Aptiv (APTV) 10-K risk factor changes: FY2019 vs FY2018

[removed: Risks] [added: Risks] Related to Business Environment and Economic [removed: Conditions][added: Conditions]

[removed: The] [added: The] cyclical nature of automotive sales and production can adversely affect our [removed: business.][added: business.]

[removed: A] [added: A] prolonged economic downturn or economic uncertainty could adversely affect our business and cause us to require additional sources of financing, which may not be [removed: available.][added: available.]

Due to overall global economic conditions in [removed: 2018,] [added: 2019,] the automotive industry experienced decreased global customer sales and production schedules.

Compared to [removed: 2017,] [added: 2018,] vehicle production in [removed: 2018 remained flat in North America and] [added: 2019] decreased by [removed: 1%] [added: 9%] in [added: China, 4% in North America, 4% in] Europe and 4% in [removed: China.][added: South America, our smallest region.]

[removed: Any] [added: Any] changes in consumer credit availability or cost of borrowing could adversely affect our [removed: business.][added: business.]

[removed: A] [added: A] drop in the market share and changes in product mix offered by our customers can impact our [removed: revenues.][added: revenues.]

[removed: We] [added: We] operate in the highly competitive automotive technology and component supply industry, and are dependent on the acceptance of new product introductions for continued [removed: growth.][added: growth.]

[removed: If] [added: If] we do not respond appropriately, the evolution of the automotive industry towards autonomous vehicles and MoD services could adversely affect our [removed: business.][added: business.]

[removed: We] [added: We] have invested substantial resources in markets and technologies where we expect growth and we may be unable to timely alter our strategies should such expectations not be [removed: realized.][added: realized.]

[removed: We] [added: We] may not be able to respond quickly enough to changes in regulations, technology and technological risks, and to develop our intellectual property into commercially viable [removed: products.][added: products.]

[removed: Certain] [added: Certain] of our businesses rely on relationships with collaborative partners and other third-parties for development of certain products and potential products, and such collaborative partners or other third-parties could fail to perform [removed: sufficiently.][added: sufficiently.]

[removed: Declines] [added: Declines] in the market share or business of our five largest customers may [removed: have a disproportionate adverse] [added: adversely] impact [removed: on] our revenues and [removed: profitability.][added: profitability.]

Our five largest customers accounted for approximately [removed: 41%] [added: 39%] of our total net sales [removed: in] [added: for] the year ended December 31, [removed: 2018.][added: 2019.]

Accordingly, our revenues may be [removed: disproportionately] [added: adversely] affected by decreases in any of their businesses or market share.

[removed: Because] [added: In addition, because] our customers typically have no obligation to purchase a specific quantity of parts, a decline in the production levels of any of our major customers, particularly with respect to models for which we are a significant supplier, could [removed: disproportionately] reduce our sales and thereby adversely affect our financial condition, operating results and cash flows.

[removed: Our] [added: Our] business in China is subject to aggressive competition and is sensitive to economic and market [removed: conditions.][added: conditions.]

[removed: As the size of the Chinese market continues to increase over the] long-term, we anticipate that additional competitors, both international and domestic, will seek to enter the Chinese market and that existing market participants will act aggressively to increase their market share.

Additionally, there have been periods of increased market volatility and moderations in the level of economic growth in China, which resulted in periods of lower automotive [added: production growth rates in China than those previously experienced.]

[removed: However,] [added: For example, automotive production in China decreased by 9% in 2019, which follows a decrease of 4% in the region in 2018,] primarily due to moderations in the level of economic growth and foreign trade [removed: uncertainties, vehicle production volumes in China decreased by 4% in 2018.][added: uncertainties.]

[removed: We] [added: We] may not realize sales represented by awarded [removed: business.][added: business.]

[removed: Continued] [added: Continued] pricing pressures, OEM cost reduction initiatives and the ability of OEMs to re-source or cancel vehicle programs may result in lower than anticipated margins, or losses, which may have a significant negative impact on our [removed: business.][added: business.]

Our customer supply agreements generally require step-downs in component pricing over the period of production, typically one to [removed: two] [added: three] percent per year.

[removed: Our] [added: Our] supply agreements with our OEM customers are generally requirements contracts, and a decline in the production requirements of any of our customers, and in particular our largest customers, could adversely impact our revenues and [removed: profitability.][added: profitability.]

[removed: Disruptions] [added: Disruptions] in the supply of raw materials and other supplies that we and our customers use in our products may adversely affect our [removed: profitability.][added: profitability.]

[removed: Adverse] [added: Adverse] developments affecting one or more of our suppliers could harm our [removed: profitability.][added: profitability.]

[removed: The] [added: The] loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a significant supplier could adversely affect our financial [removed: performance.][added: performance.]

[removed: Increases] [added: Increases] in costs of the materials and other supplies that we use in our products may have a negative impact on our [removed: business.][added: business.]

[removed: Our] [added: Our] hedging activities to address commodity price fluctuations may not be successful in offsetting future increases in those costs or may reduce or eliminate the benefits of any decreases in those [removed: costs.][added: costs.]

[added: The results of our hedging practice could be] positive, neutral or negative in any period depending on price changes in the hedged exposures.

[removed: We] [added: We] may encounter manufacturing [removed: challenges.][added: challenges.]

[removed: Changes] [added: Changes] in factors that impact the determination of our non-U.S. pension liabilities may adversely affect [removed: us.][added: us.]

Our primary funded non-U.S. plans are located in Mexico and the United Kingdom and were underfunded by [removed: $58] [added: $76] million as of December 31, [removed: 2018.][added: 2019.]

Obligations, net of plan assets, related to [removed: the] [added: these non-U.S.] defined benefit pension plans and statutorily required retirement obligations totaled [removed: $447] [added: $497] million at December 31, [removed: 2018,] [added: 2019,] of which [removed: $17] [added: $25] million is included in accrued liabilities, [removed: $432] [added: $474] million is included in long-term liabilities and $2 million is included in long-term assets in our consolidated balance [removed: sheet.][added: sheets.]

[removed: We] [added: We] may suffer future asset impairment and other restructuring charges, including write downs of long-lived assets, goodwill, or intangible [removed: assets.][added: assets.]

We cannot ensure that any current or future restructuring [added: actions] will be completed as planned or achieve the desired results.

[removed: If the] carrying amount of goodwill exceeds its implied fair value, the reporting unit would recognize an impairment loss for that excess.

[removed: Employee] [added: Employee] strikes and labor-related disruptions involving us or one or more of our customers or suppliers may adversely affect our [removed: operations.][added: operations.]

[removed: We] [added: We] may lose or fail to attract and retain key salaried employees and management [removed: personnel.][added: personnel.]

[removed: We] [added: We] are exposed to foreign currency fluctuations as a result of our substantial global operations, which may affect our financial [removed: results.][added: results.]

In particular, our recent agreement with Hyundai to form an autonomous driving joint venture is dependent on the success of our relationship with our joint venture partner.

For instance, certain United Automobile Workers (“UAW”) represented employees at GM initiated a labor strike in September 2019, lasting approximately six weeks in duration.

As GM is one of our largest customers, this labor strike adversely impacted our financial condition, operating results and cash flows for the year ended December 31, 2019.

As the size of the Chinese market continues to increase over the

If the

For instance, certain UAW represented employees at GM initiated a labor strike in September 2019, lasting approximately six weeks in duration.

As GM is one of our largest customers, this labor strike adversely impacted our financial condition, operating results and cash flows for the year ended December 31, 2019.

In addition, the ongoing coronavirus outbreak emanating from China at the beginning of 2020 has resulted in increased travel restrictions and extended shutdown of certain businesses in the region.

Any significant disruptions to our information technology systems or facilities, or those of third parties with which we do business, such as disruptions caused by cyber-attacks, could adversely impact our business.

Further, as we transition to offering more cloud-based solutions which are dependent on the Internet or other networks to operate, we may increasingly be the target of cyber threats, including computer viruses or breaches due to misconduct of employees, contractors or others who have access to our networks and systems, or those of third parties with which we do business.

Further, maintaining and updating these systems may require significant costs and often involves implementation, integration and security risks, including risks that we may not adequately anticipate the market or technological trends or that we may experience unexpected challenges that could cause financial, reputational and operational harm.

However, failing to properly respond to and invest in information technology advancements may limit our ability to attract and retain customers, prevent us from offering similar products and services as those offered by our competitors or inhibit our ability to meet regulatory or other requirements.

obligations.

Vehicle production in South America, our smallest region, increased 4% as compared to 2017.

See Item 1.

Supply Relationships with Our Customers.

production growth rates in China than those previously experienced.

For example, in 2017, automotive production in China increased 3% as compared to 2016, benefiting in part from a partial increase in the consumer vehicle tax reduction program.

The results of our hedging practice could be

As a result of the referendum, the British government formally initiated the process for withdrawal in March 2017.

The terms of any withdrawal are subject to a negotiation period that could last at least two years from the initiation date.

and we regularly evaluate potential opportunities, some of which could be material.

Any significant disruption could impact our business.

Further, as we transition to offering more cloud-based solutions, we may increasingly be the target of cyber threats.

For example, adoption of greenhouse gas rules in jurisdictions in which we operate facilities could require

Additionally, in determining the

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help you understand the business operations and financial condition of the Company for the [removed: three year] period ended December 31, [removed: 2018.][added: 2019.]

Discontinued Operations [added: and Held For Sale] to the audited consolidated financial statements included herein.

