Posted on: Saturday, December 11, 2004

Delphi to cut 8,500 jobs in 2005

By John Porretto
Associated Press

DETROIT — Delphi Corp. said yesterday that it plans to cut 8,500 jobs — or 4.6 percent of its total workforce — worldwide next year as part of an ongoing restructuring. The world's largest automotive supplier also expects to lose $350 million as it struggles with lower vehicle production and rising commodity prices.

The Troy, Mich.-based company had a similar goal for global job reductions this year and exceeded it through attrition, retirements and job transfers. In the first nine months of 2004, Delphi trimmed between 9,100 and 9,200 jobs, spokeswoman Claudia Baucus said.

Of the total announced, Delphi said 3,000 of the cuts were expected to be U.S. hourly employees and 5,500 would be from outside the country.

Delphi also revised its earnings forecast for the fourth quarter and 2005 to take into account the layoffs as well as slower sales.

Delphi shares slipped 34 cents, or 3.9 percent yesterday, to close at $8.30 on the New York Stock Exchange — very near the low end of its 52-week trading range of $8.17 to $11.78.

Delphi, which has 186,500 employees worldwide, is among several auto suppliers that have warned of lower-than-anticipated earnings because of higher materials expenses, particularly for steel, and because top U.S. automakers General Motors Corp. and Ford Motor Co. plan to turn out fewer vehicles.

GM, Delphi's biggest customer, and Ford both recently announced lower production schedules for the first quarter of next year versus this year's first quarter. Delphi is a former GM division and has worked aggressively to expand its non-GM business.

In a conference call with analysts and financial journalists, Delphi chairman and chief executive J.T. Battenberg III said the company's financial picture also has been hurt by rising healthcare costs and a cooling off of business in China.

On a positive note, Battenberg said, Delphi remains on target to achieve a goal of $1.4 billion in operating cash flow for this year.

"We've had to put some plans together to try and offset as many of these head winds as possible in 2005," he said. "However, the combined forces of these events will outpace our progress in the early part of 2005."

In a research note yesterday, Merrill Lynch analyst John Casesa said the "head winds" cited by Battenberg were nothing new, but the lower outlook "points to the increasing intensity of these pressures."

"We believe a continued restructuring program to right-size the business is sensible, but we think the cash charges will be tough to deal with," Casesa said.

Delphi forecasts revenue in the October-December period to be between $6.9 billion and $7 billion — $200 million lower than its previous outlook.