Dana Corp. may recover as much as $1.15 billion from the planned sale of its automotive aftermarket business, but the company hasn't said what it will do with the funds.
Michael Burns, Dana's new CEO, declined to say what the firm will do with the proceeds of the sale but said an ``add-on acquisition'' is possible ``if it makes sense.''
Toledo, Ohio-based Dana is pressing to reach a deal by the end of June, Mr. Burns said. Dana's aftermarket business last year generated between 20 and 25 percent of the company's $8.07 billion in sales.
In December, Dana said it planned to divest much of its replacement parts business so it could focus on building parts directly for auto makers. Mr. Burns said the sale will make the firm less attractive as a takeover target. Rival ArvinMeritor Inc. of Troy, Mich., unsuccessfully attempted a hostile takeover of Dana last year, a move that would have enabled the two companies to cut costs by combining their aftermarket units.
Mr. Burns, the former General Motors of Europe president who took over the top job at Dana in March, is expected to follow deceased predecessor Joe Magliochetti's goal of paying down debt and other measures to recover the firm's investment grade corporate ratings.
Other moves could include a contribution to the firm's pension plan or an improvement in dividends. Mr. Burns said his immediate goals are to build revenue and cut costs.
Dana's management has been in a hurry to improve earnings and growth since the failed takeover bid from ArvinMeritor.
Mr. Burns said companies in the auto parts business ``are never fixed. They have to continue cutting costs and pushing for profitable growth. ``Companies in the auto industry have a constant need to take cost out of the business. We'll get some help from more sales in the heavy-truck end of the business this year.''
One cost issue immediately confronting Dana and the rest of the auto industry is the dramatic climb in steel prices. The issue is so hot that Delphi Corp. obtained court orders forcing three suppliers to continue shipping components despite cost increases.
It will take action by auto makers and suppliers to cope with the higher prices, he added.
And while his time at the head of GM Europe means Mr. Burns has bonds with parts buyers within the auto maker, he doesn't expect to get any breaks in pricing negotiations. ``When it comes to winning business, it's beneficial to know the players, but results are all that counts,'' he said. ``I think I understand the dynamics of both sides of the business, but I don't look for it to get easier any time soon.''
Mr. Burns said he sees revenue growth for Dana this year in its engine components and thermal products.
He said it is important for the supplier's growth to come from existing business units rather than by acquisition.
``It will take some time,'' he said. ``If we do any acquisitions, they will be strategic to the things we do.''