BorgWarner acquires Delphi Technologies in $3.3 billion stock deal

End of an era

Delphi, a spinoff from General Motors (NYSE: GM) in the 1990s, once was the world’s largest auto supplier because it made so many components for the former No. 1 automaker. Delphi later expanded into other businesses before a financial scandal in the mid-2000s led to earnings restatements and a five-year bankruptcy reorganization.

Two years ago, Dephi split itself into two companies: Aptiv (NYSE:APTV), focused on autonomous and connected vehicles; and Delphi Technologies, which retained components for internal combustion engines and some electrification applications.

“This is the last vestige of that name,” Sam Abuelsamid, principal analyst at Navigant Research, told FreightWaves. “After they were spun off, they gradually grew their business beyond GM.”

BorgWarner said the acquisition will boost its power electronics products, capabilities and scale as it evolves toward future propulsion systems while maintaining flexibility across combustion, hybrid and electric efforts. It expects Delphi to add $125 million in cost synergies by 2023.

Synergies and realities

Though there is some overlap in the two companies, each makes internal combustion engine components that the other does not. Delphi, for example, makes fuel injectors while BorgWarner makes turbochargers.

The merger of the companies not only makes business sense, it was inevitable as the passenger car and commercial vehicle industry turns to electrification, Abuelsamid said.

“This is why Delphi Automotive split itself up a couple years ago,” he said. “They knew that the powertrain side of the business was never going to be a growth business. It was still a profitable business that was going to be around for a while.”

Post-bankruptcy Delphi shed several business units that could not generate growth. One of those became Chinese-owned Nexteer Automotive, once known as Saginaw Steering Gear when it was part of GM’s Worldwide Components Group.

“There were a lot of business units that were part of Delphi that were at best break even, so Delphi spun them off to other companies or as independent companies,” Abuelsamid said.

BorgWarner also faced the prospect of little organic growth, so it has expanded through acquisition like the 2015 purchase of Remy International, a maker of rotating electrical components such as alternators, starter motors and electric traction motors.