Dana loses Grand Cherokee axle work

12/22/2001

After six decades of supplying Jeeps with axles, Toledo's Dana Corp. has lost the design and development contract for the high-end Grand Cherokee's revamp and also could lose the 2005 sports utility vehicle's production work, a spokesman says.

American Axle & Manufacturing, Inc., won the upcoming SUV's design and process-development contract, but Dana remains in the running for the manufacturing end, said Tim Schira, a spokesman with the auto supplier's Spicer axle.

“We're still waiting to hear the production side of it,” he said. “I don't know what's holding it up.”

Said equity analyst Efraim Levy of S&P Equity Group in New York: “It's a blow to Dana to lose the axle contract because if you lose the design, what often follows is the production contract too.”

An American Axle spokeswoman, however, said she was unaware of whether the Detroit auto supplier received the design contract and referred questions about it to DaimlerChrysler AG's U.S. side. Automaker spokesmen said the company does not comment on future products.

American Axle in recent years has beat out Dana for some key Chrysler unit business, including axles for the recently redesigned Dodge Ram. Dana had held the axle contract for the previous Ram model.

Dana, meanwhile, has captured some American Axle business, such as the contract to make axles for General Motors Corp.'s vans. It's a concern when business is lost to a competitor, but automakers periodically revise their parts suppliers, said Gary Corrigan, a Dana spokesman.

Still, Dana has been with the Toledo-born Jeep brand since the beginning, when its Spicer Manufacturing Corp. designed the World War II vehicle's four-wheel drive and axle. It also supplied parts in huge volume, and the company's Toledo plant was dubbed the “Spicer Arsenal” after nearly doubling in size during the war.

Dana does supply the two Toledo-made Jeeps, the all-new Liberty, and the Wrangler, with axles as well as driveshafts. The current Grand Cherokee is made in Detroit with Dana axles, and a limited-slip differential used on front and rear axles is offered as an option.

Some Grand Cherokee owners have complained of axle noise, which Dana has called a misnomer. But that likely added to the Chrysler unit's decision to go with American Axle for the SUV's redesign, said analyst Richard Hilgert of Detroit's First of Michigan, a division of Fahnestock & Co.

“It can be just a whole list of little things combined together,” he said. “It's really more that DaimlerChrysler is looking for competition for its parts. By looking for competition, it's hoping to drive down price, or improve quality, or both.”

American Axle, founded in 1994 from former GM operations, is trying to increase its business, and the Chrysler unit is a likely target, Mr. Hilgert said. The supplier had $3.1 billion in sales last year, compared to $12.3 billion for Dana.

Plus, American Axle's co-founder, chairman, and chief executive, Richard Dauch, was with the former Chrysler Corp., Mr. Hilgert pointed out.