GM to move parts contract from American Axle
DETROIT -- General Motors intends to move a small but important parts
contract from American Axle & Manufacturing Holdings Inc. -- a sign that
GM is losing patience as a UAW strike at the axle supplier drags into
the fifth week.
GM has agreed to transfer to archrival Dana Holding Corp. a 30,000-unit
prop shaft contract for GM's light trucks.
The order is low-volume, but the move underscores GM's concern about
further production problems because of the inability of American Axle
CEO Richard E. Dauch to resolve the strike, say two people familiar with
Dana will begin producing the prop shafts within a matter of weeks, a
Dana source said.
It is the first known contract that GM has moved because of the strike.
The stoppage, which began Feb. 26, has shut all GM light-truck
production in the United States.
The strike also has caused GM to halt production of some sedans,
including the Buick Lucerne and Cadillac DTS. American Axle produces
axles and other parts for all of GM's light trucks.
GM is 'protecting its own'
GM and American Axle have long been best friends, and that has long
buoyed the Detroit axle maker with Wall Street. " But it's a problem
when GM has to cut truck and SUV production," said Shelly Lombard, a New
York bond analyst.
Spokespeople for GM, American Axle and Dana declined to comment.
It's unclear how the UAW locals representing American Axle would respond
to the business moving to the UAW local representing Dana.
American Axle has the right of last refusal on new contracts and could
undercut Dana. But the 30,000-prop-shaft order is part of an existing
Said one observer: " GM is simply protecting its own."
Moving business from American Axle, a business spun off from GM in 1994,
is a delicate decision that likely has reached GM CEO Rick Wagoner's
office. The final decisions would have been made by Bo Andersson, GM
group vice president for purchasing and supply chain. He could not be
Andersson has long said GM tries to maintain a high level of
manufacturing to support GM operations in Michigan. But his efforts
could be undercut by American Axle. Dauch has threatened to move his
operations to Mexico, eliminating 3,600 U.S. jobs.
American Axle has the right to move GM parts production to Mexico, and
GM stands to gain much lower production costs.
American Axle produces one-, two- and three-piece propeller shafts for
rear-wheel, four-wheel and all-wheel-drive vehicles and for other