Delphi aims to diversify its baseAuto supplier will spend $1 billion to get its electronic components into new uses and markets ... THE INDIANAPOLIS STAR March 02, 2001, Friday, CITY EDITION BY TED EVANOFF STAR DETROIT BUREAU ... TROY, Mich. --
Delphi Automotive Systems Corp. is committing $1 billion to find customers in the
cellular phone, medical, computer and other industries for the electronic components it now sells
chiefly to auto manufacturers.
The capital will be spent on twin missions:
Developing new in-house products, largely at its Kokomo-based Delphi Delco Electronics Systems.
Buying top-notch outside technologies and companies.
The goal, company executives said Thursday, is to increase annual nonautomotive industry sales to $1
billion within six years.
Delphi, which has idled 10 percent of its North American production workers, announced formation
of its New Markets enterprise Thursday as GM disclosed auto sales fell 9.4 percent in February.
The idea of moving outside autos came up in 1997 when GM's board began to seriously consider a
Delphi spinoff. Until this year, executive staff at the auto-parts maker was preoccupied with getting
the company ready for independence, taking it public and running it.
While it's the 56th largest U.S.-based corporation with annual sales of $29.1 bil lion last year, Del
phi's heavy reliance on GM and the auto market has discouraged investors leery of boom-and-bust
manufacturing stocks.
At every opportunity, Delphi executives have touted the company's engineering competence in hopes
that Wall Street would prop up the stock. Now, with the start of the New Markets office in the
corporate headquarters in suburban Detroit, executives will have tangible proof of their efforts to
diversify beyond autos.
"We're not looking to grow this new business at an unbridled pace," said Alan Dawes, Delphi chief
financial officer. "But hopefully, we'll be a little less cyclical over a longer time."
Sales last year of electronic parts and other components outside the auto sector amounted to $250
million at Delphi. Another $250 million came from nontraditional auto customers such as
Harley-Davidson motorcycles.
Business inspired by the New Markets unit could increase that volume by 20 percent a year, Dawes
said, and possibly as much as 60 percent in some years as Delphi acquires new technology or
companies.
In contrast, Delphi forecasts its auto business will decline 10 per cent this year as GM and others cut
back production.
Heading the New Markets unit as executive director is Atul Pasricha. A GM regional treasurer in
Singapore from 1996 to 1998, Pasricha joined Delphi in 1998. His office is in the Troy headquarters.
Last fall, he worked in Kokomo as acting general finance director for Delphi's electronics and mobile
communications business. He reports to Dawes.
"As we go into these other markets, we can gain some knowledge which we can bring back and
apply to our automotive markets," Pasricha said in an interview at Delphi's headquarters.
Stepping outside the traditional automotive sector will give Delphi's 7,800-employee engineering
complex at Kokomo the challenge of reconfiguring components for new customers brought in by
Pasricha.
Because its electronic devices are in vehicles driven on every continent, Delphi has a competitive
advantage, Pasricha said. Its tiny electronic systems are built to function in intense heat, high humidity
and extreme cold.
That level of durability in a tiny package is attractive to potential customers such as cell-phone maker
Nokia.
While it's not clear if the new business unit will cause employment at Kokomo to rise, Pasricha said it
will bring in new responsibilities for the current engineers and could lead to more employment later.
"We're going to take a methodical approach, essentially look at our technologies and look at the
opportunities we may have in terms of gaps in our market or in the technology we have," Pasricha
said.
Although the fast pace of the high-tech sector requires product development in a few months,
compared to 18 to 24 months in the auto industry, engineers in Kokomo have already shown they can
move quickly.
The Mobile MultiMedia unit, centered largely in Kokomo, brought out 10 new products last year,
including the MPCpro for cars. It gives drivers hands-free access to data in their Palm V or Vx
handheld computer and understands spoken commands.
"Talk about a quick product cycle. They brought out that MPC -- brought it from design to market --
in nine months," Pasricha said. "That's an excellent example of how well we can do it and how fast we
can do it."
Call Ted Evanoff at (313) 417-9215
or e-mail ted.evanoff@starnews.com
INFO BOX:
Delphi Automotive Systems Corp.
What:Delphi is the world's largest auto-parts manufacturer. It was spun off by General Motors Corp.
in 1999.
Sales:$29.1 billion
Profits:$1.1 billion
Fortune 500 rank:56th
Employees:211,000
Headquarters:Troy, Mich.
Chairman:J.T. Battenberg III
Indiana operations:Kokomo-based Delphi
motorage.com ... original link
Troy, Pa.-Based Automotive Systems Maker Seeks New Markets ... Detroit Free Press March 2, 2001, Friday, By Jeff Bennett
Delphi Automotive Systems will invest up to $ 1 billion in the next year to market its high-tech
automotive products in new industries, such as telecommunications and health care, company officials
said Thursday.
It's a move Delphi executives hope will diversify the automotive parts supplier whose bottom line is
tightly connected to the ups and downs of the auto industry.
This year, Delphi expects its revenues to be down about 10 percent in the first half of the year and up
somewhat in the second half due to the slowing automotive market.
In addition, Delphi might find new areas for business growth.
"We have had our eyes opened in the last three to four years of the opportunities that are out there,"
said Alan Dawes, chief executive officer of Troy-based Delphi.
For example, Delphi will start selling hard metric connectors to the telecom market through its Irvine,
Calif.-based Hughes Interconnect subsidiary. The connectors are similar to the two plastic pieces that
are plugged into each other to connect a phone cord to a phone. The connector industry is expected
to grow globally to $ 50 billion by 2004.
"It is providing information into a very tight crevice, and we have the skills to do that," Dawes said.
Delphi also proved it was getting serious by appointing Atul Pasricha as executive director of new
markets. Pasricha, 43, will be responsible for identifying where Delphi needs to be.
"This is a natural evolution," Pasricha said. "When you are an automotive company you think
automotive. With so many of Delphi's high-tech automotive products applicable to other industries,
we should be able to capitalize on our vast electronic integration capabilities and experience."
The announcement by the General Motors Corp. spin-off is nothing new in the automotive supplier
industry.
In October, Dearborn-based Visteon Corp., a Ford Motor Co. spin-off, said it wants to lessen its
dependence on the automaker and raise non-Ford sales to 20 percent. It also wants to focus on
telematics, multimedia entertainment and voice-recognition technology.
Katie Noonan, president of the Beverly Hills-based Noonan Group, which provides consulting work
for automotive suppliers, said suppliers need to sell their wares to whatever application those wares
fit. "The margins they've enjoyed for the past 15 years in the automotive game have shrunk so it may
now make sense to start exploring other industries," Noonan said.
"If anyone can do it, Delphi can do it. They are far and away one of the most progressive and
market-savvy companies out there. They see the writing on the wall, and they don't sit around for two
days. They react."
Dawes said the company will avoid some of the diversification pitfalls because it will increase
production only of its current products.
Delphi is already selling in non-automotive markets. In 2000, the company generated $ 460 million, or
about 1 percent of its revenues, from those markets.
motorage.com ... original link |
