Delphi looks for 'fix' at Lockport
Business First of Buffalo - by Tom Hartley Business First
Delphi Automotive Systems Corp. will cut deeper into its global work force next year and take more steps to improve its troubled thermal business, which includes Delphi Harrison Thermal Systems in Lockport .
The actions, disclosed in a Dec. 10 corporate briefing for analysts, investors and media, indicate that the components supplier will keep up its pressure on Western New York's largest manufacturer, even as auto sales are projected to fall 2.3 percent next year to $25.2 billion.
Though details were few, what emerged from the one-hour conference for some observers was a definite indication that Delphi Automotive is serious about wanting to fix Harrison's problems and that the local operation is, at least for now, an important unit in the corporate structure.
Specifics of the fix-up plan were not disclosed, but in referring to the $2.2 billion thermal business of which Harrison is the largest component, Delphi chief financial officer Alan Dawes said, "We will need to further consolidate U.S. facilities during 2002 to address excess capacity and needed operating improvements."
Dawes said that efforts will continue to correct productivity and profitability problems at Lockport and elsewhere, including Moraine, Ohio, where Delphi Harrison facilities also are located.
The Lockport site, which the corporation designated last summer a "troubled operation," is in Delphi's category of "fix, sell, or close."
One remedy that was looked at in 2001 was a partnership venture, with another party to help in running thermal operations. Dawes said such an arrangement would strengthen the "long-term viability" of the business.
Though unsuccessful this year, this and other efforts will continue, he said.
Dawes mentioned the local agreement that was overwhelmingly ratified in October by members of United Auto Workers Local 686. Aimed at improving competitiveness and profitability, its elements include productivity improvement, work force reduction through retirements, withdrawing from certain unprofitable product lines, consolidation of certain manufacturing operations and closing a warehouse facility.
Dawes said the thermal business, which consists of climate control systems and components such as air conditioning and heating compressor and radiators, continues to attract new global customers.
Still, Delphi Automotive continues to rely heavily on General Motors, its former parent, for a huge majority of business. In Lockport's case, it is more than 90 percent. The corporate target is a 50/50 split between GM and non-GM business.
Brett Hoselton, a senior auto industry analyst for McDonald Investments Inc., said the presentation by Dawes and Delphi Chairman, CEO and President J.T. Battenberg III indicates that Delphi probably tried but failed to find a buyer for its thermal business.
"Now it looks like they may have decided on the fixed partner venture concept," Hoselton said. Two months ago, he expressed the belief that within five years, Delphi Harrison would no longer be a part of Delphi Automotive.
In Dawes' comments, though, Hoselton sees a positive sign for a continued role within Delphi for Harrison.
"They are saying that while they are pursuing change, it is still part of their business plan." he said. "Look at it this way. This (Delphi Automotive) is a company with $25 billion in revenues, they just held an hour-long conference call, and they spent 5 and 10 minutes talking about their thermal business."
"That suggests that this, among other things, is a top-of-the mind topic for Delphi. It puts significant pressure on the business, the managers and employees in the business."
Dawes said, "What we are challenging Ron Pirtle (Delphi Harrison president) and the team to do is to get critical mass to diversify their customer base and improve their cost structure."
But when pressed for a deadline, he would say only: "We've got mileposts with all our businesses and they are working to these mileposts," he said.
The thermal sector is included in about $4 billion to $5 billion of business that Delphi, the world's largest parts supplier, has been reviewing as part of a sweeping restructuring that began last March.
Thermal systems, along with Delphi's generator and instrumentation business sectors, are getting the closest scrutiny. Delphi recently signed a non-binding letter of intent to sell its $500 million generator business to Delco Remy International Inc. The transaction could be completed at year end.
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