1. Delphi Electronics and Safety 1 Outsourcing and Globalizing: Simplifying or Complicating Logistics Michael G. Coady 21st Century Transportation Distribution Logistics Summit September 14, 2004

2. Delphi Electronics and Safety 2 Delphi Electronics and Safety Global Manufacturing Sites Milwaukee Flint Kokomo Reynosa Matamoros Deltronicos Rimir CMM2 Ashimori Rio Grande Singapore Suzhou Liverpool BadSaltzDetfurth Szombathely St. Aubin Osberghousen Tucson Munmak Braga Ponte de Sor

3. Delphi Electronics and Safety 3 Market Environment Cost + Profit = Price Price – Profit = Cost How you would like it to be: Seller’s Market Limited Competition How it is: Buyer’s Market Unlimited Competition

4. Delphi Electronics and Safety 4 Why China? Price – Cost = Profit What happens when prices steadily decline and costs don’t decline at the same rate?

5. Delphi Electronics and Safety 5 Cost Breakdown

6. Delphi Electronics and Safety 6 Component Value Stream for Products Manufactured in Mexico Mexico 7% Japan Malaysia Singapore USA 5% China Europe 2% Philippines Mexico Plant Customer Plants Asia* 86%

7. Delphi Electronics and Safety 7 Component Value Stream for Products Manufactured in China Shanghai Suzhou XiaMeng GuangZhou Asia (outside China) 26% China 74% Customer Plants China Plant

8. Delphi Electronics and Safety 8 Cost Breakdown

9. Delphi Electronics and Safety 9 Thoughts on using China as a PML u Wages + Benefits are ½ of Mexico’s and 1/30 of U.S. Sites –High touch labor products benefit more than low touch labor products u Material cost reductions (BOM purchased in China ) –Range from 5 to 10% depending on the commodity u 4% VAT added 1-Jan-04 for exported value add from China u Currency Exchange Rates –Today the value of the RMB is locked to the $U.S. –In the future the RMB will float with a portfolio of currencies u Logistics –From China to the U.S.A. or Europe is quite high –1 month of additional inventory is required to fill the logistics pipeline (reduced velocity) u Duty –Duty from China into Europe is quite high on certain commodities u China domestic sales always make good sense to build in China u Export sales from China are less attractive today than one year ago, but still make sense for high touch labor products

10. Delphi Electronics and Safety 10 Back Up Slides

11. Delphi Electronics and Safety 11 Indiana Jobs Low Cost Manufacturing Jobs 1970s Low Cost Engineering Jobs 1990s Pushing Jobs Out Composite Wage Rates for Manufacturing and Engineering Pulling Jobs Out Global Local Content Value Chain Dis-Integration Value Chain Vertical Dis-Integration 1980s Local Content Legislation 1990s Highly Competitive Global Market Place

12. Delphi Electronics and Safety 12 Americans Claim Most Patents Innovation New Materials New Processes New Equipment New Products Source: U.S. Patent and Trademark Office’s Technology Assessment and Forecast Report

13. Delphi Electronics and Safety 13 Applied Innovation Launch Center Future Vision for Advanced Manufacturing