Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 three and six months ended June 30, 2023. This discussion should be read in conjunction with Item 1. Financial Statements. Our MD&A is presented in eight sections:

Executive Overview
Consolidated Results of Operations
Results of Operations by Segment
Liquidity and Capital Resources
Off-Balance Sheet Arrangements
Contingencies and Environmental Matters
Recently Issued Accounting Pronouncements
Critical Accounting Estimates

Within the MD&A, “Aptiv,” the “Company,” “we,” “us” and “our” refer to Aptiv PLC (formerly known as Delphi Automotive PLC), a public limited company formed under the laws of Jersey on May 19, 2011, which completed an initial public offering on November 22, 2011, and its consolidated subsidiaries. The Company’s ordinary shares are publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “APTV.”

Executive Overview

Our Business

We are a leading global technology and mobility architecture company primarily serving the automotive sector. We deliver end-to-end mobility solutions enabling our customers’ transition to more electrified, software-defined vehicles. We design and manufacture vehicle components and provide electrical, electronic and active safety technology solutions to the global automotive and commercial vehicle markets, creating the software and hardware foundation for vehicle features and functionality. Our Advanced Safety and User Experience segment is focused on providing the necessary software and advanced computing platforms, and our Signal and Power Solutions segment is focused on providing the requisite networking architecture required to support the integrated systems in today’s complex vehicles. Together, our businesses develop the ‘brain’ and the ‘nervous system’ of increasingly complex vehicles, providing integration of the vehicle into its operating environment.

We are one of the largest vehicle technology suppliers and our customers include the 25 largest automotive original equipment manufacturers (“OEMs”) in the world.

Our total net sales during the three and six months ended June 30, 2023 were $5.2 billion and $10.0 billion, an increase of 28% and 22% compared to the same periods of 2022, respectively. Our volumes increased 22% for the three months ended June 30, 2023, which reflects volume growth in all regions, as well as increased global automotive production of 16% (15% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue, “AWM”). Our volumes increased 17% for the six months ended June 30, 2023, which reflects volume growth in all regions, as well as increased global automotive production of 11% (12% on an AWM basis). Our increased net sales also reflects incremental sales as a result of our acquisitions of Wind River Systems, Inc. (“Wind River”) and Intercable Automotive Solutions S.r.l. (“Intercable Automotive”) in the fourth quarter of 2022.

We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle, including during periods of reduced industry volumes. Accordingly, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering as conditions permit. As we operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure, as evidenced by our ongoing restructuring programs focused on the continued rotation of our manufacturing footprint to best cost locations and on reducing our global overhead costs, as described in Note 7. Restructuring to the consolidated financial statements contained herein. We believe our strong balance sheet coupled with our flexible cost structure will position us to capitalize on improvements in OEM production volumes as economic conditions improve.

Trends, Uncertainties and Opportunities

Ukraine/Russia conflict. The conflict between Ukraine and Russia, which began in February 2022, has had, and is expected to continue to have, negative economic impacts to both countries and to the European and global economies. In response to the conflict, the European Union (the “E.U.”), United States (the “U.S.”) and other nations implemented broad economic sanctions against Russia. These countries may impose further sanctions and take other actions as the situation continues.

Given the sanctions put in place by the E.U., U.S. and other governments, which restrict our ability to conduct business in Russia, we initiated a plan in the second quarter of 2022 to exit our 51% owned subsidiary in Russia. As a result, the Company determined that this subsidiary, which was reported within the Signal and Power Solutions segment, initially met the held for sale criteria as of June 30, 2022. Consequently, during the three months ended June 30, 2022, the Company recorded a pre-tax charge of $51 million to impair the carrying value of the Russian subsidiary’s net assets to fair value. The remaining assets and liabilities were de minimis, net of the appropriate valuation allowances, and were presented as other current assets and other current liabilities, respectively, in the consolidated balance sheet as of December 31, 2022.

Ukraine and Russia are significant global producers of raw materials used in our supply chain, including copper, aluminum, palladium and neon gases. Disruptions in the supply and volatility in the price of these materials and other inputs produced by Ukraine or Russia, including increased logistics costs and longer transit times, could adversely impact our business and results of operations. The conflict has also increased the possibility of cyberattacks occurring, which could either directly or indirectly impact our operations. Furthermore, the conflict has caused our customers to analyze their continued presence in the region and future customer production plans in the region remain uncertain.

We do not have a material physical presence in either Ukraine or Russia, with less than 1% of our workforce located in the countries as of December 31, 2022 and less than 1% of our net sales for the year ended December 31, 2022 generated from manufacturing facilities in those countries. However, the impacts of the conflict have adversely impacted, and may continue to adversely impact, global economies, and in particular, the European economy, a region which accounted for approximately 31% of our net sales for the year ended December 31, 2022. Furthermore, as a result of the conflict, we estimate that the adverse impacts to revenue from Russia operations were approximately $20 million and $30 million during the three and six months ended June 30, 2022, respectively.

We continue to monitor the situation and will seek to minimize its impact to our business, while prioritizing the safety and well-being of our employees located in both countries and our compliance with applicable laws and regulations in the locations where we operate. Any of the impacts mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

COVID-19 pandemic. The global spread of COVID-19, which originated in late 2019 and was later declared a pandemic by the World Health Organization in March 2020, negatively impacted the global economy, disrupted supply chains and created significant volatility in global financial markets in 2020 with various adverse impacts continuing to date. Direct adverse impacts have included extended work stoppages and travel restrictions at our facilities and those of our customers and suppliers, decreases in consumer demand and vehicle production schedules and disruptions to our supply chain and other adverse global economic impacts, particularly those resulting from temporary governmental “lockdown” orders for all non-essential activities.

To date in 2023, our manufacturing facilities have not been impacted by prolonged shutdowns directly resulting from the COVID-19 pandemic.

Beginning late in the first quarter of 2022 and continuing into the second quarter, various regions in China, including regions where Aptiv has operations, were subjected to lockdowns imposed by governmental authorities to mitigate the spread of COVID-19. In response, our manufacturing facilities located in these areas implemented measures designed to minimize the impacts of any shutdowns. Despite these measures, industry-wide production interruptions adversely impacted our sales and profitability beginning at the end of the first quarter and continuing throughout much of the second quarter. Most of the lockdowns were eased in China late in the second quarter, however many lockdowns were re-imposed and production was once again adversely impacted for portions of the fourth quarter of 2022. Estimated total indirect and direct adverse impacts to revenue as a result of these lockdowns during the three and six months ended June 30, 2022 were approximately $165 million and $210 million, respectively. The overall duration and impact, as well as possible reoccurrence, of these lockdowns in China or other regions, or other measures aimed at containing and mitigating the effects of the pandemic, including renewed travel bans and restrictions, quarantines, social distancing orders, “lockdown” orders and shutdowns of non-essential activities, remain uncertain and may adversely impact our results of operations and cash flows in future periods. Other than these production

interruptions in China, our manufacturing facilities were not impacted by prolonged shutdowns directly resulting from the COVID-19 pandemic in 2022.

Certain direct and indirect adverse impacts of the COVID-19 pandemic have persisted to date, including the worldwide semiconductor supply shortage and global supply chain disruptions. As a result, due to the continuing uncertainties surrounding the COVID-19 pandemic, including potential future governmental actions and economic impacts, it is possible that these adverse impacts could reoccur, resulting in further adverse impacts on our future operating earnings and cash flows. We will continue to actively monitor all direct and indirect potential impacts of the COVID-19 pandemic, and will seek to aggressively mitigate and minimize their impact on our business.

Global supply chain disruptions. Due to various factors that are beyond our control, there are currently global supply chain disruptions, including a worldwide semiconductor supply shortage. The semiconductor supply shortage continues to impact production in automotive and other industries. We anticipate these supply chain disruptions will continue throughout 2023. We, along with most automotive component manufacturers that use semiconductors, have suffered interruptions in our production and have been unable to fully meet the vehicle production demands of original equipment manufacturers (“OEMs”) at times over the last several years because of events which are outside our control, including but not limited to, the COVID-19 pandemic, the global semiconductor shortage, fires in our suppliers’ facilities, unprecedented weather events, and other extraordinary events. Although we continue to work closely with suppliers and customers to minimize supply disruptions, some of our customers have indicated that they expect us to bear at least some responsibility for their lost production and other costs. While no assurances can be made as to the ultimate outcome of these customer expectations or any other future claims, we do not currently believe a loss is probable. We will continue to actively monitor all direct and indirect potential impacts of these supply chain disruptions, and will seek to aggressively mitigate and minimize their impact on our business.

