Delphi automotive: An american company ... in name only

Abstract

DELPHI Automotive PLC (DELPHI), a long time ago a General Motors' (GM) subsidiary, went public (DPH) and became totally independent from its holding company in 1999. Under the new ownership structure, DELPHI decreased its share as a GM supplier, and along with high labor costs, its poor financial situation saw the company filing for bankruptcy in the US in 2005, as non-US subsidiaries were not included and continued operations as usual. As part of its reorganization to emerge from bankruptcy, DELPHI designed a three-tier strategy: megatrends (See: Ernst and Young. Megatrends 2016 (Madrid: E and Y, 2016)) (e.g., focus on core products), internationalization (e.g., footprint rotation, searching for best-cost countries instead of just low-labor-cost countries), and divestitures of non-core products and divisions. Accordingly, DELPHI enforced an aggressive strategy to penetrate in new, growing markets (e.g., China), as well as in getting close to key suppliers and major customers (e.g., Eastern Europe, North Africa). Our results show that internationalization and complexity are interlocked notions (e.g., personnel turnover, supply chain) and that geographical diversification should be implemented in conjunction with other strategic actions (e.g., focus on core products). Our findings also provide support for the notion that technological diversification benefits from internationalization and cultural diversity. Our results show that the internationalization strategy implemented along with the megatrends was successful (e.g., 70% of DELPHI's sales were international) and created the base for further focus on smart, high-tech products. Overall, our evidence shows that the three-tier strategy paid off and DELPHI emerged from bankruptcy in 2009 as a solid firm; it became a public firm once more, and its stock market value has quadrupled since 2011.