Another Auto Parts Maker Seeks Bankruptcy Protection
Dana Corp., which has been in business since the Ford Model T era, on Friday became the sixth major auto parts supplier to seek Chapter 11 bankruptcy protection, citing slumping sales by American automakers.
Toledo, Ohio-based Dana supplies axles, brakes, drive shafts and other parts to many automakers, but Ford Motor Co. and General Motors Corp. are its largest customers. The two big automakers continue to lose U.S. sales to Asian brands and have cut production, reducing the need for parts from their suppliers.
In the past, Ford and GM “would have propped up suppliers to ensure a smooth flow of parts, but they no longer can afford to absorb the losses,” said credit analyst Sean Egan of Egan-Jones Ratings in Philadelphia.
Dana supplies frames and axles for Ford’s popular F-Series pickups, and concerns about the struggling auto sector pushed Ford’s stock to a three-year low Friday, before it rebounded slightly to finish at $7.57, down 9 cents.
Several automakers, including Ford and Nissan Motor Corp., which uses Dana parts in its pickups and sport utility vehicles, said Friday that Dana had promised to keep supplies coming.
Other parts suppliers cited similar reasons for their bankruptcy filings. Delphi Corp. -- a former GM subsidiary and the world’s largest auto parts supplier -- filed for Chapter 11 in October.
The other parts firms in bankruptcy are Tower Automotive Inc., Collins & Aikman, Meridian Automotive Systems and Eagle Picher Inc.
Delphi and Tower are trying to reorganize by forcing unions to accept significantly lower wages and benefits.
Dana filed for bankruptcy protection after missing a $21-million interest payment to bondholders Wednesday.
The company, with 46,000 employees worldwide, lost $1.3 billion in the third quarter last year; at the time it listed assets of $7.9 billion and $4.7 billion in liabilities.
Dana operates about 50 facilities in the U.S., mostly in the Midwest. Previously, Dana said it would cut its salaried workforce by 5%, close three plants and sell some of its businesses to sharply reduce costs.
Unions represent about 7,200 of Dana’s 19,000-member domestic workforce. The company is meeting with automakers and the United Auto Workers.
Filing for Chapter 11 “provides the company an opportunity to fix our business comprehensively,” said Dana Chief Executive Michael J. Burns. “This will be fundamental change, not just incremental improvement.”
The bankruptcy does not affect Dana’s large operations in Europe, Asia, Mexico, Canada and Latin America.
“They’re making money overseas,” Marc Santucci, a supplier analyst for ELM International Inc. told Associated Press. “Anyone who is a major supplier to the Big Three is in trouble.”
Dana cited soaring steel and raw-material costs and rising energy costs as key factors for its bankruptcy filing, along with declining revenue because of reduced production by GM and Ford. Both automakers, along with DamilerChrysler’s Chrysler Group, have been relentlessly pressing suppliers to cut their prices.
“The entire parts industry has been affected by these things,” said automotive industry analyst David Healy of Burnham Securities.
“There’s been a perfect storm: Sales volume declines at Ford and GM; years of forced price reductions from the Big Three; and now their commodity costs over the last couple of years have gone through the roof,” he said.
“Its suppliers had begun demanding cash upfront, and [Dana] simply ran out” of funds, said Daniel DiSenso, a credit analyst at Standard & Poor’s, which cut its rating on Dana bonds deeper into “junk” status after Friday’s filing.
“The commodities price increases, particularly steel, hurt them more than most because they haven’t been able to pass the increases on to their biggest customers,” he said.
After its filing, Dana said it had secured $1.45 billion in financing from Citigroup Inc., Bank of America and JPMorgan Chase & Co. for working capital.
Shares of Dana declined 38 cents to 66 cents Friday before trading was halted. The stock had been as high as $17.03 in the last year.