In addition, we are carrying critical inventory items and key components, and we continue to procure productive, raw material and non-critical inventory components in order to satisfy our customers’ vehicle production schedules. However, as a result of our customers’ recent production volatility and cancellations, our balance of productive, raw and component material inventories has increased substantially from customary levels as of June 30, 2023 and December 31, 2022. We will continue to actively monitor and manage inventory levels across all inventory types in order to maximize both supply continuity and the efficient use of working capital.

Commercializing the high-tech evolution of the automotive industry. The automotive industry is increasingly evolving towards the implementation of software-dependent components and solutions. In particular, the industry is focused on the development of advanced driver assistance technologies, with the goal of developing and introducing a commercially-viable, fully automated driving experience. We expect automated driving technologies will provide strong societal benefit as well as the opportunity for long-term growth for our product offerings in this space. We are focused on enabling and delivering end-to-end smart mobility solutions, enabling our customers’ transition to more electrified, software-defined vehicles, accelerating the commercialization of active safety and autonomous driving technologies and providing enhanced user experience and connected services.

As part of our strategy to harness the full potential of connected intelligent systems across industries, strengthen our capabilities in software-defined mobility and to enable advanced smart vehicle architecture changes, we acquired Wind River in December 2022. Wind River is a global leader in delivering software for the intelligent edge. Previously, we executed a strategic collaboration agreement with Wind River to develop a software toolchain for various automotive applications.

We are also 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 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 leaders in their respective fields to advance the pace of development and commercialization of these emerging technologies.

Our joint venture, Motional AD LLC (“Motional”), began testing fully driverless systems in 2020 and began testing a production-ready autonomous driving platform available for robotaxi providers, meal delivery providers, fleet operators and automotive manufacturers at prototype scale in 2022, with initial production deployments anticipated in the fourth quarter of 2023. In addition, Motional is involved in collaborative arrangements with mobility providers and with smart cities such as Boston, Las Vegas, Los Angeles and Singapore as solutions are developed for the evolving nature of the mobility industry. As a result of our substantial investments and strategic partnerships, we believe we are well-aligned with industry technology trends that will result in sustainable future growth in these evolving areas.

However, there are many risks associated with these evolving areas, including the high development costs of active safety and autonomous driving technologies, the uncertain timing of customer and consumer adoption of these technologies, increased competition from entrants outside the traditional automotive industry and evolving regulations, such as the guidance for automated driving systems published by the U.S. Department of Transportation. 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 us or our partners and ultimately there can be no assurance that we will be successful in our efforts to develop these technologies.

Economic conditions. Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales depend on a number of factors, including global and regional economic conditions. Global automotive vehicle production increased 5% (5% on an AWM basis) from 2021 to 2022, reflecting increased vehicle production of 10% in North America, 3% in China, and 8% in South America, our smallest region, and a decrease of 1% in Europe. Compared to 2022, vehicle production for the six months ended June 30, 2023 increased by 11% (12% on an AWM basis).

In the third quarter of 2023, several of our largest customers’ collective bargaining agreements with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) in the United States and Unifor in Canada, as well as various collective bargaining agreements in Mexico, will expire. Although negotiation of new agreements has begun, the outcome of these negotiations is uncertain and may result in work stoppages and strikes at our customers’ manufacturing facilities, which could adversely affect our results of operations, financial condition and cash flows. Refer to Part I, Item 1A. Risk Factors of our 2022 Annual Report on Form 10-K for further discussion of the risks related to any significant disruption at our or our customers’ manufacturing facilities.

Economic volatility or weakness in North America, Europe, China or, to a lesser extent, South America could result in a significant reduction in automotive sales and production by our customers, which would have an adverse effect on our business, results of operations and financial condition. Global inflationary pressures have, at times, both reduced consumer demand for automotive vehicles and increased the price of inputs to our products, which has adversely impacted our profitability and this trend has continued in 2023. There is also potential that geopolitical factors could adversely impact the U.S. and other economies, and specifically the automotive sector. In particular, changes to international trade agreements, such as the United States-Mexico-Canada 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. Increases in interest rates could also negatively impact automotive production as a result of increased consumer borrowing costs or reduced credit availability. Additionally, economic weakness may result in shifts in the mix of future automotive sales (from vehicles with more content such as luxury vehicles, trucks and sport utility vehicles toward smaller passenger cars). While our diversified customer and geographic revenue base, along with our flexible cost structure, have well positioned us to withstand the impact of industry downturns and benefit from industry upturns, shifts in the mix of global automotive production to higher cost regions or to vehicles with less content could adversely impact our profitability.

Key growth markets. There have been periods of increased market volatility and moderation in the level of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously experienced. Automotive production in China experienced growth of 3% in 2022, which follows growth of 2% in 2021. Despite the moderation 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. Our strong global presence, and presence in these markets, has positioned us to experience above-market growth rates over the long-term. We continue to expand our established presence in key growth markets, positioning us to benefit from the expected long-term growth opportunities in these regions. We are capitalizing on our long-standing relationships with the global OEMs and further enhancing our positions with the key growth market OEMs to continue expanding our worldwide leadership. We continue to build upon our extensive geographic reach to capitalize on fast-growing automotive markets. We believe that our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards the key growth markets.

We have a strong local presence in China, including a major manufacturing base and well-established customer relationships. Each of our business segments have operations and sales in China. Our business in China remains sensitive to economic and market conditions that impact automotive sales volumes in China, and may be affected if the pace of growth slows as the Chinese market matures or if there are reductions in vehicle demand in China, as have recently been experienced as a result of the COVID-19 pandemic and related governmental lockdowns. However, we continue to believe this market will benefit from long-term demand for new vehicles and stringent governmental regulation driving increased vehicle content, including accelerated demand for electrified vehicles.

Market driven products. Our product offerings satisfy the OEMs’ needs to meet increasingly stringent government regulations and meet consumer preferences for products that address the mega-trends of Safe, Green and Connected, leading to increased content per vehicle, greater profitability and higher margins. With these offerings, we believe we are well-positioned to benefit from the growing demand for vehicle content and technology related to safety, electrification, high speed data, connectivity to the global information network and automated driving technologies. 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 infotainment in vehicles. Our ability to design a reliable electrical architecture that optimizes power distribution and/or consumption is key to satisfying the OEMs’ needs to reduce emissions while continuing to meet consumer demand for increased vehicle content and technology.

Global capabilities. Many OEMs are continuing to adopt global vehicle platforms to increase standardization, reduce per unit cost and increase capital efficiency and profitability. As a result, OEMs are selecting suppliers that have the capability to manufacture products on a worldwide basis, as well as the flexibility to adapt to regional variations. Suppliers with global scale and strong design, engineering and manufacturing capabilities are best positioned to benefit from this trend. Our global footprint enables us to serve the global OEMs on a worldwide basis as we gain market share with key growth market OEMs. This regional model is structured primarily to service the North American market from Mexico, the South American market from Brazil, the European market from Eastern Europe and North Africa and the Asia Pacific market from China, and we have continued to rotate our manufacturing footprint to best cost locations within these regions.

Our operations are subject to certain risks inherent in doing business globally, including military conflicts in regions in which we operate, unexpected changes in laws or regulations governing trade, or other monetary or tax fiscal policy changes, including tariffs, quotas, customs and other import or export restrictions or trade barriers. We are also subject to risks associated with actions taken by governmental authorities to impose changes in laws or regulations that restrict certain business operations, trade or travel in response to a pandemic or widespread outbreak of an illness. For instance, as described above, the conflict between Ukraine and Russia has created numerous economic uncertainties, including the potential for further sanctions against Russia, the impact on the global supply chain for raw materials produced in each country, as well as increased logistics costs and transit times, and the actions of automotive OEMs and suppliers as they relate to production plans in each country and within the region. The impacts of any of these factors mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

In addition, the global spread of the COVID-19 pandemic and variants thereof in recent years, has had various direct and indirect adverse impacts on our global operations, the automotive industry and economies around the world. Although certain of the adverse impacts of the pandemic have abated, other direct and indirect adverse impacts have continued, such as the overall supply chain disruptions, including the global semiconductor supply shortage and the regional lockdowns imposed by governmental authorities in China during portions of 2022. These impacts continue to negatively affect the global economy and automotive industry, and certain impacts have persisted in 2023. As a result, we are unable to predict the ultimate impact to our business due to a number of evolving factors, including the duration and spread of the pandemic, the impact of the pandemic on economic activity, our supply chain, consumer demand and vehicle production schedules, and the actions of governmental authorities across the globe.

