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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549-1004


FORM 10-Q



|   |                                                                                         
|-- | ----------------------------------------------------------------------------------------
|x  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|   |                                                                                         
|   | For the quarterly period ended September 30, 2002                                       
|   |                                                                                         
|OR
|   |                                                                                         
|o  | TRANSITION REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934         









| | 
| | 

For the transition period from

to
.

Commission file No. 1-14787

DELPHI CORPORATION

(Exact name of registrant as specified in its
charter)


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

(248) 813-2000

(Registrants telephone number, including
area code)


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

As of September 30, 2002, there were
558,405,980 outstanding shares of the registrants $0.01
par value common stock.



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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. FINANCIAL STATEMENTS                                                                 
|CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)                                            
|CONSOLIDATED BALANCE SHEETS                                                                  
|CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)                                            
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                       
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                                                                   
|ITEM 1. LEGAL PROCEEDINGS                                                                    
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                                                                                    
|CERTIFICATIONS                                                                               
|EX-99(a) Certification Pursuant to 18 USC Sec 1350                                           
|EX-99(b) Certification Pursuant to 18 USC Sec 1350                                           
|EX-99(c) Press Release dated October 16, 2002                                                



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DELPHI CORPORATION

INDEX

|                               |  |                                                                                                                           |    |      |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                               |  |                                                                                                                           |    | Page |   
|                               |  |                                                                                                                           |    |      |   
|Part I  Financial Information
|                              
|Item 1.                        |  | Financial Statements                                                                                                      |    |      |    | 
|                              
|                               |  | Consolidated Statements of Operations (Unaudited)
    for the Three and Nine Months Ended September 30, 2002 and
    2001 |    |      | 3  | 
|                              
|                               |  | Consolidated Balance Sheets at September 30,
    2002 (Unaudited) and December 31, 2001                                   |    |      | 4  | 
|                              
|                               |  | Consolidated Statements of Cash Flows (Unaudited)
    for the Nine Months Ended September 30, 2002 and 2001               |    |      | 5  | 
|                              
|                               |  | Notes to Consolidated Financial Statements
    (Unaudited)                                                                |    |      | 6  | 
|                              
|Item 2.                        |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                 |    |      | 14 | 
|                              
|Item 3.                        |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                            |    |      | 25 | 
|                              
|Item 4.                        |  | Controls and Procedures                                                                                                   |    |      | 25 | 
|                              
|Part II  Other Information   
|                              
|Item 1.                        |  | Legal Proceedings                                                                                                         |    |      | 26 | 
|                              
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                          |    |      | 26 | 
|                              
|Signature                      |  |                                                                                                                           | 27 |     
|                              
|Certifications                 |  |                                                                                                                           | 28 |     

2



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PART I. FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS


DELPHI CORPORATION






CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |        |        |   |      |        |        | 
|---------------------------------- | ------------------------------------------- | --------------------------------------- | --- | ----- | ----------------- | - | -- | ----- | ----- | - | ---- | ------ | ------ | - | ---- | ------ | ------ | 
|                                   |                                             |                                         |     |       |                   |  
|                                   |                                             | Three Months                            |     |       |                  
|                                   |                                             | Ended                                   |     |       | Nine Months Ended |  
|                                   |                                             | September 30,                           |     |       | September 30,     |  
|                                   |                                             |                                         |     |       |                   |  
|                                   |                                             | 2002                                    |     |       | 2001              |   |    | 2002  |       |   | 2001 |       
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|                                   |                                             |                                        
|                                   |                                             | (in millions, except per share amounts) |    
|Net sales:                         |                                             |                                         |     |       |                   |   |    |       |       |   |      |        |        |   |      |       
|                                   | General Motors and affiliates               |                                         | $   | 4,077 |                   |   | $  | 4,238 |       |   | $    | 13,379 |        |   | $    | 13,328 |       
|                                   | Other customers                             |                                         |     | 2,369 |                   |   |    | 1,991 |       |   |      | 7,077  |        |   |      | 6,380  |       
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|                                   |                                             | Total net sales                         |     |       | 6,446             |   |    |       | 6,229 |   |      |        | 20,456 |   |      |        | 19,708 | 
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|Less operating expenses:           |                                             |                                         |     |       |                   |   |    |       |       |   |      |        |        |   |      |       
|                                   | Cost of sales, excluding items listed below |                                         |     | 5,695 |                   |   |    | 5,540 |       |   |      | 17,916 |        |   |      | 17,465 |       
|                                   | Selling, general and administrative         |                                         |     | 368   |                   |   |    | 348   |       |   |      | 1,091  |        |   |      | 1,089  |       
|                                   | Depreciation and amortization               |                                         |     | 258   |                   |   |    | 260   |       |   |      | 749    |        |   |      | 831    |       
|                                   | Restructuring (Note 2)                      |                                         |     |      |                   |   |    |      |       |   |      | 225    |        |   |      | 536    |       
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|                                   |                                             | Total operating expenses                |     |       | 6,321             |   |    |       | 6,148 |   |      |        | 19,981 |   |      |        | 19,921 | 
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|Operating income (loss)            |                                             |                                         | 125 |       |                   |   | 81 |       |       |   | 475  |        |        |   | (213 | )     
|Less interest expense              |                                             |                                         | 49  |       |                   |   | 57 |       |       |   | 144  |        |        |   | 169  |       
|Other income, net                  |                                             |                                         | 9   |       |                   |   | 17 |       |       |   | 27   |        |        |   | 23   |       
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|Income (loss) before income taxes  |                                             |                                         | 85  |       |                   |   | 41 |       |       |   | 358  |        |        |   | (359 | )     
|Income tax expense (benefit)       |                                             |                                         | 31  |       |                   |   | 15 |       |       |   | 135  |        |        |   | (120 | )     
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|Net income (loss)                  |                                             | $                                       | 54  |       |                   | $ | 26 |       |       | $ | 223  |        |        | $ | (239 | )     
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|Earnings (loss) per share (Note 1) |                                             |                                         |     |       |                   |   |    |       |       |   |      |        |        |   |      |       
|                                   | Basic                                       |                                         | $   | 0.10  |                   |   | $  | 0.05  |       |   | $    | 0.40   |        |   | $    | (0.43  | )     
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       
|                                   | Diluted                                     |                                         | $   | 0.10  |                   |   | $  | 0.05  |       |   | $    | 0.39   |        |   | $    | (0.43  | )     
|                                   |                                             |                                         |     |       |                   |   |    |       |       |   |      |       

See notes to consolidated financial statements.

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DELPHI CORPORATION






CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                    |                               |                            |       |              |        |        |       |       |        | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------ | ----------------------------- | -------------------------- | ----- | ------------ | ------ | ------ | ----- | ----- | ------ | 
|                                           |                                                                                                                    | September 30,                 |                            |       |             
|                                           |                                                                                                                    | 2002                          |                            |       | December 31, |       
|                                           |                                                                                                                    | (Unaudited)                   |                            |       | 2001         |       
|                                           |                                                                                                                    |                               |                            |       |              |       
|                                           |                                                                                                                    |                              
|                                           |                                                                                                                    | (in millions)                 |                           
|ASSETS                                     |                                                                                                                    |                               |                            |       |              |        |        |      
|Current assets:                            |                                                                                                                    |                               |                            |       |              |        |        |      
|                                           | Cash and cash equivalents                                                                                          |                               | $                          | 707   |              |        | $      | 757   |      
|                                           | Accounts receivable, net:                                                                                          |                               |                            |       |              |        |        |       |      
|                                           |                                                                                                                    | General Motors and affiliates |                            |       | 3,254        |        |        |       | 2,829 |       
|                                           |                                                                                                                    | Other customers               |                            |       | 1,880        |        |        |       | 1,778 |       
|                                           | Inventories, net (Note 4)                                                                                          |                               |                            | 1,711 |              |        |        | 1,621 |      
|                                           | Deferred income taxes                                                                                              |                               |                            | 323   |              |        |        | 319   |      
|                                           | Prepaid expenses and other                                                                                         |                               |                            | 172   |              |        |        | 194   |      
|                                           |                                                                                                                    |                               |                            |       |              |       
|                                           |                                                                                                                    |                               | Total current assets       |       |              | 8,047  |        |       |       | 7,498  | 
|Long-term assets:                          |                                                                                                                    |                               |                            |       |              |        |        |      
|                                           | Property, net                                                                                                      |                               |                            | 5,763 |              |        |        | 5,724 |      
|                                           | Deferred income taxes                                                                                              |                               |                            | 3,126 |              |        |        | 3,152 |      
|                                           | Goodwill, net                                                                                                      |                               |                            | 671   |              |        |        | 630   |      
|                                           | Other                                                                                                              |                               |                            | 1,596 |              |        |        | 1,598 |      
|                                           |                                                                                                                    |                               |                            |       |              |       
|Total assets                               |                                                                                                                    | $                             | 19,203                     |       |              | $      | 18,602 |      
|                                           |                                                                                                                    |                               |                            |       |              |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY   |                                                                                                                    |                               |                            |       |              |        |        |      
|Current liabilities:                       |                                                                                                                    |                               |                            |       |              |        |        |      
|                                           | Notes payable and current portion of long-term
    debt                                                            |                               | $                          | 1,393 |              |        | $      | 1,270 |      
|                                           | Accounts payable                                                                                                   |                               |                            | 3,101 |              |        |        | 2,779 |      
|                                           | Restructuring obligations (Note 2)                                                                                 |                               |                            | 52    |              |        |        | 121   |      
|                                           | Accrued liabilities                                                                                                |                               |                            | 1,794 |              |        |        | 1,680 |      
|                                           |                                                                                                                    |                               |                            |       |              |       
|                                           |                                                                                                                    |                               | Total current liabilities  |       |              | 6,340  |        |       |       | 5,850  | 
|Long-term liabilities:                     |                                                                                                                    |                               |                            |       |              |        |        |      
|                                           | Long-term debt                                                                                                     |                               |                            | 2,062 |              |        |        | 2,083 |      
|                                           | Pension benefits                                                                                                   |                               |                            | 1,963 |              |        |        | 2,146 |      
|                                           | Postretirement benefits other than pensions                                                                        |                               |                            | 5,013 |              |        |        | 4,702 |      
|                                           | Other                                                                                                              |                               |                            | 1,473 |              |        |        | 1,509 |      
|                                           |                                                                                                                    |                               |                            |       |              |       
|                                           |                                                                                                                    |                               | Total liabilities          |       |              | 16,851 |        |       |       | 16,290 | 
|                                           |                                                                                                                    |                               |                            |       |              |       
|Stockholders equity (Note 6):             |                                                                                                                    |                               |                            |       |              |        |        |      
|                                           | Common stock, $0.01 par value, 1,350 million
    shares authorized, 565 million shares issued in 2002 and
    2001 |                               |                            | 6     |              |        |        | 6     |      
|                                           | Additional paid-in capital                                                                                         |                               |                            | 2,446 |              |        |        | 2,450 |      
|                                           | Retained earnings                                                                                                  |                               |                            | 1,449 |              |        |        | 1,343 |      
|                                           | Minimum pension liability                                                                                          |                               |                            | (830  | )            |        |        | (830  | )    
|                                           | Accumulated other comprehensive loss, excluding
    minimum pension liability                                      |                               |                            | (611  | )            |        |        | (567  | )    
|                                           | Treasury stock, at cost (6.6 million and
    4.8 million shares in 2002 and 2001, respectively)                    |                               |                            | (108  | )            |        |        | (90   | )    
|                                           |                                                                                                                    |                               |                            |       |              |       
|                                           |                                                                                                                    |                               | Total stockholders equity |       |              | 2,352  |        |       |       | 2,312  | 
|                                           |                                                                                                                    |                               |                            |       |              |       
|Total liabilities and stockholders equity |                                                                                                                    | $                             | 19,203                     |       |              | $      | 18,602 |      
|                                           |                                                                                                                    |                               |                            |       |              |       

See notes to consolidated financial statements.