As the disposal of [removed: both] the Powertrain Systems [removed: and Thermal Systems businesses] [added: business] represented [added: a] strategic [removed: shifts] [added: shift] that will have a major effect on the Company’s operations and financial results, the assets and liabilities, operating results, and operating and investing cash flows for the previously reported Powertrain Systems [removed: and Thermal Systems segments] [added: segment] are presented as discontinued operations separate from the Company’s continuing operations for all periods presented.

[removed: Executive Overview][added: Executive Overview]

[removed: Our Business][added: Our Business]

We are one of the largest vehicle component manufacturers, and our customers include [removed: all 25] [added: 23] of the [added: 25] largest automotive original equipment manufacturers (“OEMs”) in the world.

[removed: Business Strategy][added: Business Strategy]

[removed: We have successfully created a competitive cost structure while investing in research and] development to grow our product offerings, which are aligned with the high-growth industry mega-trends, and re-aligned our manufacturing footprint into an efficient, low-cost regional service model, focused on increasing our profit margins.

Our achievements in [removed: 2018 included] [added: 2019 include] the following:

| • | Generating gross business bookings of [added: over] $22 billion, based upon expected volumes and pricing; |

| • | Generating $1.6 billion of cash from [removed: continuing] operations and net income of [removed: $1.1] [added: $1.0] billion; and |

| • | Maximizing our operational flexibility and profitability at all points in the normal automotive business cycle, by having approximately 96% of our hourly workforce based in best cost countries and approximately [removed: 13%] [added: 15%] of our hourly workforce composed of temporary employees. |

We repurchased [removed: $499] [added: $420] million of ordinary shares in [removed: 2018,] [added: 2019,] and in January 2019 announced a new share repurchase program of up to $2.0 billion of ordinary shares.

We also continued to return cash to our shareholders, paying cash dividends totaling [removed: $233] [added: $226] million in [removed: 2018.][added: 2019.]

[removed: Commercializing] [added: *Commercializing] the high-tech evolution of the automotive [removed: industry.][added: industry*.]

Additionally, in 2017 we acquired nuTonomy, Inc. [added: (“nuTonomy”)] in order to further accelerate the commercialization of automated driving solutions.

The acquisition of nuTonomy is the latest in a series of investments we have made to expand our position in the new mobility space, including the [removed: prior period acquisitions] [added: 2015 acquisition] of automated driving software developer [removed: Ottomatika and data service companies Control-Tec and Movimento.][added: Ottomatika.]

We believe the increasing societal demand for MoD services will accelerate the development of autonomous driving technologies, strongly [added: benefiting the MoD space.]

[removed: In addition, we have entered into agreements with the] Singapore Land Transport Authority and with the city of Boston to develop fully-autonomous vehicles and associated infrastructure as part of automated MoD pilots.

While we believe we are well-positioned in these markets, the high development cost of active safety and autonomous driving technologies may result in a higher risk of exposure to the success of new or disruptive technologies different than those being developed by [removed: us.][added: us or our partners.]

[removed: Leveraging] [added: *Leveraging] our engineering and technological [removed: capabilities.][added: capabilities*.]

[removed: Targeting] [added: *Targeting] the right business with the right [removed: customers.][added: customers*.]

[removed: Capitalizing] [added: *Capitalizing] on our scale, global footprint and established position in emerging [removed: markets.][added: markets*.]

[removed: Leveraging] [added: *Leveraging] our lean and flexible cost structure to deliver profitability and cash [removed: flow.][added: flow*.]

[added: *Advancing and maintaining an efficient capital structure.*] We actively manage our capital structure in order to maintain an investment grade credit rating and healthy capital ratios to support our business and maximize shareholder value.

[removed: Pursuing] [added: *Pursuing] selected acquisitions and strategic [removed: investments.][added: investments*.]

During [removed: 2018,] [added: 2019,] we continued to complete selected acquisitions and strategic investments in order to continue to enhance our product offerings and competitive position in growing market segments.

[removed: Trends,] [added: Trends,] Uncertainties and [removed: Opportunities][added: Opportunities]

In particular, changes to international trade [removed: agreements] [added: agreements,] such as the [removed: North American Free Trade] [added: United States-Mexico-Canada] Agreement and its [removed: anticipated successor] [added: predecessor] agreement, the [removed: United States-Mexico-Canada Agreement which is still subject to approval,] [added: North American Free Trade Agreement,] or other political pressures could affect the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions.

There have also been periods of increased market volatility and currency exchange rate fluctuations, both globally and most specifically within the United Kingdom (“U.K.”) and Europe, as a result of the [removed: U.K. referendum in which voters approved an] [added: U.K.’s] exit from the European Union (“E.U.”), commonly referred to as “Brexit,” [removed: scheduled to become effective on March 29, 2019.][added: the terms of which remain undetermined.]

[removed: Nevertheless, the proposed] [added: The] withdrawal has created significant uncertainty about the future relationship between the U.K. and the E.U. These developments, or the perception that any of them could occur, may adversely affect European and worldwide economic and market conditions, including vehicle production, significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets and could contribute to instability in global financial and foreign exchange markets, including increased volatility in interest rates and foreign exchange rates.

Although we do not have a material physical presence in the U.K., [removed: approximately 1% of our annual net sales are generated in the U.K. and] [added: with] less than 1% of our [removed: global] workforce [removed: is] located in the U.K. [removed: as] [added: and approximately 2%] of [removed: December 31, 2018,] [added: our annual net sales generated in] the [added: U.K., the] potential impacts of [removed: the impending] Brexit [removed: decision] could adversely impact other global economies, and in particular, the European economy, a region which accounted for approximately [removed: 32%] [added: 33%] of our total net sales for the year ended December 31, [removed: 2018.][added: 2019.]

[removed: Key] [added: *Key] growth [removed: markets.][added: markets*.]

There have been periods of increased market volatility and moderations in the level of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously [removed: experienced.][added: experienced, as evidenced by the reduction in volumes in the region during the year ended December 31, 2019.]

Despite [removed: these] [added: the 2019 vehicle production declines and the] recent moderations in the level of economic growth in China, rising income levels in China and other key growth markets are expected to result in stronger growth rates in these markets over the long-term.

[removed: Market] [added: *Market] driven [removed: products.][added: products*.]

[added: We are benefiting from the substantial] increase in vehicle content, software and electrification that requires a complex and reliable electrical architecture and systems to operate, such as automated advanced driver assistance technologies, electrical vehicle monitoring, active safety systems, lane departure warning systems, integrated vehicle cockpit displays, navigation systems and technologies that enable connected [removed: infotainment in vehicles.]

Global [removed: capabilities.]

For instance, [removed: the] recent [removed: presidential elections and] government changes in Mexico have yielded requirements that call for [removed: an increase] [added: increases] in minimum wages at the border as well as the interior of Mexico.

In addition, existing free trade laws and regulations, such as the [removed: North American Free Trade] [added: United States-Mexico-Canada] Agreement and its [removed: anticipated successor] [added: predecessor] agreement, the [removed: United States-Mexico-Canada Agreement which is still subject to approval,] [added: North American Free Trade Agreement,] provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements.

We have successfully created a competitive cost structure while investing in research and

| • | Furthering our leadership position in automated driving through the agreement with Hyundai to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies; |

| • | Expanding our platforms for growth in key industrial markets and executing on our end-market diversification strategy through the acquisitions of gabo Systemtechnik GmbH and Falmat Inc.; |

| • | Leveraging our investment grade credit metrics to further refine our capital structure and increase our financial flexibility by successfully issuing $300 million of 10-year, 4.35% senior unsecured notes and $350 million of 30-year, 5.40% senior unsecured notes, utilizing the combined proceeds to redeem our $650 million, 3.15% senior notes; |

| • | Continuing to grow our revenues, excluding the impacts of foreign currency exchange and commodity costs, despite global automotive vehicle production declines of 6% during the year; |

| • | Returning $646 million to shareholders through share repurchases and dividends; |

In addition, we have entered into agreements with the

In an effort to further our leadership position in the automated driving space, in September 2019 we entered into a definitive agreement with Hyundai to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies.

We expect this partnership to advance the development of production-ready autonomous driving systems for commercialization by bringing together our innovative vehicle technologies in the new mobility space with one of the world’s largest vehicle manufacturers.

The joint venture anticipates it will begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators and automotive manufacturers in 2022.

The transaction is subject to the satisfaction of customary closing conditions and the receipt of regulatory and other approvals, and is expected to close in the first quarter of 2020.

*Economic conditions*.

automotive vehicle production decreased 6% from 2018 to 2019, representing automotive vehicle production declines across all major regions during the year.

Compared to 2018, vehicle production in 2019 decreased by 9% in China, 4% in North America, 4% in Europe and 4% in South America, our smallest region.

infotainment in vehicles.

*Global capabilities*.

*Product development*.

*Pricing*.

*Industry consolidation*.

We experienced volume growth of 4% for the period, primarily as a result of increases in Europe and Asia Pacific.

Volume was also impacted by increased net sales of approximately $320 million as a result of the acquisitions of KUM and Winchester in mid and late-2018, respectively, and adverse impacts of approximately $200 million resulting from the GM labor strike.

This section discusses our consolidated results of operations and results of operations by segment for the years ended December 31, 2019 versus 2018.

A detailed discussion of our consolidated results of operations and results of operations by segment for the years ended December 31, 2018 versus 2017 can be found under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 4, 2019.

| Total net sales | $ | 14,357 | | | $ | 14,435 | | | $ | (78 | ) | | | $ | 371 | | | $ | (394 | ) | | $ | (55 | ) | | $ | — | | | $ | (78 | ) |

We experienced volume growth of 4% for the period, primarily as a result of increases in Europe and Asia Pacific.

