Fitch Lowers Dana's IDR to 'C'; Remains on Watch Negative; Corrects Limitations on Liens Statement

CHICAGO--March 3, 2006--Fitch Ratings has downgraded the ratings of Dana Corporation as follows:

-- Issuer default rating (IDR) to 'C' from 'CCC';

-- Senior secured bank facility to 'B-' from 'B';

-- Senior unsecured debt to 'CC' from 'CCC'.

The recovery rating on the senior unsecured debt is 'RR4', and the senior secured bank facility has a recovery rating of 'RR1'. Dana remains on Rating Watch Negative by Fitch.

The rating downgrade reflects Dana's failure to pay $21 million in interest scheduled for payment on March 1. Fitch's concerns also include: the protracted period of time in obtaining secured bank financing; a higher risk that liquidity needs could increase if suppliers begin to insist on cash terms; the potential for more aggressive restructuring actions which could increase demands on cash; Dana's reliance on the declining sport utility vehicle (SUV) market; and the company's financial condition heading into a potential commercial vehicle downturn in 2007.

While the Rating Watch Negative status includes a going concern issue, as reflected by the 'C' IDR, it also includes Fitch's concerns regarding the outcome of an ongoing SEC accounting investigation and uncertainty with respect to the final amount of a secured bank line, which could impair the position of unsecured bondholders.

Fitch estimates that as of Sept. 30, 2005 certain of Dana's bond indentures restrict the company's ability to incur debt secured by real property or the value of domestic subsidiary stock to about $400 million (15% of net tangible assets, as defined) before pari passu provisions within these indentures would otherwise be triggered. Debt secured by most other assets is not specifically restricted under Dana's indentures. For this reason, Fitch believes that Dana has adequate tangible assets available to also support a total of approximately $1 billion in bank and asset securitization facilities. Per Dana's press release dated Nov. 2, 20051, 2005, the company has already pledged to the banks certain domestic current assets and machinery and equipment. In the event that Dana's existing accounts receivable agreement must be terminated, Fitch presumes that the lenders to the credit agreement would benefit from first liens on the underlying receivables collateral.

Fitch calculates that as of the end of the third quarter, Dana had negative free cash flow for the previous 12 months of $712 million versus full year 2004 negative free cash flow of $329 million. At Sept. 30, 2005, Dana had $145 million available under its bank facility, $55 million available under a $275 million accounts receivable securitization program and $730 million in cash and cash equivalents. Given the rate of increase in negative free cash flow and the amounts drawn at the end of the third quarter, there is a high probability that Dana's current bank lines could now be fully drawn.

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