the net deferred tax assets is dependent on future reversals
of existing taxable temporary differences and adequate future taxable income,   
exclusive of reversing temporary differences and carryforwards. Although        
realization is not assured, management believes that it is more likely than not 
that the net deferred tax assets will be realized.                              

Annual tax provisions include amounts considered sufficient to pay    
assessments that may result from examination of prior year tax returns; however,
income tax accruals in the consolidated balance sheets reflect that, as part of 
the Separation Agreement, GM agreed to indemnify Delphi, excluding Delco        
Electronics, for prior year tax issues in the United States.                    

Provisions are made for estimated U.S. and foreign income taxes, less 
available tax credits and deductions, which may be incurred on the remittance of
Delphi's share of subsidiaries' undistributed earnings not deemed to be         
permanently reinvested. Taxes have not been provided on foreign subsidiaries'   
earnings, which are deemed permanently reinvested, of approximately $30 million 
at December 31, 1997. Quantification of the deferred tax liability, if any,     
associated with permanently reinvested earnings is not practicable.             

F-25

424B4
184th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 184th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

6. PROPERTY, NET                                                                

Property, net consisted of the following:                             

                                                                [Download Table]

                                                                   DECEMBER 31,    
                                              ESTIMATED USEFUL  ------------------ 
                                               LIVES (YEARS)     1996       1997   
                                              ----------------   ----       ----   
                                                                  (IN MILLIONS)    
                                                                                   
Land.........................................         --        $    69    $    66 
Land and leasehold improvements..............       3-30            248        249 
Buildings....................................      29-45          2,067      2,114 
Machinery and equipment......................       3-30          9,754     10,159 
Furniture and office equipment...............       3-20            149        153 
Construction in progress.....................         --            705        762 
                                                                -------    ------- 
     Total...................................                    12,992     13,503 
Less accumulated depreciation and                                                  
  amortization...............................                    (7,751)    (8,903)
                                                                -------    ------- 
Total property, net..........................                   $ 5,241    $ 4,600 
                                                                =======    ======= 

7. ACCRUED LIABILITIES                                                          

Accrued liabilities consisted of the following:                       

                                                                [Download Table]

                                                               DECEMBER 31,   
                                                             -----------------
                                                              1996       1997 
                                                              ----       ---- 
                                                               (IN MILLIONS)  
                                                                              
Payroll related obligations................................. $  861     $  636
Income taxes payable........................................     --        671
Other.......................................................    543        357
                                                             ------     ------
     Total.................................................. $1,404     $1,664
                                                             ======     ======

8. INTRACOMPANY NOTE PAYABLE AND LONG-TERM DEBT                                 

Pursuant to a Cash and Debt Management Agreement, Delphi's financial  
statements reflect an outstanding intracompany note payable with the automotive 
and corporate sectors of GM of $3.1 billion at both December 31, 1996 and 1997. 
This intracompany note payable bears interest at variable interest rates        
established consistent with the overall credit risk of the Delphi business      
sector; such rates approximated 7.4%, 7.3% and 7.2% in 1995, 1996 and 1997,     
respectively. The intracompany note payable matures on January 1, 2000, and is  
not subject to any collateral or covenant requirements.                         

     Delphi has certain other long-term debt outstanding, principally at certain
international subsidiaries. The amount of the intracompany note payable is      
increased or repaid pursuant to the Cash and Debt Management Agreement such that
the total long-term debt outstanding at any period end is $3.5 billion. The     
repayment schedule of amounts due at December 31, 1997 was as follows:          
1998--$159 million; 1999--$9 million; 2000--$3.3 billion; 2001--$1 million;     
2002--$3 million; 2003 and thereafter--$55 million.                             

In January 1999, Delphi entered into two financing agreements with a  
syndicate of lenders providing for an aggregate of $5 billion in revolving      
credit facilities. In general, borrowings of up to $5 billion are available     
under the facilities through January 3, 2000, after which $1.5 billion will be  
available through January 3, 2004. The amount Delphi may borrow under the       
facilities will be reduced to the extent the                                    
F-26

424B4
185th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 185th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

aggregate net cash proceeds from issuances of common stock by Delphi and its    
subsidiaries, excluding issuances under its regular employee, executive and     
director stock option plans, exceeds $1.5 billion. This includes the net cash   
proceeds from this offering. The amount Delphi may borrow will also be reduced  
to the extent of the net cash proceeds from public offerings and private        
placements of debt securities, excluding debt securities with a maturity of less
than one year. The total reduction arising from issuances of common stock and   
debt securities will not exceed $2.0 billion. Borrowings under these financing  
arrangements may be used for general corporate purposes. The credit facilities  
include certain customary affirmative and negative covenants. The credit        
facilities also provide for certain events of default, including upon a change  
of control, which is defined to include the acquisition of more than 20% of the 
voting power of Delphi common stock by any person other than GM.                

