Edgar Filing: DANA HOLDING CORP

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended: December 31, 2015

Commission File Number: 1-1063

Dana Holding Corporation

(Exact name of registrant as specified in its charter)



Delaware		26-1531856
(State of incorporation)		(IRS Employer Identification Number)
3939 Technology Drive, Maumee, OH		43537
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 887-3000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, par value $0.01 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the common stock held by non-affiliates of the registrant computed by reference to the closing price of the common stock on June 30, 2015 was $3,289,900,525.

APPLICABLE ONLY TO CORPORATE ISSUERS:

There were 149,370,259 shares of the registrant's common stock outstanding at February 5, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on April 28, 2016 are incorporated by reference into Part III.

DANA HOLDING CORPORATION

FORM 10-K

YEAR ENDED DECEMBER 31, 2015

Table of Contents



		Pages
PART I
Item 1	Business	1
Item 1A	Risk Factors	5
Item 1B	Unresolved Staff Comments	10
Item 2	Properties	10
Item 3	Legal Proceedings	11

PART II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6	Selected Financial Data	13
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8	Financial Statements and Supplementary Data	39
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	89
Item 9A	Controls and Procedures	89
Item 9B	Other Information	89

PART III
Item 10	Directors, Executive Officers and Corporate Governance	89
Item 11	Executive Compensation	89
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	90
Item 13	Certain Relationships and Related Transactions, and Director Independence	90
Item 14	Principal Accountant Fees and Services	90

PART IV
Item 15	Exhibits and Financial Statement Schedules	91

Signatures		92
Exhibit Index		93
Exhibits

Forward-Looking Information

Statements in this report (or otherwise made by us or on our behalf) that are not entirely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often be identified by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” "predicts," "seeks," “estimates,” “projects,” “outlook,” "may," "will," "should," "would," "could," "potential," "continue," "ongoing" and similar expressions, variations or negatives of these words. These statements represent the present expectations of Dana Holding Corporation and its consolidated subsidiaries (Dana) based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present expectations due to a number of factors, including those discussed below and elsewhere in this report and in our other filings with the Securities and Exchange Commission (SEC). All forward-looking statements speak only as of the date made and we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances that may arise after the date of this report.

PART I

(Dollars in millions, except per share amounts)

Item 1. Business

General

Dana Holding Corporation (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a global provider of high technology driveline (axles, driveshafts and transmissions), sealing and thermal-management products our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets. We employ approximately 23,100 people, operate in 25 countries and have 90 major facilities around the world.

The terms “Dana,” “we,” “our” and “us,” when used in this report are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.

Overview of our Business

We have aligned our organization around four operating segments: Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Driveline Technologies (Off-Highway) and Power Technologies. These operating segments have global responsibility and accountability for business commercial activities and financial performance.

External sales by operating segment for the years ended December 31, 2015, 2014 and 2013 are as follows:



	2015				2014				2013
	Dollars		% of Total		Dollars		% of Total		Dollars		% of Total
Light Vehicle	$	2,482	40.9	%	$	2,496	37.7	%	$	2,549	37.7	%
Commercial Vehicle	1,533		25.3	%	1,838		27.8	%	1,860		27.5	%
Off-Highway	1,040		17.2	%	1,231		18.6	%	1,330		19.6	%
Power Technologies	1,005		16.6	%	1,052		15.9	%	1,030		15.2	%
Total	$	6,060			$	6,617			$	6,769

Refer to Segment Results of Operations in Item 7 and Note 18 to our consolidated financial statements in Item 8 for further financial information about our operating segments.

Our business is diversified across end-markets, products and customers. The following table summarizes the markets, products and largest customers of each of our operating segments.



Segment	Markets	Products	Largest Customers
Light Vehicle	Light vehicle market:	Front axles	Ford Motor Company
	Light trucks (full frame)	Rear axles	Hyundai Mobis
	Sport utility vehicles	Driveshafts	Tata Motors
	Crossover utility vehicles	Differentials	Nissan Motor Company
	Vans	Torque couplings	General Motors Company
	Passenger cars	Modular assemblies	Toyota Motor Company
Commercial Vehicle	Medium/heavy vehicle market:	Steer axles	PACCAR
	Medium duty trucks	Drive axles	Ford Motor Company
	Heavy duty trucks	Driveshafts	AB Volvo
	Buses	Tire inflation systems	Daimler AG
	Specialty vehicles		Navistar International Corporation
Off-Highway	Off-Highway market:	Front axles	Deere & Company
	Construction	Rear axles	AGCO Corporation
	Earth moving	Driveshafts	Manitou Group
	Agricultural	Transmissions	Oshkosh Corporation
	Mining	Torque converters	Terex Corporation
	Forestry	Tire inflation systems
	Rail	Electronic controls
	Material handling
Power Technologies	Light vehicle market	Gaskets	Ford Motor Company
	Medium/heavy vehicle market	Cover modules	General Motors Company
	Off-Highway market	Heat shields	Volkswagen AG
		Engine sealing systems	Caterpillar Inc.
		Cooling	Cummins Inc.
		Heat transfer products

Geographic Operations

We maintain administrative and operational organizations in North America, Europe, South America and Asia Pacific to support our operating segments, assist with the management of affiliate relations and facilitate financial and statutory reporting and tax compliance on a worldwide basis. Our operations are located in the following countries:



North America	Europe		South America	Asia Pacific
Canada	Belgium	South Africa	Argentina	Australia
Mexico	France	Spain	Brazil	China
United States	Germany	Sweden	Colombia	India
	Hungary	Switzerland	Ecuador	Japan
	Italy	United Kingdom		South Korea
	Russia			Taiwan
				Thailand

Our non-U.S. subsidiaries and affiliates manufacture and sell products similar to those we produce in the United States. Operations outside the U.S. may be subject to a greater risk of changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and market fluctuations than our domestic operations. See the discussion of risk factors in Item 1A.

Sales reported by our non-U.S. subsidiaries comprised $3,255 of our 2015 consolidated sales of $6,060. A summary of sales and long-lived assets by geographic region can be found in Note 18 to our consolidated financial statements in Item 8.

Customer Dependence

We are largely dependent on light vehicle, medium- and heavy-duty vehicle and off-highway original equipment manufacturer (OEM) customers. Ford Motor Company (Ford) was the only individual customer accounting for 10% or more of our consolidated sales in 2015. As a percentage of total sales from operations, our sales to Ford were approximately 20% in 2015, 18% in 2014 and 18% in 2013 and our sales to PACCAR, our second largest customer, were approximately 8% in 2015, 9% in 2014 and 8% in 2013. Hyundai Mobis, Nissan Motor Corporation and Tata Motors were our third, fourth and fifth largest customers in 2015. Our 10 largest customers collectively accounted for approximately 58% of our sales in 2015.

Loss of all or a substantial portion of our sales to Ford or other large volume customers would have a significant adverse effect on our financial results until such lost sales volume could be replaced and there is no assurance that any such lost volume would be replaced.

Sources and Availability of Raw Materials

We use a variety of raw materials in the production of our products, including steel and products containing steel, stainless steel, forgings, castings and bearings. Other commodity purchases include aluminum, brass, copper and plastics. These materials are typically available from multiple qualified sources in quantities sufficient for our needs. However, some of our operations remain dependent on single sources for certain raw materials.

While our suppliers have generally been able to support our needs, our operations may experience shortages and delays in the supply of raw material from time to time, due to strong demand, capacity limitations, short lead times, production schedule increases from our customers and other problems experienced by the suppliers. A significant or prolonged shortage of critical components from any of our suppliers could adversely impact our ability to meet our production schedules and to deliver our products to our customers in a timely manner.

Seasonality

Our businesses are generally not seasonal. However, in the light vehicle market, our sales are closely related to the production schedules of our OEM customers and those schedules have historically been weakest in the third quarter of the year due to a large number of model year change-overs that occur during this period. Additionally, third-quarter production schedules in Europe are typically impacted by the summer vacation schedules and fourth-quarter production is affected globally by year-end holidays.

Backlog

A substantial amount of the new business we are awarded by OEMs is granted well in advance of a program launch. These awards typically extend through the life of the given program. This backlog of new business does not represent firm orders. We estimate future sales from new business using the projected volume under these programs.

Competition

Within each of our markets, we compete with a variety of independent suppliers and distributors, as well as with the in-house operations of certain OEMs. With a renewed focus on product innovation, we differentiate ourselves through efficiency and performance, reliability, materials and processes, sustainability and product extension.

The following table summarizes our principal competitors by operating segment.



Segment	Principal Competitors
Light Vehicle	ZF Friedrichshafen AG
	GKN plc
	American Axle & Manufacturing Holdings, Inc.
	Magna International Inc.
	Wanxiang Group Corporation
	Hitachi Automotive Systems, Ltd.
	IFA ROTORION Holding GmbH
	Neapco, LLC
	Vertically integrated OEM operations
Commercial Vehicle	Meritor, Inc.
	American Axle & Manufacturing Holdings, Inc.
	Hendrickson (a subsidiary of the Boler Company)
	Klein Products Inc.
	Tirsan Kardan
	Vertically integrated OEM operations
Off-Highway	Carraro Group
	ZF Friedrichshafen AG
	GKN plc
	Kessler + Co.
	Meritor, Inc.
	YTO Group
	Comer Industries
	Hema Endustri A.S.
	Vertically integrated OEM operations
Power Technologies	ElringKlinger AG
	Federal-Mogul Corporation
	Freudenberg NOK Group
	MAHLE GmbH
	Modine Manufacturing Company
	Valeo Group
	YinLun Co., LTD
	Denso Corporation

Intellectual Property

Our proprietary driveline and power technologies product lines have strong identities in the markets we serve. Throughout these product lines, we manufacture and sell our products under a number of patents that have been obtained over a period of years and expire at various times. We consider each of these patents to be of value and aggressively protect our rights throughout the world against infringement. We are involved with many product lines and the loss or expiration of any particular patent would not materially affect our sales and profits.

We own or have licensed numerous trademarks that are registered in many countries, enabling us to market our products worldwide. For example, our Spicer®, Victor Reinz® and Long® trademarks are widely recognized in their market segments.

Engineering and Research and Development

Since our introduction of the automotive universal joint in 1904, we have been focused on technological innovation. Our objective is to be an essential partner to our customers and we remain highly focused on offering superior product quality, technologically advanced products, world-class service and competitive prices. To enhance quality and reduce costs, we use statistical process control, cellular manufacturing, flexible regional production and assembly, global sourcing and extensive employee training.

We engage in ongoing engineering and research and development activities to improve the reliability, performance and cost-effectiveness of our existing products and to design and develop innovative products that meet customer requirements for new applications. We are integrating related operations to create a more innovative environment, speed product development, maximize efficiency and improve communication and information sharing among our research and development operations. At December 31, 2015, we had eight stand-alone technical and engineering centers with additional research and development activities carried out at eight additional sites. Our research and development costs were $75 in 2015, $72 in 2014 and $64 in 2013. Total engineering expenses including research and development were $183 in 2015, $176 in 2014 and $165 in 2013.

Our research and development activities continue to improve customer value. For all of our markets, this means drivelines with higher torque capacity, reduced weight and improved efficiency. End-use customers benefit by having vehicles with better fuel economy and reduced cost of ownership. We are also developing a number of power technologies products for vehicular and other applications that will assist fuel cell, battery and hybrid vehicle manufacturers in making their technologies commercially viable in mass production.

