Delphi is demonstrated the capability of its automated driving system by driving an Audi Q5 from San Francisco to New York City a while back.
Delphi Automotive, one of the automotive industry’s largest and most diversified parts suppliers, said it is preparing to spin off operations tied to internal combustion engines and focus on technology for electrically powered and self-driving vehicles.
“There’s a whole element of the componentry of the car that Wall Street values at a lower level,” Delphi Chief Executive Officer Kevin Clark told Reuters.
The electronic Delphi – the part that remains – will compete in a potential market the supplier believes exceeds more than $100 billion annually. That twice as big as the current internal combustion segment, explaining the appeal of the “electronic” market. Delphi said its electronic systems units had about $12 billion in revenue last year.
Barclays’s analyst Brian Johnson said the spinoff “improves Delphi’s position in a world of automotive big data” and the company is among the best-positioned to benefit in the coming years as automakers spend more money on systems that manage the data needed by autonomous vehicles to navigate.
(Delphi looking to get Intel inside is autonomous technology. For the story, Click Here.)
While the areas electronic Delphi will compete in are not mainstream yet, Clark said the speed at which the market is moving in their direction was part of the reason for the move to spinoff the more conventional unit.
Delphi showed off its new CSLP system featuring new Intel computer chips at the comping CES last January.
Clark told Reuters that during the next three to five years demand will accelerate for high speed in-vehicle data networking systems, autonomous driving technology and over the air software updates.
Delphi has acquired companies that enable over the air software updates and develops high speed data networks. Clark said Delphi could make more acquisitions to grow its capabilities, Reuters reported.
The spinoff, which will have about 20,000 employees globally and 5,000 engineers with revenue of $4.5 billion may even get to keep the Delphi name, Clark said.
“I do like the Delphi name. We have created a lot of value for customers, a lot of value for shareholders so there is value in that name,” Clark said.
(Investors betting big on autonomous technology. Click Here for the story.)
“We just think as a management team that given what we are going through, someone is going to have to have a new name … I quite frankly don’t have a preference one way or the other.”
The decision allows both Delphi’s powertrain division and the remaining company to carve out separate, distinct identities, Clark said.
Delphi’s powertrain division makes components and systems for gasoline, diesel and electric engines while its remaining business specializes in electrical systems and the electrical infrastructure of cars.
Investors, who will get stock in both companies in the tax-free deal, immediately signaled that they love the idea. Delphi’s shares surged $8.56, or 10.9%, to close at $87.01 on Wednesday.
(To see more about the Delphi, Mobileye partnership, Click Here.)
Delphi, the former parts arm of General Motors, has been shedding conventional automotive businesses ever since it was spun off as a separate company by GM in 1999. The company filed for bankruptcy in 2005 to shed its legacy costs and didn’t emerge until as new privately held company until 2009.