The deal that haunts Dana Corp. CEO Joe Magliochetti was made in 1998.
His predecessor's $3.9 billion buyout of aftermarket giant Echlin Inc. saddled Dana with a massive integration headache.
ArvinMeritor's bid for Dana, in a way, becomes a referendum for Dana's shareholders on the restructuring launched after troubles cropped up from the Echlin deal.
Mistakes were made, Magliochetti says of the Echlin acquisition. "Hindsight is 20-20," he says.
Magliochetti's predecessor, Woody Morcott, thrust Dana into the role of white knight to buy Echlin, an aftermarket supplier that was the target of a $3 billion hostile takeover bid from SPX Corp.
The magnitude of integrating Echlin's 55 companies into Dana soon proved a nightmare, says Scott Rawling, a former Echlin engineer and now engineering group manager at Callaway Cars Inc. in Old Lyme, Conn.
"It was sort of like buying a big box of parts, knowing that you wanted the stuff on the top but didn't know if you could use the things on the bottom," Rawling says.
Echlin's winners included brake and chassis component units, Rawling says. But there were also losers.
"Hard as Dana tried, the margins for replacement and performance engine management could never make corporate standards," Rawling says.
The painful startup of three distribution centers sealed the fate of the struggling Engine Management Group, Rawling says.
Dana sold the unit earlier this year to Standard Motor Products Co. of Long Island City, N.Y., which promptly announced the closing
of seven of the nine plants purchased.
Rawling chalks up the problems Dana suffered from Echlin as "the necessary risks for growth."
Such trauma was not widely expected in 1998.
Thanks to the addition of Echlin, Dana's annual revenues topped $12 billion in 1998, and the company confidently aimed for the $15 billion mark in 2000. But revenues fell below $10 billion in 2001 and have stayed there since.
The Echlin deal also helped Morcott earn a place of distinction in the industry in his last full year as Dana's CEO.
The Automotive Hall of Fame honored Morcott when it named him Automotive Industry Leader of the Year for 1998.