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DCX Likely to Sell Detroit Axle

http://www.aftermarketnews.com/defau...id=4943&stid=0

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Posted: March 22, 2007, 9 a.m., EST

From Detroit Free Press

American Axle & Manufacturing Holdings Inc. is a likely buyer for Chrysler Group's Detroit Axle Plant, an analyst said Wednesday.

"We believe there is a reasonable chance that DCX will look to sell its Detroit Axle Plant ... or outsource its internal axle manufacturing in the near future, perhaps prior to the expiration of the current labor contract in September 2007," Rob Hinchliffe, an analyst with UBS Investment Research, told investors in a note. "AXL, the only healthy, independent axle supplier, has the inside track to be the beneficiary, in our view."

Representatives from Chrysler and American Axle declined comment.

Chrysler Group, which had an operating loss of $1.5 billion last year, unveiled in February its second major turnaround plan in the past decade that includes the elimination of 13,000 jobs, closing the Newark, Del., assembly plant and shuttering a parts distribution facility in Ohio.

On Wednesday, Chrysler also gave greater detail about where some of the new efficiencies that would make the turnaround plan possible would come from -- another 600 jobs would be cut at the two St. Louis plants. The company already had announced the elimination of a production shift, which included 1,300 jobs at the minivan plant.

The February turnaround announcement, however, has been overshadowed by comments from DaimlerChrysler Chairman Dieter Zetsche that all options were on the table for Chrysler, indicating a potential sale of the company.

"While the potential sale of Chrysler could delay a decision, we believe that Chrysler and the UAW are already discussing options for" Detroit Axle Plant. "That said, we expect that strategic buyers, especially private equity, would be just as inclined to divest of this plant," Hinchliffe noted.

After Chrysler's turnaround announcement, Sean McAlinden, the chief economist for the Center for Automotive Research in Ann Arbor, said the Chrysler Group's restructuring plan could grow to include closing more plants than previously announced -- including Detroit Axle.

In 2003 contract talks with the UAW and Chrysler originally proposed closing or selling Detroit Axle, but the final contract protected the facility.

"Potential catalysts behind a decision by DCX to sell the asset could include headcount reductions" via buyout offers similar to those offered by GM and Ford, "the likelihood that DAP will be a smaller business going forward, and an inability to turn a profit," Hinchliffe said. "We believe that Detroit Axle has been a consistent money-losing operation for Chrysler."
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