Furthermore, existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as China and Mexico, could have a material adverse effect on our business and financial results. For example, in October 2022, the U.S. government imposed additional export control restrictions targeting the export, re-export or transfer of, among other products, certain advanced computing semiconductors, semiconductor manufacturing items and related technology to China, which could further disrupt supply chains and adversely impact our business. Furthermore, management continues to monitor the volatile geopolitical environment to identify, quantify and assess proposed or threatened duties, taxes or other business restrictions which could adversely affect our business and financial results.

Product development. The automotive technology and components industry is highly competitive and is characterized by rapidly changing technology, evolving industry standards and changes in customer needs. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely and cost competitive basis will be a significant factor in our ability to remain competitive. To compete effectively in the automotive technology and components industry, we must be able to develop and launch new products to meet our customers’ demands in a timely manner. With our innovative technologies and robust global engineering and development capabilities we are well positioned to meet the increasingly stringent vehicle manufacturer demands and consumer preferences for high-technology content in automobiles.

OEMs are increasingly looking to their suppliers to simplify vehicle design and assembly processes to reduce costs and weight. As a result, suppliers that sell vehicle components directly to manufacturers (Tier I suppliers) have assumed many of the design, engineering, research and development and assembly functions traditionally performed by vehicle manufacturers. Suppliers that can provide fully-engineered solutions, systems and pre-assembled combinations of component parts are positioned to leverage the trend toward system sourcing.

Engineering, design and development. Our history and culture of innovation have enabled us to develop significant intellectual property and design and development expertise to provide advanced technology solutions that meet the demands of our customers. We have a team of approximately 22,000 scientists, engineers and technicians focused on developing leading product solutions for our key markets, located at 11 major technical centers in China, Germany, India, Mexico, Poland, Singapore and the United States. During the year ended December 31, 2022, we invested approximately $1.5 billion (which includes approximately $379 million co-investment by customers and government agencies) in research and development, including engineering, to maintain our portfolio of innovative products, and own/hold approximately 9,500 patents and protective rights. We also encourage “open innovation” and collaborate extensively with peers in the industry, government agencies and academic institutions. Our technology competencies are recognized by both customers and government agencies, which, as noted above, co-invest approximately $379 million annually in new product development, accelerating the pace of innovation and reducing the risk associated with successful commercialization of technological breakthroughs.

In the past, suppliers often incurred the initial cost of engineering, designing and developing automotive component parts, and recovered their investments over time by including a cost recovery component in the price of each part based on expected volumes. Recently, we and many other suppliers have negotiated for cost recovery payments independent of volumes. This trend reduces our economic risk.

Pricing. Cost-cutting initiatives adopted by our customers result in increased downward pressure on pricing. Our customer supply agreements generally require step-downs in component pricing over the periods of production and OEMs have historically possessed significant leverage over their outside suppliers because the automotive component supply industry is fragmented and serves a limited number of automotive OEMs. Our profitability depends in part on our ability to generate sufficient production cost savings in the future to offset price reductions. In addition, during recent years, global economies and our industry were subjected to significant inflationary cost pressures, and these pressures have continued in 2023. We continue to work with our customers, through price increases, cost recoveries and adjustments as well as future pricing adjustments as contracts renew, to mitigate the impact of these inflationary pressures on our results of operations.

We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle. As a result, approximately 97% of our hourly workforce is located in best cost countries. Furthermore, we have substantial operational flexibility by leveraging a large workforce of contingent workers, which represented approximately 24% of the hourly workforce as of June 30, 2023. However, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering, as evidenced by our ongoing restructuring programs focused on reducing our global overhead costs and on the continued rotation of our manufacturing footprint to best cost locations in Europe. As we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure.

We have a strong balance sheet with gross debt of approximately $6.5 billion and substantial available liquidity of approximately $3.8 billion as of June 30, 2023, consisting of cash and cash equivalents, available financing under our Revolving Credit Facility and committed European accounts receivable factoring facility, and no significant U.S. defined benefit or workforce postretirement health care benefits and employer-paid postretirement basic life insurance benefits (“OPEB”) liabilities. We intend to maintain strong financial discipline by targeting industry-leading earnings growth, cash flow generation and return on invested capital and to maintain sufficient liquidity to sustain our financial flexibility throughout the industry cycle.

OEM product recalls. The number of vehicles recalled globally by OEMs has increased above historical levels. These recalls can either be initiated by the OEMs or influenced by regulatory agencies. Although there are differing rules and regulations across countries governing recalls for safety issues, the overall transition towards global vehicle platforms may also contribute to increased recalls outside of the U.S., as automotive components are increasingly standardized across regions. Given the sensitivity to safety issues in the automotive industry, including increased focus from regulators and consumers, we anticipate the number of automotive recalls may remain above historical levels in the near future. Although we engage in extensive product quality programs and processes, it is possible that we may be adversely affected in the future if the pace of these recalls continues.

Efficient use of capital. The global vehicle components industry is generally capital intensive and a portion of a supplier’s capital equipment is frequently utilized for specific customer programs. Lead times for procurement of capital equipment are long and typically exceed start of production by one to two years. Substantial advantages exist for suppliers that can leverage their prior investments in capital equipment or amortize the investment over higher volume global customer programs.

Industry consolidation and disruptive new entrants. Consolidation among worldwide OEMs and suppliers is expected to continue as these companies seek to achieve operating synergies and value stream efficiencies, acquire complementary technologies and build stronger customer relationships. Additionally, the rise of advanced software and technologies in vehicles has attracted new and disruptive entrants from outside the traditional automotive supply industry. These entrants may seek to

gain access to certain vehicle technology and component markets. Any of these new competitors may develop and introduce technologies that gain greater customer or consumer acceptance, which could adversely affect the future growth of the Company. We believe companies with strong balance sheets and financial discipline are in the best position to take advantage of these trends.

Consolidated Results of Operations

Aptiv typically experiences fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and the net of new and lost business (which we refer to collectively as volume), increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs (which we refer to as commodity pass-through), fluctuations in foreign currency exchange rates (which we refer to as “FX”), contractual reductions of the sales price to the OEM (which we refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or unfavorable impacts on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as well as shifts in consumer demand related to vehicle segment purchases and content penetration. For instance, a shift in sales demand favoring a particular OEM’s vehicle model for which we do not have a supply contract may negatively impact our revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of those of our customers that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.

We typically experience (as described below) fluctuations in operating income due to:

Volume, net of contractual price reductions—changes in volume offset by contractual price reductions (which typically range from 1% to 3% of net sales) and changes in mix;
Operational performance—changes to costs for materials and commodities or manufacturing and engineering variances; and
Other—including restructuring costs and any remaining variances not included in Volume, net of contractual price reductions or Operational performance.

The automotive technology and component supply industry is traditionally subject to inflationary pressures with respect to raw materials and labor which may place operational and profitability burdens on the entire supply chain. For instance, the industry has recently been subjected to increased pricing pressures, specifically in relation to copper and petroleum-based resin products, which have experienced significant volatility in price. We have also been impacted globally by increased overall inflation as a result of a variety of global trends. Due to various factors, the industry is also facing increased operating and logistics challenges from certain global supply chain disruptions, including the ongoing worldwide semiconductor supply shortage. This shortage has resulted in increased pricing pressures on semiconductors as well. In addition, we expect semiconductor supply cost and commodity cost volatility to have a continual impact on future earnings and/or operating cash flows. As such, we continually seek to mitigate both inflationary pressures and our material-related cost exposures using a number of approaches, including combining purchase requirements with customers and/or other suppliers, using alternate suppliers or product designs, negotiating cost reductions and/or commodity cost contract escalation clauses into our vehicle manufacturer supply contracts and hedging. We have also negotiated, and will continue to negotiate, price increases with our customers in response to the aforementioned global supply chain disruptions and increased overall inflation.

Three and Six Months Ended June 30, 2023 versus Three and Six Months Ended June 30, 2022

The results of operations for the three and six months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended June 30,								Six Months Ended June 30,
	2023			2022			Favorable/(unfavorable)		2023			2022			Favorable/(unfavorable)

	(dollars in millions)
Net sales	$	5,200		$	4,057		$	1,143	$	10,018		$	8,235		$	1,783
Cost of sales	4,336			3,617			(719)		8,394			7,206			(1,188)
Gross margin	864		16.6%	440		10.8%	424		1,624		16.2%	1,029		12.5%	595
Selling, general and administrative	353			286			(67)		695			560			(135)

Amortization	59			38			(21)		118			75			(43)
Restructuring	42			19			(23)		53			41			(12)
Operating income	410			97			313		758			353			405
Interest expense	(72)			(56)			(16)		(139)			(99)			(40)
Other income (expense), net	11			(25)			36		10			(64)			74
Income before income taxes and equity loss	349			16			333		629			190			439
Income tax expense	(30)			(16)			(14)		(64)			(37)			(27)
Income before equity loss	319			—			319		565			153			412
Equity loss, net of tax	(73)			(72)			(1)		(155)			(135)			(20)


Net income (loss)	246			(72)			318		410			18			392
Net income (loss) attributable to noncontrolling interest	4			(27)			31		7			(26)			33
Net loss attributable to redeemable noncontrolling interest	—			—			—		(1)			—			(1)
Net income (loss) attributable to Aptiv	242			(45)			287		404			44			360
Mandatory convertible preferred share dividends	(13)			(16)			3		(29)			(32)			3
Net income (loss) attributable to ordinary shareholders	$	229		$	(61)		$	290	$	375		$	12		$	363

Total Net Sales

Below is a summary of our total net sales for the three months ended June 30, 2023 versus June 30, 2022.


