##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549-1004


FORM 10-Q


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|  |  | For the quarterly period ended June 30, 2006                                                
|  |  | OR                                                                                          
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For
the transition period from

to
.


Commission file No. 1-14787


DELPHI CORPORATION




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

(248) 813-2000




þ o


12b-2


þ o o


12b-2 o þ












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##### 










DELPHI CORPORATION


INDEX


|                                                                |  |                                                                                                     |    |      |    | 
|--------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                                |  |                                                                                                     |    | Page |   
|                                                                |  |                                                                                                     |    |      |   
|Part I  Financial
    Information                             
|Item 1.                                                         |  | Financial Statements (Unaudited)                                                                    |    |      |    | 
|                                                                |  | Consolidated Statements of Operations for
    the Three and Six Months Ended June 30, 2006 and 2005 |    |      | 3  | 
|                                                                |  | Consolidated Balance Sheets as of
    June 30, 2006 and December 31, 2005                           |    |      | 4  | 
|                                                                |  | Consolidated Statements of Cash Flows for
    the Six Months Ended June 30, 2006 and 2005           |    |      | 5  | 
|                                                                |  | Notes to Consolidated Financial
    Statements                                                      |    |      | 6  | 
|Item 2.                                                         |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations           |    |      | 30 | 
|Item 3.                                                         |  | Quantitative and Qualitative Disclosures
    About Market Risk                                      |    |      | 48 | 
|Item 4.                                                         |  | Controls and Procedures                                                                             |    |      | 48 | 
|Part II  Other
    Information                                
|Item 1.                                                         |  | Legal Proceedings                                                                                   |    |      | 50 | 
|Item 1A.                                                        |  | Risk Factors                                                                                        |    |      | 50 | 
|Item 2.                                                         |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                     |    |      | 50 | 
|Item 3.                                                         |  | Defaults Upon Senior Securities                                                                     |    |      | 50 | 
|Item 6.                                                         |  | Exhibits                                                                                            |    |      | 50 | 
|Signature                                                       |  |                                                                                                     | 52 |     
|Supplement to UAW-GM-Delphi Special Attrition Program Agreement
|IUE-CWA-GM-Delphi Special Attrition Program                    
|Certification Pursuant to Section 302                          
|Certification Pursuant to Section 302                          
|Certification pursuant to 18 U.S.C. Section 1350               
|Certification pursuant to 18 U.S.C. Section 1350               



2



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##### Table of Contents






PART I. FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS


DELPHI CORPORATION


(DEBTOR-IN-POSSESSION)





CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |        |        |   |       |        |        | 
|------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------ | ----- | ---------------- | - | ----- | ----- | ----- | - | ------ | ------ | ------ | - | ----- | ------ | ------ | 
|                                                                                                                                     |                                                                                                                                                          | Three Months Ended                      |        |       | Six Months Ended |  
|                                                                                                                                     |                                                                                                                                                          | June 30,                                |        |       | June 30,         |  
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |  
|                                                                                                                                     |                                                                                                                                                          | 2006                                    |        |       | 2005             |   |       | 2006  |       |   | 2005   |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|                                                                                                                                     |                                                                                                                                                          | (in millions, except per share amounts) |       
|Net sales:                                                                                                                           |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |        |        |   |       |       
|                                                                                                                                     | General Motors and affiliates                                                                                                                            |                                         | $      | 3,069 |                  |   | $     | 3,407 |       |   | $      | 6,286  |        |   | $     | 6,806  |       
|                                                                                                                                     | Other customers                                                                                                                                          |                                         |        | 3,926 |                  |   |       | 3,616 |       |   |        | 7,682  |        |   |       | 7,079  |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|                                                                                                                                     |                                                                                                                                                          | Total net sales                         |        |       | 6,995            |   |       |       | 7,023 |   |        |        | 13,968 |   |       |        | 13,885 | 
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Operating expenses:                                                                                                                  |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |        |        |   |       |       
|                                                                                                                                     | Cost of sales, excluding items listed below                                                                                                              |                                         |        | 6,543 |                  |   |       | 6,606 |       |   |        | 13,102 |        |   |       | 13,106 |       
|                                                                                                                                     | U.S. employee special attrition program charges                                                                                                          |                                         |        | 1,905 |                  |   |       |      |       |   |        | 1,905  |        |   |       |       |       
|                                                                                                                                     | Selling, general and administrative                                                                                                                      |                                         |        | 387   |                  |   |       | 412   |       |   |        | 763    |        |   |       | 806    |       
|                                                                                                                                     | Depreciation and amortization                                                                                                                            |                                         |        | 272   |                  |   |       | 289   |       |   |        | 542    |        |   |       | 581    |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|                                                                                                                                     |                                                                                                                                                          | Total operating expenses                |        |       | 9,107            |   |       |       | 7,307 |   |        |        | 16,312 |   |       |        | 14,493 | 
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Operating loss                                                                                                                       |                                                                                                                                                          |                                         | (2,112 | )     |                  |   | (284  | )     |       |   | (2,344 | )      |        |   | (608  | )     
|                                                                                                                                     | Interest expense (contractual interest expense for the three and
    six months ended June 30, 2006 was $144 million and
    $284 million, respectively) |                                         |        | (104  | )                |   |       | (67   | )     |   |        | (203   | )      |   |       | (121   | )     
|                                                                                                                                     | Other income, net                                                                                                                                        |                                         |        | 12    |                  |   |       | 22    |       |   |        | 23     |        |   |       | 27     |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Loss before reorganization items, income taxes, minority
    interest, equity income, and cumulative effect of accounting
    change |                                                                                                                                                          |                                         | (2,204 | )     |                  |   | (329  | )     |       |   | (2,524 | )      |        |   | (702  | )     
|                                                                                                                                     | Reorganization items, net                                                                                                                                |                                         |        | (20   | )                |   |       |      |       |   |        | (33    | )      |   |       |       |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Loss before income taxes, minority interest, equity income, and
    cumulative effect of accounting change                           |                                                                                                                                                          |                                         | (2,224 | )     |                  |   | (329  | )     |       |   | (2,557 | )      |        |   | (702  | )     
|                                                                                                                                     | Income tax expense                                                                                                                                       |                                         |        | (51   | )                |   |       | (20   | )     |   |        | (91    | )      |   |       | (57    | )     
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Loss before minority interest, equity income, and cumulative
    effect of accounting change                                         |                                                                                                                                                          |                                         | (2,275 | )     |                  |   | (349  | )     |       |   | (2,648 | )      |        |   | (759  | )     
|                                                                                                                                     | Minority interest, net of tax                                                                                                                            |                                         |        | (14   | )                |   |       | (8    | )     |   |        | (24    | )      |   |       | (16    | )     
|                                                                                                                                     | Equity income                                                                                                                                            |                                         |        | 14    |                  |   |       | 19    |       |   |        | 31     |        |   |       | 34     |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Loss before cumulative effect of accounting change                                                                                   |                                                                                                                                                          |                                         | (2,275 | )     |                  |   | (338  | )     |       |   | (2,641 | )      |        |   | (741  | )     
|Cumulative effect of accounting change                                                                                               |                                                                                                                                                          |                                         |       |       |                  |   |      |       |       |   | 3      |        |        |   |      |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Net loss                                                                                                                             |                                                                                                                                                          | $                                       | (2,275 | )     |                  | $ | (338  | )     |       | $ | (2,638 | )      |        | $ | (741  | )     
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Basic and diluted loss per share                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |        |        |   |       |       
|                                                                                                                                     | Before cumulative effect of accounting change                                                                                                            |                                         | $      | (4.05 | )                |   | $     | (0.60 | )     |   | $      | (4.71  | )      |   | $     | (1.33  | )     
|                                                                                                                                     | Cumulative effect of accounting change                                                                                                                   |                                         | $      |      |                  |   | $     |      |       |   | $      | 0.01   |        |   | $     |       |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|                                                                                                                                     | Basic and diluted loss per share                                                                                                                         |                                         | $      | (4.05 | )                |   | $     | (0.60 | )     |   | $      | (4.70  | )      |   | $     | (1.33  | )     
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       
|Dividends declared per share                                                                                                         |                                                                                                                                                          | $                                       | 0.00   |       |                  | $ | 0.015 |       |       | $ | 0.00   |        |        | $ | 0.045 |       
|                                                                                                                                     |                                                                                                                                                          |                                         |        |       |                  |   |       |       |       |   |        |       



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DELPHI CORPORATION


(DEBTOR-IN-POSSESSION)