Volume growth was also impacted by increased net sales of approximately $320 million as a result of the acquisitions of KUM and Winchester in mid and late-2018, respectively, and adverse impacts of approximately $200 million resulting from the GM labor strike.

| Cost of sales | $ | 11,711 | | | $ | 11,706 | | | $ | (5 | ) | | | $ | (548 | ) | | $ | 303 | | | $ | 155 | | | $ | 85 | | | $ | (5 | ) |

| Gross margin | $ | 2,646 | | | $ | 2,729 | | | $ | (83 | ) | | | $ | (177 | ) | | $ | (91 | ) | | $ | 155 | | | $ | 30 | | | $ | (83 | ) |

| • | $5 million of decreased warranty costs. |

| | 2019 | | | | 2018 | | | | Favorable/ (unfavorable) | | |

| | (dollars in millions) | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Favorable/ (unfavorable) | | |

| | 2019 | | | | 2018 | | | | Favorable/ (unfavorable) | | |

| | (dollars in millions) | | | | | | | | | | |

None of the Company’s individual restructuring programs initiated during 2019 were material and there have been no changes in previously initiated programs that have resulted (or are expected to result) in a material change to our restructuring costs.

| | Year Ended December 31, | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Favorable/ (unfavorable) | | |

The increase in interest expense during the year ended December 31, 2019 compared to 2018 reflects the issuance of the 2019 Senior Notes in the first quarter of 2019, which were utilized to redeem the 3.15% Senior Notes, and increased short-term borrowings.

| | Year Ended December 31, | | | | | | | | | | |

| | |

| --- | --- |

Also as described in Note 25.

Discontinued Operations to the audited consolidated financial statements included herein, on March 31, 2016, we completed the final step of our strategy to divest our former Thermal Systems business through the sale of our ownership interest in the Shanghai Delphi Automotive Air Conditioning (“SDAAC”) joint venture for net cash proceeds of $62 million.

Previously, on June 30, 2015 we completed the sale of the Company’s wholly owned Thermal Systems business to MAHLE GmbH (“MAHLE”) for net cash proceeds of approximately $660 million, and on September 24, 2015 we completed the sale of our interest in the Korea Delphi Automotive Systems Corporation (“KDAC”) joint venture to a separate buyer for net cash proceeds of $70 million.

The SDAAC and KDAC joint ventures were previously reported within the Thermal Systems segment.

Proceeds from the sale were used to fund growth initiatives, including acquisitions, as well as share repurchases.

| • | Accelerating our end-market diversification strategy through the acquisition of Winchester Interconnect, a leading provider of advanced interconnect solutions for harsh environment applications; |

| • | Further strengthening our leadership position in Asia Pacific and expanding our range of specialized connectors and cable management solutions through the acquisition of KUM; |

| • | Extending leadership position in perception systems by complementing our portfolio with enhanced interior sensing capabilities through investment in Affectiva, Inc., a leader in human perception artificial intelligence technology; |

| • | Announcing a partnership with Lyft, Inc. by launching a fleet of autonomous vehicles in Las Vegas which operate on Aptiv’s fully-integrated autonomous driving platform and are available to the public on the Lyft network; |

We have entered into a collaborative arrangement with Mobileye N.V. to develop the Centralized Sensing Localization and Planning (“CSLP”) system, a complete turn-key fully autonomous driving platform for our OEM customers and mobility partners, with the goal of being application ready in 2019 and production ready in the 2021 to 2022 time frame.

We also entered into a collaborative arrangement with Intel Corporation and the BMW Group to develop and deploy automated driving technology.

benefiting the MoD space.

Advancing and maintaining an efficient capital structure.

Economic conditions.

Although

global automotive vehicle production decreased 1% from 2017 to 2018, the levels of automotive vehicle production were uneven from a regional perspective.

Compared to 2017, vehicle production in 2018 in North America remained flat as compared to the reduced volumes experienced in the region in 2017, while vehicle production decreased by 1% in Europe and 4% in China.

Vehicle production in South America, our smallest region, increased 4% compared to 2017.

As a result of the referendum, the British government formally initiated the process for withdrawal in March 2017.

The terms of any withdrawal are subject to a negotiation period that could last at least two years from the initiation date.

We are benefiting from the substantial

We have developed a 48-volt mild hybrid vehicle electrical architecture solution, which maximizes the use of 48-volt electrification to minimize the demand on the engine, improving performance while lowering CO2 emissions by more than 10%.

Product development.

year, it is generally in the range of 15% to 20% of engineering expenses.

For example, we have entered into a collaborative arrangement with Mobileye N.V. to develop a complete turn-key fully autonomous driving platform for our OEM customers and mobility partners, with the goal of being application ready in 2019 and production ready in the 2021 to 2022 time frame.

Pricing.

For example, in September 2016, one of our OEM customers initiated a recall of approximately 3.64 million vehicles in the U.S. to enhance the airbag deployment system.

The Company supplied sensors and related control modules for the airbags in the affected vehicles.

Although Aptiv believes it supplied these components in compliance with the customer’s product specifications and validation criteria, we assisted with our customer’s efforts surrounding its recall, and during the first quarter of 2017, reached an agreement with our customer to share costs associated with the recall.

Accordingly, during the year ended December 31, 2017 we recognized an incremental $43 million charge in addition to our previously recorded reserve estimate related to this matter.

Industry consolidation.

The increase in our total net sales is primarily attributable to continued increased volumes in all major regions, as well as incremental sales as a result of our acquisitions of KUM in June 2018 and Winchester in October 2018.

The increase in our total net sales of 5% during the year ended December 31, 2017 as compared to 2016 was primarily attributable to continued increased volumes in the Europe and Asia Pacific regions, partially offset by volume decreases of 4% in the North America region.

We will continue

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[removed: Currency] [added: Currency] Exchange Rate [removed: Risk][added: Risk]

During the year ended December 31, [removed: 2018,] [added: 2019,] the foreign currency translation adjustment loss of [removed: $194] [added: $45] million was primarily due to the impact of a strengthening U.S. dollar, which increased approximately [removed: 5%] [added: 2%] in relation to both the Euro and the Chinese Yuan Renminbi from December 31, [removed: 2017.][added: 2018.]

As of December 31, [removed: 2018] [added: 2019] and [removed: December 31, 2017] [added: 2018] the net fair value liability of all financial instruments, including hedges and underlying transactions, with exposure to currency risk was approximately [removed: $1,412] [added: $1,199] million and [removed: $1,397] [added: $1,412] million, respectively.

The potential loss or gain in fair value for such financial instruments from a hypothetical 10% adverse or favorable change in quoted currency exchange rates would be approximately [removed: $131] [added: $78] million and [removed: $156] [added: $131] million [removed: at] [added: as of] December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

[removed: Commodity] [added: Commodity] Price [removed: Risk][added: Risk]

The net fair value of our contracts was a liability of [removed: approximately $22] [added: less than $1] million and [removed: an asset of approximately $35] [added: $22] million [removed: at] [added: as of] December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

If the price of the commodities that are being hedged by our commodity swaps/average rate forward contracts changed adversely or favorably by 10%, the fair value of our commodity swaps/average rate forward contracts would decrease or increase by [removed: $25] [added: $21] million and [removed: $19] [added: $25] million [removed: at] [added: as of] December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

As of December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: $385] [added: $450] million of floating rate debt, related to the Credit Agreement.

We may elect to change the selected interest rate over the term of the Credit [added: Facilities in accordance with the provisions of the Credit Agreement.]

The table below indicates interest rate sensitivity on interest expense to floating rate debt based on amounts outstanding as of December 31, [removed: 2018.][added: 2019.]

| [removed: Change] [added: Change] in [removed: Rate] [added: Rate] | | [removed: (impact] [added: (impact] to annual [removed: interest expense,] [added: interest expense,] in [removed: millions)] [added: millions)] |

| | | Credit Agreement |

Facilities in accordance with the provisions of the Credit Agreement.

| | | Tranche A Term Loan |

[removed: The completion of the Separation positioned] Aptiv [removed: as] [added: is] a leading global technology and mobility company primarily serving the automotive sector.

We are one of the largest vehicle component manufacturers, and our customers include [removed: all 25] [added: 23] of the [added: 25] largest automotive original equipment manufacturers (“OEMs”) in the world.

We have a presence in 44 countries and have approximately [removed: 18,600] [added: 20,200] scientists, engineers and technicians focused on developing market relevant product solutions for our customers.

[removed: Website] [added: Website] Access to Company’s [removed: Reports][added: Reports]

[removed: Our Company][added: Our Company]

| • | [removed: Signal] [added: Signal] and Power [removed: Solutions—This] [added: Solutions—This] segment provides complete design, manufacture and assembly of the vehicle’s electrical architecture, including engineered component products, connectors, wiring assemblies and harnesses, cable management, electrical centers and hybrid high voltage and safety distribution systems. Our products provide the critical signal distribution and computing power backbone that supports increased vehicle content and electrification, reduced emissions and higher fuel economy. |

| • | [removed: Advanced] [added: Advanced] Safety and User [removed: Experience—This] [added: Experience—This] segment provides critical components, systems [added: integration] and advanced software development for [removed: passenger] [added: vehicle] safety, security, comfort and [removed: vehicle operation,] [added: convenience,] including [removed: body controls, infotainment] [added: sensing] and [added: perception systems, electronic control units, multi-domain controllers, vehicle connectivity systems, application] |

We previously reported the results of our former Powertrain Systems [removed: and Thermal Systems businesses] [added: business] as [removed: segments.][added: a segment.]