	Three Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/(unfavorable)		Volume, net of contractual price reductions		FX		Commodity pass-through		Other		Total

	(in millions)						(in millions)
Total net sales	$	5,200	$	4,057	$	1,143	$	1,031	$	(40)	$	(24)	$	176	$	1,143

Total net sales for the three months ended June 30, 2023 increased 28% compared to the three months ended June 30, 2022. Our volumes increased 22% for the period, which reflects volume growth in all regions, as well as increased global automotive production of 16% (15% on an AWM basis). Our total net sales also reflect the impacts of favorable pricing, net of contractual price reductions, of $138 million, and net sales as a result of our acquisitions of Wind River and Intercable Automotive of $176 million, which is reflected in Other above, partially offset by unfavorable foreign currency impacts, primarily related to the Chinese Yuan Renminbi. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our business acquisitions.

Below is a summary of our total net sales for the six months ended June 30, 2023 versus 2022.


	Six Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/(unfavorable)		Volume, net of contractual price reductions		FX		Commodity pass-through		Other		Total

	(in millions)						(in millions)
Total net sales	$	10,018	$	8,235	$	1,783	$	1,665	$	(168)	$	(68)	$	354	$	1,783

Total net sales for the six months ended June 30, 2023 increased 22% compared to the six months ended June 30, 2022. Our volumes increased 17% for the period, which reflects volume growth in all regions, as well as increased global automotive production of 11% (12% on an AWM basis). Our total net sales also reflect the impacts of favorable pricing, net of contractual price reductions, of $256 million, and net sales as a result of our acquisitions of Wind River and Intercable Automotive of $354 million, which is reflected in Other above, partially offset by unfavorable foreign currency impacts, primarily related to the Chinese Yuan Renminbi.

Cost of Sales

Cost of sales is primarily comprised of material, labor, manufacturing overhead, freight, fluctuations in foreign currency exchange rates, product engineering, design and development expenses, depreciation and amortization, warranty costs and other operating expenses. Gross margin is revenue less cost of sales and gross margin percentage is gross margin as a percentage of net sales.

Cost of sales increased $719 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, as summarized below. The Company’s material cost of sales was approximately 55% of net sales in both the three months ended June 30, 2023 and 2022.


	Three Months Ended June 30,								Variance Due To:
	2023			2022			Favorable/(unfavorable)		Volume (a)		FX		Operational performance		Other		Total

	(dollars in millions)								(in millions)
Cost of sales	$	4,336		$	3,617		$	(719)	$	(646)	$	(10)	$	(1)	$	(62)	$	(719)
Gross margin	$	864		$	440		$	424	$	385	$	(50)	$	(1)	$	90	$	424
Percentage of net sales	16.6		%	10.8		%

(a)Presented net of contractual price reductions for gross margin variance.

The increase in cost of sales reflects increased volumes, unfavorable impacts from currency exchange and the impacts of operational performance. Our operational performance for the three months ended June 30, 2023 includes approximately $55 million of increased costs for semiconductors and commodities, as well as approximately $60 million of decreased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. Cost of sales was also impacted by the following items in Other above:

Increased costs of $114 million resulting from the operations of the businesses acquired; partially offset by
$24 million of decreased commodity pass-through costs.

Cost of sales increased $1,188 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, as summarized below. The Company’s material cost of sales was approximately 55% of net sales in both the six months ended June 30, 2023 and 2022.


	Six Months Ended June 30,								Variance Due To:
	2023			2022			Favorable/(unfavorable)		Volume (a)		FX		Operational performance		Other		Total

	(dollars in millions)								(in millions)
Cost of sales	$	8,394		$	7,206		$	(1,188)	$	(1,013)	$	56	$	(51)	$	(180)	$	(1,188)
Gross margin	$	1,624		$	1,029		$	595	$	652	$	(112)	$	(51)	$	106	$	595
Percentage of net sales	16.2		%	12.5		%

(a)Presented net of contractual price reductions for gross margin variance.

The increase in cost of sales reflects increased volumes and the impacts of operational performance, partially offset by favorable impacts from currency exchange. Our operational performance for the six months ended June 30, 2023 includes approximately $185 million of increased costs for semiconductors and commodities, as well as approximately $80 million of decreased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. Cost of sales was also impacted by the following items in Other above:

Increased costs of $234 million resulting from the operations of the businesses acquired; and
Increased incentive compensation costs of $20 million; partially offset by
$68 million of decreased commodity pass-through costs.

Selling, General and Administrative Expense


	Three Months Ended June 30,
	2023			2022			Favorable/ (unfavorable)

	(dollars in millions)
Selling, general and administrative expense	$	353		$	286		$	(67)
Percentage of net sales	6.8		%	7.0		%

	Six Months Ended June 30,
	2023			2022			Favorable/ (unfavorable)

	(dollars in millions)
Selling, general and administrative expense	$	695		$	560		$	(135)
Percentage of net sales	6.9		%	6.8		%

Selling, general and administrative expense (“SG&A”) includes administrative expenses, information technology costs, incentive compensation related costs and selling and marketing expenses. SG&A as a percentage of sales for the three and six months ended June 30, 2023 compared to 2022 was impacted by our increased sales as well as the inclusion of costs from the operations of the businesses acquired.

Amortization


	Three Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Amortization	$	59	$	38	$	(21)

	Six Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Amortization	$	118	$	75	$	(43)

Amortization expense reflects the non-cash charge related to definite-lived intangible assets. The increase in amortization during the three and six months ended June 30, 2023 compared to 2022 is primarily attributable to the acquisitions of Wind River and Intercable Automotive in the fourth quarter of 2022. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of our business acquisitions, including details of the intangible assets recorded in each transaction.

Restructuring


	Three Months Ended June 30,
	2023			2022			Favorable/ (unfavorable)

	(dollars in millions)
Restructuring	$	42		$	19		$	(23)
Percentage of net sales	0.8		%	0.5		%

	Six Months Ended June 30,
	2023			2022			Favorable/ (unfavorable)

	(dollars in millions)
Restructuring	$	53		$	41		$	(12)
Percentage of net sales	0.5		%	0.5		%

The Company recorded employee-related and other restructuring charges totaling approximately $42 million and $53 million during the three and six months ended June 30, 2023, respectively. The charges recorded during the three months ended June 30, 2023 included the recognition of approximately $27 million of employee-related and other costs related to the initiation of the closure of a Western European manufacturing site within the Advanced Safety and User Experience segment pursuant to the Company’s ongoing European footprint rotation strategy. Cash payments related to this restructuring action are expected to be principally completed in 2024. We expect to make cash payments of approximately $45 million over the next twelve months pursuant to currently implemented restructuring programs.

The Company recorded employee-related and other restructuring charges totaling approximately $19 million and $41 million during the three and six months ended June 30, 2022, respectively.

We expect to continue to incur additional restructuring expense in 2023 and beyond, primarily related to programs focused on reducing global overhead costs and on the continued rotation of our manufacturing footprint to best cost locations in Europe, which includes approximately $20 million (of which approximately $10 million relates to the Advanced Safety and User Experience segment and approximately $10 million relates to the Signal and Power Solutions segment) for programs approved as of June 30, 2023. Additionally, as we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further adjust our cost structure and optimize our manufacturing footprint. The Company plans to implement additional restructuring activities in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing regional automotive production levels and locations, to improve the efficiency and utilization of other locations and in order to increase investment in advanced technologies and engineering. Such future restructuring actions are dependent on market conditions, customer actions and other factors.

Refer to Note 7. Restructuring to the consolidated financial statements contained herein for additional information.