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DELPHI CORPORATION






CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


|                                      |                                                                                              |                                                                       |                                                         |      |      |      |   |      |      |        |  
|------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------- | ---- | ---- | ---- | - | ---- | ---- | ------ | -
|                                      |                                                                                              |                                                                      
|                                      |                                                                                              | Nine Months Ended                                                     |                                                        
|                                      |                                                                                              | September 30,                                                         |                                                        
|                                      |                                                                                              |                                                                       |                                                        
|                                      |                                                                                              | 2002                                                                  |                                                         |      | 2001 |     
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      |                                                                                              |                                                                      
|                                      |                                                                                              | (in millions)                                                         |                                                        
|Cash flows from operating activities: |                                                                                              |                                                                       |                                                         |      |      |      |   |     
|                                      | Net income (loss)                                                                            |                                                                       | $                                                       | 223  |      |      | $ | (239 | )   
|                                      | Adjustments to reconcile net income
    (loss) to net cash provided by operating activities: |                                                                       |                                                         |      |      |      |   |      |     
|                                      |                                                                                              | Depreciation and amortization, excluding
    amortization of goodwill |                                                         |      | 749  |      |   |      | 807  |       
|                                      |                                                                                              | Amortization of goodwill                                              |                                                         |      |     |      |   |      | 24   |       
|                                      |                                                                                              | Deferred income taxes                                                 |                                                         |      | 9    |      |   |      | (244 | )     
|                                      |                                                                                              | Restructuring                                                         |                                                         |      | 225  |      |   |      | 536  |       
|                                      | Changes in operating assets and liabilities:                                                 |                                                                       |                                                         |      |      |      |   |      |     
|                                      |                                                                                              | Accounts receivable, net                                              |                                                         |      | (535 | )    |   |      | 38   |       
|                                      |                                                                                              | Inventories, net                                                      |                                                         |      | (95  | )    |   |      | (66  | )     
|                                      |                                                                                              | Prepaid expenses and other                                            |                                                         |      | 40   |      |   |      | 67   |       
|                                      |                                                                                              | Accounts payable                                                      |                                                         |      | 322  |      |   |      | 231  |       
|                                      |                                                                                              | Restructuring obligations                                             |                                                         |      | (279 | )    |   |      | (250 | )     
|                                      |                                                                                              | Accrued liabilities                                                   |                                                         |      | 134  |      |   |      | (142 | )     
|                                      |                                                                                              | Other long-term liabilities                                           |                                                         |      | 69   |      |   |      | 202  |       
|                                      |                                                                                              | Other                                                                 |                                                         |      | (166 | )    |   |      | (80  | )     
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      |                                                                                              |                                                                       | Net cash provided by operating activities               |      |      | 696  |   |      |      | 884    |  
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|Cash flows from investing activities: |                                                                                              |                                                                       |                                                         |      |      |      |   |     
|                                      | Capital expenditures                                                                         |                                                                       |                                                         | (710 | )    |      |   | (734 | )   
|                                      | Cost of acquisitions, net of cash acquired                                                   |                                                                       |                                                         |     |      |      |   | (313 | )   
|                                      | Other                                                                                        |                                                                       |                                                         | 58   |      |      |   | (5   | )   
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      |                                                                                              |                                                                       | Net cash used in investing activities                   |      |      | (652 | ) |      |      | (1,052 | )
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|Cash flows from financing activities: |                                                                                              |                                                                       |                                                         |      |      |      |   |     
|                                      | Net proceeds from (repayments of) borrowings
    under credit facilities and other debt      |                                                                       |                                                         | 102  |      |      |   | (174 | )   
|                                      | Net proceeds from issuance of debt securities                                                |                                                                       |                                                         |     |      |      |   | 498  |     
|                                      | Dividend payments                                                                            |                                                                       |                                                         | (117 | )    |      |   | (117 | )   
|                                      | Issuance (purchases) of treasury stock, net                                                  |                                                                       |                                                         | (22  | )    |      |   | 6    |     
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      |                                                                                              |                                                                       | Net cash (used in) provided by financing
    activities |      |      | (37  | ) |      |      | 213    |  
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      | Effect of exchange rate fluctuations on cash and
    cash equivalents                        |                                                                       |                                                         | (57  | )    |      |   | (47  | )   
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      | Decrease in cash and cash equivalents                                                        |                                                                       |                                                         | (50  | )    |      |   | (2   | )   
|                                      | Cash and cash equivalents at beginning of period                                             |                                                                       |                                                         | 757  |      |      |   | 760  |     
|                                      |                                                                                              |                                                                       |                                                         |      |      |     
|                                      | Cash and cash equivalents at end of period                                                   |                                                                       | $                                                       | 707  |      |      | $ | 758  |     
|                                      |                                                                                              |                                                                       |                                                         |      |      |     

See notes to consolidated financial statements.

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DELPHI CORPORATION






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. BASIS OF PRESENTATION

General
Delphi Corporation (Delphi) is a world-leading
supplier of vehicle electronics, transportation components,
integrated systems and modules. The consolidated financial
statements and notes thereto included in this report should be
read in conjunction with our consolidated financial statements
and notes thereto included in our 2001 Annual Report on
Form 10-K filed with the Securities and Exchange
Commission. The consolidated financial statements include the
accounts of Delphi and its wholly owned and majority-owned
subsidiaries.

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

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

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

|                                    |  |                    |         |  |                   |  |         |      |  |  |         |  |  |  |         | 
|----------------------------------- |  | ------------------ | ------- |  | ----------------- |  | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                    |  |                    |         | 
|                                    |  | Three Months Ended |         |  | Nine Months Ended | 
|                                    |  | September 30,      |         |  | September 30,     | 
|                                    |  |                    |         |  |                   | 
|                                    |  | 2002               |         |  | 2001              |  |         | 2002 |  |  | 2001    | 
|                                    |  |                    |         |  |                   |  |         |      |  |  |         | 
|                                    |  |                   
|                                    |  | (in thousands)     |        
|Weighted average shares outstanding |  |                    | 559,187 |  |                   |  | 560,180 |      |  |  | 560,091 |  |  |  | 559,975 | 
|Effect of dilutive securities       |  |                    | 2,562   |  |                   |  | 5,581   |      |  |  | 4,561   |  |  |  |        | 
|                                    |  |                    |         |  |                   |  |         |      |  |  |         | 
|Diluted shares outstanding          |  |                    | 561,749 |  |                   |  | 565,761 |      |  |  | 564,652 |  |  |  | 559,975 | 
|                                    |  |                    |         |  |                   |  |         |      |  |  |         | 

The Board of Directors declared a dividend on
Delphi common stock of $0.07 per share on September 4,
2002, which was paid on October 15, 2002, to holders of
record on September 16, 2002. The dividend declared on
June 27, 2002 was paid on August 5, 2002.

The Board of Directors has authorized the
repurchase of up to 22.5 million shares of Delphi common
stock through the first quarter of 2003 to fund stock options
and other employee benefit plans. During the first nine months
of 2002 we repurchased approximately 2.8 million shares in
the open market to offset the effect of shares issued under
those plans and to provide for a more consistent number of
shares outstanding; of the 22.5 million shares authorized,
12 million shares remain available for repurchase.

Goodwill and Other Intangible
Assets Effective
January 1, 2002, we adopted Statement of Financial
Accounting Standards (SFAS) No. 142
Goodwill and Other Intangible Assets and stopped the
amortization of purchased goodwill. We also reevaluated our
intangible assets and determined that their remaining useful
lives remained appropriate. At September 30, 2002, our
unamortized purchased goodwill balance was approximately
$671 million, principally in the Dynamics and Propulsion
Sector. We completed the impairment tests of goodwill as
required by SFAS No. 142. In doing so we determined that
our goodwill is not impaired; therefore there was no
transitional impairment charge to be recorded. For the three and
nine months ended September 30, 2001, our reported net
income (loss) and basic and diluted earnings
(loss) per share was $26 million and $0.05 and $(239)
million and $(0.43), respectively. Adjusted for the
non-amortization provisions of SFAS No. 142, our reported
net income (loss) and basic

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and diluted earnings (loss) per share would
have been $33 million and $0.06 and $(220) million and
$(0.39) for the three and nine months ended September 30,
2001, respectively. The after-tax impact of the non-amortization
provisions of SFAS No. 142 as compared to 2001 reported net
income are expected to be $9 million ($0.02 per share) and
$28 million ($0.05 per share) for the fourth quarter and
full year, respectively.


2. RESTRUCTURING, IMPAIRMENT AND PRODUCT
LINE CHARGES

In the first quarter of 2002, Delphi approved
further restructuring plans to eliminate 6,100 positions from
our global workforce, downsize more than 25 selected facilities
in the United States and Europe, and exit certain other
activities by the end of the first quarter of 2003.

The restructuring charge totaled
$231 million with $222 million of employee costs
(including postemployment benefits and special termination
pension benefits) and $9 million in other exit costs (lease
cancellation costs and contract cancellation fees). This charge,
when netted against the $6 million reversal noted below for the
2001 restructuring reserve, resulted in a net restructuring
charge of $225 million ($150 million after-tax) in the
first quarter of 2002. The plans entail the elimination of
approximately 6,100 positions worldwide, comprised of 3,100 U.S.
employees and 3,000 employees in non-U.S. locations. Employees
at impacted locations were informed of the restructuring
initiatives and the benefits available to them under applicable
benefit plans or related contractual provisions. Affected
employees have left or will leave Delphi using a mixture of
voluntary or involuntary separation programs, early retirements,
social plan programs, and layoffs. We expect to pay
approximately $200 million in cash related to the
restructuring programs with the remaining $31 million for
non-cash special termination pension benefits. During the three
months ended September 30, 2002, we paid $28 million
related to employee costs. During the nine months ended
September 30, 2002, we paid $148 million, with
$146 million related to employee costs and $2 million
related to exit costs, and incurred $31 million of non-cash
cost for special termination pension and postretirement
benefits. As of September 30, 2002, approximately 2,850
U.S. employees and 2,750 non-U.S. employees have been separated
under the plans.

In the first quarter of 2001, Delphi approved
restructuring plans to sell, close or consolidate nine plants,
downsize the workforce at more than 40 other facilities and exit
selected products by the first quarter of 2002. We also recorded
an impairment loss related to certain long-lived assets at
impacted sites and certain investments in joint ventures. As a
result of these actions, we recorded a total charge of
$617 million ($404 million after-tax) in the first
quarter of 2001.

The 2001 restructuring plans resulted in a charge
of $536 million that included $492 million of employee
costs (including postemployment benefits and special termination
pension and postretirement benefits) and $44 million in
other exit costs (principally lease termination and contract
cancellation payments). The plans entailed the elimination of
approximately 11,500 positions worldwide, comprised of 5,600
U.S. hourly employees, 2,000 U.S. salaried employees, and 3,900
employees in non-U.S. locations. We ultimately eliminated 11,440
positions and incurred costs of $530 million. For the U.S.
hourly workforce, we reduced 5,400 positions against a plan of
5,600 positions. This shortfall occurred during the first
quarter of 2002, due to minor variances in the execution of our
restructuring plans. We eliminated 4,040 non-U.S. positions,
slightly above the planned 3,900 positions, and we eliminated
2,000 U.S. salaried employee positions as planned. Total cash
paid for the first quarter 2001 restructuring plan was
$457 million, with $413 million for employee costs and
$44 million for other exit costs. We also had
$73 million of non-cash charges, principally for special
termination pension and postretirement benefits. Upon completion
of our plans, in the first quarter of 2002, we reversed
$6 million of the original $536 million charge on the
Restructuring line in our Statement of Operations. The
$6 million is a result of the minor shortfall in head count
noted previously, as well as slight favorable variances in the
costs actually incurred under the various initiatives. This
reversal was netted against the 2002 restructuring charge
explained above.

