1. “Transcending Turbulence”
Gary L. Convis
Chief Executive Officer
Dana Holding Corporation
The Management Briefing Seminars
August 13, 2008 – Traverse City, Michigan
“I believe that both the scope and impact
of that which is within our control is far greater
than most observers, and perhaps
many of us here today, appreciate.”
Good morning. It’s a pleasure to be back in beautiful Yes, much of what is occurring in our industry today
Traverse City and to take part in this 43rd edition of is beyond our direct control. Some past errors in
The Management Briefing Seminars. strategy and execution are very difficult – and costly –
to fix. And current challenges like the skyrocketing
At the risk of stating the obvious, our theme today – prices for petroleum, steel (which Dana uses at the
Transcending Turbulence – couldn’t be timelier, or rate of about 1.5 million tons annually), and other
more crucial to our future. commodities; intense global competition; and the
ailing broader economy in the U.S. are all the result of
Turbulence, by definition, is a state of agitation or larger forces.
irregularity – the departure from a smooth flow. As a
lifelong student of manufacturing process, where the This graphic [refers to slide] provides a pretty stark
objective is consistent flow and repeatability, you illustration of the downturn in the North American
could say that “turbulence” has been an enduring foe light vehicle markets. However, I firmly believe that
of mine over the years. both the scope and impact of that which is within our
control is far greater than most observers, and perhaps
Speaking more figuratively, “transcending turbulence” many of us here today, appreciate.
has today become a virtual rallying cry across our
industry. This is particularly true here in North When we talk of solutions to our industry’s problems,
America, where conditions – both macro and micro – the conversation inevitably turns to the bold, game-
are as about as difficult as I have witnessed at any changing remedies. Alternative-energy vehicles
point during my 40-plus years in this industry. powered by hydrogen, electricity, or bio-fuels, are the
most frequently cited examples. And while it’s
At the same time, I want to be clear in also saying that essential that we continue to advance toward these
I don’t believe our collective future is nearly as bleak long-term solutions, I’m here to tell you that there are
as some would have us think. also “game-changing” benefits to be derived from the
comparatively mundane, “un-sexy” pursuit of
systematic process improvement across our
operations.

2. As is so often the case in times of turmoil and Because this is precisely the effort I am currently
turbulence, it’s a recommitment to the basics – a immersed in, I’d like to provide you a few specific
return to the very essence of our purpose – that examples of how we are doing this at Dana.
unlocks the potential of our future.
First and foremost, we are aggressively working to
As David [Cole] noted, I spent more than 20 years at “jump-start” our operations. Within days of joining
Toyota, where the benefits derived from the legendary the Dana team, I launched an initiative we have
Toyota Production System are inarguable. But these termed “Operational Excellence.” At its core,
benefits are only realized because the entire Operational Excellence is about better aligning our
organization – from team members to senior managers company’s resources and support infrastructure to
– understand, appreciate, and practice the ensure that our manufacturing operations are capable
fundamentals of TPS on a daily basis, and drive of being best-in-industry performers.
success through a strong culture committed to
continuous improvements, big and small. To facilitate this, we are implementing the Dana
Operating System, which focuses on improvement in
Of course, I have brought this philosophy with me to every Dana plant and process.
Dana, and I’ll talk about some of our efforts – and
early results – in a few moments. Specifically, the standard set of values, processes,
tools, and metrics in the Dana Operating System will
Dana, as you may know, has been something of a help the people in our plants pursue the goals of
standard-bearer for turbulence in the automotive perfect safety and quality, lowest cost (including
industry over the past decade. The company has minimal waste and variation), and 100-percent on-
experienced several major restructurings, a hostile time delivery.
takeover attempt, the death of a sitting chairman,
financial restatements, major divestitures, and Chapter The Operational Excellence initiative is already well
11 reorganization … and that’s just what’s occurred underway in North America with a strong team
during the last five years! assembled, multiple pilots in progress, and continued
movement toward eventual roll-out across our global
The good news in this litany of challenges is that Dana manufacturing organization.
has emerged (quite literally) as a fundamentally
changed – and improved company. The early results, less than six months into the
program, have been both tangible and extremely
We have a great new Board, a strong investor in positive.
Centerbridge Partners, positive union relationships, a
solid financial position, and an experienced new At our Lima, Ohio, driveshaft products operation
management team that is collectively focused on we have:
• Reduced changeover times in certain areas of
returning Dana to the leadership position it enjoyed
not so long ago. the plant from eight hours to less than two.
• Improved our capacity to deliver driveshaft
There are those who would have you believe that the
timing of our emergence is akin to one setting out with service kits, which are a very important
a realtor’s license these days – not exactly the best offering, by 80 percent with no substantial
conditions for immediate success. capital investment. In May, we produced
60,000 kits; in July, we produced 108,000.
