Automotive News - February 4, 2008 - (Page 3) FEBRUARY 4, 2008 • 3 A leaner Dana leaves Chapter 11, saying it’s ready to compete James B. Treece jtreece@crain.com Dana Holding Corp. exited Chapter 11 protection on Friday, Feb. 1, just as light-vehicle sales are deflating in North America. So be it, says John Devine, Dana’s chairman and new acting CEO. “There’s no great time to re-enter the market, but you want to get out of bankruptcy as quick as possible,” he says. The company is better prepared for a downturn now, thanks to a restructuring that centered on North Ameri- ca, says Mike Burns, the outgoing CEO who steered Dana through Chapter 11. “We took a lot of costs out of the business. The company is in a much better position to compete at lower volume levels.” Since entering Chapter 11 in March 2006 due in part to rising steel prices, Dana cut annual costs and raised revenues by $440 million to $475 million, the company said. Savings came from closing plants, reducing labor costs, changing benefits and creating trusts to assume retiree health costs. Dana also is more diversified than New Dana acting CEO John Devine: “You want to get out of bankruptcy as quick as possible.” before, Burns says. Even if the North American light-vehicle market slides to 14.3 million to 14.5 million vehicles in 2008, “the world market is up,” he says, adding that. Dana is growing in China, Europe and South America. The off-road sector, including agricultural implements and mining equipment, is “very strong,” Burns says. “Mining equipment chews itself up as it goes along.” Dana, formerly known as Dana Corp., makes axles; driveshafts; and structural, sealing and thermal-management products. The Toledo, Ohio, company employs about 35,000 people in 26 countries, down from almost 45,000 employees before filing for Chapter 11 protection. It posted 2006 sales of $8.50 billion. More than half came from outside the United States. Less than 60 percent of Dana’s business is in the light-duty sector. Devine, 63, is a former CFO of General Motors and Ford Motor Co. Burns, 55, who had been Dana’s CEO since 2004, will remain with the company for a transition period. Before joining Dana, Burns spent 34 years at GM. He was president of GM Europe from 1998 to 2004. “There are a lot of people who’d think the business would be concentrated in certain platforms. That’s not true,” says Devine. “It’s very diversified.” c Isuzu’s collapse The once-nimble Japanese brand prospered in the 1980s and ’90s with its hot-selling SUVs — then plummeted this decade. Who is to blame? Kathy Jackson kjackson@crain.com Coming down fast Isuzu debuted in the U.S. light-vehicle market in 1981 and by middecade was selling over 100,000 units annually. But since 2000 the Japanese brand has been in free fall. Affordable and nicely designed, the Rodeo was the top-selling mid-sized import-brand SUV in the mid-1990s. Isuzu later built a version for Honda. A 1993 model is shown. LOS ANGELES — For the past four years, Terry Maloney has had to drag himself to the podium at Isuzu’s annual NADA make meeting, face a grim, even surly dealer body and relay the worst possible news: No new product is coming. Maloney won’t have to do that this year, though. The Isuzu Motors America Inc. president has canceled the brand’s Feb. 11 make meeting in San Francisco. Isuzu’s train wreck of a U.S. sales operation is calling it quits — after years of self-destruction. Isuzu will stop selling new vehicles here Jan. 31, 2009. The brand’s 201 U.S. dealers have a year to clear their inventories of five-seat Ascenders and small i-series pickups. Isuzu will book a ¥4 billion ($37 million) charge to wrap up its U.S. operations. So what happened to the once nimble Japanese brand that as late as 1994 sold more SUVs in the United States than Toyota — then collapsed in a heap? 150,000 120,000 Units 90,000 60,000 30,000 0 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 Source: Automotive News Data Center The Amigo, a two-door convertible SUV based on the Rodeo, was produced from 1990 to 1994 and initially sold well. A 1990 model is shown. U.S. pullout coming. “Isuzu Limited made the decision just the other day,” he said last week. “It was a surprise — a sad surprise. Not that I didn’t have my eyes wide open, but it was always our intention to stay in North America.” Maloney, 59, has been president