INTERVIEW-Delphi CEO sees big acquisition by year end_
By Todd Nissen
TROY, Mich., Nov 4 (Reuters) - As prices fall in the rapidly consolidating auto supplier industry, Delphi Automotive Systems Corp. (NYSE:DPH - news) is likely to make a multibillion-dollar purchase by the end of this year, Chairman and Chief Executive Officer J.T. Battenberg said on Thursday.
At the same time, Delphi, the world's No. 1 auto supplier, has increased its target for winning new business outside of its former parent, General Motors Corp. (NYSE:GM - news), Battenberg said in an interview with Reuters.
Delphi, which completed its spin-off from GM in May, now wants non-GM business to grow at 13-15 percent annually after 2001, up from the previous goal of 10 percent. Through the third quarter, Delphi had booked $7 billion in non-GM business, up 13 percent from the year-ago period.
GM accounted for 77 percent of Delphi's $21.94 billion in revenues in the first nine months of the year. That compares to 78 percent of the $20.68 billion in revenues for the year-ago period. Delphi had $28.5 billion in sales for all of 1998.
With Asian automakers dismantling their massive supplier bases, and the cyclical business on a downturn, component makers worldwide have picked up the pace of their shopping sprees. Battenberg said ''it's a great time for acquisitions.''
Delphi is on pace to generate $2 billion in cash flow this year and has little debt, Battenberg said, making it well-positioned to buy a major company. He declined to specify a size, but indicated it could be a multibillion-dollar deal. Delphi makes an acquisition about once every five weeks, many of them small.
''We have a lot of dry powder,'' he said. ''I'd be very surprised if we don't do a major acquisition by the end of the year.''
Market speculation in Europe over the past few months that Delphi may be interested in Valeo has driven the French auto parts company's stock. Delphi officials declined to comment on the rumors.
Delphi has 170 product lines and Battenberg said the company wants to grow in the electronic, wiring connectors and engine management segments.
After wrapping up a peaceful -- but expensive -- round of labor talks with the United Auto Workers on a new national contract, Battenberg said the company is ahead of schedule for reaching new agreements with its 23 UAW locals. He also expects Delphi to get through the process without any strikes.
Battenberg credited UAW President Stephen Yokich and Vice President Dick Shoemaker with setting a constructive tone to the national negotiations and agreeing to relax work rules that will allow Delphi to boost plant productivity.
That is a big change from the 1996 national and local talks, when UAW strikes against GM and Delphi plants gave GM the worst labor relations among Detroit's Big Three automakers. But Battenberg, who received a pen set from Yokich following a signing ceremony Wednesday, said this time was different.
''It was one of the most professional sets of negotiations that I've ever been involved in,'' he said.
Merrill Lynch analyst John Casesa said in a research report this week UAW workers will represent less than 20 percent of Delphi's work force because of increased attrition and overseas sales growth. The UAW represented 27 percent in 1998.
Meantime, the more flexible work rules will help Delphi as it moves through its ''troubled plant'' restructuring. Delphi this year expects to shed $600 million in product lines it has identified as under-performing, Battenberg said. Two European plants he did not name have entered the restructuring process.
Historically, Delphi has fixed and kept one-third of its sub-par businesses. But going forward, Battenberg said he expects the company will be able to fix more than half of what remains of the $2-$3 billion in under-performing operations. |
