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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549-1004


FORM 10-Q



|  |                                                         
|- | --------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE



For the quarterly period ended March 31, 2003

OR



|  |                                                
|- | -----------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OF THE



For the transition period from

to
.

Commission file No. 1-14787

DELPHI CORPORATION

(Exact name of registrant as specified in its
charter)


|                                         |  |                       
|---------------------------------------- |  | ----------------------
|Delaware                                 |  | 38-3430473            
|(State or other jurisdiction of          |  | (IRS employer         
|incorporation or organization)           |  | identification number)
|                                        
|5725 Delphi Drive, Troy, Michigan        |  | 48098                 
|(Address of principal executive offices) |  | (Zip code)            

(248) 813-2000

(Registrants telephone number, including
area code)


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

As of March 31, 2003, there were 560,280,510
outstanding shares of the registrants $0.01 par value
common stock.



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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. FINANCIAL STATEMENTS                                                                 
|CONSOLIDATED STATEMENTS OF INCOME (Unaudited)                                                
|CONSOLIDATED BALANCE SHEETS                                                                  
|CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)                                            
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                       
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                                                                   
|ITEM 1. LEGAL PROCEEDINGS                                                                    
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                                                                                    
|CERTIFICATIONS                                                                               
|EXHIBIT INDEX                                                                                
|Sec. 906 Certification of Chief Executive Officer                                            
|Sec. 906 Certification of Chief Financial Officer                                            



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DELPHI CORPORATION

INDEX

|                               |  |                                                                                                          |    |      |    | 
|------------------------------ |  | -------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                               |  |                                                                                                          |    | Page |   
|                               |  |                                                                                                          |    |      |   
|Part I  Financial Information
|Item 1.                        |  | Financial Statements                                                                                     |    |      |    | 
|                               |  | Consolidated Statements of Income (Unaudited) for
    the Three Months Ended March 31, 2003 and 2002     |    |      | 3  | 
|                               |  | Consolidated Balance Sheets at March 31,
    2003 (Unaudited) and December 31, 2002                      |    |      | 4  | 
|                               |  | Consolidated Statements of Cash Flows (Unaudited)
    for the Three Months Ended March 31, 2003 and 2002 |    |      | 5  | 
|                               |  | Notes to Consolidated Financial Statements
    (Unaudited)                                               |    |      | 6  | 
|Item 2.                        |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                |    |      | 12 | 
|Item 3.                        |  | Quantitative and Qualitative Disclosures About
    Market Risk                                           |    |      | 21 | 
|Item 4.                        |  | Controls and Procedures                                                                                  |    |      | 21 | 
|Part II  Other Information   
|Item 1.                        |  | Legal Proceedings                                                                                        |    |      | 22 | 
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                         |    |      | 22 | 
|Signature                      |  |                                                                                                          | 23 |     
|Certifications                 |  |                                                                                                          | 24 |     

2



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PART I. FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS


DELPHI CORPORATION






CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


|                                                         |                                             |                          |      |       |       |   |       |       |       | 
|-------------------------------------------------------- | ------------------------------------------- | ------------------------ | ---- | ----- | ----- | - | ----- | ----- | ----- | 
|                                                         |                                             |                         
|                                                         |                                             | Three Months             |     
|                                                         |                                             | Ended                    |     
|                                                         |                                             | March 31,                |     
|                                                         |                                             |                          |     
|                                                         |                                             | 2003                     |      |       | 2002  |  
|                                                         |                                             |                          |      |       |       |  
|                                                         |                                             |                         
|                                                         |                                             | (in millions, except     |     
|                                                         |                                             | per share amounts)       |     
|Net sales:                                               |                                             |                          |      |       |       |   |       |      
|                                                         | General Motors and affiliates               |                          | $    | 4,555 |       |   | $     | 4,484 |      
|                                                         | Other customers                             |                          |      | 2,627 |       |   |       | 2,204 |      
|                                                         |                                             |                          |      |       |       |  
|                                                         |                                             | Total net sales          |      |       | 7,182 |   |       |       | 6,688 | 
|                                                         |                                             |                          |      |       |       |  
|Less operating expenses:                                 |                                             |                          |      |       |       |   |       |      
|                                                         | Cost of sales, excluding items listed below |                          |      | 6,312 |       |   |       | 5,889 |      
|                                                         | Selling, general and administrative         |                          |      | 389   |       |   |       | 362   |      
|                                                         | Depreciation and amortization               |                          |      | 253   |       |   |       | 244   |      
|                                                         | Restructuring (Note 2)                      |                          |      |      |       |   |       | 225   |      
|                                                         |                                             |                          |      |       |       |  
|                                                         |                                             | Total operating expenses |      |       | 6,954 |   |       |       | 6,720 | 
|                                                         |                                             |                          |      |       |       |  
|Operating income (loss)                                  |                                             |                          | 228  |       |       |   | (32   | )    
|Less: interest expense                                   |                                             |                          | 45   |       |       |   | 48    |      
|Other income, net                                        |                                             |                          | 2    |       |       |   | 10    |      
|                                                         |                                             |                          |      |       |       |  
|Income (loss) before income taxes                        |                                             |                          | 185  |       |       |   | (70   | )    
|Income tax expense (benefit)                             |                                             |                          | 58   |       |       |   | (19   | )    
|                                                         |                                             |                          |      |       |       |  
|Net income (loss)                                        |                                             | $                        | 127  |       |       | $ | (51   | )    
|                                                         |                                             |                          |      |       |       |  
|Basic and diluted earnings (loss) per share
    (Note 1) |                                             | $                        | 0.23 |       |       | $ | (0.09 | )    
|                                                         |                                             |                          |      |       |       |  

See notes to consolidated financial statements.

3



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DELPHI CORPORATION






CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                    |                                             |                           |       |              |        |        |       |        |        | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------ | ------------------------------------------- | ------------------------- | ----- | ------------ | ------ | ------ | ----- | ------ | ------ | 
|                                           |                                                                                                                    | March 31,                                   |                           |       |             
|                                           |                                                                                                                    | 2003                                        |                           |       | December 31, |       
|                                           |                                                                                                                    | (Unaudited)                                 |                           |       | 2002         |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|                                           |                                                                                                                    |                                            
|                                           |                                                                                                                    | (in millions)                               |                          
|ASSETS                                     |                                                                                                                    |                                             |                           |       |              |        |        |      
|Current assets:                            |                                                                                                                    |                                             |                           |       |              |        |        |      
|                                           | Cash and cash equivalents                                                                                          |                                             | $                         | 755   |              |        | $      | 1,014 |       
|                                           | Accounts receivable, net:                                                                                          |                                             |                           |       |              |        |        |       |       
|                                           |                                                                                                                    | General Motors and affiliates               |                           |       | 2,954        |        |        |       | 2,304  |       
|                                           |                                                                                                                    | Other customers                             |                           |       | 1,516        |        |        |       | 1,712  |       
|                                           | Inventories, net (Note 3)                                                                                          |                                             |                           | 1,765 |              |        |        | 1,769 |       
|                                           | Deferred income taxes                                                                                              |                                             |                           | 493   |              |        |        | 502   |       
|                                           | Prepaid expenses and other                                                                                         |                                             |                           | 173   |              |        |        | 241   |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|                                           |                                                                                                                    |                                             | Total current assets      |       |              | 7,656  |        |       |        | 7,542  | 
|Long-term assets:                          |                                                                                                                    |                                             |                           |       |              |        |        |      
|                                           | Property, net                                                                                                      |                                             |                           | 5,912 |              |        |        | 5,944 |       
|                                           | Deferred income taxes                                                                                              |                                             |                           | 3,652 |              |        |        | 3,649 |       
|                                           | Goodwill, net                                                                                                      |                                             |                           | 707   |              |        |        | 699   |       
|                                           | Other                                                                                                              |                                             |                           | 1,474 |              |        |        | 1,482 |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|Total assets                               |                                                                                                                    | $                                           | 19,401                    |       |              | $      | 19,316 |      
|                                           |                                                                                                                    |                                             |                           |       |              |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY   |                                                                                                                    |                                             |                           |       |              |        |        |      
|Current liabilities:                       |                                                                                                                    |                                             |                           |       |              |        |        |      
|                                           | Notes payable and current portion of long-term
    debt                                                            |                                             | $                         | 648   |              |        | $      | 682   |       
|                                           | Accounts payable                                                                                                   |                                             |                           | 3,202 |              |        |        | 3,060 |       
|                                           | Accrued liabilities                                                                                                |                                             |                           | 1,982 |              |        |        | 2,118 |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|                                           |                                                                                                                    |                                             | Total current liabilities |       |              | 5,832  |        |       |        | 5,860  | 
|Long-term liabilities:                     |                                                                                                                    |                                             |                           |       |              |        |        |      
|                                           |                                                                                                                    | Long-term debt                              |                           |       | 2,082        |        |        |       | 2,084  |       
|                                           |                                                                                                                    | Pension benefits                            |                           |       | 3,440        |        |        |       | 3,568  |       
|                                           |                                                                                                                    | Postretirement benefits other than pensions |                           |       | 5,269        |        |        |       | 5,120  |       
|                                           |                                                                                                                    | Other                                       |                           |       | 1,338        |        |        |       | 1,405  |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|                                           |                                                                                                                    |                                             | Total liabilities         |       |              | 17,961 |        |       |        | 18,037 | 
|                                           |                                                                                                                    |                                             |                           |       |              |       
|Stockholders equity (Note 6):             |                                                                                                                    |                                             |                           |       |              |        |        |      
|                                           | Common stock, $0.01 par value, 1,350 million
    shares authorized, 565 million shares issued in 2003 and
    2002 |                                             |                           | 6     |              |        |        | 6     |       
|                                           | Additional paid-in capital                                                                                         |                                             |                           | 2,459 |              |        |        | 2,445 |       
|                                           | Retained earnings                                                                                                  |                                             |                           | 1,618 |              |        |        | 1,530 |       
|                                           | Accumulated other comprehensive loss:                                                                              |                                             |                           |       |              |        |        |       |       
|                                           |                                                                                                                    | Minimum pension liability                   |                           |       | (2,098       | )      |        |       | (2,098 | )     
|                                           |                                                                                                                    | All other components                        |                           |       | (469         | )      |        |       | (493   | )     
|                                           | Treasury stock, at cost (4.7 million and 6.9
    million shares in 2003 and 2002, respectively)                    |                                             |                           | (76   | )            |        |        | (111  | )     
|                                           |                                                                                                                    |                                             |                           |       |              |       
|                                           |                                                                                                                    | Total stockholders equity                  |                           |       | 1,440        |        |        |       | 1,279  |       
|                                           |                                                                                                                    |                                             |                           |       |              |       
|Total liabilities and stockholders equity |                                                                                                                    | $                                           | 19,401                    |       |              | $      | 19,316 |      
|                                           |                                                                                                                    |                                             |                           |       |              |       

See notes to consolidated financial statements.

