Seven years after Dana Corp. emerged from bankruptcy, the supplier is looking for acquisitions.
CEO Roger Wood, 52, says he aims to make some "bolt-on" acquisitions of companies -- perhaps this year -- to expand Dana's portfolio of driveline components for light vehicles, commercial trucks and off-highway equipment. The company produces driveshafts, axles, oil-cooling components, head gaskets, hub systems and other parts.
Wood, who plans to retire from Dana next year, spelled out the company's growth strategy in a March 23 interview with Special Correspondent David Sedgwick.
Q: Is Dana actively seeking acquisitions, or is this hypothetical?
A: It's not a hypothetical at all. We are very much working on some M&A activities. We have a very, very strong balance sheet, and we generate very good cash flow.
Is that Dana's top priority for growth? How much organic growth do you expect for the company?
We've increased our capital investment into the company as a result of our business backlog. Our second priority is M&A activity, to complement the technologies we already have.
How much money is Dana willing to spend?
We are thinking of bolt-on acquisitions ranging from $200 million to $500 million. We feel we can do a few of those deals simultaneously if the opportunities present themselves. We've been working for a few years to build relationships with companies that we feel would be good assets.
When might Dana make an acquisition?
I'm optimistic that in the near to mid-term, we'll get a couple of those deals done.
At least one could potentially happen this year.
Could Dana finance that deal out of its cash flow?
Yes, we have a substantial cash balance. There is not a problem with financing at all. If we had to, we could do a couple of transactions simultaneously, with absolutely no problem at all.
Is Dana considering an acquisition for its light-vehicle division?
We operate in three different markets: off-road vehicles, commercial vehicles and light vehicles. Regardless of the technology we bring in, for the most part, we'll be able to use that technology in all our markets.
So Dana is looking for access to new technology or new regions?
Both. Certainly, technology is first and foremost on our radar screen.
What sort of companies are targets?
[Dana is targeting] businesses that have done a great job commercializing new technologies but may be having trouble bringing it to markets around the world. Because we have the footprint, customer relationships and technical centers around the world, we may be able to assist them.
Dana has a major presence overseas. Has the strong dollar hurt Dana's revenues?
It's been a significant issue. Everybody is talking about the [weak] euro, but we've been experiencing problems in emerging markets as well.
Can you hedge against these currency fluctuations?
We do a little bit of that, but it's not practical from a translational standpoint.
Last year, Dana increased its business backlog by 30 percent. Which products are generating that growth?
Our driveline products have really done a nice job penetrating the marketplace. Our AdvanTEK high-efficiency axles are a big part of that.
In 2014, Bob Pyle, president of Dana's light-vehicle drivetrain technologies, predicted sales of prop shafts would rise 10 percent annually over the next three years. How is Dana doing?
We're doing great. Out of that 30 percent increase in backlog, the majority is in light vehicles. The launch of the Chevy Colorado, the GMC Canyon and the Ford Super Duty pickups are really driving that growth.
American Axle has had a lock on General Motors truck parts for a long time. With the Canyon and Colorado, has GM opened the door for Dana?
General Motors has been a great new customer for us. They've been very interested in the technology investments we have been making.
Is GM encouraging Dana to bid on more programs?
We feel that as long as we have good technology and good solutions, they are very interested in our products.
Dana has a lot of launches this year with the Ford Super Duty pickups, Jaguar XF and XE sedans and Toyota Hilux in South America, to name a few. Is the company keeping up?
It's a big year for launches. We are making more capital investments this year than in the past. We've had a number of launches in all our business units, but our light-vehicle unit is really driving business activity in a major way.
Is Dana hiring engineers?
We are. We've increased our investment in engineers every year that I've been here. And yes, we have the engineers we need to launch these programs. We are prepared.
In 2012, you said you would raise r&d expenditures to 4 percent of sales, from 2 percent. Have you done so?
We're between 2 and 3 percent. In 2014, we increased our engineering investment for the fourth consecutive year.
Even though we are not at 4 percent, we are not underspending on engineering. We will continue to add to it.
Now that gasoline prices are plunging, are automakers slowing their efforts to improve fuel economy? Or is corporate average fuel economy forcing the pace?
We have not seen any lessening of interest in fuel efficiency. None of the projects we've been working on have been delayed because of lower fuel costs. A short-term reduction of fuel prices isn't going to change the strategy of any of our customers.