Dana Corporation Announces Settlements with USW and UAW, Agreement with Centerbridge Capital Partners on Major Investment in Dana

PRNewswire-FirstCall
TOLEDO, Ohio
(OTC:DCNAQ)
Jul 6, 2007

TOLEDO, Ohio, July 6 /PRNewswire-FirstCall/ -- Dana Corporation (OTC: DCNAQ) (BULLETIN BOARD: DCNAQ) today announced a series of interrelated agreements that will substantially reduce the company's operating costs and provide important momentum toward its emergence from bankruptcy as a competitive, sustainable business. The agreements consist of:

  - A settlement agreement with each of the United Steel Workers (USW) and
    the United Auto Workers (UAW), which will lower Dana's labor costs and
    replace the company's health care and long-term disability obligations
    for retirees and employees represented by these unions with Voluntary
    Employees' Beneficiary Association (VEBA) trusts to which Dana will
    contribute in aggregate approximately $700 million in cash (less certain
    benefit payments made prior to the effective date of the company's plan
    of reorganization) and approximately $80 million in common stock of the
    reorganized Dana;
  - An agreement with Centerbridge Capital Partners, L.P., and its
    affiliates on the terms under which the firm will invest up to $500
    million in cash for convertible preferred stock in the reorganized Dana
    and facilitate an additional investment by other investors of up to $250
    million in convertible preferred stock; and
  - A plan support agreement with the USW, the UAW, and Centerbridge, under
    which these parties will support a plan of reorganization filed by Dana
    that includes both the labor settlements and the Centerbridge investment
    agreement.

  (LOGO http://www.newscom.com/cgi-bin/prnh/19990903/DANA )

These agreements are subject to approval by the Bankruptcy Court for the Southern District of New York, where the company's Chapter 11 bankruptcy proceeding is pending. The union settlement agreements are also subject to ratification by Dana's USW and UAW employees, which the unions will seek in the near term.

"Through our negotiations with the USW and the UAW, and negotiations with Centerbridge for the investment that will contribute to our ability to fund the VEBAs, we have reached what we believe are fair and constructive agreements," said Mike Burns, Dana's chairman and chief executive officer. "I am particularly pleased that these agreements were reached as a result of a shared commitment - from all of the involved parties - to the long-term success and viability of Dana Corporation."

"We welcome the investment by Centerbridge, a private equity investor with considerable expertise in the automotive industry and complex restructurings. Centerbridge brings a long-term perspective and a strong commitment to assisting us in building a solid future for Dana," Burns added. "While there is a good deal of work yet to be done, we are on track to file a reorganization plan by the beginning of September and to emerge from bankruptcy by year end."

Settlements with USW and UAW

Encompassed in the settlements with the USW and UAW are four-year extensions of Dana's collective bargaining agreements with all of its USW- and UAW-organized facilities in the United States and new agreements with several recently organized facilities. Among other items, the extended and new bargaining agreements will provide for the establishment of a two-tier wage structure at certain affected U.S. operations, changes in disability benefits, and a freeze on credited service and benefit accruals under the pension plans for active employees represented by the USW and UAW.

"These agreements will resolve significant ongoing cost issues when implemented and they provide important momentum toward our completion of a reorganization plan that will position us to operate as a competitive, sustainable business after emergence," Burns said.

Each of the union settlement agreements also calls for the establishment of a VEBA to replace the company's current retiree health care plans and long- term disability obligations for employees covered by USW and UAW collective bargaining agreements. A VEBA is a special, tax-deductible trust that can be used to provide certain benefits, such as medical reimbursement, to participants and their beneficiaries.

The settlement agreements provide that upon Dana's emergence from bankruptcy, the company will contribute, in aggregate, approximately $700 million in cash (less certain benefit payments made prior to the effective date of the company's plan of reorganization) and approximately $80 million in common stock of reorganized Dana to the VEBAs in exchange for the termination of Dana's obligation to provide non-pension retiree welfare benefits for USW- and UAW-represented retirees and long-term disability benefits to USW- and UAW-represented employees. The company will continue to provide benefits for these retirees and employees under its existing plans until emergence. Dana currently has an aggregate of approximately $1.1 billion in unfunded non- pension benefit and long-term disability obligations under its U.S. post- retirement health care plans for USW- and UAW-represented retirees and employees.

Dana estimates that the modifications to the USW and UAW collective bargaining agreements and other provisions of the union settlement agreements will collectively result in annual savings of more than $100 million.

