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DELPHI AUTOMOTIVE SYSTEMS Increasing demand keeps plan on track

By Don Shilling

Wednesday, October 17, 2001

The giant automotive supplier remains committed to growing business for locally made parts.
YOUNGSTOWN -- Delphi Automotive Systems is spending $100 million in new plants and equipment in Trumbull County because of the increasing demand for plastic connectors produced there, a top company official said.
The spending comes as Michigan-based Delphi cut its capital improvement spending about $45 million in the third quarter as part of its cost-cutting efforts, said Alan Dawes, chief financial officer.
Delphi planned to spend about $275 million globally on improvements to equipment and buildings each quarter this year but spent only $230 million in the third quarter.
Capital spending continues at Delphi Packard Electric Systems, a locally based division of Delphi that makes wiring harnesses and related components.
Packard's connectors have a growing customer base so Delphi wants to improve the production capabilities of that business line, Dawes said. Use for these connectors is growing because they are being marketed to makers of telecommunications equipment, computers and medical devices, as well as cars.
Even with Delphi's lower sales and earnings this year, it isn't changing its commitment to that business line, Dawes said.
Local plants: Packard broke ground last month on a $58 million plant in Vienna. Last year, it re-opened its Cortland plant after it received $42 million in renovations and equipment.
Packard is placing 120 molding machines in each plant to replace aging machines at its Dana Street plant in Warren. The new machines produce higher quality parts.
Packard officials said earlier this year they intend to open three or four other connector plants in the next four years to meet projected sales growth. The locations would depend on the needs of customers.
Dawes said that business bookings for connectors remain solid and that more capacity will be added to that segment if it continues to grow.
He said, however, that the company will look to use existing floor space first. Packard has done a good job of becoming more efficient so it may have space that could be used before a new facility is built, he said.
Quarterly report: Dawes was interviewed after Delphi announced Tuesday that its third-quarter earnings fell 82 percent to $26 million and its sales fell 6 percent to $6.2 billion.
Results from Packard aren't broken out separately, but the segment that includes Delphi reported that operating income increased $11 million to $60 million, while revenues fell $90 million to $2.16 billion. Packard makes up about half of the size of that segment.
Operating income was up because of cost reductions, new products, the acquisition of a profitable switch business and the weakening of the Mexican peso, Dawes said.
Delphi has been implementing a restructuring plan this year that includes looking at its troubled business lines and deciding which will be closed, sold or fixed. Between $3 billion and $4 billion worth of business is expected to fall into those categories.
Dawes said about $1 billion worth of troubled business lines have been cut with plant closings that have been announced so far. Most of the remaining restructuring will come from sales and repairs of business lines. Dawes added that the company expects to make those decisions by the end of the year.
Ann Cornell, a Packard spokeswoman, said one small business line was moved out of Packard because it was found to fit better with another division.
Packard has been reducing its union and nonunion staff this year but will not announce the number until at least January, Cornell said. Packard had about 7,000 hourly and salaried workers at the beginning of the year.