23 November 1999

Delphi Automotive Systems Corporation announced that it has entered into an agreement to acquire Lucas Diesel Systems from TRW Inc. for approximately 538 million pounds or US$ 871 million in cash. Upon closing of the transaction, Lucas Diesel Systems will be renamed Delphi Diesel Systems.

Upon completion of the transaction, Delphi Diesel Systems will be the world's No. 2 producer of diesel fuel-injection systems for light-, medium- and heavy-duty vehicles with annual revenues of approximately US $1.1 billion. All required official filings will have been made by the end of the year. The transaction is subject to receipt of regulatory approvals and other customary closing conditions, including consultations with employee representatives.

J.T. Battenberg III, chairman, CEO and president of Delphi Automotive Systems, said: "With this acquisition, Delphi is now positioned to offer customers complete gas and diesel engine management systems, including fuel handling, air control, emissions aftertreatment, sensors and actuators, and sophisticated electronic control."

Battenberg said he expected this acquisition to bring significant strategic value to the company and be completed efficiently and seamlessly. According to Battenberg, this acquisition will support a number of Delphi's objectives, including:

  • Position Delphi to be number one or number two in its various businesses.
  • Increase non-GM revenue by an estimated 16% to about US $8 billion on annual basis.
  • Boost Delphi's European sales by more than 20% to a total of more than US $5 billion.
  • Enhance Delphi's system and product capabilities and complement Delphi's gasoline engine management systems capabilities.
  • Strengthen Delphi's technology focus by adding entirely new high-growth diesel product lines—common rail and electronic unit injection (EUI).

In the transaction Delphi will acquire a combination of stocks and assets, comprising substantially all of the assets and certain liabilities of Lucas Diesel Systems and its associated aftermarket activities. With 1998 sales of US $1.1 billion Lucas Diesel Systems has 12 manufacturing locations in seven countries. Lucas Diesel Systems and its associated aftermarket operations employ approximately 8,600 people.

According to Delphi Chief Financial Officer Alan S. Dawes, the acquisition is expected to favorably impact Delphi's net income in 2000. "The acquisition," Dawes said, "will be financed using a portion of Delphi's strong 1999 cash flow from operations of more than US $2 billion. Given our healthy balance sheet and significant cash flow, we are able to increase shareholder value through this acquisition." Jose Maria Alapont, president of Delphi Automotive Systems, Europe, said diesel engines are an increasingly important powerplant that have significant potential for future growth in Europe, as well as in South America and Asia.

"The diesel common rail injection system is very attractive to Delphi", said Donald L. Runkle, president of Delphi Energy & Engine Management Systems. "It is a rapidly emerging technology that offers several benefits over more conventional indirect injection systems. We believe that Lucas Diesel Systems has the best common rail technology today, as well as the management, engineering, manufacturing talent and workforce commitment to ensure that this technology achieves a major share of the rapidly growing common rail diesel injection market". Runkle will have responsibility for Delphi Diesel Systems when the acquisition is complete.

Runkle pointed out that today's diesels have changed: "Diesels are not what they used to be. In the past, diesels were noisy and underpowered. Diesels today are quiet, clean and powerful. The new diesel engines are paving the way for tomorrow's propulsion system of choice."

Delphi Automotive Systems, a spin-off from General Motors, is the largest manufacturer of automotive parts with 168 manufacturing plants in 37 countries and 201,000 employees. Most of Delphi's business comes from former parent GM. The acquisition of Lucas is another move to diversify Delphi's customer base.

Source: Delphi Automotive Systems