CONSOLIDATED BALANCE SHEETS


|                                               |                                                                                                                |                                                   |                             |        |              |        |        |        |       |        |  
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------- | ------ | ------------ | ------ | ------ | ------ | ----- | ------ | -
|                                               |                                                                                                                | June 30,                                          |                             |        |             
|                                               |                                                                                                                | 2006                                              |                             |        | December 31, |       
|                                               |                                                                                                                | (Unaudited)                                       |                             |        | 2005         |       
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                | (in millions)                                     |                            
|ASSETS                                        
|Current assets:                                |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Cash and cash equivalents                                                                                      |                                                   | $                           | 1,988  |              |        | $      | 2,221  |      
|                                               | Restricted cash                                                                                                |                                                   |                             | 117    |              |        |        | 36     |      
|                                               | Accounts receivable, net:                                                                                      |                                                   |                             |        |              |        |        |        |      
|                                               |                                                                                                                | General Motors and affiliates                     |                             |        | 2,223        |        |        |        | 1,920 |       
|                                               |                                                                                                                | Other                                             |                             |        | 3,296        |        |        |        | 2,975 |       
|                                               | Inventories, net:                                                                                              |                                                   |                             |        |              |        |        |        |      
|                                               |                                                                                                                | Productive material, work-in-process and supplies |                             |        | 1,477        |        |        |        | 1,350 |       
|                                               |                                                                                                                | Finished goods                                    |                             |        | 601          |        |        |        | 524   |       
|                                               | Deferred income taxes                                                                                          |                                                   |                             | 50     |              |        |        | 51     |      
|                                               | Prepaid expenses and other                                                                                     |                                                   |                             | 469    |              |        |        | 477    |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total current assets        |        |              | 10,221 |        |        |       | 9,554  |  
|Long-term assets:                              |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Property, net                                                                                                  |                                                   |                             | 4,996  |              |        |        | 5,108  |      
|                                               | Deferred income taxes                                                                                          |                                                   |                             | 135    |              |        |        | 59     |      
|                                               | Investments in affiliates                                                                                      |                                                   |                             | 452    |              |        |        | 418    |      
|                                               | Goodwill                                                                                                       |                                                   |                             | 370    |              |        |        | 363    |      
|                                               | Other intangible assets, net                                                                                   |                                                   |                             | 52     |              |        |        | 54     |      
|                                               | Pension intangible assets                                                                                      |                                                   |                             | 698    |              |        |        | 891    |      
|                                               | Other                                                                                                          |                                                   |                             | 590    |              |        |        | 576    |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total long-term assets      |        |              | 7,293  |        |        |       | 7,469  |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total assets                |        | $            | 17,514 |        |        | $     | 17,023 |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                              
|LIABILITIES AND STOCKHOLDERS DEFICIT         
|Current liabilities:                           |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Notes payable, current portion of long-term debt, and debt in
    default                                      |                                                   | $                           | 3,109  |              |        | $      | 3,117  |      
|                                               | Accounts payable                                                                                               |                                                   |                             | 2,882  |              |        |        | 2,494  |      
|                                               | Accrued liabilities                                                                                            |                                                   |                             | 1,980  |              |        |        | 1,192  |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total current liabilities   |        |              | 7,971  |        |        |       | 6,803  |  
|Long-term debt                                 |                                                                                                                |                                                   | 296                         |        |              |        | 273    |       
|Pension benefits                               |                                                                                                                |                                                   | 340                         |        |              |        | 310    |       
|Other                                          |                                                                                                                |                                                   | 909                         |        |              |        | 651    |       
|Liabilities subject to compromise              |                                                                                                                |                                                   | 15,754                      |        |              |        | 15,074 |       
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total liabilities           |        |              | 25,270 |        |        |       | 23,111 |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|Minority interest in consolidated subsidiaries |                                                                                                                |                                                   | 171                         |        |              |        | 157    |       
|Stockholders deficit:                         |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Common stock, $0.01 par value, 1,350 million shares
    authorized, 565 million shares issued in 2006 and 2005 |                                                   |                             | 6      |              |        |        | 6      |      
|                                               | Additional paid-in capital                                                                                     |                                                   |                             | 2,753  |              |        |        | 2,744  |      
|                                               | Accumulated deficit                                                                                            |                                                   |                             | (9,067 | )            |        |        | (6,429 | )    
|                                               | Minimum pension liability                                                                                      |                                                   |                             | (1,544 | )            |        |        | (2,395 | )    
|                                               | Accumulated other comprehensive loss, excluding minimum pension
    liability                                  |                                                   |                             | (23    | )            |        |        | (119   | )    
|                                               | Treasury stock, at cost (3.2 million shares in 2006 and
    2005)                                              |                                                   |                             | (52    | )            |        |        | (52    | )    
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total stockholders deficit |        |              | (7,927 | )      |        |       | (6,245 | )
|                                               |                                                                                                                |                                                   |                             |        |              |       
|Total liabilities and stockholders deficit    |                                                                                                                | $                                                 | 17,514                      |        |              | $      | 17,023 |       
|                                               |                                                                                                                |                                                   |                             |        |              |       



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DELPHI CORPORATION


(DEBTOR-IN-POSSESSION)





CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


|                                      |                                                                                     |                                                               |                                                     |        |       |      |   |      |      |      |  
|------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------------- | ------ | ----- | ---- | - | ---- | ---- | ---- | -
|                                      |                                                                                     | Six Months Ended                                              |                                                    
|                                      |                                                                                     | June 30,                                                      |                                                    
|                                      |                                                                                     |                                                               |                                                    
|                                      |                                                                                     | 2006                                                          |                                                     |        | 2005  |     
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      |                                                                                     | (in millions)                                                 |                                                    
|Cash flows from operating activities: |                                                                                     |                                                               |                                                     |        |       |      |   |     
|                                      | Net loss                                                                            |                                                               | $                                                   | (2,638 | )     |      | $ | (741 | )   
|                                      | Adjustments to reconcile net loss to net cash provided by
    operating activities: |                                                               |                                                     |        |       |      |   |      |     
|                                      |                                                                                     | Depreciation and amortization                                 |                                                     |        | 542   |      |   |      | 581  |     
|                                      |                                                                                     | Deferred income taxes                                         |                                                     |        | (16   | )    |   |      | (14  | )   
|                                      |                                                                                     | Pension and other postretirement benefit expenses             |                                                     |        | 804   |      |   |      | 772  |     
|                                      |                                                                                     | Equity income                                                 |                                                     |        | (31   | )    |   |      | (34  | )   
|                                      |                                                                                     | Reorganization items                                          |                                                     |        | 33    |      |   |      |     |     
|                                      |                                                                                     | U.S employee special attrition program charges                |                                                     |        | 1,905 |      |   |      |     |     
|                                      | Changes in operating assets and liabilities:                                        |                                                               |                                                     |        |       |      |   |      |     
|                                      |                                                                                     | Accounts receivable and retained interest in receivables, net |                                                     |        | (573  | )    |   |      | 200  |     
|                                      |                                                                                     | Inventories, net                                              |                                                     |        | (209  | )    |   |      | 90   |     
|                                      |                                                                                     | Prepaid expenses and other                                    |                                                     |        | (173  | )    |   |      | 83   |     
|                                      |                                                                                     | Accounts payable                                              |                                                     |        | 549   |      |   |      | 67   |     
|                                      |                                                                                     | Employee and product line obligations                         |                                                     |        |      |      |   |      | (44  | )   
|                                      |                                                                                     | Accrued and other long-term liabilities                       |                                                     |        | 229   |      |   |      | 20   |     
|                                      |                                                                                     | Pension contributions and benefit payments                    |                                                     |        | (141  | )    |   |      | (655 | )   
|                                      |                                                                                     | Other postretirement benefit payments                         |                                                     |        | (116  | )    |   |      | (92  | )   
|                                      |                                                                                     | Net payments for reorganization items                         |                                                     |        | (21   | )    |   |      |     |     
|                                      |                                                                                     | Other, net                                                    |                                                     |        | 43    |      |   |      | (9   | )   
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      |                                                                                     |                                                               | Net cash provided by operating activities           |        |       | 187  |   |      |      | 224  |  
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|Cash flows from investing activities: |                                                                                     |                                                               |                                                     |        |       |      |   |     
|                                      | Capital expenditures                                                                |                                                               |                                                     | (416   | )     |      |   | (555 | )   
|                                      | Proceeds from sale of property                                                      |                                                               |                                                     | 34     |       |      |   | 43   |     
|                                      | Increase in restricted cash                                                         |                                                               |                                                     | (81    | )     |      |   |     |     
|                                      | Proceeds from divestitures                                                          |                                                               |                                                     | 12     |       |      |   |     |     
|                                      | Other, net                                                                          |                                                               |                                                     | 48     |       |      |   | 37   |     
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      |                                                                                     |                                                               | Net cash used in investing activities               |        |       | (403 | ) |      |      | (475 | )
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|Cash flows from financing activities: |                                                                                     |                                                               |                                                     |        |       |      |   |     
|                                      | Net proceeds from term loan facility                                                |                                                               |                                                     |       |       |      |   | 983  |     
|                                      | Repayments under cash overdraft.                                                    |                                                               |                                                     | (24    | )     |      |   |     |     
|                                      | Net proceeds (repayments) under other short-term debt
    agreements                |                                                               |                                                     | 5      |       |      |   | (554 | )   
|                                      | Dividend payments                                                                   |                                                               |                                                     |       |       |      |   | (56  | )   
|                                      | Other, net                                                                          |                                                               |                                                     | (11    | )     |      |   | (57  | )   
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      |                                                                                     |                                                               | Net cash (used in) provided by financing activities |        |       | (30  | ) |      |      | 316  |  
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      | Effect of exchange rate fluctuations on cash and cash equivalents                   |                                                               |                                                     | 13     |       |      |   | (41  | )   
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      | (Decrease) increase in cash and cash equivalents                                    |                                                               |                                                     | (233   | )     |      |   | 24   |     
|                                      | Cash and cash equivalents at beginning of period                                    |                                                               |                                                     | 2,221  |       |      |   | 950  |     
|                                      |                                                                                     |                                                               |                                                     |        |       |     
|                                      |                                                                                     | Cash and cash equivalents at end of period                    |                                                     | $      | 1,988 |      |   | $    | 974  |     
|                                      |                                                                                     |                                                               |                                                     |        |       |     



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DELPHI CORPORATION


(DEBTOR-IN-POSSESSION)





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)




|   |                      
|-- | ---------------------
|1. | BASIS OF PRESENTATION

General 10-K


Consolidation




Bankruptcy Filing and Going Concern debtors-in non-U.S.


debtor-in


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90-7, 90-7), 90-7


Contractual Interest Expense 90-7.


Use of Estimates


Annual Incentive Plan 8-K


Postemployment Benefits


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Employee Termination Benefits and Other Exit
Costs


Recently Issued Accounting
Pronouncements Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109. Accounting for Income Taxes.




|   |                      
|-- | ---------------------
|2. | CHAPTER 11 BANKRUPTCY

debtors-in non-U.S.




