1840 Holbrook Avenue
American Axle & Manufacturing and its associates are committed to meeting customer requirements through measurable quality improvement, cost reduction, and on-time delivery of products and services, while achieving profitable growth and increasing shareholder value.
American Axle & Manufacturing Holdings, Inc. (AAM) designs and manufactures driveline systems, chassis systems, and forged products for trucks, sport utility vehicles, buses, and passenger cars. AAM relies heavily on General Motors Corporation (GM) for its business, deriving more than 80 percent of its sales from the car maker. AAM also supplies driveline components (the parts that transfer power from the transmission and deliver it to the drive wheels) to DaimlerChrysler AG, Ford Motor Company, Nissan, Renault, Visteon Automotive, and others. AAM operates 17 manufacturing facilities in the United States, Mexico, Brazil, and the United Kingdom. Company-owned sales and business offices are located in Tokyo, Japan, and Ulm, Germany.
The dominant figure behind AAM's impressive success was the architect of its development, Richard Dauch. Dauch was a 30-year veteran of the automotive industry when he decided to resurrect a handful of manufacturing plants neglected by GM. A hard-nosed, pragmatic executive, Dauch began his illustrious career at GM, joining the car manufacturer in 1964 after earning a Bachelor of Science degree in industrial management and science at Purdue University. Dauch spent a dozen years at GM, rising from an entry level position to become the youngest plant manager in Chevrolet's history. From there, Dauch moved on to Volkswagen of America, serving for four years as the company's group vice-president of manufacturing operations. Dauch was becoming an expert in his field, something of a manufacturing evangelist whose views were regarded as visionary. His reputation as a forward-thinking executive drew the admiration of Lee Iacocca, Chrysler's influential chairman.
In 1980, Iacocca recruited Dauch from Volkswagen, tapping the rising executive to apply his salubrious touch to Chrysler's troubled manufacturing operations. At Chrysler, Dauch confirmed his reputation as a manufacturing guru, becoming the driving force behind the car maker's well-publicized resurgence during the 1980s. Chrysler's comeback made Iacocca a household name, but those in the industry were quick to bestow the company's executive vice-president of worldwide manufacturing with a large portion of the credit for the company's revival. Dauch's success at Chrysler prompted him to write a book about his favorite subject, the title of which neatly described its author. Passion for Manufacturing, published in 1993, contained 280 pages of wisdom from the renowned automotive authority that eventually would be sold in 80 countries and used as a textbook in numerous colleges and universities. One year after finishing his book, Dauch directed his manufacturing zeal toward the dilapidated factory where he once worked as a GM employee.
During the early 1990s, Dauch turned his attention to a business unit of his former employer. The Final Drive and Forge Business Unit of GM's Saginaw Division was a collection of neglected manufacturing facilities that represented the car maker's axle, forge, and driveshaft driveline assets. GM executives thought little of the business. They viewed the business of making axles and driveshafts as a low technology, low profit-margin business and their attention to the factories reflected their ambivalence. Dauch, on the other hand, saw a perfect opportunity to demonstrate his manufacturing acumen and apply new technology to the business. With the help of two investors, Raymond Park and Morten Harris, Dauch acquired five plants from GM for an undisclosed sum, though industry observers speculated that the trio paid approximately $300 million for assets located "in a horrible part of town ... surrounded by abandoned houses, crack houses, prostitution, and plenty of bars," as described by Crain's Detroit Business in a July 26, 2004 article.
Dauch incorporated his company, initially called American Axle & Manufacturing of Michigan, Inc. in March 1994. (American Axle & Manufacturing Holdings, Inc. was adopted as the company's corporate title in January 1999.) From its inception under Dauch's control, AAM was a more than $1 billion business with more than a half-century of existence behind it, but its assets were in dire need of a visionary's touch. Dauch began with core manufacturing operations based in Michigan and New York and a commitment from GM to be the car maker's sole-source supplier of the components it previously had made for itself. To turn this base into a flourishing enterprise, which AAM did become, Dauch applied his three decades of experience to the company's improvement. He focused on improving product quality, manufacturing efficiency, and, perhaps most importantly, he demonstrated an unwavering commitment to research and development.
