Dana CEO says customers 'baffled' by ArvinMeritor's bid

Dana CEO Joe Magliochetti said rival ArvinMeritor Inc.’s hostile offer for his company has not distracted him or his employees. Dana’s board and employees are behind his efforts to turn the company around, Magliochetti said in an interview at the Management Briefing Seminars in Michigan. “Dana is getting better everyday,” Magliochetti said. Asked about his automaker customers’ response to the $4.4 million bid from ArvinMeritor, Magliochetti said they are mystified. They, too, fail to see any benefit from a combined Dana/ArvinMeritor, he said. “Yes, I’ve spoken with them,” Magliochetti said. “Most are baffled by the logic” of the ArvinMeritor offer. Dana, of Toledo, Ohio, has installed defenses against its rival, but Magliochetti declined to discuss them. Nor would he say if he has a “white knight” to initiate a friendly takeover of Dana. Industry analysts say Eaton Corp. has strong ties to Dana, and some have suggested that the Cleveland company could become a friendly bidder. But Eaton has a high debt-to-equity ratio, making a competing bid difficult.Asked if he would sell off a key Dana business unit to deter ArvinMeritor, Magliochetti said he “would not destroy the company to stave off a suitor.” Asked about ArvinMeritor CEO Larry Yost’s motive in bidding for Dana, Magliochetti said ArvinMeritor is suffering problems in its heavy-truck business, and aftermarket unit, which has been hurt by automakers’ shift to stainless exhaust systems. ArvinMeritor spokeswoman Lin Cummins said yesterday that the company’s heavy truck business operating margins are up this year, compared to last year. As to its exhaust business, she said, “Higher steel prices have hurt everyone.” The financing of ArvinMertior’s bid for Dana makes Magliochetti uncomfortable. He said the required financing for a Dana buyout would result in ArvinMeritor having between 80 percent and 90 percent pro forma debt-to-capital ratio, which would be among the highest in the automotive parts making sector. Dana’s board and Magliochetti formally rejected ArvinMeritor’s offer on July 22. Magliochetti said he and the board have no plans to change their response, even though the $15 per share deal remains on the table through Aug. 28. “So far it is totally inadequate,” Magliochetti said. ArvinMeritor will continue the fight, Cummins said. “We are committed to the Dana proposal.”

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