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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

For the Fiscal Year Ended December 31, 2003

Commission file number 1-1063

Dana Corporation

Registrant’s telephone number, including area code

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

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

     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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.     o

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

     The aggregate market value of the voting stock held by non-affiliates of the registrant at February 20, 2004, was approximately $3,173,000,000.

      There were 148,773,035 shares of registrant’s common stock, $1 par value, outstanding at February 20, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

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TABLE OF CONTENTS

DANA CORPORATION — FORM 10-K

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PART I

(Dollars in millions, except per share amounts)

      Dana Corporation is one of the world’s largest independent suppliers of modules, systems and components for light, commercial and off-highway vehicle original equipment (OE) manufacturers globally and for related OE service customers. Our products are used in passenger cars and vans, sport-utility vehicles (SUVs), light, medium and heavy trucks and a wide range of off-highway vehicles. From our introduction of the automotive universal joint in 1904 to the development of high-performance products for the 21st century, we have been a leader in technological innovation. Many of our products have unique and patented features that provide added value to our customers. We are also highly focused on product quality, delivery and service, as evidenced by our numerous supplier quality awards. As a result, we have developed successful long-standing business relationships with thousands of customers worldwide.

      In addition, Dana has been the third largest North American aftermarket supplier. Nearly all of our aftermarket operations have been conducted through our Automotive Aftermarket Group (AAG). In December 2003, we announced our intention to sell substantially all of the AAG. That portion of the AAG intended for sale has been presented in our financial statements as a discontinued operation. The remaining portion of the AAG, which distributes engine hard parts, has become a part of our engine and fluid management operations. Our commercial vehicle and off-highway aftermarket activities are unaffected by the December announcement.

      Our continuing operations are organized into the following market-focused strategic business units (SBUs):

      For nearly two decades, we were a leading provider of lease financing services in selected markets through our wholly owned subsidiary, Dana Credit Corporation (DCC). However, in October 2001, we determined that the sale of DCC’s businesses would enable us to more sharply focus on our core businesses. During 2002 and 2003, we sold portions of DCC, bringing the total reduction in portfolio assets since we made the decision to exit this business to $850. This has reduced total portfolio assets to approximately $1,350 from $2,200 at the end of 2001. While some key pieces of DCC will be retained within Dana, significant assets remain for sale. During 2004, we will continue our effort to maximize the value of these assets to Dana and its shareholders.

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      The above description reflects our SBU structure at the end of 2003. Several changes were made to the SBUs during 2003, the most significant of which relate to the planned divestiture of substantially all of the AAG. Due to this announcement, the AAG is no longer reported as a business segment in our Business Segment footnote table.

Strategy

      Our overall strategic direction is set out in our Transformation 2005 business plan. Our goals under this plan represent an increased emphasis on anticipating the needs of our markets and serving our customers. The following are key elements of our plan:

      Focus and Expand Core Businesses. We believe that our core businesses are the key to the long-term profitable growth of our company. These core businesses focus on the development, design and manufacture of our core products: axles, driveshafts, structures, fluid systems and bearing and sealing products. These businesses have leading market positions and brand equity and provide our customers with value-added solutions and products.

      Our OE customers continue to target improved asset utilization, speed to market, lower cost, lower investment risk, and greater flexibility and to look for outsourcing alternatives. We expect that our global presence and technological and engineering capabilities, as well as our experience, scale of operations and long-standing relationships with major OE customers, will enable us to continue to take advantage of this opportunity. We project net new business, based on our review of our customers’ production estimates, will add more than $400 to our sales revenue in 2004. The new business is not only with our traditional U.S.-based OE customers, but also with OEs such as BMW, Isuzu, Nissan and Toyota.

