No sooner had Mike Burns annnounced that he would step down as Dana’s CEO than the US supplier world was buzzing with the names of possible successors according to analysts at SupplierBusiness.
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Among the first to surface last week were ex-Magna and General Motors executive Mark Hogan; Federal-Mogul chief Jose Maria Alapont; former Tower Automotive head Kathleen Ligocki; and General Motors manufacturing executive Gary Cowger.
Dana’s chairman, John Devine, former CFO at both General Motors and Ford, will serve as acting CEO. And while viewed as a caretaker, one school of thought is that the 63-year-old Devine will stay much longer than expected and may even become the permanent CEO.
Some clues as to future leadership could be gleaned from Dana’s new all-star board of directors, which includes Jerry York, former CFO of Chrysler and confrere of Kirk Kerkorian; Mark Schulz, ex-international chief at Ford; Gary Convis, the former boss of Toyota’s North American manufacturing operations and Steve Girsky, the famed former auto analyst and briefly GM finance exec who is now president of Centerbridge Capital Partners. Schulz and Convis are plausible CEO candidates.
Burns had run Dana since 2004 after six years in charge of GM Europe.
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By GlobalDataThe 55-year-old’s future seems up in the air, but Magna has been mentioned as a possible landing area.
And there were even whispers that Burns could be a candidate to head Delphi, which will emerge from Chapter 11 next month. Both notions sound far-fetched, but Burns did get his start in the pre-spin-off Delphi.
Centerbridge, which has injected US$790m in Dana is said to have insisted on new leadership. But several analysts have admired Burns’ performance in Chapter 11. Burns led Dana into Chapter 11 protection in March 2006 and has since reconfigured the company.
But whoever takes on the job will find hard-going outside bankruptcy protection.
The future for any large American, Tier One supplier with a heavy reliance on the Detroit 3 is deeply troubled this year.
US sales numbers in January were not as bad as some feared (down 3 percent year-to-year). But talk of recession continues to roil in the United States and the Detroit OEMs plan severe production cuts in the first half of 2008.
Dana, which emerged with help from US$2bn in financing from Citigroup Global Markets Inc., Lehman
Brothers Inc. and Barclays Capital, is a far
different company than the one that went in — much more diversified than before its bankruptcy.
It has disposed of three business units, begun the process of selling eight plants and reached a two-tier wage deal with its unions. It expects to save more than US$100m annually in labour costs. Retiree health care costs have been shifted to a union-controlled trust fund.
Meanwhile, a federal judge has approved Delphi’s reorganization plan, allowing it to exit bankruptcy by March. Delphi’s emergence is being led by Appaloosa a private-equity firm that is investing US$2.55bn.
Appaloosa had also taken an unsuccessful run at Dana.
But after bids the directors went with the Centerbridge-led offer.
Delphi, like Dana, is counting on moving manufacturing to lower-cost countries and cutting labour costs. But as with Dana things won’t be easy. These two giants remain exceedingly dependent on American automakers and will continue to be squeezed by their old-line customers. Dana receives about 40 percent of its revenue from Ford, GM and Chrysler and about one-quarter from Ford. Of course, Dana, which makes axles, driveshafts and other drivetrain components, also relies heavily on construction equipment, commercial trucks and off-road vehicles.
But it is a new year and a new day in the US automotive business. This year, the American automakers are expected to be much more aggressive in shifting their sourcing to low-cost foreign shores.
The big question is whether even the reconstituted Dana and Delphi can keep pace with that shift.
