DELPHI AUTOMOTIVE SYSTEMS CORP, S-1, 1998-11-16

DELPHI AUTOMOTIVE SYSTEMS CORP
S-1, 1998-11-16
MOTOR VEHICLES & PASSENGER CAR BODIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER THE
THE SECURITIES ACT OF 1933
------------------------

DELPHI AUTOMOTIVE SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(State or other jurisdiction of
incorporation or organization)
3714
(Primary Standard Industrial
Classification Code Number)
38-3430473
(IRS Employer
Identification Number)

5725 Delphi Drive
Troy, Michigan 48098
(248) 813-2000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------

Alan S. Dawes
Chief Financial Officer
and Vice President
5725 Delphi Drive
Troy, Michigan 48098
(248) 813-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------

Copies to:

<TABLE>
<S> <C> <C> <C>
Jill Sugar Factor Warren G. Andersen General Counsel Frank Morison
Robert S. Osborne, P.C. General Motors Delphi Automotive Sarah Beshar
Kirkland & Ellis Corporation Systems Corporation Davis Polk & Wardwell
200 East Randolph Drive 3031 West Grand Boulevard 5725 Delphi Drive 450 Lexington Avenue
Chicago, Illinois 60601 Detroit, Michigan 48232 Troy, Michigan 48098 New York, New York 10017
(312) 861-2000 (313) 974-1528 (248) 813-2000 (212) 450-4000
</TABLE>

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

Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value........................ $1,500,000,000 $417,000
- ---------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights(2)................... -- --
- ---------------------------------------------------------------------------------------------------------------------
Total................................................ $1,500,000,000 $417,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) The rights will initially trade together with the common stock. The value
attributable to the rights, if any, is reflected in the market price of the
common stock.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of shares of common stock (the "U.S. Offering"). The
second prospectus relates to a concurrent offering outside the United States and
Canada of an aggregate of shares of common stock (the
"International Offering"). The prospectuses for each of the U.S. Offering and
the International Offering will be identical with the exception of an alternate
front cover page for the International Offering. Such alternate page appears in
this Registration Statement immediately following the complete prospectus for
the U.S. Offering.
<PAGE> 3

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS (Subject to Completion)
Issued November 16, 1998

[DELPHI AUTOMOTIVE SYSTEMS CORPORATION LOGO]
Delphi Automotive Systems Corporation
COMMON STOCK
------------------------

DELPHI AUTOMOTIVE SYSTEMS CORPORATION IS OFFERING SHARES OF ITS COMMON
STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND THERE IS CURRENTLY NO PUBLIC
MARKET FOR OUR SHARES. WE CURRENTLY ESTIMATE THAT THE INITIAL PUBLIC
OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE. EACH SHARE
OF COMMON STOCK WILL HAVE ATTACHED ONE PREFERRED SHARE PURCHASE RIGHT
(RELATING TO OUR STOCKHOLDER RIGHTS PLAN) WHICH WILL INITIALLY TRADE
TOGETHER WITH THE SHARE OF COMMON STOCK.

GENERAL MOTORS CORPORATION OWNS 100% OF THE CURRENTLY OUTSTANDING
SHARES OF OUR COMMON STOCK. AFTER THIS OFFERING, GENERAL MOTORS
WILL CONTINUE TO OWN ABOUT % OF OUR COMMON STOCK (OR ABOUT %
IF THE U.S. UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT OPTION
IN FULL) AND WILL CONTINUE TO CONTROL OUR COMPANY. GENERAL
MOTORS HAS ADVISED US THAT IT CURRENTLY PLANS TO COMPLETE
ITS DIVESTITURE OF OUR COMPANY LATER IN 1999 BY
DISTRIBUTING TO THE HOLDERS OF ITS $1 2/3 COMMON STOCK
ALL OF ITS SHARES OF OUR COMMON STOCK.

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

WE WILL APPLY FOR THE LISTING OF OUR COMMON STOCK ON
THE NEW YORK STOCK EXCHANGE UNDER THE TRADING
SYMBOL "DPH."

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

INVESTING IN OUR COMMON STOCK INVOLVES
RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
------------------------
PRICE $ A SHARE
------------------------

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of 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
shares of common stock to cover over-allotments. Morgan Stanley & Co.
Incorporated expects to deliver the shares of common stock to purchasers on
, 1999.

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

MORGAN STANLEY DEAN WITTER

GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.

DONALDSON, LUFKIN & JENRETTE SCHRODER & CO. INC.

, 1999
<PAGE> 4
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 171
Michigan, USA, Delphi manufacturing sites
Automotive Systems and 27 technical
has operations in 36 centers around the
countries. We have world. We employ
regional headquarters in over 200,000
Sao Paulo, Brazil; Paris, individuals and are
France and Tokyo, engaged in 40 joint
Japan. ventures.

<PAGE> 5
PROSPECTUS COVER GATEFOLD
INSIDE FRONT - PAGE 2

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

[AUTOMOBILE WITH HIGHLIGHTED DIAGRAM OF COMPONENT PARTS VISIBLE]

SAFETY, THERMAL AND
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 AND 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

<PAGE> 6
PROSPECTUS COVER GATEFOLD
INSIDE FRONT - PAGE 3

[AUTOMOBILE WITH HIGHLIGHTED DIAGRAM OF COMPONENT PARTS VISIBLE]

DYNAMICS AND 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
<PAGE> 7

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 12
Delphi and Its Separation from
General Motors..................... 29
Use of Proceeds...................... 33
Dividends............................ 33
Capitalization....................... 34
Selected Financial Data.............. 35
Unaudited Pro Forma Condensed
Consolidated Financial
Statements......................... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 45
Business of Delphi................... 74
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management........................... 105
Arrangements Between Delphi and
General Motors..................... 122
Principal Stockholder................ 140
Description of Capital Stock......... 140
Shares Eligible for Future Sale...... 150
Certain United States Federal Tax
Consequences to Non-United States
Holders............................ 152
Underwriters......................... 155
Legal Matters........................ 158
Experts.............................. 158
Where You Can Find More
Information........................ 159
Index to Financial Statements........ F-1
</TABLE>

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

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. Unless we have indicated otherwise,
the information contained in this prospectus assumes that our Delco Electronics
subsidiary, which was integrated with our company in December 1997, has been a
part of our company for all periods for which information is presented in this
prospectus. The historical financial data presented in this prospectus reflect
the historical results of operations and cash flows of our company for 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 General Motors. The historical consolidated balance sheets
reflect the assets and liabilities that are expected to be transferred to our
company in accordance with our agreements with General Motors relating to our
separation from GM. For more information, you should read the "Risk
Factors--Risk Factors Relating to Separating Our Company from General
Motors--Limited Relevance of Our Historical Financial Information," "Selected
Financial Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" sections of this prospectus.
-------------------------

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 , 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.
-------------------------

This preliminary prospectus is subject to completion prior to this
offering. Among other things, this preliminary prospectus describes our company
as we currently expect it to exist at the time of this offering. However, as of
the date of the filing of this preliminary prospectus, GM has not yet
transferred to us the assets and liabilities described herein as being
attributable to Delphi.

2
<PAGE> 8

PROSPECTUS SUMMARY

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

DELPHI

Let us tell you more about our company:

- RELATIONSHIP WITH GM. We have become a leader in the global automotive
parts industry by using the extensive experience we have gained as the
principal supplier of automotive components to General Motors, the
world's largest manufacturer of automotive vehicles. We are currently
wholly owned by GM, which is by far our largest customer. GM has
announced that it intends to divest itself of its ownership of our
company during 1999. We believe that our separation from GM will enhance
our ability to grow our business over time.

- EXPANDED CUSTOMER BASE. 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
automotive vehicle manufacturer ("VM") in the world. Since 1993, our
sales to customers other than GM have grown from 13.3% of our total sales
(including, for this purpose, all sales by entities in which we own a
minority interest) to 18.3% in 1997.

- 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 30% of our wholly owned
and leased manufacturing sites (based on square footage) and about 59% of
our employees 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.

- PRODUCTS. We are primarily a "Tier 1" supplier, providing our products
directly to VMs. 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

3
<PAGE> 9

- 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 non-VM customers.

OUR INDUSTRY. We operate in the highly competitive global automotive parts
industry. Many VMs 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 VM. 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 VMs source more fully-engineered, integrated
systems and modules

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

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

- suppliers are consolidating globally as they seek to: (1) achieve
operating synergies through business combinations; (2) shift production
to lower-cost manufacturing locations; (3) acquire complementary
technologies; (4) build stronger customer relationships; and (5) follow
their customers as they expand around the world

- product development cycles are becoming shorter as VMs 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. General Motors, particularly its North American automotive
operations (we sometimes refer to these automotive operations of GM in the
United States, Canada and Mexico as "GM-North America"), is by far our largest
customer and we expect it to remain so for a significant period of time.
Although we will strive to maintain our important customer-supplier relationship
with GM, we believe that our principal opportunity for future earnings growth
will be increased sales to customers other than GM-North America. 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 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 VMs.
During this transitional period, our financial results have at times been
adversely affected by a variety of factors, such as: (1) significant price
reductions as GM implemented its global sourcing initiative; (2) labor
disruptions at both GM and Delphi; and (3) certain unprofitable manufacturing
operations. In response to these and other factors, we continue to execute
initiatives to improve our operating performance.

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

4
<PAGE> 10

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. Although we strive to maintain a strong customer-supplier
relationship with GM, our strategy focuses on growing business with
customers other than GM-North America to offset the expected decline in
our sales to GM-North America. We have established customer-supplier
relationships with all of the major VMs. However, we believe that our
status as a part of GM has historically been a major impediment to the
expansion of our business with other VMs, 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 VMs around the world.

- LEVERAGE GLOBAL PRESENCE. Our operations (including joint ventures) in 36
countries position us well to pursue new business around the world,
especially as VMs increasingly favor suppliers who can deliver products
with consistent technology and quality for their "global vehicle
platforms" (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, including our Delphi Manufacturing System or "DMS" (which
focuses on achieving lean operations through operating flexibility); 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 material
cost reduction initiatives.

- COMPLETE STRATEGIC ACQUISITIONS, JOINT VENTURES AND ALLIANCES. We will
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 as
currency in acquisitions and the opportunity to form alliances with
companies not willing to partner with a supplier owned by GM.

OUR SALES. GM is our largest customer and we are its largest supplier.
While we expect our business with other customers 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 we have
entered into with GM in connection with our separation from GM.

- SALES BREAKDOWN BY CUSTOMER. We supply our products to GM-North America,
GM's automotive operations throughout the rest of the world (we sometimes
refer to these other automotive operations of GM as "GM-International")
and every other major VM in the world. 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 Organization ("GM-SPO")
for distribution principally to the North American aftermarket.

5
<PAGE> 11

The following table shows how our total net sales were derived for each of
the last three years and for the nine months ended September 30, 1997 and 1998:

<TABLE>
<CAPTION>
TOTAL SALES*
-----------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- --------------------
CUSTOMER 1995 1996 1997 1997 1998**
-------- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
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%
===== ===== ===== ===== =====
</TABLE>

- AWARDED BUSINESS. We have a substantial base of "awarded business" from
GM and our other VM customers. Because automotive vehicles have long
development cycles, VMs often award business to suppliers for vehicle
programs several years before products are actually purchased. After
vehicle production begins, purchases from suppliers may continue for a
number of years. Early in the development cycle, business may be awarded
initially through representations, nomination letters or letters of
intent. Later in the cycle, awarded business may be covered by contracts
or purchase orders. In each case, the customer generally commits to
purchase certain of its requirements from us with respect to automotive
parts for a particular vehicle model, rather than committing to purchase
a specific quantity of our products. Accordingly, our awarded business is
generally subject to a number of uncertainties, such as actual volume and
timing of vehicle production and the mix of options on the vehicles that
are actually produced.

As part of our business planning process, we track as "awarded
business" the future sales that we have a strong expectation of realizing
based on VM awards to us and our own assumptions regarding vehicle
production. On that basis, we believe that we currently have a solid
foundation of awarded business upon which to grow our company. However,
due to the uncertainties involved, we cannot assure you that we will in
fact realize any specific amount of awarded business or other future
sales. For more information about these matters, see "Risk Factors--Risk
Factors Relating to Our Business--Our Ability to Realize Sales from
Awarded Business" and "Business of Delphi--Industry--Awarded Business."

- SUPPLY AGREEMENT WITH GM. We have entered into certain arrangements with
GM intended to provide us with a substantial base of future business with
GM well into the next decade. The Supply Agreement provides that all
existing contracts between GM and our company as of January 1, 1999 will
generally remain in effect, including the pricing, duration and purchase
order terms and conditions, although the timing of payments from GM to us
under these contracts will change. These existing contracts, which range
from short-term purchase orders to long-term contracts covering the life
of a particular vehicle program, represent a substantial portion of our
total awarded business.

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
6
<PAGE> 12
GM as of January 1, 1999, provided that GM sources such replacement cycle
business prior to January 1, 2002. Given the duration of most vehicle programs
(currently about five to eight years, depending on 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. The
Supply Agreement specifies that GM has the right to move existing business with
us to other suppliers in the event that we are not competitive in terms of
quality, service, design and technology, as well as the right at all times to
adopt new technology. We will 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.

For more information regarding the terms of the Supply Agreement, see
"Arrangements Between Delphi and General Motors--Supply Agreement." In addition,
we have entered into arrangements with GM-SPO regarding aftermarket sales in the
United States. For more information, see "Arrangements Between Delphi and
General Motors--Aftermarket Sales."

7
<PAGE> 13

RELATIONSHIP WITH GENERAL MOTORS

THE DISTRIBUTION. We are currently a wholly owned subsidiary of General
Motors. General Motors has advised us that it currently intends to divest itself
of its entire ownership of our company during 1999. After the completion of this
offering of our common stock (which we refer to as the "Offering"), GM will own
about % of the outstanding shares of our common stock (or about % 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 by
distributing all of its shares of Delphi common stock to the holders of its
$1 2/3 common stock. GM expects to accomplish this distribution through the
following:

- an exchange offer in which holders of its $1 2/3 common stock would be
invited to tender their shares in exchange for GM's shares of our common
stock (this type of transaction is sometimes referred to as a
"split-off "); or

- a pro rata distribution by GM of its shares of our common stock to
holders of its $1 2/3 common stock (this type of transaction is sometimes
referred to as a "spin-off "); or

- some combination of both of the above transactions.

We refer to this distribution, in whatever form it takes, as the "Distribution."
GM has the sole discretion to determine the timing and all terms of the
Distribution, and we have agreed to cooperate with GM in all respects to
complete the Distribution. For more information, see "Arrangements Between
Delphi and General Motors--IPO and Distribution Agreement--The Distribution."

Although GM has announced that it currently plans to effect the
Distribution, it is not obligated to do so. See "Risk Factors--Risk Factors
Relating to Separating Our Company from General Motors--Risk of Not Completing
the Distribution."

SEPARATION AND TRANSITIONAL ARRANGEMENTS. 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, agreements providing for the
separation of Delphi from GM. 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 as described in the "Arrangements Between Delphi
and General Motors" section of this prospectus. We believe that the transfer of
substantially all of these assets and liabilities will be completed before the
closing of the 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--Transitional Arrangements with 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.

8
<PAGE> 14

THE OFFERING

<TABLE>
<S> <C>
Common stock offered:
U.S. offering.................................... shares
International offering........................... shares
-------------
Total......................................... shares(1)
=============
Common stock to be outstanding immediately after
the Offering..................................... shares(1)(2)
Common stock to be held by General Motors
immediately after the Offering................... shares(3)
Use of proceeds.................................... We estimate that our net proceeds from the
Offering will be about $ (assuming an
initial public offering price of $ per
share). We will use the net proceeds from the
Offering for general corporate purposes,
including working capital. 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 about $ 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. See "Description of Capital
Stock--Rights Plan."
</TABLE>

- ------------------
(1) Unless we specifically state otherwise, the information in this prospectus
does not take into account the possible issuance of up to
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, shares of common stock
will be outstanding after the Offering.

(2) In connection with the completion of the Distribution, if it occurs,
employee stock options and other GM common stock-based employee benefit
awards issued or granted under GM's incentive plans, but held by employees
of Delphi, will be replaced with comparable options and awards under
Delphi's incentive plans. This number does not include shares of Delphi's
common stock that will be issuable upon exercise of such replacement
employee stock options (not all of which will be immediately exercisable)
and other common stock-based employee benefit awards. Based on the
assumptions set forth in the "Arrangements Between Delphi and General
Motors--Employee Matters--Shares of Delphi's Common Stock Subject to
Substitute Awards" section of this prospectus, as of , ,
there would have been about shares of our common stock
subject to such replacement options and awards. In addition, this number
does not include about shares of Delphi common stock issuable upon
exercise of options and vesting of restricted stock units granted to certain
officers and employees of Delphi as a "founders grant" (none of which will
be immediately exercisable). See "Management--Incentive Plans--Founders
Grants."

(3) These shares are currently owned by General Motors and constitute all of our
outstanding common stock immediately prior to the Offering. General Motors
is not selling any shares in the Offering.

9
<PAGE> 15

SUMMARY FINANCIAL DATA

The following table presents summary financial data for Delphi, including
Delco Electronics, the electronics and mobile communication business that GM
transferred to Delphi 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--Limited Relevance of Our Historical Financial
Information." 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 the Offering and the terms of
the agreements governing our separation from GM. The pro forma balance sheet
information gives effect to (1) the Offering; (2) a change in intracompany
accounts receivable payment terms from GM prior to the separation; and (3) the
settlement of certain General Motors intracompany accounts receivable and the
intracompany note payable. The pro forma statement of income data give effect to
(1) decreased employee benefit costs due to the retention of certain benefit
obligations by GM and (2) 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 the results we would have achieved
had our separation from GM been completed at the beginning of the periods
presented and had the Offering been completed on September 30, 1998.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ---------------------------
PRO PRO
FORMA FORMA
1993 1994(1) 1995 1996(2) 1997(3) 1997 1997(3) 1998(4) 1998
---- ------- ---- ------- ------- ----- ------- ------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 1,273 352 702 1,229 (284) (190)
Net income (loss)........... 948 975 1,307 853 215 432 736 (181) (123)
OTHER FINANCIAL DATA:
Operating income, excluding
the impact of special
items and work
stoppages................. 1,763 2,084 2,138 2,059 1,942 2,292 1,457 1,049 1,143
Income, excluding the impact
of special items and work
stoppages................. 948 975 1,307 1,371 1,167 1,384 842 650 708
Cash provided by (used in)
operating activities...... n/a n/a 1,370 2,701 2,918 n/a 1,812 (51) n/a
EBITDA(5)................... 2,378 2,603 2,959 2,182 2,459 2,809 1,877 530 624
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Net Sales Per Employee (U.S.)............................. $176,000 $199,000 $237,000 $234,000 $247,000
Customer Rejected/Returned Parts Per Million(6)........... n/a n/a 812 462 355
Lost Work Day Cases Per Hundred Employees................. 3.29 3.04 2.27 1.62 1.24
</TABLE>

10
<PAGE> 16

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT DECEMBER 31, -----------------------------
----------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
</TABLE>

- ------------------
(1) Delphi 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.

(2) Work stoppages at GM and Delphi in the United States and Canada during 1996
reduced operating income by about $453 million ($281 million after-tax),
after considering partial recovery of lost production. In addition, an
operating loss of $247 million ($153 million after-tax) was recorded during
1996 in connection with the sale of four Delphi component facilities located
in Flint and Livonia, Michigan, and Oshawa and Windsor, Ontario. Retiree
lump sum benefit payments resulting from U.S. labor negotiations during 1996
resulted in a charge of $86 million ($53 million after-tax). Other special
charges totaled $50 million ($31 million after-tax). These costs primarily
reflect the sale of certain businesses, none of which were material on an
individual basis.

(3) Operating results in 1997 reflect the impact of certain special items,
including the following:

- During the first quarter of 1997, we recorded an $80 million plant closing
charge ($50 million after-tax) relating to a facility in Trenton, New
Jersey.

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

- Gains aggregating $58 million and $39 million ($60 million combined
after-tax) were recorded 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 ($870
million after-tax) relating to the competitiveness study.

(4) Work stoppages at GM and Delphi in the United States during the second and
third quarters of 1998 reduced operating income by about $903 million ($560
million after-tax), after considering partial recovery of lost production.
In addition, an operating loss of $430 million ($271 million after-tax) was
recorded during the third quarter of 1998 in connection with the sale of
Delphi's seating, lighting and coil spring businesses.

(5) "EBITDA" is defined as income before provision for interest expense and
interest income, income taxes, depreciation and amortization. EBITDA is a
measure not in accordance with generally accepted accounting principles and
is not intended to represent cash flows from operations and should not be
considered as an alternative to net income as an indicator of our operating
performance, or as an alternative to cash flows as a measure of liquidity,
in accordance with generally accepted accounting principles. We believe that
EBITDA is a standard measure commonly reported and widely used by analysts,
investors and other interested parties in the automotive parts industry.
However, EBITDA as presented herein may not be comparable to similarly
titled measures reported by other companies.

(6) This measurement was not tracked on a consistent basis prior to 1995.

11
<PAGE> 17

RISK FACTORS

You should carefully consider each of the following factors 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 factors relate principally to
our company's separation from General Motors. Other factors relate principally
to our business in general and the industry in which we operate. Finally, other
factors relate principally to your investment in 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

Each of the following factors describes certain risks to which our company
will be subject in connection with our separation from General Motors.

RISK OF NOT COMPLETING THE DISTRIBUTION

General Motors has advised us that it currently plans to complete its
divestiture of Delphi during 1999 by distributing all of its shares of Delphi
common stock to the holders of its $1 2/3 common stock by means of a split-off,
a spin-off or some combination of both. GM has announced that it currently plans
to effect the Distribution, but it is not obligated to do so. GM has the sole
discretion to determine the timing and all terms of the Distribution and we have
agreed to cooperate with GM in all respects to complete the Distribution.
However, we cannot assure you as to whether or when the Distribution will occur.
The failure of the Distribution to occur substantially within the time
contemplated, or at all, would have a material adverse effect on our business.
Specifically, we would likely not realize the benefits described below in
"--Failure to Realize the Benefits We Expect from Our Separation from General
Motors" and "Delphi and Its Separation from General Motors--Separation from
General Motors--Benefits of the Separation." In addition, the issues discussed
in "--Control of Our Company by General Motors Prior to the Distribution" and
"--Conflicts of Interest and Cross-Directorships" would continue to be relevant
to our stockholders.

FAILURE TO REALIZE THE BENEFITS WE EXPECT FROM OUR SEPARATION FROM GENERAL
MOTORS

As described elsewhere in this prospectus, we believe that our ability to
grow through increased sales to major VMs other than General Motors will be
significantly enhanced if we are not part of GM. We operate in a very
competitive, cyclical industry and cannot assure you that we will be successful
in growing our non-GM sales. Also, due to the multi-year sourcing contracts
common within our industry, we will not begin to realize significant revenues
from new business, if any, until several years after the business is awarded.

After the Offering and the Distribution, 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. As
described elsewhere in this prospectus, we believe that certain VMs have been
concerned that awarding contracts to us would benefit GM and that GM might
obtain access through us to confidential information regarding the other VMs'
vehicle design and manufacturing processes. Whether or not the Distribution
occurs, we cannot give you any assurance as to the amount or timing of purchases
from Delphi by VMs other than GM.

