Dana to cut more jobs, close plants
Thu, 06 Nov 2008 13:57:30 GMT —
Dana Holding Corp. said Thursday it will close up to 10 plants and cut 2,000 more employees than originally planned as the auto parts maker's net loss widened in the third quarter.
The Toledo, Ohio, company said its loss available to common stockholders widened to $279 million, or $2.79 per share, from $69 million, or 46 cents per share, in the year-earlier period. Sales for the quarter ended Sept. 30 fell 9 percent to $1.93 billion from $2.13 billion.
Dana said the plant closures will take place in 2009 and 2010, while the 5,000 job cuts will be complete by the end of this year. Previously, Dana said it intended to cut only 3,000 jobs this year.
"These are difficult actions," Executive Chairman John Devine said in conference call with analysts. "We don't like doing them, but the industry situation right now forces us to move as quickly as we can in this environment."
Dana said it remained in compliance with its financial covenants through Sept. 30. However, it said it won't be able to comply with its covenants through the end of the year, and expects to complete an amendment to its credit facility with its lenders within the next few weeks.
Dana, which emerged from bankruptcy protection in January after nearly two years of restructuring, said it had $1 billion in cash and global liquidity of $1.3 billion.
Dana also cut its sales guidance for the year, to $8.2 billion. The company had previously expected $8.6 billion to $8.8 billion in sales for the year.
It also targeted lower sales in 2009 of between $7.2 billion and $7.3 billion. Devine told analysts he expects the company to continue to suffer from weaker volumes next year.
Shares of Dana tumbled 22 cents, or 11.6 percent, to $1.67 in morning trading. The stock is down 86 percent from a post-bankruptcy high of $13.30 set in February.
The 2,000 additional job cuts this year represent about 6 percent of the company's 32,000 employees.
Dana identified only one of the 10 facilities it plans to close: its drive shaft plant in Magog, Quebec, which employs 115 people. The remaining nine plants slated for closure will be announced as they are determined, Devine said.
Dana spokesman Chuck Hartlage said the closures will result in additional job cuts on top of the 5,000 announced Thursday. However, it is unclear how large the cuts will be because the company hasn't yet determined which plants will close, he said.
Devine said the plant closures will result in charges of between $100 million and $150 million, and will generate about $40 million per year in savings.
The company also took several charges during the quarter, including $123 million in impairment charges related to the write downs of its drive shaft business and the equity in a joint venture with German transmission maker Getrag.
The maker of axles and brakes has been working recently to cut its costs in the face of a difficult parts market. It has been moving manufacturing to lower-cost countries such as India, Brazil and China, and reducing its dependence on Ford Motor Co. and General Motors Corp., its two biggest customers.
Auto parts suppliers have been battered recently as automakers cut production to deal with the shrinking vehicle market. Job cuts have been sweeping the sector.
Last week, ArvinMeritor Inc. said it would cut 1,250 jobs, about 7 percent of its worldwide staff. Earlier in October, Federal-Mogul Corp. announced plans to close several facilities in 2009, while Harman International Inc. said it planned to close two engineering sites in Germany by next year.