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Nearly 1,500 Take American Axle Buyouts

Jan. 11, 2007
Capacity idling, “other capacity rationalization initiatives” expected

January 11, 2007 — American Axle & Manufacturing, one of North America's largest forging organizations, reports that nearly 1,500 United Autoworkers union members have accepted one of its severance packages since the program was announced last October. At that time, AA&M said it was trying “to realign (its) production capacity and cost structure to current and projected operational and market requirements.”

In addition, the company now says it will idle some U.S. operations serving the mid-size light truck market. American Axle says these plans "and other capacity rationalization initiatives" will result in charges of as much as $200 million in the fourth quarter of 2006.

AA&M offered severance packages to all UAW-affiliated employees at its plants in Detroit and Three Rivers, MI, and Buffalo, Cheektowaga, and Tonawanda, NY, combining various early-retirement incentives, buy-outs, and educational opportunities. These were to include:
- A $50,000 incentive to retirement eligible employees;
- A monthly incentive for workers eligible to grow into retirement within four years;
- A $70,000 buy-out incentive to workers with less than 10 years of seniority;
- A $100,000 buy-out incentive to employees with greater than or equal to 10 years of seniority;
- A $30,000 buy-out incentive to certain associates at Cheektowaga and the axle operations at Three Rivers; or
- An educational opportunities buy-out incentive program providing benefits of two or four years for tuition and living expenses.

As of now, AA&M indicates that approximately 265 retirement-eligible associates participated in the program, and a further 1,208 associates elected one of the buyout options at these facilities. More than 1,300 left the company before year-end 2006.

Those workers who retired as a result of the incentive will retain all vested pension and post-retirement benefits, while those who accepted buy-outs will retain only the vested pension benefits, not other post-retirement benefits.

The company initially forecast the attrition program and other restructuring efforts would result in special charges in the $150- to $250-million range for 2006; now, it estimates that the total cost of the attrition program will be approximately $140 million, including an estimated $10 million for pension and post-retirement benefit curtailment and special termination benefits, as well as costs associated with salaried workforce reductions and supplemental unemployment benefits estimated to be payable to UAW members who will be permanently idled through the end of the current collective-bargaining agreement, in February 2008. And, AA&M indicates it expects to incur special charges ranging from $175 million to $200 million for these items in 2006.

Richard E. Dauch, AA&M chairman, stated: “The special attrition program accelerates our ability to realign our hourly workforce with actual and projected production and market conditions. The structural cost benefit to AA&M resulting from the special attrition program and other related restructuring actions should exceed $100 million annually. This will enhance our ability to invest in the continuing expansion of AA&M's product portfolio, served markets, customer base and global manufacturing footprint.”