As described above, we completed the spin-off of the Powertrain Systems segment into a new, independent public company [removed: named Delphi Technologies PLC] on December 4, 2017.

The assets and liabilities, operating results and operating and investing cash flows for the previously reported Powertrain Systems [removed: and Thermal Systems segments] [added: segment] are presented as discontinued operations separate from the Company’s continuing operations for all periods presented, as further described in Note 25.

Discontinued Operations [added: and Held For Sale] to the audited consolidated financial statements [added: included] herein.

Management’s Discussion and Analysis [added: of Financial Condition] and [added: Results of Operations and] Note 23.

Our customer base includes [removed: all 25] [added: 23] of the [added: 25] largest automotive OEMs in the world, and in [removed: 2018,] [added: 2019,] 27% of our net sales came from the Asia Pacific region, which we have identified as a key market likely to experience substantial long-term growth.

Our ten largest platforms in [removed: 2018] [added: 2019] were with eight different OEMs.

In addition, in [removed: 2018] [added: 2019] our products were found in 19 of the 20 top-selling vehicle models in the United States (“U.S.”), in [removed: 18] [added: 19] of the 20 top-selling vehicle models in Europe and in [removed: 14] [added: 15] of the 20 top-selling vehicle models in China.

[removed: Our Industry][added: Our Industry]

In [removed: 2018,] [added: 2019,] the industry experienced decreased global customer sales and production schedules.

[added: We have identified a core portfolio of] products that draw on our technical strengths and align with these mega-trends where we believe we can provide differentiation to our customers.

[added: Safe*.*] The first mega-trend, “Safe,” represents technologies aimed not just at protecting vehicle occupants when a crash occurs, but those that actually proactively reduce the risk of a crash occurring.

[removed: As a result, suppliers are focused on developing technologies aimed at protecting] vehicle occupants when a crash occurs, as well as advanced driver assistance systems that reduce driver distractions and automated safety features that proactively mitigate the risk of a crash occurring.

[added: Green*.*] The second mega-trend, “Green,” represents technologies designed to help reduce emissions, increase fuel economy and minimize the environmental impact of vehicles.

On a worldwide basis, the relevant authorities in the European Union, the U.S., China, India, Japan, Brazil, South Korea and Argentina have already instituted regulations requiring [removed: further] reductions in emissions and/or increased fuel [removed: economy through 2018.][added: economy.]

[added: Connected*.*] The third mega-trend, “Connected,” represents technologies designed to seamlessly integrate today’s highly complex vehicles into the electronic operating environment, and provide drivers with connectivity to the global information network.

[removed: Convergence] [added: Convergence] of Safe, Green and Connected Solutions in New Mobility and Autonomous [removed: Driving][added: Driving]

[added: Societal benefits of increased vehicle automation include enhanced safety] (resulting from collision avoidance and improved vehicle control), environmental improvements (a reduction in CO2 emissions resulting from optimized driving behavior), labor cost savings and improved productivity (as a result of alternate uses for drive time).

We are continuing to invest in the automated driving space, and have continued to develop market-leading automated driving platform solutions such as automated driving software, key active safety sensing technologies and our Multi-Domain [removed: Controller, which fuses information from sensing systems as well as mapping and navigation data to make driving decisions.]

We believe we are well-aligned with industry technology trends that will result in sustainable future growth in this space, and have partnered with [removed: other] leaders in [removed: the field] [added: their respective fields] to advance the pace of development and commercialization of these [added: emerging] technologies.

Additionally, in 2017 we acquired nuTonomy, Inc. in order to further accelerate [removed: our] [added: the] commercialization of automated driving solutions.

The acquisition of nuTonomy is the latest in a series of investments we have made to expand our position in the new mobility space, including the [removed: previous acquisitions] [added: 2015 acquisition] of automated driving software developer [removed: Ottomatika and data service companies Control-Tec and Movimento.][added: Ottomatika.]

We believe the increasing societal demand for [removed: mobility on demand (“MoD”)] [added: MoD] services will accelerate the development of autonomous driving technologies, strongly benefiting the MoD space.

[removed: Standardization] [added: Standardization] of Sourcing by [removed: OEMs][added: OEMs]

Many OEMs [removed: are adopting] [added: have adopted] global vehicle platforms to increase standardization, reduce per unit cost and increase capital efficiency and profitability.

As a result, OEMs [removed: are selecting] [added: select] suppliers that have the capability to manufacture products on a worldwide basis as well as the flexibility to adapt to regional variations.

[removed: Shorter] [added: Shorter] Product Development [removed: Cycles][added: Cycles]

[removed: Products][added: Products]

[removed: Signal] [added: Signal] and Power [removed: Solutions.][added: Solutions.]

| • | Distribution systems, including hybrid high voltage systems, are integrated into one optimized vehicle electrical system that can utilize smaller cable and gauge sizes and ultra-thin wall insulation (which product line makes up approximately [removed: 44%, 47%] [added: 42%, 44%] and [removed: 50%] [added: 47%] of our total revenue for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively). |

[removed: Advanced] [added: Advanced] Safety and User [removed: Experience.][added: Experience.]

This segment provides critical components, systems [added: integration] and advanced software development for [removed: passenger] [added: vehicle] safety, security, comfort and [removed: vehicle operation,] [added: convenience,] including [removed: body controls, infotainment] [added: sensing] and [added: perception systems, electronic control units, multi-domain controllers, vehicle] connectivity systems, [removed: active and passive safety electronics] [added: application software] and autonomous driving technologies.

[removed: Competition][added: Competition]

software and autonomous driving technologies.

Compared to 2018, vehicle production in 2019 decreased by 4% in both North America and Europe and also decreased by 4% in South America, our smallest region.

Additionally, increased market volatility and economic uncertainty in China has resulted in decreased vehicle production of 9% in 2019, which follows a decrease of 4% in the region in 2018.

As a result, suppliers are focused on developing technologies aimed at protecting

Controller, which fuses information from sensing systems as well as mapping and navigation data to make driving decisions.

There has also been increasing societal demand for mobility on demand (“MoD”) services, such as car- and ride-sharing, and an increasing number of traditional automotive companies have made investments in the MoD space.

In an effort to further our leadership position in the automated driving space, in September 2019 we entered into a definitive agreement with Hyundai Motor Group (“Hyundai”) to form a new joint venture focused on the design, development and commercialization of autonomous driving technologies, which is expected to close in the first quarter of 2020.

We expect this partnership to advance the development of production-ready autonomous driving systems for commercialization by bringing together our innovative vehicle technologies in the new mobility space with one of the world’s largest vehicle manufacturers.

The joint venture anticipates it will begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators and automotive manufacturers in 2022.

| • | Advanced safety primarily consists of solutions that enable active and passive safety features and vehicle automation, as well as vision, radar, LiDAR and other sensing technologies. |

| • | The user experience portfolio primarily enables in-cabin solutions around infotainment, driver interface and interior sensing solutions. |

| • | Connectivity and security products primarily consists of solutions that provide body control, security and unlock vehicle data. |

| • Draexlmaier Automotive | |

| | |

| General Motors Company (“GM”) | 9% |

| Tata Motors Limited | 2% |

2015 to 2016.

Our reports filed prior to December 4, 2017 were under the name of Delphi Automotive PLC.

connectivity systems, active and passive safety electronics, autonomous driving software and technologies and systems integration.

The Powertrain Systems segment provided gasoline and diesel engine management systems including fuel handling, fuel injection, combustion, electronic controls, test and validation capabilities, electric and hybrid electric vehicle power electronics and aftermarket components.

The Thermal Systems business provided powertrain cooling and heating, ventilating and air conditioning (“HVAC”) systems, such as compressors, systems and controls, and heat exchangers for vehicle markets.

As part of our strategy to focus on a high-growth product portfolio, we completed the sale of the wholly owned Thermal Systems business to MAHLE GmbH on June 30, 2015.

While North American vehicle production in 2018 remained flat as compared to the reduced volumes experienced in the region in 2017, increased market volatility and economic uncertainty has resulted in decreases in vehicle production of 1% in Europe and 4% in China as compared to 2017.

Vehicle production in South America, our smallest region, increased 4% in 2018, which follows an increase of 21% in the region in 2017.

We have identified a core portfolio of

Safe.

Green.

Connected.

Societal benefits of increased vehicle automation include enhanced safety

We have entered into a collaborative arrangement with Mobileye N.V. to develop the Centralized Sensing Localization and Planning (“CSLP”) system, a complete turn-key fully autonomous driving platform for our OEM customers and mobility partners, with the goal of being application ready in 2019 and production ready in the 2021 to 2022 time frame.

We also entered into a collaborative arrangement with Intel Corporation and the BMW Group to develop and deploy automated driving technology.

| • | Electronic controls products primarily consist of body computers and security systems. |

| • | The infotainment and driver interface portfolio primarily consists of receivers, digital receivers, satellite audio receivers and navigation systems. |

| • | Active and passive safety electronics and advanced driver assistance systems primarily include occupant detection systems, collision warning systems and collision sensing, as well as vision, radar, Light Detection and Ranging (“LIDAR”) and other sensing technologies and multi-domain controllers that enable active safety features such as adaptive cruise control, lane departure warning and auto braking. |

| GM | 11% |

| Renault-Nissan | 2% |

Kevin P.

