Brinksmanship on benefits; Dana Corp., unions due in court this week

3/25/2007

PARTS SHORTAGES resulting in intermittent shutdowns at Dana Corp.'s Henderson, Ky., axle factory are evidence to workers there that the Toledo firm's foreign plants are more important.

Dana, as part of its bid to right itself financially, has been consolidating operations and moving some work to Mexico, and managers in Henderson have said the south-of-the border operations get priority for parts shipments.

The bankrupt Toledo supplier of axles, driveshafts, and other parts wants significant wage, benefit, and other concessions from its unionized factory workers in the United States.

But, said 30-year Henderson veteran Bill Scheu, "We'd just as soon they shut the plant down than take any concessions or wage or benefit cuts."

This is a time of reckoning for Toledo's largest firm.

The company and union lawyers are to debate the plans in hearings this week in U.S. Bankruptcy Court in Manhattan. So far, behind-the-scenes talks haven't produced an agreement to alter labor contracts, and the firm wants to nullify those pacts.

"At this point, the negotiations have not been successful," said Jim Robinson, the United Steelworkers' director for Illinois and Indiana, who is heading the union's negotiations with Dana.

Chief among concerns for his union and for the United Auto Workers, Dana's other big union, is maintaining good-paying jobs in the United States and protecting retirees, Mr. Robinson said. "Clearly, picking up and moving jobs to Mexico is not the solution."

Dana was suffering from cash-flow problems when it filed for Chapter 11 protection from creditors on March 3, 2006. The Fortune 500 company lost $1.6 billion in 2005 and $739 million last year as sales declined slightly to $8.5 billion.

As part of an overall plan to save at least $405 million a year to successfully emerge from bankruptcy by year's end, Dana estimates it can save $60 million to $90 million a year by reducing labor and benefits costs.

It said it will save $70 million to $90 million a year by eliminating retiree health care and $60 million to $85 million by downsizing plants and moving some operations to lower-cost countries.

This month the firm announced it reached an agreement with a committee representing 9,700 nonunion retirees to eliminate their traditional health-care benefits July 1 and to provide no coverage for future nonunion retirees. It will contribute $78 million to a fund to provide some medical coverage for current retirees.

The Steelworkers and UAW have threatened to strike if Judge Burton Lifland grants the firm's request to void the labor contracts and allow it to end health care for union retirees.

At stake is whether Dana can slash wages at U.S. plants by up to $6 an hour. At its Lima, Ohio, factory, where is has 400 employees, wages for veteran workers would be cut by 25 percent, to $15 an hour from about $20.

The UAW has been told that either the Lima plant or a factory in Marion, Ind., will be closed by mid-2008, according to court documents.

Among allegations the unions have made in court documents is that the Dorr Street business wants the concessions so it can afford the costs of eventually eliminating jobs and closing plants.

The company has 40,000 employees worldwide, including 2,040 in northwest Ohio and southeast Michigan. It has yet to identify four more plants it plans to close.

But spokesman Chuck Hartlage said the firm does not want to eliminate virtually all its U.S. manufacturing.

"U.S. operations remain critical to our ability to supply dozens of domestic assembly plants of our U.S., Asian, and European-based customers," he told The Blade.

To their credit, workers in Lima continue building driveshafts and making parts despite their concerns, said Scott Williams, president of UAW Local 1765 at the factory.

"You're not seeing any spike in absenteeism or anything like that," he said. "There really hasn't been any negative activity."

Judge Lifland has said he will decide on issues involving the unions by the end of April.

The judge likely wants the unions and Dana to negotiate a solution rather than him intervening, said James J. White, a bankruptcy expert at the University of Michigan in Ann Arbor.

"What this is is an elaborate negotiation," Mr. White said. "It's a complicated negotiation, and the outcome is hard to predict."

Dana will have to prove it cannot afford to continue paying higher wages, retiree health care, and other bills, and neither side will want all of those details revealed, said John Penn, of Haynes and Boone LLP in Fort Worth, immediate past president of the American Bankruptcy Institute.

Although Dana will not want to outline publicly all of its financial matters, the unions will want confidentiality as they talk with other bankrupt and ailing companies nationally.

Court documents related to the battle have been filed either under seal or submitted with various sections kept confidential.

The company contends that salaried and management personnel are contributing to the cost savings, but unions and retirees are particularly incensed about executive bonuses the judge approved, including an annual bonus of up to $5.5 million Chief Executive Officer Mike Burns.

Labor and management officials last week largely remained mum about specifics of negotiations. But the two sides remain far apart, said Wayne Reynolds, the UAW's servicing representative for Dana's Lima factory.

A deal similar to what the nonunion retirees agreed to doesn't interest Robert Davis, of Birdsboro, Pa., a Dana retiree who is a UAW member. He worked for the firm for nearly 40 years.

A cancer survivor, he said he doubts he and others with pre-existing conditions can obtain any medical coverage, adding that retirees could outlive any interim fund.

"There is no definite date when it will end," he said. "That could be a scary thing, too."

In Henderson, at the former Eaton Corp. factory Dana acquired in 1998, Mr. Scheu and other workers represented by the Steelworkers don't make as much as counterparts in Lima and other union factories, and they don't get health care in retirement. Tool makers in Henderson are at the top of the scale, and they are paid less than $18 an hour, Mr. Scheu said.

Still, Dana has talked about reducing wages at the factory, where about 125 of roughly 500 hourly workers are on layoff until business picks up, Mr. Scheu said. Meanwhile, the walls and floors are being painted, much like in a hom being prepared for sale, he said.

"The mood at the plant is horrible, it's just terrible," Mr. Scheu said.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.