The Wall Street Journal
By Terry Kosdrosky and John D Stoll
May 19, 2008
Several General Motors Corp. plants are set to ramp up production this week after key supplier American Axle & Manufacturing Holdings Inc. and the United Auto Workers reached a tentative agreement ending an 11-week strike.
The strike had all but crippled GM's ability to produce large pickup trucks and sport-utility vehicles, which generate hefty margins for the auto maker, and slammed its North American profit in the first quarter.
The end of the strike brightens GM's prospects for the second quarter, and removes one element of uncertainty from its business. The company's liquidity has come under scrutiny lately because of the Axle strike, as well as continuing trouble at lending giant GMAC LLC and former parts unit Delphi Corp., which is under bankruptcy protection.
GM SUVs roll down the line at a plant in Wisconsin. Resolution of the American Axle strike, which had hampered SUV production, brightens GM's second-quarter prospects.
A person close to GM said the auto maker has already been preparing to resume production at several plants hurt by the strike. A truck plant in Moraine, Ohio, and a van plant in Wentzville, Mo., resumed production on one shift last week, this person said.
A ratification vote on the contract at one American Axle plant is set for Monday. A vote at a second plant is scheduled for Thursday.
"Our members at American Axle have displayed extraordinary solidarity during this strike," UAW President Ron Gettelfinger said in a statement. "The bargaining committee worked extremely hard to achieve this tentative agreement and they have voted to recommend it to the membership."
About 3,650 employees represented by the UAW at five American Axle plants in Michigan and New York have been on strike since Feb. 26.
The strike forced GM, American Axle's largest customer, to idle all or parts of 30 plants due to the strike. The auto maker said the strike cost it $800 million in operating earnings in the first quarter and 230,000 vehicles in production through the end of April.
Auto makers book revenue on vehicles when they are shipped from the assembly plants, not when they are sold at the dealership.
The announcement came a few days after GM said it would provide American Axle with $200 million to settle the strike, helping to fund buyouts.
Under the terms of the deal, American Axle would pay as much as $140,000 to workers who agree to leave the payroll, people familiar with the matter said. The company would also make substantial lump-sum payments to workers who agree to stay on at reduced wages, they said. Wages under the deal would fall to $14.50 to $18.50 an hour, down from $28 an hour. Workers would also get $5,000 signing bonuses.
American Axle would close forging plants in Detroit and New York, but keep open a factory in Three Rivers, Mich., and reverse a plan to close its Cheektowaga, N.Y., plant, these people said.
