Delphi Spins Off Engine Unit -- Update
May 03 2017 - 11:30AM
Dow Jones News
By Chester Dawson
DETROIT -- Automotive supplier Delphi Automotive PLC will spin
off its engine-components unit into a separate company, a move
designed to allow the remaining company to focus on an advanced
electronics business that could be a big player in the race to
develop self-driving cars.
The move, announced Wednesday and expected to be completed by
next March, comes as Delphi is trying to keep pace with Silicon
Valley companies and other tech firms edging into the auto
industry. The engine business will become its own publicly traded
entity, potentially making Delphi's separate electronics business
more attractive at a time when other automotive companies have been
acquired by tech giants willing to pay big premiums.
"As the pace of change accelerates and the needs of our
customers continue to evolve we feel now is the time" for the split
into two companies, Kevin Clark, Delphi's chief executive, told
investors on a conference call.
The announcement comes shortly after Intel Corp. agreed to pay
$15.3 billion for Mobileye NV, an Israeli car-camera pioneer
selling to most auto makers looking to develop autopilot features.
The deal's price tag is roughly equivalent to the market
capitalization of Fiat Chrysler Automobiles NV.
Samsung recently completed its $8 billion deal to buy Harman
International Industries Inc., a one-time giant in car audio that
expanded by boosting its in-vehicle connectivity and telematics
software and parts.
Delphi's $12 billion advanced electronics business is its top
revenue generator and employs about 145,000 people globally. Its
$4.5 billion engine, or powertrain, business employs about 20,000
employees around the world.
Investors reacted positively to the news, sending Delphi's stock
price surging more than 11% in early trading on the New York Stock
Exchange.
The decision to split the company was driven in part by
shareholder concerns over lower profit potential from its
investments in the hardware-heavy engine-components business
compared with the software-focused advanced electronics unit, Mr.
Clark said.
Delphi's CEO declined to comment when asked by an analyst about
speculation it has held discussions with German rival Continental
AG about combining the two companies' powertrain businesses.
Delphi has diverted more of its spending away from traditional
components into high-tech applications geared for next-generation
vehicles. Last month, Delphi invested in a trio of high-tech
startups to bolster its ability to harness diagnostic and other
data in vehicles and provide a more interactive experience for
drivers, as well as open potential avenues to market services to
drivers.
Delphi's engine, or powertrain, business has long been at the
core of the company, which itself was spun off from General Motors
Co. in 1999. The new powertrain company will focus on boosting
performance of standard gasoline engines and developing new engine
technologies. It will be run by a new management team led by two
veteran Delphi executives.
Mr. Clark said the company is reviewing the names of both the
spinoff and the remaining business, hinting one or both might
abandon the iconic Delphi name.
The combined company also reported Wednesday that first-quarter
net income from continuing operations rose 4.5% to $335 million, or
$1.24 a share, from the year-ago period. Its revenue increased 6%
to $4.3 billion.
Write to Chester Dawson at chester.dawson@wsj.com
(END) Dow Jones Newswires
May 03, 2017 11:15 ET (15:15 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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