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Published: Tuesday, 10/25/2005

The Dana domino

WHEN the other shoe fell at Toledo's largest corporation, it wasn't a complete shock. It's no secret the auto parts industry has been vigorously struggling to survive slow sales and rapidly rising raw material costs this year. But the restructuring changes announced at Dana Corp., an area institution, were a gut blow nevertheless to a community intrinsically linked to auto manufacturing.

The worldwide company, headquartered on Dorr Street, will get a lot smaller after it closes two plants, cuts up to 5 percent of its salaried workers, and sells parts of its business to sharply lower overall costs.

Like others in the auto parts sector reeling from the same depleted market that forced Delphi Corp. to file for bankruptcy, Dana has to adjust its operational focus or surrender to the ongoing industry shakeout.

The upheaval among auto parts suppliers comes from a bad combination of overcapacity and ever-rising energy and steel costs. Suppliers are in the unenviable position of being squeezed by pricing pressures from automakers that they can't pass along to cover higher energy and steel prices.

As a result many will either follow Delphi's lead or close plants and cut jobs across the country before the shakeout subsides. "It's very simple," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.: "It's change or die."

Dana's decision to change corporate direction by narrowing its product line and divesting itself of three business units making engine hard parts, fluid products, and pump products, made shareholders happy.

The day the company said it planned to focus on its core businesses like drive-train products and sealing and thermal products, shares of Dana went up 20 cents to $7.76 in trading. Through the day before, the stock had dropped 56 percent for the year.

Cutting costs by cutting jobs and closing plants may be hailed by industry analysts as a way to reclaim lost profit margins, but the human toll is a painful drawback.

The three businesses that Dana plans to sell employ a combined 9,800 workers at 44 facilities which generated about $1.3 billion in 2004 revenues. Two plants slated to close in Virginia will put about 545 people out of work, and a factory in Lima, Ohio, already decimated by job cuts, will lose about 100 more when some operations move to Mexico.

By now auto manufacturing towns like Toledo should be used to the periodic head-count cuts and facility closings that inevitably come when the big three automakers convulse with a glut of new cars and trucks and order immediate production cuts. Employees get used to wage freezes, benefit cuts, and paying more for health insurance.

But factory families never really see the other shoe falling, never really adapt to high-paying jobs gone forever.

When all of Dana's plant closings, consolidations, and salaried work force eliminations are complete, the auto parts maker will have fewer than 36,000 employees worldwide and annual sales of under $8 billion. Only five years ago the Fortune 500 corporation boasted 85,000 workers and an annual revenue of $13.2 billion.

Dana's financial troubles aren't a complete shock in light of industry pressures among large U.S. suppliers, but they are stunning nonetheless considering where the Toledo-based company was in the booming 1990s.



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