Reality squeezes Dauch, UAW
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Friday, February 29, 2008
Daniel Howes:
Reality squeezes Dauch, UAW
Dick Dauch, the chairman of American Axle & Manufacturing Inc., is never one to mince words — even in Day Three of a United Auto Workers strike against his company, which will be 14 years old Saturday. "We took over an absolutely troubled set of assets and nobody is going to hold us hostage," he told me in an interview Thursday. "The last three days we’ve been sitting here ready to negotiate and nobody’s showed up." Dauch and two partners founded American Axle on March 1, 1994, from General Motors Corp.’s decrepit axle and forge operations. Now he and his company are facing the kind of squeeze that defines legacies, shapes corporate strategies and, for the staunch defender of industrial America, determines how committed Dauch truly is to reviving manufacturing in his own country. His chief rival, Dana Corp. of Toledo, has emerged from bankruptcy with competitive labor costs and more efficient operations. Axle operations at Detroit’s automakers are exempt from the traditional union wage-and-benefit scale Dauch still is obliged to pay. "We are not an" automaker "and we never will be," he said. American Axle’s "$73.48 (an hour) all-in labor cost is over 300 percent higher than my competitors in the United States. Our competition is in the $20 to $30 range, all-in." Some 3,600 UAW members at five facilities walked out early Tuesday in a dispute centering on American Axle’s push to bring wages and benefits sharply lower and in line with rivals operating union shops in the United States — a discussion Dauch says has been under way for 28 months. "How can he say we’re holding him hostage when we’re the ones out on the street," Dana Edwards, Local 235 shop chairman and member of the negotiation committee, told The Detroit News. "They know all the information we’ve requested, and we’re waiting for them to turn over that information." The UAW worked with American Axle to cut costs in the contract signed four years ago and is willing to consider further proposals this time, he said, but "we don’t feel they are being straight-forward about how they arrived at those numbers."
Competition is here, not abroad
Any charges of unfair labor practices clearly rankle Dauch, who called them "an absolute cheap shot." He said it is "absolutely not true" that American Axle has failed to provide information sought by union bargainers. He ticked off the company’s safety record, its $3 billion of investment in U.S. facilities and a string of 14 years with only a single-day work stoppage — until this week. "We are open to discussions at any time," Dauch said. "We are giving them everything they are entitled to. What the issue is here is not just about lifestyle, it’s not just about feel-good, it’s about market economic competitiveness in the United States. I’m not talking about Mexico, China and India, I’m talking about the U.S.A. And I’m not talking about non-union." Fourteen years ago, Dauch and his partners engineered the kind of sweet deal that GM, longtime owner of American Axle’s original plants, never again granted — a cheap sale of operations building core components for its largest product lines and the evergreen contracts to go with them. It was Dauch’s chance to be the Detroit auto CEO he had worked so long to be, to prove union workers and local management could transform the rotting hulks of GM’s neglect into an American manufacturing powerhouse and do it in the heart of Detroit, the symbol of industrial decline. Ever since, the red-white-and-mostly-blue edifice on Holbrook just off I-75 has generally symbolized nothing but success, making Dauch wealthy and one of the few true automotive entrepreneurs among a generation of CEOs who are, at base, caretakers of someone else’s enterprise.
Is bankruptcy the only option?
But things changed. Demand for GM pickups and large SUVs, core products to American Axle’s top line, ebbed. Gas prices shot to $3 a gallon, the economy cooled and the industry’s balance of power shifted to companies who went where Dauch once told me, in his inimitable way, he would never go — bankruptcy court. He said as much again Thursday: "Is that what we’re supposed to do, go bankrupt?" He added that American Axle’s core five plants — three near Buffalo, N.Y., and two in Michigan — have delivered "drastic red-ink performance" as production volumes have declined and the company has been unable to hire new workers at "second-tier" wages. Increasingly, Dauch’s American Axle stands by itself. Delphi Corp., a similar cast-off from GM’s vast empire, declared bankruptcy protection and got GM to finance the buyouts, buydowns and early retirements of thousands of union workers still receiving Big Three wages and benefits. Dana is leaner and armed with more competitive contracts, as are other rivals and the captive axle plants of Detroit’s automakers, namely Chrysler LLC and Ford Motor Co. Hence the AAM squeeze: Rivals have lower costs, customers want higher quality more cheaply. Worse, American Axle’s former parent, GM, doesn’t have the financial obligation to "help" Dauch solve his labor cost problem the way it did with Delphi. He and the UAW have to do it together, alone, as bitter as American Axle’s proposed step-down in wages and benefits truly is to union members walking the line. Denying reality, as both sides know, is not an option.
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