On March 3, 2006, Dana declared bankruptcy and began reorganizing unprofitable operations and shedding dead weight. They exited bankruptcy on February 1, 2008. Debt was reduced from $3.5B in 2002, to $1.2B in 2007. By 2008, Dana was profitable again.
On the same day that Dana exited bankruptcy, Burns resigned and was replaced by John Devine, formerly the CFO of GM and Ford. Dana lost money in 2009 as did almost all auto suppliers during the economic crash. They returned to profitability in 2010 and have made money every year since then.
If Dana’s debt had not been brought under control by Burns during the bankruptcy, Dana would not have survived when revenue dropped from $7.9B in 2003 to $5.2B in 2009. Since their IPO, Dana’s stock price has outperformed the DJIA rising 57% compared to 42% for the Dow.
In 2011-14, Dana has returned to 3-5% net income. Devine left the company on 4/1/11 and was replaced by Roger Wood, a former Borg Warner executive. Unfortunately, since Devine left, the debt to equity ratio has increased from 52% to 155%, I guess the lesson was not learned.
So, my conclusion based on the above data is that rather than running Dana into the ground, the two former GM executives brought the company through bankruptcy caused by a weakening economy and an unsustainable debt structure, to a once again profitable company. Quite a different story than what has been told on this message board.
Some time ago a certain poster (perfect_market) made the claim that ex-GM executives had run the Dana Corporation into the ground.
I made a mental note of that intending to investigate some day. Well, I had a couple hours free this afternoon and had read the interaction between Justum and perfect_market which served to remind me of that mental note.
Here’s what I found out. Before I even begin, I want to say that I’m not a big fan of Mike Burns who was one of the ex-GM people that went to Dana. With that in mind, setting aside my personal feelings about Burns, let’s see what the facts are.
Mike Burns went to Dana in March, 2004 replacing the previous CEO Joe Magliochetti who unfortunately passed away.
Looking at Dana results in the preceding years, in 2001 Dana LOST $298 million in net income (-4.0%), in 2002 they LOST $182 million (-2.4%), and in 2003 they managed to GAIN $222 million (2.8%). So they were basically a breakeven company on its best day, which was a deterioration from 1998-2000 when they were a 5% margin company consistently.
Between 1998 and 2003, the stock price went DECREASED 55% (from $40.88 at the end of 1998 to $18.35 at the end of 2003. During this same time frame, the DJIA INCREASED 14%.
Of particular concern was the fact that total debt in 2002 was a whopping 236% of stockholders equity. Think of that, debt was more than double the book value of the company.
Clearly, Dana was a dead man walking when Mike Burns arrived. He undoubtedly was brought in by the BOD to take the company through bankruptcy and eliminate the unsustainable debt. He did that.
To be continued
"Perhaps they were 'sold right off the truck.' Right."
Or perhaps they follow my experience when I was trying to buy an Escalade last fall. The dealer had none to show me and said that it would be 2-3 months before they had one that was not already tagged. As soon as the vehicle arrives they call the customer, prepare the paper work and it's gone. Same thing at the GMC dealer re: Denali's. I finally bought a Yukon SLT because it was available.
That was last fall. I have no idea what the demand is now. Believe it or not, I don't care.
" However, I did see 64,370 somewhere on the interweb, so maybe that's right."
Hey, if it's on the interweb, it must be right!
"If you can follow the above instructions and find the correct answer of 54,370, rate this post with a 'thumbs up'."
I found it!!
"I have a nice position in GM and will buy more ,however I'll be supporting the activist investors. $25 in cash per share is much too much"
If they had that much you might have a point, but in the last 10K they had $28.2 billion in cash and cash equivalents which is more like $17 per share.
With negotiations, possible law suits, payouts of the GM fund settlements, etc. all coming up, how much stock would you recommend they buy back?
"i am not having issue with your post, just the q's comment that an engineer is telling the gm bod what the financial strategy is. seems a bit of a stretch."
Looking back at that period of time, the new BOD were chosen by the Auto Task Force and you might recall that they were primarily private equity and hedge fund people. Naturally they thought the corporation would be best served by people who looked like them. I disagree, but that's only my opinion.
If you have ever worked with PE and hedge funds, you know that they are a bunch of financial types that are a little short at running a business themselves....very smart people, but not experienced in running large organizations typically. I think another reason that they picked those types is that there was a feeling that the major shortcomings in GM were the financial processes. Very seldom do you find one that has any type of manufacturing background (good for me, provided a lot of money for me advising them).
The article that questinator was looking at is a bit in error, there were other people in the room when it was explained to this subsection of the BOD that engines were a cost center. This particular part of the BOD was a little naive in how large industrial companies cost account, and it needed to be explained to them. GM does, however, have small pockets that do sell major components externally and typically the margin on those products exceeds the overall margin of GM. For instance marine engines and transmissions.
"wow, questinator knows how to spin a tale"
Actually, he is quite right. I don't know about the rest, but GM treats power train manufacturing as a cost center, not a profit center. It would make no sense to establish a selling price for an engine when it is an entirely internal transaction. It is transfer at cost to the assembly group.
The same is true for stamping, transmission, and casting operations.