Interest Expense


	Three Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Interest expense	$	72	$	56	$	(16)

	Six Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Interest expense	$	139	$	99	$	(40)

The increase in interest expense during the three months ended June 30, 2023 compared to 2022 reflects an increased interest rate on the outstanding Tranche A Term Loan. The increase in interest expense during the six months ended June 30, 2023 compared to 2022 reflects the issuance of $2.5 billion in aggregate principal amount of senior unsecured notes in February

2022 (the “2022 Senior Notes”) and an increased interest rate on the outstanding Tranche A Term Loan. Refer to Note 8. Debt to the consolidated financial statements contained herein for additional information.

Other Income, Net


	Three Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Other income (expense), net	$	11	$	(25)	$	36

	Six Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Other income (expense), net	$	10	$	(64)	$	74

Other income (expense), net for the three and six months ended June 30, 2023 includes interest income of $24 million and $46 million, respectively, partially offset by losses of $3 million and $6 million, respectively, recognized for the change in fair value of publicly traded equity securities and an impairment loss of $18 million recognized for Aptiv’s equity investments without readily determinable fair values for the six months ended June 30, 2023.

Other income (expense), net for the three and six months ended June 30, 2022 includes losses of $17 million and $49 million, respectively, recognized for the change in fair value of publicly traded equity securities.

Refer to Note 16. Other Income, net to the consolidated financial statements contained herein for additional information.

Income Taxes


	Three Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Income tax expense	$	30	$	16	$	(14)

	Six Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Income tax expense	$	64	$	37	$	(27)

The Company’s tax rate is affected by the fact that its parent entity is an Irish resident taxpayer, the tax rates in Ireland and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. The Company’s effective tax rate is also impacted by the receipt of certain tax incentives and holidays that reduce the effective tax rate for certain subsidiaries below the statutory rate. For the three and six months ended June 30, 2022, the Company’s effective tax rate was impacted by impairments and other charges related to the Ukraine/Russia conflict for which no tax benefit was recognized.

The Company’s effective tax rate for the three and six months ended June 30, 2023 includes net discrete tax benefits of approximately $22 million and $25 million, respectively, primarily related to changes in tax law and changes in reserves. The effective tax rate for the three and six months ended June 30, 2022 includes net discrete tax expenses of approximately $0 million and net discrete tax benefits of approximately $4 million, respectively, primarily related to net changes in accruals for unremitted earnings, provision to return adjustments and changes in reserves. Refer to Note 11. Income Taxes to the consolidated financial statements contained herein for additional information.

On December 15, 2022, the E.U. Member States formally adopted the E.U.’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organisation for Economic Co-operation and Development (the “OECD”) Pillar Two Framework. The OECD continues to release additional guidance on these rules. While the framework was issued without opposition from representatives from over 130 countries participating in the OECD’s consultative process, not all countries are actively changing their tax laws to adopt certain parts of the OECD’s proposals. Some countries have indicated they do not support the OECD efforts. This is creating significant uncertainty with regard to future tax policy. The Company is closely monitoring developments and analyzing the potential impacts these new rules may have on our effective tax rate.

Equity Loss


	Three Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Equity loss, net of tax	$	73	$	72	$	(1)

	Six Months Ended June 30,
	2023		2022		Favorable/ (unfavorable)

	(in millions)
Equity loss, net of tax	$	155	$	135	$	(20)

Equity loss, net of tax reflects the Company’s interest in the results of ongoing operations of entities accounted for as equity method investments. The equity losses recognized by Aptiv for each period presented are primarily attributable to the Motional autonomous driving joint venture.

Results of Operations by Segment

We operate our core business along the following operating segments, which are grouped on the basis of similar product, market and operating factors:

Signal and Power Solutions, which includes complete electrical architecture and component products.
Advanced Safety and User Experience, which includes vehicle technology and services in advanced safety, user experience and connectivity and security solutions, as well as cloud-native software platforms, autonomous driving technologies and DevOps tools.
Eliminations and Other, which includes i) the elimination of inter-segment transactions, and ii) certain other expenses and income of a non-operating or strategic nature.

Our management utilizes segment Adjusted Operating Income as the key performance measure of segment income or loss to evaluate segment performance, and for planning and forecasting purposes to allocate resources to the segments, as management believes this measure is most reflective of the operational profitability or loss of our operating segments. Segment Adjusted Operating Income should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income attributable to Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies.

The reconciliation of Adjusted Operating Income to operating income includes, as applicable, amortization, restructuring, other acquisition and portfolio project costs (which includes costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures), asset impairments and other related charges, compensation expense related to acquisitions and gains (losses) on business divestitures and other transactions. The reconciliations of Adjusted Operating Income to net income (loss) attributable to Aptiv for the three and six months ended June 30, 2023 and 2022 are as follows:


	Signal and Power Solutions		Advanced Safety and User Experience		Total

	(in millions)
For the Three Months Ended June 30, 2023:
Adjusted operating income	$	392	$	138	$	530
Amortization	(36)		(23)		(59)
Restructuring	(8)		(34)		(42)

Other acquisition and portfolio project costs	(8)		(3)		(11)


Compensation expense related to acquisitions	—		(8)		(8)


Operating income	$	340	$	70	410
Interest expense					(72)
Other income, net					11
Income before income taxes and equity loss					349
Income tax expense					(30)
Equity loss, net of tax					(73)


Net income					246
Net income attributable to noncontrolling interest					4

Net income attributable to Aptiv					$	242


	Signal and Power Solutions		Advanced Safety and User Experience		Total

	(in millions)
For the Three Months Ended June 30, 2022:
Adjusted operating income (loss)	$	243	$	(30)	$	213
Amortization	(37)		(1)		(38)
Restructuring	(13)		(6)		(19)
Other acquisition and portfolio project costs	—		(2)		(2)
Asset impairments	(3)		—		(3)
Other charges related to Ukraine/Russia conflict (1)	(54)		—		(54)

Operating income (loss)	$	136	$	(39)	97
Interest expense					(56)
Other expense, net					(25)
Income before income taxes and equity loss					16
Income tax expense					(16)
Equity loss, net of tax					(72)


Net loss					(72)
Net loss attributable to noncontrolling interest					(27)
Net loss attributable to Aptiv					$	(45)

(1)Primarily consists of charges related to the designation of our former majority owned Russian subsidiary as held for sale in the second quarter of 2022. Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further information.


	Signal and Power Solutions		Advanced Safety and User Experience		Total

	(in millions)
For the Six Months Ended June 30, 2023:
Adjusted operating income	$	766	$	201	$	967
Amortization	(72)		(46)		(118)
Restructuring	(15)		(38)		(53)

Other acquisition and portfolio project costs	(20)		(5)		(25)


Compensation expense related to acquisitions	—		(13)		(13)

Operating income	$	659	$	99	758
Interest expense					(139)
Other income, net					10
Income before income taxes and equity loss					629
Income tax expense					(64)
Equity loss, net of tax					(155)


Net income					410
Net income attributable to noncontrolling interest					7
Net loss attributable to redeemable noncontrolling interest					(1)
Net income attributable to Aptiv					$	404


	Signal and Power Solutions		Advanced Safety and User Experience		Total

	(in millions)
For the Six Months Ended June 30, 2022:
Adjusted operating income (loss)	$	551	$	(14)	$	537
Amortization	(72)		(3)		(75)
Restructuring	(22)		(19)		(41)
Other acquisition and portfolio project costs	(7)		(4)		(11)
Asset impairments	(3)		—		(3)
Other charges related to Ukraine/Russia conflict (1)	(54)		—		(54)

Operating income (loss)	$	393	$	(40)	353
Interest expense					(99)
Other expense, net					(64)
Income before income taxes and equity loss					190
Income tax expense					(37)
Equity loss, net of tax					(135)


Net income					18
Net loss attributable to noncontrolling interest					(26)
Net income attributable to Aptiv					$	44

Net sales, gross margin as a percentage of net sales and Adjusted Operating Income by segment for the three and six months ended June 30, 2023 and 2022 are as follows:

Net Sales by Segment


	Three Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/ (unfavorable)		Volume, net of contractual price reductions		FX		Commodity pass-through		Other		Total

	(in millions)						(in millions)
Signal and Power Solutions	$	3,679	$	3,039	$	640	$	632	$	(32)	$	(24)	$	64	$	640
Advanced Safety and User Experience	1,532		1,026		506		402		(8)		—		112		506
Eliminations and Other	(11)		(8)		(3)		(3)		—		—		—		(3)
Total	$	5,200	$	4,057	$	1,143	$	1,031	$	(40)	$	(24)	$	176	$	1,143

	Six Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/(unfavorable)		Volume, net of contractual price reductions		FX		Commodity pass-through		Other		Total

	(in millions)						(in millions)
Signal and Power Solutions	$	7,143	$	6,145	$	998	$	1,076	$	(145)	$	(68)	$	135	$	998
Advanced Safety and User Experience	2,898		2,108		790		595		(24)		—		219		790
Eliminations and Other	(23)		(18)		(5)		(6)		1		—		—		(5)
Total	$	10,018	$	8,235	$	1,783	$	1,665	$	(168)	$	(68)	$	354	$	1,783

Gross Margin Percentage by Segment


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Signal and Power Solutions	17.0	%	13.4	%	17.1	%	14.8	%

Advanced Safety and User Experience	15.6	%	3.3	%	14.0	%	5.6	%

Total	16.6	%	10.8	%	16.2	%	12.5	%

Adjusted Operating Income (Loss) by Segment


	Three Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/ (unfavorable)		Volume, net of contractual price reductions		Operational performance		Other		Total

	(in millions)						(in millions)
Signal and Power Solutions	$	392	$	243	$	149	$	211	$	(15)	$	(47)	$	149
Advanced Safety and User Experience	138		(30)		168		174		14		(20)		168

Total	$	530	$	213	$	317	$	385	$	(1)	$	(67)	$	317

As noted in the table above, Adjusted Operating Income for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 was impacted by volume, including product mix, and the impacts of favorable pricing, net of contractual price reductions, of $138 million, and operational performance. Our operational performance for the three months ended June 30, 2023 includes approximately $55 million of increased costs for semiconductors and commodities, as well as approximately $60 million of decreased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. Other in the table above includes increased earnings resulting from the operations of the businesses acquired, as well as the following items:

$51 million of unfavorable foreign currency impacts, primarily related to the Mexican Peso and Chinese Yuan Renminbi; and
$22 million of increased SG&A expense excluding SG&A expenses from the operations of the businesses acquired as well as the impact of other acquisition and portfolio project costs.


	Six Months Ended June 30,						Variance Due To:
	2023		2022		Favorable/(unfavorable)		Volume, net of contractual price reductions		Operational performance		Other		Total

	(in millions)						(in millions)
Signal and Power Solutions	$	766	$	551	$	215	$	388	$	(32)	$	(141)	$	215
Advanced Safety and User Experience	201		(14)		215		264		(19)		(30)		215

Total	$	967	$	537	$	430	$	652	$	(51)	$	(171)	$	430

As noted in the table above, Adjusted Operating Income for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was impacted by volume, including product mix, and the impacts of favorable pricing, net of contractual price reductions, of $256 million, and operational performance. Our operational performance for the six months ended June 30, 2023 includes approximately $185 million of increased costs for semiconductors and commodities, as well as approximately $80 million of decreased costs, primarily related to material logistics costs associated with the global supply chain disruptions due to the worldwide semiconductor shortage and other extraordinary events. Other in the table above includes increased earnings resulting from the operations of the businesses acquired, as well as the following items:

$107 million of unfavorable foreign currency impacts, primarily related to the Mexican Peso and Chinese Yuan Renminbi; and
$50 million of increased SG&A expense, including increased incentive compensation costs, and excluding SG&A expenses from the operations of the businesses acquired as well as the impact of other acquisition and portfolio project costs.

Liquidity and Capital Resources

Overview of Capital Structure

Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements and operational restructuring activities. Our primary sources of liquidity are cash flows from operations, our existing cash balance, and as necessary and available, borrowings under credit facilities and issuance of long-term debt and equity. To the extent we generate discretionary cash flow we may consider using this additional cash flow for optional prepayments of existing indebtedness, strategic acquisitions or investments, additional share repurchases and/or general corporate purposes. We also continually explore ways to enhance our capital structure.

As of June 30, 2023, we had cash and cash equivalents of $1.3 billion and net debt (defined as outstanding debt less cash and cash equivalents) of $5.2 billion. The following table summarizes our available liquidity, which includes cash, cash equivalents and funds available under our significant committed credit facilities, as of June 30, 2023:


	June 30, 2023

	(in millions)
Cash and cash equivalents	$	1,302
Revolving Credit Facility, unutilized portion (1)	2,000
Committed European accounts receivable factoring facility, unutilized portion (2)	491
Total available liquidity	$	3,793

(1)Availability reduced by less than $1 million in letters of credit issued under the Credit Agreement as of June 30, 2023.

(2)Based on June 30, 2023 foreign currency rates, subject to the availability of eligible accounts receivable.

Despite the current global economic impacts and uncertainties resulting from the conflict between Ukraine and Russia, the ongoing global supply chain disruptions, the COVID-19 pandemic and the resulting direct and indirect impacts on global

vehicle production, we currently expect existing cash, available liquidity and cash flows from operations to continue to be sufficient to fund our global operating activities, including restructuring payments, any mandatory payments required under the Credit Agreement as described below and capital expenditures.

We also continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies. We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Aptiv. As of June 30, 2023, the Company’s cash and cash equivalents held by our non-U.S. subsidiaries totaled approximately $1.2 billion. If additional non-U.S. cash was needed for our U.S. operations, we may be required to accrue and pay withholding if we were to distribute such funds from non-U.S. subsidiaries to the U.S.; however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.

2020 Public Equity Offering

In June 2020, the Company completed the underwritten public offering of approximately 15.1 million ordinary shares at a price of $75.91 per share, resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million. Simultaneously, the Company completed the underwritten public offering of 11.5 million 5.50% Mandatory Convertible Preferred Shares, Series A, $0.01 par value per share (the “MCPS”) with a liquidation preference of $100 per share (the “MCPS Offering”), resulting in net proceeds of approximately $1,115 million, after deducting expenses and the underwriters’ discount of $35 million.

Conversion of the MCPS—On June 15, 2023 (the “Mandatory Conversion Date”), each outstanding share of the Company’s MCPS converted into 1.0754 ordinary shares of the Company. In aggregate, the MCPS converted into approximately 12.37 million ordinary shares of the Company, pursuant to the Statement of Rights governing the MCPS.

Prior to their conversion, holders of the MCPS were entitled to receive, when and if declared by the Company’s Board of Directors, cumulative dividends at the annual rate of 5.50% of the liquidation preference of $100 per share (equivalent to $5.50 annually per share), payable in cash or, subject to certain limitations, by delivery of the Company’s ordinary shares or any combination of cash and the Company’s ordinary shares, at the Company’s election. Dividends on the MCPS were payable quarterly on March 15, June 15, September 15 and December 15 of each year (commencing on September 15, 2020 to, and including June 15, 2023), to the holders of record of the MCPS as they appear on the Company’s share register at the close of business on the immediately preceding March 1, June 1, September 1 and December 1, respectively. Refer to Note 12. Shareholders’ Equity and Net Income Per Share to the consolidated financial statements contained herein for further detail on the June 2020 public equity offering.

Share Repurchases

In January 2019, the Board of Directors authorized a share repurchase program of up to $2.0 billion of ordinary shares, which commenced in February 2023 following completion of the Company’s $1.5 billion April 2016 share repurchase program. This share repurchase program provides for share purchases in the open market or in privately negotiated transactions, depending on share price, market conditions and other factors, as determined by the Company.

A summary of the ordinary shares repurchased during the three and six months ended June 30, 2023 is as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023		2023
Total number of shares repurchased	269,003		872,774
Average price paid per share	$	104.36	$	112.03
Total (in millions)	$	28	$	98

There were no shares repurchased during the three and six months ended June 30, 2022. As of June 30, 2023, approximately $1,915 million of share repurchases remained available under the January 2019 share repurchase program. All previously repurchased shares were retired, and are reflected as a reduction of ordinary share capital for the par value of the shares, with the excess applied as reductions to additional paid-in-capital and retained earnings.

Preferred Dividends

In the second quarter of 2023, the Board of Directors declared and paid a quarterly cash dividend of approximately $1.375 per MCPS outstanding as of the June 1, 2023 record date.

Dividends from Equity Investments

During the three months ended June 30, 2023, Aptiv received dividends of $5 million from its equity method investments. The dividends were recognized as a reduction to the investment and represented a return on investment included in cash flows from operating activities.

Acquisitions and Other Transactions

Höhle—On April 3, 2023, Aptiv acquired 100% of the equity interests of Höhle Ltd. (“Höhle”), a manufacturer of microducts, for total consideration of $42 million. The results of operations of Höhle are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired Höhle utilizing cash on hand.

Wind River—On December 23, 2022, Aptiv acquired 100% of the equity interests of Wind River, a global leader in delivering software for the intelligent edge, for total consideration of approximately $3.5 billion. The results of operations of Wind River are reported within the Advanced Safety and User Experience segment from the date of acquisition. The Company acquired Wind River utilizing cash on hand, which included proceeds from the 2022 Senior Notes. Upon completion of the acquisition, Aptiv incurred transaction related expenses totaling approximately $43 million, which were recorded within other expense, net in the statement of operations in the fourth quarter of 2022.

