# Aptiv PLC (APTV) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Aptiv PLC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1521332/000152133224000011/aptv-20231231.htm
Accession: 0001521332-24-000011
Filing date: 2024-02-06
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/APTV/
All MD&A years: /company/APTV/mda/
Previous year: /company/APTV/mda/fy2022/ (FY 2022)
Next year: /company/APTV/mda/fy2024/ (FY 2024)

ITEM 7. 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 year ended December 31, 2023. This discussion should be read in conjunction with Item 8. Financial Statements and Supplementary Data. Our MD&A is presented in seven sections:

•Executive Overview

•Consolidated Results of Operations

•Results of Operations by Segment

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Significant Accounting Policies and Critical Accounting Estimates

•Recently Issued Accounting Pronouncements

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.

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We are one of the largest vehicle technology suppliers and our customers include the 25 largest automotive OEMs in the world.

Business Strategy

We believe the Company is well-positioned for growth from increasing global vehicle production volumes, as well as the industry’s accelerating transition to software-defined vehicles, the commercialization of active safety, the adoption of autonomous driving technologies, enhanced user experiences and connected services, and providing the software, advanced computing platforms and networking architecture required to do so. We have successfully created a competitive cost structure while investing in research and development to grow our product offerings, which are aligned with the high-growth industry mega-trends, and re-aligned our manufacturing footprint into an efficient, low-cost regional service model, focused on increasing our profit margins.

Our 2023 performance reflects increasing global vehicle production and our solid execution despite the global inflationary environment and North American OEM labor strikes. Our recent financial and business achievements include the following:

•Generating record new business awards of approximately $34 billion, based on expected volumes and prices, validating our industry leading portfolio of advanced technologies tied to the accelerating megatrends in our industry

•Delivering strong revenue growth over the prior year despite adverse impacts from the North American OEM labor strikes

•Producing $1.6 billion of operating income or $2.1 billion of adjusted operating income and cash flow from operations of $1.9 billion, demonstrating strong operating execution in the face of the OEM labor disruptions and continuing material cost inflation

•Opportunistically paying off the outstanding principal balance of $301 million on the Tranche A Term Loan, Aptiv’s only variable rate borrowing

◦Reducing our weighted average interest rate on total borrowings to 3.15%.

•Continuing our relentless focus on cost structure and operational optimization

◦Maximizing our operational flexibility and profitability at all points in the normal automotive business cycle, by having approximately 97% of our hourly workforce based in best cost countries, and approximately 27% of our hourly workforce composed of contingent employees.

•Enhancing our optimized full system, edge-to-cloud capabilities

◦Increasing commercial traction, including a new business award that leverages the software product offerings of Wind River Systems, Inc. (“Wind River”) integrated with Aptiv’s full system solutions to optimize advanced driver assistance systems performance.

•Meeting the sustainability-linked targets for greenhouse gas emissions and workplace safety within our Credit Agreement.

Our strategy is to build on these accomplishments and continue to develop and manufacture innovative market-relevant products for a diverse base of customers around the globe and leverage our lean and flexible cost structure to achieve strong and disciplined earnings growth and returns on invested capital. Through our culture of innovation and world class engineering capabilities we intend to employ our rigorous, forward-looking product development process to deliver new technologies that provide solutions to our customers. We are committed to creating value for our shareholders, including through the repurchase of shares. In 2023, we repurchased $398 million of ordinary shares. Our key strategic priorities include:

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 for multiple industries, including automotive, by leveraging mixed-criticality software products and solutions enabling customers to develop in the cloud, deploy over the air and run and manage software at the vehicle edge.

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We are also continuing to develop market-leading automated driving solutions such as automated driving software, key active safety sensing and compute technologies capable of supporting safety-critical applications. We believe we are well-aligned with industry technology trends that will help to support 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.

In March 2020, we completed a transaction with Hyundai Motor Group to form Motional, AD LLC (“Motional”), a joint venture focused on the design, development and commercialization of autonomous driving technologies. 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 in the fourth quarter of 2023 and commercial launch planned in the first half of 2024. 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.

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.

Leveraging our engineering and technological capabilities. We seek to leverage our strong product portfolio tied to the industry’s key mega-trends with our global footprint to increase our revenues, as well as committing to substantial annual investment in research and development to maintain and enhance our leadership in new mobility solutions across each of our product lines.

Targeting the right business with the right customers. We intend to be strategic in our pursuit of new business and customers in order to achieve disciplined, above-market growth. We conduct in-depth analysis of market share and product trends by region in order to prioritize research, development and engineering spend for the customers that we believe will be successful. Collaboration with customers in our 11 major technical centers around the world helps us develop innovative product solutions designed to meet their needs. As more OEMs design vehicles for global platforms, where the same vehicle architecture is shared among different regions, we are well suited to provide global design and engineering support while manufacturing these products for a specific regional market.

Capitalizing on our scale, global footprint and established position in key growth markets. We intend to generate sustained growth by capitalizing on the breadth and scale of our operating capabilities. Our global footprint provides us important proximity to our customers’ manufacturing facilities and allows us to serve them in every region in which they operate. We anticipate that we will continue to build upon our extensive geographic reach to capitalize on growing automotive markets, particularly in China. In addition, our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards key growth markets.

Leveraging our lean and flexible cost structure to deliver profitability and cash flow. We recognize the importance of maintaining a lean and flexible cost structure in order to deliver stable earnings and cash flow in a cyclical industry. Our focus is on maximizing and optimizing manufacturing output to meet increasing production requirements with minimal additions to our fixed-cost base. Additionally, we are continuing to use a meaningful amount of temporary workers to ensure we have the appropriate operational flexibility to scale our operations so that we can maintain our profitability as industry production levels increase or contract.

Advancing and maintaining an efficient capital structure. We actively manage our capital structure in order to maintain an investment grade credit rating and healthy capital ratios to support our business and maximize shareholder value. We will continue to make adjustments to our capital structure in light of changes in economic conditions or as opportunities arise to provide us with additional financial flexibility to invest in our business and execute our strategic objectives going forward.

Pursuing selected acquisitions and strategic investments. In recent years, we continued to complete selected acquisitions and strategic investments in order to continue to leverage our technology capabilities and enhance and expand our commercialization of new mobility solutions, product offerings, customer base, geographic penetration and scale to complement our current businesses, while continuing to enhance our product offerings and competitive position in growing market segments.

Accelerating an electric, zero-emissions future. We are committed to becoming carbon-neutral in our global operations by 2030 and to achieving net carbon neutrality by 2040 as we transition away from carbon-intensive energy and processes in our global operations. We also continue to focus on minimizing the overall environmental impact of vehicles as a key part of our overall business strategy. We believe that this strong, foundational focus on sustainability makes Aptiv a partner of choice

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for our customers, a desirable place to work for our employees and a valued contributor to the communities in which we operate.

