Dana to discontinue its supplier contract with Chrysler (no more Dana axles?)

TerryMason

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Dana to cut 3,000 jobs this year; 'revolutionary' downturn cited for mounting losses

Toledo's largest company said yesterday that it will cut at least 3,000 jobs this year - including the 100 announced last week in Maumee - to deal with the "revolution" going on in the North American automotive industry.

Dana Holding Corp., which disclosed it lost $140 million in the second quarter after emerging from bankruptcy protection, said the dramatic downturn in the industry is causing the job cuts.

"2008 in North America is a lot more difficult than any of us would have expected in the beginning of the year. In my career ... I can't recall a more difficult year," said executive chairman John Devine, who spent decades with Ford Motor Co. and General Motors Corp. before joining Dana.

"I would have to say that this is nothing short of revolution. I'd like to say it's limited to 2008, but it isn't," Mr. Devine told analysts.

Dana said it loss $133 million, or 70 cents a share, for the same period a year ago.

The auto-parts manufacturer said sales increased for the quarter to $2.33 billion from $2.29 billion a year ago. However, its overseas revenues and those from its off-highway, big-truck segment showed growth but its longtime strength in the North American pickup truck and sport utility vehicle market significantly dampened its performance, company officials said.

Those vehicles with lower fuel economy are getting hammered in the industry, with few sales, which means fewer needed parts.

The company has shed about 1,000 of the 3,000 jobs cuts since the beginning of the year, primarily through attrition and the previously announced closing of two plants in Ontario, spokesman Chuck Hartlage said.

He said he could not say when or where the other job cuts would come, only that they will happen "before the end of the year."

Last week, Dana laid off 100 salaried workers at its facilities in Maumee, the majority of which were at its ASG Tech Center on Monclova Road.

Before yesterday's announced job cuts, the company had about 35,000 workers worldwide, including about 1,100 in the Toledo area.

Mr. Devine told analysts that the firm will consider selling or disposing of noncore businesses in an effort to refocus on its main business mission: making money manufacturing driveline products. He did not say when or which businesses might be divested, or when a decision might be made.

"We're working this process hard," Mr. Devine said. "These are good businesses, we like them. But like everything else, you have to make hard calls about where your focus is and where it isn't."

Mr. Devine said the company is looking at two options.

"We either have to consolidate to reduce costs and generate cash, or we have to downsize further," he said. "We want a North American business that could well be smaller, but it has to generate cash."

Dana, which lowered its revenue expectations for 2008 from $9 billion to $8.6 million to $8.8 billion, was No. 283 on Fortune magazine's list of the largest companies in 2007, on revenues of $9.2 billion.

The company's financial report was not well received by investors. Its stock fell 15 cents yesterday to $5.84 on the New York Stock Exchange.

Dana this week revealed it asked the U.S. Bankruptcy Court in New York City to allow it to discontinue its supplier contract with Chrysler LLC after this year, saying it was too expensive. Dana makes axles for several Jeep models and other Chrysler vehicles.

Rising raw materials costs mean the prices for Dana parts agreed to during the firm's bankruptcy process now result in losses, as much as $75 million a year. Chrysler represents about 3 percent of Dana's overall business.

"We're not looking to end our relationship with Chrysler. We're not out here to pick a fight with Chrysler. That said, we have a business today that is in a significant loss," Mr. Devine said.

In a written statement, Chrysler spokesman Kevin Frazier said: "Chrysler believes that, while the agreement may end on Jan. 1, 2009, the underlying purchase orders were intended to continue in accordance with their terms. We cannot comment further as the matter is in litigation."

Auto industry analyst James Gillette of CSM Worldwide Inc. in Grand Rapids, Mich., said that the capital costs needed to manufacture driveline products may give Dana the upper hand in the dispute.

"You have a Dana where they have an investment in the fixed assets, and if they can't get a certain price for it, they might as well shut it down," Mr. Gillette said.

"It's not a matter that Dana would be shooting itself in the foot by telling Chrysler to go away, especially when there's some question where Chrysler is going to be five years from now."
 

in other words...



Dear Chrysler.
We are canceling the contract because it costs us 1200$ to make an axle but in our old LTA (Long Term Contract) we have to sell to you at 900$.
Now would you like to re-negotiate?
 
Sounds like we've got Chinese axles headed our way.:(



"We have met the enemy, and it is us." .......Pogo
 

probably use aam axles, the more the aftermarket builds for them, the more I am starting to like them.

jeep doesn't use a dana axle IMHO that is worthy anyways... jeep needs to use 35 spline 60's again..
 
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