Delphi Earnings Stumble 73 Percent

Automotive parts supplier Delphi Automotive Systems Corp. on Thursday reported a 73 percent drop in fourth-quarter earnings before one-time items, but forecast higher-than-expected results for the first quarter as automakers increase vehicle production.

Troy, Michigan-based Delphi, the world's largest automotive supplier, said earnings before one-time items fell to $55 million, or 10 cents per share, from $200 million, or 36 cents per share, in the year-ago fourth quarter.

The results matched Wall Street forecasts that ranged from 5 cents to 12 cents per share, with a consensus of 10 cents, according to research firm Thomson Financial/First Call.

Delphi had warned in October that it expected fourth-quarter earnings of 5 cents to 15 cents per share, below forecasts then of 19 cents per share.

The company, which was spun off from General Motors Corp. in 1999, said fourth-quarter sales fell to $6.38 billion from $6.91 billion a year earlier.

Since the Sept. 11 attacks, Delphi shares have underperformed the S&P 500 by about 10 percent, but the parts company has outperformed its closest competitor, Visteon Corp., by about 22 percent.

Including fourth-quarter 2001 charges of $186 million after taxes for its decision to divest its generator business and write down investments in Brazil and Argentina, Delphi lost $131 million or 23 cents per share in the fourth quarter.

But for the first quarter, Delphi said it expected earnings of $110 million to $130 million, excluding charges, or about 19 cents to 23 cents per share, versus a loss of $25 million in the first quarter last year.

Wall Street analysts' forecasts of Delphi first-quarter earnings ranged from a loss of 15 cents to a profit of 17 cents, with a consensus estimate of a profit of 9 cents per share, according to Thomson Financial/First Call.

Delphi Chief Financial Officer Alan Dawes said that, with its largest customer GM scheduled to increase North American vehicle production by 7 percent in the first quarter, the automotive industry is showing some signs of recovery.

``For the first time in six quarters, we'll be looking at favorable comparisons...reflecting the fact that production schedules may be up,'' Dawes told Reuters. ``It looks like there may be light at the end of the tunnel.''

Delphi repeated an earlier forecast that it expects to take a charge of $100 million to $150 million, likely in the first quarter, to cut 1,400 jobs through voluntary separation incentives.

Global sales in the first quarter are expected to total between $6.6 billion and $6.7 billion, up slightly from $6.5 billion in the year-ago first quarter. Operating cash flow is expected to range from $50 million to $150 million in the first quarter, Delphi said.

The company repeated its forecasts for all of 2002, previously announced in December, of sales of $25.5 billion, earnings of $275 million excluding a charge of $100 million to $150 million, and operating cash flow of $800 million.

Despite unexpectedly strong U.S. automotive sales in the fourth quarter, and record results in October due to zero-percent financing incentives offered by many automakers, most car companies slashed production as a result of the slowing U.S. economy.

GM cut its fourth-quarter vehicle production in its core North American market by 5 percent, a less drastic move than some of its domestic competitors. Delphi's sales to customers other than GM totaled $2.1 billion, or 33 percent of total sales, during the fourth quarter.

The slowing economy and competitive pressures in the automotive industry have pressured automakers to seek price cuts from suppliers, slicing their already razor-thin margins.

Delphi's competitor Visteon took the unusual step last week of issuing a statement saying it was fighting Ford Motor Co.'s requests for price cuts, which it said were larger than cuts sought from other suppliers.

Delphi, in the midst of a restructuring aimed at closing nine plants and reducing its global work force by 11,500 jobs or about 5 percent by March this year, has already closed seven of those plants and cut 10,100 jobs. The company said it spent $343 million on the restructuring in 2001.

Visteon, the second largest U.S. supplier, is expected to post a loss when it reports fourth-quarter results on Friday.