UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Dana Holding Corporation

(Exact name of registrant as specified in its charter)

Delaware		26-1531856
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
4500 Dorr Street, Toledo, Ohio		43615
(Address of principal executive offices)		(Zip Code)

(419) 535-4500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 1, 2009
Common stock, $0.01 par value		100,084,225

 

 

DANA HOLDING CORPORATION — FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009

TABLE OF CONTENTS

		10-Q Pages
Table of Contents			1
PART I — FINANCIAL INFORMATION
Item 1 Financial Statements			2
Consolidated Statement of Operations (Unaudited)			2
Consolidated Balance Sheet (Unaudited)			3
Consolidated Statement of Cash Flows (Unaudited)			4
Notes to Consolidated Financial Statements (Unaudited)			6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3 Quantitative and Qualitative Disclosures About Market Risk			41
Item 4 Controls and Procedures			42
PART II — OTHER INFORMATION
Item 1 Legal Proceedings			42
Item 1A Risk Factors			42
Item 6 Exhibits			43
Signatures			44
Exhibit Index			45
EX-18.1
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Holding Corporation

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Net sales		$	1,216			$	1,561				$	751
Costs and expenses
Cost of sales			1,233				1,503					702
Selling, general and administrative expenses			75				65					34
Amortization of intangibles			17				12
Realignment charges, net			50				5					12
Other income, net			29				32					8
Income (loss) from continuing operations before interest, reorganization items and income taxes			(130	)			8					11
Interest expense (contractual interest of $17 for the one month ended January 31, 2008)			35				27					8
Reorganization items			1				9					98
Fresh start accounting adjustments												1,009
Income (loss) from continuing operations before income taxes			(166	)			(28	)				914
Income tax benefit (expense)			9				(20	)				(199	)
Equity in earnings of affiliates			(3	)			1					2
Income (loss) from continuing operations			(160	)			(47	)				717
Loss from discontinued operations							(1	)				(6	)
Net income (loss)			(160	)			(48	)				711
Less: Net loss (income) attributable to noncontrolling interests			3				(2	)				(2	)
Net income (loss) attributable to the parent company			(157	)			(50	)				709
Preferred stock dividend requirements			8				5
Net income (loss) available to common stockholders		$	(165	)		$	(55	)			$	709
Income (loss) per share from continuing operations attributable to parent company stockholders:
Basic		$	(1.64	)		$	(0.54	)			$	4.77
Diluted		$	(1.64	)		$	(0.54	)			$	4.75
Loss per share from discontinued operations attributable to parent company stockholders:
Basic		$	—			$	(0.01	)			$	(0.04	)
Diluted		$	—			$	(0.01	)			$	(0.04	)
Net income (loss) per share attributable to parent company stockholders:
Basic		$	(1.64	)		$	(0.55	)			$	4.73
Diluted		$	(1.64	)		$	(0.55	)			$	4.71
Average common shares outstanding
Basic			100				100					150
Diluted			100				100					150

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

		March 31,				December 31,
		2009				2008
Assets
Current assets
Cash and cash equivalents		$	549			$	777
Accounts receivable
Trade, less allowance for doubtful accounts of $21 in 2009 and $23 in 2008			804				827
Other			188				170
Inventories
Raw materials			337				394
Work in process and finished goods			434				521
Other current assets			117				58
Total current assets			2,429				2,747
Goodwill			103				108
Intangibles			538				569
Investments and other assets			187				207
Investments in affiliates			132				135
Property, plant and equipment, net			1,758				1,841
Total assets		$	5,147			$	5,607
Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt		$	44			$	70
Liability for advance received on corporate facility sale			11
Accounts payable			613				824
Accrued payroll and employee benefits			168				185
Taxes on income			89				93
Other accrued liabilities			257				274
Total current liabilities			1,182				1,446
Long-term debt			1,184				1,181
Deferred employee benefits and other non-current liabilities			886				845
Commitments and contingencies (Note 18)
Total liabilities			3,252				3,472
Parent company stockholders’ equity
Preferred stock, 50,000,000 shares authorized
Series A, $0.01 par value, 2,500,000 issued and outstanding			242				242
Series B, $0.01 par value, 5,400,000 issued and outstanding			529				529
Common stock, $.01 par value, 450,000,000 authorized, 100,074,997 issued and outstanding			1				1
Additional paid-in capital			2,323				2,321
Accumulated deficit			(871	)			(706	)
Accumulated other comprehensive loss			(428	)			(359	)
Total parent company stockholders’ equity			1,796				2,028
Noncontrolling interests			99				107
Total equity			1,895				2,135
Total liabilities and equity		$	5,147			$	5,607

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Cash flows — operating activities
Income (loss) attributable to the parent company		$	(157	)		$	(50	)			$	709
Income (loss) attributable to noncontrolling interests			(3	)			2					2
Net income (loss)			(160	)			(48	)				711
Depreciation			73				47					23
Amortization of intangibles			21				15
Amortization of inventory valuation							45
Amortization of deferred financing charges and original issue discount			7				4
Deferred income taxes			(13	)			(2	)				191
Reorganization:
Gain on settlement of liabilities subject to compromise												(27	)
Payment of claims							(88	)
Reorganization items net of cash payments			(1	)			(18	)				79
Fresh start adjustments												(1,009	)
Payments to VEBAs							(733	)				(55	)
Loss (gain) on sale of businesses and assets			(1	)			1					7
Change in working capital			(112	)			(128	)				(61	)
Other, net			12				(22	)				19
Net cash flows used in operating activities			(174	)			(927	)				(122	)
Cash flows — investing activities
Purchases of property, plant and equipment			(30	)			(29	)				(16	)
Proceeds from sale of businesses and assets												5
Change in restricted cash												93
Other							8					(5	)
Net cash flows provided by (used in) investing activities			(30	)			(21	)				77
Cash flows — financing activities
Repayment of debtor-in-possession facility												(900	)
Net change in short-term debt			(24	)			(7	)				(18	)
Advance received on corporate facility sale			11
Payment of DCC Medium Term Notes												(136	)
Proceeds from Exit Facility debt							80					1,350
Original issue discount												(114	)
Deferred financing fees												(40	)
Repayment of Exit Facility debt			(3	)			(4	)
Issuance of Series A and Series B preferred stock												771
Other			2				(5	)				(1	)
Net cash flows provided by (used in) financing activities			(14	)			64					912
Net increase (decrease) in cash and cash equivalents			(218	)			(884	)				867
Cash and cash equivalents — beginning of period			777				2,147					1,271
Effect of exchange rate changes on cash balances			(10	)			20					5
Net change in cash of discontinued operations												4
Cash and cash equivalents — end of period		$	549			$	1,283				$	2,147

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation
Index to Notes to the Consolidated
Financial Statements

	1.		Organization and Summary of Significant Accounting Policies
	2.		Emergence from Chapter 11
	3.		Reorganization Items
	4.		Discontinued Operations
	5.		Realignment of Operations
	6.		Inventories
	7.		Long-Lived Assets
	8.		Goodwill and Other Intangible Assets
	9.		Capital Stock
	10.		Earnings Per Share
	11.		Incentive and Stock Compensation
	12.		Pension and Postretirement Benefit Plans
	13.		Comprehensive Income (Loss)
	14.		Cash Deposits
	15.		Liquidity and Financing Agreements
	16.		Fair Value Measurements
	17.		Risk Management and Derivatives
	18.		Commitments and Contingencies
	19.		Warranty Obligations
	20.		Income Taxes
	21.		Other Income, Net
	22.		Segments

Notes to Consolidated Financial Statements

Note 1. Organization and Summary of Significant Accounting Policies

General

     As a result of Dana Corporation’s emergence from Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) on January 31, 2008 (the Effective Date), Dana is the successor registrant to Dana Corporation (Prior Dana) pursuant to Rule 12g-3 under the Securities Exchange Act of 1934. The terms “Dana”, “we,” “our” and “us,” when used in this report with respect to the period prior to Dana Corporation’s emergence from bankruptcy, are references to Prior Dana and, when used with respect to the period commencing after Dana Corporation’s emergence, are references to Dana. These references include the subsidiaries of Prior Dana or Dana, as the case may be, unless otherwise indicated or the context requires otherwise.

