Dana Corp. has to cut labor costs and retirement obligations in order to emerge from bankruptcy and compete with cheaper overseas suppliers, lawyers for the auto parts maker.

U.S. Bankruptcy Judge Burton Lifland urged the company and unions to negotiate more.

The Toledo, Ohio-based company asked a judge to allow it to reject collective bargaining agreements that cover about 5,200 active employees represented by the United Auto Workers and United Steelworkers. Dana also proposes eliminating retiree health benefits for all its union workers; it has already obtained court permission to do so for non-union active and retired workers.

"The gate is not closed, we're not at impasse and both parties, both sides should ardently avoid brinkmanship and continue to negotiate," Judge Burton Lifland said. "You have some time."

Dana, one of the largest auto parts makers in the world, filed for bankruptcy protection on March 3, 2006, amid pressure from American automakers to obtain price cuts from suppliers. Dana has said its U.S. operations has lost $2 billion (1.5 billion EUR) over the past five years.

Both the unions and the company say they would like to reach an agreement out of court. Lifland is expected to rule by the end of the month.

"Dana's strategic ploy is clear," union lawyer Bruce Simon said. "It seeks to obtain, through this process, bargaining leverage in pursuit of its strategic vision for reorganization."

Dana lawyer Jayton Tombe accused the unions of playing a game of brinksmanship, as the company seeks annual cost savings of $405 million (303 million EUR) to $540 million (404 million EUR). Of that total, $100 million (75 million EUR) to $150 million (112 million EUR) would come from cuts in retiree benefits and another $60 million (45 million EUR) to $90 million (67 million EUR) from labor costs.

"We urge them to return to the bargaining table," Tombe said in closing arguments that followed five days of hearings in the past few weeks.

About 50 union-represented Dana workers came to court Tuesday. The company proposal affects workers at plants in Elizabethtown, Kentucky; Auburn Hills, Michigan; Fort Wayne, Indiana, and Marion, Indiana. The company is separately discussing contracts that have expired at plants in Lima, Ohio, and Pottstown, Pennsylvania.

A significant portion of Dana's business making axle, driveshaft, frame and other car parts comes from carmakers such as Ford Motor Co., General Motors Corp. and DaimlerChrysler AG.

The company has stressed how cutting operating costs depends on moving manufacturing to countries such as Mexico, China or India. Dana has operations in the U.S., Mexico, Canada and 24 other countries.

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Author`s name Angela Antonova