Document 99Nyw6dEaywZ1ZKMpLGp565qe

Dana Corporation Page 65 of 176 Table of Contents $5, respectively. HVTSG's sales were favorably impacted by currency effects in Europe ($19), but unfavorably impacted in North America ($2) and South America ($12). Nearly all of the net divestiture impact on HVTSG sales in 2002 is attributable to the sale of the Chelsea power take-off business in July 2001. HVTSG's organic growth in 2002 is primarily attributable to higher commercial vehicle Class 8 production in 2002 (181,000 units) versus 2001 (146,000 units). In part, the 2002 production increase was due to customer pre-buy in advance of new diesel engine emission regulations that went into effect in October 2002. Other income for the year ended December 31, 2002 was $103, or $22 higher than in 2001. The increase in 2002 is attributable to higher reported gains from divestitures and asset sales in 2002 as compared to 2001. An analysis of our 2002 and 2001 gross and operating margins and selling, general and administrative expense is presented in the following table. Gross and Operating Margin Analysis Gross Margin %: ASG EFMG HVTSG Consolidated Selling, general and administrative expense %: ASG EFMG HVTSG Consolidated Operating margin %: ASG EFMG HVTSG Consolidated As a Percentage of Sales 2002 2001 Increase/ % (Decrease) Change 8.31% 11.77 10.43 9.29 7.68% 10.01 8.14 8.51 3.40 3.49 6.87 8.05 5.86 6.96 7.75 8.02 4.91 4.20 4.90 1.96 4.57 1.19 1.53 0.49 0.63% 1.76 2.29 0.78 (0.09) (1.18) (1.10) (0.27) 0.71 2.94 3.38 1.04 8% 18 28 9 (3) (15) (16) (3) 17 150 284 212 Gross margin for 2001 would improve to 8.9% on a pro forma basis if goodwill amortization were excluded. The improvement in gross margin in 2002 compared to the pro forma 2001 margin is attributable in part to our restructuring program announced in the fourth quarter of 2001. The restructuring program achieved substantial progress in 2002 and included the consolidation of a number of operations and the outsourcing of certain non-core production. Margin improvement in ASG and EFMG were also driven by higher levels of light vehicle production in 2002 (16.4 million units) as compared to 2001 (15.5 million units). Similarly, margin improvements in HVTSG resulted from higher commercial vehicle production levels. In the Class 8 market, 181,000 units were produced in 2002 versus 146,000 units in 2001. Selling, general and administrative (SG&A) expenses decreased in both absolute dollars ($18) and as http://www.sec.gov/Archives/edgar/data/26780/000095015204001384/105571ael0vk.htm 8/1/2004