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Published: Wednesday, 3/8/2006

Unions wait for Dana's giveback demands

BY GARY T. PAKULSKI
BLADE BUSINESS WRITER

While Dana Corp. has not requested it, experts said concessions in union contracts are likely and changes to pensions are possible as the Toledo auto supplier moves through bankruptcy.

The issues are critical because other firms in bankruptcy have sought similar wage and benefit reductions.

Unionized employees of the local company are closely monitoring the firm's five-day-old bankruptcy case for signs that the company will seek wage and benefit givebacks.

"There is a concern," said Denny Leazier, who represents 450 members of the United Steelworkers at an axle plant in Fort Wayne, Ind.

"I'm sure they will seek concessions. But we've been through a couple of concessionary contracts already."

Another probable hot-button issue, experts said, is Dana's underfunded pension plans. Firms in Chapter 11 often seek to shed these costly plans. Examples include United Airlines, which emerged from bankruptcy this year.

But Chuck Hartlage, a Dana spokesman, yesterday reiterated assurances made by executives of the multibillion-dollar auto parts producer since its Chapter 11 filing in New York Friday.

"Dana has no plans to reduce people's pay at this point," he said.

"We're mindful of the need to retain our people as we prepare a plan to reorganize and ultimately emerge from bankruptcy a stronger company."

Dana has 19,000 employees in U.S. operations affected by the bankruptcy, of which 7,200 belong to unions.

The spokesman confirmed the firm plans to stop disability payments for workers injured before the bankruptcy filing, in which assets of $7.9 billion and debts of $6.8 billion were listed. But he was unable to provide details of the move or say how many workers are involved.

Management expert James Craft, a faculty member at the University of Pittsburgh, said Dana is likely to seek cuts from its employee unions.

"They will be considering concessions," he said. Executives will likely first seek to negotiate reductions with union leaders, turning the matter over to a bankruptcy judge only if those talks fail.

Bruce Belzowski of the University of Michigan Transportation Research Institute agreed that concessions likely will be on the table.

"Filing bankruptcy is a big deal," he said. "Dana didn't do it because they want to beat up on the unions. It's a difficult time for the auto industry."

That would be a change from what Dana Chief Executive Mike Burns told employees in a letter last week: "You will be paid the same amount and on the same schedule, and your health care, vacation, sick leave, and similar benefits will continue as before."

Company officials have not blamed high labor costs for the filing, but they also have not ruled out that wage cuts will be sought as part of the firm's financial reorganization. In Chapter 11, bankrupt firms have the option of renegotiating contracts, including labor agreements, on more favorable terms.

Concerns have been fueled by the bankruptcy case at Delphi Automotive Systems, another giant auto parts maker. It indicated it would seek wage cuts for longtime workers of up to 64 percent to as little as $10 an hour.

The United Auto Workers, which represents Delphi's 34,000 hourly employees, has threatened to strike if the company tries to do that.

The company has delayed asking a bankruptcy judge to cancel the labor agreements, which would be the first step in the process.

But Delphi's employees make $26 an hour, plus benefits. By comparison, employees at Dana's Fort Wayne plant make $22, plus benefits.

The firm plans to pay $15 an hour at a new plant in Toledo that is to supply DaimlerChrysler AG's local assembly operations.

Christopher Ceraso, an analyst with Credit Suisse Group, predicted that labor issues will not be as significant at Dana as they have been at Delphi.

"The risk of labor disruptions as Dana works through its reorganization is much more limited than the current strike risk that investors fear at other bankrupt suppliers like Delphi and Tower [Automotive]," he wrote in a research note Friday.

As for Dana's pension plans, it reported last year those were underfunded by $353 million, even after executives pumped in $200 million in 2004 from an asset sale.

The company's options include freezing the plans or turning them over to the Pension Benefit Guaranty Corp., a federal insurance agency.

In either case, existing participants, upon retirement, get benefits already earned. But no new employees are enrolled.

When the pension agency takes over, however, certain federally set benefit limits apply - $47,659 a year for participants retiring at age 65 whose plans are terminated in 2006.

Benefits of retirees already collecting checks are usually unaffected, although they could face a benefit reduction if they receive more than the $47,659 limit. (Limits are lower for early retirees, decreasing by age).

But even in bankruptcy firms are prohibited from turning over a plan to the pension agency unless they can prove "that a reorganization is not possible if the company has to continue carrying the ... plan," said Gary Pastorius, a pension agency spokesman.

Dana officials have said that for now employees will continue to accrue benefits as before Chapter 11. It is "premature" to speculate on "whether the pension plans will change in any way," they added.

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.



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