And while we would surely prefer to begin this new
• And we’ve accomplished this without losing
chapter in Dana’s 104-year history amid a stronger
U.S. marketplace, the fact is that emergence in itself sight of our primary pursuit at the facility –
was a substantial positive accomplishment for the producing high-quality, heavy-duty driveshafts
Dana team. Despite the broader environment, I for many of the leading Class 5-8 truck
believe that there is actually a silver lining within manufacturers. In fact, we recently eclipsed
these extreme challenges. our record day in producing driveshafts from
the facility and have full confidence that this
To fully exploit this silver lining, we must begin by kind of performance will be consistently
taking a firm grasp of that which is within our control. achieved.
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3. At our Auburn Hills, Michigan, driveshaft plant, At our Longview, Texas, and Hopkinsville, Kentucky,
through strong problem solving and teamwork with structural products stamping facilities, we are now
engineering and manufacturing, we have reduced focusing not on how much we can produce in a given
scrap to one tenth of the level incurred there just a few period, but rather on how much we should produce,
months ago (from nearly 4% of sales in January, to a and how best to achieve this goal. To support this
little more than 1% today). new thinking, we’ve adopted pattern production,
which seeks smaller lot sizes and more frequent die
At our Lugoff, South Carolina, Off-Highway heavy changes, thus reducing total costs by avoiding excess
axle facility, we’ve doubled the number of axles storage racks, fork trucks, and space.
rolling off our Hercules line from eight weeks ago,
with no increase in manpower or investment. This adoption of the Dana Standard KPIs is central to
our overall effort to jump-start Dana’s operations.
In our Ft. Wayne, Indiana, light axle manufacturing
plant, and our Dry Ridge, Kentucky, light axle You might be surprised to hear that over the course of
assembly plant, we have identified and begun my career, I’ve rarely witnessed an issue with workers
implementing standard work improvements that we diligently pursuing their production goals.
expect will save us $2 million to $3 million annually.
Again, this is largely the result of good standardized At the same time, I’ve consistently observed that
work and waste elimination. workers are far more committed and do a far better job
when they understand how they can have a positive
While we have made good initial progress with our impact on the outcome. To achieve this level of
pilot operations, the challenge that we face in the engagement, we need to establish KPIs that are
coming months is embedding the cultural change of appropriate and visible on the production floor. The
the Dana Operating System in all of our North answer, in many cases, is as simple as providing a KPI
American plants, and then rolling out the Dana “scoreboard” that illustrates and motivates progress.
Operating System worldwide.
This slide [refers to slide] further illustrates a number
While the DOS roll out has largely been confined to of the tangible improvements we achieved during the
North America thus far, we have been working to second quarter – again just a few months into the
embed a root cause/corrective action and continuous Operational Excellence program.
improvement culture in all of our facilities worldwide
through the deployment of standard Key Performance We also need to ensure that new team members are
Indicators, or “KPIs.” equipped to understand – and perform – their role
before they begin working for us. To facilitate this,
Today, we are tracking the same six metrics with 17 we’re establishing Certified Training Centers in our
subcomponent KPIs in all 113 of our facilities plants to ensure that these individuals are uniformly
worldwide, a first for this organization. trained and certified, which results in a more stable
environment and improved safety, quality, and
Additionally, we have established meeting standards efficiency.
and visualization standards, which will be fully
implemented worldwide by the end of this quarter, to Is any of this revolutionary? Of course not. But as I
help our plants identify root causes and many of the noted earlier, it’s the execution of the seemingly
daily challenges that inhibit our performance and to mundane basics that so often fuels improved
develop corrective actions to help the plants performance.
continuously improve. This accomplishment, when
Another “basic” development at Dana is the recent
coupled with a regular operating review cadence, will
formation of an Engineering Council to implement
provide transparency into the key issues at a plant and
and spread best practices throughout our driveline
help us help our plant management teams develop
product operations and across our automotive,
defined action plans, schedules, resources, and
commercial vehicle, and off-highway groups. The
leadership to improve the past performance of all
council’s scope includes advancing and extending our
KPIs.
work in technological development; advanced
Today, we track and review these KPIs daily at the engineering; testing and standards; gated
plant level, weekly, bi-weekly at the regional level, management; VA/VE; parts communization; and
and monthly at the executive level. complexity reduction. In short, we’re working to
improve and replicate our best work throughout our
company.
