PARIS - Delphi sales are likely to fall this year, as parent GM continues its preparations to sell off the parts making subsidiary.
Hit by labor troubles in the USA, a recession in Asia and flat sales across Europe, Delphi 'has a chance' to top $30 billion in sales, said President J.T. Battenberg III. That would be down from $31.4 billion in 1997. But it would be enough to keep Delphi the world's largest automotive supplier.
Battenberg said he still expects Delphi's spinoff from GM to begin early next year. The automaker plans to sell a 20 percent stake in Delphi through an initial public offering. This would be the first step toward a complete separation.
But even if Delphi keeps to its sell-off timetable, the coming year will be difficult for four reasons.
First, annual sales in Europe have remained at $4 billion since 1995, and Delphi needs to increase that figure.
Delphi has had some success in selling to non-GM customers. This autumn, for example, Jaguar will unveil a Delphi-designed adaptive cruise-control system on the S-type sedan.
Delphi now supplies every major European automaker. About 50 percent of Delphi's European sales are non-GM, and it hopes to boost that figure to 60 percent.
Second, sales will continue to fall in North America as GM buys more components from other suppliers. GM's North American Operations currently accounts for 64 percent of Delphi's sales. That will decline to 50 percent by 2002 - and not just because Delphi will be doing more business overseas.
'The clear loser is Delphi,' said Battenberg. In North America, 'our sales will go down.'
That is not counting the impact of the third problem, this year's strikes at two Delphi parts plants, which shut down most of GM.
Delphi intends to upgrade, sell or close three or four unprofitable plants, according to Battenberg. That will cause tension with the UAW labor union.
Moreover, the union opposes the GM/Delphi split. The spinoff and job security will be major issues in next year's labor negotiations.
The fourth worry is the recession in Asia. Delphi's Asian sales will total $1.7 billion in 1998, up from the previous year, but 'not the growth we were projecting,' said Battenberg.
In spite of all these problems, Delphi does have a couple of assets that it intends to exploit. The newly absorbed Delco division will help Delphi to integrate electronics into a variety of components. That offers major potential for growth at a time when electronics accounts for 15 percent of a vehicle's cost.
Delphi is also promoting its ability to integrate a variety of parts into larger component systems. The company now supplies cockpits to Daimler-Benz, Fiat and Volkswagen.