Mexstan

Is it just my imagination or is the US auto industry getting into deeper and deeper trouble? Seems like weekly there are more reports of bigger and bigger problems. Earlier this week in the Wall Street Journal I was reading about how GM pay people NOT to work. GM have a room large enough for 400 employees called the rubber room and employees have to arrive at 6 a.m. and leave at 2:30 with 45 minutes off for lunch. Their job; to do nothing!!!!!! This is part of the so-called job bank and costs the industry between 1.4 and 2 BILLION dollars a year. And the industry wonder why they are in trouble.!!!!!!!!!!!!!!!!!!!

Today there is a new story about Dana. Here it is:

US auto parts firm Dana Corp declares bankruptcy

Detroit - The struggling US auto sector claimed another victim Friday as parts maker Dana Corp. filed for bankruptcy protection.

Dana Corp., once considered one of the richest and best managed companies supplying American carmakers, said it and 40 of its US subsidiaries have voluntary petitions for reorganization under Chapter 11 of the US Bankruptcy Code.

"Dana has faced a continued decline in revenues resulting from the decreasing market share and production levels of its largest domestic customers, along with sharp increases in commodity and energy prices that have outpaced the cost savings Dana has been able to achieve," the company said in a statement.

"The general financial condition of the industry, together with Dana's inability to renew or expand its credit facilities in a timely manner, has significantly constrained Dana's liquidity."

The Toledo, Ohio-based maker of axles, transmissions and other auto components said it had obtained $1.45 billion in special debtor financing from Citigroup, Bank of America and JP Morgan Chase Bank to continue operations during the reorganization.

Dana's European, South American, Asia-Pacific, Canadian and Mexican subsidiaries are not included in the bankruptcy filing.

"Its bankruptcy will clearly take a minimum of two years given its complexity and the number of things they have to address while in bankruptcy," said Howard Seife, a bankruptcy partner at Chadbourne and Parke LLP.

Elsewhere in the industry, the effects of Dana's filing will be felt, he added.

"These bankruptcies clearly have ripple effects," said Seife. "The second- or third-tier manufacturers that supply Dana will feel the squeeze as well because Dana will put enormous pressure on them with prices."

Dana disclosed last September that the company's board of directors was investigating inaccuracies related to its commercial vehicle business, which resulted in restatements for the years 2002-2005.

The operational inefficiencies revealed last year and the resulting restructuring plan imposed an increasing financial stress on Dana, Standard and Poor's noted Thursday when it lowered Dana's credit rating to D.

The company reported total assets of $7.9 billion and liabilities of $4.7 billion as of September 30.

"The Chapter 11 process provides the company an opportunity to fix our business comprehensively -- financially and operationally," chairman and chief executive Michael Burns said.

Shares of Dana lost nearly half their value Thursday after the auto parts maker said it missed $21 million in interest payments on two of its senior secured notes. The shares plunged another 36 percent to 76 cents Friday.

Dana, which has 46,000 employees in 28 countries, posted a loss of nearly $1.3 billion in the third quarter, the latest it filed, blaming higher materials costs and troubles for the entire industry.

It joined Delphi Corp., the former General Motors parts unit that filed for bankruptcy last year, adding to the woes of GM, which still has financial obligations to the onetime subsidiary.

Ford recently bailed out its struggling former parts subsidiary Visteon Corp. by purchasing 23 plants for $1.8 billion. - AFP

Published on the web by Business Report on March 4, 2006.

Bart Timothy

Bad management and bad luck.

"The general financial condition of the industry, together with Dana's inability to renew or expand its credit facilities in a timely manner, has significantly constrained Dana's liquidity."

Without looking at their financials, my guess is, the real culprit is here. They must have some real cash flow problems, along with the loss in sales, increased costs, and some bad financial reporting from years previuos. A good businessman increases his cash flow by paying his creditors as slowly as possible and collecting his recievables as quickly as possible. My guess is they've got a large accounts recievable, which coupled with the loss in sales and increased costs makes for a tight squeeze, money wise. To get his bonus, some manager, some where, juggled the 2002 - 2005 books, making the the company performance look better than it actually was. And now they're also having to eat that too.

Dodge didn't help out Dana when they switched to American for their axles.

DieselDaze

Thats too bad, They made/make some good stuff. I hope they are able to work through it and crawl back from this.

