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Web Address of Delphi: Related Topics: Supplier Groups
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Companies : Delphi Corp.
Delphi's Q4 2003 revenue was $7.26 billion, up 4.1 percent from Q4 2002, including revenues realized as a result of Delphi's acquisition of Grundig Car Intermedia System GmbH (Grundig) in November 2003. GAAP net income for the quarter was $82 million, which included the impact of $46 million in previously anticipated charges related to restructuring initiatives announced in October 2003. Excluding these costs, Q4 net income was $128 million, or $0.23 per share, at the high end of the prior guidance range of $110 to $130 million. Thomson First Call consensus was $0.21 for the period. Fourth Quarter 2003 Financial Highlights
Calendar Year 2003 Financial Highlights
"The keys to our ability to generate cash from operations are sustained growth of non-GM revenues and continued aggressive cost reduction activities," added Battenberg. "We're optimizing our global presence and offering differentiating technologies -- including satellite radio, diesel systems, safety systems, and performance-enhancing ride and handling technologies -- that consumers value. Our business has expanded to include every major automaker worldwide and we're also seeing strong growth in adjacent markets." In Q4 2003, Delphi's non-GM revenues exceeded $3 billion for the first time, reaching 42 percent of total sales. For the year, customers other than GM accounted for $11.1 billion, or 39 percent of revenue, both new milestones for Delphi. Restructuring Update Following successful completion of its negotiations with the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW), Delphi initiated global actions designed to address under- performing operations, appropriately size the company's global salaried and hourly workforce, and strengthen its competitive position. "We are actively pursuing all opportunities to reduce structural costs through facility consolidations, attrition-based headcount reduction, and efforts to create competitive wage and benefit structures," Dawes said. As announced in October 2003, Delphi anticipates it will incur a total of approximately $515 million after-tax in charges related to this restructuring effort through December 31, 2004. Delphi recorded $356 million after-tax in Q3, and $46 million after-tax in Q4, bringing total restructuring expenses to $402 million after-tax for 2003. The balance of $113 million after-tax, related to permanent hourly reductions and other initiatives, will be recorded in future periods. "To date, as part of these initiatives, Delphi has already achieved its targeted reduction of 500 U.S. salaried workers, and we're well on our way to reducing our non-U.S. workforce by 3,000, having already achieved a reduction of 1,550," Dawes added. "Through the end of 2004, our plans also call for reducing Delphi's U.S. hourly workforce by 5,000 through a combination of normal retirements and flowbacks to GM," Dawes continued. "We are making good solid progress on these efforts, and are slightly farther along than we expected to be at this point, having already achieved 1,600 of the total target." As part of this restructuring, Delphi continues to work with the UAW to enhance the competitiveness of its U.S. cost structure, which is critical to the company's transformation and efforts to win new business. "We expect to complete negotiations on a two-tier wage and benefit structure within 90 days," Dawes said. "We also expect to take steps toward the consolidation of four facilities in our Automotive Holdings Group, as previously announced. This will enable us to create a much more competitive cost environment over time and win new work, which will lead to better returns and enhanced value for Delphi's shareholders." Furthermore, in November 2003 Delphi said it planned to consolidate product lines managed by its Safety & Interior Systems division into Delphi Electronics & Safety (formerly Delphi Delco Electronics Systems) and Delphi Thermal & Interior (formerly Delphi Harrison Thermal Systems), eliminating one operating division. This change became effective January 1, 2004. The company is also on track with plans to consolidate support staffs across its headquarters, divisions and regions. Pension Update "Our strong operating cash flow of $1.22 billion has enabled Delphi to address the challenges posed by our pension liabilities," Dawes said. "In 2003, we contributed $0.6 billion of operating cash flow to our pension funds. We contributed an additional $0.4 billion in trust preferred proceeds in Q4 2003, bringing Delphi's total pension contributions to $1 billion for 2003." On December 31, 2002, the under-funded status of Delphi's pensions was $4.1 billion. The company saw the impact of $500 million in liability increases