Employees

The following table summarizes our employees by operating segment.



Segment		Employees
Light Vehicle		9,500
Commercial Vehicle		4,800
Off-Highway		2,700
Power Technologies		4,900
Technical and administrative		1,200
Total		23,100

Environmental Compliance

We make capital expenditures in the normal course of business as necessary to ensure that our facilities are in compliance with applicable environmental laws and regulations. The cost of environmental compliance has not been a material part of capital expenditures and did not have a material adverse effect on our earnings or competitive position in 2015.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended (Exchange Act) are available, free of charge, on or through our Internet website at http://www.dana.com/investors as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. We also post our Corporate Governance Guidelines, Standards of Business Conduct for Members of the Board of Directors, Board Committee membership lists and charters, Standards of Business Conduct and other corporate governance materials on our Internet website. Copies of these posted materials are also available in print, free of charge, to any stockholder upon request from: Dana Holding Corporation, Investor Relations, P.O. Box 1000, Maumee, Ohio 43537, or via telephone in the U.S. at 800-537-8823 or e-mail at InvestorRelations@dana.com. The inclusion of our website address in this report is an inactive textual reference only and is not intended to include or incorporate by reference the information on our website into this report.

Item 1A. Risk Factors

We are impacted by events and conditions that affect the light vehicle, medium/heavy vehicle and off-highway markets that we serve, as well as by factors specific to Dana. Among the risks that could materially adversely affect our business, financial condition or results of operations are the following, many of which are interrelated.

Risk Factors Related to the Markets We Serve

Failure to sustain a continuing economic recovery in the United States and elsewhere could have a substantial adverse effect on our business.

Our business is tied to general economic and industry conditions as demand for vehicles depends largely on the strength of the economy, employment levels, consumer confidence levels, the availability and cost of credit and the cost of fuel. These factors have had and could continue to have a substantial impact on our business.

We expect global market conditions to result in overall comparable sales in 2016. We expect the North America economic climate will continue to be modestly strong to stable with light vehicle demand levels continuing to be strong, while the medium/heavy truck market is expected to be weaker and the off-highway market remains relatively stable at already weak levels. Although the rate of growth in the Asia Pacific region has slowed, we expect overall economic improvement in the on-highway markets in 2016, with off-highway segment demand continuing to be weak. The economy in Europe is expected to improve modestly, with on-highway markets being slightly stronger while the off-highway market remains weak but stable. The South America countries where we do business are expected to remain relatively weak across all our markets in 2016. Adverse developments in the economic conditions of these markets could reduce demand for new vehicles, causing our customers to reduce their vehicle production and, as a result, demand for our products would be adversely affected.

Adverse global economic conditions could also cause our customers and suppliers to experience severe economic constraints in the future, including bankruptcy, which could have a material adverse impact on our financial position and results of operations.

We could be adversely impacted by the loss of any of our significant customers, changes in their requirements for our products or changes in their financial condition.

We are reliant upon sales to several significant customers. Sales to our ten largest customers accounted for 58% of our overall sales in 2015. Changes in our business relationships with any of our large customers or in the timing, size and continuation of their various programs could have a material adverse impact on us.

The loss of any of these customers, the loss of business with respect to one or more of their vehicle models on which we have high component content, or a significant decline in the production levels of such vehicles would negatively impact our business, results of operations and financial condition. Pricing pressure from our customers also poses certain risks. Inability on our part to offset pricing concessions with cost reductions would adversely affect our profitability. We are continually bidding on new business with these customers, as well as seeking to diversify our customer base, but there is no assurance that our efforts will be successful. Further, to the extent that the financial condition of our largest customers deteriorates, including possible bankruptcies, mergers or liquidations, or their sales otherwise decline, our financial position and results of operations could be adversely affected.

We may be adversely impacted by changes in international legislative and political conditions.

We operate in 25 countries around the world and we depend on significant foreign suppliers and customers. Further, we have several growth initiatives that are targeting emerging markets like China and India. Legislative and political activities within the countries where we conduct business, particularly in emerging markets and less developed countries, could adversely impact our ability to operate in those countries. The political situation in a number of countries in which we operate could create instability in our contractual relationships with no effective legal safeguards for resolution of these issues, or potentially result in the seizure of our assets. Through January 23, 2015, we operated in Venezuela where government exchange controls and policies placed restrictions on our ability to operate effectively and repatriate funds. Our risk associated with operating in this country was eliminated with the divestiture of our operations in Venezuela on January 23, 2015. However, we expect to continue exporting product to Venezuela, and our ability to do so effectively could be adversely impacted by Venezuela government policies. We operate in Argentina, where trade-related initiatives and other government restrictions limit our ability to optimize operating effectiveness. At December 31, 2015, our net asset exposure related to Argentina was approximately $21, including $11 of net fixed assets.

We may be adversely impacted by the strength of the U.S. dollar relative to the currencies in the other countries in which we do business.

Approximately 54% of our sales in 2015 were from operations located in countries other than the U.S. Currency variations can have an impact on our results (expressed in U.S. dollars). Currency variations can also adversely affect margins on sales of our products in countries outside of the U.S. and margins on sales of products that include components obtained from affiliates or other suppliers located outside of the U.S. Strengthening of the U.S. dollar against the euro and currencies of other countries in which we have operations has had and could continue to have an adverse affect our results reported in U.S. dollars. We use a combination of natural hedging techniques and financial derivatives to mitigate foreign currency exchange rate risks. Such

hedging activities may be ineffective or may not offset more than a portion of the adverse financial impact resulting from currency variations.

We may be adversely impacted by new laws, regulations or policies of governmental organizations related to increased fuel economy standards and reduced greenhouse gas emissions, or changes in existing ones.

The markets and customers we serve are subject to substantial government regulation, which often differs by state, region and country. These regulations, and proposals for additional regulation, are advanced primarily out of concern for the environment (including concerns about global climate change and its impact) and energy independence. We anticipate that the number and extent of these regulations, and the costs to comply with them, will increase significantly in the future.

In the U.S., vehicle fuel economy and greenhouse gas emissions are regulated under a harmonized national program administered by the National Highway Traffic Safety Administration and the Environmental Protection Agency. Other governments in the markets we serve are also creating new policies to address these same issues, including the European Union, Brazil, China and India. These government regulatory requirements could significantly affect our customers by altering their global product development plans and substantially increasing their costs, which could result in limitations on the types of vehicles they sell and the geographical markets they serve. Any of these outcomes could adversely affect our financial position and results of operations.

Company-Specific Risk Factors

We have taken, and continue to take, cost-reduction actions. Although our process includes planning for potential negative consequences, the cost-reduction actions may expose us to additional production risk and could adversely affect our sales, profitability and ability to attract and retain employees.

We have been reducing costs in all of our businesses and have discontinued product lines, exited businesses, consolidated manufacturing operations and positioned operations in lower cost locations. The impact of these cost-reduction actions on our sales and profitability may be influenced by many factors including our ability to successfully complete these ongoing efforts, our ability to generate the level of cost savings we expect or that are necessary to enable us to effectively compete, delays in implementation of anticipated workforce reductions, decline in employee morale and the potential inability to meet operational targets due to our inability to retain or recruit key employees.

We operate as a holding company and depend on our subsidiaries for cash to satisfy the obligations of the holding company.

Dana Holding Corporation is a holding company. Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash flow and our ability to meet our obligations depend on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends, intercompany payments, tax sharing payments and otherwise may be subject to restrictions under the laws of the countries of incorporation of our subsidiaries or the by-laws of the subsidiary.

Labor stoppages or work slowdowns at Dana, key suppliers or our customers could result in a disruption in our operations and have a material adverse effect on our businesses.

We and our customers rely on our respective suppliers to provide parts needed to maintain production levels. We all rely on workforces represented by labor unions. Workforce disputes that result in work stoppages or slowdowns could disrupt operations of all of these businesses, which in turn could have a material adverse effect on the supply of, or demand for, the products we supply our customers.

We could be adversely affected if we are unable to recover portions of commodity costs (including costs of steel, other raw materials and energy) from our customers.

We continue to work with our customers to recover a portion of our material cost increases. While we have been successful in the past recovering a significant portion of such cost increases, there is no assurance that increases in commodity costs will not adversely impact our profitability in the future.

We could be adversely affected if we experience shortages of components from our suppliers or if disruptions in the supply chain lead to parts shortages for our customers.

A substantial portion of our annual cost of sales is driven by the purchase of goods and services. To manage and minimize these costs, we have been consolidating our supplier base. As a result, we are dependent on single sources of supply for some

components of our products. We select our suppliers based on total value (including price, delivery and quality), taking into consideration their production capacities and financial condition, and we expect that they will be able to support our needs. However, there is no assurance that adverse financial conditions, including bankruptcies of our suppliers, reduced levels of production, natural disasters or other problems experienced by our suppliers will not result in shortages or delays in their supply of components to us or even in the financial collapse of one or more such suppliers. If we were to experience a significant or prolonged shortage of critical components from any of our suppliers, particularly those who are sole sources, and were unable to procure the components from other sources, we would be unable to meet our production schedules for some of our key products and to ship such products to our customers in a timely fashion, which would adversely affect our sales, profitability and customer relations.

Adverse economic conditions, natural disasters and other factors can similarly lead to financial distress or production problems for other suppliers to our customers which can create disruptions to our production levels. Any such supply-chain induced disruptions to our production are likely to create operating inefficiencies that will adversely affect our sales, profitability and customer relations.

During 2013, we advised one of our largest suppliers that we did not intend to extend our existing contractual relationship beyond the contract expiration date of December 31, 2014. As a consequence, we established relationships with alternative suppliers. During the first half of 2015 as we transitioned to new suppliers, we were challenged with relatively high levels of demand in the market segment supported by these suppliers. This resulted in increased costs in the first half of 2015. Additionally, our inability to fully satisfy customer demands led to some lost business with a significant customer. There is a risk that our operating results and customer relationships could be adversely impacted if other supplier transitions are not completed effectively.

In 2014, the financial condition of a major supplier to our South America operations led to them pursuing legal reorganization. As more fully described in Note 2 of the consolidated financial statements in Item 8, in 2015, legal actions were required to maintain the supply of product from this supplier that was necessary to satisfy our customer commitments. Although we are currently operating under an arrangement with this supplier that is providing us with the required supply, we have incurred additional costs and there is continued uncertainty whether we will be able to maintain cost effective, uninterrupted supply. Our future operating results and customer relationships could be adversely impacted depending on the actions required to maintain existing product supply and the outcome of this supplier's legal reorganization. Our Commercial Vehicle operating segment had sales $98 and $225 in 2015 and 2014 attributable to axles and parts sourced from this supplier.

We use important intellectual property in our business. If we are unable to protect our intellectual property or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected.

We own important intellectual property, including patents, trademarks, copyrights and trade secrets, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design around the patents we own or license. Further, as we expand our operations in jurisdictions where the protection of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite efforts we undertake to protect them. Developments or assertions by or against us relating to intellectual property rights, and any inability to protect these rights, could materially adversely impact our business and our competitive position.

We could encounter unexpected difficulties integrating acquisitions and joint ventures.

