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Published: May 21, 2003

 
 

Delphi Builds a Board

  • Diversifying Delphi’s core automotive business beyond GM, especially into foreign markets;
  • Developing new nonautomotive markets, such as electronics and even consumer electronics;
  • Cultivating a strong bench of line executives who will have the breadth and depth of experience to lead Delphi in the future.

“If you get the right board and give them enough time to talk and think and act strategically, they’ll make important contributions,” says Mr. Battenberg. That’s very different from the way management traditionally has treated boards, he adds: “cramming them into a dark room, showing them some slides, and then saying, ‘Thank you very much for coming.’”

Engaging a Board
For years, Delphi was responsible for supplying the world’s largest automaker with everything from electrical systems to airbags. In 1992, GM began to reconsider the need to maintain an in-house parts supplier. Mr. Battenberg was asked to lead and chart the long-term strategy for GM’s large and diffuse supplier operation (made up of 13 highly autonomous divisions), known as the Automotive Components Group Worldwide (ACGW). In 1995, the ACGW changed its name to the Delphi Automotive Systems Corporation (which was later changed to the Delphi Corporation). In the ensuing years, Mr. Battenberg consolidated several operations into seven divisions, all with decentralized profit-and-loss responsibility, and developed a common marketing strategy and organizational objectives. Eventually, GM decided that spinning off Delphi would benefit both organizations by giving the newly independent company the chance to develop non-GM customers, and by allowing GM to broaden its supplier base. For Mr. Battenberg, the spin-off also provided a singular opportunity to run his own company.

Mr. Battenberg’s experience at GM had certainly made him highly aware of the importance of a strong, independent board of directors, long before the current outcry for governance reform was in daily headlines or business leaders were admitting it was time for a change. While Mr. Battenberg had — and still has — a healthy appreciation for the discipline that an independent board imposes on Delphi’s management, he is equally driven by a conviction that the board should serve as a resource to him and to his lieutenants in developing strategy, fostering new customers and markets, and even solving technological problems — despite the potential for conflict with senior management. One of the best things about a hands-on board is also one of the hardest things, says Mr. Battenberg: “The brutal frank openness that forces us to deal with reality.”

At the time of the spin-off, Mr. Battenberg and Mr. Wyman agreed to select board members based on skills they thought would be useful to the company, including sales and marketing experience in the U.S. and abroad, experience handling union relations, and technological know-how. They hired the global executive search firm Egon Zehnder International to generate a list of candidates based on the criteria. Among the first directors retained were Roger S. Penske, founder of the Penske Corporation, an auto and truck leasing and service company, and John D. Opie, a former vice chairman of General Electric Company. Mr. Opie is currently lead director, having taken over when Mr. Wyman retired.

Mr. Battenberg’s board is a textbook study of the board as resource. The 12 directors — nine of whom are outsiders — have a rich body of industry-specific knowledge to support the company’s key strategies. Mr. Penske, for example, is considered one of the most knowledgeable “car guys” in Detroit. Another three international automotive experts give Delphi entrée to the trio of major markets the company is targeting for new business — Japan, Latin America, and Europe. Shoichiro Irimajiri, the former head of Honda of America Manufacturing, is one of the highest-ranking Japanese executives to sit on a U.S. board, and lives in Tokyo, where he helps open doors for Delphi. Bernd Gottschalk is president of the Association of the German Automobile Industry and a former executive with Mercedes-Benz. Oscar De Paula Bernardes Neto, a Brazilian, formerly was an automotive consultant in Latin America, the CEO of Bunge International, and a senior vice president with Booz Allen Hamilton.

 
 
 
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Resources

  1. Art Kleiner, “The Cult of Three Cultures,” s+b, Third Quarter 2001; Click here. 
  2. Paul F. Kocourek, Christian Burger, and Bill Birchard, “Corporate Governance: Hard Facts about Soft Behaviors,” s+b, Spring 2003; Click here. 
  3. “The Way We Govern Now,” The Economist, January 11, 2003
  4. Andrea Gabor, “Challenging a Corporate Addiction to Outsiders,” New York Times, November 17, 2002
  5. Corporate Governance, The Wall Street Journal Reports, February 24, 2003