12
<PAGE> 18

We believe that our complete separation from General Motors will enable us,
over time, to increase our competitiveness by 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 we will be able to do
so. As described elsewhere in this prospectus, 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.
GM has informed us that it has held 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. The United Steel Workers of America
(the "USW") has also indicated to GM an interest in holding discussions
regarding the effects of the separation on its members. Similar discussions are
expected to occur with the other unions representing our employees, but we
cannot assure you as to when they will occur. In this regard, the International
Union, United Automobile, Aerospace and Agricultural Implement Workers of
America (the "UAW"), our largest union (representing about 29% of our unionized
employees), has publicly announced its intention to aggressively work to protect
the rights and interests of its members who would be impacted by the
Distribution. We intend to cooperate with GM in working together with the UAW,
IUE, USW and the other unions representing our employees to address the best
interests of their members regarding these matters.

In addition, we may incur costs and expenses, potentially including
additional taxes, greater than those we have planned for in connection with our
separation from General Motors. We cannot assure you that these costs will not
be material to our business.

For more information about our separation from General Motors and the
benefits we expect, see "Delphi and Its Separation from General
Motors--Separation from General Motors--Benefits of the Separation." If the
Distribution does occur, we cannot assure you that we will obtain these or other
benefits as a result of our separation from GM or as to the timing of any such
benefits.

CONTROL OF OUR COMPANY BY GENERAL MOTORS PRIOR TO THE DISTRIBUTION

Until the Distribution is completed, we will be controlled by General
Motors. After the completion of the Offering, GM will own about % of our
outstanding shares of common stock (or about % 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;

- the payment of dividends on our common stock; and

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

13
<PAGE> 19

GM is our largest customer and will continue to be so for a significant
period of time. 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; 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. The Supply Agreement 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 that may be more or less favorable to us
than the current terms of the agreement. In addition, 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. See "Arrangements Between Delphi and General
Motors--Supply Agreement."

LIMITED RELEVANCE OF OUR HISTORICAL FINANCIAL INFORMATION

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
as a result of our separation from General Motors.

In addition, our financial results reflect the impact of several factors that
have varied from year to year, such as work stoppages and special charges. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

History as Part of GM. Because our company as it exists today was not
operated as a single division of GM at all times during the period for which
historical financial information is presented in this prospectus, certain
adjustments and allocations were required in connection with the preparation of
our financial statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for more information about these matters.

Separation From GM. The historical consolidated financial information
included in this prospectus does not reflect many significant changes that will
occur in our funding and operations in connection with our separation from
General Motors. For example, as set forth under "Arrangements Between Delphi and
General Motors," we have entered into several agreements with GM to govern
employee benefit obligations. Generally, GM will retain responsibility for the
employee benefit obligations of all salaried retirees and we will retain
responsibility for all active and inactive salaried employees of our business as
of January 1, 1999. GM U.S. hourly employees that are employees in our
operations were transferred to our company as of January 1, 1999 and will remain
under the applicable national collective bargaining agreement (and incorporated
employee benefit plans) until the Distribution, and GM will retain
postretirement benefit obligations for retired U.S.
14
<PAGE> 20

hourly employees. The understandings between us and GM related to the effect of
the separation on U.S. and Canadian hourly employees represented by unions may
be affected by negotiations with the unions. For a description of the effect of
these and other changes in our operations that will occur as a result of our
separation from GM, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

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. For example, our historical effective income tax rates do
not necessarily reflect the effective tax rates which will be applicable to our
future operating results because we may have benefited historically from GM's
overall consolidated tax environment. See "Arrangements Between Delphi and
General Motors--Tax Matters."

As a result of these factors, 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."

CONFLICTS OF INTEREST AND CROSS-DIRECTORSHIPS

We currently anticipate that, prior to the Distribution, three members of
our Board of Directors will be executive officers of GM (two of whom are also
directors of GM). For more information about our Board of Directors both prior
to and following the Distribution, see "Management--Directors, Executive
Officers and Key Employees of Delphi." Our directors who are also directors or
executive officers of GM 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 Restated Certificate of Incorporation contains provisions for
resolving these potential conflicts which we believe will assist the directors
of our company in fulfilling their fiduciary duties to our stockholders. 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.
Although these provisions are designed to resolve such conflicts between us and
General Motors fairly, we cannot assure you that conflicts will be so resolved.
See "Description of Capital Stock--Certain Provisions of the Restated
Certificate of Incorporation and Bylaws."

In addition, certain of our directors and a number of our executive
officers own substantial amounts of GM stock and options on GM stock. See
"Management--Stock Ownership of Directors and Executive Officers." Although we
believe that such directors and officers will be able to fulfill their fiduciary
duties to our stockholders despite their ownership of GM stock, 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.

OUR ABILITY TO MEET OUR FUTURE CAPITAL AND LIQUIDITY REQUIREMENTS

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. In the past, our working capital needs have been managed by GM
pursuant to its corporate-wide cash management policies. However, after the
Offering, General Motors will no longer provide or manage funds to finance our
operations. We expect that our credit rating will be lower than GM's and that we
will not be able to obtain financing with interest rates and terms as favorable
as those obtained by GM. 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.

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

15
<PAGE> 21

from our operations. 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."

CERTAIN CONTRACTUAL LIMITATIONS TO WHICH WE ARE SUBJECT

Before we complete the Offering, we will enter into an agreement with
General Motors with respect to certain matters relating to the Offering and the
Distribution. This agreement will contain a number of restrictive covenants.

Tax-Related Covenants. In order to preserve the tax-free status of the
Distribution, we are subject to the following restrictions (any of which may be
waived by GM if, after following certain agreed-upon procedures, GM has
determined, in its sole and absolute discretion, that such action would not
jeopardize the tax-free status of the Distribution):

- prior to the completion of the Distribution, we cannot 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 shares of
our voting stock or issue shares of any class or series of our capital
stock other than our voting stock;

- until two years after the completion of the Distribution, we cannot enter
into any transaction which would result in one or more persons acquiring
50% or more of the value or voting power of all outstanding shares of our
capital stock;

- until two years after the completion of the Distribution, we cannot (1)
liquidate, dispose or otherwise discontinue the conduct of any portion of
our active trade or business with a value in excess of $ billion or (2)
dispose of any assets or business 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 Internal
Revenue Service ("IRS") or tax counsel in connection with GM's request
for a private letter ruling with respect to the tax-free nature of the
Distribution; and

- until two years after the completion of the Distribution, except in the
ordinary course of business, we cannot sell, transfer or otherwise
dispose of assets that, in the aggregate, constitute more than (1) 60% of
our gross assets or (2) 60% of our and our subsidiaries' consolidated
gross assets.

We and GM have agreed to certain procedures with respect to the tax-related
covenants in the IPO and Distribution Agreement. See "Arrangements Between
Delphi and General Motors--IPO and Distribution Agreement--Cooperation on Tax
Matters."

Other Covenants. Because GM will continue to include us as a subsidiary for
various financial reporting, accounting and other purposes following the
Offering, we are subject to the following additional restrictions (any of which
may be waived by GM upon its prior written consent, which it may withhold in its
sole and absolute discretion):

- until GM ceases to own at least 50% of our outstanding common stock, we
cannot incur indebtedness in excess of $5 billion;

- until GM ceases to own at least 50% of our outstanding common stock, we
cannot acquire another entity if after giving effect to such acquisition
our indebtedness would exceed a specified acquisition indebtedness
threshold (as described further in the "Arrangements Between Delphi and
General Motors--IPO and Distribution Agreement--Other Delphi Covenants"
section of this prospectus); and

- until GM ceases to own at least 50% of our outstanding common stock, we
cannot issue shares of our 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 our then outstanding common stock.

16
<PAGE> 22

In addition, our Supply Agreement with GM contains provisions relating to a
change in control of our company and, in certain cases, the closing of plants,
the elimination of product lines and the divestiture of businesses. For a
description of these provisions, see "--Risk Factors Relating to Your Ownership
of Our Stock--Provisions in Our Supply Agreement with General Motors Relating to
a Change in Control of Our Company" and "Arrangements Between Delphi and General
Motors--Supply Agreement."

These restrictions, individually or in the aggregate, could materially
limit the way in which we conduct our business and our ability to pursue our
business objective (including the making of acquisitions and dispositions).
Accordingly, these restrictions could have a material adverse effect on our
company and your investment in our company. For more information about these
agreements, see "Arrangements Between Delphi and General Motors--IPO and
Distribution Agreement."

TRANSITIONAL ARRANGEMENTS WITH GENERAL MOTORS

We have never operated as a stand-alone company. We currently have, and
after the Offering and the Distribution will continue to have, contractual
arrangements which require GM and its affiliates to provide certain transitional
services to us. These services include, among others:

- certain treasury, accounting (including accounts payable and receivable),
tax, customs and payroll services;

- certain purchasing systems services;

- certain information systems services;

- certain administrative support services;

- certain audit services; and

- managed access to GM's proving grounds, test facilities and research and
development and engineering centers.

While General Motors is contractually obligated to provide us with these
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. After the expiration of these contracts, we cannot assure you
that we will be able to replace these services in a timely manner or on terms
and conditions (including cost) as favorable as those we received from GM.

Also, we will lease and sub-lease certain office and manufacturing
facilities from GM. These leases and sub-leases were also made in the context of
a parent-subsidiary relationship and were negotiated in the overall context of
our separation from GM. We cannot assure you that the terms of these leases and
sub-leases are more or less favorable than those we could negotiate with an
unaffiliated third party or that upon the expiration of these leases we will be
able to renew or replace these leases and sub-leases on favorable terms.

For more information about these arrangements, see "Arrangements Between
Delphi and General Motors."

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RISK FACTORS RELATING TO OUR BUSINESS

Each of the following factors describes certain risks to which our business
is subject, including risks relating to the industry in which we operate.

OUR DEPENDENCE ON ONE MAJOR CUSTOMER

GM accounted for about 84.1%, 83.5% and 81.7% of our total sales in 1995,
1996 and 1997, respectively (including for such purpose, all of the sales from
minority joint ventures and other investments that are not reflected in our
consolidated sales). We expect that GM will continue to be our largest customer
by far for a significant period of time. For more information about our sales to
GM, see "Business of Delphi--Customers--General Motors."

In connection with our separation from GM, we have entered into a supply
agreement with GM pursuant to which we will continue to supply products to GM
for several years. The Supply Agreement was made in the context of a
parent-subsidiary relationship and was negotiated in the overall context of our
separation from GM. The terms of the Supply Agreement may be more or less
favorable than the terms of purchase contracts we could negotiate with an
unaffiliated VM.

Under the terms of the Supply Agreement, our existing contracts with GM as
of January 1, 1999 will generally remain in effect. However, the timing of
payments from GM to us under these contracts will change. 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" and "Arrangements Between Delphi
and General Motors--Supply Agreement--Payment Terms." The Supply Agreement also
requires GM to provide us the opportunity to supply on competitive terms the
first replacement cycle of certain product programs. 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.

Our arrangements with GM, including the Supply Agreement, are expected to
provide us with a substantial base of future business with GM well into the next
decade. However, they also mean that we will continue to depend on
GM--especially GM-North America--which is by far our largest customer. Our
ability to realize future sales to GM will be subject to all of the
uncertainties we identify elsewhere in this prospectus as applicable to other
VMs, but will be heightened to the extent that these factors affect our business
with our largest customer. See "--Our Ability to Realize Sales from Awarded
Business."

In light of these factors, we cannot assure you as to the amount of our
future business with General Motors. For more information regarding the Supply
Agreement, see "Arrangements Between General Motors and Delphi--Supply
Agreement."

Except for the arrangements with respect to the first replacement cycle of
certain product programs as described elsewhere in this prospectus, if we elect
to bid for GM's business, we will do so on the same basis as all other
suppliers. For several years, General Motors has been pursuing a global sourcing
strategy that has permitted GM to leverage its purchasing power by sourcing its
products on a global basis and increase competition for its business among its
suppliers on the basis of quality, service, technology and price. Pursuant to
this strategy, GM has provided suppliers worldwide with the opportunity to bid
for business--particularly GM-North America business--historically sourced with
us. As a result, our share of GM-North America's sourcing needs has decreased
and we expect it to continue to do so. 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 that we will
be successful in bidding for or retaining GM's business.

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LABOR RELATIONS

As of August 31, 1998, about 96% of our hourly workforce was represented by
unions. These employees 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. 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. 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.

The national labor agreements negotiated by GM with the unions currently
apply to our workforce. 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 these national agreements for our employees in connection
with the Distribution. While we believe that our separation from General Motors
will provide us with the opportunity to improve our labor relations and, over
time, establish work rules and practices more consistent with those generally
prevailing in the automotive parts industry, we cannot assure you in this
regard. See "--Risk Factors Relating to Separating Our Company from General
Motors--Failure to Realize the Benefits We Expect from Our Separation from
General Motors."

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 (which involved 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 VM 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 VMs, which could have a material adverse impact
on our business. For more information, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business of
Delphi--Employees; Union Representation."

OUR ABILITY TO CAPTURE BUSINESS WITH CUSTOMERS OTHER THAN GM-NORTH AMERICA

An important part of our business strategy is to increase our sales to VMs
other than GM-North America, including, among others, GM-International. We will
need to do this in order to offset the expected decline in our revenues from
sales to GM-North America. 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 VMs are
increasingly seeking from their suppliers;

- our ability to develop technologically advanced products;

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

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

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

Even if we are successful in expanding our sales to other customers, revenues
from such sales, if any, will likely not be realized, if at all, for several
years because the majority of VM parts purchases for the next several years have
already been sourced.
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OUR ABILITY TO REALIZE SALES FROM AWARDED BUSINESS

Our business planning is based on realizing future sales from business that
has been awarded to us by GM and other VMs at various stages of the vehicle
development cycle. VMs award business through a variety of procedures, including
representations, nomination letters and letters of intent as well as formal
contracts, purchase orders and other firm commitments. In each case, the
customer generally commits to purchase certain of its requirements from us with
respect to automotive parts for a particular vehicle model, rather than
committing to purchase a specific quantity of our products. Accordingly, the
realization of sales from awarded business is subject to a number of risks and
uncertainties, including the following:

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

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

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

- the VM's contractual right to terminate the 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 select us to supply
any or all of the same parts we were providing on the previous vehicle
model; and

- price reductions on existing contracts negotiated in connection with the
VM's sourcing of new business with us.

Our VM customers' actual vehicle production volumes (and option mix) depend
on a number of factors that are beyond our control. These include:

- general economic conditions;

- consumer preferences for particular vehicles or vehicle features;

- labor difficulties or work stoppages; and

- capital planning and other VM-specific factors.

For more information regarding our awarded business, see "Business of
Delphi--Industry--Awarded Business."

OUR ABILITY TO IMPROVE OUR OPERATING PERFORMANCE

We have implemented several important strategic initiatives designed to
improve our operating performance. See "Business of Delphi--Strategy--Improve
Operating Performance." We believe that in many cases the full impact of these
initiatives has not yet been realized. These initiatives are subject in many
cases to participation by labor unions and other third parties, including GM,
which has certain contractual rights with respect to our plant closures, product
line eliminations and divestitures of businesses. For a description of these
rights, see "Arrangements Between Delphi and General Motors--Supply Agreement--
Delphi Plant Closures and Product Eliminations" and "--Delphi Divestitures" and
"Arrangements Between Delphi and General Motors--IPO and Distribution
Agreement." Accordingly, 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.

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THE HIGHLY COMPETITIVE NATURE OF THE AUTOMOTIVE PARTS INDUSTRY

The automotive parts industry is highly competitive. We compete with a
number of independent automotive parts suppliers and units of major VMs in the
United States and internationally that produce components, systems and modules
for sale to VMs and in the aftermarket as replacement parts. Although the
overall number of our competitors has decreased due to 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."

We principally compete for new VM business at the beginning of the
development of new vehicle models and upon the redesign of existing vehicle
models. 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. 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.

CYCLICALITY AND SEASONALITY ACROSS REGIONS IN THE AUTOMOTIVE INDUSTRY

Almost all of our business is directly related to automotive sales and
production by our customers. Automotive sales and production are highly cyclical
and depend on general economic conditions and other factors, including consumer
spending. Any significant reduction in automotive production and sales by our
customers would have a material adverse effect on 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 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. We cannot assure you that the current economic downturn will
not worsen, or that similarly negative situations will not arise in the future.

In addition, our business is seasonal. We typically experience decreased
revenue and operating income during the third and fourth quarters of each year
because of decreased demand from VMs in those quarters. Our primary North
American VM customers historically halt production for about two weeks in July
and about one week in December to re-tool plants for production of new models of
vehicles and to allow time for employee vacations. In addition, third quarter
automotive production is traditionally lower due to the change-over to new
vehicle models.

For more information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview--Variability in Delphi's
Business."

OUR OPEB AND UNDERFUNDED PENSION OBLIGATIONS

In connection with our separation from General Motors, we have agreed to
assume certain obligations relating to pensions and other postretirement
employee benefits ("OPEB") for our employees as well as certain employees
associated with prior divestitures. In connection with the separation, we will
receive from GM certain assets and liabilities related to GM salaried pension
plans. In connection with the Distribution, we will receive from GM certain
assets and liabilities related to GM hourly pension plans. Under current
economic conditions and federal government regulations, our pension obligations
(based on their assets, the

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expected investment return on those assets and the plans' expected liabilities)
would as of January 1, 1999 be considered to be "underfunded."

Because of the underfunded nature of our pension plans, federal regulations
will require us to make contributions over time to meet minimum funding
requirements. 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."

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 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 have agreed with General Motors
that the obligations associated with certain employees who leave Delphi and join
GM will be shared. The movement of employees from Delphi to GM, and changes in
their status once they are at GM, may also have a material adverse effect on the
funding status of the plans or payment obligations related to such employees.
For more information, see "Arrangements Between Delphi and General Motors--
Employee Matters--Employee Transfers."

COST REDUCTIONS TO OUR VM CUSTOMERS

There is substantial and continuing pressure from VMs to reduce costs,
including the cost of products purchased from outside suppliers such as our
company. As a result, suppliers are forced to reduce prices both in the initial
bidding process and during the term of the contractual arrangements. Certain of
our products are sold under long-term agreements that require us to provide
annual cost reductions (directly through price reductions and/or indirectly
through suggestions regarding manufacturing efficiencies or other cost savings)
by certain percentages each year. 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, VMs 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 to our VM customers is limited, with cost
recovery generally less than 100% and often on a delayed basis.

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. For more information, see "Business of
Delphi--Industry--Contracts for VM Business."

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 difficulty associated with managing a large organization spread
throughout various countries;

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

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- 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.

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 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. 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.

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 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 profit (and conversely, depreciation of the U.S. dollar against
these foreign currencies will have a positive impact). 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 consolidated financial statements included
elsewhere in this prospectus. We generally do not seek to mitigate this
translation effect through the use of derivative financial instruments.

OUR ABILITY TO COMPLETE STRATEGIC ACQUISITIONS, JOINT VENTURES AND
ALLIANCES

Another part of our business strategy is 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 buy a company, we could have difficulty
assimilating the personnel and operations of the acquired company, which would
constrain our ability to realize 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.

We are subject to certain contractual restrictions which may limit our
ability to make acquisitions or enter into joint ventures or other strategic
alliances. For a discussion of these restrictions and the risks related thereto,
see "--Risk Factors Relating to Separating Our Company from General
Motors--Certain Contractual Limitations to Which We Are Subject" and
"Arrangements Between Delphi and General Motors--IPO and Distribution
Agreement--Preservation of the Tax-Free Status of the Distribution" and "--Other
Delphi Covenants." 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.

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PRODUCT LIABILITY CLAIMS 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, and until
the completion of the Distribution will continue to be, covered by GM's
insurance against product liability claims and we expect to purchase product
liability insurance coverage to be effective as of the time of the completion of
the Distribution with amounts determined at that time to be adequate with
reasonable deductibles or self-insured retentions. 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 prove 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. 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 to
GM either before or after that date, we will be responsible for liability
relating to all products we sold to others during the period we were wholly
owned by General Motors. In addition, we are responsible for liability relating
to all products we manufacture and sell to General Motors on or after January 1,
1999. For more information, see "Arrangements Between Delphi and General
Motors--Product Liability."

OUR RESPONSIBILITY FOR PRODUCT WARRANTIES

VMs generally offer warranties to new vehicle purchasers which cover the
repair and replacement of defective parts on their vehicles for a certain 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 such 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. 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."

OUR DEPENDENCE ON KEY PERSONNEL

We rely heavily on our senior executive officers and other key management
personnel. Other than with respect to two of our executive officers located
outside the United States, we do not have retention agreements with any of our
executive officers or other key management personnel. If any of these persons
leaves our company, it could have a material adverse effect on our company. In
addition, we expect that we will need to hire additional employees, including
senior executive officers and other employees to provide services previously
provided by GM employees. The competition for such personnel is intense and is
increasing and, accordingly, we may not be able to hire or retain necessary
personnel in the future.

POTENTIAL ENVIRONMENTAL LIABILITIES

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. These laws and regulations govern, among
other things, the significant number of manufacturing sites we operate around
the world and their air emissions, water discharge and waste materials. We
cannot assure you that we have been or will be at all times

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<PAGE> 30

in complete compliance with all such requirements or that we will not incur
material costs or liabilities in connection with such requirements. 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.

We are also subject to environmental laws requiring the investigation and
cleanup of environmental contamination. If a release of hazardous substances
occurred or occurs at our properties or at an offsite disposal location that
received wastes from our operations and is discovered after January 1, 1999 to
require cleanup, we may be liable for cleanup costs and the amount of such
liability could be material. We are in various stages of investigation and
cleanup at our manufacturing sites where contamination has been alleged.
Although we have recorded a reserve for the costs and liabilities associated
with such investigation and cleanup, we cannot assure you that our environmental
cleanup costs and liabilities will not exceed the amount of our current reserve.
For more information about our environmental compliance and potential
environmental liabilities, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters" and
"Business of Delphi--Environmental Matters."

DEVELOPMENT OF NEW PRODUCTS TO MEET CHANGING TECHNOLOGICAL AND REGULATORY
REQUIREMENTS AND CONSUMER PREFERENCES

Certain of our products may be rendered obsolete by changes in legislative,
regulatory or industry requirements, new technologies introduced by our
competitors or changes in consumer preferences. In order to grow and remain
competitive, we will have to anticipate changes in technology and regulatory
standards and consumer preferences and develop and introduce new and enhanced
products designed to address such changes on a timely basis, especially in light
of increasingly shorter product development cycles. We cannot assure you that we
will be able to develop products to meet changing regulatory standards or
consumer preferences, achieve the technological advances necessary for us to
remain competitive or that our competitors will not introduce new technologies
similar to, or more advanced than, ours. We are also subject to risks generally
related to the development of new products, including lack of market acceptance,
delays in product development and failure of our products to operate properly.

YEAR 2000 AND OTHER INFORMATION TECHNOLOGY ISSUES

We use software and related computer technologies essential to our
operations that use two digits rather than four 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

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<PAGE> 31

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 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.

We also are in the process of implementing throughout our global operations
on an incremental basis a new enterprise software system (based on the SAP AG
system) that will replace the 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 YOUR OWNERSHIP OF OUR STOCK

Each of the following factors describes certain risks to consider in
connection with your investment in and ownership of our stock, including
limitations on our ability to execute certain business combinations and change
of control transactions.