We acquired businesses and invested in joint ventures in 2012 and 2011, and we expect to complete additional investments in the future that complement or expand our businesses. The success of this strategy will depend on our ability to successfully complete these transactions or arrangements, to integrate the businesses acquired in these transactions and to develop satisfactory working arrangements with our strategic partners in the joint ventures. We could encounter unexpected difficulties in completing these transactions and integrating the acquisitions with our existing operations. We also may not realize the degree or timing of benefits anticipated when we entered into a transaction.

Several of our joint ventures operate pursuant to established agreements and, as such, we do not unilaterally control the joint venture. There is a risk that the partners’ objectives for the joint venture may not be aligned, leading to potential differences over management of the joint venture that could adversely impact its financial performance and consequent contribution to our earnings. Additionally, inability on the part of our partners to satisfy their contractual obligations under the agreements could adversely impact our results of operations and financial position.

We could be adversely impacted by the costs of environmental, health, safety and product liability compliance.

Our operations are subject to environmental laws and regulations in the U.S. and other countries that govern emissions to the air; discharges to water; the generation, handling, storage, transportation, treatment and disposal of waste materials; and the cleanup of contaminated properties. Historically, other than an U.S. Environmental Protection Agency settlement as part of our bankruptcy proceedings, environmental costs related to our former and existing operations have not been material. However, there is no assurance that the costs of complying with current environmental laws and regulations, or those that may be adopted in the future, will not increase and adversely impact us.

There is also no assurance that the costs of complying with current laws and regulations, or those that may be adopted in the future, that relate to health, safety and product liability matters will not adversely impact us. There is also a risk of warranty and product liability claims, as well as product recalls, if our products fail to perform to specifications or cause property damage, injury or death, and a risk that asbestos-related product liability claims could result in increased liabilities at Dana Companies, LLC, a wholly owned subsidiary. (See Notes 14 and 15 to our consolidated financial statements in Item 8 for additional information on product liabilities and warranties.)

A failure of our information technology infrastructure could adversely impact our business and operations.

We recognize the increasing volume of cyber attacks and employ commercially practical efforts to provide reasonable assurance that the risks of such attacks are appropriately mitigated. Each year, we evaluate the threat profile of our industry to stay abreast of trends and to provide reasonable assurance our existing countermeasures will address any new threats identified. Despite our implementation of security measures, our IT systems and those of our service providers are vulnerable to circumstances beyond our reasonable control including acts of terror, acts of government, natural disasters, civil unrest and denial of service attacks which may lead to the theft of our intellectual property, trade secrets or business disruption. To the extent that any disruption or security breach results in a loss or damage to our data or an inappropriate disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our customers, suppliers and employees, lead to claims against the company and ultimately harm our business. Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

We participate in certain multi-employer pension plans which are not fully funded.

We contribute to certain multi-employer defined benefit pension plans for our union-represented employees in the U.S. in accordance with our collective bargaining agreements. Contributions are based on hours worked except in cases of layoff or leave where we generally contribute based on 40 hours per week for a maximum of one year. The plans are not fully funded as of December 31, 2015. We could be held liable to the plans for our obligation, as well as those of other employers, due to our participation in the plans. Contribution rates could increase if the plans are required to adopt a funding improvement plan, if the performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit agreements. (See Note 10 to our consolidated financial statements in Item 8 for additional information on multi-employer pension plans.)

Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability.

We have unfunded obligations under certain of our defined benefit pension and other postretirement benefit plans. The valuation of our future payment obligations under the plans and the related plan assets are subject to significant adverse changes if the credit and capital markets cause interest rates and projected rates of return to decline. Such declines could also require us to make significant additional contributions to our pension plans in the future. A material increase in the unfunded obligations of these plans could also result in a significant increase in our pension expense in the future.

We may incur additional tax expense or become subject to additional tax exposure.

Our provision for income taxes and the cash outlays required to satisfy our income tax obligations in the future could be adversely affected by numerous factors. These factors include changes in the level of earnings in the tax jurisdictions in which we operate, changes in the valuation of deferred tax assets, changes in our plans to repatriate the earnings of our non-U.S. operations to the U.S. and changes in tax laws and regulations. Our income tax returns are subject to examination by federal, state and local tax authorities in the U.S. and tax authorities outside the U.S. The results of these examinations and the ongoing assessments of our tax exposures could also have an adverse effect on our provision for income taxes and the cash outlays required to satisfy our income tax obligations.

Our ability to utilize our net operating loss carryforwards may be limited.

Net operating loss carryforwards (NOLs) approximating $729 were available at December 31, 2015 to reduce future U.S. income tax liabilities. Our ability to utilize these NOLs may be limited as a result of certain change of control provisions of the U.S. Internal Revenue Code of 1986, as amended (Code). Of this amount, NOLs of approximately $594 are treated as losses incurred before the change of control upon emergence from Chapter 11 and are limited to annual utilization of $84. The balance of our NOLs, treated as incurred subsequent to the change in control, is not subject to limitation as of December 31, 2015. However, there can be no assurance that trading in our shares will not effect another change in control under the Code, which would further limit our ability to utilize our available NOLs. Such limitations may cause us to pay income taxes earlier and in greater amounts than would be the case if the NOLs were not subject to limitation.

Risk Factors Related to our Securities

Provisions in our Restated Certificate of Incorporation and Bylaws may discourage a takeover attempt.

Certain provisions of our Restated Certificate of Incorporation and Bylaws, as well as the General Corporation Law of the State of Delaware, may have the effect of delaying, deferring or preventing a change in control of Dana. Such provisions, including those governing the nomination of directors, limiting who may call special stockholders’ meetings and eliminating stockholder action by written consent, may make it more difficult for other persons, without the approval of our board of directors, to make a tender offer or otherwise acquire substantial amounts of common stock or to launch other takeover attempts that a stockholder might consider to be in such stockholder’s best interest.

Item 1B. Unresolved Staff Comments

-None-

Item 2. Properties



Type of Facility	North America	Europe	South America	Asia Pacific	Total
Light Vehicle
Manufacturing/Distribution	13	3	5	9	30
Commercial Vehicle
Manufacturing/Distribution	8	4	3	4	19
Off-Highway
Manufacturing/Distribution	2	8		2	12
Power Technologies
Manufacturing/Distribution	12	4		2	18
Technical and Engineering Centers	3				3
Corporate and other
Administrative Offices	2			1	3
Technical and Engineering Centers - Multiple Segments	2			3	5
	42	19	8	21	90

We operate in 25 countries and have 90 major facilities housing manufacturing and distribution operations, technical and engineering centers and administrative offices. In addition to the eight stand-alone technical and engineering centers in the table above, we have eight technical and engineering centers housed within manufacturing sites. We lease 32 of these facilities and a portion of four others and own the remainder. We believe that all of our property and equipment is properly maintained.

Our corporate headquarters facilities are located in Maumee, Ohio. This facility and other facilities in the greater Detroit, Michigan and Maumee, Ohio areas house functions that have global or North American regional responsibility for finance and accounting, treasury, risk management, legal, human resources, procurement and supply chain management, communications and information technology.

Item 3. Legal Proceedings

We are a party to various pending judicial and administrative proceedings that arose in the ordinary course of business. After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs and expenses and our established reserves for uninsured liabilities), we do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations. Legal proceedings are also discussed in Notes 2 and 14 to our consolidated financial statements in Item 8.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market information — Our common stock trades on the New York Stock Exchange (NYSE) under the symbol "DAN." The following table shows the high and low prices of our common stock as reported by the NYSE for each of our fiscal quarters during 2015 and 2014.



	2015				2014
	High		Low		High		Low
Fourth quarter	$	18.12	$	13.01	$	22.36	$	16.81
Third quarter	20.81		15.33		24.82		18.93
Second quarter	22.73		20.35		24.48		20.60
First quarter	23.48		20.04		23.28		18.06

Holders of common stock — Based on reports by our transfer agent, there were approximately 3,720 registered holders of our common stock on February 5, 2016.

Stockholder return — The following graph shows the cumulative total shareholder return for our common stock since December 31, 2010. The graph compares our performance to that of the Standard & Poor’s 500 Stock Index (S&P 500) and the Dow Jones US Auto Parts Index. The comparison assumes $100 was invested at the closing price on December 31, 2010. Each of the returns shown assumes that all dividends paid were reinvested.

Performance chart

Index



	12/31/2010		12/31/2011		12/31/2012		12/31/2013		12/31/2014		12/31/2015
Dana Holding Corporation	$	100.00	$	74.70	$	96.66	$	121.92	$	135.84	$	89.58
S&P 500	100.00		102.11		118.45		156.82		178.29		180.75
Dow Jones US Auto Parts Index	100.00		88.21		98.71		154.04		170.42		164.10

Dividends — We declared and paid quarterly common stock dividends in 2015 and 2014, raising the dividend from five cents to six cents per share in the second quarter of 2015.

Issuer's purchases of equity securities — On July 30, 2014, our Board of Directors approved an expansion of our existing share repurchase program from $1,000 to $1,400. We repurchased shares utilizing available excess cash either in the open market or through privately negotiated transactions. The stock repurchases were subject to prevailing market conditions and other considerations. Under the program, we used cash of $66 to repurchase shares of our common stock during the fourth quarter of 2015.

The following table shows repurchases of our common stock for each calendar month in the quarter ended December 31, 2015.



Calendar Month	Class or Series of Securities	Number of Shares Purchased	Average Price Paid per Share		Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October	Common	2,948,254	$	16.75	2,948,254	$	17
November	Common	981,954	$	16.80	981,954	$	—
December						$	—

Our Board of Directors approved an expansion of our existing common stock share repurchase program from $1,400 to $1,700 on January 11, 2016. The share repurchase program expires on December 31, 2017.

Annual meeting — We will hold an annual meeting of stockholders on April 28, 2016.