     In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). These financial statements should be read in conjunction with our Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2008. Financial results for interim periods are not necessarily indicative of anticipated results for the entire year. The results of operations for the three month period ended March 31, 2009 are not necessarily indicative of results for our 2009 fiscal year because of seasonal variations and other factors.

     This report includes the results of the implementation of the Third Amended Joint Plan of Reorganization of Debtors and Debtors in Possession as modified (the Plan) and the effects of the adoption of fresh start accounting. In accordance with GAAP, historical financial statements of Prior Dana are presented separately from Dana results. The implementation of the Plan and the application of fresh start accounting result in financial statements that are not comparable to financial statements in periods prior to emergence.

Summary of Significant Accounting Policies

Basis of Presentation — Our financial statements include all subsidiaries in which we have the ability to control operating and financial policies and are consolidated in conformity with GAAP. All significant intercompany balances and transactions have been eliminated in consolidation. Affiliated companies (20% to 50% ownership) are recorded in the statements using the equity method of accounting.

     Dana and forty of its wholly-owned subsidiaries (collectively, the Debtors) reorganized under Chapter 11 of the United States Bankruptcy Code. American Institute of Certified Public Accountants’ (AICPA) Statement of Position (SOP) 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (SOP 90-7), which is applicable to companies operating under Chapter 11, generally does not change the manner in which financial statements are prepared. However, SOP 90-7 does require that the financial statements for periods subsequent to the filing of a Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization and related restructuring of our business from the ongoing operations of the business.

     We adopted SOP 90-7 on March 3, 2006 (the Filing Date) and prepared our financial statements in accordance with its requirements through the date of emergence. Effective February 1, 2008, we adopted fresh start accounting following the guidance of SOP 90-7. Pursuant to the Plan, all outstanding securities of Prior Dana were cancelled and new securities were issued. In addition, fresh start accounting required that our assets and liabilities be stated at fair value upon our emergence from bankruptcy in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations” (SFAS 141).

     Certain prior period amounts have been revised to conform to the current year’s presentation. Our operating segments have been reorganized in line with our management structure and certain income and expense items have been included or excluded from the segment EBITDA results (the segment measure of profitability — See Note 22) in the first quarter of 2009. The Light Axle and Driveshaft segments have been combined into the Light Vehicle Driveline (LVD) segment with certain operations from these former segments moving to our Commercial Vehicle and Off-Highway segments. See Note 22 for additional information.

Change in Accounting Principle

     Our inventories are valued at the lower of cost or market. On January 1, 2009, we changed the method of determining the cost basis of inventories for our U.S. operations from the last-in, first-out (LIFO) basis to the first-in, first-out (FIFO) basis. See Note 6 for additional information regarding this change. Our non-U.S. operations continue to determine cost using the average or FIFO cost basis.

Recently Adopted Accounting Standards

     On January 1, 2009, we adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No.133” (SFAS 161), which provides revised guidance for enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and the related hedged items are accounted for under SFAS 133, and how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows. The adoption of SFAS 161 did not have an impact on our consolidated financial position or results of operations. For additional information, see Note 17 - Risk Management and Derivatives.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160). SFAS 160 changes the accounting for and reporting of noncontrolling or minority interests (now called noncontrolling interests) in consolidated financial statements. SFAS 160 was effective January 1, 2009 and clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We have adopted this standard effective January 1, 2009. The presentation and disclosure requirements of this standard are applied retrospectively for all periods presented. See Note 12 for a reconciliation of the beginning and ending carrying amount of equity attributable to the parent company and to noncontrolling interests.

Recent Accounting Pronouncements

     In December 2008, the FASB issued FASB Staff Position No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP 132(R)-1). FSP 132(R)-1 expands disclosures about the types of assets and associated risks in an employer’s defined benefit pension or other postretirement plan. An employer will also be required to disclose information about the valuation of plan assets similar to that required under SFAS No. 157, “Fair Value Measurements” (SFAS 157). Those disclosures include the level within the fair value hierarchy in which fair value measurements of plan assets fall, information about the inputs and valuation techniques used to measure the fair value of plan assets, and the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period. The new disclosures are required to be included in financial statements for years ending after December 15, 2009.

Note 2. Emergence from Chapter 11

Emergence from Reorganization Proceedings and Related Subsequent Events

Claims resolution — On January 31, 2008 (the Effective Date) the Plan was consummated and we emerged from bankruptcy. As provided in the Plan, we issued and set aside approximately 28 million shares of Dana common stock (valued in reorganization at $640) for future distribution to holders of allowed unsecured nonpriority claims in Class 5B under the Plan. These shares are being distributed as the disputed and unliquidated claims are resolved. The claim amount related to the 28 million shares for disputed and unliquidated claims was estimated not to exceed $700. Since emergence, we have issued 23 million of the 28 million shares for allowed claims (valued in reorganization at $529), increasing the

total shares issued to 93 million (valued in reorganization at $2,157) for unsecured claims of approximately $2,239. The corresponding decrease in the disputed claims reserve leaves 5 million shares (valued in reorganization at $113). The remaining disputed and unliquidated claims total approximately $106. To the extent that these remaining claims are settled for less than the 5 million remaining shares, additional incremental distributions will be made to the holders of the previously allowed general unsecured claims in Class 5B.

Fresh Start Accounting — As required by GAAP, we adopted fresh start accounting effective February 1, 2008 following the guidance of SOP 90-7. The financial statements for the periods ended prior to January 31, 2008 do not include the effect of any changes in our capital structure or changes in the fair value of assets and liabilities as a result of fresh start accounting.

     Our reorganized consolidated balance sheet as of January 31, 2008 and the related disclosures are included in Note 2 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2008.

Note 3. Reorganization Items

     Professional advisory fees and other costs directly associated with our reorganization were reported separately as reorganization items pursuant to SOP 90-7. Post-emergence professional fees relate to claim settlements, plan implementation and other transition costs attributable to the reorganization. Reorganization items of Prior Dana include provisions and adjustments to record the carrying value of certain pre-petition liabilities at their estimated allowable claim amounts, as well as the costs incurred by non-Debtor companies as a result of the Debtors’ bankruptcy proceedings.

     The reorganization items in the consolidated statement of operations consisted of the following items:

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Professional fees		$	—			$	6				$	27
Employee emergence bonus												47
Foreign tax costs due to reorganization												33
Other			1				3					19
Interest income												(1	)
Total reorganization items			1				9					125
Gain on settlement of liabilities subject to compromise												(27	)
Reorganization items, net		$	1			$	9				$	98

     The gain on settlement of liabilities subject to compromise resulted from the satisfaction of these liabilities at emergence through issuance of Dana common stock or cash payments. The $125 of reorganization items for the one month ended January 31, 2008 included $104 of costs incurred as a direct consequence of emergence from bankruptcy. These costs included an accrual of $47 for stock bonuses for certain union and non-union employees, transfer taxes and other tax charges to effectuate the emergence and new legal organization, success fee obligations to certain professional advisors and other parties contributing to the bankruptcy reorganization and other costs relating directly to emergence.