POSSIBILITY OF SUBSTANTIAL SALES OF OUR COMMON STOCK

The Distribution would involve the distribution of about shares of
our common stock by GM to its $1 2/3 common stockholders. Other than any shares
held by affiliates of Delphi, all of those shares would be eligible for
immediate resale in the public market. We cannot predict whether substantial
amounts of our common stock will be sold in the open market in anticipation of,
or following, the Distribution. The timing, structure and terms of the
Distribution (all of which are within the sole discretion of GM) may also cause
there to be sales of our common stock. Although GM has the sole discretion to
determine the timing and all terms of the Distribution, we have agreed to
cooperate with GM in all respects to complete the Distribution.

In addition, in the event the Distribution is not completed, GM will have
the right, subject to certain conditions, to require us to register its shares
of common stock under the Securities Act and will be able to sell its shares to
third parties or in the public market following their registration. See
"Arrangements Between Delphi and General Motors--Registration Rights Agreement."

Any sales of substantial amounts of our common stock in the public market,
or the perception that such sales might occur (whether as a result of the
Distribution, GM's registration rights or otherwise) could have a material
adverse effect on the price of our common stock.

CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF OUR COMPANY

Our Restated Certificate of Incorporation and Bylaws, our stockholder
rights plan and applicable provisions of the Delaware General Corporation Law
("DGCL") contain several provisions that may make

26
<PAGE> 32

the acquisition of control of our company more difficult, in most cases without
the approval of our Board of Directors. These provisions of the Restated
Certificate and the Bylaws include, among others:

- our Board of Directors is classified into three classes, each of which
(after an initial transition period) will serve for staggered three-year
terms;

- once GM owns less than a majority of our outstanding stock, a director
may be removed by our stockholders only for cause;

- once GM owns less than a majority of our outstanding stock, only our
Board of Directors or the Chairman of our Board of Directors may call
special meetings of our stockholders;

- once GM owns less than a majority of our outstanding stock, our
stockholders may take action only at a meeting of our stockholders--not
by written consent;

- stockholders, other than GM for as long as it owns more than a majority
of our outstanding stock, must comply with certain advance notice
procedures in order to nominate candidates for election to our Board of
Directors or to place stockholders' proposals on the agenda for
consideration at meetings of the stockholders;

- certain business combinations involving one or more persons that own or
intend to own at least 10% of our voting stock (other than GM while it
owns more than 10% of our outstanding stock) must be approved by the
affirmative vote of at least 66 2/3% of our voting stock (excluding that
held by such person or persons) or by a majority of "continuing
directors" (as that term is defined in our Restated Certificate of
Incorporation) and in accordance with the "fair price" provisions
specified therein; and

- the stockholders may amend or repeal any of the foregoing provisions of
our Restated Certificate of Incorporation or our Bylaws only by a vote of
80% (other than the provision requiring stockholder approval of certain
business combinations, which generally requires a 66 2/3% vote) of the
stock entitled to vote generally in the election of directors.

For more information about these provisions, see "Description of Capital Stock."

In addition, our stockholder rights plan would cause substantial dilution
to any person or group that attempts to acquire our company on terms not
approved in advance by our Board of Directors. Our stockholder rights plan does
not apply to General Motors while it beneficially owns 15% or more of our
outstanding voting stock. In addition, with certain exceptions, Section 203 of
the DGCL imposes certain restrictions on mergers and other business combinations
between us and any holder of 15% or more of our common stock. By its terms,
Section 203 of the DGCL is currently not applicable to GM.

Delphi's management currently intends to recommend to the Delphi Board at
its first meeting following completion of the Distribution that Delphi establish
change in control agreements that will provide certain of our officers with
monetary compensation and certain other benefits upon (1) a change in control of
our company and (2) the occurrence of one of several events specified in the
agreements within three years of the change in control. The existence of these
agreements could delay or prevent a change in control of our company. For a
description of the change in control agreements, see "Management--Change in
Control Agreements."

PROVISIONS IN OUR SUPPLY AGREEMENT WITH GENERAL MOTORS RELATING TO 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 would likely have a material adverse effect
on our company. For more information, see "Arrangements Between Delphi and
General Motors--Supply Agreement."

27
<PAGE> 33

POSSIBLE VOLATILITY OF OUR STOCK PRICE

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 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 the
Distribution, if it occurs, 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.

ABSENCE OF A PUBLIC MARKET FOR OUR COMMON STOCK

Prior to the Offering, there has been no public market for our common
stock. Although we have filed an application to list our common stock on the New
York Stock Exchange (the "NYSE"), we cannot assure you that there will be an
active public market for our common stock or that you will be able to resell
your shares at or above the initial public offering price. The initial public
offering price 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.

28
<PAGE> 34

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 the Offering and
our separation from General Motors.

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 us in order to more
closely integrate Delco Electronics' expertise in electronics with our
capabilities in automotive components and systems. Our Electronics and Mobile
Communication sector consists of the operations of our Delco Electronics
subsidiary. From 1986 through 1997, Delco Electronics was operated by GM's
Hughes Electronics Corporation ("Hughes Electronics") subsidiary, which is a
leader in satellite communications and space technology and was at that time
also a leading defense electronics company.

SEPARATION FROM GENERAL MOTORS

GM'S PLAN TO DIVEST DELPHI. General Motors has advised us that it currently
intends to divest itself of its entire ownership of Delphi during 1999. After
completion of the Offering, GM will own about % of the outstanding shares of
our common stock (or about % 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 by distributing all of its shares of
Delphi common stock to the holders of its $1 2/3 common stock. GM expects to
accomplish this distribution through the following:

- a pro rata distribution by GM of its shares of our common stock to
holders of its $1 2/3 common stock (this type of transaction is sometimes
referred to as a "spin-off"); or

- some combination of both of the above transactions.

BACKGROUND OF THE SEPARATION. Historically, many large VMs have relied on
in-house components divisions to fill their supply needs. Over the past few
decades, however, the automotive industry has moved
29
<PAGE> 35

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 many major VMs also remain reluctant to source from us because
they fear that GM might obtain access through us to confidential
information regarding their vehicle design 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. 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 Our Business--Our Ability to Capture Business with Customers
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 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 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 we will realize these benefits. GM has informed us that it has held
discussions regarding the effects of the separation on its members with
the IUE, one of the principal unions representing our employees. The USW
has also indicated to GM an interest in holding discussions regarding the
effects of the separation on its members. Similar discussions are
expected to occur with the other unions representing our employees, but
we cannot assure you as to when they will occur. In this regard, the UAW,
our largest union (representing about 29% of our unionized employees),
has publicly announced its intention to aggressively work to protect the
rights and interests of its members who would be impacted

30
<PAGE> 36
by the Distribution. We intend to cooperate with GM in working together
with the UAW, IUE, 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--Failure to Realize the Benefits We Expect from 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 and the risks related thereto, see "Risk
Factors--Risk Factors Relating to Separating Our Company from General
Motors--Certain Contractual Limitations to Which We Are Subject" and
"Arrangements Between Delphi and General Motors--IPO and Distribution
Agreement."

- 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.

Although General Motors has advised us that it currently intends 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 when or whether a complete separation will take place or, if
such a separation occurs, that the expected benefits will result. For more
information about these risks, see "Risk Factors--Risk Factors Relating to
Separating Our Company from General Motors--Risk of Not Completing the
Distribution" and "--Failure to Realize the Benefits We Expect from Our
Separation from General Motors."

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 between us and GM (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 the Supply Agreement, which is
intended to provide Delphi with a substantial base of business with GM-North
America 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. For more information about the
separation, including the Supply Agreement, see "Arrangements Between Delphi and
General Motors."

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. 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 (as well as the other agreements relating to the
separation of our business from GM) were negotiated in a similar context and we
cannot assure you that the terms are more or less favorable than those we could
negotiate with an unaffiliated third party.

31
<PAGE> 37

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 transfer of substantially
all of these assets and liabilities will be completed before the closing of the
Offering. Certain international 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, in the aggregate, material to
Delphi. In addition, certain information technology assets relating primarily to
the business of Delphi: (1) 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 (2) 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. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Employee Benefits Arrangements" and "Arrangements Between
Delphi and General Motors--Employee Matters."

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

32
<PAGE> 38

USE OF PROCEEDS

We estimate that we will receive net proceeds from the Offering of
$ (or $ if the U.S. underwriters exercise their over-allotment
option in full), after deducting the estimated underwriting discounts and
commissions relating to the Offering (assuming an initial public offering price
of $ per share). 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" and "Arrangements
Between Delphi and General Motors--Supply Agreement--Payment Terms."

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 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 about
$ per share, commencing with the first declaration in June 1999
for payment in July 1999. Our Board is free to change its 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.

33
<PAGE> 39

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 (assuming an initial public offering price
of $ per share). 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.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS (UNAUDITED)
---------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
DEBT:
Notes payable and current portion of long-term
debt............................................ $ 206 $ 206
Long-term debt.................................... 3,294 $(3,000)(1) 3,294
3,000(1)
------ ------- ------
Total debt.............................. 3,500 -- 3,500
EQUITY (DEFICIT):
Common stock...................................... (2)
Additional paid-in capital........................ 1,198(2)
(2)
General Motors' net investment.................... (2) 1,200(1) --
(1,198)(2)
Accumulated translation adjustments............... (37) (37)
------ ------- ------
Total equity (deficit).................. (39)
------ ------- ------
Total capitalization............... $3,461 $ $
====== ======= ======
</TABLE>

- ------------------
(1) Reflects the settlement of a $3.0 billion intracompany note payable with
General Motors and a $1.2 billion increase in GM's net investment in Delphi
after considering the $1.8 billion settlement of intracompany accounts
receivable at the time of the transactions contemplated by the Separation
Agreement. It is expected that during the first quarter of 1999, Delphi will
finance its operations through third-party credit sources, with borrowings
that will increase to about $3.0 billion through March 1999.

(2) Reflects proceeds from the Offering and adjustments to equity to reclassify
GM's net investment to additional paid in capital.

34
<PAGE> 40

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 business sector 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 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 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 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 historical data in this table reflect the following significant items:

CAPITAL ARRANGEMENTS

- We have operated under a Cash and Debt Management Agreement and
intracompany note payable with GM. The Cash and Debt Management Agreement
established our combined cash and marketable securities balance at $1.0
billion. Our total debt is $3.5 billion, reflecting a $3 billion
intracompany note payable to GM and outstanding debt at our international
subsidiaries. The $3 billion intracompany note payable to GM reflects the
portion of GM's outstanding debt that is specifically related to our
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 September 30,
1998 and December 31, 1997 and 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

- Interest expense reflects interest associated with the debt
capitalization discussed above, primarily using a blend of prevailing
short-term and long-term weighted-average interest rates commensurate
with the anticipated overall credit risk of our company as a stand-alone
entity.

EMPLOYEE BENEFITS ARRANGEMENTS

35
<PAGE> 41
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 or paying GM for underfunding relating to such employees.
The amount of such underfunding varies depending on factors such as
discount rates, asset returns, contribution levels and other factors. On
December 31, 1996 the underfunding attributable to Delphi was $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 law 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 will retain
postretirement benefit obligations for retired U.S. hourly employees.

- The liabilities set forth in our consolidated financial statements
include employee benefit obligations related to our active and inactive
employees only; however, the consolidated statements of income include
benefit costs for our 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 our company based on
usage or allocation methodologies primarily based on total net sales,
certain tangible assets and payroll expenses. Although we believe the
allocations and charges for such services to be reasonable, the costs of
these services charged to our company are not indicative of the costs
that would have been incurred if we had been a stand-alone entity. An
estimate of the incremental corporate costs associated with operating our
company as a stand-alone entity is included in the pro forma condensed
consolidated statement of income data. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements" for additional information.

INCOME TAXES

- Income taxes were determined in accordance with the provisions of
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting
for Income Taxes." Once our company is a stand-alone entity and is no
longer included in GM's 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 rate in future periods to generally be
higher than our historical effective income tax rates.

36
<PAGE> 42

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--Limited Relevance of Our Historical
Financial Information."

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1993 1994(1) 1995 1996(2) 1997(3) 1997(3) 1998(4)
---- ------- ---- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
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 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 (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)
======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL 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
EBITDA(5)............................. $ 2,378 $ 2,603 2,959 2,182 2,459 1,877 530
</TABLE>

<TABLE>
<CAPTION>
AT
AT DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
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)
</TABLE>

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

(1) Delphi 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.

(2) Work stoppages at GM and Delphi in the United States and Canada during 1996
reduced operating income by about $453 million ($281 million after-tax),
after considering partial recovery of lost production. In addition, an
operating loss of $247 million ($153 million after-tax) was recorded during
1996 in connection with the sale of four Delphi component facilities located
in Flint and Livonia, Michigan, and Oshawa and Windsor, Ontario. Retiree
lump sum benefit payments resulting from U.S. labor negotiations during 1996
resulted in a charge of $86 million ($53 million after-tax). Other special
charges totaled $50 million ($31 million after-tax). These costs primarily
reflect the sale of certain business investments, none of which were
material on an individual basis.

37
<PAGE> 43

(3) Operating results in 1997 reflect the impact of certain special items,
including the following:

- During the first quarter of 1997, we recorded an $80 million plant closing
charge ($50 million after-tax) relating to a facility in Trenton, New
Jersey.

- During the fourth quarter of 1997, we recorded a $1.4 billion charge ($870
million after-tax) relating to the competitiveness study.

38
<PAGE> 44

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
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
consolidated balance sheets. The unaudited pro forma condensed consolidated
statements of income data for the nine months ended September 30, 1998 and for
the year ended December 31, 1997 have been prepared as if our separation from GM
and the Offering 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 and the
Offering 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 consolidated financial statements and notes thereto included
elsewhere in this prospectus.

The 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 taken place on
September 30, 1998. The 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 taken place 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 pro forma condensed consolidated balance
sheet information gives effect to (1) the Offering, (2) a change in GM's
intracompany accounts receivable payment terms and (3) the settlement of certain
GM intracompany accounts receivable and the intracompany note payable. The pro
forma condensed consolidated statement of income data give effect to (1)
decreased employee benefit costs due to the retention of certain benefit
obligations by GM and (2) certain incremental costs associated with operating
Delphi as a stand-alone publicly traded company.

39
<PAGE> 45

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA

FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
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) 1,528
132(2)
Depreciation and amortization................... 1,970 1,970
------- ----- -------
Total operating expenses..................... 31,095 (350) 30,745
------- ----- -------
Operating income.................................. 352 350 702
Interest expense.................................. (287)(3) (287)
Other income, net................................. 194 194
------- ----- -------
Income before income taxes........................ 259 350 609
Income taxes...................................... 44 133(4) 177
------- ----- -------
Net income........................................ $ 215 $ 217 $ 432
======= ===== =======
Earnings per share................................ $ $
======= =======
</TABLE>

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
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) 1,104
100(2)
Depreciation and amortization................... 731 731
------- ------ -------
Total operating expenses..................... 20,963 (94) 20,869
------- ------ -------
Operating loss.................................... (284) 94 (190)
Interest expense.................................. (199)(3) (199)
Other income, net................................. 124 124
------- ------ -------
Loss before income taxes.......................... (359) 94 (265)
Income tax benefit................................ (178) 36(4) (142)
------- ------ -------
Net loss.......................................... $ (181) $ 58 $ (123)
======= ====== =======
Loss per share.................................... $ $
======= =======
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.
40
<PAGE> 46

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

<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and marketable securities...................... $ 1,000 (5)
$(2,100)(6)
3,000(7)
(1,800)(8)

Accounts receivable, net:
General Motors and affiliates.................... 1,962 2,100(6) $ 4,062
(1,800)(7)
1,800(8)
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
Property, net......................................... 4,878 4,878
Deferred income taxes................................. 2,552 2,552
Other assets.......................................... 1,141 1,141
------- ------- -------
Total assets.......................................... $14,930 $ $
======= ======= =======
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 $(3,000)(7) 3,294
3,000(7)
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........................................ (5)
Additional paid in capital.......................... (5)
1,198(9)
General Motors' net investment...................... (2) 1,200(7) --
(1,198)(9)
Accumulated translation adjustments................. (37) (37)
------- ------- -------
Total equity (deficit)........................... (39)
------- ------- -------
Total liabilities and equity (deficit)................ $14,930 $ $
======= ======= =======
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.
41
<PAGE> 47

NOTES TO 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 financial statements. The unaudited pro
forma statements of income for the nine months ended September 30, 1998 and for
the year ended December 31, 1997 have been prepared as if our separation from GM
and the Offering occurred at the beginning of the earliest pro forma period
presented. The unaudited pro forma balance sheet as of September 30, 1998 has
been prepared as if our separation from GM and the Offering 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 financial statements and notes thereto included elsewhere in this
prospectus.

The pro forma condensed balance sheet is 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 taken place on September 30, 1998. The
pro forma condensed statements of income 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 taken place 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 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:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(IN MILLIONS)
<S> <C> <C>
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)
===== =====
</TABLE>

42
<PAGE> 48

(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:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Incremental insurance and risk
management......................... $ 34 $ 26
Incremental corporate costs.......... 48 36
Taxes other than income.............. 40 30
Other................................ 10 8
---- ----
Total.............................. $132 $100
==== ====
</TABLE>

Incremental corporate costs include additional personnel and systems
costs that will be required to operate as a stand-alone entity, and
reflect transactional 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Historical Financial Statements" 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 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 rate in future periods to generally 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 shares of common stock in the Offering
assuming an initial public offering price of $ per share (the mid-point
of the range set forth on the cover page of this prospectus). 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 (6) below.

(6) 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.

(7) Reflects the settlement of certain intracompany accounts receivable from GM
with the intracompany note payable due to GM. Immediately prior to the
transactions contemplated by the Separation Agreement, certain intracompany
accounts receivable from GM estimated at $1.8 billion will be settled with
the $3.0 billion outstanding intracompany note payable due to GM with the
difference resulting in an increase in GM's net investment in Delphi. It is
expected that during the first quarter of 1999, Delphi will finance its
operations through a combination of $3.0 billion in borrowings under a bank
credit facility, commercial paper and the issuance of long-term debt. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

43
<PAGE> 49

(8) Reflects the expected increase in accounts receivable from operations,
subsequent to the settlement of intracompany accounts receivable described
in note (7) and the related effect on cash and marketable securities.

(9) Reflects the adjustment to equity to reclassify GM's net investment to
additional paid in capital.

44
<PAGE> 50

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

OVERVIEW

HISTORY OF DELPHI

We are currently a wholly owned subsidiary of General Motors. Our company
was incorporated in Delaware in late 1998 in preparation for the Offering and
our separation from General Motors.

Before 1991, our business was conducted by many separate automotive parts
operations which GM had acquired over time. 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 Corporation ("Delco
Electronics") to us 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 Delco Electronics. From 1986 through 1997, Delco Electronics was
operated by GM's Hughes Electronics Corporation subsidiary.

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, including a Master Separation Agreement between GM and Delphi (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 the Supply Agreement, which is intended to provide Delphi with a
substantial base of business with GM-North America. In addition, pursuant to
such agreements, GM will provide certain transitional services to us. For more
information regarding the separation terms, including the supply agreement
between the companies, see "Arrangements Between Delphi and General Motors."

GM has announced that it intends to divest itself of its entire ownership
of Delphi during 1999. GM also has announced that it currently plans to complete
its divestiture of our company by distributing to the holders of its $1 2/3
common stock all of its shares of Delphi common stock by means of either a
split-off or spin-off, or some combination of both. See "Delphi and Its
Separation from General Motors--Separation from General Motors." Immediately
after completion of the Offering, GM will own about % of the outstanding
shares of our common stock (or about % if the U.S. underwriters exercise
their over-allotment option in full).

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 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

45
<PAGE> 51

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 "--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.

The following significant factors are reflected in the financial
information included herein:

CAPITAL ARRANGEMENTS

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
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 or paying GM for underfunding
relating to such employees. The amount of such underfunding varies
depending on factors such as discount rates, asset returns, contribution
levels and other factors. On December 31, 1996 the underfunding
attributable to Delphi was $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.

46
<PAGE> 52

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 our company based on
usage or allocation methodologies primarily based on total net sales,
certain tangible assets and payroll expenses. Although we believe the
allocations and charges for such services to be reasonable, the costs of
these services charged to our company are not indicative of the costs
that would have been incurred if we had been a stand-alone entity. An
estimate of the incremental corporate costs associated with operating our
company as a stand-alone entity is included in the pro forma results of
operations. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements" for additional information.

INCOME TAXES

- 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 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 rate in future periods to
generally be higher than our historical effective income tax rates.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and net sales and expenses during the periods reported. 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. In
addition, there are certain risks and uncertainties inherent in operating the
business, including matters discussed below under "--Overview--Variability in
Delphi's Business" and "--Environmental Matters." Other areas where estimates
and judgments are required are discussed in the notes to the consolidated
financial statements included elsewhere in this prospectus.

NET SALES

Our 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 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. Overall, 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 and several tables that break down our net sales by
customer, by product sector, and by principal geographic region. For additional
information on our net sales and such breakdowns, also see "--Results of
Operations."

Net Sales by Customer. Historically, GM has accounted for the vast majority
of our sales. Although GM is by far our largest customer, we do business with
all of the other major VMs worldwide and growth in sales to customers other than
GM-North America is an important measure of our efforts to grow a diversified
customer base. Due to the long lead time between the awarding of business and
the realization of related sales, our historical results do not reflect the
level of success we have achieved to date in winning business from these non-GM
customers. We also supply our products to the worldwide aftermarket as
replacement parts and to

47
<PAGE> 53

non-VM customers. While a key element of our business strategy has been, and
will continue to be, growing our sales to customers other than GM, GM will
continue to be our largest customer for a significant period of time.

For several years, GM has been pursuing a global sourcing strategy designed
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, we believe
that GM has provided suppliers worldwide with the opportunity to bid for
GM-North America business historically sourced with our company. As a result,
our share of GM-North America's automotive parts requirements has declined and
we have reduced our prices on products supplied to GM-North America. The
following table shows our consolidated net sales by customer, as a percentage of
our consolidated net sales:

CONSOLIDATED NET SALES % BY CUSTOMER

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- -------------------
CUSTOMER 1995 1996 1997 1997 1998(1)
-------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
GM-North America.............. 75.0% 72.6% 72.7% 72.5% 68.0%
GM-International.............. 4.5 4.8 4.3 4.5 4.3
GM-SPO........................ 4.7 5.6 5.4 5.6 6.0
----- ----- ----- ----- -----
Total GM................. 84.2 83.0 82.4 82.6 78.3
Other Customers............... 15.8 17.0 17.6 17.4 21.7
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

- ------------------
(1) The percentages for the nine months ended September 30, 1998 were affected
by work stoppages in North America in June and July 1998.

As an alternative method of calculating sales to customers other than
GM-North America as a percentage of total net sales, we include all sales from
entities in which we own a minority interest. Our goal has been and continues to
be to increase our net sales to customers other than GM-North America to at
least 50% of our total net sales (including, for this purpose, all sales by
entities in which we own a minority interest) by the end of 2002. This
calculation method is consistent with the way in which we have historically
tracked our net sales by customer for internal business planning,
decision-making and analysis purposes. We have historically tracked our net
sales by customer this way because, among other things, these sales 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 50%.

48
<PAGE> 54

The following table provides additional detail on our net sales by
customer, as a percentage of our total net sales, including all sales by
entities in which we own a minority interest:

NON-CONSOLIDATED NET SALES % BY CUSTOMER

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- -------------------
CUSTOMER 1995 1996 1997 1997 1998(1)
-------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
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%
===== ===== ===== ===== =====
</TABLE>

- -------------------------
(1) The percentages for the nine months ended September 30, 1998 were affected
by work stoppages in North America in June and July 1998.

