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

    TOLEDO, Ohio, July 6 /PRNewswire-FirstCall/ -- Dana Corporation (OTC
 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.
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     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:
 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.
 
 

SOURCE Dana Corporation