High restructuring costs – largely for laying off employees or keeping them idled – hit American Axle & Manufacturing Holdings third quarter results. The supplier reported a net loss of $US62.9m or $1.25 per share, compared with earnings of $19.3m ($0.38 per share) in 2005.
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During the third quarter, AAM booked a special charge relating to supplemental unemployment benefits estimated to be payable to United Auto Workers (UAW) staff likely to be permanently laid-off until the end of the current labour contract period in February 2008.
This special charge increased AAM’s operating costs in the third quarter of 2006 by $91.2m. AAM also booked $22.7m of supplemental unemployment benefits and other related benefit costs for workers already laid-off in the third quarter of 2006. And it booked a $1.9m special charge for future severance payments to staff in European operations.
Q3 results reflected an overall 19% year- over-year decline in production volumes, including an estimated 5.4% decrease in parts volumes for major full-size truck and SUV models built by GM and Chrysler. AAM estimated that volumes for its mid-sized pick-up truck and SUV programmes were down approximately 54% in the quarter on a year-over-year basis.
“As the domestic automotive industry continues its unprecedented structural transformation, we are taking the necessary actions to improve AAM’s global cost competitiveness,” said American Axle & Manufacturing chairman and CEO, Richard Dauch. “AAM remains focused on managing the things that we control.”
Net sales in the third quarter of 2006 were $701.2m as compared to $848.1m in the third quarter of 2005. Non-GM sales in the quarter were $153.2m representing 22% of AAM’s total sales. Year-to-date, AAM’s non-GM sales were $561.4m, or 23% of sales to the end of the third quarter.
Gross margin in the third quarter of 2006 was negative 8.8% compared to 9.8% in 2005. Operating income was a loss of $110.0m or negative 15.7% of sales in the quarter versus $34.9m or 4.1% a year ago.
Net sales in the first three quarters of 2006 were $2.4bn, versus $2.5bn in 2005. Gross margin was 3.8% versus 9.5% and operating income was a loss of $54.5m or negative 2.3% of sales versus $97.0m or 3.8% of sales.
