Dana Holding Corp., which produces a wide variety of powertrain systems for light vehicles and commercial vehicles, has stopped sourcing forged components from Sypris Technologies.

Forger Hit Hard in Contract Dispute

April 5, 2015
Sypris warns investors of future losses due to unresolved legal matter with powertrain producer Dana Holding Corp. Solid 2014 revenues Deal signed, not completed Layoffs for hundreds

Sypris Solutions Inc., a forger of axle shafts, trailer beams, and many other parts required by automotive, truck, off highway, farm equipment, mining and energy markets, warned investors of a pending loss of revenue due to a contract dispute with one of the largest manufacturers of powertrain products.

Louisville-based Sypris consists of two business units: the Industrial Group includes several forging operations and Tube Turns Inc., a manufacturer of closures, joints, and specialty pipe components for oil, gas, petrochemical, and processing applications; the Electronics Group produces various security devices and systems.

The looming problem relates to a contract dispute with Dana Holding Corp., which produces powertrain systems for light and commercial vehicle, off-highway, industrial, and aftermarket manufacturers. Sypris Technologies, one operating unit of the Industrial Group, has supplied forged components to Dana, but none since the expiration of the last contract in December 2014.

In the corporation’s 2014 results, issued on March 31, Sypris president and CEO wrote: “Within our Industrial Group, our legal dispute with Dana remains unresolved and as of the beginning of 2015, all shipments to Dana ceased. The Company is working to adjust manpower and overhead expenses to reflect the cessation of shipments, while optimizing our ability to bring in potential new business; we do not expect to resume direct shipments to Dana in 2015.”

The loss of income has been estimated at $200 million.

In a published interview Sypris Technologies president Paul Larochelle explained that the dispute centers on a disputed contract, one that the supplier believed had been executed because it was signed — but that was labeled "draft," giving Dana the option to pursue other suppliers.

Reportedly the company reportedly laid off an estimated 300 workers since the start of this year.

Sypris Technologies has two plants in Louisville, KY: one has hot forging, cold extrusion, and machining capability for heavy truck, automotive, off-highway, farm equipment, energy, and power transmission customers; the other plant is Tube Turns Inc.

Sypris also has a plant in Morganton, NC, where it performs low- to high-volume machining of cast and forged products, and trailer beam forming and machining. A plant in Toluca, Mexico, forges and machines I-beams, knuckles, gears, pinions, and shafts.

Despite the current challenge, the corporation reported consolidated revenue increased 14% from 2013 to $354.8 million. Industrial Group Q4 2014 revenues increased 25.4% to $80.2 million compared to Q4 2013, “primarily as a result of increased demand from customers in the commercial vehicle markets.” Gross profit for the quarter was $10.2 million, or 12.7% of revenue, compared to $7.3 million, or 11.3% of revenue for the same period in 2013.