Trends, Uncertainties and Opportunities

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 9% (10% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue, “AWM”) from 2022 to 2023, reflecting increased vehicle production of 13% in Europe, 10% in China, 9% in North America and flat production in South America, our smallest region. Refer to Note 22. Segment Reporting of the notes to the audited consolidated financial statements, included in Item 8. Financial Statements and Supplementary Data of this Annual Report for financial information concerning principal geographic areas.

On September 15, 2023, several of our largest customers’ collective bargaining agreements with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”), expired and the UAW subsequently went on strike against General Motors (“GM”), Ford Motor Company (“Ford”) and Stellantis N.V. (“Stellantis”) in the United States (the “U.S.”), causing work stoppages at certain of these customers’ vehicle production and parts distribution facilities, which lasted approximately six weeks. Aptiv’s estimated total indirect and direct adverse impacts of these labor strikes to revenue during the year ended December 31, 2023 were approximately $180 million. Refer to Part I, Item 1A. Risk Factors for further discussion of the risks related to significant disruptions 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. In 2023, 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 may continue in 2024. 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.

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.”), 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 year ended December 31, 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. The Company did not record any incremental gain or loss resulting from this disposition. Refer to Note 20. Acquisitions and Divestitures to the audited consolidated financial statements contained herein for further detail on this transaction.

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.

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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, 2023 and less than 1% of our net sales for the year ended December 31, 2023 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 34% of our net sales for the year ended December 31, 2023. As a result of the conflict, the Company ceased using certain long-lived assets in Ukraine and consequently recorded non-cash impairment charges of $11 million during the year ended December 31, 2023. These charges were recorded within cost of sales in the statement of operations. Furthermore, as a result of the conflict, we estimate that the adverse impacts to revenue from Russia operations were approximately $65 million during the year ended December 31, 2022.

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.

Global supply chain disruptions. Due to various factors that are beyond our control, there have been global supply chain disruptions at times during recent years, including a worldwide semiconductor supply shortage. The semiconductor supply shortage impacted production in automotive and other industries. We, along with most automotive component manufacturers that use semiconductors, have suffered interruptions in our production and were unable to fully meet the vehicle production demands of 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 work closely with suppliers and customers to minimize any 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 our global supply chain and will seek to aggressively mitigate and minimize the impact of any future disruptions 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 both December 31, 2023 and 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.

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 10% in 2023, which follows growth of 3% in 2022. Despite the market volatility and 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, such as during the COVID-19 pandemic and related governmental lockdowns in 2022. Estimated total indirect and direct adverse impacts to revenue as a result of these lockdowns during 2022 was approximately $270 million. 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

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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. While we have identified high voltage electrification systems as a key product market, certain of our OEM customers have recently announced delays in their electric vehicle investment strategies amidst reduced expectations for future consumer demand for these products.

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 labor, trade, or other monetary or tax fiscal policy changes, including the Organisation for Economic Co-operation’s (“OECD”) Pillar Two Directive, tariffs, quotas, customs and other import or export restrictions or trade barriers. For instance, effective January 1, 2024, the government of Mexico implemented a country-wide statutory minimum wage increase of 20%. Additionally, the government of Mexico has indicated it may implement other labor reforms, such as a bill to shorten the work week from 48 to 40 hours. While management has implemented measures to mitigate the impact of these labor reforms on our cost structure, we cannot predict the ultimate future impact on our business.

The outbreak of armed conflicts in the Middle East beginning in October 2023 has created numerous uncertainties, including the risk that the conflicts spread to the broader region, and their impact on the global economy and supply chains. In addition, as described above, the conflict between Ukraine and Russia has also 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. 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. 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.

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. 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.

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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 22,200 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. Our total investment in research and development, including engineering, was approximately $1.8 billion, $1.5 billion and $1.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively, which includes approximately $492 million, $379 million and $320 million of co-investment by customers and government agencies. Each year we share some engineering expenses with OEMs and government agencies which generally ranges from 20% to 30% of engineering expenses. This level of co-investment supports product development, accelerates the pace of innovation and reduces the risk associated with successful commercialization of technological breakthroughs. We also encourage “open innovation” and collaborate extensively with peers in the industry, government agencies and academic institutions.

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.

We utilize a Technology Advisory Council, a panel of prominent global technology thought leaders, which helps us anticipate cutting-edge technology trends and guides our product strategies and investments in technology with a focus on developing advanced technologies to drive growth and foster innovation. This independent perspective assists Aptiv in pursuing investments in the right technologies that create the most value for all of its stakeholders. We believe that our engineering and technical expertise, together with our emphasis on continuing research and development, allow us to use the latest technologies, materials and processes to solve problems for our customers and to bring new, innovative products to market. We believe that continued engineering activities are critical to maintaining our pipeline of technologically advanced products. Given our strong financial discipline, we seek to effectively manage fixed costs and efficiently rationalize capital spending by critically evaluating the profit potential of new and existing customer programs, including investment in innovation and technology. We maintain our engineering activities around our focused product portfolio and allocate our capital and resources to those products with distinctive technologies. We expect expenditures for research and development activities, including engineering, net of co-investment, to be approximately $1.2 billion for the year ended December 31, 2024.

We maintain a large portfolio of approximately 10,000 patents and protective rights in the operation of our business as of December 31, 2023. While no individual patent or group of patents, taken alone, is considered material to our business, taken in the aggregate, these patents provide meaningful protection for our products and technical innovations. Similarly, while our trademarks are important to identify our position in the industry, we do not believe that any of these are individually material to our business. We are actively pursuing marketing opportunities to commercialize and license our technology to both automotive and non-automotive industries and we have selectively taken licenses from others to support our business interests. These activities foster optimization of intellectual property rights.

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 may continue in 2024. We continue to work with our customers, both through price 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 27% of the hourly workforce as of December 31, 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. Assuming constant product mix and pricing, based on our 2023 results, we estimate that our EBITDA breakeven level would be reached if we experienced a 45% downturn to current product volumes.

We have a strong balance sheet with gross debt of approximately $6.2 billion and substantial available liquidity of approximately $4.1 billion consisting of cash and cash equivalents, and available financing under our Revolving Credit Facility and committed European accounts receivable factoring facility (as defined below in Liquidity and Capital Resources) as of

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December 31, 2023, and no significant U.S. defined benefit or workforce postretirement health care benefits and employer-paid postretirement basic life insurance benefits 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

Our total net sales during the year ended December 31, 2023 were $20.1 billion, an increase of approximately 15% compared to 2022. Our overall volumes increased 10%, which reflects volume growth in all regions, as well as increased global automotive production of 9% (10% on an AWM basis) for the year ended December 31, 2023, compared to 2022 production rates, which was partially offset by adverse impacts to our revenue of approximately $180 million resulting from the UAW labor strikes. Our net sales were also impacted by increased sales of approximately $634 million as a result of the acquisitions of Wind River and Intercable Automotive Solutions S.r.l. (“Intercable Automotive”) in late-2022. Our overall lean cost structure, along with continued growth in all regions, has enabled us to achieve strong levels of operating income, while continuing to strategically invest in the future.

