July 1, 2011 / 9:01 PM / 6 years ago

CORRECTED - American Axle shutting Detroit plant, UAW balks

(Corrects to 33 percent, paragraph 1; corrects to 80 pages, paragraph 15)

* Work likely to move to plant in Three Rivers, Mich.

* Plant had nearly 2,000 workers in 2008, about 300 now

* UAW said workers had made enough concessions

By Bernie Woodall

DETROIT, July 1 (Reuters) - The 94-year-old American Axle & Manufacturing Holdings (AXL.N) plant in Detroit that made airplane parts during World War I will shut next February after the company failed to secure union worker approval for a 33 percent cut in pay and benefits.

There are about 300 workers at the plant that until 1994 was owned and operated by General Motors Co (GM.N), including 260 United Auto Workers unionized hourly workers and 40 nonunion salaried employees.

The company announced on Thursday that it would shutter the Detroit plant after the current labor contract expires on Feb. 25, 2012.

UAW Local 22 President George McGregor said there is little to no chance that the workers will accept what American Axle said was its best and final offer.

“We won’t be coming back to take the same deal. They’ve had enough, they’ve made it clear,” McGregor said of the plant’s hourly workers.

The Detroit plant was one of the first bought by a group led by Richard E. Dauch in 1994 to form American Axle. Dauch has been chief executive since he co-founded the company.

Chris Son, director of investor relations at American Axle, said the company needed to lower the wages and benefits in order for the plant to be competitive.

McGregor said American Axle could have easily saved the old plant if it had brought back work that was shifted to Mexico a few years ago, and that the company never really intended to keep the plant open.

“They wanted to close the plant and they wanted to make it look like we caused the plant to close, because they knew we couldn’t accept their proposal,” said McGregor.

Son, in a telephone interview on Friday, said that the full cost of compensation or workers including benefits was $45 per hour, and that American Axle wanted that to fall to about $30 per hour.

That $30 per hour level has been achieved by the company at its Three Rivers in southwestern Michigan, where workers are represented by the UAW, Son said.

McGregor countered that the company wanted 80 workers who now make $14.35 per hour before benefits to agreed to be paid $11 per hour.

“How are you going to make it, and support a family on $11 per hour?” McGregor said in a telephone interview on Friday.

He also said most of the higher-end production workers making $18.50 per hour were asked to cut pay to $18 per hour. That is not a great wage cut, McGregor said, but most of those higher-end production workers were making $28 per hour before a 2008 strike at the Detroit plant.

The contract rejected this week had been whittled down to 80 pages from 300, said Cindy Estrada, a UAW vice president who negotiated for the UAW.

There were about 2,000 workers at the plant in 2008 and only 300 after the three-month strike.

PRODUCTION SLIPPING

There wasn’t enough work at the plant making axles for pickup trucks made by GM at its plants in Flint, Michigan, and Fort Wayne, Indiana, Son said.

Demand for pickup trucks is down over the past several years as consumers choose cars and crossover vehicles, Son said, and were down to 10 percent of the overall U.S. retail market in May versus 12.6 percent last June.

That slackening demand has cut the capacity utilization at the Detroit plant, Son said.

“To ensure a viable and sustainable future for that facility, we needed to try to achieve a market-competitive labor agreement as well as win new business for the facility that would overcome the high fixed cost of running the complex,” said Son in a telephone interview on Friday.

Bob King, the UAW president, in a press statement issued on Friday said: ”The UAW is angry about AAM’s decision to close its Detroit plant after our members made real sacrifices to make the plant competitive and viable.

“This is another example of corporate greed gone amok. AAM earned record profits of $115 million in 2010 with net income of $37 million in the first quarter of 2011 and still it is abandoning Detroit.”

The plant makes front axles, rear axles and steering linkages for pickup trucks.

During its General Motors heyday, the plant employed 4,000 and was located partly in Detroit and partly in Hamtramck, a suburb the larger city surrounds.

The buildings at the plant on the Hamtramck side were shuttered a few years ago and the operational Detroit buildings are only about 200 yards from the corporate headquarters of American Axle.

There are no plans to move American Axle’s headquarters, Son said. The company has more than 30 plants in North America, South America, Europe, and Asia.

American Axle shares closed at $10.93 on Friday, down 4 percent. Its shares have fallen 32 percent since mid-January. (Reporting by Bernie Woodall; Editing by Gary Hill)

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