Three years after it began, a strategy to divest several business units of General Motors Corp.'s Delphi Automotive Systems comes to a close with the late June sale of Magnaquench magnets to a Chinese consortium with offices in Delaware. GM officials are pleased with the results of the program, and the new owners of the divested operations feel likewise.

Simplification was the rationale when GM's Automotive Components Group (ACG) Worldwide changed its name to Delphi earlier this year. A colorful advertising campaign reinforced the idea. But the streamlining (not downsizing) of North America's largest supplier really started three years ago.

In 1991 the then-ACG took "significant losses," recalls J.T. Battenberg III, Delphi's president and a GM senior vice president. The group was forced to take a long, hard look at its businesses. Company officials decided to keep "core" operations, those that were No. 1 and No. 2 in the world or could be rated that high with minimum investment, and "strategic" businesses (those that could lead to other opportunities).

ACG kept businesses like lighting, chassis, environmental systems, batteries, engine management and seats. On the sales block were vacuum pump, radiator cap, small motor and actuator, starter motor, generator, wiring, rear axle and magnet manufacturing operations. This represented about $3.5 billion in annual sales.

"We had 310 product lines," says Mr. Battenberg. "We couldn't handle that many product lines efficiently. We had too many mouths to feed. So we decided to just feed the ones we felt we could make world class and grow."

Mr. Battenberg maintains that GM didn't hold a "fire sale" to unload its unwanted businesses. "Some were marginal and could do better without the overhead structure of GM, and some could be helped with volume," he says. "We put parameters around how to divest. We wanted these businesses to succeed. We wanted buyers who were excellent operating people with manufacturing and engineering expertise with capital to invest."

He says GM definitely didn't want financiers dismantling the companies for quick profits, for the sake of the employees involved and because GM wanted to keep buying from them. "We want everyone to win," Mr. Battenberg insists. "We have a carefully crafted and thought-out strategy. And it took us a couple of years to get it done."

So far, so good. In 1994 Pontiac, MI-based Delphi had $26 billion in worldwide sales and was profitable for the third year in a row. Delphi also has plans to move into a brand new headquarters building in Troy, MI, by 1997.

The three highest-profile companies resulting from ACG businesses divested -- American Axle & Mfg. Corp., Delco Remy America Inc. and Electrical Systems Inc. -- also appear to be doing quite well.

"I'm very pleased with (the results)," says Mr. Battenberg. "It's allowed us to focus our capital and resources on 165 product lines. We now have the same expenditures with fewer mouths."

The success of the strategy, says Mr. Battenberg, is evidenced by the amount of non-GM business Delphi is winning. In 1988 only 15% of ACG's business came from outside the parent corporation. Last year the group was up to 28%. This year Mr. Battenberg expects to reach 30%. The ultimate goal is to be 50% non-GM by 2000. Other targets include a profit margin of 5% and a 12.5% return on investment. "We're not there yet, but we're well on the way," he adds.

Despite reports to the contrary, says Mr. Battenberg, the divestiture strategy is not a retrenching plan. "We are aggressive," he asserts. "This will strengthen our company in the long run."

Other moves to strengthen Delphi include the 17 joint ventures and three outright acquisitions the company has completed since 1992. Just like other suppliers, Delphi is pursuing partners to increase its technological capability and worldwide reach. Two of the joint ventures, for example, revolve around catalytic converters. One, with Applied Ceramics, produces ceramic honeycomb substrates for catalytic converters and another with AlliedSignal produces catalytic coatings. Five of the JVs and two acquisitions serve to bolster Delphi's wiring harness and electrical component business in places such as China, Mexico, Indonesia, India, Poland and Hungary.