A quarterly dividend of $0.27 per share paid to the shareholders of Dana Corp. on Dec. 15 was the 240th consecutive dividend since 1936 from what has grown to be the largest independent vehicular-parts maker in North America. That performance is a point of pride for Southwood J. (Woody) Morcott, a personable Georgia native who has been chairman and CEO of the Toledo, Ohio-based company since 1990. To build on that record he has been reshaping and focusing Dana for greater growth and profitability with a strategy designed to even out cycles and better serve the new global interests of his customers. The key elements include a makeover of the corporate structure to facilitate closer, more effective customer relationships; transitioning from components supplier to systems supplier; and strengthening core competencies through acquisitions and divestitures. Morcott describes Danas past as cyclical and remembers the last downturn in 1991 as "one of the worst cycles weve gone through since the Great Depression. We got through it without losing money or reducing the dividend and kept that long record intact." (Since becoming a public company in 1916, Dana has been in the red only two years--1930 and 1931.) "When we came out of the 1991 recession we were determined to continue without subjecting ourselves to that trauma again," Morcott says. "We responded by being more international, more diverse with markets and customers, and in general less dependent on OEM business--automotive in particular. And I think weve accomplished a lot of that. Weve had a wonderful run since then with the help of a strong market." Although the recent performance of the automotive market has been a key to Danas current success, Morcott faces a North American segment that is past its peak. "Arguably if were in a no-growth plateau, then its a very mild slowdown," he says, citing the production evidence. "In 1995 some 15.6 million units were made in North America. In 1996 it dropped to 15.4 million, sagged somewhat to 15.2 million for 1997, and may reach only 15 million to 15.2 million in 1998." Success in reducing cyclicality is only one challenge in Morcotts "Beyond 2000" strategic vision. First launched as "Dana 2000" in 1990, the year Morcott became chairman and CEO, the original plan set several ambitious goals. One is for sales to reach $10 billion by 2000--a goal Dana may well attain ahead of schedule. Sales for 1997 reached $8.3 billion with $9 billion projected for 1998. At the start of the decade Danas revenues were just $4.4 billion. In Beyond 2000, Morcott has refined the original vision with a restructuring that focuses on six strategic business units that have global responsibility: the Automotive Components Group under President Bill Carroll; the Engine Components Group under President Chuck McNamara; the Heavy Truck Components Group under Vice President Rick Clayton; the Off-Highway Components Group under President Nick Cole; the Industrial Components Group under Vice President Mike Plumley; and Dana Commercial Credit under President Edward Shultz. Morcotts Beyond 2000 vision calls for a 10% annual growth rate. Although that goal might seem daunting, it is based on a conservative business strategy. For example, the assumptions for the growth plan for the next five years presume a flat market. Then, too, consider that Danas growth during the last 25 years has averaged 11.1%. Additionally, Morcott plans to meet fully a third of the annual growth goal with his ongoing acquisition-divestiture program. That means the companys strategic business units will have to come up with only slightly more than 6%. Morcott has moved aggressively on strengthening core businesses with acquisitions and divesting operations that were not producing. Last year he sold off activities that accounted for about $900 million of 1997 sales and replaced them with core businesses that produce annual sales of $1.3 billion, thus adding $58 million to the bottom line. The latest acquisition, the largest in Danas history, is Eaton Corp.s global axle and brake operations for $287 million. "That transaction will not only add to Danas axle product line, but it will also result in significant engineering, purchasing, manufacturing, and marketing synergies for Dana in North America, Europe, and South America," says Clayton. Other purchases in 1997 included Clark-Hurth Components and the cylinder liner and piston ring operations of SPX Corp. Other strategic moves involved the divestiture of Danas European warehouse-distribution facilities, hydraulic-cylinder operations, and global clutch operations. Morcott also expects innovative new products to feed growth. "For example, we recently introduced a product at a 30% premium over the previous version, and customers love it because the special features are worth even more to them," he says. "In that instance our cost was roughly equivalent to the old product." Hes also counting on leveraging Danas innovation and experience in delivering