 The credit facilities provide that the interest rate is to be based, at
Delphi's option, on either an Alternate Base Rate (higher of prime, federal     
funds or certificate of deposit based rates) or a Eurodollar rate, plus a       
margin. Delphi also has the right under the credit facilities to request that   
lenders provide from time to time alternative rates on loans. The rates offered 
by the lenders on these loans will either be fixed rates or rates based on a    
Eurodollar rate, plus, at the discretion of the offering lender, a margin. In   
addition to interest payments, Delphi is obligated to pay certain facility fees 
throughout the term of the facilities.                                          

9. PENSION BENEFITS                                                             

    During the periods presented, substantially all of Delphi's U.S. employees
participated in GM's defined benefit pension plans. Plans covering U.S.         
represented employees generally provide benefits of negotiated, stated amounts  
for each year of service, as well as supplemental benefits for employees who    
retire with 30 years of service before normal retirement age. The benefits      
provided by the plans covering U.S. salaried employees are generally based on   
years of service and salary history. Certain Delphi employees also participate  
in GM's nonqualified pension plans covering executives, which are unfunded. Such
plans are based on targeted wage replacement percentages, and are generally not 
significant to Delphi. GM's funding policy with respect to its qualified plans  
is to contribute annually, not less than the minimum required by applicable laws
and regulations.                                                                

Certain of Delphi's international subsidiaries sponsor defined benefit
pension plans, which provide benefits based on negotiated amounts for each year 
of service. The unfunded plans have projected benefit obligations of            
approximately $80 million and $76 million at December 31, 1996 and 1997,        
respectively. The funded plans have assets in excess of projected benefit       
obligations of approximately $45 million and $25 million at December 31, 1996   
and 1997, respectively.                                                         

During the periods presented, Delphi participated in GM's U.S. defined
benefit pension plans for hourly and salaried employees. GM charged Delphi      
approximately $421 million, $337 million and $433 million, in 1995, 1996 and    
1997, respectively, related to Delphi hourly employees and retirees in the U.S.,
and approximately $33 million, $27 million and $(11) million in these respective
years for U.S. salaried employees and retirees.                                 

  The Separation Agreement provides generally that pension plan assets and
liabilities related to Delphi's U.S. salaried active and inactive employees     
retiring after January 1, 1999 will be assumed by Delphi. Delphi will establish 
and administer defined benefit pension plans for its salaried employees under   
the same terms that existed for the GM plans at the time of separation, subject 
to all plan terms. The consolidated financial statements reflect the assets and 
liabilities related to U.S. salaried employees that Delphi will assume pursuant 
to the Separation Agreement, and exclude employee benefit obligations and assets
related to employees retired as of January 1, 1999. Generally, Delphi's U.S.    
hourly employees will continue to participate in the defined benefit pension    
plan for hourly workers administered by GM until the Distribution. Delphi is    
responsible for assuming the unfunded hourly pension liability associated with  
Delphi hourly employees either through the                                      

F-27

424B4
186th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 186th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

transfer of specified obligations and plan assets to a Delphi plan at the date  
of the Distribution, or through an equivalent series of future payments to GM   
under certain circumstances. Delphi's obligation to GM related to the U.S.      
hourly pension plan is specified in the Separation Agreement to equal the       
projected benefit obligation related to Delphi U.S. hourly active and inactive  
employees, using applicable pension actuarial assumptions, less an amount equal 
to the level of plan assets that would be received by Delphi under applicable   
laws and regulations had the plan transfer occurred on January 1, 1999, adjusted
for subsequent asset returns. Such obligation totaled $1.5 billion and $1.7     
billion at December 31, 1996 and 1997, respectively. Delphi intends to work with
GM to ensure that any plan transfers are accomplished in accordance with        
applicable law and regulations.                                                 

   The funded status related to the pension obligation for Delphi's salaried
employees at December 31 is set forth below. The measurement date utilized for  
such disclosures is December 31.                                                

                                                                [Download Table]

                                                               DECEMBER 31,         
                                                      ------------------------------
                                                          1996             1997     
                                                         ASSETS           ASSETS    
                                                         EXCEED           EXCEED    
                                                       ACCUMULATED      ACCUMULATED 
                                                        BENEFITS         BENEFITS   
                                                       -----------      ----------- 
                                                              (IN MILLIONS)         
                                                                                    
