UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended: ~~September 30, 2016~~March 31, 2017

Commission File Number: 1-1063

Dana Incorporated

(Exact name of registrant as specified in its charter)



Delaware		26-1531856
(State of incorporation)		(IRS Employer Identification Number)

3939 Technology Drive, Maumee, OH		43537
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 887-3000

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 has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)			Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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

APPLICABLE ONLY TO CORPORATE ISSUERS:

There were ~~143,823,091~~144,559,475 shares of the registrant’s common stock outstanding at ~~October 7, 2016.~~April 21, 2017.

DANA INCORPORATED – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2016~~MARCH 31, 2017

TABLE OF CONTENTS



		10-Q Pages

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive Income (Unaudited)	4
	Consolidated Balance Sheet (Unaudited)	5
	Consolidated Statement of Cash Flows (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3	Quantitative and Qualitative Disclosures About Market Risk	4544

Item 4	Controls and Procedures	4644

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	4645

Item 1A	Risk Factors	4645

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4645

Item 6	Exhibits	4645

Signatures		4746
Exhibit Index		4847

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Incorporated

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2016		2015			2016			2015			2017			2016
Net sales	$	1,384	$	1,468		$	4,379		$	4,685		$	1,701		$	1,449
Costs and expenses
Cost of sales	1,176		1,255			3,739			4,008			1,438			1,250
Selling, general and administrative expenses	99		98			303			299			121			98
Amortization of intangibles	2		4			6			13			2			2
Restructuring charges, net	17		1			23			13			2			1
Impairment of long-lived assets			(36		)				(36		)
Loss on extinguishment of debt						(17		)	(2		)
Other income, net	9		2			17			18
Income before interest expense and income taxes	99		76			308			332
Other expense, net												(9		)	(2		)
Income before interest and income taxes												129			96
Interest income												3			3
Interest expense	27		31			84			86			27			27
Income before income taxes	72		45			224			246			105			72
Income tax expense (benefit)	13		(77		)	66			(10		)
Income tax expense												30			24
Equity in earnings of affiliates	2		—			6			3			5
Net income	61		122			164			259			80			48
Less: Noncontrolling interests net income	4		3			9			18			5			3
Less: Redeemable noncontrolling interest net income
Net income attributable to the parent company	$	57	$	119		$	155		$	241		$	75		$	45

Net income per share attributable to the parent company
Basic	$	0.40	$	0.75		$	1.06		$	1.49		$	0.52		$	0.30
Diluted	$	0.39	$	0.75		$	1.05		$	1.48		$	0.51		$	0.30

Weighted-average shares outstanding - Basic	144.0		158.0			146.7			161.6
Weighted-average shares outstanding - Diluted	144.6		158.9			147.1			162.7
Weighted-average common shares outstanding
Basic												144.6			149.4
Diluted												145.9			149.9

Cash dividends declared per share	$	0.06	$	0.06		$	0.18		$	0.17		$	0.06		$	0.06

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

Dana Incorporated

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017			2016
Net income	$	61		$	122		$	164		$	259		$	80		$	48
Less: Noncontrolling interests net income	4			3			9			18
Net income attributable to the parent company	57			119			155			241

Other comprehensive income (loss) attributable to the parent company, net of tax:
Other comprehensive income (loss), net of tax:
Currency translation adjustments	(8		)	(66		)	(3		)	(151		)	30			30
Hedging gains and losses	(11		)	1			(21		)	3			(4		)	3
Investment and other gains and losses	(5		)	(5		)	(2		)	(5		)				2
Defined benefit plans				17			13			40			5			7
Other comprehensive loss attributable to the parent company	(24		)	(53		)	(13		)	(113		)

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax:
Currency translation adjustments				(3		)	1			(5		)
Defined benefit plans										1
Other comprehensive income (loss) attributable to noncontrolling interests	—			(3		)	1			(4		)

Total comprehensive income attributable to the parent company	33			66			142			128
Total comprehensive income attributable to noncontrolling interests	4			—			10			14
Other comprehensive income													31			42
Total comprehensive income	$	37		$	66		$	152		$	142		111			90
Less: Comprehensive income attributable to noncontrolling interests													(7		)	(4		)
Less: Comprehensive loss attributable to redeemable noncontrolling interest													1
Comprehensive income attributable to the parent company													$	105		$	86

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

Dana Incorporated

Consolidated Balance Sheet (Unaudited)

(In millions, except share and per share amounts)


	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Assets
Current assets
Cash and cash equivalents	$	727		$	791		$	423		$	707
Marketable securities	126			162			31			30
Accounts receivable
Trade, less allowance for doubtful accounts of $6 in 2016 and $5 in 2015	802			673
Trade, less allowance for doubtful accounts of $7 in 2017 and $6 in 2016							1,009			721
Other	150			115			129			110
Inventories
Raw materials	331			303			376			321
Work in process and finished goods	365			322			438			317
Other current assets	140			108			98			78
Total current assets	2,641			2,474			2,504			2,284
Goodwill	89			80			134			90
Intangibles	108			102			180			109
Deferred tax assets							578			588
Other noncurrent assets	345			353			60			226
Investments in affiliates	147			150			158			150
Property, plant and equipment, net	1,283			1,167			1,676			1,413
Total assets	$	4,613		$	4,326		$	5,290		$	4,860

Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt	$	50		$	22		$	213		$	69
Accounts payable	833			712			1,028			819
Accrued payroll and employee benefits	147			145			150			149
Taxes on income	20			19			22			15
Other accrued liabilities	202			193			203			201
Total current liabilities	1,252			1,091			1,616			1,253
Long-term debt, less debt issuance costs of $23 in 2016 and $21 in 2015	1,615			1,553
Long-term debt, less debt issuance costs of $20 in 2017 and $21 in 2016							1,623			1,595
Pension and postretirement obligations	508			521			569			565
Other noncurrent liabilities	368			330			255			205
Total liabilities	3,743			3,495			4,063			3,618
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)
Redeemable noncontrolling interest							44
Parent company stockholders' equity
Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding	—			—			—			—
Common stock, 450,000,000 shares authorized, $0.01 par value, 143,813,145 and 150,068,040 shares outstanding	2			2
Common stock, 450,000,000 shares authorized, $0.01 par value, 144,541,593 and 143,938,280 shares outstanding							2			2
Additional paid-in capital	2,322			2,311			2,334			2,327
Accumulated deficit	(281		)	(410		)
Treasury stock, at cost (6,810,678 and 23,963 shares)	(83		)	(1		)
Retained earnings							82			195
Treasury stock, at cost (6,957,065 and 6,812,784 shares)							(86		)	(83		)
Accumulated other comprehensive loss	(1,187		)	(1,174		)	(1,254		)	(1,284		)
Total parent company stockholders' equity	773			728			1,078			1,157
Noncontrolling equity	97			103
Noncontrolling interests							105			85
Total equity	870			831			1,183			1,242
Total liabilities and equity	$	4,613		$	4,326		$	5,290		$	4,860

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

Dana Incorporated

Consolidated Statement of Cash Flows (Unaudited)

(In millions)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2017			2016
Operating activities
Net income	$	164		$	259		$	80		$	48
Depreciation	129			117			49			41
Amortization of intangibles	7			14			3			2
Amortization of deferred financing charges	4			3			1			1
Call premium on senior notes	12			2
Write-off of deferred financing costs	5			1
Earnings of affiliates, net of dividends received	3			12			(5		)	2
Stock compensation expense	11			14			4			2
Deferred income taxes	1			(97		)	10			4
Pension contributions, net	(12		)	(14		)	(2		)	(7		)
Impairment of long-lived assets				36
Change in working capital	(142		)	(92		)	(133		)	(128		)
Other, net				11			4			8
Net cash provided by operating activities	182			266
Net cash provided by (used in) operating activities							11			(27		)

Investing activities
Purchases of property, plant and equipment	(198		)	(192		)	(96		)	(71		)
Acquisition of business	(18		)
Acquisition of businesses, net of cash acquired							(184		)	(18		)
Purchases of marketable securities	(41		)	(29		)	(11		)	(12		)
Proceeds from sales of marketable securities	47			15						3
Proceeds from maturities of marketable securities	33			21			13			8
Other	(10		)	(3		)	(4		)	(2		)
Net cash used in investing activities	(187		)	(188		)	(282		)	(92		)

Financing activities
Net change in short-term debt	14			3			(1		)	11
Repayment of letters of credit				(4		)
Proceeds from long-term debt	441			18						32
Repayment of long-term debt	(378		)	(59		)	(17		)	(24		)
Call premium on senior notes	(12		)	(2		)
Deferred financing payments	(10		)
Dividends paid to common stockholders	(26		)	(27		)	(9		)	(9		)
Distributions to noncontrolling interests	(16		)	(8		)	(1		)	(1		)
Repurchases of common stock	(81		)	(245		)				(28		)
Other	(4		)	6			2			(1		)
Net cash used in financing activities	(72		)	(318		)	(26		)	(20		)

Net decrease in cash and cash equivalents	(77		)	(240		)	(297		)	(139		)
Cash and cash equivalents – beginning of period	791			1,121			707			791
Effect of exchange rate changes on cash balances	13			(64		)	13			17
Cash and cash equivalents – end of period	$	727		$	817		$	423		$	669

Non-cash investing activity
Purchases of property, plant and equipment held in accounts payable							$	106		$	45

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

Dana Incorporated

Index to Notes to Consolidated Financial Statements



1.	Organization and Summary of Significant Accounting Policies

2.	Acquisitions

3.	Disposal Groups ~~and Impairment of Long-Lived Assets~~

4.	Goodwill and Other Intangible Assets

5.	Restructuring of Operations

6.	Stockholders' Equity

7.	Redeemable Noncontrolling Interest

8.	Earnings per Share

8.9.	Stock Compensation

9.10.	Pension and Postretirement Benefit Plans

~~10.~~11.	Marketable Securities

~~11.~~12.	Financing Agreements

~~12.~~13.	Fair Value Measurements and Derivatives

~~13.~~14.	Commitments and Contingencies

~~14.~~15.	Warranty Obligations

~~15.~~16.	Income Taxes

~~16.~~17.	Other ~~Income,~~Expense, Net

~~17.~~18.	Segments

~~18.~~19.	Equity Affiliates

Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

Note 1. Organization and Summary of Significant Accounting Policies

General

~~Effective August 1, 2016, Dana Holding Corporation changed its legal name to Dana Incorporated.~~ Dana Incorporated (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a global provider of high technology driveline (axles, driveshafts and transmissions), sealing and thermal-management products our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.

The terms "Dana," "we," "our" and "us," when used in this report, are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.

Summary of significant accounting policies

Basis of presentation — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our ~~2015~~2016 Form 10-K.

InWe have added the ~~third quarter of 2016, we identified an error attributable to our second quarter 2016 calculation of cash used for purchases of property, plant~~subtotal "Income before interest and equipment. While the error had no impact on the total net cash flows presented for the period it did result in a misclassification between net cash provided by operating activities and net cash used in investing activities. Purchases of property, plant and equipment previously presented for the six months ended June 30, 2016 should have been $18 lower with a corresponding offset to the change in working capital. Based on our assessments of qualitative and quantitative factors, the error and related impacts were not considered to be materialincome taxes" to our consolidated ~~financial statements in Item 1~~statement of ~~Part I~~operations. Interest income, interest expense and loss on extinguishment of ~~our June 30, 2016 Form 10-Q. Purchases of property, plant and equipment and change in working capital for~~debt are presented below the ~~six months ended June 30, 2016, will be revised to reflect~~new subtotal but above the ~~correction when presented as the comparable period in our June 30, 2017 Form 10-Q. At September 30, 2016 and September 30, 2015, we had $82 and $42 of purchases of property, plant and equipment~~subtotal "Income before income taxes." Interest income was previously included in ~~accounts payable.~~

~~In the first quarter of 2015, we identified an error attributable~~Other expense, net. Prior year amounts have been reclassified to conform to the calculation of noncontrolling interests net income of a subsidiary. The error resulted in an understatement of noncontrolling equity and noncontrolling interests net income and a corresponding overstatement of parent company stockholders' equity and net income attributable to the parent company in prior periods. Based on our assessments of qualitative and quantitative factors, the error and related impacts were not considered material to the financial statements of the prior periods to which they relate. The error was corrected in March 2015 by increasing noncontrolling interests net income by $9. The correction was not considered material to our 2015 net income attributable to the parent company.2017 presentation.

Recently adopted accounting pronouncements

In ~~March~~October 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-16, Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory,guidance ~~intended~~that simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. GAAP had prohibited the recognition in earnings of current and deferred income taxes for an intra-entity transfer until the asset was sold to ~~simplify various aspects~~an outside party or recovered through use. This amendment simplifies the accounting by requiring entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance, which requires modified retrospective application, becomes effective January 1, 2018 with early adoption permitted in 2017 prior to the issuance of interim financial statements. We adopted this guidance effective January 1, 2017. The adoption of the new guidance resulted in a decrease in Other current assets of $10, a decrease in Other noncurrent assets of $169 and a decrease in Retained earnings at January 1, 2017 of $179.

We also adopted the following standards during the first quarter of 2017, none of which had a material impact on our financial statements or financial statement disclosures:



Standard		Effective Date
2016-07	Investments – Equity Method and Joint Ventures – Simplifying the Transition to the Equity Method of Accounting	January 1, 2017
2016-06	Derivatives and Hedging – Contingent Put and Call Options in Debt Instruments	January 1, 2017
2016-05	Derivatives and Hedging – Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships	January 1, 2017
2015-11	Inventory – Simplifying the Measurement of Inventory	January 1, 2017

Recently issued accounting pronouncements

In March 2017, the FASB issued ASU 2017-07, Retirement Benefits – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, guidance that requires entities to present the service cost component of net

periodic pension cost and net periodic postretirement benefit cost in the income statement line items where they report compensation cost. Entities will present all other components of net benefit cost outside operating income, if this subtotal is presented. The rules related to the timing of when costs are recognized or how ~~share-based payments~~they are ~~accounted~~measured have not changed. This amendment only impacts where those costs are reflected within the income statement. In addition, only the service cost component will be eligible for capitalization in inventory and ~~presented~~other assets. This guidance becomes effective January 1, 2018. Early adoption is permitted. We do not expect this guidance to have a material impact on our consolidated financial statements in the near term as the service components and related net periodic benefit costs are not significantly different.

In January 2017, the FASB issued ASU 2017-04, Goodwill – Simplifying the Test for Goodwill Impairment, guidance that simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 of the goodwill impairment test. The new guidance quantifies goodwill impairment as the amount by which the carrying amount of a reporting unit, including goodwill, exceeds its fair value, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit. This guidance becomes effective January 1, 2020 and will be applied on a prospective basis. Early adoption is permitted for impairment tests performed after January 1, 2017. We do not expect the adoption of this guidance to impact our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations – Clarifying the Definition of a Business, guidance that revises the definition of a business. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill impairment and consolidation. When substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the asset acquired would not represent a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present. This guidance becomes effective January 1, 2018. Early adoption is permitted.

In November 2016, the FASB released ASU 2016-18, Statement of Cash Flows – Restricted Cash, guidance that addresses ~~income tax effects of share-based payments, tax withholding requirements, recognition for forfeitures~~the diversity in practice in the classification and presentation ~~requirements~~of changes in restricted cash on the statement of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance becomes effective January 1, ~~2017 with earlier adoption permitted. We elected to adopt the new~~2018 and must be applied on a retrospective basis. This guidance in the third quarter of 2016, requiring us to reflect any adjustments as of January 1, 2016 in retained earnings. The primary impact of adopting the new guidance was an increase in deferred tax assets of $32 related to the cumulative excess tax benefits resulting from share-based payments. Previous guidance resulted in credits to equity for such tax benefits and delayed recognition until the tax benefits reduced income taxes payable. Because we continue to carry a valuation allowance against certain of our deferred tax assets in the U.S., the increase in deferred tax assets was offset by an increase in our valuation allowance of $32, resulting in no impact to retained earnings as of January 1, 2016. With respect to other provisions in the new guidance, our plans currently dois not ~~permit tax withholdings in excess of the statutory minimums and we have elected to continue estimating forfeitures~~ expected to ~~occur when determining the amount of compensation cost to be recognized in each period. The presentation requirements for cash flows under the new standard had no~~have a material impact on our consolidated statement of cash flows.

In September 2015, the FASB issued an amendment that eliminates the requirement to restate prior period financial statements for measurement period adjustments in accounting for business combinations. Entities must recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This guidance became effective January 1, 2016 and requires prospective application to qualifying business combinations.

In May 2015, the FASB issued guidance that modifies disclosures related to investments for which fair value is measured using the net asset value (or its equivalent) per share practical expedient by eliminating the requirement to categorize such assets under the fair value hierarchy. The new guidance also eliminates the requirement to include in certain disclosures those investments that are merely eligible to be measured using the practical expedient, limiting the disclosures to those investments actually valued under that approach. This guidance became effective January 1, 2016 and requires retrospective application. We believe that this guidance will result in substantially all of the hedge fund of funds and real estate investments held by our pension plans being removed from the fair value hierarchy within our year-end pension disclosures.

In April 2015, the FASB issued an amendment to provide explicit guidance about a customer's accounting for fees paid in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer must account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, then the customer must account for the arrangement as a service contract. We adopted the new guidance effective January 1, 2016. Applying the amendment to all arrangements entered into or materially modified after the effective date did not have an impact on our consolidated financial statements.

In April 2015, the FASB issued guidance to provide for a practical expedient that permits an entity to measure defined benefit plan assets and obligations as of the month end that is closest to the date of a significant event, such as a plan amendment, settlement or curtailment, that calls for a remeasurement in accordance with existing requirements. An entity is required to disclose the accounting policy election and the date used to measure defined benefit plan assets and obligations. The new guidance was effective January 1, 2016 and did not impact our consolidated financial statements.

In February 2015, the FASB released updated consolidation guidance that entities must use to evaluate specific ownership and contractual arrangements that lead to a consolidation conclusion. The updates could change consolidation outcomes affecting presentation and disclosures. The new guidance was effective January 1, 2016 and did not impact our consolidated financial statements.

In June 2014, the FASB issued guidance to provide clarity on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of a share-based payment award. Generally, an award with a performance target also requires an employee to render service until the performance target is achieved. In some cases, however, the terms of an award may provide that the performance target could be achieved after an employee completes the requisite service period. The amendment requires that a performance target that affects vesting and extends beyond the end of the service period be treated as a performance condition and not as a factor in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The new guidance was effective January 1, 2016 and did not impact our consolidated financial statements.

~~Recently issued accounting pronouncements~~

In August 2016, the FASB released ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, guidance intended to reduce diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. This guidance becomes effective January 1, 2018 and ismust be applied on a retrospective basis. This guidance is not expected to have a material impact on our consolidated statement of cash flows.

In June 2016, the FASB issuedASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments, new guidance for the accounting for credit losses on certain financial instruments. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. This guidance, which becomes effective January 1, 2020, is not expected to have a material impact on our consolidated financial statements.

In March 2016, the FASB issued simplification guidance to eliminate the requirement for an entity to retrospectively apply the equity method of accounting upon obtaining significant influence over an investment that it previously accounted for under the cost basis or at fair value. That is, it is no longer required to restate all periods as if the equity method had been in effect during all previous periods that the investment had been held. The guidance applies to covered transactions that occur after

~~December 31, 2016. Early adoption is permitted. The significance of this guidance for us is dependent on any qualifying future investments.~~

In March 2016, the FASB issued guidance that simplifies the embedded derivative analysis for debt instruments containing contingent call or put options. The amendment clarifies that an exercise contingency does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. That is, a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency. This guidance becomes effective January 1, 2017 and must be applied on a modified retrospective basis to all existing and future debt instruments. Early adoption is permitted. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

In March 2016, the FASB issued guidance that clarifies the hedge accounting impact when there is a change in one of the counterparties to a derivative contract. The new guidance clarifies that a change in the counterparty to a derivative contract by itself does not require the dedesignation of a hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance becomes effective January 1, 2018 and can be applied on either a prospective basis or a modified retrospective basis. Early adoption is permitted. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements.

In February 2016, the FASB issuedASU 2016-02, Leases, its new lease accounting standard. The primary focus of the standard ~~addresses~~is on the accounting by lessees. This standard requires ~~all~~ lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease) on the balance sheet. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern in the income statement. Quantitative and qualitative disclosures are required to provide insight into the extent of revenue and expense recognized and expected to be recognized from leasing arrangements. Approximately three-fourths of our global lease portfolio represents leases of real estate, including manufacturing, assembly and office facilities, while the remainder represents leases of personal property, including manufacturing, material handling and IT equipment. Many factors will impact the ultimate measurement of the lease obligation to be recognized upon adoption, including our assessment of the likelihood of renewal of leases that provide such an option. We continue to evaluate the impact this guidance will have on our consolidated financial statements. This guidance becomes effective January 1, ~~2019. Early~~2019 with early adoption is permitted.

In January 2016, the FASB issuedASU 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities, an amendment that addresses the recognition, measurement, presentation and disclosure of certain financial instruments. Investments in equity securities currently classified as available-for-sale and carried at fair value, with changes in fair value reported in other comprehensive income (OCI), will be carried at fair value determined on an exit

price notion and changes in fair value will be reported in net income. The new guidance also affects the assessment of deferred tax assets related to available-for-sale securities, the accounting for liabilities for which the fair value option is elected and the disclosures of financial assets and financial liabilities in the notes to the financial statements. This guidance, which becomes effective January 1, 2018, is not expected to have a material impact on our consolidated financial statements.

In November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. This amendment simplifies the presentation to require that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction. The change to noncurrent classification will have an impact on working capital. This guidance becomes effective January 1, 2017 and allows for prospective or retrospective application, with appropriate disclosures. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and expect to complete out assessment and early adopt the guidance in the fourth quarter of 2016.

In July 2015, the FASB issued an amendment that changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. This amendment only addresses the measurement of inventory if its value declines or is impaired. The guidance on determining the cost of inventory is not being amended. This guidance becomes effective January 1, 2017 and requires prospective application. Early adoption is permitted. Adoption of this guidance will have no impact on our consolidated financial statements.

In May 2014, the FASB issuedASU 2014-09, Revenue – Revenue from Contracts with Customers, guidance that requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in amounts that reflect the consideration a company expects to be entitled to in exchange for those goods or services. The new guidance will also require new disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB adopted a one-year deferral of this guidance. In March 2016, the FASB issued an amendment to clarify the principal versus agent assessment in a revenue transaction. In April 2016, the FASB finalized amendments on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB finalized amendments on collectibility, noncash consideration, presentation of sales tax and transition. This guidance will be effective January 1, 2018 ~~with the option to adopt the standard as~~

~~of the original January 1, 2017 effective date.~~for Dana. The guidance allows for either a full retrospective or a modified retrospective transition method. We are ~~currently~~in the process of assessing our customer contracts, identifying contractual provisions that may result in a change in the timing or the amount of revenue recognized in comparison with current guidance, as well as assessing the enhanced disclosure requirements of the new guidance. Under current guidance we generally recognize revenue when products are shipped and risk of loss has transferred to the customer. Under the proposed requirements, the customized nature of some of our products and contractual provisions in many of our customer contracts that provide us with an enforceable right to payment, may require us to recognize revenue prior to the product being shipped to the customer. We are also assessing pricing provisions contained in certain of our customer contracts. Pricing provisions contained in some of our customer contracts represent variable consideration or may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. In addition, we are evaluating how the new guidance may impact our accounting for customer tooling, engineering and design services and pre-production costs. We continue to evaluate the impact this guidance will have on our ~~consolidated~~ financial statements.

Note 2. Acquisitions

USM – Warren — On March 1, 2017, we acquired certain assets and liabilities relating to the Warren, Michigan production unit of U.S. Manufacturing Corporation (USM). The production unit acquired is in the business of manufacturing axle housings, extruded tubular products and machined components for the automotive industry. The acquisition will increase Dana's revenue from light and commercial vehicle manufacturers and will vertically integrate a significant element of Dana's supply chain. It also provides Dana with new lightweight product and process technologies.

USM contributed certain assets and liabilities relating to its Warren, Michigan production unit to Warren Manufacturing LLC (USM – Warren), a newly created legal entity, and Dana acquired all of the company units of USM – Warren. The company units were acquired by Dana free and clear of any liens. We paid $104 at closing, including $25 to effectively settle trade payable obligations originating from product purchases Dana made from USM prior to the acquisition, and have recorded a receivable of$1 to reflect purchase price adjustments determined under the terms of the agreement. The acquisition has been accounted for as a business combination. The purchase consideration and the preliminary allocation to the acquisition date fair values of the assets acquired are presented in the following table:



Total purchase consideration	$	78

Accounts receivable - Trade	17
Inventories	9
Other current assets	4
Goodwill	4
Intangibles	33
Property, plant and equipment	50
Accounts payable	(35		)
Accrued payroll and employee benefits	(3		)
Other accrued liabilities	(1		)
Total purchase consideration allocation	$	78

The purchase consideration and fair value of the assets acquired and liabilities assumed are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to property, plant and equipment and intangibles.