Note 4. Discontinued Operations

     In 2005, the Board of Directors of Prior Dana approved the divestiture of our engine hard parts, fluid products and pump products operations and we have reported these businesses as discontinued operations through the dates of divestiture. The divestiture of these discontinued operations was

substantially completed during 2007 with the remaining pump products business divested in the first quarter of 2008. Prior Dana incurred a loss from discontinued operations of $6 in the month ended January 31, 2008 including a postclosing adjustment of $5 and Dana incurred a loss of $1 in the two months ended March 31, 2008.

     There were no assets or liabilities of discontinued operations as of December 31, 2008. In the consolidated statement of cash flows, the cash flows of discontinued operations have been reported in the respective categories of cash flows, along with those of our continuing operations.

Note 5. Realignment of Operations

     Realignment of our manufacturing operations was an essential component of our bankruptcy reorganization plans and remains a primary focus of management. We continue to eliminate excess capacity by closing and consolidating facilities and repositioning operations in lower cost facilities or those with excess capacity and focusing on reducing and realigning overhead costs.

     Realignment expense includes costs associated with previously announced actions as well as programs initiated during the first quarter of 2009. These actions include various employee reduction programs, manufacturing footprint optimization programs and other realignment activities across our global businesses, including the transfer of certain U.S. LVD and Commercial Vehicle manufacturing operations to Mexico.

     In January 2008, we announced the closure of our Barrie, Ontario Commercial Vehicle facility. Realignment expense in January 2008 included severance and other costs associated with the termination of approximately 160 employees and costs incurred to transfer the manufacturing operations to certain facilities in Mexico.

     In the third quarter of 2008, we entered into an agreement to sell our corporate headquarters. The book value in excess of sale proceeds was recognized as accelerated depreciation and recorded as realignment expense from the date we entered the agreement through the closing of the agreement in February 2009. Under the terms of the agreement, we received proceeds of $11 and we are entitled to occupy the facility rent-free through January 2010 while absorbing the customary occupancy related costs. Due to the conditions under which we continue to occupy the facility, the sale proceeds are being treated as an obligation to the purchaser under the provisions of SFAS No. 66, “Accounting for Sales of Real Estate” and SFAS No. 98, “Accounting for Leases” and are classified as a liability until we no longer occupy the facility. Headquarters personnel are expected to be relocated to other facilities in the Toledo, Ohio area by September 30, 2009.

     In response to increased economic and market challenges during the second half of 2008, particularly lower production volumes, we initiated further cost reduction plans and continued to execute such plans in the first quarter of 2009. In 2008, we achieved a global workforce reduction of approximately 6,000 employees of which approximately 5,000 were in North America. During the fourth quarter of 2008, we also offered a voluntary separation program to our salaried workforce, predominantly in the United States and Canada, and incurred costs of $17 associated with approximately 275 employees who accepted this offer and terminated employment during the fourth quarter of 2008.

     During the first quarter of 2009, we recorded an additional charge of $10 for severance and related benefit costs associated with approximately 125 additional employees who accepted the offer of voluntary separation. We also implemented other employee reduction programs, resulting in a global reduction of approximately 4,800 employees. Including the $10 associated with the voluntary separation program, we recorded an additional $46 of severance and related benefit costs associated with the headcount reduction programs and the realignment of our global businesses, including the announced closures of the Mississauga, Ontario facility in our Thermal business and the McKenzie, Tennessee facility in our Sealing business.

     Depending on the nature of the restructuring activities, including the conditions associated with severance benefits and other exit costs and activities, we accrue for these actions in accordance with the appropriate provisions of SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of

Defined Benefit Pension Plans and for Termination Benefits,” SFAS No. 112, “Employers’ Accounting for Postemployment Benefits” and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”

     The following table shows the realignment charges and related payments and adjustments recorded in our continuing operations during the three months ended March 31, 2009.

		Employee				Long-Lived
		Termination				Asset				Exit
		Benefits				Impairment				Costs				Total
Balance at December 31, 2008		$	55			$	—			$	10			$	65
Activity during the period
Charges to realignment			46				1				8				55
Adjustments of accruals											(5	)			(5	)
Non-cash write-off							(1	)							(1	)
Cash payments			(59	)							(9	)			(68	)
Currency impact			(1	)											(1	)
Balance at March 31, 2009		$	41			$	—			$	4			$	45

     At March 31, 2009, $45 of realignment accruals remained in accrued liabilities, including $41 for the reduction of approximately 1,900 employees to be completed over the next two years and $4 for lease terminations and other exit costs. The estimated cash expenditures related to these liabilities are projected to approximate $40 in 2009 and $5 thereafter. In addition to the $45 accrued at March 31, 2009, we estimate that another $36 will be expensed in the future to complete previously announced initiatives.

     The following table provides project-to-date and estimated future expenses for completion of our pending realignment initiatives for our business segments.

		Expense Recognized												Future
		Prior to				Year-to-date				Total				Cost to
		2009				2009				to Date				Complete
Light Vehicle Driveline		$	89			$	15			$	104			$	16
Structures			37				4				41				6
Sealing			3				7				10				4
Thermal							6				6
Off-Highway			2								2
Commercial Vehicles			31				12				43				9
Other			17				6				23				1
Total continuing operations		$	179			$	50			$	229			$	36

     The remaining cost to complete includes estimated noncontractual separation payments, lease continuation costs, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

Note 6. Inventories

     On January 1, 2009, we changed the method of determining the cost of inventories for our U.S. operations from the LIFO basis to the FIFO basis. Our non-U.S. operations continue to determine cost using the average or FIFO cost method. We believe the change is preferable as the FIFO method better reflects the current value of inventories on the consolidated balance sheet, provides greater uniformity across our operations and enhances our comparability with peers.

     This change in accounting method was completed in accordance with SFAS No. 154, “Accounting Changes and Error Corrections.” We applied the change in accounting method by adjusting the 2008 financial statements for the periods subsequent to our emergence from bankruptcy on January 31, 2008. As a result of applying fresh start accounting, inventory values at January 31, 2008 had been adjusted to their acquired value which resulted in LIFO basis equaling FIFO basis at that date. At December 31,

2008, our FIFO basis exceeded our LIFO basis by $14. The change in accounting from the LIFO to FIFO method was recorded as a reduction to cost of sales, resulting in a $14 benefit to operating income from continuing operations for the eleven months ended December 31, 2008. For the two-month period ended March 31, 2008, the accounting change increased cost of sales by $26. A charge to cost of sales of $30 to amortize the valuation step-up recorded at January 31, 2008 in connection with fresh start accounting was offset by a $4 reversal of other LIFO adjustments that had been recorded in that two-month period. The amortization of an additional $4 of the valuation step-up and the reversal of credit LIFO reserves of $44 recorded in the last three quarters of 2008 resulted in a net benefit of $40 for those periods. There is no net effect on income tax expense due to the valuation allowance on U.S. deferred tax assets.

