Delphi Corp.

founded: 1998

Contact Information:

headquarters: 5725 delphi dr.
troy, mi 48098-2815 phone: (248)813-2000 fax: (248)813-2670 url: http://www.delphiauto.com

OVERVIEW

With net sales for 2001 of $26.1 billion, Delphi Automotive Systems Corp. is a worldwide leading supplier of vehicle electronics, transportation components, integrated systems, and modules. With a broad range of products and expertise in systems integration, Delphi can provide vehicle manufacturers with comprehensive, system-based solutions in an array of vehicle component lines. Delphi's products are marketed within three product sectors: electronics and mobile communications, which includes automotive electronics and audio and communications systems; safety, thermal, and electrical architecture, including safety, thermal, and power and signal distribution components; and dynamics and propulsion, which includes energy and engine management, as well as chassis and steering products.

Along with providing components to vehicle manufacturers, Delphi also sells its products to the aftermarket (i.e., for needs arising after the automobiles have been manufactured and sold). In the aftermarket business segment, Delphi focuses on electronic and electrically enhanced replacement parts such as fuel pumps, oxygen sensors and injectors, batteries, and clutches. New offerings may also include satellite digital audio receivers, rear seat entertainment systems, and MP-3 music playback products. Delphi also provides comprehensive service and solution to the component and equipment installer.

After the automotive production and sales slowed during the first years of the 2000s, Delphi began increasingly to pursue customers outside the vehicle manufacturing industry. The company hopes find ways to apply its expertise in automotive technology to increase it presence in a wide range of business markets including medical, computer, telecommunications, military, aerospace, home appliances, agriculture, and construction.

In February 1999 Delphi, previously a private, wholly owned subsidiary of General Motors, completed its initial public offering. In May 1999 General Motors sold its remaining interest to the public. Although the majority of Delphi's business is generated by it previous parent company, both General Motor and Delphi have begun to expand its automotive component business to include new providers and new customers, respectively.

COMPANY FINANCES

For 2001 Delphi posted a net loss of $370 million on net sales of $26.1 billion, compared to a net profit of $1.1 billion on net sales of $29.1 billion in 2000. The totals for 2000 reflect a slight decrease over the net income and net revenues posted for 1999. The negative balance for 2001 resulted in a loss of $0.61 per adjusted basic share of Delphi stock, compared to earnings per adjusted basic share of $1.94 and $1.99 in 2000 and 1999, respectively.

The dynamics and propulsion product sector was the largest generator of revenue during 2001 with sales totaling $12.6 billion, down from $14.2 billion in 2000. Of 2001's total, General Motors and its affiliates accounted for $8.8 billion. Safety, thermal, and electrical architecture was the second-largest revenue producer, posting sales of $9 billion in 2001, down $1 billion from 2000. Of 2001's total, General Motors and its affiliated accounted for $5.6 billion. Electronics and mobile communication posted revenues of $4.8 billion for 2001, down from $5.3 billion in 2000. Of 2001's total, General Motors and its affiliates accounted for $3.2 billion.

Of the $26.1 billion in total sales for 2001, $16.4 billion in goods and services were sold in the United States and Canada and $3.9 billion in Mexico, making the entire North American market valued at $20.3 billion. Europe accounted for $4.8 billion in sales and South America accounted for $412,000, with the remaining $600,000 provided by the rest of the world. North American sales totals were down nearly $3.4 billion from 2000, and European sales were up nearly $350,000.

Year-on-year net sales for the first quarter of 2002 improved to $6.7 billion, up from $6.5 billion the previous year. Although still not showing a profit, net losses for the quarter were down to $51 million, compared to $429 million during the same period of 2001. The increases over 2000's figures are reflected in improved sales in all three of Delphi's major product sectors.

ANALYSTS' OPINIONS

With 67 percent of Delphi's sales going to General Motors in 2001, analysts tend to tie Delphi's fate with that of its largest customer. Although General Motors showed an 11.4 percent increase in its North American production, the auto giant's overall revenue growth was only 2.7 percent due to a 20 percent decline in European production. Delphi's increased revenues for the first quarter of 2002 reflect its limited benefit from General Motor's increased production schedule. Analysts predict a positive performance in the short term; however, the auto industry's propensity to be volatile limits the accuracy of any long-range predictions.

