Dana Inc (DAN) 2007 Q4 法說會逐字稿

Good morning and welcome to Dana Holding Corporation's fourth-quarter and full-year 2007 webcast and conference call. My name is Dennis, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and the Q&A session, will be recorded for replay purposes. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer period after the speakers' remarks. We will take questions from the telephone and the Web. (OPERATOR INSTRUCTIONS). At this time, I would like to begin the presentation by turning the call over to Dana's Investor Relations Officer, [Steve Superitz]. Please go ahead, Mr. Superitz.

Thanks, Dennis. Good morning, everyone. Thank you for joining us today. As referenced on this slide, I would like to remind everyone that topics discussed in today's call will include forward-looking statements. Please take a moment to review our Safe Harbor statement. Today's call is being recorded. This conference call and its supporting visuals are the property of Dana Holding Corporation. They may not be recorded, copied or rebroadcast without our written consent. As a reminder, our webcast system allows you to direct questions to us via the Internet. We will answer as many questions as time permits.

Today's call will feature remarks by Dana's Executive Chairman and Acting CEO, John Devine and Chief Financial Officer, Ken Hiltz. John will begin today's presentation with a brief summary of our emergence activities and a company overview. Ken will follow with a review of our 2007 financial results. Following a few closing remarks from John, our call will conclude with a question-and-answer session. With that, let's move to slide number five, and I will turn the call over to John Devine.

Thank you, Steve. And good morning, everybody. Thanks for joining us. Great to be back in the auto business. I can't seem to stay away, obviously, so it is nice to be back and great to be here at Dana.

We want to cover primarily today the '07 results. So Ken will discuss that in a moment, but before we do that, I wanted to cover just a couple brief areas to remind everybody about the snapshot of Dana as we emerge from Chapter and a brief overview of our company footprint, which we think is an important point for Dana. We think it is a real strength because of our diversification by customer, by productline and by geography. And then lastly, I will finish up at the end of Ken's presentation with a review of our -- 2008 focus. I know you have a lot of questions about '08. We will tell you what we can today, but at the very least, we wanted to cover with you what our focus is, what we are working on and we will update you as that progresses during the year.

If I can ask you to turn to page 5, just a couple pages here on our snapshot coming out of Chapter 11. You've seen this before, so this is not new news. Obviously, the team, Mike Burns and the team did a terrific job getting through Chapter quickly. These things are never easy. But the emergence on January 31st was very much on schedule, and I think in today's environment, reflected a very good work.

There were four key initiatives that were focused on during bankruptcy. Product profitability, some pricing improvements from customers, those are locked in with specific agreements. Obviously, we started an important and new relationship with both the auto workers and the steel workers. And that resulted in a number of benefits to both of us, including, obviously, labor and benefit costs stated here, including getting the healthcare off the balance sheet.

Optimization of the manufacturing footprint was important. Obviously, this is an area that is very important to us, but we moved a number of plants and had to consolidate and close some and we had a reduction in our overhead costs of $50 million. So I would say couple things here that there has really been pain shared by all the stakeholders, but it has resulted in a much stronger company.

On page 6, we restructured a number of businesses. We exited several businesses. You can see it here. Ken will cover the cash impact later of doing that. That was about $600 million that we received for these businesses. But it has given us a much narrower and we think important focus going forward. The headcount that followed that reduction from '05 to '07 is really a result of downsizing and focusing the business.

[You've been true] to capital structure and financing. I would say just a couple things here. The Centerbridge investment was very important for us, really acted as a catalyst in coming up with what we think is an innovative partnership with our labor unions I mentioned before. That also resulted in fresh capital to the Company, which was very important for our emergence. Ken and Mike sealed the financing facility at the end of January. It is a $1.4 billion in term, $650 million in the revolver, and you can see the equity on the bottom of this page and the preferred equity was new equity. And obviously, a very important step forward for the Company as it emerged.

On page 7, I think most of you have seen Dana in the past. I just want to remind you what we look like from a couple different angles. We focus on three primary markets -- the automotive market, the commercial vehicle market and the off-highway market. I will cover customers in a moment.

The commercial vehicle market, which is a very good market, we are very pleased with it, is really defined by the medium and class 8 business and that is largely in North America and our off-highway business, which has been booming the last couple years and we expect to remain strong. It is largely construction, agriculture and a number of other businesses. That is largely outside the US.

On page 8, you can see our product mix. This is based on 2007 sales by business. Our ASG business is just about all light vehicle business with one exception I will cover in a moment and HVSG is our heavy truck business. We are primarily a driveline company. That hasn't changed for a long time -- axles and driveshaft. We do some other things as well, such as the (inaudible) structures, frame business, sealing and thermal businesses.

And the other you see there under heavy vehicle is largely some off-highway business. We do things like large transmissions. The driveshaft business of 14% under ASG is a combination of both the light vehicle and commercial business. That is the only business that really covers both. We do some additional off-highway business in driveshaft you can see into the heavy vehicle.

On page 9, again, another important diversification is our key customers. We are pleased with our primary customers. Historically, Ford has been our biggest customer. They continue, still a very important relationship for us, but you can see the diversity going down the page. Of course, this varies by year depending upon what is going on in the commercial business or in the off-highway business. But we are reasonably diversified here and that is an important strength for the Company. It is also important that we keep our historical relationships strong as well.

Page 10 gives you an idea of our geographic footprint. You can see it by region on the left and by specific country on the right. Obviously, the biggest footprint we have is in North America. Europe, we have a too small a footprint in Asia. We clearly are behind in that market, but it will be a real focus for us going forward. South America continues to be strong, and this diversification, again by geography, is an important part of where the Company has been, but also very important going forward. With that, let me turn it over to Ken to go through the 2007 data.

