The Buffalo News, March 14, 2009, Saturday

The Buffalo News

March 14, 2009, Saturday

The Buffalo News

American Axle auditors warn of concerns over viability

- American Axle & Manufacturing Holdings, the supplier whose biggest customers are General Motors Corp. and Chrysler LLC, said it may breach terms of its loan agreements and be unable to stay in business.

Compliance with financial covenants is “uncertain” because of doubts about the survival of GM and Chrysler, which account for about 84 percent of sales, the company said in a U. S. regulatory filing Friday. American Axle’s auditors said there was “substantial doubt” about the company’s viability.

That “could be a last straw for bank lenders who are already nervous about the sector,” said Shelly Lombard, an analyst at bond-research firm Gimme Credit LLC. Questions about Detroit-based American Axle’s viability may make banks less inclined to rework debt accords, she said.

American Axle’s Buffalo area presence is a fraction of what it was when the auto parts maker acquired some of General Motors” operations in the mid 1990s.

It operates a machining plant in Cheektowaga, after shutting its forge in the Town of Tonawanda and its gear and axle plant in Buffalo. The Walden Avenue plant has less than 100 hourly and salaried employees, said Renee Rogers, a company spokeswoman.

The workforce includes 62 hourly employees, several of whom are on layoff, said Jim Lakeman, president of United Auto Workers Local 846.

American Axle’s Buffalo gear and axle plant, which in recent years had more than 2,000 employees, was idled in late 2007 before being officially closed in 2008. The Tonawanda forge had 530 employees as of early last year. The company has sold both of those facilities.

Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations, said the parts supplier faces an uphill battle if seeks outside financial support. GM, for one, is focused on its own problems and possibly taking on portions of Delphi Corp., he said.

Wheaton said he felt the company’s decision to close the Tonawanda forge left the Cheektowaga plant more vulnerable, since the Walden Avenue plant used to machine parts made by the forge.

But he said the UAW has shown cooperation in supporting the operation. The Cheektowaga plant opened a decade ago under a lower-wage structure, and UAW members agreed to reduced wages there under a contract approved last year.

American Axle’s filing shows how U. S. auto sales at a 27-year low may overwhelm suppliers” efforts to save themselves by shutting plants and chopping payrolls. As many as 500 of the biggest domestic partsmakers may be at risk of failure, accounting firm Grant Thornton LLP said Thursday.

News Business Reporter Matt Glynn contributed to this report.