Most football teams, when forced to punt, try to pin the opposition deep in its own territory, thereby improving their own field position. That's a strategy General Motors Corp.'s Delphi Automotive Systems Div. knows something about.
Faced with significant losses in 1991, Delphi (then GM's Automotive Components Group) decided to kick away its businesses that were not "core" and those that not No. 1 or No. 2 in the industry (see WAW -- Aug. '95, p.34). With that accomplished, Delphi "Coach" J.T. Battenberg III has his team in the opponent's red zone (football parlance for inside the 20-yard line) poised to score a lot of points.
While it was divesting some $3.5 billion in annual sales of vacuum pumps, rear axles, radiator caps, starter motors, small motors and actuators, generators, wiring and magnets, Delphi formed 19 joint ventures (for a total of 38) and made outright acquisitions to bolster and globalize its core lighting, chassis, environmental systems, battery, engine management and seat businesses. Three additional joint ventures -- in Eastern Europe and the Far East -- are expected to be announced soon.
The result was $26 billion in worldwide sales and a third consecutive year of profitability in 1994. It also made an undisclosed amount of profits during the third quarter and first nine months of 1995. Although he won't predict 1996 sales, Mr. Battenberg, Delphi's president and a GM senior vice president, says $30 billion is "not out of the question."
As Delphi continues to gain momentum, it's getting more new business from outside GM's North American Operations (NAO). In 1988 only 15% of Delphi's business came from outside GM. In 1994, the group was up to 28%. The 1995 figure should hit 30%.
"(1995) sales will be up, driven by non-NAO sales, which are growing at 10%-15%," states Mr. Battenberg. "And we're on track to get to the 50% in the year 2002." Delphi Packard, says Mr. Battenberg, already has 51% non-NAO business. "We're picking up a billion dollars a year of non-NAO growth every year. And that will continue to accelerate," he adds.
Mr. Battenberg explains that Delphi's success is a result of offering customers globalized one-stop shopping. "We've made our technology available to all the OEMs around the world," he says. "We've put a global network in place for BMW, for Renault, for Chrysler, that deals exclusively with them. They can do one-stop shopping at Delphi worldwide."
Delphi also is making its products widely available in the Far East, particularly in South Korea (see story below). "We'll probably do $700 million this year in Korea alone," says Mr. Battenberg, who adds he's working hard to get in on the ground floor with Samsung, the Korean electronics giant that's now gearing up to produce cars.
As the world's largest automotive supplier, Delphi is well-positioned to capitalize on the trend toward modules and systems. In fact, Mr. Battenberg says Delphi is currently bidding on complete interior packages with two major European automakers.
Although Mr. Battenberg sits on several of GM's corporate strategy committees, he says Delphi operates "at arm's length" from its parent. That arm will stretch a bit farther in summer 1997 when Delphi moves out of the Pontiac Motor Div. building in Pontiac, MI, into a new, six-story world headquarters in nearby Troy. The company broke ground for the $50 million, 264,000-sq.-ft. (24,520-sq.-m) complex last September.
With that in mind, as well as GM's looming spinoff of the Electronic Data Systems subsidiary, wouldn't it make sense for Delphi to head out on its own? "I don't know of any (such plans)," he tersely replies. What's the benefit to Delphi of remaining as an integral unit of GM? "I'd rather not discuss it," he snaps.
So at least for now, a profitable Delphi continues to help NAO's fragile bottom line. And that profitability is a direct result of punting 14 non-core businesses and an aggressive trans-oceanic passing attack that would impress Vince Lombardi.