Delphi Automotive Systems Corp., the $28.5 billion company spun off last month from General Motors Corp., announced today it has awarded two five-year services contracts to EDS. Before the May 28 spin-off of Delphi from GM, EDS completed the separation of Delphi systems from GM systems in the United States and Brazil in 108 days.
Because of the spin-off, Delphi needs to create its own relationship with EDS, which has a master agreement to provide outsourcing services to all of GM. The new Delphi- EDS master services agreement contains broad terms and conditions for the relationship between the companies, while a U.S. agreement identifies services in the United States that EDS will provide and those which Delphi can put out for competitive bid. Other specific agreements will be reached soon for additional regions in the world, says Delphi CIO Peter Janak.
While the master and U.S. agreements with EDS were not competitively bid, Delphi used benchmarking comparisons to make sure EDS service levels and prices were competitive.
In April, Delphi awarded a three-year, $25 million contract to Hewlett-Packard for SAP management and support. And a global wide-area-network contract is in competition, to be awarded at the end of July, Janak says.
The values of the two contracts announced today, and effective July 1, were not disclosed. However, "from a financial viewpoint, these are very good for Delphi," says Janak, representing "big dollar numbers." Services that EDS will provide include engineering and manufacturing IT support to Delphi facilities in 36 countries, support and connectivity for Delphi's use of ANX, the automotive industry's extranet, ongoing support for Delphi's legacy systems, and some new development, although new development also can be competitively bid on a project-by-project basis.
The EDS master services agreement with GM was for 10 years. Janak's preference for shorter-term contracts--three years with HP and five with EDS--reflects his desire for flexibility to accommodate change and some continual pressure on suppliers. While he considers outsourcers to be partners, he also wants his suppliers "to worry on a daily basis about their future with us, just as we do with our customers."