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

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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 has recently been impacted by increased operating and logistics challenges from certain global supply chain disruptions, including a worldwide semiconductor supply shortage. This shortage has resulted in increased pricing pressures on semiconductors as well. Although the severity of these disruptions abated during the second half of 2023, 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 increased overall inflation and global supply chain disruptions.

This section discusses our consolidated results of operations and results of operations by segment for the years ended December 31, 2023 versus 2022. A detailed discussion of our consolidated results of operations and results of operations by segment for the years ended December 31, 2022 versus 2021 can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 8, 2023.

2023 versus 2022

The results of operations for the years ended December 31, 2023 and 2022 were as follows:

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31,"],["","","","","","","","2023","","2022","","Favorable/ (unfavorable)"],["","","","","","","","(dollars in millions)"],["Net sales","","","","","","","$","20,051","","","$","17,489","","","$","2,562"],["Cost of sales","","","","","","","16,612","","","14,854","","","(1,758)"],["Gross margin","","","","","","","3,439","","17.2%","2,635","","15.1%","804"],["Selling, general and administrative","","","","","","","1,436","","","1,138","","","(298)"],["Amortization","","","","","","","233","","","149","","","(84)"],["Restructuring","","","","","","","211","","","85","","","(126)"],["Operating income","","","","","","","1,559","","","1,263","","","296"],["Interest expense","","","","","","","(285)","","","(219)","","","(66)"],["Other income (expense), net","","","","","","","63","","","(54)","","","117"],["Income before income taxes and equity loss","","","","","","","1,337","","","990","","","347"],["Income tax benefit (expense)","","","","","","","1,928","","","(121)","","","2,049"],["Income before equity loss","","","","","","","3,265","","","869","","","2,396"],["Equity loss, net of tax","","","","","","","(299)","","","(279)","","","(20)"],["Net income","","","","","","","2,966","","","590","","","2,376"],["Net income (loss) attributable to noncontrolling interest","","","","","","","28","","","(3)","","","31"],["Net loss attributable to redeemable noncontrolling interest","","","","","","","\u2014","","","(1)","","","1"],["Net income attributable to Aptiv","","","","","","","2,938","","","594","","","2,344"],["Mandatory convertible preferred share dividends","","","","","","","(29)","","","(63)","","","34"],["Net income attributable to ordinary shareholders","","","","","","","$","2,909","","","$","531","","","$","2,378"]]
[[/GREPCENT_TABLE]]

39

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Total Net Sales

Below is a summary of our total net sales for the years ended December 31, 2023 versus 2022.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","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","$","20,051","","","$","17,489","","","$","2,562","","","","$","2,114","","","$","(118)","","","$","(68)","","","$","634","","","$","2,562"]]
[[/GREPCENT_TABLE]]

Total net sales for the year ended December 31, 2023 increased 15% compared to the year ended December 31, 2022. Our volumes increased 10% for the period, which reflects volume growth in all regions, as well as increased global automotive production of 9% (10% on an AWM basis), which was partially offset by adverse impacts of approximately $180 million resulting from the UAW labor strikes and unfavorable foreign currency impacts, primarily related to the Chinese Yuan Renminbi, partially offset by impacts related to the Euro. Our total net sales also reflect the impact of favorable pricing, net of contractual price reductions, of $345 million, and net sales as a result of our acquisitions of Wind River and Intercable Automotive of $634 million, which is reflected in Other above.

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, 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 $1,758 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, as summarized below. The Company’s material cost of sales was approximately 55% of net sales in both the years ended December 31, 2023 and 2022, respectively.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Variance Due To:"],["","2023","","2022","","Favorable/ (unfavorable)","","","Volume (a)","","FX","","Operational performance","","Other","","Total"],["","(dollars in millions)","","","(in millions)"],["Cost of sales","$","16,612","","","$","14,854","","","$","(1,758)","","","","$","(1,263)","","","$","(13)","","","$","(91)","","","$","(391)","","","$","(1,758)"],["Gross margin","$","3,439","","","$","2,635","","","$","804","","","","$","851","","","$","(131)","","","$","(91)","","","$","175","","","$","804"],["Percentage of net sales","17.2","%","","15.1","%"]]
[[/GREPCENT_TABLE]]

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

The increase in cost of sales reflects increased volumes, as well as the impacts from currency exchange and operational performance. Our operational performance for the year ended December 31, 2023 includes approximately $365 million of increased costs for semiconductors and commodities, as well as approximately $110 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 $418 million resulting from the operations of the businesses acquired; and

•Increased incentive compensation costs of approximately $30 million; partially offset by

•$68 million of decreased commodity pass-through costs.

Selling, General and Administrative Expense

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(dollars in millions)"],["Selling, general and administrative expense","$","1,436","","","$","1,138","","","$","(298)"],["Percentage of net sales","7.2","%","","6.5","%"]]
[[/GREPCENT_TABLE]]

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Selling, general and administrative expense (“SG&A”) includes administrative expenses, information technology costs, incentive compensation related costs and selling and marketing expenses. SG&A increased as a percentage of net sales for the year ended December 31, 2023 as compared to 2022, primarily due to the inclusion of costs from the operations of the business acquired, partially offset by increased sales in 2023.

Amortization

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(in millions)"],["Amortization","$","233","","","$","149","","","$","(84)"]]
[[/GREPCENT_TABLE]]

Amortization expense reflects the non-cash charge related to definite-lived intangible assets. The increase in amortization during the year ended December 31, 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 20. Acquisitions and Divestitures to the audited consolidated financial statements included herein for further detail of our business acquisitions, including details of the intangible assets recorded in each transaction.

In 2024, we expect to incur non-cash amortization charges of approximately $220 million.

Restructuring

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(dollars in millions)"],["Restructuring","$","211","","","$","85","","","$","(126)"],["Percentage of net sales","1.1","%","","0.5","%"]]
[[/GREPCENT_TABLE]]

The Company recorded employee-related and other restructuring charges totaling approximately $211 million during the year ended December 31, 2023, of which $68 million was recognized for a program initiated in the fourth quarter of 2023 focused on global salaried headcount reduction, primarily in the North American and European regions. We expect to recognize additional charges of approximately $75 million related to this program in 2024. Cash payments related to this restructuring action are expected to be principally completed in 2024. The charges recorded during the year ended December 31, 2023 also 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 $140 million in 2024 pursuant to currently implemented restructuring programs.

The Company recorded employee-related and other restructuring charges totaling approximately $85 million during the year ended December 31, 2022, of which $61 million was recognized for programs implemented in the European region and $23 million was recognized for programs implemented in the North America region.

We expect to continue to incur additional restructuring expense in 2024 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 $80 million (of which approximately $40 million relates to the Signal and Power Solutions segment and approximately $40 million relates to the Advanced Safety and User Experience segment) for programs approved as of December 31, 2023, which includes $75 million related to the global salaried headcount reduction program described above and which are expected to be incurred within the next twelve months. 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.