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DELPHI CORPORATION






CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


|                                      |                                                                                              |                               |                                           |       |      |      |   |      |      |      |  
|------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------- | ----------------------------------------- | ----- | ---- | ---- | - | ---- | ---- | ---- | -
|                                      |                                                                                              |                              
|                                      |                                                                                              | Three Months                  |                                          
|                                      |                                                                                              | Ended March 31,               |                                          
|                                      |                                                                                              |                               |                                          
|                                      |                                                                                              | 2003                          |                                           |       | 2002 |     
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      |                                                                                              |                              
|                                      |                                                                                              | (in millions)                 |                                          
|Cash flows from operating activities: |                                                                                              |                               |                                           |       |      |      |   |     
|                                      | Net income (loss)                                                                            |                               | $                                         | 127   |      |      | $ | (51  | )   
|                                      | Adjustments to reconcile net income
    (loss) to net cash provided by operating activities: |                               |                                           |       |      |      |   |      |     
|                                      |                                                                                              | Depreciation and amortization |                                           |       | 253  |      |   |      | 244  |     
|                                      |                                                                                              | Deferred income taxes         |                                           |       | 3    |      |   |      | (37  | )   
|                                      |                                                                                              | Restructuring                 |                                           |       |     |      |   |      | 225  |     
|                                      | Changes in operating assets and liabilities:                                                 |                               |                                           |       |      |      |   |      |     
|                                      |                                                                                              | Accounts receivable, net      |                                           |       | (474 | )    |   |      | (523 | )   
|                                      |                                                                                              | Inventories, net              |                                           |       | 1    |      |   |      | 23   |     
|                                      |                                                                                              | Prepaid expenses and other    |                                           |       | 68   |      |   |      | (31  | )   
|                                      |                                                                                              | Accounts payable              |                                           |       | 153  |      |   |      | 263  |     
|                                      |                                                                                              | Restructuring obligations     |                                           |       | (24  | )    |   |      | (174 | )   
|                                      |                                                                                              | Accrued liabilities           |                                           |       | (101 | )    |   |      | 87   |     
|                                      |                                                                                              | Other long-term liabilities   |                                           |       | 16   |      |   |      | 181  |     
|                                      |                                                                                              | Other                         |                                           |       | (18  | )    |   |      | 13   |     
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      |                                                                                              |                               | Net cash provided by operating activities |       |      | 4    |   |      |      | 220  |  
|                                      |                                                                                              |                               |                                           |       |      |     
|Cash flows from investing activities: |                                                                                              |                               |                                           |       |      |      |   |     
|                                      | Capital expenditures                                                                         |                               |                                           | (221  | )    |      |   | (209 | )   
|                                      | Other                                                                                        |                               |                                           | 27    |      |      |   | 16   |     
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      |                                                                                              |                               | Net cash used in investing activities     |       |      | (194 | ) |      |      | (193 | )
|                                      |                                                                                              |                               |                                           |       |      |     
|Cash flows from financing activities: |                                                                                              |                               |                                           |       |      |      |   |     
|                                      | Net repayments of borrowings under credit
    facilities and other debt                      |                               |                                           | (36   | )    |      |   | (50  | )   
|                                      | Dividend payments                                                                            |                               |                                           | (39   | )    |      |   | (39  | )   
|                                      | Issuance of treasury stock, net                                                              |                               |                                           | 1     |      |      |   | 9    |     
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      |                                                                                              |                               | Net cash used in financing activities     |       |      | (74  | ) |      |      | (80  | )
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      | Effect of exchange rate fluctuations on cash and
    cash equivalents                        |                               |                                           | 5     |      |      |   | (7   | )   
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      | Decrease in cash and cash equivalents                                                        |                               |                                           | (259  | )    |      |   | (60  | )   
|                                      | Cash and cash equivalents at beginning of period                                             |                               |                                           | 1,014 |      |      |   | 757  |     
|                                      |                                                                                              |                               |                                           |       |      |     
|                                      | Cash and cash equivalents at end of period                                                   |                               | $                                         | 755   |      |      | $ | 697  |     
|                                      |                                                                                              |                               |                                           |       |      |     

See notes to consolidated financial statements.

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DELPHI CORPORATION






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. BASIS OF PRESENTATION

General
Delphi Corporation (Delphi) is a world-leading
supplier of vehicle electronics, transportation components,
integrated systems and modules and other electronic technology.
The consolidated financial statements and notes thereto included
in this report should be read in conjunction with our
consolidated financial statements and notes thereto included in
our 2002 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The consolidated financial
statements include the accounts of Delphi and its wholly-owned
and majority-owned subsidiaries.

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

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

Earnings Per
Share Basic earnings
per share amounts were computed using weighted average shares
outstanding for each respective period. Diluted earnings per
share also reflect the weighted average impact from the date of
issuance of all potentially dilutive securities, unless
inclusion would have had an antidilutive effect. Actual weighted
average shares outstanding used in calculating basic and diluted
earnings per share were:

|                                    |  |                    |         |  |      |  |         | 
|----------------------------------- |  | ------------------ | ------- |  | ---- |  | ------- | 
|                                    |  |                   
|                                    |  | Three Months Ended |        
|                                    |  | March 31,          |        
|                                    |  |                    |        
|                                    |  | 2003               |         |  | 2002 | 
|                                    |  |                    |         |  |      | 
|                                    |  |                   
|                                    |  | (in thousands)     |        
|Weighted average shares outstanding |  |                    | 559,561 |  |      |  | 560,448 | 
|Effect of dilutive securities       |  |                    | 170     |  |      |  |        | 
|                                    |  |                    |         |  |      | 
|Diluted shares outstanding          |  |                    | 559,731 |  |      |  | 560,448 | 
|                                    |  |                    |         |  |      | 

The Board of Directors declared a dividend on
Delphi common stock of $0.07 per share on March 26,
2003, which is payable on May 5, 2003 to holders of record
on April 7, 2003. The dividend declared on December 4,
2002 was paid on January 15, 2003.

Stock-Based
Compensation As
allowed under Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation, Delphi accounts for stock-based
compensation using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations. Stock options granted during the
three months ended March 31, 2002 were exercisable at
prices equal to the fair market value of Delphi common stock on
the dates the options were granted; accordingly, no compensation
expense has been recognized for the stock options granted. There
were no stock options granted during the first quarter of 2003.

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

|                                                                                                                                            |                                 |                  |     |      |      |   |     |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ---------------- | --- | ---- | ---- | - | --- | ----- | -
|                                                                                                                                            |                                 |                 
|                                                                                                                                            |                                 | Three Months     |    
|                                                                                                                                            |                                 | Ended            |    
|                                                                                                                                            |                                 | March 31,        |    
|                                                                                                                                            |                                 |                  |    
|                                                                                                                                            |                                 | 2003             |     |      | 2002 |  
|                                                                                                                                            |                                 |                  |     |      |      |  
|                                                                                                                                            |                                 |                 
|                                                                                                                                            |                                 | (in millions,    |    
|                                                                                                                                            |                                 | except per share |    
|                                                                                                                                            |                                 | amounts)         |    
|Net income (loss), as reported                                                                                                              |                                 | $                | 127 |      |      | $ | (51 | )    
|Less: Total stock-based employee compensation
    expense determined under fair value method for all awards, net
    of related tax effects |                                 |                  | 3   |      |      |   | 10  |      
|                                                                                                                                            |                                 |                  |     |      |      |  
|Pro forma net income (loss)                                                                                                                 |                                 | $                | 124 |      |      | $ | (61 | )    
|                                                                                                                                            |                                 |                  |     |      |      |  
|Earnings (loss) per share:                                                                                                                  |                                 |                  |     |      |      |   |     |      
|                                                                                                                                            | Basic and diluted  as reported |                  | $   | 0.23 |      |   | $   | (0.09 | )
|                                                                                                                                            |                                 |                  |     |      |      |  
|                                                                                                                                            | Basic and diluted  pro forma   |                  | $   | 0.22 |      |   | $   | (0.11 | )
|                                                                                                                                            |                                 |                  |     |      |      |  

During 1999, Delphi awarded certain employees
approximately 3 million restricted stock units, which were
delivered to them as stock during the first quarter of 2003 in
accordance with the original award terms.

During the first quarter of 2003, we cancelled
approximately 20 million shares available for future grants
under the terms of certain of Delphis stock option plans.
As of March 31, 2003, there are 24 million shares
available for future grants under these stock option plans.

