CORTLAND, OHIO - Delphi Automotive Systems Corp. is looking to boost its electronic connections business beyond the auto industry, spending $21.8 million to buy a molder that supplies components for the computer, telecommunications and medical industries.
Delphi expects to complete its acquisition of Specialty Electronics Inc. by the end of May, said Kevin R. Heigel, business line executive for Delphi's Connection Systems unit.
``This is a good example of our using strategic acquisitions to access new markets,'' Heigel said during the May 24 grand opening of Delphi's new injection molding plant in Cortland.
The purchase also is part of an overall plan to expand the Delphi Connection Systems business sales to $3 billion annually by 2005, up from an estimated $1.3 billion currently.
Specialty, based in Landrum, S.C., posted about $17 million in sales last year. It has injection molding, insert molding and metal-stamping operations at Landrum and manufacturing sites in Reynosa, Mexico, and Singapore. Its 180 employees will transfer to Delphi.
Its customers include Hewlett-Packard Co., Pitney Bowes Inc., Roche Diagnostics and Apple Computer Inc., allowing Delphi the links it needs to expand sales of its injection molded connections into different markets, Heigel said.
Connection Systems falls under Delphi's Warren, Ohio-based Packard Electric division, itself part of Troy, Mich.-based auto supply giant Delphi Automotive.
Only about $70 million of Connection Systems' $1.3 billion in connector sales goes outside the auto industry, Heigel said. Worldwide demand for the products, typically enclosed in injection molded nylon, is expected to hit $46 billion by 2005, up from $33.2 billion in 2000.
To grab a bigger piece of that pie, Delphi needs to find more customers beyond the auto industry. It plans to leverage its vast manufacturing abilities with Specialty's sales list to launch greater access outside its familiar base.
Delphi as a corporation is a production giant, with about $30 billion in global sales, but it lacks recognition among telecommunications and nonautomotive electronics specialists.
``We go in with a business card that says Delphi, and we sometimes get a response of, `Who are you guys?''' Heigel said. ``[Specialty has] access to customers we don't have and relations we don't have today. We could do it without the acquisitions, but this is going to help.''
Delphi specifically created the business line name of Connection Systems to provide the unit with a nonautomotive focus, he said.
Specialty has more to offer beyond its sales base, though, Heigel noted. It knows how to respond quickly to changing customer demands, he said. Delphi is accustomed to an auto industry that spends 18 months to two years planning for model-year changes. Specialty can teach it to adapt.
``We will have maybe six months to respond in the data and telecommunications markets,'' Heigel said. ``It's a big, big step for us.''
Delphi is not abandoning its automotive base, he noted. Its growth strategy also calls for increased sales to its sister units and to other auto suppliers. As more electronic gadgets come into vehicles, the demand for electronic connections to make those parts work will only increase.