Delphi to spin off its powertrain business and focuses on electronic market
【Summary】Delphi, one of the world's largest automotive parts manufacturers, has announced that it will spin off all operations connected with combustion engines, and fully concentrate on electric powered and autonomous vehicles.
Delphi, one of the world's largest automotive parts manufacturers, has announced that it will spin off all operations connected with combustion engines, and fully concentrate on electric powered and autonomous vehicles. The move is seen by many as a significant step of transforming itself into EV and self-driving components developer.
After the news release, shares of Delphi's stock rose 10.9%, to $87.01 per share. It seems that investors are pretty positive toward the change. The company is planning to spin off its powertrain division that's worth $4.5 billion, into a separate publicly traded company by next year. Delphi has 161,000 employees globally.
After spin-off, the new company will have around 20,000 employees and 500 engineers—it may still keep the Delphi name, or possibly find a new one. Liam Buttersworth, the current senior vice president of Powertrain Systems, will become president and CEO of the new company when the transaction is completed next year.
"There's a whole element of the component of the car that Wall Street values at a lower level," Delphi CEO Kevin Clark told Reuters in an interview on Wednesday. "(Automakers) are requiring a significant ramp up in computing power...and more and faster signals and data distribution in the car. We are the only supplier in the industry that has both the electrical architecture that controls the computing power, signal distribution, and the software capability to develop the systems for autonomous driving."
Delphi was the former parts arm of General Motors before spinning-off in 1999, has been doing conventional automotive businesses. It is one of the world's largest manufacturers in the automotive industry today. Since 2012, the company has acquired or invested in 11 companies that specializes in electric architecture or autonomous or connected technology. These divisions in total have contributed an annual revenue of more than $12 billion to Delphi.
However, Clark stressed that internal combustion engines are still going to be around for a long, long time. It will probably account for 95% of all vehicle sales through 2025. Therefore, the newly separated company has room to grow, and has more freedom to invest in that growth.
Currently, the spun-off powertrain company accounted for 27% of Delphi's revenues last year. Analysts value the electronic market potential to more than $100 billion annually, almost twice of that of the internal combustion market.
On the autonomous technology side, Delphi has developed partnerships with Intel Corp and Israeli self-driving rising star Mobileye, which is being purchased by Intel for $15.3 billion. The company said it expects to launch its turnkey autonomous driving system in 2019, and hope major automakers could buy it directly from them.
The spinoff will be tax free and is expected to be completed by March 2018.
Claire Peng has over 6 years of professional experience in the media industry, covering TV, newspaper and online media. She was once a reporter and producer for Fairchild Television based in Toronto Canada, and worked as an English news reporter for the Global Times in Beijing. She writes mainly about self-driving, companies investment, and the enterprise lab.
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