Old Dana taps the fountain of youth

Dana's deal with TM4 gives the supplier a stake in a joint venture in China.

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MAUMEE, Ohio — With little fanfare this year, one of the global auto industry's oldest suppliers began repositioning itself for a business of the future.

Dana, which counts on Europe for nearly a third of its global sales, has made two key acquisitions in the past four months. The 114-year-old manufacturer agreed to acquire controlling interest in the Canadian company TM4 and signed a deal to buy the Drive Systems business of Swiss engineering and tech company Oerlikon Group.

The acquisitions are intended to fortify Dana's expanding electric driveline portfolio. The $605 million Oerlikon acquisition alone will bring Dana about $800 million in additional annual revenue, along with five r&d centers, 12 plants and controlling interest in a Chinese joint venture.

Dana also came within a whisker of buying Britain's GKN this year but was outbid in the final hours by Melrose Industries in a hostile takeover.

Dana's transactions come on top of four other strategic acquisitions over the past three years.

What's going on at the suburban Toledo, Ohio, maker of axles, driveshafts and sealing products?

The goal, says Dana CEO James Kamsickas, is to keep an old-school supplier firmly planted on the breaking wave of developing technologies.

"If you look at our five completed deals — six if you include the Oerlikon deal — they've all been a little bit bigger each time, and they're all tied into a specific strategic intent all along the way," Kamsickas told Automotive News in his office here. "Others think of us as a kind of Rust Belt, heavy metals, stamping, forging company, but we're the furthest thing from that these days."

"It's really a high-tech company," Kamsickas said.

E-drive systems

With the acquisition of a majority interest in TM4 — formerly wholly owned by the Canadian utility Hydro-Quebec — Dana gained a leading supplier of electric motors, power inverters and controls with a joint venture in Weifang, China.

The deal, announced June 22, enables Dana to deliver complete e-drive system capabilities to manufacturers in all of Dana's traditional segments — light vehicle, off highway and commercial. It also broadened Dana's footprint in China and positioned the company for growth in China, which is moving heavily to electrified vehicles.

Meanwhile, the purchase of Oerlikon's Drive Systems business, announced July 30, boosted Dana's portfolio in e-drives and transmissions, along with advanced gearing, planetary drives and other shifting products across Dana's traditional portfolio.

Dana CEO James Kamsickas: Deals are "tied into a specific strategic intent all along the way."

Also this year, Dana had been positioned as a white knight in the battle to acquire GKN, which was fighting off a hostile takeover bid from Melrose. In public, Dana appeared to step in at the last minute to scoop up one of its primary rivals in the light-vehicle all-wheel-drive segment, but Kamsickas said he and his team had seen the early warning signs that GKN was vulnerable, and had been working on a potential deal before Melrose showed up.

Kamsickas recalled that, for Dana, "GKN became a very strong, opportunistic act because it had great industrial logic, and our stock price was at a record high. Those are two very big variables when you're going to do an acquisition."

As it began pursuing GKN, Kamsickas said, Dana had the freedom to study the prospects fully. "So we said, 'Let's deploy. Let's live in the U.K. for a couple of months, and let's see if we can pull this thing off.' "

But Melrose stepped in and ultimately outbid Dana with an $11.2 billion offer.

"The thing that I'm very proud of," he said, "is that I learned that you don't overpay for a deal. We could have gotten the deal, if you're all about overpaying and have deal fever. But that doesn't do anything but drive your company out of business."

Core products

As for Dana's core product portfolio, including the axles that are rolling the Jeep Wrangler to record global sales, business has never been stronger. Dana spent much of the past year developing and marketing its aftermarket product line for light vehicles, as well as expanding its traditional products into new vehicles. The coming Ford Ranger and Bronco, for example, will ride on Dana axles.

"At the end of the day, our core business is still going to be axles, driveshafts, all-wheel-drive products because the internal combustion engine is not going away anytime soon," Kamsickas said. "When you look at our portfolio, we are almost all truck and SUV and everything up from there."

Dana isn't tied completely to light-vehicle sales — roughly 43 percent of its $7.21 billion in 2017 sales were in commercial vehicles or off-highway, such as heavy mining equipment and front-end loaders. Kamsickas said the company is well positioned to weather a downturn in light-vehicle sales.

"It's a competitive advantage for us that we are significantly end-market agnostic," Kamsickas said. And technology it has developed for larger vehicles gives Dana an advantage in the light-vehicle segments, he said. The drivelines for large underground mining equipment have been electrified for decades, he noted.

"We try to stay very core. No matter what we're doing, everything still backs up to the gear," Kamsickas said of vehicles and Dana's products. "At the end of the day, we're going to convey power."

Dana ranks No. 36 on the Automotive News Europe list of the top 100 global suppliers, with worldwide sales to automakers of $7.2 billion in 2017. Europe accounted for 30 percent of that total.

You can reach Larry P. Vellequette at lvellequette@crain.com.

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