American Axle and Manufacturing Holdings Inc. said Wednesday it will cut more than half of its U.S. hourly work force, or 2,000 jobs, through early retirement and buyout offers, plant closures and layoffs.
The moves were made possible by a new contract ratified last week by the United Auto Workers union that came after a nearly three-month strike.
The auto parts maker said its total hourly labor costs would drop from $73.48 before the new contract to between $30 and $45. The cost will vary by factory because they have different wage and benefit costs.
About 3,650 UAW workers at American Axle's five original facilities in New York and Michigan went on strike Feb. 26 but ratified a contract with deep concessions Thursday. The company also has about 850 workers at three U.S. subsidiaries.
The bitter strike crippled General Motors Corp.'s production of pickup trucks and big sport utility vehicles, and it took a contribution of $215 million from the automaker to end a stalemate between the union and American Axle.
Chief Financial Officer Mike Simonte said the strike will cost American Axle $125 million to $130 million in lost profits and $370 million in sales this year. But it expects to save $300 million per year with lower labor costs from the new contract.
Simonte said most of the job cuts will come through buyout and early retirement offers, although there will be some involuntary layoffs.
The company plans to close its forge operations in Detroit and Tonawanda, N.Y., and it will idle parts of two other plants in Detroit and Three Rivers, Mich., Simonte said.
He said idling is due to declining demand for the trucks and truck-based sport utility vehicles for which American Axle provides parts. American Axle expects a 30 percent reduction in light truck production by its customers this year. The company gets about 80 percent of its business from GM.
"Unfortunately because of the rundown in demand ... we have too many associates at these facilities," Simonte said.
American Axle plans to move some of the business from the plants to lower-cost subsidiaries in Michigan and Ohio, and to operations in Mexico, he said.
The new contract, which expires Feb. 25, 2012, makes American Axle's labor costs competitive with other U.S. auto parts suppliers, the company said. Production workers in Detroit, for example, will see their pay cut from around $28 per hour to $18.50.
The deal also caps pay for laid-off workers at $18 million, after which they will get only state unemployment benefits, Simonte said. American Axle expects to deplete the $18 million in the first quarter of next year.
But the contract includes $90,000 to $95,000 per worker "buydowns" over three years to ease the transition to lower pay. Workers also have the choice of taking a $55,000 early retirement incentive or up to $140,000 to leave the company.
The company expects the buydowns, buyouts and early retirement packages to cost $400 million to $450 million.
Although many workers were unhappy with the contract, 78 percent of the votes were in favor.
Many said they feared the company would make good on threats to move production to other countries.
Also Wednesday, American Axle said it has a $1.4 billion new business backlog from 2009 through 2013.
American Axle and GM began bringing idled factories back on line this week, although GM said it would cut one shift each at its Pontiac and Flint pickup truck plants.
American Axle shares fell $1.11, or 5.8 percent, to $17.92 Wednesday.
On the Net:
American Axle and Manufacturing Holdings Inc.: http://www.aam.com