Delphi Posts $114M Loss, Maintains Outlook

Monday, October 18th 2004, 10:17 am

By: News On 6

DETROIT (AP) _ Delphi Corp., the world's largest automotive supplier, said Monday it lost $114 million in the third quarter, reflecting lower North American vehicle production and higher material costs.

The July-September loss, which amounted to 20 cents a share, was far less than the loss of $353 million, or 63 cents a share, posted in the year-ago quarter when Delphi took a $356 million charge for restructuring.

Excluding $25 million in restructuring charges in the most recent quarter, Troy-based Delphi posted a loss of $66 million, or 12 cents a share, in line with the Wall Street consensus compiled by Thomson First Call.

Sales in the third quarter totaled $6.65 billion, up from $6.56 billion a year ago.

The company also reaffirmed its earnings guidance for the fourth quarter.

Delphi said earlier this month it expected to post a wider third-quarter loss than previously anticipated because of lower vehicle production and higher material costs. At the time, company officials said they anticipated a net loss of $113 million to $120 million for the July-September period, versus a previous forecast of a loss of $10 million to $40 million.

``As we discussed Oct. 5, the third quarter was a more challenging environment than we experienced in the first half of 2004, with increased commodity pressures, low production volumes, product launch issues and lower attrition,'' J.T. Battenberg III, Delphi's chairman and chief executive, said in a statement. ``While we have near-term challenges, our long-term strategy remains on track.''

General Motors Corp., Delphi's largest customer, and Ford Motor Co. both announced planned fourth-quarter production cuts for North America in September. Several other suppliers also have warned of lower third-quarter earnings because of North American production cuts and rising material costs such as steel.

``We believe improvements in Delphi's operating performance hinge on management's ability to reduce labor costs while controlling the upward pressure on prices from raw materials and its supply base,'' Prudential Equity Group analyst Michael Bruynesteyn said in a report scrutinizing auto suppliers last week.

Delphi, spun off from GM in 1999, said its client diversification efforts continue to pay off, as non-GM business accounted for 47 percent of third-quarter revenue, up from 45 percent in the second quarter and 40 percent a year ago.

The company said it also generated $360 million in operating cash flow in the most recent quarter, more than double the result from a year ago.

``This strong cash flow generation, fueled by our non-GM revenue growth and aggressive cost reductions, allowed Delphi to strengthen its balance sheet and will continue to position Delphi for long-term value creation,'' Battenberg said.

To help improve finances, Delphi said last month it would defer ``non-critical'' spending and hiring in the United States. Following the announcement a year ago of a major overhaul of its U.S. operations, the supplier said Monday it has reduced its U.S. hourly head-count by nearly 5,700. It announced last month that it expects that number to grow to more than 6,000 by year's end.

Delphi chief financial officer Alan Dawes said the company was looking for ``creative solutions'' across the supply chain to trim overall costs and counteract some commodity cost increases.

Looking ahead, Delphi maintained its fourth-quarter forecast for a loss of $18 million to earnings of $32 million on revenue of $7 billion to $7.2 billion.