Union workers begin voting on contract

Reuters May 19, 2008 - 12:40 pm ET

DETROIT (Reuters) -- Union workers at American Axle & Manufacturing Holdings Inc. on Monday began voting a quandary -- approve a contentious contract that cuts wages by more than a third, or reject it and risk losing even more.

The UAW and Detroit supplier American Axle reached a tentative contract agreement late on Friday aimed at ending a 3-month-old strike that has idled about 30 plants at major customer General Motors.

Many UAW workers said they were unhappy with the proposed four-year contract, which would cut hourly pay by up to $10, but they would vote for it out of fear that rejection would prompt the company to close its U.S. plants.

Analysts said the contract terms showed American Axle's success in pushing through a cost-cutting deal and said investor attention would shift now to how many of its 3,650 UAW-represented workers would accept buyout offers provided the deal is ratified.

An end to the strike would allow GM to begin ramping up production at idled North American plants and remove a drag on its earnings that reached $800 million in the first quarter.

Workers at American Axle's Detroit forging plant slated for closure under the contract began voting on the proposed deal at 8 a.m. on Monday.

Workers in Three Rivers, Mich., who would have to accept lower wages than those at the company's Detroit complex to keep their plant open, were also voting on Monday.

The union delayed a vote at the company's flagship plant in Detroit until Thursday in the wake of a stormy meeting where many union workers expressed frustration with both the company and their own bargaining team.

Over the course of three months of bitter bargaining, American Axle CEO Richard E. Dauch had threatened to move manufacturing out of the United States if the company failed to win the wage cuts it has said it needs to remain competitive.

"There is a lot of negativity toward Dick Dauch, union leadership, the contract," said Michael Nowak, 65, who has worked at American Axle since 1994.

"But if you don't accept it, you'll lose it all," said Nowak, who plans to take a buyout.

UAW officials have told members drawing $200 a week in strike pay that if they reject the contract, GM could withdraw an offer of $218 million to fund buyouts and supplemental unemployment benefits.

At the same time, GM's planned cutback in truck and SUV production means American Axle could have to lay off workers even if they ratify the contract and return to work.

American Axle had been looking to lay off about 2,000 of its 3,650 workers by January 2009 before negotiating buyouts, according to a document the union presented to members.

UAW workers went on strike on Feb. 26 at five American Axle plants in Michigan and New York. The tentative contract would cut hourly wage rates to a range of $10 to $26 and offer up to $105,000 over three years in exchange for lower wages.

The company will also run a voluntary buyout program, which will pay up to $140,000 for employees who leave.

Forging plants in Detroit and Tonawanda, N.Y., would be shut down within a year, while an axle plant in Buffalo, N.Y., would close immediately.

Lehman Brothers analyst Brian Johnson said in a research note he expected about 1,200 American Axle workers, or about a third of its U.S. factory work force, would take the buyouts.

"Investors' focus will now turn to the outcome of the large buyout and early retirement programs that (American Axle) will offer, as success with these programs will greatly influence (the company's) future competitiveness," Johnson said.

JP Morgan analyst Himanshu Patel said American Axle appeared to have clinched a better-than-expected contract, but said the ratification vote could be close because of the magnitude of concessions the UAW is being asked to make.

American Axle shares fell about 2 percent to $22 on the New York Stock Exchange, while GM's shares rose 3.2 percent to $21.35. Expectations for a concessionary labor contract had driven American Axle's stock up 21 percent since the start of the year.