In connection with our separation from GM, the companies have entered into
a supply agreement pursuant to which we will continue to supply products to GM.
The Supply Agreement is intended to provide us with a substantial base of future
business with GM. Under the terms of the Supply Agreement, contracts with GM as
of January 1, 1999 will generally remain in effect (other than as to the timing
of payments as described below under "--Liquidity and Capital Resources"),
including pricing provisions, durations and purchase order terms and conditions.
The Supply Agreement also requires GM to provide Delphi the opportunity to
supply on competitive terms the first replacement cycle of all product programs
in the United States and Canada which were provided by Delphi to GM as of
January 1, 1999, to the extent that GM sources such replacement cycle business
prior to January 1, 2002. Except for the arrangements with respect to the first
replacement cycle for certain product programs, as described above, if we elect
to bid on GM's business, we will do so on the same basis as all other suppliers.

Net Sales by Product Sector. Our product offerings are organized into three
product sectors: Electronics & Mobile Communication; Safety, Thermal &
Electrical Architecture; and Dynamics & Propulsion. The Electronics & Mobile
Communication product sector supplies various electronics 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, this product sector 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.

49
<PAGE> 55

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

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
PRODUCT SECTOR 1995 1996 1997 1997 1998
-------------- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= =======
</TABLE>

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 of our net sales for the periods presented:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- ----------------
PRODUCT SECTOR 1995 1996 1997 1997 1998
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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%
===== ===== ===== ===== =====
</TABLE>

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

CONSOLIDATED NET SALES BY GEOGRAPHIC REGION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
GEOGRAPHIC REGION $ % $ % $ %
----------------- - - - - - -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
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%
======= ===== ======= ===== ======= =====
</TABLE>

50
<PAGE> 56

OPERATING COSTS

Our operating costs include structural costs and material costs. Structural
costs generally consist of our fixed costs, including commercial (selling,
general and administrative costs), engineering and manufacturing (including
labor) 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 "--Overview--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, as follows:

- Delphi Manufacturing System. We have achieved substantial manufacturing
efficiencies over the last several years by implementing a number of
manufacturing performance initiatives and a manufacturing system known as
the Delphi Manufacturing System.

- Structural Cost Reductions. We continually seek to achieve savings by
reducing our structural costs, principally through infrastructure
improvements and elimination of redundancies.

- Global Sourcing. We use global sourcing in order to obtain the best
prices for our direct and indirect materials, machinery and equipment and
services, as well as products we purchase from other suppliers.

- Labor Relations. We share relevant information with our international and
local union leadership worldwide and work with the unions representing
our employees to jointly develop local work rules and practices.

- Product Portfolio Management. We have implemented a portfolio management
process designed to streamline and focus our product portfolio, thereby
emphasizing comprehensive, systems-based solutions for customers.

- Fix/Sell/Close Process. We have adopted a "fix/sell/close" process that
addresses the competitiveness of our operations on a plant-by-plant basis
to improve our cost competitiveness.

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--Our Ability to Improve Our
Operating Performance."

VARIABILITY IN DELPHI'S BUSINESS

There are a number of factors that contribute to variability in our
business. The variability can produce significant fluctuations in sales and
earnings from quarter to quarter, and in some cases from year to year. The
primary factors that affect variability are summarized below. See "Risk
Factors--Risk Factors Relating to Our Business--Cyclicality and Seasonality
Across Regions in the Automotive Industry."

Cyclicality Across Regions in the Automotive Industry. Our operations are
directly related to automotive sales and production by our VM customers.
Automotive sales and production are highly cyclical and depend

51
<PAGE> 57

on general economic conditions and other factors, including consumer spending
and preferences. Any significant changes in automotive sales and production can
have a significant impact on our results of operations.

We have significant operations in every major region of the world. The
recent unfavorable economic trends in Asia and South America have led to
reductions in demand for automobiles and component parts in those areas. To the
extent that those conditions continue or worsen, or spread to other regions, our
results of operations could be unfavorably impacted.

Seasonality. Our business is moderately seasonal as our primary North
American customers historically shut down 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. See "--Results of
Operations--Quarterly Data."

SPECIAL ITEMS AND WORK STOPPAGES

The global automotive components and systems market 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 Delphi's consolidated financial statements
presented elsewhere in this prospectus.

Our operating results for the periods presented were also impacted by a
number of other special items, including divestitures and plant closings, as
well as work stoppages at certain GM and Delphi facilities.

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 a loss of $430 million
($271 million after-tax) related to divestitures involving our seating,
coil spring and lighting 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 during 1998 reduced operating income by
about $435 million ($270 million after-tax) and $468 million ($290
million after-tax) during the third and second quarters of 1998,
respectively, after considering partial recovery of lost production.

1997

- During the first quarter of 1997, we recorded an $80 million plant
closing charge ($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 during the second quarter of 1997 had an unfavorable
impact of $185 million ($115 million after-tax). The full year impact of
work stoppages was $148 million ($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 ($36 million and $24 million after-tax, respectively) during the
second and fourth quarters of 1997, respectively. These

52
<PAGE> 58

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
($870 million after-tax) relating to the Competitiveness Study. Overall,
the charge had the effect of increasing 1997 cost of sales and
depreciation and amortization by $262 million and $1.1 billion,
respectively.

1996

- During the 1996 fourth quarter, we sold four facilities located in Flint
and Livonia, Michigan and Oshawa and Windsor, Ontario, which resulted in
a loss of $247 million ($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.

- 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 ($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 1996 fourth quarter
totaled $252 million ($156 million after-tax).

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

- Other special charges totaled $50 million ($31 million after-tax), of
which $18 million ($11 million after-tax) were 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.

See "--Results of Operations--Results of Operations Excluding the Impact of
Special Items and Work Stoppages" for additional analysis.

On-Going 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 is anticipated to be completed prior to December 31, 1998, and
other actions which may be taken are expected to result in a 1998 fourth quarter
charge of about $325 million to $400 million ($200 million to $250 million
after-tax). We will continue to monitor the competitiveness of all aspects of
our business. Accordingly, 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.

53
<PAGE> 59

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:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- -------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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 (benefit)..................... 2.0 0.8 0.1 1.5 (0.8)
----- ----- ----- ----- -----
NET INCOME (LOSS).......................... 4.2% 2.8% 0.7% 3.1% (0.9)%
===== ===== ===== ===== =====
</TABLE>

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.

54
<PAGE> 60

Results of Operations Excluding the Impact of Special Items and Work Stoppages

Our operating results for the periods presented were impacted by a number
of special items associated with competitiveness initiatives, work stoppages and
other factors. See "--Overview--Special Items and Work Stoppages." The following
table adjusts reported operating income (loss) and net income (loss) to exclude
the impact of special items and work stoppages.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING INCOME (LOSS):
As reported..................................... $2,138 $1,273 $ 352 $1,229 $ (284)
Competitiveness Study(1)........................ -- -- 1,362 -- --
Trenton plant closing(1)........................ -- -- 80 80 --
Sale of facilities/businesses(1)................ -- 247 -- -- 430
Work stoppages(1)(2)............................ -- 453 148 148 903
Retiree lump sum payments(2).................... -- 86 -- -- --
------ ------ ------ ------ ------
OPERATING INCOME, EXCLUDING THE IMPACT OF SPECIAL
ITEMS AND WORK STOPPAGES........................ $2,138 $2,059 $1,942 $1,457 $1,049
====== ====== ====== ====== ======
NET INCOME (LOSS):
As reported..................................... $1,307 $ 853 $ 215 $ 736 $ (181)
Competitiveness Study(1)........................ -- -- 870 -- --
Trenton plant closing(1)........................ -- -- 50 50 --
Sale of facilities/businesses(1)................ -- 153 -- -- 271
Work stoppages(1)(2)............................ -- 281 92 92 560
Retiree lump sum payments(2).................... -- 53 -- -- --
Other special items(3).......................... 31 (60) (36) --
------ ------ ------ ------ ------
INCOME, EXCLUDING THE IMPACT OF SPECIAL ITEMS AND
WORK STOPPAGES.................................. $1,307 $1,371 $1,167 $ 842 $ 650
====== ====== ====== ====== ======
</TABLE>

- ------------------
(1) See "--Overview--Special Items and Work Stoppages" for additional details.

(2) Work stoppages primarily impacted "net sales" and "cost of sales," while
retiree lump sum payments are reflected in "cost of sales" for 1996.

(3) Other special items were not material on an individual basis and are
included in "Other income, net" in the consolidated statements of income.

55
<PAGE> 61

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:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, CHANGE
-------------------- ------------------
PRODUCT SECTOR 1997 1998 $ %
-------------- ---- ---- - -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
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)%
======= ======= ======= =====
</TABLE>

The decrease in consolidated net sales for each product sector primarily
relates to (1) 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) and (2) lower international production due to
the unfavorable impact of economic conditions in Asia and South 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. The decrease in consolidated net sales for each operating
sector during the first nine months of 1998 reflects the impact of price
reductions from 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. Overall, price reductions had the largest impact on our
Electronics & Mobile Communication product sector (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 "--Results of Operations Excluding the Impact of Special
Items and Work Stoppages" for additional information.

56
<PAGE> 62

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

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------
PRODUCT SECTOR 1997 1998
-------------- ---- ----
(IN MILLIONS)
<S> <C> <C>
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
====== ======
</TABLE>

In response to industry pricing pressures, 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. Cost savings
were further offset by the impact of lower international volumes due to economic
conditions in Asia and South America.

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 1997. The increase is primarily
due to gains on sales of assets during the nine months of 1998.

Taxes. The effective income (benefit) tax rate for the first nine months of
1998 was (49.6%) compared with 32.4% for the first nine months of 1997. The
effective rate for both 1998 and 1997 reflect benefits related to research and
experimentation credits. During 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 in 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.

57
<PAGE> 63

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:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, CHANGE
------------------ -------------
PRODUCT SECTOR 1996 1997 $ %
-------------- ---- ---- - -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
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%
======= ======= ===== ====
</TABLE>

The increase in consolidated net sales during 1997 was realized despite the
impact of the 1996 sale of four plants by the 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. Price reductions for our Electronics & Mobile
Communication product sector (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. The
remaining increase in net sales for each product sector primarily reflects the
impact of greater penetration of 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 impact of special items and 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
"--Results of Operations Excluding the Impact of Special Items and Work
Stoppages" for additional information.

58
<PAGE> 64

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
PRODUCT SECTOR 1996 1997
-------------- ---- ----
(IN MILLIONS)
<S> <C> <C>
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
====== ======
</TABLE>

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
totalled 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 ($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 resulted from the
favorable effect of the impact of research and experimentation credits. 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 $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.

59
<PAGE> 65

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:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, CHANGE
----------------- -------------
PRODUCT SECTOR 1995 1996 $ %
-------------- ---- ---- - -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
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)%
======= ======= ===== =====
</TABLE>

The overall 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 vehicle manufacturers
to reduce their vehicle costs through price reductions from suppliers. Such
price pressures were more 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. 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 improved aftermarket sales and greater
penetration of non-GM customers during 1996.

Cost of Sales. Cost of sales, as a percentage of net sales, was 88.5% in
1996 compared to 86.5% in 1995. The increase reflects the impact of special
items and work stoppages during 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
in 1996, operating income totaled $2.1 billion. The following information on
operating income and changes in operating income and its components excludes the
impact of special items and work stoppages. See "--Results of Operations
Excluding the Impact of Special Items and Work Stoppages" for additional
information.

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
PRODUCT SECTOR 1995 1996
-------------- ---- ----
(IN MILLIONS)
<S> <C> <C>
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
====== ======
</TABLE>

60
<PAGE> 66

Our cost reduction strategies allowed us to achieve total material and
manufacturing cost savings of about $545 million during 1996. 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 totalled
$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. In addition, 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 and excluding the impact
of special items and work stoppages, operating income by product sector would be
as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
PRODUCT SECTOR DECEMBER 31, 1997 SEPTEMBER 30, 1998
-------------- ----------------- ------------------
(IN MILLIONS)
<S> <C> <C>
Electronics & Mobile Communication......... $ 607 $ 344
Safety, Thermal & Electrical
Architecture............................. 1,151 670
Dynamics & Propulsion...................... 583 358
Other...................................... (49) (229)
------ ------
Pro forma operating income excluding the
impact of special items and work
stoppages............................. $2,292 $1,143
====== ======
</TABLE>

Overall, the terms of the Separation Agreement would have a favorable
impact on operating income of $350 million and $94 million for the year ended
December 31, 1997 and the nine months ended September 30, 1998, 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 publicly traded 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.

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<PAGE> 67

QUARTERLY DATA

Our 1996, 1997 and 1998 quarterly results were impacted by a number of
special items associated with competitiveness initiatives (including
divestitures and plant closings), work stoppages and other factors. The
following table sets forth certain unaudited quarterly historical 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 "--Overview-- Special Items and Work Stoppages" and Note 18 to the
consolidated financial statements.

<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING INCOME (LOSS):
As reported..................... $(132) $497 $587 $145 $ (877) $337 $112 $(733)
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 $337 $580 $ 132
===== ==== ==== ==== ====== ==== ==== =====
NET INCOME (LOSS):
As reported..................... $ (93) $287 $373 $ 76 $ (521) $239 $ 84 $(504)
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 $239 $374 $ 37
===== ==== ==== ==== ====== ==== ==== =====
</TABLE>

The above 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. To facilitate analysis,

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<PAGE> 68

the following table adjusts 1997 and 1998 quarterly operating income (loss) and
net income (loss) (excluding the impact of special items and work stoppages) to
reflect the estimated impact of the terms of our separation from GM. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1997 1997 1997 1997 1998 1998 1998
--------- -------- --------- -------- --------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING INCOME, EXCLUDING THE IMPACT OF
SPECIAL ITEMS AND WORK STOPPAGES.......... $577 $772 $108 $485 $337 $580 $132
Estimated impact of terms of separation:
Pension and other postretirement
benefits.............................. 120 121 120 121 65 65 64
Other................................... (33) (33) (33) (33) (33) (34) (33)
---- ---- ---- ---- ---- ---- ----
PRO FORMA OPERATING INCOME, EXCLUDING THE
IMPACT OF SPECIAL ITEMS AND WORK
STOPPAGES............................... $664 $860 $195 $573 $369 $611 $163
==== ==== ==== ==== ==== ==== ====
INCOME, EXCLUDING THE IMPACT OF SPECIAL
ITEMS AND WORK STOPPAGES................ $337 $452 $ 53 $325 $239 $374 $ 37
Estimated impact of terms of separation:
Pension and other postretirement
benefits.............................. 75 75 75 75 40 40 40
Other................................... (21) (21) (21) (20) (21) (21) (20)
---- ---- ---- ---- ---- ---- ----
PRO FORMA INCOME, EXCLUDING THE IMPACT OF
SPECIAL ITEMS AND WORK STOPPAGES........ $391 $506 $107 $380 $258 $393 $ 57
==== ==== ==== ==== ==== ==== ====
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Pursuant to the Cash and Debt Management Agreement and the intracompany
note payable, we had 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 billion intracompany note payable to GM and
outstanding debt at our international subsidiaries. The $3 billion intracompany
note payable to GM reflects the portion of GM's outstanding debt that is
specifically related to our operations.

Our net liquidity (cash and marketable securities less the total of
short-term and long-term debt) was $(2.5) billion at September 30, 1998 and
December 31, 1997 and 1996. The ratio of total debt to total capital (debt plus
equity) was 101% at September 30, 1998 compared to 113% at December 31, 1997 and
79% at December 31, 1996. 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
% 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 %.

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

The following 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 such intracompany accounts receivable and the
intracompany note payable occurred before assets and liabilities were
transferred to Delphi Automotive

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<PAGE> 69

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

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
-----------------------------------------
CASH AND
MARKETABLE SHORT- AND NET
SECURITIES LONG-TERM DEBT LIQUIDITY
---------- -------------- ---------
(IN BILLIONS)
<S> <C> <C> <C>
Net liquidity--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....... -- (3.0) 3.0
Increase in accounts receivable, subsequent to
settlement of intracompany accounts receivable.... (1.8) -- (1.8)
Proceeds from third party financing................. 3.0 3.0 --
Proceeds from the Offering.......................... --
----- ----- -----
$ $ 3.5 $
===== ===== =====
</TABLE>

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, effective January 1, 1999, payment
terms for intracompany accounts receivable from GM will be modified such that
payments will be 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, it generally pays suppliers on the 25th 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 the short-term cash-flow gap through
short-term borrowings, as discussed below.

DEBT CAPITALIZATION AND AVAILABLE FINANCING SOURCES

Immediately prior to the transactions contemplated by the Separation
Agreement, approximately $1.8 billion of certain intracompany accounts
receivable from GM will be offset with the $3.0 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 $3.0 billion from a $5.0 billion third party revolving credit facility
combined with the issuance of commercial paper and long-term debt. We expect the
draw downs to be refinanced with any combination of the following: the
implementation of a commercial paper program, operating cash flows and issuance
of long-term debt during the first half of 1999. Subsequently, it is expected
that the $5.0 billion revolving credit facility would be reduced to an available
$3.0 billion revolving credit facility, 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

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<PAGE> 70

purposes. Accordingly, we have agreed to certain covenants regarding the
incurrence of debt. Specifically, these covenants limit our maximum indebtedness
based upon the level of GM's ownership interest in our company and other factors
that would prevent our company from exceeding a specific threshold of debt. 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 will be the case. In addition, we expect cash
flow from operations and funding obtained through the Offering and the
establishment of available syndicated lines of credit to be sufficient to
satisfy future working capital, capital expenditure, research and development,
pension funding requirements and debt service requirements. See "--Cash
Flows--Investing Activities" and "--Overview--Employee Benefit Arrangements."

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 1997 period. 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 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 the 1997 calendar
year 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 month periods 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

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<PAGE> 71

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:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
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
------ ------ ------ ---- ----
$1,155 $1,177 $1,383 $923 $872
====== ====== ====== ==== ====
</TABLE>

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 1997 period. The lower
level of spending for the 1998 nine month period, compared to the same 1997
period, resulted primarily from differences in the timing of project spending
for new product programs. As discussed in further detail below, 1998 capital
expenditures are expected to total $1.4 billion. Total capital expenditures for
the year ended December 31, 1997 were $1.4 billion compared to $1.2 billion in
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 the 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 the Safety, Thermal & Electrical
Architecture product sector during 1997 and 1996 primarily reflected spending to
support expansion into new market areas outside of the United States.

The higher level of capital spending for the 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.

We expect capital expenditures to total $1.4 billion in 1998. About 42% of
1998 capital expenditures are targeted outside the United States. The
Electronics & Mobile Communication, Safety, Thermal & Electrical Architecture
and the Dynamics & Propulsion product sectors are expected to account for 15.1%,
32.7% and 51.5% of 1998 capital expenditures, respectively.

We expect capital expenditures to total $1.5 billion in 1999. About 43% of
1999 capital expenditures are targeted outside the United States. The
Electronics & Mobile Communication, Safety, Thermal & Electrical

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<PAGE> 72

Architecture and the Dynamics & Propulsion product sectors are expected to
account for 18.3%, 33.4% and 47.5% of 1999 capital expenditures, respectively.

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 agreed to
assume certain obligations relating to pensions and other postretirement
employee benefits for our employees as well as certain employees associated with
prior divestitures. In connection with the separation, we will receive from GM
certain assets and liabilities related to GM salaried pension plans. In
connection with the Distribution, we will receive from GM certain assets and
liabilities related to GM hourly pension plans. Under current economic
conditions and federal government regulations, our pension obligations (based on
their assets, the expected investment return on those assets and the plans'
expected liabilities) 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 us to make contributions over time to 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.

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
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<PAGE> 73

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 vehicle
manufacturers. 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 GM
vehicle models (1988 and 1989 only) 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 vehicle manufacturer 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 cost 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.

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 approximately 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
is still underway but is expected to be substantially complete 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. We are
generally targeting the end of 1998 for remediation of our critical
systems and will continue to address remediation of these and other
systems on a prioritized basis thereafter (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 on-going plan to incrementally
implement new enterprise software, 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. This phase 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. This phase
follows essentially the same schedule as remediation and system testing.

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<PAGE> 74

- 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 and this
phase is expected to become the major focus of the Year 2000 program
commencing in the fourth quarter of 1998 and continuing 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 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. 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 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 ("AIAG"), has distributed Year
2000 compliance questionnaires as well as numerous Year 2000 awareness and
assistance mailings to many of the 40,000 supplier sites that supply Delphi
throughout the world. The program also 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 are expected to be
substantially complete for critical supplier sites by the end of 1998. 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 or our respective supplier assessment and assistance efforts after
the Distribution.

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. Delphi currently expects its total Year 2000 spending to be
about $125 million, with peak spending occurring in late 1998 and early 1999.
This total spending also includes an additional payment of about $13 million
(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
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<PAGE> 75

GM that are included in normal fixed price services and other on-going payments
to EDS that are attributable to work being performed in connection with Delphi's
Year 2000 program is about $77 million (part of the estimated $300 million
attributable to GM overall). This does not represent incremental spending to
Delphi. Our Year 2000 program costs do not include information technology
projects that have been accelerated due to Year 2000, which are estimated to be
about $9 million. None of our information technology projects has been delayed
due to Year 2000.

In view of the foregoing, Delphi does 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 Delphi's 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 Delphi's ability to carry on our normal operations in
the area or areas so affected. In the event that Delphi is unable to complete
our remedial actions as described above and is unable to implement adequate
contingency plans in the event that problems are encountered, there could be a
material adverse effect on Delphi's business, results of operations or financial
condition.

EUROPEAN MONETARY UNION

Within Europe, the European Economic and Monetary Union (the "EMU") will
introduce 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 are scheduled to adopt the
euro as their local currency, initially available for currency trading on
currency exchanges and non-cash (banking) transactions. 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 currency 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 do not currently expect the introduction of the euro to cause any
significant operational disruptions. In addition, we do not expect to incur any
significant costs, 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 (see Note 5 to Delphi's consolidated financial statements).
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

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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.

- 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
participate 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 Delphi consolidated financial statements and further
disclosure is provided in Note 17 to the Delphi consolidated 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, models appropriate to the instrument 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. 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.

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INTEREST RATE RISK

Due to limited borrowings from third party credit sources, Delphi's
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.

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, 1997, 1996
and 1995 and are not expected to be material in 1998 or 1999. 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.

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 amount of our current reserve.

Pursuant to the separation arrangements between our company and GM, GM will
retain responsibility for environmental cleanup and claims for all
non-performing assets. Non-performing assets include: (1) offsite waste disposal
sites that are identified prior to January 1, 1999 as requiring investigation or
cleanup; (2) facilities closed and vacated prior to December 31, 1998; and (3)
businesses sold prior to December 31, 1998. GM will also retain responsibility
for pre-closing environmental conditions and non-compliance matters at locations
which Delphi will lease from GM. After January 1, 1999, Delphi and GM will each
be responsible for environmental cleanup and claims at their respective
properties and have each agreed to hold the other party harmless with respect
thereto. Liability resulting from offsite waste disposal sites that are
discovered after January 1, 1999 to require investigation or cleanup will be
allocated between Delphi and GM based upon the respective contribution of wastes
from Delphi's facilities and from the facilities for which GM retains
responsibility. For more information regarding environmental matters, see
"Business of Delphi--Environmental Matters." For more information regarding the
separation arrangements for environmental matters, see "Arrangements Between
Delphi and General Motors--Real Estate and Environmental."

