updated 3/6/2006 2:30:14 PM ET 2006-03-06T19:30:14

Dana Corp. can pay its utility bills and some taxes and fulfill orders the auto parts maker received from car manufacturers before it filed for bankruptcy protection last week, a New York judge said Monday.

Judge Burton Lifland, who is overseeing Dana’s bankruptcy, said suppliers must honor contracts to keep the auto parts maker’s plants open.

“Disruption is something that cascades up and down,” in the auto industry, he said.

The U.S. operations of the Toledo, Ohio auto-parts maker were the latest in a growing number of auto-parts suppliers to file for Chapter 11 bankruptcy protection because of a slumping domestic auto industry and rising energy costs that drove up costs of raw materials and hobbled demand for sport utility vehicles.

Dana supplies parts to General Motors Corp., Ford Motor Co. and other automakers. The bankruptcy filing does not affect the company’s businesses in Europe, South America, Asia, Mexico or Canada, the company said.

Dana, which sells brakes, axles and other parts to most major automakers, has faced increasing pressure from customers to offer products at lower prices. The company, with 46,000 workers worldwide, said in January it lost nearly $1.3 billion in the third quarter of last year while realigning its business.

Dana Chairman and Chief Executive Officer Michael Burns testified on Monday that the entire auto industry relies on a very complex supply chain which, if disrupted, can be costly.

“When you do affect the customers they have a long memory. It costs them a lot of money,” Burns said. “Our responsibility is to get them the proper product we agreed to on time.”

Lifland also approved Dana’s request to hire Miller Buckfire & Co., as its financial advisers and investment bankers, and legal firms Jones Day and Hunton & Williams.

The company said Monday it plans to have a meeting on Friday in New York with all its creditors to set up a creditors committee that would help manage it during its bankruptcy.

Earlier Monday, Dana said its chief financial officer Robert C. Richter has retired. Richter, also a vice president, will continue to be available to the company as a consultant, Burns said in a press release.

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