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S&P Cuts Long-Term Ratings on Dana Corp. & Unit

17 February 2000

S&P Cuts Long-Term Ratings on Dana Corp. & Unit; Commercial Paper Affirmed

    NEW YORK, Feb. 17 -- Standard & Poor's today lowered its
long-term corporate credit rating and its senior unsecured debt rating on Dana
Corp. (Dana) to triple-'B'-plus from single-'A'-minus.
    At the same time, the counterparty credit and senior unsecured debt
ratings on Dana Credit Corp., a 100%-owned subsidiary of Dana, were lowered to
triple-'B'-plus from single-'A'-minus.
    In addition, the 'A-2' commercial paper and short-term corporate credit
ratings on the companies were affirmed.
    The outlook is now stable.
    The rating actions reflect Dana's failure to achieve the expected
reduction in debt leverage, and concerns that additional share repurchases and
other investment requirements will limit improvement in the financial profile.
    Dana's ratings reflect the company's leading market positions and
well-diversified customer, end-market, and geographic diversity, offset
somewhat by exposure to cyclical and competitive end markets.
    Dana is a major supplier of automotive components to both the original
equipment and replacement markets.  The company also produces parts for
off-highway and industrial applications and provides lease financing through
Dana Credit Corp.  Dana enjoys leading market positions for many of its
products, with an especially strong global presence in axles, drive shafts,
and structural components.
    The company has a diversified customer base, including most major truck
and auto manufacturers; a solid aftermarket distribution network; and good
global diversification.  Dana has restructured and realigned its operations in
the past four years to enhance its business profile and operating performance.
As part of this process, the company bought and sold a number of operations
and spent additional funds on other investments.  As a result of investment
activity, Dana's adjusted debt leverage (accounting for Dana Credit on the
equity basis) increased to 49% at year-end 1998 and remained unchanged at
year-end 1999.  Previous ratings had incorporated an expectation that debt
leverage would decline to the 40% area by the end of 2000.  It now appears
unlikely that the company will achieve this goal.
    The downgrades reflect an expectation that adjusted debt to capital will
remain in the 45%-50% range and that funds from operations to debt will
average 40%-45% over the course of the business cycle.  Last year, during a
period of peak demand in light and heavy-duty truck markets, Dana's funds from
operations to debt was in the mid-40% area.  Although the company's product,
geographic, and end-market diversity should offset cyclical pressures to some
extent, this measure is likely to decline somewhat during the next industry
downturn.

    OUTLOOK: STABLE
    Share repurchases and other investment requirements, as well as cyclical
and competitive end markets, are likely to limit significant improvements in
debt-protection measures in the next three years.  Downside risk is limited by
the company's strong business profile and management's commitment to
maintaining a moderate financial profile, Standard & Poor's said.