UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2006

Dana Corporation

Virginia		34-4361040
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
4500 Dorr Street, Toledo, Ohio		43615
(Address of principal executive offices)		(Zip Code)

(419) 535-4500

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer: þ

Accelerated filer: o

Non-accelerated filer: o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at July 21, 2006
Common stock, $1 par value		150,374,968

 

 

DANA CORPORATION — FORM 10-Q
FOR THE QUARTERLY AND YEAR-TO-DATE PERIODS
ENDED JUNE 30, 2006

Table of Contents

				10-Q
				Pages
Cover					1
Table of Contents					2
Forward-Looking Information					3
PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements			4
		Condensed Consolidated Statement of Operations (Unaudited) Three and Six Months Ended June 30, 2006 and 2005			4
		Condensed Consolidated Balance Sheet (Unaudited) June 30, 2006 and December 31, 2005			5
		Condensed Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30, 2006 and 2005			6
		Notes to Condensed Consolidated Financial Statements			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			54
Item 4.		Controls and Procedures			54
PART II — OTHER INFORMATION
Item 1.		Legal Proceedings			55
Item 1A.		Risk Factors			56
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 6.		Exhibits			56
Signatures					57
Exhibit Index					58
EX-10.Y
EX-10.Z
EX-31.A
EX-31.B
EX-32

FORWARD-LOOKING INFORMATION

Statements in this report that are not entirely historical constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forwarding-looking statements are indicated by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “estimates,” “projects” and similar expressions. These statements represent our present expectations based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those we currently anticipate or project due to a number of factors, including those discussed elsewhere in this report, the risk factors included in our Form 10-K for the year ended December 31, 2005 and the following:

•		The reorganization of Dana Corporation and forty of its wholly-owned domestic subsidiaries under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code), which may have adverse consequences for Dana and our stakeholders and may or may not be successful;
•		The cyclical nature of the vehicular markets we serve, particularly the heavy-duty commercial vehicle market;
•		Changes in national and international economic conditions that affect our markets, such as increased fuel prices and legislation regulating vehicle emissions;
•		Increases in the cost of certain of our commodities (including steel, other raw materials and energy) that we cannot recoup in our product pricing;
•		Price reduction pressures from our customers;
•		Changes in business relationships with our major customers and in the timing, size and duration of their various programs;
•		Competitive pressures on our sales from other vehicle component suppliers;
•		Potential bankruptcy or consolidation of our key customers or suppliers;
•		The ability of our customers to maintain their market positions and achieve their projected sales and production levels;
•		Changes in the competitive environment in our markets due, in part, to outsourcing and consolidation by our customers;
•		Our ability to complete our previously announced strategic actions as contemplated, including the divestiture of our non-core engine hard parts, fluid products and pump products businesses; the operational restructuring in our Automotive Systems Group; and the establishment of a joint venture with Dongfeng Motor Co., Ltd. (Dongfeng) in China;
•		The ability of our suppliers to maintain their projected production levels and furnish critical components for our products, as well as other necessary goods and services;
•		Our success in implementing our cost-savings, lean manufacturing and VA/VE (value added/value engineering) programs;
•		The strength of the U.S. dollar relative to other currencies in which we transact business;
•		Potential adverse effects on our operations and business resulting from terrorism or hostilities; and
•		Potential adverse effects that could result from enactment of proposed U.S. federal legislation relating to asbestos personal injury claims.

While we continue our reorganization under Chapter 11, investments in our securities will be highly speculative. Although shares of our common stock continue to trade on the Over The Counter Bulletin Board under the symbol “DCNAQ,” the trading prices of the shares may have little or no relationship to the actual recovery, if any, by the holders under any eventual court-approved reorganization plan. The opportunity for any recovery by holders of our common stock under such reorganization plan is uncertain and shares of our common stock may be cancelled without any compensation pursuant to such plan.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DANA CORPORATION

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Net sales		$	2,300			$	2,297			$	4,497			$	4,446
Costs and expenses
Cost of sales			2,157				2,139				4,250				4,161
Selling, general and administrative expenses			120				119				239				237
Other income, net			(38	)			(20	)			(55	)			(53	)
Income from continuing operations before interest, reorganization items and income taxes			61				59				63				101
Interest expense (contractual interest of $53 and $100 for the three and six months ended June 30, 2006)			26				40				65				82
Reorganization items, net			34				—				89				—
Income (loss) before income taxes			1				19				(91	)			19
Income tax benefit (expense)			(36	)			(4	)			(58	)			2
Minority interests			(2	)			(2	)			(3	)			(5	)
Equity in earnings of affiliates			6				13				16				21
Income (loss) from continuing operations			(31	)			26				(136	)			37
Income (loss) from discontinued operations			3				4				(18	)			5
Income (loss) before effect of change in accounting			(28	)			30				(154	)			42
Effect of change in accounting			—				—				—				4
Net income (loss)		$	(28	)		$	30			$	(154	)		$	46
Basic earnings (loss) per common share
Income (loss) from continuing operations before effect of change in accounting		$	(0.21	)		$	0.17			$	(0.91	)		$	0.25
Income (loss) from discontinued operations			0.02				0.03				(0.12	)			0.03
Effect of change in accounting			—				—				—				0.03
Net income (loss)		$	(0.19	)		$	0.20			$	(1.03	)		$	0.31
Diluted earnings (loss) per common share
Income (loss) from continuing operations before effect of change in accounting		$	(0.21	)		$	0.17			$	(0.91	)		$	0.25
Income (loss) from discontinued operations			0.02				0.03				(0.12	)			0.03
Effect of change in accounting			—				—				—				0.02
Net income (loss)		$	(0.19	)		$	0.20			$	(1.03	)		$	0.30
Cash dividends declared and paid per common share		$	—			$	0.12			$	—			$	0.24
Average shares outstanding — Basic			150				150				150				150
Average shares outstanding — Diluted			150				151				150				151

The accompanying notes are an integral part of
the condensed consolidated financial statements.

DANA CORPORATION

		June 30, 2006				December 31, 2005
Assets
Current assets
Cash and cash equivalents		$	871			$	762
Accounts receivable
Trade			1,352				1,064
Other			289				244
Inventories			681				664
Assets of discontinued operations			516				521
Other current assets			252				141
Total current assets			3,961				3,396
Investments and other assets			1,442				1,516
Investments in equity affiliates			850				818
Property, plant and equipment, net			1,703				1,628
Total assets		$	7,956			$	7,358
Liabilities and Shareholders’ Equity
Current liabilities
Notes payable, including current portion of long-term debt		$	502			$	2,578
Accounts payable			1,039				948
Liabilities of discontinued operations			191				201
Other accrued liabilities			758				1,137
Total current liabilities			2,490				4,864
Liabilities subject to compromise			3,959				—
Deferred employee benefits and other noncurrent liabilities			227				1,798
Long-term debt			16				67
Debtor-in-possession financing			700				—
Commitments and contingencies (Note 12)
Minority interest in consolidated subsidiaries			80				84
Shareholders’ equity			484				545
Total liabilities and shareholders’ equity		$	7,956			$	7,358

The accompanying notes are an integral part of
the condensed consolidated financial statements.

DANA CORPORATION

		Six Months Ended
		June 30,
		2006				2005
Operating activities
Net income (loss)		$	(154	)		$	46
Depreciation and amortization			135				163
Charges related to divestitures and asset sales			46				(5	)
Reorganization charges			89				—
Payment of reorganization charges			(44	)			—
Changes in working capital			(10	)			(219	)
Effect of change in accounting			—				(4	)
Other			24				(130	)
Net cash flows provided by (used for) operating activities			86				(149	)
Investing activities
Purchases of property, plant and equipment			(182	)			(124	)
Proceeds from sales of other assets			28				137
Payments from partnerships			11				38
Payments received on leases and loans			6				—
Other			13				(11	)
Net cash flows provided by (used for) investing activities			(124	)			40
Financing activities
Net change in short-term debt			(549	)			225
Payments of long-term debt			(4	)			(45	)
Proceeds from debtor-in-possession facility			700				—
Issuance of long-term debt			7				—
Dividends paid			—				(36	)
Other			(7	)			(3	)
Net cash flows provided by financing activities			147				141
Net increase in cash and cash equivalents			109				32
Cash and cash equivalents — beginning of period			762				634
Cash and cash equivalents — end of period		$	871			$	666

The accompanying notes are an integral part of
the condensed consolidated financial statements.

DANA CORPORATION

1.		Basis of Presentation
2.		Reorganization Under Chapter 11 of the Bankruptcy Code
3.		Recent Accounting Pronouncements
4.		Common Shares and Preferred Share Purchase Rights
5.		Goodwill
6.		Equity-Based Compensation
7.		Pension and Postretirement Benefit Plans
8.		Comprehensive Income
9.		Cash Deposits
10.		Financing Agreement
11.		Income Taxes
12.		Commitments and Contingencies
13.		Warranty Obligations
14.		Divestitures, Discontinued Operations and Realignment of Operations
15.		Segments

Notes to Condensed Consolidated Financial Statements
(In millions, except share and per share amounts)

Note 1. Basis of Presentation

In our opinion, the accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of financial condition, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of full-year results. We have reclassified certain amounts in 2005 to conform to the 2006 presentation.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2005 Annual Report on Form 10-K.

