Dana's Supplier Sypris May Seek Damages Over Contract Dispute

Sypris says they will lose hundreds of million of dollars as Dana looks for lower-cost suppliers.

WASHINGTON (Dow Jones/AP) - Dana Corp. could be on the hook for hundreds of millions of dollars if it decides to part company with its largest supplier over the cost of component parts.

Dana and Sypris Technologies Inc. have been at odds over the cost of large-steer axle beams, forgings, castings and other parts Sypris makes. The disputes led to ongoing clashes between the two companies during Dana's Chapter 11 case before Judge Burton R. Lifland of the U.S. Bankruptcy Court in Manhattan.

In January, Lifland approved an agreement between the two companies that allows Dana to seek other suppliers with better prices. Under current supply contacts, Dana spends about $194 million a year with Sypris.

Dana said Tuesday in court papers that Sypris believed damages from the loss of business will reach hundreds of millions of dollars. Dana disputed that figure, saying it believed claims would only yield a fraction of that amount.

Dana is asking Lifland to make Sypris release various documents such as profit and loss statements, cash flow data and sales summaries for all product lines sold to Dana and its units. A hearing on the issues has been scheduled for April 25 in the Manhattan bankruptcy court.

Dana said it needs to assess whether to cut all or some of its supplier contracts with Sypris so it can increase the value of its estate for creditors and stakeholders. The cost cuts need to occur while not interrupting a steady flow of parts so Dana can service customers like Ford Motor Co. and General Motors Corp.

In addition to finding other parts suppliers, Dana has been in talks with Sypris in an effort to reach lower prices, but ''to date, these efforts have not effectively addressed the disparity between the opportunities under the re-sourcing program and the supply contracts.''

Dana said in January that if it stays with Sypris under current conditions, the price structure will cost the company about $115 million over the remaining term of the contracts. The plan to find other suppliers will cost about $10 million and take more than a year to complete.

Dana, based in Toledo, Ohio, sells brakes, axles and other parts to most major vehicle manufacturers. It's among a growing number of suppliers forced into major restructurings because of the slumping U.S. auto industry.