Actuarial present value of:                                                         
  Vested benefits....................................    $1,388           $1,543    
  Nonvested benefits.................................       345              384    
                                                         ------           ------    
Accumulated benefit obligation.......................     1,733            1,927    
Effect of projected benefits.........................       412              459    
                                                         ------           ------    
Total projected benefit obligation (PBO).............     2,145            2,386    
Plan assets at fair value............................     2,218            2,475    
                                                         ------           ------    
PBO less than plan assets............................        73               89    
Unamortized net loss.................................       344              267    
Unamortized prior service cost.......................       139              129    
Unrecognized asset at date of adoption...............       (54)             (40)   
                                                         ------           ------    
Net pension asset....................................    $  502           $  445    
                                                         ======           ======    

  The following assumptions were used to determine the pension expense and
the actuarial value of the PBO for the U.S. plans in which Delphi's salaried    
employees participate:                                                          

                                                                [Download Table]

                                                             1996   1997 
                                                             ----   ---- 
                                                                         
Weighted-average discount rate..............................  7.5%   7.0%
Rate of increase in future compensation levels..............  5.0%   5.0%
Expected long-term rate of return on plan assets............ 10.0%  10.0%

10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                 

  Substantially all of Delphi's U.S. employees participate in GM's various
postretirement medical, dental, vision and life insurance plans. The cost of    
such benefits is recognized in the consolidated financial statements during the 
period employees provide service to Delphi. Certain of Delphi's non-U.S.        
subsidiaries have postretirement plans, although most participants are covered  
by government sponsored or administered programs. The cost of such programs     
generally is not significant to Delphi.                                         

F-28

424B4
187th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 187th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

  Delphi's postretirement benefit costs were determined based on actuarial
methods and include costs related to Delphi's salaried and hourly employees and 
retirees for all periods presented.                                             

Postretirement benefit cost included the following components:        

                                                        [Enlarge/Download Table]

                                                         YEAR ENDED DECEMBER 31,      
                                                     -------------------------------- 
                                                      1995         1996         1997  
                                                      ----         ----         ----  
                                                              (IN MILLIONS)           
                                                                                      
Service cost........................................ $  172       $  185       $  175 
Interest cost.......................................    902          859          896 
Net amortization....................................    (34)         (26)         (24)
Curtailments........................................    (10)          (3)          -- 
                                                     ------       ------       ------ 
     Total postretirement benefit cost.............. $1,030       $1,015       $1,047 
                                                     ======       ======       ====== 

The Separation Agreement provides, in general, that GM will assume    
responsibility for postretirement benefit costs related to U.S. salaried and    
U.S. hourly retired employees. The postretirement benefit obligation for Delphi 
based on such terms of the Separation Agreement is as follows:                  

                                                                [Download Table]

                                                                DECEMBER 31,    
                                                             -------------------
                                                              1996         1997 
                                                              ----         ---- 
                                                                (IN MILLIONS)   
                                                                                
Accumulated postretirement benefit obligation (APBO):                           
  Fully eligible active plan participants................... $1,348       $1,373
  Other active plan participants............................  2,959        3,237
                                                             ------       ------
APBO........................................................  4,307        4,610
Unamortized prior service costs due to plan changes.........     79           64
Unamortized net amount resulting from changes in plan                           
  experience and actuarial assumptions......................    263          114
                                                             ------       ------
Net postretirement benefit obligation(1).................... $4,649       $4,788
                                                             ======       ======

------------------                                                              
(1) During 1997, Delphi contributed $925 million to a Voluntary Employees'      
Beneficiary Association ("VEBA") trust. The contribution was made in    
  connection with GM's pre-funding of a portion of its other post-retirement
    benefit liability. In accordance with the terms of the Separation Agreement,
GM will retain 100% of the pre-funding and accordingly, Delphi's other  
   postretirement benefit liability does not reflect an allocation of the VEBA
trust assets.                                                           

F-29

424B4
188th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 188th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

The principal assumptions used were as follows:                       

                                                                [Download Table]

                                                          1995  1996  1997
                                                          ----  ----  ----
                                                                          
Weighted-average discount rate..........................  7.5%  7.8%  7.2%
Weighted-average rate of increase in future compensation                  
  levels related to pay-related life insurance..........  4.3%  4.4%  4.4%
Base weighted-average health care cost trend rate(a)....  6.5%  6.5%  5.5%
Ultimate sustained weighted-average health care cost                      
  trend rate in 2004(b).................................  5.0%  5.0%  5.0%

------------------                                                              
(a) Current year trend rate assumed at beginning of year was adjusted to actual 
to determine year-end obligations.                                      

(b) Rate increases to 6.0% in 1999 and then decreases on a linear basis through 
2004, to the ultimate weighted-average trend rate of 5.0%.              