      Focus on Capital and Operating Efficiency. In 2003, we continued to focus on opportunities to optimize our resources and reduce manufacturing costs and undertook initiatives to maximize our return on invested capital and to improve cash flow. One example of this improved efficiency is the integration of our formerly separate global light axle and driveshaft divisional headquarters and engineering operations into the new Automotive Systems Group Technology Center, located in Maumee, Ohio. This center has enabled us to better leverage the combined manufacturing, engineering and support capabilities of these units, fostering technology sharing, accelerating the development of world-class driveline systems and modules, and helping Dana respond more quickly and effectively to marketplace demands. On the operational side, we continued our efforts to outsource non-core manufacturing activity, as evidenced by the transfer of more than $140 annually in non-strategic axle component manufacturing to our Mexican partner, Spicer S.A. Additionally, we continued our efforts to reduce working capital and manage for cash.

      Evaluate Strategic Alliances, Joint Ventures and Selected Divestiture and Acquisition Opportunities. Among the keys to our business plan is the concept of capitalizing on strategic alliances and joint ventures. Such relationships offer opportunities to expand our capabilities with a reduced level of investment and enhance our ability to provide the full scope of services required by our customers. We have a number of strategic alliances and joint ventures, including our Roadranger^TM marketing program with Eaton Corporation and programs with GETRAG Cie, to strengthen our portfolio of advanced axle technologies; Chassis Systems Limited, a joint venture with GKN to supply vehicular frames to Land Rover and a joint venture with Emerson Electric Co. to develop and produce a series of actuator products and related components for the global electric steering market.

      In 2003, we expanded our existing partnership with GETRAG to encompass a joint venture with Volvo Car Corporation to produce all-wheel-drive and chassis systems and components for passenger cars and sport utility vehicles.

      Our divestiture activities in 2003 are described elsewhere in this report. In 2004, we will continue to evaluate remaining non-core operations for divestiture. We will also evaluate potential acquisition candidates that have product platforms complementary to our core OE businesses, strong operating potential

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2003 Overview

      Improved performance best characterizes 2003 compared to 2002. Net income for the year ended December 31, 2003 increased by over $400 to $222 from a year earlier loss of $182. Net income in 2002 was adversely impacted by a $220 effect of a change in accounting for goodwill. Income from continuing operations increased by nearly $170 in 2003.

      These performance improvements were linked in large part to the restructuring actions taken subsequent to the announcement of our restructuring program in December 2001. By the end of 2002 we had incurred nearly all of the charges associated with this program and many of the actions related to the announcements have been completed. The completion of such actions has enabled us to reduce costs.

      Closely related to our restructuring actions has been the focus given to business components considered core to our strategy. Significant progress in divesting non-core business components has been made in 2003 and 2002. The sale of the engine management business highlighted our 2003 divestiture activity. In December 2003, we announced our intention to sell substantially all of the AAG. When completed, this transaction will represent the largest divestiture in our history.

Restructuring

      In October 2001, we announced plans to accelerate the restructuring of our operations, to evaluate at least 30 facilities for closure and to reduce our workforce globally by more than 15%. As of December 31, 2003, we had closed or consolidated 35 of the 39 facilities selected for closure. When completed, these actions will have reduced our workforce — at all levels of the organization — by approximately 17% since October of 2001. The after-tax charges recorded in connection with this restructuring totaled approximately $442. We also sold portions of our Dana Credit Corporation (DCC) leasing operation, as described above.

Geographic Areas

      We maintain administrative organizations in four regions — North America, Europe, South America and Asia Pacific — to facilitate financial and statutory reporting and tax compliance on a worldwide basis and to support our SBUs. Our operations are located in the following countries (shown by the regions in which we administer them):

      Our non-U.S. subsidiaries and affiliates manufacture and sell a number of products similar to those we produce in the U.S. In addition to normal business risks, 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.

      Consolidated non-U.S. sales were $3,176, or 40% of our 2003 consolidated sales. Including U.S. exports of $397, non-U.S. sales accounted for 45% of 2003 consolidated sales. Our non-U.S. net

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      You can find more information about our regional operating results in “Note 22. Business Segments” on pages 74 — 80 of this annual report on Form 10-K.