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Refer to Note 10. Restructuring to the audited consolidated financial statements included herein for additional information.

Interest Expense

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(in millions)"],["Interest expense","$","285","","","$","219","","","$","(66)"]]
[[/GREPCENT_TABLE]]

The increase in interest expense during the year ended December 31, 2023 compared to 2022 includes the impacts of an increased interest rate on the Tranche A Term Loan while it was outstanding during 2023 and the issuance of $2.5 billion in aggregate principal amount of senior unsecured notes in February 2022 (the “2022 Senior Notes”).

Refer to Note 11. Debt to the audited consolidated financial statements included herein for additional information.

Other Income, Net

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(in millions)"],["Other income (expense), net","$","63","","","$","(54)","","","$","117"]]
[[/GREPCENT_TABLE]]

Other income, net for the year ended December 31, 2023 includes interest income of $111 million, partially offset by an impairment loss of $18 million recognized for Aptiv’s equity investments without readily determinable fair values and losses of $6 million for the change in fair value of publicly traded equity securities. The Company also recorded $28 million during the year ended December 31, 2023 related to the components of net periodic pension and postretirement benefit cost other than service costs, as further described in Note 12. Pension Benefits to the audited consolidated financial statements included herein.

Other expense, net for the year ended December 31, 2022 includes $61 million in transaction costs, primarily related to the acquisitions of Wind River and Intercable Automotive, as further discussed in Note 20. Acquisitions and Divestitures to the audited consolidated financial statements included herein. During the year ended December 31, 2022, the Company also recognized interest income of $86 million, partially offset by losses of $52 million for the change in fair value of publicly traded equity securities. The Company also recorded $15 million during the year ended December 31, 2022 related to the components of net periodic pension and postretirement benefit cost other than service costs, as further described in Note 12. Pension Benefits to the audited consolidated financial statements included herein.

Refer to Note 19. Other Income, Net to the audited consolidated financial statements included herein for additional information.

Income Taxes

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(in millions)"],["Income tax (benefit) expense","$","(1,928)","","","$","121","","","$","2,049"]]
[[/GREPCENT_TABLE]]

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.

The Company’s effective tax rate was (144)% and 12% for the years ended December 31, 2023 and 2022, respectively. The effective tax rate for the year ended December 31, 2023 was primarily impacted by the Company’s transfers of intellectual property, as described below.

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The effective tax rate for the year ended December 31, 2022 was impacted by favorable changes in valuation allowances offset by changes in reserves and provision to return adjustments. The effective tax rate was also impacted by impairments and charges related to our exit from our majority owned Russian subsidiary and other charges in Ukraine for which no tax benefit was recognized.

On December 15, 2022, the European Union (the “E.U.”) Member States formally adopted the 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 of 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. The Company is proactively responding to these anticipated tax policy changes, as described below. Although we will continue to closely monitor developments and analyze other potential impacts these new rules may have, we currently anticipate that the future impacts may be unfavorable to our effective tax rate.

In response to the OECD’s Pillar Two Directive, the Company initiated changes to its corporate entity structure, including intercompany transfers of certain intellectual property to one of its subsidiaries in Switzerland during 2023. Furthermore, during the year ended December 31, 2023, the Company’s Swiss subsidiary was granted a ten-year tax incentive, beginning in 2024. The total income tax benefit recorded as a result of the intercompany transfers of intellectual property and tax incentive, all as described above, combined with related additional current year tax expense as a result of the transactions, was approximately $2,080 million during the year ended December 31, 2023.

Refer to Note 14. Income Taxes to the audited consolidated financial statements included herein for additional information.

Equity Loss

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","Favorable/ (unfavorable)"],["","(in millions)"],["Equity loss, net of tax","$","299","","","$","279","","","$","(20)"]]
[[/GREPCENT_TABLE]]

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 smart vehicle compute and software, 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.

Generally, Aptiv evaluates segment performance based on stand-alone segment net income before interest expense, other income (expense), net, income tax (expense) benefit, equity income (loss), net of tax, 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 (“Adjusted Operating Income”).

Our management utilizes 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

43

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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 attributable to Aptiv for the years ended December 31, 2023 and 2022 are as follows:

[[GREPCENT_TABLE]]
[["","Signal and Power Solutions","","","","Advanced Safety and User Experience","","","","Total"],["","(in millions)"],["For the Year Ended December 31, 2023:"],["Adjusted operating income","$","1,676","","","","","$","451","","","","","$","2,127"],["Amortization","(140)","","","","","(93)","","","","","(233)"],["Restructuring","(82)","","","","","(129)","","","","","(211)"],["Other acquisition and portfolio project costs","(60)","","","","","(20)","","","","","(80)"],["Asset impairments","(15)","","","","","(3)","","","","","(18)"],["Compensation expense related to acquisitions","\u2014","","","","","(26)","","","","","(26)"],["Operating income","$","1,379","","","","","$","180","","","","","1,559"],["Interest expense","","","","","","","","","(285)"],["Other income, net","","","","","","","","","63"],["Income before income taxes and equity loss","","","","","","","","","1,337"],["Income tax benefit","","","","","","","","","1,928"],["Equity loss, net of tax","","","","","","","","","(299)"],["Net income","","","","","","","","","2,966"],["Net income attributable to noncontrolling interest","","","","","","","","","28"],["Net income attributable to Aptiv","","","","","","","","","$","2,938"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Signal and Power Solutions","","","","Advanced Safety and User Experience","","","","Total"],["","(in millions)"],["For the Year Ended December 31, 2022:"],["Adjusted operating income","$","1,441","","","","","$","144","","","","","$","1,585"],["Amortization","(139)","","","","","(10)","","","","","(149)"],["Restructuring","(30)","","","","","(55)","","","","","(85)"],["Other acquisition and portfolio project costs","(15)","","","","","(11)","","","","","(26)"],["Asset impairments","(8)","","","","","\u2014","","","","","(8)"],["Other charges related to Ukraine/Russia conflict (1)","(54)","","","","","\u2014","","","","","(54)"],["Operating income","$","1,195","","","","","$","68","","","","","1,263"],["Interest expense","","","","","","","","","(219)"],["Other expense, net","","","","","","","","","(54)"],["Income before income taxes and equity loss","","","","","","","","","990"],["Income tax expense","","","","","","","","","(121)"],["Equity loss, net of tax","","","","","","","","","(279)"],["Net income","","","","","","","","","590"],["Net loss attributable to noncontrolling interest","","","","","","","","","(3)"],["Net loss attributable to redeemable noncontrolling interest","","","","","","","","","(1)"],["Net income attributable to Aptiv","","","","","","","","","$","594"]]
[[/GREPCENT_TABLE]]

(1)Primarily consists of charges related to the designation of our former majority owned Russian subsidiary as held for sale as of December 31, 2022. Refer to Note 20. Acquisitions and Divestitures to the audited consolidation financial statements included herein for further information.