Intercable Automotive—On November 30, 2022, Aptiv acquired 85% of the equity interests of Intercable Automotive, a manufacturer of high-voltage busbars and interconnect solutions, for total consideration of $609 million. The results of operations of Intercable Automotive are reported within the Signal and Power Solutions segment from the date of acquisition. The Company acquired its interest in Intercable Automotive utilizing cash on hand. Upon completion of the acquisition, Aptiv incurred transaction related expenses totaling approximately $10 million, which were recorded within other expense, net in the statement of operations in the fourth quarter of 2022.

Sale of Interest in Majority Owned Russian Subsidiary—Given the sanctions put in place by the E.U., U.S. and other governments, which restrict our ability to conduct business in Russia, we initiated a plan in the second quarter of 2022 to exit our 51% owned subsidiary in Russia. As a result, the Company determined that this subsidiary, which was reported within the Signal and Power Solutions segment, initially met the held for sale criteria as of June 30, 2022. Consequently, during the three months ended June 30, 2022, the Company recorded a pre-tax charge of $51 million to impair the carrying value of the Russian subsidiary’s net assets to fair value. The remaining assets and liabilities were de minimis, net of the appropriate valuation allowances, and were presented as other current assets and other current liabilities, respectively, in the consolidated balance sheet as of December 31, 2022.

On May 30, 2023, the Company completed the sale of its entire interest in the Russian subsidiary to JSC Samara Cables Company, the sole minority shareholder in the Russian subsidiary, for a nominal amount in exchange for all of the Company’s shares in the subsidiary. As a result of this transaction, the net assets held for sale of the Russian subsidiary were deconsolidated from the Company’s consolidated financial statements and the Company did not record any incremental gain or loss resulting from this disposition. Furthermore, losses relating to the Russian subsidiary during the held for sale period were de minimis. The former Russian subsidiary is not considered to be a related party of the Company after deconsolidation.

Refer to Note 17. Acquisitions and Divestitures to the consolidated financial statements contained herein for further detail of the Company’s business acquisitions and divestitures.

Investment in TTTech Auto AG—On March 15, 2022, Aptiv acquired approximately 20% of the equity interests of TTTech Auto AG (“TTTech Auto”), a leading provider of safety-critical middleware solutions for advanced driver-assistance systems and autonomous driving applications, for €200 million (approximately $220 million, using foreign currency rates on the investment date). The Company made the investment in TTTech Auto utilizing cash on hand.

Technology Investments—In May 2022, the Company’s Advanced Safety and User Experience segment made an investment totaling 50 billion South Korean Won (approximately $40 million, using foreign currency rates on the investment date) in StradVision, Inc., a provider of deep learning-based camera perception software for automotive applications.

Refer to Note 21. Investments in Affiliates to the consolidated financial statements contained herein for further detail of the Company’s investments.

Credit Agreement

Aptiv PLC and its wholly-owned subsidiary Aptiv Corporation entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), under which it maintains senior unsecured credit facilities currently consisting of a term loan (the “Tranche A Term Loan”) and a revolving credit facility of $2 billion (the “Revolving Credit Facility”). Subsequently, Aptiv Global Financing Limited (“AGFL”), a wholly-owned subsidiary of Aptiv PLC, executed a joinder agreement to the Credit Agreement, which allows it to act as a borrower under the Credit

Agreement, and a guaranty supplement, under which AGFL guarantees the obligations under the Credit Agreement, subject to certain exceptions.

The Credit Agreement was entered into in March 2011 and has been subsequently amended and restated on several occasions, most recently on June 24, 2021, and was further amended on April 19, 2023. The June 2021 amendment, among other things, (1) refinanced and replaced the existing term loan A and revolver with a new term loan A that matures in 2026, and a new five-year revolving credit facility with aggregate commitments of $2 billion, (2) utilized the Company’s existing sustainability-linked metrics and commitments, that, if achieved, would change the facility fee and interest rate margins as described below, and (3) established the leverage ratio maintenance covenant that requires the Company to maintain total net leverage (as calculated in accordance with the Credit Agreement) of less than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement) and allowed for dividends and other payments on equity. Effective from the date of the April 2023 amendment, all interest rate benchmarks within the Credit Agreement that were previously based on the London Interbank Offered Rate (“LIBOR”) were transitioned to a rate based on the Secured Overnight Financing Rate (“SOFR”). The Credit Agreement also contains an accordion feature that permits Aptiv to increase, from time to time, the aggregate borrowing capacity under the Credit Agreement by up to an additional $1 billion upon Aptiv’s request, the agreement of the lenders participating in the increase, and the approval of the Administrative Agent.

The Tranche A Term Loan and the Revolving Credit Facility mature on June 24, 2026. Beginning in the third quarter of 2022, Aptiv was obligated to begin making quarterly principal payments on the Tranche A Term Loan according to the amortization schedule in the Credit Agreement.

As of June 30, 2023, there were no amounts outstanding under the Revolving Credit Facility and less than $1 million in letters of credit were issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility. No amounts were drawn on the Revolving Credit Facility during the six months ended June 30, 2023.

As of June 30, 2023, loans under the Credit Agreement bore interest, at Aptiv’s option, at either (a) the Administrative Agent’s Alternate Base Rate (“ABR” as defined in the Credit Agreement) or (b) SOFR plus in either case a percentage per annum as set forth in the table below (the “Applicable Rate”). As of December 31, 2022, loans under the Credit Agreement bore interest, at Aptiv’s option, at either (a) ABR or (b) LIBOR plus in either case a percentage per annum as set forth in the table below. The rates under the Credit Agreement on the specified dates are set forth below:


	June 30, 2023				December 31, 2022
	SOFR plus		ABR plus		LIBOR plus		ABR plus
Revolving Credit Facility	1.06	%	0.06	%	1.06	%	0.06	%
Tranche A Term Loan	1.105	%	0.105	%	1.105	%	0.105	%

The Applicable Rate under the Credit Agreement, as well as the facility fee, may increase or decrease from time to time based on changes in the Company’s credit ratings and whether the Company achieves or fails to achieve certain sustainability-linked targets with respect to greenhouse gas emissions and workplace safety. Such adjustments may be up to 0.04% per annum on interest rate margins on the Revolving Credit Facility, 0.02% per annum on interest rate margins on the Tranche A Term Loan and 0.01% per annum on the facility fee. Accordingly, the interest rate is subject to fluctuation during the term of the Credit Agreement based on changes in the ABR, SOFR (after the April 2023 amendment), LIBOR (before the April 2023 amendment), changes in the Company’s corporate credit ratings or whether the Company achieves or fails to achieve its sustainability-linked targets. The Credit Agreement also requires that Aptiv pay certain facility fees on the Revolving Credit Facility, which are also subject to adjustment based on the sustainability-linked targets as described above, and certain letter of credit issuance and fronting fees. The Company achieved the sustainability-linked targets for the 2021 calendar year, and the interest rate margins and facility fees were reduced by the amounts specified above, effective in the third quarter of 2022. The Company also achieved the sustainability-linked targets for the 2022 calendar year, and the interest rate margins and facility fees will continue to be reduced by the amounts specified above, effective in the third quarter of 2023.

The interest rate period with respect to SOFR interest rate options can be set at one-, three-, or six-months as selected by Aptiv in accordance with the terms of the Credit Agreement (or other period as may be agreed by the applicable lenders). Aptiv may elect to change the selected interest rate option in accordance with the provisions of the Credit Agreement. As of June 30, 2023, Aptiv selected the one-month SOFR interest rate option on the Tranche A Term Loan, and the rate effective as of June 30, 2023, as detailed in the table below, was based on the Company’s current credit rating and the Applicable Rate for the Credit Agreement:


		Borrowings as of
		June 30, 2023		Rates effective as of
	Applicable Rate	(in millions)		June 30, 2023




Tranche A Term Loan	SOFR plus 1.105%	$	307	6.29	%

Borrowings under the Credit Agreement are prepayable at Aptiv’s option without premium or penalty.

The Credit Agreement contains certain covenants that limit, among other things, the Company’s (and the Company’s subsidiaries’) ability to incur certain additional indebtedness or liens or to dispose of substantially all of its assets. In addition, the Credit Agreement requires that the Company maintain a consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the Credit Agreement) of not more than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement). Following completion of the acquisition of Wind River in December 2022, the Company elected to increase the ratio of Consolidated Total Indebtedness to Consolidated EBITDA to 4.0 to 1.0 commencing with the fiscal quarter ending December 31, 2022. Refer to Note 17. Acquisitions and Divestitures for further information on this acquisition.