Through September 30, 2002, approximately
17,040 positions have been eliminated under the 2001 and 2002
programs.

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In the first quarter of 2001, we evaluated the
carrying value of the long-lived assets at each site impacted by
the restructuring plans for impairment, and recorded impairment
losses of $63 million. The impairment losses, primarily
related to machinery and equipment held for use in the Safety,
Thermal and Electrical Architecture sector, were recorded in
depreciation and amortization. In addition, in the fourth
quarter of 2001, we recorded an impairment charge of
$9 million, included in depreciation and amortization,
related primarily to the machinery and equipment held for use in
the Electronics & Mobile Communications sector. This
equipment is used by one of our product lines located in
Argentina, which was impacted by 2001 macroeconomic developments.

In addition, in the first and fourth quarters of
2001, we recorded charges of $18 million and
$52 million, respectively, included in other income
(expense) related to declines in the value of certain joint
ventures, principally in Korea, caused by the uncertain
recoverability of assets of the underlying ventures. This
uncertainty resulted from the corporate reorganization
proceedings of a Korean customer/ business partner. This
uncertainty was substantially resolved on September 30,
2002, with the approval of the reorganization plan by the Korean
Bankruptcy Court, which provided for only partial recovery of
receivables for applicable creditors, which included Delphi and
several of its Korean joint ventures. As a result, in the third
quarter of 2002, we recorded an additional charge of
$6 million, related to the resolution of the reorganization.

Generator
Product Line

In July 2002, we began the process to wind
down our generator product line. This process affects a number
of parties, including our customers, employees and suppliers.
Discussions with these affected parties have progressed
materially and are expected to continue throughout 2002. We have
notified our customers of the wind down and are supporting the
customers in selection of replacement suppliers. We expect to
see a meaningful decline in generator sales over the next twelve
months. Advanced and development engineering for the generator
product line has been suspended. Capital expenditures for the
remainder of 2002 supporting the generator product line have
been curtailed, and capital expenditures previously planned for
2003 have been eliminated.

The total recorded loss associated with the wind
down of this product line was $231 million
($149 million after-tax), of which $194 million
($125 million after-tax) was recorded in the fourth quarter
of 2001 and $37 million ($24 million after-tax) was
recorded in the first quarter of 2002. As a result of our
decision to wind down this product line, we have reviewed our
current estimates with respect to wind down related costs,
including redundant work force costs and determined, based upon
our current expectations, that our reserves for these items are
adequate. These amounts are based upon our best estimates with
respect to timing of the wind down process and ultimate
resolution of contractually required payments. Due to the
significance of the estimates involved, the final costs for the
wind down of the product line could materially differ from the
recorded amounts.

We expect the redundant workforce to grow as a
result of the wind down process, and we expect to resolve their
employment status by late in 2003, concurrent with the
expiration of our labor contracts. Such resolution, which will
affect the final cost for the wind down, could include
retirements, transfers to other facilities, paid separations,
continued redundant status and/ or replacement work.

Due to a change from our original plan to sell
this product line, in the second quarter of 2002, we
reclassified the generator product line as held and used from
available for sale as required by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. No additional adjustments were required as the
result of this reclassification.

We expect to pay $75 million of the
$231 million total cost in cash, primarily for estimated
contractually required redundant workforce payments related to
our unionized U.S. manufacturing operations. We have paid
$17 million in the first nine months of 2002.

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3. ACQUISITIONS

Delphi
Connection Systems-Specialty Electronics

In June 2001, Delphi purchased Specialty
Electronics, Inc., now Delphi Connection Systems-Specialty
Electronics, for approximately $22 million. The acquisition
was accounted for under the purchase method of accounting. The
pro forma effect of this acquisition would not be significantly
different from reported results. Delphi Connection
Systems-Specialty Electronics is a provider of electronic
connector products and customized interconnect solutions to the
telecommunications, computer, industrial electronics, medical
and automotive markets, which complements Delphis
strategic expansion into new markets.

Delphi
Mechatronic Systems

In March 2001, Delphi acquired substantially
all the assets and assumed certain liabilities of Eaton
Corporations Vehicle Switch/ Electronics Division, now
Delphi Mechatronic Systems, for approximately $0.3 billion.
Delphi Mechatronic Systems is a global producer of
electromechanical switches, mechatronic modules and body
electronics for the light vehicle industry. Delphi Mechatronic
Systems technology, complemented by our extensive
electrical and electronic integration capabilities, will enable
us to offer customers new solutions in modular cockpits, doors
and overhead systems. The Delphi Mechatronic Systems acquisition
supports our goals of enhancing our technology, diversifying our
customer base and geographic footprint, and leveraging our
system integration capabilities. The acquisition has been
accounted for using the purchase method of accounting and
therefore the purchase price has been allocated to assets
acquired and liabilities assumed based on estimated fair values.
The pro forma effect of this acquisition would not be
significantly different from reported results. The
$146 million excess consideration given over the estimated
fair value of net assets acquired was recorded as goodwill. In
addition, we recorded $10 million of intangible assets,
primarily patents and related technology, which will be
amortized over 5 years. The purchase price and related
allocation were finalized in the first quarter of 2002 resulting
in an increase in goodwill of approximately $34 million.
The increase was primarily attributable to adjustments to fair
value of assets and liabilities acquired and finalization of our
integration plans.

4. INVENTORIES, NET

Inventories, net consisted of:

|                                                                               |                           |               |       |       |              |   |       |       | 
|------------------------------------------------------------------------------ | ------------------------- | ------------- | ----- | ----- | ------------ | - | ----- | ----- | 
|                                                                               |                           | September 30, |       |       | December 31, |  
|                                                                               |                           | 2002          |       |       | 2001         |  
|                                                                               |                           |               |       |       |              |  
|                                                                               |                           |              
|                                                                               |                           | (in millions) |      
|Productive material, work-in-process and supplies                              |                           | $             | 1,557 |       |              | $ | 1,563 |      
|Finished goods                                                                 |                           |               | 409   |       |              |   | 313   |      
|                                                                               |                           |               |       |       |              |  
|                                                                               | Total inventories at FIFO |               |       | 1,966 |              |   |       | 1,876 | 
|Less allowance to adjust the carrying value of
    certain inventories to LIFO |                           |               | (255  | )     |              |   | (255  | )    
|                                                                               |                           |               |       |       |              |  
|                                                                               | Total inventories, net    |               | $     | 1,711 |              |   | $     | 1,621 | 
|                                                                               |                           |               |       |       |              |  

5. DERIVATIVES AND HEDGING
ACTIVITIES

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

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Delphi has currency exchange exposure from buying
and selling in currencies other than the local currencies of our
operating units. The primary purpose of our currency hedging
activities is to manage the volatility associated with
forecasted currency purchases and sales. Principal currencies
hedged include the Mexican peso, Canadian dollar, euro, British
pound, Japanese yen, Singapore dollar, and Brazilian real. We
primarily utilize forward exchange contracts with maturities of
less than 24 months, which qualify as cash flow hedges.

Delphi has exposure to the prices of commodities
in the procurement of certain raw materials. The primary purpose
of our commodity price hedging activities is to manage the
volatility associated with these forecasted inventory purchases.
We primarily utilize swaps and options with maturities of less
than 24 months, which qualify as cash flow hedges. These
instruments are intended to offset the effect of changes in
commodity prices on forecasted inventory purchases.

In order to manage the interest rate risk
associated with our debt portfolio, we periodically enter into
derivative transactions to manage our exposure to changes in
interest rates, although we do not have any outstanding at
September 30, 2002.

Gains and losses on derivatives qualifying as
cash flow hedges are recorded in other comprehensive income
(OCI) to the extent that hedges are effective until the
underlying transactions are recognized in earnings. Net losses
included in OCI as of September 30, 2002 were
$26 million after-tax ($41 million pre-tax). Of this
pre-tax total, a loss of approximately $38 million is
expected to be included in cost of sales within the next
12 months and a loss of approximately $7 million is
expected to be included in subsequent periods. A loss of
approximately $2 million is expected to be included in
depreciation and amortization expense over the lives of the
related fixed assets and a gain of approximately $6 million
is expected to be included in interest expense over the term of
the related debt. The unrealized amounts in OCI will fluctuate
based on changes in the fair value of open contracts at each
reporting period. Due to unusually pronounced production volume
reductions, we discontinued several cash flow hedges during the
quarter ended March 31, 2001, which resulted in the
immediate recognition of $6 million of income included in
cost of sales. Cash flow hedges are discontinued when it is
probable that the original forecasted transactions will not
occur. The amount included in cost of sales related to hedge
ineffectiveness and the time value of options was not material.

6. STOCKHOLDERS EQUITY

Changes in stockholders equity for the nine
months ended September 30, 2002 were:

|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |     |   |   |      |     |   |   |       |      |     | 
|----------------------------- | ------------------------------------------------------------------------- | -------------------------- | --- | - | ---------- | - | - | -------- |  | ----------------- | -------- | -- | - | --------- | ----- | -------- | ----- | - | ------------- | ----- |  | - | ------ | --- | - | - | ---- | --- | - | - | ----- | ---- | --- | 
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |          
|                              |                                                                           |                            |     |   |            |   |   |          |  | Accumulated Other |          |    |   |           |      
|                              |                                                                           |                            |     |   |            |   |   |          |  | Comprehensive     |          |    |   |           |      
|                              |                                                                           |                            |     |   |            |   |   |          |  | Income (Loss)     |          |    |   |           |      
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |  
|                              |                                                                           | Common Stock               |     |   | Additional |   |   |          |  | Minimum           |          |    |   |           |       |          | Total |  
|                              |                                                                           |                            |     |   | Paid-in    |   |   | Retained |  |                   | Pension  |    |   |           |       | Treasury |       |   | Stockholders |      
|                              |                                                                           | Shares                     |     |   | Amount     |   |   | Capital  |  |                   | Earnings |    |   | Liability |       |          | Other |   |               | Stock |  |   | Equity |    
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |    
|                              |                                                                           |                           
|                              |                                                                           | (in millions)              |    
|Balance at January 1, 2002    |                                                                           |                            | 565 |   |            | $ | 6 |          |  | $                 | 2,450    |    |   | $         | 1,343 |          |       | $ | (830          | )     |  | $ | (567   | )   |   | $ | (90  | )   |   | $ | 2,312 |     
|                              | Net income                                                                |                            |     |  |            |   |   |         |  |                   |          |   |   |           |       | 223      |       |   |               |      |  |   |        |    |   |   |      |    |   |   |       | 223  |    
|                              | Currency translation adjustments, net of tax                              |                            |     |  |            |   |   |         |  |                   |          |   |   |           |       |         |       |   |               |      |  |   |        | (16 | ) |   |      |    |   |   |       | (16  | )  
|                              | Net change in unrecognized loss on derivative
    instruments, net of tax |                            |     |  |            |   |   |         |  |                   |          |   |   |           |       |         |       |   |               |      |  |   |        | (28 | ) |   |      |    |   |   |       | (28  | )  
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |    
|                              |                                                                           | Total comprehensive income |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |     |   |   |      |     |   |   |       |      | 179 | 
|                              | Shares issued for employee benefit plans                                  |                            |     |  |            |   |   |         |  |                   |          | (4 | ) |           |       |         |       |   |               |      |  |   |        |    |   |   |      | 17  |   |   |       | 13   |    
|                              | Shares repurchased for employee benefit plans                             |                            |     |  |            |   |   |         |  |                   |          |   |   |           |       |         |       |   |               |      |  |   |        |    |   |   |      | (35 | ) |   |       | (35  | )  
|                              | Dividends                                                                 |                            |     |  |            |   |   |         |  |                   |          |   |   |           |       | (117     | )     |   |               |      |  |   |        |    |   |   |      |    |   |   |       | (117 | )  
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |    
|Balance at September 30, 2002 |                                                                           |                            | 565 |   |            | $ | 6 |          |  | $                 | 2,446    |    |   | $         | 1,449 |          |       | $ | (830          | )     |  | $ | (611   | )   |   | $ | (108 | )   |   | $ | 2,352 |     
|                              |                                                                           |                            |     |   |            |   |   |          |  |                   |          |    |   |           |       |          |       |   |               |       |  |   |        |    