2. RESTRUCTURING AND PRODUCT LINE
CHARGES

In the first quarter of 2002, Delphi approved
restructuring plans to eliminate approximately
6,100 positions from our global workforce, comprised of
3,100 U.S. employees and 3,000 employees in non-U.S.
locations, downsize more than 25 selected facilities in the
United States and Europe, and exit certain other activities by
the end of the first quarter of 2003. The restructuring charge
totaled $231 million with $222 million of employee
costs (including postemployment benefits and special termination
pension benefits) and $9 million in other exit costs (lease
and contract cancellation fees). This charge, when netted
against the $6 million reversal for the 2001 restructuring
reserve, resulted in a net restructuring charge of
$225 million ($150 million after-tax) in the first
quarter of 2002.

We executed our restructuring actions as planned.
Total cash paid for restructuring was $200 million, with
$191 million for employee costs and $9 million for other
exit costs. The cash outflows for the first quarter of 2003 were
$24 million, with $17 million for employee costs and
$7 million for other exit costs.

In late 2001, we planned to dispose of our
generator product line. During 2002, we determined that we would
not complete the transaction and began to wind down this product
line. Of the total recorded loss of $231 million ($149
million after-tax) associated with the wind down of this product
line, $37 million ($24 million after-tax) for
contractually required payments (principally employee related)
was recorded in cost of sales during the first quarter of 2002.

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3. INVENTORIES, NET

Inventories, net consisted of:

|                                                                                |                           |               |       |       |              |   |       |       | 
|------------------------------------------------------------------------------- | ------------------------- | ------------- | ----- | ----- | ------------ | - | ----- | ----- | 
|                                                                                |                           | March 31,     |       |       | December 31, |  
|                                                                                |                           | 2003          |       |       | 2002         |  
|                                                                                |                           |               |       |       |              |  
|                                                                                |                           |              
|                                                                                |                           | (in millions) |      
|Productive material, work-in-process and supplies                               |                           | $             | 1,454 |       |              | $ | 1,587 |      
|Finished goods                                                                  |                           |               | 564   |       |              |   | 435   |      
|                                                                                |                           |               |       |       |              |  
|                                                                                | Total inventories at FIFO |               |       | 2,018 |              |   |       | 2,022 | 
|Less: allowance to adjust the carrying value of
    certain inventories to LIFO |                           |               | (253  | )     |              |   | (253  | )    
|                                                                                |                           |               |       |       |              |  
|                                                                                | Total inventories, net    |               | $     | 1,765 |              |   | $     | 1,769 | 
|                                                                                |                           |               |       |       |              |  

4. ASSET SECURITIZATION

In the first quarter of 2003, we entered into a
$500 million domestic accounts receivable securitization
facility agreement (Facility Agreement) for certain
trade receivables. Under this Facility Agreement, we have agreed
to sell certain accounts receivable to Delphi Receivables LLC,
(DR) a wholly-owned consolidated special purpose
entity. DR may then sell, on a non-recourse basis (subject to
certain exceptions relating to receivables that are reduced or
cancelled for reasons unrelated to the creditworthiness of the
obligor or customary write-offs, are disputed, or for which any
representations and warranties are no longer true), an undivided
interest in its receivables to certain receivable conduits that
fund their purchases through the issuance of commercial paper,
with back-up purchase commitments from the conduits
related financial institutions. The receivables are sold at fair
market value and a discount on the sale is recorded in operating
income. While we do not retain an interest in the receivables
sold, we do perform collections and administrative functions. As
of March 31, 2003, DR had not sold any undivided interests
in its accounts receivables; on April 1, 2003, DR sold
undivided interests in its receivables equal to
$350 million to the receivable conduits. The Facility
Agreement expires on March 31, 2004 and can be extended on
an annual basis until March 31, 2006 based upon the mutual
agreement of the parties. Additionally, the Facility Agreement
contains financial and other covenants similar to our revolving
credit facilities that, if not met, would result in a
termination of the agreement. As of March 31, 2003, we are
in compliance with all such covenants.

5. DERIVATIVES AND HEDGING
ACTIVITIES

Delphi is exposed to market risk, such as
fluctuations in foreign currency exchange rates, commodity
prices and changes in interest rates. To manage the volatility
relating to these exposures, we aggregate the exposures on a
consolidated basis to take advantage of natural offsets. For
exposures that are not offset within our operations, we enter
into various derivative transactions pursuant to our risk
management policies. Designation is performed on a transaction
basis to support hedge accounting. The changes in fair value of
these hedging instruments are offset in part or in whole by
corresponding changes in the fair value or cash flows of the
underlying exposures being hedged. We assess the initial and
ongoing effectiveness of our hedging relationships in accordance
with our documented policy. We do not hold or issue derivative
financial instruments for trading purposes.

Gains and losses on derivatives qualifying as
cash flow hedges are recorded in other comprehensive income
(OCI) to the extent that hedges are effective
until the underlying transactions are recognized in earnings.
Net losses included in OCI as of March 31, 2003, were
$7 million after-tax ($11 million pre-tax). Of this
pre-tax total, a loss of approximately $16 million is
expected to be included in cost of sales within the next
12 months and a gain of approximately $2 million is
expected to be included in subsequent periods. A loss of
approximately $2 million is expected to be included in
depreciation and amortization expense over the lives of the
related fixed assets and a gain of approximately $5 million
is expected to be

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included in interest expense over the term of the
related debt. The unrealized amounts in OCI will fluctuate based
on changes in the fair value of open contracts at each reporting
period. Cash flow hedges are discontinued when it is probable
that the original forecasted transactions will not occur. The
amount included in cost of sales related to hedge
ineffectiveness and the time value of options was not material.


6. STOCKHOLDERS EQUITY

Changes in stockholders equity for the
three months ended March 31, 2003 were:

|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |    |  |   |      |    |  |   |       |     |     | 
|--------------------------- | ------------------------------------------------------------------------- | -------------------------- | --- | - | ---------- | - | - | -------- |  | ------------------ | -------- | -- |  | --------- | ----- | -------- | ----- | - | ------------- | ----- |  | - | ------ | -- |  | - | ---- | -- |  | - | ----- | --- | --- | 
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |          
|                            |                                                                           |                            |     |   |            |   |   |          |  | Accumulated Other  |          |    |  |           |      
|                            |                                                                           |                            |     |   |            |   |   |          |  | Comprehensive Loss |          |    |  |           |      
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    | 
|                            |                                                                           | Common Stock               |     |   | Additional |   |   |          |  | Minimum            |          |    |  |           |       |          | Total |  
|                            |                                                                           |                            |     |   | Paid-in    |   |   | Retained |  |                    | Pension  |    |  |           |       | Treasury |       |   | Stockholders |      
|                            |                                                                           | Shares                     |     |   | Amount     |   |   | Capital  |  |                    | Earnings |    |  | Liability |       |          | Other |   |               | Stock |  |   | Equity |   
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |   
|                            |                                                                           |                           
|                            |                                                                           | (in millions)              |    
|Balance at January 1, 2003. |                                                                           |                            | 565 |   |            | $ | 6 |          |  | $                  | 2,445    |    |  | $         | 1,530 |          |       | $ | (2,098        | )     |  | $ | (493   | )  |  | $ | (111 | )  |  | $ | 1,279 |    
|                            | Net income                                                                |                            |     |  |            |   |   |         |  |                    |          |   |  |           |       | 127      |       |   |               |      |  |   |        |   |  |   |      |   |  |   |       | 127 |    
|                            | Currency translation adjustments and other, net
    of tax                |                            |     |  |            |   |   |         |  |                    |          |   |  |           |       |         |       |   |               |      |  |   |        | 21 |  |   |      |   |  |   |       | 21  |    
|                            | Net change in unrecognized loss on derivative
    instruments, net of tax |                            |     |  |            |   |   |         |  |                    |          |   |  |           |       |         |       |   |               |      |  |   |        | 3  |  |   |      |   |  |   |       | 3   |    
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |   
|                            |                                                                           | Total comprehensive income |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |    |  |   |      |    |  |   |       |     | 151 | 
|                            | Shares issued for employee benefit plans                                  |                            |     |  |            |   |   |         |  |                    |          | 14 |  |           |       |         |       |   |               |      |  |   |        |   |  |   |      | 35 |  |   |       | 49  |    
|                            | Dividends                                                                 |                            |     |  |            |   |   |         |  |                    |          |   |  |           |       | (39      | )     |   |               |      |  |   |        |   |  |   |      |   |  |   |       | (39 | )  
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |   
|Balance at March 31, 2003.  |                                                                           |                            | 565 |   |            | $ | 6 |          |  | $                  | 2,459    |    |  | $         | 1,618 |          |       | $ | (2,098        | )     |  | $ | (469   | )  |  | $ | (76  | )  |  | $ | 1,440 |    
|                            |                                                                           |                            |     |   |            |   |   |          |  |                    |          |    |  |           |       |          |       |   |               |       |  |   |        |   

7. SEGMENT REPORTING

Effective January 1, 2003, we realigned our
business sectors in order to strengthen our focus on customer
relationships and growth, accelerate lean transformation across
key business processes and place more emphasis on initiatives to
resolve under-performing assets in our portfolios. Under the
realignment, we have three reporting segments that are grouped
on the basis of similar product, market and operating factors:



| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Dynamics, Propulsion & Thermal Sector, which
    includes selected businesses from our energy and engine
    management systems, chassis, steering and thermal systems
    product lines.                                                                                     
|
| |  | Electrical, Electronics, Safety & Interior
    Sector, which includes selected businesses from our automotive
    electronics, audio, consumer and aftermarket products,
    communication systems, safety and power and signal distribution
    systems product lines.       
|
| |  | Automotive Holdings Group (AHG),
    which is comprised of product lines and plant sites that do not
    meet our targets for net income or other financial metrics,
    allowing for consistent and targeted management focus on finding
    solutions to these businesses.