of Isuzu Motors America since 2002. He spent 17 years in sales and marketing see ISUZU, Page 100 Not much mystery there. Isuzu’s bosses in Japan gave up on America, or at least began to treat it like a distant irrelevancy. U.S. dealers were starved of products. The die was cast in 2002 when exec- utives in Tokyo decided to concentrate on commercial trucks in emerging markets and let Isuzu Motors America’s once lucrative light-duty vehicle business shrivel. Still, Maloney says he didn’t see the Tough sledding ahead for Canadian labor talks David Barkholz and Amy Wilson dbarkholz@crain.com The Detroit 3 are preparing for Canadian labor talks this summer that could prove to be more difficult than the landmark UAW negotiations completed last November. Canadian Auto Workers President Buzz Hargrove said the union won’t entertain wage cuts, a lower new-hire wage or retiree health care trusts like those approved by the UAW. “If that’s what the automakers want, it looks like it might be tough bargaining,” said Hargrove. The CAW contracts expire Sept. 17. Lower new-hire wages with the UAW and the offloading of retiree health care into Voluntary Employee Beneficiary Associations will help the Detroit 3 save a combined $8 billion annually when the UAW contracts are fully in force in 2010. CAW President Buzz Hargrove: “If that’s what the automakers want, it looks like it might be tough bargaining.” year’s talks with the CAW: They want to bring Canadian labor rates closer to the $59 an hour for wages and benefits paid by the Japanese automakers. CAW workers now earn about $85 an hour, in U.S. dollars, in wages and benefits, compared with $73 for veteran UAW workers. That gap will grow. The new UAW contracts will move UAW labor rates much closer to the Japanese rates by the time the VEBAs are in full force in 2010. The Detroit 3 also are offering buyouts and early retirements to UAW members to make room for new hires who will earn half the wages and ben- Hot times in Canada The Detroit 3 and the Canadian Auto Workers union are drawing battle lines for this summer’s contract negotiations. The current agreements expire Sept. 17. The CAW represents about 35,000 workers at 15 Detroit 3 assembly and parts plants in Canada. Here are key sticking points. CAW President Buzz Hargrove says the union won’t entertain wage cuts or a lower new-hire wage. CAW workers are covered by national health care and negotiated supplemental benefits. They make UAW-like trusts for health care costs less attractive to the Detroit 3. The Detroit 3 want to bring the CAW’s industry-leading $85 an hour in wages and benefits more in line with the $59 an hour paid by Japanese automakers in the United States. source said. “Cost savings with the CAW are in much-harder-to-get-at locations.” Different dollars The free-fall of the U.S. dollar over the past year has highlighted Canada’s labor cost gap. When the Canadian dollar was worth 30 percent less than the U.S. dollar, CAW labor was a bargain even at a higher pay scale. That’s not the case anymore. Last month, Ford Motor Co. manufacturing chief Joe Hinrichs said Ford will have to address competitive issues with the CAW exacerbated by the fall of U.S. currency. Ford is launching its Flex crossover in Oakville, Ontario, this summer. The successful Ford Edge and Lincoln MKX crossovers also are built there. Said Hinrichs: “The recent challenges associated with currency add to the already pre-existing issues with the competitiveness of our operations and our agreements in Canada.” c The goal: Japanese rates As in the UAW negotiations, the Detroit 3 have a clear goal for this efits of veteran workers. If the CAW doesn’t follow suit, the result is likely to be a cutback by automakers in Canadian auto plants, said an industry expert. The source requested anonymity because of the sensitivity of the upcoming talks. Hargrove calls two-tier wages “a nonstarter” because of the damage to factory morale when new hires do the same jobs as longtime workers paid twice as much. And VEBAs are not a likely source of big savings because Canada’s national health insurance pays for the bulk of worker health care, Hargrove said. That leaves little common ground, the industry expert concedes. “With the UAW, the labor cost gap was largely in legacy kinds of things,” the
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