By Jeff Bennett
Dana Holding Corp. sold its Venezuelan operations on Monday, the
latest company in the automotive industry to make significant
changes in a nation dogged with economic uncertainty and tight
currency controls.
Dana's Venezuelan subsidiary, C.A. Danaven, which employs about
540 people at two plants, was sold to Manufacturing and Logistics
Solutions Ltd. Dana will take a $77 million fourth-quarter charge
relating to the divestiture and will act as a supplier providing
axle components to MLS, which provides parts to auto companies in
Venezuela.
"This business decision was made to improve Dana shareholder
value by reducing uncertainty associated with foreign currency and
other regulatory pressures," Dana Chief Executive Roger Wood said
in a statement. South America account for less than 5% of the
company's annual sales, it said.
Auto makers and parts suppliers are struggling to protect their
balance sheets as currency fluctuations within South America
generated unexpected losses. New car demand in the region also
continues to fall. Auto sales industrywide in Venezuela fell 76% in
2014 to 23,707 vehicles, and the country's auto production fell
72.5% to 19,759 vehicles, according to WardsAuto.com.
Ford Motor Co. last week said it would take an $800 million
charge against fourth-quarter earnings to remove Venezuelan
operations from consolidated earnings, largely to shield itself
against exchange rate problems between the Venezuelan bolívar and
the U.S. dollar. Ford plans to record cash and recognize income
from the country when it is paid for parts.
Dana, based in Maumee, Ohio, warned at the start of 2014 it was
facing increasing financial hardship in the region saying it
expected costs to cut its full-year earnings by as much as $40
million. The company will report its fourth-quarter results on Feb.
19.
Joseph Spak, an auto analyst with RBC Capital Markets, said
Dana's move is a "clear positive" for the company and its
investors. "Venezuela is a relatively small part of the company's
sales exposure that would often cause out-sized volatility (and
headaches) given how difficult it has been for a U.S.-based company
to operate in the country and access cash."
Shares in Dana were up less than 1% in recent trading to
$21.54.
Write to Jeff Bennett at jeff.bennett@wsj.com
Corrections & Amplifications
Manufacturing and Logistics Solutions is acquiring C.A. Danaven,
Dana Holding's Venezuelan auto-parts operation. An earlier version
of this article said C.A. Danaven was acquiring the business.
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