Even as stockholders of Dana Corp. have lost their representation in the firm's bankruptcy case, the Toledo auto-parts maker has remade its case to end its union contracts and terminate its retiree health care benefits.
Both issues occurred in the past few days.
Meanwhile, a bankruptcy judge in New York City approved the Fortune 500 firm's hiring of more internal-auditing services and of leases to be voided.
The company, which filed for court protection from creditors nearly a year ago, said it must improve its operating margins and cut costs, moves that would annually boost operating income by $405 million to $540 million.
It has been hurt by higher raw material costs, a tougher market in which to sell its products, and cost-squeezing by major automakers that reduces the local firm's revenues.
Dana, which makes axles and other parts mostly for pickup trucks and sport-utility vehicles, said its higher pay and benefits for union workers at its facilities and the cost of retiree health care need to be curtailed. It also plans "a significant shift in manufacturing" to Mexico and other low-cost countries, it said in its court filing.
The firm wants to implement a two-tiered wage structure at its factories. It proposes reducing its to $16 an hour for current workers and paying $13 an hour for new hires after three years.
It would trim overtime, eliminate
tuition reimbursement, and make other changes such as more cost-sharing by workers for health care. "For Dana to reorganize successfully, it is necessary for Dana to obtain the annual cost savings it seeks," the firm said in its court filing.
The unions and retirees have objected to the reductions. The issues are expected to be heard in court next month. A number of details in the company's plan have been filed under seal with the court.
Meanwhile, bankruptcy Judge Burton Lifland in New York yesterday granted Dana's request to use more services from the accounting firm of Ernst & Young for internal audits. No dollar amount was specified.
The judge did not rule on the sale of Dana's engine-parts segment to a German firm, Mahle Gmbh, for $157 million. Two unions have objected to the sale because of uncertainties over benefits received by 290 retirees.
The leases Dana asked the court to void range from a $40-a-month IBM Thinkpad to a contract for six forklifts costing $2,500 monthly.
The U.S. Trustee in the case last week disbanded the committee representing shareholders because two of its three members quit. It wasn't clear whether new members would be named.