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Automotive supplier Delphi announced plans on Wednesday to spin off all operations tied to internal combustion engines and focus solely on electric propulsion and autonomous vehicles.
The move boosted share prices while underscoring the problems facing the industry’s old guard. That’s not to suggest that internal combustion engines are going to vanish anytime soon, but the investors who fund their development seem progressively less interested in backing them. An interesting choice, considering EV-maker Tesla is valued well above a traditional manufacturer like Ford — despite not being nearly as profitable.
Delphi says it will spin off its $4.5 billion powertrain division into a separate publicly traded company by early 2018 and is considering a new name.
“I do like the Delphi name. We have created a lot of value for customers, a lot of value for shareholders so there is value in that name,” Delphi CEO Kevin Clark told the Detroit Free Press. “We just think as a management team that given what we are going through, someone is going to have to have a new name…I quite frankly don’t have a preference one way or the other.”
Creating a distinction between the two companies will be important, however. Investors will want to be clear about which entity they funnel money into. The “new” company will employ roughly 20,000 employees globally and 5,000 engineers and, according to Clark, maintain its current presence in metro Detroit.
Since the announcement, Delphi’s shares surged $9.43, or 12 percent, to $87.88 on the New York Stock Exchange.
This post first appeared on thetruthaboutcars.com