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.

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firm commitment (fair value hedge), (2) a hedge of the exposure to variable cash
flows of a forecasted transaction (cash flow hedge) or (3) 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 (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 for the
American Institute of Certified Public Accountants ("ASEC") 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, we generally expense the costs of developing or
obtaining internal use software as incurred. We will adopt 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 are required to
adopt the pronouncement 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 factors, 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 factors.

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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 most recently available 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 our
extensive operating history 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
supply our products to every major VM in the world. Since 1993, our sales to
customers other than GM have grown from 13.3% of our total sales (including, for
this purpose, all sales of entities in which we own a minority interest) to
18.3% in 1997.

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 30% of our wholly owned and leased
manufacturing sites (based on square footage) and about 59% of our employees
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 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 on a global basis 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 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. We intend to focus on
increasing our sales to customers other than GM while maintaining our strong
customer-supplier relationship. General Motors is by far our largest customer.
We believe that the principal source of our earnings growth will be increased
sales to customers other than GM-North America and that our ability to achieve
these sales over the longer term 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

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

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- to improve our operating performance

- to complete strategic acquisitions, joint ventures and alliances

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 (we sometimes refer to these North American automotive
operations of GM as "GM-North America"), and to GM's automotive operations
throughout the rest of the world (we sometimes refer to these other automotive
operations of GM as "GM-International"). We also supply replacement parts to the
worldwide aftermarket. We currently sell most of our aftermarket products to
GM's Service Parts Organization ("GM-SPO") for distribution principally to the
North American aftermarket.

The following table shows how our total net sales were derived for each of
the last three years and for the nine months ended September 30, 1997 and 1998:

<TABLE>
<CAPTION>
TOTAL SALES*
----------------------------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
CUSTOMER 1995 1996 1997 1997 1998**
-------- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
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%
===== ===== ===== ===== =====
</TABLE>

- ------------------
* We have included in this table 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. For information about our
consolidated sales, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview--Net Sales--Net Sales by
Customer."
** The percentages for the nine months ended September 30, 1998 were affected by
work stoppages in North America in June and July 1998.

We have a substantial base of "awarded business" from GM and our other VM
customers. Due to the long product development cycles in the automotive industry
and the sourcing process generally used by VMs with their Tier 1 suppliers, VMs
often award business to suppliers for vehicle programs several years before
products are actually purchased. After vehicle production begins, purchases from
suppliers may continue for a number of years. Early in the development cycle,
business may be awarded initially through representations, nomination letters or
letters of intent. Later in the cycle, awarded business may be covered by
contracts or purchase orders. In each case, the customer generally commits to
purchase certain of its requirements from us with respect to automotive parts
for a particular vehicle model, rather than committing to purchase a specific
quantity of our products. Accordingly, our awarded business is generally subject
to a number of risks and uncertainties, such as the VM's actual volume and
timing of vehicle production and the mix of options on the vehicles that are
produced.

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As part of our business planning process, we track as "awarded business"
the future sales that we have a strong expectation of realizing based on VM
awards to us and our own assumptions regarding vehicle production and option
mix. On that basis, we believe that we currently have a solid foundation of
awarded business upon which to grow our business. Our awarded business with GM
was awarded to us under contractual arrangements which are governed by our
Supply Agreement with GM. For more information about our Supply Agreement with
GM, see "Arrangements Between Delphi and General Motors--Supply Agreement."

We believe that our current level of awarded business will provide a solid
foundation for operating and growing our business over time. We cannot assure
you, however, that we will in fact realize this awarded business in full since
it remains in all cases subject to a number of important risks, 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. However, 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. For more
information, see "--Industry--Awarded Business," "Risk Factors--Risk Factors
Relating to Our Business--Our Ability to Realize Sales from 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--Risk of Not Completing the
Distribution" and "--Failure to Realize the Benefits We Expect from Our
Separation from General Motors" 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, such as 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 Our Business--Our Ability to Improve 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.

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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 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 (the smaller of which are sometimes referred to as
"Tier 3" suppliers) sell their products principally to Tier 1 suppliers,
who then combine these parts into their own product offerings.

CONTRACTS FOR VM BUSINESS. 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 recognized. These arrangements pursuant to which business is awarded range
from representations, nomination letters or letters of intent to more formal
contracts, purchase orders or other firm commitments.

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. Contract durations for automotive parts generally range
from one year to the entire life of the vehicle model (currently about three to
seven years for cars and six to ten years for trucks). In light of the long
product development cycles in the automotive industry and the sourcing processes
generally used by VMs with their Tier 1 suppliers, it is important for suppliers
to have a strong base of "awarded business" several years in advance of when
they expect to begin to recognize revenues from such business. Early in the
development cycle, business may be awarded initially through representations,
nomination letters or letters of intent; later in the cycle, awarded business
may be covered by contracts or purchase orders. We use the term
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"awarded business" with respect to a customer to refer to the estimated future
sales which a supplier has a strong expectation of realizing based on VM awards
or other commitments to the supplier and various estimates and assumptions
regarding applicable vehicle production. 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 and the mix of options on the vehicles produced.

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, such as general economic conditions, consumer
preferences and labor disputes)

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

- 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

- price reductions on existing contracts negotiated in connection with the
VM's sourcing of new business with the supplier

For more information, see "Risk Factors--Risk Factors Relating to Our
Business--Our Ability to Realize Sales from Awarded Business."

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

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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 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 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 through 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 for
smaller, less expensive vehicles that satisfy basic transportation needs
has increased. 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.

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STRATEGY

Our core business objective is to increase our earnings by expanding our
sales on a global basis while improving our operating performance. We intend to
focus on increasing our sales to customers other than GM while maintaining our
position as a principal supplier to GM. We believe that the principal source of
our earnings growth will be increased sales to customers other than GM-North
America. Although we expect that our business with 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. 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.

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- 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 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 ("Hughes
Electronics") subsidiary. Hughes Electronics is a leader in satellite
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 the principal source of our 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--Our Ability to Capture Business
with Customers Other Than GM-North America."

We have made progress towards achieving this goal. Our customers now
include every major VM 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 part 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. If we did not include these sales,
the percentages for GM-North America would be higher. For information about our
consolidated sales, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview--Net Sales--Net Sales by
Customer."

We believe that, as an independent company no longer owned by General
Motors, we will have significant opportunities to sell our products to VMs
worldwide. We believe that our status as a part of GM has
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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 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 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:

<TABLE>
<CAPTION>
CUSTOMER AWARD YEAR
-------- ----- ----
<S> <C> <C>
General Motors GM Worldwide Supplier of the Year Award 1998
DaimlerChrysler AG Gold Pentastar Award 1998
Volkswagen AG VW Formal Q Award 1998
Toyota Motor Corp./NUMMI NUMMI Triple Crown "Gold" Award 1998
</TABLE>

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 171 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 around the world. We are continually 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

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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.

From 1992 to 1997, the percentage of our wholly owned and leased
manufacturing sites (based on square footage) located outside the United States
and Canada has increased from about 20% to about 30%, 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 30% of our total 1997 sales were
derived from products manufactured at sites located outside the United States
and Canada.

Our global presence (excluding our joint ventures and other investments) as
of September 30, 1998 is shown below:

GLOBAL PRESENCE

<TABLE>
<CAPTION>
CUSTOMER
MANUFACTURING TECHNICAL CENTERS AND TOTAL JOINT
SITES CENTERS SALES OFFICES EMPLOYMENT VENTURES
------------- --------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
United States/Canada....... 48 14 11 82,794 5
Europe/Middle
East/Africa.............. 66 7 20 37,243 7
Mexico/South America....... 42 4 6 75,922 9
Asia/Pacific............... 15 2 14 4,504 19
--- -- -- ------- --
Total.................... 171 27 51 200,463 40
</TABLE>

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.

MANUFACTURING PERFORMANCE IMPROVEMENTS

<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales Per Employee (U.S.)............... $176,000 $199,000 $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
</TABLE>

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

In 1997, we developed and began the process of implementing the Delphi
Manufacturing System ("DMS") 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 DMS, 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

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placed centrally within each cellular configuration to increase
operational availability. This cell design provides flexibility by varying
the number of operations each operator performs. DMS has allowed us to
improve our product quality and be more responsive to the changing needs
of our customers. By implementing DMS, we can improve our manufacturing
productivity, increase our daily inventory turns and reduce our production
lead times.

Through implementing DMS 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 DMS 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 DMS 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 commercial (selling, general and
administrative), engineering and manufacturing (including labor) costs.
Structural costs as a percentage of net sales declined from about 43% in
1993 to 39% 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. In connection with the recent integration of
Delco Electronics into our operations, we are realizing and 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 DMS 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. Since 1993, we have reduced our
materials costs by about 3% per year (based on a year-to-year actual
price comparison).

- 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 our complete separation from General Motors will enable us, over
time, to increase our competitiveness by 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 we
will be able to do so. As described elsewhere in this prospectus, 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. GM has informed us that it
has held 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. The United Steel Workers of
America (the "USW") has also indicated to GM an interest in holding
discussions regarding the effects of the separation on its members.
Similar discussions are expected to occur with the other unions
representing our employees, but we cannot assure you as to when they will
occur. We intend to cooperate with GM in working together with the
International Union, United

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Automobile, Aerospace and Agricultural Implement Workers of America (the
"UAW"), IUE, 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--Failure to Realize the Benefits We Expect from Our
Separation from General Motors."

- 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), as a result of this process, we
streamlined our portfolio 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 Delco Electronics (about 30
product lines) 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.

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 as currency 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

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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 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 from each of our three
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/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."

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, 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. In 1998, we employed more than 15,000 engineers,
scientists and technicians around the world. We continually evaluate and enhance
our engineering and

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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 1996 and 1995,
respectively. 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 and Mobile Communication
product sector. We have started to employ some of these capabilities on 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. Our emerging technologies include
individual adaptive comfort control to achieve enhanced driver and
passenger comfort. Our thermal management 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 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

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<PAGE> 93

without conventional mechanical hardware connections. Instead, each
system is connected by wires that communicate information from various
sensors positioned throughout the vehicle to an electronic control
module, which then provides input to a system's motorized actuator that
performs the mechanical function of the system.

- 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 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 supplier. GM is the world's largest VM, having a market share of about
16% of all vehicles produced throughout the world in 1997 according to Standard
& Poor's 1998 DRI World Car Industry 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

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accounted for about 81.7% of our total sales (including, for this purpose, all
sales of entities in which we own a minority interest), as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF DELPHI'S
CUSTOMER 1997 SALES
-------- ----------------------
<S> <C>
GM-North America................................... 65.4%
GM-International................................... 11.2
GM-SPO............................................. 5.1
----
Total GM...................................... 81.7%
====
</TABLE>

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's international operations. We also did not have the global
presence to compete effectively for GM-International business. As noted above,
we 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 (even if we have not yet begun to supply products under such
contracts), including the pricing, duration and purchase order terms and
conditions. However, the timing of payments from GM to us under these 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" and "Arrangements
Between Delphi and General Motors--Supply Agreement--Payment Terms."

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<PAGE> 95

(generally from 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" and "Risk Factors--Risk Factors Relating to Our
Business--Our Ability to Realize Sales from 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. After GM, the next five largest VMs (based on their 1997
worldwide market shares) 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 vehicles produced throughout the world in 1997
according to Standard & Poor's 1998 DRI World Car Industry 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.

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. 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

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<PAGE> 96

developed for the VM market to aftermarket customers can reduce the impact of
adverse changes in demand for new vehicles. With respect to the United States
aftermarket, we intend to continue to sell products through GM-SPO until the
expiration of the transitional arrangements described above. Outside the United
States, we intend to focus initially on the aftermarket business in Europe and
South America.

While we believe that incremental aftermarket sales opportunities will be
available to us following our complete separation from GM, growth in the highly
competitive aftermarket business will take time to achieve in light of the
significant investment in an aftermarket distribution infrastructure that will
be 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 worldwide customer network in order to
better represent the interests of the customer 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 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 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 11,000 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. We believe that we have the largest and most diversified
portfolio of products in the industry. Each of our product lines includes many
individual product offerings, most of

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<PAGE> 97

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 (in billions) by product sector for the last three
years:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
PRODUCT SECTOR 1995 1996 1997
-------------- ---- ---- ----
<S> <C> <C> <C>
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
===== ===== =====
</TABLE>

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 of our net sales for the last three years:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
PRODUCT SECTOR 1995 1996 1997
-------------- ---- ---- ----
<S> <C> <C> <C>
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%
===== ===== =====
</TABLE>

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."

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 other two 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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.
</TABLE>

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<PAGE> 98

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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.
Safety Systems Products include frontal inside airbag controllers,
occupant positioning, adaptive restraints and
roll-over sensing.
</TABLE>

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 ease 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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, 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.
</TABLE>

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- 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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 designed to efficiently maintain passenger
comfort in all climates and weather conditions, and
include HVAC modules, compressors and condensors.
HVAC Systems and Modules HVAC (which refers to "heating, ventilation and air
conditioning") 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.
</TABLE>

- 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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).
</TABLE>

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<PAGE> 100

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
Switch Products A wide range of pushbutton switches, elastomer
switches incorporating integrated electronics and
miscellaneous specialty switches.
</TABLE>

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:

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

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- 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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.
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.
</TABLE>

- 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:

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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.
</TABLE>

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<PAGE> 102

<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION
------------ -----------
<S> <C>
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.
</TABLE>

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.

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 part of Ford
Motor Company.

We also face significant competition within each of our three major product
sectors. 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: Denso
Inc., Siemens AG, Robert Bosch GmbH, 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., Denso Inc. and TRW Inc.

DYNAMICS & PROPULSION. Our principal competitors in the Dynamics &
Propulsion product sector include the following: Robert Bosch GmbH, 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 171 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.

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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, DMS 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 volume changes in our
customer 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 DMS. 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, DMS has resulted in significant cost savings, including reduction
in plant-floor costs in many of our manufacturing facilities. We expect to
continue to implement DMS in all of our operations on a worldwide basis. For
more information about DMS, 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 VM's assembly efficiency.
Just-in-time delivery generally requires that the supplier have a local presence
in close proximity to the VM's manufacturing facility so that the supplier's
facility (where various sub-assembly functions will be performed) 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 process 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. About 15% of this amount was for raw materials, including steel,
aluminum, copper, lead, platinum group metals and resins. About 10% of this
amount was for machinery and equipment, tooling and operating supplies. About 1%
of this amount was for services. The remainder of this amount was for parts we
purchase from other suppliers for use in our product offerings.

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

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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 steel, precious group
metals, aluminum, resin, copper and lead, all of which are available from
numerous sources. 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 order precise quantities and types of our raw materials on short
notice, thereby enabling us to maintain relatively low inventories.

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.

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 in part 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" and "Risk
Factors--Risk Factors Relating to Our Business--Year 2000 and Other Information
Technology Issues."

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
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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.

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 patent 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
have been recorded in the last two years. We intend to continue to actively
pursue technological innovation.

GM has transferred to us full or partial ownership of about trademarks
and trademark applications. 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, 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,

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including the UAW, IUE and 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:

UNION REPRESENTATION

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
REGION UNIONS EMPLOYEES
------ --------- ---------
<S> <C> <C>
United States
UAW............................................ 1 46,032
IUE............................................ 1 14,505
USW............................................ 1 2,078
Other unions................................... 3 500
-- -------
Total United States......................... 6 63,115

Canada........................................... 2 968
Mexico........................................... 6 58,297
Europe........................................... 32 30,558
South America.................................... 5 6,578
Asia/Pacific..................................... 2 175
-- -------
Total....................................... 53 159,691
== =======
</TABLE>

The national collective bargaining agreements negotiated by GM with the
unions currently apply to our workforce. 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.

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 (which involved 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
product losses. 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. For more information, see "--Strategy--Improve Operating Performance."

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in the automotive parts industry. However, we cannot assure you as to when we
will be able to do so. As described elsewhere in this prospectus, 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. GM has informed us that it has held discussions with the IUE, one of
the principal unions representing our employees, regarding the effects of the
separation on its members. The USW has also indicated to GM an interest in
holding discussions regarding the effects of the separation on its members.
Similar discussions are expected to occur with the other unions representing our
employees, but we cannot assure you as to when they will occur. We intend to
cooperate with GM in working together with the UAW, IUE, 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--Failure to Realize the Benefits We Expect from
Our Separation from General Motors."

PROPERTIES

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

We also maintain regional headquarters in Tokyo, Japan (for our
Asia/Pacific region), Cedex, France (for our Europe/Africa/Middle East region)
and Sao Paulo, Brazil (for our South America region). We currently maintain a
total of 246 sites (excluding our joint ventures and other investments) 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," shows our principal facilities as
of September 30, 1998:

SITES

<TABLE>
<CAPTION>
NUMBER OF TOTAL OWNED TOTAL LEASED
REGION SITES SQUARE FOOTAGE SQUARE FOOTAGE
------ --------- -------------- --------------
<S> <C> <C> <C>
United States/Canada......... 78 44,837,322 13,471,249
Europe/Middle East/Africa.... 94 6,237,621 5,112,391
Mexico/South America......... 48 7,951,242 3,752,457
Asia/Pacific................. 26 1,341,501 723,502
--- ---------- ----------
Total................... 246 60,367,686 23,059,599
=== ========== ==========
</TABLE>

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," shows our capabilities as of September 30,
1998:

CAPABILITIES

<TABLE>
<CAPTION>
CUSTOMER
MANUFACTURING TECHNICAL CENTERS AND
REGION SITES CENTERS SALES OFFICES
------ ------------- --------- -------------
<S> <C> <C> <C>
United States/Canada......... 48 14 11
Europe/Middle East/Africa.... 66 7 20
Mexico/South America......... 42 4 6
Asia/Pacific................. 15 2 14
--- -- --
Total................... 171 27 51
=== == ==
</TABLE>

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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 1998 and 1999. 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. As part of our separation from GM,
we have assumed all environmental liabilities (and related reserves) with
respect to the performing assets at the facilities transferred to us. General
Motors has retained all environmental liabilities (and related reserves) with
respect to non-performing assets, whether or not such non-performing assets were
previously used by Delphi. Non-performing assets include: (1) offsite waste
disposal sites that were identified prior to January 1, 1999 as requiring
investigation or cleanup; (2) facilities closed and vacated prior to December
31, 1998; and (3) businesses sold prior to December 31, 1998.

After January 1, 1999, Delphi and General Motors are each responsible for
environmental cleanup and claims at their respective properties and have agreed
to hold the other party harmless with respect thereto. Liability for offsite
waste disposal sites which are discovered after January 1, 1999 to require
investigation or cleanup will be allocated between Delphi and GM, based upon the
respective contributions of wastes from Delphi's facilities and from the
facilities for which GM retains responsibility.

We are in various stages of investigation and cleanup at our manufacturing
sites where contamination has been alleged. As of 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 amount of our current reserve.

For more information regarding our environmental expenditures and potential
future environmental liabilities see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters." For more
information regarding the separation arrangements relating to environmental
matters, see "Arrangements Between Delphi and General Motors--Real Estate and
Environmental."

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
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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
prove 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 recalls and
other product liability actions relating to its suppliers. However, as suppliers
become more involved in the vehicle design process and assume more of the
assembly functions, VMs are increasingly looking towards suppliers for
contribution when faced with product liability actions.

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 to GM either before or after that
date. We have responsibility for all product liability actions relating to
products we sold at any time to VMs other than GM, as well as actions relating
to products we manufacture and sell to GM on or after January 1, 1999.

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 nonconforming 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 such 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 such time as GM
owns less than a majority of our outstanding stock. This means that we would no
longer be insured under GM's insurance programs upon the occurrence of the
Distribution. We expect to purchase product liability insurance to be effective
immediately upon the effective time of the Distribution within 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.

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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 whom are currently executive officers and/or
directors of General Motors (Messrs. Losh, Pearce and Smith) and one of whom was
a director of General Motors until October 1998 (Mr. Wyman). In connection with
the closing of the Offering, the persons listed below as director nominees will
join the Board. We expect to add two additional independent Board members 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 November 1, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
J.T. Battenberg III.................. 55 Chairman, Chief Executive Officer and
President
Alan S. Dawes........................ 44 Chief Financial Officer and Vice President
Volker J. Barth...................... 51 Vice President
William A. Ebbert.................... 55 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 Treasurer and Vice President
Ray C. Campbell...................... 56 Vice President, Purchasing
Karen L. Healy....................... 44 Vice President, Corporate Affairs
Peter H. Janak....................... 59 Chief Information Officer and Vice President
Mark C. Lorenz....................... 48 Vice President, Production Control and
Logistics
Mark R. Weber........................ 50 Vice President, Human Resources Management
</TABLE>

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<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas H. Wyman...................... 68 Director (Lead 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.................... 58 Director Nominee
Shoichiro Irimajiri.................. 58 Director Nominee
John D. Opie......................... 61 Director Nominee
Roger S. Penske...................... 61 Director Nominee
</TABLE>

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 of office expire. Messrs. Battenberg, Colbert and
Irimajiri 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 may appoint a non-employee director to serve as its "lead
director." The lead 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 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. 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 General Motors Institute ("GMI")) and the
National Advisory Board for Chase Manhattan Corp. and is 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 (1988) and
Assistant Comptroller (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
the company in 1963.

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<PAGE> 112

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 HVAC/HE (heating, ventilation
and air conditioning/heat exchangers) business unit of the now Delphi Harrison
Thermal Systems. Prior thereto, Mr. Hachey held several manufacturing positions
with GM since joining the company in 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 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 Service Parts Operations 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 the former
Chevrolet-Pontiac-GM of Canada Group 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 Kettering University (formerly GMI) Alumni
Association 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 beginning in 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
the former 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.

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<PAGE> 113

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
(now Delphi Delco Electronics) since February 1997. In 1994, Mr. Wohleen was
named Director of Electrical, Interior and HVAC (heating, ventilation and air
conditioning) 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
after joining GM in 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. 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
joining the company in 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 joining the
company in 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 joining the
company in 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 joining the company in 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 joining the company in
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.

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<PAGE> 114

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 and 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,
Chevrolet-Pontiac-GM of Canada production systems. Prior thereto, he held
various manufacturing and materials management positions at GM since joining the
company in 1973.

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 Chevrolet-Pontiac-GM of
Canada (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 after joining the company in 1966.

Mr. Wyman was named Lead 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. On January 1,
1996, Mr. Smith became Chairman of the Board of Directors 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 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 Corporation 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
Board of Trustees, Boston University; Board of Overseers of Memorial
Sloan-Kettering Cancer Center; Board of Governors of The Nature Conservancy and
Board of Polish-American Enterprise Fund.

Mr. Pearce has been associated with General Motors since 1985. 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 (now GM Locomotive Group), 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 Corporation, 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

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<PAGE> 115

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. 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 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 for 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 for the Thurgood Marshall
Scholarship Fund and he is a member of the Board of Trustees for 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 for 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 joining the company in 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 the company's development and
production activities. He had been associated with Honda since 1963.

Mr. Opie was elected Vice Chairman of the Board and 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 1965 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 Diesel Technology Company, a partnership with
Robert Bosch Corporation and he is Chairman of the Board of Penske Truck Leasing
Corporation. Mr. Penske is a Director
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<PAGE> 116

for General Electric Company and a Director for 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.

COMMITTEES OF THE BOARD OF DIRECTORS

Our Bylaws provide for 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"). We expect these
Committees to be established upon completion of the Offering.

