GM-UAW-Delphi Stuck in Neutral by Joseph
Talks lay fallow, but zingers do too.
Following a path worn by
big suppliers such as Delphi, Tower,
Dana, which had total sales of $9
billion in 2004, cited a combination of factors from production cuts by General
Motors Corp., Ford Motor Co., and the Chrysler Group to the rise in commodity
and energy prices, which have outpaced cost savings efforts, the company
The general financial condition of
the industry, together with an inability to renew or expand its credit
facilities, also has undercut the company’s liquidity, Dana said in a statement.
John Murphy, an analyst with
Merrill Lynch, said in research note earlier this week Dana’s troubles in its
heavy truck business have exacerbated the pressure it is already feeling in its
Dana executives had openly spurned
an offer for a merger from ArvinMeritor of Troy, Mich. Dana had more than enough
resources to make it on its own, the company’s executives said. The ArvinMeritor
merger plan had included a comprehensive plan for restructuring both companies,
one analyst noted.
Nevertheless, the failure of Dana
Corp., which is more than a century old, caught many observers by surprise
because the company was always considered one of the better-managed companies in
the auto industry with a diversified portfolio of products for both light- and
Up until last fall when the
company disclosed it may have overstated its earnings in recent years, there had
never been any hint of financial trouble. However, the company posted a
$1.3-billion loss for the third quarter and has delayed releasing complete
financial results for the fourth quarter.
However, Michael J. Burns,
Dana chairman and chief executive officer, said Chapter 11 will “provide the
company a chance to fix our business comprehensively — financially and
operationally.” Dana reported total assets of approximately $7.9 billion
and total liabilities of approximately $4.7 billion, on a consolidated basis, as
of September 30, 2005.
“This will be fundamental change, not just incremental improvement. The Chapter 11 process allows us to continue normal business operations, while we restructure our debt and other obligations and enhance performance,” added Burns, who said the bankruptcy filing should have no impact on Dana’s customers.
Dana has about 46,000 employees
worldwide, about 35 percent fewer than it employed in 2001. In the
Only about 7200 of Dana’s
Dana's factories, however, makes a
variety of auto parts such as axles and vehicle frames that are expensive to
ship from outside the
Burns called the decision to file
for bankruptcy protection “extremely difficult but necessary and responsible,”
and said the move would give Dana time and opportunity to fix its operations.
“We want to assure everyone — our
customers, suppliers, our people, and our communities — that Dana is open for
business as usual,” he added. “And, to this end, our customers can continue to
rely on Dana for quality products — delivered on time and to best-in-class
Dana filed for bankruptcy only
after consulting with advisors and concluding that the interests of its
creditors, employees, customers, and suppliers would be best served by
reorganizing under Chapter 11 of the U.S. Bankruptcy Code, Burns said.
Burns said Dana also intends to
move ahead with restructuring plans announced last autumn, which include the
sale of non-core businesses, the closure of several, and shifts of production to
lower-cost plants outside the
Dana is only the latest in a
growing string of automotive suppliers that have gone bankrupt. Delphi Corp. of