Delphi Announces Agreement to Purchase Diesel Business from TRW Inc.
23 November 1999
Delphi Announces Agreement to Purchase Diesel Business from TRW Inc.
TROY, Mich., Nov. 23 -- Delphi Automotive Systems Corporation
announced today that it has entered into an agreement to acquire
Lucas Diesel Systems and the associated aftermarket business from TRW Inc. for
approximately 538 million pounds or U.S.$ 871 million in cash. Upon closing
of the transaction, Lucas Diesel Systems will be renamed Delphi Diesel
Systems.
Upon completion of the transaction, Delphi Diesel Systems will be the
world's No. 2 producer of diesel fuel-injection systems for light-, medium-
and heavy-duty vehicles with annual revenues of approximately U.S.
$1.1 billion. All required official filings will have been made by the end of
the year. The transaction is subject to receipt of regulatory approvals and
other customary closing conditions, including consultations with employee
representatives.
Delphi Diesel Systems is expected to position Delphi to continue progress
toward achieving its vision -- to be recognized by its customers as their best
supplier -- and, in turn, build shareholder value. According to J.T.
Battenberg III, chairman, CEO and president of Delphi Automotive Systems, this
acquisition will clearly meet Delphi's strategic and financial objectives:
"With this acquisition, Delphi is now positioned to offer customers complete
gas and diesel engine management systems, including fuel handling, air
control, emissions aftertreatment, sensors and actuators, and sophisticated
electronic control. Additionally, this transaction, which we view as an
investment in our future, is expected to exceed Delphi's 2002 net income
margin objective of 5 percent, surpass our RONA objective of 12.5 percent, is
accretive to earnings in 2000 and generates a superior return on investment.
This transaction firmly supports our drive to further diversify our customer
base."
So far this year Delphi has successfully completed 11 projects, including
five joint ventures, one acquisition and five new projects or plants.
Battenberg says he expects this acquisition to bring significant strategic
value to the company and be completed efficiently and seamlessly.
Battenberg said that this acquisition when completed would support all of
Delphi's key initiatives, including:
* Position Delphi to be number one or number two in its various
businesses.
* Increase non-GM revenue by an estimated 16 percent to about U.S.
$8 billion on an annualized basis.
* Boost Delphi's European sales by more than 20 percent to a total of
more than U.S. $5 billion.
* Enhance Delphi's system and product capabilities and complement
Delphi's gasoline engine management systems capabilities.
* Strengthen Delphi's technology focus by adding entirely new high-growth
diesel product lines -- common rail and electronic unit injection
(EUI).
In the transaction Delphi will acquire a combination of stocks and assets,
comprising substantially all of the assets and certain liabilities of Lucas
Diesel Systems and its associated aftermarket activities.
With 1998 sales of U.S. $1.1 billion Lucas Diesel Systems has
12 manufacturing locations in seven countries. Lucas Diesel Systems and its
associated aftermarket operations employ approximately 8,600 people.
According to Donald L. Runkle, president of Delphi Energy & Engine
Management Systems, which will have responsibility for Delphi Diesel Systems
when the acquisition is complete, the business will fit smoothly into the
Delphi organization: "We anticipate synergies in engineering, manufacturing
and general administrative activities that will add further value to this
transaction almost immediately, and this will grow, particularly as we realize
efficiencies between the two organizations."
This acquisition, according to Delphi Chief Financial Officer Alan S.
Dawes, is expected to favorably impact Delphi's net income in 2000.
"The acquisition," Dawes said, "will be financed using a portion of Delphi's
strong 1999 cash flow from operations of more than U.S. $2 billion. Given our
healthy balance sheet and significant cash flow, we are able to increase
shareholder value through this acquisition."
Jose Maria Alapont, president of Delphi Automotive Systems, Europe, said
diesel engines are an increasingly important powerplant that have significant
potential for future growth in Europe, as well as in South America and Asia.
"The diesel common rail injection system is very attractive to Delphi,"
Runkle added. "It is a rapidly emerging technology that offers several
benefits over more conventional indirect injection systems. We believe that
Lucas Diesel Systems has the best common rail technology today, as well as the
management, engineering, manufacturing talent and workforce commitment to
ensure that this technology achieves a major share of the rapidly growing
common rail diesel injection market."
Runkle pointed out that today's diesels have changed: "Diesels are not
what they used to be. In the past, diesels were noisy and underpowered.
Diesels today are quiet, clean and powerful. The new diesel engines are
paving the way for tomorrow's propulsion system of choice. Demonstrations by
PSA Peugeot Citroen have shown that diesels can be virtually particulate-free.
In addition, Delphi's award-winning advanced technologies like non-thermal
plasma will help reduce remaining NOx emissions.
"Lucas Diesel Systems produces a complete range of diesel fuel-injection
systems and related components for major original equipment manufacturers and
provides Delphi with a significantly strengthened presence with many
customers," Runkle said. "The organization brings unusual expertise in
high-precision diesel fuel injection which will also complement Delphi's
gasoline engine management business."
"At the same time, Delphi complements and enhances Lucas Diesel Systems,
with its demonstrated abilities in implementing lean manufacturing techniques
that will improve the overall value stream," said Runkle. "Delphi brings
strong engineering systems and electronics capabilities along with an
extensive customer base in engine management systems.
"Working together," Alapont said, "we believe Lucas Diesel Systems and
Delphi will be able to provide the advanced diesel and gasoline engine
management systems demanded by customers around the world."
Delphi Automotive Systems, with headquarters in Troy, Mich., USA, is a
world leader in automotive component and systems technology. Delphi's three
business sectors -- Dynamics & Propulsion; Safety, Thermal & Electrical
Architecture; and Electronics & Mobile Communications -- provide comprehensive
product solutions to complex customer needs. Delphi currently has
approximately 201,000 employees and operates 168 wholly owned manufacturing
sites, 38 joint ventures, 51 customer centers and sales offices, and
27 technical centers in 37 countries. Regional headquarters are located in
Paris, Tokyo and Sao Paulo, Brazil. Delphi can be found on the Internet at
http://www.delphiauto.com .
This press release, other than historical financial information, contains
forward-looking statements that involve a number of risks and uncertainties.
Important factors that could cause actual results to vary materially from
those anticipated in the forward-looking statements are set forth in Delphi's
Securities and Exchange filings, including without limitation, in Items 1
and 7 of Delphi's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and Item 2 of Delphi's Quarterly Reports on Form 10-Q for
the quarters ended March 31, June 30, and Sept. 30, 1999.