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is deductible for tax purposes. Intangibles includes $30 allocated to customer relationships and $3 allocated to developed technology. We used the relief from royalty method, an income approach, to value developed technology. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement cost method to value fixed assets. The developed technology and customer relationship intangible assets are being amortized on a straight-line basis over eighteen and eleven years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from one to twelve years.

The results of operations of the business are reported in our Light Vehicle operating segment from the date of acquisition. As a result of the acquisition, we incurred transaction related expenses totaling $1, which were charged to Other expense, net. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements are presented. During the first quarter of 2017, the business contributed sales of $11 and a de minimis net loss.

BFP and BPT —On February 1, 2017, we acquired 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment product portfolio to include technologies for tracked vehicles, doubling our addressable market for off-highway driveline systems and establishing Dana as the only off-highway solutions provider that can manage the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial-vehicle end markets, helping to accelerate our hybridization and electrification initiatives.

We paid $181 at closing, using cash on hand, and intend to refinance debt assumed in the transaction during the first half of 2017. The purchase price is subject to adjustment upon determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date. The terms of the agreement provide Dana the right to call half of Brevini’s noncontrolling interests in BFP and BPT, and Brevini the right to put half of its noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call right, after the 2017 BFP and BPT financial statements have been approved by the board of directors. Further, Dana has the right to call Brevini’s remaining noncontrolling interests in BFP and BPT, and Brevini the right to put its remaining noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call right, after the 2019 BFP and BPT financial statements have been approved by the board of directors. The call and put prices are based on the amount Dana paid to acquire its initial 80% interest in BFP and BPT subject to adjustment based on the actual EBITDA and free cash flows, as defined in the agreement, of BFP and BPT.



Total purchase consideration	$	181

Cash and cash equivalents	$	75
Accounts receivable - Trade	74
Accounts receivable - Other	10
Inventories	137
Other current assets	6
Goodwill	39
Intangibles	41
Deferred tax assets	1
Other noncurrent assets	4
Property, plant and equipment	146
Notes payable, including current portion of long-term debt	(131		)
Accounts payable	(51		)
Accrued payroll and employee benefits	(14		)
Other accrued liabilities	(19		)
Long-term debt	(51		)
Pension and postretirement obligations	(12		)
Other noncurrent liabilities	(15		)
Redeemable noncontrolling interest	(45		)
Noncontrolling interests	(14		)
Total purchase consideration allocation	$	181

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce, is not deductible for tax purposes and will be assigned to and evaluated for impairment at the operating segment level. Intangibles includes $29 allocated to customer relationships and $12 allocated to trademarks and trade names. We used the multi-period excess earnings method, an income approach, to value the customer relationships. We used the relief from royalty method, an income approach, to value customer trademarks and trade names. We used a replacement cost method to value fixed assets. We used a discounted cash flow approach to value the redeemable noncontrolling interests, inclusive of the put and call provisions. We used both discounted cash flow and cost approaches to value the noncontrolling interests. The customer relationships and trademarks and trade names intangible assets are being amortized on a straight-line basis over 17 years, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to 30 years.

The results of operations of the businesses are reported in our Off-Highway operating segment from the date of acquisition. As a result of the acquisition, we incurred transaction related expenses totaling $6, which were charged to Other expense, net. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements are presented. During the first quarter of 2017, the businesses contributed sales of $69 and a net loss of $2.

SIFCO —On December 23, 2016, we acquired strategic assets of SIFCO S.A.'s (SIFCO) commercial vehicle steer axle systems and related forged components businesses. The acquisition enables us to enhance our vertically integrated supply chain, which will further improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of sophisticated forged components. In addition to strengthening our position as a central source for products that use forged and machined parts throughout the region, this acquisition enables us to better accommodate the local content requirements of our customers, which reduces their import and other region-specific costs.

SIFCO contributed the strategic assets to SJT Forjaria Ltda., a newly created legal entity, and Dana acquired all of the issued and outstanding quotas of SJT Forjaria Ltda. The strategic assets were acquired by Dana free and clear of any liens, claims or encumbrances. The acquisition was funded using cash on hand and has been accounted for as a business combination. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired are presented in the following table:



Purchase price, cash consideration	$	60
Purchase price, deferred consideration	9
Total purchase consideration	$	69

Accounts receivable - Trade	$	1
Accounts receivable - Other	1
Inventories	10
Goodwill	6
Intangibles	3
Property, plant and equipment	59
Accounts payable	(2		)
Accrued payroll and employee benefits	(9		)
Total purchase consideration allocation	$	69

Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce, and is deductible for tax purposes. Intangibles includes $2 allocated to developed technology and $1 allocated to trade names. We used the relief from royalty method, an income approach, to value developed technology and trade

names. We used a replacement cost method to value fixed assets. The developed technology and trade name intangible assets are being amortized on a straight-line basis over seven and five years respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to ten years.

The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. As a result of the acquisition, we incurred transaction related expenses totaling $5 during 2016, which were charged to Other expense, net. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements are presented.

Magnum — On January 29, 2016, we acquired the aftermarket distribution business of Magnum^® Gaskets (Magnum), a U.S.-based supplier of gaskets and sealing products for automotive and commercial-vehicle applications, for a purchase price of $18 at closing and additional cash payments of up to $2 contingent upon the achievement of certain sales metrics over a future two-year period. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $1. Assets acquired included trademarks and trade names, customer relationships and goodwill. The results of operations of Magnum are reported within our Power Technologies operating segment. We acquired Magnum using cash on hand. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements ~~were~~are presented.

Note 3. Disposal Groups

Divestiture of Dana Companies —On December 30, 2016, we completed the divestiture of Dana Companies, LLC (DCLLC), a consolidated wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and ~~Impairment of Long-Lived Assets~~

~~Disposal of operations in Venezuela~~ — ~~In December 2014, we entered~~manage personal injury asbestos claims retained by the reorganized Dana Corporation which was merged into an agreement to divest our Light Vehicle operations in Venezuela (the disposal group) to an unaffiliated company for no consideration. Upon classification of the disposal group as held for sale in December 2014, we recognized an $80 loss to adjust the carrying value of theDCLLC. DCLLC had net assets of ~~our operations~~$165 at the time of sale including cash and cash equivalents, marketable securities and rights to insurance coverage in ~~Venezuela~~place to ~~fair value less cost~~satisfy a significant portion of its liabilities. We received cash proceeds of $88 – $29 net of cash divested – with $3 retained by the purchaser subject to ~~sell.~~the satisfaction of certain future conditions that we expect will be achieved in 2017. We recognized a pre-tax loss of $77 in 2016 upon completion of the transaction. In the event the conditions associated with the retained purchase price of $3 are satisfied in the future, income of $3 will be recognized at such time. Following completion of the sale, Dana has no obligation with respect to current or future asbestos claims.

~~Upon completion~~Divestiture of Nippon Reinz — On November 30, 2016, we sold our 53.7% interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to Nichias Corporation. Dana received net cash proceeds of $5 and recognized a pre-tax loss of $3 on the divestiture of Nippon Reinz, inclusive of the ~~disposal group in January 2015, we recognized a~~$12 gain ~~of $5~~ on ~~the~~ derecognition of the noncontrolling interest in a former Venezuelan subsidiary in other income, net. We also credited other comprehensive loss attributable to the parent for $10 and other comprehensive loss attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in accumulated other comprehensive loss.

~~Impairment of long-lived assets~~ — On February 1, 2011, we entered into an agreement with SIFCO S.A. (SIFCO), a leading producer of steer axles and forged components in South America. In return for payment of $150 to SIFCO, we acquired the distribution rights to SIFCO's commercial vehicle steer axle systems as well as an exclusive long-term supply agreement for key driveline components. Our Commercial Vehicle operating segmentinterest. Nippon Reinz had sales ~~attributable to SIFCO supplied axles and parts~~ of ~~$98 and $225~~$42 in ~~2015 and 2014.~~2016 through the transaction date.

This agreement was accounted for as a business combination for financial reporting purposes. The aggregate fair value of the net assets acquired were allocated primarily to the exclusivity provisions of the supply agreement as a contract-based intangible asset and recorded within our Commercial Vehicle operating segment. Fair value was also allocated to fixed assets and an embedded lease obligation. The intangible asset was being amortized and the fixed assets were being depreciated on a straight-line basis over ten years. The embedded lease obligation was being amortized using the effective interest method over the ten-year useful lives of the related fixed assets.

On April 22, 2014, SIFCO and affiliated companies filed for judicial reorganization before Bankruptcy Court in São Paulo, Brazil and an ancillary Chapter 15 proceeding before the Bankruptcy Court of the Southern District of New York. The Brazilian bankruptcy case has subsequently been moved to the 5th Lower Civil Court in the Judicial District of Jundiai, the location of SIFCO's principal operations. Until the third quarter of 2015, SIFCO complied with the terms of the supply agreement. In August 2015, SIFCO discontinued production of our orders and failed to comply with provisions of the supply agreement. We obtained a judicial injunction requiring that SIFCO release any finished product in their possession that was produced pursuant to the supply agreement, resume production and parts supply pursuant to the terms of the supply agreement and cease communications with our customers regarding direct sale of parts. SIFCO contested the injunction we obtained, without success, and refused to comply with the injunction. Through a judicial seizure order issued on September 9, 2015, we were successful in obtaining the release of the finished product.

Based on SIFCO's refusal to comply with the terms of the supply agreement and the court injunctions as noted above, we believed that the carrying amount of the contract-based intangible asset was not recoverable and therefore tested the associated asset group for impairment as of September 30, 2015 under ASC 360-10. Based upon management's conclusion that there were no future economic benefit and related cash flows associated with the long-lived assets of this asset group, which is comprised predominantly of the intangible asset, management concluded that the fair value of the asset group was de minimis and accordingly recorded a full impairment charge of $36 in the third quarter of 2015.

On October 27, 2015, we entered into an interim agreement with SIFCO under which they have continued to supply us product while pursuing various mutually satisfactory longer-term alternatives. On October 10, 2016, we submitted a bid to the

Brazilian bankruptcy court overseeing SIFCO’s reorganization in the competitive process to sell SIFCO's commercial vehicle steer axle systems business and its related forged components business. The bid and the proposed transaction are governed by a purchase agreement entered into between certain of Dana’s affiliates and SIFCO and certain of its affiliates. The transaction is subject to certain closing conditions, including that Dana is the winning bidder pursuant to the bankruptcy court supervised competitive auction process and certain Brazilian regulatory approvals. If Dana’s bid is approved in the bankruptcy court supervised competitive auction process and the applicable Brazilian regulatory approvals are received, closing is expected to occur in the fourth quarter of 2016. The purchase price for the business being acquired is 275 Brazilian reals, which approximates $85 at current exchange rates.

Our ability to maintain continued uninterrupted product supply to satisfy our customer commitments is somewhat uncertain, dependent on SIFCO's compliance with the terms of the supply agreement until the closing of the transaction. We continue to preserve the ability to pursue the legal rights and remedies available to us to enforce compliance with the original supply agreement.

Note 4. Goodwill and Other Intangible Assets

Goodwill — The ~~carrying amount of goodwill attributable to each of our operating segments at September 30, 2016 were as follows: Off-Highway — $83 and Power Technologies — $6. The~~ change in the carrying amount of goodwill in ~~2016~~2017 is due to currency fluctuation and the ~~acquisition~~acquisitions of ~~an aftermarket distribution business.~~USM – Warren and 80% interests in BFP and BPT. See Note 2 for additional information.

Changes in the carrying amount of goodwill by segment —



	Light Vehicle		Commercial Vehicle		Off-Highway		Power Technologies		Total
Balance, December 31, 2016	$	—	$	6	$	78	$	6	$	90
Acquisitions	4				39				43
Currency impact			1						1
Balance, March 31, 2017	$	4	$	7	$	117	$	6	$	134

Components of other intangible assets —


		September 30, 2016							December 31, 2015								March 31, 2017							December 31, 2016
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount
Amortizable intangible assets
Core technology	7	$	87	$	(85	)	$	2	$	86	$	(83	)	$	3	7	$	92	$	(84	)	$	8	$	88	$	(83	)	$	5
Trademarks and trade names	12	5		(2		)	3		3		(2		)	1		15	18		(2		)	16		6		(2		)	4
Customer relationships	7	399		(381		)	18		383		(370		)	13		8	449		(378		)	71		389		(374		)	15
Non-amortizable intangible assets
Trademarks and trade names		65					65		65					65			65					65		65					65
Used in research and development activities		20					20		20					20			20					20		20					20
		$	576	$	(468	)	$	108	$	557	$	(455	)	$	102		$	644	$	(464	)	$	180	$	568	$	(459	)	$	109

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at ~~September 30, 2016~~March 31, 2017 were as follows: Light Vehicle — ~~$23,~~$55, Commercial Vehicle — ~~$34,~~$36, Off-Highway — ~~$36~~$76 and Power Technologies — ~~$15.~~$13.

Amortization expense related to amortizable intangible assets —


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2016		2015		2016		2015		2017		2016
Charged to cost of sales	$	1	$	—	$	1	$	1	$	1	$	—
Charged to amortization of intangibles	2		4		6		13		2		2
Total amortization	$	3	$	4	$	7	$	14	$	3	$	2

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on ~~September 30, 2016~~March 31, 2017 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.

Remainder of 2016 2017 2018 2019 2020
Amortization expense $ 2
$ 6
$ 3
$ 2
$ 1



	Remainder of 2017		2018		2019		2020		2021
Amortization expense	$	9	$	9	$	8	$	7	$	7

Note 5. Restructuring of Operations

Our restructuring activities have historically included rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. In recent years, however, in response to lower demand and other market conditions in certain businesses, our focus has primarily been headcount reduction initiatives to reduce operating costs. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including costs associated with lease continuation obligations and certain operating costs of facilities that we are in the process of closing.

During the ~~third~~first quarter of ~~2016,~~2017, we ~~approved plans~~continued to ~~implement certain headcount reduction initiatives, primarily in~~execute our ~~Off-Highway business. Including costs associated with this action and with other~~ previously announced ~~initiatives, restructuring~~actions. Restructuring expense during the ~~third~~first quarter of ~~2016~~2017 was ~~$17, including $16 of severance~~$2 and ~~benefits costs and $1 of~~primarily represented continuing exit costs.

During the first ~~half~~quarter of 2016, ~~we approved and announced the closure~~restructuring expense of our Commercial Vehicle manufacturing facility in Glasgow, Kentucky. The closure is expected to be completed by mid-2017. We expect that completion of this action will require cash expenditures in the range of $15 to $20, of which $6 represents estimated restructuring charges for employee separation costs, $3 represents estimated restructuring charges for equipment relocation costs and the remainder represents expected capital investment costs for supplier tooling and other$1 also primarily represented continuing exit ~~costs. Including~~ costs associated with ~~these actions and with other~~ previously announced ~~initiatives, restructuring expense for the nine months ended September 30, 2016 was $23, including $20 of contractual severance and benefits costs and $3 of exit costs.~~actions.

During the first nine months of 2015, we implemented certain headcount reduction initiatives, primarily in our Commercial Vehicle business in Brazil in response to lower demand in that region. Including costs associated with this action and with other previously announced initiatives, restructuring expense during the first nine months of 2015 was $13, including $11 of severance and benefits costs and $2 of exit costs.

Accrued restructuring costs and activity, including noncurrent portion—

Employee
Termination
Benefits

Exit
Costs
Total
Balance at June 30, 2016 $ 9
$ 7
$ 16
Charges to restructuring 16
1
17
Cash payments (2 ) (1 ) (3 )
Balance at September 30, 2016 $ 23
$ 7
$ 30

Balance at December 31, 2015 $ 9
$ 8
$ 17
Charges to restructuring 21
3
24
Adjustments of accruals (1 )

(1 )
Cash payments (6 ) (4 ) (10 )
Balance at September 30, 2016 $ 23
$ 7
$ 30



	Employee Termination Benefits			Exit Costs			Total
Balance at December 31, 2016	$	32		$	6		$	38
Charges to restructuring	—			2			2
Cash payments	(12		)	(2		)	(14		)
Balance at March 31, 2017	$	20		$	6		$	26

At ~~September 30, 2016~~March 31, 2017, the accrued employee termination benefits include costs to reduce approximately 400 employees to be completed over the next ~~two years.~~year. The exit costs relate primarily to lease continuation obligations.

Cost to complete — The following table provides project-to-date and estimated future restructuring expenses for completion of our approved restructuring initiatives for our business segments at ~~September 30, 2016.~~March 31, 2017.


	Expense Recognized						Future Cost to Complete		Expense Recognized						Future Cost to Complete
	Prior to 2016		2016		Total to Date		Future Cost to Complete		Prior to 2017		2017		Total to Date		Future Cost to Complete
Light Vehicle	$	9	$	1	$	10	$	1	$	10	$	1	$	11	$	1
Commercial Vehicle	25		6		31		17		41		1		42		14
Off-Highway			14		14				6				6
Corporate			2		2
Total	$	34	$	23	$	57	$	18	$	57	$	2	$	59	$	15

The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs, and exit costs through 2021, including lease continuation costs, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

Note 6. Stockholders’ Equity

Common stock — Our Board of Directors declared a quarterly cash ~~dividends~~dividend of six cents per share of common stock in ~~each of~~ the first ~~three quarters~~quarter of ~~2016.~~2017. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.

Share repurchase program — Our Board of Directors approved ~~an expansion of our existing~~a common stock share repurchase program ~~from $1,400~~up to $1,700 on January 11, 2016. The program expires on December 31, 2017. ~~Under the program, we spent $81 to repurchase 6,612,537 shares of our common stock during the first nine months of 2016 through open market transactions.~~ Approximately $219 remained available under the program for future share repurchases as of ~~September 30, 2016.~~March 31, 2017.

Changes in equity —


	2016									2015									2017									2016
Three Months Ended September 30,	Attributable to Parent			Attributable to Non- controlling Interests			Total Equity			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity
Balance, June 30	$	743		$	95		$	838		$	1,006		$	103		$	1,109
Total comprehensive income	33			4			37			66						66
Three Months Ended March 31,																			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity
Balance, December 31																			$	1,157		$	85		$	1,242		$	728		$	103		$	831
Adoption of ASU 2016-16 tax adjustment, January 1, 2017																			(179		)				(179		)							—
Net income																			75			5			80			45			3			48
Other comprehensive income																			30			2			32			41			1			42
Common stock dividends	(8		)				(8		)	(9		)				(9		)	(9		)				(9		)	(9		)				(9		)
Distributions to noncontrolling interests				(2		)	(2		)				(2		)	(2		)				(1		)	(1		)				(1		)	(1		)
Common stock share repurchases							—			(119		)				(119		)							—			(28		)				(28		)
Increase from business combination																						14			14									—
Stock compensation	5						5			7						7			7						7			2						2
Stock withheld for employee taxes							—			(1		)				(1		)	(3		)				(3		)	(1		)				(1		)
Balance, September 30	$	773		$	97		$	870		$	950		$	101		$	1,051

Nine Months Ended September 30,
Balance, December 31	$	728		$	103		$	831		$	1,080		$	100		$	1,180
Total comprehensive income	142			10			152			128			14			142
Common stock dividends	(26		)				(26		)	(27		)				(27		)
Distributions to noncontrolling interests				(16		)	(16		)				(8		)	(8		)
Common stock share repurchases	(81		)				(81		)	(245		)				(245		)
Derecognition of noncontrolling interests							—						(5		)	(5		)
Stock compensation	11						11			17						17
Stock withheld for employee taxes	(1		)				(1		)	(3		)				(3		)
Balance, September 30	$	773		$	97		$	870		$	950		$	101		$	1,051
Balance, March 31																			$	1,078		$	105		$	1,183		$	778		$	106		$	884

See Note 1 for additional information about adoption of new accounting guidance on January 1, 2017.

Changes in each component of accumulated other comprehensive income (AOCI) of the parent —

Parent Company Stockholders
Foreign Currency Translation Hedging Investments Defined Benefit Plans Accumulated Other Comprehensive Income (Loss)
Balance, June 30, 2016 $ (603 ) $ (14 ) $ 5
$ (551 ) $ (1,163 )
Other comprehensive income (loss):
Currency translation adjustments (8 ) (8 )
Holding gains and losses (17 ) 2
(15 )
Reclassification of amount to net income (a) 6
(7 ) (1 )
Actuarial loss on census update (6 ) (6 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b) 7
7
Tax expense

(1 ) (1 )
Other comprehensive loss (8 ) (11 ) (5 ) —
(24 )
Balance, September 30, 2016 $ (611 ) $ (25 ) $ —
$ (551 ) $ (1,187 )

Balance, June 30, 2015 $ (512 ) $ (7 ) $ 5
$ (543 ) $ (1,057 )
Other comprehensive income (loss):
Currency translation adjustments (66 ) (66 )
Holding gains and losses (4 ) (5 ) (9 )
Reclassification of amount to net income (a) 5

5
Actuarial gain on census update 13
13
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b) 5
5
Tax expense

(1 ) (1 )
Other comprehensive income (loss) (66 ) 1
(5 ) 17
(53 )
Balance, September 30, 2015 $ (578 ) $ (6 ) $ —
$ (526 ) $ (1,110 )


																Parent Company Stockholders
																Foreign Currency Translation			Hedging			Investments		Defined Benefit Plans			Total
Balance, December 31, 2016																$	(646	)	$	(34	)	$	—	$	(604	)	$	(1,284	)
Other comprehensive income (loss):
Currency translation adjustments																34											34
Holding loss on net investment hedge																(5		)									(5		)
Holding gains and losses																			(12		)						(12		)
Reclassification of amount to net income (a)																			6								6
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)																								8			8
Tax (expense) benefit																			2					(3		)	(1		)
Other comprehensive income (loss)																29			(4		)	—		5			30
Balance, March 31, 2017																$	(617	)	$	(38	)	$	—	$	(599	)	$	(1,254	)

Balance, December 31, 2015	$	(608	)	$	(4	)	$	2		$	(564	)	$	(1,174	)	$	(608	)	$	(4	)	$	2	$	(564	)	$	(1,174	)
Other comprehensive income (loss):
Currency translation adjustments	(3		)										(3		)	29											29
Holding gains and losses				(30		)	5						(25		)				1			2					3
Reclassification of amount to net income (a)				9			(7		)				2						2								2
Actuarial loss on census update										(6		)	(6		)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										20			20											7			7
Tax expense										(1		)	(1		)
Other comprehensive income (loss)	(3		)	(21		)	(2		)	13			(13		)
Balance, September 30, 2016	$	(611	)	$	(25	)	$	—		$	(551	)	$	(1,187	)

Balance, December 31, 2014	$	(427	)	$	(9	)	$	5		$	(566	)	$	(997	)
Other comprehensive income (loss):
Currency translation adjustments	(149		)										(149		)
Holding loss on net investment hedge	(2		)										(2		)
Holding gains and losses				(13		)	(5		)				(18		)
Reclassification of amount to net income (a)				16									16
Actuarial gain on census update										13			13
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)										18			18
Elimination of net prior service costs and actuarial losses of disposal group										10			10
Tax expense										(1		)	(1		)
Other comprehensive income (loss)	(151		)	3			(5		)	40			(113		)
Balance, September 30, 2015	$	(578	)	$	(6	)	$	—		$	(526	)	$	(1,110	)
Other comprehensive income																29			3			2		7			41
Balance, March 31, 2016																$	(579	)	$	(1	)	$	4	$	(557	)	$	(1,133	)

(a) Foreign currency contract and investment reclassifications are included in ~~other income,~~Other expense, net.

(b) See Note 910 for additional details.

Note 7. Redeemable Noncontrolling Interest

In connection with the acquisition of a controlling interest in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini) on February 1, 2017, we recognized $45 for Brevini's 20% redeemable noncontrolling interest. The terms of the agreement provide Dana the right to call Brevini's noncontrolling

interests in BFP and BPT, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana, assuming Dana

does not exercise its call rights, at dates and prices defined in the agreement. The call and put prices are based on the amount Dana paid to acquire its initial ownership interest in BFP and BPT subject to adjustment based on the actual EBITDA and free cash flows, as defined in the agreement, of BFP and BPT. See Note 2 for additional information.

Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption values (i.e., the "floor"). Redeemable noncontrolling interest adjustments of redemption value to the floor are reflected in retained earnings and are included as an adjustment to net income available to parent company stockholders in the calculation of earnings per share. There were no current period adjustments to reflect a redemption value in excess of carrying value. See Note 8.

~~Upon completion~~

Reconciliation of ~~the divestiture of our operations~~changes in ~~Venezuela in January 2015, we eliminated the unrecognized pension expense and the~~redeemable noncontrolling interest ~~related to our former Venezuelan subsidiaries. See Note 3 for additional information regarding the disposal group held for sale at the end of 2014 and divested in January 2015.~~ —



Three months ended March 31,	2017
Balance, December 31	$	—
Initial fair value of redeemable noncontrolling interest of acquired business	45
Comprehensive income (loss) adjustments:
Other comprehensive income (loss) attributable to redeemable noncontrolling interest	(1		)
Retained earnings adjustments:
Adjustments to redemption value	—
Balance, March 31	$	44

Note 7.8. Earnings per Share

Reconciliation of the numerators and denominators of the earnings per share calculations —


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2016		2015		2016		2015		2017		2016
Numerator - Basic and Diluted:
Net income attributable to the parent company	$	57	$	119	$	155	$	241
Net income attributable to the parent company - Numerator basic									$	75	$	45
Less: Redeemable noncontrolling interest adjustment to redemption value									—
Net income available to common stockholders - Numerator diluted									$	75	$	45

Denominator:
Weighted-average shares outstanding - Basic	144.0		158.0		146.7		161.6		144.6		149.4
Employee compensation-related shares, including stock options	0.6		0.9		0.4		1.1		1.3		0.5
Weighted-average shares outstanding - Diluted	144.6		158.9		147.1		162.7		145.9		149.9

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded ~~2.1~~0.5 million and ~~0.2~~1.9 million CSEs from the calculations of diluted earnings per share ~~for the third quarters of~~in 2017 and 2016 ~~and 2015 and excluded 2.1 million and 0.1 million CSEs for the year-to-date periods of 2016 and 2015~~ as the effect of including them would have been anti-dilutive.

Note 8.9. Stock Compensation

The Compensation Committee of our Board of Directors approved the grant of RSUs and performance share units (PSUs) shown in the table below during ~~the first nine months of 2016.~~2017.


		Weighted-average Per Share
	Granted (In millions)	Grant Date Fair Value		Granted (In millions)	Grant Date Fair Value*
RSUs	1.2	$	13.30	0.7	$	19.51
PSUs	0.4	$	13.21	0.3	$	18.63

* Weighted-average per share

We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified return on invested capital targets and specified ~~total shareholder return~~margin targets, ~~relative to peer companies. For~~with an even distribution between the ~~portion of the award based on the return on invested capital performance metric, we~~two targets. We estimated the fair value of the PSUs at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the ~~award is~~awards are not dividend protected. For the portion of the award based on shareholder returns, we estimated the fair value of the PSUs at grant date using various assumptions as part of a Monte Carlo simulation. The expected term represents the period from the grant date to the end of the three-year performance period. The risk-free interest rate of 1.00% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of 1.40% was calculated by dividing the expected annual dividend by the average stock price over the prior year. The expected volatility of 33.4% was based on historical volatility over the prior three years using daily stock price observations.

We received $4 of cash from the exercise of stock options related to 0.3 million shares. We paid $1 of cash to settle RSUs and issued ~~0.5~~0.4 million shares of common stock based on the vesting of RSUs during ~~2016.~~2017. We recognized stock compensation expense of $4 and ~~$6 during the third quarter of 2016 and 2015 and $11 and $14~~$2 during the first ~~nine months~~quarter of ~~2016~~2017 and ~~2015.~~2016. At ~~September 30, 2016,~~March 31, 2017, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was ~~$24.~~$36. This cost is expected to be recognized over a weighted-average period of ~~2.0~~2.2 years.

Note 9.10. Pension and Postretirement Benefit Plans

We have a number of defined contribution and defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement.

Components of net periodic benefit cost (credit) —


	Pension																Pension
	2016						2015						OPEB - Non-U.S.				2017						2016						OPEB - Non-U.S.
Three Months Ended September 30,	U.S.			Non-U.S.			U.S.			Non-U.S.			2016		2015
Three Months Ended March 31,																	U.S.			Non-U.S.			U.S.			Non-U.S.			2017		2016
Interest cost	$	13		$	2		$	16		$	2		$	1	$	1	$	13		$	2		$	13		$	2		$	1	$	1
Expected return on plan assets	(23		)	(1		)	(27		)	(1		)					(21		)	(1		)	(23		)	(1		)
Service cost				2						2					1					1						1
Other
Amortization of net actuarial loss	6			1			4			1							6			2			5			2
Net periodic benefit cost (credit)	$	(4	)	$	4		$	(7	)	$	4		$	1	$	2	$	(2	)	$	4		$	(5	)	$	4		$	1	$	1

Nine Months Ended September 30,
Interest cost	$	39		$	6		$	50		$	6		$	3	$	3
Expected return on plan assets	(69		)	(2		)	(82		)	(2		)
Service cost				4						5					1
Other				1
Amortization of net actuarial loss	16			4			14			4
Net periodic benefit cost (credit)	$	(14	)	$	13		$	(18	)	$	13		$	3	$	4

Pension expense for ~~the nine months ended September 30, 2016~~2017 increased modestly versus the same period in ~~2015~~2016 as ~~the effect~~a result of a lower assumed return on plan assets ~~was mostly offset by a reduction~~and an increase in amortization of the net actuarial loss in the interest component. The $11 reduction in interest resulted primarily from adopting a full yield curve approach to estimating interest expense effective at the beginning of 2016. The new method applies the specific spot rates along the yield curve used in the most recent remeasurement of the benefit obligation, resulting in a more precise estimate.U.S.

Note ~~10.~~11. Marketable Securities


	September 30, 2016						December 31, 2015						March 31, 2017						December 31, 2016
	Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value
U.S. government securities	$	34	$	—	$	34	$	38	$	—	$	38	$	2	$	—	$	2	$	2	$	—	$	2
Corporate securities	42				42		42				42		3				3		2				2
Certificates of deposit	24				24		18				18		22				22		22				22
Other	26				26		62		2		64		4				4		4				4
Total marketable securities	$	126	$	—	$	126	$	160	$	2	$	162	$	31	$	—	$	31	$	30	$	—	$	30

U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate securities are primarily debt securities. Other consists of investments in mutual and index funds. U.S. government securities, corporate debt and certificates of deposit maturing in one year or less and after one year through five years totals $22 and ~~after five years through ten years total $41, $48 and $11~~$5 at ~~September 30, 2016.~~March 31, 2017.

Note ~~11.~~12. Financing Agreements

Long-term debt at —


			September 30, 2016					December 31, 2015							March 31, 2017					December 31, 2016
	Interest Rate		Principal		Unamortized Debt Issue Costs			Principal		Unamortized Debt Issue Costs			Interest Rate		Principal		Unamortized Debt Issue Costs			Principal		Unamortized Debt Issue Costs
Senior Notes due February 15, 2021	6.750%		$	—	$	—		$	350	$	(4	)
Senior Notes due September 15, 2021	5.375%		450		(6		)	450		(6		)	5.375%		$	450	$	(5	)	$	450	$	(5	)
Senior Notes due September 15, 2023	6.000%		300		(4		)	300		(5		)	6.000%		300		(4		)	300		(4		)
Senior Notes due December 15, 2024	5.500%		425		(6		)	425		(6		)	5.500%		425		(5		)	425		(6		)
Senior Notes due June 1, 2026	6.500%	*	375		(7		)						6.500%	*	375		(6		)	375		(6		)
Other indebtedness			119		—			66							202					120
Total			$	1,669	$	(23	)	$	1,591	$	(21	)			$	1,752	$	(20	)	$	1,670	$	(21	)


*	In conjunction with the issuance of the June 2026 Notes we entered into two 10-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the June 2026 Notes to ~~euro denominated~~euro-denominated debt at a fixed rate of 5.140%. See Note 1213 for additional information.

Interest on the senior notes is payable semi-annually. Other indebtedness includes borrowings from various financial institutions, capital lease obligations, ~~and~~ the unamortized fair value adjustment related to a terminated interest rate ~~swap.~~swap and the financial liability related to a build-to-suit lease. The increase in other indebtedness during the first quarter of 2017 is primarily due to our acquisition of BPT and BFP. See Note 122 for additional information regarding the acquisition and Note 13 for additional information on the terminated interest rate swap.

Senior notes — On ~~May 27, 2016,~~April 4, 2017, Dana Financing Luxembourg S.à r.l., a wholly-owned subsidiary of Dana, issued ~~$375~~$400 in senior notes ~~(June 2026~~(April 2025 Notes) at 5.750%. The ~~June 2026~~April 2025 Notes were issued through a private placement and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act). The ~~June 2026~~April 2025 Notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and, outside the United States, only to non-U.S. investors in reliance on Regulation S under the Securities Act. The ~~June 2026~~April 2025 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on ~~June~~April 15 and ~~December~~October 15 of each year, beginning on ~~December~~October 15, ~~2016.~~2017. The ~~June 2026~~April 2025 Notes will mature on ~~June 1, 2026.~~April 15, 2025. Net proceeds of the offering totaled ~~$368.~~$394. Financing costs of ~~$7 were~~$6 will be recorded as deferred costs and ~~are being~~ amortized to interest expense over the life of the notes. The proceeds from the offering ~~were~~will be used to repay indebtedness of our BPT and BFP subsidiaries and indebtedness of a wholly-owned subsidiary in Brazil and to redeem $100 of our ~~February~~September 2021 Notes. In conjunction with the issuance of the April 2025 Notes, we entered into eight-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to ~~pay related fees and expenses and~~euro-denominated debt at a fixed rate of 3.850%. See Note 13 for ~~general corporate purposes.~~additional information.

At any time prior to ~~June 1, 2019,~~April 15, 2020, we may redeem up to 35% of the aggregate principal amount of the ~~June 2026~~April 2025 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to ~~106.500%~~105.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the ~~June 2026~~April 2025 Notes remains outstanding after the redemption.

Prior to ~~June 1, 2021,~~April 15, 2020, we may redeem some or all of the ~~June 2026~~April 2025 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

We may redeem some or all of the ~~June 2026~~April 2025 Notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on ~~June 1~~April 15 in the years set forth below:


Year	Redemption Price	Redemption Price
2020		104.313%
2021	103.250%	102.875%
2022	102.167%	101.438%
2023	101.083%	100.000%
2024	100.000%	100.000%
2025	100.000%

During April 2017, we redeemed $100 of our September 2021 Notes pursuant to a tender offer at a weighted average price equal to 104.031% plus accrued and unpaid interest. The $5 loss on extinguishment of debt to be recorded in April 2017 includes the redemption premium and transaction costs associated with the tender offer and the write-off of $1 of previously deferred financing costs associated with the September 2021 Notes.

On June 23, 2016, we redeemed all of our February 2021 Notes at a price equal to 103.375% plus accrued and unpaid interest. The $16 loss on extinguishment of debt includes the $12 redemption premium and the $4 write-off of previously deferred financing costs associated with the February 2021 Notes.

On December 9, 2014, we elected to redeem $40 of our previously outstanding February 2019 Notes effective January 8, 2015 at a price equal to 103.000% plus accrued and unpaid interest. On March 16, 2015, we redeemed the remaining $15 of our February 2019 Notes at a price equal to 103.250% plus accrued and unpaid interest. The $2 loss on extinguishment of debt includes the redemption premium and the write-off of previously deferred financing costs associated with the February 2019 Notes.

Revolving facility — On June 9, 2016, we ~~received commitments from~~entered into a new ~~and existing lenders for a~~ $500 ~~amended and restated~~ revolving credit facility (the ~~Amended~~ Revolving Facility) which ~~expires~~matures on June 9, 2021. The Revolving Facility refinanced and replaced our previous revolving credit facility. In connection with the ~~Amended~~ Revolving Facility, we paid $3 in deferred financing costs to be amortized to interest expense over the life of the facility. We wrote off $1 of previously deferred financing costs associated with our prior revolving credit facility to loss on extinguishment of debt. Deferred financing costs on our ~~Amended~~ Revolving Facility are included in ~~other~~Other noncurrent assets.

The ~~Amended~~ Revolving Facility is guaranteed by all of our wholly-owned domestic subsidiaries, subject to certain exceptions, including exceptions for Dana Credit Corporation and ~~Dana Companies, LLC and their respective~~its subsidiaries (the guarantors), and grants a first-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.

Advances under the ~~Amended~~ Revolving Facility bear interest at a floating rate based on, at our option, the base rate or Eurodollar rate (each as described in the revolving credit agreement) plus a ~~margin. The margins on the base rate and Eurodollar rate are 0.75% and 1.75% per annum respectively until September 30, 2016 and~~margin as set forth ~~below thereafter:~~

below:



	Margin
Total Net Leverage Ratio	Base Rate		Eurodollar Rate
Less than or equal to 1.00:1.00	0.50	%	1.50	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00	0.75	%	1.75	%
Greater than 2.00:1.00	1.00	%	2.00	%

Commitment fees are applied based on the average daily unused portion of the available amounts under the ~~Amended~~ Revolving ~~Facility. The applicable fee will be~~ ~~0.375%~~ ~~per annum until September 30, 2016 and~~Facility as set forth ~~below thereafter:~~

below:



Total Net Leverage Ratio	Commitment Fee
Less than or equal to 1.00:1.00	0.250	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00	0.375	%
Greater than 2.00:1.00	0.500	%

Up to $275 of the ~~Amended~~ Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable margin for Eurodollar rate advances based on a quarterly average availability under issued and undrawn letters of credit under the ~~revolving facility~~Revolving Facility and a per annum fronting fee of 0.125%, payable quarterly.

~~There were~~As of March 31, 2017, we had no outstanding borrowings under the ~~Amended~~ Revolving Facility ~~at September 30, 2016 but~~and we had utilized ~~$22~~$23 for letters of credit. We had availability at ~~September 30, 2016~~March 31, 2017 under the ~~Amended~~ Revolving Facility of ~~$478~~$477 after deducting ~~the~~ outstanding borrowings and letters of credit.

Debt covenants — At ~~September 30, 2016~~March 31, 2017, we were in compliance with the covenants of our financing agreements. Under the ~~Amended~~ Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the ~~Amended~~ Revolving Facility, a maintenance covenant ~~that the~~requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00.

Note ~~12.~~13. Fair Value Measurements and Derivatives

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs.

Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as follows:


			Fair Value Measurements Using						Fair Value
			Quoted Prices in Active Markets		Significant Other Observable Inputs
September 30, 2016	Total		(Level 1)		(Level 2)
Marketable securities	$	126	$	26	$	100
Currency forward contracts - Accounts receivable other
Category							Balance Sheet Location	Fair Value Level	March 31, 2017		December 31, 2016
Available-for-sale securities							Marketable securities	1	$	4	$	4
Available-for-sale securities							Marketable securities	2	27		26
Currency forward contracts
Cash flow hedges							Accounts receivable other	2	3		2
Cash flow hedges	1				1		Other accrued liabilities	2	—		4
Undesignated	2				2		Accounts receivable other	2	2		1
Currency forward contracts - Other accrued liabilities
Undesignated							Other accrued liabilities	2	1		1
Currency swaps
Cash flow hedges	3				3		Other noncurrent liabilities	2	29		12
Undesignated	2				2		Other accrued liabilities	2	2		3
Currency swaps - Accounts receivable other
Undesignated	1				1
Currency swaps - Other accrued liabilities
Undesignated	12				12
Currency swaps - Other noncurrent liabilities
Cash flow hedges	28				28

December 31, 2015
Marketable securities	$	162	$	64	$	98
Currency forward contracts - Accounts receivable other
Cash flow hedges	1				1
Undesignated	2				2
Currency forward contracts - Other accrued liabilities
Cash flow hedges	5				5
Undesignated	1				1
Currency swaps - Accounts receivable other
Undesignated	4				4
Currency swaps - Other accrued liabilities
Undesignated	9				9

Fair Value Level 1 assets and liabilities reflect quoted prices in active markets. Fair Value Level 2 assets and liabilities reflect the use of significant other observable inputs.

Fair value of financial instruments –— The financial instruments that are not carried in our balance sheet at fair value are as follows:


	September 30, 2016				December 31, 2015				March 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	$	1,550	$	1,611	$	1,525	$	1,552	$	1,550	$	1,608	$	1,550	$	1,612
Other indebtedness*	119		97		66		56		202		185		120		101
Total	$	1,669	$	1,708	$	1,591	$	1,608	$	1,752	$	1,793	$	1,670	$	1,713


*	The carrying value includes the unamortized portion of a fair value adjustment related to a terminated interest rate ~~swap.~~swap at both dates. The carrying value and fair value also include a financial liability associated with a build-to-suit lease arrangement at both dates.

The fair value of our senior notes is estimated based upon a market approach (Level 2) while the fair value of our other indebtedness is based upon an income approach (Level 2).

See Note 12 for additional information about financing agreements.

Fair value measurements on a nonrecurring basis — Certain assets are measured at fair value on a nonrecurring basis. These are long-lived assets that are subject to fair value adjustments only in certain circumstances. These assets include intangible assets and property, plant and equipment which may be written down to fair value when they are held for sale or as a result of impairment.

Interest rate derivatives — Our portfolio of derivative financial instruments periodically includes interest rate swaps designed to mitigate our interest rate risk. As of ~~September 30, 2016,~~March 31, 2017, no fixed-to-floating interest rate swaps remain outstanding. However, ~~an $8~~a $7 fair value adjustment to the carrying amount of our December 2024 Notes, associated with a fixed-to-floating interest rate swap that had been executed but was subsequently terminated during 2015, remains deferred at ~~September 30, 2016.~~March 31, 2017. This amount is being amortized as a reduction of interest expense through the period ending December 2024, the scheduled maturity date of the December 2024 Notes. The amount amortized as a reduction of interest expense was not material during the quarter ~~or nine months~~ ended ~~September 30, 2016.~~March 31, 2017.

Foreign currency derivatives — Our foreign currency derivatives include forward contracts associated with forecasted transactions, primarily involving the purchases and sales of inventory through the next fifteen months, as well as currency swaps associated with certain recorded external notes payable and intercompany loans receivable and payable. Periodically, our foreign currency derivatives also include net investment hedges of certain of our investments in foreign operations.

During February 2017, in conjunction with the issuance of an aggregate $15 of U.S. dollar-denominated short-term notes payable by one of our Brazilian subsidiaries (the "Brazilian Notes"), we executed fixed-to-fixed cross-currency swaps with the same critical terms as the Brazilian Notes. Additionally, in conjunction with the issuance of €281 of euro-denominated intercompany notes payable, issued by certain of our Luxembourg subsidiaries (the "Luxembourg Intercompany Notes") and payable to USD-functional Dana, Inc., we executed fixed-to-fixed cross-currency swaps with the same critical terms as the Luxembourg Intercompany Notes. The risk management objective of these swaps is to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / Brazilian real and euro / U.S. dollar exchange rates associated with the forecasted principal and interest payments on the respective underlying instruments.

During March 2017, in conjunction with the planned April 2017 issuance of the $400 of U.S. dollar-denominated April 2025 Notes by euro-functional Dana Financing Luxembourg S.à r.l., we executed fixed-to-fixed cross-currency swaps with the same critical terms as the April 2025 Notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / euro exchange rates associated with the forecasted principal and interest payments.

During May 2016, in conjunction with the issuance of the $375 of U.S. dollar-denominated June 2026 Notes by euro-functional Dana Financing Luxembourg S.à r.l. ~~(euro-functional subsidiary)~~, we executed ~~two~~ fixed-to-fixed cross-currency swaps with the same critical terms as the June 2026 Notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / euro exchange rates associated with the forecasted principal and interest payments.

All of the underlying designated financial instruments, and any subsequent replacement debt, have been designated as the hedged items in each respective cash flow hedge relationship, as shown in the table below. Designated as a cash flow ~~hedge~~hedges of the forecasted principal and interest payments of the ~~June 2026 Notes,~~underlying designated financial instruments, or subsequent replacement debt, all of the swaps economically convert the ~~June 2026 Notes from $375~~underlying designated financial instruments into the functional currency of ~~U.S. dollar-denominated debt at~~each respective holder. The impact of the interest rate differential between the inflow and outflow rates on all fixed-to-fixed cross-currency swaps is recognized during each period as a ~~fixed rate~~component of 6.500% to €338 of euro-denominated debt at a fixed rate of 5.140%. The June 2026 Notes and any subsequent replacement debt have both been designated as the hedged items (collectively, the "designated debt") in the cash flow hedge relationship. See Note 11 for additional information about the June 2026 Notes.interest expense.

~~The~~Summary of Fixed-to-Fixed Cross-Currency Swaps —



Underlying Financial Instrument						Derivative Financial Instrument
Description	Type	Face Amount		Rate		Designated Notional Amount		Traded Amount		Inflow Rate		Outflow Rate
Outstanding at March 31, 2017
June 2026 Notes	Payable	$	375	6.50	%	$	375	€	338	6.50	%	5.14	%
Brazilian Notes	Payable	$	15	3.80	%	$	15	R$	47	3.80	%	13.58	%
Luxembourg Intercompany Notes	Receivable	€	281	3.91	%	€	281	$	300	6.00	%	3.91	%

Issued during April 2017
April 2025 Notes	Payable	$	400	5.75	%	$	400	€	371	5.75	%	3.85	%

All of the swaps are expected to be highly effective in offsetting the corresponding currency-based changes in cash outflows related to the underlying designated ~~debt.~~financial instruments. Based on our qualitative assessment that the critical terms of all of the ~~June 2026 Notes~~underlying designated financial instruments and all of the associated swaps match and that all other required criteria have been met, we do not expect to incur any ineffectiveness. As an effective cash flow ~~hedge,~~hedges, changes in the fair value of the swaps will be recorded in OCI during each period. Additionally, to the extent the swaps remain effective, the appropriate portion of AOCI will be reclassified to earnings each period as an offset to the foreign exchange gain or loss resulting from the remeasurement of the underlying ~~U.S. dollar-denominated debt by~~designated financial instruments. See Note 12 for additional information about the ~~euro-functional subsidiary.~~June 2026 Notes and the April 2025 Notes.

In the event our ongoing assessment demonstrates that the critical terms of either the swaps or the underlying designated ~~debt~~financial instruments have changed, or that there have been adverse developments regarding counterparty risk, we will use the long haul method to assess ineffectiveness of the hedging relationship. To the extent the swaps are no longer effective, changes in their fair values will be recorded in earnings. ~~At September 30, 2016, a~~During the first quarter of 2017, deferred ~~loss~~losses of ~~$24~~$11 associated with all of the fixed-to-fixed cross-currency swaps ~~remains~~were recorded in ~~AOCI. The deferred loss represents~~OCI and reflect the net impact of a $17 unfavorable change in the fair value of the swaps ~~net of~~and a $4$6 reclassification from AOCI to earnings. The reclassification from AOCI to earnings asrepresents an offset to a foreign exchange remeasurement gain on all of the designated debt instruments outstanding during the quarter ~~and nine months~~ ended ~~September 30, 2016.~~March 31, 2017.

The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was ~~$136 as of September 30, 2016~~$200 at March 31, 2017 and ~~$212 as of~~$143 at December 31, ~~2015.~~2016. The total notional amount of outstanding foreign currency swaps, including but not limited to the fixed-to-fixed cross-currency swaps, was ~~$519 as of September 30, 2016~~$1,129 at March 31, 2017 and ~~$219 as of~~$571 at December 31, ~~2015.~~2016.

