Skip navigation

Delphi Profitable in North America

In an interview with Ward’s, CEO Rodney O’Neal says Delphi won $89 billion in new business while in bankruptcy, and he describes its relationship with GM as “extremely positive.”

Special Coverage

SAE World Congress

DETROIT – The messy, painful, 4-year bankruptcy case drew to a close for Delphi Corp. Oct. 6, ending a sad money-losing chapter for what started out as the Goliath of the automotive supply chain more than a decade ago.

But a new day has dawned, and no one is happier than CEO and President Rodney O’Neal to put the legacy costs, unprofitable contracts, inefficient manufacturing plants and labor discord into the past.

The biggest transformation for the new Delphi, aside from jettisoning commodity products such as steering, foundation brakes and interior plastics, is a significantly more diverse customer base.

At one point before being spun off from General Motors Corp. in 1999, Delphi relied on the auto maker for about 83% of its revenues, O’Neal tells Ward’sduring an interview at this week’s SAE World Congress here.

Today, no single auto maker represents more than 15% of Delphi’s estimated $11 billion in annual revenues. And O’Neal says Delphi managed to win a whopping $89 billion in new business globally while in bankruptcy, contracts that will ramp up over the next several years.

“We never lost our way technology-wise,” he says of the anxiety-filled bankruptcy years. “It’s about winning new business, and you win through technology. We staked out the space we’d operate in. We took the technologies we were good at and had global size in.”

And Delphi technologies found a ready audience among numerous auto makers.

“We were compelling enough that we could sit down with our customers, show them our value, and win contracts even in the face of Chapter (11), because they were as confident as we were that we would come out.”

Based on the new business, O’Neal says Delphi’s revenues should grow 40% by 2012.

He describes the supplier’s relationship with former parent GM as “extremely positive” and says he still wants new business with the auto maker, despite the bruising revelation during the bankruptcy that Delphi had thousands of money-losing contracts with GM.

That won’t happen again, O’Neal assures.

“If you’re not doing business that’s profitable, then you’re not really doing business,” he says. “We believe our technologies are of a state that it’s not three quotes in a cloud of dust. It’s not about price. It’s about value. At end of the day, though, it has to be profitable. The model can’t work where it’s a zero-sum game.”

If a contract cannot achieve a win-win for both auto maker and supplier, then the relationship should not move forward.

“At the commercial line of scrimmage, the OEM has the ability to say, ‘No thank you,’ and so does the supplier. Nobody is making anybody take business,” he says. “No matter how inexpensive my part is, or how expensive the OEM car is, if it doesn’t sell, nobody makes any money.”

As a privately held company, Delphi no longer has to share many of its financial results. But O’Neal is eager to reveal this nugget, which he’s rarely been able to say during his long career with Delphi.

“North America is profitable,” he says of the supplier’s home region, with a vastly reduced manufacturing footprint. “I’m a different company. We will be profitable in every region, in every product, in every division, in every product business unit. Every part of our company will carry its own weight.”

Key to that strategy is a continued emphasis on research and development of new technologies to keep Delphi on the cutting edge in its product segments: electronics and safety; powertrain; thermal; and electrical and electronic systems.

Delphi’s owners, led by Elliott Management Corp. and Silverpoint Capital LP, have pledged to invest 11% of revenues into product R&D each year, O’Neal says.

O’Neal came up through Delphi on the operations side, and he believes the current manufacturing footprint is well suited for what he hopes will be a vehicle market on a continued upswing.

After closing or selling off dozens of North American facilities, Delphi has only four U.S. plants, in Brookhaven, MS; Clinton, MS; Vandalia, OH; and Warren, OH.

Those facilities should remain stable for years to come, ramping up new contracts already on the books. O’Neal sees no reason to pare the Delphi product portfolio further.

“You look at our 10 product business units and 35 business lines – they’re all relevant in this space. They’re not commodities,” he says.

Next week, O’Neal travels to China, then on to Europe, in an effort to continue winning new business for the new Delphi.

[email protected]

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish