American Axle to unions: deal or new work goes overseas
By Terry Kosdrosky
Last Update: 5:39 PM ET Mar 8, 2006
DETROIT (MarketWatch) -- American Axle & Manufacturing Holdings Inc. (AXL) has a $1.4 billion book of
business it's using to try to get its unions to accept new terms, one of its executives said Wednesday.
Rick Dauch, American Axle's executive vice president of manufacturing, said Wednesday the company is willing
to put $700 million of that backlog into its North American plants, "but only under our conditions with modified
contracts from both a wage and benefit and classification structure," he said.
Chairman and Chief Executive Richard E. Dauch said last month during the company's fourth-quarter earnings
call that the company was talking "daily" with its unions to address labor costs, but wouldn't reveal details.
Rick Dauch, who is Richard E. Dauch's son, said Wednesday during a presentation at Citigroup's Global
Industrial Manufacturing Conference that the company's unions have worked with the company in the past to
create a two-tier wage structure and eliminate job classifications to increase efficiency. The company is looking
for more flexibility to lower its labor costs and talks continue, most notably with the United Auto Workers.
"If there's no deal, the work goes to China, it goes to Brazil and it goes to Mexico," he said during the
presentation, which was broadcast over the Internet.
American Axle shares were up 18 cents or 1.2% to $15.52 in late trading Wednesday.
Besides the book of business, Dauch said there are some short-term opportunities created by the Chapter 11
filing of competitor Dana Corp. (DCNAQ) He said American Axle's strong balance sheet will allow it to take
advantage of acquisitions and conquest business.
"We're in for a couple of years of restructuring (as an industry) and only the strong companies will survive," he
said. "There's lots of opportunities to win new business and to take over other people's business or assets under
the right conditions."
Still, American Axle isn't without its challenges. The company is reliant on General Motors Corp. (GM) and
DaimlerChrysler AG's (DCX) Chrysler Group for much of its revenue. American Axle reported net income of
$56 million, or $1.10 a share, on sales of $3.39 billion in 2005, down from 2004 when it reported net income of
$159.5 million, or $2.98, a share on revenue of $3.6 billion.
Dauch said the company is expanding its business with Asian auto makers and has new driveline systems for the
growing crossover vehicle market, which uses primarily all-wheel drive transmissions.
An announcement on the location of its new plant in Central or Eastern Europe will be made soon, Dauch said.
In its earnings call last month, the company predicted an up and down 2006 due to customer launch schedules
and a GM plant closing.