Published: June 30, 2011 4:50 PM Modified: July 01, 2011
American Axle & Manufacturing Holdings Inc. will close its Detroit manufacturing complex in February following a breakdown in labor talks with the UAW.
About 300 hourly and salaried workers will be affected by the closure, said Christopher Son, a spokesman for the Detroit-based supplier.
American Axle, a former General Motors unit, sought to obtain a competitive labor contract with the United Auto Workers that would have been much like a pact in place at its Three Rivers plant in southwest Michigan, Son said.
Axle wanted to reduce compensation to $30 an hour from $45 an hour, he said.
"It's a matter of being market competitive and achieving an appropriate cost structure," Son said. "This facility was lacking in that and this is the unfortunate outcome."
The manufacturing complex is next to the company's Detroit headquarters and supplies front and rear axle assemblies and steering linkages for light trucks. It suffered from shifting demand to more fuel-efficient cars, Son said.
The plant will officially close no earlier than Feb. 26, 2012, when a current UAW contract expires, the company said.
Cindy Estrada, UAW vice president, said in a statement that American Axle had been moving work to its Mexico plant with intent in closing the Detroit plant.
"UAW members found dramatic cost savings to make the Detroit plant competitive, and instead of assigning enough work to keep the facility open and profitable, AAM is running from Detroit," Estrada said."
UAW President Bob King called the plant closure, "another example of corporate greed gone amuck."
The complex once housed eight factories and as recently as 2007 employed about 2,200 workers. There are three plants in operation today.
American Axle Chairman Richard E. Dauch, a long-time champion of American manufacturing and the U.S. worker, has come under fire from union leaders in recent years for an increasingly hard-line negotiating stance.
A former head of manufacturing at Chrysler Corp. and Volkswagen of America, Dauch's reputation took a beating in 2008 when 3,650 UAW members staged a bitter strike at five American Axle plants. The strike halted or disrupted output at 30 factories of American Axle's dominant customer, GM.
The tough bargaining posture has coincided with a drive by American Axle to reduce its reliance on GM and target other customers, such as VW, Audi, Ford Motor Co. and Chery.
Like Delphi Automotive LLP, Visteon Corp. and other U.S.-based suppliers, American Axle has shifted manufacturing overseas to countries such as China, Poland and India to take advantage of lower wages and to be closer to customers.
The company's plant in Siloa, Mexico, for example, opened in 1998 with just 12 workers. It employs 2,700 hourly employees today and accounted for 28 percent of American Axle's global revenues of $2.3 billion last year.
About 40 percent of the rear-axle assemblies, propeller shafts, driveline systems and forging components produced at the Silao plant are supplied to vehicles assembled in Mexico.
In Mexico the average wage and benefit package for hourly auto assembly workers is $6.94, according to Mexico's National Institute of Statistics and Geography.
UAW President Bob King estimates that union members at Detroit automakers and parts factories earn an average of about $35 an hour in combined wages and benefits.
American Axle has rebounded since losing $253 million and watching revenues plunge 29 percent to $1.5 billion in 2009.
The supplier, which avoided bankruptcy during the industry collapse of 2008 and 2009, more than doubled earnings in posting its sixth straight quarterly profit during the first quarter of 2011.
American Axle posted net income of $37.7 million, compared with a profit of $16.3 million a year earlier as the company attracted more non-GM business.
When GM and Chrysler Group filed for bankruptcy protection during the latest industry downturn, American Axle was forced to slash daily axle output from 14,000 to 8,000 and eventually down to 6,000 axles a day.
Payrolls dropped from 13,000 employees to 7,000, and plants in New York were idled or closed. The Detroit factory underwent a major consolidation.
Son said American Axle hasn't decided whether the Detroit complex will be sold or used for other purposes.
When Dauch and a group of investors acquired American Axle from GM in 1994, many of the bars, party stores and drug houses that once surrounded the Detroit complex slowly vanished.
American Axle offered to buy a half-dozen nearby bars and party stores — in one case, for $500,000 — to eliminate the impact of alcohol and drugs in the workplace, UAW officials and owners of homes and bars in the area said at the time.
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