10.03.2006

Dana files chapter 11

The Dana Corporation, supplier of axles drive shafts and transmission for telehandlers, among other things, has filed for protection from its creditors, under chapter 11 of the US bankruptcy code.

The filing in New York applies to the groups US businesses the company said that its European, South American, Asia-Pacific, Canadian and Mexican subsidiaries are unaffected.

Dana remains open for business and has secured a $1.45 billion debtor-in-possession financing facility from Citigroup, Bank of America and JP Morgan Chase Bank, which replaces two revolving facilities and will be used to fund normal working capital requirements, including employee wages, supplier payments, and other operating expenses during the reorganisation process. The line of credit is secured against the company’s receivables...

Dana says that it has seen a continued decline in revenues resulting, from the decreasing market share and production levels of its largest domestic customers, along with sharp increases in commodity and energy prices.

The company has also failed to renew or expand its credit facilities causing a cash crisis.

Dana chairman and chief executive officer Michael J. Burns said, "The Chapter 11 process provides the company an opportunity to fix our business comprehensively -- financially and operationally. 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.
"We want to assure everyone -- our customers, suppliers, our people and our communities -- that Dana is open for business as usual. This is an extremely difficult, but necessary and responsible decision that will provide us with the time and opportunity to strengthen our performance and achieve a sustained turnaround at Dana."

Burns also said that Dana intends to sell off several non- core businesses and close several facilities, while shifting production to lower-cost locations.

Vertikal Comment

It is no surprise, Dana has been slipping towards chapter 11 for some time, in the nine months to September 2005 revenues rose by over $800 million but costs rose faster include SG&A so not all down to rising commodities.

As an outsider looking in it would seem that the business would in fact benefit from a break up rather than a rescue. The group comprises some great products and brands such as Spicer but hard to see how each of the component businesses have benefited form the costs of being part of a large disparate group.
Dana has dominated the Telescopic handler driveline market, producing complete kites of running gear including axles, transmission and all drivelines. The off highway division is though competing in a market where giant construction companies like to build their own, components and where hydrostatic drive continues to take market away from traditional drivelines.