Bankruptcy Court Sides with Dana

After a court battle over component pricing that could have stalled delivery to Ford and Nissan assembly plants, Dana finds relief.

Score one for Dana Corp. The auto-parts supplier, which is trying to work out a deal with creditors so it can emerge from bankruptcy, won a key pricing dispute with one of its own suppliers. The win in bankruptcy court allows Dana to continue its shipments of parts used in Ford and Nissan vehicles, reports the Associated Press.

The arrangement calls for Dana to pay lower prices for parts it receives from component manufacturer Citation Corp. In addition, Citation must pay $790,000 to compensate Dana for alleged past overpayments, according to the report.

In 2006 Dana bought about $30 million worth of components from Citation, a Dana supplier for more than a decade, the AP notes. However, a dispute surfaced in 2004 when Citation filed for Chapter 11 bankruptcy protection. Citation threatened to stop providing components unless Dana agreed to pay higher prices, according to the AP. The following year, Dana claimed it was cheated by Citation: allegedly, the components Citation delivered to Dana did not contain the full $6 million worth of steel Dana had purchased for Citation to be used in the fabrication of the components.

Several days before Dana filed for bankruptcy protection in March 2006, Citation threatened to stop shipping parts to Dana unless it paid $4.9 million to “clear all open invoices,” according to the report. As a result, Dana made a wire transfer of $3.5 million to Citation to keep the factories open. But later that year, Citation went ahead and raised its prices, reported the AP.

Under the court-approved settlement, the prices will be lowered by more than 10 percent, retroactive to September 2006, says the AP. In addition, Citation will provide Dana with a refund to cover price differences on parts purchased after that month. Under the deal, Citation will get $565,116 in unsecured claims against Dana and an affiliate in their Chapter 11 cases.

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