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7. SEGMENT REPORTING

Selected information regarding Delphis
product sectors follows:

|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |     |       |   |       |      |      |   |       |     |       | 
|--------------------------- | ------------------------------ | ----------------------- | --------------- | ------------- | ------------- | -- | - | ----- | --------- | ---------- | ------------ | --- | ---------- | ---------- | - | ----- | -------- | ----- | - | ----- | --- | ----- | - | ----- | ---- | ---- | - | ----- | --- | ----- | 
|                            |                                |                         |                 |               |               |    |   |       |           |           
|                            |                                | Electronics & Mobile    |                 |               |               |    |   |       |           |            |             
|                            |                                | Communication           |                 |               |               |    |   |       |           |            |             
|                            |                                |                         |                 |               |               |    |   |       |           |            |             
|                            |                                |                         |                 | Other         |               |    |   |       | Safety,   |            |              |     |            |            |   |      
|                            |                                |                         |                 | Electronics & |               |    |   |       | Thermal & |            |              |     |            |            |   |      
|                            |                                | Mobile                  |                 |               | Mobile        |    |   |       |           | Electrical |              |     | Dynamics & |            |   |       |          |      
|                            |                                | MultiMedia(a)           |                 |               | Communication |    |   | Total |           |            | Architecture |     |            | Propulsion |   |       | Other(b) |       |   | Total |    
|For the Three Months Ended: |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|                            |                                |                        
|                            |                                | (in millions)           |                
|September 30, 2002          |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |     |       |   |       |      |      |   |      
|                            | Net sales to GM and affiliates |                         | $               | 30            |               |    | $ | 658   |           |            | $            | 688 |            |            | $ | 1,288 |          |       | $ | 1,809 |     |       | $ | 292   |      |      | $ | 4,077 |    
|                            | Net sales to other customers   |                         |                 | 31            |               |    |   | 330   |           |            |              | 361 |            |            |   | 934   |          |       |   | 901   |     |       |   | 173   |      |      |   | 2,369 |    
|                            | Inter-sector net sales         |                         |                 |              |               |    |   | 150   |           |            |              | 150 |            |            |   | 72    |          |       |   | 308   |     |       |   | (530) |      |      |   |      |    
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|                            |                                |                         | Total net sales |               | $             | 61 |   |       | $         | 1,138      |              |     | $          | 1,199      |   |       | $        | 2,294 |   |       | $   | 3,018 |   |       | $    | (65) |   |       | $   | 6,446 | 
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|                            |                                | Operating income (loss) |                 | $             | (9            | )  |   | $     | 89        |            |              | $   | 80         |            |   | $     | 85       |       |   | $     | (20 | )     |   | $     | (20) |      |   | $     | 125 |      
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|September 30, 2001          |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |     |       |   |       |      |      |   |      
|                            | Net sales to GM and affiliates |                         | $               | 63            |               |    | $ | 685   |           |            | $            | 748 |            |            | $ | 1,305 |          |       | $ | 1,866 |     |       | $ | 319   |      |      | $ | 4,238 |    
|                            | Net sales to other customers   |                         |                 | 12            |               |    |   | 249   |           |            |              | 261 |            |            |   | 770   |          |       |   | 823   |     |       |   | 137   |      |      |   | 1,991 |    
|                            | Inter-sector net sales         |                         |                 |              |               |    |   | 154   |           |            |              | 154 |            |            |   | 84    |          |       |   | 305   |     |       |   | (543) |      |      |   |      |    
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|                            |                                |                         | Total net sales |               | $             | 75 |   |       | $         | 1,088      |              |     | $          | 1,163      |   |       | $        | 2,159 |   |       | $   | 2,994 |   |       | $    | (87) |   |       | $   | 6,229 | 
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    
|                            |                                | Operating income (loss) |                 | $             | (10           | )  |   | $     | 73        | (e)        |              | $   | 63         | (e)        |   | $     | 63       | (e)   |   | $     | (21 | )(e)  |   | $     | (15) | (e)  |   | $     | 90  | (e)  
|                            |                                |                         |                 |               |               |    |   |       |           |            |              |     |            |            |   |       |          |       |   |       |    

|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |    |        |   |         |      |        |   |        |     |        | 
|--------------------------- | ------------------------------ | ----------------------- | --------------- | ------------- | ------------- | --- | - | ----- | --------- | ---------- | ------------ | ----- | ---------- | ---------- | - | ----- | -------- | ------ | - | ----- | -- | ------ | - | ------- | ---- | ------ | - | ------ | --- | ------ | 
|                            |                                |                         |                 |               |               |     |   |       |           |           
|                            |                                | Electronics & Mobile    |                 |               |               |     |   |       |           |            |             
|                            |                                | Communication           |                 |               |               |     |   |       |           |            |             
|                            |                                |                         |                 |               |               |     |   |       |           |            |             
|                            |                                |                         |                 | Other         |               |     |   |       | Safety,   |            |              |       |            |            |   |      
|                            |                                |                         |                 | Electronics & |               |     |   |       | Thermal & |            |              |       |            |            |   |      
|                            |                                | Mobile                  |                 |               | Mobile        |     |   |       |           | Electrical |              |       | Dynamics & |            |   |       |          |       
|                            |                                | MultiMedia(a)           |                 |               | Communication |     |   | Total |           |            | Architecture |       |            | Propulsion |   |       | Other(b) |        |   | Total |   
|For the Three Months Ended: |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|                            |                                |                        
|                            |                                | (in millions)           |                
|September 30, 2002          |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |    |        |   |         |      |        |   |       
|                            | Net sales to GM and affiliates |                         | $               | 165           |               |     | $ | 2,137 |           |            | $            | 2,302 |            |            | $ | 4,221 |          |        | $ | 5,939 |    |        | $ | 917     |      |        | $ | 13,379 |    
|                            | Net sales to other customers   |                         |                 | 76            |               |     |   | 896   |           |            |              | 972   |            |            |   | 2,744 |          |        |   | 2,846 |    |        |   | 515     |      |        |   | 7,077  |    
|                            | Inter-sector net sales         |                         |                 |              |               |     |   | 483   |           |            |              | 483   |            |            |   | 272   |          |        |   | 933   |    |        |   | (1,688) |      |        |   |       |    
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|                            |                                |                         | Total net sales |               | $             | 241 |   |       | $         | 3,516      |              |       | $          | 3,757      |   |       | $        | 7,237  |   |       | $  | 9,718  |   |         | $    | (256)  |   |        | $   | 20,456 | 
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|                            |                                | Operating income (loss) |                 | $             | (19           | )   |   | $     | 343       | (c)        |              | $     | 324        | (c)        |   | $     | 407      | (c)    |   | $     | 66 | (c)    |   | $       | (60) |        |   | $      | 737 | (c)   
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|September 30, 2001          |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |    |        |   |         |      |        |   |       
|                            | Net sales to GM and affiliates |                         | $               | 254           |               |     | $ | 2,105 |           |            | $            | 2,359 |            |            | $ | 4,072 |          |        | $ | 5,887 |    |        | $ | 1,010   |      |        | $ | 13,328 |    
|                            | Net sales to other customers   |                         |                 | 34            |               |     |   | 758   |           |            |              | 792   |            |            |   | 2,433 |          |        |   | 2,730 |    |        |   | 425     |      |        |   | 6,380  |    
|                            | Inter-sector net sales         |                         |                 |              |               |     |   | 483   |           |            |              | 483   |            |            |   | 306   |          |        |   | 932   |    |        |   | (1,721) |      |        |   |       |    
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|                            |                                |                         | Total net sales |               | $             | 288 |   |       | $         | 3,346      |              |       | $          | 3,634      |   |       | $        | 6,811  |   |       | $  | 9,549  |   |         | $    | (286)  |   |        | $   | 19,708 | 
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   
|                            |                                | Operating income (loss) |                 | $             | (20           | )   |   | $     | 251       | (d)(e)     |              | $     | 231        | (d)(e)     |   | $     | 243      | (d)(e) |   | $     | 5  | (d)(e) |   | $       | (69) | (d)(e) |   | $      | 410 | (d)(e)
|                            |                                |                         |                 |               |               |     |   |       |           |            |              |       |            |            |   |       |          |        |   |       |   



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Information for the Mobile MultiMedia business
    line within the Electronics & Mobile Communication sector is
    separately disclosed due to the strategic importance of this
    high-tech business line and its usefulness in understanding
    sector net sales and operating results. Mobile MultiMedia
    develops products designed to bring the Internet, telematics,
    entertainment and mobile communication technologies into
    vehicles.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Other includes activity not allocated to the
    product sectors and elimination of inter-sector transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(c) | Excludes the 2002 net restructuring and generator
    product line charges of $262 million with $20 million
    for Electronics & Mobile Communication, $101 million for
    Safety, Thermal & Electrical Architecture, $126 million
    for Dynamics & Propulsion and $15 million for Other.                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(d) | Excludes the 2001 restructuring and asset
    impairment charges of $599 million with $78 million for
    Electronics & Mobile Communication, $214 million for Safety,
    Thermal & Electrical Architecture, $280 million for
    Dynamics & Propulsion and $27 million for Other.                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(e) | Effective January 1, 2002, we adopted SFAS
    No. 142 Goodwill and Other Intangible Assets
    and stopped amortization of purchased goodwill. Accordingly, the
    third quarter of 2001 excludes goodwill amortization of
    $9 million with $1 million for Electronics &
    Mobile Communication, $3 million for Safety, Thermal &
    Electrical Architecture and $5 million for
    Dynamics & Propulsion. The nine months ended
    September 30, 2001 excludes goodwill amortization of
    $24 million with $3 million for Electronics &
    Mobile Communication, $7 million for Safety,
    Thermal & Electrical Architecture, $12 million for
    Dynamics & Propulsion and $2 million for Other.

8. COMMITMENTS AND
CONTINGENCIES

Delphi is from time to time subject to various
legal actions and claims incidental to its business, including
those arising out of alleged defects, breach of contracts,
product warranties, intellectual property matters,
employment-related matters and environmental matters.

As previously disclosed, with respect to
environmental matters, Delphi received notices that it is a
potentially responsible party (PRP) in proceedings
at various sites, including the Tremont City Landfill Site
located in Tremont, Ohio. The Tremont City Landfill Site
proceeding, which is alleged to concern ground water
contamination, is in the early stages of investigation and
involves multiple other PRPs. In September 2002, Delphi and
other PRPs entered into a Consent Order with the Environmental
Protection Agency (EPA) to perform a Remedial
Investigation and Feasibility Study concerning a portion of the
site. We have reserved approximately $1 million for our
share of the expected investigation costs. Although we believe
these reserves are adequate, because the scope of the
investigation is still being determined, we cannot assure you
that our share of the investigative costs and the ultimate cost,
if any, to remediate the site will not exceed the amount of the
reserves.

