NEW YORK (Dow Jones/AP) - A federal judge on Tuesday approved a settlement between Dana Corp. and component supplier Sypris Technologies Inc. that ends long-running litigation between the two companies and saves Dana millions of dollars.
Sypris, Dana's biggest component-part supplier, has agreed to cut prices on some parts and make quality enhancements. The new agreement relieves Dana of its obligations under the previous contract to purchase certain parts from Sypris, a unit of Louisville, Ky.-based Sypris Solutions Inc.
Under the settlement approved by U.S. Bankruptcy Judge Burton R. Lifland, Dana and Sypris will enter into a new, long-term master supply agreement in lieu of the three existing agreements. The new pact, which runs through 2014, provides Dana with enhanced pricing for certain commodities starting next year and ''improved coverage in the areas of quality and warranty,'' Sypris said last month.
In return, Sypris will receive an $89.9 million unsecured claim in Dana's bankruptcy case. Dana, of Toledo, Ohio, sought Chapter 11 bankruptcy protection in March 2006 amid cutbacks by U.S. auto manufacturers.
''The agreement provides Dana with greater flexibility, provides Sypris with greater confidence, allows Dana to know they'll be getting quality products in a timely fashion and balances what is needed in the marketplace today,'' said Dana attorney David Heiman. ''Under the settlement, Dana has a much better ability to compete in the marketplace.''
The settlement ends Dana's battle with Sypris over the cost of the supply contracts. Dana had tried to get the bankruptcy court's approval to end its relationship with Sypris and source the contracts to multiple suppliers. Sypris, which produced about $200 million worth of axle beams, forgings and castings for Dana in 2006, tried to block that request.
''This was a broken leg from day one,'' Lifland said.
Dana's dispute with Sypris goes back to a series of transactions that took place between 2000 and 2003, in which Sypris bought Dana production plants in Morgantown, N.C.; Glasgow, Ky.; Humboldt, Tenn. and Toluca, Mexico.
Sypris had argued that it has spent more than $110 million to purchase and improve the plants in exchange for a commitment from Dana to buy certain component parts only from Sypris through 2014.
Dana filed for Chapter 11 bankruptcy protection in March 2006.