Rich.

mikmaze

well, I C one thing in a bit of a glimmer, more of a haze kinda like a mirage.... but this one might actually hold some hope. I am talking about E85 vehicles, finally someone out there doing somnething to keep a little more money and work here in the USA. Unless they are hiding something , I am pretty sure they arent going to outsource production of CORN to india, I don't think they would export it to Japan to distill it, & hey what do you know, the farmers that are gonna grow it live here, year round! My stepson is doing a project now in school about ethanol and it is good to see because it brings him home with ideas that we may miss. The one rediculous claim that some people have is that it is going to increase the cost of things like milk and beef due to a rising demand for corn. Well to that I say what about the land being paid to be kept fallow? all those acres kept out of production to keep from having a glut, instead the farmers will be able to do w2hat they do better than anywhere in the world, grow a crop and bring it to market. It will cause an upsurge of equipment sales and a new level of pride to the farmers who took a handout and now produce something to earn a living. I see many opportunities for other by products form the ethanol producition, from feed to fuel, would not be that hard to turn the waste plant matter into a dried pellet form that could be burned in a pellet stove, heck combine it with post consumer paper ( recycled newspaper ) and get rid of two vastly available and cheap materials. To get back to the ethanal a bit..... some say it gets fewer mpg, so what, its cheaper and net results in lower emisions. again, the money earned here satays here, shoot for every gallon of ethanol used as fuel that saved moeny could even bring down the national Debt, not likely but hey its a thought.

TomW

Ethanol isn't a cost effective alternative fuel. The total energy costs to create it (farming, etc.) outweigh the gains at the pump. Just robbing Peter to pay Paul.

mikmaze

maybe true, but at least Peter and Paul are both living and spending here in the USA.

ArkansasRam

well said mikmaze

RickG

Are you talking about Dana making good stuff ? That's true . They make frames for Toyota trucks in Owensboro , KY , ship them to IN and they go right on the assembly line and out the door within hours . I can't see Toyota allowing Dana to go out of business .
GM is another story as well as Ford . Their products are rated poorly by consumer reports and other testing groups .

MikeyB

And doesn't Dana make the axles for Nissan trucks?

MikeyB

t-15 firefighter

Mextan,

You strike me as a real "glass is half empty" type of guy. Is there no good news in the world?

Britt

grantx5

Last monday a co-worker of mine decided to invest in Dana. Looked at the financials, etc. and bought 1000 shares at $4+. Price started to drop so to hedge his investment he doubled-down. Price continue to drop so he doubles down again. By Thursday he had bought 4000 shares. Felt Ok since now his average price is closer to $2.

Calls me Friday to say Dana had filed chapter 11, laughing the whole time. Says if it wasn't for bad luck he wouldn't have any luck at all.

MikeyB

As the old saying goes 'Buy high and sell low, keeps the market going'.

MikeyB

Mexstan

Sure there is, but who is going to bother reading about it? I keep telling you guys about Paradise, the glorious weather we have and much more, but does anybody appreciate it. Noooooooooo!!!!! Some of you just want to dump huge masses of snow and other horrible stuff on me.
Want to hear about the great Mexican brunch I just had?
In reality my glass is overflowing and the real life blessings I have are sometimes unbelievable.

Timmay2

True.

And when the glass is half empty, is when you start looking for more.

Being content with what you have, and not realizing when its time to get more, is stubborn.

Mexstan

I may have just stumbled on the reason for all the problems in the US auto industry. Could this be it?:

Baking a potato in the Auto Industry.


How a Honda employee bakes a potato:

*Preheat new, high quality oven to 350o F.;
*Insert Idaho potato;
*Go do something productive for 45 minutes;
*Check for doneness, then remove perfectly baked potato from
the oven and serve.


How a “Big 3” employee bakes a potato:

*Instruct an Idaho potato supplier to preheat the oven to 350
deg. F.;
*Demand that the supplier show you how he turned the dial to
reach 350o F and have him come up with documentation from
the oven manufacturer proving that it was calibrated properly;
*Review documentation, then have the supplier check the
temperature using a sophisticated temperature probe;
*Direct supplier to insert potato and set timer for 45 minutes;
*Have supplier open oven to prove potato has been installed
correctly and request a free study proving that 45 minutes is the
ideal time to bake a potato of this size;
*Check potato for doneness after 10 minutes;
*Check potato for doneness after 11 minutes;
*Check potato for doneness after 12 minutes;
*Become impatient with supplier (why is this simple potato taking
so long to bake?);
*Demand status reports every five minutes;
*Check potato for doneness after 15 minutes ...;
*After 35 minutes, conclude the potato is nearing completion;
*Congratulate the supplier;
*Update your boss on all the great work you’ve done, in spite of
having to work with such an uncooperative supplier;
*Remove potato from oven after 40 minutes, as a cost savings
without loss of function or quality, versus the original 45
minutes baking time.