The realignment is designed to increase focus on
products and services for the greatest long-term benefit for
Delphi while at the same time placing an equal focus on
businesses requiring additional management attention. It is a
further step in the implementation of our long-term portfolio
plans.

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We have presented our segment data for the three
months ended March 31, 2002 to be consistent with our
realigned sectors. Included below are sales and operating data
for our realigned sectors for the three months ended
March 31, 2003 and 2002.

|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |   |      |      |   |   |       |       | 
|--------------------------- | ------------------------------ | --------------- | - | ----------- | ------------ |  | - | ---------- | ----- |  | -------- | ---- | ---- | ----- | - | ---- | ---- | - | - | ----- | ----- | 
|                            |                                |                 |   | Electrical, |              |  |   |            |       |  |         
|                            |                                | Dynamics,       |   |             | Electronics, |  |   | Automotive |       |  |          |      |     
|                            |                                | Propulsion      |   |             | Safety &     |  |   | Holdings   |       |  |          |      |     
|                            |                                | & Thermal       |   |             | Interior     |  |   | Group      |       |  | Other(a) |      |      | Total |  
|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |  
|                            |                                |                
|                            |                                | (in millions)   |  
|For the Three Months Ended: |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |   |      |      |   |   |      
|March 31, 2003              |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |   |      |      |   |   |      
|                            | Net sales to GM and affiliates |                 | $ | 2,035       |              |  | $ | 2,014      |       |  | $        | 506  |      |       | $ |     |      |   | $ | 4,555 |      
|                            | Net sales to other customers   |                 |   | 1,036       |              |  |   | 1,491      |       |  |          | 100  |      |       |   |     |      |   |   | 2,627 |      
|                            | Inter-sector net sales         |                 |   | 192         |              |  |   | 107        |       |  |          | 216  |      |       |   | (515 | )    |   |   |      |      
|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |  
|                            |                                | Total net sales |   | $           | 3,263        |  |   | $          | 3,612 |  |          | $    | 822  |       |   | $    | (515 | ) |   | $     | 7,182 | 
|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |  
|                            | Sector operating income (loss) |                 | $ | 120         |              |  | $ | 260        |       |  | $        | (138 | )    |       | $ | (14  | )    |   | $ | 228   |      
|                           
|March 31, 2002              |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |   |      |      |   |   |      
|                            | Net sales to GM and affiliates |                 | $ | 1,962       |              |  | $ | 2,001      |       |  | $        | 521  |      |       | $ |     |      |   | $ | 4,484 |      
|                            | Net sales to other customers   |                 |   | 925         |              |  |   | 1,173      |       |  |          | 106  |      |       |   |     |      |   |   | 2,204 |      
|                            | Inter-sector net sales         |                 |   | 192         |              |  |   | 91         |       |  |          | 269  |      |       |   | (552 | )    |   |   |      |      
|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |  
|                            |                                | Total net sales |   | $           | 3,079        |  |   | $          | 3,265 |  |          | $    | 896  |       |   | $    | (552 | ) |   | $     | 6,688 | 
|                            |                                |                 |   |             |              |  |   |            |       |  |          |      |      |       |  
|                            | Sector operating income (loss) |                 | $ | 98          | (b)          |  | $ | 240        | (b)   |  | $        | (95  | )(b) |       | $ | (13  | )(b) |   | $ | 230   | (b)  



|    |                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the
    product sectors and elimination of inter-sector transactions.                                                                                                                                                                                                 
|   
|(b) | Excludes the first quarter 2002 net restructuring
    and generator product line charges of $262 million with
    $78 million for Dynamics, Propulsion & Thermal,
    $64 million for Electrical, Electronics, Safety &
    Interior, $104 million for Automotive Holdings Group and
    $16 million for Other.

8. COMMITMENTS AND
CONTINGENCIES

Delphi is from time to time subject to various
legal actions and claims incidental to its business, including
those arising out of alleged defects, breach of contracts,
product warranties, intellectual property matters, environmental
matters, and employment-related matters. In particular, as more
fully discussed in Item 2. Managements
Discussion And Analysis Of Financial Condition And Results Of
Operations  Labor Matters, the International
Union of Electronic, Electrical, Salaried, Machine &
Furniture Workers-Communication Workers of America, AFL-CIO
filed a grievance to protest certain planned layoffs at one of
our manufacturing sites, which was submitted to binding
arbitration and for which we are still awaiting a final ruling.

As previously disclosed, with respect to
environmental matters, Delphi received notices that it is a
potentially responsible party (PRP) in proceedings
at various sites, including the Tremont City Landfill Site
located in Tremont, Ohio. The Tremont City Landfill Site
proceeding, which is alleged to concern ground water
contamination, is in the early stages of investigation and
involves multiple other PRPs. Based on the information gathered
to date, Delphi has been identified as the largest
waste-generator PRP, however, we expect that other parties,
including landfill operator and transporter PRPs, will
ultimately have to share a significant portion of any overall
site costs. In September 2002, Delphi and other PRPs entered
into a Consent Order with the Environmental Protection Agency
(EPA) to perform a Remedial Investigation and
Feasibility Study concerning a portion of the site. The
investigation is expected to be completed during 2005, as
various EPA reviews are required through each phase of the
study. Current preliminary assessments indicate that a
reasonably possible outcome of the investigative study is
capping and future monitoring of this site, which would
substantially limit future remediation costs. We have reserved
approximately $2 million for our share of the expected
investigation costs. As preliminary assessments indicate that
future remediation costs could be limited, we have not
established an additional

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reserve for future remediation. Because the scope
of the investigation, and the extent of the required remediation
are still being determined, it is possible that the final
resolution of this matter may require that we make material
future expenditures for remediation, possibly over an extended
period of time.


With respect to warranty matters, as previously
disclosed, a few customers have advised Delphi that they intend
to pursue warranty claims vigorously. In particular, although in
2001 we settled or resolved most of our known pre-separation
warranty claims with GM, as previously disclosed, GM requested
that Delphi agree to reimburse GM for the anticipated costs of
GMs voluntary recall campaign to repair certain 1996 to
1998 models which GM states could experience a failure of the
power steering gear lower pinion bearing. In addition, GM may
assert additional pre-separation claims in the future. As we
have already informed GM, we believe that this claim and the
remainder of known pre-separation warranty claims are adequately
covered by commercial defenses or customer credits and that we
have no further financial liability for such matters.
Accordingly, although we cannot ensure that the future costs of
warranty claims by GM or other customers will not be material,
we believe our established reserves are adequate to cover
potential warranty settlements. However, the final amounts
determined to be due related to these matters could differ
materially from our recorded estimates. Additionally, in
connection with our separation from GM, we agreed to indemnify
GM against substantially all losses, claims, damages,
liabilities or activities arising out of or in connection with
our business. Due to the nature of such indemnities we are not
able to estimate the maximum amount.

Litigation is subject to many uncertainties, and
the outcome of individual litigated matters is not predictable
with assurance. After discussions with counsel, it is the
opinion of management that the outcome of such matters will not
have a material adverse impact on the consolidated financial
position, results of operations or cash flows of Delphi.

In November 2000, a federal district court jury
awarded a former supplier to Delphi approximately
$37 million inclusive of accrued interest, in connection
with a commercial dispute. Delphi and the supplier filed post
trial motions seeking a directed verdict, and Delphi also sought
a new trial. In February 2001, the district court denied all
parties motions. Both parties appealed the district
courts judgment and have filed briefs with the Ninth
Circuit Court of Appeals. On December 2, 2002 the parties
argued their respective positions before the Ninth Circuit Court
of Appeals and are still awaiting the Courts decision.
While legal proceedings are subject to inherent uncertainty, we
believe we had valid grounds for appeal, and it is possible that
the existing judgment could be substantially altered or
eliminated by the appellate court. Consequently, in the opinion
of management and counsel, it is not possible to estimate the
outcome of such uncertainty at this time. We record provisions
for any legal judgments, at the time that management and counsel
conclude a loss is probable.

On a worldwide basis, Delphi has a concentration
of employees working under union collective bargaining
agreements representing approximately 91% of its hourly
workforce. A significant proportion of the U.S. union
employees labor agreements expire in September 2003.
Certain suppliers and customers of Delphi also have union
represented work forces. Future work stoppages by Delphi
employees or employees of Delphis suppliers or customers
could disrupt Delphis production of automotive components
and systems. In addition, our ability to fix certain sites and
businesses that have been placed in AHG depend, in part, on
our ability to satisfactorily address any labor issues, which
arise as a result of such plans.

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ITEM 2. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL


CONDITION AND RESULTS OF OPERATIONS


Results of Operations

The following managements discussion and
analysis of financial condition and results of operations
(MD&A) should be read in conjunction with the
MD&A included in our Annual Report on Form 10-K for the
year ended December 31, 2002. The information presented
below is based on our sector realignment effective
January 1, 2003, as discussed in Note 7 of our consolidated
financial statements.



| |                                                                               
| | ------------------------------------------------------------------------------
| | Three Months Ended March 31, 2003
    versus Three Months Ended March 31, 2002

Net Sales.Consolidated net sales by product
sector and in total for the three months ended March 31,
2003 and 2002 were:

|                                           |                        |                 |       |       |      |   |       |       | 
|------------------------------------------ | ---------------------- | --------------- | ----- | ----- | ---- | - | ----- | ----- | 
|                                           |                        |                
|                                           |                        | Three Months    |      
|                                           |                        | Ended March 31, |      
|                                           |                        |                 |      
|Product Sector                             |                        | 2003            |       |       | 2002 |  
|                                           |                        |                 |       |       |      |  
|                                           |                        |                
|                                           |                        | (in millions)   |      
|Dynamics, Propulsion & Thermal             |                        | $               | 3,263 |       |      | $ | 3,079 |      
|Electrical, Electronics, Safety & Interior |                        |                 | 3,612 |       |      |   | 3,265 |      
|Automotive Holding Group                   |                        |                 | 822   |       |      |   | 896   |      
|Other                                      |                        |                 | (515  | )     |      |   | (552  | )    
|                                           |                        |                 |       |       |      |  
|                                           | Consolidated net sales |                 | $     | 7,182 |      |   | $     | 6,688 | 
|                                           |                        |                 |       |       |      |  

Consolidated net sales for the first quarter of
2003 were $7.2 billion compared to $6.7 billion for
the same period of 2002. Our non-GM sales increased by
$423 million principally due to $259 million of
increased production volumes and $197 million of favorable
currency exchange rates, partially offset by price decreases.
Net sales to GM increased by $71 million, principally due
to $163 million of increased production volumes in North
America and to a lesser extent favorable currency exchange
rates, partially offset by price decreases and loss of certain
business. As a percent of our net sales for the first quarter of
2003, our non-GM sales were 37%. Our net sales also were
impacted by continued price pressures that resulted in price
reductions of approximately $111 million, or 1.7% for the
first quarter of 2003 compared to approximately
$120 million or 1.8% for the first quarter of 2002.

