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March 19, 2001 01:00 AM

Delphi buys Eaton unit, eyes more growth

Rhoda Miel
Managing Editor
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    For Delphi Automotive Systems Corp., 120 new injection presses at a new facility in Ohio may not be enough to satisfy growing demand for automotive electronics.

    Delphi is continuing its drive into electronics with its purchase of the vehicle switch and electronics division of Eaton Corp.

    Meanwhile, Delphi is exploring options to expand its own facilities.

    The Troy, Mich.-based auto parts supplier announced March 12 it had purchased Eaton's switch electronics unit for $300 million, giving it access to $320 million worth of business and Eaton's mechanical/electronic switches used throughout vehicles.

    Those switches are the plastic-encased link to a market that is rapidly on the rise, and a key to electronics integration throughout vehicles, said Ann Cornell, spokeswoman for Delphi's Packard Electric Systems division based in Warren, Ohio.

    "We see a lot of growth potential for `mechatronics' going forward," she said.

    The value of the global automotive switches market alone is expected to nearly double to $7 billion by 2010, from $3.8 billion now. With its purchase of Eaton's Vehicle Switch/Electronics Division, Delphi becomes the third-largest automotive switch maker in the world.

    Mechatronic switches typically include an injection molded housing for a metal and wire unit that serves as a conduit for working systems such as power windows, seats and other electronically controlled moving parts.

    The Eaton unit — with North American headquarters in Downers Grove, Ill., and European operations based in Illkirch, France — makes switches in steering columns, instrument panels, consoles, overhead systems, doors and lighting systems. It claimed 8 percent of the global market, ranked behind Japan's Tokai Rika Co. Ltd. and Germany's Leopold Kostal & Co. GmbH. Delphi ranked 11th worldwide, with 2.5 percent of the fragmented world market, Cornell said.

    The purchase brings Delphi immediate international business, with manufacturing facilities in Langenlonsheim, Germany; Barcelona, Spain; Gdansk, Poland; and Sao Jose dos Campos, Brazil, in addition to its sole North American production plant in Matamoros, Mexico.

    The 3,800-employee company also has engineering facilities in Downers Grove, Illkirch and Langenlonsheim.

    But the deal brings more than global reach and a larger share of the switch market, Cornell said. It adds more electronics-integration capability just as the automotive market pushes its powered systems into overdrive.

    To meet expanding demand, Delphi already is considering whether to build a new plant near Cortland, Ohio — even before the grand opening for its most recent facility there. The company will host a grand opening in late May for the 165,000-square-foot plant, which includes 120 Van Dorn injection molding presses and plans to turn out 1 billion parts annually.

    "It looks as though the market will be growing at a rate beyond what Cortland can produce," Cornell said.

    The company has not committed to building an additional site but is "pulling together a business case" for the continued expansion, she said.

    Cars and trucks already have a range of powered programs, from windows to seats to exterior mirrors. Automakers also have started adding on-board navigation systems and are looking at ways to bring in everything from satellite radio to Internet access.

    To accommodate the bigger power use, carmakers have laid out plans to adapt 42-volt electronic systems, up from the current standard of 14 volts. Ford Motor Co. will introduce a 42-volt Explorer in 2004.

    The higher-powered vehicles will hit the streets in fairly small volumes until 2007 or 2008, but by the end of this decade millions will be produced, predicted Paul Nicastri, project leader for electrical architecture machine and drive development with Dearborn, Mich.-based Ford's research laboratories.

    "A lot of things that once were mechanical are changing to electrical controls," Nicastri said during the ITB Group Ltd.'s Automotive Cockpit Modules 2001 conference March 9 in Dearborn.

    Used as regulators throughout the vehicle, Cornell said, mechatronic switches are likely to play an increasing role in that move to higher voltages.

    "It's quite a growing area," she said.

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