Delphi’s recent US$530m IPO saw shares priced at US$22 on the New York Stock Exchange and comes as the global automotive industry faces challenging times given global economic uncertainty, particularly in Europe.
However, the decision to list represents a clear step forward for the former ex-General Motors components division, following its exit from bankruptcy reorganisation. Delphi Automotive CEO and president Rodney O’Neal talked to just-auto about his ambitions and why the listing decision was made.
j-a: Why did you choose this time for listing the company on the stock exchange?
“The management team wanted to return to being a publicly-traded company and we’re happy about that. Doing so was important to our customers, it matters to our employees and it creates value for our company. This was a management-led initiative for which we have been prepared for some time.
“We believe we have a business model that rises above the market volatility and investors appear to understand our value proposition.”
j-a: Why did you decide to press ahead when the market trend observed is that companies are exiting the stock market?
“Being a publicly-traded company creates value, even though global markets are a bit choppy right now. We had a narrow window and were able to effectively execute our offering during this time.”
j-a: Europe accounts for around 43% of Delphi’s sales. Can you comment on how that market is doing right now?
“The economic challenges in Europe are primarily at the governmental level, not necessarily throughout the industry. We [Delphi] have had a great year in Europe. Our sales have been up almost four to five times the market and our schedules through the fourth quarter are very robust. I’ll need to analyse the data but, following discussions with many of our customers and suppliers while in Frankfurt, I remain cautiously optimistic about 2012.
“Our largest customers in Europe are the German OEs, specifically the luxury groups and they’ve had a great year. Our customer diversification and distribution channels have allowed us to outgrow the market. We have a strong heavy-duty and medium-duty business in Europe as well as light-duty and aftermarket business in the region. The industry continues to do well… even in the face of turmoil in global markets.”
j-a: How did you transform the company?
“We had noted across the globe government regulations and consumer preferences were changing rapidly…. and these trends were clear. Customers and regulators both wanted safer vehicles; better fuel economy and lower emissions; and connectivity and infotainment while in the vehicle. These macro trends – safe, green, and connected – became the focus of our product portfolio…. within this portfolio, we also focused on products that had leading market positions – primarily in the number one or number two positions.
“We right-sized the cost structure to ensure we were profitable across all points of the auto industry cycle; we strengthened our balance sheet by addressing uncompetitive legacy costs and, finally, we focused on balance across our customer base and geographical footprint.”
j-a: How is ‘new’ Delphi different from ‘old’ Delphi?
“We hand-selected our portfolio: we went from 27 business units to 10; we narrowed our product lines from 119 to 33 and the product portfolio was focused on the hot space of safe, green and connected. Some 70% of our revenues are from products with a number one or number two market position.
“Additionally, we have diversified and balanced the company. Our largest customer is now only 21% of revenue; our six largest platforms are with six different OEMs and we have five customers each with over US$1bn in revenue.”
j-a: How do you envisage the future of Delphi Automotive?
“Since our formation back in October of 2009, our revenues have grown by over 40%. We created a business that is competitive and is profitable with a lean and flexible cost structure, superior margins, solid returns on invested capital and a very strong cash flow.
“We are building on the transformation and are well positioned as we shift our focus to expansion, both top and bottom line of Delphi.”