The Executive Committee is authorized to exercise, between meetings of our
Board, all of the powers and authority of the Board in the management of Delphi,
except as prohibited by applicable law or our Restated Certificate of
Incorporation. The Audit Committee will select and engage, on behalf of Delphi,
the independent public accountants to audit our annual financial statements and
will review and approve the scope of the planned 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 the Chief Executive Officer and the President, all officers of
the company and will establish and administer employee benefit plans. Our Board
may establish other committees to facilitate the management of the business and
affairs of our company.

COMPENSATION OF DIRECTORS

Directors who are also employees of GM or Delphi receive no remuneration
for serving as directors or committee members. Non-employee directors will
receive compensation consisting of: (1) a cash retainer and (2) common stock
units. Non-employee directors other than the lead director will receive total
compensation of $110,000, equally divided between the two components, and the
lead director will receive total compensation of $300,000, $100,000 of which
will be cash and $200,000 of which will be common stock units. Non-employee
directors (other than the lead director) will receive an additional fee of
$5,000 per year for serving as chairperson of a board committee.

The stock portion of non-employee directors' annual compensation will
automatically be deferred in units until such persons 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.

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. Certain executive
officers, including the executive officers named in the Summary Compensation
Table in the "--Executive Compensation" section below, will be granted options
to purchase shares of Delphi common stock, restricted stock units and certain
long-term incentive awards. 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

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<PAGE> 117

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 September 30, 1998 by each of our directors,
director nominees, 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.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY DEFERRED TOTAL STOCK
NAME OWNED(1) STOCK UNITS SHARES OPTIONS
---- ------------ ----------- ------ -------
<S> <C> <C> <C> <C>
J.T. Battenberg III............................ 23,389 14,084 37,473 128,431
Alan S. Dawes.................................. 7,898 2,739 10,637 60,147
David R. Heilman............................... 9,903 1,482 11,385 35,081
Donald L. Runkle............................... 9,244 3,159 12,403 41,673
Paul J. Tosch.................................. 5,068 3,471 8,539 19,081
Thomas H. Wyman................................ 1,000 6,724 7,724 0
John F. Smith, Jr. ............................ 117,767 52,153 169,920 662,906
Harry J. Pearce................................ 21,857 23,681 45,538 240,397
J. Michael Losh................................ 26,400 13,240 39,640 231,612
Oscar De Paula Bernardes Neto.................. 0 0 0 0
Virgis W. Colbert.............................. 0 0 0 0
Shoichiro Irimajiri............................ 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 (29 persons)... 278,469 125,538 404,007 1,646,742
</TABLE>

- ------------------
(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.

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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 employment with General Motors and its subsidiaries, were the most
highly compensated officers of Delphi for the year ended December 31, 1997. All
information set forth in this table reflects compensation earned by such
individuals for services with General Motors and its subsidiaries.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ---------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING LONG-TERM ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTION INCENTIVE COMPENSATION
POSITION YEAR ($) ($) ($) (#)(1) PAYOUTS($)(2) ($)(3)
------------------ ---- ------ ----- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J.T. Battenberg III......... 1997 887,000 1,020,000 53,448 108,495 475,000 38,112
Chairman, Chief
Executive
Officer and President
Donald L. Runkle............ 1997 391,000 325,000 n/a 17,359 111,000 14,085
Vice President
David R. Heilman............ 1997 350,000 295,000 n/a 17,359 111,000 12,600
Vice President
Paul J. Tosch............... 1997 372,000 262,000 n/a 15,189 111,000 13,380
Vice President
Alan S. Dawes............... 1997 360,000 262,000 n/a 15,189 111,000 12,960
Chief Financial Officer
and Vice President
</TABLE>

- ------------------
(1) As 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.

(2) 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 three years
(1995-1997). The award to Mr. Battenberg vests 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, and the fourth installment vests subsequent to
retirement. The awards for the other named executive officers vest in two
equal annual installments. Dividend equivalents are paid on unvested shares.
The following table sets forth the number of shares of such award that were
vested and paid to the executive officers and the number of shares that
remained unvested and unpaid on February 28, 1998:

<TABLE>
<CAPTION>
SECOND INSTALLMENT OF 1994-96
GRANT AND THIRD
INSTALLMENT OF 1993-95 GRANT
1995-97 GRANT ---------------------------------
---------------------------- SHARES VALUE OF SHARES
SHARES VESTED SHARES VESTED UNVESTED
VESTED SHARES DECEMBER 31, DECEMBER 31, DECEMBER 31,
IN 1998(#) UNVESTED(#) 1997(#) 1997($)* 1997(#)
------------ ------------- ------------- ----------------- -------------
COM. CL.H COM. CL.H COM. CL.H COM. CL.H COM. CL.H
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.T. Battenberg III......... 1,591 652 4,773 1,955 6,984 2,791 424,278 103,100 6,610 2,827
D.L. Runkle................. 929 0 929 0 3,151 642 191,423 23,175 1,435 0
D.R. Heilman................ 929 0 929 0 0 0 0 0 0 0
P.J. Tosch.................. 929 0 929 0 2,791 551 169,553 20,354 1,320 0
A.S. Dawes.................. 929 0 929 0 1,320 0 80,190 0 1,320 0
</TABLE>

- ------------------
* Based on the closing price of GM $1 2/3 common stock ($60.75) and GM Class H
common stock ($36.94) on the NYSE on December 31, 1997.

(3) Reflects contributions by General Motors on behalf of each executive officer
under various savings plans. The amount for Mr. Battenberg also includes
$6,162 imputed income 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.

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<PAGE> 119

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 Amended 1987 Stock Incentive Plan in the year ended December 31,
1997. 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."

<TABLE>
<CAPTION>
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)
---- ------------- ------------ ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
J.T. Battenberg III.......... 108,495 1.11 53.76 2/4/07 1,402,000
Donald L. Runkle............. 17,359 0.18 53.76 2/4/07 224,000
David R. Heilman............. 17,359 0.18 53.76 2/4/07 224,000
Paul J. Tosch................ 15,189 0.16 53.76 2/4/07 196,000
Alan S. Dawes................ 15,189 0.16 53.76 2/4/07 196,000
</TABLE>

- ------------------
(1) These options were granted on February 3, 1997 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 February 3, 1998,
February 3, 1999 and February 3, 2000, respectively. The incentive stock
options expire ten years from the date of grant and the non-qualified
options expire two days later. These options have been 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.

(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
6.49%, a dividend yield of 3.43% 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.

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<PAGE> 120

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, 1997 by the executive
officers named in the Summary Compensation Table in the "--Executive
Compensation" section above. Unless exercised prior thereto, the securities
underlying 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."

<TABLE>
<CAPTION>
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
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J.T. Battenberg III...... 29,958 727,804 70,566/151,892 854,320/1,304,748
Donald L. Runkle......... 26,740 575,217 28,290/24,953 303,834/216,948
David R. Heilman......... 11,370 174,844 22,783/23,868 342,659/203,288
Paul J. Tosch............ 16,500 275,340 11,934/15,189 75,184/106,171
Alan S. Dawes............ 0 0 48,571/21,698 916,767/188,119
</TABLE>

- ------------------
(1) No SARs may be granted under GM's stock incentive plans.

(2) Based on the closing price of the GM $1 2/3 common stock ($60.75) on the
NYSE on December 31, 1997.

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,
1997 to the executive officers named in the Summary Compensation Table in the
"--Executive Compensation" section above.

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
NON-STOCK PRICE-BASED
NUMBER OF PERFORMANCE OR PLANS(1)
SHARES, UNITS OTHER PERIOD ------------------------------- SPECIAL
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM ONE-TIME GRANT
NAME RIGHTS(#) OR PAYOUT ($) ($) ($) $(2)
---- ------------- ---------------- --------- ------ ------- --------------
<S> <C> <C> <C> <C> <C> <C>
J.T. Battenberg III...... n/a 1997-99 370,000 925,000 1,850,000 700,000
Donald L. Runkle......... n/a 1997-99 80,000 200,000 400,000 210,000
David R. Heilman......... n/a 1997-99 80,000 200,000 400,000 200,000
Paul J. Tosch............ n/a 1997-99 80,000 200,000 400,000 200,000
Alan S. Dawes............ n/a 1997-99 80,000 200,000 400,000 200,000
</TABLE>

- ------------------
(1) These awards relate to performance during 1997-1999. 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.

(2) This special one-time grant was made under the General Motors 1997
Performance Achievement Plan. If the performance target set in connection
with this grant is met on or before December 31, 2000, the awards will be
paid in GM $1 2/3 common stock; however, if this performance target is not
met prior thereto, in connection with the Distribution, the awards will be
replaced with substitute awards providing for payment in shares of Delphi
common stock. If the relevant performance target is not met, the award will
expire on December 31, 2000 and no payment will be made. There are no
minimum or maximum amounts payable under this award.

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<PAGE> 121

CHANGE IN CONTROL AGREEMENTS

Delphi's management intends to recommend to the Delphi Board at its first
meeting following the completion of the Distribution that Delphi establish
change in control agreements ("Change in Control Agreements") that apply to
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 the three years after the
Distribution; and

(2) within three years after the change in control, one of the following
events occurs:

(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 benefits or compensation are materially 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 total sale or substantial breakup (50% or more of value) of Delphi in a
merger, consolidation, other reorganization, liquidation, dissolution or
substantial asset sale.

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 for five years thereafter unless such options
expire earlier;

- 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 deferred at the election of the Participant 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 existing medical plan will
remain in force for thirty-six months.

Upon the occurrence of both triggering events described above, Participants
will receive (1) monetary compensation and (2) certain other benefits. The
amount of monetary compensation each Participant is entitled to receive is set
forth below:

<TABLE>
<S> <C>
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
</TABLE>

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;
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<PAGE> 122

- 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 terms of his or her
non-compete agreement with Delphi.

The benefits of the Change in Control Agreements will only be available to
those Participants who have signed a non-compete agreement with Delphi. The
non-compete agreements provide that for a period of two years immediately
following the employee's voluntary termination of employment with us or any of
our subsidiaries, the employee agrees to not, 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. We expect that 21 of our officers will be subject to
these non-compete agreements and thereby covered by the Change in Control
Agreements.

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") and the Delphi Automotive Systems
Performance Achievement Plan (the "Performance Achievement Plan"). All of these
plans will be administered by the Compensation Committee. In order to ensure
that compensation paid pursuant to the incentive plans can qualify as
"performance based compensation" not subject to the limitation on deductibility
of certain executive compensation in excess of $1 million, Delphi intends to
seek stockholder approval of each of these plans at its annual meeting of
stockholders in 2000.

FOUNDERS GRANTS. Certain executive officers will be granted options to
purchase shares of Delphi common stock, restricted stock units and certain
long-term incentive awards. In addition, other employees of Delphi will be
granted options to purchase shares of Delphi common stock. A total of
shares of common stock are subject to such awards.

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. 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 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 . It is anticipated that about 650
employees will participate in the Stock Incentive Plan, including about 25
officers. The maximum grant to any individual in any calendar year may not
exceed shares.

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<PAGE> 123

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"). 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
NQSOs 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) and after such date 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 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 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 provisions of such awards will be interpreted in a
manner consistent with that intent to the extent appropriate. Subject to
adjustments as set forth in the Stock Incentive Plan, the maximum number of
shares of common stock that may be granted to any individual in the form of RSUs
in any calendar year shall not exceed shares.

The Compensation Committee generally will have the power and authority to
amend the Stock Incentive Plan at any time without approval of Delphi's
stockholders, subject to applicable federal securities and tax laws limitations
(including regulations of the NYSE).

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

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<PAGE> 124

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 $ million in any calendar year. We anticipate
that about 600 employees 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. The Compensation Committee may delegate
authority to the Delphi Strategy Board to determine individual final awards for
employees who are not officers of the corporation, subject to a maximum amount
approved by the Compensation Committee.

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 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 $ 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 the participant's employment with Delphi is
terminated 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.

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<PAGE> 125

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 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 (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 ($16,104 for a 65 year old retiring in 1998).

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, 1997) 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 1998 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.

<TABLE>
<CAPTION>
YEARS OF PART B CREDITED SERVICE(b)
AVERAGE ANNUAL -----------------------------------------
BASE SALARY(a) 15 25 35 45
- -------------- -- -- -- --
<S> <C> <C> <C> <C>
$ 250,000 $ 70,169 $116,948 $163,727 $210,506
425,000 122,669 204,448 286,227 368,006
600,000 175,169 291,948 408,727 525,506
775,000 227,669 379,448 531,227 683,006
950,000 280,169 466,948 653,727 840,506
1,125,000 332,669 554,448 776,227 998,006
</TABLE>

- ------------------
(a) Average annual base salary means the average of the highest five years of
base salary paid during the final ten years of service.

(b) The Average annual base salary and the years of Part B credited service
(shown in parenthesis) as of December 31, 1997 for each of the Named
Executive Officers were as follows: J.T. Battenberg III--$653,083 (35
years); Donald L. Runkle--$329,750 (29 years); Paul J. Tosch--$321,000 (39
years); Alan S. Dawes--$294,833 (16 years); and David R. Heilman--$271,217
(32 years). The annual base salary for the most recent year(s) considered in
the calculation reported here are shown in the Summary Compensation Table
above in the column labeled "Salary."

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<PAGE> 126

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 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, 1997) 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 1998 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.

<TABLE>
<CAPTION>
AVERAGE ANNUAL ELIGIBLE YEARS OF PART B CREDITED SERVICE(b)
TOTAL DIRECT --------------------------------------------------------
COMPENSATION(a) 15 20 25 30 35
- --------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 500,000 $ 98,396 $133,896 $171,396 $ 208,896 $ 246,396
875,000 180,771 246,396 312,021 377,646 443,271
1,250,000 265,146 358,896 452,646 546,396 640,146
1,625,000 349,521 471,396 593,271 715,146 837,021
2,000,000 433,896 583,896 733,896 883,896 1,033,896
2,375,000 518,271 696,396 874,521 1,052,646 1,230,771
</TABLE>

- ------------------
(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.

(b) The average annual total direct compensation and the eligible years of Part
B credited service (shown in parenthesis) 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--$1,339,483 (35
years); Donald L. Runkle--$613,750 (29 years); Paul J. Tosch--$589,400 (35
years); Alan S. Dawes--$506,233 (16 years); and David R. Heilman--$502,217
(32 years). The annual total direct compensation for the most recent year(s)
considered in the calculation reported here are reported in the Summary
Compensation Table above in the columns labeled "Salary" and "Bonus."

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.

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<PAGE> 127

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 , 1998, between Delphi and General Motors
(as amended from time to time, the "Separation Agreement"). In addition, as
contemplated by the Separation Agreement, we have entered into or will enter
into certain ancillary agreements which govern various interim and ongoing
relationships between us and GM (collectively, as amended from time to time, the
"Ancillary Agreements"). The Ancillary Agreements to be entered into on or prior
to 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, the provisions of certain interim services and various other
commercial arrangements. 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 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, 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." 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 "--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 SUPPLY
AGREEMENT, THE IPO AND DISTRIBUTION AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT, HAVE BEEN FILED WITH THE SEC AS EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.

SEPARATION AGREEMENT

The Separation Agreement 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 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, 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.

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. For any such
services provided directly by GM, we must pay GM the historical cost of such
services on or prior to the 15th day after receipt of an invoice. For any such
services that are provided directly by third parties, we will pay such third
party directly. We must use all commercially reasonable efforts to obtain any
transition services provided pursuant to this provision of the Separation
Agreement from a

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<PAGE> 128

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.

ANCILLARY AGREEMENTS. In general, 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.

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. 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.

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 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 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 that:

(1) are reflected in the Delphi Financial Statements and not disposed of by
Delphi after the date thereof and before the Contribution Date; or

(2) are acquired by 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

(3) are expressly provided by the Separation Agreement or any Ancillary
Agreement to be transferred to Delphi; or

(4) are listed on Schedule A to the Separation Agreement; or

(5) 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;

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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 preceding clause (5) 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 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 financial statements (including 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 the date of the Separation Agreement.

"Delphi Liabilities" means all of the Liabilities of General Motors that:

(1) are reflected in the Delphi Financial Statements and remain outstanding
at the Contribution Date; or

(2) 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

(3) are expressly provided by the Separation Agreement or any Ancillary
Agreement to be transferred to and assumed by Delphi; or

(4) 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

(5) 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, 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 the preceding clause (5) 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, 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.

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IPO AND DISTRIBUTION AGREEMENT

GENERAL. Prior to the closing of the Offering, we will enter into an
Initial Public Offering and Distribution Agreement (as amended from time to
time, the "IPO and Distribution Agreement") with GM to govern our respective
rights and duties with respect to this Offering and the Distribution, and to set
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--Risk of Not Completing the Distribution."

THE DISTRIBUTION. We have agreed that we will, at GM's direction, promptly
take all actions necessary or desirable to effect the Distribution, including
the registration under the Securities Act of GM's shares of our capital stock.
General Motors has the sole discretion to determine all terms of the
Distribution, including the form, structure and terms of any offering and the
timing of and conditions to the consummation of the Distribution.

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. GM has filed a request with the IRS
for a private letter ruling (the "IRS Ruling") to such effect. In connection
with GM's request for the IRS Ruling, we have 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. We have also
agreed that, during such period, we will not issue (or agree to issue)
shares of any class or series of our capital stock other than voting
stock.

- Certain Acquisition Transactions. Until two years after the completion of
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 (1) the value of all outstanding
shares of our capital stock or (2) 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, 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 (1) liquidate,
dispose of or otherwise discontinue the conduct of any portion of our
active trade or business with a value in excess of $ billion or (2)
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 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, we have agreed that (1) we will not voluntarily dissolve or
liquidate, and (2) 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

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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 (A) 80% or
more of the total combined voting power of all outstanding shares of
voting stock of such subsidiary or (B) 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 completion of 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, we will not be able to have any such indebtedness with
GM.

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
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 (1) 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 (2)
provide all reasonable cooperation to us in connection with our obtaining such
an IRS ruling or tax opinion. In either case, we have agreed to bear the
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 indebtedness for
borrowed money that we have 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, we will not (and will not permit any of our subsidiaries
to), without GM's prior written consent (which it may withhold in its
sole and absolute discretion), create, incur, assume or suffer to exist
Indebtedness in excess of $5 billion. For this purpose, "Indebtedness"
means the sum of our long-term and

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short-term liabilities for borrowed money as reflected in our financial
statements plus the amounts attributable to all factoring or
securitization of receivables in excess of $1.2 billion.

- For so long as GM continues to own at least 50% of our outstanding
common stock, we will not, without GM's prior written consent (which it
may withhold in its sole and absolute discretion), make acquisitions if,
after giving effect to the acquisition, our debt would exceed a
specified threshold. This threshold is the sum of the acquisition
target's long-term and short-term book debt, including capitalized
leases, plus the incremental debt incurred by our company to finance the
acquisition. If the target has an FFO (which means the sum of net income
plus book depreciation and amortization for the trailing four quarters)
to debt ratio in excess of 20%, this covenant will not be breached
unless the consolidated total debt for our company exceeds $6 billion.
However, if the target's FFO to debt ratio is less than 20%, the
incremental debt (which means the amount by which the debt would need to
be reduced to achieve a 20% FFO to debt ratio) will be added back to
Delphi's total debt, in which case the covenant will be breached if our
total debt plus the incremental debt is more than $5 billion.

- 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, 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;

- we will not, without GM's prior written consent, 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, alter our stockholders rights plan in a manner adverse to GM
(and its transferees) causing the rights to detach or become
exercisable as described under "Description of Capital Stock--Rights
Plan;" and

- to the extent that GM is a party to any agreements that provide that
certain actions of GM's subsidiaries may result in GM being in breach
or default under such agreements, we will not take any actions that may
result in GM so being in breach or default.

- 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.

- 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 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 GM's auditors date their 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

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specified accounting standards; and notify and consult with GM regarding
any changes to our accounting principles; and make any changes to our
accounting principles reasonably requested by GM.

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. This indemnification does not
apply to information relating to General Motors (excluding, for this purpose,
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 to the extent they relate to Delphi, the
capital stock of Delphi, the Delphi business, financial information and data
relating to Delphi (including both historical and pro forma financial data)
and/or plans regarding Delphi after the Distribution and other forward-looking
information regarding Delphi.

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.

- Certain Expenses Relating to the Offering. We and GM will each bear
certain expenses in connection with the Offering. We will be responsible
for, among other things, the underwriting discount and commissions and
SEC filing fees.

- 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 outside auditors, legal counsel and
other advisors. GM will not reimburse us 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--Risk of Not Completing the Distribution." In the event that the
Distribution is not completed, or if the Distribution is completed but GM does
not divest itself of all of its Delphi common stock in the Distribution, GM
could not freely sell all of the shares of our company's stock it held without
registration under the Securities Act. Accordingly, prior to the closing of the
Offering, we will enter 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. The registration rights of General Motors described below generally
become effective at such time as GM informs us that it no longer intends to
complete the Distribution or that the Distribution was completed without GM
divesting itself of all of its Delphi common stock.

DEMAND REGISTRATIONS. GM may request registration (each, a "Demand
Registration") under the Securities Act of all or any portion of the stock of
our company it holds and we will register such stock 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 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 shares of our stock.

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- Selection of Professionals. General Motors will select the investment
banker(s) and manager(s) in connection with any Demand Registration, as
well as any financial printer, solicitation and/or exchange agent and
counsel for GM. We will select our own outside counsel and independent
auditors.

- Priority on Demand Registrations. Without GM's consent, no other party,
including Delphi, can participate in any Demand Registration.

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 , 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"), provided that, if GM has given notice of its
request for a Demand Registration, we cannot propose any other registration of
our securities until GM's offering is completed or abandoned.

- Selection of Underwriters. General Motors must approve any investment
banker(s) and manager(s) selected by us in connection with any Piggyback
Registration.

- Priority on Piggyback Registrations. If the underwriters advise us that
cutbacks are necessary, we must include: (1) first, the securities we
propose to offer and (2) second, the securities requested to be included
by GM.

HOLDBACKS. We are subject to customary holdbacks in connection with any
Demand Registration. If General Motors participates in a Piggyback Registration,
it is subject to customary holdbacks.

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.

ASSIGNMENT. GM's rights under the Registration Rights Agreement are freely
transferable, in whole or in part, including to any private purchaser or
transferee of shares of our stock held by GM. Any successor entities to our
company will be bound by the terms of the Registration Rights Agreement.

DURATION. The Registration Rights Agreement will remain in effect (1) with
respect to General Motors, so long as GM holds any of our stock (including any
other securities into which our stock may be converted or otherwise be
recapitalized, as to which all of GM's rights under the Registration Rights
Agreement will apply), and (2) with respect to any other person, so long as any
distribution of the shares of our stock held by such person or their transferee
would require registration under the Securities Act.

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 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,

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subject to certain exceptions as described below, 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 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 (even if we have not yet begun
to supply products under such contracts), including the existing pricing,
duration and purchase order terms and conditions. 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.

Both long-term and lifetime contracts 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 "Risk Factors--Risk Factors
Relating to Our Business--Our Ability to Realize Sales from 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. See "Risk Factors--Risk Factors Relating to Our Business--Our
Ability to Realize Sales from Awarded Business."

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." The modified

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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.

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 (generally from 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.

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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 Process (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.

GM'S RIGHT TO ADOPT NEW TECHNOLOGIES. The Supply Agreement provides that
General Motors has the right 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 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.

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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 generally comparable to then existing
industry standards.

