American Axle Back at Work but Fallout from Three-Month Strike Begins

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Researched by Industrial Info Resources (Sugar Land, Texas)--What began with a roar ended with essentially a whimper at the end of May. The three-month strike by 3,600 workers at American Axle & Manufacturing Incorporated (NYSE:AXL) (Detroit, Michigan) ended in late May with union members accepting a new contract from the major tier supplier to General Motors Corporation (NYSE:GM) (Detroit) and Chrysler LLC (Auburn Hills, Michigan). Now that the contract has been ratified by the membership, the fallout of the deal will begin in earnest.

As a result of the lengthy strike, 30 GM plants were idled because of the lack of parts, and tens of thousands of additional workers were temporarily off the job while the United Auto Workers (UAW) union (Detroit) and American Axle negotiated a new contract. Timing is everything, as the old saying goes, and rising gas prices combined with a downturn in the economy certainly did not help the UAW negotiate from a position of strength during the strike. In the end, GM offered to pony up $215 million to assist with the buy-down program as part of the new contract.

About 78% of the UAW employed at American Axle approved the new contract, which will result in two plant closures -- the forging operations in Tonawanda, New York, and Detroit -- and the loss of 2,000 jobs. The job reductions will be accomplished through early retirement, buy-down and buyout offers and possibly layoffs if the other options do not lead to enough jobs being reduced. In addition, portions of the Three Rivers, Michigan, and Detroit facilities will be idled.

In all, the three-month strike cost American Axle $370 million in sales and possibly as much as $130 million in sales. GM, on the other hand, was hit hard by the strike, losing $2 billion and producing 230,000 less vehicles as a result of declining sales and the idling of facilities. The overall result is that American Axle will save $300 million a year over the course of the agreement as a result of the reduction in work force and lower wages paid to employees. Labor costs at American Axle will be reduced from $73 to the $30-$45 range.

Although the strike is over, the effects of the strike-ending agreement will take months to unfold and develop. With GM's recent announcement to close four of its pickup and SUV plants in 2010, times will only get harder for the UAW and its membership. The effects of these closures will also be felt at American Axle, as they are a major supplier to the plants that assemble both pickups and SUVs. 2008 has been and will continue to be a rough year for the automotive industry as a whole, but it will survive. The real question is, Once the rough times are over, who will be left standing?

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