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  Title	American Axle's latest acquisition highlights its long rise from near death
  ID	6380803
  External ID	7509820878
  Author	Jackie Charniga
  Published Date	Jan. 30, 2025, 5:34 a.m.
  Summary	Detroit Free Press With its acquisition of a British competitor, Detroit-based American Axle will expand its production in Michigan, diversify its business beyond North America and reduce its relianc
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  URL	https://eu.freep.com/story/money/cars/2025/01/30/american-axle-long-rise-from-near-death-buys-uk-dowlais/78018673007/
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  Content ID	3935795
  Key	9359262d-7176-4ed2-a3d2-a546dde9f024
  Content	Detroit Free Press With its acquisition of a British competitor, Detroit-based American Axle will expand its production in Michigan, diversify its business beyond North America and reduce its reliance on General Motors — a megamove that signals how far the company has come since its near death 15 years ago. The purchase of British driveline provider Dowlais for $1.44 billion, announced Wednesday, marks the latest step for the company to achieve greater scale to meet the demand of electric vehicles in the U.S. market and carve out an even larger global footprint. The combined company will be among the world's largest auto suppliers. The goal? To serve the ever-expanding Chinese vehicle market and produce enough parts to serve more automakers, regardless of whether they're looking to expand production of electric vehicles or internal combustion engines. John McElroy, host of “Autoline After Hours,” told the Free Press that the move signals the new definition of success for auto suppliers. “Car sales have not grown in the last decade,” he said. “So how do you grow your company if you can't count on additional sales volume to get you there? You do it through acquisition.” Diversifying its business further beyond North America — and General Motors — will help launch the company into a new era. “The combined group will be a truly global supplier, serving a wide range of vehicles with a well-diversified and complementary customer base. Additionally, the combined group will benefit from a more balanced regional presence,” the companies said in a government filing Wednesday. “The combined businesses also have strong foundations to serve the large and growing Chinese vehicle market, in particular with emerging domestic Chinese OEMs that are positioned for global growth.” Combined company will be based in Detroit The company had no comment beyond its statement and information provided in an investor call. A Delaware corporation, American Axle has facilities in 16 countries across North America, Latin America, Europe and Asia and has roughly 21,000 employees globally, 3,400 of them in Michigan. The deal is expected to close this year pending shareholder and regulatory approval from the European Union, United States and China, where Dowlais operates a joint venture. The new company will be based in Detroit and led by American Axle's CEO and chairman David Dauch. “This announcement marks another key milestone in our continued long-term strategic growth plan,” Dauch said in a news release. “We are excited to bring together these two outstanding companies to create a leading driveline and metal-forming supplier serving the global automotive industry as it continues to evolve.” Birth of American Axle Before it became an institution of the Detroit auto industry, American Axle began as a part of General Motors. Once known as Chevrolet Gear and Axle, the axle-maker was one of three tranches that GM decided to spin off in favor of further investment in Chinese production — alongside Detroit Diesel and Delco Remy. In 1992, GM publicly announced that 18 of its manufacturing plants were for sale. Dick Dauch, then-retired as former head of manufacturing at Chrysler, stepped in. He turned five General Motors plants in Michigan and New York into American Axle in March 1994, which generated a $66 million profit in its first year. In 2012, Dauch's son David succeeded him as CEO. Dauch died less than a year later. Three-month strike The company's strong performance today is a stark contrast to its darkest days during the Great Recession. As its largest partner General Motors idled plants, laid off workers and struck deals with Washington, American Axle barely survived 2008. Part of this is because what American Axle paid its employees: Wages and benefits were out of step with suppliers across the industry that didn't have employees under UAW contracts. When the market crashed and the automakers for which American Axle provided parts slashed production, the supplier shed 2,000 workers and lowered wages through what the company called buy-downs and plant closures. The average gas price was about $3.50 per gallon in 2008, stinging the company by shifting demand away from trucks and SUVs. Attempts to shrug off UAW promises caused turmoil. During a grueling three-month strike, American Axle lost $370 million in sales and as much as $130 million in profits. The cost to remove expensive workers also proved burdensome. The contract's attrition and buy-down programs cost nearly $450 million. Of