     A one percentage point increase in the assumed health care trend rate would
have increased the aggregate service and interest cost components of non-pension
postretirement benefit expense for 1997 by $139 million, and would have         
increased the APBO by $725 million as of and for the year ended December 31,    
1997.                                                                           

Delphi has disclosed in the consolidated financial statements certain 
amounts associated with estimated future postretirement benefits other than     
pensions and characterized such amounts as "costs" or "obligations."            
Notwithstanding the recording of such amounts and the use of these terms, Delphi
does not admit or otherwise acknowledge that such amounts or existing           
postretirement benefit plans of GM, other than pensions, represent legally      
enforceable liabilities of Delphi.                                              

11. COMMITMENTS AND CONTINGENCIES                                               

 Rental expense totaled $82 million, $98 million and $99 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Delphi had minimum  
lease commitments under noncancelable operating leases at December 31, 1997     
totaling $329 million which become due as follows: 1998--$54 million; 1999--$54 
million; 2000--$49 million; 2001--$45 million; 2002--$45 million and            
thereafter--$82 million.                                                        

 Delphi is from time to time subject to various legal actions and claims
incidental to its business, including those arising out of alleged defects,     
product warranties, employment-related matters and environmental matters.       
Litigation is subject to many uncertainties, and the outcome of individual      
litigated matters is not predictable with assurance. After discussions with     
counsel, it is the opinion of management that the outcome of such matters will  
not have a material adverse impact on the consolidated financial position,      
results of operations or cash flows of Delphi.                                  

F-30

424B4
189th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 189th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

12. OTHER COMPREHENSIVE INCOME (LOSS)                                           

     The change in other comprehensive income (loss), net of related tax effect,
is as follows at December 31, 1995, 1996 and 1997:                              

                                                                [Download Table]

                                              PRE-TAX    TAX EFFECT    NET  
                                              AMOUNT      (CREDIT)    AMOUNT
                                              -------    ----------   ------
                                                       (IN MILLIONS)        
                                                                            
Other comprehensive income (loss)--foreign                                  
  currency translation adjustments:                                         
  1995.......................................  $  42        $(16)      $ 26 
  1996.......................................    (50)         19        (31)
  1997.......................................   (134)         51        (83)

13. OTHER INCOME, NET                                                           

Other income, net included the following:                             

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED DECEMBER 31,     
                                                       ------------------------------ 
                                                       1995         1996         1997 
                                                       ----         ----         ---- 
                                                               (IN MILLIONS)          
                                                                                      
Claims and commissions................................ $ 53         $ 76         $ 80 
Gain (loss) on disposition of assets, net.............   39          (44)          52 
Interest income.......................................   53           49           57 
Earnings of non-consolidated affiliates...............   47           57           27 
Other expense.........................................  (91)         (23)         (22)
                                                       ----         ----         ---- 
Other income, net..................................... $101         $115         $194 
                                                       ====         ====         ==== 

14. STOCK INCENTIVE PLANS                                                       

     Certain eligible employees of Delphi are participants in the General Motors
1997 Stock Incentive Plan ("GMSIP"), formerly the General Motors Amended 1987   
Stock Incentive Plan. Pursuant to the GMSIP, shares, rights, or options to      
acquire GM $1 2/3 common stock may be granted through May 31, 2002. The option  
price is equal to 100% of the fair market value of GM $1 2/3 common stock on the
date the options are granted. These non-qualified options generally expire 10   
years from the dates of grant and are subject to earlier termination under      
certain conditions. Upon completion of the Distribution, all outstanding options
on GM $1 2/3 common stock previously granted to Delphi employees are likely to  
be converted to equivalent stock options on Delphi common stock subject to the  
terms of the Separation Agreement.                                              

15. SEGMENT REPORTING                                                           

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," established standards for reporting information about operating   
segments in annual financial statements and requires selected information about 
operating segments in interim financial reports issued to stockholders. It also 
established standards for related disclosures about products and services,      
geographic areas, and major customers. Operating segments are defined as        
components of an enterprise about which separate financial information is       
available that is evaluated regularly by the chief operating decision maker, or 
decision making group, in deciding how to allocate resources and in assessing   
performance. Delphi's chief operating decision                                  

F-31

424B4
190th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 190th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

making group is the Delphi Strategy Board, which is comprised of the Chief      
Executive Officer and 20 senior executives from the three operating segments and
the world headquarters staff. Certain senior executives for each operating      
segment are also members of a Strategy Board or equivalent committee that       
manages the profitability and cash flow of each respective segment's various    
product lines and businesses. The three operating segments are managed          
separately because of differences in the nature of the respective products.     

