US-based automotive parts manufacturer Delphi has lost two members of its management staff in the wake of accounting irregularities first raised by the US Securities and Exchange Commission last year. While tough market conditions mean that the timing is not ideal, it could be just what the company needs to turn itself around.

The company's CFO, Alan Dawes, left the company after the board's audit committee had apparently lost confidence in him. The chief accountant has also left Delphi. The company first came under the spotlight last summer when questions about its accounting were first raised.

In light of internal investigations, Delphi has since admitted that due to improper accounting, off-balance sheet transactions had been exaggerated by $US200 million in 2000 and that accounting irregularities concerning rebates and various other payments from suppliers exaggerated its pre-tax income by about $61 million in 2001. The company is still investigating the validity of subsequent years' results.

Delphi has been experiencing difficult times of late, suffering from the falling production at General Motors, the firm's former parent company and current major customer, high labour costs and high material costs. These problems have been compounded by the fact that auto parts manufacturers have been unable to pass the price increases on to their customers, squeezing profit margins to a minimum.

The company can take some solace from the fact that many of its competitors have also fallen on hard times. Tower Automotive filed for bankruptcy in February of this year and several others have seen their credit ratings cut. For example, Visteon, the second largest US automotive parts maker, has seen its rating cut by Moody's Investor Services to two steps below investment grade.

Although the company still faces a number of challenges ahead relating to its current woes, especially given the fact that it may have to restate its results from the past six years, a fresh start with a new team may be exactly what Delphi needs to turn itself around.

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