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Delphi memo outlines company makeover

Delphi Corp. is studying a plan to remake its Electronics & Safety division by shedding U.S. factories, shutting technical centers and possibly buying rival Motorola’s automotive unit, the Detroit News reported Wednesday.
/ Source: Reuters

Delphi Corp. is studying a plan to remake its Electronics & Safety division by shedding U.S. factories, shutting technical centers and possibly buying rival Motorola’s automotive unit, the Detroit News reported Wednesday.

Citing an internal company document outlining a plan code-named “Northstar,” Delphi sees the restructuring of its Electronics & Safety unit as a cornerstone of its efforts to reorganize in Chapter 11 bankruptcy, the newspaper said.

The document lays out a draft of Delphi’s plan to grow one of its core divisions even as it abandons several money-losing product lines and closes plants, the paper reported.

In its drive for global dominance of the auto electronics and safety markets, Delphi will pursue “aggressive cost reduction via product exits, site consolidation, and legacy labor cost reduction,” the document said.

The auto parts giant also is committed to “execute ruthless portfolio management” by focusing on “more winners, more exits,” the paper said, quoting from the memo.

Key components of the plan include the “exits” of five manufacturing plants in Michigan, Indiana, Wisconsin, Ohio and Arizona, and the “potential exits” of product lines ranging from anti-lock brakes to ignition systems.

The document also identifies Motorola’s automotive activities as an acquisition target, the paper said. The cell phone maker has reportedly been trying to sell its auto electronics operations that generated $1.7 billion in sales last year.

Possible options
A Delphi spokeswoman said the document, which is dated November 9, is a draft of possible options for the Electronics & Safety division, which accounts for $5.8 billion of Delphi’s annual sales of about $28 billion, the paper said.

The document appears to be a presentation that will be made by Beth Schwarting, Delphi’s general director of sales and marketing for the Electronics & Safety division, the paper said.

Delphi Chairman Robert “Steve” Miller has said the company expects to close, sell or consolidate an unspecified number of U.S. plants to become profitable.

The “Northstar” plan identifies five U.S. plants for “exit” — Flint East, Michigan; Kokomo, Indiana, Plant 9; Milwaukee, Wisconsin; Vandalia, Ohio; and Tucson, Arizona. Also on the list are plants in Ashimori, Japan; and Liverpool in the UK.

The plan also calls for reducing the Electronics & Safety division’s technical centers from 23 to 16.

Among the “product line potential exits” are ignition systems, air meters, anti-lock brakes, steering controllers, suspension components and instrumentation products. While those businesses account for an estimated $131 million in revenues, they are projected to lose nearly $20 million in 2006, according to the document, the paper said.

The Northstar plan also identifies product and technology synergies with Motorola’s auto unit that makes components for vehicle navigation and safety systems.