Thanks, John. The 2007 income statement highlights the effects of our restructuring initiatives. But before a jump into that, I would like to comment briefly on our sales for the year. As we all know, 2007 was a typical year for the auto industry, and Dana's sales reflect those challenges. Overall, sales increased by $217,000 million over 2006. This was driven largely by the dramatic changes in currencies we saw in 2007 as currency changes increased our sales by $348 million.

Going the other way, the 2007 divestitures of our trailer axle and pumps businesses reduced sales by $176 million while the full-year effect of the 2006 purchase of our Mexico joint venture increased sales by $43 million. This leaves overall organic sales growth of $2 million in 2007.

The organic growth has several facets. While Europe, South America and Asia-Pacific enjoyed organic growth of $318 million, the North America sales declined by $316 million. This North American decline includes over $150 million of pricing improvements offset by a volume and mix impact of $466 million, reflecting the overall weakness in the North American light vehicle and commercial vehicle markets.

If I can draw your attention to the first [subtotal] entitled income, loss from continuing operations before realignment, impairment, interest, reorganization items and income taxes. It highlights the performance improvements achieved over the past two years. While there are many pluses and minuses as further described in the 10-K, this improvement is largely related to our restructuring initiatives, which focused on pricing improvements, union and a non-union wage and benefit reductions and overhead cost reductions. With our emergence from Chapter 11, we expect to see further improvements as OPEB costs are eliminated and other cost savings, which are tied to our emergence, take effect.

Moving down the income statement, realignment charges include approximately $136 million related to the final settlement of our UK pension liability in 2007, as well as approximately $69 million for facility closure costs under our program to reposition our manufacturing footprint to lower-cost countries. Footnote 6 in the 10-K is a full discussion of our realignment charges and expected future costs of ongoing activities. We expect to see benefits from these activities beginning in 2008 with additional benefits into 2010 as the program becomes fully implemented.

In the fourth quarter of 2007, we also recorded an impairment charge of $89 million to reduce the recorded goodwill of our thermal products group. Reorganization expense includes $121 million of bankruptcy-related professional fees, as well as $134 million of non-cash charges related to claim settlements and contract rejections. With our emergence from Chapter 11 on January 31, these costs will be eliminated as the reorganization process comes to an end.

Losses from discontinued operations relate to operations sold in 2007 and early 2008. As a result, as outlined in footnote 5 to the 10-K, the losses from these discontinued operations should be eliminated in the future as well. On a related matter, the wind-down of the Dana Credit Corporation was virtually completed in 2007. The remaining DCC obligations were paid in early 2008, and DCC's remaining net investments at December 31, 2007 were $6 million.

Slide 12 focuses on this core operating performance before realignment, impairment, interest, reorganization items and income taxes. As I mentioned earlier, we expect additional benefits from these initiatives in 2008 and beyond as we realize the full-year effect of price improvements and cost reductions implemented in 2007, as well as the impact of certain savings, most notably the elimination of OPEB in the United States that became effective with our emergence from Chapter 11 on January 31st. The remainder of the savings are expected to be realized in 2009 and '10 as our current manufacturing footprint program reaches completion and other cost-cutting actions are more fully realized.

In addition to the income realized under the restructuring initiatives, other key factors in the year-over-year improvement in results include the $31 million improvement in the results from DCC due to gains on sales of assets and approximately $44 million in a one-time currency gain as a result of the recharacterization of intercompany notes with our foreign affiliates, which, under our repatriation strategy, are no longer considered to be permanently invested outside of the United States, offsetting approximately $47 million in losses due to other factors, including, most notably, volume and mix.

Slide 13 provides a breakout of our segment EBIT by product group. The improvement is largely attributed to the restructuring initiatives described earlier. Our MD&A and footnote 20 of our 10-K provide further specifics on our segment performance. As a general comment, the performance shows improvement in our light axle and structures businesses despite weakening North American market conditions. Our driveshaft business is down versus 2006 due to conditions in the North America commercial vehicle market. However, the benefit and other cost savings, which went into effect in emergence, will have a positive impact on this product group going forward.

Our sealing products business has been aggressively managing its costs despite rising stainless steel costs and difficult industry conditions. Our thermal business results, while affected by increasing competition and commodity costs, reflect the startup costs of shifting its manufacturing footprint to lower-cost countries.

Looking at the commercial vehicle group, their sales reflect the significant downturn of the North America commercial vehicle market. Despite these difficult conditions, the commercial vehicle leadership has managed to reduce costs to maintain profitability.

The off-highway group continued its growth in 2007 in the varied markets it serves. It continues to be an increasingly important part of our business. The other line includes miscellaneous sales and expenses, including business unit administration not allocated to specific product segments.

Finally, looking at the shared services line, about $75 million of the reduction compared to 2006 relates to asset sale gains generated by DCC in 2007 and certain currency gains described earlier.

Turning to slide 14, we show a condensed view of the fourth quarter. While the net loss was heavily impacted by realignment, impairment and reorganization items, income loss from continuing operations before these items improved by $116 million as, among other things, our restructuring initiatives and the wind-down of DCC had a significant impact on our performance.

On the next few slides, we will talk a little bit about our cash flow. Turning to slide 15, cash generated by asset sales and net borrowings were used to fund overall cash used by operations of $52 million and build cash balances by $462 million. The significant cash provided by divestitures and asset sales reflects Dana's success in completing the divestitures of our discontinued operations and our wind-down of DCC.

Also during 2007, we increased our debtor-in-possession financing by $200 million to ensure strong liquidity under deteriorating North American market conditions. The sale of DCC assets resulted in the repayment of DCC debt in accordance with our forbearance agreement with DCC's creditors. Given the fact that we were operating in bankruptcy, cash used by operations was heavily impacted by reorganization-related items.

Turning to slide 16, we've adjusted the cash used for operations for these significant reorganization related items. The reorganization line includes bankruptcy and related professional fees, which will end in 2008. The VEBA payments were the initial settlement payments with the remainder paid at emergence in 2008. The VEBA payments were essentially funded by our capital raised at emergence and did not affect the liquidity of our operations. After emergence, we are out of the OPEB business in the United States.

