Delphi buying TRW's fuel-injector unit

Attraction is Europe's diesel engine market

Auto parts industry

November 24, 1999|By BLOOMBERG NEWS

DETROIT -- Delphi Automotive Systems Corp., the world's largest auto parts maker, said yesterday that it will buy TRW Inc.'s diesel fuel-injector business for $871 million to grab a piece of Europe's fast-growing market for diesel engines.

TRW acquired the unit this year in its $6.53 billion purchase of United Kingdom-based LucasVarity PLC, and the sale will help TRW pare debt. The unit had sales of $1.1 billion last year.

The purchase furthers Delphi's goal of adding customers other than former parent General Motors Corp. and makes it the No. 2 maker of diesel-fuel injectors, behind Germany's Robert Bosch GmbH. Diesel engines now account for 25 percent of new cars and light trucks sold in Europe, and Troy, Mich.-based Delphi expects that to rise to 35 percent by 2010.

"This is dead-on for Delphi," said Eric Goldstein, an automotive analyst with Bear Stearns & Co. "This will give them a big position in diesel fuel injection in Europe, which was something they were missing in their product portfolio."

Delphi plans to finance the purchase from internal cash flow, which Chief Financial Officer Alan Dawes said will total about $2 billion this year. Delphi said the diesel unit will add to its earnings starting next year.

Don Runkle, president of Delphi Energy & Engine Management Systems, will manage the acquired business, which will be renamed Delphi Diesel Systems.

The purchase helps Delphi reduce its reliance on former parent GM, which accounted for three-quarters of Delphi's $28.5 billion in revenue last year. Delphi separated from GM in February through an initial sale of 100 million shares, and GM distributed its remaining stake to GM shareholders in May.

Delphi shares, which have slipped 7.7 percent since it started trading in February, fell 14.06 cents to close at $15.6875 yesterday. TRW shares fell 50 cents to close at $51.50.

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