that, American Axle paid the bulk and General Motors kicked in the rest needed for the settlement. This allowed the company to drop its labor cost per worker, including wages, benefits, pension and other costs, from $73.48 per hour to $30 to $45 an hour per worker, though at the time the union did not agree with those estimates. In Detroit, the new deal depressed production and support wages to a range from $14.35 to $18.50 an hour, depending on the job. Skilled-trades workers made $26 an hour. For American Axle production based in Three Rivers, Michigan, hourly wages ranged from $10 to $18. Yet the embattled company still had further to fall. Its worst day on Wall Street was March 9, 2009, when stock traded as low as 29 cents per share. Trucks and SUVs Outside of cost-saving measures and bailout money from GM, what really saved American Axle was a marketplace trend that seemed unlikely during the darkest days of the recession — the rise of the SUV. “They always had a pretty good operation and reputation in the field. At least in the U.S. market right now, they're in a sweet spot,” McElroy said. “Full-size and midsize pickups and SUVs are what makes all the money in the American car industry, and American Axle is right in the thick of that.” General Motors The new business would accomplish one of American Axle's longest standing goals: to reduce its dependence on General Motors for its bottom line and break away from limited vehicle types. For years, American Axle has sought to further reduce the company's dependance on GM by diversifying its product portfolio. In 2016 , the company purchased Plymouth-based Metaldyne Performance Group Inc., at a time when GM contracts comprised about one-third of the company's business and two-thirds of its revenue. Today, GM comprises 39% of American Axle's business. Stellantis is the next-largest tranche at 16% and Ford third with 12%. After the purchase, GM would make up 24% of the portfolio, Stellantis 14%, and Ford 9%, adding brands Volkswagen, Toyota and Renault-Nissan for 13% of the company's production. The purchase also reduces the company's dependance on the North American market. Adding the business drops North America to 54% of the company's focus, down from 73%. Mark Wakefield, global automotive market lead at AlixPartners, said it takes a great deal more strategy to be a successful supplier in today's auto environment. Catering to more markets and offering parts for the broader range of vehicle powertrains offered today is key to future growth. “It's a highly capital-intensive and competitive business, for automakers and even more for auto suppliers,” Wakefield said. “To a large degree, what they're going to make is defined by the automakers and what is asked of them.” Advantageous partnership Both companies build automotive parts for all powertrains currently sold on the market. The global tier-one suppliers specialize in driveline and metal-forming technologies for internal combustion, electric and hybrid vehicles. AAM expects the joint venture to produce $300 million in benefits such as cost savings and production streamlining by the end of the third year after the deal closes. Without adjustments, both companies generated $12 billion in annual revenue in 2023. If that size is maintained, the combined company would rank sixth among global suppliers by revenue, between BorgWarner and Dana. The largest global supplier is Magna, which generated $43 billion in annual revenue in 2023. American Axle's metal forming segment is the largest automotive forging operation in the world, according to the company, and provides engine, transmission, driveline and safety-critical components for light, commercial and industrial vehicles. It reported approximately $6.08 billion in net sales for 2023. Estimated 2024 sales are around $6.1 billion, with projected adjusted EBITDA of $740 million and $750 million. In 2009, American Axle closed its largest Detroit-based axle plant and relocated operations to Mexico . Today, the company has 13 plants and manufacturing facilities in Mexico, according to its website . Most of its driveline business is produced there, with seven plants creating those parts compared with just four in Detroit. As for what could happen to American Axle — and the auto industry as a whole — few want to imagine the impacts of tariffs. What some, like McElroy, considered a negotiation tactic by President Donald Trump is looking less and less like a bluff. “All I can say for sure is if tariffs go through, it's going to tear this industry to pieces. Even if they phase them in over a couple of months, it would take years to move production back to the U.S. In the meantime, it's going to be total chaos,” McElroy said. “It'll drive up the price of vehicles. Most suppliers run on single-digit profit margins and they can't eat a 25% increase in cost. They're absolutely going to pass it on to the automakers.” Jackie Charniga covers General Motors for the Free Press. Reach her at jcharniga@freepress.com.
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  Publisher Name	Detroit Free Press (#3214)
  Publisher URL	https://eu.freep.com/
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  Citation Flow Score	74

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