May 17, 2008 / 5:01 AM / 11 years ago

American Axle and UAW reach tentative agreement

DETROIT (Reuters) - The United Auto Workers and American Axle & Manufacturing Holdings Inc (AXL.N) reached a tentative contract agreement late Friday aimed at ending an 11-week-long strike that had triggered thousands of layoffs and cost General Motors Corp (GM.N) at least $1 billion.

United Auto Worker union members picket outside the American Axle Manufacturing plant as workers reject demands for steep wage cuts from the auto parts supplier in Hamtramck, Michigan February 26, 2008. he United Auto Workers and American Axle & Manufacturing Holdings Inc <AXL.N> reached a tentative contract agreement late Friday aimed at ending an 11-week-long strike that had triggered thousands of layoffs and cost General Motors Corp <GM.N> at least $1 billion. REUTERS/Rebecca Cook

Both sides confirmed that a tentative deal had been reached to end the strike by some 3,650 U.S. hourly workers at the auto parts supplier but neither side offered details of the proposed contract.

The UAW went on strike on February 26 at five American Axle plants in Michigan and New York, triggering parts shortages that shut down production at some 30 GM plants in North America and marking the start of what became one of the longest-running strikes in the 73-year history of the union.

The union said in a short statement that it would hold a meeting in Detroit on Sunday to explain the contract to hourly workers at the company’s main Detroit factory.

The UAW said it would schedule other meetings to discuss the details of the agreement with workers in Three Rivers, Michigan, and in New York, clearing the way for ratification votes next week.

GM accounts for about 80 percent of the revenue for the auto parts supplier, which was formed in 1994 when Chief Executive Dick Dauch led a group of investors that bought the company’s assets from the No. 1 U.S. automaker.

American Axle had sought steep cuts in wages and benefits for its UAW-represented workers and had been looking to cut at least two of its factories.

The Detroit-based supplier had argued it could no longer afford the wage and benefit packages paid by major automakers in competition with other suppliers, including Dana Holding Corp (DAN.N), that have come through bankruptcy with sharply lower labor costs.

For its part, GM offered $200 million to fund buyouts and one-time payouts to remaining workers in exchange for lower hourly wages.

The automaker has been struggling with plunging demand for trucks and sport utility vehicles and the strike gave GM a chance to run down overstocked inventory for slower-selling models including its Chevrolet Silverado pickup.

But GM, which books revenue when it produces vehicles, also said that the strike had cost it $800 million in the first quarter and 230,000 units of lost production as of April.

GM had also shut or partly idled over 30 facilities and put thousands of its own hourly workers on lay-off due to parts shortages caused by the strike.


At 80 days through Friday, the American Axle strike ran longer than major recent actions by the UAW, including a 59-day strike against two GM plants in 1998 and a 67-day strike against GM in 1970 that won a 13-percent pay raise.

From the start, the tone of the American Axle dispute was also more bitter than contract talks with the major automakers last year when the UAW agreed to slash costs by bringing in new hires at lower wages and shifting retiree health care costs to a union-aligned trust.

The UAW accused American Axle of unfair labor practices by failing to share financial information and of overpaying executives, including Dauch.

American Axle posted a net profit of $37 million on $3.2 billion in sales in 2007. The company gave Dauch a 9-percent raise in 2007, taking his total compensation to $10.2 million.

The UAW’s Gettelfinger blasted that as “excessive,” saying Dauch had collected over $257 million in pay over a decade.

Gettelfinger, who joined the bargaining in recent weeks, also said the company should be renamed, “Axle — Mexico and elsewhere” after the supplier threatened to ship production to Mexico unless its U.S. workers made deep concessions.

For its part, the company had said the union was out of touch with economic reality by insisting that it offer full medical insurance and supplemental unemployment pay. The supplier said the union had also failed to recognize how badly the decline in U.S. light truck sales had undermined its business during the strike.

At more than $70 per hour, American Axle had also said its overall labor costs ran three times higher than its rivals.

It promised to invest up to $200 million in remaining U.S. plants if the union agreed to a cost-cutting wage agreement.

Wall Street analysts have expected the company to get most of its demands, a view that has supported its stock price in the face of slumping U.S. auto sales. Shares in American Axle are up 21 percent since the start of the year.

Additional reporting by David Bailey; Editing by Anshuman Daga

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