Delphi Automotive Systems Corp. is slashing its global work force by 5 percent and shedding some operations but will focus long-term growth around the plastics-intensive electronics integration business.
The Troy, Mich., company announced March 29 it will cut 11,500 jobs worldwide, including 7,600 U.S. positions, or 10 percent of the U.S. employee base.
Delphi also is closing nine facilities in the United States, South America and Europe. More than 40 of Delphi's 87 worldwide operations will experience staff cuts.
The restructuring comes as Delphi, the world's biggest auto supplier, faces a first quarter that could leave it either breaking even or losing as much as $50 million.
"The first quarter was much tougher than we expected," said J.T. Battenberg III, chief executive officer, chairman and president.
Delphi posted $26.4 billion in sales last year, down from its 1999 level of nearly $27.3 billion. As it streamlines, the company will give up an estimated $900 million worth of business. To thrive, Battenberg said it must cut unneeded units and people to focus on core platforms.
"This action will put it back on track," he said.
That track is powered by electronics integration, which comes complete with injection molded housings and plastic-coated wiring.
Dropping noncore units such as leaf springs will free up funds for other investments, including last month's announced purchase of Eaton Corp.'s vehicle switch and electronics division, said Alan S. Dawes, Delphi executive vice president and chief financial officer.
"While we are resolving issues in our noncore operations, we are acquiring and growing strategic business lines," he said.
Delphi's Packard Electric Systems division, based in Warren, Ohio, is seeing its share of the restructuring fallout, however. Five of the nine plants slated to close are Packard operations: in Robertsdale, Ala.; Fort Defiance, Ariz.; Betim, Brazil; Bochum, Germany; and Casoli, Italy. Those plants are not involved in plastics processing, said Delphi spokeswoman Ann Cornell.
The Arizona and Alabama facilities assembled wiring harnesses for aerospace customers; Delphi is dropping its aerospace wiring program. Betim, Bochum and Casoli also were wire harness assembly operations, employing a few dozen people each.
The Brazilian operation is closing because of reduced production in South America, while Delphi will shift work from Germany and Italy to sites in Eastern Europe to take advantage of lower labor costs, she said.
But the long-term outlook for Packard is strong, she said. Each piece of new technology added to a vehicle — from navigation systems to palm-top docking stations — brings more demand for electrical infrastructure.
"Where we're seeing a lot of growth is in electronics, which means we're looking at all the ways we can support our products with plastic injection molding, with metal stamping and with cables," Cornell said.