Dana threatens to terminate Chrysler business
Automotive News | August 7, 2008 - 12:01 am EST
DETROIT — Chrysler LLC appears headed for a crack up with Dana Holding Corp., one of its largest and oldest driveline parts suppliers.
Dana, in a statement released Wednesday evening, said it has asked a U.S. Bankruptcy Court in New York to allow it to end its business with Chrysler by the end of this year. Dana emerged from two years of Chapter 11 bankruptcy court protection on Feb. 1 and now has a new management team and board.
Dana wants the court to enforce an agreement reached with Chrysler during the bankruptcy process.
“Our goal is to establish a mutually rewarding supply agreement with Chrysler moving forward,” according to statement by Dana Executive Chairman John Devine.
But if negotiations are unsuccessful, Dana will vacate the Chrysler business, the statement said.
Dana’s statement did not specify its differences with Chrysler. But the financial pressure from escalating raw material prices is breaking down old ties between suppliers and automakers.
Earlier Wednesday, Magna International Inc’s CFO Vincent Galifi told analysts some of Magna’s customers are trying to break their contracts with the supplier by asking it to bear more costs of the costs brought on by commodity price increases.
“We can’t eat it all, so we’re going to have to have some discussions with them,” Galifi said in the conference call.
In recent months, seating supplier Johnson Controls Inc. filed suit against several of its suppliers who were threatening to withhold shipments if they were unable to get price relief on the steel products it supplied Johnson Controls.
Dana is a large steel buyer for the driveline systems it supplies Chrysler Jeeps. Both Dana and Jeep originated their business in Toledo, Ohio. Dana’s history of supplying Chrysler dates back more than 70 years and includes supplying four-wheel drive and axle technologies for the first Willys Jeep produced in 1941.
Dana currently supplies parts for the Wrangler, Liberty, and select versions of the Grand Cherokee; the Dodge Nitro and Viper vehicles; and select light- and medium-duty versions of the Dodge Ram pickup truck.
Chrysler is not one of Dana’s largest three customers — Ford Motor Co., General Motors and Toyota Motor Corp. — but it ranks among a group of customers that still made up 19 percent of the supplier’s business in 2007.
Dana ranks No. 19 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $8.72 billion in 2007.
Craig Trudell contributed to this report
PRESS RELEASE: Dana Holding Corporation Seeks Declaratory Judgment Regarding Conclusion of Supply Contract with Chrysler LLC
TOLEDO, Ohio, Aug. 6 /PRNewswire/ — Dana Holding Corporation (NYSE:DAN) today announced that it has asked the Bankruptcy Court for the Southern District of New York to provide a declaratory judgment confirming that the existing supply agreement between Dana and Chrysler LLC will conclude on Dec. 31, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990903/DANA )
Dana is seeking to confirm its rights relative to the Settlement Agreement reached by the two companies in August, 2007 and confirmed by the Bankruptcy Court one month later. The requested court action is an attempt to determine Dana’s future course as a supplier to Chrysler.
"Our goal is to establish a mutually rewarding supply agreement with Chrysler moving forward," said Dana Executive Chairman John Devine. "However, Dana is prepared to exercise its right to discontinue supplying Chrysler effective January 1, 2009, if we continue to be unsuccessful in engaging them to address this goal in a meaningful way.
"While we sincerely hope that this will not be the case, we have informed Chrysler of our intentions in order to provide both companies with the time to consider their options for ongoing sourcing of the programs we currently support," he added. "While this is an isolated case, it serves to illustrate our commitment to pursue only market-competitive business opportunities moving forward."
Devine acknowledged that a potential decision to vacate the Chrysler business could have a substantial impact on select Dana facilities, but cautioned that any related concerns would be premature. "It’s far too early and inappropriate to speculate on potential outcomes at a facility level," he said. "To be clear, our focus remains on achieving a market-competitive agreement with Chrysler moving forward."
Dana’s history of supplying Chrysler dates back more than 70 years and includes supplying four-wheel drive and axle technologies for the very first Willys MA Jeep(R) produced in 1941. This relationship continues today with Dana’s supply of drivetrain technologies for several Jeep models including the Wrangler, Liberty, and select versions of the Grand Cherokee; the Dodge Nitro and Viper vehicles; and select light- and medium-duty versions of the Dodge Ram pickup truck.