The UK's pension settlement, which was completed in the second quarter of 2007, was fully paid. As you can see, adjusting out the reorganization-related items shows a growing, positive cash flow from our underlying business operations that we expect to be enhanced as the benefits from the initiatives that become effective on emergence are realized.

As a final perspective on cash, let's look at liquidity as we emerge. Slide 17 is a pro forma look at our liquidity after emergence and assuming all emergence obligations are paid. For the sake of this pro forma illustration, we've used and assumed emergence dated December 31, 2007. Walking down the slide, we start with consolidated cash at December 31, 2007. We deduct cash from that which may not be readily accessible, and the result is what we consider to be available cash prior to emergence.

The next section of the schedule looks at sources of emergence funding and available liquidity from our revolver. This would give us available liquidity prior to disbursing our required emergence payments. The third section of the schedule summarizes the emergence cash requirements. While some of these payments were required at emergence, others will be made during the course of 2008. Assuming, however, for the moment that these funds for emergence activities were either disbursed or set aside, we can see that the pro forma liquidity at emergence is approximately $1.5 billion, which represents a significant level of liquidity available to support operations.

Turning to slide 18, I would like to begin to provide some insights into the affects that emergence from Chapter 11 will have on our financial statements. Right now, we will focus on the balance sheet. In our 10-K, we have included the pro forma reorganized consolidated balance sheet that is summarized on this slide. It tries to capture two developments -- the recapitalization of the Company at emergence and the adoption of fresh start accounting. The pro forma is, again, as of December 31, so we begin with the December 31st historical balances in the first column.

The second column is the recapitalization of the Company and the forgiveness of debt. Thus, we see the old debt being replaced with new debt and the issuance of the new common and preferred stock. The third column is the adoption of fresh start accounting, which is generally required of companies emerging from bankruptcy. Fresh start applies purchase accounting to the emerging assets and liabilities, writing them up or down to their fair value as defined under GAAP. The fresh start effect is to write up assets, current assets, $138 million; property and equipment, $271 million; write-down, goodwill and other nonrecurring assets; recognize new intangible assets for customer contracts and trademark technology and to recognize deferred taxes on the net changes in these asset values. The result is a stronger and healthy balance sheet, showing good liquidity for the challenging road ahead under the short-term industry conditions.

I would caution that this balance sheet is pro forma and that the actual numbers will change, but we believe the analysis gives a good directional view of the changes to our balance sheet at emergence. We will be adopting fresh start accounting at emergence, which means that our first quarter 2008 10-Q will reflect fresh start accounting. That report is expected to be filed around May 9, 2008. You can see the 10-K footnote 23 for more on the pro forma balance sheet. I would like to turn it back to John for some final comments.

Thank you, Ken. We realize our '07 results were complicated, so as you go through our K and you've got a favor of it here, there is just a lot of stuff going on in '07. And as Ken mentioned, this will extend into the first quarter. We didn't emerge from Chapter until the end of January. So the first quarter that we present to you later in the year is really a combination of one-third still in Chapter, two-thirds on the exit basis. We will work very hard to make that as transparent to you as possible. I think the team did a very nice job on the K in doing that, and obviously, we welcome your questions in a moment.

Before we do that, I know there is a lot of interest in what is happening to the Company in 2008. We aren't prepared to talk about that in detail yet. We will, obviously, keep you informed during the year, and I will mention that before I finish here. A number of things we are working on.

I wanted to stand back a minute, and before we get into specific questions, tell you what we can about our real priorities for the year. We agreed on these really some time at the end of December as we looked at the new company and what we had to do. And the focus for myself, obviously, but the management team and the entire Company is really built around these four priorities. So this isn't just a couple of us.

First of all, the first one is clearly the management issue about how do we rebuild the team. We've been fortunate in attracting a new Board that I would describe as excellent, great fit, off to a good start in terms of chemistry and most importantly, everybody is involved. They bring different backgrounds and different capabilities. And it is has really been nice to see from my standpoint about how everybody is working together.

I think you know, we are still in a search mode for a new CEO with Mike Burns' departure. And Ken will be going back to Jay Alix at some time, so we are in a search mode for CFO, as well. So we know we have a lot of building here and obviously, we are looking at making sure that our talent is first class right through the organization. I consider this the center point of everything we have to do. We need the right team to drive the right results.

The second piece characterize as jump-starting operations. This is fundamental blocking and tackling, and I don't want to understate how important this is to Dana's future success. Certainly during bankruptcy, but before that, I think this is an issue that frankly has been neglected at Dana. And it is vital to any company. At our hardware manufacturing company, in our heart, we have to serve our customers not only here in the States, but around the world. And we have to do a better job on that. We are fortunate to build on the changes that were made as part of the Chapter 11 restructuring in our manufacturing footprint and our labor agreements. We are working well with our friends in the auto workers and the steelworkers. But we know we have to drive results on a consistent basis.

One of the issues we face at Dana is we had run our business historically each business separate and independent from the other. So at this point in time, we still have seven businesses in the Company. It is very diversified. And too frequently, we had run those businesses one quite different from the other in terms of operational capability, operation metrics. We are changing that. We are changing it fast. So the application of consistent metrics, the fewer the better, consistent benchmarking with a real focus on execution at the plant level, but right through the Company. It is fundamental to the improvements and the savings we can make going forward.

Despite the savings that we've made so far through Chapter, we still think there are significant opportunities throughout the Company, certainly in our manufacturing plants and our supply chain and our overhead. We will talk about this as we go through the year. We are not prepared to go through any more detail today. But I think it is important that our view of this business is that Chapter 11 gave us a new platform, but we have a lot more to do here and we are very focused on achieving that as quickly as we can.

