Dana gets court OK on Sypris Technologies settlement

By Reshmi Basu

New York, Aug. 7 - Dana Corp. obtained approval Tuesday from the U.S. Bankruptcy Court for the Southern District of New York for Dana's settlement agreement with Sypris Solutions, Inc.

The settlement agreement provides component supplier Sypris an $89.9 million general unsecured non-priority claim against Dana and establishes a new long-term master supply agreement between the companies.

The agreement is an "amazing result" in which both parties "fought like dogs for the last eight or nine months," said Dana attorney David Heiman of Jones Day.

He added that the accord provides Dana with greater flexibility and Sypris with greater confidence, which allows Dana to get better quality parts in a more timely fashion, enabling it to better compete in the market place.

Heiman also told the court that the settlement was critical to the company's reorganization plan, as it results in annual savings of around $23 million.

In approving the accord, judge Burton R. Lifland gave his "kudos" to the parties, noting that controversy erupted on day one of the negotiations.

As previously reported, the new master supply agreement is in lieu of three existing contracts and will run through 2014. The agreement provides Dana with one-time price reductions for certain commodities beginning in 2008 with an estimated value of $7.7 million per year based on 2006 volumes and improved coverage in areas including quality and warranty.

Also under the settlement, Dana and Sypris agreed to exchange production of certain non-core components, to rebalance production among Sypris' plants to reduce costs for both parties and to cease all litigation related to prior contract disputes, including the release of Dana from certain committed but undelivered production volumes.

Dana, a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets, filed for bankruptcy on March 3, 2006 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 06-10354.

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