American Axle to get $200 Million for GM to Put an End to UAW Strike
The UAW strike at American Axle and Manufacturing has literally crippled General Motors 32 plants across the United States. These plants are responsible for the production of GM’s hot-selling models Chevrolet Malibu and Buick Enclave among others. In an unprecedented move, General Motors has offered American Axle $200 million that would greatly help the company initiate buyouts and one-time payouts to the returning union workers who would then be compelled to accept lower hourly wages. This generous offer from GM just might be the answer that American Axle has been looking for to put a quick end to the strike.
Following this news, American Axle’s share rose a full 2% on the New York Stock Exchange and the company finally got some room to breathe. According to GM spokesman Dan Flores, “We believe that the offer will help bridge the gap between American Axle and the UAW and the two parties will be able to reach a mutually satisfactory settlement in the near future." Commenting on this sudden development, American Axle spokeswoman Renee Rogers said, “This is sort of a breaking news situation. It happened very quickly. It makes us hopeful that the parties can quickly reach an agreement to bring an end to the terribly costly and disruptive strike.”
General Motors has not taken this action in charity though. Majority of GM’s production depends upon the smooth running of American Axle. GM itself is going through a crisis with UAW, as the latter is on strike at GM’s plant in Fairfax, Kansas. Another plant near Lansing, Michigan has been facing the aftermaths of a strike since mid-April this year.
Since February 26th 2008, about 3,650 workers have been on strike against American Axle plants. The strikes were initiated by UAW after refusing company’s demands to cut the wages from $28 an hour to a mere $14 an hour.
A senior analyst Shelly Lombard at the research firm Gimme Credit said, “General Motors is like the nursery rhyme about the old woman in the shoe who had too many children. Everywhere it looks, there’s another mouth to feed. All of the potential handouts in total could possibly use up $1 billion of G.M.’s $24 billion of cash. Of course it will cost G.M. a lot more if the Axle strike drags on, so it’s worth the money to end the Axle strike and get Delphi back on its feet. One of the things that made the market comfortable with G.M.,” Ms. Lombard wrote, “was the fact that it had plenty of money to survive this industry downturn and give itself enough time to execute a turnaround.”
