WASHINGTON (Dow Jones/AP) — Dana Corp. wants the U.S. government to pick up some of the $250 million cost of cleaning up a toxic factory site in South Plainfield, N.J., arguing the Defense Department oversaw the factory during World War II, when much of the contamination occurred.
In papers filed with the U.S. Bankruptcy Court in Manhattan, the auto parts company asked a judge to reject the government's environmental-damage claims against it. It said most of the $300 million in cleanup costs the government is seeking are related to the South Plainfield site, which the Environmental Protection Agency lists among the country's most hazardous.
The government hasn't accused Dana of contaminating the site — the actual contamination, according to court papers, occurred after Dana stopped manufacturing at the site in 1929 and leased it to Cornell Dubilier Electronics Inc.
The EPA has said Cornell Dubilier ''dumped material contaminated with polychlorinated biphenyls (PCBs) and other hazardous substances directly onto site soils.''
Still, the government contends Dana is liable for the entire cleanup cost simply because Dana owned the site at the time of the contamination.
In its court papers, Dana said the government's claim is unfair because ''it effectively seeks to shift the government's own liability to Dana.''
The company, based in Toledo, Ohio, said the government played a key role at the Cornell Dubilier site for much of the period during which the alleged contamination occurred -between 1929 and 1956.
Cornell Dubilier makes capacitors and other electronic components. During World War II, the Defense Department was ''pervasively involved'' in the operations of the South Plainfield factory, Dana said, citing a memorandum written to the EPA by a Cornell Dubilier attorney in 2004.
The attorney, Robert S. Sanoff, said the Defense Department ''pushed aggressively'' to increase the production of capacitors at the factory. He also said that pressure to address ''urgent war needs'' may have caused ''substantial releases to the environment of the raw materials used in the manufacturing process.''
Under the circumstances, Dana said, ''to the extent that there was any contamination that occurred while Dana owned the site,'' Cornell Dubilier and the Defense Department ''caused the contamination.''
Dana said the size of the environmental claims could also ''significantly impact creditor recoveries'' under its proposed reorganization plan. A $250 million increase in the size of the pool of general unsecured claims could cut recoveries by 6 percent to 8 percent, the company said. Unsecured creditors are slated to recover about 69 cents on the dollar under Dana's Chapter 11 plan.
Moreover, Dana said, the fight over environmental liabilities threatens to delay the company's exit from bankruptcy proceedings. The company, which began its Chapter 11 reorganization in March 2006, has said it aims to complete that process by the end of the year.
Dana said the government's environmental claims are among largest against the company. As a result, they could have a ''substantial impact'' on the company's bid ''to emerge from Chapter 11 by their stated goal at the end of 2007.''