The following currency derivatives were outstanding at ~~September 30, 2016~~March 31, 2017:


		Notional Amount (U.S. Dollar Equivalent)								Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity
U.S. dollar	Mexican peso, euro	$	40	$	1	$	41	Sep-17	Mexican peso, euro	$	91	$	—	$	91	Jun-18
Euro	U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble	28		6		34		Sep-17	U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble	26		4		30		Jun-18
British pound	U.S. dollar, Euro	3				3		Sep-17	U.S. dollar, Euro	3				3		May-18
Swedish krona	Euro	10				10		Sep-17	Euro	19				19		May-18
South African rand	U.S. dollar, Euro			10		10		Dec-16	U.S. dollar, Euro, Thai baht			9		9		Sep-17
Thai baht	U.S. dollar, Australian dollar			14		14		Jun-17	U.S. dollar, Australian dollar			4		4		Jun-17
Canadian dollar	U.S. dollar			2		2		May-17	U.S. dollar			15		15		Jun-18
Brazilian real	Euro			1		1		May-17	Euro			2		2		Mar-18
Indian rupee	U.S. dollar, British pound, Euro			21		21		Dec-17	U.S. dollar, British pound, Euro			27		27		Jun-18
Total forward contracts		81		55		136				139		61		200

U.S. dollar	Mexican peso			76		76		Oct-16	Euro, Canadian dollar	300		20		320		Sep-23
Euro	U.S. dollar, Canadian dollar, British pound	375		68		443		Jun-26	U.S. dollar, British pound	775		18		793		Jun-26
Brazilian real									U.S. dollar	15				15		Feb-18
South African rand									U.S. dollar			1		1		Sep-17
Total currency swaps		375		144		519				1,090		39		1,129
Total currency derivatives		$	456	$	199	$	655			$	1,229	$	100	$	1,329

Cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which the contracts remain outstanding are reported in OCI to the extent such contracts remain effective. Effectiveness is measured by using regression analysis to determine the degree of correlation between the change in the fair value of the derivative instrument and the change in the associated foreign currency exchange rates. Changes in fair value of contracts not designated as cash flow hedges or as net investment hedges are recognized in ~~other income,~~Other expense, net in the period in which the changes occur. Realized gains and losses from currency-related forward contracts, including those that have been designated as cash flow hedges and those that have not been designated, are recognized in ~~other income,~~Other expense, net.

Net investment hedges — We periodically designate derivative contracts or underlying non-derivative financial instruments as net investment hedges. With respect to contracts designated as net investment hedges, we apply the forward method, but for non-derivative financial instruments designated as net investment hedges, we apply the spot method. Under both methods, we report changes in fair value in the cumulative translation adjustment (CTA) component of OCI during the period in which the contracts remain outstanding to the extent such contracts and non-derivative financial instruments remain effective.

During the first quarter of 2017, we designated the principal amount of an existing non-derivative Mexican peso-denominated intercompany note payable (the "MXN-denominated intercompany note") by Dana European Holdings Luxembourg S.à r.l. to Dana de Mexico Corporacion S. de R.L. de C.V., one of our Mexican subsidiaries, as a net investment hedge of the equivalent portion of the investment in the associated Mexican operations. At March 31, 2017, the principal amount of the MXN-denominated intercompany note is 1,465 Mexican pesos, or approximately $78.

During the first quarter of 2017, we recorded a deferred loss of $5 in the CTA component of OCI associated with the MXN-denominated intercompany note. Amounts recorded in CTA remain deferred in AOCI until such time as the investments in the associated subsidiaries are substantially liquidated. See also Note 6.

Amounts to be reclassified to earnings — Deferred gains or losses associated with effective cash flow hedges of forecasted transactions are reported in AOCI and are reclassified to earnings in the same periods in which the underlying transactions affect earnings. Amounts expected to be reclassified to earnings assume no change in the current hedge relationships or to ~~September 30, 2016~~March 31, 2017 exchange rates. Deferred ~~losses~~gains of $1$3 at ~~September 30, 2016~~March 31, 2017 are expected to be reclassified to earnings during the next twelve months, compared to deferred losses of $4$2 at December 31, ~~2015~~2016. Amounts reclassified from AOCI to earnings arising from the discontinuation of cash flow hedge accounting treatment were not material during the first ~~nine months~~quarter of ~~2016.~~2017.

Note ~~13.~~14. Commitments and Contingencies

~~Asbestos personal injury liabilities~~ — As part of our reorganization in 2008, assets and liabilities associated with personal injury asbestos claims were retained in Dana Corporation which was then merged into Dana Companies, LLC (DCLLC), a consolidated wholly-owned limited liability company. The assets of DCLLC include insurance rights relating to coverage against these liabilities, marketable securities and other assets which are considered sufficient to satisfy its liabilities. DCLLC had approximately ~~25,000~~ ~~active pending asbestos personal injury liability claims at both~~ ~~September 30, 2016~~ ~~and~~ ~~December 31, 2015. DCLLC had accrued $73 for indemnity and defense costs for settled, pending and future claims at~~ ~~September 30, 2016, compared to~~ ~~$78~~ at ~~December 31, 2015. A~~ ~~fifteen~~-year time horizon was used to estimate the value of this liability. In addition to claims and litigation experience, we consider additional qualitative and quantitative factors such as changes in legislation, the legal environment, our strategy in managing claims and obtaining insurance, including our defense strategy, and health related trends in the overall population of individuals potentially exposed to asbestos in determining whether a change in the estimate of its liability for pending and future claims and defense costs or insurance assets is warranted.

At ~~September 30, 2016, DCLLC had recorded $48 as an asset for probable recovery from insurers for the pending and projected asbestos personal injury liability claims, compared to~~ ~~$51~~ ~~recorded at~~ ~~December 31, 2015~~. The recorded asset represents 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. The recognition of these recoveries is based on our assessment of our right to recover under the respective contracts and on the financial strength of the insurers. DCLLC has coverage agreements in place with insurers confirming substantially all of the related coverage and payments are being received on a timely basis. The financial strength of these insurers is reviewed at least annually with the assistance of a third party. The recorded asset does not represent the limits of the insurance coverage, but rather the amount DCLLC would expect to recover if the accrued indemnity and defense costs were paid in full.

DCLLC continues to process asbestos personal injury claims in the normal course of business, is separately managed and has an independent board member. The independent board member is required to approve certain transactions including dividends or other transfers of $1 ~~or more of value to Dana. Dana Incorporated has no obligation to increase its investment in or otherwise support DCLLC.~~

~~Other product~~Product liabilities — We had accrued $4 and $1$5 for ~~non-asbestos~~ product liability costs at ~~September 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 and a $4 for an expected recovery from third parties at September 30, 2016. The increases in the liability and recoverable amounts at September 30, 2016 reflect the recognition of the estimated cost, net of payments made, and the expected recovery of an insured matter.both dates. 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.

Environmental liabilities — Accrued environmental liabilities were $9$7 at ~~September 30, 2016~~March 31, 2017 and ~~$11~~$8 at December 31, ~~2015~~2016. We consider the most probable method of remediation, current laws and regulations and existing technology in estimating our environmental liabilities.

Guarantee of lease obligations — In connection with the divestiture of our Structural Products business in 2010, leases covering three U.S. facilities were assigned to a U.S. affiliate of Metalsa. Under the terms of the sale agreement, we will guarantee the affiliate’s performance under the leases, which run through June 2025, including approximately $6 of annual payments. In the event of a required payment by Dana as guarantor, we are entitled to pursue full recovery from Metalsa of the amounts paid under the guarantee and to take possession of the leased property.

Other legal matters — We are subject to various pending or threatened legal proceedings arising out of the normal course of business or operations. In view of the inherent difficulty of predicting the outcome of such matters, we cannot state what the eventual outcome of these matters will be. However, based on current knowledge and after consultation with legal counsel, we believe that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity, financial condition or results of operations.

In November 2013, we received an arbitration notice from Sypris Solutions, Inc. (Sypris), formerly our largest supplier, alleging damage claims under the long-term supply agreement that expired on December 31, 2014. The arbitration proceedings related to these claims concluded in the second quarter of 2015 with Sypris being awarded immaterial damages. Sypris also alleged that Dana and Sypris entered into a new binding long-term supply agreement in July 2013. Dana filed suit against Sypris requesting declaratory judgment that the parties did not enter into a new supply agreement. During the first quarter of 2015, the court granted summary judgment in Dana’s favor, rejecting Sypris’ position that a new contract was formed in July 2013. The Ohio Sixth District Court of Appeals upheld the summary judgment ruling in December 2015 and that decision is no longer subject to appeal. We have been advised that Sypris will not pursue its claim that Dana failed to negotiate in good faith under the 2007 agreement.

On September 25, 2015, the Brazilian antitrust authority (“CADE”) announced an investigation of an alleged cartel involving a former Dana business in Brazil and various competitors related to sales of shock absorbers between 2000 and 2014. We divested this business as a part of the sale of our aftermarket business in 2004. The investigation of Dana's involvement in this matter concluded in the second quarter of 2016 without a material impact on Dana.

Note ~~14.~~15. Warranty Obligations

We record a liability for estimated warranty obligations at the dates our products are sold. We record the liability based on our estimate of costs to settle future claims. Adjustments to our estimated costs at time of sale are made as claim experience and other new information becomes available.

Obligations for service campaigns and other occurrences are recognized as adjustments to prior estimates when the obligation is probable and can be reasonably estimated.

Changes in warranty liabilities —


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017			2016
Balance, beginning of period	$	63		$	48		$	56		$	47		$	66		$	56
Acquisitions													8
Amounts accrued for current period sales	6			6			19			20			7			7
Adjustments of prior estimates	7						19			4			3			5
Settlements of warranty claims	(10		)	(7		)	(28		)	(23		)	(12		)	(10		)
Currency impact	1			(1		)	1			(2		)	1			1
Balance, end of period	$	67		$	46		$	67		$	46		$	73		$	59

Note ~~15.~~16. Income Taxes

We estimate the effective tax rate expected to be applicable for the full fiscal year and use that rate to provide for income taxes in interim reporting periods. We also recognize the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

We have generally not recognized tax benefits on losses generated in several entities ~~including those in the U.S.,~~ where the recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets. Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as valuation allowances are adjusted to offset the associated tax expense or benefit.

We record interest and penalties related to uncertain tax positions as a component of income tax expense. Net interest expense for the periods presented herein is not significant.

We reported income tax expense ~~(benefit)~~ related to operations of ~~$13~~$30 and ~~$(77)~~$24 for the quarters ended ~~September 30, 2016~~March 31, 2017 and 2015 and $66 and $(10) for the respective nine-month periods. The third-quarter and nine-month net tax benefits in 2015 included a $100 release of valuation allowances on U.S. deferred tax assets in connection with the planned sale of an affiliate's stock and certain operating assets by a U.S. subsidiary of the company to a non-U.S. affiliate. As a consequence of proposed Internal Revenue Service regulations issued in last year's third quarter providing guidance on the tax treatment afforded a component of the tax planning actions we were undertaking, we revised the estimated forecasted income being generated upon completion of the transaction which led to the third quarter 2015 release. Upon completion of this intercompany transaction in the fourth quarter of 2015, we recognized a prepaid tax asset.2016. Our effective tax rates were ~~26%~~29% and ~~37%~~33% in ~~the first nine months of~~2017 and 2016, ~~and 2015, exclusive of $8~~respectively, with $3 from the amortization of the prepaid tax asset increasing the rate in ~~2016 and $100 of valuation allowance released on U.S. deferred tax assets in the third quarter of 2015.~~2016. Our effective income tax rates vary from the U.S. federal statutory rate of 35% due to establishment, release and adjustment of valuation allowances in several countries, nondeductible expenses, local tax incentives in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. In 2016, jurisdictions with valuation allowances reported higher aggregate pre-tax income, thereby decreasing the effective rate. In 2015, these jurisdictions had lower pre-tax income, which increased the effective rate.

We provide for U.S. federal income and non-U.S. withholding taxes on the earnings of our non-U.S. operations that are not considered to be permanently reinvested. Accordingly, we continue to analyze and adjust the estimated tax impact of the income and non-U.S. withholding tax liabilities based on the amount and source of these earnings. As part of the annual effective tax rate, we recognized net expense of $2 and $1 ~~for both quarters ended September 30,~~in 2017 and 2016 ~~and 2015 and $5 and $4 in the nine-month periods of 2016 and 2015~~ related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $2 and $1 ~~for the quarters ended September 30,~~during 2017 and 2016 ~~and 2015 and $4 and $7 for the respective nine-month periods~~ related to the actual transfer of funds to the U.S. and transfers of funds between foreign subsidiaries.

~~At September 30, 2016, we have a valuation allowance against our deferred~~The adoption of new accounting guidance at the beginning of 2017 resulted in the $179 write-off of certain tax assets, primarily a prepaid tax recorded in conjunction with the U.S. When evaluating the continued need for this valuation allowance we consider all components of comprehensive income, and we weight the positive and negative evidence, putting greater reliance on objectively verifiable historical evidence than on projections of future profitability that are dependent on actions that have not occurred as of the assessment date. We also consider changes to historical profitability of actions occurring in the year of assessment that have a sustained effect on future profitability, the effect on historical profits of nonrecurring events, as well as tax planning strategies. These effects included items such as the

~~lost future interest income resulting from the prepayment on and subsequent~~intercompany sale of a payment-in-kind callable note receivable, the additional interest expense resulting from the $750 senior unsecured notes payable issued in July 2013, the effects of a 2015 intercompany transfer of an affiliate's stock and certain operating assets ~~by a U.S. subsidiary of the company~~ to a non-U.S. affiliate ~~and, as discussed~~ in 2015. See Note 11, the recent debt refinancing transaction which included an issuance of new debt by an international subsidiary and repayment of certain debt obligations held by the U.S. parent company. Management believes a sustained period of profitability, after considering historical changes from implemented actions and nonrecurring events, along with positive expectations1 for ~~future profitability is important evidence for a determination that a valuation allowance should be released.~~additional information.

While our U.S. operations have experienced improved profitability, there is considerable uncertainty around demand levels in the U.S. in certain of our end markets. After weighting the positive and negative evidence at September 30, 2016, in our judgment, release of the valuation allowance against U.S. deferred tax assets was not appropriate. Within the next twelve months, to the extent our operating performance demonstrates sustained profitability as defined above, certain of our end markets stabilize and we are able to affirm sustained profitability in our forecasts, we believe that release of U.S. valuation allowances approximating $500 is reasonably possible.

Note ~~16.~~17. Other ~~Income,~~Expense, Net

Three Months Ended
September 30, Nine Months Ended
September 30,
2016 2015 2016 2015
Interest income $ 3
$ 4
$ 8
$ 11
Government grants and incentives 2
1
5
2
Foreign exchange loss (2 ) (4 ) (4 ) (10 )
Strategic transaction expenses (3 ) (1 ) (6 ) (3 )
Gain on derecognition of noncontrolling interest

5
Gain on sale of marketable securities 7

7
1
Insurance recoveries

1
4
Other 2
2
6
8
Other income, net $ 9
$ 2
$ 17
$ 18



	Three Months Ended March 31,
	2017			2016
Government grants and incentives	$	2		$	1
Foreign exchange loss	(2		)	(2		)
Strategic transaction expenses	(11		)	(2		)
Insurance and other recoveries				1
Other, net	2
Other expense, net	$	(9	)	$	(2	)

Foreign exchange gains and losses on cross-currency intercompany loan balances that are not of a long-term investment nature are included above. Foreign exchange gains and losses on intercompany loans that are permanently invested are reported in OCI.

~~Upon completion~~Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including integration costs. The increase in strategic transaction expenses in 2017 is primarily attributable to our acquisitions of ~~the disposal of our operations in Venezuela in January 2015, we recognized a gain on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary.~~BFP and BPT from Brevini and USM – Warren from USM. See Note 2 for additional information.

Note ~~17.~~18. Segments

We are a global provider of ~~high technology driveline, sealing and thermal-management~~high-technology products ~~for~~to virtually every major vehicle and engine manufacturer in the ~~on-highway~~world. We also serve the stationary industrial market. Our technologies include drive and motion products (axles, driveshafts, planetary hub drives, power-transmission products, tire-management products, and transmissions); sealing solutions (gaskets, seals, heat shields, and fuel-cell plates); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, and exhaust-gas heat recovery); and fluid-power products (pumps, valves, motors, and controls). We serve our global light vehicle, medium/heavy vehicle and off-highway ~~markets. Our driveline products~~markets through four operating segments – ~~axles, driveshafts and transmissions – are delivered through our~~ Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Drive and ~~Off-Highway operating segments. Our fourth global operating segment –~~Motion Technologies (Off-Highway) and Power Technologies, –which is the center of excellence for ~~the~~ sealing and ~~thermal~~thermal-management technologies that span all customers in our on-highway and off-highway markets. These operating segments have global responsibility and accountability for business commercial activities and financial performance.

Dana evaluates the performance of its operating segments based on external sales and segment EBITDA. Segment EBITDA is a primary driver of cash flows from operations and a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. Our segments are charged for corporate and other shared administrative costs. Segment EBITDA may not be comparable to similarly titled measures reported by other companies.

Segment information —


	2016							2015							2017							2016
Three Months Ended September 30,	External Sales		Inter-Segment Sales			Segment EBITDA		External Sales		Inter-Segment Sales			Segment EBITDA
Three Months Ended March 31,															External Sales		Inter-Segment Sales			Segment EBITDA		External Sales		Inter-Segment Sales			Segment EBITDA
Light Vehicle	$	631	$	27		$	73	$	605	$	28		$	63	$	761	$	29		$	89	$	613	$	32		$	58
Commercial Vehicle	294		21			23		367		24			31		329		23			28		333		22			26
Off-Highway	199		7			28		246		8			35		328		8			45		241		9			32
Power Technologies	260		3			42		250		5			40		283		4			50		262		3			35
Eliminations and other			(58		)					(65		)					(64		)					(66		)
Total	$	1,384	$	—		$	166	$	1,468	$	—		$	169	$	1,701	$	—		$	212	$	1,449	$	—		$	151

Nine Months Ended September 30,
Light Vehicle	$	1,913	$	91		$	202	$	1,883	$	100		$	193
Commercial Vehicle	976		64			81		1,231		75			102
Off-Highway	692		24			97		809		29			115
Power Technologies	798		11			120		762		13			117
Eliminations and other			(190		)					(217		)
Total	$	4,379	$	—		$	500	$	4,685	$	—		$	527

Reconciliation of segment EBITDA to consolidated net income —


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017			2016
Segment EBITDA	$	166		$	169		$	500		$	527		$	212		$	151
Corporate expense and other items, net	2			(2		)	(6		)	(4		)	(7		)	(3		)
Depreciation	(45		)	(39		)	(129		)	(117		)	(49		)	(41		)
Amortization of intangibles	(3		)	(4		)	(7		)	(14		)	(3		)	(2		)
Restructuring	(17		)	(1		)	(23		)	(13		)	(2		)	(1		)
Stock compensation expense	(4		)	(6		)	(11		)	(14		)	(4		)	(2		)
Strategic transaction expenses	(3		)	(1		)	(6		)	(3		)	(11		)	(2		)
Acquisition related inventory adjustments													(6		)
Other items				(4		)	(3		)	(4		)	(1		)	(4		)
Impairment of long-lived assets				(36		)				(36		)
Distressed supplier costs							(1		)							(1		)
Amounts attributable to previously divested/closed operations				(4		)	3			(4		)				1
Gain on derecognition of noncontrolling interest										5
Loss on extinguishment of debt							(17		)	(2		)
Interest expense	(27		)	(31		)	(84		)	(86		)	(27		)	(27		)
Interest income	3			4			8			11			3			3
Income before income taxes	72			45			224			246			105			72
Income tax expense (benefit)	13			(77		)	66			(10		)
Income tax expense													30			24
Equity in earnings of affiliates	2			—			6			3			5
Net income	$	61		$	122		$	164		$	259		$	80		$	48

Note ~~18.~~19. Equity Affiliates

We have a number of investments in entities that engage in the manufacture of vehicular parts – primarily axles, driveshafts and wheel-end braking systems – supplied to OEMs.

Equity method investments exceeding $5 at ~~September 30, 2016~~March 31, 2017 —


	Ownership Percentage	Investment		Ownership Percentage	Investment
Dongfeng Dana Axle Co., Ltd. (DDAC)	50%	$	81	50%	$	88
Bendix Spicer Foundation Brake, LLC	20%	48		20%	49
Axles India Limited	48%	8		48%	8
Taiway Ltd.				14%	5
All others as a group		8			6
Investments in equity affiliates		145			156
Investments in affiliates carried at cost		2			2
Investments in affiliates		$	147		$	158

Summarized financial information for DDAC —


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended March 31,
	2016		2015			2016		2015			2017		2016
Sales	$	145	$	114		$	425	$	402		$	190	$	120
Gross profit	$	21	$	8		$	53	$	31		$	24	$	10
Income (loss) before income taxes	$	5	$	(4	)	$	8	$	(8	)	$	8	$	(3	)
Net income (loss)	$	2	$	(3	)	$	4	$	(6	)	$	7	$	(2	)
Dana's equity in earnings (loss) of affiliate	$	—	$	(3	)	$	—	$	(7	)	$	3	$	(2	)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)

Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes in this report.

Forward-Looking Information

Statements in this report (or otherwise made by us or on our behalf) that are not entirely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often be identified by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “predicts,” “seeks,” “estimates,” “projects,” “outlook,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing” and similar expressions, variations or negatives of these words. These statements represent the present expectations of Dana Incorporated and its consolidated subsidiaries (Dana) based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present expectations due to a number of factors, including those discussed below and elsewhere in this report and in our other filings with the Securities and Exchange Commission (SEC). All forward-looking statements speak only as of the date made and we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances that may arise after the date of this report.

Management Overview

Dana is headquartered in Maumee, Ohio, and was incorporated in Delaware in 2007. AsWe are a global provider of ~~high technology driveline, sealing and thermal-management~~high-technology products ~~our customer base includes~~to virtually every major vehicle and engine manufacturer in the world. We also serve the stationary industrial market. Our technologies include drive and motion products (axles, driveshafts, planetary hub drives, power-transmission products, tire-management products, and transmissions); sealing solutions (gaskets, seals, heat shields, and fuel-cell plates); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, and exhaust-gas heat recovery); and fluid-power products (pumps, valves, motors, and controls). We serve our global light vehicle, medium/heavy vehicle and off-highway ~~markets. Our driveline products~~markets through four business units – ~~axles, driveshafts and transmissions – are delivered through our~~ Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Drive and ~~Off-Highway Driveline~~Motion Technologies (Off-Highway) ~~operating segments. Our fourth operating segment –~~and Power Technologies, –which is the center of excellence for ~~the~~ sealing and ~~thermal~~thermal-management technologies that span all customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint, which minimizes our exposure to individual market and segment declines. At ~~September 30, 2016,~~March 31, 2017, we employed approximately ~~23,800~~27,900 people, operated in 2534 countries and had 90more than 100 major facilities housing manufacturing and distribution operations, technical and engineering centers and administrative offices.

External sales by operating segment for the periods ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~ are as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2016				2015				2016				2015				2017				2016
			% of				% of				% of				% of				% of				% of
	Dollars		Total		Dollars		Total		Dollars		Total		Dollars		Total		Dollars		Total		Dollars		Total
Light Vehicle	$	631	45.6	%	$	605	41.2	%	$	1,913	43.7	%	$	1,883	40.2	%	$	761	44.8	%	$	613	42.3	%
Commercial Vehicle	294		21.2	%	367		25.0	%	976		22.3	%	1,231		26.3	%	329		19.3	%	333		23.0	%
Off-Highway	199		14.4	%	246		16.8	%	692		15.8	%	809		17.3	%	328		19.3	%	241		16.6	%
Power Technologies	260		18.8	%	250		17.0	%	798		18.2	%	762		16.2	%	283		16.6	%	262		18.1	%
Total	$	1,384			$	1,468			$	4,379			$	4,685			$	1,701			$	1,449

See Note 1718 to our consolidated financial statements in Item 1 of Part I for further financial information about our operating segments.

Our internet address is www.dana.com. The inclusion of our website address in this report is an inactive textual reference only and is not intended to include or incorporate by reference the information on our website into this report.

Operational and Strategic Initiatives

In 2016 we outlined our current enterprise strategy which leverages our strong technology foundation and our commitment to continuous improvement. Our strategy places increased focus leveraging resources across the organization, satisfying customer requirements, expanding products and markets and accelerating commercialization of new technology.

Central to our strategy is leveraging our core operations by sharing our capabilities, technology, assets and people across the enterprise, leading to improved execution and increased customer satisfaction. Although we have taken significant strides to improve our profitability and margins, particularly through streamlining and rationalizing our manufacturing activities, we believe additional opportunities remain to further improve our cost performance. Leveraging investments across multiple end markets and making disciplined, value enhancing acquisitions, will allow us to bring product to market faster, grow our top-line sales and enhance financial returns.

Strengthening customer centricity and expanding global markets are key elements of our strategy that focus on market penetration. Foundational to growing the business is directing the entire organization to putting the customer at the center of our value system and shifting from transactional to relationship-based interactions. These relationships are built on a foundation of providing unparalleled technology with exceptional quality, delivery and value. With even stronger relationships we will be better positioned to support our customers’ most important global and flagship programs and capitalize on future growth opportunities.