     The effects of the change on the consolidated statement of operations for the two months ended March 31, 2008 are presented in the following table as are the effects of the change on the statement of operations for the three months ended March 31, 2009:

		2009												2008
		LIFO Estimate				Difference				As Reported				As Reported				Adjustments				As Adjusted
		Three Months				Between				Three Months				Two Months				to Change				Two Months
		Ended				LIFO				Ended				Ended				from				Ended
		March 31,				and				March 31,				March 31,				LIFO				March 31,
		2009				FIFO				2009				2008				to FIFO				2008
Cost of sales		$	1,225			$	8			$	1,233			$	1,477			$	26			$	1,503
Income (loss) from continuing operations before interest, reorganization items and income taxes			(122	)			(8	)			(130	)			34				(26	)			8
Loss from continuing operations before income taxes			(158	)			(8	)			(166	)			(2	)			(26	)			(28	)
Loss from continuing operations			(152	)			(8	)			(160	)			(21	)			(26	)			(47	)
Net loss			(152	)			(8	)			(160	)			(22	)			(26	)			(48	)
Loss attributable to the parent company			(149	)			(8	)			(157	)			(24	)			(26	)			(50	)
Loss available to common stockholders			(157	)			(8	)			(165	)			(29	)			(26	)			(55	)
Loss per share from continuing operations attributable to the parent company:
Basic		$	(1.56	)		$	(0.08	)		$	(1.64	)		$	(0.28	)		$	(0.26	)		$	(0.54	)
Diluted		$	(1.56	)		$	(0.08	)		$	(1.64	)		$	(0.28	)		$	(0.26	)		$	(0.54	)
Loss per share attributable to the parent company stockholders:
Basic		$	(1.56	)		$	(0.08	)		$	(1.64	)		$	(0.29	)		$	(0.26	)		$	(0.55	)
Diluted		$	(1.56	)		$	(0.08	)		$	(1.64	)		$	(0.29	)		$	(0.26	)		$	(0.55	)

     The impacts of this change on reported balances at December 31, 2008 and the effects as of March 31, 2009 are as follows:

		2009												2008
						Difference				As Reported				As Reported				Adjustments				As Reported
		LIFO Estimate				Between				under FIFO				Under LIFO				to Change				Under FIFO
		March 31,				LIFO and				March 31,				December 31,				from LIFO				December 31,
		2009				FIFO				2009				2008				to FIFO				2008
Inventories		$	765			$	6			$	771			$	901			$	14			$	915
Total current assets			2,423				6				2,429				2,733				14				2,747
Total assets			5,141				6				5,147				5,593				14				5,607
Accumulated deficit			(877	)			6				(871	)			(720	)			14				(706	)
Total parent company stockholders’ equity			1,790				6				1,796				2,014				14				2,028
Total equity			1,889				6				1,895				2,121				14				2,135
Total liabilities and equity			5,141				6				5,147				5,593				14				5,607

     The impacts of this change on operating cash flow for the two months ended March 31, 2008 are presented in the following table as are the effects of the change on operating cash flow for the three months ended March 31, 2009:

		2009												2008
		LIFO Estimate				Adjustments				As Reported				As Reported				Adjustments				As Adjusted
		Three Months				to Change				Three Months				Two Months				to Change				Two Months
		Ended				from				Ended				Ended				from				Ended
		March 31,				LIFO				March 31,				March 31,				LIFO				March 31,
		2009				to FIFO				2009				2008				to FIFO				2008
Net loss		$	(152	)		$	(8	)		$	(160	)		$	(22	)		$	(26	)		$	(48	)
Amortization of inventory valuation															15				30				45
Change in working capital			(120	)			8				(112	)			(124	)			(4	)			(128	)
Net cash flows used in operating activities			(174	)							(174	)			(927	)							(927	)

Note 7. Long-lived Assets

     We evaluated the long-lived assets in our segments for impairment as of December 31, 2008. Those assessments supported the carrying values of the long-lived assets; however deterioration of market conditions or operational execution impacting any of the key assumptions underlying our estimated cash flows could result in potential future long-lived asset impairment.

     Declines in production and the related changes to our forecasted results due to economic developments in 2009 could require us to assess the carrying value of our goodwill and other intangible assets in certain segments and could result in impairments of these intangible assets.

Note 8. Goodwill and Other Intangible Assets

Goodwill

     In accordance with SFAS No. 142, “Goodwill and Other Intangibles Assets” (SFAS 142), we test goodwill for impairment on an annual basis unless conditions arise that warrant an interim review. The annual impairment tests are performed as of October 31. In assessing the recoverability of goodwill, estimates of fair value are based upon consideration of various valuation methodologies, including projected future cash flows and multiples of current earnings. If these estimates or related projections change in the future, we may be required to record goodwill impairment charges.

     Goodwill declined from $108 at December 31, 2008 to $103 at March 31, 2009 due to the impact of foreign currency translation.

Other Intangible Assets

     Intangible assets include core technology, trademarks and trade names and customer relationships. Core technology includes the proprietary know-how and expertise that is inherent in our products and manufacturing processes. Trademarks and trade names include our trade names related to product lines and the related trademarks including Dana ^®, Spicer ^® and others. Customer relationships include the established relationships with our customers and the related ability of these customers to continue to generate future recurring revenue and income.

     Customer contracts and developed technology have finite lives while substantially all of the trademarks and trade names have indefinite lives. Definite-lived intangible assets are amortized over their useful lives using the straight-line method of amortization and are periodically reviewed for impairment indicators. Indefinite-lived intangible assets are reviewed for impairment annually or more frequently if impairment indicators exist.

     The following table summarizes the components of other intangible assets at March 31, 2009:

		Weighted
		Average				Gross								Net
		Useful Life				Carrying				Accumulated				Carrying
		(years)				Amount				Amortization				Amount
Amortizable intangible assets
Core technology			7			$	95			$	(17	)		$	78
Trademarks and trade names			17				3								3
Customer relationships			8				467				(81	)			386
Non-amortizable intangible assets
Trademarks and trade names							71								71
						$	636			$	(98	)		$	538

     The net carrying amounts of intangible assets attributable to each of our operating segments at March 31, 2009 were as follows: LVD — $33; Sealing — $41; Thermal — $17; Structures — $52; Commercial Vehicle — $218; and Off-Highway — $177.

     Amortization expense related to intangible assets was $21 in the first quarter of 2009. Amortization of core technology of $4 was charged to cost of sales and $17 of amortization of trademarks and trade names and customer relationships was charged to amortization of intangibles.

     Estimated aggregate pre-tax amortization expense related to intangible assets for the remainder of 2009 and each of the next five years is as follows: remainder of 2009, $53; 2010, $71; 2011, $69; 2012, $69; 2013, $69 and 2014, $66. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.

Note 9. Capital Stock

Series A and Series B Preferred Stock

Dividends — Dividends on the preferred stock have been accrued from the issue date at a rate of 4% per annum and are payable in cash on a quarterly basis as approved by the Board of Directors. The payment of preferred dividends was suspended in November 2008 under the terms of our amended Term Facility and may resume when our total leverage ratio as of the end of the previous fiscal quarter is less than or equal to 3.25:1.00. See Note 15 for additional information on the amended Term Facility. Preferred dividends accrued but not paid at March 31, 2009 were $18.

Common Stock

     At March 31, 2009, 100,109,124 shares of our common stock have been issued and we held less than $1 in treasury stock (34,127 shares at an average cost per share of $6.38).

Note 10. Earnings Per Share

     The following table reconciles the weighted-average number of shares used in the basic earnings per share calculations to the weighted-average number of shares used to compute diluted earnings per share (in millions of shares):

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Weighted-average number of shares outstanding — basic			100.1				100.0					149.9
Employee compensation-related shares, including stock options												0.5
Weighted-average number of shares outstanding — diluted			100.1				100.0					150.4

     Basic earnings (loss) per share is calculated by dividing the net income (loss) attributable to parent company stockholders by the weighted-average number of common shares outstanding. The outstanding common shares computation excludes any shares held in treasury.

