updated 10/20/2005 9:13:47 AM ET 2005-10-20T13:13:47

Auto-parts supplier Dana Corp. said Thursday it will cut its salaried work force by 5 percent, close two plants and sell parts of its business as part of a restructuring aimed at sharply reducing costs.

The company said last month it expected changes after cutting its profit forecast for the year in half because of soaring energy and steel costs. The entire auto-parts supplier industry is struggling.

Dana plans to narrow its product line by selling businesses that employ about 9,800 people worldwide. The company will focus on its light- and heavy-vehicle drivetrain products and sealing and thermal products.

The three businesses being divested — engine hard parts, fluid products and pump products — posted 2004 sales of $1.3 billion. Dana had total sales for the year of about $9 billion.

“These actions will position Dana to be more profitable moving forward,” Chairman and Chief Executive Michael J. Burns said in a statement. The company plans to take a charge to 2005 earnings of $324 million for the restructuring.

The company also said it will significantly restructure operations at two units — automotive systems and heavy vehicles — and cut medical and stock benefits.

For automotive systems, this includes closing two Virginia plants that together employ about 545 people. The group also plans to shift certain steering shaft operations from Lima, Ohio, to Mexico, eliminating about 100 of the 385 jobs at the U.S. plant.

For its commercial-vehicles business, Dana plans to increase production in Mexico and move certain operations from a Kentucky plant to one in Tennessee.

Dana also said it aims to reduce its salaried work force by 5 percent in addition to the operations to be sold or divested by the end of 2006. The company said it plans to achieve those cuts primarily through attrition.

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