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.

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.

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 (which 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.

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 amended
from time to time, the "Business Relationship Agreement") with GM-SPO regarding
aftermarket sales in the United States (other than 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 to ensure market based pricing with respect to ACDelco(R) branded
products and the payment terms are being modified so as to require GM-SPO to 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. During the term of the Business Relationship

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Agreement, we are obligated to offer all new technology to GM-SPO on a
non-exclusive 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. 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. GM is retaining responsibility for pension and other
postretirement employee benefits ("OPEB") obligations for all U.S. salaried
employees that retired on or before January 1, 1999. It is anticipated that GM
will have discussions with the unions that represent the GM hourly employees
transferred to us regarding the effect of the separation on the employees. With
regard to our hourly employees and the employees of divested Delphi units, we
anticipate that Delphi will assume OPEB obligations and underfunded pension
obligations, and GM will retain postretirement benefit obligations for retired
U.S. hourly employees. These amounts vary 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

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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. 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
(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 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 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 replacement of such GM
Award, will remain outstanding as GM Awards, with an appropriate revaluation to
reflect the Distribution.

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 (as
defined in the next paragraph), 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 obtained by dividing (1) the average of the
daily high and low per share prices of the GM $1 2/3 common stock as listed on
the NYSE during each of the three trading days immediately preceding the date of
the Distribution by (2) the average of the daily high and low per share

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prices of our common stock as listed on the NYSE during each of the three
trading days immediately following the date of the Distribution.

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 after the Distribution is completed. Our stockholders, are, however,
likely to experience some dilutive impact from the above-described adjustments.

As of , , there were about shares of GM
$1 2/3 common stock subject to options pursuant to GM Awards (about
of which were exercisable as of , ) held by
our employees. If the Ratio were determined using the closing price of the GM
$1 2/3 common stock on , , on the NYSE ($ per share)
and a price of $ per share of our common stock (the mid-point of the range
set forth on the cover page of this prospectus), the foregoing number of shares
of GM $1 2/3 common stock subject to GM stock options would be replaced with
options on about shares 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 will only be
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 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 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
(excluding, however, 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) for all periods prior to tax
deconsolidation. 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.

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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 full or partial ownership of about trademark and trademark
applications. 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.

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. Generally, such real estate has been assigned to the party currently
using the facilities located thereon. With respect to shared facilities, the
party occupying a majority of the space will remain the owner or primary lessee
of such facility, and lease, or sublease, to the other party the current space
it uses therein.

Generally, the terms of any such leases or sub-leases are substantially the
same regardless of which company is the tenant or landlord. In the case of owned
real estate to be leased, the lease terms will generally be three years and the
rent payments are intended to approximate prevailing market rates. In the case
of sub-leases or sub-subleases of property, the lease term will generally be the
same as the remaining term of the primary lease or sub-lease, and rent payments
will be determined by reference to the rent specified in the underlying lease or
sub-lease. Under these lease arrangements, the lessor will retain responsibility
for environmental conditions and non-compliance matters arising before the
closing of the real estate transactions. The lessee will be responsible for
post-closing environmental conditions and post-closing non-compliance matters
during the lease term.

With respect to facilities transferred to our company, all performing
assets at such sites have been transferred to us and we have assumed all
operating costs thereof and applicable financial and environmental

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reserves with respect thereto. With respect to non-performing assets, General
Motors has retained all operating costs thereof and applicable financial and
environmental reserves with respect thereto, whether or not such non-performing
assets were previously used by Delphi. Non-performing assets include: (1)
offsite waste disposal sites that are identified prior to January 1, 1999 as
requiring investigation or cleanup; (2) facilities closed and vacated prior to
December 31, 1998 and (3) businesses sold prior to December 31, 1998.

After January 1, 1999, Delphi and GM will each be responsible for
environmental cleanup and claims at their respective properties and have agreed
to hold the other party harmless with respect thereto. Liability resulting from
for offsite waste disposal sites that are discovered after January 1, 1999 to
require environmental investigation or cleanup will be allocated between Delphi
and GM, based upon the respective contribution of wastes from Delphi's
facilities and from the facilities for which GM retains responsibility.

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.

PRODUCT LIABILITY

We have entered into an agreement with GM regarding the allocation of
liability for product liability claims made with respect to our products.
Pursuant to such agreement, GM has retained responsibility for all product
liability actions relating to products we manufactured prior to January 1, 1999
and sold to GM either before or after that date, and we will be responsible for
liability relating to all products we sold to others during the period we were
wholly owned by GM. Also, we will indemnify General Motors against any product
liability costs resulting from our sales of products to VMs other than General
Motors. We are responsible for all product liability actions relating to our
products that are manufactured on or after the Contribution Date. Accordingly,
VMs to which we sell products after the Contribution Date, including GM, may
seek contribution from us for product liability actions related to such
products. See "Business of Delphi--Legal Proceedings."

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.

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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 (including accounts payable and receivable),
tax, customs and payroll services;

- 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 audit services; and

- managed access to proving grounds, test facilities, research and
development and engineering centers and the services provided thereat by
General Motors personnel.

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, 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.

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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 %
(or about % 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.

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,
shares of common stock will be outstanding (or shares
if the U.S. underwriters exercise their over-allotment option in full). All of
the shares of common stock that will be outstanding immediately following the
Offering, including the shares of common stock sold in the Offering, will be
validly issued, fully paid and non-assessable.

The following descriptions are summaries and do not purport to be complete.
Reference is also 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.

COMMON STOCK

Holders of common stock will be entitled to one vote per share with respect
to each matter submitted to a vote of stockholders of Delphi, subject to voting
rights that may be established for shares of preferred stock, if any. 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. 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 common stock are, and the shares of common stock
being offered hereby will be upon payment therefor, fully paid and
nonassessable. The common stock will not have any preemptive, subscription or
conversion rights. Additional shares of authorized common stock may be issued,
as authorized by the Delphi Board from time to time, without stockholder
approval, except as may be required by applicable stock exchange requirements.

Application has been made to list the common stock on the NYSE under the
symbol "DPH."

PREFERRED STOCK

Our Board is empowered, without approval of the stockholders, to cause
shares of preferred stock to be issued in one or more series, with the numbers
of shares of each series and the designation, powers, privileges,

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preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. 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;

- 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 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 Delphi's Board.

Although 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 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:

- for any breach of the director's duty of loyalty to Delphi or its
stockholders;

- for acts or omissions not in good faith or which involve 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

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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 stockholder" for a
period of three years after the time such stockholder became an interested
stockholder, unless:

- prior to such time, 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 such time, 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 GM.

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 meeting
of stockholders and providing for certain procedures to be

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followed by stockholders in nominating persons for election to the Delphi Board.
Generally, such advance notice provisions provide that the stockholder must give
written notice to the Secretary of Delphi not less than 90 days nor more than
120 days before the scheduled date of the annual meeting of stockholders of
Delphi. The notice must set forth specific information regarding such
stockholder and such business or director nominee, as described in the Bylaws.
This provision of Delphi's Bylaws does not apply to General Motors and its
affiliates or any common stockholder, while it and its affiliates own more than
a majority of Delphi's common stock.

Our Bylaws provide, in accordance with our Restated Certificate of
Incorporation, that except as may be provided therein or in the resolution or
resolutions providing for 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 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
and Executive Officers of Delphi." On or after the time when General Motors and
its affiliates own less than a majority of Delphi's outstanding stock (the
"Trigger Date"), a director of Delphi may be removed only for cause by
affirmative vote of a majority of the Board of Directors. Also, until the
Trigger Date, vacancies on our Board may only be filled by the affirmative vote
of 80% of the remaining directors and the affirmative vote of 80% of the Whole
Board is required to establish committees of the Board, to fill committee
memberships and to rescind or amend resolutions which establish policies for
Delphi with respect to the categories of matters that must be presented to our
Board (or a committee of our Board) prior to the company taking action.

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 by the
Chairman of Delphi's Board or by the Board, but may not be called by
stockholders. Before the Trigger Date, Delphi's Secretary shall call a special
meeting of the stockholders at the request of GM or its affiliates. The Bylaws
may be amended by the Board, provided that prior to the Trigger Date, the
affirmative vote of at least 80% of the Whole Board shall be required for such
action, or at any annual or special meeting of the stockholders by the
affirmative vote of the holders of at least a majority of the aggregate voting
power of the outstanding capital stock of Delphi entitled to vote thereat,
provided that amendment of certain provisions of the bylaws require the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding capital stock of Delphi entitled to vote in the election of
directors (the "Voting Stock").

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 the outstanding
Voting Stock of Delphi (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 the affirmative vote of the holders of at least 66 2/3% of
the Voting Stock not beneficially owned by the Interested Stockholder, to
approve such business combination transactions between the Interested
Stockholder and Delphi or its subsidiaries, or approve any agreement or other
arrangement providing for such business combination transactions, including:

- any merger or consolidation;

- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or other arrangement with or for the benefit of the
Interested Stockholder involving the assets of Delphi or its subsidiaries
having a fair market value of $10 million or more or constituting more
than five percent of the value of the entity in question;

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- the adoption of any plan or proposal for the liquidation or dissolution
of Delphi or any change to or exchange of Delphi's capital stock; and

- certain reclassifications of securities or recapitalizations of Delphi.

This voting requirement will not apply to certain transactions, including:

- any transaction involving the payment of consideration to holders of
Delphi's outstanding capital stock in which the following conditions,
among others, are met: the consideration to be received by the holders of
each class of capital stock of Delphi is (a) 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 (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 and (b) the same form and amount as that paid by
the Interested Stockholder in connection with its acquisition of such
class of capital stock; or

- any transaction approved by a majority of Delphi's continuing directors
(as such term is defined in Delphi's Restated Certificate of
Incorporation).

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.

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 and the time

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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:

- certain 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.

Delphi may, from time to time, enter into and perform agreements with
General Motors to engage in any transaction, to compete or not to compete with
each other or to allocate, or to cause their respective directors, officers and
employees to allocate, corporate opportunities between themselves. The
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 of Directors, 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 of Directors 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 of
Directors or committee thereof, as specified in (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 delegated; or

(3) Such agreement or transaction was fair to Delphi; or

(4) Such agreement or transaction was approved by affirmative vote of a
majority of the shares of capital stock entitled to vote, excluding GM
and any Interested Person.

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 shall cease to be the owner of at least 25% of the Voting Power (as
defined in our Certificate of Incorporation) that may be exercised by all the
outstanding shares of common stock; provided, however, that such termination
shall not terminate the effect of such provisions with respect to (1) 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 (2) any transaction entered into between
Delphi and GM or the allocation of any opportunity between them before such
time. 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.

TRANSFER AGENT AND REGISTRAR

Boston Equiserve Trust Company will serve as the Transfer Agent and
Registrar for the common stock.

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RIGHTS PLAN

Delphi's Board currently expects to adopt a Stockholder Rights Plan (the
"Rights Plan") at or prior to the consummation of the Offering. Pursuant to the
Rights Plan, there will be attached to each share of common stock one right (a
"Right") to purchase from Delphi a unit consisting of one one-hundredth of a
share (a "Unit") of Series A Junior Preferred Stock, par value $0.10 per share
(the "Series A Preferred Stock"), at an exercise price of $ per Unit,
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, a copy 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 (or in the case of uncertificated shares of
common stock, by the book-entry account evidencing record ownership of such
shares), and no separate certificates for the Rights ("Certificates") will be
distributed. The Rights will separate from the common stock and a "Distribution
Date" will occur upon the earlier of:

- ten days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of common stock (the date of the announcement being
the "Stock Acquisition Date"), or

- ten business days (or such later date as may be determined by the Delphi
Board prior to such time as any person becomes an Acquiring Person)
following the commencement or announcement of an intention by a person or
group of affiliates or associated persons to commence a tender offer or
exchange offer that would result in a person's becoming an Acquiring
Person.

Until the Distribution Date:

- the Rights will be evidenced by the certificates representing common
stock (or in the case of uncertificated shares of common stock, by the
book-entry account evidencing record ownership of such shares) and will
be transferred with and only with such certificates;

- certificates representing common stock will contain a notation
incorporating the Rights Plan by reference; and

- the surrender for transfer of any shares of common stock will also
constitute the transfer of the Rights associated with such shares.

The Rights are not exercisable until the Distribution Date and will expire
at the close of business on the tenth anniversary of the date of issuance (the
"Final Expiration Date"), unless earlier redeemed or exchanged by Delphi as
described below.

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 and, from and after the Distribution Date, the separate
Certificates alone will represent the Rights. All shares of common stock issued
prior to the Distribution Date will be issued with Rights. Shares of common
stock issued after the Distribution Date pursuant to (1) the exercise of stock
options, (2) employee plans or arrangements, (3) upon exercise, conversion or
exchange of certain securities, or (4) a contractual obligation of Delphi, in
each case existing prior to the Distribution Date, may be issued with Rights.
Except as otherwise determined by Delphi's Board, no other shares of common
stock issued after the Distribution Date will be issued with Rights.

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
such person becomes an acquiring Person (a "Permitted Offer")), each holder of a
Right 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

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Exercise Price of the Right. Notwithstanding the foregoing, following the
occurrence of any Flip-In Event, all Rights that are, or (under certain
circumstances specified in the Rights Plan) were, beneficially owned by any
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Plan. However, the Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by Delphi as set forth below.

In the event (a "Flip-Over Event") that, at any time on or after a person
becomes an Acquiring Person:

- Delphi is merged into or consolidated with another entity (whether or not
related to an Acquiring Person); or

- Delphi is merged with another entity (whether or not related to an
Acquiring Person) and is the surviving entity, but any shares of Delphi's
common stock were changed into or exchanged for other securities as
assets; or

- 50% or more of Delphi assets or earning power is sold or transferred in
one or a series of transactions.

Each holder of a Right (except Rights that previously 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."

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 on, or a subdivision, combination or
reclassification of, the common stock;

- if holders of the common stock are granted certain rights or warrants to
subscribe for common stock or certain convertible securities at less than
the current Fair Market Value of the common stock; or

- upon the distribution to holders of the common stock of evidences of
indebtedness (including any distribution made in connection with a merger
or consolidation in which Delphi is the continuing or surviving entity),
cash (excluding regular quarterly cash dividends) or assets (other than
dividends payable in shares of common stock) or of subscription rights or
warrants (other than those referred to above).

No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the common stock on the last
Trading Date (as such term is defined in the Rights Plan) 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.

At any time prior to the Stock Acquisition Date, Delphi 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
its Board may determine. Immediately upon the effectiveness of the action of
Delphi's Board ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $0.01 redemption
price.

At any time after a person becomes an Acquiring Person and prior to a
person's becoming the beneficial owner of 50% or more or the shares of common
stock then outstanding, Delphi may at its option, exchange the Rights (other
than Rights owned by an Acquiring Person or an affiliate or an associate of an
Acquiring Person, 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.

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For as long as the rights are then redeemable, Delphi may, except with
respect to the redemption price, amend the Rights in any manner, including an
amendment to extend the time period in which the rights may be redeemed. At any
time when the Rights are not then 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 Series A Preferred Stock of Delphi (the
"Certificate of Designations") provides that any shares 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 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 preferential quarterly
cash dividends.

Holders of Series A Preferred Stock will have 100 votes per share ("Vote
Multiple") and, except as otherwise provided by the Certificate of Designations,
our Restated Certificate of Incorporation or required by 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.

Whenever dividend payments on the Series A Preferred Stock are in arrears,
we will not:

(1) declare or pay dividends on, make any other distributions on, or redeem
or purchase, any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;

(2) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled if the full dividends
accrued thereon were to be paid; or

(3) except in accordance with a purchase offer to all holders approved by
our Board, (A) redeem or purchase shares of any stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock or (B) purchase any
shares of Series A Preferred Stock.

In the event of the liquidation, dissolution or winding up of our company,
the holders of any such Series A Preferred Stock will be entitled to receive
(after satisfaction of or provision for liabilities and any preferential amounts
payable with respect to any preferred stock ranking senior to the Series A
Preferred Stock) liquidation payments per share in an amount equal to the
greater of (a) $ plus an amount equal to accrued and unpaid dividends and
distributions thereon to the date of such payment and (b) 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, combination 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 such event.

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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 the company or any holder thereof.

The Rights will have certain antitakeover 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 favorable to the interest of Delphi'
stockholders. Because Delphi's Board can redeem the Rights or approve a
Permitted Offer, the Rights should not interfere with a merger or other business
combination approved by Delphi's Board.

The Rights Plan excludes GM and its affiliates and associates from being
Acquiring Persons until GM first ceases to beneficially own 15% or more of the
Voting Stock of Delphi then outstanding.

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SHARES ELIGIBLE FOR FUTURE SALE

GENERAL

The shares of common stock sold in the Offering (or shares if the
U.S. underwriters exercise their over-allotment option in full) will be freely
tradeable without restriction under the Securities Act of 1933, as amended (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
("Rule 144") promulgated under the Securities Act, which shares will remain
subject to the resale limitations of Rule 144.

The shares of 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) 1% of the then outstanding shares of
common stock and (2) 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 common stock pursuant to the Offering or
acquires shares of 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
broker's 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 or registration under the
Securities Act.

Sales of substantial amounts of the 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 to the holders of its $1 2/3 common stock
all of the shares of Delphi common stock which it owns. See "Delphi and Its
Separation from General Motors--GM's Plan to Divest Delphi" and "Risk
Factors--Risk Factors Relating to Separating Our Company from General
Motors--Risk of Not Completing the Distribution." 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.

An aggregate of shares of common stock are reserved for issuance
under the company's Stock Incentive Plan. The company intends to file a
registration statement on Form S-8 covering the issuance of shares of common
stock pursuant to the Stock Incentive Plan. Accordingly, the shares issued
pursuant to the Stock Incentive Plan will be freely tradeable, subject to the
restrictions on resale by affiliates under Rule 144.

REGISTRATION RIGHTS OF GENERAL MOTORS

Pursuant to the Registration Rights Agreement we will enter into with
General Motors, at any time after GM informs us that it no longer intends to
complete the Distribution or that the Distribution was completed
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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 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 our substantial amounts of our common stock in the public
market, or the perception that such sales might occur (whether as a result of
the Distribution, GM's registration rights or otherwise) could have a material
adverse effect on the market price of our common stock.

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CERTAIN 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 (counting 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). Resident aliens are subject
to U.S. federal income tax as if they were U.S. citizens.

EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF 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. In addition, if (1) 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, are
attributable to a United States permanent establishment of the Non-U.S. Holder
and (2) an Internal Revenue Service Form 4224 (or successor form) is filed with
the payer, the dividends are not 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. 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.

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 (unless the payer
has knowledge to the contrary) 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,
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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 (1) the common stock was "regularly traded" on an established
securities market within the meaning of applicable Treasury regulations and (2)
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. 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

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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 (1) is engaged in the
conduct of a trade or business in the United States or (2) 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 (1) 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 (2) 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.

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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 common stock set forth opposite the names of
such underwriters below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
U.S. underwriters:
Morgan Stanley & Co. Incorporated.........................
Goldman, Sachs & Co.......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated........
Donaldson, Lufkin & Jenrette Securities Corporation.......
Schroder & Co. Inc........................................
--------
Subtotal...............................................
--------
International underwriters:
Morgan Stanley & Co. International Limited................
Goldman Sachs International...............................
Merrill Lynch International...............................
Donaldson, Lufkin & Jenrette International................
J. Henry Schroder & Co. Limited...........................

Subtotal...............................................
--------
Total................................................
========
</TABLE>

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 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 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: (1)
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 (2) 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

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Canadian person. Pursuant to the Agreement between U.S. and International
Underwriters, each international underwriter has represented and agreed that,
with certain exceptions: (1) it is not purchasing any shares for the account of
any United States or Canadian person and (2) 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 (1) made by it in its capacity as a U.S. underwriter apply only to it
in its capacity as a U.S. underwriter and (2) 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."

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 (1) 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; (2) 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 (3) 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,

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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.

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 $ a share under the public offering price. Any underwriter
may allow, and such dealers may reallow, a concession not in excess of $ 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
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 $ , the total underwriters' discounts and commissions would be
$ and total proceeds to Delphi would be $ .

The Underwriters have informed Delphi that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

Application has been made to list the common stock on the NYSE under the
symbol "DPH." 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 may reserve up to 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.
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 the company and certain directors and executive officers of the
company 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 days after the date of this prospectus, (1) 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 (2) 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 in
clause (1) or (2) above is to be settled by delivery of common stock or such
other securities, in cash or otherwise. The restrictions described in this
paragraph do not apply to (1) the sale of the shares to the underwriters, (2)
the issuance by Delphi of shares of common stock upon the exercise of an option
or a warrant or the
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conversion of a security outstanding on the date of this prospectus of which the
underwriters have been advised in writing, (3) transactions by any person other
than Delphi relating to shares of common stock or other securities acquired in
open market transactions after the completion of the offering of the shares, (4)
the Distribution or (5) the conversion of GM Awards into substitute awards under
Delphi's incentive plans in connection with the Distribution.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover 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. 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.

The underwriters have agreed to pay certain 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 will be determined by negotiations
among Delphi, General Motors and the U.S. representatives. Among the factors to
be considered in determining the initial public offering price will be 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. The estimated initial public
offering price range set forth on the cover page of this prospectus is subject
to change as a result of market conditions and other factors.

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.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission (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 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
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.

159
<PAGE> 165

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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 Consolidated Financial Statements (Unaudited)...... F-6
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
</TABLE>

F-1
<PAGE> 166

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
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 intracompany debt, including 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 6)
Deficit:
General Motors' net investment............................ (335) (2)
Accumulated translation adjustments....................... (78) (37)
------- -------
Total deficit........................................ (413) (39)
------- -------
Total liabilities and deficit............................... $15,026 $14,930
======= =======
</TABLE>

See notes to consolidated financial statements.
F-2
<PAGE> 167

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
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 (benefit)...................................... 352 (178)
------- -------
Net income (loss)........................................... $ 736 $ (181)
======= =======
Earnings per share
Basic and diluted.........................................
</TABLE>

See notes to consolidated financial statements.
F-3
<PAGE> 168

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (UNAUDITED)

<TABLE>
<CAPTION>
ACCUMULATED GENERAL TOTAL
TRANSLATION MOTORS' NET EQUITY
ADJUSTMENTS INVESTMENT (DEFICIT)
----------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
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)
==== ======= =======
</TABLE>

See notes to consolidated financial statements.
F-4
<PAGE> 169

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
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
====== =====
</TABLE>

See notes to consolidated financial statements.
F-5
<PAGE> 170

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BACKGROUND AND BASIS OF PRESENTATION

BACKGROUND--Delphi Automotive Systems Corporation ("Delphi") 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 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 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.

Delphi was incorporated in late 1998 with two billion shares of $0.01 par
value common stock and 650 million shares of $0.10 par value preferred stock
authorized. As of , common shares and preferred
shares were issued and outstanding. All outstanding shares are owned by GM.

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 and
intracompany note payable with 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
billion intracompany note payable to GM and outstanding debt at Delphi's
international subsidiaries. The $3 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.

F-6
<PAGE> 171

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
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 or paying GM for underfunding
relating to such employees. The amount of such underfunding varies
depending on factors such as discount rates, asset returns, contribution
levels and other factors. On December 31, 1997 the underfunding
attributable to Delphi 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 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 Standard ("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 GM's consolidated income tax environment. As a result,
Delphi expects its effective income tax rate in future periods will
generally be higher than its historical effective income tax rates.