Agreement for Issuance of New Equity

Under terms of the investment agreement, Centerbridge will purchase up to $500 million of convertible preferred stock of the reorganized Dana and facilitate an additional investment of up to $250 million in convertible preferred stock.

The conversion price will be based on trading prices of common stock of the reorganized Dana during a short period after emergence. Using preliminary forecasts and a preliminary valuation as an estimate of future market trading prices for the reorganized Dana's common stock, the company estimates that the $500 million of convertible preferred shares would represent less than 25 percent of the fully diluted common stock of the reorganized Dana on an as- converted basis.

Proceeds from the investment will be deployed in part to fund the VEBA trusts that will be established under the settlement agreements with the USW and UAW.

The closing of the Centerbridge investment will be subject to Dana's filing of a plan of reorganization and a disclosure statement by September 3, 2007, as well as other customary conditions, but will not be subject to further due diligence.

Dana will be able to terminate its arrangements with Centerbridge to accept an alternative transaction or plan under certain circumstances, with the reasonable consent of the USW and UAW.

Agreements Keep Company on Track to Achieve Fundamental Changes

"Last November, to address the harsh reality that Dana had generated more than $2 billion in losses over the past five years, we announced a series of interdependent restructuring initiatives," Burns added. "These initiatives, affecting all of the company's constituencies - our customers, suppliers, both union and non-union employees and retirees - were designed to result in an aggregate pre-tax annual income improvement of $405 million to $540 million."

  The Dana initiatives call for savings in five interrelated areas:
  1.  Achieving substantial price recovery from customers;
  2.  Optimizing Dana's U.S. manufacturing footprint, including the moving
      of certain operations to lower-cost sites;
  3.  Reducing labor costs by creating a more industry-competitive cost
      structure;
  4.  Eliminating retiree health and welfare costs; and
  5.  Reducing administrative costs.

"Without the settlements with the USW and UAW, essential savings in other areas could be jeopardized," Burns said. "With these settlements, we will be solidly within the range of savings we need to move forward with our plan of reorganization and emerge as a competitive, sustainable business."

About Centerbridge Capital Partners L.P.

Centerbridge is a $3.2 billion multi-strategy private investment firm. The firm is dedicated to partnering with world-class management teams in a range of industry verticals. Centerbridge's investment style provides the flexibility to employ various strategies to help companies achieve their operating and financial objectives. The limited partners of Centerbridge include many of the world's most prominent financial institutions, university endowments, pension funds, and charitable trusts.

About Dana Corporation

Dana is a world leader in the supply of axles; driveshafts; and structural, sealing, and thermal management products; as well as genuine service parts. The company's customer base includes virtually every major vehicle and engine manufacturer in the global automotive, commercial vehicle, and off-highway markets, which collectively produce more than 65 million vehicles annually. Based in Toledo, Ohio, the company's continuing operations employ approximately 35,000 people in 28 countries and reported 2006 sales of $8.5 billion, with more than half of this revenue derived from outside the United States. For more information, please visit: http://www.dana.com/.

Dana and certain of its U.S. subsidiaries are operating under Chapter 11 of the U.S. Bankruptcy Code as debtors in possession. Information about the bankruptcy proceedings can be found at: http://www.dana.com/reorganization. While Dana continues its reorganization under Chapter 11, investments in its securities are highly speculative. Although shares of Dana common stock continue to trade on the OTC Bulletin Board (OTC Bulletin Board) under the symbol "DCNAQ," the trading prices of the shares may have little or no relationship to the actual recovery, if any, by the holders under any eventual court-approved reorganization plan. The opportunity for any recovery by holders of Dana common stock under such reorganization plan is uncertain and shares of Dana common stock may be cancelled without any compensation pursuant to such plan.

Forward-Looking Statements

The agreements with the USW, the UAW, and Centerbridge that are discussed in this release are proposed agreements which are subject to the approval of the Bankruptcy Court, and ratification by union members with respect to the union settlement agreements, and there can be no assurance that these agreements will be approved or implemented as contemplated herein. Statements in this release about Dana's equity under the company's eventual court- approved plan of reorganization constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are speculative. Forward-looking statements are inherently subject to risks and uncertainties and the actual value of Dana's equity may differ materially from that anticipated herein. Dana does not undertake to update any forward- looking statements in this release.

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PRN Photo Desk, photodesk@prnewswire.com

SOURCE: Dana Corporation

CONTACT: Chuck Hartlage of Dana Corporation, +1-419-535-4728,
chuck.hartlage@dana.com

Web site: http://www.dana.com/

Company News On-Call: http://www.prnewswire.com/comp/226839.html


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