Net sales, gross margin as a percentage of net sales and Adjusted Operating Income by segment for the years ended December 31, 2023 and 2022 are as follows:

Net Sales by Segment

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","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","$","14,404","","","$","12,943","","","$","1,461","","","","$","1,368","","","$","(96)","","","$","(68)","","","$","257","","","$","1,461"],["Advanced Safety and User Experience","5,695","","","4,587","","","1,108","","","","754","","","(23)","","","\u2014","","","377","","","1,108"],["Eliminations and Other","(48)","","","(41)","","","(7)","","","","(8)","","","1","","","\u2014","","","\u2014","","","(7)"],["Total","$","20,051","","","$","17,489","","","$","2,562","","","","$","2,114","","","$","(118)","","","$","(68)","","","$","634","","","$","2,562"]]
[[/GREPCENT_TABLE]]

Gross Margin Percentage by Segment

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31,"],["","","","","","2023","","2022"],["Signal and Power Solutions","","","","","18.0","%","","17.2","%"],["Advanced Safety and User Experience","","","","","15.0","%","","8.9","%"],["Total","","","","","17.2","%","","15.1","%"]]
[[/GREPCENT_TABLE]]

45

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Adjusted Operating Income by Segment

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","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","$","1,676","","","$","1,441","","","$","235","","","","$","527","","","$","(88)","","","$","(204)","","","$","235"],["Advanced Safety and User Experience","451","","","144","","","307","","","","324","","","(3)","","","(14)","","","307"],["Total","$","2,127","","","$","1,585","","","$","542","","","","$","851","","","$","(91)","","","$","(218)","","","$","542"]]
[[/GREPCENT_TABLE]]

As noted in the table above, Adjusted Operating Income for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was impacted by volume, including product mix and adverse impacts of approximately $80 million resulting from the UAW labor strikes, and the impacts of favorable pricing, net of contractual price reductions, of $345 million, as well as operational performance. Our operational performance for the year ended December 31, 2023 includes approximately $365 million of increased costs for semiconductors and commodities, as well as approximately $110 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:

•$134 million of unfavorable foreign currency impacts, primarily related to the Mexican Peso and Chinese Yuan Renminbi; and

•$106 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 December 31, 2023, we had cash and cash equivalents of $1.6 billion and net debt (defined as outstanding debt less cash and cash equivalents) of $4.6 billion. We also have access to additional liquidity pursuant to the terms of the $2.0 billion Revolving Credit Facility and the committed European accounts receivable factoring facility, as described below. The following table summarizes our available liquidity, which includes cash, cash equivalents and funds available under our significant committed credit facilities, as of December 31, 2023.

[[GREPCENT_TABLE]]
[["","December 31, 2023"],["","(in millions)"],["Cash and cash equivalents","$","1,640"],["Revolving Credit Facility, unutilized portion (1)","2,000"],["Committed European accounts receivable factoring facility, unutilized portion (2)","497"],["Total available liquidity","$","4,137"]]
[[/GREPCENT_TABLE]]

(1)Availability reduced by less than $1 million in letters of credit issued under the Credit Agreement as of December 31, 2023.

(2)Based on December 31, 2023 foreign currency rates, subject to the availability of eligible accounts receivable.

We expect existing cash, available liquidity and cash flows from operations to continue to be sufficient to fund our global operating activities, including restructuring payments and capital expenditures. In addition, we expect to continue to repurchase outstanding ordinary shares pursuant to our authorized ordinary share repurchase program, as further described below.

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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 December 31, 2023, the Company’s cash and cash equivalents held by our non-U.S. subsidiaries totaled approximately $1.6 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.

Based on these factors, we believe we possess sufficient liquidity to fund our global operations and capital investments in 2024 and beyond.

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 year ended December 31, 2023 is as follows:

[[GREPCENT_TABLE]]
[["Total number of shares repurchased","","","4,701,558"],["Average price paid per share","","","$","84.59"],["Total (in millions)","","","$","398"]]
[[/GREPCENT_TABLE]]

There were no shares repurchased during the years ended December 31, 2022 and 2021. As of December 31, 2023, approximately $1,615 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.

Dividends from Equity Investments

During the years ended December 31, 2023, 2022 and 2021, Aptiv received dividends of $5 million, $5 million and $6 million, respectively, 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 Solutions S.r.l. (“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.

Concurrent with the acquisition, the Company entered into an agreement with the noncontrolling interest holders that provides the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining 15% of Intercable Automotive for cash of up to €155 million, beginning in 2026. The final purchase price is contractually defined and will be determined based on Intercable Automotive’s 2025 operating results.

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El-Com—On December 30, 2021, Aptiv acquired 100% of the equity interests of El-Com, Inc. (“El-Com”), a manufacturer of custom wire harnesses and cable assemblies for high-reliability products and industries, for total consideration of up to $88 million. The total consideration includes a cash payment of up to $10 million, contingent upon the achievement of certain performance metrics over a one-year period following the acquisition. The acquisition was accounted for as a business combination, with the operating results of El-Com included within the Company’s Signal and Power Solutions segment from the date of acquisition. The Company acquired El-Com utilizing cash on hand.

Krono-Safe Automotive—On November 9, 2021, Aptiv acquired 100% of the equity interests of Krono-Safe Automotive, SAS (“Krono-Safe Automotive”), a leading software developer of safety-critical real-time embedded systems, for total consideration of $13 million, which was comprised of Aptiv’s previous investment of $6 million in Krono-Safe, SAS and $7 million of cash. The acquisition was accounted for as a business combination, with the operating results of Krono-Safe Automotive included within the Company’s Advanced Safety and User Experience segment from the date of acquisition.

Ulti-Mate—On April 30, 2021, Aptiv acquired certain assets of Ulti-Mate Connector, Inc. (“Ulti-Mate”), a manufacturer of miniature and micro-miniature connectors and cable assemblies, for total consideration of $45 million. The acquisition was accounted for as a business combination, with the operating results of Ulti-Mate included within the Company’s Signal and Power Solutions segment from the date of acquisition. The Company acquired Ulti-Mate utilizing cash on hand.

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 year ended December 31, 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 20. Acquisitions and Divestitures to the audited consolidated financial statements included 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 December 2023, LeddarTech, Inc. (“LeddarTech”) merged with a publicly traded special purpose acquisition company (“SPAC”) and shares of LeddarTech began trading on the NYSE under the symbol LDTC. As part of the SPAC merger, our preferred shares in LeddarTech were converted into LeddarTech ordinary shares. Following this conversion, the Company will measure the fair value of the LeddarTech investment on a recurring basis, with changes in fair value recorded to other expense, net.

In October 2023, Otonomo Technologies Ltd. (“Otonomo”) merged with Urgent.ly, Inc. (“Urgently”) and Aptiv’s Otonomo ordinary shares were converted into Urgently ordinary shares. Upon completion of the merger, shares of Urgently began trading on the Nasdaq Stock Market LLC under the symbol ULY.

