Delphi Says Majority of Next Year’s Sales Will be Non-GM

Delphi Corp., the world’s largest auto-parts company, said it expects next year for the first time in its history to do more business outside General Motors Corp. than with its former owner.
In a report from the Detroit Free Press, the company rsaid faster-than-expected shrinking of GM business combined with rapidly growing sales from Ford Motor Co., Korean automaker Hyundai and outside the auto industry entirely should push Delphi’s non-GM sales to about $15 billion U.S. next year, compared to about $14.5 billion with GM, a split of about 51 to 49 percent. By comparison, when Delphi was spun off from GM in 1999 it got about 80 percent of its sales from GM.
Delphi has been more successful at diversifying its sales than some other parts rivals that spun off from automakers. For example, American Axle Manufacturing & Holding still gets 82 percent of its sales from former owner GM, which spun it out in 1994. Visteon Corp, which spun off from Ford in 2000, gets 76 percent of its sales from Ford.
“We are pretty committed to pretty strong growth of our non-GM business,” Delphi CEO J.T. Battenberg III told a group of Wall Street auto analysts and investors Tuesday. “We are going down on GM business a little faster than we expected. We think it will stabilize in 2007, but there will be some step downs until then.”
Battenberg and other Delphi executives cited Ford as one place where Delphi has dramatically grown business. At the time of Delphi’s initial public offering in 1999 it had less than $100 million a year in sales at Ford. Delphi estimates that should top $1 billion in 2005.
“We’re very intimate with Ford, probably more than at GM. Almost every week we announce some new business with them,” he said. Battenberg noted Delphi was making a safety system on the new Ford F-150 pickup truck, which he said is helping Ford earn a top rating in federal government side-impact crash tests.
Delphi Chief Financial Officer Alan Dawes projected GM sales to shrink to $13 billion in 2006 and hold steady after that. In the meantime, Delphi expects several customers will grow to more than $1 billion in annual sales, such as Ford, DaimlerChrysler AG, Renault, Nissan and Hyundai.
Battenberg said GM sales should remain steady or grow beginning in 2007 when the supplier can start hiring large numbers of plant workers under the new two-tier UAW agreement. That deal will allow Delphi and Visteon to hire workers at starting wages of $14 to $18 an hour, compared to current Delphi-UAW workers who make an average of $24 an hour with higher-seniority workers making up to $34 an hour.
Workers hired under the new wage system will make about $25 an hour with benefits compared to $60 to $70 an hour for current Delphi-UAW workers, said Kevin Butler, Delphi vice president of human resources. So far, Delphi has hired 62 workers under this lower wage structure, Butler said. He said Delphi would probably “get up to a few hundred” workers under this plan by the end of the year. Delphi has about 27,000 UAW workers. Dawes told Bloomberg that lower-wage UAW workers could exceed the higher-wage workers at Delphi by 2010.