Customer Dependence

      We have thousands of customers around the world and have developed long-standing business relationships with many of them. Ford and DaimlerChrysler were the only individual customers accounting for 10% or more of our consolidated sales in 2003. We have been supplying products to these companies and their subsidiaries for many years. As a percentage of total sales, sales to Ford were 27%, 26% and 26% in 2003, 2002 and 2001, and sales to DaimlerChrysler were 10%, 14% and 14%. Loss of all or a substantial portion of our sales to Ford, DaimlerChrysler or other large volume customers would have a significant adverse effect on our financial results until such lost sales volume could be replaced. There would be no assurance, in such event, that the lost volume would be replaced.

      Ford, DaimlerChrysler and some of our other customers periodically ask us to reduce the prices of our products. We discuss cost saving measures with these customers on an ongoing basis. In light of these requests, we cannot assure that we will be able to maintain or improve our historical levels of profitability.

Products

      The following table presents the relative sales of our continuing operations by core product for the last three years:

      We do not consider our leasing service revenue to be sales and none of our other products individually accounted for 10% of sales in these periods.

Material Source and Supply

      Our operating units purchase most of the raw materials (such as steel) and semi-processed or finished items (such as forgings and castings) used in our products from suppliers located within the same geographic regions. Generally, these materials are available from numerous qualified sources in quantities sufficient for our needs. Temporary shortages of a particular material or part occasionally occur, but we do not consider the overall availability of materials to be a significant risk factor for our operations.

      A number of our steel suppliers implemented a price surcharge during the fourth quarter of 2003. Because this is a recent development, we have been unable to project the duration of these price surcharges or estimate the impact on our future results of operations.

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Seasonality

      Our businesses are not seasonal. However, sales to our OE manufacturing (OEMs) customers are closely related to their production schedules and historically those schedules have been strongest in the first two quarters of the year.

Backlog

      Generally, our products are not on a backlog status. They are produced from readily available materials and have a relatively short manufacturing cycle. Each operating unit maintains its own inventories and production schedules and some of our products are available from more than one facility.

Competition

      Within each of our continuing operating segments, we compete with a variety of independent suppliers and distributors, as well as the in-house operations of certain OEMs. We compete primarily on the basis of product quality, technology, cost, delivery and service.

      A summary by operating segment is set forth below:

      Automotive Systems Group — We are one of the primary independent suppliers in torque and traction technologies (axles, driveshafts, and drivelines), structural solutions (frames) and system integration technologies (including advanced modularity concepts and systems). Our primary competitors include American Axle, in-house operations of DaimlerChrysler, GKN, Magna, Tower Automotive, ThyssenKrupp, Visteon and ZF Group.

      Engine and Fluid Management Group — We are one of the leading independent suppliers of sealing systems (gaskets and cam covers), thermal management (thermal acoustical shields, heat exchangers, and small radiators), fluid transfer (fuel rails, brake lines and HVAC routing) and power products (piston rings and engine bearings). On a global basis, our primary competitors in sealing systems are ElringKlinger, Federal Mogul and Freudenberg NOK. Competitors in thermal management include Behr, Delphi, Modine and Valeo. On the fluid transfer side of the business, we compete against companies such as Delphi, Eaton, Valeo and Visteon. Primary competitors on the power products side of the business include Federal Mogul and Mahle.

      Heavy Vehicle Technologies and Systems Group — We are one of the primary independent suppliers of axles, driveshafts and brakes for both the medium and heavy truck markets, as well as various off-highway segments. With regard to the off-highway markets specifically, we also specialize in the manufacturing of transmissions. Our primary competition in North America includes ArvinMeritor in the heavy and medium markets and Hendrickson in the trailer market. Other major competitors in Europe include OEM vertically integrated operations in the heavy truck markets, as well as Carraro, ZF Group and OEM vertically integrated operations in the off-highway markets.

