Dana completes two agreements for growth in emerging markets

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Dana Holding Corp. on Tuesday, July 5, announced that it has completed two transactions that will enhance its position for further growth in the emerging markets of China and India. Dana has increased its stake in Dongfeng Dana Axle Co. Ltd., a China-based commercial-vehicle axle joint venture, to 50 percent. Dana also has acquired the commercial-vehicle axle business of Axles India Ltd.

Dana has acquired from Dongfeng Motor Co. Ltd an additional 46 percent equity in DDAC to achieve equal ownership. Dana paid $124 million to DFL; a sales incentive agreement effectively could increase Dana’s consideration by as much as $20 million if specified profitability targets are achieved. According to Dana, DDAC achieved 2010 sales of nearly $1 billion, supported by the strong performance of both the truck and bus markets and in particular of its main customer, Dongfeng Motor Co. Ltd.

“We are encouraged by the continued strong performance of the truck and bus markets in China, and of our partner Dongfeng, and look forward to the strengthened relationship,” says Roger Wood, Dana president and chief executive officer. “This is another important step in our ongoing drive to seek out opportunity in the Chinese market and expand globally.”

Headquartered in Xiangyang, Hubei Province, DDAC is the primary supplier of truck axles to Dongfeng Motor Co. Ltd. DDAC, originally formed in 2005, currently offers a complete range of truck axles in the Chinese market, including drive, steer, tandem and hub-reduction axles for light-, medium- and heavy-duty trucks as well as buses. With Dana’s increased equity in the joint venture, DDAC will become its largest overseas axle manufacturing base.

Dana’s manufacturing experience in China stretches back to 1991. In addition to DDAC, Dana manufactures off-highway axles, driveshafts and transmissions; commercial vehicle driveshafts; light-duty axles and driveshafts; and thermal products in the country. In May, Dana broke ground on a technical center in Wuxi, Jiangsu, China. This facility will provide advanced product and applications engineering through research, design, development and testing of driveline, sealing and thermal products, including electric vehicle battery coolers. The center is expected to be fully operational by the end of 2011.

In India, Dana has acquired the drive head manufacturing and final assembly operations of the commercial-vehicle axle business of AIL. The axle drive head includes the pinion, ring gear, differential lock, bearings, lube pump and yoke inside the axle housing. Dana also has assumed responsibility for the marketing, sales and engineering of these medium- and heavy-duty axles.

Key customers of this business are Ashok Leyland and Mahindra & Mahindra. Dana’s investment of $13 million in this transaction is expected to generate about $50 million in annual revenue. AIL, a joint venture between Dana and two India-based companies, will continue to manufacture axle housings for Dana and other customers.

“This transaction further extends our capabilities and operations in another rapidly growing market,” Wood says. “Dana’s recognized manufacturing and engineering leadership will be a key advantage in growing both of these businesses.”

Dana’s manufacturing presence in India dates to 1965 and today includes the manufacture of axles and driveshafts for the automotive, commercial vehicle and off-highway vehicle markets. In addition, Dana is able to produce sealing products in this region.