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##### Table of Contents



Accounting for the impairment or Disposal of Long-Lived
Assets








9



---



##### Table of Contents



Employers Accounting
for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits Employers Accounting for
Postretirement Benefits Accounting for the Impairment or Disposal of Long-Lived
Assets Accounting
for Costs Associated with Exit or Disposal Activities.








Basis of Presentation


Condensed Combined
Debtors-in-Possession
Financial Statements 90-7.


Intercompany Transactions


10



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##### Table of Contents



CONDENSED COMBINED DEBTORS-IN-POSSESSION STATEMENTS OF


OPERATIONS (Unaudited)


(Non-filed entities, principally
non-U.S.subsidiaries,
excluded from consolidated Debtor group)


|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |   |        |       |        | 
|------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------ | ----- | ------------- | - | ------ | ----- | ------ | 
|                                                                                                                    |                                                                                                                                                          | Three Months             |        |       | Six Months    |  
|                                                                                                                    |                                                                                                                                                          | Ended                    |        |       | Ended         |  
|                                                                                                                    |                                                                                                                                                          | June 30, 2006            |        |       | June 30, 2006 |  
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|                                                                                                                    |                                                                                                                                                          | (in millions)            |       
|Net sales:                                                                                                          |                                                                                                                                                          |                          |        |       |               |   |        |      
|                                                                                                                    | General Motors and affiliates                                                                                                                            |                          | $      | 2,631 |               |   | $      | 5,422 |       
|                                                                                                                    | Other customers                                                                                                                                          |                          |        | 1,812 |               |   |        | 3,623 |       
|                                                                                                                    | Intercompany non-Debtor subsidiaries                                                                                                                     |                          |        | 154   |               |   |        | 308   |       
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|                                                                                                                    |                                                                                                                                                          | Total net sales          |        |       | 4,597         |   |        |       | 9,353  | 
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Operating expenses:                                                                                                 |                                                                                                                                                          |                          |        |       |               |   |        |      
|                                                                                                                    | Cost of sales, excluding items listed below                                                                                                              |                          |        | 4,538 |               |   |        | 9,257 |       
|                                                                                                                    | U.S. employee special attrition program charges                                                                                                          |                          |        | 1,905 |               |   |        | 1,905 |       
|                                                                                                                    | Selling, general and administrative                                                                                                                      |                          |        | 271   |               |   |        | 527   |       
|                                                                                                                    | Depreciation and amortization                                                                                                                            |                          |        | 166   |               |   |        | 331   |       
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|                                                                                                                    |                                                                                                                                                          | Total operating expenses |        |       | 6,880         |   |        |       | 12,020 | 
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Operating loss                                                                                                      |                                                                                                                                                          |                          | (2,283 | )     |               |   | (2,667 | )    
|                                                                                                                    | Interest expense (contractual interest expense for the three and
    six months ended June 30, 2006 was $131 million and
    $260 million, respectively) |                          |        | (91   | )             |   |        | (178  | )     
|                                                                                                                    | Other expense, net                                                                                                                                       |                          |        | (4    | )             |   |        | (4    | )     
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Loss before reorganization items, income tax expense, equity
    income, and cumulative effect of accounting change |                                                                                                                                                          |                          | (2,378 | )     |               |   | (2,849 | )    
|                                                                                                                    | Reorganization items, net                                                                                                                                |                          |        | (16   | )             |   |        | (25   | )     
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Loss before income tax expense, equity income, and cumulative
    effect of accounting change                       |                                                                                                                                                          |                          | (2,394 | )     |               |   | (2,874 | )    
|                                                                                                                    | Income tax expense                                                                                                                                       |                          |        | (2    | )             |   |        | (6    | )     
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Loss before equity income, and cumulative effect of accounting
    change                                           |                                                                                                                                                          |                          | (2,396 | )     |               |   | (2,880 | )    
|                                                                                                                    | Equity income from non-consolidated subsidiaries, net of tax                                                                                             |                          |        | 12    |               |   |        | 26    |       
|                                                                                                                    | Equity income from non-Debtor subsidiaries, net of tax                                                                                                   |                          |        | 109   |               |   |        | 213   |       
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Loss before cumulative effect of accounting change                                                                  |                                                                                                                                                          |                          | (2,275 | )     |               |   | (2,641 | )    
|Cumulative effect of accounting change                                                                              |                                                                                                                                                          |                          |       |       |               |   | 3      |      
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  
|Net loss                                                                                                            |                                                                                                                                                          | $                        | (2,275 | )     |               | $ | (2,638 | )    
|                                                                                                                    |                                                                                                                                                          |                          |        |       |               |  

11



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CONDENSED COMBINED DEBTORS-IN-POSSESSION BALANCE SHEET


(Non-filed entities, principally
non-U.S.subsidiaries,
excluded from consolidated Debtor group)


|                                               |                                                                                                                |                                                   |                             |        |              |        |        |        |       |        |  
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------- | ------ | ------------ | ------ | ------ | ------ | ----- | ------ | -
|                                               |                                                                                                                | June 30,                                          |                             |        |             
|                                               |                                                                                                                | 2006                                              |                             |        | December 31, |       
|                                               |                                                                                                                | (Unaudited)                                       |                             |        | 2005         |       
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                | (in millions)                                     |                            
|ASSETS                                        
|Current assets:                                |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Cash and cash equivalents                                                                                      |                                                   | $                           | 850    |              |        | $      | 1,361  |      
|                                               | Restricted cash                                                                                                |                                                   |                             | 75     |              |        |        |       |      
|                                               | Accounts receivable, net:                                                                                      |                                                   |                             |        |              |        |        |        |      
|                                               |                                                                                                                | General Motors and affiliates                     |                             |        | 1,900        |        |        |        | 1,654 |       
|                                               |                                                                                                                | Other third parties                               |                             |        | 1,499        |        |        |        | 1,428 |       
|                                               |                                                                                                                | Non-Debtor subsidiaries                           |                             |        | 325          |        |        |        | 287   |       
|                                               | Notes receivable from non-Debtor subsidiaries                                                                  |                                                   |                             | 352    |              |        |        | 349    |      
|                                               | Inventories, net:                                                                                              |                                                   |                             |        |              |        |        |        |      
|                                               |                                                                                                                | Productive material, work-in-process and supplies |                             |        | 898          |        |        |        | 820   |       
|                                               |                                                                                                                | Finished goods                                    |                             |        | 317          |        |        |        | 286   |       
|                                               | Prepaid expenses and other                                                                                     |                                                   |                             | 325    |              |        |        | 354    |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total current assets        |        |              | 6,541  |        |        |       | 6,539  |  
|Long-term assets:                              |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Property, net                                                                                                  |                                                   |                             | 2,606  |              |        |        | 2,743  |      
|                                               | Investments in affiliates                                                                                      |                                                   |                             | 377    |              |        |        | 356    |      
|                                               | Investments in non-Debtor subsidiaries                                                                         |                                                   |                             | 3,413  |              |        |        | 3,131  |      
|                                               | Goodwill                                                                                                       |                                                   |                             | 152    |              |        |        | 139    |      
|                                               | Other intangible assets, net                                                                                   |                                                   |                             | 40     |              |        |        | 42     |      
|                                               | Pension intangible assets                                                                                      |                                                   |                             | 678    |              |        |        | 871    |      
|                                               | Other                                                                                                          |                                                   |                             | 328    |              |        |        | 319    |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total long-term assets      |        |              | 7,594  |        |        |       | 7,601  |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total assets                |        | $            | 14,135 |        |        | $     | 14,140 |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                              
|LIABILITIES AND STOCKHOLDERS DEFICIT         
|Current liabilities not subject to compromise: |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Notes payable and secured debt in default                                                                      |                                                   | $                           | 2,497  |              |        | $      | 2,519  |      
|                                               | Accounts payable                                                                                               |                                                   |                             | 1,308  |              |        |        | 1,027  |      
|                                               | Accounts payable to non-Debtor subsidiaries                                                                    |                                                   |                             | 376    |              |        |        | 486    |      
|                                               | Accrued liabilities                                                                                            |                                                   |                             | 1,066  |              |        |        | 410    |      
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total current liabilities   |        |              | 5,247  |        |        |       | 4,442  |  
|Debtor-in-possession financing                 |                                                                                                                |                                                   | 250                         |        |              |        | 250    |       
|Employee benefit plan obligations and other    |                                                                                                                |                                                   | 752                         |        |              |        | 550    |       
|Liabilities subject to compromise              |                                                                                                                |                                                   | 15,813                      |        |              |        | 15,143 |       
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total liabilities           |        |              | 22,062 |        |        |       | 20,385 |  
|                                               |                                                                                                                |                                                   |                             |        |              |       
|Stockholders deficit:                         |                                                                                                                |                                                   |                             |        |              |        |        |       
|                                               | Common stock, $0.01 par value, 1,350 million shares
    authorized, 565 million shares issued in 2006 and 2005 |                                                   |                             | 6      |              |        |        | 6      |      
|                                               | Additional paid-in capital                                                                                     |                                                   |                             | 2,753  |              |        |        | 2,744  |      
|                                               | Accumulated deficit                                                                                            |                                                   |                             | (9,067 | )            |        |        | (6,429 | )    
|                                               | Minimum pension liability, Debtors only                                                                        |                                                   |                             | (1,449 | )            |        |        | (2,304 | )    
|                                               | Accumulated other comprehensive loss, including minimum pension
    liability of non-Debtor subsidiaries       |                                                   |                             | (118   | )            |        |        | (210   | )    
|                                               | Treasury stock, at cost (3.2 million shares in 2006 and
    2005)                                              |                                                   |                             | (52    | )            |        |        | (52    | )    
|                                               |                                                                                                                |                                                   |                             |        |              |       
|                                               |                                                                                                                |                                                   | Total stockholders deficit |        |              | (7,927 | )      |        |       | (6,245 | )
|                                               |                                                                                                                |                                                   |                             |        |              |       
|Total liabilities and stockholders deficit    |                                                                                                                | $                                                 | 14,135                      |        |              | $      | 14,140 |       
|                                               |                                                                                                                |                                                   |                             |        |              |       