Gross Margin.Our
gross margin was 12.1% for the first quarter of 2003 compared to
gross margin of 11.9% for the first quarter of 2002. The
improvement reflected increased volumes and lower material
costs, as well as greater efficiencies resulting from stable
customer build schedules and savings realized from our
restructuring plans, offset by $182 million of higher wages
and increased U.S. pension and healthcare expenses as well as
price decreases. First quarter 2002 gross margin included a
charge of $37 million related to our generator product line.

Selling, General and Administrative.Selling, general and administrative
expenses of $389 million, 5.4% of total net sales for the
first quarter of 2003, were consistent with $362 million or
5.4% of total net sales for the first quarter of 2002.

Depreciation and Amortization.Depreciation and amortization for the
first quarter of 2003 was consistent with amounts for the
comparable period of 2002.

Restructuring.In
the first quarter of 2002, Delphi approved restructuring plans
to eliminate approximately 6,100 positions from our global
workforce, comprised of 3,100 U.S. employees and 3,000
employees in non-U.S. locations, downsize more than
25 selected facilities in the United States and Europe, and
exit certain other activities by the end of the first quarter of
2003. The restructuring charge totaled $231 million with
$222 million of employee costs (including postemployment
benefits and special termination pension benefits) and
$9 million in other exit costs (lease and contract
cancellation fees). This

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charge, when netted against the $6 million
reversal for the 2001 restructuring reserve, resulted in a net
restructuring charge of $225 million ($150 million
after-tax) in the first quarter of 2002.


We executed our restructuring actions as planned.
Total cash paid for restructuring was $200 million, with
$191 million for employee costs and $9 million for
other exit costs. The cash outflows for the first quarter of
2003 were $24 million, with $17 million for employee
costs and $7 million for other exit costs. We are currently
realizing savings, principally payroll and related costs,
associated with these restructuring actions and we expect these
savings to grow to more than $125 million (after-tax) by
early 2004 with reductions of approximately $90 million in
cost of sales and approximately $35 million in selling,
general and administrative expense. The after-tax breakdown of
these savings by sector is expected to be approximately $43
million for Dynamics, Propulsion & Thermal, approximately
$36 million for Electrical, Electronics, Safety &
Interior, approximately $37 million for Automotive Holdings
Group and approximately $9 million for Other.

Following is a summary of our actions related to
our 2002 restructuring charge (in millions):

|                                        |                            |                |      |   |            |   |     |            |  |   |       |   |  |   |      |   | 
|--------------------------------------- | -------------------------- | -------------- | ---- | - | ---------- | - | --- | ---------- |  | - | ----- | - |  | - | ---- | - | 
|                                        |                            |                |      |   |            |  
|                                        |                            | Employee Costs |      |   |            |   |    
|                                        |                            |                |      |   | Other Cash |   |     |           
|Restructuring Actions                   |                            | Cash           |      |   | Non Cash   |   |     | Exit Costs |  |   | Total |  
|                                        |                            |                |      |   |            |   |     |            |  |   |       |  
|First quarter 2002 restructuring charge |                            | $              | 191  |   |            | $ | 31  |            |  | $ | 9     |   |  | $ | 231  |  
|Usage in 2002.                          |                            |                | (174 | ) |            |   | (31 | )          |  |   | (2    | ) |  |   | (207 | )
|                                        |                            |                |      |   |            |   |     |            |  |   |       |  
|Balance at December 31, 2002.           |                            | $              | 17   |   |            | $ |    |            |  | $ | 7     |   |  | $ | 24   |  
|Usage in first quarter 2003.            |                            |                | (17  | ) |            |   |    |            |  |   | (7    | ) |  |   | (24  | )
|                                        |                            |                |      |   |            |   |     |            |  |   |       |  
|                                        | Balance at March 31, 2003. |                | $    |  |            |   | $   |           |  |   | $     |  |  |   | $    |  | 
|                                        |                            |                |      |   |            |   |     |            |  |   |       |  

Operating Income (Loss).Operating income was $228 million
for the first quarter of 2003 compared to an operating loss of
$(32) million for the first quarter of 2002. To facilitate
analysis of our operating income by product sector and
consistent with the manner in which management reviews our
results, we have excluded the 2002 net restructuring and
generator product line charges of $262 million from the
information presented below:

|                                           |                        |               |      |     |         |   |     |     | 
|------------------------------------------ | ---------------------- | ------------- | ---- | --- | ------- | - | --- | --- | 
|                                           |                        |              
|                                           |                        | Three Months  |     
|                                           |                        | Ended         |     
|                                           |                        | March 31,     |     
|                                           |                        |               |     
|Product Sector                             |                        | 2003          |      |     | 2002(a) |  
|                                           |                        |               |      |     |         |  
|                                           |                        |              
|                                           |                        | (in millions) |     
|Dynamics, Propulsion & Thermal             |                        | $             | 120  |     |         | $ | 98  |    
|Electrical, Electronics, Safety & Interior |                        |               | 260  |     |         |   | 240 |    
|Automotive Holding Group                   |                        |               | (138 | )   |         |   | (95 | )  
|Other                                      |                        |               | (14  | )   |         |   | (13 | )  
|                                           |                        |               |      |     |         |  
|                                           | Total operating income |               | $    | 228 |         |   | $   | 230 | 
|                                           |                        |               |      |     |         |  



| |     |                                                                                                                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Excludes the first quarter 2002 net restructuring
    and generator product line charges of $262 million with
    $78 million for Dynamics, Propulsion & Thermal,
    $64 million for Electrical, Electronics, Safety &
    Interior, $104 million for Automotive Holdings Group and
    $16 million for Other.

The slight decrease in operating income from the
first quarter of 2002 primarily reflected lower pricing and
increased pension, healthcare and wages, partially offset by
savings realized from our restructuring plans, increased
revenues, material cost savings and improved efficiencies
resulting from the stabilization of customer build schedules.

Taxes.Our effective
tax rate for the first quarter of 2003 was 31% compared to 27%
for the first quarter of 2002. The rate for the first quarter of
2003 was affected by entity structuring and tax planning
activities, which allowed substantial earnings from the
Asia-Pacific region to be considered indefinitely reinvested in
foreign operations. This change has reduced our expected 2003
effective tax rate to 31%-32%.

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The rate for the first quarter of 2002 reflected
our inability to fully tax effect our restructuring initiatives
in certain jurisdictions. The effective tax rate for the full
year of 2002 was 35%.


Net Income (Loss).Our net income was $127 million
for the first quarter of 2003 as compared to a net loss of $(51)
million for the first quarter of 2002.

Earnings (Loss) Per Share.Basic and diluted earnings per share
were $0.23 for the first quarter of 2003 compared to basic and
diluted loss per share of $(0.09) for the first quarter of 2002.

Our segment data shown above is based on our
realigned sectors; for comparative purposes, the financial data
for the years ended December 31, 2002 and 2001 is shown
below:

|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |   |        |        |   |   |        |        | 
|---- | ------------------------------ | --------------- | - | ----- | ----------------- |  | - | ---------- | ------ |  | -------- | ----- | ----- | ----- | - | ------ | ------ | - | - | ------ | ------ | 
|     |                                | Dynamics,       |   |       | Electrical,       |  |   | Automotive |        |  |          |       |      
|     |                                | Propulsion &    |   |       | Electronics,      |  |   | Holdings   |        |  |          |       |      
|     |                                | Thermal         |   |       | Safety & Interior |  |   | Group      |        |  | Other(a) |       |       | Total |  
|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |  
|     |                                |                
|     |                                | (in millions)   |  
|2002 |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |   |        |        |   |   |       
|     | Net sales to GM and affiliates |                 | $ | 7,754 |                   |  | $ | 8,016      |        |  | $        | 2,092 |       |       | $ |       |        |   | $ | 17,862 |       
|     | Net sales to other customers   |                 |   | 3,883 |                   |  |   | 5,259      |        |  |          | 423   |       |       |   |       |        |   |   | 9,565  |       
|     | Inter-sector net sales         |                 |   | 838   |                   |  |   | 357        |        |  |          | 1,035 |       |       |   | (2,230 | )      |   |   |       |       
|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |  
|     |                                | Total net sales |   | $     | 12,475            |  |   | $          | 13,632 |  |          | $     | 3,550 |       |   | $      | (2,230 | ) |   | $      | 27,427 | 
|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |  
|     | Sector operating income (loss) |                 | $ | 413   | (b)               |  | $ | 972        | (b)    |  | $        | (375  | )(b)  |       | $ | (58    | )(b)   |   | $ | 952    | (b)   
|2001 |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |   |        |        |   |   |       
|     | Net sales to GM and affiliates |                 | $ | 7,581 |                   |  | $ | 7,884      |        |  | $        | 2,159 |       |       | $ |       |        |   | $ | 17,624 |       
|     | Net sales to other customers   |                 |   | 3,581 |                   |  |   | 4,417      |        |  |          | 466   |       |       |   |       |        |   |   | 8,464  |       
|     | Inter-sector net sales         |                 |   | 763   |                   |  |   | 404        |        |  |          | 1,119 |       |       |   | (2,286 | )      |   |   |       |       
|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |  
|     |                                | Total net sales |   | $     | 11,925            |  |   | $          | 12,705 |  |          | $     | 3,744 |       |   | $      | (2,286 | ) |   | $      | 26,088 | 
|     |                                |                 |   |       |                   |  |   |            |        |  |          |       |       |       |  
|     | Sector operating income (loss) |                 | $ | 175   | (c)(d)            |  | $ | 695        | (c)(d) |  | $        | (248  | )(d)  |       | $ | (69    | )(d)   |   | $ | 553    | (c)(d)



|    |                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the
    product sectors and elimination of inter-sector transactions.                                                                                                                                                                                                 
|   
|(b) | Excludes the first quarter 2002 net restructuring
    and generator product line charges of $262 million with
    $78 million for Dynamics, Propulsion & Thermal,
    $64 million for Electrical, Electronics, Safety &
    Interior, $104 million for Automotive Holdings Group and
    $16 million for Other.



