TROY, MI — Delphi Corp. said Friday it plans to cut 8,500 jobs, or 4.6 percent of its workforce, worldwide next year as part of an ongoing restructuring. The world’s largest automotive-parts supplier also expects to lose $350 million as it struggles with lower vehicle production and rising commodity prices.
The Troy, Mich.-based company had a similar goal for global job reductions in 2004 and exceeded it through attrition, retirements and job transfers. In the first nine months of 2004, Delphi trimmed between 9,100 and 9,200 jobs, spokeswoman Claudia Baucus said.
Of the total announced Friday, Delphi said 3,000 of the cuts are expected to be U.S. hourly employees and 5,500 would be from outside the country.
Delphi also revised its earnings forecast for the fourth quarter and 2005 to take into account the layoffs as well as slower sales.
On Friday, Delphi shares slipped 34 cents, or 3.9 percent, to close at $8.30 on the New York Stock Exchange, near the low end of its 52-week trading range of $8.17 to $11.78.
Delphi, which has 186,500 employees worldwide, is among several auto suppliers that have warned of lower-than-anticipated earnings because of higher materials expenses, particularly for steel, and because top U.S. automakers General Motors Corp. and Ford Motor Co. plan to turn out fewer vehicles.
GM, Delphi’s biggest customer, and Ford recently announced lower production schedules for the first quarter of 2005 versus this year’s first quarter. Delphi is a former GM division and has worked aggressively to expand its non-GM business.
In a conference call with analysts and financial journalists, Delphi Chairman and Chief Executive J.T. Battenberg III said the company’s financial picture also has been hurt by rising health-care costs and a cooling off of business in China.
On a positive note, Battenberg said, Delphi remains on target to achieve a goal of $1.4 billion in operating cash flow in 2004.
“We’ve had to put some plans together to try and offset as many of these headwinds as possible in 2005,” he said. “However, the combined forces of these events will outpace our progress in the early part of 2005.”
In a research note Friday, Merrill Lynch analyst John Casesa said the headwinds Battenberg cited are nothing new, but the lower outlook “points to the increasing intensity of these pressures.”
“We believe a continued restructuring program to right-size the business is sensible, but we think the cash charges will be tough to deal with,” Casesa said.
Delphi forecasts revenue in the October-December period to be between $6.9 billion and $7 billion — $200 million lower than its previous outlook.
It also said it expects to report a loss of between $123 million and $143 million in the fourth quarter. Excluding restructuring and other charges, the fourth-quarter loss will be between $70 million and $90 million, it said.
Delphi’s previous fourth-quarter forecast ranged from a loss of $18 million to a profit of $32 million.
For the year, Delphi forecasts a loss of $57 million to $77 million. Excluding charges, earnings are expected to be $118 million to $138 million, it said.
For 2005, the company expects revenue of $28.5 billion to $29 billion.
It said the full-year 2005 loss would be $350 million, including $150 million for workforce reductions. Delphi reports 2004 financial results Jan. 20.
The announcement came two days after Delphi revealed in a filing with the Securities and Exchange Commission that it had improperly recorded a $20-million payment from Electronic Data Systems Corp. in 2001.
The 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.
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