Accounting Requirements

As described in Note 2, Dana Corporation and certain subsidiaries are reorganizing under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code). American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (SOP 90-7), which is applicable to companies operating under Chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in our statements of operations beginning in the quarter ended March 31, 2006. Our balance sheet must distinguish pre-petition liabilities subject to compromise both from those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by our plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by or used for reorganization items must be disclosed separately in our statement of cash flows. We adopted SOP 90-7 effective March 3, 2006 (the Filing Date), and will prepare our financial statements in accordance with its requirements for the duration of the reorganization proceedings.

Note 2. Reorganization Under Chapter 11 of the Bankruptcy Code

On March 3, 2006, Dana Corporation and forty of its wholly-owned domestic subsidiaries (collectively, the Debtors) filed voluntary petitions for reorganization under the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). These Chapter 11 cases are collectively referred to as the “Bankruptcy Cases.” Neither Dana Credit Corporation (DCC) nor any of our non-U.S. affiliates commenced any bankruptcy proceedings.

The wholly-owned subsidiaries included in the Bankruptcy Cases are Dakota New York Corp., Brake Systems, Inc., BWDAC, Inc., Coupled Products, Inc., Dana Atlantic LLC f/k/a Glacier Daido America, LLC, Dana Automotive Aftermarket, Inc., Dana Brazil Holdings I LLC f/k/a Wix Filtron LLC, Dana Brazil Holdings LLC f/k/a/ Dana Realty Funding LLC, Dana Information Technology LLC, Dana International Finance, Inc., Dana International Holdings, Inc., Dana Risk Management Services, Inc., Dana Technology Inc., Dana World Trade Corporation, Dandorr L.L.C., Dorr Leasing Corporation, DTF Trucking, Inc., Echlin-Ponce, Inc., EFMG LLC, EPE, Inc., ERS LLC, Flight Operations, Inc., Friction, Inc., Friction Materials, Inc., Glacier Vandervell, Inc., Hose & Tubing Products, Inc., Lipe Corporation, Long Automotive LLC, Long Cooling LLC, Long USA LLC, Midland Brake, Inc., Prattville Mfg., Inc., Reinz Wisconsin Gasket LLC, Spicer Heavy Axle & Brake, Inc., Spicer Heavy Axle Holdings, Inc., Spicer Outdoor Power Equipment Components LLC, Torque-Traction Integration Technologies, LLC, Torque-Traction Manufacturing Technologies, LLC, Torque-Traction Technologies, LLC and United Brake Systems Inc.

The Bankruptcy Cases are being jointly administered, with the Debtors managing their businesses in the ordinary course as debtors in possession subject to the supervision of the Bankruptcy Court. We intend to continue normal business operations during the Bankruptcy Cases while we evaluate our businesses both financially and operationally and implement comprehensive improvements as appropriate to enhance performance. We intend to proceed with previously announced divestiture and restructuring plans, which include the sale of several non-core businesses, the closure of certain facilities and the shift of production to lower-cost locations. In addition, we intend to take steps to reduce costs, increase efficiency and enhance productivity. We intend to effect fundamental, not incremental, change to our business. While we cannot predict with precision how long the reorganization process will take, we expect it to take 18 to 24 months from the Filing Date. Under an order entered by the Bankruptcy Court on June 28, 2006, the Debtors currently have the exclusive right to file a plan of reorganization until January 3, 2007. The Debtors are allowed, and currently expect, to seek an additional extension of this exclusive period.

Our continuation as a going concern is contingent upon, among other things, our ability (i) to comply with the terms and conditions of the DIP Credit Agreement described below; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code; (iii) to reduce wage and benefit costs and liabilities through the bankruptcy process; (iv) to return to profitability; (v) to generate sufficient cash flow from operations; and (vi) to obtain financing sources to meet our future obligations. These matters create uncertainty relating to our ability to continue as a going concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability of assets and classification of liabilities that might result from the outcome of these uncertainties. In addition, our plan of reorganization could materially change the amounts reported in our condensed consolidated financial statements. Our consolidated financial statements as of June 30, 2006 do not give effect to all the adjustments to the carrying value of assets and liabilities that may become necessary as a consequence of reorganization under Chapter 11.

Our bankruptcy filing triggered the immediate acceleration of certain direct financial obligations, including, among others, an aggregate of $1,623 in principal and accrued interest on currently outstanding non-secured notes issued under our Indentures dated as of December 15, 1997; August 8, 2001; March 11, 2002; and December 10, 2004. Such amounts are characterized as unsecured debt for purposes of the reorganization proceedings and the related obligations have been classified as liabilities subject to compromise in our condensed consolidated balance sheet as of June 30, 2006. In addition, the Chapter 11 filing for reorganization created an event of default under certain of our lease agreements. The ability of our creditors to seek remedies to enforce their rights under the agreements described above is automatically stayed as a result of our bankruptcy filing and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.

As required by SOP 90-7, we recorded the Debtors’ pre-petition debt instruments at the allowed claim amount, as defined by SOP 90-7. Accordingly, we accelerated the amortization of the related deferred debt issuance costs, the original issuance discounts and the valuation adjustment related to the termination of interest rate swaps, which resulted in a pre-tax expense of $17 during March 2006 that is included in reorganization items in our condensed consolidated statement of operations.

An official committee of the Debtors’ unsecured creditors and an official committee of equity security holders have been appointed in the Bankruptcy Cases and, in accordance with the provisions of the Bankruptcy Code, will have the right to be heard on all matters that come before the Bankruptcy Court. We have filed a motion with the Bankruptcy Court for the appointment of an official committee of retired employees to act as representatives of persons receiving retiree health care benefits. The Debtors are required to bear certain of the committees’ costs and expenses, including those of their counsel and financial advisors.

While we continue our reorganization under Chapter 11, investments in our securities will be highly speculative. Although shares of our common stock continue to trade on the Over The Counter Bulletin Board under the symbol “DCNAQ,” the trading prices of the shares may have little or no relationship to the actual recovery, if any, by the holders under any eventual court-approved reorganization plan. The opportunity for any recovery by holders of our common stock under such reorganization plan is uncertain and shares of our common stock may be cancelled without any compensation pursuant to such plan.

Under the Bankruptcy Code, the Debtors have the right to assume or reject executory contracts (i.e., contracts that are to be performed by the contract parties after the Filing Date) and unexpired leases, subject to Bankruptcy Court approval and other limitations. In this context, “assuming” an executory contract or unexpired lease generally means that the Debtor will agree to perform its obligations and cure certain existing defaults under the contract or lease and “rejecting” it means that the Debtor will be relieved of its obligations to perform further under the contract or lease, which will give rise to an unsecured pre-petition claim for damages for the breach thereof. The Bankruptcy Court has authorized the Debtors to reject certain unexpired leases and executory contracts.

On June 30, 2006, the Debtors filed their schedules of the assets and liabilities existing on the Filing Date with the Bankruptcy Court. The Bankruptcy Court has set September 21, 2006 as the general bar date. This is the date by which most entities that assert a pre-petition claim against a Debtor must file a proof of claim in writing and in accordance with the order of the Bankruptcy Court entered on July 19, 2006. Differences between amounts recorded by the Debtors and claims filed by the creditors will be investigated and resolved as part of the proceedings in the Bankruptcy Cases. The ultimate number and allowed amounts of claims are not presently known.

The Debtors have received approval from the Bankruptcy Court to pay or otherwise honor certain of their pre-petition obligations, subject to certain restrictions, including employee wages, salaries, certain benefits and other employee obligations; claims of foreign vendors and certain suppliers that are critical to our continued operation; and certain customer program and warranty claims.

We anticipate that substantially all of the Debtors’ liabilities as of the Filing Date will be addressed under, and treated in accordance with, a plan of reorganization to be proposed to and voted on by their creditors in accordance with the provisions of the Bankruptcy Code. Although we intend to file and seek confirmation of such a plan, there can be no assurance as to when the plan will be filed or that the plan will be confirmed by the Bankruptcy Court and consummated. Nor can there be any assurance that we will be successful in achieving our restructuring goals, or that any measures that are achievable will result in sufficient improvement to our financial position. Accordingly, until the time that the Debtors emerge from bankruptcy, there will be no certainty about our ability to continue as a going concern. If a restructuring is not completed, we could be forced to sell a significant portion of our assets to retire debt outstanding or, under certain circumstances, to cease operations.

DIP Credit Agreement

In March 2006, the Bankruptcy Court approved a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the DIP Credit Agreement), a $1,450 debtor-in-possession credit facility. This facility provides funding to continue our operations without disruption and meet our obligations to suppliers, customers and employees during the Chapter 11 reorganization process. See Note 10 for additional information.

