Business restructuring impacts Delphi, FCI-Burndy

FCI group (www.fciconnect.com) has entered into an agreement to sell its electrical division, known by the brand name Burndy, to Hubbell Inc. (www.hubbell.com), a worldwide manufacturer of electrical and electronic products. FCI-Burndy represented nearly 12% of FCI group’s total sales revenue in 2008.

Burndy, founded in 1924 and headquartered in Manchester, NH, manufactures connectors, cable accessories, and tooling serving utilities as well as commercial and industrial customers. In 2008, Burndy generated sales of approximately $225 million, with operating profit margins in the high teens. Products are primarily sold through distributors, the same channel utilized by Hubbell. Sales are roughly 63% construction and industrial and 37% utility while the geographic split is approximately 75% in the U.S. and 25% in Canada, Brazil and Mexico.

Completion of the transaction is expected to be on or around October 1.

Timothy Powers, chairman, president and chief executive officer of Hubbell Inc., says “Burndy has earned great respect over the years from distributors and end users, and the brand is a natural complement to Hubbell’s positioning. Their emphasis on lean manufacturing and safety, as well as their strength in engineering and customer service, reinforce some of Hubbell’s core competencies.”

FCI says it had received many unsolicited offers over the years for the Burndy acquisition. According to a press release, some of the more recent offers were “particularly attractive and deserved closer attention.” FCI top management decided to carefully study these proposals, which ended in the decision to divest the electrical division.

Pierre Vareille, chairman and CEO of FCI group, comments, “The electrical division had the least synergies with the other divisions of FCI in terms of products and customers, and we think that the combination with Hubbell will enhance the value creation opportunities for the Burndy brand. This divestiture opens for FCI a wealth of opportunities for new developments, be it vis-a-vis our customers, our partners, or other companies that may join our group.”

Meanwhile, major automotive supplier Delphi Corp. works its way through reorganization. In late July, the company announced the bankruptcy court entered an order confirming a reorgnization plan.

“We deeply appreciate the support of Delphi by all our customers, employees, suppliers, and other stakeholders during one of the most challenging periods in automotive history,” the company’s CEO and president Rodney O’Neal said. “Delphi has executed a dramatic transformation of our business during the restructuring process and will emerge as a strong and resilient company. The process has not been without great sacrifice on the part of several stakeholders, however, we have taken the necessary actions to position Delphi as a competitive enterprise with a pipeline full of outstanding technologies that will help our customers meet the demands of their consumers.”

Recent analysis by Ronald E. Bishop, president of connector-industry research firm Bishop and Associates Inc., indicates that Delphi Connection Systems slipped from eighth to tenth in worldwide connector market share from 2007 to 2008. Specifically, Bishop tracked the company’s 2007 total sales at $1.165 billion and its 2008 sales at $999 million?a 14.2% decline.

That just-under-a-billion figure put the company tenth behind Tyco Electronics, Amphenol Corp, Molex Inc., FCI, JST, Yazaki, Foxconn, Hirose, and JAE. In 2007, Delphi had been ahead of Hirose and JAE.

In his report on the ten biggest connector manufacturers, Bishop stated that, in total, sales for the top ten manufacturers grew 2.1% year-over-year from 2007 to 2008. Delphi’s 14.2% drop in sales was by far the largest drop of the top ten; JST’s 5.6% decline was the second largest.

Big gainers among the top ten were Yazaki with 14.9% growth in 2008 and Amphenol Corp. with 13.5% growth.

Overall, the top ten connector manufacturers garnered a 54.5% share of market in 2008, compared to a 54.8% share the previous year.

Bishop stated, “Almost all of the top ten have significant sales in automotive, the worst-performing market in 2008.”

He made the comment in reference to the fact that while the top ten’s overall growth rate was 2.1%, all other connector manufacturers combined for a 3.4% growth rate last year.