"Dan Akerson, who ran General Motors for less than three and a half years, issued a stern warning to Apple this week against making a car. In an interview with Bloomberg, he noted that making cars was hard. "
No #$%^ Dan.
"There is nothing responsible about a sustained short term focus.
Agreed Wngr. Get the hedge funds out of the board room."
Unfortunately, their strategy has already worked for them. With yesterday's run up of GM stock, and the four hedge funds already owning 34 million shares, they made almost $52 million just on the rumor. I really don't think there's a big chance they will force the company into the $8 billion buy back. Wilson would only be one person on a board of 14 and the other 13 are responsible people, but this legalized manipulation is not good for the market.
" I have no desire to "research" this guy so if you have some insight, please share!"
I won't share my personal knowledge of this guy, but here is what is publicly known.
He represents 4 hedge funds that have, or will, take large positions in GM. He will use his influence and power to force the company into using cash to buy back shares whether it's a good idea or not for the company. If you read the WSJ article, he will get a cut of the profits the hedge funds make from this manipulation. After a good portion of the cash on hand is depleted, the hedge funds will take their profits and run and Harry Wilson will resign from the board, his job completed.
"Interesting report today in the WSJ."
Supor, GM does NOT need this guy on the board. You'll just need to trust me on this. Maybe good for investors short term, disaster long term.
"It was a number of years ago and I am not going to say which one. It was a major GM plant in SE MI."
You might want to do it again. Things have changed. You might have your eyes opened.
You bring up a good point and it's been my experience as well. Subordinates will invariably pick up on your true attitudes toward them."
Absolutely. Unfortunately, a lesson lost on too many people that have the responsibility of supervising others. I remember when I was a young 23 year old supervisor, my first plant manager told me the same thing before my first day. I have always tried to live up to that and I think it has served me well.
Don't get me wrong, this is not to say that you need to be permissive, I have fired my share of people including plant managers, but the good ones will flourish with high expectations on the part of management.
"Whatever the case, the car buying public should shop Toyota and Honda and give the poor overworked UAW people some time off to sort out their values and discern who the customer actually is. Am I right or am I wrong on this proposal?"
If you are seriously concerned about injuring people (which of course you aren't), people should not buy Toyota's and Honda's. If you have access to OSHA 300 Log data, which I do, you will see that injury frequency and severity are much worse at these two companies vs GM and Ford.
"GM supports nomination of Harry Wilson to board."
FYI, Harry Wilson is a jerk. He will not be a good addition to the BOD. I have some personal knowledge of him.
"Yes, I have visited an auto plant (the one where you worked)"
Which one, I have worked at 5 plants plus 2 stints at headquarters.
"many were strung out on drugs and alcohol and spent as much time on sick leave as they did working"
Clearly you run in a different crowd than I do.
" As for your claim that drug abuse in the factory is no worse than among the general population, I am really surprised that you would offer that in support of your case. So what, even if it is true! "
So what? It makes your point invalid.
"A relative, a first level supervisor, described his people as "not being smart enough to come in out of the rain."
Your relative lacks leadership skills. Probably in one of two groups. First group includes people freshly promoted from hourly that believes that all should behold his wonderfulness. Second group is fresh college grads who just don't know any better. Neither of these types last very long. They are not well suited for supervisory work. These people represent a small percentage of first line supervisors.
"Once, a Chevrolet superintendent complained to me that he had to have one-third excess head count to ensure that he had enough people to keep the line going."
I am going to assume this information is over 20 years old since it's been at least that long since GM had a Chevrolet plant. i was responsible for 15 plants for the last 6 years I worked at GM. Casual absenteeism ran around 1-2%, with about 5-10% on long term sick leave. Admittedly, the European and Mexican plants were lower than the US plants.
"Oh brother! And drank alcohol and took drugs, smoked excessively, skipped any fitness activity."
We can talk about how much these workers are paid, but you are showing your ignorance and TV promoted conception of UAW workers. I will tell you it is a lie propagated by reporters trying to sell their story. Have you ever been involved in a news story? If so, you know the inaccuracies and down right lies that these people tell. Heck, even the most trusted anchor on US television will probably lose his job over fabricated enhancements to stories.
I don't know what you did for a living, but I bet that your work content wasn't as packed as a UAW worker on an assembly line. In a typical high volume assembly plant, the workers have a TAKT time of 55 seconds, i.e., he/she is responsible for completing their assigned task within that period of time. And there's an Industrial Engineer standing behind them timing every movement and will pack their job content to about 95%. Bear in mind that even with ergonomics tools recently developed, wrestling a back seat or two tire and wheel assemblies into place is not for the faint hearted....would you like to try?
Have you ever been in an automotive factory? Even just to walk through? I'm pretty sure you haven't or you're not very observant.
Can you find autoworkers that drink and take drugs? Yep, can I find priests, politicians, and executives that do the same? Absolutely. I don't have statistics but I would be willing to bet that substance abuse is probably not any more prevalent in the UAW than it is in the general population.
You seem to think they are just dumb people that couldn't do anything else. Any auto plant has many, many people that are there simply because they didn't have the breaks in life that you did. There are some impressively smart, well rounded people that I personally know and count among my friends that were union people and union leaders.
You are simply wrong.