DCC Notes

Dana’s bankruptcy filing created an event of default under DCC’s outstanding medium-term and private placement notes (the DCC Notes). DCC is engaged in discussions with an Ad Hoc Committee formed by certain of its noteholders regarding a potential forbearance agreement (see Notes 10 and 14). Two DCC noteholders have commenced a lawsuit against DCC for nonpayment of the principal and interest on their DCC Notes which were due in April 2006, and have filed a motion for summary judgment which is scheduled for hearing in August 2006.

Financial Statement Presentation

Our condensed consolidated financial statements have been prepared in accordance with SOP 90-7 and on a going-concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of our bankruptcy filing, such realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors in possession under the protection of Chapter 11 of the Bankruptcy Code all or some of the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the condensed consolidated financial statements, subject to Bankruptcy Court approval or otherwise as permitted in the ordinary course of business. Further, Dana’s plan of reorganization could materially change the amounts and classification of items reported in our historical consolidated financial statements.

Substantially all of the Debtors’ pre-petition debt is now in default due to the bankruptcy filing. As described below, the accompanying condensed consolidated financial statements present the Debtors’ pre-petition debt of $1,585 within Liabilities subject to compromise. In accordance with SOP 90-7, following the Filing Date, we discontinued recording interest expense on debt classified as Liabilities subject to compromise. Contractual interest on all debt, including the portion classified as Liabilities subject to compromise, amounted to $100 for the six months ended June 30, 2006. As required by SOP 90-7, the amount of the Liabilities subject to compromise represents our estimate of known or potential pre-petition claims to be addressed in connection with the Bankruptcy Cases. Such claims are subject to future adjustments. Adjustments may result from, among other things, negotiations with creditors, rejection of executory contracts and unexpired leases, and orders of the Bankruptcy Court. Payment terms and amounts for these claims will be established in connection with the Bankruptcy Cases.

The Liabilities subject to compromise in the condensed consolidated and debtor-in-possession balance sheets consisted of the following items at June 30, 2006:

Accounts payable		$	280
Pension and postretirement plan obligations			1,554
Debt (including accrued interest of $38)			1,623
Other			502
Consolidated liabilities subject to compromise			3,959
Payables to non-debtor subsidiaries			1,486
Debtors’ liabilities subject to compromise		$	5,445

Other includes accrued liabilities for environmental, asbestos, product liability, income tax, deferred compensation, and lease rejection claims and warranty obligations.

Professional advisory fees and other costs directly associated with the reorganization are separately reported pursuant to SOP 90-7 as reorganization items. Professional fees include underwriting fees paid in connection with the DIP Credit Agreement, which were expensed in their entirety in March 2006. Also included in reorganization items are provisions and adjustments to reflect the carrying value of certain pre-petition liabilities at their estimated allowable claim amounts. The debt valuation adjustments and the underwriting fees related to the DIP Credit Agreement are associated with the initial phase of the reorganization and generally represent one-time charges.

The reorganization items in the condensed consolidated statements of operations for the three and six months ended June 30, 2006 consisted of the following items:

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2006				2006
Professional fees		$	30			$	67
Debt valuation adjustments			—				17
Loss on rejection of leases			10				11
Investment income			(3	)			(3	)
Gain on settlement of claims			(3	)			(3	)
Total reorganization items		$	34			$	89

Debtor-in-Possession Financial Information

In accordance with SOP 90-7, aggregate financial information of the Debtors is presented below as of and for the three and six months ended June 30, 2006. Inter-company balances between Debtors and non-debtors are not eliminated. The investment in non-debtor subsidiaries is recorded on an equity basis and, accordingly, the net loss reported in the Debtor-In-Possession Statement of Operations is equal to the consolidated net loss.

DANA CORPORATION
DEBTOR-IN-POSSESSION STATEMENT OF OPERATIONS (Unaudited)

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2006				2006
Net sales
Customers		$	1,126			$	2,234
Non-debtor subsidiaries			65				126
			1,191				2,360
Costs and expenses
Cost of sales			1,191				2,381
Selling, general and administrative expenses			80				161
Other income, net			(45	)			(85	)
Loss from operations before interest, reorganization items and income taxes			(35	)			(97	)
Interest expense (contractual interest of $39 and $78 for the three and six months ended June 30, 2006)			12				43
Reorganization items, net			31				86
Loss before income taxes			(78	)			(226	)
Income tax expense			(9	)			(10	)
Equity in earnings of affiliates			(4	)			(7	)
Loss from continuing operations			(91	)			(243	)
Loss from discontinued operations			(14	)			(43	)
Equity in earnings of non-debtor subsidiaries			77				132
Net loss		$	(28	)		$	(154	)

DANA CORPORATION
DEBTOR-IN-POSSESSION BALANCE SHEET (Unaudited)

		June 30, 2006
Assets
Current assets
Cash and cash equivalents		$	282
Accounts receivable
Trade			589
Other			189
Inventories			252
Assets of discontinued operations			247
Other current assets			28
Total current assets			1,587
Investments and other assets			1,252
Investments in equity affiliates			566
Investments in non-debtor subsidiaries			3,237
Property, plant and equipment, net			726
Total assets		$	7,368
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$	370
Liabilities of discontinued operations			55
Other accrued liabilities			281
Total current liabilities			706
Liabilities subject to compromise			5,445
Deferred employee benefits and other noncurrent liabilities			31
Debtor-in-possession financing			700
Minority interest in consolidated subsidiaries			2
Shareholders’ equity			484
Total liabilities and shareholders’ equity		$	7,368

DANA CORPORATION
DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS (Unaudited)

		Six Months
		Ended June 30,
		2006
Operating activities
Net income (loss)		$	(154	)
Depreciation and amortization			60
Charges related to divestitures and asset sales			31
Reorganization charges			86
Payment of reorganization charges			(42	)
Equity in earnings of non-debtor subsidiaries			(132	)
Changes in working capital			30
Other			41
Net cash flows used for operating activities			(80	)
Investing activities
Purchases of property, plant and equipment			(107	)
Other			29
Net cash flows used for investing activities			(78	)
Financing activities
Proceeds from debtor-in-possession facility			700
Net change in short-term debt			(546	)
Net cash flows provided by financing activities			154
Net increase in cash and cash equivalents			(4	)
Cash and cash equivalents — beginning of period			286
Cash and cash equivalents — end of period		$	282

Note 3. Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces Accounting Principles Board Opinion (APB) No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and requires the direct effects of accounting principle changes to be retrospectively applied. The existing guidance with respect to accounting estimate changes and error corrections is carried forward in SFAS No. 154. SFAS No. 154 is effective for accounting changes and corrections made in fiscal years beginning after December 15, 2005. We do not expect SFAS No. 154 to have a material effect on our consolidated financial statements.

In December 2004, the FASB revised SFAS No. 123, “Share-Based Payment” (SFAS No. 123(R)), requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is to be measured based on the fair value of the equity or liability instruments issued. We adopted SFAS No. 123(R) on January 1, 2006 using the modified prospective transition method. See Note 6 for information about our equity-based compensation plans.

In December 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151, which became effective January 1, 2006, requires the treatment of certain abnormal costs such as idle facility expense and excessive freight and handling charges as period expenses and requires that allocation of fixed overhead be based on normal capacity. We adopted SFAS No. 151 as of January 1, 2006. The new guidance does not have a material effect on our 2006 consolidated financial statements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 will be effective for fiscal years beginning after December 15, 2006. We are currently in the process of evaluating the effect, if any, FIN 48 will have on our consolidated financial statements.

In July 2006, the FASB issued FASB Staff Position No. FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction” (FSP 13-2), which will require companies to recalculate the income recognition for a leveraged lease if there is a change or projected change in the timing of income tax cash flows directly related to the leveraged lease. FSP 13-2 will be effective for fiscal years beginning after December 15, 2006. We are currently in the process of evaluating the effect, if any, FSP 13-2 will have on our consolidated financial statements.

Note 4. Common Shares and Preferred Share Purchase Rights

The following table reconciles the average shares outstanding used in determining basic earnings per share to the number of shares used in the diluted earnings per share calculation for the three and six months ended June 30, 2006 and 2005:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Average shares outstanding for the period — basic			149.8				149.5				149.8				149.5
Plus: Incremental shares from:
Deferred compensation units			0.5				0.7				0.5				0.6
Restricted stock			—				0.2				—				0.3
Stock options			—				0.4				—				0.5
Potentially dilutive shares			0.5				1.3				0.5				1.4
Average shares outstanding for the period — diluted			150.3				150.8				150.3				150.9

The potentially dilutive shares shown above for the three and six months ended June 30, 2006, have been excluded from the computation, as the loss from continuing operations for these periods caused the shares to have an anti-dilutive effect.

In addition, potential common shares of 13.6 and 14.2 for the 2006 and 2005 periods, respectively, have also been excluded from the computation of earnings per share, as the effect of including them is anti-dilutive in all periods shown. These shares represent stock options with exercise prices higher than the average share-trading price of our stock during the respective periods.

