Detroit, Feb 25: Lear Corp emerged on Tuesday as the winning bidder for General Motors Corp's Delphi Automotive Systems seating unit, announcing a letter of intent to purchase the $1.2 billion-a-year business.Terms of the deal were not disclosed, and both GM and Lear said more negotiations were needed to reach a final agreement, with an expected closing date sometime in the second quarter.
Some Wall Street analysts said the Delphi seating operations are not currently profitable and estimated the likely sale price at $200 million to $500 million.
The GM business has about 7,000 employees in eight major facilities around the world, including plants in Auburn Hills and Grand Rapids, Michigan, Mexico, England, Italy, Turkey, and South Africa, as well as an engineering centre in Warren, Michigan.
Most of the locations are unionised, and a Lear spokesman declined to say whether any operations would be consolidated. Lear operates a major engineering centre at its Southfield, Michigan, headquarters, which isonly a few miles from Warren.
Lear was seen as a top candidate because of its strong track record in managing United Auto Workers-represented seating plants efficiently , but many had expected Canada's Magna International Inc and France's Bertrand Faure SA to bid more aggressively in order to build up their seat businesses.
Other finalists among an initial field of 41 bidders also included Milwaukee-based Johnson Controls Inc, Lear's traditional US arch rival.``Strategically, this acquisition does not look necessary (for Lear), but given an acceptable price it would be favourable,'' said an analyst Gregory Kagay with McDonald & Co.
He noted, however, that Lear's ability to operate the Delphi business profitably depended in part on its ability to negotiate a more flexible labour agreement with the UAW. GM's labour costs for seats and other components are generally higher than those of most of its competitors. Lear shares fell $1.25 to close at $52.75 on the New York Stock Exchange, while GM shares rose$2.19 to $68.50.The deal should boost Lear's share of the worldwide automotive seating market to 28 per cent from about 20 per cent currently, Kagay said.
With $7.3 billion in sales in 1997, Lear is one of the world's largest automotive components suppliers and produces seats, door panels, floor and carpet systems, instrument panels and headliners.
In recent years, it has acquired Ford Motor Co.'s North American seating operations and Italian automaker Fiat SpA's seating business in Europe.GM spokeswoman Kari Gaffe declined to elaborate on GM's reasons for choosing Lear, but said Lear's labour-friendly track record was considered.
``We were interested in selling the business to a company who would maintain it and have a good relationship with the employees,'' the spokeswoman said.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
