GM's profits rest on selling parts Report on Delphi Systems shows strength of unit, but weak operation overall

March 13, 1997|By BLOOMBERG NEWS

DETROIT -- General Motors Corp. said yesterday that its Delphi Automotive Systems parts unit contributed almost half of the automaker's $4.88 billion in North American profit over the last three years.

The results, the first time Delphi profit has been broken out, come as GM prepares to sell a stake of up to 20 percent in the unit sometime after this year. GM usually combines Delphi results with its North American Operations, which makes cars and trucks in the United States, Canada and Mexico.

Since 1994, Delphi contributed $2.33 billion to GM's profit from operations. The results show that GM's automaking business in North America is weaker than expected, some analysts said.

"I'm not so much impressed with Delphi as I am disappointed" with the North American Operations, said Gary Lapidus, an analyst with Sanford C. Bernstein & Co.. "It shows that NAO makes even less money than I thought."

GM's earnings fell in 1996 because of labor union strikes in the United States and Canada. While Delphi earnings fell 21 percent to $728 million last year, that still was more than twice the $333 million GM earned making automobiles in North America.

Delphi's profit from operations, which excludes the effects of one-time gains and charges, rose 33 percent in 1995 to $916 million from $686 million in 1994, the company said. Sales at Delphi, the world's largest auto parts maker, fell 1.6 percent in 1996 to $26.0 billion from the year before.

GM's North American Operations profit, excluding Delphi, rose 54 percent to $1.52 billion in 1995 from $706 million in 1994.

The results, which were broken out dating back to 1991, show that both units have improved since the $7.2 billion total loss in 1991, said GM Chief Financial Officer J. Michael Losh. "Both have a ways to go," he said.

GM wants its business to operate at 5 percent net profit margins in good times and bad. Delphi's 1996 net margin, excluding special items, was 2.8 percent, while the North American auto business ran at 0.4 percent. Net margin is the percentage of profit earned on each $1 sale.

The Delphi results released today covered 1994-96 on a quarterly basis, and 1991-96 on an annual basis. Losh declined to provide more detail on the proposed sale of the Delphi stake.

Pub Date: 3/13/97

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