Auto-parts firm Dana adopts new fee-for-service strategy Source: Star Detroit Bureau ©2001- Ted Evanoff Auto-parts supplier Dana Corp. of Toledo, Ohio, has latched on to an idea to generate cash in an era when the automakers are cutting back output. Dana, whose Spicer Axle Division is based in Fort Wayne, is charging fees for services it had absorbed in the past. If a program manager at a car company, for example, wants Dana to take a stab at engineering a new component for the axle, Dana will charge a separate fee for the work. In the past, the company would have done the work and included the costs in a larger production contract for the new part. If the part were never ordered, Dana would have absorbed the cost. Not anymore. "We're looking at other ways of growing our business by using our assets," said Dana Vice President Gary Corrigan in Toledo. Dana Chairman Joseph Magliochetti recently said Dana intends to eventually generate $500 million a year in fee revenue, or about 4 percent of last year's $12.4 billion in total revenue. With the Detroit automakers and the nation's heavy truck makers paring output sharply this year, Dana earned $16 million in the first quarter, or 1 cent a share on sales of $2.7 billion. The company outperformed Wall Street's forcast for a 6-cent loss. In the first quarter last year, Dana earned $64 million on revenue of $3.5 billion. Car and truck sales volume this year is projected to be about 16.5 million vehicles down 5.1 percent from last year. Heavy truck production is expected to decline more than 35 percent. Fee-for-service is part of the new world of auto-parts manufacturing. Auto companies have handed their largest suppliers increased engineering chores. At the same time, they've dragged their feet on price increases. And they've just set up Covisnt LLC, a new entity to drive down prices even more. It's online auto-parts auction that could handle $300 billion in volume within five years. In this lean environment, Dana has followed in the path of Canadian auto-parts maker Magna International, Inc. of Aurora, Ontario, and Porche AG of Stuttgart, Germany. Each charge fees for engineering services performed outside the usual production contracts.