If anyone is confused about who used to be whom in the auto business, it is understandable, considering the repositioning of such an industry figure as Delphi.
Last year, Delphi Automotive — with roots that went back a century as General Motors' in-house parts operation — split in two. Its new identities as of December are Aptiv, supplying automakers with software and networking architecture for autonomous vehicles, and Delphi Technologies, supplying vehicle propulsion products and electronics.
Liam Butterworth, 47, was named head of what used to be Delphi Automotive's global powertrain business in 2014. With the spinoff, he is CEO of Delphi Technologies, a stand-alone supplier with 2017 sales of $4.8 billion. Butterworth spoke with Automotive News Europe Correspondent Peter Sigal about what's ahead.
Q: Delphi Technologies has released its first quarterly report as a stand-alone company. How is the transition going?
A: We're in a great place as a business. The spinoff was executed seamlessly, and it was completed about four months ahead of schedule. We announced our 2017 results in February. Among the highlights: We had very strong revenue of $4.8 billion, 22 percent growth in China and new business booking of $7.1 billion, which is about 10 percent higher than the prior year. About $2 billion of that was in electrification.
New business booking this year has run ahead of expectations. Why?
We've done a lot of work to broaden our portfolio across internal combustion and electrification in the last couple of years, and the acceleration in bookings in 2017 and 2018 reflects our customers' appreciation of that. Our bookings are split pretty evenly between the two areas. In electrification, they center on power electronics, high-voltage systems and software, as well as thermal management and packaging. For internal combustion, we have a strong portfolio in [gasoline direct injection] to help automakers gain efficiency. Our overall approach is that we should have a balanced approach to our portfolio, across customers, regions and technologies, so we can react to where the market is evolving.
Power electronics sales rose 65 percent in the first quarter. What accounts for the increase?
Automakers whose platforms use our products are seeing strong growth, for example Volvo and BMW. But really it's across all automakers. We expect that to continue through the rest of the year.
Bookings for power electronics are six times the average content per vehicle. Why?
If you look at a typical internal combustion engine, maybe a 1.6- or 2-liter gasoline engine, the content is around $300 for a [gasoline direct injection] system, the valvetrain and a few associated components. But if you take the electrification portfolio, which is a mixture of onboard chargers, the battery controller and the combined inverter and DC-to-DC converter — those products represent around $1,500. On a plug-in hybrid, which is really the sweet spot for content from a powertrain supplier standpoint, the content is around $1,800 to $2,000 per vehicle. If you go battery electric, all you lose is the internal combustion components, about $300, so we still keep a significant amount of content. 48-volt technology is lower, about the same as internal combustion. Electrification is good for us.
What is Delphi Technologies' involvement in electrification in the U.S.?
We're on some GM and Ford platforms but clearly the volume of those platforms has not taken off as strongly as it has in Europe and China. One example would be GM's Chevrolet Volt. We're working on advanced development activity with all Big 3 OEMs, so they're increasing their activity in electrification.
Is North America in danger of being left behind in electrification?
If you look at what's going on with fuel economy regulations in North America, the pressure to electrify isn't as high as in China and Europe. But I don't believe that it will be left as a backwater, because the OEMs need to develop platforms that are applicable to all markets. The other trend we're seeing is that automakers are increasingly seeing electrification as a performance enhancement feature.
How does the company see the aftermarket business developing in the context of increasing electrification?
Aftermarket is about 18 percent of our total revenue. Our mix is pretty broad and many of our products will still be applicable to electrified powertrains as they evolve. We're working with our customers to understand what they will require in terms of diagnostic and service expertise. In terms of the timing, the sweet spot for our business, where aftermarket really starts to see growth, is when vehicles are 7 to 8 years old. So while hybrids and electrified vehicles are important to our future, the aftermarket piece is lagging behind a little bit because of that time gap.
Can Delphi Technologies do some things that it couldn't as part of Delphi Automotive?
Capital allocation was clearly the big driver why we decided to spin off powertrain. We're now 100 percent focused on propulsion systems, all of our investment strategy is around propulsion and we're really in a great position to support OEMs to deliver cleaner and more efficient vehicle fleets. We are much more agile and focused in that space.
How has the reception been in the financial markets?
When we first went out on the road last year, there was clearly a misconception around what Delphi powertrain was all about. The perception was that it was a legacy business of Delphi that is no longer of strategic interest, which is not at all the case. We had to educate the investment community about the business in terms of portfolio, technology and customer reach and global spread across the powertrain universe. The reaction has been favorable, but our task now is to deliver on our commitments and perform as we have done in the past.
Is Delphi Technologies allowed to collaborate with Aptiv?
There are no restrictions in terms of collaborating with Aptiv or any other major Tier 1 supplier. At the end of the day, what's important is what the customer is looking for and what we can do to bring more value to our customers. If it makes sense to collaborate with Aptiv, whether on electrical architecture or autonomous technologies, then we would do it.
What are Delphi Technologies' main profit centers?
The three areas that are the strategic focus for the company are electronics and electrification, highly efficient gasoline systems and commercial vehicle systems.
We have very balanced profitability. We have three business units: one is for internal combustion engines, based in Luxembourg; our electronics and electrification business, which is based in Shanghai; and our aftermarket business, which is based in the U.K.
How will that arrangement evolve in, say, 10 years?
An increasing share of revenue in the future will come from our electronics and electrification business, with growth across Asia, especially in China. Also, we continue to invest in gasoline direct injection, and that will be important for our customers as they move away from diesel. That will continue to drive significant growth for the next four to five years.
Is the portrayal of Delphi Technologies as "old tech" accurate?
It's not an accurate description of what we offer our customers. We offer solutions across every type of powertrain, whether it's internal combustion, full electric, plug-in hybrid or 48 volt, because every automaker is approaching the CO2 challenge in different ways. And as automakers look at different powertrain mixes, software becomes important to control those systems. We have around 1,500 software engineers collaborating with customers to implement that technology.
The company also is researching intelligent driving. What is meant by that?
We have advanced projects to control the powertrain software to adapt the vehicle driving dynamics according to where it is on the globe, to deliver improved fuel efficiency. For example, if a vehicle is in the city, you could have a different combustion cycle than in other areas.
Is Delphi Technologies spending more on r&d now than under Delphi?
The business was never starved from an r&d standpoint, but it could have been a problem in two years' time. Our strategies make sure we invest those dollars in the most efficient manner, on our three strategic legs: fuel efficient engines, electronics and electrification and commercial vehicle applications.
Is the company targeting any other areas of the electrification market?
We have products in three areas: DC-to-DC converters, inverters and onboard chargers, and the associated software for those three products. Beyond that, in terms of battery or motor technology, we won't be investing in those areas. There are expert companies focused here. However, we'll partner with battery or motor suppliers in areas where it makes sense for the customer.
Is Delphi Technologies involved in any high-tech ecosystems, joint ventures or partnerships?
Not at this time, but we are involved in collaborations with other Tier 1 suppliers. For example, if an OEM asks us to package our inverter technology on an axle or the transmission, then we will work with the chosen transmission or axle supplier that brings value to the OEMS. Our strategy is not to hang our hats on one partner. Automakers want suppliers who are independent and flexible.