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  • November 2010 Baselines: American Axle & Manufacturing

November 2010 Baselines: American Axle & Manufacturing

A Modern American Success Story, Born In The Motor City

Bill Senefsky
Nov 1, 2010
When America entered World War I in 1917, the war in Europe had been raging for three years. America, which had been neutral to everything but arms production, turned to its industrial base to produce supplies for its Allies and own possible defense. That same year, in Detroit, the Cadillac division of General Motors constructed its Plant #2, expressly for the manufacture of airplane parts. Cadillac, a division of Billy Durant's original General Motors, came under GM's umbrella in 1908. Durant (who had encountered his own hostilities within GM) had just completed a successful second takeover of General Motors in 1915.
Photo 2/5   |   Though AAM inherited a number of technologies and production parts from General Motors, it has been ferociously pursuing new designs and contracts over the last 10 years. One of AAM's biggest conquests was winning the contract to supply front and rear axles for the all-new '03 Dodge Ram 3/4- and 1-ton pickups.
Durant utilized the assets of the Chevrolet Motor Company of New York to return to power. His rapid expansion and production plans included Detroit Forge and Central Gear and Forge. Durant had internally formed two new divisions within GM: Central Gear Company, and Central Axle. Both operations moved into a divided Plant #2 in 1919. The following May brought further consolidation, with Central Gear, Central Axle, Central Forge, and Central Power Company all combined under the Central Products Company. During the following 24 months, those operations were taken over by Chevrolet Motor Company and renamed Chevrolet Gear & Axle. The gear operations were moved to Plant #1, and the axle operations were moved to Plant #2. A short year later, Detroit Forge was added under the Chevrolet umbrella. GM was on a roll, and by 1928, Detroit Forge added Plant #1 for the production of crankshafts. The same year saw the construction of Plant #4 for Chevrolet Gear & Axle. Detroit Forge then added chassis and spring production to Plant #3 in 1929-just before the stock market crash. Bumper manufacturing was added to Plant #4 in 1931.
During the Great Depression, a new independent front suspension and hypoid rear axle line were added. In Flint, in December of 1936, a massive sit-down strike crippled production until the following February, when the United Auto Workers union gained access. War appeared on the horizon again in 1939, and by 1942 civilian car production was halted for the war effort.
Post-War Years In 1946, GM resumed the production of axles at the Chevrolet-Buffalo (New York) location. Volume production was slow to recover due to the Korean Conflict. Full manufacturing output didn't resume until 1952, when steering linkages and coil springs were added. The company's Tonawanda, New York, plant switched over to forging activities in 1954. This plant was responsible for the production of crankshafts, axleshafts, pitman arms, rod caps, tie rod sockets, side gears, ring gears, and steering knuckles.
Photo 3/5   |   American Axle & Manufacturing was born out of General Motors' axle and forging capabilities from the turn of the century. Known now as AAM, this publically traded company (NYSE: AXL) provides drivetrain pieces for lots of diesel vehicles-including the front and rear axles found in GM and Ram HD trucks.
In 1959, a small complex dubbed Plant #7 was purchased from L.A. Young Spring & Wire. By 1973, 1 million axles had been manufactured. The late '70s saw front axle production discontinued at the Chevrolet-Buffalo plant, with rear axle and steering linkage operations expanded. GM's 71/2-inch ring gear diameter rear axles were then exclusively produced at this location.
The '80s saw the first flexible automation system installed at Chevrolet Gear & Axle, with the Detroit and Tonawanda Forge operations under the umbrella of the New Departure Hyatt Division. The Chevrolet-Buffalo plant was transferred to GM's Saginaw Division. In 1990, the Tonawanda Forge operations produced 100 percent of ring gears, and GM's Saginaw Division took over the Three Rivers Facility (Michigan).
AAM-New Beginnings
Through the early '90s, a large collection of ancient factories in the heart of Detroit limped along as the Final Drive and Forge unit of General Motors' Saginaw Division. The buildings, relics of another age, caught the interest of one Richard Dauch, who was the youngest GM plant manager in the company's history. Dauch began his career at GM in 1964, after graduating from Purdue University.
Beginning at an entry level within GM, Dauch rose to become plant manager in a short 12 years. He was offered a job with Volkswagen of America, where he became the company's group vice president of manufacturing operations. He quickly became an expert in this segment of automotive production. As his reputation grew, he drew the attention of Lee Iacocca, Chrysler's then chairman.
Dauch was hired by Chrysler to put his organizational skills and experience into play with the company's production methods. Chrysler was back to profitability in a short amount of time thanks in part to Dauch's efforts. He went on to write a book, Passion for Manufacturing, in 1993, which became an industry and collegiate bestseller.
In the year that followed, Dauch turned his sights on his first industry home, the five ancient facilities of GM's Final Drive and Forge. Dauch, with the help of investors Morten Harris and Raymond Park, purchased the five manufacturing plants from the General for $300 million. By March 1994, the new incorporated company was dubbed American Axle & Manufacturing of Michigan.
The company, known as AAM, had more than a $1 billion in business and more than 50 years of expertise. Assets alone, however, were not enough, and Dauch rolled up his sleeves. It helped that GM was willing to offer the new company a sole source contract for the original components already in place. The key to growth, however, was AAM's philosophy of quality improvement, manufacturing efficiency, and a new dependence on research and development. Research was the key and the new company created a new R&D center in 1995. As a result, AAM's sales numbers reached $2.2 billion one year later. Dauch's success attracted the attention of Blackstone Capital Partners, a private capital fund, and it took a controlling interest in the company for $700 million worth of capital.
