DETROIT (Reuters) - The United Auto Workers union went on strike against American Axle & Manufacturing Holdings Inc (AXL.N) on Tuesday, rejecting demands for steep wage cuts from the parts supplier in a move that could threaten production at General Motors Corp (GM.N).
The strike — the third called by the union against a U.S. automotive company in the last six months — began just after midnight as a four-year contract expired. The walkout affected some 3,600 workers and shut down American Axle plants in Michigan and New York.
Shares of American Axle were almost flat in early trade. Wall Street analysts said the company’s hard line pointed to the potential for it to win deep savings from the union.
Statements from both sides also underscored sharp divisions despite weeks of bargaining centered on wages, benefits and whether the Detroit-based company is committed to keeping production in the United States.
American Axle said in a statement that it wanted to recoup more than $3 billion in investment in U.S. plants by cutting hourly labor costs closer to rates of $20 to $30 per worker from nearly $70 currently.
UAW officials said American Axle had failed to provide the financial information the union requested and repeatedly threatened to move production to Mexico in the absence of sweeping concessions.
More immediately, analysts have said a prolonged strike against American Axle could disrupt production of trucks and sport utility vehicles by GM. The No. 1 U.S. automaker accounts for nearly four-fifths of American Axle’s revenue.
American Axle had stockpiled parts for GM in advance of the strike, but it was not clear how many days that would last.
American Axle workers in Detroit walked off the job shortly after midnight. Dozens quickly formed picket lines at the factory gate, trudging through a blanket of snow and carrying signs that read “Unfair Labor Practices” and “UAW on Strike.”
Contract talks broke off Monday with major issues unresolved, including proposed wage cuts and reductions in health care coverage for future retirees, the UAW said.
Union officials briefed on the talks said American Axle had proposed closing four facilities: a forging operation in its Detroit plant, two New York-based plants and a now-idled facility nearby in Buffalo. That move would cut over 700 jobs.
The UAW accused American Axle of unfair labor practices and local union officials said the company was bargaining in bad faith, possibly setting the stage for a federal complaint that could make it harder for the company to hire replacement workers if the two sides cannot reach a deal.
“Our members cannot be expected to make the extreme sacrifices American Axle is asking for with nothing in return,” UAW President Ron Gettelfinger said in a statement.
American Axle spokeswoman Renee Rogers said that there was no schedule for resuming negotiations, but added that the company’s bargaining team was ready to return to the table.
Earlier the company had said its ability to maintain plants in Michigan and New York and to compete for future business was in immediate jeopardy without steep union concessions.
The UAW contract covers facilities in Detroit and Three Rivers, Michigan; Tonawanda and Cheektowaga, New York; and a Buffalo, New York, plant idled in late 2007. The UAW also represents American Axle workers at other facilities covered under a different agreement that did not expire.
“All of the changes we have proposed have been accepted by the UAW in agreements with our competitors in the United States,” Chief Executive Dick Dauch said.
The UAW had called brief strikes against GM and Chrysler LLC last year before reaching historic agreements that allow the Detroit-based automakers to cut labor costs as they attempt to return to profitability.
Wall Street analysts said those concessions had set the stage for some tough bargaining at American Axle that they saw certain to allow it to cut costs and boost earnings.
“We are not really concerned by this strike, quite the opposite,” Lehman Brothers analyst Brian Johnson said in a note for clients. “We believe that the large magnitude of the concessions requested by (American Axle) in (the) first round of negotiations bodes very well for the savings the company will get in its final agreement.”
Johnson said he expected a negotiated settlement to end the strike within several days.
KeyBanc analyst Brett Hoselton cited American Axle’s plant closure proposal as the basis to reiterate his “aggressive buy” rating on the stock and share price target of $35 — almost 48 percent above the current price.
American Axle was spun off from GM in 1994 when an investor group that included Dauch bought five of the automaker’s axle plants.
The company supplies axles, shafts and related components to automakers. It is the sole axle supplier to GM for light trucks like the Chevrolet Tahoe and GMC Yukon SUVs.
Workers leaving American Axle’s sprawling Detroit complex said it was unfair that the company was demanding cuts at a time when it was profitable. Dauch also came in for criticism.
“We made this company a lot of money,” said Diane Hurd, a UAW-represented American Axle employee.
Several picketers said they expected to be able hold out longer on savings and strike pay than the company could with its stockpile of axles and other parts for GM.
“It’s hard for everybody,” said Darek Bazinski, one of the first to walk out as the strike began.
Shares of American Axle were down 2 cents to $22.95 in morning trade on the New York Stock Exchange. The stock has gained almost 22 percent since the start of the year.
(Additional reporting by Pat Doyle in Detroit and David Bailey in Chicago)
Writing by David Bailey; Lisa Von Ahn and Steve Orlofsky