With respect to warranty matters, as previously
disclosed, a few customers have advised Delphi that they intend
to pursue warranty claims vigorously. In particular, although in
2001 we settled or resolved most of our known pre-separation
warranty claims with GM, GM may assert additional pre-separation
claims in the future. We believe the remainder of known
pre-separation warranty claims are adequately covered by
customer credits or commercial defenses. Accordingly, although
we cannot assure you that the future costs of warranty claims by
GM or other customers will not be material, we believe our
established reserves are adequate to cover potential warranty
settlements. However, the final amounts determined to be due
related to these matters could differ materially from our
recorded estimates.

In November 2000, a federal district court
jury awarded a former supplier to Delphi approximately
$32 million in connection with a commercial dispute. Delphi
and the supplier filed post trial motions seeking a directed
verdict, and Delphi also sought a new trial. In
February 2001, the district court denied all parties
motions. Both parties appealed the district courts
judgment and have filed briefs with the Ninth Circuit Court of
Appeals. We expect the Ninth Circuit will hear the appeals at
the end of this year or during the first quarter of 2003. While
legal proceedings are subject to inherent uncertainty, we
believe we have valid grounds for appeal, and it is possible
that the existing judgment could be substantially altered or
eliminated by the appellate court. Consequently, in the opinion
of management and counsel, it is not possible to estimate the
outcome of such uncertainty at this time. Delphi will record a
provision for any legal judgment, if and at the time that
management and counsel conclude a loss is probable.

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

In the normal course of business, we extend
credit on open account to our customers. From time to time, we
also invest in joint ventures with a variety of business
partners. Although Delphi is affected by the financial
well-being of the automotive industry as a whole, we believe
that our risk associated with trade receivables and
recoverability of investments in our joint ventures is mitigated
by our customer base and ongoing control procedures to monitor
the credit-worthiness of customers and viability of joint
ventures business partners. From time to time, we also actively
work with our joint ventures, their customers and creditors, to
ensure that the ventures are adequately capitalized to maintain
operations. As part of our ongoing procedures, we regularly
review our trade receivables and joint venture investments for
potential impairments or permanent declines in value, and record
adjustments when required, in accordance with applicable
accounting requirements.

In April 2002, Delphi extended for four
months through August 31, 2002 a consulting agreement with
Shoichiro Irimajiri, Inc., a company of which Shoichiro
Irimajiri, a member of Delphis Board of Directors, is the
principal shareholder. Under the consulting agreement, the
company performed services for Delphi relating to the Japanese
auto industry at $50,000 per month. The consulting agreement
expired by its terms on August 31, 2002.

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ITEM 2. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL


CONDITION AND RESULTS OF OPERATIONS


Results of Operations

The following managements discussion and
analysis of financial condition and results of operations
(MD&A) should be read in conjunction with the
MD&A included in our Annual Report on Form 10-K for the
year ended December 31, 2001.

Three
Months Ended September 30, 2002 versus Three Months Ended
September 30, 2001

Net Sales.Consolidated net sales by product sector and in total for the
three months ended September 30, 2002 and 2001 were:

|                                                         |                                          |                                          |       |       |       |   |       |       |       | 
|-------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                                         |                                          |                                         
|                                                         |                                          | Three Months                             |      
|                                                         |                                          | Ended                                    |      
|                                                         |                                          | September 30,                            |      
|                                                         |                                          |                                          |      
|Product Sector                                           |                                          | 2002                                     |       |       | 2001  |  
|                                                         |                                          |                                          |       |       |       |  
|                                                         |                                          |                                         
|                                                         |                                          | (in millions)                            |      
|Electronics & Mobile Communication
    Mobile MultiMedia |                                          | $                                        | 61    |       |       | $ | 75    |      
|                                                         | Other Electronics & Mobile Communication |                                          |       | 1,138 |       |   |       | 1,088 |      
|                                                         |                                          |                                          |       |       |       |  
|                                                         |                                          | Total Electronics & Mobile Communication |       |       | 1,199 |   |       |       | 1,163 | 
|Safety, Thermal & Electrical Architecture                |                                          |                                          | 2,294 |       |       |   | 2,159 |      
|Dynamics & Propulsion                                    |                                          |                                          | 3,018 |       |       |   | 2,994 |      
|Other                                                    |                                          |                                          | (65   | )     |       |   | (87   | )    
|                                                         |                                          |                                          |       |       |       |  
|                                                         | Consolidated net sales                   |                                          | $     | 6,446 |       |   | $     | 6,229 |      
|                                                         |                                          |                                          |       |       |       |  

Consolidated net sales for the third quarter of
2002 were $6.4 billion compared to $6.2 billion for
the same period of 2001. Net sales to GM decreased by
$161 million, as a result of the mix of products sold,
lower prices and exited businesses, partially offset by
increased volume in North America. Our non-GM sales increased by
$378 million due to several previously announced customer
programs which began ramping up to volume production levels.
Additionally, net sales were favorably impacted by currency
exchange rates, primarily the euro. As a percent of our net
sales for the third quarter of 2002 our non-GM sales were 37%.
Our net sales also were impacted by continued price pressures
that resulted in price reductions of approximately
$115 million, or 1.8% for the third quarter of 2002
compared to approximately $152 million or 2.3% for the
comparable period of 2001.

Gross Margin.Our
gross margin was 11.7% for the third quarter of 2002 compared to
gross margin of 11.1% for the comparable period of 2001. The
slight improvement reflects savings realized from our
restructuring plans, material cost savings and greater
efficiencies resulting from stabilization of customer build
schedules, partially offset by higher wages and increased U.S.
pension and healthcare expenses.

Selling, General and Administrative.Selling, general and administrative
expenses were $368 million or 5.7% of third quarter 2002
total net sales, as compared to $348 million or 5.6% of
third quarter of 2001 total net sales.

Depreciation and Amortization.Depreciation and amortization for the
third quarter of 2002 was consistent with amounts for the
comparable period of 2001, adjusted for $9 million of
goodwill amortization in the third quarter of 2001.

Operating Income.Operating income was $125 million
for the third quarter of 2002 compared to operating income of
$81 million for the third quarter of 2001. To facilitate
analysis of our operating

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income by product sector, we have excluded 2001
goodwill amortization of $9 million from the information
presented below:


|                                                         |                                          |                                          |     |     |         |   |     |    |    | 
|-------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | --- | --- | ------- | - | --- | -- | -- | 
|                                                         |                                          |                                         
|                                                         |                                          | Three Months                             |    
|                                                         |                                          | Ended                                    |    
|                                                         |                                          | September 30,                            |    
|                                                         |                                          |                                          |    
|Product Sector                                           |                                          | 2002                                     |     |     | 2001(a) |  
|                                                         |                                          |                                          |     |     |         |  
|                                                         |                                          |                                         
|                                                         |                                          | (in millions)                            |    
|Electronics & Mobile Communication
    Mobile MultiMedia |                                          | $                                        | (9  | )   |         | $ | (10 | ) 
|                                                         | Other Electronics & Mobile Communication |                                          |     | 89  |         |   |     | 73 |   
|                                                         |                                          |                                          |     |     |         |  
|                                                         |                                          | Total Electronics & Mobile Communication |     |     | 80      |   |     |    | 63 | 
|Safety, Thermal & Electrical Architecture                |                                          |                                          | 85  |     |         |   | 63  |   
|Dynamics & Propulsion                                    |                                          |                                          | (20 | )   |         |   | (21 | ) 
|Other                                                    |                                          |                                          | (20 | )   |         |   | (15 | ) 
|                                                         |                                          |                                          |     |     |         |  
|                                                         | Total operating income                   |                                          | $   | 125 |         |   | $   | 90 |   
|                                                         |                                          |                                          |     |     |         |  



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Effective January 1, 2002, we adopted SFAS
    No. 142 Goodwill and Other Intangible Assets
    and stopped amortization of purchased goodwill. Accordingly, the
    third quarter 2001 excludes goodwill amortization of
    $9 million with $1 million for Electronics &
    Mobile Communication, $3 million for Safety,
    Thermal & Electrical Architecture and $5 million
    for Dynamics & Propulsion.

The increase in operating income from third
quarter 2001 primarily reflects increased non-GM revenues,
improved efficiencies resulting from the stabilization of
customer build schedules, and savings realized from our
restructuring plans, offset by lower pricing and increased
pension, healthcare and wages. The increase in net sales
attributable to currency exchange rates did not significantly
impact our operating income as we manage our currency exposures
through hedging techniques, including derivative instruments.
Our operating income was also impacted by a charge of
$6 million related to the resolution of a Korean corporate
reorganization of a customer/business partner. Our
Dynamics & Propulsion Sector was positively impacted by
a gain on the sale of a facility of $10 million, partially
offset by mix of products sold. Our Safety, Thermal &
Electrical Architecture Sector incurred approximately
$7 million of employee separation costs. Mobile MultiMedia
reported an operating loss of $9 million reflective of the
ongoing high level of investment in engineering and research and
development related to the start-up of this high-tech business.

Taxes.Our effective
tax rate was 36% for the three months ended September 30,
2002 and 2001.

Net Income.Our net
income was $54 million for the third quarter of 2002 as
compared to net income of $26 million for the third quarter
of 2001. Excluding goodwill amortization of $7 million
after-tax, third quarter 2001 net income would have been
$33 million.

Earnings Per Share.Basic and diluted earnings per share
was $0.10 for the third quarter of 2002 compared to basic and
diluted earnings per share of $0.05 for the third quarter 2001.
Excluding goodwill amortization of $7 million after-tax,
third quarter 2001 basic and diluted earnings per share would
have been $0.06.

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Nine
Months Ended September 30, 2002 versus Nine Months Ended
September 30, 2001

Net Sales.Consolidated net sales by product
sector and in total for the nine months ended September 30,
2002 and 2001 were:

|                                                         |                                          |                                          |       |        |       |   |       |        |       | 
|-------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | ----- | ------ | ----- | - | ----- | ------ | ----- | 
|                                                         |                                          |                                         
|                                                         |                                          | Nine Months Ended                        |      
|                                                         |                                          | September 30,                            |      
|                                                         |                                          |                                          |      
|Product Sector                                           |                                          | 2002                                     |       |        | 2001  |  
|                                                         |                                          |                                          |       |        |       |  
|                                                         |                                          |                                         
|                                                         |                                          | (in millions)                            |      
|Electronics & Mobile Communication
    Mobile MultiMedia |                                          | $                                        | 241   |        |       | $ | 288   |       
|                                                         | Other Electronics & Mobile Communication |                                          |       | 3,516  |       |   |       | 3,346  |      
|                                                         |                                          |                                          |       |        |       |  
|                                                         |                                          | Total Electronics & Mobile Communication |       |        | 3,757 |   |       |        | 3,634 | 
|Safety, Thermal & Electrical Architecture                |                                          |                                          | 7,237 |        |       |   | 6,811 |       
|Dynamics & Propulsion                                    |                                          |                                          | 9,718 |        |       |   | 9,549 |       
|Other                                                    |                                          |                                          | (256  | )      |       |   | (286  | )     
|                                                         |                                          |                                          |       |        |       |  
|                                                         | Consolidated net sales                   |                                          | $     | 20,456 |       |   | $     | 19,708 |      
|                                                         |                                          |                                          |       |        |       |  

Consolidated net sales for the first nine months
of 2002 were $20.5 billion compared to $19.7 billion
for the same period of 2001. Our non-GM sales increased by
$697 million principally due to several previously
announced customer programs which began ramping up to volume
production levels and the acquisition of Delphi Mechatronic
Systems at the end of the first quarter of 2001, partially
offset by price decreases. Net sales to GM increased by
$51 million, principally due to increased production volume
in North America, partially offset by other major automotive
markets which remained weak, mix of products sold and exited
businesses. Additionally, net sales were favorably impacted by
currency exchange rates, primarily the euro. As a percent of our
net sales for the nine months ended September 30, 2002, our
non-GM sales were 35%. Our net sales also were impacted by
continued price pressures that resulted in price reductions of
approximately $382 million, or 1.9% for the first nine
months of 2002 compared to approximately $468 million or
2.1% for the comparable period of 2001.

