Dana supplier's request to force assumption or rejection of contracts denied

By Caroline Salls

Pittsburgh, Aug. 28 - Dana Corp. supplier Sypris Technologies, Inc.'s motion asking the U.S. Bankruptcy Court for the Southern District of New York to force Dana to assume or reject its supply contracts with Sypris by Oct. 3 was denied, according to a Monday court filing.

In the order, bankruptcy judge Burton R. Lifland said arbitration is ongoing to resolve long-standing disputes regarding the supply contracts.

Lifland said both sides agreed to use arbitration to resolve the contract issues, so it is not up to the court to decide whether Dana should be forced to assume or reject the contracts.

"Without sufficient information about the nature of their business plan and other key restructuring issues to evaluate their largest and most complex supply arrangements, a viable assessment of the contracts is not feasible until the disputed contractual issues are determined through the arbitration," Lifland said in the order.

According to Sypris's motion, the supplier wanted Dana to decide on whether to assume or reject its contracts soon because a decision is not difficult given the limited options available in the event of rejection, and because Sypris said further delay would cost Dana's estate millions of dollars in additional and unnecessary damages.

According to Sypris, even if rejected, the agreements allow it to enjoin Dana from purchasing any of the parts in question from anyone but Sypris through 2014.

Sypris said rejection of these agreements would effectively require Dana to exit the markets served by its commercial vehicle services division for lack of essential components.

In addition, Sypris said any further delay would increase the value of its damage claims, whether the agreements are rejected or not.

Specifically, Sypris said millions of dollars in equipment maintenance costs are essential to avoid shutdowns of production if the agreements are to be assumed, but will only increase Sypris' rejection damages if the agreements are to be rejected.

Sypris also said many new programs are currently scheduled to begin before 2007, which will require millions of dollars in equipment purchases and months of detailed planning, unless the agreements are to be rejected.

As previously reported, Dana's official committee of equity security holders objected to the motion, saying the request is premature in light of the ongoing arbitration.

The equity committee said the outcome of the arbitration process is not known, and, as a result, it is not possible for Dana to determine the impact the results will have on Dana and Sypris's business relationship and the underlying supply contracts until the arbitration is completed.

Dana, a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets, filed for bankruptcy on March 3. Its Chapter 11 case number is 06-10354.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.