     The share count for diluted earnings (loss) per share is computed on the basis of the weighted-average number of common shares outstanding plus the dilutive effects of potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options, restricted stock unit awards, performance share awards and preferred stock. To the extent these instruments are anti-dilutive they are excluded from the calculation of diluted earnings per share. Also, when there is a loss from continuing operations, potentially dilutive shares are excluded from the computation of earnings per share as their effect would be anti-dilutive.

     We excluded 5.6 million and 0.8 million common stock equivalents from the table above as the effect of including them would have been anti-dilutive for the quarter ended March 31, 2009 and the two months ended March 31, 2008. There were also common stock equivalents of 0.4 million and less than 0.1 million for these same periods that satisfied the definition of potentially dilutive shares. These potentially dilutive shares have also been excluded from the computation of earnings per share as the loss from continuing operations for these periods caused these shares to have an anti-dilutive effect. Conversion of the preferred stock was also not included in the share count for diluted earnings per share due to the loss from continuing operations. The preferred stock would convert into approximately 59.9 million shares of common stock at a $13.19 conversion price.

     The calculation of earnings per share is based on the following income (loss) attributable to the parent company stockholders:

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Income (loss) from continuing operations		$	(157	)		$	(49	)			$	715
Loss from discontinued operations							(1	)				(6	)
Net income (loss)		$	(157	)		$	(50	)			$	709

     The calculation of earnings per share for income (loss) per share from continuing operations attributable to parent company stockholders and net income (loss) per share attributable to parent company stockholders include the charge for the preferred stock dividend requirement for periods subsequent to January 31, 2008.

     Earnings per share information reported by Prior Dana is not comparable to earnings per share information reported by Dana because all existing equity interests of Prior Dana were eliminated upon the consummation of the Plan.

Note 11. Incentive and Stock Compensation

      Our Board of Directors granted 2.8 million stock options, 0.6 million stock appreciation rights (SARs) and 0.1 million restricted stock units (RSUs) during the first quarter of 2009 under the 2008 Omnibus Incentive Plan. The weighted average exercise price per share of the options and SARs issued during the period was $0.51 and the weighted-average grant-date fair value per share of the RSUs was $0.48. The expected term was estimated using the simplified method as historical data was not sufficient to provide a reasonable estimate. Stock options related to 0.2 million shares were forfeited in the first quarter. We estimated fair values for options and SARs granted during the period using the following key assumptions as part of the Black-Scholes model:

		Weighted-
		Average of
		Assumptions
Expected term (in years)			6.00
Risk-free interest rate			1.80	%
Expected volatility			62.97	%

      We recognized stock compensation expense of $2 during the three months ended March 31, 2009 and no expense in the two months ended March 31, 2008 or in the one month ended January 31, 2008. As of March 31, 2009, unearned compensation cost related to the unvested portion of all stock based awards granted was approximately $11 and is expected to be recognized over vesting periods averaging from 0.8 to 1.3 years.

Note 12. Pension and Postretirement Benefit Plans

     We have a number of defined contribution and defined benefit, qualified and nonqualified, pension plans for certain employees. Other postretirement benefit plans (OPEB), including medical and life insurance, are provided for certain employees upon retirement.

     The components of net periodic benefit costs (credits) were as follows:

		Pension Benefits
		Dana																	Prior Dana
		Three Months Ended								Two Months Ended									One Month Ended
		March 31, 2009								March 31, 2008									January 31, 2008
		U.S.				Non-U.S.				U.S.				Non-U.S.					U.S.				Non-U.S.
Service cost		$	—			$	1			$	—			$	1				$	1			$	1
Interest cost			27				5				18				5					9				2
Expected return on plan assets			(29	)			(2	)			(23	)			(4	)				(12	)			(2	)
Recognized net actuarial loss																				2
Net periodic benefit cost (credit)		$	(2	)		$	4			$	(5	)		$	2				$	—			$	1

		Other Benefits
		Dana																	Prior Dana
		Three Months Ended								Two Months Ended									One Month Ended
		March 31, 2009								March 31, 2008									January 31, 2008
		U.S.				Non-U.S.				U.S.				Non-U.S.					U.S.				Non-U.S.
Service cost		$	—			$	—			$	—			$	—				$	—			$	—
Interest cost							1								1					5				1
Amortization of prior service cost																				(3	)
Recognized net actuarial loss																				3
Net periodic benefit cost							1								1					5				1
Curtailment gain																				(61	)
Net periodic benefit cost (credit) after curtailments		$	—			$	1			$	—			$	1				$	(56	)		$	1

     During the first quarter of 2009, we settled a portion of the Canadian retiree pension benefit obligations by purchasing non-participating annuity contracts to cover vested benefits. This action necessitated a remeasurement of the assets and liabilities of the affected plans as of February 28, 2009. The discount rate used for remeasurement was 6.39%. As a result of the annuity purchases, we reduced the benefit obligation by $43 and also reduced the fair value of plan assets by $43. We recorded the related settlement loss of less than $1 to cost of sales in the first quarter of 2009.

     Our postretirement healthcare obligations for all U.S. employees and retirees were eliminated upon emergence. We contributed an aggregate of approximately $733 in cash on February 1, 2008 (which is net of amounts paid for non-pension retiree benefits, long-term disability and related healthcare claims of retirees incurred and paid between July 1, 2007 and January 31, 2008) to union-administered VEBAs. As a result of the changes in our U.S. other postretirement benefits that became effective on January 31, 2008 with our emergence from bankruptcy, we recognized a portion of the previously unrecognized prior service credits as a curtailment gain of $61 due to the negative plan amendment and reported it as a component of the gain on settlement of liabilities subject to compromise as of January 31, 2008. The gain was calculated based on the current estimate of the future working lifetime attributable to those participants who will not receive benefits following the estimated exhaustion of funds. The calculation used current plan assumptions and current levels of plan benefits. In connection with the recognition of our obligations to the VEBAs at emergence, the APBO was reset to an amount equal to the VEBA payments, resulting in a reduction of $278 with an offsetting credit to accumulated other comprehensive loss.

Note 13. Comprehensive Income (Loss)

     Comprehensive income (loss) includes our net income (loss) and components of other comprehensive income (OCI) such as currency translation adjustments that are charged or credited directly to equity.

     The components of our total comprehensive income (loss) were as follows:

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Parent company:
Net income (loss) attributable to the parent company		$	(157	)		$	(50	)			$	709
Other comprehensive income (loss):
Currency translation			(48	)			44					3
Postretirement healthcare plan amendments												278
Immediate recognition of prior service credit due to curtailment												(61	)
Benefit plan actuarial loss, net			(10	)								(140	)
Reclassification to net income (loss) of:
Benefit plan amortization												2
Unrealized investment losses and other			(11	)								(6	)
Comprehensive income (loss) attributable to the parent company		$	(226	)		$	(6	)			$	785
Noncontrolling interests:
Net income (loss)		$	(3	)		$	2				$	2
Other comprehensive income (loss):
Currency translation			(3	)			1					(21	)
Other												3
Comprehensive income (loss) attributable to noncontrolling interests			(6	)			3					(16	)
Total comprehensive loss (income)		$	(232	)		$	(3	)			$	769

     The $48 currency translation loss reported in the first quarter of 2009 was largely due to a stronger U.S. dollar relative to the euro ($32) and the Argentine peso ($6).

     The $44 currency translation gain reported for the two months ended March 31, 2008 was primarily due to the weakness of the U.S. dollar in relation to the euro ($39). For the one month ended January 31, 2008, the euro ($8) and the Brazilian real ($2) strengthened relative to the U.S. dollar while the South African rand weakened ($4).

     The following table reconciles the beginning and ending balances of equity between parent company stockholders’ equity and noncontrolling interests for the periods ended March 31, 2009 and 2008 after inclusion of the change from the LIFO to the FIFO method of accounting for inventories (see Note 6).

