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Published: Wednesday, 3/8/2006

Crisis mode at Dana

AS DANA Corp. starts its painful slog through bankruptcy proceedings, about the best that can be hoped for at Toledo's largest company is that some semblance of normal operations can be maintained while the financial mess is sorted out.

The similar plight of another local industrial survivor, Owens Corning, which has been under Chapter 11 reorganization since 2000, indicates that bankruptcy does not have to be the beginning of the end for Dana. OC has recovered to the point where it reported record sales in 2005.

As a member of the Toledo community, Dana's welfare is of prime importance to everyone. Besides its enormous economic footprint - it provides 1,950 jobs in this area, 19,000 throughout the United States, and 44,000 worldwide - the potential loss of its corporate contributions to local charities and institutions weighs heavily.

The 102-year-old auto parts giant, headquartered in Toledo since 1928, has the capacity to recover, although major changes certainly are in store at 4500 Dorr St., just as they are in virtually every segment of this nation's automotive industry.

While we wish the company well, we believe the board of directors' approval, just prior to the bankruptcy filing, of performance incentives for four top executives was ill-timed. We understand the need for effective management, but the average Toledoan is likely to interpret such payments as rewards for the people who got Dana into trouble.

In filing for bankruptcy protection, Dana joins a growing list of struggling auto suppliers that includes Delphi Corp., a cascade of trouble that some experts believe could even drag down industry leader General Motors.

There is little doubt that the steady down-trend of the auto industry in recent years contributed to Dana's troubles, but it was a comparative dynamo into the late 1990s, busily supplying axles and other parts for the burgeoning sport utility vehicle and heavy-truck markets.

Some analysts believe the company never recovered from a mistaken attempt to diversify into the replacement parts business, highlighted by the $3.9 billion acquisition of Echlin, Inc., in 1999.

Dana restructured in 2001, but executives spent valuable time and energy fending off a predatory takeover attempt by ArvinMeritor in 2003, a process complicated by the unexpected death two months earlier of chief executive Joe Magliochetti.

Failure to resolve the lingering financial problems, coupled with still-unexplained accounting irregularities in Dana's commercial truck operation and a downturn in the SUV market, snowballed into another restructuring in 2004 and a $1.3 billion loss in the third quarter of last year. Resulting credit roadblocks, which starved the company of operating cash, led to last weekend's bankruptcy filing.

Whether Dana's downfall was the result of market vagaries, management mistakes, or a combination of the two, will be hotly debated, but fingerpointing won't put the company back on its Fortune 500 track.

What is needed is a solid recovery program that will allow Dana to concentrate on its core manufacturing business while regaining its financial footing and, most of all, preserving jobs for its employees, both here in Toledo and around the world.



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