Item 6. Selected Financial Data



	Year Ended December 31,
	2015			2014			2013			2012			2011
Operating Results
Net sales	$	6,060		$	6,617		$	6,769		$	7,224		$	7,544
Income from continuing operations before income taxes	292			260			368			364			306
Income from continuing operations	176			343			261			315			240
Income (loss) from discontinued operations	4			(15		)	(1		)	—			(8		)
Net income	180			328			260			315			232

Net income attributable to the parent company	$	159		$	319		$	244		$	300		$	219
Preferred stock dividend requirements	—			7			25			31			31
Preferred stock redemption premium	—			—			232			—			—
Net income (loss) available to common stockholders	$	159		$	312		$	(13	)	$	269		$	188

Net income (loss) per share available to common stockholders
Basic
Income (loss) from continuing operations	$	0.98		$	2.07		$	(0.08	)	$	1.82		$	1.34
Income (loss) from discontinued operations	0.02			(0.10		)	(0.01		)	—			(0.06		)
Net income (loss)	1.00			1.97			(0.09		)	1.82			1.28
Diluted
Income (loss) from continuing operations	$	0.97		$	1.93		$	(0.08	)	$	1.40		$	1.05
Income (loss) from discontinued operations	0.02			(0.09		)	(0.01		)	—			(0.03		)
Net income (loss)	0.99			1.84			(0.09		)	1.40			1.02

Depreciation and amortization of intangibles	$	174		$	213		$	262		$	277		$	307
Net cash provided by operating activities	406			510			577			339			370
Purchases of property, plant and equipment	260			234			209			164			196

Financial Position
Cash and cash equivalents and marketable securities	$	953		$	1,290		$	1,366		$	1,119		$	987
Total assets	4,326			4,905			5,103			5,131			5,262
Long-term debt, less debt issuance costs	1,553			1,588			1,541			790			816
Total debt	1,575			1,653			1,598			891			887
Preferred stock	—			—			372			753			753
Common stock and additional paid-in capital	2,313			2,642			2,842			2,670			2,644
Treasury stock	(1		)	(33		)	(366		)	(25		)	(9		)
Total parent company stockholders' equity	728			1,080			1,309			1,836			1,730
Book value per share	$	4.58		$	6.83		$	8.94		$	12.41		$	11.81

Common Share Information
Dividends declared per common share	$	0.23		$	0.20		$	0.20		$	0.20		$	—
Weighted-average common shares outstanding
Basic	159.0			158.0			146.4			148.0			146.6
Diluted	160.0			173.5			146.4			214.7			215.3
Market prices
High	$	23.48		$	24.82		$	23.46		$	16.76		$	19.35
Low	13.01			16.81			15.17			11.13			9.45

Note:

In April 2015, the Financial Accounting Standards Board issued guidance which changes the presentation of debt issuance costs. Debt issuance costs related to term debt will be presented on the balance sheet as a direct deduction from the related debt liability rather than recorded as a separate asset. The guidance requires retrospective application to all prior periods presented. We have presented $21, $25, $26, $13 and $15 of debt issuance costs as a direct deduction from long-term debt as of December 31, 2015, 2014, 2013, 2012 and 2011. See Note 1 to our consolidated financial statements in Item 8 for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)

Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes in Item 8.

Management Overview

We are a global provider of high technology driveline, sealing and thermal-management products for virtually every major vehicle manufacturer in the on-highway and off-highway markets. Our driveline products – axles, driveshafts and transmissions – are delivered through our Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle) and Off-Highway Driveline Technologies (Off-Highway) operating segments. Our fourth global operating segment – Power Technologies – is the center of excellence for the sealing and thermal technologies that span all customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint which minimizes our exposure to individual market and segment declines. In 2015, 53% of our sales came from North American operations and 47% from operations throughout the rest of the world. Our sales by operating segment were Light Vehicle – 41%, Commercial Vehicle – 25%, Off-Highway – 17% and Power Technologies – 17%.

Operational and Strategic Initiatives

Over the past several years, we have significantly improved our overall financial position — improving the overall profitability of our business, simplifying our capital structure, maintaining strong cash flows and addressing structural costs. We have also strengthened our leadership team and streamlined our operating segments to focus on our core competencies of driveline technologies, sealing systems and thermal management. As a result, we believe that we are well-positioned to place increasing focus on profitable growth and shareholder returns.

Shareholder returns and capital structure actions — When evaluating capital structure initiatives, we balance our growth opportunities and shareholder value initiatives with maintaining a strong balance sheet and access to capital. Our strong financial position in recent years enabled us to simplify our capital structure while providing returns to our common shareholders in the form of cash dividends and reduction in the number of common share equivalents outstanding. During 2013, we redeemed our Series A preferred stock, the equivalent of 21 million common shares on an as converted basis, for $474. In 2014, we exercised our option to convert all remaining outstanding preferred shares to common shares. In 2014, our Board of Directors approved the expansion of our share repurchase program from $1,000 to $1,400. In 2015, we used $311 under this program to repurchase common shares, bringing the total shares repurchased since program inception to 67 million, inclusive of the common share equivalent reduction resulting from redemption of preferred shares. In January 2016, our Board of Directors approved the expansion of our share repurchase program from $1,400 to $1,700. Additionally, we declared and paid quarterly common stock dividends over the past four years, raising the dividend from five cents to six cents per share in the second quarter of 2015.

In December 2014 and the first quarter of 2015, we completed the redemption of our senior notes maturing in 2019, replacing them with senior notes having lower interest rates and maturing in 2024. Additionally, in the fourth quarter of 2014, we completed a voluntary program offered to deferred vested salaried participants in our U.S. pension plans. With this program, we reduced plan benefit obligations by $171 with lump sum payments of $133 from plan assets.

Technology leadership — With a clear focus on market-based value drivers, global-mega trends and customer sustainability objectives and requirements, we are driving innovation to create differentiated value for our customers, enabling a “market pull” product pipeline. Our sealing and thermal engine expertise provides us with early insight into some of the critical design factors important to our customers. When combined with our drivetrain expertise, we are able to collaborate with our customers on complete power conveyance solutions, from the engine through the vehicle driveline. We are committed to making investments and diversifying our product offerings to strengthen our competitive position in our core driveline, sealing and thermal technologies businesses, creating value for our customers through improved fuel efficiency, emission control, electric and hybrid electric solutions, durability and cost of ownership, software integration and systems solutions. Our industry leading electronically actuated disconnecting all wheel drive technology, which we believe is the most fuel efficient rapidly disconnecting system in the market, was recently selected by one of our major customers for a significant new global vehicle platform - opening up new commercial channels for us in the passenger car, crossover and sport utility vehicle markets. A strategic alliance with Fallbrook Technologies Inc. (Fallbrook) provides us the opportunity to leverage leading edge continuously variable planetary (CVP) technology into the development of advanced drivetrain and transmission solutions for customers in our end markets.

Additional engineering and operational investment is being channeled into reinvigorating our product portfolio and capitalizing on technology advancement opportunities. Combined engineering centers of our Light Vehicle and Commercial Vehicle segments allow us the opportunity to better share technologies among these businesses. New engineering facilities in India and China were opened in the past few years and are now on line, more than doubling our engineering presence in the Asia Pacific region with state-of-the-art development and test capabilities that globally support each of our businesses. Additionally, in 2014, we opened a new technology center in Cedar Park, Texas to support our CVP technology development initiatives.

Geographic expansion — Our manufacturing and technology center footprint positions us to support customers globally - an important factor as many of our customers are increasingly focused on common powertrain solutions for global platforms. While growth opportunities are present in each region of the world, we have a primary focus on building our presence and local capability in the Asia Pacific region, especially India and China. In addition to new engineering facilities in those countries, new gear manufacturing facilities were recently established in India and Thailand. We have expanded our China off-highway activities and we believe there is considerable opportunity for growth in this market.

Aftermarket opportunities — We have a global group dedicated to identifying and developing aftermarket growth opportunities that leverage the capabilities within our existing businesses – targeting increased future aftermarket sales.

Selective acquisitions — Our current acquisition focus is to identify “bolt-on” or adjacent acquisition opportunities that have a strategic fit with our existing core businesses, particularly opportunities that support our growth initiatives and enhance the value proposition of our customer product offerings. Any potential acquisition will be evaluated in the same manner we currently consider customer program opportunities – with a disciplined financial approach designed to ensure profitable growth.

New commercial channels — In each of our operating segments, we have customer, geographic and product growth opportunities. By leveraging our relentless pursuit of customer satisfaction, innovative technology and differentiated products, we believe there are opportunities to open new, as well as further penetrate existing, commercial channels.

Manufacturing excellence/cost management — Although we have taken significant strides to improve our profitability and margins, particularly through streamlining and rationalizing our manufacturing activities and administrative support processes, we believe additional opportunities remain to further improve our financial performance. We have ramped up our material cost efforts to ensure that we are rationalizing our supply base and obtaining appropriate competitive pricing. We have embarked on information technology initiatives to reduce and streamline systems and supporting costs. With a continued emphasis on process improvements and productivity throughout the organization, we expect cost reductions to continue contributing to future margin improvement.

Divestitures

Disposal of operations in Venezuela — The operating, political and economic environment in Venezuela in recent years was very challenging. Foreign exchange controls restricted our ability to import required parts and material and satisfy the related U.S. dollar obligations. Production activities were curtailed for most of 2014 as our major original equipment customers suspended production, with a limited amount of activity coming back on line later in the year. Our sales in Venezuela during 2014 approximated $110 as compared to $170 in 2013. Results of operations were adversely impacted by the reduced production levels making break-even operating performance a significant challenge. Further, devaluations of the bolivar along with other foreign exchange developments provided added volatility to results of operations and increased uncertainty around future performance.

In December 2014, we entered into an agreement to divest our operations in Venezuela (the disposal group) to an unaffiliated company for no consideration. We completed the divestiture in January 2015. In connection with the divestiture, we entered into a supply and technology agreement whereby Dana will supply product and technology to the operations at competitive market prices. Dana has no obligations to otherwise provide support to the operations. The disposal group was classified as held for sale at December 31, 2014, and we recognized a net charge of $77 – an $80 loss to adjust the carrying value of the net assets to fair value less cost to sell, with a reduction of $3 for the noncontrolling interest share of the loss. These assets and liabilities were presented as held for sale on our December 31, 2014 balance sheet. Upon completion of the divestiture of the disposal group in January 2015, we recognized a gain of $5 on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary in other income, net. We also credited other comprehensive loss attributable to the parent for $10 and other comprehensive loss attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in accumulated other comprehensive loss. See Note 2 to our consolidated financial statements in Item 8 for additional information. With the completion of the sale in January 2015, Dana has no remaining investment in Venezuela.

Divestiture of Structural Products Business — In 2010, we completed the sale of substantially all of the assets of our Structural Products business to Metalsa S.A. de C.V. (Metalsa). We had received cash proceeds of $134 by the end of 2011, excluding amounts related to working capital adjustments and tooling. The parties reached a final agreement on disputed issues in May 2014, resulting in the receipt of additional cash proceeds of $9 and a charge of $1 to other expense. Prior to the third quarter of 2012, Structural Products was reported as an operating segment of continuing operations. With the cessation of the retained operations in the third quarter of 2012, we began reporting the activities relating to the Structural Products business as discontinued operations.

Segments

We manage our operations globally through four operating segments. Our Light Vehicle and Power Technologies segments primarily support light vehicle original equipment manufacturers (OEMs) with products for light trucks, SUVs, CUVs, vans and passenger cars. The Commercial Vehicle segment supports the OEMs of on-highway commercial vehicles (primarily trucks and buses), while our Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled vehicles used in construction, mining and agricultural applications).