Another area, frankly, that hadn't had enough attention over the last couple years is addressing some important strategic issues. Our businesses are much better than they were a couple years ago, but we know in many of our operations, certainly in the US, that they need more work to perform at what we consider an acceptable level. So we are evaluating each of our business lines on how we can improve that even further beyond the operational improvements, and we have, as we talked about before, imported growth opportunities we believe in commercial vehicle, the off-highway business, which continues to boom and importantly, in Asia where we are admittedly well behind the curve. We have to work very hard over the next couple year to do a lot more in Asia.

And then the last priority for us is, obviously, our financial performance and plans. Our focus throughout the Company is on profits and cash flow by business. We aren't going after 10 or 15 metrics. There are two. Every business has them. That is what we have at the corporate level. These are tied into our compensation plans. That was the case during Chapter 11. It worked very well. We are going to continue that. And I have to say it is equal focus on both profitability and cash flow.

As Ken mentioned, we have strong liquidity and balance sheet. We think that is important certainly in this market. The focus of the Board, the focus of the management team is to drive value over time. As we talk about 2008 though, certainly the environment has gotten a lot tougher over the last several months, so we are now having to deal with a much tougher 2008 than we might have expected three or four months ago. Certainly the economic downturn here in the States, although our markets outside the US continue to hold up quite well.

And importantly for us, steel prices on the commodity side, we've had aluminum prices to deal with, but we are largely a steel user. And that has hurt us, as well. And what we are doing in this area and we have to deal with it, we are redoubling our efforts on the cost reduction side. We will keep you informed as the year goes through on those results.

Let me stop there. I know you have some questions. We will turn it back to the facilitator, and we will begin our Q&A session.

(OPERATOR INSTRUCTIONS) John Murphy, Merrill Lynch.

Good morning. I had a question on the light axle business considering it is your biggest segment. I am just wondering if you could talk just broadly in sort of the strategy you are taking in this business given the problems we are seeing here in the short run in some of your competitors and where do you think this business might be able to go in the future and really just talking about the capacity levels in North America and maybe the opportunities or issues that you might have as we see a mix shift away from trucks towards cars.

There are several questions in there. I think you have a near-term issue dealing with what is going on right now in the economic downturn. And then I would characterize it as a medium and longer-term issue with what is happening on CO2 and CAFE around the world.

On the near term, we think the work we did last year put us in pretty good position this year. I think, as I mentioned in our priorities, we have more work to do to run our operations more consistently and at a higher level. So the bankruptcy gave us an opportunity to change some of our core costs and we are able to do some rebalancing at the plant level. We think that is all right, but we know we have to run them well.

So our focus right now and in fact, nobody likes a downturn, but in a downturn, you tend to go back to the bread and butter -- working on cost, working on quality and we are doing that right now. So we think we are reasonably well-positioned in the near term, although I wouldn't underestimate how much more we have to do. This is plant-by-plant, operation-by-operation. We think our capacity is aligned. We think -- we feel pretty good about where we are, although nobody here is complacent. Nobody here has a view that we are competitive in those businesses. You just have to look at the results on page 13 and in our light axle business and I'd say our driveshaft business and our structures business, those businesses are largely the US businesses. We have more work to do.

In the medium and longer term, I think there is a number of things that are going to happen here. Clearly CAFE and CO2 are going to be a big impact. I'm old enough where I remember the disruption to the business that happened in the '70s when the US industry went through a number of things. We had fuel price increases, fuel shortages, so we didn't have CAFE at that time, early '70s, but then we had emission requirements and damageability requirements, a whole host of issues that, frankly, was a major turning point in the industry. I think we are going to be faced with that again as a result of CO2 and CAFE. Hard to predict exactly what's going on, but directionally I think it is going to be there.

So in things like our axle business, we have to work hard on the technology side. I spent a couple hours yesterday going through our technology plan going forward in the light axle business. I walked away with it feeling reasonably comfortable. I wouldn't say comfortable, but reasonably comfortable about how we do it -- lighter weight, more efficient axles.

Is there going to be a push to sell fewer pickups in this market in the US? Probably. But the business isn't going away. Around the world, there is still a big opportunity on the light vehicle, light axle business as we grow in Asia, grow in other parts of the world I think for that business to go. If you are going to haul a load, you still want a rear drive, rear axle configuration. And that is not going to change.

Is the US pickup business going to be flat to down? Probably. But there is answers there as well on things like diesel engines. So I think we are going to go through this medium and longer term. I think it is going to be traumatic. I think it is going to be significant changes for everybody. I think we are going to be there in a number of ways in the US market. But importantly, I just have to say in the markets outside the US where our market share is low, our presence is low, certainly in places like India and China where we have a lot more opportunity and we are going to have to continue to fix the US while we grow in other parts of the world.

And John, that leads me to my second question. When we think about your overexposure to North America and almost 55% of your revenue, it does seem like there is a need to diversify internationally quite drastically in the coming years. Can you do that with your existing customers as they are expanding internationally and they have -- GM and Ford have large international operations? Is that an easier way to grow internationally and almost become dare keiretsu-like suppliers? Is that the better opportunity or do you need to penetrate new customers in international markets to grow?

I think we have to do both, John. I think, obviously, we have a great relationship with Ford and GM and others and I think we can grow with them. They do a very nice job in their overseas markets, but I think it is up to us to grow separately. There is a lot of producers in China that are going to continue. We have a small ownership position in a Chinese company, a big axle company, that gives us an entree to a number of manufacturers in China and elsewhere.

So I think you have to play both sides, not that they are in conflict. I don't think they are. I think we can do with our existing customers, but also grow with new customers. And that would be our plan in a nutshell. Obviously, a lot more subtlety than I can describe in a minute here, but growing in those markets, certainly Asia, a big part of what we have to do going forward.

Great. Thank you very much.

[Akshay Midhaven], Citigroup.

