DETROIT -- Dana Corp. -- the 100-year-old company that supplied parts to the Model T, the World War II-vintage Jeep and the classic London taxicab -- sought Chapter 11 bankruptcy protection Friday in New York.
The filing, which did not include Danas overseas operations, ended several weeks of speculation about the deteriorating financial condition of the axle, driveshaft and heavy components manufacturer based in Toledo, Ohio.
Dana becomes the second major automotive supplier to seek reorganization in the last five months. Delphi Corp., the former parts making unit of General Motors, filed for bankruptcy protection Oct. 8.
Dana said it has negotiated a new $1.45 billion credit line, known as debtor in possession financing, to meet its obligations during the Chapter 11 process. Deliveries to customers should not be affected, the company said.
CEO Mike Burns, who took Danas helm in March 2004 after a 34-year career at GM, said in a statement that the filing gives the company a chance to fix its business comprehensively -- financially and operationally.
This will be fundamental change, not just incremental improvement, he said. The Chapter 11 process allows us to continue normal business operations, while we restructure our debt and other obligations and enhance performance.
We want to assure everyone -- our customers, suppliers, our people and our communities -- that Dana is open for business as usual. And, to this end, our customers can continue to rely on Dana for quality products -- delivered on time and to best-in-class specification.
This is an extremely difficult but necessary and responsible decision that will provide us with the time and opportunity to strengthen our performance and achieve a sustained turnaround at Dana.
Dana listed assets of $7.9 billion and liabilities of $4.9 billion.
Dana supplies components for a significant number of platforms at Ford Motor Co. and GM. About 25 percent of Danas business in 2004 was with Ford, according to Danas annual report. Another 11 percent of its business was with GM that year.
Burns has been restructuring the company for the last few months, but the effort gained little traction on Wall Street. Danas stock has been in a tailspin since the start of the year.
Burns said last week that the company was in negotiations with its bankers and hoped to reach an agreement on new lines of credit in two weeks. Dana missed a $21 million bond interest payment on Wednesday, March 1.
Dana has been beset by multiple challenges in recent months, including a federal accounting probe, declining business from Ford and GM and higher raw material costs. The company posted a $1.23 billion loss through the first nine months of 2005 -- all but $20 million of the loss stemmed from one-time charges and write-downs.
Without new lines of credit, the Chapter 11 filing was inevitable for the company, analysts said.
Failure to obtain a new (credit line) facility would lead to default and likely bankruptcy, S&P analyst Daniel DiSenso wrote in a report Thursday, March 2. Both S&P and Moodys Investors Service downgraded Danas credit ratings for the second time in a week on Thursday.
The missed interest payment prompted the second major sell-off of Dana stock in five trading days. Shares in the company closed Thursday at $1.04, down 44 percent, in massive trading on the New York Stock Exchange. Reuters reported that the closing price was an all-time low, but the New York Stock Exchange could not confirm that benchmark. The stock on Feb. 24 fell 52 percent.
Dana, which employs about 46,000 people in 28 countries, is the third-largest automotive bankruptcy case in history, based on total assets, behind Delphi and Federal-Mogul Corp. Dana ranks No. 15 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $9.06 billion in 2004. It listed $7.88 billion in assets on Sept. 30, 2005.
You may e-mail Philip Nussel at [email protected]