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CONDENSED COMBINED DEBTORS-IN-POSSESSION STATEMENT OF


CASH FLOWS (Unaudited)


(Non-filed entities, principally
non-U.S.subsidiaries,
excluded from consolidated Debtor group)


|                                      |                                                                                 |                                                           |                                       |        |       |      |  
|------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------- | ------ | ----- | ---- | -
|                                      |                                                                                 | Six Months Ended                                          |                                      
|                                      |                                                                                 | June 30, 2006                                             |                                      
|                                      |                                                                                 |                                                           |                                      
|                                      |                                                                                 | (in millions)                                             |                                      
|Cash flows from operating activities: |                                                                                 |                                                           |                                       |       
|                                      | Net loss                                                                        |                                                           | $                                     | (2,638 | )    
|                                      | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                           |                                       |        |      
|                                      |                                                                                 | Depreciation and amortization                             |                                       |        | 331   |     
|                                      |                                                                                 | Pension and other postretirement benefit expenses         |                                       |        | 771   |     
|                                      |                                                                                 | Equity income from non-consolidated subsidiaries          |                                       |        | (26   | )   
|                                      |                                                                                 | Equity income from non-Debtor subsidiaries, net of tax    |                                       |        | (213  | )   
|                                      |                                                                                 | Reorganization items                                      |                                       |        | 25    |     
|                                      |                                                                                 | U.S. employee special attrition program charges           |                                       |        | 1,905 |     
|                                      | Changes in operating assets and liabilities:                                    |                                                           |                                       |        |      
|                                      |                                                                                 | Accounts receivable, net                                  |                                       |        | (200  | )   
|                                      |                                                                                 | Inventories, net                                          |                                       |        | (110  | )   
|                                      |                                                                                 | Prepaid expenses and other                                |                                       |        | (148  | )   
|                                      |                                                                                 | Accounts payable, accrued and other long-term liabilities |                                       |        | 309   |     
|                                      |                                                                                 | Pension contributions and benefit payments                |                                       |        | (119  | )   
|                                      |                                                                                 | Other postretirement benefit payments                     |                                       |        | (116  | )   
|                                      |                                                                                 | Payments for reorganization items, net                    |                                       |        | (14   | )   
|                                      |                                                                                 | Other, net                                                |                                       |        | 29    |     
|                                      |                                                                                 |                                                           |                                      
|                                      |                                                                                 |                                                           | Net cash used in operating activities |        |       | (214 | )
|                                      |                                                                                 |                                                           |                                      
|Cash flows from investing activities: |                                                                                 |                                                           |                                       |       
|                                      | Capital expenditures                                                            |                                                           |                                       | (180   | )    
|                                      | Proceeds from sale of property                                                  |                                                           |                                       | 7      |      
|                                      | Increase in restricted cash                                                     |                                                           |                                       | (75    | )    
|                                      | Other, net                                                                      |                                                           |                                       | (21    | )    
|                                      |                                                                                 |                                                           |                                      
|                                      |                                                                                 |                                                           | Net cash used in investing activities |        |       | (269 | )
|                                      |                                                                                 |                                                           |                                      
|Cash flows from financing activities: |                                                                                 |                                                           |                                       |       
|                                      | Proceeds from prepetition secured revolving credit facility, net                |                                                           |                                       | 2      |      
|                                      | Repayments under cash overdraft.                                                |                                                           |                                       | (24    | )    
|                                      | Repayments of borrowings under other short-term debt agreements                 |                                                           |                                       | (6     | )    
|                                      |                                                                                 |                                                           |                                      
|                                      |                                                                                 |                                                           | Net cash used in financing activities |        |       | (28  | )
|                                      |                                                                                 |                                                           |                                      
|                                      | Decrease in cash and cash equivalents                                           |                                                           |                                       | (511   | )    
|                                      | Cash and cash equivalents at beginning of period                                |                                                           |                                       | 1,361  |      
|                                      |                                                                                 |                                                           |                                      
|                                      |                                                                                 | Cash and cash equivalents at end of period                |                                       | $      | 850   |     
|                                      |                                                                                 |                                                           |                                      

13



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##### Table of Contents





|   |                         
|-- | ------------------------
|3. | SHARE-BASED COMPENSATION

Share-Based Payments






|                                                                                                                                            |                                 |                      |      |       |               |   |      |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------------------- | ---- | ----- | ------------- | - | ---- | ----- | -
|                                                                                                                                            |                                 | Three Months         |      |       | Six Months    |  
|                                                                                                                                            |                                 | Ended                |      |       | Ended         |  
|                                                                                                                                            |                                 | June 30, 2005        |      |       | June 30, 2005 |  
|                                                                                                                                            |                                 |                      |      |       |               |  
|                                                                                                                                            |                                 | (in millions, except |     
|                                                                                                                                            |                                 | per share amounts)   |     
|Net loss, as reported                                                                                                                       |                                 | $                    | (338 | )     |               | $ | (741 | )    
|Add: Share-based compensation expense recognized, net of related
    tax effects                                                            |                                 |                      | 10   |       |               |   | 13   |      
|Less: Total share-based employee compensation expense determined
    under fair value method for all awards, net of related tax
    effects |                                 |                      | (14  | )     |               |   | (19  | )    
|                                                                                                                                            |                                 |                      |      |       |               |  
|Pro forma net loss                                                                                                                          |                                 | $                    | (342 | )     |               | $ | (747 | )    
|                                                                                                                                            |                                 |                      |      |       |               |  
|Loss per share:                                                                                                                             |                                 |                      |      |       |               |   |      |      
|                                                                                                                                            | Basic and diluted  as reported |                      | $    | (0.60 | )             |   | $    | (1.33 | )
|                                                                                                                                            |                                 |                      |      |       |               |  
|                                                                                                                                            | Basic and diluted  pro forma   |                      | $    | (0.61 | )             |   | $    | (1.34 | )
|                                                                                                                                            |                                 |                      |      |       |               |  

Share-Based
Compensation Plans




14



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##### Table of Contents









|                                    |  |                |        |          |       |   |       | 
|----------------------------------- |  | -------------- | ------ | -------- | ----- | - | ----- | 
|                                    |  |                |        | Weighted |      
|                                    |  |                |        | Average  |      
|                                    |  |                |        | Exercise |      
|                                    |  | Stock Options  |        |          | Price |  
|                                    |  |                |        |          |       |  
|                                    |  | (in thousands) |        |          |      
|Outstanding as of December 31, 2005 |  |                | 84,565 |          |       | $ | 13.72 | 
|Exercised                           |  |                |       |          |       | $ |      | 
|Forfeited or expired                |  |                | (5,528 | )        |       | $ | 14.95 | 
|                                    |  |                |        |          |       |  
|Outstanding as of June 30, 2006     |  |                | 79,037 |          |       | $ | 13.64 | 
|                                    |  |                |        |          |       |  
|Exercisable as of June 30, 2006     |  |                | 76,951 |          |       | $ | 13.73 | 
|                                    |  |                |        |          |       |  



Approved by Stockholders


|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |        |  |  |   |       | 
|--------------- |  | -------------- | ------ |  | ---------------- |  | --- | ---------------- | -------------- | - | ------------------------- |  |  | ---------------- | ------ |  |  | - | ----- | 
|Range of        |  | Outstanding    |        |  | Weighted Average |  |     | Weighted Average |                |   | Number of                 |  |  | Weighted Average |       
|Exercise Prices |  | Stock Options  |        |  | Remaining Life   |  |     | Exercise Price   |                |   | Stock Options Exercisable |  |  | Exercise Price   |       
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       
|                |  | (in thousands) |        |  |                  |  |     |                  | (in thousands) |   |                           | 
|$ 8.43-$10.00   |  |                | 10,639 |  |                  |  | 6.8 |                  |                | $ | 8.43                      |  |  |                  | 10,637 |  |  | $ | 8.43  | 
|$10.01-$20.00   |  |                | 47,030 |  |                  |  | 4.4 |                  |                | $ | 13.50                     |  |  |                  | 44,946 |  |  | $ | 13.66 | 
|$20.01-$20.97   |  |                | 73     |  |                  |  | 2.5 |                  |                | $ | 20.66                     |  |  |                  | 73     |  |  | $ | 20.66 | 
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       
|                |  |                | 57,742 |  |                  |  |     |                  |                | $ | 12.58                     |  |  |                  | 55,656 |  |  | $ | 12.67 | 
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       

Other Plans


|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |        |  |  |   |       | 
|--------------- |  | -------------- | ------ |  | ---------------- |  | --- | ---------------- | -------------- | - | ------------------------- |  |  | ---------------- | ------ |  |  | - | ----- | 
|Range of        |  | Outstanding    |        |  | Weighted Average |  |     | Weighted Average |                |   | Number of                 |  |  | Weighted Average |       
|Exercise Prices |  | Stock Options  |        |  | Remaining Life   |  |     | Exercise Price   |                |   | Stock Options Exercisable |  |  | Exercise Price   |       
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       
|                |  | (in thousands) |        |  |                  |  |     |                  | (in thousands) |   |                           | 
|$ 9.55-$10.00   |  |                | 1      |  |                  |  | 1.5 |                  |                | $ | 9.55                      |  |  |                  | 1      |  |  | $ | 9.55  | 
|$10.01-$20.00   |  |                | 18,965 |  |                  |  | 3.1 |                  |                | $ | 16.00                     |  |  |                  | 18,965 |  |  | $ | 16.00 | 
|$20.01-$24.76   |  |                | 2,329  |  |                  |  | 2.5 |                  |                | $ | 20.64                     |  |  |                  | 2,329  |  |  | $ | 20.64 | 
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       
|                |  |                | 21,295 |  |                  |  |     |                  |                | $ | 16.50                     |  |  |                  | 21,295 |  |  | $ | 16.50 | 
|                |  |                |        |  |                  |  |     |                  |                |   |                           |  |  |                  |       



