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Published: Tuesday, 2/28/2006

Formerly called excellent, now trying to survive

For many years, Toledo's Dana Corp. piled up the honors.

Dana was one of just 14 firms named as "exemplars" in the 1982 best-seller In Search of Excellence: Lessons from America's Best-Run Companies.

In 1995, Dana was named by Financial World magazine as one of "America's Best 100 Growth Companies." It was for many years a favorite stock pick of thousands of investment clubs.

And twice Dana units won Malcolm Baldrige National Quality Awards - Dana Commercial Credit in 1996 and the Spicer driveshaft division in 2000.

But all of that is small consolation to investors who saw Dana's stock plunge in recent months, to a close Friday at $1.51 a share, nearly 98 percent below its peak of $61.50 in the late 1990s.

Now, Dana is fighting for its life amid accounting problems, its second restructuring in the last four years, and speculation among analysts that bankruptcy is an option.

This isn't what one would have expected in the early 1980s, when Thomas Peters and Robert Waterman, Jr., wrote In Search of Excellence, a blockbuster that eventually sold 4 million copies.

It also isn't what an investor would have expected after Dana's stock split seven times since World War II (not counting two 5 percent stock dividends).

An investment of $1,000 in Dana stock in 1946 would have grown to more than $164,000 by the time its stock peaked in 1998, and the dividends in that 52-year period would have totaled $50,000. Total value: $215,000. Not bad for a $1,000 flyer.

But that was before the latest troubles: That $164,000 in stock would have crashed to just over $4,000 by the end of last week.

Perhaps Dana's greatest fame in the business world came from the book by Mr. Peters and Mr. Waterman.

The authors lauded Dana for its "people-oriented" management philosophy, its decentralization of corporate power, and its lean but productive staff.

Dana got very good marks on the authors' other tests for excellence such as a bias for action, developing close ties to customers, hands-on management, and "sticking to the knitting" (in other words, paying attention to the firm's main businesses).

They particularly liked many of the innovations introduced by Rene McPherson, the visionary chief executive who ran Dana until he retired in 1980, at the age of 55, to make room for younger executives.

Mr. McPherson, who went on to be dean of the Stanford University Graduate School of Business for three years in the early 1980s, died almost exactly 10 years ago, on Feb. 26, 1996.

Dana has had its share of troubles in the last decade, but it certainly isn't alone.

A number of the 14 "exemplars" in the book went through rough patches - stock downturns, widespread layoffs, labor problems, bad press - but survived and thrived.

Among them are eight firms that are among the 30 in the Dow Jones industrial average: Boeing, Caterpillar, Hewlett-Packard, IBM, Johnson & Johnson, McDonald's, Procter & Gamble, and 3M Co.

But some others haven't been so lucky. Digital Equipment Corp. was taken over by Compaq Computer, which in turn was acquired by Hewlett-Packard. And Delta Air Lines is in bankruptcy. Its stock, delisted from the New York Stock Exchange, now trades in the 50-cent range on the Pink Sheets.

Some Dana old-timers, including retirees, say the culture of the company began to change when Mr. McPherson left in 1980.

But perhaps that's an unfair knock against the CEOS and top managers since then.

The automotive industry is different, and suppliers are now pretty well beaten up. Times in general are different. Globalization has had an impact on just about every industry.

Dana's experience in recent years is a humbling reminder that nothing is forever. Even "excellent" companies can stumble and fall.



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