Delphi puts 3 units on sales block It elects to focus on profitability

Auto parts

September 19, 1997|By BLOOMBERG NEWS

TROY, Mich. -- General Motors Corp.'s Delphi parts subsidiary plans to sell seating, coil spring and lighting businesses employing 11,300 people, or about 6 percent of its work force, to focus on more profitable products and spruce itself up for a public stock offering.

The businesses, which have plants in North America, Europe and South Africa, generated $2 billion in sales last year. Delphi, with $26 billion in annual sales and 178,000 employees, is the world's largest auto-parts maker.

Analysts had expected Delphi to shed its lackluster product lines as it prepares for an initial public offering, expected as early as next year, and as it shifts its focus from individual parts to the more comprehensive component systems increasingly demanded by GM and other automakers.

"They need to be able to put their money behind products they want to stick with," said Craig Cather, an auto industry consultant with CSM Corp. in Lansing, Mich.

Because the businesses to be sold are marginally profitable at best, proceeds aren't likely to be significant, analysts said. The company last year sold four North American plants with annual sales of $1 billion to closely held Peregrine Corp. for less than $80 million.

Delphi, which said it wants to get out of "mature businesses in crowded markets," has been informally trying for more than a year to sell the businesses put on the block yesterday, analysts said. Some were in danger of being shut down.

"Exploring other options for seating and lighting will allow us to concentrate our resources on growth businesses," said Rodney O'Neal, vice president and general manager of Delphi Interior & Lighting. He singled out air bags, passenger compartments and door units complete with interior trim and window controls.

Delphi, like other parts suppliers, is stepping up production of entire systems, such as climate controls and steering and braking systems, rather than individual parts. Automakers are pressuring suppliers to provide complete systems, which enable auto plants to operate more efficiently.

Delphi will buy from outsiders the parts that it can't produce profitably itself, Cather said.

Delphi also is under pressure to be more efficient as it weans itself from GM business. About 63 percent of its sales are to GM's North American plants, and it wants to reduce that to 50 percent by 2002.

Delphi's sales are growing faster in Latin America, Asia and Central Europe than in North America, analysts said.

A spokesman for the United Auto Workers union, which represents Delphi's U.S. workers, declined to comment.

Pub Date: 9/19/97

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