15



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##### Table of Contents







Restricted
Stock Units




|                                |  |                |        |          |            |   |      | 
|------------------------------- |  | -------------- | ------ | -------- | ---------- | - | ---- | 
|                                |  |                |        | Weighted |           
|                                |  |                |        | Average  |           
|                                |  | Restricted     |        |          | Grant Date |  
|                                |  | Stock Units    |        |          | Fair Value |  
|                                |  |                |        |          |            |  
|                                |  | (in thousands) |        |          |           
|Non-vested at December 31, 2005 |  |                | 10,027 |          |            | $ | 8.58 | 
|Vested                          |  |                | (839   | )        |            | $ | 8.43 | 
|Forfeited                       |  |                | (504   | )        |            | $ | 8.65 | 
|                                |  |                |        |          |            |  
|Non-vested at June 30, 2006     |  |                | 8,684  |          |            | $ | 8.56 | 
|                                |  |                |        |          |            |  





|   |                     
|-- | --------------------
|4. | REORGANIZATION ITEMS

90-7


|                                                     |                            |               |     |    |               |   |     |    | 
|---------------------------------------------------- | -------------------------- | ------------- | --- | -- | ------------- | - | --- | -- | 
|                                                     |                            | Three Months  |     |    | Six Months    |  
|                                                     |                            | Ended         |     |    | Ended         |  
|                                                     |                            | June 30, 2006 |     |    | June 30, 2006 |  
|                                                     |                            |               |     |    |               |  
|                                                     |                            | (in millions) |    
|Professional fees directly related to reorganization |                            | $             | 36  |    |               | $ | 67  |   
|Interest income                                      |                            |               | (15 | )  |               |   | (31 | ) 
|Gain on settlement of prepetition liabilities        |                            |               | (1  | )  |               |   | (3  | ) 
|                                                     |                            |               |     |    |               |  
|                                                     | Total Reorganization Items |               | $   | 20 |               |   | $   | 33 | 
|                                                     |                            |               |     |    |               |  



16



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##### Table of Contents





|   |                                      
|-- | -------------------------------------
|5. | WEIGHTED AVERAGE SHARES AND DIVIDENDS







|   |           
|-- | ----------
|6. | WARRANTIES





|                                     |                                                              |               |     |     |      |   |     |     |  
|------------------------------------ | ------------------------------------------------------------ | ------------- | --- | --- | ---- | - | --- | --- | -
|                                     |                                                              | June 30,      |    
|                                     |                                                              |               |    
|                                     |                                                              | 2006          |     |     | 2005 |  
|                                     |                                                              |               |     |     |      |  
|                                     |                                                              | (in millions) |    
|Accrual balance at beginning of year |                                                              | $             | 312 |     |      | $ | 274 |    
|                                     | Provision for estimated warranties accrued during the period |               |     | 104 |      |   |     | 59  |  
|                                     | Settlements made during the period (in cash or in kind)      |               |     | (79 | )    |   |     | (85 | )
|                                     | Foreign currency translation                                 |               |     | 3   |      |   |     | (7  | )
|                                     |                                                              |               |     |     |      |  
|Accrual balance at end of period     |                                                              | $             | 340 |     |      | $ | 241 |    
|                                     |                                                              |               |     |     |      |  





|   |                                  
|-- | ---------------------------------
|7. | LIABILITIES SUBJECT TO COMPROMISE



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90-7




|                                                                                    |                                         |               |       |        |              |   |       |        | 
|----------------------------------------------------------------------------------- | --------------------------------------- | ------------- | ----- | ------ | ------------ | - | ----- | ------ | 
|                                                                                    |                                         | June 30,      |       |        | December 31, |  
|                                                                                    |                                         | 2006          |       |        | 2005         |  
|                                                                                    |                                         |               |       |        |              |  
|                                                                                    |                                         | (in millions) |      
|Pension obligations (see Note 8)                                                    |                                         | $             | 4,217 |        |              | $ | 3,578 |       
|Postretirement obligations other than pensions, including
    amounts payable to GM |                                         |               | 7,710 |        |              |   | 7,331 |       
|Debt and notes payable                                                              |                                         |               | 2,057 |        |              |   | 2,062 |       
|Accounts payable                                                                    |                                         |               | 773   |        |              |   | 916   |       
|Junior subordinated notes due to Delphi Trust I and II                              |                                         |               | 403   |        |              |   | 403   |       
|Postemployment benefits for other than temporarily idled
    employees              |                                         |               | 11    |        |              |   | 148   |       
|Other                                                                               |                                         |               | 583   |        |              |   | 636   |       
|                                                                                    |                                         |               |       |        |              |  
|                                                                                    | Total Liabilities Subject to Compromise |               | $     | 15,754 |              |   | $     | 15,074 | 
|                                                                                    |                                         |               |       |        |              |  



|   |                                                                                          
|-- | -----------------------------------------------------------------------------------------
|8. | U.S. EMPLOYEE SPECIAL ATTRITION PROGRAM AND PENSION AND
    OTHER POSTRETIREMENT BENEFITS



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|                                                                  |                                                   |                                                  |        |        |                |   |        |        |        |  
|----------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------ | ------ | ------ | -------------- | - | ------ | ------ | ------ | -
|                                                                  |                                                   |                                                  |        | Other  |               
|                                                                  |                                                   | Pension                                          |        |        | Postretirement |  
|                                                                  |                                                   | Benefits                                         |        |        | Benefits       |  
|                                                                  |                                                   | June 30, 2006                                    |        |        | June 30, 2006  |  
|                                                                  |                                                   |                                                  |        |        |                |  
|                                                                  |                                                   | (in millions)                                    |       
|Change in benefit obligation:                                     |                                                   |                                                  |        |        |                |   |        |       
|                                                                  | Benefit obligation at beginning of year           |                                                  | $      | 8,894  |                |   | $      | 9,434  |       
|                                                                  |                                                   | Expense                                          |        |        | 321            |   |        |        | 329    |  
|                                                                  |                                                   | Benefits paid                                    |        |        | (219           | ) |        |        | (153   | )
|                                                                  |                                                   | Impact of curtailments, remeasurement, and other |        |        | 630            |   |        |        | (2,032 | )
|                                                                  |                                                   |                                                  |        |        |                |  
|                                                                  | Benefit obligation at June 30, 2006               |                                                  | $      | 9,626  |                |   | $      | 7,578  |       
|                                                                  |                                                   |                                                  |        |        |                |  
|Change in plan assets:                                            |                                                   |                                                  |        |        |                |   |        |       
|                                                                  | Fair value of plan assets at beginning of year    |                                                  | $      | 6,621  |                |   | $      |       |       
|                                                                  |                                                   | Actual return on plan assets                     |        |        | 315            |   |        |        |       |  
|                                                                  |                                                   | Delphi contributions                             |        |        | 53             |   |        |        |       |  
|                                                                  |                                                   | Benefits paid                                    |        |        | (219           | ) |        |        |       |  
|                                                                  | Fair value of plan assets at June 30, 2006        |                                                  | $      | 6,770  |                |   | $      |       |       
|                                                                  |                                                   |                                                  |        |        |                |  
|                                                                  | Underfunded status                                |                                                  | $      | (2,856 | )              |   | $      | (7,578 | )     
|                                                                  | Unamortized actuarial loss and prior service cost |                                                  |        | 1,747  |                |   |        | 1,270  |       
|                                                                  |                                                   |                                                  |        |        |                |  
|Net amount recognized in consolidated balance sheets              |                                                   | $                                                | (1,109 | )      |                | $ | (6,308 | )     
|                                                                  |                                                   |                                                  |        |        |                |  
|Amounts recognized in the consolidated balance sheets consist of: |                                                   |                                                  |        |        |                |   |        |       
|                                                                  | Accrued benefit liability                         |                                                  | $      | (2,856 | )              |   | $      | (6,308 | )     
|                                                                  | Intangible asset                                  |                                                  |        | 518    |                |   |        |       |       
|                                                                  | Accumulated other comprehensive income (pre-tax)  |                                                  |        | 1,229  |                |   |        |       |       
|                                                                  |                                                   |                                                  |        |        |                |  
|Net amount recognized                                             |                                                   | $                                                | (1,109 | )      |                | $ | (6,308 | )     
|                                                                  |                                                   |                                                  |        |        |                |  

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Employers Accounting for Postretirement Benefits
Other than Pensions,


non-U.S. non-U.S.


