Note 9. Stock Compensation

2008 Omnibus Incentive Plan

Our 2008 Omnibus Incentive Plan authorizes grants of stock options, stock appreciation rights (SARs), restricted stock awards, restricted stock units (RSUs) and performance share awards (PSUs) to be made pursuant to the plan. The eligibility requirements and terms governing the allocation of any common stock and the receipt of other consideration under the 2008 Omnibus Incentive Plan are determined by the Board of Directors and/or its Compensation Committee. The number of shares of common stock that may be issued or delivered may not exceed 16.1 million shares in the aggregate. Cash-settled awards do not count against the maximum aggregate number.

At December 31, 2011, there were 3.0 million shares available for future grants of options and other types of awards under the 2008 Omnibus Incentive Plan.

Award activity — (shares in millions)

											Restricted					Performance
	Options					SARs					Stock Units					Notional Shares
				Weighted-					Weighted-					Weighted-					Weighted-
				Average					Average					Average					Average
				Exercise					Exercise					Grant-Date					Grant-Date
Outstanding at	Shares			Price		Shares			Price		Shares			Fair Value		Shares			Fair Value
December 31, 2008		5.6		$	8.01		0.1		$	0.69		0.8		$	5.10		0.4		$	0.74
Granted		4.4			0.90		0.6			1.00		0.4			2.33		0.2			2.49
Exercised or vested		(0.1	)		2.09							(0.2	)		2.13		(0.3	)		1.76
Forfeited or expired		(0.7	)		5.05		(0.1	)		0.51		(0.1	)		7.17		(0.1	)		2.49
December 31, 2009		9.2			4.87		0.6			1.00		0.9			4.46		0.2			0.74
Granted		1.0			11.74		0.2			11.34		0.1			11.75		0.5			11.37
Exercised or vested		(3.6	)		3.33		(0.1	)		0.69		(0.5	)		2.95		(0.4	)		6.54
Forfeited or expired		(0.5	)		6.97		(0.1	)		1.24
December 31, 2010		6.1			6.71		0.6			4.16		0.5			7.44		0.3			7.58
Granted		0.7			16.83		0.1			17.62		1.0			16.92		0.3			15.59
Exercised or vested		(1.9	)		5.64		(0.1	)		2.86		(0.5	)		8.36		(0.1	)		0.79
Forfeited or expired		(0.3	)		8.67		(0.1	)		6.44		(0.1	)		16.69		(0.1	)		15.83
December 31, 2011		4.6		$	8.56		0.5		$	8.13		0.9		$	16.51		0.4		$	14.95

	2011		2010		2009
Weighted-average per share grant-date fair value
Stock options	$	9.43	$	7.23	$	0.53
SARs		9.89		6.99		0.60

Intrinsic value of awards exercised or vested
Stock options / SARs	$	26	$	38	$	—
RSUs / PSUs		10		14		4

Compensation expense is measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. For options/SARs, we use an option-pricing model to estimate fair value. For RSUs and PSUs, the fair value is based on the closing market price of our common stock at the date of grant. Awards that are settled in cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting period until settled or expired. We had accrued $4 and $6 for cash-settled awards at December 31, 2011 and 2010.

We recognized total stock compensation expense of $12, $18 and $13 during 2011, 2010 and 2009. The total fair value of awards vested during 2011, 2010 and 2009 was $14, $17 and $6. We received $11 and $12 of cash from the exercise of stock options and we paid $4 and $3 of cash to settle SARs, RSUs and PSUs during 2011 and 2010. There were no stock option exercises and there was no cash paid in 2009. We also issued 0.3 million shares related to PSUs and 0.4 million in RSUs based on vesting. At December 31, 2011, the total unrecognized compensation cost related to the nonvested equity awards granted and expected to vest over the next 34 months was $17. This cost is expected to be recognized over a weighted-average period of two years.

Stock options and stock appreciation rights — The exercise price of each option or SAR equals the closing market price of our common stock on the date of grant. Options and SARs generally vest over three years and their maximum term is ten years. Shares issued upon the exercise of options are recorded as common stock and additional paid-in capital at the option price. SARs are settled in cash for the difference between the market price on the date of exercise and the exercise price.

We estimated fair values for options and SARs at the date of grant using the following key assumptions as part of the Black-Scholes option pricing model. The expected term was estimated using the simplified method because the limited period of time our common stock has been publicly traded provides insufficient historical exercise data. The risk-free rate was based on U.S. Treasury security yields at the time of grant. There is no dividend yield assumption since there were no plans to pay common stock dividends. The expected volatility was estimated using a combination of the historical volatility of similar entities and the implied volatility of our exchange-traded options.

	Options						SARs
	2011		2010		2009		2011		2010		2009
Expected term (in years)		6.00		6.00		6.00		6.00		6.00		6.00
Risk-free interest rate		2.63%		2.74%		2.21%		2.66%		2.75%		1.87%
Dividend yield		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%
Expected volatility		58.03%		66.15%		63.08%		58.16%		66.10%		63.17%

Restricted stock units and performance shares — Each RSU or PSU granted represents the right to receive one share of Dana common stock or, at the election of Dana (for units awarded to board members) or for certain non-U.S. employees (for employee awarded units), cash equal to the market value per share. All RSUs contain dividend equivalent rights. RSUs granted to non-employee directors vest in three equal annual installments beginning on the first anniversary date of the grant and those granted to employees generally cliff vest fully after three years. Performance shares are awarded if specified performance goals are achieved during the respective performance period.

Outstanding awards expected to vest and those exercisable or convertible at December 31, 2011 — (shares in millions)

	Equity Awards Outstanding								Equity Awards Outstanding
	Expected to Vest								That are Exercisable or Convertible
					Weighted-Average								Weighted-Average
			Aggregate				Remaining				Aggregate				Remaining
			Intrinsic		Exercise		Contractual				Intrinsic		Exercise		Contractual
	Shares		Value		Price		Life in Years		Shares		Value		Price		Life in Years
Options / SARs		5.0	$	22	$	8.46		7.2		3.1	$	14	$	7.88		6.6
RSUs		0.9		10		—		1.6		0.1		1		—		0.3
PSUs		0.4		5		—		1.0		0.1		1		—		1.0

Annual cash incentive awards — Our 2008 Omnibus Incentive Plan provides for cash incentive awards. We make awards annually to certain eligible employees designated by Dana, including certain executive officers. Awards under the plan are based on achieving certain financial target performance goals. The performance goals of these plans are established annually by the Board of Directors.

Under the 2011 and 2010 programs, participants were eligible to receive cash awards based on achieving earnings and cash flow performance goals. Additionally, both our 2011 and 2010 long-term incentive programs included a cash-settled component which provided for potential payments if we achieved return on invested capital and new business origination performance goals. We accrued $37 and $40 of expense in 2011 and 2010 for the expected cash payments under these programs.

During the fourth quarter of 2009, we accrued $13 of expense for two compensation programs. Employees working in countries where pay increases were frozen in 2009 were awarded a one-time payment of 2% of their eligible base salary. Also included was a one-time Special Recognition Bonus awarded to the top 1,000 bonus eligible employees pursuant to the terms and conditions of the 2008 Omnibus Incentive Plan. This award was based on each individual’s compensation level and their individual contributions toward achievement of our 2009 objectives.