Subsequent event – Preferred Share Purchase Rights

We have a preferred share purchase rights plan that is designed to deter coercive or unfair takeover tactics. The plan, which has been in place since 1996, replaced a prior rights plan that was adopted in 1986 and expired after ten years. The plan is described in “Note 2. Preferred Share Purchase Rights” to the consolidated financial statements in our 2005 Form 10-K. Under the plan, one Series A Junior Participating Preferred Stock Purchase Right has been issued on each share of our common stock outstanding on and after July 25, 1996. The rights issued under the plan were scheduled to expire on July 25, 2006 under the terms of the Rights Agreement that governs the plan. On July 18, 2006, our Board adopted an amendment to the Rights Agreement to extend the expiration date of the rights for another ten years. Consequently, the rights will now expire at the close of business on July 25, 2016, unless exercised, redeemed or exchanged sooner. The extension is intended to preserve the status quo and continue the protection provided by the plan to Dana and all of our stakeholders while we proceed through the reorganization process.

Note 5. Goodwill

Changes in goodwill during the six months ended June 30, 2006, in both the Automotive Systems Group (ASG) and the Heavy Vehicle Technology Systems Group (HVTSG), were as follows:

						Effect of
		December 31,				Currency				June 30,
		2005				and Other				2006
ASG		$	328			$	14			$	342
HVTSG			111				3				114
Total		$	439			$	17			$	456

Note 6. Equity-Based Compensation

Stock Incentive Plan

Our Stock Incentive Plan (SIP) provides for the issuance of up to 28,850,000 shares of Dana common stock. Awards may be in the form of stock options, stock appreciation rights (SARs), restricted stock or units, performance shares or units, stock or other stock-based awards, at the discretion of the Compensation Committee of our Board.

Stock Options

All outstanding options under the SIP were granted at exercise prices equal to the market price of our underlying common shares on the date of the grant. The option grants generally provide that the options will vest and be exercisable in 25% increments at each of the first four anniversary dates of the grant and expire ten years from the date of the grant, with vesting accelerated upon retirement if age and service minimums are met.

The following table contains information about stock options granted, exercised, exercisable and lapsed or canceled in the six months ended June 30, 2006:

						Weighted Average
		Number				Exercise				Remaining
		of				Price				Contractual
		Options				(in $'s)				Life (Years)
Outstanding at December 31, 2005			15,300,698			$	23.83				5.9
Granted
Exercised
Lapsed or canceled			(1,857,903	)		$	24.77
Outstanding at June 30, 2006			13,442,795			$	23.70				5.4
Exercisable at June 30, 2006			12,751,650			$	24.42				5.3

We adopted SFAS No. 123(R) as of January 1, 2006, using the modified prospective transition method. Under this method, our share-based compensation expense for the first six months of 2006 includes expense for all share-based awards granted prior to but not vested as of January 1, 2006, based on the grant date fair value. This expense is recognized on a straight-line basis over the period during which the employee is required to provide service to earn the award. For the three and six months ended June 30, 2006, such compensation expense, determined under the “fair value-based” method of accounting, totaled $1 and $1 and reduced our earnings per share by $0.00 and $0.01. Prior to 2006, as allowed by SFAS No. 123, we accounted for stock options using the intrinsic-value method in APB No. 25. Under that method, no compensation expense was recognized on the grant date, since the option exercise price equaled the market price of the underlying common shares on that date. The intrinsic value for options outstanding and exercisable at June 30, 2006 was nil.

The following table contains information about nonvested stock options granted, vested and forfeited during the six months ended June 30, 2006:

		Number				Weighted Average
		of				Grant Date Fair
		Options				Value (in $'s)
Nonvested at December 31, 2005			1,370,818				3.40
Granted			—				—
Vested			(554,116	)			3.43
Forfeited			(125,557	)			3.40
Nonvested at June 30, 2006			691,145				3.39

At June 30, 2006, there was $2 of total unrecognized compensation cost related to non-vested stock options, which we expect to recognize over a period of approximately one year. The total fair value of options that vested during the three and six months ended June 30, 2006, was $2 and $2.

Prior to 2006, as permitted by SFAS No. 123, we chose the “nominal vesting period approach” for recognizing the amount of stock option expense to be included in the pro forma compensation expense for retirement eligible employees. Under this method, expense was recognized over the four-year vesting period. Under SFAS No. 123(R), we are required to continue applying this approach for unvested options granted prior to January 1, 2006, rather than the “non-substantive vesting period approach,” where expense recognition is made over the period from grant date to the date retirement eligibility is achieved, if expected to occur during the nominal vesting period. Our compensation expense for the three and six months ended June 30, 2006 would have increased $0 and $1 had we utilized the non-substantive vesting period approach for this period.

Under the modified prospective transition method, our financial results for the years prior to 2006 have not been restated. The following table contains information about our stock option expense for the three and six months ended June 30, 2005 on a pro-forma basis as if we had applied the fair value recognition provisions of SFAS No. 123(R):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2005				2005
Stock compensation expense, as reported		$	1			$	2
Stock option expense, pro forma			3				6
Stock compensation expense, pro forma		$	4			$	8
Net income, as reported		$	30			$	46
Net income, pro forma			27				40
Basic earnings per share
Net income, as reported		$	0.20			$	0.31
Net income, pro forma			0.18				0.27
Diluted earnings per share
Net income, as reported		$	0.20			$	0.30
Net income, pro forma			0.18				0.27

There were no grants in 2006.

The weighted average fair value of options granted during the three and six months of 2005 was $3.27 and $4.05 per share under the binomial method, using a weighted average market value at date of grant of $11.61 and $14.94; and the following weighted average assumptions: risk-free interest rate of 4.07% and 3.91%, a dividend yield of 2.83% and 2.68%, volatility of 31.50% to 33.07% and 30.71% to 31.50%, expected forfeitures of 16.70% and 17.33% and an expected option life of 6.85 and 6.77 years. The total intrinsic value of options exercised during these three- and six-months periods in 2005 was zero.

On December 1, 2005, our Compensation Committee approved the immediate vesting of all unvested stock options and SARs granted under the SIP with an option exercise price or an SAR grant price of $15.00 or more per share. As a result, unvested stock options to purchase 3,584,646 shares of our common stock, with a weighted average exercise price of $21.97 per share, became exercisable on December 1, 2005, rather than on the later dates when they would have vested in the normal course. The decision to accelerate the vesting of these stock options and SARs was made to reduce the compensation expense that we would have otherwise been required to record following our adoption of SFAS No. 123(R). If the vesting of these stock options and SARs had not been accelerated, we would have expected to recognize an incremental share-based compensation expense of approximately $19 in the aggregate from 2006 through 2009. As a result of the acceleration, the stock option expense reported for the six months ended June 30, 2006 was substantially lower than the amount disclosed for the comparable period in 2005.

Restricted Shares and Restricted Stock Units

Restricted shares and restricted stock units granted under the SIP are subject to forfeiture until the restrictions lapse or terminate. At December 31, 2005, there were 250,000 restricted shares and 50,000 restricted stock units outstanding, with an aggregate fair value of approximately $6. Unrecognized compensation for these shares and units was $2 at June 30, 2006. We expect to recognize that amount in 2006 to 2010. No restricted shares or restricted stock units were granted in the first six months of 2006. Claims with respect to restricted stock units that were not vested prior to our bankruptcy filing are pre-petition claims.

Performance Stock Awards (Performance Shares)

Performance shares awarded under the SIP will vest if Dana achieves certain pre-established performance goals selected by the Compensation Committee over two three-year performance periods (2004-2006 and 2005-2007). Generally, the employee must be actively employed with Dana at the end of the performance period for his performance shares to vest. Upon vesting, certain of the performance share awards will be payable in cash, while others will be payable in shares of Dana common stock. At December 31, 2005, there were 627,031 performance shares outstanding, 280,520 payable in stock and 346,511 payable in cash. No performance shares were granted in the first six months of 2006. We recorded compensation expense of $1 and $1 for the three and six months ended June 30, 2005 with respect to the performance shares. No expense was recorded in the first six months of 2006, as we no longer expect the performance goals to be met for either three-year performance period.

1999 Restricted Stock Plan

The Compensation Committee may also grant restricted shares to key employees under our 1999 Restricted Stock Plan (1999 RSP). These shares are subject to forfeiture until the restrictions lapse or terminate. Generally, the employee must remain employed by Dana for at least three years after the date of grant to avoid forfeiting the shares. Historically, dividends have been credited on granted restricted shares in the form of additional restricted shares.

Before 2005, participants in the 1999 RSP could elect to convert their unvested restricted stock into an equal number of restricted stock units under certain conditions. The 1999 RSP provides that such units be credited with the equivalent of dividends and be payable in unrestricted stock upon the employee’s retirement or termination of employment unless subject to forfeiture at such time. Claims with respect to restricted stock units granted under the 1999 RSP that vested prior to our bankruptcy filing are pre-petition claims.

