Parts Manufacturer Returns, Reinvents Itself

Wall Street Journal

Eight years ago, Del­phi Corp. was in bank­rupt­cy and the auto­mo­tive indus­try was on the cusp of seri­ous prob­lems at all ends of the indus­try spec­trum.

Now enter Del­phi Auto­mo­tive PLC, presents a lean­er and more prof­itable suc­cess sto­ry.

Eight years ago, auto-parts mak­er Del­phi Corp.‘s bank­rupt­cy fil­ing her­ald­ed the storm that would engulf the U.S. auto indus­try and dri­ve some of its biggest names into Chap­ter 11.

Now lean­er and prof­itable, a renamed Del­phi Auto­mo­tive is back and again lead­ing the way—this time toward a healthy auto­mo­tive indus­try built on high-tech elec­tron­ics, soft­ware and fuel-effi­cien­cy-boost­ing prod­ucts.

The biggest fac­tor in its turn­around: Del­phi is steer­ing away from low-mar­gin steer­ing wheels, ball bear­ings and spark plugs to tech­no­log­i­cal­ly com­plex prod­ucts, espe­cial­ly “active safe­ty prod­ucts,” such as adap­tive cruise con­trol, lane-depar­ture warn­ing sys­tems and front and rear cam­eras, which help pre­vent acci­dents. The com­pa­ny also is work­ing on tech­nol­o­gy that allows a vehi­cle to see and react to objects, signs and pedes­tri­ans.

“We went from 119 dif­fer­ent prod­uct lines to 33 that were rel­e­vant and what the world cared about,” Del­phi Chief Exec­u­tive Rod­ney O’Neal said Wednes­day dur­ing a pre­sen­ta­tion to investors. “Active safe­ty will dri­ve a huge change for Del­phi. It is our fastest-grow­ing prod­uct line, and we booked over $1 bil­lion [in orders] for active safe­ty.”

Mr. O’Neal said Del­phi and oth­er auto-parts mak­ers are stand­ing firm on prices and aban­don­ing the past prac­tice of fill­ing an auto maker’s order even if it meant los­ing mon­ey on the deal.

“There is no com­mod­i­ty here,” he said. “We phys­i­cal­ly mon­i­tor every piece of busi­ness we book to make sure it is equal to or bet­ter than what we have today. At the end of the day, if [the order] doesn’t raise the return on invest­ed cap­i­tal, then we prob­a­bly aren’t going to go do it.”

Delphi’s recov­ery points to a broad­er renais­sance in the U.S. auto-parts busi­ness. Four years ago, parts mak­ers were in such bad shape that the U.S. gov­ern­ment offered a line of cred­it to keep the indus­try afloat when banks refused to lend.

 

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