		Parent
		Company								Total
		Stockholders’				Noncontrolling				Stockholders’
		Equity				Interests				Equity
Balance, December 31, 2007		$	(782	)		$	95			$	(687	)
Comprehensive income (loss)			785				(16	)			769
Dividends paid							(1	)			(1	)
Stock issued			3,039								3,039
Fresh start adjustments			(3	)			34				31
Balance, January 31, 2008			3,039				112				3,151
Comprehensive income (loss)			(6	)			3				(3	)
Preferred stock dividends			(5	)							(5	)
Balance, March 31, 2008		$	3,028			$	115			$	3,143
Balance, December 31, 2008		$	2,028			$	107			$	2,135
Comprehensive income (loss)			(226	)			(6	)			(232	)
Preferred stock dividends			(8	)							(8	)
Stock compensation			2								2
Dividends paid							(2	)			(2	)
Balance, March 31, 2009		$	1,796			$	99			$	1,895

Note 14. Cash Deposits

     Cash deposits are maintained to provide credit enhancement for certain agreements and are reported as part of cash and cash equivalents. For most of these deposits, the cash may be withdrawn if comparable security is provided in the form of letters of credit. Accordingly, these deposits are not considered to be restricted.

		U.S.				Non-U.S.				Total
Cash and cash equivalents		$	211			$	201			$	412
Cash and cash equivalents held as deposits			53				18				71
Cash and cash equivalents held at less than wholly owned subsidiaries			2				64				66
Balance at March 31, 2009		$	266			$	283			$	549

     A portion of the non-U.S. cash and cash equivalents is utilized for working capital and other operating purposes. Several countries have local regulatory requirements that significantly restrict the ability of our operations to repatriate this cash. Beyond these restrictions, there are practical limitations on repatriation of cash from certain countries because of the resulting tax withholdings.

Note 15. Liquidity and Financing Agreements

     Liquidity — There are several risks and uncertainties relating to the global economy and our industry that could materially affect our future financial performance and liquidity. Among the potential outcomes, these risks and uncertainties could result in decreased sales, limited access to credit, rising costs, increased global competition, customer or supplier bankruptcies, delays in customer payments and acceleration of supplier payments, growing inventories and our failure to meet debt covenants.

     Our sales forecast is significantly influenced by various external factors beyond our control, including customer bankruptcies and overall economic market conditions. We considered downside sales scenarios for each of our markets (e.g., North American light vehicle production in 2009 of about 8.3 million units). Achieving our current forecast is also dependent upon a number of internal factors such as our ability to execute our remaining cost reduction plans, to operate effectively within the reduced cost structure and to realize our projected pricing improvements. Based on our current forecast assumptions, which include incremental headcount actions, other cost reductions, debt repayment and other initiatives, we believe that we can satisfy our debt covenants and the liquidity needs of the business during the next twelve months. However, there is a high degree of uncertainty in the current environment and it is possible that the factors affecting our business, including the Chrysler LLC (Chrysler) bankruptcy and a possible bankruptcy by General Motors (GM), could result in our not being able to comply with the financial covenants in our debt agreements or to maintain sufficient liquidity.

     We’ve considered the April 2009 bankruptcy filing by Chrysler and a potential bankruptcy filing by GM. Sales to GM and Chrysler approximated 6% and 3% of our consolidated sales in 2008 and 5% and 4% in the first quarter of 2009. With a bankruptcy filing by these customers, we believe it is likely that most of our programs would be continued following bankruptcy, or, if not, the programs would be discontinued over time allowing us sufficient opportunity to offset many of the adverse effects. As such, we expect the adverse effects of these bankruptcies would be limited principally to recovering less than the full amount of the outstanding receivable from these customers at the time of filing. We currently expect our exposure to be in the range of $5 to $30 depending on a number of factors, including the age and level of receivables at the time of their bankruptcy filings and whether we are treated as a critical supplier. We expect to mitigate some of the GM exposure by participating in the GM Automotive Supplier Support Program. The United States Department of the Treasury has allocated $2,100 to the GM program to ensure timely payment on certain receivables due to eligible suppliers, including Dana. Under the program, eligible receivables approved by GM are sold to a special purpose entity that is a subsidiary of GM with the seller receiving payment immediately for a 3% fee or under “normal” terms for a 2% fee. We have elected the latter option. All obligations of the GM special purpose entity are fully guaranteed by Department of the Treasury. We received permission from our lenders to participate in this GM program, as well as in a similar program that was being developed to support Chrysler suppliers.

     Non-compliance with the covenants would provide our lenders with the ability to demand immediate repayment of all outstanding borrowings under the amended Term Facility and the Revolving Facility. We do not have sufficient cash on hand to satisfy this demand. Accordingly, the inability to comply with covenants, obtain waivers for non-compliance, or obtain alternative financing would have a material adverse effect on our financial position, results of operations and cash flows. In the event we were unable to meet our debt covenant requirements, we believe we would be able to obtain a waiver or amend the covenants. Obtaining such waivers or amendments would likely result in a significant incremental cost. Although we cannot provide assurance that we would be successful in obtaining the necessary waivers or in amending the covenants, we were able to do so in 2008 and we believe that we would be able to do so in 2009, if necessary.

     We were in compliance with our debt covenants at December 31, 2008 and March 31, 2009 and, based on our current forecast, we expect to remain in compliance for the next twelve months. While our ability to borrow the full amount of availability under our revolving credit facilities may at times be limited by the financial covenants, we believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during this period.

     Exit Financing — As of March 31, 2009, we had gross borrowings of $1,263 and $84 of unamortized original issue discount (OID) under the amended Term Facility, no borrowings under the Revolving Facility and we had utilized $191 for letters of credit. Based on borrowing base collateral of $382 at March 31, there was potential availability at that date under the Revolving Facility of $191 after deducting the outstanding letters of credit and assuming no reduction in availability for the defaulting lender.

     On May 7, 2009, we announced a Dutch auction tender program to buy back up to 10% of the borrowings outstanding under the amended Term Facility. We anticipate that the repurchase activity under this program will be completed in May.

Interest Rate Agreements — Interest on the amended Term Facility accrues at variable interest rates. Under the amended Term Facility we are required to carry interest rate hedge agreements covering a notional amount of not less than 50% of the aggregate loans outstanding under the amended Term Facility until January 2011. The fair value of these contracts, which cap our interest rate at 10.25% on $708 of debt, was nominal as of March 31, 2009.

European Receivables Loan Facility —At March 31, 2009, there were no borrowings under this facility. The $132 of accounts receivable serving as collateral under the program at March 31, 2009 would have supported $85 of borrowings at that date.

     Our additional borrowing capacity under the Revolving Facility and our other credit facilities is effectively limited to $275 based on our financial covenants.

Note 16. Fair Value Measurements

     In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs. Decreases in the value of notes receivable of $13, $10 and $28 during the second, third and fourth quarters of 2008 were charged to OCI. These decreases were attributable to changes to the variables in our calculation.

     As of March 31, 2009, our assets and liabilities that are carried at fair value on a recurring basis include the following:

						Fair Value Measurements Using
						Quoted				Significant
						Prices in				Other				Significant
						Active				Observable				Unobservable
						Markets				Inputs				Inputs
		Total				(Level 1)				(Level 2)				(Level 3)
Assets:
Notes receivable		$	14			$	—			$	—			$	14
Interest rate caps
Currency forward contracts			9								9
Total assets		$	23			$	—			$	9			$	14
Liabilities:
Currency forward contracts		$	7							$	7
Total liabilities		$	7			$	—			$	7			$	—

The fair value of interest rate caps which are measured using Level 1 is less than $1.