Majdi Abulaban, 55, is senior vice president of Aptiv and president of Aptiv Signal and Power Solutions, effective February 2012 and president of Aptiv’s Engineered Components Group, effective February 2017.

He also continues to serve as president of Aptiv Asia Pacific.

Mr. Abulaban was most recently president of the Connection Systems product business unit for Signal and Power Solutions.

Mr. Abulaban was appointed managing director for the former Packard Electric Systems’ Asia Pacific operations and became chairman of the board for Delphi Packard Electric Systems Co., Ltd, (China) in July 2002.

He previously held a variety of assignments, including business line executive for cockpits at the former Safety & Interior division and director of Asia Pacific Operations for Thermal Systems.

David M.

2005.

[removed: Brazil Matters][added: Brazil Matters]

As of December 31, [removed: 2018,] [added: 2019,] the majority of claims asserted against Aptiv in Brazil relate to such litigation.

As of December 31, [removed: 2018,] [added: 2019,] claims totaling approximately [removed: $145] [added: $140] million (using December 31, [removed: 2018] [added: 2019] foreign currency rates) have been asserted against Aptiv in Brazil.

As of December 31, [removed: 2018,] [added: 2019,] the Company maintains accruals for these asserted claims of $30 million (using December 31, [removed: 2018] [added: 2019] foreign currency rates).

While the Company believes its accruals are adequate, the final amounts required to resolve these matters could differ materially from the Company’s recorded estimates and Aptiv’s results of [added: operations could be materially affected.]

The Company estimates the reasonably possible loss in excess of the amounts accrued related to these claims to be zero to [removed: $115] [added: $110] million.

operations could be materially affected.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: x] [added: ☒] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: APTIV PLC][added: APTIV PLC]

| [removed: Jersey] [added: Jersey] | | [removed: 98-1029562] [added: 98-1029562] |

[removed: 5] [added: 5] Hanover [removed: Quay][added: Quay]

[removed: Grand] [added: Grand] Canal [removed: Dock][added: Dock]

[removed: Dublin 2, Ireland][added: Dublin, D02 VY79, Ireland]

[removed: 353-1-259-7013][added: 353\-1\-259-7013]

| Title of each class | | [added: Trading symbol(s) | |] Name of each exchange on which registered |

| Ordinary Shares. $0.01 par value per share | | [added: APTV | |] New York Stock Exchange |

Yes [removed: x.][added: ☒.]

Yes [removed: ¨.][added: ☐.]

| Large accelerated filer [removed: x.] | [added: ☒ | | | |] Accelerated filer [removed: ¨.] | [added: ☐ |]

| Non-accelerated filer [removed: ¨.] | [added: ☐ | | | |] Smaller reporting company [removed: ¨.] | [added: ☐ |]

| | [added: | | | |] Emerging growth company [removed: ¨.] | [added: ☐ |]

The aggregate market value of the ordinary shares held by non-affiliates of the registrant as of June 30, [removed: 2018,] [added: 2019,] the last business day of the registrant’s most recently completed second fiscal quarter, was [removed: $24,136,537,262] [added: $20,638,801,929] (based on the closing sale price of the registrant’s ordinary shares on that date as reported on the New York Stock Exchange).

The number of the registrant’s ordinary shares outstanding, $0.01 par value per share as of January [removed: 25, 2019,] [added: 24, 2020,] was [removed: 260,034,563.][added: 255,288,240.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive Proxy Statement related to the [removed: 2019] [added: 2020] Annual [removed: Shareholders] [added: General] Meeting [added: of Shareholders] to be filed subsequently are incorporated by reference into Part III of this Form 10-K.

[removed: INDEX][added: INDEX]

| | | [removed: Page] [added: Page] |

| | [removed: Part I] [added: Part I] | |

| Item 1. | [removed: [Business](#s2CFE2896766F4CC94014D49FD4343265)] [added: [Business](#sD8AD3E0378CE59A8A09907C9F19D17F7)] | [removed: [4](#s2CFE2896766F4CC94014D49FD4343265)] [added: [4](#sD8AD3E0378CE59A8A09907C9F19D17F7)] |

| Supplementary Item. | [Executive Officers of the [removed: Registrant](#s05227E5714F22311C0ADD4A0041B16E7)] [added: Registrant](#sB95FDEDB37AD5C00B9F4ADC963AFC315)] | [removed: [11](#s05227E5714F22311C0ADD4A0041B16E7)] [added: [11](#sB95FDEDB37AD5C00B9F4ADC963AFC315)] |

| Item 1A. | [Risk [removed: Factors](#sFECF62B5757820A90DD8D4A00422D5E3)] [added: Factors](#s15EBD8A80DF3501893BE6880F4B08D95)] | [removed: [13](#sFECF62B5757820A90DD8D4A00422D5E3)] [added: [13](#s15EBD8A80DF3501893BE6880F4B08D95)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s1622175FDA5755B5DCFDD4A004700A08)] [added: Comments](#sEC5D474D13B059E7A93C705E7D8B75DC)] | [removed: [24](#s1622175FDA5755B5DCFDD4A004700A08)] [added: [24](#sEC5D474D13B059E7A93C705E7D8B75DC)] |

| Item 2. | [removed: [Properties](#s24BAA9C468FD11C5C19ED49FCEECDDE4)] [added: [Properties](#s97C56A8EAA09572196F076B02FC0353E)] | [removed: [24](#s24BAA9C468FD11C5C19ED49FCEECDDE4)] [added: [24](#s97C56A8EAA09572196F076B02FC0353E)] |

| Item 3. | [Legal [removed: Proceedings](#s85B5699ADEC26E78EFEFD49FA1BFBB07)] [added: Proceedings](#s6B412CAAAFA15614926BB2F50CA49D87)] | [removed: [24](#s85B5699ADEC26E78EFEFD49FA1BFBB07)] [added: [25](#s6B412CAAAFA15614926BB2F50CA49D87)] |

| Item 4. | [Mine Safety [removed: Disclosure](#sCADF8022EA5A7109AE99D4A004C462DF)] [added: Disclosures](#s1A2B1D5F1C835A3EB043EF99080F4C4D)] | [removed: [25](#sCADF8022EA5A7109AE99D4A004C462DF)] [added: [25](#s1A2B1D5F1C835A3EB043EF99080F4C4D)] |

| | [removed: Part II] [added: Part II] | |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder [removed: Matters,] [added: Matters] and Issuer Purchases of Equity [removed: Securities](#s461768D985650AB7AA30D49FD1072724)] [added: Securities](#sA07418FBD46C5195856ADAF2242F541E)] | [removed: [26](#s461768D985650AB7AA30D49FD1072724)] [added: [26](#sA07418FBD46C5195856ADAF2242F541E)] |

| Item 6. | [Selected Financial [removed: Data](#sB49BF95B1B586466B87ED49FCDD218C1)] [added: Data](#sDA56CE69336E5F17B9D7B098E502FF91)] | [removed: [28](#sB49BF95B1B586466B87ED49FCDD218C1)] [added: [28](#sDA56CE69336E5F17B9D7B098E502FF91)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sA639C64EE6BE5EA42F16D4A005951EEE)] [added: Operations](#s806963324C375C63B32004E6429DAA3A)] | [removed: [30](#sA639C64EE6BE5EA42F16D4A005951EEE)] [added: [30](#s806963324C375C63B32004E6429DAA3A)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s9D03C871D083B978D271D4A009FF5D6E)] [added: Risk](#s95B9A5BC8F1952EA9B810F030DAB09E0)] | [removed: [65](#s9D03C871D083B978D271D4A009FF5D6E)] [added: [56](#s95B9A5BC8F1952EA9B810F030DAB09E0)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sE63DAEA6F5D0A115FAE2D4A00A2F7BB3)] [added: Data](#sFA1E4AEF59E05A4FB595519814CF4A45)] | [removed: [68](#sE63DAEA6F5D0A115FAE2D4A00A2F7BB3)] [added: [58](#sFA1E4AEF59E05A4FB595519814CF4A45)] |

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

No ☐.

No ☒.

Yes ☒.

No ☐.

Yes ☒.

No ☐.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

☐.

Yes ☐.

No ☒.

APTIV PLC

10-K 1 aptv1231201810k.htm 10-K

| | |

| --- | --- |

| | | |

| --- | --- | --- |

No ¨.

No x.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x.

¨.

As of December 31, [removed: 2018,] [added: 2019,] we owned or leased 126 major manufacturing sites and 15 major technical centers.

| | [removed: North America] [added: North America] | | | [removed: Europe, Middle East & Africa] [added: Europe, Middle East & Africa] | | | [removed: Asia Pacific] [added: Asia Pacific] | | | [removed: South America] [added: South America] | | | [removed: Total] [added: Total] | |

| Signal and Power Solutions | [removed: 45] [added: 44] | | | [removed: 33] [added: 34] | | | [removed: 33] [added: 32] | | | 5 | | | [removed: 116] [added: 115] | |

| Advanced Safety and User Experience | 2 | | | 5 | | | [removed: 3] [added: 4] | | | — | | | [removed: 10] [added: 11] | |

| Total | [removed: 47] [added: 46] | | | [removed: 38] [added: 39] | | | 36 | | | 5 | | | 126 | |

Of our 126 major manufacturing sites and 15 major technical centers, which include facilities owned or leased by our consolidated subsidiaries, [removed: 61] [added: 62] are primarily owned and [removed: 80] [added: 79] are primarily leased.

[removed: PART II][added: PART II]

As of January [removed: 25, 2019,] [added: 24, 2020,] there were 2 shareholders of record of our ordinary shares.

