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Published: Sunday, 3/12/2006

Bankruptcy wipes out savings, severance plans

BY JULIE M. McKINNON
BLADE BUSINESS WRITER
William Koch directed Dana Corp.'s Venezuela operations until his retirement. William Koch directed Dana Corp.'s Venezuela operations until his retirement.
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Retired executive William Koch is shattered financially and psychologically.

He lost more than $425,000 of his retirement savings from Dana Corp. when stock in the Toledo company he had faith in became virtually worthless.

"I bought with my heart. I believed in Dana, and I don't think I'm the only one," said the Ocala, Fla., man who retired last year.

Recently laid-off salaried employees from the company that filed for Chapter 11 bankruptcy this month are losing severance packages.

One man expected that his package would have given him a $38,000 cushion and health insurance for a year while he searched for another job after 29 years with Dana.

And nonunion employees on long-term disability, including one 34-year veteran who has had several heart attacks, no longer will receive payments or paid health insurance.

That veteran, who asked not to be identified, has about 1,200 shares of Dana stock, some bought as high as $50 a share.

"You can use it as wallpaper, or you can take a tax deduction," he said.

Dana stock has plummeted in recent weeks, particularly after the auto-parts maker filed for bankruptcy protection on March 3 amid a cash-flow problem. Experts say wage reductions, health-care changes, and other cuts are likely during the bankruptcy.

Sadness, disbelief, rage, speculation about what went wrong and when, and even some measure of relief that bankruptcy may set the company right have been voiced by the multinational firm's workers and retirees.

Some feel deceived by management and board members about Dana's financial status. Employees, fearing retribution, declined to talk to The Blade last week if they were identified. Retirees had no such reservations, however.

Mr. Koch, who was director of operations in Venezuela, feels as if he has let down his wife, Ruth, and family by holding onto 18,267 company shares. About two-thirds of Mr. Koch's retirement savings is in Dana stock. Even while he watched the share prices fall, and even after writing to the board when it was at $10 to no avail, he held fast.

The value has declined into penny-stock range, down from the average $25 each he paid or received in a now-discontinued employee stock purchase plan.

"It's very saddening, and it's very sickening," Mr. Koch said.

One longtime Dana employee and shareholder said concerns over the viability of their pensions override other worries.

"We'd given up on the stock some time ago," he said. "Now people are very troubled about the pension."

Retiree Dick Wozniak of Toledo, who worked at Dana's former Toledo factory for nearly 35 years, also wonders whether he will lose his $884 monthly pension. The payment could be trimmed if the company's pension plan is turned over to a federal insurer.

In its filing in U.S. Bankruptcy Court in New York, the Toledo Fortune 500 firm listed assets of $7.9 billion and debts of $6.8 billion. The company had 2004 sales of $11 billion, but it lost $1.3 billion in last year's third quarter.

Severance payments for claims before the bankruptcy were eliminated, as required by law, and long-term disability payments for nonunion employees were discontinued, a company spokesman said.

Still, Dana has received court approval to continue regular payroll, health-care, disability, and other employee benefits.

Chief Executive Mike Burns told The Blade last week that it is too early to tell what changes will be made with the business or benefits. The firm will continue to supply axles and other parts to automakers during the bankruptcy, from which he hopes Dana will emerge in 18 months.

Still, the possibility of liquidating the 102-year-old company is an overriding fear of Dana workers and retirees.

"You hope, quite frankly, he's not a closer," said retiree James Moore of Sun City, Ariz., who worked for 37 years at the company. "I want them to rebound. I want them pay off the debt and come back."

Mr. Moore said he was told medical benefits and life insurance would continue at the same level for at least a year, but he's unsure about what will happen after that.

Retiree Bea Altevogt of Swanton, who worked at Dana for 45 years, worries she could lose the $4,000 to $5,000-a-year benefit she receives for health care.

"It's just really sad," she said, choking back sobs, "to see a company you worked for so many years go down the tubes."

Mr. Koch, the Florida retiree, said he hopes Dana leaders make sure investors get something for their shares. Stockholders sometimes are left with no value to their shares during bankruptcies.

Luckily, he said, he took a lump-sum pension payment wwhen he accepted an early retirement package after more than 21 years with Dana.

"If it wasn't for that, we would be on very, very hard times," Mr. Koch said.

Examples of hard times and decisions are frequent among retirees and employees.

One 35-year Dana worker who lost $50,000 on company stock is trying to decide whether to retire so that he can get out with a lump-sum pension payment or to wait and see whether the company will turn around.

"Frankly, I don't know what I'd do without a job," he said.

Another Dana employee is upset that her first foray into the stock market with her husband last fall quickly turned into a $5,500 loss from Dana shares. But her utmost concern is losing her job.

She and others at Dana's Maumee technical center were further demoralized last week when local artists removed artwork for sale in the building in case the company closed the doors.

"It's nerve-racking what we're going through right now," she said.

Contact Julie M. McKinnon at: jmckinnon@theblade.com or 419-724-6087.



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