General Motors' plan to strip features from some vehicles will hurt Delphi Corp. revenue in 2002, even though the world's largest supplier continues to lower its dependence upon GM.
Delphi executives said at a meeting with analysts on Tuesday, June 25, that decontenting and a changing vehicle mix at its largest customer could cost $75 to $150 in revenue per vehicle this year. Based on 2001 GM North American production figures of just more than 5 million vehicles, the hit to Delphi could range from about $375 million to $750 million for the full year. GM's 2002 production is on pace to exceed 2001 numbers.
"The importance of (the decontenting and mix losses) we don't entirely understand yet," said Dave Wohleen, a Delphi executive vice president.
But Delphi continues to win business from non-GM customers at a rapid rate. That, plus the supplier's continued cost-cutting efforts, should offset the losses from GM's cutback, said Merrill Lynch analyst John Casesa.
Delphi estimates business with non-GM manufacturers will rise from $8.5 million in 2001 to $12.4 million in 2004. That business has been booked, Delphi Chairman J.T. Battenberg III said.
By 2004, Ford Motor Co. will be a $1 billion account for Delphi. Ford, Volkswagen AG and DaimlerChrysler all have a shot at being Delphi's No. 2 customer by 2005, executives said.
Former parent GM, which represented 68 percent of Delphi's $26 billion sales in 2001, is expected to drop to 50 percent or less by 2005, executives said. Still, Delphi is renewing 80 percent of its existing business with GM, with an even stronger retention rate for products such as safety systems and powertrain controls.
Delphi is winning more than 60 percent of new GM contracts. If GM maintains its market share in North America, Delphi expects revenue from the automaker to stabilize at around $17 billion in annual sales.
Delphi will decide whether to sell its $500 million generators business to Delco Remy International Inc. or shut it down by July 17, the date of its second-quarter earnings announcement.
A resolution of the $500 million instrumentation business should follow in the next couple of months. Delphi is in the final due diligence phase on a proposed deal for the unit, said Delphi CFO Alan Dawes.