NEW YORK (CNNfn) - Delphi Automotive Systems stock rose 9.6 percent on its first day of trading Friday after General Motors Corp. spun off a piece of the world's largest auto-parts maker.
Delphi's $1.7 billion stock offering, one of the biggest in the United States, was the largest of eight new issues trading that made Friday the busiest day for initial public offerings in a year.
Delphi opened at 18-3/4 and closed at 18-5/8 on the New York Stock Exchange after underwriters paid $17 apiece for 100 million shares of the stock Thursday.
Splitting Delphi into a separate company will free GM to obtain better deals on parts and should help Delphi expand sales to other automakers, industry officials and analysts said.
But Delphi will need to cut costs and reshuffle product lines - and keep its workers happy after damaging strikes last summer - to stay competitive in the global parts market, they said.
"This is going to refocus the company dramatically to expand its business with other carmakers," Delphi Chairman J.T. Battenberg told CNNfn. About $6 billion of Delphi's $28.5 billion in sales are currently to automakers other than GM, he said.
Delphi officials start trading at NYSE
Given Delphi's size - it will rank around No. 30 on the Fortune 500 - "one would assume they don't need to get bigger," said analyst Maryann Keller at brokerage ING Barings. But "five years from now I wouldn't be surprised to see their businesses reshuffled," she said.
Delphi, based in Troy, Mich., is a giant by almost any measure. Its 200,000 employees in 36 countries make and sell car radios, braking systems, instrument panels and other parts.
But the company lost $93 million as sales fell 10 percent last year because of price-cutting, weakness in Asia and Latin America and strikes at Delphi and GM plants that all but shut down GM for almost two months last summer.
Delphi, which has been hit by strikes each of the last three years, hopes that sales growth, its separation from GM and innovative contract agreements will bring labor peace.
Whether Delphi workers remain covered by the same national labor contract that GM negotiates starting in September is a question that will not be resolved for some months, Delphi officials said.
Delphi seeks smaller deals
Meanwhile, with other big auto-parts makers looking to merge, Delphi is content to make smaller acquisitions.
"There's a lot of turmoil in the industry, a lot of mergers," Battenberg said. "The big deals out there today, we look at them, but the prices are getting pretty high."
Delphi has bought about 40 parts makers in recent years - most of them so small as to be "off the radar screen," he said.
TRW said last week it agreed to buy LucasVarity for about $6.6 billion, though a rival bidder may yet emerge.
The shares sold represent about 17 percent of Delphi's stock and GM plans to spin off the rest to its shareholders later this year. The stock trades as DPH on the Big Board.
by staff writer Steven Radwell