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Published: Wednesday, 3/8/2006

Competitors outpaced local auto supplier, experts say

BY JULIE M. McKINNON
BLADE BUSINESS WRITER

Ten years ago, Dana Corp. was without question the Big Three's premiere supplier of axles and drivetrain products. But since then, competitors have bridged the gap.

They invested in capacity to compete against the Toledo company's best-known products, and Dana was slow to respond, said Craig Fitzgerald, a partner with Plante & Moran LLP in Southfield, Mich. "I think Dana has lost a bit of their focus," said Mr. Fitzgerald, who concentrates on supplier issues.

That should change as the Fortune 500 firm goes through the Chapter 11 bankruptcy reorganization process, he and other experts said. The company has sold some businesses and plans to sell more.

Dana spokesman Chuck Hartlage declined to comment on speculation about how the company will be reorganized as part of last week's filing in U.S. Bankruptcy Court in New York. "We'll be working on that in the coming months," he said.

Based on bankruptcy cases filed by other auto suppliers, the local firm likely will get additional payments from automakers for at least some products, some experts said. But, they said, fierce competition among automakers will prevent passing the costs on to consumers.

The bankruptcy case may give Dana an advantage over competitors by allowing it to renegotiate union contracts and make other changes to its cost structure, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

"It changes the game," he said.

Dana is no stranger to competition. In axles, which make up more than 40 percent of its business, including those for cars and pickups as well as for heavy trucks, the main competitors are American Axle & Manufacturing Inc. and ArvinMeritor Inc.

American Axle's product offerings are tightly focused and the company has benefitted from that structure, said Mr. Fitzgerald of Plante & Moran.

Dana, though, will emerge from bankruptcy a smaller, more profitable company in a couple of years, he said, although, he conceded, "It's going to be painful."

Dana's other main products include pickup frames, engine bearings, gaskets, and brake lines. Competitors producing those parts include other suppliers going through bankruptcy reorganization - Federal-Mogul Corp., Tower Automotive Inc., and Delphi Corp. - and companies such as Visteon Corp. and Magna International Inc.

The Dorr Street company's problems aren't so much that is has lost business to competitors as that it focused on pickups and SUVs, for which sales are down and costs are up, said supplier analyst Marc Santucci of ELM International Inc. in East Lansing, Mich.

"It's got a good reputation," he said. "It's been in a business a long time. It's been doing business with the same customers for a long time."

Still, some parts Dana makes could be shipped from overseas manufacturers, Mr. Santucci said. Others - such as hefty frames - are not likely candidates, but companies such as Canada's Magna are coming on strong in that area, he said.

Dana already plans to sell businesses that make Perfect Circle piston rings, Clevite camshafts, Glacier Vandervell engine bearings, and other parts. However, the company's Spicer trademark used on driveshafts, for example, is probably its best known, Mr. Santucci said.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.



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