Dana Corp. appears poised to slug it out with Rockwell Automotive for dominance of the U.S. market for heavy-truck axles.
Last week, Dana strengthened its presence in that market by swapping assets with Eaton Corp.
Dana purchased Eaton's axle and brake division for $287 million, and Eaton bought Dana's heavy-clutch operation for $180 million. The deal helps both companies focus on core products in a segment - heavy-truck components - in which profits can be slim.
The swap eliminates one of North America's three major heavy-duty axle manufacturers - Eaton - leaving Rockwell and Dana. The deal also gives Dana greater access to markets in Europe and South America.
Meanwhile, Eaton can make entire drivetrains for truck manufacturers. Eaton already is a major producer of heavy-duty transmissions. Now, Eaton can package the transmission, clutch, driveshaft and - thanks to a marketing deal with Dana - axles and brakes.
'It seems to be a very logical pair of transactions,' said John Casesa, a transportation analyst for Schroder & Co. 'It will rationalize the heavy-axle business, where profits have been low.'
Indeed, it appears that Eaton offered a discount on its axle business, which will have sales of $625 million this year. A spokesman said the axle business was profitable.
Under the agreement, Eaton will purchase Dana's Spicer Clutch operation, which is expected to generate $179 million in sales this year. Spicer Clutch owns plants in Indiana, Australia, Brazil and England. The division also remanufactures clutches in Harrisburg, N.C.; Oklahoma City; England and the Netherlands. Those plants employ 670 workers.
Meanwhile, Dana will obtain Eaton plants in Kentucky, Tennessee, Ohio, Argentina, England, Mexico and Spain. Those plants employ 3,400 workers.
Under joint marketing agreements, both Eaton and Dana will sell components produced by the other.
Because the deal would allow Dana and Rockwell to dominate the market for axles, the Federal Trade Commission may decide to look into the agreement.