American Axle to Close Detroit Plant

Wages, weak demand disputed by UAW


American Axle and Manufacturing Inc. has said it will close its Detroit Manufacturing Complex in February because it has been unable to arrive at an acceptable wage structure with the United Auto Workers union, despite a reported six months of negotiations. According to AAM director of Investor Relations Chris Son, the company and the union have failed to reach an agreement on a “market- competitive labor agreement” for the plant. AAM reportedly wants to cut the compensation from $45/hour to $30/hour, in line with its cost structure at other plants.

American Axle is an integrated global supplier of powertrain systems, and related components and modules, and chassis systems, for trucks, sport utility vehicles, passenger cars, and crossover vehicles. It has plants in Indiana, Michigan, New York, and Ohio. Over the past decade American Axle has been growing its share of revenue from non-domestic operations, including wholly owned and joint-venture manufacturing plants in Brazil, China, India, Japan, Mexico, Poland, and the U.K.

Another apparent factor in the planned closing is reduced demand for SUVs and light trucks. The plant produces various forged components for powertrains and axles, and full axle assemblies for full-size and light trucks.

The closing would affect 300 hourly and salaried workers at the plant, which is AAM’s largest operation. It was opened over 90 years and was among the General Motors’ Final Drive and Forge operations that AAM purchased when it was established by private investors in 1994.

The UAW maintains that it has agreed to significant operating cost reductions for the plant but it has been unable to meet the company’s demands. UAW vice president Cindy Estrada told the Detroit Free Press that the union was ready to agree to contract changes that would cut workers’ total wages and benefits to $32/hour. She maintained that the company is intent on moving the plant’s production orders to its Guanajuato Manufacturing Complex in Mexico.

In 2008, American Axle endured a three-month strike at its U.S. operations, which led to wage reductions and plant consolidations, including at the Detroit plant.

Last year, a federal arbitrator ruled that American Axle violated the 2008 UAW contract that ended the strike, and ordered the company to provide restitution to the affected workers. After the contract went into effect, AAM sought but failed to gain other concessions at the Detroit complex, concerning its 8.25 axle production process. Ultimately, it reassigned much of that axle work to its plant in Mexico. That move led to the UAW’s complaint.

American Axle claimed it had broad discretion about what to produce, and where and when to produce it. The UAW maintained then that sourcing commitments it negotiated in 2008 guaranteed the work to the Detroit Manufacturing Complex, and prohibited the company from relocating it.

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