Auto-parts maker Dana Corp filed for bankruptcy protection for its US operations, joining a growing list of suppliers forced to make major restructuring moves because of the slumping US auto industry.
Dana, which sells brakes, axles and other parts to most major automakers, has been facing increasing pressure from big car makers to sell them parts at lower prices.
That coupled with rising energy costs that are driving up the costs of raw materials and driving down demand for gas guzzling sport utility vehicles and pickup trucks have put auto parts suppliers in a financial bind.
Auto analysts said Dana's bankruptcy filing on Friday will increase the uncertainty engulfing the industry.
"Dana's not the first and it won't be the last," Sean Egan, managing director of Egan-Jones Ratings Co.
Financial trouble for auto suppliers will eventually hit new car buyers too, because some suppliers won't have the money to reinvest in new products and help car companies make high-quality vehicles at lower costs, he said.
Dana, with 46,000 workers worldwide said in January that it lost nearly US$1.3 billion in the third quarter last year while realigning its business. It has been in a downward spiral since the company announced last fall that it was restating earnings and lowering its profit forecast for last year because of accounting errors.
The Toledo-based company said it filed for bankruptcy reorganization protection so it could fix financial and operational problems. The filing was entered in the US Bankruptcy Court for the Southern District of New York.
"The general financial condition of the industry, together with Dana's inability to renew or expand its credit facilities in a timely manner, has significantly constrained Dana's liquidity," the company said in a statement.
Dana supplies parts to General Motors Corp, Ford Motor Co and other automakers. The filing does not affect the company's businesses in Europe, South America, Asia, Mexico or Canada, the company said.
"They're making money overseas," said Marc Santucci, a supplier analyst for ELM International Inc. "The filing shows that anyone who's a major suppler to the Big 3 is in trouble."