    Delphi's reportable operating segments ("product sectors") are Electronics
& Mobile Communication; Safety, Thermal & Electrical Architecture; and Dynamics 
& Propulsion. The Electronics & Mobile Communication product sector supplies    
various electronic products, as well as audio and communication systems for     
vehicles. The Safety, Thermal & Electrical Architecture product sector offers a 
wide range of products relating to the vehicle interior and powertrain cooling  
systems and climate control systems. In addition, the segment produces wiring   
harnesses and connectors for electrical power and signal distribution. The      
Dynamics & Propulsion product sector offers a wide range of energy and engine   
management systems, chassis control systems and steering products.              

The accounting policies of the product sectors are the same as those  
described in the summary of significant accounting policies except that the     
disaggregated financial results for the product sectors have been prepared using
a management approach, which is consistent with the basis and manner in which   
management internally disaggregates financial information for the purposes of   
assisting in making internal operating decisions. Generally, Delphi evaluates   
performance based on stand-alone product sector net income and accounts for     
intersegment sales and transfers as if the sales or transfers were to third     
parties, that is, at current market prices. Net sales are attributed to         
geographic areas based on the location of the assets producing the revenues.    

Financial information segregated by reportable product sectors is as  
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                 SAFETY,                                   
                                ELECTRONICS &    THERMAL                                   
                                   MOBILE      & ELECTRICAL   DYNAMICS &                   
             1995               COMMUNICATION  ARCHITECTURE   PROPULSION  OTHER(A)   TOTAL 
             ----               -------------  ------------   ----------  --------   ----- 
                                                       (IN MILLIONS)                       
                                                                                           
Net sales to GM and                                                                        
  affiliates...................    $4,714        $10,967       $10,975     $  --    $26,656
Net sales to other customers...       519          2,344         2,142        --      5,005
Inter-sector net sales.........       246            122            25      (393)        --
                                   ------        -------       -------     -----    -------
     Total net sales...........    $5,479        $13,433       $13,142     $(393)   $31,661
                                   ======        =======       =======     =====    =======
Depreciation and                                                                           
  amortization.................    $  151        $   267       $   355     $  --    $   773
Interest expense...............        48            108           127        10        293
Income taxes (tax benefit).....       236            296           161       (54)       639
Net income (loss)(b)...........       482            605           330      (110)     1,307
Sector assets..................     2,556          5,734         6,761       584     15,635
Capital expenditures...........       265            355           532         3      1,155

F-32

424B4
191st Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 191st
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

                                                        [Enlarge/Download Table]

                                                 SAFETY,                                   
                                ELECTRONICS &    THERMAL                                   
                                   MOBILE      & ELECTRICAL   DYNAMICS &                   
             1996               COMMUNICATION  ARCHITECTURE   PROPULSION  OTHER(A)   TOTAL 
             ----               -------------  ------------   ----------  --------   ----- 
                                                       (IN MILLIONS)                       
                                                                                           
Net sales to GM and                                                                        
  affiliates...................    $4,540        $10,009       $11,199     $  --    $25,748
Net sales to other customers...       490          2,733         2,061        --      5,284
Inter-sector net sales.........       285            200            33      (518)        --
                                   ------        -------       -------     -----    -------
     Total net sales...........    $5,315        $12,942       $13,293     $(518)   $31,032
                                   ======        =======       =======     =====    =======
Depreciation and                                                                           
  amortization.................    $  196        $   325       $   322     $  --    $   843
Interest expense...............        47            102           115        12        276
Income taxes (tax benefit).....       106            166            67       (80)       259
Net income (loss)(b)...........       349            548           222      (266)       853
Sector assets..................     2,615          5,687         6,396       692     15,390
Capital expenditures...........       195            418           548        16      1,177

                                                        [Enlarge/Download Table]

                                                 SAFETY,                                   
                                ELECTRONICS &    THERMAL                                   
                                   MOBILE      & ELECTRICAL   DYNAMICS &                   
             1997               COMMUNICATION  ARCHITECTURE   PROPULSION  OTHER(A)   TOTAL 
             ----               -------------  ------------   ----------  --------   ----- 
                                                       (IN MILLIONS)                       
                                                                                           
Net sales to GM and                                                                        
  affiliates...................    $4,652        $ 9,756       $11,499     $  --    $25,907
Net sales to other customers...       539          2,776         2,225        --      5,540
Inter-sector net sales.........       348            196             9      (553)        --
                                   ------        -------       -------     -----    -------
     Total net sales...........    $5,539        $12,728       $13,733     $(553)   $31,447
                                   ======        =======       =======     =====    =======
Depreciation and                                                                           
  amortization.................    $  481        $   539       $   950     $  --    $ 1,970
Interest expense...............        41            109           119        18        287
Income taxes (tax benefit).....        11             48             3       (18)        44
Net income (loss)(b)...........        53            234            15       (87)       215
Sector assets..................     2,063          5,749         6,328       886     15,026
Capital expenditures...........       122            464           778        19      1,383

------------------                                                              
(a) Other includes activity not allocated to the product sectors and the        
elimination of inter-sector transactions.                               