We continue to enhance and expand our global footprint, optimizing it to capture growth across all of our end markets. Specifically, our manufacturing and technology center footprint positions us to support customers globally – an important factor as many of our customers are increasingly focused on common solutions for global platforms. While growth opportunities are present in each region of the world, we have a primary focus on building our presence and local capability in the Asia Pacific region. Over the ~~past several~~last few years, we have ~~focused~~opened two new engineering facilities in the region and recently new gear manufacturing facilities were established in India and Thailand.

In addition to Asia, we see further growth opportunity in Eastern Europe where we've commenced construction of a new gear manufacturing facility in Hungary. This will be our third facility in the country and will give us the capability to cost effectively manufacture gears, one of our core technologies, and efficiently service our customers within the region.

The final two elements of our enterprise strategy, commercializing new technology and accelerating hybridization and electrification, focus on ~~maintaining~~opportunities for product expansion. Bringing new innovations to market as industry leading products will drive growth as our new products and technology provide our customers with cutting edge solutions, address end user needs and capitalize on key market trends. An example is our industry leading electronically disconnecting all-wheel drive technology, which we believe is the most fuel efficient rapidly disconnecting system in the market, was recently selected by a ~~strong overall financial position~~major global customer for a significant new global vehicle platform – ~~driving profitability~~opening up new commercial channels for us in the passenger car, crossover and sport utility vehicle markets.

Initiatives to capitalize on evolving hybridization and electrification vehicle trends are a core ingredient of the current strategy. In addition to our current technologies in battery cooling and fuel cells, this element of the strategy is leveraging our electronics controls expertise across all our business units and applications such as advanced vehicle hybridization and electrification initiatives. We are working with customers to develop new solutions for those markets where electrification will be adopted first such as hybrids, buses and urban delivery vehicles. These new solutions, which include advanced electric propulsion systems with fully integrated motors and controls, are included in our ~~business, simplifying our capital structure, maintaining strong cash flows~~recently launched Spicer Electrified portfolio of products.

The development and ~~addressing structural costs. We have also strengthened and streamlined our operating segments~~implementation of this enterprise strategy is positioning Dana to grow profitably over the next few years due to increased customer focus onas we leverage our core ~~competencies of driveline~~capabilities, expand into new markets, develop and commercialize new technologies ~~sealing systems~~including for hybrid and ~~thermal management. With an experienced leadership team, we believe that we are well-positioned to place increasing focus on profitable growth and shareholder returns.~~

electric vehicles.

Shareholder returns and capital structure actions — When evaluating capital structure initiatives, we balance our growth opportunities and shareholder value initiatives with maintaining a strong balance sheet and access to capital. Our strong financial position has enabled us to simplify our capital structure while providing returns to our ~~common~~ shareholders in the form of cash dividends and reduction in the number of ~~common share equivalents~~shares outstanding. Over the past ~~three~~four years, we returned ~~$1,400~~$1,481 of cash to shareholders in connection with redemption of all of our preferred stock and repurchase of common shares. From program inception in 2012 through December 31, ~~2015,~~2016, we repurchased 67approximately 74 million shares, inclusive of the common share equivalent reduction resulting from redemption of preferred shares. ~~In January 2016,~~Remaining share repurchase authorization under the

program approved by our Board of Directors approved the expansion of our share repurchase program from $1,400 to $1,700, and during the first six months of 2016 we repurchased 6.6 million shares for $81. No shares were repurchased in the third quarter and, at present, we are not expecting to repurchase shares during the remainder of 2016.is $219. We declared and paid quarterly common stock dividends over the past four years, raising the dividend from five cents to six cents per share in the second quarter of 2015.

We have taken advantage of the lower interest rate environment to refinance our senior notes at lower rates while extending the maturities. In December 2014 and the first quarter of 2015, we completed the redemption of notes maturing in 2019, replacing them with notes maturing in 2024. During the second quarter of 2016, we redeemed notes maturing in 2021, replacing them with notes maturing in 2026. ~~Additionally, in the fourth quarter of 2014,~~In April 2017, we completed a ~~voluntary program offered~~$400 note offering, the proceeds of which will be used to ~~deferred vested salaried participants in our U.S. pension plans. With this program, we reduced plan benefit obligations by $171 with lump sum payments~~extend maturities on nearly $400 of ~~$133 from plan assets.~~

~~Technology leadership~~ — With a clear focus on market-based value drivers, global-mega trends and customer sustainability objectives and requirements, we are driving innovation to create differentiated value for our customers, enabling a “market pull” product pipeline. Our sealing and thermal engine expertise provides us with early insight into some of the critical design factors important to our customers. When combined with our drivetrain expertise, we are able to collaborate with our customers on complete power conveyance solutions, from the engine through the vehicle driveline. We are committed to making investments and diversifying our product offerings to strengthen our competitive position in our core driveline, sealing and thermal technologies businesses, creating value for our customers through improved fuel efficiency, emission control, electric and hybrid electric solutions, durability and cost of ownership, software integration and systems solutions. Our industry leading electronically actuated disconnecting all wheel drive technology, which we believe is the most fuel efficient rapidly disconnecting system in the market, was recently selected by one of our major customers for a significant new global vehicle platform – opening up new commercial channels for us in the passenger car, crossover and sport utility vehicle markets. A strategic alliance with Fallbrook Technologies Inc. (Fallbrook) provides us the opportunity to leverage leading edge continuously variable planetary (CVP) technology into the development of advanced drivetrain and transmission solutions for customers in our light vehicle market.

Additional engineering and operational investment is being channeled into our product portfolio and technology advancement opportunities. Combined engineering centers of our Light Vehicle and Commercial Vehicle segments allow us the opportunity to better share technologies among these businesses. New engineering facilities in India and China were opened in the past few years and are now on line, more than doubling our engineering presence in the Asia Pacific region with state-of-the-art development and test capabilities that globally support each of our businesses. Additionally, in 2014, we opened a new technology center in Cedar Park, Texas to support our CVP technology development initiatives.

~~Geographic expansion~~ — Our manufacturing and technology center footprint positions us to support customers globally - an important factor as many of our customers are increasingly focused on common powertrain solutions for global platforms. While growth opportunities are present in each region of the world, we have a primary focus on building our presence and local capability in the Asia Pacific region, especially India and China. In addition to new engineering facilities in those countries, new gear manufacturing facilities were recently established in India and Thailand, and we recently announced plans to establish a new gear manufacturing facility in Hungary. Over the past few years, we expanded our China off-highway activities and we believe there is considerable opportunity for growth in this market.indebtedness at significantly lower interest rates.

Aftermarket opportunities — We have a global group dedicated to identifying and developing aftermarket growth opportunities that leverage the capabilities within our existing businesses – targeting increased future aftermarket sales. In January 2016, we completed the acquisition of ~~Magnum~~^®Magnum® Gaskets' (Magnum) aftermarket distribution business which includes the Magnum brand, product portfolio, existing customer contracts and distribution rights. The Magnum brand is the third largest aftermarket sealing brand in the U.S. and Canada, providing us with access to new customers for sealing products and an additional aftermarket channel for other products.

Selective acquisitions — Our ~~current~~ acquisition focus is ~~to identify~~principally directed at “bolt-on” or adjacent acquisition opportunities that have a strategic fit with our existing core businesses, particularly opportunities that support our ~~growth initiatives~~enterprise strategy and enhance the

value proposition of our ~~customer~~ product offerings. Any potential acquisition will be evaluated in the same manner we currently consider customer program opportunities and other uses of capital – with a disciplined financial approach designed to ensure profitable growth and increased shareholder value. ~~As discussed more fully~~

Acquisitions

BFP and BPT — On February 1, 2017, we acquired 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment product portfolio to include technologies for tracked vehicles, doubling our addressable market for off-highway driveline systems and establishing Dana as the only off-highway solutions provider that can manage the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial vehicle end markets, helping to accelerate our hybridization and electrification initiatives. The acquisition is expected to add approximately $350 of sales and $35 of adjusted EBITDA in 2017.

We paid $181 at closing using cash on hand and assumed debt of $182 as part of the transaction. The purchase price is subject to adjustment upon determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date. The terms of the agreement provide Dana the right to call Brevini's noncontrolling interests in BFP and BPT, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call rights, at dates and prices defined in the agreement. Reference is made to Note 32 of the consolidated financial statements in Item 1 of Part I for the allocation of purchase consideration to assets acquired and liabilities assumed. The results of operations of these businesses are reported within our Off-Highway operating segment.

USM – Warren — On March 1, 2017, we ~~recently entered into a definitive~~completed the purchase ~~agreement with SIFCO S.A.~~of Warren Manufacturing LLC (USM – Warren), ~~a leading producer~~which holds certain assets and liabilities of ~~forged~~the former Warren, Michigan production unit of U.S. Manufacturing Corporation (USM). With this transaction, we acquired proprietary tube-manufacturing processes and ~~machined components located~~light-weighting intellectual property for axle tubes and shafts. Significant content was previously purchased from USM. Vertically integrating this content strengthens the supply chain for several of our most strategic customers. The new product and process technologies for light-weighting will assist our customers in ~~Brazil,~~achieving their sustainability and fuel efficiency goals. The USM – Warren operation employs approximately 800 people and is expected to ~~acquire certain manufacturing~~contribute approximately $75 of sales and ~~other assets. Completion~~$15 of adjusted EBITDA in 2017.

We paid $104 for this business at closing, including $25 to effectively settle trade payable obligations originating from product purchases Dana made from USM prior to the acquisition. The purchase price is subject to ~~closing conditions, including Brazil bankruptcy court~~customary post-closing adjustments for working capital and ~~regulatory approvals. If completed,~~other items, which we currently estimate will reduce the purchase price by $1. No debt was assumed with this transaction which was funded using cash on hand. Reference is made to Note 2 of the consolidated financial statements in Item 1 of Part I for the allocation of purchase ~~would~~consideration to assets acquired and liabilities assumed. The results of operations of the USM – Warren business are reported within our Light Vehicle operating segment.

SIFCO —On December 23, 2016, we acquired strategic assets of the commercial vehicle steer axle systems and related forged components businesses of SIFCO. The acquisition enables us to enhance our vertically integrated supply chain, which will further ~~strengthen~~improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of sophisticated forged components. In addition to strengthening our position as a ~~leading supplier of~~central source for products that use forged and

machined ~~components in~~parts throughout the region, ~~and allow~~this acquisition enables us to ~~assist our vehicle manufacturing customers satisfy~~better accommodate the local content ~~requirements.~~requirements of our customers, which reduces their import and other region-specific costs.

As part of the acquisition, we added two manufacturing facilities and approximately 1,400 employees. The strategic assets were acquired by Dana free and clear of any liens, claims or encumbrances, and without assumption of any legacy liabilities of SIFCO. We had sales of $86 in 2016 resulting from business conducted under the previous supply agreement with SIFCO. The additional business relationships obtained as a result of the acquisition are expected to generate incremental sales of approximately $50 at current production levels.

The SIFCO purchase price was $69, with the payment of $9 of the purchase price deferred until December 2017 pending any claims under indemnification provisions of the purchase agreement. Reference is made to Note 2 of the consolidated financial statements in Item 1 of Part I for the allocation of purchase consideration to assets acquired and liabilities assumed. The results of operations of the SIFCO related business are reported within our Commercial Vehicle operating segment.

~~New~~Magnum — On January 29, 2016, we acquired the aftermarket distribution business of Magnum, a U.S.-based supplier of gaskets and sealing products for automotive and commercial ~~channels~~ vehicle applications, for a purchase price of $18 at closing and additional cash payments of up to $2 contingent upon the achievement of certain sales metrics over a future two-year period. As of the closing date of the acquisition, the contingent consideration was assigned a fair value of approximately $1. Assets acquired included trademarks and trade names, customer relationships and goodwill. The results of operations of Magnum are reported within our Power Technologies operating segment.

Divestitures

Nippon Reinz— ~~In each~~On November 30, 2016, we sold our 53.7% interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to Nichias Corporation. Dana received net cash proceeds of ~~our operating segments, we have customer, geographic~~$5 and ~~product growth opportunities. By leveraging our relentless pursuit~~recognized a pre-tax loss of ~~customer satisfaction, innovative technology and differentiated products, we believe there are opportunities to open new, as well as further penetrate existing, commercial channels.~~$3 on the divestiture of Nippon Reinz, inclusive of the derecognition of the related noncontrolling interest. Nippon Reinz had sales of $42 in 2016 through the transaction date.

~~Manufacturing excellence/cost management~~Dana Companies — ~~Although~~On December 30, 2016, we ~~have taken~~completed the divestiture of Dana Companies, LLC (DCLLC), a consolidated wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and manage personal injury asbestos claims retained by the reorganized Dana Corporation, which was merged into DCLLC. The assets of DCLLC at time of sale included cash and marketable securities along with the rights to insurance coverage in place to satisfy a significant ~~strides~~portion of its liabilities. We received net cash proceeds of $29 at closing on December 30, 2016, with $3 retained by the purchaser subject to improve our profitability and margins, particularly through streamlining and rationalizing our manufacturing activities and administrative support processes, we believe additional opportunities remain to further improve our financial performance. We have ramped up our material cost efforts to ensurethe satisfaction of certain future conditions that we expect will be achieved in 2017. We recognized a pre-tax loss of $77 in 2016 upon completion of the transaction. In the event the conditions associated with the retained purchase price of $3 are ~~rationalizing~~satisfied in the future, income of $3 will be recognized at such time. Following completion of the sale, Dana has no obligation with respect to current or future asbestos claims. The sale of this business also enhanced our supply base and obtaining appropriate competitive pricing. We have embarked on information technology initiatives to reduce and streamline systems and supporting costs. With a continued emphasis on process improvements and productivity throughoutavailable liquidity since the ~~organization, we expect cost reductions to continue contributing to future margin improvement.~~net proceeds from the sale are available for use in our core businesses.

Trends in Our Markets

Global Vehicle Production (Full Year)

Actual
(Units in thousands) Dana 2016 Outlook
2015
2014
North America

Light Truck (Full Frame) 4,400
to 4,500
4,136

3,834
Light Vehicle Engines 16,000
to 16,500
15,474

15,119
Medium Truck (Classes 5-7) 230
to 240
237

226
Heavy Truck (Class 8) 220
to 230
323

297
Agricultural Equipment 50
to 55
58

64
Construction/Mining Equipment 145
to 155
158

158
Europe (including Eastern Europe)

Light Truck 9,200
to 9,300
8,546

7,790
Light Vehicle Engines 22,500
to 23,000 22,570
21,510
Medium/Heavy Truck 440
to 445
434

397
Agricultural Equipment 190
to 195
202

220
Construction/Mining Equipment 290
to 295
299

301
South America

Light Truck 900
to 950
940

1,146
Light Vehicle Engines 2,100
to 2,150 2,439
3,176
Medium/Heavy Truck 70
to 80
88

167
Agricultural Equipment 25
to 30
32

43
Construction/Mining Equipment 10
to 15
13

17
Asia-Pacific

Light Truck 26,000
to 27,000
24,160

22,337
Light Vehicle Engines 48,500
to 49,500 47,209
46,497
Medium/Heavy Truck 1,450
to 1,500
1,383

1,573
Agricultural Equipment 645
to 665
676

710
Construction/Mining Equipment 390
to 400
405

509



				Actual
(Units in thousands)	Dana 2017 Outlook			2016	2015
North America
Light Truck (Full Frame)	4,200	to	4,300	4,450	4,136
Light Vehicle Engines	15,800	to	16,200	15,849	15,474
Medium Truck (Classes 5-7)	235	to	250	233	237
Heavy Truck (Class 8)	190	to	210	228	323
Agricultural Equipment	50	to	60	53	58
Construction/Mining Equipment	150	to	160	150	158
Europe (including Eastern Europe)
Light Truck	9,300	to	9,500	9,313	8,546
Light Vehicle Engines	23,800	to	24,300	23,364	22,570
Medium/Heavy Truck	440	to	470	471	434
Agricultural Equipment	190	to	210	193	202
Construction/Mining Equipment	290	to	310	290	299
South America
Light Truck	1,000	to	1,050	980	940
Light Vehicle Engines	2,000	to	2,100	2,141	2,439
Medium/Heavy Truck	75	to	85	70	88
Agricultural Equipment	25	to	35	29	32
Construction/Mining Equipment	10	to	15	10	13
Asia-Pacific
Light Truck	26,500	to	27,500	27,448	24,160
Light Vehicle Engines	50,000	to	51,500	50,524	47,209
Medium/Heavy Truck	1,450	to	1,550	1,661	1,383
Agricultural Equipment	680	to	720	648	676
Construction/Mining Equipment	380	to	410	396	405

North America

Light vehicle markets — Improving economic conditions during the past few years have contributed to increased light vehicle sales and production levels in North America. ~~Release~~Overall economic conditions in North America continue to be relatively favorable with improving employment levels and upward trending consumer confidence. There continues, however, to be considerable uncertainty with the recent transition to new government leadership in the United States, and the potential impact on the economy of future actions initiated by the new administration. The North America light vehicle market is beginning to show signs of weakening demand levels. Strong sales levels the past few years have significantly addressed built-up demand to replace older ~~vehicles, greater availability~~vehicles. Increasing interest rates, high levels of ~~credit, stronger~~ consumer ~~confidence~~debt and ~~other factors~~declining used car prices are developments that are likely to constrict demand for new vehicles. To date, these effects have ~~combined to stimulate new vehicle~~been most notable in passenger car sales. ~~Light~~While first-quarter 2017 light vehicle sales ~~in 2015~~ increased about 6%2% from ~~2014, with~~2016, passenger car sales ~~that year being up 6%~~declined by about 4% from ~~2013. The~~the first quarter of 2016. Helped by continued low fuel prices, light truck market ~~has remained~~demand continued to be relatively strong ~~in 2016 with sales~~ in this year's first ~~nine months~~quarter, with sales up ~~2% from the same period of 2015.~~7% compared to last year. Many of our programs are focused in the full frame light truck segment. Sales in this segment were ~~especially strong the past two years, being~~ up about ~~9% in 2015 and 8% in 2014. Sales of vehicles in this segment during the first nine months of 2016 were 6% higher than the comparable period of last year.~~5%. Production levels were reflective of the stronger light vehicle sales. Production of approximately ~~17.5~~4.5 million light vehicles in ~~2015~~the first quarter of 2017 was 3%2% higher than in ~~2014, after~~2016, with passenger car production ~~increased about~~down 4% and light truck production 5% ~~the preceding year.~~higher. Light vehicle engine production was ~~similarly higher, up 2%~~impacted more by developments in ~~2015~~the passenger car segment and ~~6% in 2014.~~down 1% from last year's first quarter. In the key full frame light truck segment, first-quarter 2017 production levels increased about ~~8% in 2015~~5% compared ~~with an increase~~to the same period of 6% in 2014. Production levels in the first nine months of this year continued to follow the sales pattern, with light vehicle production higher than last year's first nine months by about 3%, light vehicle engine build up 5% and full frame light truck production up 9%.2016. Days’ supply of total light vehicles in the U.S. at the end of ~~September 2016~~March 2017 was around 65 days, up slightly from 61 days at December 2015 and 59 days at the end of September 2015. In the full frame light truck segment, this year's strong nine-month production raised inventory levels at the end of September to 7472 days, up from 62 days at the end of ~~2015~~December 2016 and 6966 days at the end of ~~September 2015.~~March 2016. In the full frame light truck segment, inventory levels increased to 83 days at the end of March 2017, up from 65 days at the end of December 2016 and 76 days at the end of March 2016.

~~Steady employment levels, low fuel prices and favorably trending consumer confidence are expected to provide~~For the remainder of 2017, we expect a generally solid economic climate in North ~~America~~America. However, with the ~~remainder of~~strength in this ~~year. As such,~~market the past couple years, we ~~have maintained our~~believe slightly lower production levels are likely. Our full year ~~2016~~2017 outlook for light

vehicle engine production ~~at 16.0~~is 15.8 to ~~16.5~~16.2 million units, ~~and~~flat to an increase of 2% compared with 2016. In the full frame light truck segment where the past two years have been especially strong, our 2017 production ~~of 4.4~~outlook is 4.2 to ~~4.5~~4.3 million ~~units. At these levels, we would expect light vehicle engine production to be up~~units, a decrease of 3 to ~~7% compared with 2015 and full frame light truck production to be higher by about 6 to 9%.~~6% from 2016.

Medium/heavy vehicle markets — ~~Similar to~~The commercial vehicle market is similarly impacted by many of the same macroeconomic developments impacting the light vehicle ~~market,~~market. Strong production levels in the ~~commercial vehicle~~heavy truck segment ~~benefited~~in 2014 and first half of 2015 led to more trucks than required for freight demand. As a consequence, production levels in 2016 and 2017 have been scaled back. Class 8 production in the first quarter of 2017 is down approximately 26% from ~~an improving~~first-quarter 2016 production levels. Demand and production levels in the medium duty segment have been aligned and relatively stable, more commensurate with the relatively slow, steady economic growth in North ~~America economy in recent years, leading to increased medium~~America. Medium duty Classes 5-7 truck production the past two years. After increasing 12% in 2014, medium duty production increased another 4% in 2015. In the Class 8 segment, production levels increased 21% in 2014 and another 8% in 2015 to reach roughly 323,000 units. Although medium duty production in this year's ~~third~~first quarter ~~declined 12% from the same period last year, production over~~was down about 4% compared with the first ~~nine~~three months of ~~this year has been relatively stable, being up about 2% from the same period last year. In the~~ 2016.

Class 8 ~~segment,~~ order levels have been improving in recent months, and production ~~began declining in~~levels for the ~~second half~~remainder of ~~2015.~~the year are expected to improve sequentially from this year's first quarter. Although we have maintained our February outlook for full year 2017 Class 8 production ~~in this year's third quarter is about 39% lower than the comparable 2015 period, with nine-month production down about 29% from 2015.~~

~~Orders for Class 8 trucks continued~~at 190 to weaken in this year's third quarter, as on-highway freight demand levels are being met with existing trucks and operators are taking a cautious view until sustained increases in demand levels are apparent. As a result, we've reduced our full year Class 8 production outlook to 220,000 to 230,000 vehicles from our previous expectation of 230,000 to 240,000210 million units, ~~placing current year production about 29 to 32% lower than in 2015. Our medium duty production outlook is unchanged at 230,000 to 240,000 units. At this level, full year 2016 medium duty~~we currently expect that production will be ~~about~~nearer the ~~same as last year, with~~high end of the range, comparable to the 2016 build ~~levels~~level. In the medium duty segment, we expect 2017 production to be in the ~~last half~~range of ~~this year being~~235,000 to 250,000 units, comparable to up about ~~15% lower than in the first six months.~~7% from 2016.

Markets Outside of North America

Light vehicle markets — Signs of an improved overall European economy have been evident, albeit mixed at times, during the past few years. Reflective of a modestly improved economy, light vehicle production levels have increased with light vehicle engine production being up about 4% in 2016 after increasing 5% in 2015, ~~after increasing 3% in 2014~~ and light truck production being higher by 9%9 to 10% in ~~2015 after being up about 7%~~each of the past two years. Overall market improvement continued in ~~2014. A stable to modestly improving current economic environment contributed to continued year-over-year production increases, with~~the first quarter of 2017 as light vehicle engine ~~build in the first nine months of 2016 being~~production increased about ~~2% higher than in the same period last year~~7% and light truck production ~~in this year's~~was up about 13% compared to the first ~~nine~~three months ~~increasing about 8%.~~of last year. The United Kingdom's ~~recent~~ decision to withdraw from the European Union along with political developments in other European countries has cast an element of uncertainty around continued economic improvement in the region. At present, ~~the near-term effects on production levels are expected to remain relatively moderate. With~~we expect overall stable to improving economic conditions across the entire region ~~for the remainder of the year, our~~in 2017. Our full year ~~forecast that has light vehicle engine production about the same as last year is unchanged, while we've increased our full year 2016~~2017 outlook for light ~~truck~~vehicle engines and light trucks is unchanged from February, with production levels expected to ~~a level that is about 8~~be up 2 to ~~9% higher than the previous year.~~4% for light vehicle engines and flat to up 2% for light trucks. The economic climate in most South America markets the past ~~couple~~few years has been weak, volatile and challenging. ~~Light truck~~After significant production ~~declined 12%~~declines in 2014 and ~~was down another 17%~~2015, there were signals of the demand levels having bottomed out in ~~2015. Light vehicle engine production was similarly down 16%~~2016. Production levels in ~~2014 and another 22% in 2015. During~~ the first ~~nine months~~quarter of ~~2016, we have seen continuing market weakness. Nine-month~~2017 were reflective of a potentially improving market. This year's first- quarter light vehicle engine production was ~~18% lower than~~up 12% compared to the same period ~~of 2015. While third quarter~~in 2016 ~~year-over-year~~and light truck production ~~increased~~was higher by about ~~5%, nine-month year-over-year production is down about 1%~~25%. ~~Our~~Pending further evidence of sustained improvement our full year ~~forecast~~2017 outlook for South

America light vehicle markets is unchanged ~~and reflects an expectation that the region will remain relatively weak over the remainder of this year,~~from February, with ~~full year~~ light truck production ~~flat~~up 2 to ~~down 4%~~7% and light vehicle engine production down ~~about 13%~~2 to 7% compared with ~~2015.~~2016. The Asia Pacific markets have been relatively strong the past few years. Light truck production increased 9%8% in ~~2014~~2015 and was up another 8%14% in ~~2015,~~2016, while light vehicle engine production increased 3%2% in ~~2014~~2015 and another 1%7% in ~~2015. In~~2016. This year's first quarter exhibited signs of continuing growth in the ~~first nine months of 2016,~~region. First quarter 2017 light vehicle engine build increased 4% and light truck production ~~in the region~~ was ~~up about 11%~~higher by 7% when compared with the same period ~~of 2015, with year-over-year nine-month~~last year. Our full year 2017 outlook for the Asia Pacific light vehicle ~~engine build up 5%. On the strength of stronger demand, primarily in China and India, we have increased our full year~~markets has light truck production ~~outlook~~flat to ~~a level that reflects an increase of 8 to 12% from 2015. Our full year 2016 outlook for~~down 4% and light vehicle engine production ~~is unchanged,~~down 1% to up 2% compared with ~~year-over-year light vehicle engine build expected to be higher by about 3 to 5%.~~2016.

