LAWFUEL – The Law Firm Newswire – Jones Day successfully represent…

LAWFUEL – The Law Firm Newswire – Jones Day successfully represented Dana Corporation in obtaining a series of settlements to eliminate $1.447 billion of accumulated liability for health and life insurance benefits for retirees from its unionized and nonunion workforces, and to modify its collective bargaining agreements with active employees. The labor cost savings resulting from these settlements will enable Dana to compete successfully in the troubled auto industry upon emergence from bankruptcy.

In January of 2007, Jones Day initiated motions for relief on behalf of Dana under Sections 1113 and 1114 of the Bankruptcy Code while simultaneously attempting to negotiate a settlement of outstanding issues. Shortly thereafter, Dana settled the portion of the matter that dealt with nonunion retirees, and one union, the IAM. After a trial regarding the remaining unions, the court suggested additional settlement discussions. On July 5, 2007, after months of negotiations with the unions and their representatives, Dana reached a tentative settlement with the UAW and the USW. The settlement provided, among other things, for elimination of the Company’s retiree benefit obligations. Together with the earlier settlement with Dana’s nonunion Retirees and the IAM, settlements resulted in the elimination of almost $1.5 billion in accumulated post-retirement benefit obligations, and the creation and funding of Voluntary Employee Benefit Association (VEBA) trusts to provide non-pension retiree benefits, a freezing of the current defined benefit pension plans and contributions to a defined-contribution plan, institution of consumer-driven healthcare programs for active unionized employees with sharing of medical inflation costs, a competitive two-tier wage structure, elimination of liability for long-term disability benefits, elimination of cost of living increases, buy-outs of high-wage employees, cost-saving changes to work rules, and agreement on plant closings, work movement and other manufacturing footprint changes. As part of the settlements, Centerbridge, LP will provide financing for Dana’s VEBA contribution and, in return, will receive a portion of Dana’s post-emergence equity.

On July 6, 2007, Dana filed a motion pursuant to Section 9019 of the Bankruptcy Code requesting court approval of its labor settlement with the UAW and USW and its capitalization agreement with Centerbridge (collectively the “Global Settlement”). Several creditors filed objections to this motion; however, all but two of these objections were withdrawn as a result of successful negotiations with Dana’s main creditor constituents. On July 26, 2007 Judge Burton Lifland approved the Global Settlement, after hearing testimony from Dana CEO Michael J. Burns. In his decision, Judge Lifland described the Global Settlement as “groundbreaking” and “paving the way” for Dana’s reorganization. With the labor and legacy cost savings associated with the global settlement, as Judge Lifland noted, Dana is well positioned to emerge from bankruptcy and successfully compete in the competitive auto industry.

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