Can the Delphi Automotive Deal Turn Westport Around?

New agreement makes it easier for Westport target OEMs.

| More on:
The Motley Fool

Westport Innovations Inc.(TSX:WPT)(NASDAQ:WPRT) a producer of natural gas engines and vehicles has just announced a new partnership with Delphi Automotive PLC (NYSE:DLPH).

Under the agreement the two companies will be joining forces to co-develop and manufacture high-pressure natural gas fuel injectors. These injectors are designed for heavy duty vehicles looking to use Westport’s high pressure direct injection (HPDI 2.0) fuel systems.

The companies will be combining engineering capabilities and production capacities to create these products on multiple platforms for several OEMs. Delphi is already a major player in the OEM market. It operates major technical centers, manufacturing sites and customer support services in 32 countries, giving Westport manufacturing and inventory capabilities across the world. This boost in production is a key factor for the company, especially given its recent agreement with auto manufacturer Tata to develop OEM Westport engines for the Indian market.

The terms

Under the agreement Westport will contribute to investing in critical equipment (manufacturing, assembly, etc.) in Delphi’s production centers. The cost associated has not been released but the company claims that the funds required were earmarked in Westport’s September 2013 prospectus.

In return Delphi will work with Westport to optimize all aspects of the injectors. Intellectual property rights will be jointly owned by both companies and maintained by Westport. Both companies are expecting production to reach 100,000 injectors a year within the next four years.

Foolish bottom line

An agreement like this could be just the thing to help Westport break out of its stock slump. The company hit a new 52-week low on Monday, dropping down to $16.90, the first time since March 2011 that the stock has sunk this low. This is a far cry from the 52-week high Westport saw in July of $36.57.

Another year of losses — which totaled $185.5 million in 2013 and $98.8 million in 2012 — has taken its toll on the company. A good portion of these losses have apparently come from R&D and production of Westport’s next generation of engines. Now that the engines are ready for market and agreements such as this one and the one with Tata are rolling in, it might finally be time for the company to reap the rewards of years of capital and intellectual investments.

Fool contributor Cameron Conway does not own any shares in the companies mentioned. The Motley Fool owns shares of Westport Innovations.

More on Investing

Canadian dollars are printed
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $10,000

These leading Canadian dividend stocks have the potential to transform a TFSA into a cash-creating investment vehicle.

Read more »

Couple working on laptops at home and fist bumping
Dividend Stocks

TFSA Investors: 1 “Set-it-and-Forget-it” Stock for 2026

This "set-it-and-forget-it" stock for the TFSA today offers a rare combination of discounted valuation, income, and high growth potential.

Read more »

investor looks at volatility chart
Investing

Thomson Reuters Stock Is Down 58%: Should You Buy the Dip or Run for the Hills?

Thomson Reuters (TSX:TRI) has already fallen by more than half, but investors should be cautious buying the dip.

Read more »

crisis concept, falling stairs
Tech Stocks

Market Crash: 2 Stocks I’d Buy Without Hesitation

Markets in North America are declining. Here's are two high-end stocks that you can use to turn declines in profits…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, April 1

The TSX surged on easing geopolitical concerns, while today’s mixed commodity signals and U.S. economic data could lead to a…

Read more »

shopper pushes cart through grocery store
Stocks for Beginners

3 Global Household Brands That Diversify a Canada-Heavy Portfolio

These three global consumer stocks can help Canadians reduce home bias and add exposure to sectors the TSX barely offers.

Read more »

dividend stocks are a good way to earn passive income
Dividend Stocks

My 3 Favourite Canadian Stocks for Passive Income

These three stocks offer a simple way to build reliable passive income over time.

Read more »

woman gazes forward out window to future
Dividend Stocks

How to Create Your Own Pension With Dividend Stocks

Find out important information about pensions, focusing on the Canada Pension Plan and how it impacts your retirement.

Read more »