TROY, MI — Delphi Corp. reported Q2 2005 revenues of $7.0 billion, $500 million less than Q2 2004, and a GAAP net loss of $338 million or a loss of 60 cents per share, compared to Q2 2004 GAAP net income of $143 million or earnings of 25 cents per share. Non-GM revenues were $3.6 billion, representing 51 percent of total revenues.
“Despite significant U.S. financial challenges, we continue to experience growth and profitability in our international operations,” said Robert S. “Steve” Miller, Delphi’s chairman and CEO. “While we are pleased with our regional performance, it is apparent that we must immediately address the U.S. legacy issues. We are engaging our major unions in discussions to seek modifications required to implement our restructuring plan, as well as with GM to seek related financial support. As we announced on Aug. 5, we drew $1.5 billion under our revolving credit facility to make additional cash readily available to finance our operations to the extent required during our restructuring discussions with our unions and GM. If these discussions do not lead to the implementation of a plan that addresses our existing legacy liabilities and the resulting high cost of U.S. operations, we will consider other strategic alternatives, including chapter 11 reorganization for our U.S. businesses, to preserve the value of the company and complete our transformation plan.”
“While Delphi continues to be impacted by U.S. legacy cost issues, we are still driving our non-GM sales for long-term growth and diversification,” said John Sheehan, Delphi’s acting CFO. “With Delphi Medical Systems, we announced several actions that will strengthen our position in the medical components field, including booking more than $200 million in new business this year for respiratory care devices.”
In Q2 2005, Delphi made additional progress on restructuring activities announced in December 2004 to reduce its global workforce by 8,500 positions. During the quarter, Delphi reduced its global workforce by approximately 2,100 positions, bringing total 2005 reductions to approximately 3,600.
“Attrition in the U.S. has been challenging in this low-volume environment — principally with flow-back opportunities — and although we are still tracking to the reduction of 8,500 positions, we may see a different mix between U.S. and international reductions than we originally anticipated,” said Sheehan.
In other restructuring-related activities, on July 1, 2005, Delphi completed the sale of its battery product line to Johnson Controls Inc. for $202.5 million, which included the sale of facilities in France, Mexico and Brazil. In addition to the sale of the battery operations in Q3 2005, Delphi ceased manufacturing at the Lansing Cockpit Assembly plant in Lansing, Mich. during the second quarter 2005.
Sheehan said Delphi expects continued lower North American production levels in Q3 2005. At these low volume levels, revenue is expected to range between $6.1 billion and $6.3 billion, and margins will be lower as compared to the first half of the year, due to the high U.S. legacy fixed-cost structure. The company expects GAAP cash flow from operations to be negative in the third quarter of 2005.
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