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Dragon

Another oen bites the dust

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http://news.yahoo.com/s/nm/20060303/bs_nm/autos_dana_dc

By David Bailey 1 hour, 3 minutes ago

CHICAGO (Reuters) - Auto and truck parts maker Dana Corp. (NYSE:DCN - news) filed on Friday for bankruptcy protection, the latest U.S. supplier to succumb to declining production at large U.S. customers and high materials costs.

Dana cited general industry financial deterioration and its inability to renew or expand credit facilities in a timely matter as it became the first large U.S. auto parts maker to file for Chapter 11 protection from creditors in 2006.

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 been hurt by declining market share of key North American customers Ford Motor Co. (NYSE:F - news) and General Motors Corp. (NYSE:GM - news), which accounted for 36 percent of Dana's sales in 2004.

The producer of frames, axles and drive shafts generates about three-quarters of its revenue from the automotive sector, with a focus on Big 3 U.S. automakers. Paccar Inc. (Nasdaq:PCAR - news), and International Truck & Engine Corp. are among its largest truck business customers.

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.

"Although such a move has been rumored for some time, we believe the speed of Dana's demise will nonetheless further dampen sentiment toward the sector," J.P. Morgan analyst Himanshu Patel said in a note.

Ford shares fell to their lowest level in three years after Dana's announcement, touching an intraday low of $7.39 not seen since March of 2003.

Dana shares were down 26 cents, or 25.5 percent, to $0.76 on the

New York Stock Exchange and have fallen nearly 90 percent since the start of the year.

David Healy, an analyst with Burnham Securities, said the Dana bankruptcy could heighten concern that the traditional Big Three would lose some leverage to push suppliers to cut costs and accept lower margins.

OCTOBER RESTRUCTURING PLAN TO CONTINUE

Dana 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 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 44,000 employees worldwide as of Friday.

The company has about 19,000 U.S. employees, including roughly 7,200 represented by unions including the

United Auto Workers and the United Steelworkers of America.

The petition listed total assets of $7.9 billion and total debts of $6.8 billion.

Jones Day is Dana's legal adviser, Miller Buckfire is its financial adviser and AlixPartners 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.

Buy some shares now before it sky rockets when Magna buyout rumours start up.

Edited by Dragon

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I was expecting this to be about Isuzu before clicking on it.

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With axles & driveshafts being a primary product, and (along with PACCAR & Int'n'l) Ford & GM trucks as primary customers, it would seem product sales would NOT be a major contributor, contrary to the article's acertation. Ford & GM truck sales are better in recent years than any other time historically.

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With axles & driveshafts being a primary product, and (along with PACCAR & Int'n'l) Ford & GM trucks as primary customers, it would seem product sales would NOT be a major contributor, contrary to the article's acertation. Ford & GM truck sales are better in recent years than any other time historically.

I'm not up to speed on these suppliers and who uses them but it sounds fishy to me too. My guess is that the GM/Ford thing is just a BS smokescreen. If the 36% figure is true could it possibly be that another supplier won the contracts? Isn't American Axle doing okay?

Just once, I'd like to see executives announce that:

"We are entering chapter 11 because we totally miss managed the company, miss read the market, wasted money on self-serving pet projects, were too smart to listen to our customers, drove away all our really smart employees, and hired the same trusted crony team that helped us run our last company out of business."

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"Dana cited general industry financial deterioration and its inability to renew or expand credit facilities in a timely matter."

Businesses generally rely on discounted bonds and other loans to finance day-to-day operations. Much of the money may be sitting in a bank account as cash on hand to pay wages and suppliers etc. While cashflow may pay any interim payments the bulk of the repayment will be financed by a new bond issues. The reliance on the good will of financial institutions has forced many small supplers (and manufacturers) into liquidation when they can't raise money to pay for continuing operations, even if they have positive cash flow and are making a profit. Dana will probably find new lines of credit and come out of bankruptcy without much trauma.

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