GM completes spinoff of Delphi Automotive, No. 1 auto-parts maker

Shares valued at $9.3 billion are distributed


May 29, 1999|By BLOOMBERG NEWS

DETROIT -- General Motors Corp., the world's largest automaker, completed its separation from No. 1 auto-parts maker Delphi Automotive Systems Corp. yesterday with the distribution of $9.3 billion in Delphi shares.

GM, which handed its investors an 80.1 percent stake in Delphi and gave another 2.2 percent to a pension trust, now owns no Delphi shares. GM rose 50 cents to $69 on the New York Stock Exchange after being adjusted for the distribution, which was valued at $14.33 per GM share. Delphi slipped 87.5 cents to $19.625.

The spinoff follows February's sale of a 17.7 percent stake in Delphi, which raised $1.7 billion in one of the decade's biggest U.S. initial offerings. The separation and an interim labor understanding reached yesterday leave Delphi freer to pursue work with GM rivals such as Ford Motor Co., analysts said.

"We're being inundated with requests for quotes from all the automakers," said J. T. Battenberg III, Delphi's chairman, chief executive officer and president. About $2 billion of $6 billion in recent new business is from outside GM, he said.

Delphi, which had sales of $28.5 billion last year, wants to generate half its revenue from outside GM's North American operations by 2002, down from 67 percent. The Troy, Mich., maker of steering and suspension parts, air bags, air conditioners, brakes and other parts has 200,000 employees in 37 countries.

Delphi was added to the Standard & Poor's 500 stock index after the market closed yesterday. Its shares rose 4.8 percent yesterday in advance of the spinoff and inclusion in the S&P 500.

"The two stocks are trading more powerfully than people might have expected," analyst Gary Lapidus said of GM and Delphi.

The Sanford C. Bernstein & Co. analyst expects Delphi stock to "go through a little turmoil" as the additional shares enter the market. "A lot of people have to decide whether to hold it or sell it," he said.

In yesterday's tax-free distribution, GM investors received 452.57 million Delphi shares, or 0.69893 Delphi shares for each GM common share they owned as of Tuesday. Another 12.4 million shares are being contributed to the retiree benefits trust.

"This transaction creates value for GM shareholders while allowing for an even more competitive Delphi," said John F. Smith Jr., GM's chairman and chief executive officer.

Smith, Vice Chairman Harry Pearce and Chief Financial Officer J. Michael Losh resigned from Delphi's board yesterday.

While GM owns no Delphi shares, it will take longer for the companies to break other links, such as labor agreements. The automaker and the United Auto Workers union have agreed to create a separate bargaining unit for 46,000 workers at Delphi.

Delphi promised to abide by the existing UAW-GM contract until new agreements are reached this fall.

UAW leaders opposed the spinoff and until yesterday had not agreed to a formal, legally binding relationship with Delphi as a separate company. Richard Shoemaker, the UAW vice president who directs bargaining at GM, emphasized Delphi's pledge to honor the current labor contract until negotiations in the fall.

"UAW members in Delphi plants can rest assured that their interests, including wages, benefits and working conditions are secure," Shoemaker said.

Pub Date: 5/29/99

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