For Dana, Leaving Chapter 11 is Just One Step in Long Process

At first approach, Dana Corp.'s Toledo, OH, headquarters looks out of place. The vast brick, columned building belongs in colonial times or on a college campus. The reception area -- anchored by a 168-year-old grandfather clock and a broad, curving staircase -- seems more like one at an inn rather than a corporation. But in a way, that makes sense for this 104-year-old company.

From Detroit Free Press

TOLEDO, OH – At first approach, Dana Corp.’s Toledo, OH, headquarters looks out of place.

The vast brick, columned building belongs in colonial times or on a college campus. The reception area — anchored by a 168-year-old grandfather clock and a broad, curving staircase — seems more like one at an inn rather than a corporation.

But in a way, that makes sense for this 104-year-old company.

Dana emerged from Chapter 11 bankruptcy protection at the end of January without the credit issues that have delayed the bankruptcy exits of suppliers Delphi Corp. and Dura Automotive Systems. It did so through an unusual relationship with private equity and its unions, which has enabled the company to cut its labor costs and become enough of a threat to be singled-out as a labor cost benchmark for Detroit rival American Axle & Manufacturing Inc., where concessionary contract talks have led to a strike.

"But clearly we still have a lot to do here," said John Devine, Dana’s interim CEO, whose job entails finding his successor and assembling Dana’s new management team.

Devine, former chief financial officer of Ford Motor Co. and General Motors Corp., came out of retirement for the third time to lead the company after its bankruptcy emergence, in part, because of the industry’s challenges.

"We’re in this period in the automotive business of a significant restructuring. … Everybody asks: How long is it going to last? When is it going to be over? The short answer is we don’t know," said 63-year-old Devine. "My guess is that we’re still in the fourth or fifth inning of what’s going to be a nine-inning game."

A key partner

A key to Dana’s emergence was an investment from private equity firm Centerbridge Partners LP.

Dana’s unions — the UAW and the United Steelworkers — called on the New York-based firm as an adviser in the bankruptcy case, said Steve Girsky, president of Centerbridge Industrial Partners, an arm of the private equity firm. The supplier eventually became an investment opportunity.

Centerbridge agreed to invest as much as $500 million, if creditors didn’t buy up Dana’s new stock. Ultimately, Centerbridge invested $250 million.

"We actually had a plan to change the direction in which things were going in the company and it has succeeded," said Jim Robinson, a negotiator for the United Steelworkers, which joined the UAW in bargaining.

The unions won a stable investment from Centerbridge for Dana, and managed to keep open at least two plants slated for closure, Robinson said.

The unions adopted a two-tier wage system — with new hires earning an hourly wage of about $15, compared with $18 to $24 for veteran workers, according to Lehman Brothers. To entice older workers to leave, Dana is offering retirement incentives of $45,000.

Effort rewarded

In bankruptcy, Dana cut its debt by about $1 billion, sold three of its businesses, launched a plan to close eight plants and won a $750 million investment. Those efforts, along with plans to improve operations, drew the $2 billion loan the company needed to leave bankruptcy — something that has been a stumbling block for suppliers Troy, MI-based Delphi and Dura in Rochester Hills, MI.

"We had a proven plan for continuing to improve our cost structure," said Ken Hiltz, a managing director at AlixPartners, who started serving as Dana’s interim chief financial officer during its bankruptcy proceedings.

Now comes the next push for change at Dana. "At every plant that we have, every location around the world," Devine said, "we know we can do better in terms of quality, productivity, delivery times and efficiencies."