American Axle Deal a Bitter Pill

May 19, 2008
It’s going to take a lot more than sugar to sweeten the deal that American Axle workers are being asked to swallow. The proposed settlement that ends a nearly three-month strike at the huge partsmaker will require workers to slash wages by as much as $10 an hour – though they’ll also get “buy-downs” of up to $105,000 to help absorb the hit their facing to their weekly paychecks.

The strike, targeting one of Detroit’s biggest auto suppliers, was among the most bitter labor disputes to hit the industry in a decade, and it not only closed down American Axle, but led to the closure of 34 factories run by its largest customer, General Motors.

Workers interviewed after learning of the agreement’s details used words like “nightmare” to describe the situation their facing. But company officials insist that without sharp cuts, they’d face a nightmare of their own, having to either export jobs or close their operations down.

At some plants, workers will now make as little as $10 an hour, though skilled tradesmen will earn as much as $26. Aided by an infusion of cash from GM – which once owned what became American Axle – the supplier is encouraging workers to accept the giveback agreement with several large carrots. There are buyouts of up to $140,000, early retirement packages of $55,000, and for those who remain on the job, they stand to receive up to $105,000 over a three-year period. That would offset the reduction in wages.

Even with the deal, American Axle will still close down two of its U.S. plants: one in Detroit, the other in Tonawanda, New York.

Initial reaction was angry, though after 12 weeks off the job, it appears most Axle employees simply want the confrontation to end. A vote on the agreement, originally scheduled for Monday, has been postponed until Thursday.

Reaction was generally more positive outside labor circles. “On the surface the savings appear to be very large,” noted Rod Lache, of Deutsche Bank. In a brief on the deal, Lache suggested American Axle will eliminate about 1,000 jobs, or roughly 30 percent of its current workforce, while reducing costs about $230 million, or about $3.30 in earnings per share. Even so, he cautioned that the supplier faces some serious “headwinds.” It makes much of its money producing axles and other components for large pickups and SUVs, such as the Chevrolet Silverado and Cadillac Escalade. With sales slumping in both those segments, Axle will need all the savings it can get.

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