FAST FACTS: About Delphi Corp.

Ownership: Delphi is a publicly owned company that trades on the New York Stock Exchange.

Ticker Symbol: DPH

Officers: J.T. Battenberg III, 58, Chmn., Pres., and CEO, 2001 base pay $1.45 million; Donald L. Runkle, 56, EVP, 2001 base pay $800,000; Alan Dawes, 48, EVP and CFO, 2001 base pay $700,000; Rodney O'Neal, 48, EVP, 2001 base pay $600,000; David B. Wohleen, 51, EVP, 2001 base pay $550,000

Employees: 195,000

Principal Subsidiary Companies: Delphi operates a number of subsidiary businesses, including Delphi Diesel Systems, Delphi Energy and Chassis Systems, and Delphi Technologies Inc.

Chief Competitors: Delphi's primary competitors include Johnson Controls, Robert Bosch, and Visteon.

Because Delphi's strategy link to General Motors is not expected to generate significant growth, analysts look to the outcome of Delphi's restructuring as a means to reduce excess capacity and drive earnings. Generally analysts see Delphi's move to fix, close, or sell unprofitable and barely profitable businesses and cutting costs via closures, consolidations, and layouts, as positive steps, but warn that situation is complicated by its largely union workforce that must approve changes in labor contracts, which slows the restructuring process.

Some analysts view the mobile multimedia product segment as a weakness in Delphi's product offerings. Expected to be a growth driver, mobile multimedia reported a 28 percent decline in sales for the fourth quarter of 2001, followed by a 23 percent decrease in sales during the first quarter of 2002.

HISTORY

Delphi traces its earliest history back to the New Departure Bell Company of Bristol, Connecticut, which manufactured the first ringing doorbell device in 1888. In 1897 the company introduced the first bicycle coaster brake. In 1906 Delphi delved into the new automobile industry by working on improvements and advancement in automobile lighting components, and two years later the company began manufacturing high-quality wooden automobile bodies. In the same year, Delphi started manufacturing and marketing spark plugs under the name Champion Ignition Corp., which has since become a long-standing industry leader in the field.

In 1912 Delphi engineer Charles F. (Boss) Kettering invented the first self-starting engine. The advanced motor, which eliminated the need to hand crank the engine manually, was first introduced on Cadillacs. During the next decades Delphi continued to develop innovative advancements in the automobile industry, including the development of the first instrument-panel installation of car radios in 1936, followed three years later by the first multi-button mechanical radio tuner. In 1951 Delphi developed power steering, and in 1974 introduced rack and pinion steering. In 1954 the company began to market an air conditioning system with all major components located under the car's hood, a technology that has continued to advance so that currently nine of every ten automobiles in North America are built equipped with air conditioning. Delphi made another revolutionary advancement when it introduced the first inflatable airbag restraint system in 1973.

Delphi was incorporated in 1998 as Delphi Automotive Systems Corp., having changed its name from Automotive Component Group in 1995, as a wholly owned subsidiary of General Motors Corporation. In February of 1999 Delphi completed its initial public offering and began trading its shares to the public. In May of 1999 the company's spin off from General Motors was completed when General Motors divested itself of all remaining Delphi stocks. The company's name was changed to Delphi Corp. in March of 2002 to denote the organization's growing independence from General Motors and its diversification into non-automotive industries, such as home appliances and fiber optics telecommunications components.

CHRONOLOGY: Key Dates for Delphi Corp.

1906:

Delphi begins marketing spark plugs under the name Champion Spark Plugs

1912:

Delphi engineer Charles F. (Boss) Kettering invents the first self-starting engine

1936:

Installs first instrument-panel car radio

1939:

Develops first multi-button mechanical radio tuner

1951:

Introduces first power steering system

1954:

Begins marketing first under-the-hood automobile air conditioning system

1973:

Develops first inflatable airbag safety system

1999:

Company is spun off from General Motors as a publicly owned independent corporation

2002:

Changes name from Delphi Automotive Systems Corp. to Delphi Corp. to reflect an increased interest in non-automotive business segments

