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American Axle and Manufacturing Inc. (AXL) opened its new manufacturing facility in the Hemaraj Eastern Seaboard Industrial Estate in the Rayong Province of Thailand. It is the sixth facility in Asia that will produce front axles, rear axles and driveshafts.

The Rayong Manufacturing Facility covers an area of approximately 125,000 sq. ft., with an additional 13,000 sq. ft. dedicated to administration. Currently, the facility employs 195 associates. It will employ approximately 275 engineering and manufacturing associates when fully operational.

American Axle is focusing on Asia for profitable growth. As a result, it is expanding in the continent, while closing down plants in the U.S.

In July, the company announced plans to close its manufacturing facility in Detroit as its talks with the United Auto Workers (UAW) union broke down. The parties disagreed over the reduction of compensation for workers from $45 an hour to $30 an hour.

Last month, the company also announced that it would shut down its Cheektowaga plant in New York as its negotiation with union members for the ratification of a new contract failed last month. The company revealed that the union workers refused the proposal of a 33% cut in pay and benefits.

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 to diversify its customer base. In 2010, the company’s non-GM sales swelled 70% to $563.0 million (25% of total sales) from $331.2 million (22% of total sales) in 2009. In the first quarter of 2011, it rose 44% to $178.4 million (27.6% of total sales). 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 cents 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 $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 pick-ups 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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