|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Excludes goodwill amortization for 2001 of
    $35 million with $20 million for Dynamics,
    Propulsion & Thermal and $15 million for
    Electrical, Electronics, Safety & Interior.



|    |                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | Excludes the first quarter 2001 restructuring and
    asset impairment charges of $599 million and the fourth
    quarter 2001 product line impairment and other charges of
    $203 million with $310 million for Dynamics,
    Propulsion & Thermal, $189 million for Electrical,
    Electronics, Safety & Interior, $277 million for
    Automotive Holdings Group and $26 million for Other.

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Liquidity and Capital Resources

Liquidity

The following are some key metrics that we use
when we internally monitor our liquidity and capital resources.
We believe that these metrics provide a consistent, objective
measure of our cash and financing position and the changes from
period to period highlight the liquidity impacts of our
operating results, capital expenditures and working capital
management. Our net liquidity, which is calculated as cash and
cash equivalents less total debt, was $(1,975) million at
March 31, 2003 as compared to $(1,752) million at
December 31, 2002. The decrease in net liquidity at
March 31, 2003 results primarily from our pension
contribution of $350 million made during the first quarter
of 2003. The negative balance reflects our intended capital
structure and we expect that we will be able to meet our future
obligations as they become due. At March 31, 2003, our
ratio of debt to total capital (which consists of debt plus
stockholders equity) was 65.5%, as compared to 68.4% at
December 31, 2002.

Requirements for working capital, acquisitions,
capital expenditures, pension funding, dividends, repayment of
debt securities and restructuring obligations are expected to be
funded from operations, supplemented as needed by short-term or
long-term borrowings available under our commercial paper
programs, our Credit Facilities, sales of receivables under our
accounts receivable securitization facility, proceeds from the
future offering of preferred securities by our wholly-owned
subsidiary, Delphi Properties, all of which are described below,
and other available financing sources as necessary.

Debt
Capitalization and Available Financing Sources

Delphi has two financing arrangements with a
syndicate of lenders providing for an aggregate of
$3.0 billion in available revolving credit facilities (the
Credit Facilities), subject to certain limitations.
The terms of the Credit Facilities provide for a five-year
revolving credit line in the amount of $1.5 billion, which
expires June 2005, and a 364-day revolving credit line in the
amount of $1.5 billion, which expires in June 2003. We
expect to extend the terms of the 364-day revolving credit line
for another year during the second quarter of 2003. As of
March 31, 2003 there were no amounts outstanding under the
Credit Facilities. Utilizing the Credit Facilities as back up,
Delphi maintains $2.5 billion of worldwide commercial paper
programs, under which $0.5 billion was outstanding as of
March 31, 2003. Delphi also has approximately
$100 million available under uncommitted lines of credit.
As of March 31, 2003 there were no amounts outstanding
under uncommitted lines of credit.

In order to provide financial flexibility to
Delphi and our suppliers, we maintain a program through General
Electric Capital Corporation (GECC) pursuant to
a trade payables agreement. When a Delphi supplier elects to
participate in the program, GECC pays the supplier the amount
due from Delphi, prior to the due date of the accounts payable.
In exchange for the early payment, our suppliers accept a
discounted payment. On the original due date of the payables, we
pay GECC the full amount. These amounts are classified as
accounts payable in the consolidated balance sheet of Delphi; at
March 31, 2003 we had approximately $176 million due
to GECC under this program. Starting in the fourth quarter of
2002, we exercised our right under our trade payables agreement
with GECC, whereby we are permitted to defer payment on these
accounts payable discussed above to GECC for a period of up to
30 days, and in exchange we pay GECC a fee for the period
of such deferral. As of March 31, 2003, we have elected to
defer payment on approximately $125 million of such
payables; these amounts have been classified as short-term debt.
Also in the fourth quarter of 2002, we entered into a program
where GECC paid certain suppliers, on our behalf, the regularly
scheduled payment according to the terms of our purchase orders
with those suppliers. We elect, for a fee, to pay GECC at a date
generally 30 days later than the regularly scheduled
payment terms. At March 31, 2003, we have elected to delay
approximately $5 million that have been paid by GECC for
us, and are also classified as short-term debt. In addition, one
of our customers has arranged with GECC to provide a trade
payables program to its suppliers. During the fourth quarter of
2002, we elected to participate in this program as well. The
program permits us to sell certain of our customer receivables,
at a discount, to GECC on a non-recourse basis. When we
participate in this program, our receivables are reduced and our
cash balances are increased. At March 31, 2003, our

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receivables were reduced by $500 million, as
a result of this program. We expect to replace these programs
with our accounts receivable securitization facility agreement
discussed below.


In the first quarter of 2003, we entered into a
$500 million domestic accounts receivable securitization
facility agreement (Facility Agreement) for certain
trade receivables. Under this Facility Agreement, we have agreed
to sell certain accounts receivable to Delphi Receivables LLC,
(DR) a wholly-owned consolidated special purpose
entity. DR may then sell, on a non-recourse basis (subject to
certain exceptions relating to receivables that are reduced or
cancelled for reasons unrelated to the creditworthiness of the
obligor or customary write-offs, are disputed, or for which any
representations and warranties are no longer true), an undivided
interest in its receivables to certain receivable conduits that
fund their purchases through the issuance of commercial paper,
with back-up purchase commitments from the conduits
related financial institutions. The receivables are sold at fair
market value and a discount on the sale is recorded in operating
income. While we do not retain an interest in the receivables
sold, we do perform collections and administrative functions. As
of March 31, 2003, DR had not sold any undivided interests
in its accounts receivables; on April 1, 2003, DR sold
undivided interests in its receivables equal to
$350 million to the receivable conduits. The Facility
Agreement expires on March 31, 2004 and can be extended on
an annual basis until March 31, 2006 based upon the mutual
agreement of the parties. Additionally, the Facility Agreement
contains financial and other covenants similar to our revolving
credit facilities that, if not met, would result in a
termination of the agreement. As of March 31, 2003, we are
in compliance with all such covenants.

From time to time, certain subsidiaries may also
sell receivables in the normal course of their operations. Such
sales are generally consistent year to year and do not
significantly impact our liquidity.

On March 28, 2003, we filed a registration
statement with the Securities and Exchange Commission for the
sale of $300 million ($345 million if the
underwriters over-allotment option is exercised in full)
of Non-Cumulative Exchangeable Perpetual Preferred Securities
Series A Stock by our wholly-owned subsidiary, Delphi
Properties, Inc. (Delphi Properties), a real estate
investment trust (REIT). The Delphi Properties
Series A Preferred Stock will, upon certain events
specifically outlined in the registration statement, be
automatically exchanged, on a share-for-share basis, for Delphi
Perpetual Preferred Series AA Stock. We expect the Delphi
Properties Series A Preferred Stock offering to occur in
the second quarter of 2003, based on market conditions. The
proceeds from this offering will be used for general corporate
purposes, which may include contributions to our pension plans.

Delphi leases certain property, primarily land
and buildings that are used in our operations, under leases
commonly known as synthetic operating leases. These leases,
which are accounted for as operating leases, provide us tax
treatment equivalent to ownership, and also give us the option
to purchase these properties upon lease expiration. In
aggregate, our purchase price, if we chose to exercise such
options, approximates $139 million. These leases also
require us to guarantee a minimum value of approximately
$116 million upon expiration of the leases. At
March 31, 2003, the fair value of these properties in the
aggregate exceeds the minimum value guaranteed. As discussed
below under New Accounting Pronouncements, these
leases are subject to the rules set forth in the Financial
Accounting Standards Board (FASB) Interpretation
No. 46, Consolidation of Variable Interest
Entities, which was issued in January 2003. This
interpretation, when effective, would require us to consolidate
these assets. We plan to enter into new lease agreements for
these properties that, based on their expected terms, would be
accounted for as operating leases.

We have guaranteed the borrowings of one venture
for approximately $15 million. We have no other financial
commitments (such as lines of credit, standby lines of credit,
standby repurchase obligations, or guarantees of such items) to
or on behalf of entities that are excluded from our consolidated
financial statements. As of March 31, 2003, there have been
no material changes to our unsecured debt and leasing
arrangements as described in our Annual Report on Form 10-K
for the year ended December 31, 2002. From time to time we
enter into purchase commitments with our suppliers under
customary purchase order terms. Any significant losses implicit
in these contracts would be recognized in accordance with
generally accepted accounting principles.