STRATEGY

Delphi's strategy plan is fourfold: diversification of its customer base; strengthening its global presence; accelerating into higher-end, higher-profit margin product lines; and resolving non-strategic business lines. Uncertain of when the automotive industry will rebound and hit with a net loss for 2001, Delphi announced on March 29, 2001, that it would begin to realize its strategic goals by undergoing global restructuring designed to reduce structural costs, improve the earning potential of its core businesses, and streamline operations. The restructuring plans called for Delphi to sell, close, or consolidate nine manufacturing plants, reduce its worldwide workforce at 40 other facilities, and sell underperforming and noncore product segments. During 2001 the company divested or closed 17 product lines as it moves away from low-end, mostly mechanically based products to high-end, high-tech electronically based products. During 2001 approximately the workforce was reduced by more than 10,000 people. Additional job cuts of more than 6,000 employees, announced in April 2002, are scheduled through 2003.

Under the corporate banner of "Driving Tomorrow's Technology," Delphi intends to remain focused on advancing high tech innovations that apply to both the automotive and non-automotive sectors. At the end of 2001, the company had approximately 350 new products, in various stages of production, with plans to introduce them during the next three years. To put its put its money where its mouth is, Delphi maintains an annual budget of $1.7 billion for engineering, research, and development. During 2001 Delphi engineers earned more than 600 patents worldwide.

INFLUENCES

Delphi's business is significantly dependent on trends in automotive sales as its revenues relate directly to the automobile production schedules of its automotive customers, most importantly General Motors. Production rates, in turn, depend on factors such as general economic conditions, consumer spending, and customer preference. In an industry that tends to cyclical, the year 2001 proved exceptionally challenging. Automobile production in North America was erratic and much lower in volume than the previous year. Although production stabilized during the second half of the year, the events of September 11, 2001, further eroded consumer confidence in an already depressed market. Vehicle manufacturers responded with unique incentives such as zero percent interest rates, which increased demand, but dealer primarily sold stock on hand, and so Delphi did not benefit from the strategy. As a result, Delphi's revenues for the year declined, and the company posted a net loss. Continuing uncertainties regarding the economy as well as the return of regular pricing by the automobile industry may continue to adversely affect Delphi's sales.

CURRENT TRENDS

Delphi has identified seven market trends. First, consumers are increasingly demanding greater electronic and technological content in the vehicles they purchase. Customers want better vehicle performance, functionality, and convenience at an affordable price. Improvements in technology are also driven by the introduction of more stringent regulatory standards for automotive emissions and safety. Second, there is an increasing interest in manufacturing vehicles that can be sold in a variety of world markets that meet regional and cultural expectations of a specific area's population. Automotive suppliers, including Delphi, must adapt to the industry's move toward automobile production in which a car is designed in a single location, but produced and marketed in many different geographic locations. Namely, Delphi expects to make move to improve its global capabilities as a supplier.

Third, more and more vehicle manufacturers are outsourcing entire systems and modules as a means to streamline and simplify design and assembly processes thereby reducing their costs. Consequently, Delphi expects to increase its sales of sophisticated pre-assembled systems. Fourth, ongoing consolidation within the automotive parts industry has impacted customer and supplier relationships as suppliers work to provide vehicle manufacturers with single-point sourcing of integrated systems in an increasing global market.

INNOVATIVE TECHNOLOGIES

FOREWARN Collision Warning System provides the driver with forward, side, and rear detection systems that help monitor the road using infrared, ultrasonic, vision, and global positioning sensors. FOREWARN alerts drivers to possible hazards within its detection zone. FOREWARN can also be integrated into a car's cruise control to detect vehicles in front of the driver and make necessary adjustments to speed via throttle control and braking to maintain a preset distance between cars.

E-STEER is an innovative, fully electric, power steering system that is highly efficient. It eliminates the need for the power steering pump, hoses, and hydraulic fluid, as well as the belt and pulley on the engine. E-STEER provides high performance, improved fuel economy, acceleration, and safety, and it is environmentally friendly.

COMMUNIPORT systems address the growing market demand for mobile communications, entertainment, and information as part of the driving experience. COMMUNIPORT systems offer high-tech innovations such as global positioning satellite receivers, in-car integrated navigation, MP-3 playback, Satellite Digital Audio Receiver Service, and portable rear seat entertainment systems with DVD and multiple game system capabilities.