The Credit Agreement also contains events of default customary for financings of this type. The Company was in compliance with the Credit Agreement covenants as of June 30, 2023.

As of June 30, 2023, all obligations under the Credit Agreement were borrowed by Aptiv Corporation and jointly and severally guaranteed by AGFL and Aptiv PLC, subject to certain exceptions set forth in the Credit Agreement.

Senior Unsecured Notes

As of June 30, 2023, the Company had the following senior unsecured notes issued and outstanding:


Aggregate Principal Amount (in millions)		Stated Coupon Rate	Issuance Date	Maturity Date	Interest Payment Date

$	700	2.396%	February 2022	February 2025	February 18 and August 18
$	764	1.50%	March 2015	March 2025	March 10
$	546	1.60%	September 2016	September 2028	September 15
$	300	4.35%	March 2019	March 2029	March 15 and September 15
$	800	3.25%	February 2022	March 2032	March 1 and September 1
$	300	4.40%	September 2016	October 2046	April 1 and October 1
$	350	5.40%	March 2019	March 2049	March 15 and September 15
$	1,500	3.10%	November 2021	December 2051	June 1 and December 1
$	1,000	4.15%	February 2022	May 2052	May 1 and November 1

Although the specific terms of each indenture governing each series of senior notes vary, the indentures contain certain restrictive covenants, including with respect to Aptiv’s (and Aptiv’s subsidiaries’) ability to incur liens, enter into sale and leaseback transactions and merge with or into other entities. As of June 30, 2023, the Company was in compliance with the provisions of all series of the outstanding senior notes. Refer to Note 8. Debt to the consolidated financial statements contained herein for additional information.

Guarantor Summarized Financial Information

As further described in Note 8. Debt to the consolidated financial statements contained herein, Aptiv PLC, Aptiv Corporation and AGFL are each potential borrowers under the Credit Agreement, under which such borrowings would be guaranteed by each of the other two entities. Aptiv PLC issued the 2015 Euro-denominated Senior Notes, 2016 Euro-denominated Senior Notes, 2016 Senior Notes, 2019 Senior Notes and 2021 Senior Notes. In February 2022, Aptiv Corporation and AGFL were added as guarantors on each series of outstanding senior notes previously issued by Aptiv PLC. AGFL was added as a joint and several co-issuer of the 2021 Senior Notes in December 2021, effective as of the date of issuance. Aptiv PLC and Aptiv Corporation jointly issued the 2022 Senior Notes, which are guaranteed by AGFL. Together, Aptiv PLC, Aptiv Corporation and AGFL comprise the “Obligor Group.” All other consolidated direct and indirect subsidiaries of Aptiv PLC are not subject to any guarantee under any series of notes outstanding (the “Non-Guarantors”). The guarantees rank equally in right of payment with all of the guarantors’ existing and future senior indebtedness, are effectively subordinated to any of their existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the indebtedness of each of their existing and future subsidiaries that is not a guarantor.

The below summarized financial information is presented on a combined basis after the elimination of intercompany balances and transactions among the Obligor Group and equity in earnings from and investments in the Non-Guarantors. The below summarized financial information should be read in conjunction with the Company’s consolidated financial statements contained herein, as the financial information may not necessarily be indicative of results of operations or financial position had the subsidiaries operated as independent entities.


	Obligor Group

Six Months Ended June 30, 2023	(in millions)
Net sales	$	—
Gross margin	$	—
Operating loss	$	(16)
Net loss	$	(139)
Net loss attributable to Aptiv	$	(139)

As of June 30, 2023:
Current assets (1)	$	8,294
Long-term assets (2)	$	557
Current liabilities (3)	$	11,807
Long-term liabilities (3)	$	6,689
Noncontrolling interest	$	—

As of December 31, 2022:
Current assets (1)	$	5,340
Long-term assets (2)	$	516
Current liabilities (3)	$	7,372
Long-term liabilities (3)	$	6,668
Noncontrolling interest	$	—

(1)Includes current assets of $7,649 million and $4,763 million due from Non-Guarantors as of June 30, 2023 and December 31, 2022, respectively. The balance as of December 31, 2022 includes amounts due from affiliates of $1 million.

(2)Includes long-term assets of $549 million and $507 million due from Non-Guarantors as of June 30, 2023 and December 31, 2022, respectively.

(3)Includes current liabilities of $11,727 million and $7,261 million, and long-term liabilities of $226 million and $226 million, due to Non-Guarantors as of June 30, 2023 and December 31, 2022, respectively.

Other Financing

Receivable factoring—Aptiv maintains a €450 million European accounts receivable factoring facility that is available on a committed basis and allows for factoring of receivables denominated in both Euros and U.S. dollars (“USD”). This facility is accounted for as short-term debt and borrowings are subject to the availability of eligible accounts receivable. Collateral is not required related to these trade accounts receivable. This facility became effective on January 1, 2021 and has a term of three years, subject to Aptiv’s right to terminate at any time with three months’ notice. After expiration of the three-year term, either party can terminate with three months’ notice. Borrowings denominated in Euros under the facility bear interest at the three-

month Euro Interbank Offered Rate (“EURIBOR”) plus 0.50%. As of December 31, 2022, USD borrowings bore interest at two-month LIBOR plus 0.50%, with borrowings under either denomination carrying a minimum interest rate of 0.20%. Effective in the second quarter of 2023, this facility was amended to replace the interest rate on USD borrowings with two-month SOFR plus 0.50%, effective as of the date of the amendment. As of June 30, 2023 and December 31, 2022, Aptiv had no amounts drawn on the European accounts receivable factoring facility. No amounts were drawn under the European accounts receivable factoring facility during the six months ended June 30, 2023.

Finance leases and other—As of June 30, 2023 and December 31, 2022, approximately $33 million and $38 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and finance lease obligations were outstanding. Included within the total as of June 30, 2023, were obligations outstanding of approximately $1 million under supplier finance programs, which were recorded as short-term debt in the consolidated balance sheet. These obligations generally mature 90 days after issuance and require that Aptiv maintain a contractually defined minimum cash balance with the issuing bank.

Letter of credit facilities—In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $3 million and $3 million outstanding through other letter of credit facilities as of June 30, 2023 and December 31, 2022, respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.

Cash Flows

Intra-month cash flow cycles vary by region, but in general we are users of cash through the first half of a typical month and we generate cash during the latter half of a typical month. Due to this cycle of cash flows, we may utilize short-term financing, including our Revolving Credit Facility and European accounts receivable factoring facility, to manage our intra-month working capital needs. Our cash balance typically peaks at month end.

We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan structures and other distributions and advances, to provide the funds necessary to meet our global liquidity needs. We utilize a global cash pooling arrangement to consolidate and manage our global cash balances, which enables us to efficiently move cash into and out of a number of the countries in which we operate.

Operating activities—Net cash provided by operating activities totaled $526 million for the six months ended June 30, 2023 and net cash used in operating activities totaled $107 million for the six months ended June 30, 2022. Cash flows provided by operating activities for the six months ended June 30, 2023 consisted primarily of net earnings of $410 million, increased by $462 million for non-cash charges for depreciation, amortization and pension costs, partially offset by $546 million related to changes in operating assets and liabilities, net of restructuring and pension contributions. Cash flows used in operating activities for the six months ended June 30, 2022 consisted primarily of net earnings of $18 million, increased by $400 million for non-cash charges for depreciation, amortization and pension costs, offset by $759 million related to changes in operating assets and liabilities, net of restructuring and pension contributions.

Investing activities—Net cash used in investing activities totaled $590 million for the six months ended June 30, 2023, as compared to $705 million for the six months ended June 30, 2022. The decrease in usage is primarily attributable to $83 million paid for business acquisitions and other transactions during the six months ended June 30, 2023 as compared to $220 million during the six months ended June 30, 2022, partially offset by increased capital expenditures of $37 million.

Financing activities—Net cash used in financing activities totaled $181 million for the six months ended June 30, 2023 and net cash provided by financing activities totaled $2,394 million for the six months ended June 30, 2022. Cash flows used in financing activities for the six months ended June 30, 2023 primarily included $98 million paid to repurchase ordinary shares and $32 million of MCPS dividend payments. Cash flows provided by financing activities for the six months ended June 30, 2022 primarily included $2,472 million received from the issuance of the 2022 Senior Notes, partially offset by $32 million of MCPS dividend payments.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contingencies and Environmental Matters

The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 10. Commitments and Contingencies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.

Recently Issued Accounting Pronouncements

The information concerning recently issued accounting pronouncements contained in Note 2. Significant Accounting Policies to the unaudited consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.

Critical Accounting Estimates

There have been no significant changes in our critical accounting estimates during the three and six months ended June 30, 2023.

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