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FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 .

Commission file No. 1-14787

DELPHI CORPORATION

(248) 813-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes X.     No   .

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes X.     No   .

As of March 31, 2004 there were 560,345,280 outstanding shares of the registrant’s $0.01 par value common stock.

DELPHI CORPORATION

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PART I. FINANCIAL INFORMATION

DELPHI CORPORATION

See notes to consolidated financial statements.

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DELPHI CORPORATION

See notes to consolidated financial statements.

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DELPHI CORPORATION

See notes to consolidated financial statements.

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DELPHI CORPORATION

1. BASIS OF PRESENTATION

      General — Delphi Corporation (“Delphi”) is a world-leading supplier of vehicle electronics, transportation components, integrated systems and modules and other electronic technology. The consolidated financial statements and notes thereto included in this report should be read in conjunction with our consolidated financial statements and notes thereto included in our 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of Delphi and its subsidiaries.

      All significant intercompany transactions and balances between consolidated Delphi businesses have been eliminated. In the opinion of management, all adjustments, consisting of only normal recurring items, which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected from any other interim period or for the full year and may not necessarily reflect the consolidated results of operations, financial position and cash flows of Delphi in the future.

      Certain prior period amounts have been reclassified to conform to current period presentation.

      Earnings Per Share — Basic earnings per share amounts were computed using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, unless inclusion would not have had a dilutive effect. Certain outstanding stock options were not included in the computation of diluted shares because the options’ underlying exercise prices were greater than the average market prices for Delphi stock on March 31, 2004 and 2003 (approximately 73 million stock options were not dilutive at March 31, 2004). Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were:

      The Board of Directors declared a dividend on Delphi common stock of $0.07 per share on March 1, 2004, which was paid on April 12, 2004 to holders of record on March 15, 2004. The dividend declared on December 3, 2003 was paid on January 14, 2004.

      Stock-Based Compensation — As allowed under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” Delphi accounts for a majority of its stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. There were no stock options granted during the three months ended March 31, 2004 and 2003.

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      If we accounted for all stock-based compensation using the fair value recognition provisions of SFAS No. 123 and related amendments, our net income and basic and diluted earnings per share would have been as follows:

      During 1999, Delphi awarded certain employees approximately 3 million restricted stock units, which were delivered to them as stock during the first quarter of 2003 in accordance with the original award terms. During the first quarter of 2003, we also cancelled approximately 20 million shares available for future grants under the terms of certain of Delphi’s stock option plans. During the fourth quarter of 2003, Delphi completed a self-tender for certain employee stock options having an exercise price in excess of $17 per share. Approximately 8.4 million shares were exchanged under this program. As of March 31, 2004, there are approximately 16 million shares available for future grants under these stock option plans.

      In the third quarter of 2003, Delphi approved plans to reduce our U.S. hourly workforce by up to 5,000 employees, our U.S. salaried workforce by approximately 500 employees, and our non-U.S. workforce by approximately 3,000 employees. Our plans entail reductions to our workforce through a variety of methods including regular attrition and retirements, and voluntary and involuntary separations, as applicable. Under certain elements of the plans, the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (“UAW”) hourly employees may flow back to General Motors (“GM”). As required under generally accepted accounting principles, we record the costs associated with the flowback to GM as the employees accept the offer to exit Delphi. We expect to incur total charges related to these initiatives of approximately $807 million (pre-tax) through December 31, 2004, of which $90 million ($52 million in cost of sales and $38 million in employee and product line charges) was recorded during the first quarter of 2004 and $616 million was recorded in 2003. We expect to incur the remaining estimated charges of $101 million (pre-tax) related to the hourly employee reductions, including employee costs during periods they are idled prior to separation, and to the other structural cost initiatives during the remainder of 2004. During the first quarter of 2004, approximately 2,150 U.S. hourly employees flowed back to GM or retired while 400 U.S. salaried employees and 1,350 non-U.S. employees retired or separated under a variety of programs. Cumulatively through March 31, 2004, approximately 3,750 U.S. hourly employees, 500 U.S. salaried employees, and 2,900 non-U.S. employees have left the company pursuant to these plans.

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      Following is a summary of the activity in the employee and product line reserve (in millions):

(a)	The total cash paid in the first quarter of 2004 was $141 million, as shown on our consolidated Statement of Cash Flows. The $145 million of usage in the first quarter includes $4 million of non-cash special termination pension and postretirement benefits. In addition, we incurred $52 million of cash costs associated with the 2004 charges, which were recorded in cost of sales.
(b)	This amount is included in accrued liabilities in the accompanying consolidated balance sheet.

      The estimated cash impact of the 2003 initiatives is approximately $0.7 billion, of which $193 million was paid in the first quarter of 2004 and $205 million was paid in 2003. We expect that up to $0.2 billion will be paid in subsequent quarters in 2004 and the remainder in 2005.

      We maintain a revolving accounts receivable securitization program in the United States (“U.S. Facility Program”). Under this U.S. Facility Program, we sell a portion of our U.S. and Canadian trade receivables to Delphi Receivables LLC (“DR”), a wholly-owned consolidated special purpose entity. DR may then sell, on a non-recourse basis (subject to certain limited exceptions), an undivided interest in the receivables to asset-backed, multi-seller commercial paper Conduits. The sale of the undivided interest in the receivables from DR to the Conduits is accounted for as a sale under the provisions of SFAS No. 140, “Accounting for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). The remaining undivided interest is retained by DR. As of March 31, 2004 the retained interest in receivables, net was $893 million. We assess the recoverability of the retained interest on a quarterly basis and adjust the carrying value as necessary.

      At the time DR sells the undivided interest to the Conduits the sale is recorded at fair value with the difference between the carrying amount and fair value of the assets sold included in operating income as a loss on sale. This difference between carrying value and fair value is principally the estimated discount inherent in the U.S. Facility Program, which reflects the borrowing costs as well as fees and expenses of the Conduits (approximately 1.4% to 1.6%), and the length of time the receivables are expected to be outstanding. The loss on sale was approximately $0.7 million for the three months ended March 31, 2004.

      The U.S. Facility Program, which is among Delphi, DR, the Conduits, the sponsoring banks and their agents, was renewed on March 29, 2004 and extended through March 28, 2005. The terms and conditions are substantially the same; however, the U.S. Facility Program has been increased from $500 million to $600 million. The program can be extended for additional 364-day periods based upon the mutual agreement of the parties. Additionally, the U.S. Facility Program contains a financial covenant and certain other covenants similar to our revolving credit facilities that, if not met, could result in a termination of the program. At March 31, 2004, we were in compliance with all such covenants.

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      The table below summarizes certain cash flows received from and paid to the Conduits under the revolving U.S. Facility Program. There were no receivables sold during the first quarter of 2003.

(a)	Of the collections received on the undivided interests sold, for the three months ended March 31, 2004, $723 million was remitted to the Conduits and $150 million was reinvested.

      Inventories, net consisted of:

      Pension plans covering unionized employees in the U.S. generally provide benefits of negotiated stated amounts for each year of service, as well as supplemental benefits for employees who qualify for retirement before normal retirement age. The benefits provided by the plans covering U.S. salaried employees are generally based on years of service and salary history. Certain Delphi employees also participate in nonqualified pension plans covering executives, which are not funded. Such plans are based on targeted wage replacement percentages, and are generally not significant to Delphi. Delphi’s funding policy with respect to its qualified plans is to contribute at least the minimum amounts required by applicable laws and regulations.

      The 2004 and 2003 amounts shown below reflect the defined benefit pension and other postretirement benefit expense for the three months ended March 31 for each year for U.S. salaried and hourly employees: