paperJam speaks to Steven A. Kiefer, Managing Director - Thermal & Interior Europe & South America, and Delphi Customer Technology Centre Bascharage.

Interviewing Delphi Managing Director Steven A. Kiefer is like trying to catch a moving train, the man is so busy. He has just returned from France, is just about to head off to Brazil, and the interview with paperJam is slated for one half hour between conference calls and meetings. It becomes fifteen minutes in the end. Still, he manages to be personable and charming, accommodating at the last minute, and at a time when Delphi in the United States is taking a lot of heat from the press.

Cool toys for big boys

Kiefer is quite active around the Luxembourg American community. In September, he participated in an AMCHAM ComIT Networking event on "Innovation in the Automotive Sector" along with Dale Lehman from Delphi, held at Autopolis. A presentation was given with some key figures. In 2004, Delphi world wide had sales of 28.7 billion. The company committed 2 billion annually to R&D and engineering in the last 4 years. Globally, there has been an average of 1.400-plus Delphi patent applications each year in the last 4 years. The company has 26 operations in low cost countries (such as Poland, Turkey, Botswana, Hungary and Morrocco) and 10 technical centres in Western and Eastern Europe.

The main activities of the Customer Technology Centre in Luxembourg are the development and application of: Engine Management Systems, Thermal Management and Air Conditioning systems and related subsystems and components. Some of the technical facilities include rapid prototyping equipment, garage and outside test facilities, temperature controlled chambers, climatic wind tunnels, and a test track with pass-by noise facility.

Speculation in the U.S.

It is the kind of cool automotive playground that has little and big boys alike droo-ling. For others, it is like science fiction. You aren't allowed to see much, nor walk around with a camera, which is not surprising if you consider the confidential work they are doing for many European automakers, but it would be a very exciting place to be allowed a tour.

What is no secret is that Delphi Corp in the U.S. has been having financial troubles. There have been significant operating losses and rumours of a declaration of bankruptcy. Delphi risks a breach of a loan covenant concerning debt to equity ratios if it does not re-negotiate the covenants before Oct 30, or make payments to resolve the covenants issue. If the company declared bankruptcy, such a move would, in part be due to the multi-billion dollar future pension obligations promised to American hourly workers under current collective bargaining agreements.

Speculation has run wild amidst further rumours that General Motors Corp. and the UAW were about to announce a deal in late September to bail the company out of financial trouble causing stock prices to climb up as high as 40%, then drop back after it didn't happen. There is also widespread speculation that these threats to file Chapter 11 bankruptcy could leave the U.S. government holding the bag because the employee pensions are guaranteed, although not to the full amount.

Chapter 11 restructuring could prove a mechanism that allows Delphi to shed unwan-ted liabilities, and borrow money on more favourable terms etc. Few industry watchers feel it is indicative of the end of Delphi.

All this seems far away from "sleepy Luxembourg" though. Currently, the expansive (and highly secure) Delphi facility in Bascharage employees around 700 people from 28 different nationalities. English is the official language of the company but many other languages are spoken as well. The largest majority of employees are French, then Belgians, Luxembourgers and just a few remaining Americans.

Business as usual

Although rumours about the situation in the U.S. are likely to make local employees a little nervous, all seemed business as usual as we spoke to Kiefer...

How long have you been in Luxembourg?

"It"s actually my second assignment in Luxembourg. I was here for 4 and half years from 1993-1997. I just returned in January, in this new capacity.

A better capacity? (as he is now Managing Director for Europe and South America and Director of the divisions Thermal and Interior).

"Different - my previous work was in our Powertrain business, but I find the challenges in our Thermal and Interior business very rewarding. My family is very well settled here with my children in the International School. My wife and I honeymooned here during our first assignment and our first son was born in Luxembourg in 1996. We lived in Tokyo as well, and I went from Luxembourg-Tokyo-Detroit and now back to Luxembourg.

Do you speak any foreign languages?

"I speak seven languages - (he pauses) - about three or four words of each one.

A lot of big American companies are here for fiscal reasons, and fiscal reasons only. Why is Delphi in Luxembourg?

"First of all, Luxembourg offers outstanding cultural diversity, with 28 nationalities at Delphi. Geographically it is attractive. By this I mean its central location of course; we can visit any of our major customers within a matter of hours. From this location we can talk to the customers, the auto manufacturers, from different countries in their languages. Also, Luxembourg has what we call automotive industry "neutrality".

By this I mean it does not have its own automotive manufacturers, which sometimes makes it difficult to supply to "competing" countries. But yes, there are fiscal benefits as well. For our employees there is a good tax situation and excellent social benefits.

As you recently were speaking on innovation in the automobile sector, can you tell us what some of the trends at Delphi, Luxembourg are? What direction is the company moving in'

"We are developing higher end systems here in Luxembourg, focused on new technology to help our customers improve the environment. There are several innovations being developed right here in Luxembourg. One is within Powertrain, where we are developing the next generation of fuel injection technology for gasoline and Diesel engines, which offers reduced fuel consumption and lower exhaust emissions. Another is the next generation of air conditioning systems, which replaces current refrigerants with a more environmentally friendly CO2 based refrigerant.

(n.b.: HVAC is Delphi"s "Automotive Air Conditioning for the Environment" which is heating, ventilation and air conditioning. The product is billed as being capable of delivering "thermal comfort that ranges from the heat of Phoenix Arizona to the cold of a Scandinavian winter." HVAC also is praised for its safety advantages, in that it keeps the cabin environment at such a state that the driver is totally awake and not in danger of drowsiness and is guaranteed to keep windows defrosted or demisted for clear visibility whatever the weather conditions may be).

Obviously it is difficult for you to comment on what is happening in the U.S., but everything seems to be running smoothly as usual here in Luxembourg. Can you tell us anything about how the situation in the U.S. might affect Delphi globally, or what ripple effect it might have on your operations here?

"I really have no comment about our current activities in the U.S.. But I will say, that the major issues that our company currently faces are primarily isolated to the U.S. operations. To be honest, there were some negative stories in the press here in Europe. These stories serve to make the people who work here understandably nervous. We want to be open with our customers, suppliers, employees and members of the community.

I am optimistic about Delphi"s future. There are issues that must be addressed in the U.S., but Luxembourg is critical to our European operations. We have been booking significant new business with several customers. We have a unique value proposition here. We get very strong feedback from our European customers when they come to this facility. They are shocked that such impressive research and development is happening in sleepy little Luxembourg. We intend to continue to serve our customers from Luxembourg, and grow our business based on technical innovation, and strong customer service. Thanks for spending time with us today, and please come back when we have some more time to tour the facility...".