U.S.

Delphi To Slash 11,500 Jobs

March 29, 2001 / 8:45 AM EST / CBS/AP

Delphi Automotive Systems Corp., the world's largest auto parts supplier, said Thursday it will cut 11,500 jobs under a massive restructuring plan prompted by a soft U.S. auto market that will leave its first-quarter earnings short of Wall Street forecasts.

While jettisoning 5 percent of its global work force, Delphi said it plans to sell, close or consolidate nine plants and cut staffing at more than 40 other sites as it exits $900 million of the company's businesses.

The planned job cuts affect 5,600 of Delphi's U.S. hourly workers, 3,900 workers outside the United States, and 2,000 white-collar workers nationwide. Delphi expects to eliminate those jobs through early retirements, layoffs and attrition.

In another sign of bad economic times, the economy grew at an annual rate of just 1.0 percent during the last three months of 2000, the weakest performance in more than five years.

Delphi plans to take a first-quarter charge of $400 million after taxes, with all of the restructuring expected to be completed within a year.

"The actions outlined today should improve our ability to rebound decisively in more favorable automotive market conditions," Alan Dawes, Delphi's executive vice president and chief financial officer, said in a statement.

Delphi said that given weaker-than-expected orders from automakers and for replacement parts, it expects first-quarter revenues of $6.4 billion to $6.5 billion, or $100 million to $150 million less than what had been forecast in January. During the same three months last year, Delphi had revenues of $7.8 billion.

Excluding the restructuring charge, Dawes said Delphi should have somewhere between a loss of $50 million and a breakeven performance in the first quarter.

The consensus expectation of analysts surveyed by First Call/Thomson Financial had been for a profit of 17 cents a share in the first quarter. Delphi earned 57 cents a share in the January-through-March period a year ago.

Delphi reports its first-quarter earnings April 19.

This week, Delphi temporarily laid off more than 3,900 hourly workers in seven states as the supplier continues adjusting to slowed production by U.S. automakers looking to trim bloated showroom inventories. Delphi idled about 4,000 workers for last week.

"Every week of this quarter we have made reductions to output in an effort to match customer order flow," Dawes said.

Delphi also has cut its Mexico work force by more than 7,600, trimmed its global contract-employee ranks by more than 15 percent, and revamped its headquarters operations in South America, Europe, Asia Pacific and the United States.

Still, "unstable order flow has prevented us from reducing enough of our costs to remain at previous levels of profitability," Dawes said. "We believe it is now time to take sustained action to permanently reduce capacity and adjust ou company infrastructure accordingly."

Delphi, spun off by General Motors Corp. in 1999, has about 71,000 U.S. workers - 51,000 of them hourly - as the world's largest auto parts maker.

February U.S. sales for GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler arm slid a combined 10 percent over the same month last year.

Analysts widely expect softness in U.S. auto sales to continue at least into mid-year.

Last week, auto parts-supplying ArvinMeritor Inc. also warned it would not meet Wall Street's estimates for the second quarter and full year, citing soft commercial truck production and higher costs.

ArvinMeritor, based in the Detroit suburb of Troy, said it would continue aggressive cost-cutting, including closing selected sites, paring its global work force of 36,000, consolidating manufacturing and engineering facilities, and cutting capital spending.

Last month, auto parts supplier Federal-Mogul Corp. blamed a slumping U.S. vehicle market for having to cut 1,110 salaried workers or 8.6 percent of its global white-collar ranks and 200 open positions.

So far this year, Federal-Mogul has targeted for closure one plant each in California, Mississippi, North Carolina and Ontario. Those plants employ about 600 hourly workers.