From Associated Press

TROY, MI — Delphi Corp., the world’s largest auto supplier, said a preliminary internal accounting review found the company improperly recorded a $20-million payment from Electronic Data Systems Corp (EDS) in 2001.

In a filing Wednesday with the Securities and Exchange Commission (SEC), the Troy, Mich., company said it also booked $26 million in credits from EDS in 2000 and 2001 for future information technology services when the amount should have been recognized over a longer period of time.

Delphi, which said its audit committee’s review was not complete, disclosed in late September that the SEC was investigating certain transactions with EDS, its longtime information technology services provider.

In the most recent filing, Delphi said it has yet to file with the SEC its quarterly report for the third quarter of 2004, and that its audit committee was working diligently to finish its investigation, though it gave no time frame.

Once the internal investigation is done, it will enable Delphi’s independent auditors, Deloitte & Touche, to complete its review procedures on the third quarter 2004 financial statements and to audit or review financial statements that might require material adjustments.

Delphi said the $20-million payment from EDS should have been recorded as a liability when it was received in the fourth quarter of 2001. The liability then should have been reduced as payments were made to EDS as part of a services agreement.

In an 8-K filing with the SEC in September, Delphi said the SEC investigation centered on the accounting treatment of $46 million in payments made and credits given by EDS to Delphi in 2000 and 2001, and $40.5 million in payments Delphi made to EDS for information technology services in 2002 and 2003. Delphi and EDS are former units of General Motors Corp.

Delphi said it received a subpoena from the SEC in July and a formal order of investigation from the federal regulatory agency in August. Delphi, which posted $28 billion in sales last year, has said it is cooperating fully with the SEC.

Like many suppliers, Delphi has warned of lower-than-anticipated earnings this year because of higher material costs, particularly for steel, and because top U.S. automakers GM and Ford Motor Co. plan to produce fewer vehicles.

Standard & Poor’s earlier this month said it might lower Delphi’s credit rating to below investment grade in part because of the higher material costs and lower production at GM. Delphi has scheduled a conference call with analysts, investors and financial journalists today to discuss its 2005 financial outlook.

Delphi shares fell 14 cents to close Thursday at $8.64.

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