American Axle Expects Revenue Loss, Turmoil In Supply Base
May 01 2009 - 1:27PM
Dow Jones News
American Axle & Manufacturing Holdings Inc. (AXL) said
Friday it's bracing for a major revenue slide and troubles at
smaller suppliers - a potential sign of things to come as Chrysler
LLC and General Motors Corp. (GM) race to restructure in and out of
bankruptcy court.
American Axle said Friday it expects to lose $250 million in
sales revenue as GM and Chrysler shut down most of their factories
for much of this summer. Chrysler's move Thursday to seek
bankruptcy protection adds more volatility to the mix.
The parts maker said it remains relatively insulated from losses
related to Chrysler's bankruptcy. But Chief Executive Richard Dauch
said the company is closely "assessing" its base of suppliers,
which may be more vulnerable because bankruptcy proceeding could
slow payments due to the companies.
Dauch described what he expects to be a "brutal" year for the
auto industry.
Though Chrysler said the plant shutdown will be no longer than
the 60-days the company expects to be in bankruptcy court, Dauch
said his company is preparing for a drought that could last "for
some indefinite time that no one really knows."
His comments came as American Axle announced its first-quarter
loss widened to $32.7 million, from $27 million a year ago, largely
as a result of major production cuts by virtually every auto maker.
The results beat analysts' expectations, though Dauch has backed
off comments that the company would return to profitability in
2009.
GM and Chrysler comprise the bulk of American Axle's business,
though the company has moved to diversify its customer base in
recent years.
American Axle shares were up 9 cents at $1.09 in recent trading.
The stock has given up 95% of its value over the past 12
months.
Chrysler on Thursday said it is planning to temporarily idle all
its U.S. plants starting Monday for the duration of bankruptcy. The
company is asking that it be able to continue paying suppliers with
their debtor in position financing.
A U.S. Treasury program to back receivables to supplier in the
case of an auto maker bankruptcy also will help cushion the effect
of Chrysler's bankruptcy.
But the shutdowns at GM and Chrysler, along with substantial
production cuts and their healthier rivals, threaten the already
fragile supply base. Many suppliers large and small are either in
bankruptcy or on the verge of it.
"There will be a big hit to revenue," said Dave Andrea, vice
president of industry analysis and economics for the Original
Equipment Suppliers Association. "Many of these companies had just
been able to get to a break-even cash position."
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com.