Two quick questions. I was wondering if you could actually provide an update on what the cancellation of net income was going to be and consequently what you think the NOL availability will be going forward.

We are in a process of calculating that right now. We've given the pro forma numbers here, obviously, as of December 31st, but we will have to do the actual calculations as of January 31st, the emergence date. On top of that too, to understand NOL utilization going forward, we need to look at a number of factors that won't be known for the next couple of months here. So that is something unfortunately we really can't provide any specific guidance on at this point.

Great. Thank you. And then the second question was I was wondering if you folks had sort of circled up definitive timing on your equity roadshow and whether there would be '08 guidance provided during that roadshow.

We haven't decided that. We've been fairly busy getting our hands around the business. But it is certainly in our mind and if you have any input on how we might do it or thoughts on when and so on, we'd welcome those.

Okay. Great. Thanks very much for taking the questions.

[Jeff Orlizi], Silver Point Capital.

I was wondering if you could just give us a little bit more detail on your off-highway business, in particular in the following areas. One with respect to sort of the competitiveness of your business; two, sort of how you view the stability in the margins going forward? They have been relatively stable over the last few years. Three, sort of how diversified your customer base is with respect to that business and then finally, are there any new initiatives that you see in the near and medium term that will support the growth of that business going forward? Thanks.

The bottom line for me, Jeff, is we like the business a lot. We have a good position in it. And again, it is our core business of axles, call it driveline if you will, but really that is our core business in that customer range. This business is more diversified. You saw some of the write-up in this package, but it is highly diversify. The big chunks would be in the construction business and the agricultural business. But then you get into a whole host of smaller markets, and they vary by geography and by business area. It can be a fire truck on one hand. It can be small lawnmowers where you probably want to make those in China. So we have a number of opportunities. The business is largely based in Europe. I think we are well-positioned there.

A couple issues that we are wrestling with and have been is really how do we continue and manage the growth in that business. It's a good problem to have in today's market. We have a lot of work to do I would say in running our operations better, not only in Europe, but plants here and plants in places like China. So that is a fundamental issue for us in how do we more efficient, but also provide more capacity in that business.

We are going through and we will continue to go through a review of really our customer base, very diversified so that we want to spend more time and resources in capital in certain markets versus the other. Those are issues we will have some interest in and obviously continue to focus on it, but it is highly diversified.

It has been an area over the last several years, as you well know, driven by the growth in agriculture, driven by the growth in construction, things like the mining business. If you had asked me in this market five or 10 years ago, I probably would've given you a different answer, but right now, our view is this growth will continue in these markets, not only in our main markets, but areas like Russia where we're not even in yet, China where we think we can compete quite well. We have a very diverse footprint from a manufacturing standpoint and has to get more so.

So I think for us, it is an interesting opportunity. We have to run it hard. We have to continue to work with some other people in providing integrated systems. So there is a number of issues we have to go after. We like the business. It is diversified. I think the growth will continue. I think it is up to us to really manage that business so it becomes even more important to Dana going forward.

Thank you.

Mike Brown, Evergreen Investment.

I just have one quick one. Of your cash balance now, how much needs to be spent on those bankruptcy-related items you mentioned on slide 17?

Slide 17 reflects those bankruptcy charges as being fully paid.

They are fully paid now?

They aren't fully paid at this point, but the balance sheet -- the liquidity balance that you see there of $1.5 billion is liquidity assuming that those are fully paid.

They were paid at the end of January, Mike, when we emerged.

There are some that have lingered past that and will linger past that, but our -- the cash on our balance sheet at emergence will be higher accordingly.

When we show you the first quarter, that'll be a little clearer.

Okay, thanks.

What we tried to do on this slide was net out the ultimate effects of that so that you could see the liquidity that would be available to basically run the business.

Again, we did this for '07 and we didn't emerge from bankruptcy until the end of January so it complicates it a little more.

Okay, thank you.

Greg Cass, Imperial Capital.

Good morning, guys. A few questions. First off, you guys mentioned steel just briefly. You talked about the cost reduction side of things. In terms of your customer repurchase programs as a possible way to hedge that exposure, is that something you guys have entered into for a certain percentage of your total exposure that you are able to discuss? And I guess secondly, want other opportunities are there for you to mitigate that cost going forward?

It's a big issue for us, obviously, so we think we have to work it a number of different ways. Just to give you an idea, there are a number of steel indices, but just to give you some numbers on this. North America steel scrap is a big piece of our business or at least has been, although I think that will change going forward. The '07 actual price was about $307 a ton and last week, the last number I had was about $420 a ton. So who knew what was going to happen to steel over the last couple of years, but it is up a lot and given, even with the downturn in the US, that probably still is going to the driven by demand in Europe and Asia. So that is only one part of the steel business, but it's an important part for us.

So how do we do with it? Obviously, we're going to be subject to the market prices. We do have pricing agreements with many of our customers, not all, to absorb that. And we have arrangements on that. But it is not all of them and there typically is a delay, so you get hit with the scrap steel price on a daily basis and you work that through your customers. It's probably a three-month delay as you work that thing through.

Bankruptcy helped in some of that. We got more agreements. We're obviously continuing to have those agreements and discussions with our customers. That is the biggest way we can mitigate the negative profit impact. At some time, maybe the market turns down, who knows. It has been up this year, but we have to plan either in the way we manage our steel prices or in cost reductions elsewhere to mitigate the impact. But there's a number of things we are doing and obviously, something we are watching every day.

Is there a percentage of your steel exposure that you can state that you have mitigated exposure contractually?

Nothing I can share with you today.

Okay, in terms of -- I guess on follow-up on that. How does scrap versus kind of the stated hot and cold rolled prices impact you guys? You're buying scrap, is that the way --?