In October 2023, the Company’s Advanced Safety and User Experience segment made an investment of 5 billion South Korean Won (“KRW”) (approximately $4 million, using foreign currency rates on the investment date) in StradVision, Inc., a provider of deep learning-based camera perception software for automotive applications. This investment was in addition to the Company’s investment of 50 billion KRW (approximately $40 million, using foreign currency rates on the investment date) in May 2022.

Refer to Note 5. Investments in Affiliates to the audited consolidated financial statements included herein for further detail of the Company’s technology 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 a senior

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unsecured credit facility currently consisting of a revolving credit facility of $2 billion (the “Revolving Credit Facility”). As of December 31, 2022, the Company also maintained a senior unsecured credit facility in the form of a term loan (the “Tranche A Term Loan”). On October 27, 2023, the Company fully repaid the outstanding principal balance of $301 million on the Tranche A Term Loan, utilizing cash on hand. As a result, Aptiv recognized a loss on debt extinguishment of approximately $1 million during the year ended December 31, 2023 within other income (expense), net in the consolidated statements of operations. Aptiv Global Financing Limited (“AGFL”), a wholly-owned subsidiary of Aptiv PLC, previously 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 term loan A and revolver with a new term loan A with an original maturity 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. Borrowings under the Credit Agreement are prepayable at Aptiv’s option without premium or penalty.

The Revolving Credit Facility matures on June 24, 2026. Prior to its full repayment, Aptiv had been obligated to make quarterly principal payments on the Tranche A Term Loan according to the amortization schedule in the Credit Agreement.

As of December 31, 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 year ended December 31, 2023.

As of December 31, 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:

[[GREPCENT_TABLE]]
[["","December 31, 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","N/A","","N/A","","1.105","%","","0.105","%"]]
[[/GREPCENT_TABLE]]

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 (prior to its repayment, as described above) 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 2022 calendar year, and the interest rate margins and facility fees were reduced from the Applicable Rates, by the amounts specified above, effective in the third quarter of 2023.

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

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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).

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 December 31, 2023.

As of December 31, 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 December 31, 2023, the Company had the following senior unsecured notes issued and outstanding:

[[GREPCENT_TABLE]]
[["Aggregate Principal Amount (in millions)","","Stated Coupon Rate","","Issuance Date","","Maturity Date","","Interest Payment Date"],["$","700","","","2.396%","","February 2022","","February 2025","","February 18 and August 18"],["$","773","","","1.50%","","March 2015","","March 2025","","March 10"],["$","552","","","1.60%","","September 2016","","September 2028","","September 15"],["$","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"]]
[[/GREPCENT_TABLE]]

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 December 31, 2023, the Company was in compliance with the provisions of all series of the outstanding senior notes. Refer to Note 11. Debt to the audited consolidated financial statements included herein for additional information.

Guarantor Summarized Financial Information

As further described in Note 11. Debt to the audited consolidated financial statements included 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 audited consolidated financial statements included herein, as the financial information may not necessarily be indicative of results of operations or financial position had the subsidiaries operated as independent entities.

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[[GREPCENT_TABLE]]
[["","Obligor Group"],["Year Ended December 31, 2023","(in millions)"],["Net sales","$","\u2014"],["Gross margin","$","\u2014"],["Operating loss","$","(73)"],["Net loss","$","(295)"],["Net loss attributable to Aptiv","$","(295)"],["As of December 31, 2023"],["Current assets (1)","$","4,699"],["Long-term assets (2)","$","562"],["Current liabilities (3)","$","6,090"],["Long-term liabilities (3)","$","6,419"],["Noncontrolling interest","$","\u2014"],["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","$","\u2014"]]
[[/GREPCENT_TABLE]]

(1)Includes current assets of $3,826 million and $4,763 million due from Non-Guarantors as of December 31, 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 $555 million and $507 million due from Non-Guarantors as of December 31, 2023 and December 31, 2022, respectively.

(3)Includes current liabilities of $6,013 million and $7,261 million, and long-term liabilities of $226 million and $226 million, due to Non-Guarantors as of December 31, 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 had an initial term of three years, and was renewed for an additional three year term, effective November 2023, subject to Aptiv’s right to terminate at any time with three months’ notice. After expiration of the new 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 December 31, 2023 and 2022, Aptiv had no amounts outstanding under the European accounts receivable factoring facility. No amounts were drawn under the European accounts receivable factoring facility during the year ended December 31, 2023.

Finance leases and other—As of December 31, 2023 and 2022, approximately $21 million and $38 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and finance lease obligations were outstanding.

Letter of credit facilities—In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $4 million and $3 million outstanding through other letter of credit facilities as of December 31, 2023 and 2022, respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.

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Contractual Commitments

The following table summarizes our expected cash outflows resulting from financial contracts and commitments as of December 31, 2023, with amounts denominated in foreign currencies translated using foreign currency rates as of December 31, 2023. We have not included information on our recurring purchases of materials for use in our manufacturing operations. These amounts are generally consistent from year to year, closely reflect our levels of production, and are not long-term in nature. The amounts below exclude the gross liability for uncertain tax positions of $222 million as of December 31, 2023. We do not expect a significant payment related to these obligations to be made within the next twelve months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the non-current portion of obligations associated with uncertain tax positions. For more information, refer to Note 14. Income Taxes to the audited consolidated financial statements included herein.

[[GREPCENT_TABLE]]
[["","Payments due by Period"],["","Total","","2024","","2025 & 2026","","2027 & 2028","","Thereafter"],["","(in millions)"],["Debt and finance lease obligations (excluding interest)","$","6,296","","","$","9","","","$","1,481","","","$","556","","","$","4,250"],["Estimated interest costs related to debt and finance lease obligations","3,616","","","200","","","348","","","333","","","2,735"],["Operating lease obligations","646","","","141","","","231","","","146","","","128"],["Contractual commitments for capital expenditures","246","","","245","","","1","","","\u2014","","","\u2014"],["Other contractual purchase commitments, including information technology","509","","","223","","","233","","","53","","","\u2014"],["Total","$","11,313","","","$","818","","","$","2,294","","","$","1,088","","","$","7,113"]]
[[/GREPCENT_TABLE]]

In addition to the obligations discussed above, certain of our non-U.S. subsidiaries sponsor defined benefit pension plans, some of which are funded. We have minimum funding requirements with respect to certain of our pension obligations and may periodically elect to make discretionary contributions to the plans in support of risk management initiatives. We will also have payments due with respect to our other postretirement benefit obligations. We do not fund our other postretirement benefit obligations and payments are made as costs are incurred by covered retirees. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional detail regarding our expected contributions to our pension plans and expected distributions to participants in future periods.