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Delphi is rated by Standard & Poors,
Moodys and Fitch Ratings. We currently have long-term
credit ratings of BBB/ Baa2/ BBB, respectively, and short-term
credit ratings of A3/ P2/ F2, respectively. On April 15,
2003, Standard & Poors placed us on credit watch with
negative implications with respect to both our long and
short-term credit ratings, stating their concerns about our
underfunded employee benefit obligations. If we were downgraded
to BBB-/ Baa3/ BBB-, we believe we would continue to have access
to sufficient liquidity; however, our cost of borrowing may
increase. In addition, as a result of our short-term credit
ratings, our access to the commercial paper market has been
limited. As further described above, we were able to refinance
commercial paper using a number of programs. To the extent that
current levels of commercial paper become unavailable, these
alternative financing programs as well as other means of
financing, would be utilized.

Cash
Flows

Operating Activities.Net cash provided by operating
activities totaled $4 million for the three months ended
March 31, 2003 compared to $220 million for the three
months ended March 31, 2002. Cash provided by operating
activities in the first quarter of 2003 was impacted by a
$350 million voluntary contribution to our U.S. pension
plans. Cash provided by operating activities in the first
quarter of 2002 resulted primarily from improved operating
results.

Investing Activities.Cash flows used in investing
activities totaled $194 million and $193 million for
the three months ended March 31, 2003 and 2002,
respectively. The use of cash in the first quarters of 2003 and
2002 reflected capital expenditures, primarily machinery and
equipment and tooling related to future customer programs.

Financing Activities.Net cash used in financing activities
was $74 million and $80 million for the three months
ended March 31, 2003 and 2002, respectively. Cash used in
financing activities during the first quarters of 2003 and 2002
reflected dividend payments and repayments of short-term
borrowings.

Dividends.The Board
of Directors declared a dividend on Delphi common stock of $0.07
per share on March 26, 2003, which is payable on
May 5, 2003 to holders of record on April 7, 2003. The
dividend declared on December 4, 2002 was paid on
January 15, 2003.

Outlook

General.Although
first quarter 2003 North American production schedules remained
firm, we are cautious that this stability could be impacted by
weakening U.S. vehicle retail sales due to the current
geopolitical climate and lessening of future demand if
zero-percent interest and other aggressive incentive programs
are phased down or lose their sales effectiveness. In addition,
we continue to experience softness in other major automotive
markets. However, our non-GM revenue is expected to continue to
grow, up 19.2% in first three months of 2003 over the comparable
period of 2002 and representing 37% of our total sales for the
first three months of 2003. We expect our non-GM revenue to grow
by at least 10% on a constant exchange rate basis. Given the
current uncertainty inherent in the world economy as a whole and
the automotive industry in particular, we expect our second
quarter 2003 sales to be between $7.0 billion and $7.3 billion
and net income to be between $160 million and $200 million, and
operating cash flow to be between $300 million and
$400 million. Operating cash flow is defined as cash flow
from operations, prepared on a generally accepted accounting
principles (GAAP) basis, before $250 million of
pension contributions and after approximately $250 million of
capital expenditures.

Delphi continues to implement productivity
improvements and streamline activities designed to reduce
overhead and improve manufacturing processes. In addition, we
continue to streamline our portfolio, reduce excess capacity and
operating costs, and respond to global industry conditions and
increased employee related costs such as U.S. health care and
pensions as well as wages in non-U.S. locations. As previously
announced, we are in the process of winding down our generators
product line, which is now part of AHG. AHG is designed to
provide a better environment for all of our stakeholders. Each
of the product lines and sites within AHG has its own unique set
of challenges that require us to be flexible and creative in our
ongoing efforts to find solutions.

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In addition to conditions in our market and the
economy as a whole, we depend on GM as a customer. GM accounted
for 63% of our net sales for the first three months of 2003. Our
sales to GM have declined since our separation from GM;
principally reflecting the impact of customer driven price
reductions and the elimination of non-profitable businesses as
well as GMs diversification of its supply base and recent
changes in our vehicle content and the product mix supplied to
them. We also continue to exit some businesses as part of our
portfolio review process. Reflecting these and other factors, we
expect our sales to GM to decline over time. If we are unable to
compete effectively for new business with GMs other
suppliers, our revenues may decline further. While we intend to
continue to focus on retaining and winning GMs business,
we cannot assure you that we will succeed in doing so.
Additionally, our revenues may be affected by increases or
decreases in GMs business or market share. Our GM North
America content per vehicle for the first quarter of 2003 was
$2,761, and we anticipate our 2003 GM North America content per
vehicle will be $2,675. We continue to project our sales to grow
modestly assuming projected production levels, with non-GM sales
increasing and GM sales slightly decreasing. Total annual sales,
based on organic growth plans, are expected to rise from
$28.0 billion in 2003 to $29.4 billion in 2005. Based
on this organic growth plan, net sales to customers other than
GM are expected to increase by a compounded annual growth rate
of approximately 14% from 2002 to 2005 in dollar terms.

We face an inherent business risk of exposure to
product liability and warranty claims in the event that our
products fail to perform as expected and such failure of our
products results, or is alleged to result, in bodily injury
and/or property damage. We cannot assure you that we will not
experience any material warranty or product liability losses in
the future or that we will not incur significant costs to defend
such claims. In addition, if any of our products are or are
alleged to be defective, we may be required to participate in a
recall involving such products. Each vehicle manufacturer has
its own practices regarding product recalls and other product
liability actions relating to its suppliers. However, as
suppliers become more integrally involved in the vehicle design
process and assume more of the vehicle assembly functions,
vehicle manufacturers are increasingly looking to their
suppliers for contribution when faced with recalls and product
liability claims. A recall claim brought against us, or a
product liability claim brought against us in excess of our
available insurance, may have a material adverse effect on our
business. Vehicle manufacturers are also increasingly requiring
their outside suppliers to guarantee or warrant their products
and bear the costs of repair and replacement of such products
under new vehicle warranties. Depending on the terms under which
we supply products to a vehicle manufacturer, a vehicle
manufacturer may attempt to hold us responsible for some or all
of the repair or replacement costs of defective products under
new vehicle warranties, when the product supplied did not
perform as represented. Accordingly, although we cannot assure
you that the future costs of warranty claims by our customers
will not be material, we believe our established reserves are
adequate to cover potential warranty settlements. Our warranty
reserves are based upon our best estimates of amounts necessary
to settle future and existing claims. We regularly evaluate the
appropriateness of these reserves, and adjust them when
appropriate. However, the final amounts determined to be due
related to these matters could differ materially from our
recorded estimates.

In the normal course of business, we extend
credit on open account to our customers. From time to time, we
also invest in joint ventures with a variety of business
partners. Although Delphi is affected by the financial
well-being of the automotive industry as a whole, we believe
that our risk associated with trade receivables and
recoverability of investments in our joint ventures is mitigated
by our customer base and ongoing control procedures to monitor
the credit-worthiness of customers and viability of joint
venture business partners. As part of our ongoing procedures, we
regularly review our joint venture investments for potential
impairments or permanent declines in value.

U.S. Pension Plans.Delphi sponsors defined benefit pension plans covering certain
hourly and salaried employees in the United States. At
December 31, 2002, the projected benefit obligation
exceeded the market value of plan assets by $4.1 billion.
We are not required by employee benefit and tax laws to make
contributions to our pension plans prior to 2004, however, we
contributed $350 million to our U.S. pension plans in
January 2003 and we expect to make additional contributions
during the second quarter of 2003. Changes in interest rates and
the market values of the securities held by the plans during
2003 could

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materially, positively or negatively, change our
underfunded status and affect the level of pension expense and
required contributions in 2004 and beyond. For example, every
100 basis point difference in our actual 2003 asset returns
versus our assumed 9% long-term asset return rate would increase
or decrease the underfunded status of our plans by approximately
$60 million and our 2004 pension expense by approximately
$7 million to $10 million. Similarly, a 25 basis
point change in the discount rate used to value pension
liabilities at December 31, 2003, could increase or
decrease the underfunded status of our plans by approximately
$300 million and 2004 pension expense by approximately
$20 million to $30 million. Actual investment returns
and changes in the discount rate during 2003 will have no effect
on our 2003 pension expense.


Environmental Matters

As previously disclosed, with respect to
environmental matters, Delphi received notices that it is a
potentially responsible party (PRP) in proceedings
at various sites, including the Tremont City Landfill Site
located in Tremont, Ohio. The Tremont City Landfill Site
proceeding, which is alleged to concern ground water
contamination, is in the early stages of investigation and
involves multiple other PRPs. Based on the information gathered
to date, Delphi has been identified as the largest
waste-generator PRP, however, we expect that other parties,
including landfill operator and transporter PRPs, will
ultimately have to share a significant portion of any overall
site costs. In September 2002, Delphi and other PRPs entered
into a Consent Order with the Environmental Protection Agency
(EPA) to perform a Remedial Investigation and
Feasibility Study concerning a portion of the site. The
investigation is expected to be completed during 2005, as
various EPA reviews are required through each phase of the
study. Current preliminary assessments indicate that a
reasonably possible outcome of the investigative study is
capping and future monitoring of this site, which would
substantially limit future remediation costs. We have reserved
approximately $2 million for our share of the expected
investigation costs. As preliminary assessments indicate that
future remediation costs could be limited, we have not
established an additional reserve for future remediation.
Because the scope of the investigation, and the extent of the
required remediation are still being determined, it is possible
that the final resolution of this matter may require that we
make material future expenditures for remediation, possibly over
an extended period of time.