Dauch, now company chairman and chief executive officer, acquired Albion Automotive Limited of Scotland for AAM. Albion was important for its production of axles, driving heads, crankshafts, transmission parts, and other chassis components. Two other domestic purchases were completed in 1999, that of Colfer Manufacturing and MSP Industries. These forging companies were added to an axle plant in Mexico, along with a joint machining operation in South America.
At the beginning of 2000, the company had, in a mere six years, increased axle production from 6,000 to 16,000 units per day. More importantly, the defective part rate fell from 13,441 pieces per million, to a mere 89 pieces per million. More than $3 billion in sales was generated. One nagging issue for investors was the company's dependence on General Motors' contracts, which provided almost 85 percent of AAM's income. Dauch recognized the need for new customers. In September of 2001, AAM signed a contract with Ford Motor Company for the supply of automatic transmission gears. A short month later it inked another deal for front and rear driveshafts for Dodge Ram heavy-duty trucks. In 24 months, AAM reduced its dependence on GM by almost 50 percent.
The New Century
Obviously, the management's reliance on new technology charted its progress for the beginning of the new century. Within the first 24 months, more than three quarters of the company's products had been developed during the last 36 months of the earlier decade. New driveline systems were being produced for both General Motors and DaimlerChrysler-specifically for the long-wheelbase platforms of the General's Chevrolet and GMC's Trailblazer and Envoy SUV series, along with the HUMMER H2. Dodge Ram heavy-duty pickup axles ('03-and-newer trucks) were also included in the production mix.
A huge contract was awarded in 2006-again from General Motors-to the tune of $1.6 billion annually for new drivelines. At the time, the contract was the largest of its type to be awarded to any component manufacturer. AAM felt it was secure revenue-wise through the year 2015. As a result, 2006 revenue reached $3.5 billion, with the company's net income recorded at $176 million. Equally impressive was the fact that this represented a sweet increase of 53 percent.
The continued monitoring of product defects continued to pay off with further reductions to only 15 pieces per million, recorded by year's end in 2003. During this same period, 80 percent of AAM's revenue was derived from new product offerings and technological advancements. As a result, the company erected a new, $40 million, 250,000-square-foot headquarters. In less than a decade, AAM acquired and operated 14 subsidiaries in the new global market.
Market Meltdown and Strike
As the industry began to experience massive changes to the government and market conditions, AAM was not immune. In February of 2008, more than 3,600 AAM workers went on strike protesting wage cuts. The hourly rate was to be slashed in half, from $28 to $14 dollars an hour. Additional cuts in benefits were also proposed. This massive three-month shutdown ended up costing General Motors $2.6 billion as the automaker lost production of its new and redesigned Chevrolet Malibu platform. AAM produced parts for the Malibu's transmission. Other GM models were also affected as production was cut at 30 GM plants. Lost production was estimated to be 330,000 units during the period. The massive walkout was the beginning of troubles for many Motor City suppliers. When settled, employee buyouts and lower wages were the result for future workers. Other suppliers, such as Delphi and Visteon, also followed suit with extensive reorganizational programs.
AAM came through the crisis largely due to extensive global operations with international clients. Today, the company continues its extensive new product design, engineering, and testing programs, along with its production of drivelines and related systems. Driveline components, including modules and companion components; chassis systems; and metal-formed product lines for light trucks, SUVs, and passenger car platforms are included in the product mix. AAM continues on its quest of extensive cost-monitoring and quality product output with defective part rates of less than 3.4 parts per million. Electronics, along with hybrid technology, are now part of more than 70 percent of its current products produced.
Ram 3500 AAM 1150 Rear Axle
AAM Axle Applications:
  • '03-to-present Ram 2500 and 3500 solid front axle: AAM 925
  • '03-to-present Ram 2500 and 3500 solid rear axle: AAM 1050 and AAM 1150 (diesel)
  • '88-to-present GM 2500 and 3500 independent front axle: AAM 925
  • '88-to-present GM 2500 and 3500 solid rear axle: AAM 1050 and AAM 1150 (diesel)
Photo 4/5   |   1011dp November 2010 Baselines American Axle And Manufacturing dodge Ram Aam 1150 Rear Axle
GMC 3500 AAM 1150 Rear Axle
Back in the day when GM made its own axles, there really wasn't a need to create model names for each unit. So while a Ford or Dodge truck might have a Dana 60 front or a Dana 70 rear axle (made by Dana Spicer)-GM axles didn't really have names. GM typically differentiated its axles by the diameter of the ring gear. So an axle with an 81/2-inch ring gear, was in fact an 81/2-inch ring gear axle. Enthusiasts had a hard time with that naming convention. In order to distinguish one GM axle from another, they began referring to axles by the number of bolts that held the differential cover on. An 81/2-inch ring gear axle became the 10-bolt. The 8.875-inch ring gear axle became the 12-bolt. Things got a little tricky when GM began building different axles with the same number of differential cover bolts.
Photo 5/5   |   1011dp November 2010 Baselines American Axle And Manufacturing gmc 3500 Aam 1150 Rear Axle
Take, for example, the rear axle known as the 14-bolt. For the '73 model year, GM offered a 101/2-inch ring gear rear axle that had 14 bolts holding the differential cover on. Then, in the '80s, GM launched a heavier-duty replacement for the 12-bolt, which also featured 14 bolts on the differential cover. This axle had only a 91/2-inch ring gear diameter and was not offered as a full-floater. If you put these two 14-bolt axles side by side (91/2-inch vs. 101/2-inch), it would be obvious which was which, but you can see how confusion could arise.
Decoding American Axle & Manufacturing's axle naming structure is very simple, although it requires the enthusiast to either identify the axle based on looks, or to measure the ring gear. In AAM's world, a 9 1/4-inch ring gear axle is an AAM 925. The 111/2-inch diameter ring gear rear axle, found in diesel-powered Ram and GM pickups, is an AAM 1150.

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