Patents and Trademarks

      Our proprietary drivetrain, engine parts, chassis, structural components, fluid power systems and industrial power transmission 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 which 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. Because we are involved with many product lines, the loss or expiration of any particular patent would not materially affect our sales and profits.

      We own or have licensed numerous trademarks which are registered in many countries, enabling us to market our products worldwide. Our Spicer®, Victor Reinz®, Wix®, Clevite®, Glacier® and Vandervell® trademarks, among others, are widely recognized in their respective industries.

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Research and Development

      Our objective is to be a leader in offering superior quality, technologically advanced products to our customers at 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.

      In addition, we engage in ongoing engineering, research and development activities to improve the reliability, performance and cost-effectiveness of our existing products and to design and develop disruptive products for existing and 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. One example of locations where these efforts are being integrated is our new ASG Technology Center that opened in late 2003. At December 31, 2003, our SBUs had the following number of technical centers: ASG, 20; EFMG, 17 and HVTSG, 4. Our spending on engineering, research and development and quality control programs was $252 in 2003, $248 in 2002 and $260 in 2001.

Employment

      Our worldwide employment (including consolidated subsidiaries) was approximately 59,000 at December 31, 2003, including approximately 14,000 associated with our discontinuing operations. This represents a 16% reduction from the number of people reported at the end of 2001, which is attributable to our restructuring activities and divestitures. We expect further reductions in 2004 as we complete the four final facility closures and the planned divestiture of substantially all of our Automotive Aftermarket businesses.

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 was not a material part of our capital expenditures and did not have a material adverse effect on our earnings or competitive position in 2003. We do not anticipate that future environmental compliance costs will be material. You can find more information in “Environmental Compliance and Remediation” under “Note 1. Summary of Significant Accounting Policies” on page 45 and under “Note 18. Commitments and Contingencies” on pages 68 through 71 of this annual report on Form 10-K.

Available Information

      We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Internet address is http://www.dana.com.

Executive Officers

      The following table contains information about our current executive officers and their positions. All positions are with Dana unless otherwise indicated. Messrs. Carroll, Cole, Franklin and Richter are mem-

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      In addition, Michael J. Burns has been named as Dana’s Chief Executive Officer and President and as a director effective March 1, 2004. Mr. Burns, age 51, has been President of General Motors Europe since 1998.

      William J. Carroll has been Acting President and Chief Operating Officer since September 23, 2003, and President — Automotive Systems Group and Chairman of DTF Trucking, Inc. since 1997. He will retire from Dana effective March 1, 2004.

      Bernard N. Cole has been President — Heavy Vehicle Technologies and Systems Group since 2002. He was previously President — Off-Highway Systems Group (1997-2002) and President — Commercial Vehicle Systems (2002). He has been Chairman of Dana India Pvt. Ltd. since 2001.

      Marvin A. Franklin, III has been President — Dana International & Global Initiatives since 2000. He was previously President — Dana International (1997-2000).

      Charles F. Heine has been President — Technology Development and Diversified Products since 2001. He was previously President — Engine Systems Group (1998-2001).

      James M. Laisure has been President — Engine and Fluid Management Group since 2001. He was previously President — Fluid Systems Group (2000-2001), Group Vice President — Fluid Systems Group (1999-2000) and Vice President — Modules and Systems Group (1996-1999).

      Terry R. McCormack has been President — Automotive Aftermarket Group since 2000. He was previously President — Wix Worldwide Filtration (2000) and Vice President and General Manager for Wix Division, North America (1998-2000).

      Robert C. Richter has been Vice President and Chief Financial Officer of Dana since 1999 and Chairman of Dana Credit Corporation since 2002.

      Richard J. Westerheide has been Chief Accounting Officer and Assistant Treasurer since 2002. He was previously Group Controller — Engine Management Group (2000-2002) and, for Dana Credit Corporation, Vice President — Finance (2000) and Director of Accounting Policy and Financial Reporting (1998-2000).

