THE VINDICATOR, YOUNGSTOWN
The company pursues lines outside the automotive industry for growth.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
CORTLAND -- Top officials at Delphi Automotive Systems are watching closely what happens at the newly remodeled Cortland plant.
Rodney O'Neal, Delphi executive vice president, said the Michigan-based company is betting a large amount of money that the plastic parts churned out by the plant will be an integral part of a new growth business -- connectors.
"You are our anchor. Our future is in your hands," O'Neal told a group of executives at an open house Thursday to celebrate the $42 million plant renovation.
Renaissance period: He said locally based Delphi Packard Electric Systems, a division of Delphi that employs 7,000 locally, is in the midst of a renaissance. For decades, it has been a maker of wiring harnesses, and it just sort of happened to make components.
Now, it sees itself as an electronics company that just happens to do automotive wiring.
Although it's not reducing its commitment to automotive parts, Packard is changing its customer base to include makers of computers and telecommunications equipment, O'Neal said.
Newly created business lines are key to the transformation.
Four lines: James Spencer, recently named as Packard president, said he changed the company from having one business line to four: wiring, electronics, switches and connectors.
He created Delphi Connection Systems, which already is the fourth-largest maker of connectors in the world and the largest maker of automotive connectors. Connectors are used to bring together electrical wires in a variety of products.
The connector market has $32 billion in annual sales, but industry analyst Ron Bishop of Illinois expects that to double within 10 years.
"A $30 billion industry going to $60 billion gets us excited," Spencer said.
Kevin Heigel, who was named business line executive for connectors in February, said the unit has just over $1 billion in annual sales now but expects that to reach $3 billion in 2005.
Delphi Connection Systems has 3 percent of its sales outside the automotive industry, but he wants that to increase to 33 percent in four years.
Heigel said the unit has a 10 percent profit margin and wants to maintain or improve that as it increases sales.
Sales efforts: Growth in the automotive industry will come from increasing sales efforts, he said. Instead of just focusing on making parts for its own wiring harnesses, Packard is putting together a sales force to sell connectors to other companies, including its top rival in the harness business, Yazaki.
In other industries, it will use acquisitions to boost growth, he said.
Packard announced Thursday that it intends to acquire Specialty Electronics of Landrum, S.C., for $21.8 million. Specialty, which has 180 employees, makes connectors for a variety of industries, including computer, telecommunications and medical.
Success strategy: Delphi Connection Systems, which is based in Warren, will try to beat out its competition by understanding its customers' needs better and quickly developing products to solve their problems, Heigel said.
Heigel said the projected sales growth won't affect the Cortland plant because it is operating at full capacity. Packard will have to add three or four more plants in the next four years based on its expected sales growth, he said. The location of those plants will depend on the needs of customers, he said.