Dana Corporation

4500 Dorr Street
P.O. Box 1000
Toledo, Ohio 43697
U.S.A.
(419) 535-4500

Public Company
Incorporated: October 12, 1916 as Spicer Manufacturing
Company
Employees: 38,200
Sales: $3.695 billion
Market Value: $1.829 billion
Stock Index: New York London

Executives at the Dana Corporation are proud of the fact that the company grew up with the motor vehicle industry. The company has good reason to emphasize this since Dana Corporation has managed to remain both a flexible growth company throughout the changes in the automotive industry, as well as a leader in its field.

The Dana Corporation began with an idea that would improve automotive equipment. In 1902 Clarence Spicer invented the Spicer universal joint to replace the chain and sprocket devices that were being used for automobiles at that time. With this invention, Clarence Spicer founded the Spicer Manufacturing Company of Plainfield, New Jersey.

Clarence Spicer was president of the company from 1910-1914, and Charles A. Dana was appointed to the position in 1916. Dana, a well-known philanthropist, New York lawyer, and legislator remained at the head of the Corporation for more than half a century. In 1946 the Spicer Manufacturing Company was renamed Dana Corporation in his honor.

Dana graduated from Columbia University with both a bachelor of arts and law degree. After college, he practiced law for the State of New York, becoming assistant prosecutor in 1907. Dana went on to serve as a state legislator for six years before becoming president and then chairman of the Corporation. Dana also served as director or officer of over 20 additional companies.

In 1930 the company moved to Toledo, Ohio where its headquarters have remained. Dana had to resort to numerous layoffs over the years, and in 1945 the company fired 4,000 workers because of a steel shortage. Two months before this layoff, Dana had managed to end a 55-day strike at the Pottstown, Pennsylvania plant when 1,820 employees stopped work because personnel with low seniority were rehired after the dismissal of some of their colleagues with “super-seniority” rights.

By 1952 Dana considered closing down the Pottstown plant because it was no longer competitive. But through careful, and lengthy, negotiations with the United Auto Workers union, the management agreed to a four year $5 million modernization process that would enable the plant to regain its competitive edge. This meant several concessions on the part of the UAW, including 21 revisions in its union contract, but by 1959 the plant was productive once again.

During the 1960’s the Dana Corporation grew from strength to strength and by 1967 was one of the largest independent suppliers of automotive components and replacement parts throughout the world with $500 million in sales. Dana saw itself as a “growth company” and not a conglomerate. Management was watching for new developments within the transportation industry.

Dana became a leader in the after-market industry early in the 1960’s with the acquisition of Perfect Circle Corporation, a manufacturer of piston rings and related products, and in 1963 with Victor Manufacturing and Gasket Company. By 1968 the company’s impressive customer list included General Motors, Ford, International Harvester, Chrysler, and American Motors.

In the late 1960’s, Rene C. McPherson was appointed president of the company. Described by Fortune magazine as a “maverick,” McPherson is important in the history of Dana Corporation because of his progressive policies on management and employee relations. He is credited with turning a large, somewhat unwieldy, auto parts manufacturer into a “model of productivity.” One of the first decisions McPherson made was to cut 350 people from a 500 person staff at company headquarters in Toledo and replace a 17-inch stack of company operating manuals with a brief policy statement.

McPherson decentralized the corporate bureaucracy by requiring managers to make decisions and encourage personnel to participate in a Dana stock plan. At his insistence, managers met with employees instead of sending memos, and in a unique move, time clocks were abolished and managers helped personnel to establish their own production goals.

Another innovation was the establishment of “Dana University,” an in-house training program for employees who wanted to move up the ranks of the company. The progressive policies of the company led one security analyst to note that McPherson brought “Japanese-style management to Dana before most people even knew what it was.”

McPherson’s strategy was to make careful, small acquisitions while maintaining low costs and high productivity. As a result, Dana was considered one of the nation’s best-run companies and maintained a sound financial record in the 1970’s. During this decade, McPherson moved Dana away from its reliance on the original-equipment market and toward the light trucks market, which ultimately represented 35% of its 1970’s sales.