Labor Matters

On a worldwide basis, Delphi has a concentration
of employees working under union collective bargaining
agreements representing approximately 91% of its hourly
workforce. A significant proportion of the U.S. union
employees labor agreements expire in September 2003.
Certain suppliers and customers of Delphi also have union
represented work forces. Future work stoppages by Delphi
employees or employees of Delphis suppliers or customers
could disrupt Delphis production of automotive components
and systems. In addition, our ability to fix certain sites and
businesses that have been placed in AHG depend, in part, on our
ability to satisfactorily address any labor issues, which arise
as a result of such plans.

During 2002, the International Union of
Electronic, Electrical, Salaried, Machine & Furniture
Workers-Communication Workers of America, AFL-CIO (the
IUE) filed a grievance to protest certain planned
layoffs at one of our manufacturing sites. The grievance was
submitted to binding arbitration under the terms of
Delphis labor agreement with the IUE. During the first
quarter of 2003, the arbitrator ruled in favor of the IUEs
position that Delphi had assumed an enforceable contract
obligation to maintain a minimum employment level at the site of
1,500 jobs until the year 2011. The arbitrator further ruled,
however, that enforcing the contractually required minimum
employment level at the site for the full term was not an
appropriate remedy. Instead, the arbitrator ordered the parties
to appear at a future remedial hearing, scheduled during the
second quarter of 2003, to discuss and present evidence as to
the remedy. Although our obligation for unpaid wages of
employees on layoff at March 31, 2003 was not material, a
remedy that requires continued employment at prior levels for a
significant length of time would adversely impact our ability to
achieve cost savings and achieve an acceptable net income at the
facility. The facility is included within our Automotive
Holdings Group as the facility does not meet our

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targets for net income, and negotiations to
develop a fix plan have been ongoing. Our ability to
execute such a plan will be dependent on the resolution of this
dispute.


New Accounting Pronouncements

In January 2003, the FASB issued FASB
Interpretation 46, Consolidation of Variable Interest
Entities. The Interpretation addresses the consolidation
of variable interest entities, including entities commonly
referred to as special purpose entities. The Interpretation
immediately applies to entities created after January 31,
2003, and after July 1, 2003 for existing variable interest
entities. As discussed above, we have entered into synthetic
operating leases for certain assets, used in our operations,
that would require consolidation under this Interpretation. We
expect to enter into new agreements prior to July 1, 2003
that, based on their expected terms, will be accounted for as
operating leases; if we do not do so, we may be required to
include an additional $139 million in assets and
liabilities on our balance sheet.

Forward-Looking Statements

The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements made
by us or on our behalf. Delphi and its representatives may
periodically make written or oral statements that are
forward-looking, including statements included in
this report and other filings with the Securities and Exchange
Commission and in reports to our stockholders. All statements
contained or incorporated in this report which address operating
performance, events or developments that we expect or anticipate
may occur in the future (including statements relating to future
sales, earnings expectations, savings expected as a result of
our global restructurings or other initiatives, portfolio
restructuring plans, volume growth, awarded sales contracts and
earnings per share expectations or statements expressing general
optimism about future operating results) are forward-looking
statements. These statements are made on the basis of
managements current views and assumptions with respect to
future events. Important factors, risks and uncertainties which
may cause actual results to differ from those expressed in our
forward-looking statements are set forth in this Quarterly
Report on Form 10-Q. In particular, the achievement of
projected levels of revenue, earnings, cash flow and debt levels
will depend on our ability to execute our portfolio and other
global restructuring plans in a manner which satisfactorily
addresses any resultant antitrust or labor issues and customer
concerns, any contingent liabilities related to divestitures or
integration costs associated with acquisitions, and other
matters; the success of our efforts to diversify our customer
base and still maintain existing GM business; the continued
protection and exploitation of our intellectual property to
develop new products and enter new markets; and our ability to
capture expected benefits of our cost reduction initiatives so
as to maintain flexibility to respond to adverse and cyclical
changes in general economic conditions and in the automotive
industry in each market in which we operate, including customer
cost reduction initiatives, potential increases in warranty
costs, funding requirements and pension contributions,
healthcare costs, disruptions in the labor, commodities or
transportation markets caused by terrorism, war or labor
unrests, other changes in the political and regulatory
environments where we do business; and other factors, risks and
uncertainties discussed in our Annual Report on Form 10-K
for the year ended December 31, 2002 and other filings with
the Securities and Exchange Commission. Delphi does not intend
or assume any obligation to update any of these forward-looking
statements.

20



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ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK


There have been no material changes to our
exposures to market risk since December 31, 2002.






ITEM 4. CONTROLS AND PROCEDURES


We have designed our disclosure controls and
procedures to ensure that material information related to
Delphi, including our consolidated subsidiaries, is made known
to our Disclosure Committee, including our principal executive
officer and principal financial officer on a regular basis, in
particular during the period in which the quarterly reports are
being prepared. As required, we will evaluate the effectiveness
of these disclosure controls and procedures on a quarterly
basis, and did so on April 8, 2003, a date within
90 days prior to the filing of this quarterly report. We
believe as of that date, such controls and procedures are
operating effectively as designed.

We presented the results of our most recent
evaluation to our independent auditors, Deloitte &
Touche LLP, and the Audit Committee of the Board of Directors.
Based on such evaluation, the Companys management,
including the principal executive officer and principal
financial officer, concluded that the Companys disclosure
controls and procedures are adequate to insure the clarity and
material completeness of the Companys disclosure in its
periodic reports required to be filed with the SEC and there are
no significant deficiencies in the design or operation of
internal controls which could significantly affect our ability
to record, process, summarize and report financial data.

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PART II. OTHER INFORMATION







ITEM 1. LEGAL PROCEEDINGS


Other than the arbitration with the IUE discussed
in Item 2. Managements Discussion And Analysis
Of Financial Condition And Results Of Operations 
Labor Matters, there have been no other material
developments in legal proceedings involving Delphi or its
subsidiaries since those reported in Delphis Annual Report
on Form 10-K for the year ended December 31, 2002.

We are involved in routine litigation incidental
to the conduct of our business. We do not believe that any of
the litigation to which we are currently a party will have a
material adverse effect on our business or financial condition.






ITEM 6. EXHIBITS AND REPORTS ON
FORM 8-K


(a) EXHIBITS

|        |       |  |              |                                                                                                                                                                                                                                                                           
|------- | ----- |  | ------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |             
|Number  |       |  | Exhibit Name
|        |       |  |             
|        | 3(a)  |  |              | Amended and Restated Certificate of Incorporation
    of Delphi Automotive Systems Corporation, incorporated by
    reference to Exhibit 3(a) to Delphis Quarterly Report
    on Form 10-Q for the quarter ended June 30, 2002.                                          
|        | 3(b)  |  |              | Certificate of Ownership and Merger, dated
    March 13, 2002, Merging Delphi Corporation into Delphi
    Automotive Systems Corporation, incorporated by reference to
    Exhibit 3(b) to Delphis Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2002.
|        | 3(c)  |  |              | By-laws of Delphi Automotive Systems Corporation,
    incorporated by reference to Exhibit 3.2 to Delphis
    Registration Statement on Form S-1 (Registration
    No. 333-67333).                                                                                       
|        | 99(a) |  |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                           
|        | 99(b) |  |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                           

(b) REPORTS ON FORM 8-K

During the quarter for which this report is
filed, Delphi filed the following reports on Form 8-K:



| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | January 17, 2003, Form 8-K reporting
    under Item 5. Other Events the filing of
    financial information containing highlighted financial data for
    the three months and year end ended December 31, 2002.
|
| | March 28, 2003, Form 8-K reporting
    under Item 9. Regulation FD Disclosure the
    filing of a registration statement with the SEC for the sale of
    preferred stock.                                      

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SIGNATURE


Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                   
| | ------------------
| | DELPHI CORPORATION
| |                   
| | (Registrant)      

|               |  |                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|April 16, 2003 |  | /s/ JOHN D. SHEEHAN
    -----------------------------------------------------
    John D. Sheehan, Chief Accounting
    Officer and Controller

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CERTIFICATIONS


Certification of Principal Executive
Officer

I, J. T. Battenberg III, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of Delphi Corporation;                                                                                                                                                                                                                                                                     
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                



| |    |                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

|               |  |                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|April 16, 2003 |  | /s/ J. T. BATTENBERG III
    -----------------------------------------------------
    J. T. Battenberg III
    Chairman of the Board,
    Chief Executive Officer and
    President (Principal Executive Officer)

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##### Table of Contents



Certification of Principal Financial
Officer

I, Alan S. Dawes, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of Delphi Corporation;                                                                                                                                                                                                                                                                     
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                



| |    |                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this quarterly report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this quarterly report whether or not
    there were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

|               |  |                                                                                                                                                                                  
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|April 16, 2003 |  | /s/ ALAN S. DAWES
    -----------------------------------------------------
    Alan S. Dawes
    Vice Chairman and
    Chief Financial Officer
    (Principal Financial Officer)

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EXHIBIT INDEX


|        |     |    |              |                                                                                                                                                                                                                                                                           
|------- | --- | -- | ------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |    |             
|Number  |     |    | Exhibit Name
|        |     |    |             
|        | 3(  | a) |              | Amended and Restated Certificate of Incorporation
    of Delphi Automotive Systems Corporation, incorporated by
    reference to Exhibit 3(a) to Delphis Quarterly Report
    on Form 10-Q for the quarter ended June 30, 2002.                                          
|        | 3(  | b) |              | Certificate of Ownership and Merger, dated
    March 13, 2002, Merging Delphi Corporation into Delphi
    Automotive Systems Corporation, incorporated by reference to
    Exhibit 3(b) to Delphis Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2002.
|        | 3(  | c) |              | By-laws of Delphi Automotive Systems Corporation,
    incorporated by reference to Exhibit 3.2 to Delphis
    Registration Statement on Form S-1 (Registration
    No. 333-67333).                                                                                       
|        | 99( | a) |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                           
|        | 99( | b) |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.