Medium/heavy vehicle markets — Some of the same factors referenced above that affected light vehicle markets outside of North America similarly affected the medium/heavy markets, albeit with improvements in the medium/heavy truck market being a little slower to manifest. Signs of a strengthening European market emerged in 2015 and 2016 with medium/heavy truck production increasing about 9% each year. Market strengthening continued in ~~2015 being up about 10%~~the first quarter of 2017 with first quarter production increasing by 5% compared with the same period last year. Our full year outlook is unchanged from ~~the preceding year. In this year's first nine months,~~February, reflecting 2017 medium/heavy truck production ~~increased about 8%~~being flat to down 7% compared ~~with the first nine months of~~to last year. ~~For the full year 2016, our outlook is unchanged. We expect Europe medium/heavy truck production to be up modestly from 2015.~~ A weakening South America economic climate beginning in 2014 led to medium/heavy truck production declining ~~about 23%~~47% in ~~2014~~2015 and another ~~49%~~20% in ~~2015.~~2016. As with the light vehicle markets, we have ~~seen additional weakness~~begun to see some signs of improving economic conditions in ~~South America in early 2016. This year's third quarter~~the region. First-quarter 2017 medium/heavy truck production was ~~down 14% from an already weak third quarter in 2015. Nine-month medium/heavy truck production is down 21%~~up 5% from the same period last, ~~year.~~and we believe continuing improvement is likely as we move through 2017. Our full year ~~2016~~2017 outlook ~~for South America reflects continued weakness over the remainder~~is unchanged at 75,000 to 85,000 units, an increase of ~~the year, with full year medium/heavy truck production down around 9~~7 to ~~20%. The medium/heavy truck market in Asia Pacific was sluggish the past two years, being up a modest 3% in 2014 and declining about 12% in 2015 as a slowdown in the~~21% from 2016. A stronger than expected China market ~~materialized. While the China market is expected to be comparable to up modestly in 2016,~~and an improving India market ~~is expected~~contributed to ~~help improve production in the region. Medium/~~higher medium/heavy truck production in the Asia Pacific region of about 20% in 2016. Production in this year's first ~~nine months~~quarter was especially strong – up ~~about 13%~~32% from the ~~same period~~first quarter of last year. ~~With~~This year's strong first quarter was driven in part by impending regulations in China that limit axle load and weight which accelerated buying during the ~~slightly stronger demand levels~~last half of 2016 and into 2017 prior to the ~~third quarter expecting~~new regulations becoming effective. We expect to ~~continue near term, we~~see lower second half 2017 production and have ~~increased~~maintained our ~~full year 2016~~February outlook with medium/heavy truck production outlook for the region being about 7 to ~~a level 5 to 8% higher~~13% lower than ~~in 2015.~~2016.

Off-Highway Markets — Our off-highway business has a large presence outside of North America, with ~~more than~~approximately 75% of its sales coming from Europe and ~~more than 10%~~15% from South America and Asia Pacific combined. We serve several segments of the diverse off-highway market, including construction, agriculture, mining and material handling. Our largest markets are the construction/mining and agricultural equipment ~~segments. After experiencing increased global demand in 2011 and 2012, these markets~~segments which have been relatively weak over the past ~~three~~few years. Global demand in the agriculture market was down about 11% in 2014, ~~and~~ 7% in ~~2015.~~2015 and 5% in 2016. The construction/mining ~~segme~~ntsegment weakened about 4% in 2014, ~~and~~ 11% in ~~2015. Our~~2015 and 3% in 2016. During this year's first quarter, we experienced an uplift in overall market demand. Although we've maintained our full year ~~outlook is largely unchanged from our previous outlook in July, with demand levels in both segments~~outlooks, we believe the high end of outlooks are now ~~expected to range from down modestly to down 5% compared to 2015.~~more likely.

Foreign Currency and Brexit Effects

Weaker international currencies relative to the U.S. dollar have had a significant impact on our sales and results of operations ~~in 2015.~~the past few years. The United Kingdom's ~~recent~~ decision to exit the European Union ("Brexit") has provided further uncertainty and potential volatility around European currencies, along with uncertain effects of future trade and other cross-border activities of the United Kingdom with the European Union and other countries. With new government leadership in the U.S. assuming control in early 2017, there is added uncertainly around future economic and trade policy and its potential impact on the U.S. dollar relative to other currencies. Approximately 54% of our consolidated first-quarter 2017 sales ~~in the first nine months of 2016~~ were outside the U.S., with euro zone countries, Mexico, Brazil and the United Kingdom ~~and Brazil~~ accounting for approximately ~~40%~~42%, 6%8%, 8% and 6% of our non-U.S. sales. The potential impact of future U.S. economic and trade policy has led to significant weakening of the Mexican peso against the U.S. dollar since the U.S. presidential election in November 2016. Although sales in Argentina and South Africa are each less than 5% of our non-U.S. sales, ~~a weaker Argentine peso has~~exchange rate movements of those countries have also significantly impacted ~~this year's~~ sales. Translation of our international activities at average exchange rates in 2015 as compared to average rates in 2014 reduced sales by $516, with $268 attributable to a weaker euro and $91 to a weaker Brazil real. In ~~this year's first nine months,~~2016, weaker international currencies reduced sales by another $173. A weaker Argentine peso, British pound, Mexican peso, South African rand and Brazilian real reduced sales by $70, $23, $19, $18 and $11. The euro was relatively stable in 2016. Weaker international currencies are expected to be a headwind to sales again in 2017. First-quarter 2017 sales were adversely impacted by $6 due to currency translation as compared to the ~~first nine months of last year reduced sales by $145. A weaker Brazil real and Argentina peso reduced South America sales by $70,~~same period in 2016, with a weaker euro, British pound and ~~South Africa rand reducing Europe region~~Mexican peso being partially offset by a stronger Brazilian real. Based on our current sales ~~by $35. With~~and exchange rate outlook, which includes a ~~nominal net reduction of sales due to currency effects of $5 in this year's fourth quarter, our~~somewhat stronger Brazilian real than previously forecast, we expect the full year ~~2016 sales outlook anticipates overall weaker international currencies reducing year-over-year~~2017 impact of currency translation to reduce sales by about ~~$150.~~$75. Our ~~fourth quarter~~2017 outlook is based on an assumed euro/U.S. dollar rate of 1.05 to 1.10, a U.S. dollar/Brazil real rate of ~~3.3 and~~3.50 to 4.00, a British pound/U.S. dollar rate of ~~1.30.~~1.20 to 1.30 and a U.S. dollar/Mexican peso rate of 20.00 to 22.00. At sales levels in our current outlook for ~~calendar 2016,~~2017, a 5% movement on the euro ~~Brazil real and British pound rates~~ would impact our annual sales by approximately $65 to $75. A 5% change on the Brazil real, British pound, Mexican peso, Thailand baht and China yuan rates would impact our annual sales in each of those countries by approximately $10 ~~and $10, respectively.~~

to $20.

Brazil Market

The Brazil market is an important market for our Commercial Vehicle segment, representing about 17% of this segment's first-quarter 2017 sales. Our medium/heavy truck sales in Brazil account for more than 75% of our total sales in the country. Reduced market demand resulting from the weak economic environment in Brazil in 2015 led to production levels in the light vehicle and medium/heavy duty ~~vehicle~~truck markets that were lower by about 22% and 44% from 2014. Continued weakness in 2016 resulted in further reductions in medium/heavy truck production of about 20% and a light vehicle production decline of around 10%. As a consequence, sales by our operations in Brazil for ~~2015 were $240,~~2016 approximated $200, down from ~~$505 the preceding year. Continuing weakness occurred~~about $500 in this year's first nine months, with third quarter and nine-month light vehicle production being about 9% and 16% lower than the same periods of 2015. In the medium/heavy truck market, third quarter 2016 production was down about 15% and nine-month 2016 production was lower by 22% from the comparable periods of last year. For the full year 2016, Brazil light vehicle and medium/heavy truck production is expected to be down about 12% and 20% from last year. Our medium/heavy duty presence is particularly significant, with approximately 75% of our 2015 and nine-month 2016 Brazil sales originating in our Commercial Vehicle operating segment.2014. In response to the challenging economic conditions in this country, we implemented restructuring and other cost reduction actions ~~in 2015~~the past two years and continue to trim costs to the extent practicable. As discussed in Note 32 to our consolidated financial statements in Item 1, ~~one of~~we completed a transaction in December 2016 that provided us with the underlying assets and personnel supporting our ~~major suppliers is operating~~pre-existing business with ~~judicial oversight under reorganization proceedings in Brazil. We are continuing to operate under an interim agreement~~a supplier along with this supplier while also pursuing the purchase of certain assets from this supplier through the judicial reorganization proceedings. Completion of this acquisition is subject to bankruptcy court and regulatory approvals. If completed,some incremental business. With this transaction, ~~will enhance~~we have enhanced our ~~vertically integrated supply chain capability~~competitive position in the market and ~~further assure uninterrupted product supply~~should benefit significantly in future years as the Brazilian markets rebound. As indicated above, first quarter 2017 vehicle production levels in South America were higher than the same period of last year. Brazil was a significant contributor to ~~satisfy our customer commitments.~~that performance with light truck production in this year's first quarter being higher by more than 30% and medium/heavy truck production being up about 3%. The first-quarter performance is an indication perhaps of the onset of improving market conditions in Brazil.

Commodity Costs

The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper and brass. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers. Where such formal agreements are not present, we have historically

been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes.

Higher commodity prices ~~driven in part by inflationary costs in Argentina,~~ increased our costs by approximately $8$5 in the ~~third~~first quarter of 2017, while in the same period of 2016 ~~with higher~~lower commodity prices ~~increasing~~decreased costs ~~in this years first nine months~~ by ~~$3. Lower commodity prices benefited our results by $6 in the third quarter and first nine months of 2015 as compared to the corresponding periods in 2014.~~$7. Material recovery and other pricing actions increased first-quarter 2017 sales by ~~$12 in this~~$2 and reduced last year's ~~third~~first quarter ~~and by $7 for the first nine months of 2016. In 2015, these actions reduced third-quarter~~ sales by ~~$9 and increased nine-month 2015 sales by $9.~~$8.

Sales, Earnings and Cash Flow Outlook


	2016 Outlook	2015		2014		2017 Outlook	2016		2015
Sales	~ $5,800	$	6,060	$	6,617	$6,200 - $6,400	$	5,826	$	6,060
Adjusted EBITDA	~ $655	$	652	$	746	$695 - $725	$	660	$	652
Net cash provided by operating activities	~ $440	$	406	$	510	$410 - $450	$	384	$	406
Purchases of property, plant and equipment	~ $320	$	260	$	234	$350 - $370	$	322	$	260
Free Cash Flow	~ $120	$	146	$	276	$50 - $90	$	62	$	146

Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. See the Non-GAAP Financial Measures discussion below for definitions of our non-GAAP financial measures and reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures. We have not provided a reconciliation of our ~~Adjusted~~adjusted EBITDA outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in net income, including restructuring actions, asset impairments and income tax valuation adjustments. The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.

During the past ~~three~~two years, weaker international currencies relative to the U.S. dollar were the most significant factor reducing our sales. The sales reduction attributable to currency ~~over the three-year period approximated $900, with a reduction of more than $500 occurring in 2015. We divested our Venezuela operation in January~~during 2015 ~~which further reduced consolidated sales by approximately $100.~~and 2016 was $689. Adjusted for currency and divestiture effects, sales in the ~~three preceding~~past two years ~~have~~

~~been~~were relatively ~~stable.~~comparable, with new customer programs largely offsetting the impacts of overall weaker end user demand across our global businesses. We experienced uneven end user markets, with some being relatively strong and others somewhat weak, and the conditions across the regions of the world differing quite dramatically. ~~New~~Our February outlook for full year 2017 sales included the Brevini acquisition which closed February 1, 2017. Our net new business backlog will increase sales by about $175, with ~~customers has largely offset~~overall stronger market demand also expected to contribute to higher sales. Partially offsetting these increases are currency headwinds from further weakening of international currencies against the ~~lower~~U.S. dollar that are currently expected to reduce 2017 sales ~~attributable~~by about $75. With the closing of the USM transaction on March 1, 2017, we have maintained our February outlook at $6,200 to ~~overall weaker end user demand. For 2016, we~~$6,400, but now expect ~~full year sales~~ to ~~approximate $5,800,~~be at the ~~low~~high end of the range of our July outlook. We expect the currency effect on sales for the remainder of this year to be nominal – about $5. When included with the currency effect on this year's first nine months, the full year currency effect in 2016 due to weaker international currencies will approximate $150. The lower full year expectation compared with our July outlook is primarily attributable to weaker demand levels in the North America heavy truck, global off-highway and Brazil markets more than offsetting the benefits of stronger light vehicle markets.range.

~~Over the past three years, adjusted~~Adjusted EBITDA margin as a percent of sales has remained relatively constant at around 11% despite certain markets being weak and volatile. Where practicable, we have aligned our cost with weaker demand levels in certain markets. We continue to focus on margin improvement through right sizing and rationalizing our manufacturing operations, implementing other cost reduction initiatives and ensuring that customer programs are competitively priced. Although our sales outlook has weakened some, with a continued focus on cost and new business coming on at competitive rates, we expect full year 2016 adjusted EBITDA margin to be around 11.2% – the high end of our July outlook and an improvement of 40 basis points over 2015. Further margin improvement beyond ~~2016~~2017 is anticipated as we expect to see increased end user demand in certain markets, along with continued benefit from additional new business and cost reduction actions. As with sales, we have maintained our February outlook for full year 2017 Adjusted EBITDA, but with the closure of the USM transaction this past quarter, we currently expect to be near the upper end of the range.

~~Free~~We have generated positive free cash flow ~~generation has been strong~~ the past three years ~~as we benefited from strong earnings and closely managed working~~while increasing capital ~~and capital spend requirements.~~spending to support organic business growth through launching new business with customers. Free cash flow in ~~2014 benefited~~2015 declined from the receipt of $40 of interest from the sale of an in-kind note receivable. Lower pension contributions, restructuring payments and cash taxes also benefited free cash flow in 2014, while increased new program launches resulted in higher capital spending. The lower free cash flow in 2015 was primarilyprevious year due to lower earnings and increased capital spend to support new program launches, with lower cash taxes and restructuring payments providing a partial offset. ~~During the first quarter of~~Reduced free cash flow in 2016 ~~we were successful~~is primarily attributable to our continued success in being ~~selected by certain~~awarded significant new customer programs. Although many of ~~our major customers for new programs. Although~~the recent program wins are not scheduled to begin production until 2018, these programs ~~require~~required capital investment ~~this year.~~beginning in 2016. As such, cash used for capital investments in 2016 was $62 higher than in 2015. An elevated level of capital spending will continue into 2017, with such expenditures expected to approximate $350 to $370. The USM transaction resulted in first-quarter 2017 free cash flow being reduced by $25 as a portion of the cash paid at closing was treated as having effectively settled trade payables owed to USM for product purchases prior to the acquisition. As such, we ~~increased~~now expect to be nearer the low end of our February outlook for full year ~~2016 July outlook~~2017 free cash flow. The

higher level of earnings in our businesses for the year will largely offset the increased level of capital spend, ~~by $40 to a range of $320 to $340 and correspondingly reduced our 2016~~resulting in 2017 free cash flow ~~outlook~~that is relatively comparable to ~~$120 to $140. Our current outlook is full year free cash flow~~the preceding year. The higher level of ~~$120. Capital~~capital spend in recent years associated with increased new program launches is expected to be around $320. Other free cash flow elements were largely unchanged from our July outlook. Net interest will consume cash of around $100, with estimated cash taxes being about $90, restructuring expenditures about $20 and pension contributions around $15 – all relatively comparable with 2015.dissipate after 2017.

Among our Operational and Strategic Initiatives are increased focus on and investment in product technology – delivering products and technology that are key to bringing solutions to issues of paramount importance to our customers. ~~This, more than anything, is what will position us for profitable future growth.~~ Our success on this front is measured, in part, by our sales backlog which is net new business received that will be launching in the future and adding to our base annual sales. This backlog excludes replacement business and represents incremental sales associated with new programs for which we have received formal customer awards. At December 31, ~~2015,~~2016, our sales backlog of net new business for the ~~2016~~2017 through ~~2018~~2019 period was $750. This current backlog ~~compares~~is comparable to aour three-year sales backlog at the end of ~~2014~~2015, with new business wins that ~~approximated $680 when adjusted for current exchange rates~~added sales approximating $150 being offset by reductions to the backlog to reflect the effects of weaker international currencies relative to the U.S. dollar and ~~market~~reduced demand ~~– an increase of 10%.~~levels now expected during the three-year period.

Summary Consolidated Results of Operations ~~(Third Quarter, 2016~~(Year-to-Date, 2017 versus ~~2015)~~2016)


	Three Months Ended September 30,												Three Months Ended March 31,
	2016				2015								2017					2016
	Dollars		% of Net Sales		Dollars			% of Net Sales		Increase/ (Decrease)			Dollars			% of Net Sales		Dollars			% of Net Sales		Increase/ (Decrease)
Net sales	$	1,384			$	1,468				$	(84	)	$	1,701				$	1,449				$	252
Cost of sales	1,176		85.0	%	1,255			85.5	%	(79		)	1,438			84.5	%	1,250			86.3	%	188
Gross margin	208		15.0	%	213			14.5	%	(5		)	263			15.5	%	199			13.7	%	64
Selling, general and administrative expenses	99		7.2	%	98			6.7	%	1			121			7.1	%	98			6.8	%	23
Amortization of intangibles	2				4					(2		)	2					2					—
Restructuring charges, net	17				1					16			2					1					1
Impairment of long-lived assets					(36		)			36
Other income, net	9				2					7
Income before interest expense and income taxes	99				76					23
Other expense, net													(9		)			(2		)			(7		)
Income before interest and income taxes													129					96					33
Interest income													3					3					—
Interest expense	27				31					(4		)	27					27					—
Income before income taxes	72				45					27			105					72					33
Income tax expense (benefit)	13				(77		)			90
Income tax expense													30					24					6
Equity in earnings of affiliates	2				—					2			5										5
Net income	61				122					(61		)	80					48					32
Less: Noncontrolling interests net income	4				3					1			5					3					2
Less: Redeemable noncontrolling interests net income																							—
Net income attributable to the parent company	$	57			$	119				$	(62	)	$	75				$	45				$	30

Sales — The following table shows changes in our sales by geographic region.


	Three Months Ended September 30,							Amount of Change Due To								Three Months Ended March 31,						Amount of Change Due To
	2016		2015		Increase/(Decrease)			Currency Effects			Acquisitions (Divestitures)		Organic Change			2017		2016		Increase/ (Decrease)		Currency Effects			Acquisitions (Divestitures)		Organic Change
North America	$	726	$	786	$	(60	)	$	(4	)	$	2	$	(58	)	$	902	$	782	$	120	$	(3	)	$	17	$	106
Europe	373		407		(34		)	(10		)			(24		)	489		410		79		(12		)	50		41
South America	94		88		6			(15		)			21			106		66		40		10			11		19
Asia Pacific	191		187		4								4			204		191		13		(1		)	2		12
Total	$	1,384	$	1,468	$	(84	)	$	(29	)	$	2	$	(57	)	$	1,701	$	1,449	$	252	$	(6	)	$	80	$	178

Sales in the ~~third~~first quarter of ~~2016~~2017 were ~~$84 lower~~$252 higher than in ~~the same period in 2015.~~2016. Weaker international currencies decreased sales by ~~$29,~~$6. The acquisitions of BFP, BPT, SIFCO, USM – Warren and ~~the acquisition of~~ Magnum ~~earlier this year added~~in 2016 and 2017 generated a quarter-over-quarter increase in sales of ~~$2. The~~$91, with the divestiture of Nippon Reinz providing a reduction of $11. A volume-related organic ~~change in~~ sales ~~which we define as the change in sales excluding currency and acquisition or divestiture impacts, includes a volume-related decrease~~increase of ~~$69 that~~$178 resulted primarily from ~~weaker~~stronger light truck markets, strengthening global Off-Highway demand ~~and lower commercial vehicle production in North America and Brazil, partially offset by stronger overall light vehicle volume in North America, Europe and Asia Pacific~~ and contributions from new business. ~~Cost recovery pricing actions increased sales by $12.~~Reduced demand levels in the North America commercial vehicle market provided a partial offset to the volume-related organic increase.

The North America organic sales ~~reduction~~increase of 7%14% was driven principally by stronger production levels on certain of our key light truck programs. Partially offsetting the higher light vehicle demand was a decline in ~~Class 8~~medium/heavy truck production of about 39% and weaker Off-Highway demand. These effects were partially offset by increases in full frame light truck production and light vehicle engine build of 1% and 2% respectively, along with higher sales from new customer programs.15%.

Excluding currency effects, principally from a weaker ~~South African rand~~euro and British pound, ~~our~~and the increased sales of $50 attributable to the BFP and BPT acquisitions, first-quarter 2017 sales in Europe were 10% higher than in ~~the third quarter~~2016. As a result of ~~2016 were down 6%~~improving market conditions in Europe, each of our operating segments experienced increased sales from ~~2015. Weaker Off-Highway~~ higher production/demand ~~more than offset the benefit from light truck production being higher by about 4%.~~levels.

South America sales in ~~this year's third~~the first quarter ~~were impacted by a weaker Argentine peso, partially offset by~~of 2017 benefited from a stronger ~~Brazilian real.~~Brazil real and increased sales from the SIFCO acquisition. Excluding ~~currency~~these effects, sales were up ~~24%~~29% from the ~~same period in 2015.~~first quarter of 2016. The organic sales increase in the region was driven largely by ~~pricing actions, primarily recovery of inflationary cost increases in Argentina, an increase in~~stronger production levels, with light truck production ofup about 5%25% and ~~contributions from new customer programs. These items more than offset the effects of~~ medium/heavy truck production ~~levels being about 14% lower.~~

higher by 5%.

Asia Pacific sales in this year's ~~third~~first quarter were ~~relatively comparable to 2015. Weaker currencies in Thailand, China and India contributed to~~7% higher than the ~~currency-related sales reduction.~~same period of 2016. The organic sales increase ~~resulted~~of 6% in this region was due primarily ~~from increased~~to stronger light ~~and commercial~~ vehicle production levels ~~in the region, partially offset by weaker Off-Highway vehicle demand.~~and off-highway segment demand, along with contributions from new customer programs.

