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Delphi cutting 11,500 jobs
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March 29, 2001: 1:21 p.m. ET
Largest auto parts maker cites auto slowdown; Delphi, Federal Mogul warn
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NEW YORK (CNNfn) - Delphi Automotive Systems Corp. said Thursday it will close or sell nine plants and cut 11,500 jobs as the nation's biggest auto parts maker wrestles with sluggish sales and stiff competition.
Delphi (DPH: Research, Estimates) also warned it likely will lose money in the first quarter, which ends this weekend, instead of the profit expected by analysts.
Another leading auto parts maker, Federal Mogul Corp. (FMO: Research, Estimates), also warned Thursday morning that it expects a much larger- than-expected first-quarter loss.
 Delphi, which formerly was a unit of leading automaker General Motors Corp. (GM: Research, Estimates), said it will get out of businesses with about $900 million in sales and take a $400 million restructuring charge against first-quarter earnings.
"This restructuring is necessary to strengthen Delphi both in the uncertain near-term environment and to compete and prosper for the long term," Chairman J.T. Battenberg said in a statement. The job cuts equal about 5 percent of its workforce.
Troy, Mich.-based Delphi already had cut 7,600 jobs in Mexico not included in Thursday's layoff announcement. It also had between 4,000 and 7,000 U.S. employees on temporary layoff since December due to production cutbacks by the major automakers. The 11,500 permanent layoffs announced Thursday may include many of those already on temporary layoff.
"We clearly cannot operate this close to our break-even point," said Alan Dawes, the company's chief financial officer, in a conference call. "We believe it is now time to take sustained action to permanently reduce capacity and adjust our company infrastructure accordingly."
The job cuts include 5,600, or 10 percent, of U.S. hourly employees; 2,000, or 11 percent, of U.S. salaried employees, and 3,900 employees in other locations worldwide, Delphi said. A combination of layoffs, early retirements, incentive packages and attrition will be used to achieve the cuts. The United Auto Workers union, which represents most of the U.S. hourly employees, had no immediate comment.
The company said nine plants under review to be sold, closed or consolidated include three in the United States -- Robertsdale, Ala.; Fort Defiance, Ariz., and Plant 2 in Saginaw, Mich.
Analyst Joe Phillippi with UBS Warburg said the downturn -- the first Delphi has experienced as an independent company -- provides a vivid picture of its inefficiencies.
"They're clearly taking an advantage in this industry to do what GM should have done years ago," he said. "You get to a point where you have to battle-test your plan."
More warnings hit battered sector
Financial results warnings have become common in the auto parts sector in recent months due to production cuts at major automakers. Both Delphi and Federal Mogul had been forced to warn on fourth-quarter results as well.
Delphi said Thursday it will lose up to $50 million, or about 9 cents a share, or break even at best in the first quarter, excluding the restructuring charge, due to slowing orders and falling sales. Wall Street analysts surveyed by earnings tracker First Call had forecast a profit of 17 cents a share for the quarter.
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The company also warned about the second quarter, saying it believes it will earn between $160 million and $200 million, which comes to EPS of 29 to 36 cents. First Call had forecast earnings of 37 cents in the second quarter.
Delphi said sales should be about $6.5 billion in the quarter, down 18 percent from a year earlier and $100 million to $150 million lower than its own forecasts of just two months ago.
 Federal Mogul said it expects a first-quarter loss of 65 cents a share, excluding special charges. First Call's forecast called for a loss of 37 cents in the current quarter. The company also revenue will fall to $1.43 billion from $1.64 billion a year ago.
The company said that while it expected a drop in demand for parts from automakers due to slumping sales and inventory adjustments, it has been surprised by a drop of about 10 percent in sales to the aftermarket segment of the business.
Federal Mogul said it is continuing cost-reduction measures, but did not detail any job cuts or plant closings as Delphi did.
Delphi shares lost 4 cents to $13.90 in early afternoon trading Thursday, although that was up from lows earlier in the day. Federal Mogul shares slipped 9 cents to $3.12.
-- from staff and wire reports 
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