Hits keep coming for the US auto industry
news.yahoo.com/s/nm/20060303/bs_nm/autos_dana_dcCHICAGO (Reuters) - Auto and truck parts maker Dana Corp. (NYSE:DCN - news) said on Friday that its U.S. operations have filed for bankruptcy protection, succumbing to declining production at large U.S. customers and high materials costs.
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Dana, the first large U.S. auto parts maker to file for Chapter 11 protection from creditors in 2006, cited general industry financial deterioration and its inability to renew or expand credit facilities in a timely matter.
The filing covers Dana and 40 U.S. subsidiaries. It excludes Dana's European, South American, Asia-Pacific, Canadian and Mexican subsidiaries, which are operating as normal, Dana said.
Dana has run into numerous rough spots in the past year beyond raw materials costs and declining market share at key North American customers Ford Motor Co. (NYSE:F - news) and General Motors Corp. (NYSE:GM - news)
The bankruptcy adds to a long list of U.S. auto parts makers that have turned to the courts to aid reorganizations in the past two years, including Delphi Corp. (Other OTC:DPHIQ - news), Collins & Aikman Corp. (Other OTC:CKCRQ - news) and Tower Automotive Inc. (Other OTC:TWRAQ - news)
The filing did not surprise industry analysts. Dana, which was in talks with lenders on financing alternatives, on Wednesday announced it had failed to make $21 million of bond interest payments.
David Cole, chairman of the Center for Automotive Research, said a restructuring likely would take at least one year and possibly several, though it shouldn't have a great deal of impact on automakers.
"The whole purpose is to enable the company to restructure to a point where they are once again profitable," Cole said.
Dana shares were down 26 cents, or 25.5 percent, to $0.67 on the New York Stock Exchange in early afternoon trading.
OCTOBER RESTRUCTURING PLAN TO CONTINUE
The company last October announced plans to cut jobs, plants and noncore business and shift some production to lower-cost areas to focus its operations, something that will continue under the Chapter 11 reorganization, it said.
The company was forced to restate financial statements back several years due to accounting problems, which also delayed the filing of quarterly results, and led to a formal U.S. Securities and Exchange Commission investigation.
Dana posted losses totaling $1.23 billion through the first nine months of 2005, and had postponed a decision on whether to issue a first quarter 2006 dividend until it completes its fourth-quarter and full-year 2005 financial reports.
Dana, a producer of frames, axles and driveshafts, was founded in 1904 as the Spicer Universal Joint Manufacturing Co. It had revenue of $9.1 billion in 2004, its last full year of reported results, and about 46,000 employees worldwide.
Roughly three-quarters of its 2004 sales were derived from automotive systems sales and the rest from truck products.
Dana reported total assets of $7.9 billion and liabilities of $4.7 billion, on a consolidated basis, as of September 30.
Jones Day is Dana's legal adviser, Miller Buckfire is its financial adviser and AlixPartners is its restructuring adviser.
Toledo, Ohio-based Dana said it has secured $1.45 billion of debtor-in-possession financing from Citigroup, Bank of America, and JP Morgan Chase Bank for the restructuring, pending approval of the New York bankruptcy court.
Dana said the DIP facility replaces a previous $400 million revolving credit facility and $275 million receivables securitization facility.
(Additional reporting by Jui Chakravorty in Detroit)