The following graph reflects the comparative changes in the value from December 31, [removed: 2013] [added: 2014] through December 31, [removed: 2018,] [added: 2019,] assuming an initial investment of $100 and the reinvestment of dividends, if any in (1) our ordinary shares, (2) the S&P 500 index and (3) the Automotive Peer Group.

[removed: Stock] [added: Stock] Performance [removed: Graph][added: Graph]

[removed: ][added: ]

* $100 invested on December 31, [removed: 2013] [added: 2014] in our stock or in the relevant index, including reinvestment of dividends.

Fiscal year ended December 31, [removed: 2018.][added: 2019.]

| (3) | Automotive Peer Group – Adient Plc, American Axle & Manufacturing Holdings Inc, Aptiv PLC, Borgwarner Inc, Cooper Tire & Rubber Co, Cooper-standard Holdings Inc, Dana Inc, Dorman Products Inc, Ford Motor Co, [removed: Garrett Motion Inc.,] General Motors Co, Gentex Corp, Gentherm Inc, Genuine Parts Co, Goodyear Tire & Rubber Co, Lear Corp, Lkq Corp, Meritor Inc, Motorcar Parts Of America Inc, Standard Motor Products Inc, Stoneridge Inc, [removed: Superior Industries International Inc,] Tenneco Inc, Tesla Inc, [removed: Tower International Inc,] Visteon Corp, Wabco Holdings Inc |

| [removed: Company Index] [added: Company Index] | | [removed: December] [added: December] 31, [removed: 2013] [added: 2014] | | | | [removed: December] [added: December] 31, [removed: 2014] [added: 2015] | | | | [removed: December] [added: December] 31, [removed: 2015] [added: 2016] | | | | [removed: December] [added: December] 31, [removed: 2016] [added: 2017] | | | | [removed: December] [added: December] 31, [removed: 2017] [added: 2018] | | | | [removed: December] [added: December] 31, [removed: 2018] [added: 2019] | | |

[removed: Equity] [added: Equity] Compensation Plan [removed: Information][added: Information]

| [removed: Plan Category] [added: Plan Category] | | [removed: Number] [added: Number] of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights [removed: (a)] [added: (a)] | | | | [removed: Weighted-Average] [added: Weighted-Average] Exercise Price of Outstanding Options, Warrants and Rights [removed: (b)] [added: (b)] | | | | | [removed: Number] [added: Number] of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) [removed: (c)] [added: (c)] | | |

| Equity compensation plans approved by security holders | | [removed: 2,265,586] [added: 2,436,179] | | (1) | | $ | — | | (2) | | [removed: 15,572,059] [added: 14,470,050] | | (3) |

| (1) | Includes (a) [removed: 23,932] [added: 23,326] outstanding restricted stock units granted to our Board of Directors and (b) [removed: 2,241,654] [added: 2,412,853] outstanding time- and performance-based restricted stock units granted to our [removed: executives.] [added: employees.] All grants were made under the Aptiv PLC Long Term Incentive Plan, as amended and restated effective April 23, 2015 (the “PLC LTIP”). Includes accrued dividend equivalents. |

[removed: Repurchase] [added: Repurchase] of Equity [removed: Securities][added: Securities]

A summary of our ordinary shares repurchased during the quarter ended December 31, [removed: 2018,] [added: 2019,] is shown below:

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of Shares Purchased [removed: (1)] [added: (1)] | | | [removed: Average] [added: Average] Price Paid per Share [removed: (2)] [added: (2)] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs] [added: Programs] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) [removed: (3)] [added: (3)] | | |

| Aptiv PLC (1) | | $ | 100.00 | | | $ | 119.34 | | | $ | 95.40 | | | $ | 145.39 | | | $ | 106.56 | | | $ | 166.11 | |

| S&P 500 (2) | | 100.00 | | | | 101.38 | | | | 113.51 | | | | 138.29 | | | | 132.23 | | | | 173.86 | | |

| Automotive Peer Group (3) | | 100.00 | | | | 100.06 | | | | 99.66 | | | | 124.23 | | | | 99.15 | | | | 122.61 | | |

| Total | | 2,436,179 | | | | — | | | | | 14,470,050 | | |

| October 1, 2019 to October 31, 2019 | | 366,691 | | | $ | 82.17 | | | 366,691 | | | $ | 2,070 | |

| November 1, 2019 to November 30, 2019 | | — | | | — | | | | — | | | 2,070 | | |

| December 1, 2019 to December 31, 2019 | | — | | | — | | | | — | | | 2,070 | | |

| Total | | 366,691 | | | 82.17 | | | | 366,691 | | | | | |

| Aptiv PLC (1) | | $ | 100.00 | | | $ | 122.75 | | | $ | 146.49 | | | $ | 117.11 | | | $ | 178.46 | | | $ | 130.80 | |

| S&P 500 (2) | | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | | |

| Automotive Peer Group (3) | | 100.00 | | | | 107.96 | | | | 108.05 | | | | 107.72 | | | | 134.04 | | | | 106.89 | | |

| Total | | 2,265,586 | | | | — | | | | | 15,572,059 | | |

| October 1, 2018 to October 31, 2018 | | 535,964 | | | $ | 79.32 | | | 535,964 | | | $ | 725 | |

| November 1, 2018 to November 30, 2018 | | 1,030,049 | | | 72.74 | | | | 1,030,049 | | | 650 | | |

| December 1, 2018 to December 31, 2018 | | 2,451,220 | | | 65.27 | | | | 2,451,220 | | | 490 | | |

| Total | | 4,017,233 | | | 69.06 | | | | 4,017,233 | | | | | |

Discontinued Operations [added: and Held For Sale] to the audited consolidated financial statements included herein.

| | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015 (1)] [added: 2016] | | | | [removed: 2014] [added: 2015 (1)] | | |

| | [removed: (dollars] [added: (dollars] and shares in millions, except per share [removed: data)] [added: data)] | | | | | | | | | | | | | | | | | | |

| [removed: Statements] [added: Statements] of operations [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | |

| Net sales | $ | [removed: 14,435] [added: 14,357] | | | $ | [removed: 12,884] [added: 14,435] | | | $ | [removed: 12,274] [added: 12,884] | | | $ | [removed: 10,864] [added: 12,274] | | | $ | [removed: 11,083] [added: 10,864] | |

| Depreciation and amortization (2) | [removed: 676] [added: 717] | | | | [removed: 546] [added: 676] | | | | [removed: 489] [added: 546] | | | | [removed: 344] [added: 489] | | | | [removed: 338] [added: 344] | | |

| Operating income | [removed: 1,473] [added: 1,276] | | | | [removed: 1,416] [added: 1,473] | | | | [removed: 1,539] [added: 1,416] | | | | [removed: 1,235] [added: 1,539] | | | | [removed: 1,225] [added: 1,235] | | |

| Interest expense | [removed: (141] [added: (164] | | ) | | [removed: (140] [added: (141] | | ) | | [removed: (155] [added: (140] | | ) | | [removed: (124] [added: (155] | | ) | | [removed: (131] [added: (124] | | ) |

| Income from continuing operations | [removed: 1,107] [added: 1,009] | | | | [removed: 1,063] [added: 1,107] | | | | [removed: 868] [added: 1,063] | | | | [removed: 852] [added: 868] | | | | [removed: 927] [added: 852] | | |

| Income from discontinued operations, net of tax | — | | | | [removed: 365] [added: —] | | | | [removed: 458] [added: 365] | | | | [removed: 683] [added: 458] | | | | [removed: 513] [added: 683] | | |

| Net income | [removed: 1,107] [added: 1,009] | | | | [removed: 1,428] [added: 1,107] | | | | [removed: 1,326] [added: 1,428] | | | | [removed: 1,535] [added: 1,326] | | | | [removed: 1,440] [added: 1,535] | | |

| Net income attributable to noncontrolling interest | [removed: 40] [added: 19] | | | | [removed: 73] [added: 40] | | | | [removed: 69] [added: 73] | | | | [removed: 85] [added: 69] | | | | [removed: 89] [added: 85] | | |

| Net income attributable to Aptiv | [removed: 1,067] [added: 990] | | | | [removed: 1,355] [added: 1,067] | | | | [removed: 1,257] [added: 1,355] | | | | [removed: 1,450] [added: 1,257] | | | | [removed: 1,351] [added: 1,450] | | |

| [removed: Net] [added: Net] income per share [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | |

| Continuing operations | $ | [removed: 4.04] [added: 3.85] | | | $ | [removed: 3.82] [added: 4.04] | | | $ | [removed: 3.05] [added: 3.82] | | | $ | [removed: 2.85] [added: 3.05] | | | $ | [removed: 2.97] [added: 2.85] | |

| Discontinued operations | — | | | | [removed: 1.25] [added: —] | | | | [removed: 1.55] [added: 1.25] | | | | [removed: 2.23] [added: 1.55] | | | | [removed: 1.53] [added: 2.23] | | |

| Basic net income per share attributable to Aptiv | $ | [removed: 4.04] [added: 3.85] | | | $ | [removed: 5.07] [added: 4.04] | | | $ | [removed: 4.60] [added: 5.07] | | | $ | [removed: 5.08] [added: 4.60] | | | $ | [removed: 4.50] [added: 5.08] | |

| Continuing operations | $ | [removed: 4.02] [added: 3.85] | | | $ | [removed: 3.81] [added: 4.02] | | | $ | [removed: 3.05] [added: 3.81] | | | $ | [removed: 2.84] [added: 3.05] | | | $ | [removed: 2.95] [added: 2.84] | |

