During the auto industry's great collapse of 2009, American Axle & Manufacturing Holdings Inc. had a near-death experience. The Detroit automotive supplier's two biggest customers, General Motors Co. and Chrysler, both shut down production as they went through bankruptcy.
American Axle avoided its own bankruptcy after GM gave the supplier $110 million in cash, a $100 million line of credit and 10-day payment terms in exchange for the right to buy up to 20 percent of American Axle's stock. Revenues and profits began to rebound, and now American Axle is looking for growth opportunities in Asia.
Company CEO Richard E. Dauch and his son, COO David Dauch, shared American Axle's growth strategy with David Sedgwick, senior writer for Production Line, an Automotive News newsletter.
Last year, American Axle lost $253 million, and sales plunged 29 percent to $1.5 billion. How did you survive?
Richard E. Dauch: Last year, we went through a customer collapse. We had an extended summer shutdown of three months or so. It's hard to breathe when you have no oxygen.
We took our breakeven point from 14,000 axles a day down to 8,000. And then we decided to take it to 6,000 axles a day, so we got the knife out.
We went from 13,000 employees down to 7,000. We had to idle, close or sell our [New York] plants in Buffalo and Tonawanda. Our Detroit plant went through a massive consolidation. It was very painful, but we had to do it to save the company. We avoided bankruptcy, government bailouts and TARP money.
Now we've had four straight quarters of profitability. We are absolutely delighted with our financial performance after going through that near-death spiral.
Since being spun off from GM in 1994, American Axle has depended heavily on sales of parts for GM pickups and SUVs. How quickly can you reduce your reliance on GM?
We expect to change from 75 percent of sales to 60 percent in the next 18 months. I told our people it will be a long, hard slog. It's like D-Day -- taking the first 300 yards of beach is the toughest.
Our top customers are GM, Chrysler, PACCAR, Volkswagen and Harley-Davidson.
You've become a world supplier for VW and its truck subsidiaries, MAN and Scania. Your plant in Swidnica, Poland, makes transmission differential cases for Audi. What else are you doing with VW?
We are doing business with VW, Audi, MAN and Scania. We are on three different continents with them. In Brazil, we make rear axles for their Amarok pickup. [Factories in] Brazil, Poland and China are on a pretty nice growth curve with VW.
At what percent of capacity are your plants operating?
Up until 2004, we were running at 90 percent of full capacity. When we went into the tank from 2005 to 2009, we went as low as 45 percent. You can't make money with capacity utilization like that.
David Dauch: This year, we are running at 80 to 90 percent of capacity. We can get up over 90 percent of capacity if [industry sales] stay strong.
In December 2008, you formed a production joint venture with Anhui Jianghuai Automobile Co., China's 10th-largest domestic automaker. How are you doing?
Richard E. Dauch: JAC is very critical. It's a profitable joint venture. We would like to grow and expand our relationship with JAC.
What's growing faster in China: your component sales for cars or commercial vehicles?
Right now, it's cars. Our joint venture with JAC allowed us to get into cars and crossovers. In the future, [our fastest growth] will be in commercial vehicles. We plan a tenfold expansion in China over the next four years. China will grow from $50 million or $60 million a year to $600 million or more.
Are you looking for new factory sites in China?
Options would be premature to talk about. First, we've got to use what we've got. Our plant in Hefei [JAC's hometown] is looking at a significant expansion, and our Changshu plant is vastly underutilized.
What other Asian markets are you entering?
Our plan in China, India and Thailand is to generate $1 billion in annual revenue over the next five to six years.
In India, you've got two truck axle plants in Pune and Pantnagar. How's business?
In India, we are just getting our toe in the water. Sales are [less than $10 million] this year. Maybe we'll go to double-digit millions in a year or two. We are looking at a possible third factory, but we have nothing to announce yet.
In Thailand, we've got some long commitments with GM that re- quire a significant investment in Rayong. We'll have a factory built in December to supply the GMI 700 pickup.
We'll make products for it on a couple of different continents. We'll support them globally.