Dana gets court OK for Ford Motor frame manufacturing agreement, Chrysler agreement

By Reshmi Basu

New York, Sept. 19 - Dana Corp. received approval Wednesday of a series of commercial agreements with Ford Motor Co. that will allow Dana to continue to manufacture vehicle frames for Ford from the U.S. Bankruptcy Court for the Southern District of New York.

In the summer of 2006, the company commenced negotiations with its customers seeking pricing and economic relief.

As reported earlier, the new commercial agreements with Ford resolve a complex set of disputes related to the existing manufacturing agreements and should provide Dana with the price relief necessary to allow it to emerge from bankruptcy as viable long-term suppliers to Ford and its other customers.

The agreement will help the company realize around $180 million in annual savings, Dana's lawyer Jeffrey B. Ellman of Jones Day told the court, adding that the improved profitability of the plan was key to the company's success, given that the "pressures facing Dana in the marketplace have been severe."

Chrysler accord

Meanwhile, the court also approved a similar agreement with Chrysler LLC, one of Dana's biggest customers, which Dana's legal team described as "another cornerstone in the debtors' restructuring."

Dana's attorneys noted that the deal was unique since Dana purchases axles from Chrysler, which the company then incorporates into vehicles for the automaker, which means that "there are liabilities going in both directions."

In addition, Dana said the deal will help it realize considerable savings as well as settle conflicts over set-offs and proofs of claim.

Ellman said the company hopes to exit bankruptcy by the end of 2007.

Dana, a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets, filed for bankruptcy on March 3, 2006. Its Chapter 11 case number is 06-10354.

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