| Discontinued operations | — | | | | [removed: 1.25] [added: —] | | | | [removed: 1.54] [added: 1.25] | | | | [removed: 2.22] [added: 1.54] | | | | [removed: 1.53] [added: 2.22] | | |

| Diluted net income per share attributable to Aptiv | $ | [removed: 4.02] [added: 3.85] | | | $ | [removed: 5.06] [added: 4.02] | | | $ | [removed: 4.59] [added: 5.06] | | | $ | [removed: 5.06] [added: 4.59] | | | $ | [removed: 4.48] [added: 5.06] | |

| Weighted average shares outstanding | [removed: 264] [added: 257] | | | | [removed: 267] [added: 264] | | | | [removed: 273] [added: 267] | | | | [removed: 285] [added: 273] | | | | [removed: 300] [added: 285] | | |

| Cash dividends declared and paid | $ | 0.88 | | | $ | [removed: 1.16] [added: 0.88] | | | $ | 1.16 | | | $ | [removed: 1.00] [added: 1.16] | | | $ | 1.00 | |

| [removed: Other] [added: Other] financial [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | |

| Capital expenditures | $ | [removed: 846] [added: 781] | | | $ | [removed: 698] [added: 846] | | | $ | [removed: 657] [added: 698] | | | $ | [removed: 503] [added: 657] | | | $ | [removed: 457] [added: 503] | |

| Adjusted operating income (3) | [removed: 1,751] [added: 1,548] | | | | [removed: 1,594] [added: 1,751] | | | | [removed: 1,623] [added: 1,594] | | | | [removed: 1,360] [added: 1,623] | | | | [removed: 1,340] [added: 1,360] | | |

| Adjusted operating income margin (4) | [removed: 12.1] [added: 10.8] | | % | | [removed: 12.4] [added: 12.1] | | % | | [removed: 13.2] [added: 12.4] | | % | | [removed: 12.5] [added: 13.2] | | % | | [removed: 12.1] [added: 12.5] | | % |

| Net cash provided by operating activities (5) | $ | [removed: 1,628] [added: 1,624] | | | $ | [removed: 1,468] [added: 1,628] | | | $ | [removed: 1,941] [added: 1,468] | | | $ | [removed: 1,703] [added: 1,941] | | | $ | [removed: 2,135] [added: 1,703] | |

| Net cash used in investing activities (5) | [removed: (2,048] [added: (1,111] | | ) | | [removed: (1,252] [added: (2,048] | | ) | | [removed: (578] [added: (1,252] | | ) | | [removed: (1,699] [added: (578] | | ) | | [removed: (1,186] [added: (1,699] | | ) |

| Net cash (used in) provided by financing activities (5) | [removed: (555] [added: (649] | | ) | | [removed: 456] [added: (555] | | [added: )] | | [removed: (1,081] [added: 456] | | [removed: )] | | [removed: (284] [added: (1,081] | | ) | | [removed: (1,398] [added: (284] | | ) |

| | [removed: As] [added: As] of December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | [removed: (in] [added: (in] millions, except employee [removed: data)] [added: data)] | | | | | | | | | | | | | | | | | | |

| [removed: Balance] [added: Balance] sheet and employment [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents | $ | [removed: 567] [added: 412] | | | $ | [removed: 1,596] [added: 567] | | | $ | [removed: 737] [added: 1,596] | | | $ | [removed: 427] [added: 737] | | | $ | [removed: 698] [added: 427] | |

| Total assets [added: (6)] | $ | [removed: 12,480] [added: 13,459] | | | $ | [removed: 12,169] [added: 12,480] | | | $ | [removed: 12,292] [added: 12,169] | | | $ | [removed: 11,973] [added: 12,292] | | | $ | [removed: 10,721] [added: 11,973] | |

| Total debt | $ | [removed: 4,344] [added: 4,364] | | | $ | [removed: 4,149] [added: 4,344] | | | $ | [removed: 3,963] [added: 4,149] | | | $ | [removed: 3,976] [added: 3,963] | | | $ | [removed: 2,389] [added: 3,976] | |

| Working capital, as defined [removed: (6)] [added: (7)] | $ | [removed: 1,430] [added: 1,392] | | | $ | [removed: 1,296] [added: 1,430] | | | $ | [removed: 1,169] [added: 1,296] | | | $ | [removed: 943] [added: 1,169] | | | $ | [removed: 713] [added: 943] | |

| Shareholders’ equity | $ | [removed: 3,670] [added: 4,011] | | | $ | [removed: 3,517] [added: 3,670] | | | $ | [removed: 2,763] [added: 3,517] | | | $ | [removed: 2,733] [added: 2,763] | | | $ | [removed: 3,013] [added: 2,733] | |

| Global employees [removed: (7)] [added: (8)] | [removed: 143,000] [added: 141,000] | | | | [removed: 129,000] [added: 143,000] | | | | [removed: 145,000] [added: 129,000] | | | | [removed: 139,000] [added: 145,000] | | | | [removed: 127,000] [added: 139,000] | | |

| | Year Ended December 31, | | | | | | | | | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Net income attributable to noncontrolling interest | 19 | | | | 40 | | | | 73 | | | | 69 | | | | 85 | | |

| Income from continuing operations | 1,009 | | | | 1,107 | | | | 1,063 | | | | 868 | | | | 852 | | |

| (6) | As further described in Note 2. Significant Accounting Policies, the adoption of ASU 2016-02, *Leases*, resulted in the recognition of operating lease right-of-use assets in the consolidated balance sheet as of December 31, 2019, which impacts comparability to 2018. |

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Aptiv PLC (the Company) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements [removed: referred to above] present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February [removed: 4, 2019] [added: 3, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited Aptiv PLC’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Aptiv PLC (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and [added: the] related [removed: footnotes] [added: notes] and [added: financial statement] schedule and our report dated February [removed: 4, 2019] [added: 3, 2020] expressed an unqualified opinion thereon.

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: APTIV PLC][added: APTIV PLC]

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENTS OF [removed: OPERATIONS][added: OPERATIONS]

| | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| | [removed: (in] [added: (in] millions, except per share [removed: amounts)] [added: amounts)] | | | | | | | | | | |

| Net sales | $ | [removed: 14,435] [added: 14,357] | | | $ | [removed: 12,884] [added: 14,435] | | | $ | [removed: 12,274] [added: 12,884] | |

| Cost of sales | [removed: 11,706] [added: 11,711] | | | | [removed: 10,270] [added: 11,706] | | | | [removed: 9,527] [added: 10,270] | | |

| Selling, general and administrative | [removed: 993] [added: 1,076] | | | | [removed: 952] [added: 993] | | | | [removed: 924] [added: 952] | | |

| Amortization | [removed: 154] [added: 146] | | | | [removed: 117] [added: 154] | | | | 117 | | |

| Restructuring (Note 10) | [removed: 109] [added: 148] | | | | [removed: 129] [added: 109] | | | | [removed: 167] [added: 129] | | |

| Total operating expenses | [removed: 12,962] [added: 13,081] | | | | [removed: 11,468] [added: 12,962] | | | | [removed: 10,735] [added: 11,468] | | |

| Operating income | [removed: 1,473] [added: 1,276] | | | | [removed: 1,416] [added: 1,473] | | | | [removed: 1,539] [added: 1,416] | | |

| Interest expense | [removed: (141] [added: (164] | | ) | | [removed: (140] [added: (141] | | ) | | [removed: (155] [added: (140] | | ) |

| Other income (expense), net (Note 19) | [removed: 2] [added: 14] | | | | [removed: (21] [added: 2] | | [removed: )] | | [removed: (384] [added: (21] | | ) |

| Income from continuing operations before income taxes and equity income | [removed: 1,334] [added: 1,126] | | | | [removed: 1,255] [added: 1,334] | | | | [removed: 1,000] [added: 1,255] | | |

| Income tax expense | [removed: (250] [added: (132] | | ) | | [removed: (223] [added: (250] | | ) | | [removed: (167] [added: (223] | | ) |

| Income from continuing operations before equity income | [removed: 1,084] [added: 994] | | | | [removed: 1,032] [added: 1,084] | | | | [removed: 833] [added: 1,032] | | |

| Equity income, net of tax | [removed: 23] [added: 15] | | | | [removed: 31] [added: 23] | | | | [removed: 35] [added: 31] | | |

| Income from continuing operations | [removed: 1,107] [added: 1,009] | | | | [removed: 1,063] [added: 1,107] | | | | [removed: 868] [added: 1,063] | | |

| Income from discontinued operations, net of tax (Note 25) | — | | | | [removed: 365] [added: —] | | | | [removed: 458] [added: 365] | | |

| Net income | [removed: 1,107] [added: 1,009] | | | | [removed: 1,428] [added: 1,107] | | | | [removed: 1,326] [added: 1,428] | | |

| Net income attributable to noncontrolling interest | [removed: 40] [added: 19] | | | | [removed: 73] [added: 40] | | | | [removed: 69] [added: 73] | | |

| Net income attributable to Aptiv | $ | [removed: 1,067] [added: 990] | | | $ | [removed: 1,355] [added: 1,067] | | | $ | [removed: 1,257] [added: 1,355] | |

| Income from continuing operations | $ | [removed: 1,067] [added: 990] | | | $ | [removed: 1,021] [added: 1,067] | | | $ | [removed: 834] [added: 1,021] | |

| Income from discontinued operations | — | | | | [removed: 334] [added: —] | | | | [removed: 423] [added: 334] | | |

| Net income | $ | [removed: 1,067] [added: 990] | | | $ | [removed: 1,355] [added: 1,067] | | | $ | [removed: 1,257] [added: 1,355] | |

| Continuing operations | $ | [removed: 4.04] [added: 3.85] | | | $ | [removed: 3.82] [added: 4.04] | | | $ | [removed: 3.05] [added: 3.82] | |

| Discontinued operations | — | | | | [removed: 1.25] [added: —] | | | | [removed: 1.55] [added: 1.25] | | |

| Basic net income per share attributable to Aptiv | $ | [removed: 4.04] [added: 3.85] | | | $ | [removed: 5.07] [added: 4.04] | | | $ | [removed: 4.60] [added: 5.07] | |