Fifth, Delphi has recognized increased pressure from its customers to respond more quickly to customer preferences, advancing technology, and changing regulations by shortening the time from research and design to finished product. Also automobile manufacturers wish to adjust to the trends in vehicle preferences rapidly, shifting production of vehicle types as the market demands, from light trucks to sport utilities vehicles to passenger cars. Sixth, the growth of e-business has required Delphi to adopt Internet-based strategies that offer tools to facilitate customers' needs and improve supply chain efficiency. Finally, since 2001 Delphi has been making a concentrated effort to increase its sales outside the automotive industry. The company envisions the adaptation of its vehicle components and systems to numerous fields that also require high-tech parts and services, such as consumer appliances, medical, construction, aerospace, and telecommunications.

PRODUCTS

Within the electronics and mobile communication business segment, Delphi offers automotive electronics products, including audio systems, security systems, and powertrain and engine control modules. The company's safety, thermal, and electrical architecture business unit provides such products as powertrain cooling systems, climate control systems, and safety airbag system as well as a range of connective wiring, switch, and electrical components. Delphi's dynamic and propulsion product segment produces engine management systems for both gasoline and diesel engines and major electronic chassis controls related to brakes, steering, and suspension. The company's aftermarket segment offerings include consumer and vehicle electronics and innovative diagnostic and service equipment.

CORPORATE CITIZENSHIP

Delphi's corporate citizenship focuses on education, community relations, and volunteering. It carries out its commitment to education through its For Inspiration and Recognition of Science and Technology (FIRST) program, which provides opportunities for students compete with Delphi engineers serving as FIRST coaches to student teams or as FIRST judges. As part of its drive to better community relations Delphi participates in a number of community programs, such as Habitat for Humanity and special housing projects in Mexico. Employee volunteering is encouraged and supported at Delphi. For example, following the events of September 11, 2001, Delphi employees responded with monetary collections and blood drives.

GLOBAL PRESENCE

Delphi's world headquarters in based in Troy, Michigan, along with regional offices in Tokyo and San Paulo, Brazil. In all, Delphi operates more than 300 manufacturing, engineering, and customer service and sales facilities in 42 countries around the world. As a part of its restructuring plan, Delphi has reduced or eliminated some of its international operations. By the end of 2001, Delphi had closed, sold, or consolidated manufacturing plants in Ande, France; Betim, Brazil; Casoli, Italy; Robertsdale, Alabama; Saginaw, Michigan; Fort Defiance, Arizona; Piracicaba, Brazil; and Bochum, Germany. Another plant located in Southampton, United Kingdom, was closed in the first quarter of 2002.

EMPLOYMENT

At the heart of Delphi's workforce is its roster of 16,000 engineers, scientists, and technicians who introduced 126 new products during 2001 and have 350 more in different stages of development. Of Delphi's approximately 195,000 employees, 36,000 are salaried and 159,000 are hourly. Of the hourly employees, 93 percent, or 147,000 people, are represented by one of fifty-six unions. Approximately 47,500 U.S. employees are represented by a union, with three-quarters of that total aligned with the United Automobile Workers. In Mexico two unions represent nearly 60,000 hourly workers, and in Europe 38 unions represent more than 32,000 people.

SOURCES OF INFORMATION

Bibliography

"delphi injects $60m into parts production." professional engineering, 16 january 2002.

"delphi launches wireless diagnostic system." motor age, may 2002.

"delphi shortens its name to reflect its new markets." the new york times, 16 march 2002.

"delphi to cut 6,100 more jobs." united press international, 17 april 2002.

freeman, sholnn. "delphi posts narrower loss as rival dana's loss widens." wall street journal, 18 april 2002.

"relationship is linchpin of lean manufacturing." automotive news, 27 may 2002.

sherefkin, robert. "suppliers drop 'automotive'; auto firm by any other name may lure investors." automotive news, 1 april 2002.

willoughby, jack. "revving up." barrons, 22 april 2002.

For an annual report:

on the internet at: http://www.delphiauto.com

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. delphi corp.'s primary sics are:

3714 motor vehicle parts and accessories

also investigate companies by their north american industry classification system codes, also known as naics codes. delphi corp.'s primary naics codes are:

336399 all other motor vehicle parts manufacturing