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4. Again, nothing revolutionary; just good old fashioned But while current conditions may necessitate some
common sense applied in a very focused manner. difficult actions, none of us believes in reducing our
way to prosperity. Rather, it’s about refining our
Yet another “common sense” tactic during a downturn direction and executing with increasing discipline and
is to take advantage of the situation to tackle issues precision.
that can’t be addressed when you’re running at full
capacity. In fact, while we are necessarily cutting in some areas,
we are also growing in others. Growth is not
One of the proudest moments during my leadership of something you hear too much about in the auto
Toyota’s Georgetown, Kentucky, facility, was a long- industry these days. But even amid our challenges,
term improvement we accomplished during what there are considerable opportunities to fully leverage
many would have viewed as a moment of crisis. Back our prospects for profitable growth.
in the early part of this decade, the Georgetown
facility was faced with the move of one of our chief At Dana, we are pursuing growth on several fronts.
programs, the Sienna minivan, to the new Princeton,
Indiana, plant because the new model was going to be The first is through taking advantage of our market
too large to fit in the TMMK plant. The cadence of diversification. While many people primarily
this move left the Georgetown plant with a six-month associate Dana with the automotive market, the fact is
gap in production and uncertainty about our future. that North American light-duty sales actually
comprise only about a third of our overall sales.
Instead of merely riding out the storm, we embraced
the situation as an opportunity to create a new future And nearly 40 percent of our annual sales are derived
for the facility, and to more substantially form the from our operations devoted to the off-highway and
vision of what we called “The Plant of Choice.” commercial vehicle sectors.
We seized on this opportunity to deploy resources to The off-highway business has been particularly
redesign two of our paint spray booths to achieve beneficial to Dana in recent years. Marked by the
increased automation, paint transfer efficiency, speed, diversity of both its customers and its geographic
volume, and profitability while reducing costs base, this business has been growing by about 20
dramatically by shutting down a third spray booth and percent annually for several years due largely to
oven. We also embarked on an aggressive training construction in emerging markets, as well as our
effort to “level-up” the capabilities of our workforce. ability to supply the makers of agricultural, mining,
and forestry equipment.
The direct result of this effort, which I’ve obviously
oversimplified for the purposes of this discussion, was Our industry extends far beyond North America and
the eventual award an all-new crossover vehicle added into countries and regions that are experiencing strong
to the TMMK Camry, Camry Hybrid, and Avalon growth.
vehicles built there, which significantly enhanced the
plant’s long-term future. Dana’s footprint currently encompasses more than 100
operations in 26 countries and we’re expanding our
Again, I’d like to emphasize the important role of footholds in China, India, the Mercosur region and
company leadership facing turbulent times. This elsewhere. And we are actively looking to
could only have been achieved by looking beyond the strategically expand to support the emerging needs in
near-term storms, and charting a path that would result Russia, which may soon eclipse Germany as the
in a much stronger and more competitive business leading European automotive market.
model as the waters calmed.
We’re also diversifying the company’s sales by
In turbulent times, there is obviously an enhanced customer. Our goal is to increase sales with all of our
focus on controlling costs through aggressive customers, while at the same time diversifying our
management of the supply chain, process efficiency, revenue base. Today, the Detroit “Big 3” comprise
and yes, unfortunately, reducing our workforce in approximately a third of our sales. Toyota is our third
some cases. As you may know, we recently largest customer, and we’ve more than doubled our
announced plans to reduce our North American sales with Japanese-based equipment manufacturers
workforce, both salaried and hourly, by about 17 over the past decade, surpassing the $1 billion
percent largely in response to what we feel are threshold for the first time last year.
structural changes taking place here in the U.S.
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5. We’ve also experienced continued growth with non- When Dana emerged from Chapter 11 reorganization
back on January 31st, we coined the theme, “Our New
automotive customers like PACCAR, Navistar, and
John Deere, all of which are among our Top 10 Beginning.” While the company had accomplished
customers in terms of sales. much in its reorganization, our new beginning was
just that – a beginning.
The pursuit of profitable growth is largely a tactical
effort. But beneath the tactics lies a strategic approach I would suggest that our collective efforts to transcend
to transcending turbulence. the turbulence of today’s automotive industry will also
represent a new beginning.
At Dana, we’ve determined that our future will be
aligned around our deep capabilities in driveline And I firmly believe that while we face some
products – principally axles and driveshafts – applied considerable headwinds and a great deal of work, we
across our three key markets: automotive, commercial also possess the ability to successfully weather today’s
vehicle, and off-highway. turbulence and shape a new beginning that is worthy
of this great industry.
To support this focus, we are realigning our North
American light vehicle businesses and leveraging Thank you.
growth opportunities – particularly in the stronger
markets and regions I just mentioned.
Those of us who have been around a while understand
that the turbulent state of today’s automotive industry
is unquestionably serious. But we also benefit from
the perspective gained from overcoming past
challenges. And as a result, we understand that this
moment is a snapshot in time.
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