American Axle Eyes NY Plant Layoffs - Analyst Blog

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American Axle and Manufacturing Inc. ( AXL ) plans to lay off 83 workers (75 hourly and eight salaried employees) at its Cheektowaga plant in New York, which will be permanently closed down next year. The auto parts maker filed a WARN notice with the labor department, stating that the workers would be laid off by February 25, 2012.

Few months back, the company announced that it would shut down the Cheektowaga plant as its negotiation with union members regarding the ratification of a new contract failed. The company revealed that the union workers refused the proposal of a 33% cut in pay and benefits.

The plant will be closed on or after February 26, 2012. However, the company will continue to honor the labor agreements through February 25, 2012.

American Axle is a leading supplier of driveline systems, modules and components for the light vehicle market. The company makes axles, driveshafts and chassis components for light trucks, sport utility vehicles and passenger cars.

The company is exposed to platforms that faced the maximum production cuts following the global economic crisis. It also has a high exposure to General Motors Company ( GM ) and Chrysler, which sought bankruptcy protection in 2009.

The Zacks #3 Rank (Hold) company posted a decline in profit to $38.3 million or 50 cents per share in the third quarter of the year from $38.8 million or 52 cents per share in the third quarter of 2010 (all excluding special items). However, the profit was higher than the Zacks Consensus Estimate by a penny. Net sales in the quarter inched up 5% to $64 7.6 million from $618.2 million in the third quarter of 2010. 

Gross profit dipped to $103.5 million or 16.0% of sales from $113.9 million or 18.4% of sales.  Meanwhile, operating income declined to $44.5 million or 6.9% of sales compared with $60.7 million or 9.8% in the year-ago quarter.

American Axle focuses on expanding its manufacturing footprint in the emerging markets at the cost of its big-ticket U.S. facilities. The company plans to accelerate the expansion of its high quality, cost-competitive and operationally flexible global manufacturing footprint in Brazil, China, India, Mexico, Poland and Thailand. Therefore, the failure to conclude a wage-cut agreement with the workers would definitely leave the company with no choice but to close the plant.


 
AMER AXLE & MFG ( AXL ): Free Stock Analysis Report
 
GENERAL MOTORS ( GM ): Free Stock Analysis Report
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AXL , GM

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