resulting from its new labor agreements, as well as the effects of the reduced discount rate, which fell to 6.25 percent from 6.75 percent. Taken together with Delphi's contributions, as well as a return rate for Q4 of approximately 20 percent on pension fund investments, Delphi's under-funded status as of December 31, 2003 was $4.0 billion. "Because we anticipate Delphi will continue to generate strong operating cash flow, we view these obligations as quite manageable," Dawes added. Business Highlights China - In 2003, Delphi remained the largest foreign-invested automotive supplier in China, which became the world's fourth-largest automotive producer and moved into the number-three position for sales during the year. Calendar year 2003 consolidated revenue for Delphi China was $650 million, representing an approximately 50 percent year-over-year increase and continuing the company's track record for strong annual sales growth. In December, Delphi announced it is investing $50 million in a new R&D technical center in Shanghai. Labor negotiations - In 2003, Delphi completed negotiations with two unions that represent the majority of the company's U.S. hourly workforce. Delphi's new four-year contract with the UAW includes modest wage economics and provisions for helping Delphi boost competitiveness. Delphi's four-year pact with the IUE-CWA, the Industrial Division of the Communications Workers of America, AFL-CIO, CLC, is also consistent with Delphi's efforts to bolster competitiveness and enhance shareholder value. Growth and opportunity process - In Q4 2003, GM and Delphi reached agreement on a growth and opportunity process that provides for advanced review of GM sourcing opportunities that can help stabilize business at Delphi's U.S. legacy sites. This initiative is part of Delphi's overall efforts to strengthen the competitive position of certain North American operations through cost reductions and revenue growth opportunities. Satellite radio - Delphi continued its dominance in satellite radio and, by the end of 2003, Delphi had shipped 1.8 million satellite digital audio receiver systems to vehicle manufacturers and retailers, including three-quarters of a million Delphi XM SKYFi units to retail customers such as Best Buy, Circuit City, Wal-Mart, Sears and Crutchfield. Wireless and consumer electronics - Delphi booked more than $3 billion in global wireless business during 2003, a 50 percent year-over-year increase. During the year, Delphi sold increased volumes of radio head units and receiver boxes, MP3 radios, navigation systems, rear-seat entertainment systems, Bluetooth(TM) and Wireless Application Protocol Internet browser technologies, terrestrial digital TV and advanced active antenna systems. Diesel - Sales of Delphi diesel common rail systems increased from 1 million units in 2002 to 1.2 million in 2003, and are forecast to grow to 2.5 million units by 2007. Delphi is currently number 2 in the European market and diesel is an important part of the company's overall growth in the region. Customers for Delphi's award-winning common rail diesel technology include Ford, Renault, PSA Peugeot Citroen, Kia/Hyundai and Ssangyong, along with two major worldwide powertrain technology leaders and three additional Asian OEMs that have not yet been announced. Grundig acquisition - In November, Delphi announced its acquisition of Grundig Car Intermedia System GmbH (Grundig) for $39 million, including cash acquired. "This acquisition, expected to be modestly accretive to our earnings in the first full year of operation, is an example of how Delphi's use of operating cash for small, strategic acquisitions will drive increased value to investors," Dawes noted. "The Grundig acquisition will enhance our European electronics sales, as well as strengthen customer relationships and bolster our local engineering and manufacturing support in the region." Lean and Quality initiatives - During 2003, Delphi continued its progress toward a Lean enterprise, redoubling efforts in its manufacturing, engineering and purchasing functions. "Our results remain impressive," noted Dawes. "For the year, we reduced PPM by 50 percent and our on time delivery to OEM customers reached a new high of 99.2 percent. This level of performance is helping us win new business." Throughout the calendar year, Delphi received numerous industry and customer accolades, including the "Excellence Award for Quality" from Toyota, "Masters of Quality" from Freightliner, "Quality Performance Award" from Honda, "Supplier of the Year" from GM, "Gold Star Award" from Ford, and a record-setting four Shingo Prizes for manufacturing excellence from Utah State University. Delphi also received an Automotive News PACE award for its breakthrough MagneRide(TM) suspension system technology. January 20, 2004
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