(b) Our operating results for the years ended December 31, 1996 and 1997 were   
   impacted by a number of special items, including the Competitiveness Study,
  divestitures and plant closings (see Note 3), as well as work stoppages at
    certain GM and Delphi facilities (see Note 2). The net unfavorable impact on
net income for each product sector was as follows:                      

                                                        [Enlarge/Download Table]

                                                        SAFETY,                        
                                      ELECTRONICS &    THERMAL &                       
           YEAR ENDED                    MOBILE        ELECTRICAL    DYNAMICS &        
          DECEMBER 31,                COMMUNICATION   ARCHITECTURE   PROPULSION   TOTAL
          ------------                -------------   ------------   ----------   -----
                                             (IN MILLIONS, NET OF RELATED TAXES)       
                                                                                       
1996.................................     $ 98            $282          $138      $518 
1997.................................     $239            $271          $442      $952 

F-33

424B4
192nd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 192nd
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

   Information concerning principal geographic areas is set forth below. Net
sales data is for the year ended December 31 and net property data is as of     
December 31.                                                                    

                                                        [Enlarge/Download Table]

                                 1995                 1996                 1997        
                          -------------------  -------------------  -------------------
                            NET        NET       NET        NET       NET        NET   
                           SALES     PROPERTY   SALES     PROPERTY   SALES     PROPERTY
                           -----     --------   -----     --------   -----     --------
                                                  (IN MILLIONS)                        
                                                                                       
North America:                                                                         
  United States.......... $23,387     $3,578   $22,139     $3,777   $21,925     $3,186 
  Canada.................   1,211         88       719          9       806         14 
  Mexico.................   2,272        266     2,714        264     3,448        263 
                          -------     ------   -------     ------   -------     ------ 
     Total North                                                                       
       America...........  26,870      3,932    25,572      4,050    26,179      3,463 
Europe:                                                                                
  France.................     661        254       713        284       645        267 
  Germany................   1,297        197     1,502        211     1,365        181 
  Spain..................     572        147       637        145       575        131 
  United Kingdom.........     331         34       349         47       324          7 
  Other..................   1,379        263     1,454        261     1,311        234 
                          -------     ------   -------     ------   -------     ------ 
     Total Europe........   4,240        895     4,655        948     4,220        820 
South America:                                                                         
  Brazil.................     235         73       399         91       598         91 
  Other..................       3          4        43         13        64         26 
                          -------     ------   -------     ------   -------     ------ 
     Total South                                                                       
       America...........     238         77       442        104       662        117 
All Other................     313         98       363        139       386        200 
                          -------     ------   -------     ------   -------     ------ 
     Total............... $31,661     $5,002   $31,032     $5,241   $31,447     $4,600 
                          =======     ======   =======     ======   =======     ====== 

Historically, Delphi has relied on GM for a substantial portion of its
total revenues. Delphi expects that a significant portion of its future revenues
will continue to be generated by GM. Any substantial reduction in orders by GM  
could materially adversely affect Delphi's operating results.                   

16. FAIR VALUE OF FINANCIAL INSTRUMENTS                                         

   The fair value of derivative financial instruments reflects the estimated
amounts which Delphi would receive or pay to terminate contracts which it will  
assume under the Separation Agreement; such estimated amounts take into account 
the current unrealized gains or losses on open contracts that are deferred and  
recognized when the offsetting gains or losses are recognized on the related    
hedged items. The fair value of foreign exchange forward contracts is estimated 
based on foreign exchange rate quotes at the reporting date. At December 31,    
1996 and 1997, the total estimated fair value of open contracts were generally  
not significant to Delphi. No amounts were recorded for such contracts on       
Delphi's consolidated balance sheets at these dates.                            

For certain international long-term debt, which was recorded at $177  
million and $230 million, at December 31, 1996 and 1997, respectively, the      
related fair value approximated $179 million and $232 million. For all other    
financial instruments recorded at December 31, 1996 and 1997, fair value        
approximates book value.                                                        

F-34

424B4
193rd Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 193rd
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

17. DERIVATIVES INSTRUMENTS                                                     

Delphi, through its relationship with GM, is a party to financial     
instruments with off-balance sheet risk, which are used in the normal course of 
business to manage exposure principally to foreign exchange rate fluctuations.  
The primary class of such derivatives used are foreign exchange forward         
contracts, which involve varying degrees of market risk, and elements of credit 
risk in the event of counterparty default. Derivative transactions are entered  
into in order to hedge underlying business exposures. The market risk in these  
instruments is offset by opposite movements in the underlying exposure. Cash    
receipts and payments on these contracts normally occur at maturity.            