Most of the steel we buy is made from melt, from steel scrap. My guess is -- I am not an expert in the steel business -- but I think a lot of firms are going to go back to pig iron as a source of steel given what is happening on pricing. But I'm not an expert on steel. But I think you get some real changes. The last several years, as you know, there has been a real drive on steel. Scrap is the primary product in steelmaking. My guess is that could change. You'll probably see a resurgence of steel mills, but our demand for steel continues and when you add in Asia and Europe is still going strong, that is a strong demand for steel. And it is amazing what has happened in that business over the last several years.

Certainly can see that. Okay, moving onto the next one. In terms of the total 460 of targeted cost savings you guys have talked about in your plan in your K, 260 seems to be remaining if you realize 200 in '07. What portion of that is supposed to come in '08 versus '09?

Obviously, we want to see the bulk of it in '08. There are some that lingers on our plant restructuring, but we want to see the bulk book of it. That 460, by the way, is some pricing, as well as cost action. So it was a combination of both.

Right, but most of the pricing and labor costs saving are already baked into the '07 results, right?

Exactly.

Well, the labor -- there are a number of initiatives that don't kick in until emergence, so things like the OPEB savings, which is fairly significant, does not appear in -- that does not appear in 2007 and will appear in 2008.

The roughly 90 of OPEB shows up this year postemergence --?

On an annualized basis, yes.

Okay, and then in terms of overhead manufacturing, had most of that -- does show up in '08. Was any of that an '07 improvement as well?

Some of that was in '07. The manufacturing side -- that is more of a 2009, 2010, but there is some positive impact in 2008 as well.

Okay, thank you. One final follow-up. In terms of your availability, the 15, 14 pro forma estimate that you have there in your slides, that suggests that, with the 417 availability on the revolver, (inaudible) securitization and other availability, you have cash roughly of $1.97 billion. That seems to be about $180 million ahead of where the planned target was. So the suggestion is that your net debt plus minority interest would be $180 million less than the 679, which was your last public estimate in the plan documents. Are you guys shooting for more like a 500 at exit instead of the 679 or is that a number you haven't flushed out yet?

We really haven't flushed that number out yet. There are a number of moving parts as we look specifically at January 31st on that. So there are a number of moving parts if I think I understand what you're getting at with that and that really hasn't been flushed out yet. We are in the process of working through that.

Okay, and in terms of your cash received, can you just give us one final clarification on whether any of that is ever available for repatriation and what prevents you guys from doing that and how that impacts your future concerns of potential capacity adjustments in North American restructuring activities depending on where the economy goes here?

I think we've done a lot during the course of the bankruptcy to make cash available from overseas. We did have significant repatriation in 2007 and our intention is to continue that practice moving forward. It is not necessary that we would want to repatriate everything. Sometimes leaving money overseas for investment opportunities there does make sense. So we are balancing the repatriation strategy against the needs in different countries, as well as our ability and timing of getting financing in place in those countries.

I think it is clear that our goal here is to get as much flexibility as we can achieve and that is an important goal for us going forward.

Okay. Thank you very much and best of luck this year.

[Stan Manoukian], Libertas Partners.

Good morning. I have a couple of quick questions for you about the correlation between your projections at POR, plan of reorginization, with changing environment, especially North America. And clearly, obviously, you have adjusted your projections here. So my question is, number one, what do you think would be the adjustment to the top line for the next couple of years here, if any, under the assumption of current level of sales in North America both in axles and commercial vehicles?

And second, in light of your impending projections to sort of move to a greater extent into the Asian markets, do you think that your projected capital expenditures level will be sufficient to finance this transition into emerging market countries or do you think that your CapEx will grow? That's sort of two questions that I have.

First, with respect to the projections filed with the plan of reorganization, we expressly stated in there it was not our intention to maintain those going forward. As John indicated earlier, we are not at this point giving forward-looking guidance on 2008. Certainly as we look at the market conditions, there has been a deterioration in the North American light vehicle market. However, looking at this globally, the light vehicle production projections for 2008 have actually increased over the last six months. So you have to weigh that on a geographic-weighting basis, as well as a specific platform basis.

On the commercial vehicles side, obviously 2007 was a difficult year with the emissions changes affecting volumes in 2007 and then the recovery there becoming somewhat uncertain as to timing due to economic conditions. But I think the projections that we are looking at still show a recovery in the latter part of 2008. So I think we are comfortable there. John did outline some of the threats and some of the things that are challenges to us moving forward.

With respect to investments in Asia, I think we have included and anticipated the types of capital expenditures that it would take for organic growth. In the plan of reorganization projections you referred to, we did not include any assumptions with respect to any strategic acquisitions or other strategic moves, but as we look at things, we are looking at our liquidity. We are looking at our capital resources. And we would look at opportunities accordingly.

I think this will be an evolving story, Stan. We will keep you updated as we can, but we are not prepared to give any more guidance today.

So in other words, I just want to make sure that if you want to sort of preserve or establish a very competitive advantage in the Asian countries, you would probably prefer to do it through acquisitions as opposed to sort of establishing your own plans there, right?

I think we can do several things. We have good relationships today. We have to grow those. We have some relationships -- obviously, we've talked about with Ford and with General Motors. We have other relationships that will grow with that and we have a separate group of opportunities, so I think we will look at these in a number of different ways. Capital will be an important part of it and I don't want to sit here today and give you a number on that but because I don't know. But I think the issue for us -- these are important markets. We are behind the curve. We have to get going, we have to do it, but we have to do it profitably. So I think we will tell you more as this unfolds.

So in other words, the shift in this business due to the emergence of new economies is changing and pretty much it is useless to talk about normalized sort of CapEx sales ratio in this business because the changes will be financed probably through acquisitions as opposed to normalized maintenance CapEx per se.