      Some of the above officers are appointed by the Board annually at its organizational meeting, as provided in our By-Laws, and hold office until their successors are appointed or their earlier death, retirement, resignation or removal. Others are appointed by the Board or designated by the Chief Executive Officer from time to time and serve, as applicable, at the pleasure of the Board or the CEO.

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      As shown in the following table, at December 31, 2003, our continuing operations had 251 manufacturing, distribution and service branch or office facilities worldwide. We own the majority of our manufacturing and larger distribution facilities. We lease certain manufacturing facilities and most of our smaller distribution outlets and financial service branches and offices.

Dana Facilities by Geographic Region

      We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. After reviewing the proceedings that are currently pending (including the probable outcomes, reasonably anticipated costs and expenses, availability and limits of our insurance coverage, 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.

      Environmental Proceedings. In our reports for the quarterly periods ended June 30, 2003, and September 30, 2003, we discussed an environmental matter in which the U.S. Department of Justice (DOJ) had proposed a consent decree and a $0.7 fine in connection with alleged violations of the U.S. Clean Water Act at our facility at Harvey Street, Muskegon, Michigan. We have submitted a proposal to the DOJ to undertake certain supplemental environmental projects to reduce or offset the amount of the proposed fine. The DOJ is reviewing our proposal and the matter is pending.

      In addition, we reported in our annual report for the year ended December 31, 2002, an environmental proceeding involving our plant at Sanford Street in Muskegon, Michigan. That facility had received a notice of an enforcement action and a proposed consent order from the Michigan Department of Environmental Quality (MDEQ) alleging various air permit and rule violations. The alleged violations related to smoke and odor complaints from neighbors, failure to have permits for the installation of certain engine test cells and noncompliance with certain record keeping requirements. Negotiations with the MDEQ resulted in a final consent order with a fine of $0.1. The MDEQ released this order for public comment in December 2002, and the matter is pending.

      Litigation. In our reports for the quarterly periods ended June 30, 2003, and September 30, 2003, we also discussed a number of lawsuits that had been filed in various courts in connection with the $15.00 per share cash tender offer for all of the outstanding shares of our common stock that was commenced by Delta Acquisition Corp. (the Offeror), a subsidiary of ArvinMeritor, Inc. (ArvinMeritor), on July 9, 2003, and raised to $18.00 per share on November 17, 2003 (the Offer). The Offer was withdrawn on November 23, 2003, and we are updating the information in those reports as follows.

      Following the withdrawal of the Offer, the parties reached an agreement to dismiss the two actions brought by ArvinMeritor and the Offeror against Dana and its directors in Virginia and the action brought by Dana against ArvinMeritor in Ohio. These three lawsuits remain pending, awaiting the execution and filing of stipulated dismissals.

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      The two purported shareholder actions brought in Virginia against Dana and its directors (In re Dana Corporation Shareholder Litigation and Kincheloe v. Dana Corp., et al.) remain pending. We do not expect any material developments in these lawsuits in the future.

      Dana’s action against UBS Securities LLC and UBS A.G. in New York was settled in the fourth quarter of 2003.

      You can find more information about our legal proceedings under “Note 18. Commitments and Contingencies” on pages 68 — 71 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 13 — 35 of this annual report on Form 10-K.

      - -None-

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PART II

      Our common stock is listed on the New York Stock Exchange and the Pacific Exchange. On February 20, 2004, there were approximately 37,000 shareholders of record.

      We have paid quarterly cash dividends on our common stock since 1942. Information regarding the quarterly ranges of our stock price and dividends declared and paid during 2003 and 2002 is presented in the following table.