The following table contains information about the restricted shares granted, vested and forfeited under the 1999 RSP in the six months ended June 30, 2006:

		Weighted Average
		Grant Date
		Fair Value				Shares
Balance, beginning of period		$	16.64				815,070
Granted							—
Vested			17.42				(129,392	)
Forfeited			17.41				(95,487	)
Balance, end of period		$	16.34				590,191

The aggregate fair value of the restricted shares that vested in the three and six months ended June 30, 2006 was less than $1. Compensation expense recognized under the 1999 RSP with respect to these shares was less than $1 in these two periods. The remaining unrecognized compensation related to these shares totaled $4 at June 30, 2006. We expect to recognize that amount in 2006 through 2011.

Note 7. Pension and Postretirement Benefit Plans

Components of net periodic benefit costs for the three and six months ended June 30, 2006 and 2005 were as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Pension Benefits
Service cost		$	11			$	13			$	23			$	26
Interest cost			41				40				82				80
Expected return on plan assets			(50	)			(52	)			(101	)			(104	)
Amortization of prior service cost			1				1				2				2
Recognized net actuarial loss			8				6				16				12
Loss on settlements			7								11
Net periodic benefit cost		$	18			$	8			$	33			$	16
Other Benefits
Service cost		$	3			$	3			$	6			$	6
Interest cost			23				25				45				50
Amortization of prior service cost			(3	)			(3	)			(7	)			(6	)
Recognized net actuarial loss			10				9				20				18
Net periodic benefit cost		$	33			$	34			$	64			$	68

Based on the amount of lump sum payments of pension benefits during the six months ended June 30, 2006, we recognized settlement costs of $11, representing a portion of the previously unrecognized net actuarial loss.

Note 8. Comprehensive Income

Comprehensive income (loss) includes net income (loss) and components of other comprehensive income (loss), such as foreign currency translation gains and losses that are charged or credited directly to shareholders’ equity. The components of our total comprehensive loss for the three and six months ended June 30, 2006 and 2005 follow:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
Net income (loss)		$	(28	)		$	30			$	(154	)		$	46
Other comprehensive income (loss):
Deferred translation gain (loss)			57				(58	)			90				(118	)
Other			(2	)			1				—				5
Total comprehensive income (loss)		$	27			$	(27	)		$	(64	)		$	(67	)

The $57 deferred translation gain reported for the three months ended June 30, 2006 was primarily the result of the strengthening of the euro ($44), Canadian dollar ($16) and British pound ($14) relative to the U.S. dollar. These gains were partially offset by the effects of a weaker South African rand ($7) and Mexican peso ($4). The $90 deferred gain for the six months ended June 30, 2006 was due largely to a stronger euro ($60), Brazilian real ($23), British pound ($15) and Canadian dollar ($14). The South African rand ($6) and Mexican peso ($4) both lost value relative to the U.S. dollar, partially offsetting the gains.

The deferred translation loss reported for the three months ended June 30, 2005 was $58. The decline in the euro ($57), British pound ($10) and Swedish krona ($7) accounted for the largest components of the quarterly change. The same currencies were primarily responsible for the $118 deferred loss for the six months ended June 30, 2005. The euro ($97), British pound ($49), Swedish krona ($12) and Canadian dollar ($9) all fell in value relative to the U.S. dollar. These effects were partially offset by the impact of a stronger Brazilian real ($30).

Note 9. Cash Deposits

At June 30, 2006, we maintained cash deposits of $111, to provide credit enhancement for certain lease agreements and to support surety bonds that allow us to self-insure our workers’ compensation obligations. These financial instruments are typically renewed each year and are recorded in Cash and cash equivalents. In most jurisdictions, these cash payments can be withdrawn if we provide comparable security in the form of letters of credit. Our banking facilities provide for the issuance of letters of credit and the availability at June 30, 2006 was adequate to cover the amounts on deposit.

Note 10. Financing Agreements

DCC Notes

At June 30, 2006, long-term debt at DCC included medium-term and private placement notes (the DCC Notes) totaling $399, including $275 outstanding under a $500 Medium Term Note Program established during 1999. The DCC Notes are general, unsecured obligations of DCC. Following Dana’s bankruptcy filing, the holders of a majority of the DCC Notes formed an Ad Hoc Committee of Noteholders with which DCC has been discussing the potential for restructuring the DCC Notes. A successful outcome of DCC’s efforts to complete a restructuring of the DCC Notes with the Ad Hoc Committee and its other noteholders cannot be assured. See Note 14 for further information.

Debt Reclassification

Dana’s bankruptcy filing triggered the immediate acceleration of the Debtors’ direct financial obligations including, among others, outstanding non-secured notes issued under our Indentures dated as of December 15, 1997; August 8, 2001; March 11, 2002 and December 10, 2004, and DCC’s obligations under the DCC Notes. The amounts accelerated under our Indentures are characterized as unsecured debt for purposes of the reorganization proceedings. The related Debtor obligations of $1,585 have been classified as Liabilities subject to compromise (see Note 2), and the unsecured DCC notes have been classified as part of the current portion of long-term debt in our condensed consolidated balance sheet. As a result of the first quarter 2006 agreement to sell DCC’s interest in a limited partnership, $55 of DCC non-recourse debt expected to be assumed by the buyer has been classified as a current liability. Certain non-U.S. borrowings totaling $16 continue to be classified as Long-term debt.

DIP Credit Agreement

Dana, as borrower, and our debtor U.S. subsidiaries, as guarantors, are parties to a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the DIP Credit Agreement) with Citicorp North America, Inc., Bank of America, N.A. and JPMorgan Chase Bank, N.A. as lenders. The DIP Credit Agreement, as amended, was approved by the Bankruptcy Court in March 2006. The aggregate amount of the facility is $1,450, including a $750 revolving credit facility (of which $400 is available for the issuance of letters of credit) and a $700 term loan facility.

All of the loans and other obligations under the DIP Credit Agreement will be due and payable on the earlier of 24 months after the effective date of the DIP Credit Agreement or the consummation of a plan of reorganization under the Bankruptcy Code. Prior to maturity, Dana will be required to make mandatory prepayments under the DIP Credit Agreement in the event that loans and letters of credit exceed the available commitments, and from the proceeds of certain asset sales, unless reinvested. Such prepayments, if required, are to be applied first to the term loan facility and second to the revolving credit facility with a permanent reduction in the amount of the commitments thereunder.

Interest under the DIP Credit Agreement will accrue, at Dana’s option, either at the London interbank offered rate (LIBOR) plus a per annum margin of 2.25% for both the term loan facility and the revolving credit facility or the prime rate plus a per annum margin of 1.25% for both facilities. Dana will pay a fee for issued and undrawn letters of credit in an amount per annum equal to the LIBOR margin applicable to the revolving credit facility and a per annum fronting fee of 25 basis points. Dana will also pay a commitment fee of 0.375% per annum for unused committed amounts under the revolving credit facility.

The DIP Credit Agreement is guaranteed by substantially all of Dana’s domestic subsidiaries, excluding DCC. As collateral, Dana and each of its guarantor subsidiaries has granted a security interest in and lien on effectively all of its assets, including a pledge of 66% of the equity interests of each material foreign subsidiary directly or indirectly owned by Dana.

Under the DIP Credit Agreement, Dana and each of its subsidiaries (other than certain excluded subsidiaries) are required to comply with customary covenants for facilities of this type. These include (i) affirmative covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds, retention of a restructuring advisor and financial advisor, maintenance of cash management systems, use of proceeds, priority of liens in favor of the lenders, maintenance of properties and monthly, quarterly, annual and other reporting obligations, and (ii) negative covenants, including limitations on liens, additional indebtedness (beyond that permitted by the agreement), guaranties, dividends, transactions with affiliates, claims in its bankruptcy proceedings, investments, asset dispositions, nature of business, payment of pre-petition obligations, capital expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, and limitations on restrictions affecting subsidiaries and sale-leasebacks.

Additionally, the DIP Credit Agreement requires us to (i) maintain a minimum amount of consolidated earnings before interest, taxes, depreciation, amortization, restructuring and reorganization costs (EBITDAR), for each period beginning on March 1, 2006 and ending on the last day of each month from May 2006 through February 2007, and (ii) a rolling 12-month cumulative EBITDAR for Dana and our direct and indirect subsidiaries, on a consolidated basis, beginning on March 31, 2007 and ending on February 28, 2008, at levels set forth in the DIP Credit Agreement. We must also maintain minimum availability of $100 under the DIP Credit Agreement at all times. The DIP Credit Agreement provides for certain events of default customary for debtor-in-possession financings of this type including cross default with other indebtedness. Upon the occurrence and during the continuance of any event of default under the DIP Credit Agreement, interest on all outstanding amounts would be payable on demand at 2% above the then applicable rate. We were in compliance with the requirements of the agreement at June 30, 2006.

In March 2006, we borrowed $700 under the $1,450 DIP Credit Agreement and used the proceeds to pay off debt obligations outstanding under our prior five-year bank facility (which had provided us with $400 in borrowing capacity), our accounts receivable securitization program (which had provided us with up to $275 borrowing capacity to meet periodic demand for short-term financing), and certain other pre-petition obligations, as well as to provide for working capital and general corporate expenses. As of June 30, 2006, we have utilized $239 of the net availability under the facility for the issuance of letters of credit.