CASH FLOWS

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 pensions 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 from 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 ($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 ($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 (in millions):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
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
====== ======
</TABLE>

4. COMPREHENSIVE INCOME (LOSS)

Delphi's comprehensive income (loss) was as follows (in millions):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------
1997 1998
---- ----
<S> <C> <C>
Net income (loss)........................................... $736 $(181)
Other comprehensive income (loss)--foreign currency
translation adjustments, net of tax....................... (67) 41
---- -----
Comprehensive income (loss)................................. $669 $(140)
==== =====
</TABLE>

F-8
<PAGE> 173

5. SEGMENT REPORTING

Selected information regarding Delphi's product sectors is as follows (in
millions):

<TABLE>
<CAPTION>
SAFETY,
ELECTRONICS & THERMAL &
MOBILE ELECTRICAL DYNAMICS &
COMMUNICATION ARCHITECTURE PROPULSION OTHER(A) TOTAL
------------- ------------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
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)
====== ====== ======= ===== =======
</TABLE>

- ------------------
(a) Other includes activity not allocated to the product sectors and the
elimination of inter-sector transactions.

6. COMMITMENTS AND CONTINGENCIES

Delphi is from time to time subject to various legal actions and claims
incidental to the 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 from such matters will
not have a material adverse impact on the consolidated financial position,
results of operations or cash flows of Delphi.

7. 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 (1) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment
(fair value hedge), (2) a hedge of the exposure to variable cash flows of a
forecasted transaction (cash flow hedge) or (3) 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 (foreign currency hedge).

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 for the
American Institute of Certified Public Accountants ("ASEC") 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 will adopt 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 is required to
adopt the pronouncement 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
<PAGE> 175

The accompanying financial statements give effect to the consummation of
the Master Separation Agreement (the "Separation Agreement") between Delphi
Automotive Systems Corporation and General Motors Corporation effective January
1, 1999. The following report is in the form that will be furnished by Deloitte
& Touche LLP upon the consummation of the Separation Agreement described in Note
1 to the consolidated financial statements assuming that no other material
events occur that would affect the accompanying financial statements or require
disclosure therein.

DELOITTE & TOUCHE LLP
Detroit, Michigan
November 16, 1998

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, pursuant to the Master Separation
Agreement effective January 1, 1999, as described in Note 1, 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, pursuant to the Master
Separation Agreement described in Note 1, 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.

Detroit, Michigan
January , 1999

F-11
<PAGE> 176

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
---- ----
(IN MILLIONS)
<S> <C> <C>
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
======= =======
</TABLE>

See notes to consolidated financial statements.
F-12
<PAGE> 177

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
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.........................................
</TABLE>

See notes to consolidated financial statements.
F-13
<PAGE> 178

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
ACCUMULATED GENERAL TOTAL
COMPREHENSIVE TRANSLATION MOTORS' NET EQUITY
INCOME ADJUSTMENTS INVESTMENT (DEFICIT)
------------- ----------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
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)
==== ======= =======
</TABLE>

See notes to consolidated financial statements.
F-14
<PAGE> 179

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>

See notes to consolidated financial statements.
F-15
<PAGE> 180

DELPHI AUTOMOTIVE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND BASIS OF PRESENTATION

- A split-off transaction 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.

Delphi was incorporated in late 1998 with two billion shares of $0.01 par
value common stock and 650 million shares of $0.10 par value preferred stock
authorized. As of , common shares and preferred shares were
issued and outstanding. All outstanding shares are owned by GM.

The following significant factors are reflected in the consolidated
financial statements:

CAPITAL ARRANGEMENTS

F-16
<PAGE> 181

EMPLOYEE BENEFITS ARRANGEMENTS

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

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 are included
F-17
<PAGE> 182
in cash flows from financing activities. The net cash effect of the
separation adjustments exceeded the net 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
pensions 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 fully diluted earnings per share
attributable to Delphi common stock was determined based on Delphi net income
for the period divided by the common shares outstanding at the time of the
Offering. There were no potential common shares outstanding during the period
which would have a dilutive effect on earnings per share.

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 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.

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
F-18
<PAGE> 183

application of such reserve. The effect of the LIFO method of accounting was to
increase Delphi's net 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 arrangement between Delphi and GM, GM will retain
responsibility for environmental cleanup and claims for all non-performing
assets, including matters previously associated with the business of Delphi.
Non-performing assets include: (1) offsite waste disposal sites that are
identified prior to January 1, 1999 as requiring investigation or cleanup; (2)
facilities closed and vacated prior to December 31, 1998; and (3) businesses
sold prior to December 31, 1998. After January 1, 1999, Delphi and GM will each
be responsible for environmental cleanup and claims at their respective
properties and have each agreed to hold the other party harmless with respect
thereto. Liability resulting from offsite waste disposal sites that are
discovered after January 1, 1999 to require investigation or cleanup will be
allocated between Delphi and GM, based upon the respective contributions of
waste from Delphi's facilities and from facilities for which GM retains
responsibility.

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 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.

F-19
<PAGE> 184

DERIVATIVE FINANCIAL INSTRUMENTS--During the periods presented, Delphi's
exposure to fluctuations in foreign exchange rates and certain commodities
prices were 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 corporate policies
and procedures.

GM established the 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 Separation. This assignment will not alter the original terms of the
contracts being transferred. In 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.

F-20
<PAGE> 185

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 labor
supply in employees working under union collective bargaining agreements, which
represent 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. Work stoppages by Delphi's employees or by employees of Delphi's
customers could disrupt Delphi's production of automotive components and
systems.

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.

In March 1998, the Accounting Standards Executive Committee for the
American Institute of Certified Public Accountants ("ASEC") 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 will adopt 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 is required to
adopt the pronouncement 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

F-21
<PAGE> 186

("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 ($870 million after-tax). This charge was
comprised of the following:

<TABLE>
<CAPTION>
PRE-TAX AFTER-TAX
------- ---------
<C> <C> <S>
$791 million $506 million Underperforming assets
$55 million $34 million Capacity reductions
$516 million $330 million Assets held for disposal
</TABLE>

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, coil spring
and lighting 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.

Separately, Delphi recognized a charge to cost of sales totaling $80
million ($50 million after-tax) during 1997 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
component facilities located in Flint and Livonia, Michigan and Oshawa and
Windsor, Ontario, which resulted in a loss of $247 million ($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 (in millions):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
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
====== ======
</TABLE>

F-22
<PAGE> 187

5. INCOME TAXES

Income before income taxes for U.S. and foreign operations was as follows
(in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
U.S. income (loss)................................... $1,293 $ 584 $(99)
Foreign income....................................... 653 528 358
------ ------ ----
Total........................................... $1,946 $1,112 $259
====== ====== ====
</TABLE>

The provision for income taxes was as follows (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
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
==== ===== =======
</TABLE>

A reconciliation of the provision for income taxes compared with the
amounts at the U.S. federal statutory rate was as follows (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
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
==== ==== ====
</TABLE>

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-23
<PAGE> 188

Temporary differences that gave rise to deferred tax assets and liabilities
included the following (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1997
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
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
====== ==== ====== ====
</TABLE>

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. In
addition, the annual tax provisions 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.

6. PROPERTY, NET

Property, net consisted of the following (in millions):

<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED USEFUL ------------------
LIVES (YEARS) 1996 1997
---------------- ---- ----
<S> <C> <C> <C>
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
======= =======
</TABLE>

F-24
<PAGE> 189

7. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in millions):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
---- ----
<S> <C> <C>
Payroll related obligations................................. $ 861 $ 636
Income taxes payable........................................ -- 671
Other....................................................... 543 357
------ ------
Total.................................................. $1,404 $1,664
====== ======
</TABLE>

8. INTRACOMPANY NOTES PAYABLE AND LONG-TERM DEBT

Pursuant to a Cash and Debt Management Agreement, Delphi had outstanding an
intracompany note payable with the automotive and corporate sectors of GM of
approximately $3 billion at both December 31, 1996 and 1997. This intracompany
note bears interest at variable interest rates established consistent with
Delphi's overall credit risk as a stand-alone entity; such rates approximated
7.4%, 7.3% and 7.2% in 1995, 1996 and 1997, respectively. Such 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.

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

F-25
<PAGE> 190

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 transfer of specified obligations and
plan assets to a Delphi plan at the date of 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 (in millions). The measurement date
utilized for such disclosures is December 31.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1997
ASSETS ASSETS
EXCEED EXCEED
ACCUMULATED ACCUMULATED
BENEFITS BENEFITS
----------- -----------
<S> <C> <C>
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
====== ======
</TABLE>

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:

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
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%
</TABLE>

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

F-26
<PAGE> 191

postretirement plans, although most participants are covered by government
sponsored or administered programs. The cost of such programs generally is not
significant to Delphi.

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 (in
millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>

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 (in millions):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
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
====== ======
</TABLE>

- ------------------
(1) During 1997, Delphi contributed $925 million to a Voluntary Employees'
Beneficiary Association trust (VEBA). 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.

The principal assumptions used were as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
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%
</TABLE>

- ------------------
(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%.

F-27
<PAGE> 192

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.

12. OTHER COMPREHENSIVE INCOME (LOSS)

The change in other comprehensive income (loss), net of related tax effect,
is as follows at December 31, (in millions):

<TABLE>
<CAPTION>
PRE-TAX TAX EFFECT NET
AMOUNT (CREDIT) AMOUNT
------- ---------- ------
<S> <C> <C> <C>
Other comprehensive income (loss)--foreign
currency translation adjustments:
1995....................................... $ 42 $(16) $ 26
1996....................................... (50) 19 (31)
1997....................................... (134) 51 (83)
</TABLE>

13. OTHER INCOME, NET

Other income, net included the following (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
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
==== ==== ====
</TABLE>

F-28
<PAGE> 193

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 final separation from GM, 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 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.

F-29
<PAGE> 194

Financial information segregated by reportable product sectors is as
follows (in millions):

<TABLE>
<CAPTION>
SAFETY,
ELECTRONICS & THERMAL
MOBILE & ELECTRICAL DYNAMICS &
1995 COMMUNICATION ARCHITECTURE PROPULSION OTHER(A) TOTAL
---- ------------- ------------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
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 (benefit)......... 236 296 161 (54) 639
Net income (loss).............. 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
</TABLE>

<TABLE>
<CAPTION>
SAFETY,
ELECTRONICS & THERMAL
MOBILE & ELECTRICAL DYNAMICS &
1996 COMMUNICATION ARCHITECTURE PROPULSION OTHER(A) TOTAL
---- ------------- ------------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
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 (benefit)......... 106 166 67 (80) 259
Net income (loss).............. 349 548 222 (266) 853
Sector assets.................. 2,615 5,687 6,396 692 15,390
Capital expenditures........... 195 418 548 16 1,177
</TABLE>

<TABLE>
<CAPTION>
SAFETY,
ELECTRONICS & THERMAL
MOBILE & ELECTRICAL DYNAMICS &
1997 COMMUNICATION ARCHITECTURE PROPULSION OTHER(A) TOTAL
---- ------------- ------------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
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 (benefit)......... 11 48 3 (18) 44
Net income (loss).............. 53 234 15 (87) 215
Sector assets.................. 2,063 5,749 6,328 886 15,026
Capital expenditures........... 122 464 778 19 1,383
</TABLE>

- -------------------------
(a) Other includes activity not allocated to the product sectors and the
elimination of inter-sector transactions.

F-30
<PAGE> 195

Information concerning principal geographic areas is as follows (in
millions):

<TABLE>
<CAPTION>
1995 1996 1997
------------------- ------------------- -------------------
NET NET NET NET NET NET
SALES PROPERTY SALES PROPERTY SALES PROPERTY
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
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
======= ====== ======= ====== ======= ======
</TABLE>

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.

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

F-31
<PAGE> 196

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-32
<PAGE> 197

18. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH TOTAL
--- --- --- --- -----
<S> <C> <C> <C> <C> <C>
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
====== ====== ====== ====== =======
</TABLE>

F-33
<PAGE> 198
PROSPECTUS COVER GATEFOLD
INSIDE BACK

A LONG, PROUD HISTORY OF INNOVATION.

[VIEW OF VEHICLE INSTRUMENT PANEL]

INDUSTRY FIRSTS

Delphi Automotive Systems has been providing world-class technology to General
Motors and manufacturers around the world for almost a century. Some of our
pioneering developments include:

First electric self-starter
First in-dash radio
First turn signal
First catalytic converter
First airbag
First tilt wheel
First independent front-
wheel suspension
First energy-absorbing
steering column
First electric power
sliding door
First integrated child
safety seat

NEXT CENTURY WINNERS

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, distance an individual is from an air bag, whether a seat belt is
being used and severity of a collision.

[CRYSTAL BALL IN HAND]

NETWORK VEHICLE - Delphi's Network Vehicle received the "InfoVision Award" from
the International Engineering Consortium. In the future we will bring
satellitecommunications, E-mail, the World Wide Web, movies, games and more into
the vehicle you drive.

[INTERIOR VIEW OF NETWORK VEHICLE]

SYSTEMS ARCHITECTURE - Because of Delphi's diverse technologies, we have the
ability to integrate vehicle subsystems. This allows us to help manufacturers
maximize vehicle performance while minimizing environmental impact.

[CAR IN LANDSCAPE]
<PAGE> 199
PROSPECTUS COVER GATEFOLD
OUTSIDE BACK

[DELPHI AUTOMOTIVE SYSTEMS LOGO]
<PAGE> 200

[ALTERNATE INTERNATIONAL COVER]
PROSPECTUS (Subject to Completion)
Issued November 16, 1998

[DELPHI AUTOMOTIVE SYSTEMS CORPORATION LOGO]
Delphi Automotive Systems Corporation
COMMON STOCK

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

WE WILL APPLY FOR THE LISTING OF OUR COMMON STOCK ON
THE NEW YORK STOCK EXCHANGE UNDER THE TRADING
SYMBOL "DPH."

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

INVESTING IN OUR COMMON STOCK INVOLVES
RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
------------------------
PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS DELPHI
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................... $ $ $
Total........................ $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

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

MORGAN STANLEY DEAN WITTER

GOLDMAN SACHS INTERNATIONAL MERRILL LYNCH INTERNATIONAL

DONALDSON, LUFKIN & JENRETTE SCHRODERS

, 1999
<PAGE> 201

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission registration fee and the New York
Stock Exchange listing fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ------
<S> <C>
Securities and Exchange Commission registration fee......... $417,000
NASD registration fee....................................... 30,500
NYSE listing fee............................................ *
Blue Sky qualification fees and expenses.................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent and registrar fees........................... *
Directors and officers insurance............................ *
Printing and engraving expenses............................. *
Miscellaneous expenses...................................... *
--------
Total.................................................. $ *
========
</TABLE>

- ------------------
* To be completed by Amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

GENERAL CORPORATION LAW

Delphi is incorporated under the laws of the State of Delaware. Section 145
("Section 145") of the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended (the "General Corporation Law"), inter
alia, provides that a Delaware corporation may indemnify any persons who were,
are or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reasons of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer, director,
employee or agent is adjudged to be liable to the corporation. Where an officer,
director, employee or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director has actually and reasonably
incurred.

II-1
<PAGE> 202

Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.

CERTIFICATE OF INCORPORATION

Delphi's Certificate of Incorporation and By-laws provide for the
indemnification of officers and directors to the fullest extent permitted by the
General Corporation Law.

All of Delphi's directors and officers will be covered by insurance
policies maintained by it against certain liabilities for actions taken in their
capacities as such, including liabilities under the Securities Act of 1933, as
amended.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In connection with its incorporation and organization, on September 16,
1998, Delphi issued 10 shares of common stock to General Motors Corporation.
Delphi believes that this issuance was exempt from registration under Section
4(2) of the Securities Act as a transaction not involving any public offering.
In connection with this Offering, these 10 shares were split into
shares.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Form of Restated Certificate of Incorporation of Delphi.*
3.2 Form of Bylaws of Delphi.*
4.1 Form of Delphi's Common Stock certificate.*
4.2 Form of Rights Agreement relating to Delphi's Stockholder
Rights Plan.*
5.1 Opinion of Kirkland & Ellis re: legality of shares being
registered.*
10.1 Master Separation Agreement between Delphi and General
Motors.*
10.2 Supply Agreement between Delphi and General Motors.*
10.3 IPO and Distribution Agreement between Delphi and General
Motors.*
10.4 Registration Rights Agreement between Delphi and General
Motors.*
10.5 Form of Non-Compete Agreement between Delphi and certain of
its officers and other executives.*
10.6 Delphi Automotive Systems Corporation Stock Incentive Plan.*
10.7 Delphi Automotive Systems Corporation Performance
Achievement Plan.*
10.8 Delphi Automotive Systems Corporation Annual Incentive
Plan.*
10.9 Delphi Automotive Systems Corporation Deferred Compensation
Plan for Non-Employee Directors.*
21.1 Subsidiaries of Delphi.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Power of Attorney (included on the signature page of this
Registration Statement).
</TABLE>

II-2
<PAGE> 203

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
99.1 Consent of Virgis W. Colbert to be named as a director
nominee.
99.2 Consent of Shoichiro Irimajiri to be named as a director
nominee.
99.3 Consent of Oscar De Paula Bernardes Neto to be named as a
director nominee.
99.4 Consent of John D. Opie to be named as a director nominee.
99.5 Consent of Roger S. Penske to be named as a director
nominee.
</TABLE>

- ------------------
* To be filed by amendment.

(b) Financial Statement Schedules.

Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or
notes thereto.

II-3
<PAGE> 204

UNDERTAKINGS

The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

Insofar as the indemnification for liabilities arising under the Securities
Act of 1933 may be permitted as to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payments by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned Registrant hereby undertakes that:

(1) for purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective;
and

(2) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.

II-4
<PAGE> 205

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Troy, State of Michigan,
on November 16, 1998.
DELPHI AUTOMOTIVE SYSTEMS CORPORATION

By: /s/ J.T. BATTENBERG III
------------------------------------
J.T. Battenberg III
Chairman, Chief Executive Officer
and President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on November 16,
1998 in the capacities indicated.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of J.T. Battenberg III and Alan S. Dawes, or
any of them, each acting alone, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for such person and in his
name, place and stead, in any and all capacities, in connection with the
Registrant's Registration Statement on Form S-1 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Registrant
or on behalf of the undersigned as a director or officer of the Registrant, and
any and all amendments or supplements to the Registration Statement, including
any and all stickers and post-effective amendments to the Registration
Statement, and to sign any and all additional registration statements relating
to the same offering of securities as the Registration Statement that are filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>

/s/ J.T. BATTENBERG III Chairman, Chief Executive Officer and President
- --------------------------------------------------- (Principal Executive Officer)
J.T. Battenberg III

/s/ ALAN S. DAWES Chief Financial Officer and Vice President
- --------------------------------------------------- (Principal Financial Officer)
Alan S. Dawes

/s/ PAUL R. FREE Chief Accounting Officer and
- --------------------------------------------------- Controller
Paul R. Free (Principal Accounting Officer)

/s/ THOMAS H. WYMAN Director
- ---------------------------------------------------
Thomas H. Wyman

/s/ JOHN F. SMITH, JR. Director
- ---------------------------------------------------
John F. Smith, Jr.

/s/ HARRY J. PEARCE Director
- ---------------------------------------------------
Harry J. Pearce

/s/ J. MICHAEL LOSH Director
- ---------------------------------------------------
J. Michael Losh
</TABLE>

II-5
<PAGE> 206

INDEX OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Form of Restated Certificate of Incorporation of Delphi.*
3.2 Form of Bylaws of Delphi.*
4.1 Form of Delphi's Common Stock certificate.*
4.2 Form of Rights Agreement relating to Delphi's Stockholder
Rights Plan.*
5.1 Opinion of Kirkland & Ellis re: legality of shares being
registered.*
10.1 Master Separation Agreement between Delphi and General
Motors.*
10.2 Supply Agreement between Delphi and General Motors.*
10.3 IPO and Distribution Agreement between Delphi and General
Motors.*
10.4 Registration Rights Agreement between Delphi and General
Motors.*
10.5 Form of Non-Compete Agreement between Delphi and certain of
its officers and other executives.*
10.6 Delphi Automotive Systems Corporation Stock Incentive Plan.*
10.7 Delphi Automotive Systems Corporation Performance
Achievement Plan.*
10.8 Delphi Automotive Systems Corporation Annual Incentive
Plan.*
10.9 Delphi Automotive Systems Corporation Deferred Compensation
Plan for Non-Employee Directors.*
21.1 Subsidiaries of Delphi.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 Consent of Virgis W. Colbert to be named as a director
nominee.
99.2 Consent of Shoichiro Irimajiri to be named as a director
nominee.
99.3 Consent of Oscar De Paula Bernardes Neto to be named as a
director nominee.
99.4 Consent of John D. Opie to be named as a director nominee.
99.5 Consent of Roger S. Penske to be named as a director
nominee.
</TABLE>

- ------------------
* To be filed by amendment.

<PAGE> 1

EXHIBIT 23.1

The financial statements and independent auditors' report referred to in
the following consent give effect to the consummation of the Master Separation
Agreement (the "Separation Agreement") between Delphi Automotive Systems
Corporation and General Motors Corporation effective January 1, 1999. The
following independent auditors' consent is in the form that will be furnished by
Deloitte & Touche LLP upon the consummation of the Separation Agreement
described in Note 1 to the consolidated financial statements assuming that no
other material events occur that would affect the accompanying financial
statements or require disclosure therein.

/s/ DELOITTE & TOUCHE LLP
Detroit, Michigan
November 16, 1998

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement No. 333- relating
to shares of Common Stock of Delphi Automotive Systems Corporation on
Form S-1 of our report dated January , 1999, appearing in the prospectus,
which is a part of this Registration Statement, and to the reference to us under
the heading "Experts" in such prospectus.

Detroit, Michigan
January , 1999

<PAGE> 1
EXHIBIT 99.1

CONSENT OF DIRECTOR NOMINEE

I hereby consent to being named as a nominee to the Board of Directors of
Delphi Automotive Systems Corporation, a Delaware corporation, in its
Registration Statement on Form S-1, and any and all amendments or supplements
thereto, to be filed with the U.S. Securities and Exchange Commission.

November 9, 1998 /s/ Virgis W. Colbert
---------------------------
SIGNATURE

VIRGIS W. COLBERT
---------------------------
TYPE OR PRINT NAME

<PAGE> 1
EXHIBIT 99.2

CONSENT OF DIRECTOR NOMINEE

November 11, 1998 /s/ Shoichiro Irimajiri
-----------------------------------
SIGNATURE

SHOICHIRO IRIMAJIRI
-----------------------------------
TYPE OR PRINT NAME

<PAGE> 1
EXHIBIT 99.3

CONSENT OF DIRECTOR NOMINEE

November 10, 1998 /s/ Oscar de Paula Bernardes Neto
--------------------------------
SIGNATURE

OSCAR DE PAULA BERNARDES NETO
--------------------------------
TYPE OR PRINT NAME

<PAGE> 1

EXHIBIT 99.4

CONSENT OF DIRECTOR NOMINEE

November 11, 1998 /s/ John D. Opie
---------------------
SIGNATURE

JOHN D. OPIE
---------------------
TYPE OR PRINT NAME

<PAGE> 1

EXHIBIT 99.5

CONSENT OF DIRECTOR NOMINEE

/s/ Roger S. Penske
November 13, 1998 -------------------------------
SIGNATURE

ROGER S. PENSKE
-------------------------------
TYPE OR PRINT NAME