- The Washington Times - Friday, March 3, 2006

TOLEDO, Ohio (AP) — Auto parts maker Dana Corp. filed for bankruptcy protection for its U.S. operations yesterday, joining a growing list of suppliers forced to make major restructuring moves because of the slumping U.S. auto industry.

Dana, which sells brakes, axles and other parts to most major automakers, has been facing increasing pressure from big car makers to sell them parts at lower prices.

That, coupled with rising energy costs that are driving up the costs of raw materials and driving down demand for gas-guzzling sport utility vehicles and pickup trucks, has put auto parts suppliers in a financial bind.

Auto analysts said Dana’s bankruptcy filing will increase the uncertainty engulfing the industry.

“Dana’s not the first and it won’t be the last,” said Sean Egan, managing director of Egan-Jones Ratings Co.

Financial trouble for auto suppliers eventually will hit new car buyers too, because some suppliers won’t have the money to reinvest in new products and help car companies make high-quality vehicles at lower costs, he said.

Dana, with 46,000 workers worldwide, said in January that it lost nearly $1.3 billion in the third quarter last year while realigning its business. It has been in a downward spiral since the company announced in the fall that it was restating earnings and lowering its profit forecast for 2005 because of accounting errors.

The Toledo, Ohio, company said it filed for Chapter 11 protection so it could fix financial and operational problems. The filing was entered in the U.S. Bankruptcy Court for the Southern District of New York.

“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.

Dana supplies parts to General Motors Corp., Ford Motor Co. and other automakers. The filing does not affect the company’s businesses in Europe, South America, Asia, Mexico or Canada, the company said.

“They’re making money overseas,” said Marc Santucci, a supplier analyst for ELM International Inc. “The filing shows that anyone who’s a major suppler to the Big 3 is in trouble.”

Delphi Corp., the nation’s leading parts supplier, filed Chapter 11 in October. Visteon Corp., the nation’s second-biggest auto parts supplier, is closing three plants and putting another six up for sale under its restructuring plan.

Tower Automotive Inc. filed for bankruptcy protection a year ago.

Trading of Dana’s stock was halted on the New York Stock Exchange just before the announcement. Shares fell 37 cents to 67 cents yesterday. The stock had been as high as $17.03 in the past year.

Before the filing, Dana announced plans last year to cut its salaried work force by 5 percent, close three plants in North America and Australia and sell parts of its business to sharply reduce costs.

Dana Chairman and Chief Executive Officer Michael Burns said yesterday the company will move forward with its restructuring plans. The company has secured $1.45 billion from its lenders to continue operations.

“We want to assure everyone — our customers, suppliers, our people and our communities — that Dana is open for business as usual,” Mr. Burns said.

The company has about 50 major facilities in the U.S., most of them in Ohio, Michigan, Indiana and Kentucky.

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