Canadian Credit Agreement

In June 2006, Dana Canada Corporation (Dana Canada), as borrower, and certain of its Canadian affiliates, as guarantors, entered into a Credit Agreement (the Canadian Credit Agreement) with Citibank Canada, JPMorgan Chase Bank, N.A., Toronto Branch, and Bank of America, N.A., Canada Branch, as issuing banks. The Canadian Credit Agreement provides for a $100 revolving credit facility, of which $5 is available for the issuance of letters of credit. At June 30, 2006, there were no borrowings under the Canadian Credit Agreement.

All of the loans and other obligations under the Canadian Credit Agreement will be due and payable on the earlier of (i) 24 months after the effective date of the Canadian Credit Agreement or (ii) the termination of the DIP Credit Agreement. Prior to maturity, Dana Canada will be required to make mandatory prepayments under the Canadian Credit Agreement in the event that loans and letters of credit exceed the available commitments.

Interest under the Canadian Credit Agreement will accrue, at Dana Canada’s option, either at (i) LIBOR plus a per annum margin of 2.25% or (ii) the prime rate in Toronto plus a per annum margin of 1.25%. Dana Canada will pay a fee for issued and undrawn letters of credit in an amount per annum equal to 2.25%. Dana Canada will also pay a commitment fee of 0.375% per annum for unused committed amounts under the facility.

The Canadian Credit Agreement is guaranteed by substantially all of the Canadian affiliates of Dana Canada. As collateral, Dana Canada and each of its guarantor affiliates has granted a security interest in and lien on effectively all of its assets, including a pledge of 66% of the equity interests of each direct foreign subsidiary owned by Dana Canada and each of its Canadian affiliates.

Under the Canadian Credit Agreement, Dana Canada and each of its Canadian affiliates will be required to comply with customary affirmative covenants for facilities of this type, including covenants as to corporate existence, compliance with laws, insurance, payment of taxes, access to books and records, use of proceeds, maintenance of cash management systems, priority of liens in favor of the lenders, maintenance of properties and monthly, quarterly, annual and other reporting obligations. Dana Canada and each of its Canadian affiliates will also be required to comply with customary negative covenants for facilities of this type, including limitations on liens, additional indebtedness, guarantees, dividends, transactions with affiliates, investments, asset dispositions, nature of business, capital expenditures, mergers and consolidations, amendments to constituent documents, accounting changes, restrictions affecting subsidiaries, and sale and lease-backs. In addition, Dana Canada must maintain a minimum availability under the Canadian Credit Agreement of $20.

The Canadian Credit Agreement provides for certain events of default customary for facilities of this type including cross default with the DIP Credit Agreement. Upon the occurrence and continuance of an event of default, Dana Canada’s lenders may have the right, among other things, to terminate their commitments under the Canadian Credit Agreement, accelerate the repayment of all of Dana Canada’s obligations thereunder and foreclose on the collateral granted to them. As of June 30, 2006, there were no borrowings under this agreement.

Note 11. Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” Current and deferred income tax assets and liabilities are recognized based on events which have occurred and are measured under enacted tax laws. Based on our recent history of losses in the U.S. and our near-term prospects for continued losses, we established a 100% valuation allowance against our U.S. deferred tax assets in the third quarter of 2005. Deferred tax assets resulting from subsequent U.S. losses have been offset by increases in the valuation allowances, effectively eliminating the benefit of those losses.

Since we no longer recognize income tax benefits on our U.S. losses, the income tax expense of $36 and $58 for the three and six months ended June 30, 2006 differs from $0 provision and a $32 tax benefit for the three and six months ended June 30, 2006 that would be expected using a U.S. federal statutory tax rate of 35%. With no U.S. tax benefit, the income tax expense reflected in the condensed consolidated financial statements for the three and six months ended June 30, 2006, is primarily the tax on profits of our non-U.S. operations at the expected annual effective tax rates.

We recognized $4 of income tax expense and $2 of income tax benefits for the three and six months ended June 30, 2005 as compared to tax expenses of $7 and $7 that would have been expected using a U.S. federal statutory rate of 35%. The tax benefits resulted primarily from the release of valuation allowances against certain deferred tax assets and lower rates on international income, partially offset by higher tax expenses resulting from enactment of a new tax system in the State of Ohio.

Note 12. Commitments and Contingencies

Impact of Our Bankruptcy Filing

Under the Bankruptcy Code, the filing of our petition on March 3, 2006 automatically stayed most actions against us. Substantially all of our pre-petition liabilities will be addressed under our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

Class Action Lawsuit and Derivative Actions

Dana and certain of our current and former officers are defendants in a consolidated securities class action pending in the U.S. District Court for the Northern District of Ohio. The plaintiffs in this action allege violations of the U.S. securities laws and claim that the price at which Dana’s shares traded at various times between February 2004 and November 2005 was artificially inflated as a result of the defendants’ alleged wrongdoing. We expect that a consolidated amended complaint will be filed in August 2006 in which Dana will not be named as a defendant. Two shareholder derivative actions are also pending in the same court naming our current directors, certain former directors and certain current and former officers as defendants. Among other things, the plaintiffs in these actions allege breaches of the defendants’ fiduciary duties to Dana arising from the same facts on which the consolidated class action is based. These claims have been stayed. In addition, the plaintiff in one of these actions has asserted class claims characterizing Dana’s bankruptcy filing as having been made in bad faith. Defendants intend to move to dismiss or stay these claims. A hearing on this motion has been set for January 2007. Due to the preliminary nature of these lawsuits, at this time we cannot predict their outcome or estimate Dana’s potential exposure related thereto. While we have insurance coverage with respect to these matters and do not currently 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, there can be no assurance that the impact of any loss not covered by insurance would not be material.

SEC Investigation

In September 2005, we reported that management was investigating accounting matters arising out of incorrect entries related to a customer agreement in our Commercial Vehicle business unit, and that our Audit Committee had engaged outside counsel to conduct an independent investigation of these matters as well. Outside counsel informed the Securities and Exchange Commission (SEC) of the investigation, which ended in December 2005, about when we filed restated financial statements for the first two quarters of 2005 and the years 2002 through 2004. In January 2006, we learned that the SEC had issued a formal order of investigation with respect to matters related to our restatements. The SEC’s investigation is a non-public, fact-finding inquiry to determine whether any violations of the law have occurred. This investigation has not been suspended as a result of our bankruptcy filing. We are continuing to cooperate fully with the SEC in the investigation.

Legal Proceedings Arising in the Ordinary Course of Business

We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. These include, among others, proceedings based on product liability claims and alleged violations of environmental laws. We have reviewed these pending legal proceedings, including the probable outcomes, our reasonably anticipated costs and expenses, the availability and limits of our insurance coverage and surety bonds 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.

Tax Matters

We are involved in various tax matters, including transactions for which the related tax regulations are relatively new and/or subject to interpretation. A number of years may elapse before a particular matter is audited and a tax adjustment is proposed by the taxing authority. The years with open tax audits vary depending on the tax jurisdiction. We establish a liability when the payment of additional taxes related to certain matters is considered probable and the amount is reasonably estimable. We adjust these liabilities, including the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. These liabilities are recorded in Other accrued liabilities in our condensed consolidated balance sheet. Favorable resolution of tax matters for which a liability had previously been recorded would result in a reduction of income tax expense when payment of the tax is no longer considered probable.

Asbestos-Related Product Liabilities

Under the Bankruptcy Code, our pending asbestos-related product liability lawsuits have been stayed during our reorganization process and claimants may not commence new lawsuits against us for pre-petition claims. However, proofs of additional asbestos claims may be filed in the Bankruptcy Cases either voluntarily by claimants or if a bar date is established for asbestos claims. The claims bar date order entered by the Bankruptcy Court on July 19, 2006 does not set a deadline for claimants asserting asbestos-related personal injury claims to file proofs of claim. However, claims alleging potential asbestos-related liability by insurers or other third parties who are not one of the allegedly injured individuals or one of their personal representatives, and any claims for property damage, must be filed by September 21, 2006. Our obligations with respect to asbestos claims will be resolved pursuant to our plan of reorganization, if not otherwise addressed pursuant to orders of the Bankruptcy Court.

We had approximately 76,000 active pending asbestos-related product liability claims at June 30, 2006, compared to 77,000 at December 31, 2005, including 9,000 and 10,000 claims, respectively, that were settled but awaiting final documentation and payment. We had accrued $96 for indemnity and defense costs for pending asbestos-related product liability claims at June 30, 2006, compared to $98 at December 31, 2005. We accrue for pending claims based on our claims settlement and dismissal history.

The methodology we use for projecting future asbestos-related product claims and costs is described in our 2005 Form 10-K. Based on this analysis, we estimated our potential liability through 2020 to be within a range of $70 to $120. Since the outcomes within that range are equally probable, the accrual at June 30, 2006 represents the lower end of the range. While the process of estimating future demands is highly uncertain beyond 2020, we believe there are reasonable scenarios in which our expenditures related to asbestos-related product liability claims after that date would be de minimis.