Gross Margin.Our
gross margin was 12.4% for the first nine months of 2002
compared to gross margin of 11.4% for the comparable period of
2001. The improvement reflects savings realized from our
restructuring plans, lower material costs and greater
efficiencies resulting from stabilization of customer build
schedules, partially offset by higher wages and increased U.S.
pension and healthcare expenses. During the first quarter of
2002, we recorded a charge of $37 million related to our
generator product line; this charge is explained below.
Excluding this charge, our gross margin was 12.6%.

Selling, General and Administrative.Selling, general and administrative
expenses of $1.1 billion, 5.3% of total net sales for the
first nine months of 2002, were consistent with
$1.1 billion or 5.5% of total net sales for the first nine
months of 2001.

Depreciation and Amortization.Depreciation and amortization for the
first nine months of 2002 was consistent with amounts for the
comparable period of 2001, adjusted for the $63 million
long-lived asset impairment charge included in depreciation and
amortization in the first quarter of 2001, and $24 million
of goodwill amortization in the first nine months of 2001.

Restructuring.In
the first quarter of 2002, Delphi approved further restructuring
plans to eliminate 6,100 positions from our global workforce,
downsize more than 25 selected facilities in the United States
and Europe, and exit certain other activities by the end of the
first quarter of 2003.

The first quarter 2002 restructuring charge
totaled $231 million with $222 million of employee costs
(including postemployment benefits and special termination
pension benefits) and $9 million in other exit costs (lease
cancellation costs and contract cancellation fees). This charge,
when netted against the $6 million reversal noted below for
the 2001 restructuring reserve, resulted in a net restructuring
charge of $225 million ($150 million after-tax) in the
first quarter of 2002. The plans entail the elimination of
approximately 6,100 positions worldwide, comprised of 3,100 U.S.
employees and 3,000 employees in non-

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##### Table of Contents



U.S. locations. Employees at impacted locations
were informed of the restructuring initiatives and the benefits
available to them under applicable benefit plans or related
contractual provisions. Affected employees have left or will
leave Delphi using a mixture of voluntary or involuntary
separation programs, early retirements, social plan programs,
and layoffs. We expect to pay approximately $200 million in
cash related to the restructuring programs with the remaining
$31 million for non-cash special termination pension
benefits. During the first nine months of 2002, we paid
$146 million related to employee costs and $2 million
related to exit costs. As of September 30, 2002,
approximately 2,850 U.S. employees and 2,750 non-U.S. employees
have been separated under the plans. We expect an additional 100
to 300 employees to separate during the fourth quarter, with the
remainder during the first quarter in 2003. We began to realize
savings related to the 2002 restructuring actions during the
second half of 2002 with estimated ongoing savings expected to
grow in early 2004 to more than $125 million (after-tax).
These savings are expected to be realized as reductions to cost
of sales and selling, general and administrative expenses.
Absent a turnaround in global capital market conditions or
abatement in healthcare cost increases, we currently expect that
these savings will be partially offset by increased employee and
retiree pension and healthcare costs as well as continued price
pressures.


The first quarter 2001 restructuring plans
resulted in a charge of $536 million that included
$492 million of employee costs (including postemployment
benefits and special termination pension and postretirement
benefits) and $44 million in other exit costs (principally
lease termination and contract cancellation payments). The plans
entailed the elimination of approximately 11,500 positions
worldwide, comprised of 5,600 U.S. hourly employees, 2,000 U.S.
salaried employees, and 3,900 employees in non-U.S. locations.
We ultimately eliminated 11,440 positions and incurred costs of
$530 million. For the U.S. hourly workforce, we reduced
5,400 positions against a plan of 5,600 positions. This
shortfall occurred during the first quarter of 2002, due to
minor variances in the execution of our restructuring plans. We
eliminated 4,040 non-U.S. positions, slightly above the planned
3,900 positions, and we eliminated 2,000 U.S. salaried employee
positions as planned. Total cash paid for the first quarter 2001
restructuring plan was $457 million, with $413 million
for employee costs and $44 million for other exit costs. We
also had $73 million of non-cash charges, principally for
special termination pension and postretirement benefits. Upon
completion of our plans, in the first quarter of 2002, we
reversed $6 million of the original $536 million
charge on the Restructuring line in our Statement of Operations.
The $6 million is a result of the minor shortfall in head
count noted previously, as well as slight favorable variances in
the costs actually incurred under the various initiatives. This
reversal was netted against the 2002 restructuring charge
explained above.

Approximately 17,040 positions have been
eliminated under the 2001 and 2002 programs through
September 30, 2002.

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Following is a summary of our restructuring
actions (in millions):

|                                                   |  |                |      |   |            |   |     |            |  |   |       |   |  |   |      |  
|-------------------------------------------------- |  | -------------- | ---- | - | ---------- | - | --- | ---------- |  | - | ----- | - |  | - | ---- | -
|                                                   |  |                |      |   |            |  
|                                                   |  | Employee Costs |      |   |            |   |    
|                                                   |  |                |      |   | Other Cash |   |     |           
|Restructuring Actions                              |  | Cash           |      |   | Non Cash   |   |     | Exit Costs |  |   | Total |  
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|First Quarter 2001 Restructuring Charge            |  | $              | 419  |   |            | $ | 73  |            |  | $ | 44    |   |  | $ | 536  |  
|Usage                                              |  |                | (321 | ) |            |   | (72 | )          |  |   | (22   | ) |  |   | (415 | )
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|Balance at December 31, 2001.                      |  |                | 98   |   |            |   | 1   |            |  |   | 22    |   |  |   | 121  |  
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|First Quarter usage                                |  |                | (84  | ) |            |   | (1  | )          |  |   | (22   | ) |  |   | (107 | )
|First Quarter adjustment due to change in estimate |  |                | (6   | ) |            |   |    |            |  |   |      |   |  |   | (6   | )
|Second Quarter usage                               |  |                | (8   | ) |            |   |    |            |  |   |      |   |  |   | (8   | )
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|Balance at September 30, 2002                      |  | $              |     |   |            | $ |    |            |  | $ |      |   |  | $ |     |  
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|First Quarter 2002 Restructuring Charge            |  | $              | 191  |   |            | $ | 31  |            |  | $ | 9     |   |  | $ | 231  |  
|First Quarter usage                                |  |                | (60  | ) |            |   | (31 | )          |  |   | (2    | ) |  |   | (93  | )
|Second Quarter usage                               |  |                | (58  | ) |            |   |    |            |  |   |      |   |  |   | (58  | )
|Third Quarter usage                                |  |                | (28  | ) |            |   |    |            |  |   |      |   |  |   | (28  | )
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|Total usage through September 30, 2002             |  |                | (146 | ) |            |   | (31 | )          |  |   | (2    | ) |  |   | (179 | )
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  
|Balance at September 30, 2002                      |  | $              | 45   |   |            | $ |    |            |  | $ | 7     |   |  | $ | 52   |  
|                                                   |  |                |      |   |            |   |     |            |  |   |       |  

The net restructuring charge recorded in the
first quarter of 2002 was $225 million, reflecting a
provision of $231 million, and a reversal of the 2001
charge of $6 million. At September 30, 2002, total
restructuring obligations were $52 million. In addition to
the restructuring charge explained above, our Statement of
Operations and Statement of Cash Flows include amounts related
to our generator product line. While not recorded on the
Restructuring line in the Statement of Operations, our plans for
the generator product line include similar charges, as explained
below. In total, the first quarter 2002 charges for
restructuring and our generator product line decreased earnings
by a net $262 million ($174 million after-tax), and
used $165 million of cash flow during the first nine months
of 2002.

In July 2002, we began the process to wind
down our generator product line. This process affects a number
of parties, including our customers, employees and suppliers.
Discussions with these affected parties have progressed
materially and are expected to continue throughout 2002. We have
notified our customers of the wind down and are supporting the
customers in selection of replacement suppliers. We expect to
see a meaningful decline in generator sales over the next twelve
months. Advanced and development engineering for the generator
product line has been suspended. Capital expenditures for the
remainder of 2002 supporting the generator product line have
been curtailed, and capital expenditures previously planned for
2003 have been eliminated.

The total recorded loss associated with the wind
down of this product line was $231 million
($149 million after-tax), of which $194 million
($125 million after-tax) was recorded in the fourth quarter
of 2001 and $37 million ($24 million after-tax) was
recorded in the first quarter of 2002. As a result of our
decision to wind down this product line, we have reviewed our
current estimates with respect to wind down related costs,
including redundant work force costs and determined, based upon
our current expectations, that our reserves for these items are
adequate. These amounts are based upon our best estimates with
respect to timing of the wind down process and ultimate
resolution of contractually required payments. Due to the
significance of the estimates involved, the final costs for the
wind down of the product line could materially differ from the
recorded amounts.

We expect the redundant workforce to grow as a
result of the wind down process, and we expect to resolve their
employment status by late in 2003, concurrent with the
expiration of our labor contracts. Such resolution, which will
affect the final cost for the wind down, could include
retirements, transfers to other facilities, paid separations,
continued redundant status and/or replacement work.

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We expect to pay $75 million of the
$231 million total cost in cash, primarily for estimated
contractually required redundant workforce payments related to
our unionized U.S. manufacturing operations. We have paid $17
million in the first nine months of 2002.

Operating Income (Loss).Operating income was $475 million
for the first nine months of 2002 compared to an operating loss
of $(213) million for the first nine months of 2001. To
facilitate analysis of our operating income by product sector,
we have excluded the 2002 net restructuring and product line
charges of $262 million, and 2001 charges of $536 million
for restructuring actions, $63 million for asset impairments,
and $24 million for goodwill amortization from the
information presented below:

|                                                         |                                          |                                          |     |     |            |   |     |     |     | 
|-------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | --- | --- | ---------- | - | --- | --- | --- | 
|                                                         |                                          |                                         
|                                                         |                                          | Nine Months Ended                        |    
|                                                         |                                          | September 30,                            |    
|                                                         |                                          |                                          |    
|Product Sector                                           |                                          | 2002(a)                                  |     |     | 2001(b)(c) |  
|                                                         |                                          |                                          |     |     |            |  
|                                                         |                                          |                                         
|                                                         |                                          | (in millions)                            |    
|Electronics & Mobile Communication
    Mobile MultiMedia |                                          | $                                        | (19 | )   |            | $ | (20 | )  
|                                                         | Other Electronics & Mobile Communication |                                          |     | 343 |            |   |     | 251 |    
|                                                         |                                          |                                          |     |     |            |  
|                                                         |                                          | Total Electronics & Mobile Communication |     |     | 324        |   |     |     | 231 | 
|Safety, Thermal & Electrical Architecture                |                                          |                                          | 407 |     |            |   | 243 |    
|Dynamics & Propulsion                                    |                                          |                                          | 66  |     |            |   | 5   |    
|Other                                                    |                                          |                                          | (60 | )   |            |   | (69 | )  
|                                                         |                                          |                                          |     |     |            |  
|                                                         | Total operating income                   |                                          | $   | 737 |            |   | $   | 410 |    
|                                                         |                                          |                                          |     |     |            |  



| |     |                                                                                                                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Excludes the first quarter 2002 net restructuring
    and generator product line charges of $262 million with
    $20 million for Electronics & Mobile Communication,
    $101 million for Safety, Thermal & Electrical
    Architecture, $126 million for Dynamics & Propulsion
    and $15 million for Other.



| |     |                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Excludes the first quarter 2001 restructuring and
    asset impairment charges of $599 million with
    $78 million for Electronics & Mobile Communication,
    $214 million for Safety, Thermal & Electrical
    Architecture, $280 million for Dynamics & Propulsion
    and $27 million for Other.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | Effective January 1, 2002, we adopted SFAS
    No. 142 Goodwill and Other Intangible Assets
    and stopped amortization of purchased goodwill. Accordingly, the
    first nine months of 2001 excludes goodwill amortization of
    $24 million with $3 million for Electronics &
    Mobile Communication, $7 million for Safety, Thermal &
    Electrical Architecture, $12 million for Dynamics &
    Propulsion and $2 million for Other.