Capital Expenditures

Supplier selection in the automotive industry is generally finalized several years prior to the start of production of the vehicle. Therefore, current capital expenditures are based on customer commitments entered into previously, generally several years ago when the customer contract was awarded. As of December 31, 2023, we had approximately $246 million in outstanding cancellable and non-cancellable capital commitments. Capital expenditures by operating segment and geographic region for the periods presented were:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","2022","","2021"],["","(in millions)"],["Signal and Power Solutions","$","639","","","$","573","","","$","434"],["Advanced Safety and User Experience","207","","","196","","","124"],["Other (1)","60","","","75","","","53"],["Total capital expenditures","$","906","","","$","844","","","$","611"],["North America","$","355","","","$","312","","","$","218"],["Europe, Middle East & Africa","288","","","271","","","233"],["Asia Pacific","252","","","249","","","149"],["South America","11","","","12","","","11"],["Total capital expenditures","$","906","","","$","844","","","$","611"]]
[[/GREPCENT_TABLE]]

(1)Other includes capital expenditures attributable to corporate administrative and support functions, including corporate headquarters and certain technical centers.

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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 $1,896 million and $1,263 million for the years ended December 31, 2023 and 2022, respectively. Cash flows provided by operating activities for the year ended December 31, 2023 consisted primarily of net earnings of $2,966 million, increased by $956 million for non-cash charges for depreciation, amortization and pension costs, partially offset by $2,164 million related to non-cash changes in deferred income taxes, primarily resulting from the tax benefit associated with the intercompany transfers of certain intellectual property, and $293 million related to operating assets and liabilities, net of restructuring and pension contributions. Cash flows provided by operating activities for the year ended December 31, 2022 consisted primarily of net earnings of $590 million, increased by $792 million for non-cash charges for depreciation, amortization and pension costs, partially offset by $409 million related to changes in operating assets and liabilities, net of restructuring and pension contributions.

Investing activities—Net cash used in investing activities totaled $1,002 million and $5,182 million for the years ended December 31, 2023 and 2022, respectively. The decrease in usage is primarily attributable to $83 million paid for business acquisitions and other transactions during the year ended December 31, 2023 as compared to $4,310 million during the year ended December 31, 2022, partially offset by increased capital expenditures of $62 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Financing activities—Net cash used in financing activities totaled $807 million for the year ended December 31, 2023 and net cash provided by financing activities totaled $2,359 million for the year ended December 31, 2022. Cash flows used in financing activities for the year ended December 31, 2023 primarily included $398 million paid to repurchase ordinary shares, $309 million in repayments under other long-term debt agreements and $32 million of MCPS dividend payments. Cash flows provided by financing activities for the year ended December 31, 2022 primarily included net proceeds of $2,472 million received from the issuance of the 2022 Senior Notes, partially offset by $63 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.

Significant Accounting Policies and Critical Accounting Estimates

Our significant accounting policies are described in Note 2. Significant Accounting Policies to the audited consolidated financial statements included herein. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

We consider an accounting estimate to be critical if:

•It requires us to make assumptions about matters that were uncertain at the time we were making the estimate, and

•Changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations.

Acquisitions and Other Transactions

In accordance with the accounting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, we allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The process to estimate fair value described herein is generally applicable to other transactions, including the fair value estimates used in establishing the identifiable assets, liabilities and

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goodwill recorded upon formation of Motional, Aptiv’s autonomous driving joint venture, and the resulting equity method investment recorded on Aptiv’s balance sheet.

An acquisition may include a contingent consideration component. The fair value of the contingent consideration is estimated as of the date of the acquisition and is recorded as part of the purchase price. This estimate is updated in future periods and any changes in the estimate, which are not considered an adjustment to the purchase price, are recorded in our consolidated statements of operations.

An acquisition may also include a redeemable noncontrolling interest component. The fair value of the noncontrolling interest is recorded to temporary equity in the consolidated balance sheet and is estimated as of the date of acquisition using a Monte Carlo simulation approach, which includes several assumptions including estimated future profitability, expected volatility rate and risk free rate. The redeemable noncontrolling interest is then adjusted each reporting period for the income (loss) attributable to the noncontrolling interest, and for any measurement period adjustments necessary to record the redeemable noncontrolling interest at the higher of its redemption value, assuming it was redeemable at the reporting date, or its carrying value. Any measurement period adjustments are recorded to retained earnings, with a corresponding increase or reduction to net income attributable to Aptiv.

We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets and any other significant assets or liabilities. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain more information regarding asset valuations and liabilities assumed.

Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.

Other estimates used in determining fair value include, but are not limited to, future cash flows or income related to intangibles, market rate assumptions, actuarial assumptions for benefit plans and appropriate discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but that are inherently uncertain, and therefore, may not be realized. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

Warranty Obligations and Product Recall Costs

Estimating warranty obligations requires us to forecast the resolution of existing claims and expected future claims on products sold. We base our estimate on historical trends of units sold and payment amounts, combined with our current understanding of the status of existing claims and discussions with our customers. The key factors which impact our estimates are (1) the stated or implied warranty period; (2) OEM source; (3) OEM policy decisions regarding warranty claims; and (4) OEMs seeking to hold suppliers responsible for product warranties. These estimates are re-evaluated on an ongoing basis. Actual warranty obligations could differ from the amounts estimated requiring adjustments to existing reserves in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing these estimates, changes in our assumptions could materially affect our results of operations.

In addition to our ordinary warranty provisions with customers, we are also at risk for product recall costs, which are costs incurred when a customer or the Company recalls a product through a formal campaign soliciting return of that product. In addition, the National Highway Traffic Safety Administration (“NHTSA”) has the authority, under certain circumstances, to require recalls to remedy safety concerns. Product recall costs typically include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part. The Company accrues for costs related to product recalls as part of our warranty accrual at the time an obligation becomes probable and can be reasonably estimated. Actual costs incurred could differ from the amounts estimated, requiring adjustments to these reserves in future periods. It is possible that changes in our assumptions or future product recall issues could materially affect our financial position, results of operations or cash flows.

Legal and Other Contingencies

We are involved from time to time in various legal proceedings and claims, including commercial or contractual disputes, product liability claims, government investigations, product warranties and environmental and other matters, that arise in the normal course of business. We routinely assess the likelihood of any adverse judgments or outcomes related to these matters, as well as ranges of probable losses, by consulting with internal personnel involved with such matters as well as with outside legal counsel handling such matters. We have accrued for estimated losses for those matters where we believe that the likelihood of a loss has occurred, is probable and the amount of the loss is reasonably estimable. The determination of the amount of such

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reserves is based on knowledge and experience with regard to past and current matters and consultation with internal personnel involved with such matters and with outside legal counsel handling such matters. The amount of such reserves may change in the future due to new developments or changes in circumstances. The inherent uncertainty related to the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution. Refer to Note 13. Commitments and Contingencies to the audited consolidated financial statements included herein for additional information.

Restructuring

Accruals have been recorded in conjunction with our restructuring actions. These accruals include estimates primarily related to employee termination costs, contract termination costs and other related exit costs in conjunction with workforce reduction and programs related to the rationalization of manufacturing and engineering processes. Actual costs may vary from these estimates. These accruals are reviewed on a quarterly basis and changes to restructuring actions are appropriately recognized when identified.