assembled systems to customers instead of pieces. For Dana, that approach started about 10 years ago when Mack Trucks Inc. moved operations to South Carolina. Before the move, Dana had been supplying components--axles, transmissions, and drive lines that Mack would then assemble. Today, Dana supplies an assembled chassis to Macks plants in Lugoff, S.C., and Macungie, Pa. "The chassis that Dana supplies represents about 35% of the total cost of a truck, says Morcott. Another goal set in 1990 was to have 50% of Danas revenues come from outside the U.S. To facilitate the global strategy, the company has tweaked its organizational structure to make Danas capabilities more useful and beneficial to the surging global initiatives of its customers. While Dana has long been a global company, its new structural iteration changes the way the company presents its capabilities to global customers. "This is the first time in the companys history that Danas most senior organizational structure is customer-driven instead of product-driven," Morcott says. Joe Magliochetti, Danas president and COO, contrasts the old global structure with the new: "In the past, an automotive customer would confront different Dana organizations in each of Danas four global regions. Today, those customers have something more akin to one-stop shopping. Regardless of where their projects are located, theyre still dealing with Bill Carroll and his Automotive Components Group team. With the new structure Carroll can deal with the total global requirements of those customers whether its North America, South America, or Europe--it doesnt make any difference. Bill and his people can deal with all the issues." But Dana hasnt completely abandoned its regional structure. Instead, Magliochetti explains that the regional organization now exists more in a support mode. "For example, human-resource issues usually differ on a regional basis, and there still continues to be a requirement for education and training in every region. So the regional president and his staff really deal with those kinds of support responsibilities while the main thrust of the business activity on a day-to-day basis is directed to the strategic-business-unit leaders." Having a globally responsive organization will become increasingly important as Danas global customers stress objectives in both South America and Asia. In South America, where vehicle production is expected to grow by 30% by the year 2000, Morcott sees tremendous opportunity. Dana Industria Ltda., the companys Brazilian operation, is pursuing a project with Chrysler Corp. In essence, Dana is doing for Chrysler what it has been doing for Mack--assembling and providing an entire rolling chassis for the Dodge Dakota pickup instead of supplying just components or subsystems. Morcott says it is the first time within his memory that any supplier supplied that much--30% of the cost--of a smaller vehicle. The Dakota chassis is the largest modular assembly Dana provides in South America. Others include front and rear suspension and rear axles for the Brazilian version of the VW Golf and rear suspension modules for Chrysler Neons built in Venezuela. Dana is also providing frames and driveshafts for Ford Rangers to be built in Argentina, and complete chassis assemblies for Volvo in Brazil. "In South America alone, automobile manufacturers have announced $19 billion in projects to expand assembly operations over the next five years," Morcott says. He adds that investments by suppliers will at least have to match that. He also sees great long-range potential in the Asia/Pacific region. With half of the worlds population, half of the worlds industrial output, 40% of world trade, and the worlds highest growth rate, the region is truly a land of opportunity in Danas view. One example is Danas original operation in Bangkok, Thailand, which is doubling in size. Meeting the needs of customers in the global markets is accelerating the trend to nontraditional supplier relationships--partnering more like Danas arrangement with Chrysler on the Dakota-truck project in Brazil. OEMs are clearly in a cost-cutting mode, and they want the advantages of tighter customer-supplier alliances. Partnering with a supplier that can provide a rolling chassis substitutes one supplier for hundreds and eliminates all the problems related to purchasing and assembling thousands of components. In addition, OEMs that outsource modular assemblies gain operating flexibility both in terms of plant operation and global expansion. "Our charge in life as an automotive-components supplier is to be what our customers want us to be; where they want us to be--anywhere in the world," says Carroll. Morcott sees no downside to the trend toward modular assemblies, but he admits that the capital-investment requirements mean that Dana is taking more of the risk. "But that has to be weighed against going from $1,000 per vehicle to $3,500 per vehicle, and Im willing to take more of a risk for that."