Fitch Ratings Comments on Delphi Developments

CHICAGO--March 22, 2005--The announced sale of Delphi Corporation's global automotive battery operations to Johnson Controls Inc. for $212.5 million does not affect the current ratings of Delphi, according to Fitch Ratings. Fitch's 'BB+' rating on Delphi's senior unsecured debt remains on Rating Watch Negative. Additionally, in a separate announcement, Delphi announced that it has substantially completed its financial accounting investigation with only modest further adjustments, which Fitch sees as a positive step for the company.

To resolve the Rating Watch Negative status, Fitch will be focused on the filing of Delphi's financial statements (currently estimated by the company to be by June 30), the status of the investigation by the Securities & Exchange Commission (SEC), any further changes to the company's financial management team and the status of its bank agreement. Fitch will also focus on Delphi's ability to manage the current severe operating environment, where Delphi's margin pressures will be exacerbated by GM's production cutbacks for the first half of 2005. Delphi's leverage to GM volumes, high required pension contributions and cash outlflows related to restructuring activities are expected by Fitch to lead to negative cash flow through 2005 and a weakened balance sheet. Fitch believes that the bank agreements may be renegotiated to provide the banks with security which would impair the position of the unsecured.

The sale of the battery assets provides Delphi with additional liquidity and the opportunity to exit a non-core business. These funds are expected to fund a portion of negative cash flow projected for 2005. Delphi has stated that batteries will not remain a part of its portfolio, and the ultimate resolution of the company's North American battery assets will likely require further cash outlays.

Over the long-term, Delphi has shown solid top-line growth in non-GM business, and certain technology strengths provide several platforms for growth (including non-automotive business). Although the company's severely underfunded pension position represents a heavy claim on cash flows over the near term, heavy required contributions well in excess of benefits paid indicate that the company should show progress in closing this gap. Any rise in interest rates will further assist the closing of this gap in the near term. However, current pension legislation being considered could result in tighter funding requirements which would further impair the company's cash flow position over the intermediate term.