Dana Holding Corporation (DAN)

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Dana Holding Corporation (DAN

Q2 2008 Earnings Call

August 7, 2008 10:00 am ET


John Devine – Executive Chairman

James Yost – Financial Officer

Gary Convis – Chief Executive Officer


Himanshu Patel – J.P. Morgan

Brian Johnson – Lehman Brothers

[Roger Cowell – Silverlake Financial]

[Gregg Pass – Imperial Capital]

[Chris Laring – Wolfpoint Capital]

[Nelson Yuman – Greenlight Capital]


Unidentified Corporate Participant

Thank you for joining us today. You should now be on slide number three of the presentation. As referenced on this slide, I'd 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 web cast system allows you to direct questions to us via the internet. We will answer as many questions as time permits.

Moving to slide number four, today's call will feature remarks by Dana's Executive Chairman John Devine, Financial Officer Jim Yost, and Chief Executive Officer Gary Convis. John will begin today's presentation with a brief overview of some key issues. Jim will follow with a review of our quarterly financial results and Gary will provide an update on our operation excellent initiatives. Following some strategic direction and summary remarks from John, our call will conclude with a question and answer session.

With that, please move to slide number five and I'll turn the call over to John Devine.

John Devine

Before we talk about Dana, just a quick note on 2008. I think the good news for this year is its two thirds done almost. The tough news is certainly 2008 in North America is a lot more difficult than any of us would have expected at the beginning of the year. In fact, in my career which is longer than I like to think about, I can't recall a more difficult year.

We've used the word significant headwinds to describe '08. That's probably understated for lots of reasons, as when you step back and look at the North American market today, the automotive market, really there's four things going on, maybe more. We're getting a cyclical downturn. We've lived with that before. It's not the first time we've seen it. But this is different because we're now getting a structural change driven by high gas prices in the segment ship, and certainly that's had a significant impact on the light truck business in North America, not only in '08 but certainly going forward.

Add to that the financial pressures on many, if not most North American companies both OEM's and suppliers. And then add on that the technical changes that are going through the business really to drive to better fuel efficiency. What that means in the close supplier in the OEM communities are very significant changes.

I would have to say this is nothing short of revolution, and I'd like to say it's limited to 2008 but it isn't. We're going to be [inaudible] with these trends for some time. It creates a lot of risk for companies but also opportunities and our game plan at Dana is to take advantage of those opportunities while we at least mitigate the downturn.

Certainly as we talk about Dana, we have made progress. I would describe our second quarter as reasonably good performance given what's going on. As you look at the operational changes we've made this year, very consistent with the priorities that we set out early this year. Restructuring our management team, I'll show you more on that in a moment.

We're spending most of our time on the North American operations and fixing that. Gary will talk about that in a moment. We have a strategic plan in place and progressing, and I'll cover that in more detail later. And financially, we maintained a very strong cash position and a strong balance sheet which I think is a real plus in this environment.

We put at the top our hit parade given what's happened on steel and lower North American volumes. A response plan, you can see that on page five, driven by pricing recovery on steel, addressing upside down contracts. We'll talk more about that later on. Right sizing North American operations in this new environment, and we'll talk more about that as well. And obviously we have to do and will do more cost reductions both this year and next.

When you step back and look at the environment, and I'll talk more about steel in the next slide. I won't go through the volume scenario; I think you all know that. But certainly a combination of light trucks are down sharply, class 5A trucks are down as well. I would characterize the commercial truck business as much different though than the automotive business.

Commercial truck business certainly is going in North America a cyclical downturn. We've seen that before. It's certainly impacting us this year. It's probably some impact on construction as well, but we expect that business to bounce back, and bounce back reasonably quickly next year both five through eight.

On steel prices, we're not assuming that we have a reduction. We're assuming that that continues for some time and if I could ask you to turn to slide six, we'll give you our latest view on steel prices. We talked to you at the end of the first quarter, and you can see on that slide that we were looking at $550 a ton for the remainder of the year. On the bottom of the page, you can see that our initial projection for '08 was more continuation of where steel wound up at the end of last year, just above $300 a ton.

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