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American Axle and Manufacturing Inc. (AXL) announced that it would shut down its Cheektowaga plant in New York as its negotiation with union members regarding the ratification of a new contract failed last month. The company revealed that the union workers rejected the proposal of a 33% cut in pay and benefits.

The plant, which manufactures gears, employs about 90 hourly and salaried workers. It will be closed on or after February 26, 2012. However, the company will continue to abide by the labor agreements through February 25, 2012.

American Axle is a leading supplier of driveline systems, modules and components for the light vehicle market. The company makes axles, driveshafts and chassis components for light trucks, sport utility vehicles and passenger cars.

The company is exposed to platforms that faced the maximum production cuts following the global economic crisis. It also has a high exposure to General Motors Company (GM) and Chrysler, which sought bankruptcy protection in 2009.

However, the company is struggling hard to diversify its customer base. In 2010, the company’s non-GM sales swelled 70% to $563.0 million (25%) from $331.2 million (22%) in 2009. In the first quarter of 2011, it rose 44% to $178.4 million (27.6% of sales) in the quarter. Further, the company expects its non-GM sales to account for at least 40% of total revenue by 2013.

The Zacks #3 Rank (Hold) company posted an increase in profit to $49.2 million or 65 cents per share in the second quarter of 2011 from $25.4 million or 34 cents per share in the same quarter of 2010, driven by increased production volumes across its major product programs and continuous improvements in capacity utilization. With this, the auto parts maker has surpassed the Zacks Consensus Estimate by a significant margin of 21 per share.

Sales in the quarter grew 23% to $686.2 million. Customer production volumes for the major North American light truck and SUV programs that the company currently supports for GM, Chrysler and Nissan Motors (NSANY) rose 15% in the quarter.

For full year 2011, American Axle expects sales in the range of range of $2.5 billion–$2.6 billion based on the anticipated launch schedule for the company’s new business backlog, continued recovery in market demand for full-size pickups and SUVs and the assumption that the U.S. seasonally adjusted annual rate of light vehicle sales will approximate 13.0 million vehicle units in 2011.

 
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