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.