Delphi Reports Loss in 4Q 2004 Vs. Profit in 2003

CHICAGO January 20, 2005;David Bailey writing for Reuters reported that Delphi Corp., the largest U.S. auto parts supplier, on Thursday posted a $102 million fourth-quarter net loss because of North American vehicle production cuts and rising costs for raw materials.

Delphi, which released preliminary results pending the completion of an internal accounting investigation launched last year, said 2005 has started weakly and commodity costs, the uncertain pace of planned job cuts and other factors would make it hard to provide a specific first-quarter forecast.

The fourth-quarter loss was 18 cents per share, compared with net income of $82 million, or 15 cents a share, a year earlier.

"We are starting off with a weak quarter, because of weakness both in the U.S. and a number of overseas markets, Asia and Europe," said Chief Financial Officer Alan Dawes.

Excluding charges for restructuring and recoverability of some cost structures and tax benefits and reversal of tax allowances, Delphi reported a loss of $51 million, or 9 cents a share. Analysts on average expected a loss of 15 cents a share, according to Reuters Estimates.

Revenue fell 3 percent to $7 billion in the quarter from a year earlier.

Delphi in December warned of a fourth-quarter loss and full 2005 loss because of vehicle production cuts, rising materials costs, increased pension and health-care costs and difficulties with its own suppliers. Delphi plans to cut 8,500 jobs in 2005, or nearly 5 percent of its workers, to deal with the pressure.

General Motors Corp., Delphi's former parent, and Ford Motor Co. cut vehicle production in the 2004 fourth quarter and the 2005 first quarter to ease an inventory glut.

Delphi said it expects first-quarter revenue of from $6.8 billion to $7 billion, with non-GM revenue likely to exceed 50 percent of sales. Non-GM sales were 49 percent of revenue in the fourth quarter and 46 percent of revenue for 2004.

"The reality is ... we are in the middle of this transformation, not at the end, not at the beginning," Dawes told Reuters. "We are tracking on the things we need to do to complete the transition. We still have a long way to go."

The results and 2005 first-quarter forecasts exclude any impact from the accounting investigations and may be adjusted when the investigations are completed, Delphi said. It has not announced a timetable for completing the investigation and the 2005 outlook may not be affected much by it, Dawes said.

Delphi is reviewing its accounting for systems implementation services and transactions with other suppliers where it received or paid amounts in excess of $100,000 through rebates, credits, lump sums or similar payments.

The company is also reviewing its accounting for transactions with indirect material commodity managers involving the sale by Delphi in 1999, 2000 and 2001, and subsequent purchase of inventory.

Delphi's pension under-funding rose to $4.3 billion at the end of 2004 from $4 billion a year earlier. It expects health-care costs to rise by 10 percent in 2005 from 2004, driven by prescription drug costs and other factors, and to trend back to a 5 percent rate of increase over a five-year period.