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

| *Description of the Matter* | As described in Notes 2 and 14, the Company establishes reserves for uncertain tax positions for positions that are taken on their income tax returns that might not be sustained upon examination by the taxing authorities. At December 31, 2019, the Company has recorded approximately $217 million relating to uncertain tax positions. In determining whether an uncertain tax position exists, the Company determines, based solely on its technical merits, whether the tax position is more likely than not to be sustained upon examination, and if so, a tax benefit is measured on a cumulative probability basis that is more likely than not to be realized upon the ultimate settlement. The Company identifies its certain and uncertain tax positions and then evaluates the recognition and measurement steps to determine the amount that should be recognized. The Company then evaluates uncertain tax positions in subsequent periods for recognition, de-recognition or re-measurement if changes have occurred, or when effective settlement or expiration of the statute of limitations occurs. |

| | Auditing the uncertain tax positions is complex because of the judgmental nature of the tax accruals and various other tax return positions that might not be sustained upon review by taxing authorities. The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world due to its complex global footprint. Taxing jurisdictions significant to Aptiv include China, Barbados, Luxembourg, Germany, Mexico, the U.S., Ireland, South Korea and the U.K. |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls related to the recognition, measurement and the evaluation of changes in uncertain tax positions. This included testing controls over management’s review of the tax positions, their evaluation of whether they met the measurement threshold and then recalculating the amounts recognized based upon a cumulative probability assessment performed by management. Our audit procedures to test the Company’s uncertain tax positions included, among others, involvement of our transfer pricing professionals to evaluate the third-party transfer pricing studies obtained by the Company and assessing the Company’s correspondence with the relevant tax authorities. We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. Our testing also included the evaluation of the ongoing positions and consideration of changes, the recording of penalties and interest and the ultimate settlement and payment of certain tax matters. |

| | Revenue Recognition |

| *Description of the Matter* | As described in Notes 2 and 26, Aptiv occasionally enters into pricing agreements with its customers that provide for price reductions, some of which are conditional upon achieving certain joint cost saving targets. In addition, from time to time, Aptiv makes payments to customers in conjunction with ongoing business. Revenue is recognized based on the agreed-upon price at the time of shipment, and sales incentives, allowances and certain customer payments are recognized as a reduction to revenue at the time of the commitment to provide such incentives or make these payments. Certain other customer payments or upfront fees are considered to be a cost to obtain a contract as they are directly attributable to a contract, are incremental and management expects the payments to be recoverable. In these cases, the customer payment is capitalized and amortized to revenue based on the transfer of goods and services to the customer for which the upfront payment relates. As of December 31, 2019, Aptiv has recorded $99 million related to these capitalized upfront payments. Auditing the accounting for and completeness of arrangements containing elements such as sales incentives, allowances and customer payments, including the appropriate timing and presentation of adjustments to revenue as well as costs to obtain a contract is judgmental due to the unique facts and circumstances involved in each revenue arrangement, as well as on-going commercial negotiations with customers. |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the review of customer contracts. This included testing controls over the Company’s process to identify and evaluate customer contracts that contain sales incentives, allowances and customer payments that impact revenue recognition. Our audit procedures to test the completeness of the Company’s identification of such contracts included, among others, interviewing sales representatives who are responsible for negotiations with customers and testing cash payments to customers. To test management’s assessment of customer contracts containing sales incentives, allowances and customer payments, our procedures included, among others, selecting a sample of customer agreements, obtaining and reviewing source documentation, including master agreements, and other documents that were part of the agreement, and evaluating the contract terms to determine the appropriateness of the accounting treatment. |

Report of Independent Registered Public Accounting Firm

Basis for Opinion

APTIV PLC

APTIV PLC

| Assets held for sale (Note 25) | 532 | | | | — | | |

| Operating lease right-of-use assets (Note 27) | 413 | | | | — | | |

| Liabilities held for sale (Note 25) | 43 | | | | — | | |

| Long-term operating lease liabilities (Note 27) | 329 | | | | — | | |

APTIV PLC

| Repayments under other long-term debt agreements | (25 | | ) | | (13 | | ) | | (2 | | ) |

APTIV PLC

| 2019 | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balance at January 1, 2019 | 260 | | | $ | 3 | | | $ | 1,639 | | | $ | 2,511 | | | $ | (694 | ) | | $ | 3,459 | | | $ | 211 | | | $ | 3,670 | |

| Balance at December 31, 2019 | 255 | | | $ | 3 | | | $ | 1,645 | | | $ | 2,890 | | | $ | (719 | ) | | $ | 3,819 | | | $ | 192 | | | $ | 4,011 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balance at January 1, 2018 | 266 | | | $ | 3 | | | $ | 1,649 | | | $ | 2,118 | | | $ | (471 | ) | | $ | 3,299 | | | $ | 218 | | | $ | 3,517 | |

| Adjustment for recently adopted accounting pronouncements | — | | | — | | | | — | | | | (9 | | ) | | — | | | | (9 | | ) | | — | | | | (9 | | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

APTIV PLC

1.

Discontinued Operations and Held For Sale.

2.

Generally, matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of intangible and

Fair Value of Financial Instruments for further information regarding amounts deposited into an escrow account.

90 days past due are fully reserved.

Property, Net and Note 27.

Property, Net and Note 7.

Assets and liabilities held for sale—The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the assets is probable and expected to be completed within one year (or, if it is expected that others will impose conditions on the sale of the assets that will extend the period required to complete the sale, that a firm purchase commitment is probable within one year) and it is unlikely that significant changes will be made to the plan.

Upon designation as held for sale, the Company records the assets at the lower of their carrying value or their estimated fair value, less cost to sell, and ceases to record depreciation expense on the assets.

Assets and liabilities of a discontinued operation are reclassified as held for sale for all comparative periods presented in the consolidated balance sheets.

For assets that meet the held for sale criteria but do not meet the definition of a discontinued operation, the Company reclassifies the assets and liabilities in the period in which the held for sale criteria are met, but does not reclassify prior period amounts.

February 4, 2019

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Proceeds from business divestitures, net | — | | | | — | | | | 197 | | |

| Balance at December 31, 2015 | 278 | | | $ | 3 | | | $ | 1,653 | | | $ | 1,627 | | | $ | (1,033 | ) | | $ | 2,250 | | | $ | 483 | | | $ | 2,733 | |

| Divestiture of business | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | (101 | | ) | | (101 | | ) |

1.

Discontinued Operations.

2.

$30 million during the year ended December 31, 2018.

No intangible asset impairment charges were recorded in 2017 or 2016.

During the year ended December 31, 2015, Aptiv completed the divestitures of the Company’s wholly owned Thermal Systems business and the Company’s interest in its Korea Delphi Automotive Systems Corporation (“KDAC”) joint venture.

During the year ended December 31, 2016, Aptiv completed the divestiture of its interest in its Shanghai Delphi Automotive Air Conditioning (“SDAAC”) joint venture.

Aptiv’s interests in the KDAC and SDAAC joint ventures were previously reported within the Thermal Systems segment.

its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.

| GM (1) | 11 | % | | 13 | % | | 16 | % | | | $ | 169 | | | $ | 204 | |

| VW | 9 | % | | 9 | % | | 9 | % | | | 149 | | | | 145 | | |

Aptiv adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, in the first quarter of 2018.

This guidance makes targeted improvements to existing U.S. GAAP for financial instruments, including requiring equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

In accordance with this guidance, Aptiv measures equity investments at cost, less impairments,

adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

Aptiv adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, in the first quarter of 2018.

This guidance clarifies the presentation requirements of eight specific issues within the statement of cash flows.

The adoption of this guidance did not have a significant impact on Aptiv’s financial statements, as Aptiv’s treatment of the relevant affected items within its consolidated statement of cash flows is consistent with the requirements of this guidance.

This guidance requires that the tax effects of all intra-entity sales of assets other than inventory be recognized in the period in which the transaction occurs.

The guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

The adoption of this guidance resulted in an adjustment of $9 million recorded to retained earnings as of the beginning of the period of adoption.

Aptiv adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018.

This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash.

As a result, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

The adoption of this guidance did not have a significant impact on Aptiv’s financial statements, other than the classification of restricted cash within the beginning-of-period and end-of-period totals on the consolidated statement of cash flows, as opposed to being excluded from these totals.

The Company plans to adopt this guidance in the first quarter of 2019 using the optional transition method.

Upon adoption, the Company expects to record operating lease right-of-use assets in the range of approximately $420 million to $460 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months.

The Company also expects to recorded corresponding short-term operating lease liabilities in the range of approximately $85 million to $105 million and long-term operating lease liabilities in the range of approximately $335 million to $355 million.

ASU 2016-02 provides for certain practical expedients when adopting the guidance.

The Company is in the process of finalizing its catalog of existing lease contracts and implementing changes to its systems.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this standard on its financial statements, but does not anticipate a material impact.

The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]