In the war over control of Dana Corp., Joe Magliochetti, Dana's affable CEO, has pretty much stayed out of sight. ArvinMeritor Inc.'s Larry Yost, author of the hostile takeover effort, has been highly public, telling anyone who will listen about the merits of a joined company.
But this week, Magliochetti will climb out of the foxhole when he speaks at the Management Briefing Seminars in Traverse City, Mich. "Joe Mag," as he widely is called within Dana, probably still will be affable.
But he has been marshaling resources to battle Yost, and Magliochetti is one tough CEO.
It was Magliochetti who, faced with large losses, cut 19,000 employees out of 79,000, shuttered dozens of plants, slashed the dividend and divested more than $800 million in operations.
The Magliochetti-Yost struggle is more than just a business dispute. Last week, it became personal.
ArvinMeritor singled out Magliochetti in a lawsuit filed in Virginia on Friday, July 25, for alleged "misrepresentations" in Dana's July 22 rejection of ArvinMeritor's $4.4 billion bid. The suit claims that "Magliochetti's rejection of the ArvinMeritor proposal was not based on any consultation with Dana's board," a charge Dana denies.
Yost, 65, has talked openly about his intentions to build ArvinMeritor into North America's third largest auto parts maker with the acquisition of Dana. He has preached the benefits of merging. He promised to cut $200 million in costs annually and reward shareholders of both companies.
In contrast, Magliochetti, 61, has said little since his Toledo, Ohio, company was targeted. He declined to be interviewed for this story.
But Dana's filings with the Securities and Exchange Commission show that Magliochetti has been busy preparing his defenses.
He has retained New York law firm Wachtel Lipton Rosen & Katz, which specializes in defending corporations against hostile takeovers. The law firm has battled corporate raiders such as Carl Icahn, Michael Milken, and Ivan Boesky.
Title: CEO, Dana Corp.
Hobby: Bird hunting
Years with company: 37
Title: CEO, ArvinMeritor Inc.
Hobby: Tinkering with cars. Owns a 1934 and 1949 Chevrolet, 1966 Mustang convertible.
Years with company: 9 (joined Rockwell International as president of Heavy Vehicle Systems in 1994.)
The law firm is credited with devising the "poison pill" defense. Dana has a poison pill as one of its key weapons for keeping ArvinMeritor at bay.
A poison pill is a strategic move by a takeover target to make its stock less attractive to an acquirer.
In Dana's case, the poison pill, known as preferred share purchase rights, is triggered if any person or group acquires or commences a tender offer for at least 15 percent of the company's common stock.
Once triggered, all other holders of Dana stock can buy more stock at a 50 percent discount, diluting the pursuing entity's holdings.
Dana is not inexperienced with takeover battles. It has a history that dates back to the 1970s.
The company stepped in as a white knight to rescue aftermarket supplier Echlin from SPX Corp. in 1998. After three months of delaying tactics, court challenges and other efforts designed to forestall the hostile bid by SPX, Echlin agreed to be acquired by Dana for $3.9 billion.
It's doubtful there will be a white knight for Dana, analysts say, because that sector largely has been consolidated and there are few potential buyers.
Magliochetti also may be mulling a high-stakes response to ArvinMeritor known as the "Pac Man" defense. The strategy, named after the video game, calls for the targeted company to turn around and try to acquire its opponent.
"I would be considering a Pac Man defense right now," says an investment banker familiar with Dana.
Magliochetti, Dana's CEO since 1999, can turn on the charm.
"When Joe walks into a room, he has a big smile of recognition, friendly and easy to get to know,'' says Neil De Koker, managing director of the Original Equipment Suppliers Association in Troy, Mich.
Did Yost see Magliochetti friendliness as a sign of someone who would knuckle under?
After all, Dana is known for employees with long tenure, a headquarters with a country club-like atmosphere and for being slow to react to market challenges in recent years.
But this is a new Dana under Magliochetti, says John Doddridge the former CEO of Intermet Corp. who spent 28 years working with Magliochetti at Dana.
"Larry (Yost) may have misjudged," Doddridge says. "Joe has a hidden intensity."
Any sign of softness on Magliochetti's part should have been dispelled by his efforts to turn Dana around.
Magliochetti's predecessor, Woody Morcott, a personable Georgia native, loaded Dana's balance sheet with billions in debt by buying 55 companies during his 10-year tenure at the company's helm with the aim of creating a $15 billion supplier.
Magliochetti's pruning of Dana was so extensive that it prompted analyst Robert Hinchliffe of UBS Warburg LLC to call it "the rummage sale on Dorr Street" in reference to Dana's headquarters in Toledo.
Magliochetti brought Dana back from a $298 million loss in 2001 - the only time since 1930 and '31 when the company was in the red. Dana's shares hit a low of $6.31 on March 14, for a total market capitalization of less than $1 billion.
But before Magliochetti's turnaround plan could produce substantial profits and boost the stock price, ArvinMeritor struck with its offer of $15 per share. The shares closed at $12.02 prior to the announced tender offer. They now trade in the $15 range.
"It was a brilliant move," says one financier. "(Yost) is trying to buy $1 for 50 cents."
Magliochetti and Yost were among the few supplier CEOs who earned less last year than the year before. Magliochetti ranked No. 26 out of 32 CEOs with total compensation last year of $1.4 million. Yost received $2.6 million and ranked No. 17.
Both champion the need for technology at their companies.
Magliochetti, who studied engineering at the University of Illinois before becoming a management trainee, created the post of chief technical officer at Dana
"Technology is high on his list," says Larry McCurdy, who was CEO of Echlin when Dana acquired it. "Joe backs advanced research and development, and not just for product development."
Magliochetti might have avoided the ArvinMeritor takeover fight had it not been for Dana's acquisition of a Chicago gasket manufacturer in 1966. He was a management trainee at Victor Manufacturing when he turned down a job offer from Dana.
A year later, he again said no thanks. But before Magliochetti could exit the building where the interview was held, a receptionist welcomed him as an employee of Dana, which had just acquired Victor.