TOLEDO, Ohio, July 6 /PRNewswire-FirstCall/ -- Dana Corporation (OTC
Bulletin Board: DCNAQ) today announced a series of interrelated agreements
that will substantially reduce the company's operating costs and provide
important momentum toward its emergence from bankruptcy as a competitive,
sustainable business. The agreements consist of:
- A settlement agreement with each of the United Steel Workers (USW) and
the United Auto Workers (UAW), which will lower Dana's labor costs and
replace the company's health care and long-term disability obligations
for retirees and employees represented by these unions with Voluntary
Employees' Beneficiary Association (VEBA) trusts to which Dana will
contribute in aggregate approximately $700 million in cash (less certain
benefit payments made prior to the effective date of the company's plan
of reorganization) and approximately $80 million in common stock of the
reorganized Dana;
- An agreement with Centerbridge Capital Partners, L.P., and its
affiliates on the terms under which the firm will invest up to $500
million in cash for convertible preferred stock in the reorganized Dana
and facilitate an additional investment by other investors of up to $250
million in convertible preferred stock; and
- A plan support agreement with the USW, the UAW, and Centerbridge, under
which these parties will support a plan of reorganization filed by Dana
that includes both the labor settlements and the Centerbridge investment
agreement.
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These agreements are subject to approval by the Bankruptcy Court for
the Southern District of New York, where the company's Chapter 11
bankruptcy proceeding is pending. The union settlement agreements are also
subject to ratification by Dana's USW and UAW employees, which the unions
will seek in the near term.
"Through our negotiations with the USW and the UAW, and negotiations
with Centerbridge for the investment that will contribute to our ability to
fund the VEBAs, we have reached what we believe are fair and constructive
agreements," said Mike Burns, Dana's chairman and chief executive officer.
"I am particularly pleased that these agreements were reached as a result
of a shared commitment - from all of the involved parties - to the
long-term success and viability of Dana Corporation."
"We welcome the investment by Centerbridge, a private equity investor
with considerable expertise in the automotive industry and complex
restructurings. Centerbridge brings a long-term perspective and a strong
commitment to assisting us in building a solid future for Dana," Burns
added. "While there is a good deal of work yet to be done, we are on track
to file a reorganization plan by the beginning of September and to emerge
from bankruptcy by year end."
Settlements with USW and UAW
Encompassed in the settlements with the USW and UAW are four-year
extensions of Dana's collective bargaining agreements with all of its USW-
and UAW-organized facilities in the United States and new agreements with
several recently organized facilities. Among other items, the extended and
new bargaining agreements will provide for the establishment of a two-tier
wage structure at certain affected U.S. operations, changes in disability
benefits, and a freeze on credited service and benefit accruals under the
pension plans for active employees represented by the USW and UAW.
"These agreements will resolve significant ongoing cost issues when
implemented and they provide important momentum toward our completion of a
reorganization plan that will position us to operate as a competitive,
sustainable business after emergence," Burns said.
Each of the union settlement agreements also calls for the
establishment of a VEBA to replace the company's current retiree health
care plans and long- term disability obligations for employees covered by
USW and UAW collective bargaining agreements. A VEBA is a special,
tax-deductible trust that can be used to provide certain benefits, such as
medical reimbursement, to participants and their beneficiaries.
The settlement agreements provide that upon Dana's emergence from
bankruptcy, the company will contribute, in aggregate, approximately $700
million in cash (less certain benefit payments made prior to the effective
date of the company's plan of reorganization) and approximately $80 million
in common stock of reorganized Dana to the VEBAs in exchange for the
termination of Dana's obligation to provide non-pension retiree welfare
benefits for USW- and UAW-represented retirees and long-term disability
benefits to USW- and UAW-represented employees. The company will continue
to provide benefits for these retirees and employees under its existing
plans until emergence. Dana currently has an aggregate of approximately
$1.1 billion in unfunded non- pension benefit and long-term disability
obligations under its U.S. post- retirement health care plans for USW- and
UAW-represented retirees and employees.
Dana estimates that the modifications to the USW and UAW collective
bargaining agreements and other provisions of the union settlement
agreements will collectively result in annual savings of more than $100
million.
Agreement for Issuance of New Equity
Under terms of the investment agreement, Centerbridge will purchase up
to $500 million of convertible preferred stock of the reorganized Dana and
facilitate an additional investment of up to $250 million in convertible
preferred stock.
