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American Axle Contract Ratified, Strike Ends

Reuters
Friday, 23 May 2008 | 4:52 AM ET

Workers at American Axle & Manufacturing Holdings Inc on Thursday ratified a contract that cuts wages and costs, ending an 87-day-strike with a vote by the auto supplier's main Detroit plant to back the deal.

The vote by United Auto Workers Local 235, which represents about 1,900 of 3,650 American Axle's unionized workers, removed a major source of uncertainty for General Motors Corp, the supplier's largest customer.

Other UAW locals in Three Rivers, Michigan, and in New York had already voted overwhelmingly to ratify the four-year contract this week.

The vote at UAW Local 235 was seen as the biggest hurdle for the proposed contract because of opposition from workers at the Detroit plant frustrated that union negotiators had not turned back more of the company's demands for concessions.

UAW officials said the contract had been supported by 1,172 votes cast in favor of ratification at the Detroit plant out of a total of 1,314 votes deemed valid.

The UAW said the contract was ratified by a margin of 78 percent of the overall votes cast at five U.S. plants, including three facilities that will now be closed.

Some workers at the company's flagship Detroit gear and axle plant could return to work next week after the U.S. holiday, for Memorial Day on Monday, UAW officials said.

Despite the contract's tough terms, including a cut in wages by over a third, many American Axle workers said they were concerned that the weak U.S. economy and slumping truck sales would undermine any attempt to win more.

"I think a lot of people feared this is what they had to do," said Dana Edwards, UAW Local 235 shop chairman after the ratification result was announced.

Senior UAW officials had offered only a grudging endorsement of the contract while telling workers it represented the best deal that could be won.

"Our members have had to make some tough decisions for themselves and their families and have done so with careful deliberation," UAW President Ron Gettelfinger said in a statement.

American Axle said the union had told it that the contract had been ratified.

Spokeswoman Renee Rogers said the company would have no further comment on Thursday night.

Separately, a union official said American Axle projects total costs of about $398 million to buy out retiring workers and provide "buy downs" in exchange for the lower wages for those who remain.

Detroit-based American Axle has not detailed financial projections based on the contract, the key issue for Wall Street analysts.

Their forecasts have been based on information provided by the union.

American Axle told union negotiators during talks that it expected to cut its hourly work force by about 2,000 jobs through layoffs or buyouts.

More than 900 of those cuts would come from its Detroit gear and axle plant.

GM , which remains American Axle's largest customer, pledged $200 million to fund buyouts and buy downs at American Axle, a total that would represent roughly half of the supplier's total cost, according to the estimate provided to the UAW.

GM also kicked in $18 million in the final hours of contract talks between American Axle and the union in order to bring the two sides to an agreement.

That portion of the GM funding is earmarked for supplemental unemployment insurance benefits, the union has said.

The end to the strike is a welcome development for GM, which had at least partly shut down about 30 plants because of shortages of axles and related components.

The two sides reached agreement last Friday on a four-year contract that includes plant closings and wage cuts across the board.

Worker buyouts, retirements and cash buy downs were included to soften the blow.

The national agreement cuts hourly pay to a range of $10 to $26 and provides payments of up to $105,000 over three years for workers who stay.

Some holidays would be eliminated, the most senior workers would lose one week's vacation and there would be reductions in shift premiums among other cuts.

The striking facilities represent American Axle's original plants acquired from GM at its founding 14 years ago.

GM accounts for about 80 percent of the supplier's revenue.

Shares of American Axle have dropped about 15 percent since the close of trade on Friday, just before the contract deal was announced.

The stock remains up 3 percent this year.

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