Dana has been praised for its ability dramatically to improve its acquisitions. For example, in 1974 Dana acquired Summit Engineering Corporation, a manufacturer of numerical controls for machinery. At the time the company’s sales were at $900,000. Under Dana’s direction, sales increased to $18 million by 1979.

Between 1963 and 1980 Dana Corporation purchased 24 companies that were outside its original-equipment vehicle business and it saw profits rise from $62 million in 1975 to $164 million by 1979. There were now three distinct areas to the corporation’s business: original-equipment auto and truck parts, replacement parts, and industrial machine components.

The changes implemented by McPherson were carried on by Gerald B. Mitchell in 1980 after McPherson retired. Dana’s continuing commitment to its workers’ concerns was made difficult for Mitchell because of problems brought on by the recession of the early 1980’s. But Mitchell well understood the validity of his company’s approach, having started as a Dana machine operator at the age of 16.

The emphasis on light truck parts in the 1970’s caused a dependency that resulted in a 40% earnings drop in the 1980’s when the light trucks no longer appealed to the consumer. 1982 earnings were 46% below those of 1980; Dana had to close five plants and lay off one-third of its employees in its American operations.

One United Auto Worker officer stated that Dana’s management principles “are very nice while everything is going good. But when things turn bad, Dana is just like every other company.” However, Dana’s concern for its employees was demonstrated to some degree. The company offered its unemployed workers preferential hiring at other plants and assisted with relocation expenses. Lists of laid-off employees were sent to other manufacturers in the area and a two week job counseling program was provided when Dana plants were shut down.

Suddenly in 1983 Dana’s original equipment parts business had an excellent year; earnings rose 119% to $112 million. However, Mitchell believed that Dana’s best prospects for the future were probably in the replacement market for its auto and truck parts. In 1984, Mitchell was anticipating that the replacement parts business would make up 40% of the company’s net earnings by 1989, while the original-equipment business would make up only about 30%.

Dana began manufacturing gears in 1984 that were identical to those designed for a line of Clark Equipment Company truck transmissions. Through this tactic, it is possible for Dana to “skim the cream off the top of Clark’s replacement sales.” A competitor commented in Business Week that “Gerry Mitchell has drive and nerve, but our attitude is: We are going to watch him slip on that banana.” But Mitchell did manage to direct Dana through a difficult period to a position of moderate security.

During the early 1980’s Dana also diversified into the financial service industry. The company had earlier developed an internal financial service as protection against anticipated insurance costs. However, its acquisition of Cherokee Insurance Company, a small property and casualty insurance company, was not successful. In 1984 Cherokee failed and Dana wrote off $6 million of its investment. While Dana declared it had no further liability for Cherokee Insurance, other companies felt differently, particularly because Cherokee had been unable to fulfill reinsurance obligations. Dana was subsequently sued for $1.7 million by St. Regis Corporation in 1985 and other insurance companies involved with Cherokee were reviewing the matter.

During 1985 Dana spent $120 million on “Project 90,” a program for investment in new technology, better use of existing facilities, and a new system of incentive payments which could be tied to higher productivity. The company hopes to reduce its costs to 90% of those of its major competitors. Dana is experiencing another transition because of the trend of car manufacturers’ to make parts in-house or to use foreign-made parts. Although it has now limited its manufacture of passenger car components, Dana has expanded its production of engine parts for trucks.

Dana’s future is inextricably bound to the automotive industry. However, over the years the company has learned to survive the industry’s ups and downs. The changes that are occurring within Dana at the present time are a result of management’s realistic, and optimistic, attitudes.

Principal Subsidiaries

Dana Equipamentos Limitada (Brazil) (99.9%); Racing-Hidraulica Ltd., (Brazil); Dana World Trade Corp.; Hayes-Dana Inc. (Canada) (52%); Diamond Printing and Mailing; Boston Industrial Products; Dana Domestic International Sales Corp.; Wix Corp.; Maumee Holdings BV (Netherlands); Albarus SA (Brazil) (56%); Warner Electric Brake & Clutch Co.; Dana Distributing Inc. The company also has subsidiaries in France and West Germany.