Delphi Announces Plans for Tax-Free Spin-Off of Powertrain Segment
Delphi Automotive has announced its intention to execute a tax-free spin-off of its Powertrain Systems segment into a new, independent publicly traded company (“Powertrain”).
The transaction is expected to be completed by March 2018, and Delphi shareholders will own shares of both companies.
The move is apparently being made in order for Delphi to better focus on electrification and autonomous driving technologies, and for the wider market to see the company as more of a advanced systems provider.
"The convergence of technologies underpinning industry megatrends is driving greater demand for advanced electronics and increased computing power to meet consumer preferences for more safety, efficiency, and connectivity. At the same time, regulations for emissions and fuel economy are becoming increasingly stringent globally, requiring advanced engine management and electrification systems to enhance vehicle performance and meet customer demand."
According to Crain's article, Delphi hopes to boost its investment attractiveness as Wall Street praises technological companies better than automakers and traditional suppliers.
Kevin Clark, president and chief executive officer said:
Autonomous drive development is apparently the way to go lately
“Today’s announcement represents an exciting opportunity for our businesses by creating two independent companies, each with a distinct product focus, a proven business model, and the flexibility to pursue accelerated investments in advanced technologies that solve our customers’ most complex challenges. At a time of unprecedented industry change, the underlying strength of both our operating businesses and strategic partnerships will allow each company to focus even more sharply on its unique opportunities, continue to develop the very best advanced technologies, and help our customers navigate the road ahead.”
“Looking ahead, new mobility will be defined by the convergence of automated driving, increased electrification, and connected infotainment, all enabled by exponential increases in computing power and smart vehicle architectures. As a result of our strategy to grow and expand through organic investments, acquisitions, and strategic partnerships aligned to the safe, green and connected industry megatrends, our Electrical/Electronic Architecture and Electronics & Safety businesses are well positioned for significant growth as the only global provider of an integrated ‘brain and nervous system’ of the vehicle. We have the advanced technologies, engineering capabilities, and cost structure to be a global leader in the rapidly evolving mobility sector.”
Advanced Connectivity, Autonomy and Mobility (E/EA and E&S)
Upon completion of the transaction, E/EA and E&S will remain global technology leaders with unparalleled strengths in signal and power distribution, centralized computing platforms, advanced safety and autonomous driving systems, enhanced infotainment and user experience, vehicle connectivity and electrification, and data services. With a focus on these strengths, the company is positioned for profitable growth with our industry-leading cost structure, 15,000 engineers and 145,000 global employees.
E/EA and E&S will continue to focus on its portfolio of safe, green and connected technology solutions and satisfying the increasingly complex needs of its customers. The company operates a flexible and lean business model, delivering value to shareholders through disciplined and profitable growth, strong cash generation and balanced and accretive cash deployment.
Powertrain Powertrain is a global technology leader focused on optimizing vehicle propulsion systems by enhancing environmental efficiency and vehicle performance. The company is a global supplier to original equipment manufacturers and aftermarket customers with 20,000 global employees, 5,000 engineers and revenues of approximately $4.5 billion in 2016.
Powertrain’s portfolio of advanced propulsion technologies benefits from increasingly stringent regulatory standards and consumer demands for increased fuel economy and reduced CO2 emissions. With its global engineering capabilities and lean and flexible manufacturing footprint, the company is focused and positioned to deliver above market, sustainable and profitable growth.
Timothy Manganello, currently an independent Director on the Delphi Board, will become non-executive chairman of the new Powertrain company’s board of directors upon separation. Manganello was most recently Chairman of the Board and Chief Executive Officer of BorgWarner, Inc. Liam Butterworth, currently senior vice president and president, Powertrain Systems, will become president and chief executive officer of the new entity.
“As a standalone business, Powertrain will be well positioned to pursue a focused global growth strategy while further enhancing its portfolio of advanced propulsion technologies, power electronics solutions and aftermarket business. Tim and Liam are talented, well-respected leaders with decades of experience in Powertrain businesses, longstanding customer relationships and proven track records in operations management, making them ideally qualified to lead Powertrain into the future and to create long-term value for all of its stakeholders,” said Clark.