Trends in Our Markets

Global Vehicle Production



				Actual
(Units in thousands)	Dana 2016 Outlook			2015	2014	2013
North America
Light Truck (Full Frame)	4,250	to	4,300	4,123	3,834	3,632
Light Vehicle Engines	15,500	to	16,000	15,355	15,119	14,233
Medium Truck (Classes 5-7)	230	to	240	235	226	201
Heavy Truck (Class 8)	240	to	260	322	297	245
Agricultural Equipment	55	to	60	58	64	75
Construction/Mining Equipment	155	to	165	158	158	157
Europe (including Eastern Europe)
Light Truck	8,800	to	8,900	8,525	7,790	7,276
Light Vehicle Engines	22,500	to	23,000	22,617	21,510	20,836
Medium/Heavy Truck	440	to	445	438	397	400
Agricultural Equipment	200	to	205	202	220	244
Construction/Mining Equipment	300	to	305	299	301	298
South America
Light Truck	950	to	1,000	948	1,146	1,302
Light Vehicle Engines	2,500	to	2,550	2,486	3,176	3,775
Medium/Heavy Truck	80	to	90	86	167	218
Agricultural Equipment	30	to	35	32	43	54
Construction/Mining Equipment	10	to	15	13	17	20
Asia-Pacific
Light Truck	24,000	to	25,000	24,031	22,337	20,515
Light Vehicle Engines	48,500	to	49,500	47,060	46,497	45,213
Medium/Heavy Truck	1,400	to	1,450	1,378	1,573	1,522
Agricultural Equipment	655	to	690	676	710	788
Construction/Mining Equipment	400	to	420	405	509	555

North America

Light vehicle markets — Improving economic conditions during the past three years have contributed to increased light vehicle sales and production levels in North America. Release of built-up demand to replace older vehicles, greater availability of credit, stronger consumer confidence and other factors have combined to stimulate new vehicle sales. Light vehicle sales in 2015 increased about 6% from 2014, with sales that year being up 6% from 2013. Many of our programs are focused in the full frame light truck segment. Sales in this segment were especially strong the past two years, being up about 9% in 2015 and 8% in 2014. Light vehicle production levels were reflective of the stronger vehicle sales. Production of approximately 17.5 million

light vehicles in 2015 was 3% higher than in 2014, after increased production of about 5% the preceding year. Light vehicle engine production was similarly higher, up 2% in 2015 and 6% in 2014. In the key full frame light truck segment, production levels increased about 8% in 2015 compared with an increase of 6% in 2014. Days’ supply of total light vehicles in the U.S. at the end of December 2015 was around 61 days, comparable with the number of days at the end of 2014 and down slightly from 64 days at the end of 2013. In the full frame light truck segment, an inventory level of 62 days at the end of 2015 compares favorably with 63 days at the end of 2014 and 67 days at the end of 2013.

Looking ahead to 2016, we believe the North American markets will continue to be relatively strong. Reduced unemployment levels, low fuel prices and stable consumer confidence are expected to provide a favorable economic climate. Our current outlook for 2016 light vehicle engine production is 15.5 to 16.0 million units, a 1 to 4% increase over 2015, with full frame light truck production expected to be in the range of 4.25 to 4.3 million units, an increase of about 3 to 4% from 2015.

Medium/heavy vehicle markets — Similar to the light vehicle market, the commercial vehicle segment benefited from an improving North America economy in recent years, leading to increased medium duty Classes 5-7 truck production the past three years. After increasing 12% in 2014, medium duty production increased another 4% in 2015. In the Class 8 segment, after declining 12% in 2013, production levels increased about 21% in 2014 as confidence in a sustained stronger economy took hold. That continued in 2015, as production climbed about 8% to around 322,000 units.

Orders for Class 8 trucks weakened some in the fourth quarter of 2015, which led to customers pulling back some on production near the end of the quarter and into the first month of 2016. Combined with the strong production level in 2015, inventory levels are higher and customers are being somewhat cautious about 2016 production levels. At present, we expect Class 8 production in the region to be in the range of 240,000 to 260,000 units, a decrease of around 19 to 25% from 2015. Medium duty production is expected to be relatively comparable with 2015.

Markets Outside of North America

Light vehicle markets — Signs of an improved overall European economy have been evident, albeit mixed at times, during the past few years. Reflective of a modestly improved economy, light vehicle production levels have increased with light vehicle engine production being up about 5% in 2015 after increasing 3% in 2014 and light truck production being higher by 9% in 2015 after being up about 7% in 2014. We expect the current economic stability to persist in 2016 with light vehicle engine and light truck production being comparable to up slightly from 2015. The economic climate in most South America markets the past three years has been weak, volatile and challenging. After rebounding some in 2013 from a relatively weak 2012, light truck production declined 12% in 2014 and was down another 17% in 2015. Light vehicle engine production was similarly down 16% in 2014 and another 22% in 2015. Our current 2016 outlook for light trucks and light vehicle engines has production being relatively flat with 2015. The Asia Pacific markets have been relatively strong the past few years, principally fueled by growth in China. Light truck production increased 9% in 2014 and was up another 8% in 2015, while light vehicle engine production increased 3% in 2014 and another 1% in 2015. We expect to see continued growth in 2016, with year-over-year light truck production being flat to up 4% and light vehicle engine production being higher by about 3 to 5%.

Medium/heavy vehicle markets — Some of the same factors referenced above that affected light vehicle markets outside of North America similarly affected the medium/heavy markets. Whereas some modest improvement was reflected in light vehicle production levels in 2013 and 2014, production levels in the medium/heavy truck market were relatively comparable as improvement was a little slower to manifest in this market. Signs of a strengthening European market emerged in 2015 with medium/heavy truck production in 2015 being up about 10% from the preceding year. For 2016, we expect Europe medium/heavy truck production to be comparable with 2015. South America medium/heavy truck production rebounded some in 2013 from low production levels in 2012, due in part to engine emission changes in Brazil that year. A weakening economic climate in 2014 in the region, however, led to medium/heavy truck production declining about 23% in 2014. Further weakening in 2015 resulted in a further decline in production, with vehicle build being down about 49% from 2014. Our outlook in South America for 2016 anticipates persistent economic weakness in the region, with medium/heavy truck production likely to be relatively flat with 2015. Asia Pacific medium/heavy truck production levels in 2012 and early 2013 were still restrained from the effects of natural disasters that significantly impacted the region in 2011, along with a sluggish 2012 commercial vehicle market in China. After strengthening about 2% in 2013, the medium/truck market in Asia Pacific has been sluggish the past two years, being up a modest 3% in 2014 and declining about 12% in 2015 as a slow down in the China market materialized. While the China market is expected to be comparable to up modestly in 2016, an improving India market is expected to help improve production in the region by about 2 to 5% in 2016.

Off-Highway Markets — Our off-highway business has a large presence outside of North America, with more than 75% of its sales coming from Europe and approximately 12% from South America and Asia Pacific combined. We serve several segments

of the diverse off-highway market, including construction, agriculture, mining and material handling. Our largest markets are the construction/mining and agricultural equipment segments. After experiencing increased global demand in 2011 and 2012, these markets have been relatively weak the past three years. Global demand in the agriculture market was up about 3% in 2013, but down 11% in 2014 and 7% in 2015. The construction/mining segment weakened about 8% in 2013 and was down about 4% in 2014 and 11% in 2015. Both markets are expected to remain weak in 2016, with demand levels in the agriculture segment expected to range from down 3% to up 2% from 2015 and construction/mining segment demand expected to be flat to up 3% compared to 2015.

Foreign Currency Effects

Weaker international currencies relative to the U.S. dollar had a significant impact on our sales and results of operations in 2015. Approximately 54% of our consolidated sales were outside the U.S., with euro zone countries and Brazil accounting for approximately 41% and 7% of our non-U.S. sales. Translation of our international activities at average exchange rates in 2015 as compared to average rates in 2014 reduced sales by $516, with $268 attributable to a weaker euro and $91 to a weaker Brazil real. Our current 2016 sales outlook anticipates additional weakening in international currencies, with an assumed euro/U.S. dollar rate of 1.08 to 1.05 and U.S. dollar/Brazil real rate of 4.00 to 4.25. A 5% movement on the euro and Brazil real rates would impact 2016 sales in our outlook by approximately $65 and $10, respectively.

Brazil Market

Reduced market demand resulting from the weak economic environment in Brazil in 2015 has led to production levels in the light vehicle and medium/heavy duty vehicle markets that are lower by about 22% and 44% from 2014. As a consequence, sales by our operations in Brazil for 2015 were $240, down from $505 the preceding year. Our medium/heavy duty presence is particularly significant, with approximately 74% of our Brazil sales originating in our Commercial Vehicle operating segment in 2015. In response to the challenging economic conditions in this country, we implemented restructuring and other reduction actions in 2015. As discussed in the Critical Accounting Estimates section of this Item 7 and in Note 2 to our consolidated financial statements in Item 8, one of our major suppliers is operating with judicial oversight under reorganization proceedings in Brazil.

Commodity Costs

The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper and brass. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers. Where such formal agreements are not present, we have historically been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes.

Lower commodity prices decreased our costs by approximately $10 in 2015, while higher commodity prices increased our costs by approximately $35 in 2014 and $20 in 2013. Material recovery and other pricing actions increased sales by about $1 in 2015, $65 in 2014 and $30 in 2013.

Sales, Earnings and Cash Flow Outlook



	2016 Outlook	2015		2014		2013
Sales	$5,800 - $6,000	$	6,060	$	6,617	$	6,769
Adjusted EBITDA	$640 - $670	$	652	$	746	$	745
Free Cash Flow	$160 - $180	$	146	$	276	$	368

Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. See the Non-GAAP Financial Measures discussion below for definitions of our non-GAAP financial measures and reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures.

During the past three years, weaker international currencies relative to the U.S. dollar were the most significant factor reducing our sales. Lower sales attributable to currency over the three-year period approximated $900, with a reduction of more

than $500 occurring in 2015. We divested our Venezuela operation in January 2015, which further reduced consolidated sales by approximately $100. Adjusted for currency and divestiture effects, our sales have been relatively stable. We experienced uneven end user markets, with some being relatively strong and others somewhat weak, and the conditions across the regions of the world differing quite dramatically. New business with customers has largely offset the lower sales attributable to overall weaker end user demand. Our outlook for 2016 includes additional weakening of international currencies in the range of $200 to $300. Increased sales from new business coming on line in 2016 is expected to partially offset the currency related reduction, with end user market demand remaining relatively comparable to 2015.

Over the past three years, adjusted EBITDA margin as a percent of sales has remained relatively constant at around 11% despite certain markets being weak and volatile. Where practicable, we have aligned our cost with weaker demand levels in certain markets. We continue to focus on margin improvement through right sizing and rationalizing our manufacturing operations, implementing other cost reduction initiatives and ensuring that customer programs are competitively priced. With a continued focus on cost and new business coming on at competitive rates, we expect to see a slight margin improvement in 2016. Further margin improvement following 2016 is anticipated as we expect to see increased end user demand in certain markets and we continue to benefit from higher margin on new business coming on line.

Free cash flow generation has been strong the past three years as we benefited from strong earnings and closely managed working capital and capital spend requirements. Free cash flow in 2013 benefited, in part, from reduced inventory levels and the receipt of $28 of interest relating to a callable payment-in-kind note receivable. With the sale of this note in 2014, free cash flow benefited from the additional receipt of $40 of interest. Lower pension contributions, restructuring payments and cash taxes also benefited free cash flow in 2014, while increased new program launches resulted in higher capital spending. The lower free cash flow in 2015 is primarily due to lower earnings and increased capital spend to support new program launches, with lower cash taxes and restructuring payments providing a partial offset. Based on our outlook for 2016, we expect free cash flow to be in the range of $160 to $180. An increased level of program launches in 2016 is expected to require overall capital spend of $280 to $300. Net interest will consume cash of around $90, with estimated cash taxes being about $90, restructuring expenditures about $25 and pension contributions around $15 – all relatively comparable with 2015.