Pensions

We use actuarial estimates and related actuarial methods to calculate our obligation and expense. We are required to select certain actuarial assumptions, which are determined based on current market conditions, historical information and consultation with and input from our actuaries and asset managers. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional details. The key factors which impact our estimates are (1) discount rates; (2) asset return assumptions; and (3) actuarial assumptions such as retirement age and mortality which are determined as of the current year measurement date. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions are recognized in other comprehensive income. Cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation (“PBO”) for a particular plan are amortized over the average future service period of the employees in that plan.

The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit obligation for the U.S. and non-U.S. pension plans were:

Assumptions used to determine benefit obligations at December 31:

[[GREPCENT_TABLE]]
[["","Pension Benefits"],["","U.S. Plans","","Non-U.S. Plans"],["","2023","","2022","","2023","","2022"],["Weighted-average discount rate","5.50","%","","5.20","%","","5.91","%","","5.95","%"],["Weighted-average rate of increase in compensation levels","N/A","","N/A","","2.93","%","","2.82","%"]]
[[/GREPCENT_TABLE]]

Assumptions used to determine net expense for years ended December 31:

[[GREPCENT_TABLE]]
[["","Pension Benefits"],["","U.S. Plans","","Non-U.S. Plans"],["","2023","","2022","","2021","","2023","","2022","","2021"],["Weighted-average discount rate","5.20","%","","1.90","%","","1.20","%","","5.95","%","","3.09","%","","2.21","%"],["Weighted-average rate of increase in compensation levels","N/A","","N/A","","N/A","","2.82","%","","2.47","%","","3.64","%"],["Weighted-average expected long-term rate of return on plan assets","N/A","","N/A","","N/A","","4.98","%","","4.46","%","","4.29","%"]]
[[/GREPCENT_TABLE]]

We select discount rates by analyzing the results of matching each plan’s projected benefit obligations with a portfolio of high-quality fixed income investments rated AA or higher by Standard and Poor’s or Moody’s.

Aptiv does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary. The primary funded non-U.S. plans are in the U.K. and Mexico. For the determination of 2023 expense, we assumed a long-term expected asset rate of return of approximately 4.25% and 7.50% for the U.K. and Mexico, respectively. We evaluated input from local actuaries and asset managers, including consideration of recent fund performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the U.K. and Mexico are primarily conservative long-term, prospective rates. To determine the expected return on plan assets, the market-related value of our plan assets is actual fair value.

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Our pension expense for 2024 is determined at the December 31, 2023 measurement date. For purposes of analysis, the following table highlights the sensitivity of our pension obligations and expense attributable to changes in key assumptions:

[[GREPCENT_TABLE]]
[["Change in Assumption","","Impact on Pension Expense","","Impact on PBO"],["25 basis point (\u201cbp\u201d) decrease in discount rate","","Less than + $1 million","","\u2018+ $18 million"],["25 bp increase in discount rate","","Less than + $1 million","","\u2018- $17 million"],["25 bp decrease in long-term expected return on assets","","\u2018+ $1 million","","\u2014"],["25 bp increase in long-term expected return on assets","","\u2018- $1 million","","\u2014"]]
[[/GREPCENT_TABLE]]

The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring programs.

Based on information provided by our actuaries and asset managers, we believe that the assumptions used are reasonable; however, changes in these assumptions could impact our financial position, results of operations or cash flows. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional information.

Valuation of Long-Lived Assets, Intangible Assets and Investments in Affiliates and Expected Useful Lives

We monitor our long-lived and definite-lived assets, including our investments in affiliates, the most significant of which is our investment in Motional AD LLC, for impairment indicators on an ongoing basis based on projections of anticipated future cash flows, including future profitability assessments of various manufacturing sites when events and circumstances warrant such a review. If impairment indicators exist, we perform the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the estimated fair value of the long-lived assets. Even if an impairment charge is not required, a reassessment of the useful lives over which depreciation or amortization is being recognized may be appropriate based on our assessment of the recoverability of these assets. We estimate cash flows and fair value using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments and review of appraisals. The key factors which impact our estimates are (1) future production estimates; (2) customer preferences and decisions; (3) product pricing; (4) manufacturing and material cost estimates; and (5) product life / business retention. Any differences in actual results from the estimates could result in fair values different from the estimated fair values, which could materially impact our future results of operations and financial condition. We believe that the projections of anticipated future cash flows and fair value assumptions are reasonable; however, changes in assumptions underlying these estimates could affect our valuations.

Goodwill and Intangible Assets

We periodically review goodwill for impairment indicators. We review goodwill for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs the goodwill impairment review at the reporting unit level. We perform a qualitative assessment (step 0) of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If not, no further goodwill impairment testing is performed. If so, we perform the step 1 test discussed hereafter. Our qualitative assessment involves significant estimates, assumptions, and judgments, including, but not limited to, macroeconomic conditions, industry and market conditions, financial performance of the Company, reporting unit specific events and changes in the Company’s share price. 

If the fair value of the reporting unit is greater than its carrying amount (step 1), goodwill is not considered to be impaired. We estimate the fair value of our reporting units using a combination of a future discounted cash flow valuation model and, if possible, a comparable market transaction model. Estimating fair value requires the Company to make judgments about appropriate discount rates, growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. If the fair value of the reporting unit is less than its carrying amount, an entity must record an impairment charge based on the amount by which a reporting unit’s carrying value exceeds its estimated fair value, limited to the amount of goodwill allocated to that reporting unit.

We review indefinite-lived intangible assets for impairment annually or more frequently if events or changes in circumstances indicate the assets might be impaired. Similar to the goodwill assessment described above, the Company first performs a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired. If necessary, the Company then performs a quantitative impairment test by comparing the estimated fair value of the asset, based upon its forecasted cash flows, to its carrying value. Other intangible assets with definite lives are amortized over their useful

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lives and are subject to impairment testing only if events or circumstances indicate that the asset might be impaired, as described above.

Income Taxes

Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.

When establishing a valuation allowance, we consider future sources of taxable income such as “future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards” and “tax planning strategies.” A tax planning strategy is defined as “an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets.” In the event we determine it is more likely than not that the deferred tax assets will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which we make such a determination. The valuation of deferred tax assets requires judgment and accounting for the deferred tax effect of events that have been recorded in the financial statements or in tax returns and our future projected profitability. Changes in our estimates, due to unforeseen events or otherwise, could have a material impact on our financial condition and results of operations.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense. We do not believe there is a reasonable likelihood that there will be a material change in the tax related balances. However, due to the complexity of some of these uncertainties, the ultimate resolution may be materially different from the current estimate. Refer to Note 14. Income Taxes to the audited consolidated financial statements included herein for additional information.

Recently Issued Accounting Pronouncements

Refer to Note 2. Significant Accounting Policies to the audited consolidated financial statements included herein for a complete description of recent accounting standards which we have not yet been required to implement which may be applicable to our operations. Additionally, the significant accounting standards that have been adopted during the year ended December 31, 2023 are described.