Dana Sells Engine Bearing and Components Business to MAHLE

Dana Corp. (USA; Pink Sheets: DCNAQ, operating under Chapter 11 bankruptcy since March 3, 2006) announced it has found a buyer for and will divest its engine hard parts business, including the engine bearing manufacturing operations. Dana has had the business on the market for over a year, even before declaring Chapter 11 bankruptcy. The engine parts business buyer is MAHLE Group GmbH (Germany), paying approximately USD $157 million, $98 million in cash to Dana and the rest in debt assumption. In October 2005, pre-bankruptcy Dana announced the engine hard parts division and two others were no longer strategic to its mission and would be sold. Dana's engine hard parts business includes 39 facilities employing more than 5,000 people in 10 countries. Product lines include piston rings, engine bearings, cylinder liners and camshafts. The bearing business includes well-known brands Clevite and Glacier Vandervell. In eBearing's nonscientific review of ownership records, Clevite and Glacier appear to be the most-divested hot-potato manufacturing operations in the entire base of North American automotive suppliers. Although neither Clevite nor Glacier has ever been a stone around the owners' neck at the time, their financial and operating performances have often failed to live up to expectations or deliver the requisite rate of return. Dana acquired Glacier Vandervell Bearings in 1988. It now consists of Glacier Vandervell North America's two operations in Ohio and Iowa, along with Glacier Vandervell Europe with six operations in the UK, France, Italy, Slovakia and another in Brazil. Overall, Glacier Vandervell engine bearing's OEM and aftermarket operations employ over 3,000 people worldwide. In 2001, Dana divested Glacier Industrial Bearings -- prelubricated and self-lubricating metal-polymer plain bearings -- to Goodrich, which later divested it in a spinoff to form EnPro Industries. Glacier's operations have not been as profitable as expected, however. Clevite is a brand name now used by Dana's aftermarket engine bearing sales operations, although it traces back to Clevite Corporation, which became a brand name when it merged with Cleveland Graphite Bronze Company (formerly Dann Spring Insert Company) in 1952. Forming the historical circle, Vandervell Products Ltd. got its start in the UK with thinwall bearing manufacturing equipment purchased from Cleveland Graphite Bronze. CGB later renamed itself Clevite Corp, then became part of Gould, Imperial Clevite and T&N plc. Federal-Mogul acquired T&N, and with it the Clevite and Glacier bearing operations. Meanwhile, Vandervell and Glacier had merged in 1988. Federal-Mogul sold the Glacier Vandervell and Clevite polymer and thinwall bearing operations to Dana for a total of $430 million; $410 million for Glacier and $20 million for Clevite. Since 1997, Daido Metal Corporation (Japan) and Glacier have operated the Clevite brand engine bearing plant in Bellefontaine, Ohio as a joint venture facility, Glacier Daido America. The plant supplies U.S. domestic auto manufacturers. In 2001, the thinwall plant in Atlantic, Iowa was added to the venture. In September 2005, Dana and Daido abruptly ended the entire joint venture arrangement. Dana took full control of the Glacier Daido America engine bearing plant in Atlantic, Iowa, while Daido took control of the thinwall bearing and component plant in Bellefontaine, Ohio. MAHLE's acquisition of Dana's businesses must be approved by international trade regulators, Dana's bankruptcy court, and go through a court-mandated "bidding" process. The sale is expected to be completed by the end of first quarter 2007. It is not clear if Dana's engine bearing operations will be strategic to MAHLE, the leading producer of virtually every engine component other than bearings -- pistons, rings, cylinder liners, engine blocks, piston pins, cam followers, valve seats, valve guides, air filters, oil filters, camshafts and valves. While the company does have bearing manufacturing facilities in Brazil and China, most notably at its Mahle Bearings Yingkou Co. Ltd. operation in Liaoning Province, China; bearings do not appear to play a prominent role in any strategic initiatives on the manufacturing side. MAHLE describes its bearing and bushing program as follows: MAHLE offers a comprehensive product range for bearings, whether for connecting rods or crankshafts, with thrust washers or combined crankshaft main bearings. With its range of bushings, MAHLE covers numerous applications in the passenger car and commercial vehicle area ¨C in all current sizes and base materials. These include lead-free aluminum-based two-layer bearings as well as three-layer and sputter bearings based on cast or sintered bronze. Nowadays, the bronze for sputter bearings is almost lead-free as well. Big-end bearings are included in the "power cell unit" program, sold to engine OEMs: piston with rings and pin, cylinder liner and connecting rod with bearings, all developed, engineered, manufactured and delivered as a set. MAHLE has made no comment as to which Dana operations it considers strategic and which are simply part of a larger transaction destined to be sold off or absorbed by existing facilities, except to say there would be, "appropriate restructuring measures." Dana's Chairman and CEO, Mike Burns, said: "This divestiture is an important step in implementing Dana's reorganization initiatives and sharpening our focus on our core axle, driveshaft, structural, sealing, and thermal products businesses for the automotive, commercial vehicle, and off-highway markets." Mr. Burns added, "This transaction also represents an excellent opportunity for MAHLE. While no longer central to Dana's future direction, our engine hard parts business and people have strong potential for an owner that is strategically focused on this market segment." Prof. Dr. Heinz K. Junker, CEO of MAHLE Group Management Board, commented, "The acquisition of Dana's engine hard parts business would complement our worldwide market position particularly in the areas of piston rings and engine bearings, as well as in the aftermarket for engine parts. As Dana Corporation has not considered the engine hard parts business as one of its core business segments for some time, it will be a major task to integrate the Dana locations into the existing MAHLE production network by appropriate restructuring measures, in order to facilitate all necessary synergy effects for the future."