Among our Operational and Strategic Initiatives are increased focus on and investment in product technology – delivering products and technology that are key to bringing solutions to issues of paramount importance to our customers. This, more than anything, is what will position us for profitable future growth. Our success on this front is measured, in part, by our sales backlog which is net new business received that will be launching in the future and adding to our base annual sales. This backlog of new business does not represent firm orders. At December 31, 2015, our sales backlog of net new business for the 2016 through 2018 period was $750. This current backlog compares to a three-year sales backlog at the end of 2014 that approximated $680 when adjusted for current exchange rates and market demand – an increase of 10%. The higher returns associated with this new business are expected to help drive increased future adjusted EBITDA margins.

Consolidated Results of Operations

Summary Consolidated Results of Operations (2015 versus 2014)



	2015					2014
	Dollars			% of Net Sales		Dollars			% of Net Sales		Increase/ (Decrease)
Net sales	$	6,060				$	6,617				$	(557	)
Cost of sales	5,211			86.0	%	5,672			85.7	%	(461		)
Gross margin	849			14.0	%	945			14.3	%	(96		)
Selling, general and administrative expenses	391			6.5	%	411			6.2	%	(20		)
Amortization of intangibles	14					42					(28		)
Restructuring charges, net	15					21					(6		)
Impairment of long-lived assets	(36		)								(36		)
Loss on disposal group held for sale						(80		)			80
Pension settlement charges						(42		)			42
Loss on extinguishment of debt	(2		)			(19		)			17
Other income, net	14					48					(34		)
Income from continuing operations before interest expense and income taxes	405					378					27
Interest expense	113					118					(5		)
Income from continuing operations before income taxes	292					260					32
Income tax expense (benefit)	82					(70		)			152
Equity in earnings (losses) of affiliates	(34		)			13					(47		)
Income from continuing operations	176					343					(167		)
Income (loss) from discontinued operations	4					(15		)			19
Net income	180					328					(148		)
Less: Noncontrolling interests net income	21					9					12
Net income attributable to the parent company	$	159				$	319				$	(160	)

Sales — The following table shows changes in our sales by geographic region.



								Amount of Change Due To
	2015		2014		Increase/ (Decrease)			Currency Effects			Acquisitions (Divestitures)			Organic Change
North America	$	3,210	$	3,126	$	84		$	(48	)	$	—		$	132
Europe	1,723		1,978		(255		)	(313		)				58
South America	377		771		(394		)	(110		)	(107		)	(177		)
Asia Pacific	750		742		8			(45		)				53
Total	$	6,060	$	6,617	$	(557	)	$	(516	)	$	(107	)	$	66

Sales for 2015 declined $557 or 8% from 2014. Weaker international currencies decreased sales by $516 and the divestiture of our operations in Venezuela reduced sales by $107. The organic sales increase resulted from stronger overall volume levels that added $65 and cost recovery pricing which contributed $1.

Stronger light vehicle and light vehicle engine production levels in North America were largely responsible for the 4% organic sales increase in this region. Full frame light truck production was 8% stronger than last year, while light vehicle engine production levels were about 2% higher. Increased medium/heavy truck production of about 6% and new customer programs coming on line over the past year also contributed to increased year-over-year sales. Partially offsetting this stronger demand and new business was lower sales with a significant Commercial Vehicle segment customer.

Excluding currency effects, principally from a weaker euro and British pound, our sales in Europe were 3% higher than in 2014. Higher sales from increases in light vehicle engine and light truck production of around 5% and 9%, growth in medium/heavy truck production of about 10% and new customer programs were partially offset by weaker off-highway demand levels.

South America sales were reduced by weaker currencies in Brazil, Argentina and Colombia and the divestiture of our operations in Venezuela. Excluding these effects, sales were down 23% from 2014. The organic sales decrease in the region was primarily driven by reductions in medium/heavy truck production levels of about 49%, a decline in light truck production of 17% and weaker off-highway demand. Partially offsetting weaker demand levels in the region were higher sales associated with light vehicle new business, content increases and cost recovery pricing.

Asia Pacific sales in 2015 were up slightly from 2014. The organic sales increase of 7% in the region was driven principally by stronger light vehicle and medium/heavy truck sales volumes in Thailand and India and increased off-highway sales levels in our operation in China.

Cost of sales and gross margin — Cost of sales for 2015 declined $461, or 8%, when compared to 2014. Similar to our reduction in sales, the change was due primarily to currency effects with a partial offset provided by higher sales volumes. Cost of sales as a percent of sales in 2015 was 30 basis points higher than last year. In addition to the benefit of stronger volume levels in some of our markets, savings from material cost reduction initiatives reduced cost by $48, with lower commodity costs contributing an additional $14. These favorable impacts on cost of sales were more than offset by an increase in warranty expense of $11, costs attributed to supply chain disruptions in our Commercial Vehicle segment of $16, an increase in engineering and product development expense of $7, an increase in environmental remediation expense of $8, higher costs in certain markets where we were unable to effectively flex our cost with lower demand levels and other inflationary cost increases.

Gross margin of $849 in 2015 was $96 lower than last year, representing 14.0% of sales in 2015 as compared to 14.3% of sales in 2014. The 30 basis point decrease in gross margin was principally driven by the net effect of the cost factors referenced above, partially offset by a nominal pricing and cost recovery benefit.

Selling, general and administrative expenses (SG&A) — SG&A expenses in 2015 were $391 (6.5% of sales) as compared to $411 (6.2% of sales) in 2014. Salary and benefits expenses in 2015 were $15 lower than in 2014 primarily due to lower anticipated payouts under various annual incentive programs, while selling expense and other discretionary spending declined $5.

Amortization of intangibles — The reduction of $28 in amortization of intangibles is primarily attributable to certain customer related intangibles becoming fully amortized.

Restructuring charges — Restructuring charges of $15 in 2015 included $12 of employee separation costs and $3 of exit costs. The majority of the separation cost was attributable to headcount reductions in our Brazil operations, primarily in our Commercial Vehicle segment, in response to significantly lower demand levels. The exit costs in 2015 were primarily related to activities associated with previously announced facility closure and realignment actions. The restructuring charges of $21 in 2014 primarily represented the impact of headcount reduction initiatives in our Commercial Vehicle and Light Vehicle businesses in South America and Europe, including the closure of our Commercial Vehicle foundry in Argentina and other severance and exit costs associated with previously announced initiatives.

Impairment charges — Reference is made to Note 2 of the consolidated financial statements in Item 8 for discussion of charges recognized in connection with an impairment of long-lived assets attributable to an exclusive supply relationship with a South American supplier.

Other income, net — The following table shows the major components of other income, net.



	2015			2014
Interest income	$	13		$	15
Government grants and incentives	3			4
Foreign exchange gain (loss)	(20		)	11
Gain on derecognition of noncontrolling interest	5
Strategic transaction expenses	(4		)	(3		)
Insurance and other recoveries	4			2
Gain on sale of marketable securities	1
Recognition of unrealized gain on payment-in-kind note receivable				2
Amounts attributable to previously divested/closed operations	1
Other	11			17
Other income, net	$	14		$	48

During 2015, net foreign exchange loss primarily reflects the adverse impact of settlements of certain Mexican peso and euro forward contracts driven by the strengthening of the U.S. dollar. Net foreign exchange gain in 2014 resulted in large part from favorable currency movement on an intercompany loan that was fully paid in the first half of 2014. As described in Notes 1 and 7 to the consolidated financial statements in Item 8, devaluation of the Venezuelan bolivar, net of transactional gains, resulted in a net foreign currency gain of $2 in 2014. Upon completion of the divestiture of our operations in Venezuela in January 2015, we recognized a $5 gain on the derecognition of the noncontrolling interest in one of our former Venezuelan subsidiaries. See Notes 2 and 17 to our consolidated financial statements in Item 8 for additional information. The January 2014 sale of a payment-in-kind note resulted in the recognition of $2 of unrealized gain that arose following the valuation of the note below its callable value at emergence from bankruptcy. During 2015, we reached a $3 settlement with an insurance carrier for the recovery of previously incurred legal costs, while 2014 included a payment of $2 from the liquidation proceedings of an insolvent insurer carrier. Additionally, as part of correcting overstatements of our pension obligations and goodwill in 2014, we credited other income, net for $6 to effectively reverse a portion of the write-off of goodwill assigned to our former Driveshaft segment in 2008. See Note 1 to our consolidated financial statements in Item 8 for additional information.

Loss on extinguishment of debt — Actions to refinance a portion of our long-term debt that commenced in last year's fourth quarter were completed in the first quarter of 2015, with expense recognized for the call premium incurred and write-off of unamortized financing costs associated with debt extinguished in this year's first quarter.

Interest expense — Interest expense was $113 and $118 in 2015 and 2014. The impact of higher average debt levels was more than offset by a lower average effective interest rate. As discussed in Note 12 to our consolidated financial statements in Item 8, we completed the sale of $425 of 5.5% senior unsecured notes in December 2014 and redeemed $400 of 6.5% senior unsecured notes during the four-month period ended March 2015. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 6.6% and 6.9% in 2015 and 2014.

Income tax expense (benefit) — Income tax expense of our continuing operations was $82 in 2015 and a benefit of $70 in 2014. The effective income tax rates vary from the U.S. federal statutory rate of 35% primarily due to valuation allowances in several countries, nondeductible expenses, different statutory rates outside the U.S. and withholding taxes. During 2015, we completed an intercompany transfer of an affiliate’s stock and certain operating assets, as discussed in Note 16 of the consolidated financial statements in Item 8. In conjunction with this transaction, we released $66 of valuation allowance on U.S. deferred tax assets and recognized $23 of tax expense related to the stock sale and $2 of amortization of a prepaid tax asset created as a part of the transaction. We also established a valuation allowance of $15 against the deferred tax assets of a South American subsidiary. During 2014, we released valuation allowance of $179 related to the intercompany transaction discussed above that was partially offset by a valuation allowance adjustment related to the $80 charge recorded in connection with the divestiture of our Venezuelan operations. Excluding these items, the effective tax rate was 37% in 2015 as compared to 33% in 2014. The main driver of the increase is related to the jurisdictional mix of the earnings of our non-U.S. operations.

In the U.S. and certain other countries, our recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for recognition of deferred tax assets. Therefore, there is generally no income tax recognized on the pre-tax income or losses in these jurisdictions as valuation allowance adjustments offset the associated tax effects. See Note 16 to our consolidated financial statements in Item 8 for a discussion of the factors considered in our evaluation of the valuation allowances against our U.S. deferred tax assets.

Equity in earnings (losses) of affiliates — Equity investments provided a net loss of $34 in 2015 and earnings of $13 in 2014. Our equity in earnings from Bendix Spicer Foundation Brake, LLC were $11 in 2015 and $10 in 2014. Our share of Dongfeng Dana Axle Co., Ltd.'s (DDAC) operating results were a loss of $7 in 2015 and earnings of $5 in 2014. During the fourth quarter of 2015, we determined that we had an other-than-temporary decrease in the carrying value of our DDAC investment and recorded a $39 impairment charge. See Note 19 to our consolidated financial statements in Item 8.

Income (loss) from discontinued operations — Income (loss) from discontinued operations activity relates to our Structural Products business. See Note 2 to our consolidated financial statements in Item 8.

Noncontrolling interests net income — As more fully discussed in Note 1 to our consolidated financial statements in Item 8, the first quarter of 2015 included $9 for correction of previously reported noncontrolling interests net income.

