JAPAN: Delphi sees further consolidation amongst top parts suppliers – report

Delphi Corporation, the world’s biggest maker of car parts, said on Monday that further consolidation was likely among top players in the global parts industry as they come under pressure to cut costs, Reuters reported.

“It is an extremely price-sensitive market right now,” David Wohleen, president of Delphi’s electrical, electronics, safety and interior division, said in an interview with Reuters.

“…That probably is going to cause some consolidation in the industry at the tier-one and tier-two supplier level,” Wohleen, whose division accounts for around half of Delphi’s sales and the bulk of its profits, told the news agency.

Reuters noted that the motor industry has been hit by a wave of consolidation in recent years, typified by the formation of DaimlerChrysler in 1998, and that has sent ripples through the parts industry, which is under increasing pressure to slash costs.

Wohleen told the news agency that prices would probably continue to fall by 2% a year but he added that Delphi, based in Troy, Michigan, was well-placed to weather the storm.

Reuters said that Delphi, which was spun off from parent General Motors in 1999, is ploughing money into growth areas such as diesel engine technology and intelligent air-bag systems that use sensors and deploy according to the passenger’s seating position.

The company, which inherited from GM a heavily unionised workforce and large under-funded pension obligations, also has its eyes on emerging economies such as China and India as cheap production bases and growing markets, Reuters added.

“We are very strong and bullish on China. Probably the biggest challenge for us there is to go fast enough,” Wohleen told Reuters, which noted that sales in China from the start of the business year in January to the end of September were up 40% from the year before.

At that rate, revenues from China, which were around $US700 million in 2002, are on track to top $1 billion for the first time, the report added.

Wohleen told Reuters that Delphi had its eyes on Japanese car makers, as they ramp up production in China and continue to steal market share from the US Big Three.

“Our first opportunity for the Japanese makers has been as they transplant to the US but once we’ve established relationships with them we see the chance to support them as they expand,” Wohleen reportedly said.

Wohleen told Reuters that the company saw big opportunities to invest in China and India, two of the world’s fastest-growing car markets, and the news agency said that could mean trouble for Mexico, which is home to around one-third of Delphi’s global operations and where Delphi is the biggest private-sector employer, with around 70,000 workers.

“There are investment dollars that now have more choices than they had, say five years ago. That will put competitive pressure on Mexico,” Wohleen told Reuters.