21



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non-U.S.


|                                    |                           |                             |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |   |     |     |  |   |     |     | 
|----------------------------------- | ------------------------- | --------------------------- | ----- | -------------- | -------------- | - | ---- | ---- |  | ----- | ---- | -- |  | ---- | --- | -- | ---- | - | --- | --- |  | - | --- | --- | 
|                                    |                           |                             |       |                |                |   |      |      |  | Other |     
|                                    |                           |                             |       | Postretirement |               
|                                    |                           | Pension Benefits            |       |                | Benefits       |  
|                                    |                           |                             |       |                |                |  
|                                    |                           | U.S. Plans                  |       |                | Non-U.S. Plans |   |      |     
|                                    |                           |                             |       |                |                |   |      |     
|                                    |                           | Three Months Ended June 30, |      
|                                    |                           |                             |      
|                                    |                           | 2006                        |       |                | 2005           |   |      | 2006 |  |       | 2005 |    |  | 2006 |     |    | 2005 |  
|                                    |                           |                             |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  
|                                    |                           | (in millions)               |      
|Service cost                        |                           | $                           | 74    |                |                | $ | 73   |      |  | $     | 10   |    |  | $    | 9   |    |      | $ | 45  |     |  | $ | 43  |    
|Interest cost                       |                           |                             | 185   |                |                |   | 181  |      |  |       | 15   |    |  |      | 16  |    |      |   | 129 |     |  |   | 130 |    
|Expected return on plan assets      |                           |                             | (205  | )              |                |   | (197 | )    |  |       | (16  | )  |  |      | (15 | )  |      |   |    |     |  |   |    |    
|Special termination benefits        |                           |                             |      |                |                |   | 2    |      |  |       |     |    |  |      | 9   |    |      |   |    |     |  |   | 1   |    
|Curtailment loss/(gain)             |                           |                             | 1,520 |                |                |   |     |      |  |       |     |    |  |      |    |    |      |   | (7  | )   |  |   |    |    
|Amortization of prior service costs |                           |                             | 32    |                |                |   | 35   |      |  |       | 1    |    |  |      | 1   |    |      |   | (24 | )   |  |   | (27 | )  
|Amortization of actuarial losses    |                           |                             | 58    |                |                |   | 53   |      |  |       | 7    |    |  |      | 8   |    |      |   | 78  |     |  |   | 54  |    
|                                    |                           |                             |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  
|                                    | Net periodic benefit cost |                             | $     | 1,664          |                |   | $    | 147  |  |       | $    | 17 |  |      | $   | 28 |      |   | $   | 221 |  |   | $   | 201 | 
|                                    |                           |                             |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  

|                                    |                           |                           |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |   |     |     |  |   |     |     | 
|----------------------------------- | ------------------------- | ------------------------- | ----- | -------------- | -------------- | - | ---- | ---- |  | ----- | ---- | -- |  | ---- | --- | -- | ---- | - | --- | --- |  | - | --- | --- | 
|                                    |                           |                           |       |                |                |   |      |      |  | Other |     
|                                    |                           |                           |       | Postretirement |               
|                                    |                           | Pension Benefits          |       |                | Benefits       |  
|                                    |                           |                           |       |                |                |  
|                                    |                           | U.S. Plans                |       |                | Non-U.S. Plans |   |      |     
|                                    |                           |                           |       |                |                |   |      |     
|                                    |                           | Six Months Ended June 30, |      
|                                    |                           |                           |      
|                                    |                           | 2006                      |       |                | 2005           |   |      | 2006 |  |       | 2005 |    |  | 2006 |     |    | 2005 |  
|                                    |                           |                           |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  
|                                    |                           | (in millions)             |      
|Service cost                        |                           | $                         | 147   |                |                | $ | 146  |      |  | $     | 20   |    |  | $    | 17  |    |      | $ | 90  |     |  | $ | 90  |    
|Interest cost                       |                           |                           | 370   |                |                |   | 362  |      |  |       | 31   |    |  |      | 32  |    |      |   | 259 |     |  |   | 271 |    
|Expected return on plan assets      |                           |                           | (410  | )              |                |   | (394 | )    |  |       | (32  | )  |  |      | (30 | )  |      |   |    |     |  |   |    |    
|Special termination benefits        |                           |                           |      |                |                |   | 2    |      |  |       |     |    |  |      | 9   |    |      |   |    |     |  |   | 3   |    
|Curtailment loss/(gain)             |                           |                           | 1,520 |                |                |   |     |      |  |       |     |    |  |      |    |    |      |   | (7  | )   |  |   |    |    
|Amortization of prior service costs |                           |                           | 65    |                |                |   | 70   |      |  |       | 2    |    |  |      | 2   |    |      |   | (49 | )   |  |   | (28 | )  
|Amortization of actuarial losses    |                           |                           | 115   |                |                |   | 106  |      |  |       | 13   |    |  |      | 16  |    |      |   | 156 |     |  |   | 103 |    
|                                    |                           |                           |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  
|                                    | Net periodic benefit cost |                           | $     | 1,807          |                |   | $    | 292  |  |       | $    | 34 |  |      | $   | 46 |      |   | $   | 449 |  |   | $   | 439 | 
|                                    |                           |                           |       |                |                |   |      |      |  |       |      |    |  |      |     |    |      |  



|   |                                   
|-- | ----------------------------------
|9. | DERIVATIVES AND HEDGING ACTIVITIES

Accounting for Derivative
Instruments and Hedging Activities,




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|                        |                   |               |    |    |                   |   |   |   | 
|----------------------- | ----------------- | ------------- | -- | -- | ----------------- | - | - | - | 
|                        |                   | June 30, 2006 |    |    | December 31, 2005 |  
|                        |                   |               |    |    |                   |  
|                        |                   | (in millions) |   
|Current assets          |                   | $             | 62 |    |                   | $ | 5 |  
|Non-current assets      |                   |               | 10 |    |                   |   | 2 |  
|                        |                   |               |    |    |                   |  
|                        | Total assets      |               | $  | 72 |                   |   | $ | 7 | 
|                        |                   |               |    |    |                   |  
|                       
|Current liabilities     |                   | $             | 53 |    |                   | $ | 8 |  
|Non-current liabilities |                   |               | 14 |    |                   |   |  |  
|                        |                   |               |    |    |                   |  
|                        | Total liabilities |               | $  | 67 |                   |   | $ | 8 | 
|                        |                   |               |    |    |                   |  







|    |                      
|--- | ---------------------
|10. | STOCKHOLDERS DEFICIT



|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |    |  |   |     |   |  |   |        |        |        |  
|-------------------------- | ------------------------------------------------------------------------- | ------------------------ | --- | - | ---------- | - | - | ----------- |  | ------------------ | ------- | - |  | --------- | ------ | -------- | ----- | - | ------------- | ----- | - | - | ------- | -- |  | - | --- | - |  | - | ------ | ------ | ------ | -
|                           |                                                                           |                          |     |   |            |   |   |             |  | Accumulated Other  |         |   |  |           |       
|                           |                                                                           |                          |     |   |            |   |   |             |  | Comprehensive Loss |         |   |  |           |       
|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   | 
|                           |                                                                           | Common Stock             |     |   | Additional |   |   |             |  | Minimum            |         |   |  |           |        |          | Total |  
|                           |                                                                           |                          |     |   | Paid-In    |   |   | Accumulated |  |                    | Pension |   |  |           |        | Treasury |       |   | Stockholders |      
|                           |                                                                           | Shares                   |     |   | Amount     |   |   | Capital     |  |                    | Deficit |   |  | Liability |        |          | Other |   |               | Stock |   |   | Deficit |   
|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |   
|                           |                                                                           | (in millions)            |    
|Balance at January 1, 2006 |                                                                           |                          | 565 |   |            | $ | 6 |             |  | $                  | 2,744   |   |  | $         | (6,429 | )        |       | $ | (2,395        | )     |   | $ | (119    | )  |  | $ | (52 | ) |  | $ | (6,245 | )     
|                           | Net loss                                                                  |                          |     |  |            |   |   |            |  |                    |         |  |  |           |        | (2,638   | )     |   |               |      |   |   |         |   |  |   |     |  |  |   |        | (2,638 | )     
|                           | Currency translation adjustments and other, net of tax                    |                          |     |  |            |   |   |            |  |                    |         |  |  |           |        |         |       |   |               | (8    | ) |   |         | 94 |  |   |     |  |  |   |        | 86     |       
|                           | Net change in unrecognized gain on derivative instruments, net
    of tax |                          |     |  |            |   |   |            |  |                    |         |  |  |           |        |         |       |   |               |      |   |   |         | 2  |  |   |     |  |  |   |        | 2      |       
|                           | Minimum pension liability adjustment, net of tax                          |                          |     |  |            |   |   |            |  |                    |         |  |  |           |        |         |       |   |               | 859   |   |   |         |   |  |   |     |  |  |   |        | 859    |       
|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |   
|                           |                                                                           | Total comprehensive loss |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |    |  |   |     |   |  |   |        |        | (1,691 | )
|                           | Share-based compensation, net                                             |                          |     |  |            |   |   |            |  |                    |         | 9 |  |           |        |         |       |   |               |      |   |   |         |   |  |   |     |  |  |   |        | 9      |       
|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |   
|Balance at June 30, 2006   |                                                                           |                          | 565 |   |            | $ | 6 |             |  | $                  | 2,753   |   |  | $         | (9,067 | )        |       | $ | (1,544        | )     |   | $ | (23     | )  |  | $ | (52 | ) |  | $ | (7,927 | )     
|                           |                                                                           |                          |     |   |            |   |   |             |  |                    |         |   |  |           |        |          |       |   |               |       |   |   |         |   