The increase in operating income by sector from
the first nine months of 2001 primarily reflects increased
non-GM revenues, savings realized from our restructuring plans,
material cost savings and improved efficiencies resulting from
the stabilization of customer build schedules, offset by lower
pricing and increased pension, healthcare and wages. The
increase in net sales attributable to currency exchange rates
did not significantly impact our operating income as we manage
our currency exposures through hedging techniques, including
derivative instruments. Our operating income was also impacted
by a charge of $6 million related to the resolution of a
Korean corporate reorganization of a customer/ business partner.
Our Dynamics & Propulsion Sector was positively impacted by
a gain on the sale of a facility of $10 million, partially
offset by mix of products sold. Our Safety, Thermal &
Electrical Architecture Sector incurred approximately
$7 million of employee separation costs. Mobile MultiMedia
reported an operating loss of $19 million reflective of the
ongoing high level of investment in engineering and research and
development related to the start-up of this high-tech business.

Taxes.Our effective
tax rate for the first nine months of 2002 was 38% compared to
33% for the comparable period of 2001. These rates reflect our
inability to fully tax effect the restructuring initiatives in
certain jurisdictions. Our effective tax rate excluding the net
restructuring and product line charges in 2002

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and restructuring and impairment charges in 2001
was 36% for the nine months ended September 30, 2002 and
2001.


Net Income (Loss).Our net income was $223 million
for the first nine months of 2002 as compared to a net loss of
$(239) million for the first nine months of 2001. Excluding the
2002 restructuring and generator product line charges of
$174 million after-tax, net income would have been
$397 million compared to net income of $184 million,
which excludes first quarter 2001 restructuring and impairment
charges of $404 million after-tax and goodwill amortization
of $19 million after-tax.

Earnings (Loss) Per Share.Basic and diluted earnings per share
were $0.40 and $0.39, respectively, for the nine months of 2002
compared to basic and diluted loss per share of $(0.43), for the
first nine months of 2001. Excluding the 2002 restructuring and
generator product line charges of $174 million after-tax,
basic and diluted earnings per share would have been $0.71 and
$0.70, respectively, compared to basic and diluted earnings per
share of $0.33, which excludes first quarter 2001 restructuring
and impairment charges of $404 million after-tax and
$19 million goodwill amortization after-tax.

Liquidity and Capital Resources

Liquidity

Our net liquidity, measured as cash and cash
equivalents less total debt, was $(2.7) billion at
September 30, 2002 compared to $(2.6) billion at
December 31, 2001. The ratio of our total debt to total
capital, which consists of total debt plus stockholders
equity, was 59.5% at September 30, 2002 and 59.2% at
December 31, 2001.

During the first nine months of 2002, we made
payments of $92 million related to employee costs and
$22 million in other exit costs for the remainder of the
2001 restructuring charge. Of the $262 million net
restructuring and generator product line charges in 2002 and the
$194 million 2001 generator product line impairment charge,
we expect to pay approximately $275 million in cash. During
the nine months ended September 30, 2002, we paid
$146 million related to employee costs, $2 million in
other exit costs and $17 million related to our generator
product line. We expect to pay up to an additional
$40 million during the fourth quarter of 2002 and the
remainder during 2003.

Requirements for working capital, acquisitions,
capital expenditures, pension funding, dividends, repayment of
debt securities, separation related obligations and
restructuring obligations are expected to be funded from
operations, supplemented as needed by short-term or long-term
borrowings available under our commercial paper programs, our
Credit Facilities described below, and other available financing
sources as necessary.

Debt
Capitalization and Available Financing Sources

Delphi has two financing arrangements with a
syndicate of lenders providing for an aggregate of
$3.0 billion in available revolving credit facilities (the
Credit Facilities), subject to certain limitations.
The terms of the Credit Facilities provide for a five-year
revolving credit line in the amount of $1.5 billion, which
expires June 2005, and a 364-day revolving credit line in
the amount of $1.5 billion, which expires in
June 2003. As of September 30, 2002, there were no
amounts outstanding under the Credit Facilities. Utilizing the
Credit Facilities as back up, Delphi maintains $2.5 billion of
worldwide commercial paper programs, under which
$1.3 billion was outstanding as of September 30, 2002.
Delphi also has approximately $140 million available under
uncommitted lines of credit. As of September 30, 2002,
there were no amounts outstanding under uncommitted lines of
credit. At September 30, 2002, our total debt was
$3.5 billion. We expect our total debt to approximate
$3.4 billion or less at December 31, 2002.

Delphi leases certain property, primarily land
and buildings, under leases commonly known as synthetic
operating leases. These leases, which are accounted for as
operating leases, provide us tax treatment equivalent to
ownership, and also give us the option to purchase these
properties upon lease expiration. In aggregate, our purchase
price, if we chose to exercise such options, approximates
$137 million. These leases also require us to guarantee a
minimum value of $121 million upon expiration

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of the leases. At September 30, 2002, the fair
value of these properties in the aggregate exceeds the minimum
value guaranteed. On October 2, 2002, we entered into a new
synthetic operating lease for two buildings. This lease replaced
an existing synthetic lease and is being accounted for as an
operating lease.


We have guaranteed the borrowings of one venture
for approximately $15 million. We have no other financial
commitments (such as lines of credit, standby lines of credit,
standby repurchase obligations nor have we guaranteed such
items) to or on behalf of entities that are excluded from our
consolidated financial statements. As of September 30,
2002, there have been no material changes to our unsecured debt
and leasing arrangements as described in our Annual Report on
Form 10-K for the year ended December 31, 2001. From
time to time we enter into purchase commitments with our
suppliers under customary purchase order terms. Any significant
losses implicit in these contracts would be recognized in
accordance with generally accepted accounting principles.

Delphi currently has a credit rating of BBB/Baa2
with a stable outlook, which was reviewed by the rating agencies
in July 2002. Although not currently anticipated, if we
were downgraded to BBB- or Baa3, we believe we would continue to
have access to sufficient liquidity; however, our cost of
borrowing may increase. Although in these circumstances our
access to the commercial paper market likely would be limited,
we believe our outstanding commercial paper could be refinanced
using a combination of funding available from our uncommitted
lines of credit, term debt, customer receivable based financing,
such as factoring, or the $3.0 billion Credit Facilities
described above. We believe that our receivables are of a
quality that would allow access to this market. Our Credit
Facilities also contain certain affirmative and negative
covenants including, among others, requirements for certain
leverage and indebtedness ratios. In addition, certain of our
lease facilities contain cross-default provisions to our Credit
Facilities. We were in compliance with all such covenants as of
September 30, 2002.

Cash
Flows

Operating Activities.Net cash provided by operating
activities totaled $0.7 billion for the nine months ended
September 30, 2002 compared to net cash provided by
operating activities of $0.9 billion for the nine months
ended September 30, 2001. Cash provided by operating
activities in the first nine months of 2002 was impacted by a
$400 million voluntary contribution in the second quarter
to our U.S. hourly pension plan and a $143 million payment
in the second quarter to GM for previously recorded separation
related obligations for other postretirement benefits. The
payment to GM represented the final payment required to settle
our separation related obligations. Cash provided by operating
activities in the first nine months of 2001 resulted from
improved working capital management partially offset by a
$175 million payment to GM in the second quarter for
previously recorded separation related obligations for pension
and other postretirement benefits.

Investing Activities.Cash flows used in investing
activities totaled $0.7 billion and $1.1 billion for the
nine months ended September 30, 2002 and 2001,
respectively. The use of cash in the first nine months of 2002
reflects capital expenditures related to ongoing operations. The
use of cash in the first nine months of 2001 reflects the
acquisition of Delphi Mechatronic Systems and Delphi Connection
Systems-Specialty Electronics for approximately
$0.3 billion, as well as capital expenditures related to
ongoing operations.

Financing Activities.Net cash (used in) provided by
financing activities was $(37) million and $213 million for
the nine months ended September 30, 2002 and 2001,
respectively. Cash used in financing activities during the first
nine months of 2002 reflected dividend payments and treasury
stock purchases, offset by increased short-term borrowing. Cash
provided by financing activities during the first nine months of
2001 represented the net proceeds from a $500 million
public debt offering partially offset by repayments of our
uncommitted lines of credit and commercial paper and dividend
payments.

Dividends.The Board
of Directors declared a dividend on Delphi common stock of $0.07
per share on September 4, 2002, which was paid on
October 15, 2002 to holders of record on September 16,
2002. The dividend declared on June 27, 2002 was paid on
August 5, 2002.

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Outlook

General.Our non-GM
revenue grew by 11% during the first nine months of 2002, and
represents 35% of our sales, up from 32% in the same period last
year. According to Automotive News, automotive production
in North America in the first nine months of 2002 was 7% higher
than the same period of the prior year. Production schedules for
our largest customer in North America, our largest market, were
approximately 10% higher in the first nine months of 2002 than
in the comparable period in 2001 in part reflecting the
financial impact of heavy incentive activity. However, other
major automotive markets remained weak. Based on preliminary
fourth quarter schedules it appears our North American
production schedules will remain firm, however, we are cautious
that this stability could be impacted by weakening vehicle
retail sales and will be somewhat offset by continued softness
in other major automotive markets.

Delphi continues to implement productivity
improvements and streamline activities designed to reduce
overhead and improve manufacturing processes. In addition, we
continue to streamline our portfolio, reduce excess capacity and
operating costs, and respond to global industry conditions and
increased employee related costs such as U.S. health care and
pensions and wages in non-U.S. locations. As previously
announced, we are in the process of winding down our generators
product line. We expect to see a meaningful decline in generator
sales over the next twelve months. Advanced and development
engineering for the generator product line has been suspended.
Capital expenditures for the remainder of 2002 supporting the
generator product line have been curtailed, and capital
expenditures previously planned for 2003 have been eliminated.
As for our instrumentation product line, our mainline strategy
for the business is to sharpen the focus of the business in
order to achieve suitable financial mileposts. In parallel, we
continue negotiations with several bidders to sell the business.
Any sale must be equal or better than our next best alternative.
We intend that these actions will continue to reduce our
manufacturing and selling, general and administrative costs, but
cannot assure you that such actions will be effective or
sufficient to offset the impact of adverse market conditions.

In addition to conditions in our market and the
economy as a whole, we depend on GM as a customer. GM accounted
for 65% of our net sales for the first nine months of 2002. Our
sales to GM have declined since our separation from GM in 1999;
principally reflecting the impact of customer driven price
reductions and the elimination of non-profitable businesses as
well as GMs diversification of its supply base and recent
changes in our vehicle content and the product mix supplied to
them. We also continue to exit some businesses as part of our
portfolio review process. Reflecting these and other factors we
expect our sales to GM to further decline over time. If we are
unable to compete effectively for new business with GMs
other suppliers, our revenues may decline. In connection with
our separation from GM in 1999, we entered into a supply
agreement with GM affording us limited bidding rights on new GM
products for a period of three years. Through December 31,
2001, we generally had the ability to secure under competitive
purchase order terms the first replacement cycle of all product
programs in the United States and Canada, which we were
providing to GM as of January 1, 1999, and certain other
product programs. Consistent with GMs contracts with other
suppliers, the supply agreement provided GM the right to
re-source business existing at January 1, 1999 if we were
not competitive in terms of quality, service, design and
technology. This right of last refusal under the
supply agreement expired on January 1, 2002. Accordingly,
we now bid for GMs business on the same basis as our
competitors. To compete effectively with these competitors, we
will need to continue to satisfy GMs pricing, service,
technology and increasingly stringent quality and reliability
requirements, which, because we are GMs largest supplier,
particularly affect us. For these reasons we cannot provide any
assurance as to the amount of our future business with GM;
however, our win rate for defending GM business remains in
excess of 80% during 2002. While we intend to continue to focus
on retaining and winning GMs business, we cannot assure
you that we will succeed in doing so. Additionally, our revenues
may be affected by increases or decreases in GMs business
or market share.