     The change in value of the notes receivable can be summarized as follows:

		Level 3
Changes in fair value during the period (pre-tax):
December 31, 2008		$	20
Accretion of value — included in Interest Income			2
Unrealized loss — included in OCI			(8	)
March 31, 2009		$	14

     Substantially all of the notes receivable amount consists of one note, due 2019, obtained in connection with a divestiture in 2004. It is adjusted each quarter based primarily on the market value of publicly traded debt of the operating subsidiary of the obligor. We have the ability and intent to hold this security until it recovers its contractual value which could be at its scheduled maturity and believe that all contractual payments related to this note will be received. Net changes in the values of the other notes receivable are de minimis.

Note 17. Risk Management and Derivatives

     We manufacture and sell our products in a number of countries and, as a result, are exposed to movements in foreign currency exchange rates. We use derivatives to manage financial exposures that occur in the normal course of business. We do not hold or issue derivatives for trading purposes. The changes in the fair value of these forward contracts are recorded in cost of sales for product related hedges and in other income for repatriation hedges.

     We also enter into foreign exchange forward contracts to mitigate the change in fair value of specific assets and liabilities on the balance sheet, primarily intercompany debt and the related interest accruals. These transactions are not designated as hedging instruments under SFAS 133. Accordingly, changes in the fair value of these hedges are recognized immediately in other income, net, on the income statement.

     The total notional amount of outstanding foreign currency derivatives as of March 31, 2009 was $189, which is primarily comprised of forward exchange contracts denominated in euros, British pounds and Australian dollars.

     The fair values of derivative instruments included within the consolidated balance sheet as of March 31, 2009 are recorded as $9 of receivables under forward contracts reported as part of other current assets and as $7 of payables under forward contacts in other accrued liabilities. These derivatives are not designated as hedging instruments under SFAS 133. See Note 16 — Fair Value Measurements which includes these amounts as valued in accordance with SFAS 157. Changes in the fair value of these instruments and any gain or loss realized is reported in other income, net or cost of sales for materials purchases. We recorded $3 in other income, net in the three months ended March 31, 2009 for these derivatives.

     Hedges of product costs are recorded in cost of sales when the underlying transaction affects net income. No amounts were hedged in the three months ended March 31, 2009. We also carry an interest rate cap on $708 of our long-term debt. The change in the fair value of this derivative was recorded as a loss of less than $1 in other income, net in the three months ended March 31, 2009.

     We are exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate our exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. Counterparty exposures and credit quality are periodically reviewed and reported to senior management in accordance with prescribed guidelines. We utilize a portfolio of financial institutions either headquartered or operating in the same countries where we conduct our business. As a result of the above considerations, we consider the risk of counterparty default to be immaterial.

Note 18. Commitments and Contingencies

Class Action Lawsuit and Derivative Actions — A securities class action entitled Howard Frank v. Michael J. Burns and Robert C. Richter was originally filed in October 2005 in the U.S. District Court for the Northern District of Ohio, naming our former Chief Executive Officer, Michael J. Burns, and former Chief Financial Officer, Robert C. Richter, as defendants. In a consolidated complaint filed in August 2006, lead plaintiffs alleged violations of the U.S. securities laws and claimed that the price at which our stock traded at various times between April 2004 and October 2005 was artificially inflated as a result of the defendants’ alleged wrongdoing. In June 2007, the District Court denied lead plaintiffs’ motion for an order partially lifting the statutory discovery stay which would have enabled them to obtain copies of certain documents produced to the SEC. By order dated August 21, 2007, the District Court granted the defendants’ motion to dismiss the consolidated complaint and entered a judgment closing the case. On November 19, 2008, following briefing and oral arguments on the lead plaintiff’s appeal, the Sixth Circuit vacated the District Court’s judgment of dismissal on the ground that the decision on which it was based misstated the applicable pleading standard. In doing so, the Sixth Circuit gave no indication of its views

as to whether, under the correct pleading standard, it would have affirmed the District Court’s judgment. The Sixth Circuit remanded the case to the District Court to consider whether it would still dismiss under the correct articulation of the pleading standard. By Order filed February 11, 2009, the District Court established a schedule for the submission of new briefs on the Defendants’ motion to dismiss the consolidated complaint and scheduled oral arguments on the motion for May 18, 2009.

SEC Investigation — In September 2005, we reported that management was investigating accounting matters arising out of incorrect entries related to a customer agreement in our Commercial Vehicle operations, and that the Prior Dana Audit Committee had engaged outside counsel to conduct an independent investigation of these matters as well. Outside counsel informed the SEC of the investigation, which ended in December 2005, the same month that we filed restated financial statements for the first two quarters of 2005 and the years 2002 through 2004. In January 2006, we learned that the SEC had issued a formal order of investigation with respect to matters related to our restatements. The SEC’s investigation is a non-public, fact-finding inquiry to determine whether any violations of the law have occurred. We are continuing to cooperate fully with the SEC in the investigation.

Legal Proceedings Arising in the Ordinary Course of Business — We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. These include, among others, proceedings based on product liability claims and alleged violations of environmental laws. We have reviewed these pending legal proceedings, including the probable outcomes, our reasonably anticipated costs and expenses, the availability and limits of our insurance coverage and surety bonds and our established reserves for uninsured liabilities.

     Further information about some of these legal proceedings follows, including information about our accruals for the liabilities that may arise from such proceedings. We accrue for contingent liabilities at the time when we believe they are both probable and estimable. We review our assessments of probability and estimability as new information becomes available and adjust our accruals quarterly, if appropriate. Since we do not accrue for contingent liabilities that we believe are probable unless we can reasonably estimate the amounts of such liabilities, our actual liabilities may exceed the amounts we have recorded. We do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity or financial condition.

Asbestos Personal Injury Liabilities — We had approximately 31,000 active pending asbestos personal injury liability claims at March 31, 2009 and at December 31, 2008. In addition, approximately 15,000 mostly inactive claims have been settled and are awaiting final documentation and dismissal, with or without payment. We have accrued $125 for indemnity and defense costs for settled, pending and future claims at March 31, 2009, compared to $124 at December 31, 2008. We used a fifteen year time horizon for our estimate of the liability as of March 31, 2009.

     At March 31, 2009, we had recorded $64 as an asset for probable recovery from our insurers for the pending and projected asbestos personal injury liability claims, an increase of $1 from the amount at December 31, 2008 due to accretion. The recorded asset reflects our assessment of the capacity of our current insurance agreements to provide for the payment of anticipated defense and indemnity costs for pending claims and projected future demands. The recorded asset does not represent the limits of our insurance coverage, but rather the amount we would expect to recover if we paid the accrued indemnity and defense costs.

     We accrete the asset and liability for asbestos receivables and liabilities to their fair value each period.

     As part of our reorganization, assets and liabilities associated with asbestos claims were retained in Prior Dana which was then merged into Dana Companies, LLC, a consolidated wholly owned subsidiary of Dana. The assets of Dana Companies, LLC include insurance rights relating to coverage against these liabilities and other assets which we believe are sufficient to satisfy its liabilities. Dana Companies, LLC continues to process asbestos personal injury claims in the normal course of business, is separately managed and has an independent board member. The independent board member is required to approve certain transactions including dividends or other transfers of $1 or more of value to Dana.

Other Product Liabilities — We had accrued $1 for non-asbestos product liability costs at March 31, 2009, compared to $2 at December 31, 2008, with no recovery expected from third parties at either date. The decline in 2009 results from a reduction in the volume of active claims. We estimate these liabilities based

on assumptions about the value of the claims and about the likelihood of recoveries against us derived from our historical experience and current information.

