Dana CEO cites off-highway growth potential

Diesel Progress North American Edition,  March, 2005  

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Michael J. Burns became the eighth chairman in the history of Dana Corp. a little less than a year ago, following the unexpected death of Joe Magliochetti. Burns, 52, came to Dana from General Motors Corp., where he most recently had served as president of General Motors Europe. Burns, who was named chairman and CEO of the $7.9 billion manufacturer in March 2004, recently discussed a range of subjects in a conversation with Diesel Progress.

Q. As the bulk of Dana's business has traditionally been automotive, there have always been questions concerning its commitment to the commercial vehicle and particularly, the off-highway sectors. How important is Dana's position in off-highway and commercial vehicle markets to the corporation, now and in the future?

A. The off-highway and commercial vehicle markets are integral to Dana's strategy. First of all, they represent 25% of our business. It has as much or more growth potential than any of our other businesses. And it's a very integrated business.

We'll get pretty close to a billion in '05 in off-highway. And that's just in axles, transmissions and driveshafts. When you include the Victor, Perfect Circle and other products that go to off-highway in that, we're looking at well over a billion.

Q. Dana has indicated its strong commitment to the off-highway market, and yet it recently announced that it will be closing its Statesville, N.C., off-highway facility in 2005. Is this move inconsistent with your commitment to the market?

A. Not at all. As is the case in all of our businesses, we continually assess ways in which we can improve our ability to utilize available capacity, contain costs, and enhance quality and delivery moving forward. Our decision to consolidate manufacturing was necessary to strengthen the competitiveness of this business long term and help ensure that we grow our leadership position among suppliers to the world's off-highway vehicle manufacturers.

Q. You came to Dana from General Motors. How familiar were you with the off-highway and commercial vehicle markets? What have you learned about them that perhaps you didn't know before?

A. While the light and heavy markets are different enough, I've also been struck by their similarities. We cut metal. If you look at an axle, in many ways the same characteristics that you're trying to give a truck in heavy duty, you want to give to light-duty, and vice-versa. It's the same concept with driveshafts.

I think if you go to the off-road side, we have a very strong global presence, which is really important from a standpoint of supporting the customer and delivering growth. We also have a lot of capability from a systems standpoint. We've got the ability to handle the front end, rear end, driveshafts, transmission and controls.

This flexibility and range is particularly valuable in the off-highway sector, where many of the customers are not high volume, and thereby benefit from a supplier that can fill their needs with full-systems capability.

Certainly we have a really strong brand name. It's recognized for reliability, quality and value. The commercial vehicle, again, goes back a long, long way. Driveshafts, axles, Spicer and the Roadranger activity with Eaton, are all very successful. And recently, we've also enhanced our brake capability through a joint venture with Bendix (Knorr-Bremse). It's a perfect situation in terms of giving the customer the kinds of things that they want and the selection they want in an effective way.

In this business you can't get many big off-road products or systems on airplanes and fly them around, so the logistics piece of this is pretty critical. It can make or break a business case. So you really have to have that capability.

The other thing is in developing markets, you've got to have local content. A lot of what we sell gets used in developing markets, so local contacts are another essential piece that we provide.

Q. In the 1990s, Dana was known for its aggressive position on acquisitions and growing its business--indeed, it built its non-road business primarily through acquisitions and the commercial axle business was essentially created the same way. But over the last several years, the company has been more circumspect in this regard. How is Dana looking at acquisitions and growth now?

A. I think you do it two ways. You've got generic growth that can take place. We've still got the ability to grow share. If you look at our customer base, we've got a wonderful customer base, we sell to virtually everybody. In some cases we don't have enough content for some of those people. We'd like to have more so we've got to grow the share.

If we run across something that makes sense, we're not against acquiring, we're not against venturing, we're not against finding a way of gaining access to a key product. But it's got to make sense. It's not growth for growth's sake. It's profitable growth, it's effective use of capital, and it stays in our area of expertise. We're not going to go out and do something that's outside of what we consider to be our area of expertise. So we intend to grow and as a result we'll have to do a little bit of both. The issue is always, what don't we have capability in that we need?