2/1/2005 | 3 MINUTE READ

Delphi's Domestic Strategy

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While Delphi will continue to work at being the largest supplier of mobile automotive electronics, it is working to create awareness and preference among everyday car audio buyers, not just the people at the OEMs.


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Joe Damato used to work at Bose Corp. (www.bose.com; Framingham, MA). You know, the company that runs the commercials for the Wave radio and the noise-cancellation headphones. Now Damato works for another supplier of electronics. In fact, it is the world's largest automotive mobile electronics supplier, Delphi Corp. (www.delphi.com; Troy, MI). While Delphi is widely known within automotive circles, once you get beyond those boundaries...Damato has been tasked with making his current employer as much of a household word as his former. "It's just a natural that we should be a major player in the consumer market," he says. It may seem natural, but it is something that has been largely lost of tier-one automotive electronics suppliers.

Historically, companies like Sony and Pioneer have been the nimble innovators able to quickly capitalize on emerging trends while automotive suppliers remained tied down by long vehicle development cycles and exacting certification standards. But Damato thinks that is all about to change. "The future of consumer electronics for mobile applications is going to hinge on the ability to know the vehicle and to design products that will integrate seamlessly with it," he predicts. The logic goes: as more sophisticated functions like navigation and digital infotainment are integrated into head units, only OE suppliers like Delphi are going to know enough about the intricate connections to the rest of the vehicle's systems to ensure that their aftermarket offerings maintain all of the original functions. Damato points out that oftentimes when aftermarket audio is installed in vehicles, functions like door chimes and steering wheel audio controls cease to work because they're routed through the OE head unit. "Because our competitors in the aftermarket don't understand the vehicle as well as we do, they don't know how to design solutions to maintain all of those functions," he says.

Beyond that, Delphi's strategy calls for leveraging the knowledge it gains from being the OE supplier for future vehicles to design aftermarket products that will be on the shelves at Best Buy before the cars ever hit the showrooms. "If I already know what's going to be in a 2008 vehicle as original equipment I can start planning my aftermarket solutions right now. What did the automaker leave on the table that they didn't put in their requirement? That's an opportunity for us to address a demand that is not being satisfied by the car companies," says Damato.

And that's where TV ads starring Elton John come in. By raising Delphi's profile among the general public the company hopes to create a virtuous cycle wherein people familiar with its consumer electronic products ask for its head units by name. "Most consumers didn't know what Delphi was a couple of years ago," says Damato. "Today, over a million and a half people are using our satellite radio products—they see our name and logo everyday." So even though Delphi is still more widely known by automotive engineers and marketing people than the general public, consumer electronics is Delphi's fastest growing business unit and puts it on track to achieve what it calls "aspirational" sales targets through the end of the decade, with the first aftermarket products based on future vehicle OE specifications scheduled to debut in fall 2005.



Delphi's aggressive approach to expanding direct-to-consumer sales may be unique among tier one suppliers whose primary business is automotive, but some do dabble in sideline businesses. For example, Visteon is selling aftermarket products as diverse as dockable DVD players and NASCAR-emblazoned windshields. But most companies tend not to stray too far from products related to vehicles. Then there's the Denso washing machine. "Denso's washing machine cleans laundry better than Mom" was the advertising pitch used when the then-recently spun-off Toyota division began marketing its distinctly non-automotive consumer product in Japan in 1950. Sales of the machines briefly soared and little-known Denso became a household word in Japan, but the business eventually fizzled as competition heated up. Still, the company maintains an eclectic side business in consumer products, selling items like portable air conditioners and water purification systems. And while all of these are by-products of automotive research rather than dedicated programs, Oyuki Ogawa, senior managing director and head of Denso's R&D center, says Denso will continue to look for new business possibilities in consumer products as part of its long-term growth plan.


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