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|                                   |                                                                           |                    |        |     |                  |   |      |      |   |   |        |     |  |   |        |      |  
|---------------------------------- | ------------------------------------------------------------------------- | ------------------ | ------ | --- | ---------------- | - | ---- | ---- | - | - | ------ | --- |  | - | ------ | ---- | -
|                                   |                                                                           | Three Months Ended |        |     | Six Months Ended |  
|                                   |                                                                           | June 30,           |        |     | June 30,         |  
|                                   |                                                                           |                    |        |     |                  |  
|                                   |                                                                           | 2006               |        |     | 2005             |   |      | 2006 |   |   | 2005   |    
|                                   |                                                                           |                    |        |     |                  |   |      |      |   |   |        |    
|                                   |                                                                           | (in millions)      |       
|Net loss                           |                                                                           | $                  | (2,275 | )   |                  | $ | (338 | )    |   | $ | (2,638 | )   |  | $ | (741   | )   
|Other comprehensive income (loss): |                                                                           |                    |        |     |                  |   |      |      |   |   |        |     |  |   |        |     
|                                   | Currency translation adjustments and other, net of tax                    |                    |        | 37  |                  |   |      | (122 | ) |   |        | 86  |  |   |        | (241 | )
|                                   | Net change in unrecognized gain on derivative instruments, net
    of tax |                    |        | 8   |                  |   |      | (7   | ) |   |        | 2   |  |   |        | (23  | )
|                                   | Minimum pension liability adjustment, net of tax                          |                    |        | 859 |                  |   |      |     |   |   |        | 859 |  |   |        |     |  
|                                   |                                                                           |                    |        |     |                  |   |      |      |   |   |        |    
|Other comprehensive income (loss)  |                                                                           |                    | 904    |     |                  |   | (129 | )    |   |   | 947    |     |  |   | (264   | )   
|                                   |                                                                           |                    |        |     |                  |   |      |      |   |   |        |    
|Comprehensive loss                 |                                                                           | $                  | (1,371 | )   |                  | $ | (467 | )    |   | $ | (1,691 | )   |  | $ | (1,005 | )   
|                                   |                                                                           |                    |        |     |                  |   |      |      |   |   |        |    



|    |                  
|--- | -----------------
|11. | SEGMENT REPORTING





| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Dynamics, Propulsion, Thermal & Interior Sector, which
    includes selected businesses from our energy and engine
    management systems, chassis, steering and thermal systems and
    interior product lines.                                                             
|
| |  | Electrical, Electronics & Safety 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, which is comprised of select 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.



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|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |   |        |      |   |   |        |       | 
|--------------------------- | ------------------------------ | --------------- | - | ----- | ------------- |  | - | ---------- | ----- |  | -------- | ---- | --- | ----- | - | ------ | ---- | - | - | ------ | ----- | 
|                            |                                | Dynamics,       |   |       |               |  |   |            |       |  |         
|                            |                                | Propulsion,     |   |       | Electrical,   |  |   | Automotive |       |  |          |      |    
|                            |                                | Thermal &       |   |       | Electronics & |  |   | Holdings   |       |  |          |      |    
|                            |                                | Interior        |   |       | Safety        |  |   | Group      |       |  | Other(a) |      |     | Total |  
|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |  
|                            |                                | (in millions)   |  
|For the Three Months Ended: |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |   |        |      |   |   |       
|June 30, 2006               |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |   |        |      |   |   |       
|                            | Net sales to GM and affiliates |                 | $ | 1,578 |               |  | $ | 1,157      |       |  | $        | 333  |     |       | $ | 1      |      |   | $ | 3,069  |      
|                            | Net sales to other customers   |                 |   | 1,617 |               |  |   | 2,148      |       |  |          | 149  |     |       |   | 12     |      |   |   | 3,926  |      
|                            | Inter-sector net sales         |                 |   | 185   |               |  |   | 76         |       |  |          | 144  |     |       |   | (405   | )    |   |   |       |      
|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |  
|                            |                                | Total net sales |   | $     | 3,380         |  |   | $          | 3,381 |  |          | $    | 626 |       |   | $      | (392 | ) |   | $      | 6,995 | 
|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |  
|                            | Operating (loss) income        |                 | $ | (137  | )             |  | $ | 90         |       |  | $        | (244 | )   |       | $ | (1,821 | )    |   | $ | (2,112 | )    
|                           
|June 30, 2005               |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |   |        |      |   |   |       
|                            | Net sales to GM and affiliates |                 | $ | 1,688 |               |  | $ | 1,354      |       |  | $        | 367  |     |       | $ | (2     | )    |   | $ | 3,407  |      
|                            | Net sales to other customers   |                 |   | 1,407 |               |  |   | 2,082      |       |  |          | 103  |     |       |   | 24     |      |   |   | 3,616  |      
|                            | Inter-sector net sales         |                 |   | 206   |               |  |   | 81         |       |  |          | 157  |     |       |   | (444   | )    |   |   |       |      
|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |  
|                            |                                | Total net sales |   | $     | 3,301         |  |   | $          | 3,517 |  |          | $    | 627 |       |   | $      | (422 | ) |   | $      | 7,023 | 
|                            |                                |                 |   |       |               |  |   |            |       |  |          |      |     |       |  
|                            | Operating (loss) income        |                 | $ | (157  | )             |  | $ | 171        |       |  | $        | (268 | )   |       | $ | (30    | )    |   | $ | (284   | )    

|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |   |        |      |   |   |        |        | 
|------------------------- | ------------------------------ | --------------- | - | ----- | ------------- |  | - | ---------- | ----- |  | -------- | ---- | ----- | ----- | - | ------ | ---- | - | - | ------ | ------ | 
|                          |                                | Dynamics,       |   |       |               |  |   |            |       |  |         
|                          |                                | Propulsion,     |   |       | Electrical,   |  |   | Automotive |       |  |          |      |      
|                          |                                | Thermal &       |   |       | Electronics & |  |   | Holdings   |       |  |          |      |      
|                          |                                | Interior        |   |       | Safety        |  |   | Group      |       |  | Other(a) |      |       | Total |  
|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |  
|                          |                                | (in millions)   |  
|For the Six Months Ended: |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |   |        |      |   |   |       
|June 30, 2006             |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |   |        |      |   |   |       
|                          | Net sales to GM and affiliates |                 | $ | 3,234 |               |  | $ | 2,360      |       |  | $        | 683  |       |       | $ | 9      |      |   | $ | 6,286  |       
|                          | Net sales to other customers   |                 |   | 3,127 |               |  |   | 4,207      |       |  |          | 314  |       |       |   | 34     |      |   |   | 7,682  |       
|                          | Inter-sector net sales         |                 |   | 362   |               |  |   | 159        |       |  |          | 296  |       |       |   | (817   | )    |   |   |       |       
|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |  
|                          |                                | Total net sales |   | $     | 6,723         |  |   | $          | 6,726 |  |          | $    | 1,293 |       |   | $      | (774 | ) |   | $      | 13,968 | 
|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |  
|                          | Operating (loss) income        |                 | $ | (285  | )             |  | $ | 211        |       |  | $        | (487 | )     |       | $ | (1,783 | )    |   | $ | (2,344 | )     
|                         
|June 30, 2005             |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |   |        |      |   |   |       
|                          | Net sales to GM and affiliates |                 | $ | 3,365 |               |  | $ | 2,722      |       |  | $        | 745  |       |       | $ | (26    | )    |   | $ | 6,806  |       
|                          | Net sales to other customers   |                 |   | 2,732 |               |  |   | 4,090      |       |  |          | 214  |       |       |   | 43     |      |   |   | 7,079  |       
|                          | Inter-sector net sales         |                 |   | 416   |               |  |   | 174        |       |  |          | 323  |       |       |   | (913   | )    |   |   |       |       
|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |  
|                          |                                | Total net sales |   | $     | 6,513         |  |   | $          | 6,986 |  |          | $    | 1,282 |       |   | $      | (896 | ) |   | $      | 13,885 | 
|                          |                                |                 |   |       |               |  |   |            |       |  |          |      |       |       |  
|                          | Operating (loss) income        |                 | $ | (340  | )             |  | $ | 340        |       |  | $        | (527 | )     |       | $ | (81    | )    |   | $ | (608   | )     






|    |                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the product sectors
    including the Companys medical systems operations and
    elimination of inter-sector transactions and $1,905 million
    related to U.S. employee special attrition program charges.
    (Refer to Note 8, U.S. Employee Special Attrition
    Program and Pension and Other Postretirement Benefits).

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Disclosures about Segments of an Enterprise and Related
Information.




|    |                              
|--- | -----------------------------
|12. | COMMITMENTS AND CONTINGENCIES



| |                                     
| | ------------------------------------
| | Regulatory Actions and Other Matters







| |                     
| | --------------------
| | Shareholder Lawsuits







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Ordinary
Business Litigation




27



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|    |                  
|--- | -----------------
|13. | SUBSEQUENT EVENTS



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IUE-CWA




29



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

10-K




| |                              
| | -----------------------------
| | Executive Summary of Business





debtors-in non-U.S.






| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Obtain, through negotiations with its U.S. labor unions and
    GM, modifications to its collective bargaining agreements to
    transform to a competitive U.S. labor cost structure;                             
|
| |  | Conclude negotiations with GM to finalize its financial support
    for the legacy and labor costs we currently carry and to
    ascertain its business commitment to Delphi going forward;                        
|
| |  | Streamline our product portfolio and focus on those core
    technologies for which we believe we have significant
    competitive and technological advantages and make the necessary
    manufacturing alignment;
|
| |  | Transform our salaried workforce to ensure that our
    organizational and cost structure is competitive and aligned
    with our product portfolio and manufacturing footprint; and                               
|
| |  | Devise a workable solution to our current pension situation,
    whether by extending pension payments or otherwise.                                                                                               



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31



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10-K


Overview of Performance During the Second Quarter and First
Six Months of 2006




32



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non-GM








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10-K


Results of Operations




| |                                                                             
| | ----------------------------------------------------------------------------
| | Three Months Ended June 30, 2006 versus Three Months
    Ended June 30, 2005

Net Sales.


|                                         |                        |                    |       |       |      |   |       |       | 
|---------------------------------------- | ---------------------- | ------------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                                         |                        | Three Months Ended |      
|                                         |                        | June 30,           |      
|                                         |                        |                    |      
|Product Sector                           |                        | 2006               |       |       | 2005 |  
|                                         |                        |                    |       |       |      |  
|                                         |                        | (in millions)      |      
|Dynamics, Propulsion, Thermal & Interior |                        | $                  | 3,380 |       |      | $ | 3,301 |      
|Electrical, Electronics & Safety         |                        |                    | 3,381 |       |      |   | 3,517 |      
|Automotive Holdings Group                |                        |                    | 626   |       |      |   | 627   |      
|Other (a)                                |                        |                    | (392  | )     |      |   | (422  | )    
|                                         |                        |                    |       |       |      |  
|                                         | Consolidated net sales |                    | $     | 6,995 |      |   | $     | 7,023 | 
|                                         |                        |                    |       |       |      |  






|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the product sectors
    including the Companys medical systems operations and
    eliminations of inter-sector transactions.





