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The company cited a continuing drop in revenues resulting from the dire straits of the U.S. auto industry.
Stephen Taub, CFO.com | US
March 3, 2006
Dana Corp. announced Friday that it had filed for bankruptcy for its U.S. operations. Dana is the fourth major auto-parts maker to have recently filed for Chapter 11 protection, according to Reuters.
Along with Dana, Delphi Corp., Collins & Aikman Corp., and Tower Automotive Inc. top a long list of car-parts manufacturers that have sought court aid in reorganizing in the past year, according to Reuters.
In its announcement, Dana cited a continuing drop in revenues resulting from the dire straits — including decreasing market share and production levels — of its largest domestic customers. The Toledo, Ohio-based company also blamed steep rises in commodity and energy costs that have outstripped its cost hikes. "The general financial condition of the industry, together with Dana's inability to renew or expand its credit facilities in a timely manner, has significantly constrained Dana's liquidity," the company added.
To fund its continuing operations during the restructuring, Dana said it has secured a $1.45 billion debtor-in-possession (DIP) financing facility from Citigroup, Bank of America NA, and JP Morgan Chase Bank NA. The DIP credit facility replaces the company's $400 million revolving credit facility and $275 million receivables securitization facility. The company will use the DIP financing for working capital requirements, including employee wages and benefits, supplier payments, and other operating expenses during the reorganization process.
The filing for reorganization didn't come as too much of a surprise, given that earlier in the week the company reportedly missed $21 million in interest payments on two senior bond issues. It actually had a 30-day grace period — until March 31 — to come up with the money before it would be in default.
Bankruptcy protection provides the company with the chance "to fix our business comprehensively — financially and operationally," stated Michael Burns, Dana's chairman and chief executive officer. "This will be fundamental change, not just incremental improvement."
Dana intends to proceed with its previously announced divestiture and restructuring plans, said Burns. They include the sale of several noncore businesses and the closing of several facilities, as well as shifts to cheaper production sites. Further, the company will continue to take steps to cut costs, boost efficiency, and improve productivity, he said.
Dana reported total assets of about $7.9 billion and total liabilities of about $4.7 billion, on a consolidated basis, as of September 30, 2005.
The company reported that its European, South American, Asia-Pacific, Canadian, and Mexican subsidiaries are not included in the Chapter 11 filing and are operating as normal.