Dana Corporation was reported to have won bankruptcy court approval to settle a long-standing dispute with Citation that had threatened to halt the shipment of parts used in Ford and Nissan vehicles.
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Judge Burton Lifland of the US Bankruptcy Court in Manhattan this week signed off on the pact, which Dana said cuts the price it has been paying for the Citation parts it used to make components such as axle assemblies, the Associated Press (AP) reported. The deal also requires Citation to pay $US790,000 to compensate Dana for alleged past overpayments.
AP, citing court documents, said Dana in 2006 bought about $30m worth of parts from Citation, which has been a Dana supplier for more than a decade, providing parts used in products Dana sells to Ford and Nissan Motor. But the relationship became strained in 2004, when Citation first sought Chapter 11 bankruptcy protection.
Citation threatened in 2004 to stop supplying parts unless Dana agreed to pay higher prices and, in 2005, Dana said the parts didn’t contain the full amount of the $6m worth of steel it had purchased for Citation to use in the parts, the report said.
In March 2006, just days before Dana filed for bankruptcy protection, Citation threatened to halt all shipments to Dana unless the company paid $4.9m to “clear all open invoices”, the Associated Press said. Dana made a wire transfer of $3.5m to Citation to avoid having to shut down its factories. Later in the year, Citation raised its prices.
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By GlobalDataUnder the court-approved settlement with Citation, those prices will be lowered by more than 10%, retroactive to September 2006, according to court documents seen by the news agency. Citation will provide Dana a refund to cover price differences on parts purchased after that month.
According to the court papers, Citation will get a total of $565,116 in unsecured claims against Dana and an affiliate in their Chapter 11 cases.
Citation, which makes iron and aluminium castings, filed for bankruptcy protection in 2004 and again in 2007, the Associated Press noted, and won court approval of its most recent bankruptcy reorganisation plan in April.
