Transcript Delphi - HEC Paris

(Best in France Case Study)
Group 9
Arnaud COMPLAINVILLE, Carolina GIRALDO,
Christophe TISSOT, Nam-Jun KIM, Patrick RECASENS
We Thank
• Mr. Dominique Chauvin, former Managing Director
• Mr. Jon de Gaynor, Business Line Executive
• Ms. Catherine Dupont, Director of Diesel Operations
• Mr. Robert de Vaucorbeil, HR Director
• Mr. Philippe Bercher, Chief Engineer - Common Rail
System
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Delphi is the world’s largest manufacturer of automotive
components
Delphi in a Nutshell
• Spin off from GM in 1999 (IPO)
• Services all car manufacturers in the world
–Non GM sales = 39% (2003)
• Company’s HQ  Troy, Michigan
• Regional HQs (Paris, Tokyo, Sao Paulo)
• 3 sectors :
–Mobile electronics, Transportation components, Dynamics
and propulsion
• Worldwide manufacturing and distribution
• Revenue : $ 28.1 bn (2003)
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In 2002, Delphi had a revenue of $27.4 Billion worldwide
30.0
27.4
25.0
20.6
$ Billions
20.0
20.1
18.4
16.0
15.0
14.4
11.0
10.5
10.0
5.0
0.0
Delphi
Bosch
Auto*
JCI
Visteon Denso*
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Lear
Magna*
Dana*
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Our study is focused in Delphi’s Engine & Chassis division,
part of the Dynamics and Propulsion sector
Delphi E&C Overview
• E&C annual turnover = $ 9 bn
• Purchased Lucas Diesel Systems from TRW in 1999 for
$ 800 m
• Benefited from Lucas’ expertise in diesel systems
• Cost constraint : moderate
– Highly automated manufacturing
– Development intensive
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Produces a comprehensive range of components such as
Diesel Engine Management Systems
Delphi E&C Product Portfolio
 GASOLINE Engine Management
System (EMS)
 DIESEL EMS
 BATTERIES & ADVANCED
ENERGY
 EXHAUST
 FUEL HANDLING
 SENSORS & ACTUATORS
 BRAKES & MODULES
 RIDE DYNAMICS
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It employees 3,800 people in France…
Operation in France
 3,800 employees in
France
 4 industrial sites
(19 in Europe)
•Blois
•La Rochelle
•Sarreguemines
•Florange
 2 technical centers
(11 in Europe)
•Blois
•Paris
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And have a client base that is almost all of the automotive
industry (cars, trucks and off-road)
… who expects Delphi to
achieve the following
Most of the car makers are
Delphi’s customers…
BMW, Caterpillar/Perkins,
Cummins, Daewoo, Daimler
Chrysler, Fiat, GME
Powertain, Ford, GM,
Honda, Hyundai/KIA,
Isuzu/SIA/IBC,
Mitsibushi/DSM, Nissan,
PAG, PSA, Renault, Rover,
Suzuki, Toyota/NUMMI,
Volvo Truck, GM Tier I
Customers
 Develop most effective
automobile component
 Concurrent engineering
(new models, new engines)
 Follow European Union’s
regulation (exhaust)
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Key Findings
• Historically : followed GM’s international expansion,
Purchase of Lucas Diesel
• Today : closeness to European manufacturer, notably
French
• Long visibility since changes in the business
correspond to changes in environmental regulations (6
years / 3 to 4 years for other business units)
• Less labor intensive than other divisions
- E&C (France) : Labor cost is around 25%
- Harness (Portugal) : Labor cost = 70%
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Key Benefits of being in France are…
People Benefits
Environment Benefits
• Skilled workforce
• Location benefits
– superior engineering schools;
– academic system second to none
(due to typical 5-years courses);
– Availability of a wide-range of talents;
– Seek to continuously improve
processes and manufactured
products;
– Creates a virtuous circle whereby
employees are increasingly qualified
and increasingly creative.
– international airports in Paris
– quality of life
– closeness to French
customers
• Good acceptance of individual
compensation systems (unlike
Germany)
• Mobility
– Have to use French expats in other
countries (UK, Shanghai, Seoul)
– Open-minded, integrate well
overseas;
• Net salaries comparable all over
western Europe (excl. Portugal)
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Key Constraints of being in France are…
People Constraints
Environment Constraints
• Labor laws
– 35h week increases hourly
rate by 12%
– Poor flexibility (cost of
redundancy: payback is over
2 years)
• Labor costs
– Social charges at 47% are
too high compared to other
European countries (this is
15% too high)
– French operators 25€/h
(19€/h in the UK)
• Aversion to change
• Limited command of English
• French managerial practices
differ from the American ones
(reporting, procedures, matrix
organization)
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Conclusion
+
Threats
• High labor cost
• Relocation of
production in Eastern
Europe (long run)
Main assets
• Diesel expertise in
France
• Qualified workforce
No major expansion plan, but France is
well positioned to retain value added,
highly automated activities
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Study Participants
• Arnaud Complainville, French, Doctor in biology
• Carolina Giraldo, Colombian, Banking
• Nam-Jun Kim, Korean, Consultant
• Patrick Recasens, Canadian-Spanish, Attorney-at-law
• Christophe Tissot, French, Finance director
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ANY
uestions?
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