At June 30, 2006, we had recorded $79 as an asset for probable recovery from our insurers for the pending and projected claims, compared to $78 at December 31, 2005. The asset recorded reflects our assessment of the capacity of our current insurance agreements to provide for the payment of anticipated defense and indemnity costs for pending claims and projected future demands. These recoveries assume elections under our existing coverage which we intend to adopt in order to maximize our insurance recovery. The asset recorded does not represent the limits of our insurance coverage, but rather the amount we would expect to recover if we paid the accrued indemnity and defense costs.

At December 31, 2005, we had recorded a receivable of $8 in connection with an October 2005 settlement agreement with one of our insurers. We received a payment of $2 in the first quarter of 2006 and $6 in the second quarter of 2006. Proceeds from insurance commutations are first applied to reduce any recorded recoverable amount. Any excess over the recoverable amount is evaluated to assess whether any portion of the excess represents payments by the insurer for potential future liabilities.

In addition, we had a net amount recoverable from our insurers and others of $14 at June 30, 2006 compared to $15 at December 31, 2005. This recoverable represents reimbursements for settled asbestos-related product liability claims, including billings in progress and amounts subject to alternate dispute resolution proceedings with some of our insurers. As a result of the stay in our asbestos litigation during the reorganization process, we do not expect to make any asbestos payments in the near term. However, we are continuing to pursue insurance collections with respect to asbestos-related amounts paid prior to the Filing Date.

Other Product Liabilities

We had accrued $8 for contingent non-asbestos product liability costs at June 30, 2006, compared to $13 at December 31, 2005, with no recovery expected from third parties at either date. We estimate these liabilities based on assumptions about the value of the claims and about the likelihood of recoveries against us, derived from our historical experience and current information. If there is a range of equally probable outcomes, we accrue the lower end of the range. The difference between our minimum and maximum estimates for these liabilities was $10 at both dates.

Environmental Liabilities

We had accrued $59 for contingent environmental liabilities at June 30, 2006, compared to $63 at December 31, 2005. We estimate these liabilities based on the most probable method of remediation, current laws and regulations and existing technology. Estimates are made on an undiscounted basis and exclude the effects of inflation. If there is a range of equally probable remediation methods or outcomes, we accrue the lower end of the range. The difference between our minimum and maximum estimates for these liabilities was $1 at both dates.

Included in these accruals are amounts relating to the Hamilton Avenue Industrial Park Superfund site in New Jersey, where we are presently one of four potentially responsible parties. Our estimated liabilities for the three Operable Units (OUs) at this site at June 30, 2006 remained unchanged from our estimates at December 31, 2005: $1 for future remedial work and past costs incurred by the United States Environmental Protection Agency (EPA) at OU 1 relating to off-site soil contamination; $14 for future remedial work at OU 2 relating to on-site soil contamination; and less than $1 at OU 3 for the costs of a remedial investigation and feasibility study (RI/FS) pertaining to groundwater contamination. Our obligations at this site occurred before the Filing Date and we believe they constitute pre-petition liabilities. Consequently, we have discontinued our work in connection with the RI/FS at OU 3 and informed the EPA that, as an unsecured creditor, it will receive notice of the bar date for filing a proof of claim.

Other Liabilities Related to Asbestos Claims

Until 2001, most of our asbestos-related claims were administered, defended and settled by the Center for Claims Resolution (the CCR), which settled claims for its member companies on a shared settlement cost basis. In that year, the CCR was reorganized and discontinued negotiating shared settlements. Since then, we have independently controlled our legal strategy and settlements using Peterson Asbestos Consulting Enterprise (PACE), a unit of Navigant Consulting, Inc., to administer our claims, bill our insurance carriers and assist us in claims negotiation and resolution. Some former CCR members defaulted on the payment of their shares of some of the CCR-negotiated settlements and some of the settling claimants have sought payment of the unpaid shares from Dana and the other companies that were members of the CCR at the time of the settlements. We have been working with the CCR, other former CCR members, our insurers and the claimants over a period of several years in an effort to resolve these issues. Through June 30, 2006, we had paid $47 to claimants and collected $29 from our insurance carriers with respect to these claims. At June 30, 2006, we had a net receivable of $13 that we expect to recover from available insurance and surety bonds relating to these claims. We are continuing to pursue insurance collections with respect to asbestos-related amounts paid prior to the filing of our bankruptcy petition.

Assumptions

The amounts we have recorded for contingent asbestos-related liabilities and recoveries are based on assumptions and estimates reasonably derived from our historical experience and current information. The actual amount of our liability for asbestos-related claims and the effect on us could differ materially from our current expectations if our assumptions about the outcome of the pending unresolved bodily injury claims, the volume and outcome of projected future bodily injury claims, the outcome of claims relating to the CCR-negotiated settlements, the costs to resolve these claims and the amount of available insurance and surety bonds prove to be incorrect, or if currently proposed U.S. federal legislation impacting asbestos personal injury claims is enacted. Although we have projected our liability for asbestos-related product liability claims that may be brought against us in the future based upon historical trend data that we deem to be reliable, there can be no assurance that our actual liability will not differ from what we currently project.

Note 13. Warranty Obligations

We record a liability for estimated warranty obligations at the time our products are sold. Adjustments are made as new information becomes available. Changes in our warranty liabilities are as follows:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
Balance, beginning of period		$	95			$	72			$	91			$	80
Amounts accrued for current period sales			10				7				25				15
Adjustments of prior accrual estimates			1				(2	)			1				(3	)
Change in accounting															(6	)
Settlements of warranty claims			(12	)			(11	)			(24	)			(19	)
Foreign currency translation			1				(1	)			2				(2	)
Balance, end of period		$	95			$	65			$	95			$	65

In June 2005, we changed our method of accounting for warranty liabilities from estimating the liability based on the credit issued to the customer to accounting for the warranty liabilities based on our costs to settle the claim. Management believes that this is a change to a preferable method in that it more accurately reflects the cost of settling the warranty liability. In accordance with generally accepted accounting principles, the $6 pre-tax cumulative effect of the change was effective as of January 1, 2005 and was reflected in the financial statements for the six months ended June 30, 2005. Warranty obligations that are not subject to compromise are reported as Other accrued liabilities in the condensed consolidated balance sheet.

Note 14. Divestitures, Discontinued Operations and Realignment of Operations

Divestitures

Dana Credit Corporation

DCC has been divesting its businesses and assets in accordance with plans originally announced in October 2001, and these activities continued during the first half of 2006 as DCC sold assets in individually structured transactions. DCC reduced its assets to $475 at June 30, 2006, primarily through asset sales and normal portfolio runoff, and we recognized after-tax gains and losses during the first half of 2005 and 2006 as shown in the table below.

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2006				2005				2006				2005
Asset reduction		$	35			$	115			$	85			$	190
After-tax gain (loss)		$	(1	)		$	3			$	(10	)		$	4

In February 2006, DCC signed a purchase and sale agreement to sell its remaining interest in a limited partnership that owns and operates a hotel, apartment and commercial complex. Accordingly, in the first quarter of 2006, DCC recorded a $14 provision to reduce the asset carrying value to $95, the fair value less cost to sell based upon the agreed selling price. An additional provision of $1 was recorded in the second quarter. The partnership also includes $55 of nonrecourse debt that will be assumed by the buyer at time of sale. As the transaction is expected to close by September 30, 2006, the investment and nonrecourse debt have been reclassified to current accounts.

Subsequent event — Dana Credit Corporation

Following Dana’s bankruptcy filing, the holders of the majority of the outstanding principal amount of DCC Notes formed an Ad Hoc Committee, which asserted that the DCC Notes became immediately due and payable as a result of the filing. DCC has been engaged in ongoing discussions with the Ad Hoc Committee regarding a forbearance agreement.

DCC and the Ad Hoc Committee are currently negotiating a forbearance agreement under which DCC will undertake to use commercially reasonable efforts to sell its lease and other portfolio assets over a period of 24 months and use the proceeds to make payments to the holders of the DCC Notes who agree to forbear. Accordingly, the sale of DCC’s assets could occur on a more expedited basis than had been previously anticipated and DCC would no longer expect to retain certain assets for extended periods of time. In that event, based on current market conditions, interest rates and other factors impacting the market value of DCC’s assets, we would expect to receive estimated asset sale proceeds in the range of $200 to $300 for DCC’s remaining assets, which have a net book value of $475. If and when a forbearance agreement is executed that results in a decision to sell these assets we would record an impairment based on the terms of the agreement and the fair value of the assets, less cost to sell. We would not recognize a tax benefit for this expected pre-tax loss because of the uncertainty about our ability to realize this tax benefit (see Note 11).

Discontinued Operations

The engine hard parts, fluid products and pump products businesses that we intend to divest in 2006 are aggregated and presented as discontinued operations. In the motions and affidavits presented to the Bankruptcy Court on the Filing Date, Dana advised the court of its plan to sell the discontinued operations, and the anticipated proceeds were included in the court-approved DIP Credit Agreement budget. Any final sale will be subject to Bankruptcy Court approval.