      The following table sets forth selected financial information for our company. The financial information for the years ended December 31, 2003, 2002 and 2001 and as of December 31, 2003 and 2002 has been derived from our audited consolidated financial statements included elsewhere in this report. The financial information for the years ended 2000, 1999, 1998 and 1997, and as of December 31, 2001, 2000, 1999, 1998 and 1997 has been derived from our audited consolidated financial statements not included in this report. The financial information for the years ended December 31, 1997 through 2002 has been reclassified to reflect substantially all of our Automotive Aftermarket Group as a discontinued operation based on our decision in the fourth quarter of 2003 to sell those operations. We adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002. SFAS No. 142 does not provide for restatement of prior periods; however, we have provided the after-tax amount of goodwill amortization and adjusted net income (loss) for the years 1997 through 2001 in the table.

      The historical selected financial information may not be representative of our future performance and should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included in Items 7 and 8, respectively.

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      SFAS No. 142, “Goodwill and Other Intangible Assets,” which we adopted effective January 1, 2002, does not provide for restatement of prior periods. The amounts below present the amount of goodwill amortization, net of the related income benefits, included in reported net income (loss) and pro forma net income (loss) as if SFAS No. 142 had been adopted prior to the earliest year presented.

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Dollars in millions

Overview

Strategic Actions

      During the past year, we made significant moves to sharpen the strategic focus of our business on the light vehicle, commercial vehicle and off-highway original equipment marketplace.

Divestitures

      A number of businesses that we deemed non-strategic were divested in 2002 and 2003. In June 2003, we completed the sale of our Engine Management aftermarket business with annual sales of approximately $300. More recently, in December 2003, we announced plans to divest substantially all of our Automotive Aftermarket Group, which had sales of more than $2,000 in 2003 and employed approximately 14,000 people. These businesses are now classified as discontinued operations in our financial statements. Upon completion of the divestiture of the Automotive Aftermarket business, when combined with the other divestitures closed during the last three years, we will have divested businesses that previously reported annual sales of more than $3,000.

      Additionally, in 2001 we commenced the divestiture of a major portion of our leasing operation, Dana Credit Corporation (DCC). To date, divestitures and normal run-off have reduced DCC’s portfolio assets by approximately $850; we expect continued asset dispositions over the next few years.

Outsourcing Non-Core Manufacturing

      Within our core businesses, we have looked closely at the manufacturing processes that are key to the product technology and service value package we supply our customers. In this regard, we have divested non-core product manufacturing to third parties or, in some cases, transferred such manufacturing to our international affiliates who consider it core to their business.

Strategic Partnerships

      Strategic alliances continue to be an important component of our strategy, either in supporting our global expansion, enhancing our technology or improving our cost competitiveness. During 2003, we signed a new joint venture agreement with GETRAG (one of our European partners) and Volvo Car Corporation to produce all-wheel-drive systems in Europe, and we announced plans to form a joint venture with Dongfeng to develop and produce commercial vehicle axles in China.

      Another important strategic partnership entered this past year was our agreement with the United Auto Workers. This agreement established collective bargaining and representation principles governing our automotive assembly and manufacturing facilities in the United States that serve DaimlerChrysler AG, Ford Motor Company and General Motors Corporation. The cooperative approach embodied in this agreement is expected to contribute to our business growth, improve our productivity and enhance our operational cost efficiency.

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Market Outlook

      Our industry is prone to fluctuations in demand over the business cycle. Production levels in our key markets for the past three years, along with Dana’s outlook for 2004, are shown below.

      North American light duty production levels have been relatively stable the past few years. A significant development in this market since 2001 has been the increased use of incentives by our customers to stimulate and maintain demand levels. Reasonable levels of vehicle inventories at the end of 2003 and generally positive trends in key macroeconomic indicators suggest stronger overall production in 2004.

      A challenge that we and others in the light vehicle market face is the continued price reduction pressure from our customers. Our largest customers in this market — the U.S.-based original equipment manufacturers — have experienced market share erosion to other international light vehicle manufacturers over the past few years, thereby putting additional pressure on their profitability. To the extent this trend continues, we expect the price reduction demands to continue. Our restructuring, divestitures and outsourcing initiatives have helped position us for this increasingly competitive landscape. Ongoing cost reduction programs, like our lean manufacturing and six sigma blackbelt programs, will continue to be important to sustaining and improving our margins.

