Bankrupt Dana Corporation has been in court this week requesting to terminate labour contracts and retirement benefits for employees represented by the United Auto Workers and United Steelworkers.

According to The Associated Press (AP), Dana lawyers argued that the cost cuts were an essential part of its exit from bankruptcy protection.

The parts maker has announced settlements that affect about 6,300 non-union retired workers and a tentative deal with a third union, the International Association of Machinists and Aerospace Workers.

Dana has said it needs to reduce labour and benefit costs to emerge from bankruptcy as a competitive, viable company. According to AP, it said in court papers that its US operations lost $US2bn over the past five years.

A lawyer for the UAW and USW reportedly argued that the elimination of retiree benefits for workers would seriously jeopardise health care for many aging employees, some of whom had worked for Dana for decades.

In court papers seen by the Associated Press, the company sought annual cost savings of $405m to $540m, of which $100m to $150m is paid to retiree benefits and another $60m to $90m from labour costs.

The IAM deal reportedly includes a new collective bargaining agreement, the termination of retiree benefits for its members as of 1 July and a settlement payment by Dana of $2.25m.

AP said that, under the agreement with non-union retirees, Dana would create an account to cover future health care costs for non-union retirees to which it will contribute $25m now, and another $53m upon emergence from bankruptcy.

Dana filed for bankruptcy protection just over a year ago as demand for its products from American automakers declined as sales of sport utility vehicles and light pickup trucks fell.

The company has said it needs to move manufacturing overseas to effectively compete, the Associated Press noted.