Howes: Delphi surges quietly by design, with one regret

Daniel Howes
The Detroit News

Troy — Rodney O'Neal is the CEO most outside the auto industry have never heard of — and he likes it that way, just fine.

He prefers to let the numbers do the talking: The share price of Delphi Automotive Plc, formerly based in Troy and now headquartered in the United Kingdom, has nearly quadrupled since an initial public offering in 2011 at $22 a share. Revenue swelled nearly $2 billion last year to $17 billion. The dividend is steadily rising, now paying out three times as much per share as the parts-maker's former parent company, General Motors Co.

"My aspirations have always been about the company and not about me," O'Neal, 61, said in a rare interview, less than two weeks before he is scheduled to retire March 1. "It's important our people know about us, our customers know about us, our industry knows about us. It's value creation. If it's not creating value, I'm not going to do it."

Talk about a turnaround. Delphi's epic 2005 bankruptcy exacted high costs on communities, unions and the pensions of salaried retirees. Yet the creative destruction of the four-year ordeal, shaped by management, private equity investors and the demands of the Obama auto task force, produced a global supplier that now offers 33 product lines from 141 manufacturing sites in 33 countries and employs 160,000 worldwide — only 5,000 of which work inside the United States.

The net result is a Wall Street love story attached to a radically different company bearing the same name. It's a supplier with an earned reputation for doing what it says it will do; it's led by a CEO who emphasizes what he calls "team" and "flawless execution" — neither of which characterized the captive parts supplier soon after its 1999 spin-off from GM.

Today's Delphi "has potential to become one of a handful of global suppliers that can become so powerful that they can add more value to the car than the" automaker "itself, in an autonomous world," Morgan Stanley said earlier this month, adding that Delphi is on track to become a "Tier-0" mega-supplier. "Very few companies can gain membership to the global Tier-0 club, and" Delphi "is the only publicly traded U.S. company that we believe qualifies."

The transformation is remarkable, notwithstanding the aftershocks of a reckoning that undeniably claimed jobs, plants and salaried pensions. The producer of mundane parts less than a decade ago now is chasing a "safe, green and connected" portfolio — perfect for the high-tech, environmentally aware times — to what could be a $100 stock, according to some on Wall Street.

How times have changed. Delphi's bankruptcy of its U.S. operations sent shock waves through the Detroit auto industry and its principal unions. Here was one of the world's largest suppliers using Chapter 11 to rid itself of contractual obligations to GM and its U.S. unions because they were deemed to be hamstringing its ability to compete with global suppliers, principally foreign-owned ones.

Before the onset of its 2005 reckoning, Delphi employed 184,000 worldwide, 47,000 of them in the United States; offered 119 product lines, 40 percent of which competed in so-called "commodity" segments produced by what O'Neal calls "non-competitive" plants; booked 29 percent of its sales outside the States, compared to 66 percent today; and relied on GM for 76 percent of its business in 1999, compared to 17 percent today.

At the center of it all? O'Neal, who became Delphi president in 2005 and CEO in 2007, after Chairman Steve Miller moved on to his next controversial workout. He left O'Neal a company in bankruptcy, its largest customer in increasing distress and a plan of reorganization that would be revised three times before Delphi could exit Chapter 11 — and be led for five more years by the president who took the predecessor into bankruptcy.

That's exceedingly rare in the world of corporate restructuring, bankruptcy and the private-equity cash that greases deals. There, executives associated with Chapter 11 frequently are tarred with implicit failure and dumped; that O'Neal survived and prospered underscores his acumen and the savvy restructuring plan financed by Delphi's investors.

"Rod did a fantastic job," says Gary Cowger, a Delphi director since 2009 and former group vice president of global manufacturing and labor relations at GM. "The thing that is really the most unsung of his career is that in four years in bankruptcy he never missed one shipment or one delivery. Four years and this guy never missed once. It's kind of incredible."

O'Neal didn't do it alone, as he's quick to concede. "Anybody can think this stuff up," he says. "Getting it done is another story. We execute at a very high level" with a "can-do, must-do, will-do attitude. Team is important. Reshaping the company in the way we did was revolutionary."

But it was neither easy nor painless, facts O'Neal neither deflects nor denies. Delphi's bankruptcy languished for years, a victim of roiling financial markets culminating in the global financial meltdown and the titanic battles of the GM and Chrysler Group LLC bankruptcies.

The toll: United Auto Workers-represented plants are gone. The "new" Delphi is headquartered in Britain; more than 95 percent of the company's employees work outside United States; and the pensions of salaried employees — many of whom spent the bulk of their earning years working for GM — were off-loaded to the Pension Benefit Guaranty Corp., cutting payouts to some retirees by as much as two-thirds.

"When we went into this one of the covenants was to maintain the pensions," O'Neal says, clearly mindful the subject remains raw with many salaried retirees who believe — rightly — they were shafted by the auto task force. "We went on the record with that. I did three plans of reorganization. In two of them, the pensions were intact. The last one: We ran into a global economic tsunami. It took another year-and-a-half to get out" of bankruptcy.

"What happened, happened. It was legal. But it could have happened another way, and it was legal. I failed, and I failed miserably." It "was never in our plan to throw the pensions over."

Delphi's financial performance since shows there was another way. Investors and the Obama task force didn't give O'Neal and his team the chance to prove the company could afford it — because it could.

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Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at