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Delphi Corp. is considering closing U.S. factories and bidding on the automotive unit of Motorola Corp. as part of its effort to recast its electronics and safety division toward higher-margin products. The Troy, Mich.-based company, which filed for Chapter 11 protection last month in the U.S. Bankruptcy Court for the Southern District of New York, has yet to unveil its reorganization plan. But according to an internal company memo first reported in The Detroit News, Delphi is considering a dramatic overhaul of the division responsible for more than 20 percent of its $28 billion in annual sales. The document calls for Delphi to shed manufacturing plants in Michigan, Indiana, Wisconsin, Ohio and Arizona, as well as in Japan and England, and to cease making products including ignition systems and suspension components. The product lines under consideration to be discontinued are projected to lose nearly $20 million on revenue of about $131 million in 2006, according to company estimates. Delphi spokesman Dave Bodkin said that the leaked memo was a draft, adding that the information contained in it “is incomplete and does not necessarily reflect our current plan.” Bodkin declined comment on the specifics contained in the document, including potential discussions with Motorola. It is unclear who leaked the memo, which was dated Nov. 9, to the media. Bodkin said Delphi “considers this a very serious breach” and is conducting an internal investigation. Though the plans appear to be preliminary, industry sources said it comes as little surprise. Delphi, a former General Motors Corp. subsidiary that ranks as the nation’s largest supplier of auto parts, is expected to dramatically shrink as part of its Chapter 11 reorganization. The expected transformation is part of a broader industry trend away from one-stop shopping and toward more specialized auto parts suppliers. “For the last 10 years the big guys were all about combining revenue streams to create size and mass, but that strategy is being revisited by most everyone now,” said Van Conway, president of Birmingham, Mich.-based restructuring firm Conway MacKenzie & Dunleavy. “The focus is now shifting away from growing the top line to just doing what you are best at.” Indeed, Delphi seems committed to building the product lines it keeps. The memo outlined plans to grow the electronics unit from a projected $5.8 billion in sales in 2006 to $8.5 billion in five years irrespective of any divestitures. The revamp also could help Delphi lessen its dependence on GM, which remains the company’s largest customer. According to the memo, Delphi wants to shrink electronics sales to GM from 45 percent to 35 percent of total revenue by 2010, with Hyundai Motor Co. mentioned as a key potential source of growth. The Motorola unit that Delphi is considering bidding on makes components used in vehicle navigation and safety systems. Though the Schaumburg, Ill.-based company has not said the division is on the block, industry sources said Motorola in September hired J.P. Morgan Chase & Co. to seek a buyer. The unit, which also makes sensors used in steering, braking and power doors and windows, had sales of $1.6 billion in 2004. Motorola sold its automotive global positioning chip business to Sirf Technology Holdings Inc. in June as part of its strategy to focus on its wireless handset business. Andrea Orr contributed to this report. Copyright �2005 TDD, LLC. All rights reserved.

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