      The commercial vehicle market has been at the bottom of its business cycle during the past two years. Orders in both the medium and heavy-duty North American markets have been strengthening in recent months with inventories remaining stable. Consequently, the recovery in these markets appears to be underway, supporting our improved production outlook for 2004.

      In our other markets — off highway, European commercial vehicles and light vehicles in the Asia Pacific and South American regions — we expect either stable or improving production demand in 2004.

Other Key Factors

      In our markets, concentration of business with certain customers is common, so our efforts to achieve additional diversification are important. In the light vehicle market, we have been successful in gaining new business with several international manufacturers over the past few years. We expect greater customer diversity as more of this business comes on stream and we gain additional business with these customers.

      Broadening our global presence will also be increasingly important in the months ahead. Global sourcing presents opportunities to improve our competitive cost position, as well as take advantage of higher expected growth in emerging markets such as China and India. A number of our steel suppliers implemented a price surcharge during the fourth quarter of 2003. Because this is a recent development, we have been unable to project the duration of these price surcharges or estimate the impact on our future results of operations.

      Another key factor in our future success is technology. We are continuing to invest in advanced product and process technologies as we believe that they, as much as any factor, are critical to improving our competitive position and profitability. In keeping with these efforts, our recent moves to focus even

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New Business

      In the OE vehicular business, new programs are generally awarded to suppliers well in advance of the expected start of production. The amount of lead time varies based on the nature of the product, size of the program and required start-up investment. The awarding of new business often coincides with model changes on the part of vehicle manufacturers. Given the cost and service concerns associated with changing suppliers, we expect to retain any awarded business over the vehicle life, which is typically several years.

      During 2003, more than $400 of our sales increase resulted from the addition of net new business — new business in excess of lost business. As of December 31, 2003, we expected net new business to contribute a minimum of $400 to our 2004 sales. Beyond 2004, based on business already awarded or lost, we expect net new business contributions through 2009.

Summary

      Over the last three years, we have repositioned the organization — through divestitures, restructuring, outsourcing and strategic partnerships — to be more strategically focused and more competitive. In the process, we have downsized from a company with sales in excess of $13,000 (before adjustments to reflect discontinued businesses) to a company with 2003 sales of just under $8,000 reported by our continuing operations. At the same time, we have improved our overall profitability and financial position. With a more focused strategy and improved financial situation, we are better positioned to grow the business in our core markets.

Liquidity and Capital Resources

Cash Flows (2003 versus 2002)

      For a number of reasons, the substantial increase in net income did not translate into stronger operating cash flow in 2003 when compared to 2002. After considering the non-cash nature of the effect of changing our method of accounting for goodwill in 2002, our earnings improvement was limited to $184. Depreciation and amortization declined in 2003, the result of tightened capital spend and significant divestitures during the last three years. Deferred tax benefits negatively impacted cash from operations again in 2003, but the $35 adjustment compares favorably with the amount added back in 2002. The amount by which equity earnings exceeded dividends received from our equity affiliates increased slightly in

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      Control over capital spending remained tight in 2003. While less than half the amount spent in 2000, the 2003 outlays for machinery and equipment were more in line with the operations that remain after major divestitures and outsourcing initiatives. Expenditures have been focused on opportunities to leverage technology and support new customer programs. We expect to see capital spending in 2004 increase to levels approximating depreciation expense.

      Divestiture activities were limited in 2003 in terms of proceeds received, but those proceeds were supplemented by the cash generated on asset sales, many of which were related to consolidation or outsourcing efforts. Within our leasing operations, we continued to make progress on reducing the lease investment portfolio. Overall, we generated more than $200 in connection with our net investing activities.