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Delphi Reports Losses for 4th Quarter, 2004"
TROY, Mich. -- It took Delphi Corp. (NYSE: DPH) four paragraphs of positive set-up before its 2004 year-end earnings release got around to the bad news -- a $102 million loss in the fourth quarter -- and another three paragraphs before more bad news -- a loss of $36 million in 2004.In offering off-setting numbers as a prelude, Delphi's chairman and chief executive officer had his chin way up. Said J.T. Battenberg II, "During these challenging times for the automotive industry, Delphi has remained focused on the actions needed to advance its transformation -- and 2004 showed significant progress."Battenberg noted Delphi increased non-General Motors revenues by 20% compared to 2003, and reduced its work force by 9,675 positions over the past 15 months. Delphi also enjoyed strong operating cash flow of $495 million for the fourth quarter of 2004, bringing calendar year 2004 operating cash flow to $1.5 billion, he said."These results are proof that our transformation is progressing," Battenberg said. "Although our preliminary fourth-quarter results are not satisfactory, due in part to short-term headwinds facing the industry, we recognize that the quarter was on the path to transform Delphi into a leaner, more profitable company and that we have continued moving forward on our key value drivers." The $102 fourth-quarter loss included facility and personnel restructuring charges, the company said. Excluding these special items, Delphi would have reported a quarterly loss of $51 million, or $79 million of pre-tax loss.The $36 million loss for 2004 includes $169 million in restructuring related charges -- $265 million primarily related to the recoverability of Delphi's U.S. legacy cost structure, and the benefit of $241 million from the release of tax accruals and reversal of deferred tax valuation allowance. Excluding these items, 2004 net income was $157 million, the company said. Those numbers are likely change following the audit committee's review of certain vendor transactions, the company said, but the red ink will remain. "Despite weaker revenues, coupled with pressures from continued low global production volumes and the impact of high commodity prices, we were able to drive down cost and aggressively manage working capital in order to generate strong operating cash flow," said Alan S. Dawes, vice chairman and chief executive officer."During the first half of 2004, Delphi benefitted from greater-than expected U.S. hourly attrition, and strong non-GM and Asia Pacific growth, and achieved solid results," Dawes continued. "During the second half of the year, we experienced a more challenging U.S. volume environment, increased commodity price pressures as well as volume-related cost issues, and generated a loss. Our strong calendar year non-GM revenues could not offset the combined pressures experienced during the second half of 2004."Fourth-quarter financial highlights, according to Dawes, include:Revenue of $7 billion, down 3% from the fourth quarter of 2003.Non-GM revenue of $3.4 billion, up 14% from $3 billion from the prior year quarter. For the quarter, Delphi's non-GM sales reached a record high of 49%. Operating cash flow of $495 million.Calendar year 2004 financial highlights, according to Dawes, include:Revenue of $28.7 billion, up 2% from $28.1 billion in 2003.Operating cash flow of $1.5 billion, up 26% from $1.2 billion in 2003. Non-GM revenue of $13.2 billion, up 20% from $11.1 billion in 2003. For the year, 46% of revenues came from customers other than GM. In 2004, Delphi continued to focus on its underperforming manufacturing sites through its Automotive Holdings Group structure. In September, Delphi completed the consolidation activities at its Flint West, Mich., manufacturing operation. In addition, manufacturing operations have ceased at Delphi's Tuscaloosa, Ala., site and operations will completely wind down at the Olathe, Kan., and Anaheim, Cal., sites over the next few weeks. "With approximately 6,175 U.S. hourly reductions over a 15-month period, Delphi exceeded its targeted reduction of 5,000 U.S. hourly workers in connection with the restructuring program announced in October 2003," Dawes said. "Additionally during this period, Delphi completed 500 U.S. salaried and 3,000 non-U.S. work force reductions related to the same restructuring program."This year the company plans to further reduce its work force by 8,500 positions. In addition, Delphi will fix, sell or close plans in Laurel, Miss.; Kettering, Ohio; and Home Avenue/Vandalia, Ohio. "Calendar year 2005 is presenting Delphi with a number of competitive challenges," Dawes said. "Commodities, troubled supplier situations and the unpredictability of attrition are making our ability to forecast our cost structure difficult on a quarterly basis. At the same time, our initiatives to offset these cost factors are gaining traction. We are working hard to get through these challenges, but it is more difficult for us to forecast how this will transpire on a quarterly basis.""