DELPHI AUTOMOTIVE SYSTEMS Quarter's losses are less than predicted

THE VINDICATOR, YOUNGSTOWN
Delphi's sales fell 16 percent last quarter as automakers cut back on orders.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Delphi Automotive Systems lost $429 million in the first quarter after taking an accounting charge of $404 million for a restructuring plan.
"The first quarter was very challenging for Delphi as we adjusted our infrastructure to match rapidly changing market conditions," said Alan S. Dawes, Delphi chief financial officer.
Excluding the restructuring charges, the company lost $25 million, or 4 cents a share, compared with earnings of $322 million, or 57 cents a share, in the same quarter last year. Analysts surveyed by Thomson Financial/First Call had expected a loss of 5 cents a share last quarter.
Troy, Mich.-based Delphi is the parent company of Delphi Packard Electric Systems, which makes wiring harnesses. Packard, which has headquarters in Liberty and plants in the Warren area, employs 5,200 hourly workers and 1,800 salaried workers in the area.
Major changes: Delphi last month announced a massive restructuring plan that included closing nine plants, leaving some product lines and reducing employment worldwide by 11,500. So far, the number of employees has been reduced by 2,000, including those who accepted early retirement or left voluntarily.
Locally, Packard will cut at least 250 hourly jobs at local plants and an unspecified number of salaried jobs.
Delphi reduced its selling, general and administrative expenses by $81 million in the first quarter.
Delphi has been struggling as vehicle sales have slowed, causing automakers to cut orders.
Delphi's sales in the first quarter were down 16 percent to $6.5 billion. Sales to customers other than General Motors were 33 percent of total sales, or $2.1 billion.
Dawes said the company expects slightly higher orders in the second quarter.
Expected better: He added officials were disappointed they weren't able to improve earnings at the lower sales volumes in the first quarter.
"We moved aggressively on structural and selling, general and administrative costs, but we were hurt by inefficiencies related to the uneven order-flow we faced in North America. We believe the long-term answer is to reduce our structural costs and our break-even point," he said.
Dawes said the restructuring plan should begin to add to earnings later this year and grow over the next two years. By late 2003, the company expects the plan to add more than $300 million a year to cash earnings.
Delphi said it is continuing to add new products and contracts to diversify its product line and customer base.
Delphi estimates that second quarter revenues will be between $6.8 billion and $6.9 billion, which would be about 11 percent below revenues of $7.7 billion in the second quarter of last year.
Delphi expects second quarter earnings to be between $160 million and $200 million.