Dura says it will focus on moving supplier base as it relocates plants to lower-cost countries

By Jennifer Lanning Drey

Eugene, Ore., Aug. 7 - Dura Automotive Systems Inc. will focus on moving its supplier base from high cost countries to lower cost areas, according to members of management who spoke during a company presentation at the JP Morgan Harbour Automotive Conference on Monday.

The company is currently in the process of relocating 2,000 jobs to lower-cost countries as part of its operational restructuring initiative.

"We really recognize we need to drag our supply base with us," said Keith Marchiando, Dura's chief financial officer, during the conference.

The company has announced three plant closures to date, closing plants in the United States, Canada and Europe.

In addition, Dura has begun transferring its sliding door products to Mexico from other areas of North America, and the company is transferring products used in selected European programs to the Czech Republic and Romania.

However, most of the company's suppliers remain in high-cost countries, according to Lawrence Denton, chief executive officer of Dura.

"When you see where the suppliers are located, first you get angry, then you get an idea of the opportunity for improvement and that's where we're at," Denton said.

The company also reiterated on Monday that it is on track to complete its 50-cubed program by late 2007 or early 2008.

Fifty-cubed is Dura's turnaround plan, which includes achieving a 50 parts per million quality level, raising average earnings by 50% from the company's historical performance, and transferring at least 50% of the company's production to what it terms "best-in-cost" facilities - mostly, though not exclusively in lower-labor cost regions such as Mexico or Eastern Europe.

"The intent is really the reusability of the equipment that we have and the reusability of some of the facilities we have," Marchiando said.

However, despite Dura's work in the six-month-old 50-cubed program, the company previously reported a $51 million drop in year-over-year revenues for the second quarter.

Marchiando said Dura had expected 2006 to be a difficult year due to a lack of new business in the early part of the decade when the company was not able to match new orders with the amount of business that typically rolls off each year in the automotive business.

"The bottom line is there is a hole in our revenue right now that we have addressed, and are addressing very well, but we won't see that until '07, '08, '09," Marchiando said.

Heightened raw material costs and continued market share slippage shown by the Big Three automakers in the United States have also contributed to the company's losses, he said.

The company also saw fewer pick up truck sales and a 3% drop in volume in the European market during the second quarter, Marchiando said.

Dura continues to evaluate its capital structure, he added.

"Our leverage, especially in the last 12 months is high. Given industry conditions and our day-to-day operations, we need to continue to evaluate the appropriateness of our capital structure, and management is doing just that," he said.

Dura is a Rochester Hills, Mich. designer and manufacturer of driver control systems, seating control systems, glass systems, engineered assemblies, structural door modules and exterior trim systems for the automotive industry.

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