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Gross Margin.


U.S. Employee Special Attrition Program Charges.


Selling, General and Administrative.


Depreciation and Amortization.


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Operating Results.


|                                         |                      |                    |        |        |      |   |      |      |  
|---------------------------------------- | -------------------- | ------------------ | ------ | ------ | ---- | - | ---- | ---- | -
|                                         |                      | Three Months Ended |       
|                                         |                      | June 30,           |       
|                                         |                      |                    |       
|Product Sector                           |                      | 2006               |        |        | 2005 |  
|                                         |                      |                    |        |        |      |  
|                                         |                      | (in millions)      |       
|Dynamics, Propulsion, Thermal & Interior |                      | $                  | (137   | )      |      | $ | (157 | )   
|Electrical, Electronics & Safety         |                      |                    | 90     |        |      |   | 171  |     
|Automotive Holdings Group                |                      |                    | (244   | )      |      |   | (268 | )   
|Other (a)                                |                      |                    | (1,821 | )      |      |   | (30  | )   
|                                         |                      |                    |        |        |      |  
|                                         | Total operating loss |                    | $      | (2,112 | )    |   | $    | (284 | )
|                                         |                      |                    |        |        |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the product sectors
    including the Companys medical systems operations and
    elimination of inter-sector transactions and $1,905 million
    related to U.S. employee special attrition program charges.
    (Refer to Note 8, U.S. Employee Special Attrition
    Program and Pension and Other Postretirement Benefits).



Interest Expense. 90-7, 90-7).


Other Income and Expense.


Reorganization Items.


Taxes. non-U.S.


36



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non-U.S.




| |                                                                         
| | ------------------------------------------------------------------------
| | Six Months Ended June 30, 2006 versus Six Months
    Ended June 30, 2005

Net Sales.


|                                         |                        |                  |       |        |      |   |       |        | 
|---------------------------------------- | ---------------------- | ---------------- | ----- | ------ | ---- | - | ----- | ------ | 
|                                         |                        | Six Months Ended |      
|                                         |                        | June 30,         |      
|                                         |                        |                  |      
|Product Sector                           |                        | 2006             |       |        | 2005 |  
|                                         |                        |                  |       |        |      |  
|                                         |                        | (in millions)    |      
|Dynamics, Propulsion, Thermal & Interior |                        | $                | 6,723 |        |      | $ | 6,513 |       
|Electrical, Electronics & Safety         |                        |                  | 6,726 |        |      |   | 6,986 |       
|Automotive Holdings Group                |                        |                  | 1,293 |        |      |   | 1,282 |       
|Other (a)                                |                        |                  | (774  | )      |      |   | (896  | )     
|                                         |                        |                  |       |        |      |  
|                                         | Consolidated net sales |                  | $     | 13,968 |      |   | $     | 13,885 | 
|                                         |                        |                  |       |        |      |  






|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the product sectors
    including the Companys medical systems operations and
    eliminations of inter-sector transactions.









Gross Margin.


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U.S. Employee Special Attrition Program Charges.


Selling, General and Administrative.


Depreciation and Amortization.


Operating Results.


|                                         |                               |                  |        |        |      |   |      |      |  
|---------------------------------------- | ----------------------------- | ---------------- | ------ | ------ | ---- | - | ---- | ---- | -
|                                         |                               | Six Months Ended |       
|                                         |                               | June 30,         |       
|                                         |                               |                  |       
|Product Sector                           |                               | 2006             |        |        | 2005 |  
|                                         |                               |                  |        |        |      |  
|                                         |                               | (in millions)    |       
|Dynamics, Propulsion, Thermal & Interior |                               | $                | (285   | )      |      | $ | (340 | )   
|Electrical, Electronics & Safety         |                               |                  | 211    |        |      |   | 340  |     
|Automotive Holdings Group                |                               |                  | (487   | )      |      |   | (527 | )   
|Other (a)                                |                               |                  | (1,783 | )      |      |   | (81  | )   
|                                         |                               |                  |        |        |      |  
|                                         | Total operating (loss) income |                  | $      | (2,344 | )    |   | $    | (608 | )
|                                         |                               |                  |        |        |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes activity not allocated to the product sectors
    including the Companys medical systems operations and
    elimination of inter-sector transactions and $1,905 million
    related to U.S. employee special attrition program charges.
    (Refer to Note 8, U.S. Employee Special Attrition
    Program and Pension and Other Postretirement Benefits).



Interest Expense.


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90-7.


Other Income and Expense.


Reorganization Items.


Taxes. non-U.S. non-U.S. non-U.S.


Liquidity and Capital Resources




| |                              
| | -----------------------------
| | Overview of Capital Structure







39



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debtor-in


12-month debtor-in




40



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






post-bankruptcy


41



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| |                         
| | ------------------------
| | Prepetition Indebtedness

10-K


Bonds and Trust Preferred Securities. 90-7,


1 4 over-the 1 4




Prepetition Credit Facilities. 364-day




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364-day










| |                
| | ---------------
| | Other Financing







| |                              
| | -----------------------------
| | Credit Ratings, Stock Listing

point-in BBB-/B1/BB-,


1 2 1 8


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10-Q 10-Q 1 2 1 8




| |           
| | ----------
| | Cash Flows

Operating Activities.


Investing Activities.


Financing Activities.


Dividends.


Shareholder Lawsuits






44



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45



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Regulatory Actions and Other Matters






Environmental Matters


non-U.S.




46



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Inflation




Recently Issued Accounting Pronouncements


Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109. Accounting
for Income Taxes.


Significant Accounting Policies and Critical Accounting
Estimates


10-K


Share-Based Payments 10-Q.


Forward-Looking Statements


10-Q,


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debtor-in 10-K 10-K









|        |                                                           
|------- | ----------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK








|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES

Disclosure Controls and Procedures




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13a-15(e) 15d-15(e)) 10-K 10-K


10-Q 10-K


Changes in internal control over financial reporting


10-K


49



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PART II. OTHER INFORMATION







|        |                  
|------- | -----------------
|ITEM 1. | LEGAL PROCEEDINGS

10-K









|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

10-K 10-K







|        |                                                                
|------- | ---------------------------------------------------------------
|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS

Purchase of Equity Securities by the Issuer and Affiliated
Purchasers









|        |                                
|------- | -------------------------------
|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES

10-K







|        |         
|------- | --------
|ITEM 6. | 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).                                                                                           
|       
|        | 10 | (a)          |  | Second Amendment to Amended and Restated Credit Agreement, dated
    as of April 13, 2006, incorporated by reference to
    Exhibit 99(a) to Delphis Report on Form 8-K
    filed on April 18, 2006.                                                                     
|       
|        | 10 | (b)          |  | Third Amendment to Amended and Restated Credit Agreement, dated
    as of May 26, 2006, incorporated by reference to
    Exhibit 99(a) to Delphis Report on Form 8-K
    filed on June 20, 2006.                                                                         

50



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|        |    |              |  |                                                                                                                                                                                                    
|------- | -- | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             
|Number  |    | Exhibit Name
|        |    |             
|       
|        | 10 | (c)          |  | Fourth Amendment to Amended and Restated Credit Agreement, dated
    as of June 19, 2006, incorporated by reference to
    Exhibit 99(b) to Delphis Report on Form 8-K
    filed on June 20, 2006.
|       
|        | 10 | (d)          |  | Supplement to UAW-GM-Delphi Special Attrition Program Agreement
    Dated March 22, 2006.                                                                                                          
|       
|        | 10 | (e)          |  | IUE-CWA-GM-Delphi Special Attrition program, dated June 16,
    2006.                                                                                                                              
|       
|        | 31 | (a)          |  | Certification Pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a), adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                       
|       
|        | 31 | (b)          |  | Certification Pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a), adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                       
|       
|        | 32 | (a)          |  | Certification Pursuant to 18 U.S.C. Section 1350,
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                       
|       
|        | 32 | (b)          |  | Certification Pursuant to 18 U.S.C. Section 1350,
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                       

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SIGNATURE




|                |  |  |  |                                        
|--------------- |  |  |  | ---------------------------------------
|                |  |  |  | Delphi Corporation(Registrant)         
|               
|August 15, 2006 |  |  |  | /s/ Thomas S. Timko                    
|                |  |  |  |                                        
|                |  |  |  | Thomas S. Timko                        
|                |  |  |  | Chief Accounting Officer and Controller

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EXHIBIT INDEX


|        |    |             |  |                                                                                                                                             
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | (d)         |  | Supplement to UAW-GM-Delphi Special Attrition Program Agreement
    Dated March 22, 2006.                                                   
|       
|        | 10 | (e)         |  | IUE-CWA-GM-Delphi Special Attrition program, dated June 16,
    2006.                                                                       
|       
|        | 31 | (a)         |  | Certification Pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a), adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|       
|        | 31 | (b)         |  | Certification Pursuant to Exchange Act
    Rules 13a-14(a)/15d-14(a), adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|       
|        | 32 | (a)         |  | Certification Pursuant to 18 U.S.C. Section 1350,
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                
|       
|        | 32 | (b)         |  | Certification Pursuant to 18 U.S.C. Section 1350,
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.