March 8 (Bloomberg) -- Another tremor shook the U.S. auto industry on March 3 when Dana Corp., a 102-year-old parts manufacturer, filed for bankruptcy. The repercussions for U.S. automakers will be anything but positive.

Ford Motor Co. said it was moving to ensure that Dana's troubles don't hurt production of its vehicles, most notably the F150 truck, the automaker's most important model. Dana makes metal frames for the F150 at its Elizabethtown, Kentucky, plant.

Ford doesn't yet know how much Dana's bankruptcy might cost it. The automaker could be asked to lend the Toledo, Ohio-based supplier money, it might have to pay higher prices for parts or it might have to offer more generous payment terms.

Ford, General Motors Corp. and other U.S. automakers are getting a taste of their own medicine. Dana's woes reflect the constant pressure from automakers for lower prices and more flexible payment terms, which have been crushing one parts maker after another. Each time a supplier stumbles, the automakers must reach into their pockets.

``The demands made by domestic automakers on their suppliers have been excessive,'' said John Henke, a professor of marketing at Oakland University in Rochester Hills, Michigan. ``They haven't been concerned enough about suppliers' financial health, and it's come back to bite them.''

Henke conducts anonymous surveys of U.S. suppliers showing that relations between GM and Ford and their parts makers tend to be adversarial.

Need Each Other

The automakers need viable suppliers just as much as the parts makers need a vibrant auto industry.

From 2003 to 2006 Ford bailed out Visteon Corp., its one- time captive parts supplier, three times at a cost of more than $2.6 billion. GM has said it may spend as much as $12 billion to restructure bankrupt Delphi Corp., its former parts subsidiary. Both rescues were made even more expensive by virtue of earlier guarantees the automakers made to the United Auto Workers union.

Automakers weren't greedy in their demand for prices cuts. Rather, they were responding to declining market share and eroding profitability, and they pressed suppliers to reduce prices on pain of losing the business.

On occasion suppliers have fought back, refusing to ship parts. Most of the time, they capitulated.

The latest wave of supplier bankruptcies roiling the auto industry has turned the tables on the automakers. GM and Ford now are threatened with assembly interruption caused by parts shortages.

Shaky Ground

While the U.S. automakers have substantial hoards of cash, they nevertheless are on shaky ground. They've lost the investment-grade credit ratings that permitted them to raise capital at competitive rates. (Chrysler enjoys parent company DaimlerChrysler's BBB+ investment-grade credit rating.)

Thus, each time a supplier gets into trouble, GM and Ford move closer to their own day of reckoning. If GM and Ford's cash finally runs dry -- an outcome that investors and analysts are predicting -- they will have to borrow from lenders who will demand tough terms if they don't restructure and begin to show improved financial performance.

Will the showdown happen by the end of 2007? At the beginning of 2008? The answer depends partly on how long Detroit's cash holds out, how many suppliers fail, and how much the automakers must spend to prop them up.

It's no coincidence that GM is raising $2 billion cash by selling a 17 percent stake in Suzuki Motor Corp. of Japan. GM knows its current cash position of almost $20 billion isn't all that big in automotive terms and needs to be enlarged to forestall bankruptcy as long as possible as it tries to restructure.

Dana's Demise

Sean Egan, managing director of Egan-Jones Ratings Co. of Haverford, Pennsylvania, noted on March 3 that Dana had ``increasing difficulty in passing on production costs to Ford and the clincher was that its suppliers began demanding cash payments up front as early as last week.''

Michael Burns, Dana's chief executive officer, joined the company two years ago from GM, where he had been a senior executive in charge of European operations in his last job.

Burns left GM after leading an unsuccessful effort to gain market share and end financial losses on the continent. He also presided over a disastrous alliance with the automaking subsidiary of Fiat SpA, which cost GM $2 billion to end.

When Burns joined Dana the company had just suffered two years of net losses, spurned a hostile takeover from ArvinMeritor and trimmed its workforce by 20 percent. Analysts thought Burns's timing might be auspicious because Dana might start to benefit from the painful employee cuts.

But Dana was simply shrinking, not undergoing a deeper restructuring to ensure profitability. Most unfortunate was its dependence on the health of GM and Ford, customers whose difficulties are affecting everything and everyone they touch.

To contact the writer of this column: Doron Levin in Southfield, Michigan at dlevin5@bloomberg.net

Last Updated: March 8, 2006 00:05 EST