Cost of sales and gross margin — Cost of sales ~~declined $79, or 6%, in~~for the ~~third~~first quarter of ~~2016~~2017 increased $188, or 15%, when compared to ~~the same period in 2015.~~2016. Similar to the factors affecting sales, the ~~reduction~~increase was primarily due to ~~currency effects and lower~~higher overall sales ~~volumes.~~volumes and the inclusion of acquired businesses. Cost of sales as a percent of ~~this year's~~2017 sales was 50180 basis points lower than in the ~~same period~~previous year. Cost of ~~last year. Lower material costs contributed $12~~sales attributed to ~~lower year-over-year~~net acquisitions, which included $6 of the incremental cost assigned to inventory as part of business combination accounting, amounted to $72, or 90.0% of the sales of those businesses. Excluding the effects of acquisitions and divestitures, cost of sales as percent of sales declined from 86.2% of sales in the first quarter of 2016 ~~along with other~~to 84.2% of sales in 2017 – a reduction of 200 basis points. This reduction in cost ~~reduction initiatives. The year-over-year comparison~~of sales as a percent of sales was largely attributable to better cost absorption as the higher sales volume prompted increases in manufacturing activity. Cost of sales also benefited from ~~a $6 charge in last year's third quarter for environmental remediation. These benefits~~material cost savings of approximately $17, which more than offset ~~the underabsorption of cost associated with lower sales volumes and~~ an increase in ~~warranty cost~~material commodity prices of ~~$7.~~$5.

Gross margin of ~~$208~~$263 for ~~the third quarter of 2016 decreased $5~~2017 increased $64 from ~~the same period in 2015, representing 15.0%~~2016. Gross margin as a percent of sales was 15.5% in ~~2016~~2017, 180 basis points higher than in 2016. Acquisitions net of divestitures added $8 of gross margin. The margin improvement as ~~compared to 14.5%~~a percent of sales ~~in 2015. The 50 basis point increase in gross margin~~ was driven principally ~~driven~~ by the cost of sales factors referenced ~~above that contributed to costs being reduced by a higher rate than the decrease in sales.~~above.

Selling, general and administrative expenses (SG&A) — SG&A expenses in ~~2016~~2017 were ~~$99 (7.2%~~$121 (7.1% of sales) as compared to $98 ~~(6.7%~~(6.8% of sales) in ~~2015. Salary~~2016. SG&A attributed to net acquisitions was $13. Excluding the increase associated with acquisitions and divestitures, SG&A expenses as a percent of sales were comparable with the same period of 2016. Of the $10 million year-over-year first-quarter increase exclusive of net acquisitions, salary and benefits expenses ~~in 2016~~ were ~~$4 lower than in 2015,~~$5 higher, while selling and other discretionary spending increased ~~$5, due in part to a higher level of trade show and project activity in this year's third quarter.~~$5.

Amortization of intangibles — The ~~reduction of $2~~increase in amortization of intangibles acquired as part of the acquisitions completed in late 2016 and the first quarter of 2017 was ~~primarily attributable to certain customer related intangibles becoming~~offset by reduced expense from fully ~~amortized.~~amortized intangibles.

Restructuring charges — Restructuring charges ~~of $17~~ in the third quarter of 2016 included charges of $14 for separation costs in connection with headcount reduction actions in our Off-Highway segment that are being implemented as a result of continuing weak demand levels in this business. The remaining expense in 2016 and that recognized in the third quarter of 2015 related primarilyboth periods relate to previously announced restructuring actions.

~~Impairment of long-lived assets~~ —Reference is made to Note 3 of the consolidated financial statements in Item 1 of Part I for discussion of charges recognized in the third quarter of 2015 in connection with an impairment of long-lived assets attributable to an exclusive supply relationship with a South American supplier.

Other ~~income,~~expense, net — The following table shows the major components of other ~~income,~~expense, net.


	Three Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2017			2016
Interest income	$	3		$	4
Government grants and incentives	2			1			$	2		$	1
Foreign exchange loss	(2		)	(4		)	(2		)	(2		)
Strategic transaction expenses	(3		)	(1		)	(11		)	(2		)
Gain on sale of marketable securities	7
Insurance recoveries										1
Other	2			2			2
Other income, net	$	9		$	2
Other expense, net							$	(9	)	$	(2	)

The higher level of strategic transaction expenses in 2017 is primarily attributable to the Brevini and USM transactions which were completed in the first quarter of 2017. See Note 17 to our consolidated financial statements in Item 1 of Part I for additional information.

Interest income and interest expense — Interest income was $3 in both 2017 and 2016. Interest expense was $27 in both 2017 and ~~$31 in the three months ended September 30, 2016 and 2015. The decrease in interest expense is primarily due to~~2016. A lower average interest ~~rates partially~~rate on borrowings was offset by higher average debt levels in ~~2016.~~2017. Average debt levels were higher in the first quarter of 2017 than in last year's first quarter, in part due to debt of $182 assumed in connection with the Brevini acquisition. As discussed in Note 1112 to our consolidated financial statements in Item 1 of Part I, Dana Financing Luxembourg S.à r.l. issued $375 of its June 2026 Notes on May 27, 2016 and we redeemed $350 of our February 2021 Notes on June 23, 2016. In conjunction with the issuance of the June 2026 Notes, we entered into two 10-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the June 2026 Notes to euro-denominated debt at a fixed rate of 5.140%. Through intercompany financing arrangements and associated fixed-to-fixed cross-currency swaps in the first quarter of 2017, we effectively converted the fixed U.S. dollar rate on our September 2023 Notes to a fixed euro rate of 3.91%. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated ~~6.3%~~5.9% and ~~7.1%~~6.5% in ~~2016~~2017 and ~~2015.~~2016.

Income tax expense — ~~We recorded income~~Income taxes expense for the first quarter was $30 in 2017 and $24 in 2016, resulting in effective tax ~~expense~~rates of ~~$13 in the third quarter of 2016~~29% and ~~a benefit of $77 in the same period in 2015.~~33%, respectively. The effective income tax rates vary from the U.S. federal statutory rate of 35% primarily due to valuation allowances in several countries, nondeductible expenses, different statutory rates outside the U.S. and withholding taxes. Jurisdictions with effective tax rates lower than the U.S. tax rate of 35% decreased the overall effective rate in both years. Tax expense in 2016 included $3 of amortization of a prepaid tax asset related to an intercompany transaction completed in 2015. As ~~discussed~~disclosed in Note ~~15 to our~~1 of the consolidated financial statements in Item 1 of Part I, we ~~released $100 of valuation allowance on U.S. deferred tax assets~~adopted new accounting guidance in 2017 which resulted in the ~~third quarter~~prepaid tax asset at the beginning of ~~2015. The effective~~2017 being written off directly to retained earnings. Accordingly, there is no amortization expense relating to the prepaid tax ~~rate of 18%~~asset in ~~this year's third quarter compares to an~~2017.

effective rate of 51% in the third quarter of 2015 when adjusted to exclude the $100 of valuation allowance release. In 2016, the U.S. and other jurisdictions with valuation allowances reported higher pre-tax income, thereby decreasing the effective rate. In 2015, these jurisdictions had lower pre-tax income, which increased the effective rate. Also contributing to a higher effective tax rate in 2015 was $2 of expense for withholding taxes related to repatriation of foreign earnings, future income taxes and withholding taxes on earnings of foreign operations that are not permanently reinvested, and withholding taxes associated with changes to planned repatriations of certain foreign earnings. These withholding and foreign earnings related expenses were not significant in 2016.

In ~~the U.S. and certain other~~ countries where our ~~recent~~ history of operating losses ~~does~~did not allow us to satisfy the “more likely than not” criterion for recognition of deferred tax ~~assets. Therefore, there is~~assets, we have generally recognized no income tax ~~recognized~~ on the pre-tax income or losses ~~in these jurisdictions~~ as valuation allowance adjustments offset the associated tax effects. ~~We believe that it is reasonably possible that up to $500~~Following the release of ~~the~~ valuation ~~allowance against~~allowances on our U.S. deferred tax assets ~~could be released~~ in the ~~next twelve months. See Note 15~~fourth quarter of 2016, tax effects relating to ~~our consolidated financial statements~~U.S. income in ~~Item 1 of Part I for a discussion of the factors considered in our quarterly evaluation of~~2017 are no longer being offset by adjustments to the valuation ~~allowances against our U.S. deferred tax assets.~~allowance.

Equity in earnings of affiliates — Net earnings from equity investments was $2$5 in ~~2016 and~~2017 compared with de minimis earnings in ~~2015.~~2016. Equity in earnings from Bendix Spicer Foundation Brake, LLC (BSFB) ~~was~~were $3 in 2017 and $2 in ~~2016 while earnings from~~2016. Our share of Dongfeng Dana Axle Co., Ltd. (DDAC) ~~were negligible. Equity in earnings from BSFB of~~operating results was $3 in ~~2015 was offset by~~2017 and a loss of ~~$3 from DDAC.~~$2 in 2016.

~~Summary Consolidated Results of Operations (Year-to-Date, 2016 versus 2015)~~

Nine Months Ended September 30,
2016 2015
Dollars % of
Net Sales Dollars % of
Net Sales Increase/
(Decrease)
Net sales $ 4,379
$ 4,685
$ (306 )
Cost of sales 3,739
85.4 % 4,008
85.5 % (269 )
Gross margin 640
14.6 % 677
14.5 % (37 )
Selling, general and administrative expenses 303
6.9 % 299
6.4 % 4
Amortization of intangibles 6
13
(7 )
Restructuring charges, net 23
13
10
Impairment of long-lived assets

(36 ) 36
Loss on extinguishment of debt (17 ) (2 ) (15 )
Other income, net 17
18
(1 )
Income before interest expense and income taxes 308
332
(24 )
Interest expense 84
86
(2 )
Income before income taxes 224
246
(22 )
Income tax expense (benefit) 66
(10 ) 76
Equity in earnings of affiliates 6
3
3
Net income 164
259
(95 )
Less: Noncontrolling interests net income 9
18
(9 )
Net income attributable to the parent company $ 155
$ 241
$ (86 )

~~Sales~~Noncontrolling interests net income — The ~~following table shows changes in our sales by geographic region.~~

Nine Months Ended
September 30, Amount of Change Due To
2016 2015 Increase/
(Decrease) Currency Effects Acquisitions Organic Change
North America $ 2,329
$ 2,472
$ (143 ) $ (18 ) $ 6
$ (131 )
Europe 1,231
1,326
(95 ) (35 ) (60 )
South America 251
315
(64 ) (71 ) 7
Asia Pacific 568
572
(4 ) (21 ) 17
Total $ 4,379
$ 4,685
$ (306 ) $ (145 ) $ 6
$ (167 )

~~Sales~~increased level of earnings attributable to noncontrolling interests is generally attributable to increased earnings of the consolidated operations that are less than wholly-owned. The redeemable noncontrolling interest relates to the Brevini business we acquired in the first ~~nine months~~quarter of ~~2016 were $306 lower than~~2017 on which we have a call option as described more fully in the same period in 2015. Weaker international currencies decreased sales by $145 and the acquisition of Magnum earlier this year added sales of $6. A volume-related organic sales decrease of $174 resulted primarily from weaker global Off-Highway demand, lower commercial vehicle production in North America and Brazil and lower sales with a major North America commercial vehicle customer, partially offset by stronger overall light vehicle volume levels in North America, Europe and Asia Pacific and contributions from new customer programs. Cost recovery pricing actions reduced sales by $7.

The North America organic sales reduction of 5% was driven principally by a decline in Class 8 production of about 29%, reduced sales levels with a major commercial vehicle customer and weaker Off-Highway demand. These effects were partially offset by growth in full frame light truck production of around 9%, an increase in light vehicle engine build of 5% and higher sales from new customer programs.

Excluding currency effects, principally from a weaker South African rand and British pound, our sales in Europe in the first nine months of 2016 were 5% lower than in 2015. Weaker Off-Highway demand was the primary driver of this reduction in sales, with increased light vehicle engine and light truck production providing a partial offset.

South America sales in this year's first nine months were impacted by weaker currencies in Argentina and Brazil. Excluding these effects, sales were up slightly from the same period in 2015. The organic sales increase in the region was driven largely by pricing actions, primarily recovery of inflationary cost increases in Argentina and contributions from new customer programs. These increases were largely offset by medium/heavy truck production levels being around 21% lower and light truck production declining about 1%.

Asia Pacific sales in this year's first nine months were relatively comparable to 2015. Weaker currencies in Thailand, India and China contributed to the currency-related sales reduction. The 3% organic sales increase resulted primarily from increased production levels in the region along with new customer programs.

~~Cost of sales and gross margin~~ — Cost of sales declined $269, or 7%, in the first nine months of 2016 when compared to the same period in 2015. Similar to the factors affecting sales, the reduction was primarily due to currency effects and lower overall sales volumes. Cost of sales as a percent of this year's sales was 10 basis points lower than last year. Underabsorption of cost as a result of lower sales volumes increased cost of sales as a percent of sales. Cost of sales in 2016 was also adversely impacted by increases in engineering and product development costs of $8 and in warranty expense of $14. More than offsetting these increases were savings from lower material costs of $48, avoidance of supplier transition costs in our Commercial Vehicle segment, which totaled $14 in the first nine months of 2015, and a charge of $6 in last year's results for environmental remediation.

Gross margin of $640 for the first nine months of 2016 decreased $37 from the same period in 2015. Gross margin as a percent of sales was 14.6% in 2016, 10 basis points higher than 2015. Margin improvement was driven principally by the cost of sales factors referenced above.

~~Selling, general and administrative expenses (SG&A)~~ — SG&A expenses in 2016 were $303 (6.9% of sales) as compared to $299 (6.4% of sales) in 2015. Salary and benefits expenses in 2016 were $2 lower than in 2015, while selling and other discretionary spending increased $6, due in part to execution of certain project initiatives.

~~Amortization of intangibles~~ ~~— The reduction of $7 in amortization of intangibles was primarily attributable to certain customer related intangibles becoming fully amortized.~~

~~Restructuring charges~~ — Restructuring charges of $23 in 2016 included a third quarter 2016 expense of $14 for separation costs in connection with headcount reduction actions in our Off-Highway segment that are being implemented as a result of continuing weak demand levels in this business. The remaining $9 of restructuring expense this year relates to the closure of our Commercial Vehicle manufacturing facility in Glasgow, Kentucky, headcount reduction actions at our corporate facilities in the U.S. and employee separation and exit costs associated with previously announced headcount reduction and facility closure actions. Restructuring charges of $13 in 2015 were primarily attributable to headcount reductions in our Commercial Vehicle segment operations in Brazil which were significantly impacted by lower demand levels, along with costs associated with previously announced restructuring actions.

~~Impairment of long-lived assets~~ ~~—Reference is made to~~ Note 32 of the consolidated financial statements in Item 1 of Part I for a discussion of charges recognized in the third quarter of 2015 in connection with an impairment of long-lived assets attributable to an exclusive supply relationship with a South American supplier.I.

~~Loss on extinguishment of debt~~ —During the second quarter of 2016, we redeemed our February 2021 Notes and incurred a redemption premium of $12. We also restructured our domestic revolving credit facility. In connection with these actions, we wrote off $5 of previously deferred financing costs. The prior year expense was attributable to the call premium and write-off of previously deferred financing costs associated with the redemption of $15 of our February 2019 Notes in the first quarter of 2015.

~~Other income, net~~ ~~— The following table shows the major components of other income, net.~~

Nine Months Ended
September 30,
2016 2015
Interest income $ 8
$ 11
Government grants and incentives 5
2
Foreign exchange loss (4 ) (10 )
Strategic transaction expenses (6 ) (3 )
Gain on derecognition of noncontrolling interest 5
Gain on sale of marketable securities 7
1
Insurance recoveries 1
4
Other 6
8
Other income, net $ 17
$ 18

Upon completion of the divestiture of our operations in Venezuela in January 2015, we recognized a $5 gain on the derecognition of the noncontrolling interest in one of our former Venezuelan subsidiaries. See Note 3 to our consolidated financial statements in Item 1 of Part I for additional information.

~~Interest expense~~ — Interest expense was $84 and $86 in the first three quarters of 2016 and 2015. The decrease in interest expense is primarily due to lower average interest rates partially offset by higher average debt levels in 2016. As discussed in Note 11 to our consolidated financial statements in Item 1 of Part I, Dana Financing Luxembourg S.à r.l. issued $375 of its June 2026 Notes on May 27, 2016 and we redeemed $350 of our February 2021 Notes on June 23, 2016. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 6.4% and 6.7% in 2016 and 2015.

~~Income tax expense~~ — Income tax expense was $66 in the first nine months of 2016, whereas we had a tax benefit of $10 in the same period in 2015. The effective income tax rates vary from the U.S. federal statutory rate of 35% primarily due to valuation allowances in several countries, nondeductible expenses, different statutory rates outside the U.S. and withholding taxes. As discussed in Note 15 to our consolidated financial statements in Item 1 of Part I, we released $100 of valuation allowance on U.S. deferred tax assets in the third quarter of 2015 in connection with a planned intercompany transaction. Completion of the transaction in the fourth quarter of 2015 resulted in the recognition of a prepaid tax asset. Excluding the effects of this valuation allowance release, the effective tax rate for the first nine months of 2015 was 37%. Excluding $8 of amortization of the prepaid tax asset, the effective tax rate for the comparable nine-month period of 2016 was 26%. In 2016, jurisdictions with valuation allowances reported higher aggregate pre-tax income, thereby decreasing the effective rate. In 2015, these jurisdictions had lower pre-tax income, which increased the effective rate. We recognized future income taxes and withholding taxes on earnings of foreign operations that are not permanently reinvested of $5 in the first nine months of 2016 and $4 in the same period in 2015 and we paid withholding taxes related to repatriation of foreign earnings of $4 in 2016 and $7 in 2015. Overall lower tax rates in jurisdictions outside the U.S. also reduced the effective tax rate in both periods.

In the U.S. and certain other countries, our recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for recognition of deferred tax assets. Therefore, there is generally no income tax recognized on the pre-tax income or losses in these jurisdictions as valuation allowance adjustments offset the associated tax effects. We believe that it is reasonably possible that up to $500 of the valuation allowance against our U.S. deferred tax assets could be released in the next twelve months. See Note 15 to our consolidated financial statements in Item 1 of Part I for a discussion of the factors considered in our quarterly evaluation of the valuation allowances against our U.S. deferred tax assets.

~~Equity in earnings of affiliates~~ — Net earnings from equity investments was $6 in 2016 and $3 in 2015. Equity in earnings from Bendix Spicer Foundation Brake, LLC (BSFB) was $7 in 2016 while earnings from Dongfeng Dana Axle Co., Ltd. (DDAC) were negligible. Equity in earnings from BSFB of $9 in 2015 was partially offset by a loss of $7 from DDAC.

~~Noncontrolling interests net income~~ — As more fully discussed in Note 1 to our consolidated financial statements in Item 1, the first quarter of 2015 included $9 for correction of previously reported noncontrolling interests net income.

Segment Results of Operations ~~(2016~~(2017 versus ~~2015)~~2016)

Light Vehicle


	Three Months								Nine Months								Three Months
	Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin
2015	$	605		$	63		10.4	%	$	1,883		$	193		10.2	%
2016																	$	613		$	58		9.5	%
Volume and mix	43			8					118			19					152			25
Performance	16			8					23			7					2			12
Currency effects	(33		)	(6		)			(111		)	(17		)			(6		)	(6		)
2016	$	631		$	73		11.6	%	$	1,913		$	202		10.6	%
2017																	$	761		$	89		11.7	%

Light Vehicle sales in ~~2016~~2017 were reduced by currency translation effects, primarily as a result of a weaker Mexico peso ~~Argentina peso, Thailand baht, South Africa rand,~~ and British ~~pound sterling. Sales in this year's third quarter and first nine months, exclusive~~pound. The acquisition of USM at March 1, 2017 contributed $11 to sales. Exclusive of currency and acquisition effects, first-quarter 2017 sales were ~~10% and 7%~~23% higher than in ~~2015.~~the first quarter of last year. The volume-related increases were driven primarily by stronger production ~~levels.~~levels in all regions. North America full frame light truck production in ~~the third quarter and first nine months of 2016~~2017 was up ~~1% and 9% from the same periods~~5%, although a number of ~~2015.~~our key programs in this segment were up more significantly. Light truck production in Europe, South America and Asia Pacific was stronger by 4%13%, 25% and ~~14% for the comparative third quarter periods and stronger by 8% and 11% for the year-over-year nine-month periods.~~7% compared to 2016. Sales in this segment also benefited ~~by $13~~ from ~~the inclusion of~~new customer programs, including $24 relating to a ~~customer~~ program ~~in this segment that was~~ previously ~~reported in~~supported by our Commercial Vehicle segment that moved to Light Vehicle in mid-2016 when the axle used to support the program was replaced with an axle produced by the Light Vehicle segment. ~~Partially offsetting these increases were lower sales from a discontinued program in Europe~~Customer pricing and ~~weaker South America demand. Cost recovery actions, including inflationary~~ cost recovery ~~in Argentina, were the primary drivers of the~~impacts increased quarter-over-quarter sales ~~increase categorized as performance.~~by $2.

Light Vehicle segment EBITDA of ~~$73 for the third quarter of 2016 is $10~~$89 in 2017 was $31 higher than in the same period of 2015, with segment EBITDA for the first nine months of 2016 being $9 higher than 2015. Weaker international currencies reduced segment EBITDA by $6 in the third quarter and $17 for this year's first nine months.2016. Higher sales volumes from overall stronger production levels and new business provided a benefit of ~~$8 and $19 in the third quarter and first nine months.~~$25, while currency effects, inclusive of transaction losses, reduced segment EBITDA by $6. The year-over-year ~~third-quarter~~ performance-related earnings improvement ofwas driven by $8 ~~is primarily attributable to $16~~ from material savings, pricing and recovery net of increased commodity costs. Start-up and launch-related costs reduced segment EBITDA by $7. Net cost ~~recovery actions and $9 from material cost savings initiatives. These cost recovery pricing actions and material savings benefits more partially offset by increased material commodity~~reductions and other costs of $8, higher warranty expense of $4, and program start-up and launch costs of $5. The comparative nine-month period performance-related EBITDA included pricing and material recovery benefit of $23, with material cost savings actions providing additional benefit of $18. Partially offsetting these items ~~was~~ increased material commodity and other costs of $18, higher warranty costs of $6, start-up and launch related costs of $7, and increased engineering and product development expense net of customer recoveries of $3.earnings by $11.

Commercial Vehicle


	Three Months								Nine Months								Three Months
	Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin
2015	$	367		$	31		8.4	%	$	1,231		$	102		8.3	%
2016																	$	333		$	26		7.8	%
Volume and mix	(78		)	(19		)			(237		)	(46		)			(14		)	(8		)
Performance	2			12					3			30					3			14
Currency effects	3			(1		)			(21		)	(5		)			7			(4		)
2016	$	294		$	23		7.8	%	$	976		$	81		8.3	%
2017																	$	329		$	28		8.5	%

Currency effects ~~benefited third~~which increased sales in the first quarter ~~2016 sales,~~of 2017 were primarily due to a year-over-year stronger Brazil ~~real, whereas currency reduced comparative nine-month sales due primarily~~real. The acquisition of the SIFCO business late in 2016 contributed $10 to ~~a weaker Brazil real and Mexico peso.~~first-quarter 2017 sales. After adjusting for the effects of currency ~~third-quarter~~ and ~~nine-month~~acquisitions, 2016 sales in our Commercial Vehicle segment decreased ~~21% and 19%~~6% compared to ~~2015.~~2016. The volume-related reduction ~~in both periods~~ was primarily attributable to ~~weaker~~lower sales in North America where Class 8 production was down about 26%, medium duty Classes 5-7 production was down 4% and a program having sales of $24 was transfered to the Light Vehicle segment who began supplying the axle for the program in mid-2016. Stronger end market demand in Brazil ~~where medium/heavy truck production in the third quarter~~ and ~~first nine months was down about 15% and 22% from last year and~~Europe provided a ~~year-over-year decline in third-quarter and nine-month~~partial offset to lower North America Class 8 production of about 39% and 29%. Also contributing to the volume-related reduction was the transfer of a program having sales of $13 from this segment to Light Vehicle in this year's third quarter and lower share of sales with a major North America customer.

sales.

Commercial Vehicle segment EBITDA of ~~$23 in this year's third quarter~~$28 was ~~$8 lower~~$2 higher than in ~~2015, with nine-month year-to-date segment EBITDA down $21 from last year.~~2016. Lower sales volumes reduced 2016 segment EBITDA by ~~$19~~$8. Currency effects reduced segment EBITDA due to the translation of losses at a stronger Brazil real and ~~$46 in this year's third quarter and first nine months. Partially~~to currency transaction losses. More than offsetting the effects of lower volume was improved year-over-year performance-related segment EBITDA of ~~$12 in the third quarter~~$14, resulting from lower warranty expense of $6, customer pricing and ~~$30 in the first nine months~~recovery of ~~this year. Year-over-year third quarter performance benefited by $4 from~~$3, net material cost savings ~~actions, pricing actions~~ of $2, and other net cost reduction ~~initiatives~~ of $6. Nine-month year-over-year performance benefited from $12 of material cost savings, avoidance of supplier transition costs incurred in last year's first nine months of $14, pricing actions of $3 and other net cost reductions of $5. Partially offsetting these nine-month improvements was higher warranty expense of $4.$3.

