In a sweeping overhaul to combat declining profits, Dana Corp. yesterday announced it would sell three business units, close factories, make employees pay more for health insurance, freeze wages, and cut benefits.
The moves, hailed by shareholders, means Toledo's largest corporation will pare 700 of its 1,950 area jobs, affecting virtually every operation it has in northwest Ohio and southeast Michigan.
Once completed, the restructuring will leave Dana with less than 36,000 employees worldwide and annual sales of under $8 billion, a far cry from the 85,000 workers and the $13.2 billion in annual revenues it had just five years ago. It will remain on the prestigious Fortune 500 list.
The automotive parts maker, which said it was trying to narrow its focus to axles and drivetrain products for pickups, sport utility vehicles, and bigger freight trucks, warned that it will report "a significant" financial loss this year because of accounting charges related to the moves.
Chief Executive Mike Burns said, "While a number of these actions we are taking are painful, they are vital to refocusing our company, accelerating cost and process efficiencies, and driving improved performance across our global organization."
One industry analyst praised the firm's plan to shed noncore businesses. Automakers want to buy complete systems from parts makers, but supplier conglomerates don't fit into the industry these days, said Marc Santucci, supplier industry analyst with ELM International Inc. in East Lansing, Mich.
"Specializing in this business is the way to go, not being big just for the sake of being big," he said.
While the restructuring will leave Dana leaner and its employees with more medical coverage cost-sharing and fewer benefits, shareholders found the announcement pleasing. The stock closed up 20 cents a share at $7.76 on the New York Stock Exchange, but still near its 52-week low of $5.50.
Dana said it will sell business units that primarily make piston rings, camshafts, engine bearings, pumps, and fluid products for braking and other applications. Those units combined employ 9,800 workers at 44 facilities and generate about $1.3 billion in revenues. Included are factories with 560 employees in Upper Sandusky, Wharton, and Archbold.
Another 100 of 385 jobs are being eliminated at a factory in Lima, Ohio, where steering shaft-related work is being moved to Mexico. Two Virginia plants, with 545 employees, are to be shuttered. The news came out of the blue yesterday in Lima, where Dana's employment has dropped by nearly 300 in the last few years. United Auto Workers Local 1765 has been working with management to bolster operations, said Joe Rioux, international representative in the UAW's Ohio region.
"We have been working to retain employment and making sure new work is coming in," he said.
The company still plans to open a Toledo factory by next year that will supply parts to DaimlerChrysler AG's Toledo Jeep Assembly Plant. That plant will employ about 85.
Also in the cost-cutting yesterday is trimming Dana's global salaried work force by 5 percent. Its local employment includes 1,000 engineers, corporate, and other salaried employees.
The company, headquartered on Dorr Street, will eliminate a employee stock purchase plan in which it had a maximum 50 percent match, make employees pay more for health-care plans starting next year, stop its match for employee long-term savings plans, and suspend wage and salary increases where it can worldwide.
After making a string of acquisitions in the booming 1990s, the company, begun in 1904, has spent the last few years retooling to try to adjust to narrowing profits and slowing sales in the auto industry.
Prior moves include putting much of its profitable Dana Commercial Credit leasing subsidiary up for sale, getting rid of most of its replacement-parts business, and closing or consolidating a few dozen plants, including a 195-employee factory in Antwerp, Ohio, and a 62-employee factory in Toledo.
The local firm last spring signed a 10-year deal with International Business Machines Corp. to administer its human relations operations for employees and retirees, a move Dana said would save money even though it is to pay IBM $15.6 million a year for the work.
Dana has had lower profits for the past 1 1/2 years and said this month that accounting problems will force it to restate its financial picture for last year and the first half of this year, and possibly for earlier periods.
The company has hired an outside investigator to look into its accounting troubles and is the subject of shareholder lawsuits alleging top executives knew more about Dana's problems than they let on, ultimately hurting investors.
The firm said this week it expects to restate profits by up to $45 million for at least 2004 and the first half of this year, during which time it had profits of $151 million. The company's stock dividend was chopped back to a penny this week, as it tried to save money in a move similar to one a few years ago when it undertook an earlier restructuring.
Yesterday's announcement will result in accounting charges of $315 million this year, the firm said. It expects operating savings later, and said it will use the proceeds from the divestitures to reduce debt and reinvest in remaining businesses.
By closing the Virginia factories, trimming the jobs in Lima, and shifting work among five factories in Kentucky, Tennessee, and Mexico, Dana said it will save $20 million a year.
The two Virginia factories and the plants in Upper Sandusky and Archbold to be sold are among those recently organized by the UAW as part of an agreement with Dana to remove corporate roadblocks to unionization. The union representation was not a factor in the moves, said company spokesman Todd Romain.
"Union status had no bearing whatsoever on the decision to close these facilities," he said.
Reducing its salaried work force will save the company more than $15 million, and most of the job cuts will be handled through attrition, the firm said. Changes to benefits will generate pretax savings of more than $25 million next year, Dana said.
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