The conversion price will be based on trading prices of common stock of
the reorganized Dana during a short period after emergence. Using
preliminary forecasts and a preliminary valuation as an estimate of future
market trading prices for the reorganized Dana's common stock, the company
estimates that the $500 million of convertible preferred shares would
represent less than 25 percent of the fully diluted common stock of the
reorganized Dana on an as- converted basis.
Proceeds from the investment will be deployed in part to fund the VEBA
trusts that will be established under the settlement agreements with the
USW and UAW.
The closing of the Centerbridge investment will be subject to Dana's
filing of a plan of reorganization and a disclosure statement by September
3, 2007, as well as other customary conditions, but will not be subject to
further due diligence.
Dana will be able to terminate its arrangements with Centerbridge to
accept an alternative transaction or plan under certain circumstances, with
the reasonable consent of the USW and UAW.
Agreements Keep Company on Track to Achieve Fundamental Changes
"Last November, to address the harsh reality that Dana had generated
more than $2 billion in losses over the past five years, we announced a
series of interdependent restructuring initiatives," Burns added. "These
initiatives, affecting all of the company's constituencies - our customers,
suppliers, both union and non-union employees and retirees - were designed
to result in an aggregate pre-tax annual income improvement of $405 million
to $540 million."
The Dana initiatives call for savings in five interrelated areas:
1. Achieving substantial price recovery from customers;
2. Optimizing Dana's U.S. manufacturing footprint, including the moving
of certain operations to lower-cost sites;
3. Reducing labor costs by creating a more industry-competitive cost
structure;
4. Eliminating retiree health and welfare costs; and
5. Reducing administrative costs.
"Without the settlements with the USW and UAW, essential savings in
other areas could be jeopardized," Burns said. "With these settlements, we
will be solidly within the range of savings we need to move forward with
our plan of reorganization and emerge as a competitive, sustainable
business."
About Centerbridge Capital Partners L.P.
Centerbridge is a $3.2 billion multi-strategy private investment firm.
The firm is dedicated to partnering with world-class management teams in a
range of industry verticals. Centerbridge's investment style provides the
flexibility to employ various strategies to help companies achieve their
operating and financial objectives. The limited partners of Centerbridge
include many of the world's most prominent financial institutions,
university endowments, pension funds, and charitable trusts.
About Dana Corporation
Dana is a world leader in the supply of axles; driveshafts; and
structural, sealing, and thermal management products; as well as genuine
service parts. The company's customer base includes virtually every major
vehicle and engine manufacturer in the global automotive, commercial
vehicle, and off-highway markets, which collectively produce more than 65
million vehicles annually. Based in Toledo, Ohio, the company's continuing
operations employ approximately 35,000 people in 28 countries and reported
2006 sales of $8.5 billion, with more than half of this revenue derived
from outside the United States. For more information, please visit:
http://www.dana.com.
Dana and certain of its U.S. subsidiaries are operating under Chapter
11 of the U.S. Bankruptcy Code as debtors in possession. Information about
the bankruptcy proceedings can be found at:
http://www.dana.com/reorganization. While Dana continues its reorganization
under Chapter 11, investments in its securities are highly speculative.
Although shares of Dana common stock continue to trade on the OTC Bulletin
Board (OTC Bulletin Board) under the symbol "DCNAQ," the trading prices of
the shares may have little or no relationship to the actual recovery, if
any, by the holders under any eventual court-approved reorganization plan.
The opportunity for any recovery by holders of Dana common stock under such
reorganization plan is uncertain and shares of Dana common stock may be
cancelled without any compensation pursuant to such plan.
Forward-Looking Statements
The agreements with the USW, the UAW, and Centerbridge that are
discussed in this release are proposed agreements which are subject to the
approval of the Bankruptcy Court, and ratification by union members with
respect to the union settlement agreements, and there can be no assurance
that these agreements will be approved or implemented as contemplated
herein. Statements in this release about Dana's equity under the company's
eventual court- approved plan of reorganization constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and are speculative. Forward-looking
statements are inherently subject to risks and uncertainties and the actual
value of Dana's equity may differ materially from that anticipated herein.
Dana does not undertake to update any forward- looking statements in this
release.
SOURCE Dana Corporation
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Related links:
http://www.dana.com/
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CONTACT:
Chuck Hartlage of Dana Corporation,
+1-419-535-4728, chuck.hartlage@dana.com
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