Dana, Equity Firm Make Deal

Dana, an automotive parts manufacturer operating under Chapter 11 bankruptcy protection, arranged a $500 million investment from a private-equity firm to create two trust funds that will help pay health-care expenses for retirees.

Centerbridge Capital Partners will get as much as a 25 percent stake in the axle, driveshaft and structural, sealing and thermal management parts supplier. The funds will cover retirees of the United Auto Workers and United Steelworkers unions, which agreed to manage the trusts. The changes, combined with reduced wages for new workers and buyouts, will save more than $100 million annually, Dana said yesterday.

Dana will present the plan in U.S. Bankruptcy Court on July 25. United Steelworkers' 1,000 Dana employees are scheduled to vote July 20. The UAW didn't say when its 3,300 members at 12 Dana plants would vote.

The agreement moves the Toledo company closer to its goal of emerging from bankruptcy protection by the end of the year. Dana has to file a reorganization plan by Sept. 3, and workers must vote to accept the proposed contract.

"This industry desperately needs to have its balance sheet replenished, and private equity has the cash for the restructuring," said John Casesa, managing partner of Casesa Strategic Advisors in New York.

The investment, including an additional $250 million to be arranged by Centerbridge, marks the latest rescue of a troubled parts maker by a private-equity firm. Three of the five major U.S. suppliers that have filed for bankruptcy protection since early 2005 are reorganizing with the help of buyout firms.

The UAW's agreement to administer a fund for retiree health-care costs is another sign the union may support such a plan in this month's labor talks with General Motors, Ford Motor and Chrysler.

The three automakers had preliminary discussions about proposing a similar fund to cover as much as $114 billion in combined retiree obligations, people familiar with the talks said last month. Such a fund is the top priority for GM, people familiar with the company's strategy said.