I wouldn't want to say yes or not to that. I think the interesting thing when you think about our business going forward, we've talked about the pressures of CO2 and CAFE. We talked about a number of things -- the markets are going to change. One thing as you look at the business today, forget about five or ten years down the road, but today, North American production -- US, Canada, Mexico -- the projection we are running with this year is about 14.1 million units produced in the US. So that doesn't mean sold. We have a lot of imports coming in.

If you look at on a global basis just the light duty vehicles, that global market at $73.3 million is our best assumption today. So $14 million [play] $73 million and it does say how much the market has changed, largely driven by growth in Asia, but also Eastern Europe. Brazil has bounced back and I think that is going to change the market certainly for us in a number of different ways. It doesn't mean we want to walk away from our US producers. We want to play here, and we want to do well here and we will. But the opportunity in other markets is substantial. We know we are late and we have to take advantage of that as well. How we do that -- and that is part of your question -- I think is to be determined.

Yes, that's exactly what was a major sort of focus of the question because historically, you have been understanding for obvious reasons before bankruptcy and in bankruptcy compared to your major competitors and the question is all these OEMs, they are changing the number of platforms. They are trying to diversify their platform. Obviously, that requires more capital expenditures from key suppliers.

And the question is -- the nature of relationships between the OEMs, especially the big three and you guys to suppliers, is pretty much the same. They are trying to squeeze margins from you unless you have unbeatable competitive advantage and you are sort of not sourceable. And that is the major problem that I see here. So I understand that you are the major supplier in this business.

I just want to sort of make sure that I understand how you are planning to grow your business offshore if you are planning to maintain your CapEx sales ratio at about 3%. And what you are saying to me is that your acquisition strategy is not included in the POR, right?

No, we really have an open mindset about how we grow in each market, so I think we are very pragmatic. We are not stuck with a particular number we have to hit. I think the only criteria for me is the growth has to be profitable. There is no question that you have to play globally. When you are talking to all the big manufacturers, this is true in light vehicles, it's true in commercial, it is true in off-highway. You have to play globally. There's no room for regional players anymore unless you have -- maybe in China where you have an exceptionally strong cost standpoint, but you have to play globally. We have to be there. We know we have to catch up on a number of areas. Our game plan is to do just that.

Another dimension to what you are alluding to there is that while we don't have acquisition funding in the plan of reorganization, we also don't have any acquisition earnings that would follow as a result of those investments. So the plan of reorganization was -- sorry, hang on a minute -- so there is also no corresponding income from any of those -- any potential investments there.

Don't get ahead of us, Stan on acquisitions, though. I think we have a lot to do with managing our business today. If our appetite changes going forward, we will make sure you know about it.

Thank you very much. Good luck.

Dennis, we would like to take a couple of questions off the Web. Ken will read them.

I've got one here. Could you please tell what your 2007 performance was in terms of EBITDA comparable to the $430 million guidance in the reorganization plan?

There is a way to calculate that, and I will walk you through very quickly how to do that from our segment footnote. We have -- in the segment footnote we have segment of $314 million. We have segment depreciation and amortization of $278 million. And we also have following that shared service cost and administrative cost of $142 million.

The net of those is $450 million and it is quite comparable to the $430 million in terms of calculations. So that is a way that you can get at a good EBITDA number from the information presented, and it demonstrates that we exceeded the $430 million guidance.

Thanks. Another question, I would like to bring in Bob Fesenmyer who is President of our Global Business Development effort. The question is related to your light axle business, I was just wondering if you could discuss how much of your business comes from passenger cars and CUVs, crossovers, compared to trucks and SUVs, and what do you see as your mix going forward?

Good morning. This is Bob Fesenmyer. The way I would like to answer that is that traditionally, our light axle group has been focused on the light truck and the SUV market. However, we do have [pass-care] applications that are less than 5% of our business, and our CUV crossovers is around less than 10% of our business. I guess that that presents us a great opportunity going forward, and we are certainly targeting growth in the crossover market.

The second thing is that the light truck business is growing on a global basis. So we cannot ignore that market nor part of our heritage.

Next Web question is, can you please detail your business backlog, light vehicle versus commercial vehicle?

As it is obvious in our K, the majority of our business in terms of market share is 60% towards the light side of our business and 40% on the commercial and off-highway. So that gives us a very good diversity going forward.

I would caution anyone on that backlog, there is not a standard way of determining it. So I think all of us, all the manufacturers, all the suppliers look at it a little differently. So we don't publish those data per se, and I would caution when you hear it from one company versus another, I think it's an apple and orange. But as I get in more on this business, I will find out more, but that is my sense today.

Dennis, we will take two more phone calls and then we will wrap it up.

Brian Johnson, Lehman Brothers.

A lot of our questions have been answered. But just in terms of going forward, sort of a strategic question and then a couple housekeeping things left. Where do you see the biggest -- first of all, what went operationally wrong in your view, John, over the last four years before bankruptcy? And then beyond the bankruptcy fixes, what are you going to do to change that?

I think, and this is Monday morning quarterback, Brian, so it's a little unfair, but I don't think in just a couple years. Certainly bankruptcy diverts everyone's attention, and you don't have any choice. But I've been talking to a lot of people inside then and I obviously have a view from the outside, I think this has been much more of a ten-year process in terms of what has happened, in terms of diversion of management attention and some acquisitions and, frankly, we didn't run our operations well enough. Again, I wasn't part of the organization then and it's terribly unfair for me to characterize it this way, but that is my harsh view, that this wasn't just a couple years. It's a longer-term issue. Obviously, bankruptcy gave us an opportunity to address some tough cost issues. We are pleased with it. It was tough and a pain to a lot of people, but I think it positions us well, but our view is pretty simple. It is a step one of what's going to be a multistep process.

And as I mentioned before, our operational focus, getting the metrics right, getting the consistency right, we have people working with us at the plant level, we're working on it ourselves, just how do we run things, how do we lay them out? What are the right benchmarks? That sounds like nuts and bolts and it is. And if you ask me what is the single biggest opportunity to deliver value to the bottom line, that's it. Certainly that is our focus right now.

