Dana Corporation has announced operational and strategic changes to improve its financial performance from 2006, including selling off engine hard parts, fluid products, and pump products businesses employing almost 10,000 people.

The programme will see the auto industry supplier focus on its light- and heavy-vehicle drivetrain products, associated structures, sealing, and thermal products, and divesting three non-core businesses with annual revenues of $1.3 billion; restructure operations in its automotive systems and heavy vehicle technologies and systems groups; and enhance business efficiency with measures such as workforce reductions and benefit cost reductions.

"These actions will position Dana to be more profitable moving forward," said Dana chairman and CEO Michael Burns.

"These are unprecedented times for Dana and the automotive industry. While a number of the actions we are taking are painful, they are vital to refocusing our company, accelerating cost and process efficiencies, and driving improved performance across our global organisation."

Dana intends reduce its product line through selling three businesses: engine hard parts, fluid products, and pump products. Collectively, these businesses employ approximately 9,800 people worldwide and represent 2004 sales of approximately $1.3 billion.

The engine hard parts business consists of 26 operations which primarily manufacture piston rings, camshafts, and engine bearings under the Perfect Circle, Clevite and Glacier Vandervell brands. Sales for the business totalled approximately $720 million in 2004.  The engine hard parts operations to be divested employ approximately 5,300 people in 10 countries.

The fluid products business consists of 16 operations which manufacture fluid products for braking, power steering, HVAC, and fuel applications. Combined sales for this business totalled approximately $470 million in 2004. The fluid products operations to be divested employ a total of approximately 3,850 people in 6 countries.

The pump products business consists primarily of an original equipment fluid transfer pump operation in Diadema, Brazil, and an aftermarket pumps operation in Santa Marina, Brazil. Sales for the business totalled approximately $80 million in 2004. The pump products operations to be divested employ approximately 650 people.

Dana expects to incur non-cash charges in 2005 of approximately $315 million before tax to reduce the net assets of these businesses to realisable value.

"While no longer central to Dana's future direction, these operations and the people associated with them have great potential for owners that are more strategically focused on these market segments,". Burns said.  "We expect to use the proceeds from these divestitures to reduce debt and reinvest in those businesses that will be key to profitable growth in the future."

Dana will close two facilities in its Automotive Systems Group and shift production in several other operations to balance capacity and take advantage of lower cost locations.

The Buena Vista, Virginia, axle facility will be closed and its production consolidated into an existing facility in Dry Ridge, Kentucky. The Buena Vista facility employs approximately 275 people.

The Bristol, Virginia, driveshaft facility will be closed and its production consolidated into Dana operations in Mexico. Bristol employs approximately 270 people.

Assembly and component lines that support the steering shaft business in the Lima, Ohio, driveshaft facility will also be moved to Dana operations in Mexico.  Approximately 100 of the 385 people at Lima will be affected by this move.

Service parts activities at Dana's principal commercial vehicle parts assembly facility in Henderson, Kentucky, will be moved to a Dana service parts operation in Crossville, Tennessee.

Assembly activity will be increased at the Dana facility in Monterrey, Mexico, to improve throughput at the Henderson plant.

Gear production will be increased at the Dana operation in Toluca, Mexico, to relieve constraints at the company's principal commercial vehicle gear plant in Glasgow, Kentucky.

Dana expects to incur a charge of $9 million before tax during the fourth quarter of 2005, and additional charges in 2006 and 2007 in association with these operational restructuring actions totalling $21 million before tax. The company expects the impact of these actions in 2006 to be a net expense of approximately $8 million due to both the time required to complete the moves and the recognition of additional expenses related to separation costs and equipment transfers.

However, starting in the second half of 2007, the company expects to begin realising full annualised savings of more than $20 million before tax.

Dana has set a 5% salaried workforce reduction (in addition to the operations to be divested or closed) to the end of 2006. This will be accomplished primarily through attrition and the company expects to achieve cost savings of more than $15 million before tax in 2006.

Dana is also changing some of its benefit programmes. The company will eliminate the employees' stock purchase plan, reduce its share of costs of US medical benefit plans, suspend matching contributions to its US and Canadian long-term savings programmes, and take unspecified additional actions to reduce benefit costs.

These changes are expected to generate cost savings of more than $25 million before tax in 2006. Additionally, Dana has suspended wage and salary increases globally, subject to local law and contractual requirements.

In addition to the $324 million of 2005 charges already referred to, costs to complete the restructuring actions in 2006 and 2007 are estimated at $21 million. Of the $345 million of total expected expenses from these actions, the total cash outlays are expected to be $27 million.