     Delphi is an international corporation with operations in 36 countries, and
has foreign currency exposure related to buying and selling in currencies other 
than the local currencies. Delphi's most significant foreign exposures relate to
Mexico, Germany, France, Spain and South Korea. The magnitude of these exposures
varies over time, depending on the strength of local automotive markets.        

   On Delphi's behalf, GM enters into agreements by which it seeks to manage
certain of its foreign exchange exposures in accordance with established policy 
guidelines. These agreements primarily hedge cash flows such as debt, firm      
commitments and anticipated transactions involving components and fixed assets. 
As a general practice, GM has not hedged the foreign exchange exposure related  
to either the translation of overseas earnings into U.S. dollars, or the        
translation of overseas equity positions back to U.S. dollars. On Delphi's      
behalf, GM uses foreign exchange forward contracts as well as purchased and     
written foreign exchange options to manage such exposures. Foreign exchange     
forward contracts are legal agreements between two parties to purchase or to    
sell a foreign currency for a price specified at the contract date, with        
delivery and settlement in the future.                                          

   At December 31, 1996 and 1997, GM held foreign exchange forward contracts
related to Delphi totaling $11 million and $31 million, respectively. The       
foreign exchange options contracts related to Delphi were not significant at    
December 31, 1996 and 1997. Forward contracts and options related to Delphi's   
business at the time of the Separation will be assumed by Delphi pursuant to the
Separation Agreement. Deferred hedging gains and losses on outstanding foreign  
exchange forward and options contracts were not significant at December 31, 1996
and 1997. Such deferred amounts will be included in the cost of such assets when
purchased, and subsequently recognized in operations as part of the basis of    
these assets. In the event a contract is terminated early or the anticipated    
transaction is no longer considered likely to occur, the derivative is then     
marked to market. Foreign exchange forward contracts, which hedge foreign       
exchange exposures of anticipated inventory or fixed asset transactions, are    
marked to market and recognized with other gains or losses on foreign exchange  
transactions in the consolidated statement of income. Firm commitments typically
extend for periods of up to three years.                                        

     The foreign contracts or options previously discussed contain an element of
risk that counterparties may be unable to meet the terms of the agreements.     
However, such risk is minimized by limiting the counterparties to major         
international banks or financial institutions that meet established credit      
guidelines, and by limiting the risk exposure to any one bank or financial      
institution. GM generally does not require or place collateral for these        
financial instruments. Management does not expect to incur any losses as a      
result of counterparty default.                                                 

 Delphi has business activities with customers and affiliates around the
world. Although Delphi does have large volumes of its receivables from a limited
number of vehicle manufacturer customers, particularly GM, such receivables are 
managed under standard commercial terms. Consequently, in management's opinion, 
any concentration of credit risk relating to these customers is appropriately   
managed.                                                                        

F-35

424B4
194th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 194th
DELPHI AUTOMOTIVE SYSTEMS CORPORATION 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 

18. QUARTERLY DATA (UNAUDITED)                                                  

                                                        [Enlarge/Download Table]

                                                QUARTER ENDED                                 
                             ---------------------------------------------------   YEAR ENDED 
                             MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,  DECEMBER 31,
                             ---------   --------   -------------   ------------  ------------
                                                       (IN MILLIONS)                          
                                                                                              
1996                                                                                          
Total net sales.............  $7,389      $8,773       $7,564          $7,306       $31,032   
Cost of sales, excluding                                                                      
  items listed below........   6,575       7,464        6,636           6,796        27,471   
Selling, general and                                                                          
  administrative............     303         357          359             426         1,445   
Depreciation and                                                                              
  amortization..............     194         190          243             216           843   
                              ------      ------       ------          ------       -------   
Operating income (loss).....     317         762          326            (132)        1,273   
Interest expense............     (70)        (71)         (67)            (68)         (276)  
Other income, net...........      27          41           46               1           115   
                              ------      ------       ------          ------       -------   
Income (loss) before income                                                                   
  taxes.....................     274         732          305            (199)        1,112   
Income taxes (benefit)......     102         258            5            (106)          259   
                              ------      ------       ------          ------       -------   
Net income (loss)...........  $  172      $  474       $  300          $  (93)      $   853   
                              ======      ======       ======          ======       =======   
1997                                                                                          
Total net sales.............  $7,995      $8,190       $7,183          $8,079       $31,447   
Cost of sales, excluding                                                                      
  items listed below........   6,957       7,061        6,489           7,203        27,710   
Selling, general and                                                                          
  administrative............     334         345          332             404         1,415   
Depreciation and                                                                              
  amortization..............     207         197          217           1,349         1,970   
                              ------      ------       ------          ------       -------   
Operating income (loss).....     497         587          145            (877)          352   
Interest expense............     (80)        (57)         (69)            (81)         (287)  
Other income, net...........       7          49            9             129           194   
                              ------      ------       ------          ------       -------   
Income (loss) before income                                                                   
  taxes.....................     424         579           85            (829)          259   
Income taxes (benefit)......     137         206            9            (308)           44   
                              ------      ------       ------          ------       -------   
Net income (loss)...........  $  287      $  373       $   76          $ (521)      $   215   
                              ======      ======       ======          ======       =======   