We're spending a lot of time, and you'll hear more about this going forward because it is very important. We have to run our business better, and I've told the management team inside, as far as I can see, no one is immune to this. Every business has to run better and can run better. Even if you are making reasonable money today, you are leaving a lot of money on the table. So it's a big focus for us. I'm not going to give you -- it's not like it is a silver bullet or instant answer. There's a lot of hard work over a period of time that is going to have to take place to get it to where we want it.

But reception has been good. The focus of the team today is good. I don't see any reason we can get it done. It is not a magic overnight answer. So I can't just wave a magic wand on it, but that operational improvement in every area of the business, every piece of the business we have globally is an important priority for us and one we have to get done.

And as you look at the axles and drivetrains in both light vehicle, commercial and off-highway, are there opportunities for engineering or manufacturing cost reductions there? I was struck by Toyota talking about how Hino is making their undercarriage parts for their pickup truck, which they actually view as a competitive advantage, but it sounds like from Hino's perspective it is leveraging fixed assets.

Sure. I mean how we load our plants, things like logistics costs, big deal. Continue to work on our quality to avoid rework, all of those are big deals. It is all costs. And we are fairly agnostic in terms of where it comes from. What we don't want to do is impact our customers. What we don't want to do is impact the future of our business. But everything else is really open on that, and we are going after it. So you don't get it all in one day. I wish we could. It's hard work. It is not -- there has been a lot of focus on cost the last couple years here, so we are not starting from scratch. But we know how much more has to be done.

Finally, back to how much you can share on commodities, do you have any sense of what your total steel buy is in terms of tons?

I can't tell you off the top of my head. It is significant. With the exception of our sealing business and thermal business where they tend to be more focused on aluminum, all our other businesses -- we're basically a driveline manufacturer and that's all steel for the most part, going aluminum. And aluminum, not only from a weight standpoint from a cost standpoint, it is looking a little better despite the increases there. But we are into forgings and castings.

And in your $180 million of pricing, I assume part of that was repricing up to the steel price inflation that it already hit in '04 and '05. Do you have any -- what percent of contracts are passed through versus fixed?

We haven't released that information, and really it differs customer by customer. So it's an area, frankly, we aren't prepared to talk about, but obviously it is an important area for us and we think it is important for our customers as well that we share this because it really does distort the business and has distorted the business quite substantially over the last couple years.

I think at the end of the day, the manufacturers we sell to want a healthy, profitable supply base that is prepared to invest the capital, go to a number of locations with them and really be a partner for a long term. I think the scars of what has gone on in the auto business is with everyone. We are not finished yet, so I think it's important for everybody -- both manufacturers and suppliers -- that we all are profitable, we are all generating cash, so we can invest it in a business that is going to need it going forward.

Final just quick question, to you have the final share count assuming converts fully converted?

Still a work in progress. We will get it out as soon as we can.

Okay, thanks.

Matthew Mishan, KeyBanc Capital Markets.

Good afternoon, guys. I have a question to ask you regarding your different business segments. Besides commercial vehicle and off-highway, from a strategic perspective, which of the other five businesses do you really see as being core and really material to growth?

Well, we've done a lot of focusing the last couple years. You saw that schedule in the presentation. Each of our businesses has some pluses and minuses. We're going through the right now, so I wouldn't want to comment on that at this point in time.

Are the businesses you guys have already divested or discontinued since 2005 prebankruptcy, how much revenue does that account for?

That revenue was segregated and was not reported in our overall revenue. Those operations were accounted for as discontinued operations. So the results are summarized in a single line. It is disclosed in our footnote, but in terms of looking at what impact that might have going forward on consolidated revenues, those are effectively deconsolidated on a revenue basis. The operations that I cited -- the trailer axle and the pumps business that were sold -- did not -- were not part of the discontinued operations, didn't qualify for discontinued operation accounting, so those were included in our consolidated results. The revenue from the discontinued operations in 2006 was $1.2 billion. And in 2007, was $495 million. But again, it was not included in our consolidated revenue.

I just wanted to get a color on exactly how much revenue was lost between 2005 and 2006 because of that.

That got segregated out in 2005 and it was treated as a discontinued operation. If you look at the footnote -- which footnote? That is footnote 5, is it, in our K, it summarizes that. But that's given -- the ones that are classified as discontinued operations get separate accounting treatment.

As far as -- on just another subject. As far as light axle structures, could you basically give some color on your relationship with Ford going forward and Nissan going forward, whether you think it is a growing relationship or you think it's tenuous? What is your color on that?

Well, each of our customers are very important to us. Obviously, we want to continue to grow. It is a daily interaction. As you can see, Ford is our biggest customer. I have a lot of years spent at Ford, so I have a lot of time for their programs and we want them to do well. So I don't think it is a case where we love one more than the other. We really have important relations with each of our customers. They have different opportunities and we want to be there as a competitive supplier in each one of those opportunities. So that is about all I can say on that today.

Would you say you would feel comfortable going forward that Ford is going to maintain its business especially with light axle with you guys going forward?

We don't know. We talk about it on a daily basis, but, listen, there is no certainty in this business that I can tell or any other business for that matter.

Thank you very much for that.

Thank you.

At this time, I will turn the call back over to Mr. Devine for any closing comments.

We just want to thank everybody for tuning in today. We plan to hold another call in connection with our first-quarter filing, which is obviously not too far away. We will do that probably in the first half of May, so we will give you a specific time as we get closer to that. Again, we appreciate your interest today and your questions. There will be more dialogue going forward. You are very important to us and most importantly, we want to earn our reputation again in the marketplace, so your confidence is very important for us. So thank you again. Talk to you soon.

Ladies and gentlemen, this does conclude the Dana Holding Corporation's fourth-quarter and full-year 2007 webcast and conference call. You may now disconnect.