Off-Highway


	Three Months								Nine Months								Three Months
	Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA		Segment EBITDA Margin
2015	$	246		$	35		14.2	%	$	809		$	115		14.2	%
2016																	$	241		$	32	13.3	%
Volume and mix	(44		)	(11		)			(102		)	(28		)			26			6
Acquisition of BFP and BPT																	69			6
Performance	(2		)	4					(7		)	9					(3		)	1
Currency effects	(1		)	—					(8		)	1					(5		)
2016	$	199		$	28		14.1	%	$	692		$	97		14.0	%
2017																	$	328		$	45	13.7	%

~~Currency-adjusted third-quarter and nine-month 2016~~Currency effects, primarily from a weaker euro, reduced sales by $5. The acquisition of the Brevini business on February 1, 2017 added sales of $69 to the first quarter of 2017. After adjusting sales for these two items, first-quarter 2017 sales were ~~down 19% and 13%~~higher by 10% compared to ~~2015,~~2016, primarily from ~~lower~~higher global end-market demand.

Off-Highway segment EBITDA of ~~$28~~$45 in 2017 was up $13 from 2016, primarily from the ~~third quarter~~acquisition of ~~2016 was down $7 from 2015, with segment EBITDA for the first nine months lower by $18 compared with the previous year.~~Brevini and increased sales volume. The ~~impact of lower sales volumes on segment EBITDA was partially offset by performance related~~performance-related earnings improvement was principally from year-over-year material cost savings ~~in the year-over-year three-month and nine-month periods~~ of $4 which more than offset reduced customer pricing and $13. Pricing actions in the year-over-year third quarter results were offset by cost reduction initiatives. For the comparative nine-month periods, the benefit from material cost savings was reduced by pricing actions of $7, with other ~~net cost reductions providing a net benefit to segment EBITDA of $3.~~items.

Power Technologies


	Three Months								Nine Months								Three Months
	Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA			Segment EBITDA Margin		Sales			Segment EBITDA		Segment EBITDA Margin
2015	$	250		$	40		16.0	%	$	762		$	117		15.4	%
2016																	$	262		$	35	13.4	%
Volume and mix	12			4					53			13					23			11
Performance	(4		)	(2		)			(12		)	(8		)						4
Currency effects	2			—					(5		)	(2		)			(2		)
2016	$	260		$	42		16.2	%	$	798		$	120		15.0	%
2017																	$	283		$	50	17.7	%

Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-highway markets. ~~A stronger Japanese yen provided a currency benefit in the comparative third quarter results, with the currency-related nine-month sales reduction primarily attributable to a weaker Canadian dollar.~~ Net of currency effects and a reduction of $10 attributable to the Nippon Reinz divestiture in the fourth quarter of 2016, sales in the ~~third~~first quarter ~~and first nine months~~ of ~~2016~~2017 increased ~~about 3% and 5% compared~~13%, primarily due to ~~the same periods of 2015, principally from~~overall stronger market ~~demand. Light vehicle engine build in North America was up about 2% in the comparative third-quarter periods, with comparative nine-month production up 5% in North America~~demand and ~~2% in Europe.~~new customer programs.

Segment EBITDA of ~~$42~~$50 in 2017 was $15 higher than in 2016, ~~was $2~~driven primarily by higher ~~than 2015, with nine-month 2016~~sales volumes. Performance-related segment EBITDA ~~being up $3 from the same period of last year. Third quarter 2016 segment EBITDA was impacted by lower pricing and recovery actions of $4 and increased warranty expense of $4, with~~improved in 2017 due principally to net material cost savings and other items providing a partial offset. Nine-month performance-related comparative segment EBITDA is reflective of lower customer pricing and recovery of $12 and increased warranty expense of $2 which was partially offset by net cost ~~reductions of $6, primarily from material cost savings initiatives.~~reductions.

Non-GAAP Financial Measures

Adjusted EBITDA

We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, equity grant expense, restructuring expense and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for income before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of ~~segment EBITDA and~~net income to adjusted ~~EBITDA to net income.~~EBITDA.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017		2016
Segment EBITDA
Light Vehicle	$	73		$	63		$	202		$	193
Commercial Vehicle	23			31			81			102
Off-Highway	28			35			97			115
Power Technologies	42			40			120			117
Total Segment EBITDA	166			169			500			527
Corporate expense and other items, net	2			(2		)	(6		)	(4		)
Adjusted EBITDA	168			167			494			523
Net income													$	80	$	48
Equity in earnings of affiliates													5
Income tax expense													30		24
Income before income taxes													105		72
Depreciation and amortization	(48		)	(43		)	(136		)	(131		)	52		43
Restructuring	(17		)	(1		)	(23		)	(13		)	2		1
Interest expense, net	(24		)	(27		)	(76		)	(75		)	24		24
Other*	(7		)	(51		)	(35		)	(58		)	22		8
Income before income taxes	72			45			224			246
Income tax expense (benefit)	13			(77		)	66			(10		)
Equity in earnings of affiliates	2			—			6			3
Net income	$	61		$	122		$	164		$	259
Adjusted EBITDA													$	205	$	148

Other includes stock compensation expense, strategic transaction expenses, ~~gain on derecognition of noncontrolling interest,~~ distressed supplier costs, amounts attributable to previously divested/closed operations, ~~loss on extinguishment of debt~~acquisition related inventory adjustments and other items. See Note 1718 to our consolidated financial statements in Item 1 of Part I for additional details.

Free Cash Flow

We have defined free cash flow as cash provided by operating activities less purchases of property, plant and equipment. We believe this measure is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow is neither intended to represent nor be an alternative to the measure of net cash provided by operating activities reported under GAAP. Free cash flow may not be comparable to similarly titled measures reported by other companies.

The following table reconciles ~~free cash flow to~~ net cash flows provided by operating ~~activities.~~activities to free cash flow.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2016			2015			2017			2016
Net cash provided by operating activities	$	42		$	138		$	182		$	266
Net cash provided by (used in) operating activities													$	11		$	(27	)
Purchases of property, plant and equipment	(68		)	(70		)	(198		)	(192		)	(96		)	(71		)
Free cash flow	$	(26	)	$	68		$	(16	)	$	74		$	(85	)	$	(98	)

Liquidity

The following table provides a reconciliation of our ~~operating~~ liquidity, a non-GAAP measure, to cash and cash equivalents at ~~September 30, 2016~~March 31, 2017:


Cash and cash equivalents	$	727		$	423
Less: Deposits supporting obligations	(8		)	(6		)
Available cash	719			417
Additional cash availability from revolving facility	478			477
Marketable securities	126			31
Total liquidity	1,323			$	925
Less: Liquidity at subsidiary*	(143		)
Operating liquidity	$	1,180


*	~~Cash and marketable securities, net of deposits supporting obligations, held by a wholly-owned subsidiary can be transferred out of this subsidiary only if approved by its independent board member.~~

Cash deposits are maintained to provide credit enhancement for certain agreements and are reported as part of cash and cash equivalents. For most of these deposits, the cash may be withdrawn if a comparable security is provided in the form of letters of credit. Accordingly, these deposits are not considered to be restricted.

Marketable securities are included as a component of ~~global~~ liquidity as these investments can be readily liquidated at our discretion.

The components of our ~~September 30, 2016~~March 31, 2017 consolidated cash balance were as follows:


	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Cash and cash equivalents	$	210	$	437	$	647	$	68	$	231	$	299
Cash and cash equivalents held as deposits	2		6		8				6		6
Cash and cash equivalents held at less than wholly-owned subsidiaries	1		71		72		4		114		118
Consolidated cash balance	$	213	$	514	$	727	$	72	$	351	$	423

A portion of the non-U.S. cash and cash equivalents is utilized for working capital and other operating purposes. Several countries have local regulatory requirements that significantly restrict the ability of our operations to repatriate this cash. Beyond these restrictions, there are practical limitations on repatriation of cash from certain subsidiaries because of the resulting tax withholdings and subsidiary by-law restrictions which could limit our ability to access cash and other assets.

The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on hand and (iii) borrowings from our revolving facility. We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations, common stock repurchases and other commitments during the next twelve months. While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.

In ~~May 2016,~~April 2017, Dana Financing Luxembourg S.à r.l. completed the issuance of ~~$375~~$400 of its ~~June 2026~~April 2025 Notes. Net proceeds of the offering ~~after transaction costs~~ totaled ~~$368, of which $362 was~~$394. The net proceeds from the offering will be used to ~~redeem all~~repay indebtedness of our ~~February~~BPT and BFP subsidiaries and indebtedness of a wholly-owned subsidiary in Brazil and to redeem $100 of our September 2021 Notes. The $100 of September 2021 Notes were extinguished in April 2017 pursuant to a tender offer at a weighted average price ~~of 103.375%.~~equal to 104.031% plus accrued and unpaid interest.

~~In June 2016, we received commitments from new and existing lenders for a $500 amended and restated revolving credit facility (the Amended Revolving Facility) which expires in June 2021.~~ At ~~September 30, 2016,~~March 31, 2017, we had no outstanding borrowings under the ~~Amended~~ Revolving Facility ~~but~~and we had utilized ~~$22~~$23 for letters of credit. We had availability at ~~September 30, 2016~~March 31, 2017 under the ~~Amended~~ Revolving Facility of ~~$478~~$477 after deducting ~~the~~ outstanding borrowings and letters of credit.

At ~~September 30, 2016,~~March 31, 2017, we were in compliance with the covenants of our financing agreements. Under the ~~Amended~~ Revolving Facility and our senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types. The incurrence-based covenants in the ~~Amended~~ Revolving Facility permit us to, among other things, (i) issue foreign subsidiary indebtedness, (ii) incur general secured indebtedness subject to a pro forma first lien net leverage ratio not to exceed 1.50:1.00 in the case of first lien debt and a pro forma secured net leverage ratio of 2.50:1.00 in the case of other secured debt and (iii) incur additional unsecured debt subject to a pro forma total net leverage ratio not to exceed

3.50:1.00. We may also make dividend payments in respect of our common stock as well as certain investments and acquisitions subject to a pro forma total net leverage ratio of 2.75:1.00. In addition, the ~~Amended~~ Revolving Facility is subject to a financial covenant requiring us to maintain a first lien net leverage ratio not to exceed 2.00:1.00. The indentures governing the senior notes include other incurrence-based covenants that may subject us to additional specified limitations.

Our Board of Directors approved an expansion of our existing common stock share repurchase program from $1,400 to $1,700 on January 11, 2016. During the first half of 2016, we paid $81 to acquire 6,612,537 shares of common stock in the open market. We did not repurchase any shares during the ~~third~~first quarter of ~~2016.~~2017 under our existing $1,700 common stock share repurchase program. Approximately $219 remains available under the program for future share repurchases.

From time to time, depending upon market, pricing and other conditions, as well as our cash balances and liquidity, we may seek to acquire our senior notes or other indebtedness or our common stock through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine (or as may be provided for in the indentures governing the notes), for cash, securities or other consideration. There can be no assurance that we will pursue any such transactions in the future, as the pursuit of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our financing and governance documents.

Cash Flow


	Nine Months Ended September 30,						Three Months Ended March 31,
	2016			2015			2017			2016
Cash used for working capital	$	(142	)	$	(92	)
Cash used for changes in working capital							$	(133	)	$	(128	)
Other cash provided by operations	324			358			144			101
Net cash provided by operating activities	182			266
Net cash provided by (used in) operating activities							11			(27		)
Net cash used in investing activities	(187		)	(188		)	(282		)	(92		)
Net cash used in financing activities	(72		)	(318		)	(26		)	(20		)
Net decrease in cash and cash equivalents	$	(77	)	$	(240	)	$	(297	)	$	(139	)

The table above summarizes our consolidated statement of cash flows.

Operating activities — Exclusive of working capital, other cash provided by operations was ~~$324~~$144 and ~~$358~~$101 in ~~2016~~2017 and ~~2015.~~2016. The year-over-year ~~decrease~~increase in other cash provided by operations is primarily attributable to ~~lower~~higher operating earnings in ~~2016.~~2017. Partially offsetting the stronger earnings performance were increased first-quarter 2017 payments for restructuring actions and transaction costs associated with acquisitions.

Working capital used cash of ~~$142~~$133 and ~~$92~~$128 in ~~2016~~2017 and ~~2015.~~2016. Cash of ~~$152~~$189 and ~~$80~~$132 was used to finance increased receivables in ~~2016~~2017 and ~~2015.~~2016. The higher level of cash required for receivables in ~~2016~~2017 was due primarily to ~~timing of customer payments.~~higher year-over-year first-quarter sales. Cash of ~~$57~~$20 and ~~$82~~$33 was used to fund higher inventory levels in ~~2016~~2017 and ~~2015. Higher inventory requirements in 2015 were due in part to a supplier transition initiative in our Commercial Vehicle operating segment.~~2016. Partially offsetting cash used for higher receivables and inventory in both ~~2016~~2017 and ~~2015~~2016 was cash provided by increases in accounts payable and other net liabilities of ~~$67~~$76 and ~~$70.~~$37. The cash provided by accounts payable in 2017 was reduced by a payment of $25 in connection with the USM – Warren acquisition to settle trade payable obligations at the date of closing.

Investing activities — Expenditures for property, plant and equipment were ~~$198~~$96 and ~~$192~~$71 in ~~2016~~2017 and ~~2015.~~2016. During 2017, we paid $106, net of cash acquired, to acquire 80% ownership interests in BFP and BPT and $78 to acquire USM – Warren. During 2016, we paid $18 to acquire the aftermarket distribution business of Magnum. During ~~2016~~2017 and ~~2015,~~2016, purchases of marketable securities were funded by proceeds from sales and maturities of marketable securities.

Financing activities — During ~~2016, Dana Financing Luxembourg S.à r.l. completed the issuance~~2017, we made scheduled repayments of ~~$375 of its June 2026 Notes~~$5 at international locations and paid ~~financing costs~~down $12 of ~~$10 related to the notes~~BFP and ~~the Amended Revolving Facility. We redeemed all of our February 2021 Notes at a $12 premium. Also during~~BPT acquired indebtedness. During 2016, we made scheduled repayments of ~~$28~~$24 and took out ~~$66~~$32 of additional long-term debt at international locations. During 2015, we redeemed $55 of our February 2019 Notes at a $2 premium, made scheduled long-term debt repayments at international locations and took out additional long-term debt at international locations. We used ~~$26 and $27~~$9 for dividend payments to common stockholders in ~~2016~~both 2017 and ~~2015.~~2016. We used ~~$81~~$28 to repurchase ~~6,612,537 common shares and $245 to repurchase 12,482,277~~2,264,692 common shares in ~~2016 and 2015.~~2016.

~~Contractual Obligations~~Off-Balance Sheet Arrangements

~~Aside from the impacts of the financing activities described in Note 11 to our consolidated financial statements in Item 1 of Part I, there~~There have been no material changes at ~~September 30, 2016~~March 31, 2017 in our ~~contractual obligations~~off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our ~~2015~~2016 Form 10-K.

Contractual Obligations

The acquisition of 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini) in February 2017 included the assumption of approximately $324 of liabilities, increasing our contractual obligations at March 31, 2017 versus those reported in Item 7 of our 2016 Form 10-K. The terms of the related agreement provide Dana the right to call the noncontrolling interests in BFP and BPT held by Brevini, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call rights, at dates and prices defined in the agreement. The redemption value of the redeemable noncontrolling interests in BFP and BPT was $44 at March 31, 2017. See Notes 2 and 7 to our consolidated financial statements in Item 1 of Part I for additional information.

The issuance of $400 of 2025 Notes in early April 2017 and the subsequent use of the related proceeds to repay indebtedness will extend the maturities on nearly $400 of indebtedness at significantly lower interest rates. See Note 12 to our consolidated financial statements in Item 1 of Part I for additional information.

Contingencies

For a summary of litigation and other contingencies, see Note 1314 to our consolidated financial statements in Item 1 of Part I. We believe that any liabilities beyond the amounts already accrued that may result from these contingencies will not have a material adverse effect on our liquidity, financial condition or results of operations.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to use estimates and make judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. There have been no material changes in the application of our significant accounting policies or critical accounting estimates. Our significant accounting policies are described in Note 1 to our consolidated financial statements in Item 1 of Part I, as well as in Note 1 to our consolidated financial statements in Item 8 of our ~~2015~~2016 Form 10-K. Our critical accounting estimates are described in Item 7 of our ~~2015~~2016 Form 10-K.

~~Income Taxes~~ — In the second quarter of 2016, we completed a refinancing of senior notes, redeeming our February 2021 Notes and issuing the June 2026 Notes through a wholly-owned subsidiary, Dana Financing Luxembourg S.à r.l. As referenced in Note 15 to our consolidated financial statements in Item 1, we evaluated the effects of this transaction along with other factors as part of our assessment of valuation allowances against U.S. deferred tax assets. Based on our assessment, we determined that no release of valuation allowance in the third quarter of 2016 was appropriate. However, we believe that within the next twelve months, to the extent our operating performance demonstrates sustained profitability, certain of our end markets stabilize and we are able to affirm sustained profitability in our forecasts, release of U.S. valuation allowances approximating $500 is reasonably possible.

~~Pension Plans~~ — Long-term interest rates on high quality corporate debt instruments, which are used to determine the discount rate, have decreased during 2016. The lower interest rates, if unchanged during the fourth quarter, would result in a year-end discount rate of 3.33% versus the 4.13% discount rate used for our plans in the U.S. at the end of 2015. Our 2016 pension fund asset return through the first nine months has been significantly better than our 6.5% annual expected return on plan assets. The year-end valuation, assuming no interest rate change and asset earnings at the expected rate during the fourth quarter, would result in an actuarial loss of approximately $35 being charged to other comprehensive income. Based on these assumptions, the funded status of our defined benefit pension plans in the U.S. at the end of 2016 would approximate 89%, slightly better than our position at December 31, 2015. We currently expect there to be no minimum funding requirement for our U.S. plans in 2017.

Long-term interest rates on high quality corporate debt instruments have also declined significantly outside the U.S., especially in Germany where we maintain unfunded plans that comprise the vast majority of our non-U.S. pension obligations. Rates there are approximately 100 basis points lower now than at the end of 2015. If the current discount rate is used in the year-end valuation of our defined benefit pension plans in Germany, we would expect an actuarial loss approximating $35 to be charged to other comprehensive income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the ~~second~~first quarter of ~~2016,~~2017, we executed certain refinancing activities and entered into derivative instruments to manage our debt portfolio. In conjunction with the issuance of $15 of USD-denominated external short-term notes payable in Brazil and €281 of intercompany notes payable by two of our Luxembourg subsidiaries, we executed fixed-to-fixed cross swaps with the same critical terms as the underlying financial instruments. We ~~redeemed our February 2021 Notes and~~also designated an existing MXN 1,465 intercompany note payable by USD-functional Dana European Holdings Luxembourg S.à r.l. as a net investment hedge of the equivalent portion of the investment in the operations of Dana de Mexico Corporacion.

During April 2017, we issued ~~the June 2026~~$400 of April 2025 Notes through a wholly-owned subsidiary, Dana Financing Luxembourg S.à r.l. In conjunction with the issuance, ~~of the June 2026 Notes,~~ we executed ~~two~~three fixed-to-fixed cross-currency swaps with the same critical terms as the ~~June 2026~~April 2025 Notes. We used the $394 of proceeds from the April 2025 Notes to repay a portion of the indebtedness of Brevini Fluid Power S.p.A. and Brevini Power Transmission S.p.A., to repay indebtedness of a subsidiary in Brazil and to redeem $100 of our September 2021 Notes. See Notes 1112 and 1213 to our consolidated financial statements in Item 1 of Part I for additional information.

Other than the refinancing activities described above, there have been no material changes to market risk exposures related to changes in currency exchange rates, interest rates or commodity costs from those discussed in Item 7A of our ~~2015~~2016 Form 10-K.

Item 4. Controls and Procedures

Disclosure controls and procedures — We maintain disclosure controls and procedures that are designed to ensure that the information disclosed in the reports we file with the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report on Form 10-Q. Our CEO and CFO have concluded that, as of the end of the period covered by this Report on Form 10-Q, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in internal control over financial reporting — There was no change in our internal control over financial reporting that occurred during our fiscal quarter ended ~~September 30, 2016~~March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the quarter ended March 31, 2017, we acquired Warren Manufacturing LLC (USM – Warren) and 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) and are currently integrating USM – Warren, BFP and BPT into our operations, compliance programs and internal control processes. As permitted by SEC guidance, management intends to exclude USM – Warren, BFP and BPT from its assessment of internal controls over financial reporting as of December 31, 2017.

CEO and CFO certifications — The certifications of our CEO and CFO that are attached to this report as Exhibits 31.1 and 31.2 include information about our disclosure controls and procedures and internal control over financial reporting. These

certifications should be read in conjunction with the information contained in this Item 4 and in Item 9A of Part II of our ~~2015~~2016 Form 10-K for a more complete understanding of the matters covered by the certifications.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to various pending judicial and administrative proceedings that arose in the ordinary course of business. After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs and expenses 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. Legal proceedings are also discussed in Note 1314 to our consolidated financial statements in Item 1 of Part I of this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes in our risk factors disclosed in Item 1A of our ~~2015~~2016 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer's purchases of equity securities — Our Board of Directors approved an expansion of our existing common stock share repurchase program from $1,400 to $1,700 on January 11, 2016. The share repurchase program expires on December 31, 2017. We repurchase shares utilizing available excess cash either in the open market or through privately negotiated transactions. The stock repurchases are subject to prevailing market conditions and other considerations. During the ~~third~~first quarter of ~~2016,~~2017, there were no shares of our common stock repurchased under the program. Approximately $219 remained available under the program for future share repurchases as of ~~September 30, 2016.~~March 31, 2017.

Item 6. Exhibits

The Exhibits listed in the “Exhibit Index” are filed or furnished with this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.



		DANA INCORPORATED
Date:	~~October 20, 2016~~May 2, 2017	By:	/s/ Jonathan M. Collins
			Jonathan M. Collins
			~~Senior~~Executive Vice President and
			Chief Financial Officer

EXHIBIT INDEX



Exhibit No.	Description

3.1	Certificate of Amendment to the Second Restated Certificate of Incorporation of Dana Holding Corporation, effective as of August 1, 2016. Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed August 1, 2016 and incorporated by reference herein.

3.2	Amended and Restated Bylaws of Dana Incorporated, effective as of August 1, 2016. Filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed August 1, 2016 and incorporated by reference herein.

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. Filed with this Report.

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. Filed with this Report.

32	Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). Filed with this Report.

101	The following materials from Dana Incorporated’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2016,~~March 31, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statement of Operations, (ii) the Consolidated Statement of Comprehensive Income, (iii) the Consolidated Balance Sheet, (iv) the Consolidated Statement of Cash Flows and (v) Notes to the Consolidated Financial Statements. Filed with this Report.

4847



	Remainder of 2016		2017		2018		2019		2020
Amortization expense	$	2	$	6	$	3	$	2	$	1



				Actual
(Units in thousands)	Dana 2016 Outlook			2015	2014
North America
Light Truck (Full Frame)	4,400	to	4,500	4,136	3,834
Light Vehicle Engines	16,000	to	16,500	15,474	15,119
Medium Truck (Classes 5-7)	230	to	240	237	226
Heavy Truck (Class 8)	220	to	230	323	297
Agricultural Equipment	50	to	55	58	64
Construction/Mining Equipment	145	to	155	158	158
Europe (including Eastern Europe)
Light Truck	9,200	to	9,300	8,546	7,790
Light Vehicle Engines	22,500	to	23,000	22,570	21,510
Medium/Heavy Truck	440	to	445	434	397
Agricultural Equipment	190	to	195	202	220
Construction/Mining Equipment	290	to	295	299	301
South America
Light Truck	900	to	950	940	1,146
Light Vehicle Engines	2,100	to	2,150	2,439	3,176
Medium/Heavy Truck	70	to	80	88	167
Agricultural Equipment	25	to	30	32	43
Construction/Mining Equipment	10	to	15	13	17
Asia-Pacific
Light Truck	26,000	to	27,000	24,160	22,337
Light Vehicle Engines	48,500	to	49,500	47,209	46,497
Medium/Heavy Truck	1,450	to	1,500	1,383	1,573
Agricultural Equipment	645	to	665	676	710
Construction/Mining Equipment	390	to	400	405	509