American Axle chief: Jobs can be moved by Tom

Dick Dauch, American Axle head

Union warned of outsourcing

BY TOM WALSH • FREE PRESS COLUMNIST • March 27, 2008

Dick Dauch, chairman and chief executive officer of American Axle & Manufacturing, lashed out Wednesday at UAW leaders for striking his company and refusing even to discuss what Dauch said was already a pattern of lower wage-and-benefit deals already reached with Dana Corp. and other direct AAM competitors.

"We are fighting for the absolute survival of AAM in America," Dauch said in an interview one month after a walkout by 3,600 hourly workers at AAM plants in Michigan and New York.

"We have the flexibility to source all of our business to other locations around the world, and we have the right to do so," Dauch said, in a not-so-veiled threat. AAM has plants in Mexico, South America, Europe and Asia.

"We will not be forced into bankruptcy in order to reach a market-competitive cost structure in the United States. If we cannot compete for new contracts in the U.S., there will be no work in the original plants," Dauch said, referring to operations in Detroit, Three Rivers and in the New York towns of Tonawanda and Cheektowaga.

His point: American Axle cannot win new contracts for axles and other automotive components at its older U.S. plants where so-called all-in labor costs -- including wages and benefits -- now exceed $73 per hour. AAM competitors, including Toledo-based Dana and axle plants for Ford Motor Co. and Chrysler LLC, have all-in labor costs about one-third of AAM's, he said.

Intensive negotiations between full UAW and AAM bargaining teams broke off March 11, and only sporadic conversations have occurred since.

But Dauch insisted he has no intention of turning American Axle -- which he created in 1994 by leading an investment group that purchased General Motors Corp.'s axle-making plants -- into an offshore company. In fact, Dauch, 65, a former manufacturing executive at both GM and Chrysler, has long been a fiery advocate of the need for the United States to maintain its manufacturing base.

The UAW did not respond Wednesday to a Free Press request for comment on Dauch's remarks.

But two weeks ago, UAW President Ron Gettelfinger, appearing on Paul W. Smith's WJR-AM (760) radio show, blamed the deadlock on American Axle. "As long as they come to the bargaining table with the attitude that they're not going to negotiate -- that they're going to dictate -- we're not going to get an agreement," Gettelfinger said then.

That comment didn't sit well with Dauch.

"He caused the strike," Dauch said of Gettelfinger. "I'm prepared to meet anytime. He's got plenty of time to talk on the radio ... But the message must be truthful."

Dauch's comments Wednesday were his first media interview since the early days of the strike.

The strike has forced GM to slow work or shut down at 29 factories, including eight assembly plants that mainly make pickups and SUVs. The automaker might soon have to shut down the first car plant because of the strike. A union leader in Lordstown, Ohio, where GM makes the Chevrolet Cobalt, said that plant might have to halt production next week because of the pending shortage of a brake part that American Axle indirectly supplies for that vehicle.

Dauch said he understands that AAM is asking for major sacrifices by its longtime workers. It wants to cut wages from about $28 an hour to $14 per hour, slash its legacy cost burdens for retiree health care and find a way to stop paying people for not working. AAM has paid out $250 million since its inception in supplemental unemployment benefits to laid-off UAW workers, most of it in the past three or four years, said Michael Simonte, the firm's chief financial officer.

What Dauch said he does not understand is the union's apparent unwillingness to bargain a concessionary deal similar to others already blessed by the UAW for GM, Ford, Chrysler, Dana, Delphi Corp. and others.

"They have fashioned something to be very supportive" to those firms, Dauch said. "Why are we being focused on, or profiled, not to have a similar pattern to the peer groups we compete with?"

Dauch said AAM's salaried workers already have absorbed higher health-care co-pays and other benefits costs, and have salaries in line with American Axle's peer companies in the auto parts business.

Asked about CEO compensation, a major irritant to the UAW and other union officials, Dauch said that his own pay was decided by a committee of four independent AAM board members and was competitive with other CEOs in the industry. Last year, Dauch's base salary rose 9.6% to $1.47 million but he received no bonus, after getting a $3.9-million bonus the previous year. About $7.7 million in restricted stock options vested last year because Dauch reached retirement age, according to the firm's annual proxy statement.

AAM is prepared to negotiate buyouts and early-retirement provisions to help create soft landings for workers affected by cuts, Dauch said. And he's willing to promise future work for the U.S. plants, but only if a new contract provides a cost structure that enables it to win such work.

"Reality has intruded," he said, citing globalization and the dramatic impact of rising energy costs on truck and SUV sales among key factors that have dramatically altered the industry's competitive math in the past five years.

"We need structural and permanent change in our cost structure," he said.

"We must eliminate the Detroit entitlement mentality."