Dana to close 8 U.S. auto parts plants, downsize 3 others

Saturday, November 11, 2006

From staff and wire reports

Auto parts maker Dana Corp. plans to close eight U.S. plants and downsize three others in North America, the company said Thursday in a filing with the U.S. Securities and Exchange Commission.

But company spokesman Chuck Hartlage would not say if the Cape Girardeau facility, which employs about 250 people, is among those to be closed. That decision, he said, is expected to come within the next month. Local plant management declined comment, except to refer calls to the corporate offices in Toledo, Ohio.

Dana, which filed for bankruptcy protection in March, said it would eliminate health benefits for retirees and attempt to alter labor contracts at its unionized plants.

"Our existing labor costs, especially in the U.S., impair our financial position and are a significant impediment to a successful reorganization," the company said in the filing.

It will announce within the next month which of its 66 plants will close, Dana chief executive Michael Burns said in a letter sent to employees Thursday. Eight other plants have either shut down or targeted for closing in the last year.

The company has not decided which plants will close or how many employees will be affected, spokesman Chuck Hartlage said.

Dana, which sells brakes, axles and other parts to most major automakers, has said in its bankruptcy filing that rising energy costs were driving up production costs and hurting demand for its customers' products.

Closing the plants, eliminating health benefits and reducing other labor costs should save between $405 million and $540 million each year, Burns said.

The company also plans to renegotiate contracts with its customers and cut administrative costs. At nonunion plants, it will seek to freeze wages and increase employees' share of health insurance costs.

"These changes are neither easy nor pleasant," Burns said. "The reality is that we simply cannot continue to provide a solid base of jobs in our communities and a strong presence in our industry with incremental, patchwork solutions."

The company already has started to shift operations at two of its plants and close four U.S. sealing and thermal plants and one in Canada. "We expect to continue to move manufacturing capacity from the U.S. to lower cost countries, such as Mexico," the company's filing said.

A large slice of its business comes from three customers: Ford Motor Co., General Motors Corp. and DaimlerChrysler AG.

Parts makers over the last two years have been squeezed by automakers forcing the suppliers to sell them parts at lower prices.

"This will make it more challenging for us to achieve our restructuring goal of improving product profitability by obtaining price modifications," Dana said Thursday.

The nation's largest parts maker, Delphi Corp., filed for bankruptcy protection in 2005.

Business editor Scott Moyers contributed to this report.

Dana said it lost $356 million for the quarter ended Sept. 30 compared with $1.2 billion a year ago when the company recorded tax and restructuring charges. Sales fell slightly to $2 billion from $2.1 billion.

For the year to date, the company has lost $510 million, down from a loss of $1.2 billion a year ago. Sales fell to $6.5 billion from $6.6 billion.

Business editor Scott Moyers contributed to this report.

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