NEW YORK (AP) - Dana Corp. sought to terminate labor contracts and retirement benefits for employees represented by two of its unions, as lawyers argued Monday that the cost cuts are an essential part of its exit from bankruptcy protection.
The Toledo, Ohio-based auto parts maker also announced settlements that affect about 6,300 non-union retired workers and a tentative deal with a third union, the International Association of Machinists and Aerospace Workers. Lawyers moved forward in asking a judge for permission to reject collective bargaining agreements with the United Auto Workers and United Steelworkers.
Dana, one of the largest auto parts makers in the world, said it needs to reduce labor and benefit costs to emerge from bankruptcy as a competitive, viable company. It has said in court papers that its U.S. operations lost $2 billion over the past five years.
A lawyer for the UAW and USW argued that the elimination of retiree benefits for workers would seriously jeopardize health care for many aging employees, some of whom had worked for Dana for decades.
'This case is not about globalization, it is not about the parlous state of the auto industry,' a lawyer for those unions, Bruce Simon, said. 'This case is about what's going to happen to 20,000 people employed and retired.'
In court papers, the company sought annual cost savings of $405 million to $540 million, of which $100 million to $150 million is paid to retiree benefits and another $60 million to $90 million from labor costs.
The IAM deal includes a new collective bargaining agreement, the termination of retiree benefits for its members as of July 1 and a settlement payment by Dana of $2.25 million.
Under the agreement with non-union retirees, Dana will create an account to cover future health care costs for non-union retirees to which it will contribute $25 million now, and another $53 million upon emergence from bankruptcy.
Dana filed for bankruptcy protection on March 3, 2006, amid declining demand from American automakers who saw lower sales of sport utility vehicles and light pickup trucks. It makes brakes, axles and other parts for carmakers such as Ford Motor Co. and General Motors Corp., which together accounted for 36 percent of Dana's 2004 sales.
The company has said it needs to move manufacturing overseas to effectively compete.
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