We believe the GM contenting risk is manageable
and believe the 2002 impact has been limited to selected
products, principally, premium audio, anti-lock brakes,
side-impact air bag sensors, and premium steering systems. We
continue to project our sales beyond 2002 to grow modestly
assuming projected production levels, with non-GM sales
increasing and GM sales flat to slightly decreasing.

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

U.S. Pension Plans.Delphi sponsors defined benefit
pension plans covering certain hourly and salary employees in
the U.S. On January 1, 2002, the projected benefit
obligations (calculated using a 7.25% discount rate) exceeded
the market value of plan assets by $2.4 billion. In May
2002, we made a $0.4 billion voluntary pension
contribution, however, this contribution has been offset by
negative 2002 returns for Delphis pension asset portfolio.
If asset returns are negative 10% through December 31,
2002, and all other actuarial assumptions are met, we expect the
underfunded status at December 31, 2002 to be approximately
$3.5 billion (assuming a 7.25% discount rate). Under
existing SFAS No. 87 Employers Accounting for
Pensions rules, Delphi is required annually on
December 31 to mark the gross pension liabilities and
assets to market value. Although this mark-to-market adjustment
is required, Delphi maintains a long-term outlook for developing
a pension-funding plan. In addition, we are in a period of very
low interest rates, which results in a higher liability
estimate. Assuming the negative 10% rate of return on our assets
for 2002 and interest rates increased to a historical 15-year
average range of 7.75% to 8%, Delphis underfunded status
at December 31, 2002 would decrease to $3.0 billion.
Investment returns during 2002 will have no effect on 2002
pension expense. If current market conditions remain at
year-end, then Delphis 2003 pension expense would
increase approximately $0.2 billion compared to 2002.

While the interest rate and asset return
environment has significantly impacted the funded status of our
plans, Delphi does not expect to have minimum funding
requirements, as set forth in employee benefit and tax laws,
before 2004. Notwithstanding this fact, Delphi expects to make a
voluntary contribution of $0.4 billion in 2003. While
contributions subsequent to 2003 are dependent on asset returns
and a number of other factors, based upon current market
conditions, if we made no contributions in 2003 we would be
required by employee benefit and tax laws to make contributions
of approximately $1.0 billion in 2004 and 2005.

Environmental Matters

Delphi is subject to complex laws governing the
protection of the environment and requiring investigation and
cleanup of environmental contamination. We are in various stages
of investigation and cleanup at our manufacturing sites where
contamination has been discovered. In addition, Delphi has
received notices that it is a potentially responsible party
(PRP) in proceedings at various sites, including the
Tremont City Landfill Site located in Tremont, Ohio. The Tremont
City Landfill Site proceeding,

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which is alleged to concern ground water
contamination, is in the early stages of investigation and
involves multiple other PRPs. In September 2002, Delphi and
other PRPs entered into a Consent Order with the EPA to perform
a Remedial Investigation and Feasibility Study concerning a
portion of the site. We have reserved approximately
$1 million for our share of the expected investigation
costs. Although we believe that these reserves are adequate,
because the scope of the investigation is still being
determined, we cannot assure you that our share of the
investigative costs and ultimate cost, if any, to remediate the
site will not exceed the amount of these reserves. We may be
named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. When it has been
possible to provide reasonable estimates of our liability with
respect to environmental sites, provisions have been made in
accordance with generally accepted accounting principles. We
cannot assure you that environmental requirements will not
change or become more stringent over time or that our eventual
environmental cleanup costs and liabilities will not exceed the
amount of our current reserves.


New Accounting Pronouncements

In August 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement
Obligations. This statement requires recognition of a
liability for any legal obligation associated with the
retirement of a tangible long-lived asset. Any such liability
will be recorded at fair value when incurred and generally
results in an increase to the carrying amount of the related
long-lived asset. This statement will be effective for Delphi
for the year ending December 31, 2003. The adoption of this
statement will not have a material effect on our results of
operations or financial position.

In July 2002, the FASB issued SFAS
No. 146 Accounting for Costs Associated with Exit or
Disposal Activities. This statement requires companies to
recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an
exit or disposal plan. The statement covers costs, including
certain types of employee severance, associated with a
restructuring, discontinued operations, plant closing or other
exit or disposal activities. The statement is to be applied
prospectively for such activities started after
December 31, 2002. The adoption of this statement will not
have a material effect on our results of operations or financial
position.

Forward-Looking Statements

The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements made
by us or on our behalf. Delphi and its representatives may
periodically make written or oral statements that are
forward-looking, including statements included in
this report and other filings with the Securities and Exchange
Commission and in reports to our stockholders. All statements
contained or incorporated in this report which address operating
performance, events or developments that we expect or anticipate
may occur in the future (including statements relating to future
sales, earnings, cash flow or debt level expectations, savings
expected as a result of global restructurings or other
initiatives, portfolio restructuring plans, volume growth,
awarded sales contracts and earnings per share expectations or
statements expressing general optimism about future operating
results) are forward-looking statements. These statements are
made on the basis of managements views and assumptions; as
a result, there can be no assurance that managements
expectations will necessarily come to pass. Principal important
factors, risks and uncertainties which may cause actual results
to differ from those expressed in forward-looking statements set
forth in this Quarterly Report on Form 10-Q include: our
ability to increase non-GM sales and achieve the labor
advantages expected from our separation from GM; our ability to
retain GM business; potential increases in our warranty costs;
our ability to successfully implement our global restructuring
plans, including our planned 2002 portfolio restructuring; our
ability to successfully implement our new markets initiative and
achieve the benefits anticipated by such strategy; our ability
to wind down our generator business and to fix, sell or wind
down our instrumentation business and, where applicable, to make
satisfactory arrangements with respect to antitrust matters, the
labor force, customers of such businesses and other matters;
changes in economic conditions, currency exchange rates or
political environment in the markets in which we operate; the
impact of possible terrorist attacks which could exacerbate
other risks to our business such as incremental costs, slowed
production or interruptions in the

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transportation system; financial or market
declines of our customers or significant business partners;
labor disruptions or material shortages; the level of
competition in the markets in which we operate; the cyclical
nature of the automotive industry, including significant
downturns in the vehicle production rate or changes in the
product mix; costs relating to legal and administrative
proceedings; changes in laws or regulations affecting our
business; our ability to realize cost savings expected to offset
price reductions; our ability to make pension and other
postretirement payments, which will increase with adverse market
conditions, at required levels anticipated by management; our
ability to successfully exit non-performing businesses and
absorb contingent liabilities related to divestitures and
facility closures; our ability to complete and integrate
acquisitions; changes in technology and technological risks; our
ability to protect and assert patent and other intellectual
property rights; our ability to provide high quality products at
competitive prices, to develop new products to meet changing
consumer preferences and to meet changing vehicle
manufacturers supply requirements on a timely, cost
effective basis; and other factors, risks and uncertainties
discussed in our Annual Report on Form 10-K for the year
ended December 31, 2001 and other filings with the
Securities and Exchange Commission. Delphi does not intend or
assume any obligation to update any of these forward-looking
statements.







ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK


There have been no material changes to our
exposures to market risk since December 31, 2001.






ITEM 4. CONTROLS AND PROCEDURES


At the beginning of the third quarter, in
response to recent legislation and additional requirements, we
reviewed our internal control structure and our disclosure
controls and procedures. As a result of such review we
implemented minor changes, primarily to formalize and document
the already robust procedures in place. We have designed our
disclosure controls and procedures to ensure that material
information related to Delphi, including our consolidated
subsidiaries, is made known to our disclosure committee,
including our principal executive officer and principal
financial officer on a regular basis, in particular during the
period in which the quarterly reports are being prepared. As
required, we will evaluate the effectiveness of these disclosure
controls and procedures on a quarterly basis, and did so on
October 11, 2002, a date within 90 days prior to the
filing of this quarterly report. We believe as of that date,
such controls and procedures are operating effectively as
designed.

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

25



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PART II. OTHER INFORMATION







ITEM 1. LEGAL PROCEEDINGS


There have been no material developments in legal
proceedings involving Delphi or its subsidiaries since those
reported in Delphis Annual Report on Form 10-K for
the year ended December 31, 2001.

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






ITEM 6. EXHIBITS AND REPORTS ON FORM
8-K


(a) EXHIBITS

|        |       |  |              |                                                                                                                                                                                                                                                                           
|------- | ----- |  | ------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |             
|Number  |       |  | Exhibit Name
|        |       |  |             
|        | 3(a)  |  |              | Amended and Restated Certificate of Incorporation
    of Delphi Automotive Systems Corporation, incorporated by
    reference to Exhibit 3(a) to Delphis Quarterly Report
    on Form 10-Q for the quarter ended June 30, 2002.                                          
|        | 3(b)  |  |              | Certificate of Ownership and Merger, dated
    March 13, 2002, Merging Delphi Corporation into Delphi
    Automotive Systems Corporation, incorporated by reference to
    Exhibit 3(b) to Delphis Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2002.
|        | 3(c)  |  |              | By-laws of Delphi Automotive Systems Corporation,
    incorporated by reference to Exhibit 3.2 to Delphis
    Registration Statement on Form S-1 (Registration
    No. 333-67333).                                                                                       
|        | 99(a) |  |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                           
|        | 99(b) |  |              | Certification Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                           
|        | 99(c) |  |              | Press Release dated October 16, 2002
    regarding quarterly earnings.                                                                                                                                                                                                    

(b) REPORTS ON FORM 8-K

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



| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | July 24, 2002, Form 8-K reporting under
    Item 5. Other Events the filing of charts to be
    used by members of management in meetings with investors.                                                                                          
|
| | July 30, 2002, Form 8-K reporting under
    Item 9. Regulation FD Disclosure filing of
    information relating to Delphi Chief Executive Officer and Chief
    Financial Officer statements under oath pursuant of Commission
    Order No. 4-460.

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SIGNATURE


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



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

|                 |  |                                                                                                                                               
|---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|October 16, 2002 |  | /s/ JOHN D. SHEEHAN
    -----------------------------------------------------
    John D. Sheehan, Chief Accounting
    Officer and Controller

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CERTIFICATIONS


Certification of Principal Executive
Officer

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



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



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



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



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



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

|                 |  |                                                                                                                                                                                                                   
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|October 16, 2002 |  | /s/ J. T. BATTENBERG III
    -----------------------------------------------------
    J. T. Battenberg III
    Chairman of the Board,
    Chief Executive Officer and
    President (Principal Executive Officer)

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##### Table of Contents



Certification of Principal Financial
Officer

I, Alan S. Dawes, certify that:



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



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



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



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



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

|                 |  |                                                                                                                                                                                             
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|October 16, 2002 |  | /s/ ALAN S. DAWES
    -----------------------------------------------------
    Alan S. Dawes
    Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer)

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EXHIBIT INDEX

|            |  |                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                    
|            |  |                                                                                                                                
|99(a)       |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.
|99(b)       |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.
|99(c)       |  | Press Release dated October 16, 2002
    regarding quarterly earnings.