The results of the discontinued operations for the three and six months ended June 30, 2006 and 2005 are as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Sales		$	328			$	330			$	653			$	665
Cost of sales			307				308				607				625
Selling, general and administrative expenses			15				19				33				38
Other expense (income) , net			3				—				32				(1	)
Income (loss) before income taxes			3				3				(19	)			3
Income tax benefit			—				1				1				2
Income (loss) from discontinued operations		$	3			$	4			$	(18	)		$	5

In 2005, we had reduced the carrying value of certain businesses comprising our discontinued operations to fair value less costs to sell. During the first and second quarters of 2006, we monitored changes in both the expected proceeds and the underlying net assets to determine whether additional adjustments were appropriate. Capital expenditures and currency fluctuations combined caused net assets to increase in the second quarter after decreasing slightly in the first quarter. These businesses also experienced increases in raw material costs which reduced both the gross margins of the discontinued operations and the proceeds anticipated from the related divestitures. As a result of these changes, we recorded net non-cash adjustments in Other expense of $(3) and $21 in the three months and six months ended June 30, 2006 to adjust these assets to their fair value less costs to sell and we recorded transaction costs of $3 and $10. Tax benefits of these adjustments were $3 and $5 in the three months and six months ended June 30, 2006.

The assets and liabilities of discontinued operations reported in the condensed consolidated balance sheet as of June 30, 2006 and December 31, 2005 consisted of the following:

		June 30,				December 31,
		2006				2005
Assets of discontinued operations:
Accounts receivable		$	265			$	212
Inventories			134				141
Cash and other current assets			12				7
Goodwill			—				4
Investments and other assets			77				101
Investments in leases			7				8
Property, plant and equipment			21				48
Total assets of discontinued operations		$	516			$	521
Liabilities of discontinued operations
Accounts payable		$	113			$	123
Accrued payroll and employee benefits			41				40
Other current liabilities			29				30
Other noncurrent liabilities			8				8
Total liabilities of discontinued operations		$	191			$	201

In the condensed consolidated statement of cash flows, the cash flows of discontinued operations are not separately classified or aggregated. They are reported in the respective categories of the condensed consolidated statement of cash flows along with those of our continuing operations.

Realignment of Operations

The following summarizes the charges and payments for the realignment activity recorded in our continuing operations for the six months ended June 30, 2006:

		Employee
		Termination				Exit
		Benefits				Costs				Total
Balance at December 31, 2005		$	41			$	15			$	56
Activity during the quarter
Charges to expense			—				3				3
Adjustment of accrual			(1	)			(1	)			(2	)
Adjustments due to bankruptcy			—				(2	)			(2	)
Cash payments			(4	)			(2	)			(6	)
Balance at June 30, 2006		$	36			$	13			$	49

At June 30, 2006, $49 of restructuring charges remained in accrued liabilities. This balance was comprised of $36 for the reduction of approximately 1,350 employees to be completed in 2006 and $13 for lease terminations and other exit costs. The estimated annual cash expenditures will be approximately $19 for the remainder of 2006, $17 in 2007 and $13 thereafter.

Completion of realignment initiatives generally occurs over multiple reporting periods. In connection with the realignment initiatives that were approved and announced but had not yet been completed at June 30, 2006, we have expensed $89, including $3 in the six months ended June 30, 2006. In addition to the $49 accrued at June 30, 2006, we estimate that an additional $33 will be expensed in connection with the completion of the pending initiatives. The following table provides project-to-date and estimated future expenses for completion of our realignment initiatives by business unit.

		Expense Recognized
						Year-to-								Future
		Prior to				Date								Cost to
		2006				2006				Total				Complete
ASG		$	39			$	3			$	42			$	33
HVTSG			34				—				34				—
Corporate and other			13				—				13				—
Total		$	86			$	3			$	89			$	33

Subsequent event — Joint Venture Dissolution

In July 2006, Dana and Desc Automotriz, S.A. de C.V. (Desc) completed the dissolution of their Mexican joint venture, Spicer S.A. de C.V. As part of the dissolution, Dana assumed 100% ownership of the operations that manufacture and assemble axles, driveshafts, gears, forgings and castings in which we previously held an indirect 49% interest. Desc, in turn, assumed full ownership of the transmission and aftermarket gasket operations. We previously held a 51% interest in these operations. Along with exchanging our minority interest in the joint venture, Dana also made a cash payment of $19.5 to Desc. The five Mexico-based manufacturing operations of which Dana acquired full ownership had total sales of $296 in 2005, a substantial portion of which was to Dana. Dana expects to benefit from the addition of technologically advanced operations that support the core axle and driveshaft businesses, and from the manufacturing cost efficiencies that come from expanding our global presence in this key competitive location.

Note 15. Segments

We currently have three operating segments — two manufacturing business units (ASG and HVTSG) and one non-manufacturing business unit (DCC).

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting information about operating segments and related disclosures about products and services and geographic locations. SFAS No. 131 requires reporting on a single basis of segmentation. The components that management establishes for purposes of making decisions about an enterprise’s operating matters are referred to as “operating segments.”

Management evaluates the operating segments as if DCC were accounted for on the equity method of accounting rather than on the fully consolidated basis used for external reporting. This is done because DCC is not homogeneous with our manufacturing operations, its financing activities do not support the sales of our other operating segments and its financial and performance measures are inconsistent with those of our other operating segments. Moreover, the financial covenants contained in the DIP Credit Agreement are measured with DCC accounted for on an equity basis.

Operating profit after tax (OPAT) is the key internal measure of performance used by management as a measure of segment profitability. With the exception of DCC, OPAT represents earnings before interest and taxes (EBIT), tax effected at 39% (our estimated long-term effective rate), plus equity in earnings of affiliates. Net profit (loss), which is OPAT less allocated corporate expenses and net interest expense, provides a secondary measure of profitability for our segments that is more comparable to that of a free standing entity. The allocation is based on segment sales because it is readily calculable, easily understood and, we believe, provides a reasonable distribution of the various components of our corporate expenses among our diverse business units.

The accounting guidance does not permit the allocation of corporate expenses to discontinued operations and we have elected not to allocate interest expense to discontinued operations. Therefore, we have included the corporate expenses and interest expense previously allocated to the three ASG businesses held for sale in Other in the segment table below. These amounts totaled $6 and $6 in the three months ended June 30, 2006 and 2005 and $12 and $13 in the six months ended June 30, 2006 and 2005. We believe this avoids distorting the net profit (loss) previously reported for the remaining business units and presents amounts indicative of the reduced level of corporate expenses and interest expense anticipated following the sale of the three held-for-sale businesses.

The Other category also includes businesses unrelated to the segments, trailing liabilities for certain closed plants and the expense of corporate administrative functions. In addition, Other includes interest expense net of interest income, elimination of inter-segment income and adjustments to reflect the actual effective tax rate. In the Net Profit (Loss) column, Other includes the net profit or loss of businesses not assigned to the segments and certain divested businesses (but not discontinued operations), minority interest in earnings of unconsolidated affiliates and the tax differential.

Information used to evaluate our operating segments for the three months ended June 30, 2006 and 2005 is as follows:

						Inter-								Net
		External				Segment								Profit
2006		Sales				Sales				OPAT				(Loss)
ASG		$	1,526			$	33			$	48			$	21
HVTSG			767				3				27				8
DCC											8				8
			2,293				36				83				37
Other			7				12				(80	)			(34	)
Total continuing operations			2,300				48				3				3
Discontinued operations											3				3
Total operations											6				6
Reorganization items											(34	)			(34	)
Consolidated		$	2,300			$	48			$	(28	)		$	(28	)

2005
ASG		$	1,584			$	28			$	54			$	25
HVTSG			705				1				20				4
DCC											1				1
			2,289				29				75				30
Other			8				16				(49	)			(4	)
Total continuing operations			2,297				45				26				26
Discontinued operations											4				4
Total operations											30				30
Effect of change in accounting											—				—
Consolidated		$	2,297			$	45			$	30			$	30

Information used to evaluate our operating segments for the six months ended June 30, 2006 and 2005 is as follows:

						Inter-								Net
		External				Segment								Profit
2006		Sales				Sales				OPAT				(Loss)
ASG		$	3,000			$	64			$	77			$	20
HVTSG			1,485				4				47				11
DCC											1				1
			4,485				68				125				32
Other			12				24				(172	)			(79	)
Total continuing operations			4,497				92				(47	)			(47	)
Discontinued operations											(18	)			(18	)
Total operations											(65	)			(65	)
Reorganization items											(89	)			(89	)
Consolidated		$	4,497			$	92			$	(154	)		$	(154	)

2005
ASG		$	3,059			$	59			$	93			$	34
HVTSG			1,372				2				39				7
DCC											9				9
			4,431				61				141				50
Other			15				30				(104	)			(13	)
Total continuing operations			4,446				91				37				37
Discontinued operations											5				5
Total operations											42				42
Effect of change in accounting											4				4
Consolidated		$	4,446			$	91			$	46			$	46