Segment Results of Operations (2015 versus 2014)

Light Vehicle



	Sales			Segment EBITDA			Segment EBITDA Margin
2014	$	2,496		$	250		10.0	%
Volume and mix	200			34
Performance	(12		)
Venezuelan divestiture	(107		)
Currency effects	(95		)	(22		)
2015	$	2,482		$	262		10.6	%

Light Vehicle sales in 2015 were reduced by currency translation effects, primarily as a result of a weaker British pound sterling, Brazil real, Argentina peso, Thailand baht and South African rand, and the divestiture of our Venezuela operations in January 2015. Sales, exclusive of currency and divestiture effects, were 8% higher in 2015 than in 2014. The volume related increases were driven in part by stronger production levels. North America full frame light truck production in 2015 was up 8% from the same period of 2014, and light truck production in Europe and Asia Pacific was stronger by 9% and 8%. Light Vehicle volume increases in 2015 also benefited from new customer programs that came on line over the past couple years.

Light Vehicle segment EBITDA of $262 in 2015 is $12 higher than 2014 as the benefit of stronger sales volumes was partially offset by currency effect. In addition to reductions resulting from translation of international results at weaker exchange rates relative to the U.S. dollar, we experienced increased year-over-year transactional currency losses of $10 on non-functional currency denominated activities and intercompany balances. Performance-related segment EBITDA was neutral, with $33 from material cost savings and lower commodity costs being offset by $12 due to lower pricing, a $4 increase in warranty costs, a $2 increase in program launch costs, an additional $2 of engineering and product development expense, net of customer reimbursement, and other items.

Commercial Vehicle



	Sales			Segment EBITDA			Segment EBITDA Margin
2014	$	1,838		$	172		9.4	%
Volume and mix - Brazil	(166		)	(35		)
Volume and mix - All other	(19		)	(9		)
Performance	24			(11		)
Currency effects	(144		)	(17		)
2015	$	1,533		$	100		6.5	%

The currency related reduction in sales was primarily due to a weaker euro, Brazil real and Mexico peso. After adjusting for the effects of currency, 2015 sales in our Commercial Vehicle segment decreased 9% compared to 2014. Weaker end market demand in Brazil where year-over-year medium/heavy truck production was down 44% reduced sales by $166. The remaining volume reduction is primarily attributable to lower sales of about $100 from lost market share with a major customer due to residual effects of the supply chain inefficiencies that impacted our performance in the first half of 2015. Partially offsetting this was higher sales from stronger production levels in North America where year-over-year medium/heavy truck production was up about 6%. Pricing recoveries provided a partial offset to the currency and volume impacts on 2015 sales.

Commercial Vehicle segment EBITDA of $100 was $72 lower than in 2014. Weaker Brazil market demand contributed $35, with an additional $9 resulting from net lower sales elsewhere, principally in North America as a result of the above-mentioned market share reduction with a major customer. Year-over-year performance-related segment EBITDA includes a benefit of $25 for increased pricing/recoveries and material cost savings and lower commodity costs of $5. These benefits were more than offset by increased warranty expense of $16, higher supplier transition costs of $8 and other cost increases.

Off-Highway



	Sales			Segment EBITDA			Segment EBITDA Margin
2014	$	1,231		$	169		13.7	%
Volume and mix	(25		)	(10		)
Performance	(1		)	14
Currency effects	(165		)	(26		)
2015	$	1,040		$	147		14.1	%

Reduced year-over-year sales due to currency effects resulted principally from a weaker euro. Currency-adjusted sales for 2015 were down slightly from 2014. New business gains in this business are largely offsetting the impact of continued weakness in global end-market demand.

Off-Highway segment EBITDA of $147 in 2015 was down $22 from 2014. Currency effects are the primary driver of the reduced EBITDA, reflecting a weaker euro and other international currencies. The performance-related segment EBITDA improvement is primarily attributable to material cost savings of $18 and lower warranty expense of $3 which is partially offset by increases in other costs.

Power Technologies



	Sales			Segment EBITDA			Segment EBITDA Margin
2014	$	1,052		$	154		14.6	%
Volume and mix	75			15
Performance	(10		)	2
Currency effects	(112		)	(22		)
2015	$	1,005		$	149		14.8	%

Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-highway markets. A weaker euro and Canadian dollar were the primary drivers of the reduced sales due to currency. Net of currency effects, sales in 2015 increased about 6% compared to 2014, principally from stronger market demand. Increases in year-over-year light vehicle engine build of 2% in North America and 5% in Europe were the primary drivers of the volume increase.

Segment EBITDA of $149 in 2015 was $5 lower than 2014, due principally to currency effects. The performance-related improvement in 2015 segment EBITDA was primarily driven by lower warranty expense of $7 and higher material cost savings of $6, partially offset by pricing actions which reduced segment earnings by $10.

Summary Consolidated Results of Operations (2014 versus 2013)



	2014					2013
	Dollars			% of Net Sales		Dollars			% of Net Sales		Increase/ (Decrease)
Net sales	$	6,617				$	6,769				$	(152	)
Cost of sales	5,672			85.7	%	5,849			86.4	%	(177		)
Gross margin	945			14.3	%	920			13.6	%	25
Selling, general and administrative expenses	411			6.2	%	410			6.1	%	1
Amortization of intangibles	42					74					(32		)
Restructuring charges, net	21					24					(3		)
Loss on disposal group held for sale	(80		)								(80		)
Pension settlement charges	(42		)								(42		)
Loss on extinguishment of debt	(19		)								(19		)
Other income, net	48					55					(7		)
Income from continuing operations before interest expense and income taxes	378					467					(89		)
Interest expense	118					99					19
Income from continuing operations before income taxes	260					368					(108		)
Income tax expense (benefit)	(70		)			119					(189		)
Equity in earnings of affiliates	13					12					1
Income from continuing operations	343					261					82
Loss from discontinued operations	(15		)			(1		)			(14		)
Net income	328					260					68
Less: Noncontrolling interests net income	9					16					(7		)
Net income attributable to the parent company	$	319				$	244				$	75

Sales — The following table shows changes in our sales by geographic region.



								Amount of Change Due To
	2014		2013		Increase/ (Decrease)			Currency Effects			Organic Change
North America	$	3,126	$	2,958	$	168		$	(15	)	$	183
Europe	1,978		1,994		(16		)	3			(19		)
South America	771		983		(212		)	(170		)	(42		)
Asia Pacific	742		834		(92		)	(31		)	(61		)
Total	$	6,617	$	6,769	$	(152	)	$	(213	)	$	61

Sales for 2014 declined $152 or 2% from 2013, with the primary driver being weaker international currencies. After adjusting to exclude currency effects, sales increased $61. Sales benefited by $65 from cost recovery pricing, while overall market volume and mix reduced sales by $4. Stronger sales volume in North America and Europe was more than offset by weaker demand in our global Off-Highway business and the South America medium/heavy truck market.

The 2014 sales increase of 6% in North America was driven primarily by stronger production levels in the light vehicle and medium/heavy vehicle markets. Light vehicle engine builds and full frame light truck production were both up about 6% and combined medium/heavy truck production was higher by about 17%. Partially offsetting these stronger volumes was lower demand in the off-highway markets.

Our sales in Europe in 2014 were generally flat with 2013, with currency movements having a nominal impact. Our Off-Highway segment has a significant European presence. The weaker demand in the markets served by this segment contributed to reduced sales of around $60. Largely offsetting the weaker off-highway demand were stronger production levels in the light vehicle market where light engine build was up 3% and light truck production was higher by about 7%. Our sales in Europe in 2014 also benefited from new Light Vehicle programs coming on line during the year.

South America sales in 2014 were significantly reduced by currency effects from a weaker Brazilian real and Argentine peso along with devaluation of the Venezuelan bolivar. Adjusted for currency effects, 2014 sales in South America were down

$42 or about 4%. Production levels were down in our light and commercial vehicle end markets – light truck production off 12%, light vehicle engine build down about 16% and medium/heavy truck production lower by 23%. Partially offsetting the effects of lower demand levels was cost recovery pricing for material and other cost inflation.

Asia Pacific sales were 11% lower than in 2013. Adverse currency effects resulted principally from a weakening of the Indian rupee, Thai baht, Australian dollar and Japanese yen. The organic sales reduction of 7% is primarily due to comparatively weaker economic environments in India and Thailand, along with reduced demand on a scheduled light vehicle program roll-off in Australia.

Cost of sales and gross margin — Cost of sales for 2014 was 3% lower than in 2013, with cost of sales as a percent of sales of 85.7% lower than the 86.4% realized in 2013. The reduction in cost is consistent with the decline in sales, due principally to weaker international currencies and slightly lower overall net sales volume. Cost of sales in 2014 was increased by higher material commodity costs of about $35, higher warranty expense of $14 and inflationary increases on other costs, principally in our South America and South Africa markets. More than offsetting these increases were the effects of continued supplier rationalization and engineering design actions, which contributed to material cost reductions of approximately $66, and reduced depreciation and amortization expense of $20.

Gross margin in 2014 of $945, which excludes pension settlement charges, increased $25 from 2013, representing 14.3% of sales – 70 basis points higher than the prior year's gross margin percentage of 13.6%. The gross margin improvement was attributable to the reduced cost of sales as a percent of sales discussed in the preceding paragraph.

Selling, general and administrative expenses (SG&A) — SG&A expenses in 2014 were $411 (6.2% of sales) as compared to $410 (6.1% of sales) in 2013. Salary and benefits expense in 2014 was approximately $7 less than in 2013, nearly offsetting an increase of $8 in selling expense and other discretionary spending.

Restructuring charges, net — Restructuring charges of $21 in 2014 primarily represented the impact of headcount reduction initiatives in our Commercial Vehicle and Light Vehicle businesses in South America and Europe, including the closure of our Commercial Vehicle foundry in Argentina and other severance and exit costs associated with previously announced initiatives. Restructuring charges of $24 in 2013 include the impact of headcount reduction initiatives, primarily in our Light Vehicle and Commercial Vehicle businesses in Argentina and Australia as well as in our Off-Highway business in Europe. Restructuring charges in 2013 also include severance and exit costs associated with previously announced initiatives, offset in part by a $10 reversal of previously accrued obligations. New customer programs and other developments in our Light Vehicle and Power Technologies businesses in North America and a decision by our Off-Highway business in Europe to in-source the manufacturing of certain parts were the primary factors leading to the reversal of previously accrued severance obligations.

Loss on disposal group held for sale — During the fourth quarter of 2014, we entered into an agreement to sell our operations in Venezuela. We completed the sale in January 2015. The divested business was determined to be held for sale at December 31, 2014, resulting in the recognition of a loss of $80 to reduce the assets and liabilities of this business to their fair value less cost to sell. Reference is made to Divestitures in this Item 7 and to Note 2 of the consolidated financial statements in Item 8 for additional disclosures regarding this transaction.

Pension settlement charges — We completed two actions in the fourth quarter of 2014 that reduced our pension plan obligations. Lump sum payments to deferred vested salaried participants in our U.S. pension plans under a voluntary program resulted in a settlement charge of $36, while completion of a wind-up of certain Canadian pension plans resulted in a charge of $6. See Note 10 of the consolidated financial statements in Item 8 for additional discussion of these two actions.

