Dana Corp. today announced that its Board of Directors has approved several “operational and strategic initiatives to enhance financial performance.”
The key changes to be made were described as:
- Focusing on Dana's light- and heavy-vehicle drivetrain products, associated structures, sealing, and thermal products, and divesting three non-core businesses with annual revenues of $1.3 billion
- Operational restructuring in Dana's Automotive Systems and Heavy Vehicle Technologies and Systems groups
- Enhanced business efficiency, including workforce reductions
- Benefit cost reductions.
Dana said the three non-core businesses it will shed are engine hard parts, fluid products, and pump products.
The engine hard parts business posted 2004 sales of $720 million. This business consists of 26 operations which primarily manufacture piston rings, camshafts, and engine bearings under the Perfect Circle, Clevite and Glacier Vandervell brand names.
The fluid products business manufactures fluid products for braking, power steering, HVAC, and fuel applications. It netted $470 million in sales in 2004. The pump products business, which consists primarily of original equipment and aftermarket pump operations in Brazil, posted $80 million in revenue in 2004.
Within its Commercial Vehicle business, service parts activities at the Henderson, KY, facility will move to a service parts operation in Crossville, TN. Assembly activity will be increased at the Dana plant in Monterrey, Mexico, and gear production will be increased at the Toluca, Mexico, plant. These actions will “enhance efficiency, logistics and throughput,” Dana said.
Dana will close two Virginia facilities in its Automotive Systems Group, which will result in manufacturing consolidation in Kentucky and Mexico. In addition, some of its assembly and component lines in Ohio will be moved to Mexico. These actions will “take advantage of lower cost locations,” the company stated.
Dana plans to eliminate its Employees' Stock Purchase Plan, reduce the company's share of the costs of its U.S. medical benefit plans, suspend matching contributions to its U.S. and Canadian long-term savings programs, and take additional actions to reduce benefit costs. The firm said these changes are expected to generate cost savings of more than $25 million before tax in 2006. Dana also Dana said it has suspended wage and salary increases globally, subject to local law and contractual requirements.
Dana said it expects to incur a charge of $9 million before tax during the fourth quarter of 2005, and additional charges in 2006 and 2007 in association with these operational restructuring actions totaling $21 million before tax. Further, the company said it expects the impact of these actions in 2006 to be a net expense of approximately $8 million due to both the time required to complete the moves and the additional expenses related to separation costs and equipment transfers. However, starting in the second half of 2007, Dana said it expects to begin realizing the full annualized savings of more than $20 million before tax.
"Collectively, these operational actions will result in a Dana Corporation that is even more focused on its light- and heavy-vehicle drivetrain products, associated structures, sealing, and thermal products businesses," said Dana chairman & CEO Michael J. Burns.
“While a number of the actions we are taking are painful, they are vital to refocusing our company, accelerating cost and process efficiencies, and driving improved performance across our global organization,” Burns stated.