F-36

424B4
195th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 195th

(This page intentionally left blank)

424B4
196th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 196th
PROSPECTUS COVER GATEFOLD                                                       
INSIDE BACK                                                                     

A LONG, PROUD HISTORY OF INNOVATION.

[VIEW OF VEHICLE INSTRUMENT PANEL]

YESTERDAY:

Delphi Automotive Systems has been providing innovative technology to General   
Motors for almost a century.  Some of our technologies include:                 

First electric self-starter                                                     
First in-dash radio                                                             
First turn signal                                                               
First catalytic converter                                                       
First airbag                                                                    
First steering column                                                           
First independent front-                                                        
wheel suspension                                                              
First energy-absorbing                                                          
steering column                                                               
First electric power                                                            
sliding door                                                                  
First integrated child                                                          
safety seat                                                                   

TODAY:

Because of Delphi's diverse technologies, we have the ability to integrate      
components into modules and systems.  This allows us to provide comprehensive   
systems-based solutions for our customers.                                      

[CAR IN LANDSCAPE]
TOMORROW: 

With its broad vehicle knowledge and system capabilities, Delphi is             
strategically positioned to develop automotive products for the 21st century.   
We call them our Next Century Winners and they include:                         

ADVANCED SAFETY INTERIOR - Our Occupant Protection Systems of tomorrow will     
tailor airbag deployment based on whether a seat is occupied, the size of the   
occupant, the distance an individual is from an air bag, whether a seat belt is 
being used and the severity of a collision.                                     

[CRYSTAL BALL IN HAND]

MOBILE MULTI-MEDIA - Delphi's Network Vehicle received the  "InfoVision Award"  
from the International Engineering Consortium.  In the future we expect to bring
satellite communications, E-mail, the World Wide Web, movies, games and more    
into the vehicle you drive.                                                     

[INTERIOR VIEW OF NETWORK VEHICLE]

424B4
197th Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 197th
PROSPECTUS COVER GATEFOLD                                                       
OUTSIDE BACK                                                                    

[DELPHI AUTOMOTIVE SYSTEMS LOGO]

424B4
Last Page of 198
TOC
1st
Previous
Next
↓Bottom
Just 198th

PROSPECTUS                                                                      

100,000,000 Shares

[LOGO]
Delphi Automotive Systems Corporation 

COMMON STOCK

------------------------
DELPHI AUTOMOTIVE SYSTEMS CORPORATION IS OFFERING 100,000,000 SHARES OF ITS 
COMMON STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET EXISTS 
FOR OUR SHARES. 

------------------------

OUR COMMON STOCK HAS BEEN APPROVED FOR LISTING ON THE NEW YORK STOCK EXCHANGE 
UNDER THE TRADING SYMBOL "DPH," SUBJECT TO NOTICE OF ISSUANCE.

------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. 
SEE "RISK FACTORS" BEGINNING ON PAGE 12.

------------------------

PRICE $17 A SHARE 

------------------------

                                                                [Download Table]

                                                       UNDERWRITING                
                                         PRICE TO     DISCOUNTS AND   PROCEEDS TO  
                                          PUBLIC       COMMISSIONS       DELPHI    
                                         --------     -------------   -----------  
                                                                                   
Per Share............................    $17.0000         $.7888        $16.2112   
Total................................ $1,700,000,000   $78,880,000   $1,621,120,000

The Securities and Exchange Commission and state securities regulators have not 
approved or disapproved these securities, or determined if this prospectus is   
truthful or complete. Any representation to the contrary is a criminal offense. 

Delphi has granted the U.S. underwriters an option to purchase an additional    
15,000,000 shares to cover over-allotments. Morgan Stanley & Co. Incorporated   
expects to deliver the shares to purchasers on February 10, 1999.               

------------------------

MORGAN STANLEY DEAN WITTER

GOLDMAN SACHS INTERNATIONAL                          MERRILL LYNCH INTERNATIONAL

DONALDSON, LUFKIN & JENRETTE                                           SCHRODERS

February 4, 1999