Loss on extinguishment of debt — In connection with a refinancing of long-term debt obligations in the fourth quarter of 2014, we recognized expense for the call premium incurred and the write-off of the unamortized financing costs associated with the extinguished obligations. See Note 12 of the consolidated financial statements in Item 8 for additional disclosure surrounding this debt refinancing.

Other income, net — The following table shows the major components of other income, net.



	2014			2013
Interest income	$	15		$	25
Government grants and incentives	4			3
Foreign exchange gain (loss)	11			(5		)
Strategic transaction expenses	(3		)	(4		)
Insurance and other recoveries	2			13
Gain on sale of marketable securities				9
Write-off of deferred financing costs				(4		)
Recognition of unrealized gain on payment-in-kind note receivable	2			5
Other	17			13
Other income, net	$	48		$	55

The change in interest income in 2014 includes a reduction of $11 attributable to a payment-in-kind note receivable being partially prepaid in 2013 and subsequently sold in January 2014. Additionally, interest income in 2013 included $3 from a favorable legal ruling related to recovery of gross receipts taxes paid in Brazil in earlier periods. Net foreign exchange gain in 2014 resulted in large part from favorable currency movement on an intercompany loan that was fully paid in the first half of 2014. As described in Note 1 of the consolidated financial statements in Item 8, devaluation of the Venezuelan bolivar was recognized through use of the SICAD rate for translating the bolivar-denominated activities of our operations in Venezuela. Devaluation charges of $20 in 2014 were more than offset by gains of $22 from subsequent settlement of dollar-denominated obligations at the more favorable official exchange rate and sales of U.S. dollars at the SICAD 2 exchange rate. The net foreign exchange loss for 2013 included a charge of $6 resulting from the devaluation of the Venezuelan bolivar and subsequent recoveries of $5 on transactions existing at the date of devaluation that were subsequently settled at the former exchange rate. See Note 17 of the consolidated financial statements in Item 8 for additional information. During 2013, we received $4 on the sale of our interest in claims pending in the liquidation proceedings of an insurer to a third party, $7 of other asbestos-related recoveries and a $2 insurance recovery related to business interruptions resulting from flooding in Thailand. During 2013, we wrote off deferred financing costs of $2 associated with our prior revolving credit facility and $2 upon the termination of our European accounts receivable backed credit facility. The January 2014 sale and 2013 prepayment of the payment-in-kind note receivable resulted in recognition of $2 and $5 of an unrealized gain that arose following the valuation of the note receivable below its callable value at emergence from bankruptcy.

Interest expense — Interest expense was $118 and $99 in 2014 and 2013. The impact of higher average debt levels was partially offset by a lower average effective interest rate. As discussed in Note 12 to the consolidated financial statements in Item 8, we completed the sale of $425 and $750 in senior unsecured notes in December 2014 and July 2013, respectively, and redeemed $345 in senior unsecured notes in December 2014. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 6.9% and 7.8% in 2014 and 2013.

Income tax expense (benefit) — Income taxes of our continuing operations was a benefit of $70 in 2014. The primary driver was a benefit of $179 recorded for the release of a portion of our U.S. deferred tax asset valuation allowance. As discussed more fully in Note 16 to our consolidated financial statements in Item 8, the release resulted from income forecasted to be realized in 2015 in connection with certain tax planning actions expected to be completed in 2015. The $80 charge associated with the divestiture of our operations in Venezuela provided a partial offset as the expected tax benefit was negated by an adjustment to the valuation allowance. Excluding these valuation allowance adjustments, the effective tax rate of continuing operations in 2014 was 33% as the benefit of income in certain jurisdictions outside the U.S. being taxed at lower statutory rates more than offset withholding taxes incurred in connection with the repatriation of income to the U.S. In 2013, tax expense of $119 resulted in an effective tax rate of 32%. Adjusted for valuation allowance effects, primarily in the U.S., the effective income tax rate in 2013 was 34%. Lower statutory rates outside the U.S. were the primary contributor to the adjusted 2013 rate being less than the U.S. statutory rate.

Equity in earnings of affiliates — Equity investments provided net earnings of $13 in 2014 and $12 in 2013. Our equity in earnings of Bendix Spicer Foundation Brake, LLC increased $2 in 2014 to $10 while our equity in earnings of Dongfeng Dana Axle Co., Ltd. (DDAC) decreased $2 in 2014 to $5.

Loss from discontinued operations — Loss from discontinued operations relates to our former Structural Products business. The loss in 2014 reflects the charges resulting from final settlement of the claims presented by the buyer of this business and the settlement of an outstanding legal matter relating to this business along with associated costs incurred during the year to achieve the settlements. See Note 2 to our consolidated financial statements in Item 8.

Segment Results of Operations (2014 versus 2013)

Light Vehicle



	Sales			Segment EBITDA			Segment EBITDA Margin
2013	$	2,549		$	242		9.5	%
Volume and mix	35			8
Performance	60			38
Venezuelan bolivar devaluation				(11		)
Currency effects	(148		)	(27		)
2014	$	2,496		$	250		10.0	%

Adverse currency effects in our Light Vehicle segment were attributable in large part to devaluation of the Venezuelan bolivar and a weaker Argentine peso, South African rand and Thai baht. Exclusive of currency effects, Light Vehicle sales for 2014 were 4% higher than in 2013. Volume and mix increased largely from stronger 2014 full frame light truck production in North America of 6% and increased light truck production in Europe of 7%, along with contributions from new program roll-outs. Partially offsetting these volume increases were lower demand levels in Thailand, India, Australia and Venezuela. Performance sales impact is primarily increased pricing to recover material, devaluation and inflationary costs in Argentina and Venezuela.

Light Vehicle segment EBITDA of $250 was $8 higher than in 2013, with EBITDA margin of 10.0% in 2014 increased from a margin of 9.5% in the prior year. As more fully discussed in Note 1 of the consolidated financial statements in Item 8, in the first quarter of 2014, we recorded a charge of $17 for devaluation of the bolivar as a result of using the SICAD exchange rate rather than the official exchange rate for translating the financial results of our Venezuelan operations. Further devaluation of the SICAD rate in 2014 resulted in additional charges of $3. Partially offsetting these devaluation effects were gains of $8 on approved CENCOEX settlements of U.S. dollar obligations at the official exchange rate of 6.3 bolivars per dollar. The 2013 results of this segment included a first-quarter charge of $6 for devaluation of the bolivar official exchange rate of 4.3 bolivars per U.S. dollar to 6.3. Subsequent settlement in 2013 of U.S. dollar obligations at an official rate of 4.3 provided gains of $5. The net impacts of these devaluation-related items were net charges of $12 in 2014 and $1 in 2013. Adversely impacting currency effects is about $34 for translating full year 2014 bolivar-denominated activities at the devalued SICAD rate. Partially offsetting this translation impact were gains of $14 from 2014 sales of U.S. dollars in the SICAD 2 market at an average of 49.9 bolivars per dollar.

Increased performance-related segment EBITDA in 2014 is attributable in large part to pricing, primarily to recover inflationary cost increases of about $45 in Argentina and Venezuela. Segment EBITDA also benefited from additional year-over-year material cost savings of $24 and lower warranty expense of $6. Partially offsetting these factors were increased material commodity costs of $14 and engineering and development cost of $10, with the remaining difference resulting primarily from cost reduction actions.

Commercial Vehicle



	Sales			Segment EBITDA			Segment EBITDA Margin
2013	$	1,860		$	194		10.4	%
Volume and mix	20			3
Performance	7			(22		)
Currency effects	(49		)	(3		)
2014	$	1,838		$	172		9.4	%

Reduced sales resulting from currency effects in our Commercial Vehicle segment were due primarily to a weaker Brazilian real. After adjusting for the effects of currency, sales in our Commercial Vehicle segment in 2014 were up about 2% from the previous year. Increases in Class 8 and medium truck production in North America of 21% and 12% were the primary drivers of the volume-related sales increase. This was largely offset, however, by the effects of a reduction of about 23% in medium/heavy truck production in South America where we have a significant commercial vehicle market presence.

Commercial Vehicle segment EBITDA in 2014 of $172 was $22 lower than in 2013, with EBITDA margin of 9.4% for 2014 being down from the 10.4% realized in 2013. Segment EBITDA in 2014 was adversely impacted by about $11 of increased cost from supply chain inefficiencies associated with the transition to new suppliers and increased warranty expense of $8. Material commodity cost increases affecting this business approximated $17, with material cost savings of $10 and net pricing improvement of $7 providing improved EBITDA.

Off-Highway



	Sales			Segment EBITDA			Segment EBITDA Margin
2013	$	1,330		$	163		12.3	%
Volume and mix	(101		)	(10		)
Performance	2			17
Currency effects				(1		)
2014	$	1,231		$	169		13.7	%

Sales in our Off-Highway segment were down about 7% from 2013. The reduction was due principally to lower demand levels, with global agriculture and construction/mining segment vehicle production in 2014 being down about 8%.

Off-Highway segment EBITDA of $169 was $6 higher than in 2013, resulting in an EBITDA margin of 13.7% in 2014 compared to 12.3% in 2013. Performance improvement was driven by material cost savings of about $22 and pricing improvement of $2 which more than offset a $4 increase in warranty cost and $3 of other cost increases.

Power Technologies



	Sales			Segment EBITDA			Segment EBITDA Margin
2013	$	1,030		$	150		14.6	%
Volume and mix	42			11
Performance	(4		)	(3		)
Currency effects	(16		)	(4		)
2014	$	1,052		$	154		14.6	%

Power Technologies primarily serves the light vehicle market, but also sells product to the medium/heavy truck and off-highway markets. Sales in 2014, net of currency effects, were up 4%. Sales volumes benefited from stronger global light vehicle engine production of 3% and increased medium/heavy truck production levels in North America.

The Power Technologies 2014 segment EBITDA of $154 increased by $4 from 2013. Performance-related impacts on segment EBITDA in 2014 included an increase in warranty cost of $7, lower pricing of $4 and increased material commodity costs of $2. Partially offsetting these factors were material cost savings of $9 and benefits from other cost reduction actions.

Non-GAAP Financial Measures

Adjusted EBITDA

We have defined adjusted EBITDA as earnings from continuing and discontinued operations before interest, taxes, depreciation, amortization, equity grant expense, restructuring expense and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements or divestitures, impairment, etc.). Adjusted EBITDA is a primary driver of cash flows from operations and a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. Adjusted EBITDA should not be considered a substitute for income before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of segment EBITDA and adjusted EBITDA to net income.



	2015			2014			2013
Segment EBITDA
Light Vehicle	$	262		$	250		$	242
Commercial Vehicle	100			172			194
Off-Highway	147			169			163
Power Technologies	149			154			150
Total Segment EBITDA	658			745			749
Corporate expense and other items, net	(6		)	1			(2		)
Structures EBITDA							(2		)
Adjusted EBITDA	652			746			745
Depreciation and amortization	(174		)	(213		)	(262		)
Restructuring	(15		)	(21		)	(24		)
Interest expense, net	(100		)	(103		)	(74		)
Structures EBITDA							2
Other*	(71		)	(149		)	(19		)
Income from continuing operations before income taxes	292			260			368
Income tax expense (benefit)	82			(70		)	119
Equity in earnings (losses) of affiliates	(34		)	13			12
Income from continuing operations	176			343