BREAKING NEWS: Dana files for bankruptcy protection

TOLEDO, Ohio — Truck and auto parts giant Dana Corp. said today that its U.S. operations have filed for bankruptcy protection from creditors.

The filing covers Dana and 40 U.S. subsidiaries. It excludes Dana’s Canadian, European, South American, Asia-Pacific, and Mexican subsidiaries, which are operating as normal, the company said.

A full-scale restructuring effort is expected to take at least a year or more.

Company spokesman Jeff Cole told TodaysTrucking.com earlier today that customers would not notice any service disruption in the meantime. “That’s the message we’re sending. We are open for business as usual,” he says. “Our customers can continue to rely on Dana for quality products delivered on time and to best-in-class quality standards.”

About three-quarters of the company’s sales are from automotive systems and component sales, while the rest from truck products.

Dana blamed skyrocketing raw materials and energy costs as well as declining production at some of its largest U.S. customers for the move. “The general financial condition of the industry, together with Dana’s inability to renew or expand its credit facilities in a timely manner, has significantly constrained Dana’s liquidity,” the company said in a statement.

The Big Three automakers have lost market share to foreign competitors and have announced a series of various plant closures and operational cutbacks in both the U.S. and Canada over the last few years.

While Dana insists that it’s “business as usual,” a spokesman at rival ArvinMeritor acknowledges that “…our phone has been ringing.” Some truckmakers, at least slightly nervous about filling their order boards, have been enquiring about spare capacity on ArvinMeritor production lines. And the Troy, Mich.-based company does have some supply openings, TodaysTrucking.com has been told.

Dana says customers won’t be affected as the
company restructures during bankruptcy

Dana is the first auto industry supplier in 2006 to file for bankruptcy protection, but several parts makers, such as Delphi Corp., are on lifelines and have requested similar court shelter.

Dana — which also announced a series of cuts to jobs, plants and noncore business after posting losses totaling over $1 billion through September 2005 — announced it would fund its continuing operations during the restructuring by securing a $1.45 billion debtor-in-possession (DIP) financing facility from Citigroup, Bank of America, and JP Morgan Chase Bank.

Jeff Cole said the bankruptcy filing would not affect Bendix Spicer Foundation Brake LLC, a joint venture launched in 2004 by Dana’s Heavy Vehicle Technologies and Systems Group and Bendix Commercial Vehicle Systems. “We intend to continue with the strategy we’ve outlined,” Cole said.

The focus of the venture was to combine expertise in the areas of air-disc braking systems, air-drum braking systems, and specialty wheel-end products such as friction materials and brake actuator systems (manual and automatic slack adjusters and brake chambers).

The move was an attempt to pool resources between the two companies in response to the U.S. Federal Motor Carrier Safety Administration’s new commercial vehicle stopping distance requirements.

“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,” Chairman and CEO Michael J. Burns stated in the release.