Axle sees $398 mln in buyout costs-source

DETROIT (Reuters) - American Axle & Manufacturing Holdings Inc (AXL.N) expects total costs of about $398 million to buy out retiring workers represented by the United Auto Workers and provide "buydowns" in exchange for sharply lower wages, a union official said on Thursday.

A union official involved in the negotiations who asked not to be named said that American Axle had provided that estimate during talks that resulted in a concessionary deal that would cut wages for UAW-represented workers by over a third.

UAW locals in Three Rivers, Michigan, and in New York voted overwhelmingly to ratify the proposed three-year contract this week. A vote tally was being prepared at the auto supplier's flagship plant in Detroit, which employs some 1,900 of the 3,650 union workers who have been on strike since February.

Renee Rogers, a spokeswoman for American Axle, said the company would not comment on the contract until after the union ratification vote had concluded.

Detroit-based American Axle has not detailed financial projections based on the pending labor contract, the key issue for Wall Street analysts who have based projections on the gains for the supplier based on details provided by the union.

American Axle told union negotiators during talks that it expected to cut its hourly work force by about 2,000 jobs through layoffs or buyouts. More than 900 of those cuts would come from its Detroit gear and axle plant.

General Motors Corp GM.N, which remains American Axle's largest customer, pledged $200 million to fund buyouts and buydowns at American Axle, a total that would represent roughly half of the supplier's total cost, according to the estimate provided to the UAW.

GM also kicked in $18 million in the final hours of contract talks between American Axle and the union in order to bring the two sides to a tentative agreement. That portion of the GM funding is earmarked for supplemental unemployment insurance benefits, the union has said.

An end to the strike would be welcome for GM, which had at least partly shut down about of its 30 North American plants because of shortages of axles and related components.

The UAW and American Axle reached agreement last Friday on a four-year contract that includes plant closings and massive wage cuts across the board. Worker buyouts, retirements and cash buydowns were included to soften the blow.

The national agreement cuts hourly pay to a range of $10 to $26 and provides payments of up to $105,000 over three years for workers who stay. Some holidays would be eliminated, the most senior workers would lose one week's vacation and there would be reductions in shift premiums among other cuts.

The striking facilities represent American Axle's original plants acquired from GM at its founding 14 years ago. GM accounts for about 80 percent of the supplier's revenue.

Shares of American Axle have dropped about 15 percent since the close of trade on Friday, just before the two sides announced they had reached a tentative contract deal. The stock remains up 3 percent since the start of the year.

(Writing by Kevin Krolicki, editing by Phil Berlowitz, Gary Hill)