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Strategic Planning: GM's Spinoff Grows Its IT from the Ground Up

By Sarah D. Scalet

April 15, 2001 — CIO —

READER ROI
* Learn how strategy evolves when an established business is spun off and faces life on its own
* Hear why Delphi’s IT team wants to build unity by creating common systems
* Find out how process information officers match IT solutions with user needs

Delphi automotive systems ceo j.t. battenberg III rang the opening bell at the New York Stock Exchange on Feb. 5, 1999. This marked the symbolic beginning of Delphi’s transformation into an independent entity. The newly spun-off auto parts division of General Motors already had a 100-year history but until then had little incentive to be price-competitive. The company would have to start wooing

new customers--instead of relying on a single captive customer who topped the Fortune 500. Delphi now had its own stockholders watching the bottom line. To cope with these sweeping changes, the company needed to build a separate identity that was nimble enough to survive hard times in Detroit.

The IT team was ready to help, but it wasn’t going to be easy. Until 1996, GM’s IT department--and by extension Delphi’s IT department--was under the thumb of an outsourcer: Plano, Texas-based Electronic Data Systems (EDS). For more than a decade, says Delphi CIO and Vice President Peter Janak, "EDS provided what their individual customers asked them to provide, and we became a very fragmented company as a result. We ended up with no IT strategy, really, just technical solutions."

While that was already changing, Janak knew he had to continue the strategic planning processes begun under GM. At the same time, his department needed to plunge into Delphi’s primary goals--common and improved business processes that would build unity, save money and pave the way for rapid global acquisitions and divestitures. Janak is pleased with the results thus far, but there’s plenty of work ahead.

Identity Crisis

Once a small part of its $185 billion parent, today the Troy, Mich.-based Delphi is a $29 billion company that makes everything from ignition systems to onboard multimedia devices. "When you’re part of GM, you don’t feel like you’re very big," says Bette Walker, CIO of Delphi’s energy and chassis division, which generates 40 percent of Delphi’s revenue. "But when you’re independent, all of the sudden you realize--whoa."

Auto industry pundits, who are divided on whether Delphi’s parentage is a blessing or a curse, haven’t helped these identity problems. "I don’t want to say they’re too big, but the size of [Delphi] could be a challenge," says Richard Hilgert, vice president of auto research at the First of Michigan division of Fahnestock & Co. in Detroit. Large or small, old-line manufacturing companies aren’t exactly known for their agility.

 

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