Environmental Liabilities — Accrued environmental liabilities at March 31, 2009 were $16, compared to $18 at December 31, 2008. We consider the most probable method of remediation, current laws and regulations and existing technology in determining the fair value of our environmental liabilities.

Other Liabilities Related to Asbestos Claims — After the Center for Claims Resolution (CCR) discontinued negotiating shared settlements for asbestos claims for its member companies in 2001, some former CCR members defaulted on the payment of their shares of some settlements and some settling claimants sought payment of the unpaid shares from other members of the CCR at the time of the settlements, including from us. We have been working with the CCR, other former CCR members, our insurers and the claimants over a period of several years in an effort to resolve these issues. Through March 31, 2009, we had paid $47 to claimants and collected $45 with respect to these claims. At March 31, 2009, we had a receivable of $2 for the claims to be recovered. Efforts to recover additional CCR-related payments from surety bonds and other claims are continuing. Additional recoveries are not assured and accordingly have not been recorded as assets at March 31, 2009.

Note 19. Warranty Obligations

     We record a liability for estimated warranty obligations at the dates our products are sold. We record the liability based on our estimate of costs to settle the claim. Adjustments are made as new information becomes available. Changes in our warranty liabilities are summarized below:

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Balance, beginning of period		$	100			$	93				$	92
Amounts accrued for current period sales			8				10					4
Adjustments of prior accrual estimates							1
Settlements of warranty claims			(13	)			(11	)				(3	)
Foreign currency translation and other			(2	)			2
Balance, end of period		$	93			$	95				$	93

     We have been notified by two of our larger customers that quality issues relating to products supplied by us could result in warranty claims. Our customers have advised us of alleged vehicle performance issues which may be attributable to our product. We are currently investigating the information provided by these customers and we are performing product testing to ascertain whether the reported performance failures are attributable to our products. At March 31, 2009, no liability had been recorded for these matters as the information currently available to us is insufficient to assess our liability, if any.

Note 20. Income Taxes

     We estimate the effective tax rate expected to be applicable for the full fiscal year and use that rate to provide income taxes in interim reporting periods. We also recognize the tax impact of certain discrete (unusual or infrequently occurring) items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

     We provide for U.S. Federal income and non-U.S. withholding taxes on the future repatriations of the earnings from our non-U.S. operations. During the period we reduced our forecast for future repatriations due to current market conditions. Accordingly, we reduced the future income and non-U.S. withholding tax liabilities for these repatriations and recognized a benefit of $7, net of valuation allowances.

     We record interest income or expense, as well as penalties, related to uncertain tax positions as a component of income tax expense or benefit. Net interest expense of $3 was recognized in income tax expense for the period ended March 31, 2009.

     We have not recognized tax benefits on losses generated in several countries, including the U.S., where the recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets. Consequently, there is no income tax benefit recognized on the pre-tax losses in these jurisdictions as valuation allowances are established offsetting the associated tax benefit.

     Income tax expense (benefit) was $(9) for the three months ended March 31, 2009 and $219 ($199 for January and $20 for February and March) for the three months ended March 31, 2008. The income tax rate varies from the U.S. Federal statutory rate of 35% primarily due to non-U.S. withholding taxes, net interest expense and valuation allowances relating to those countries where a benefit cannot be recognized. In addition, the income tax rate for January 2008 differs due to the effect of emerging from bankruptcy and fresh start accounting.

Note 21. Other Income, Net

     Other income, net included:

		Dana									Prior Dana
		Three Months				Two Months					One Month
		Ended				Ended					Ended
		March 31,				March 31,					January 31,
		2009				2008					2008
Interest income		$	6			$	11				$	4
Foreign exchange gain			1				15					3
Government grants			5				2					1
Contract cancellation income			17
Other, net							4
Other income, net		$	29			$	32				$	8

     Foreign exchange gains and losses on cross-currency intercompany loan balances that are not considered permanently invested are included in foreign exchange gain (loss) above. Foreign exchange gains and losses on loans that are permanently invested are reported in OCI.

     Dana and its subsidiaries enter into foreign exchange forward contracts to hedge certain intercompany loans and accrued interest balances as well as to reduce exposure in cross-currency transactions in the normal course of business. At March 31, 2009, these foreign exchange contracts had a total notional amount of $122. These contracts are marked to market, with the gain or loss recorded in foreign exchange gain.

     The contract cancellation income of $17 in 2009 represents recoveries in connection with the early cancellation of a customer program.

Note 22. Segments

     SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS 131), establishes standards for reporting information about operating segments and related disclosures about products and services and geographic locations. SFAS 131 requires reporting on a single basis of segmentation. The components that management establishes for purposes of making decisions about an enterprise’s operating matters are referred to as “operating segments.”

     We manage our operations globally through six operating segments: LVD, Sealing, Thermal, Structures, Commercial Vehicle and Off-Highway. The Light Axle and Driveshaft segments reported in 2008 were generally combined in line with our internal management structure into the LVD segment and certain operations of those segments were moved into the Commercial Vehicle and Off-Highway segments in the first quarter of 2009. The amounts reported for the first three months of 2008 have been retrospectively adjusted for these changes.

     We report the results of our operating segments and related disclosures about each of our segments on the basis shown below and this measurement is used internally for evaluating segment performance and deciding how to allocate resources to those segments.

     In the first quarter of 2008, we changed the primary measure of operating results to EBITDA. In December 2008, we modified our determination of EBITDA to more closely align it with EBITDA as defined by our debt agreements and adjusted our reconciliation of segment EBITDA to the consolidated income (loss) from continuing operations before income taxes. The following items, which are excluded from our covenant calculation of EBITDA, are now shown separately in the reconciliation: loss on repayment of debt; strategic transaction expenses; loss on sale of assets; stock compensation expense; unrealized foreign exchange gains or losses on intercompany loans and market value adjustments on currency forward contracts.

     Prior to 2009, the costs of corporate administrative services, shared service centers, trailing liabilities of closed operations and other non-administrative activities were not allocated to the operating segments. In the first quarter of 2009, we began to allocate the costs of corporate administrative services and shared service centers to our segments based on segment sales, operating assets and headcount. Administrative costs other than executive activities are now allocated to the operating segments. We also do not allocate trailing costs of previously divested businesses and other non-administrative costs that are not directly attributable to the operating segments. We have also revised the definition of segment EBITDA to include all components of the consolidated EBITDA calculation. The allocations of corporate costs for the three months ended March 31, 2009, the two months ended March 31, 2008 and the one month ended January 31, 2008 are $31, $24 and $10. The 2008 segment results presented below have been adjusted to conform to the 2009 presentation.

     Segment EBITDA is now more closely aligned with the performance measurements in our debt covenants. EBITDA, as defined for both internal performance measurement and debt covenant compliance, excludes equity in earnings of affiliates, net income attributable to noncontrolling interests, results of discontinued operations, realignment charges, reorganization items and certain nonrecurring and unusual items such as asset impairment, amortization of the fresh start inventory step-up and divestiture gains and losses.

     We used the following information to evaluate our operating segments:

		Dana
		Three Months Ended
		March 31, 2009
						Inter-
		External				Segment				Segment
2009		Sales				Sales				EBITDA
Light Vehicle Driveline		$	424			$	26			$	(7	)
Sealing			117				2				(2	)
Thermal			39				1				1
Structures			117				2				8
Commercial Vehicle			257				8				6
Off-Highway			262				8				11
Eliminations							(47	)
Total		$	1,216			$	—			$	17