Cash Infusion in 1997
The rehabilitation of AAM's assets turned the company into one of North America's largest and most profitable suppliers to the automotive industry. The development toward such status was consistent but slow during the company's first years in business, as Dauch faced the daunting challenge of breathing new life into the massive and neglected facilities that supported GM. The establishment of a new research and development center in 1995--a facility treated with several expansion and improvement programs before the end of the decade--was one of the first significant successes achieved by Dauch. His investments and changes in manufacturing techniques drove the company's sales up to $2.2 billion in 1996, by which point his efforts had produced sufficient tangible results to attract a large cash infusion. A New York investment firm, Blackstone Capital Partners II Merchant Banking Fund L.P., looked at Dauch's work and decided to invest substantially in the company's future. In October 1997, Blackstone acquired a controlling stake in the company, giving Dauch as much as $700 million to funnel toward AAM's expansion and improvement.
In the wake of Blackstone's leveraged recapitalization of AAM, Dauch assumed a more aggressive posture as the company's chairman and chief executive officer. In 1998, the company acquired Scotland-based Albion Automotive (Holdings) Limited, a supplier of front steerable and rear axles, driving heads, crankshafts, chassis components, and transmission parts. Albion's parts were used in medium-duty trucks and buses for customers in the United Kingdom and continental Europe. In 1999, when AAM completed its initial public offering of stock, Dauch completed two acquisitions on the domestic front, paying roughly $223 million for two forging companies, Colfer Manufacturing Inc. and MSP Industries Corp. He also built an axle plant in Mexico and acquired a majority interest in a joint venture in Brazil that machined forging and driveline components. The acquisitions represented Dauch's efforts to vertically integrate AAM, aping what GM had done roughly 70 years earlier. Dauch's purchases were intended to allow AAM to forge more parts for the company's axles and drivelines, part of his plan to nearly quintuple sales within five years to $10 billion. "We are a consolidator," Dauch announced in the May 17, 1999 issue of Crain's Detroit Business, "the goal is to be a strategic supplier." Dauch fell well short of reaching his financial goal, but his accomplishments hardly could be dismissed as AAM entered the 21st century.
In 2000, after six years of working to improve AAM's manufacturing capabilities, Dauch could point to convincing evidence that his expertise had worked wonders. Between 1994 and 2000, roughly $1.5 billion was spent on capital expenditures. During that period, the average number of axles produced per day increased from 10,000 to 16,000. The number of defect parts for every million parts shipped to GM plummeted from 13,441 to 89. The dramatic improvements drove the growth of the company, enabling it to edge past the $3-billion-in-sales mark in 2000, 84.5 percent of which was derived from sales to GM.
As Dauch focused on improving manufacturing methods, he also concentrated on developing another area of AAM's business. The company's relationship with GM was a strength, with the car maker's success translating into commensurate success for AAM, but the company's dependence on GM was also a potential weakness. Dauch, wishing to reduce the company's reliance on a single customer, worked to develop relationships with other car makers and other automotive suppliers. By the end of 2000, the company's sales to customers other than GM had more than tripled in comparison to 1998. In 2001, progress in the company's customer diversification was highlighted by two contracts. In September, the company was awarded a contract to supply gears for automatic transmissions in selected Ford Motor Company vehicles. The following month, AAM announced it had been selected to supply front and rear driveshafts for DaimlerChrysler AG's heavy-duty Dodge Ram pickup truck program. Dauch's continued attention to customer diversification enabled the company to reduce its dependence on GM in subsequent years. GM accounted for 87 percent of the company's business in 2001. In 2003, when sales to non-GM customers were up nearly 50 percent, the company derived 82 percent of its sales from GM.
AAM in the 21st Century
Investments in new technology underpinned the company's progress during the first years of the new decade. By 2002, three-quarters of the products AAM was supplying had been developed within the previous three years, putting Dauch's offerings on the technological vanguard. At this point, the company was supplying the driveline systems for the long-wheelbase versions of the Chevrolet TrailBlazer and GMC Envoy sport utility vehicles, the Hummer H2, and the heavy-duty version of the 2003 Dodge Ram pickup truck. The company received a new contract to supply GM with a new driveline system in 2006, a deal of tremendous importance to its future business. The contract, which potentially was worth more than $1.5 billion annually, was hailed by Dauch. "This is the largest driveline-system award program by any vehicle manufacturer in the world," he explained in a May 20, 2002 interview with Crain's Detroit Business. "It will secure our revenue (from 2006) through 2015 with this one program," he added. Revenues at the end of the year reached a record high of $3.5 billion, and the company's net income, after increasing 53 percent, reached a record high of $176 million.
As AAM entered the mid-2000s, it continued to register significant improvements in its manufacturing methods. The number of defects per million parts shipped to GM, which stood at 13,441 in 1994 before being whittled down to 89 in 2000, was only 15 by the end of 2003. The company was producing 19,300 axles per day by this point, nearly twice the daily production average in 1994. New-technology-related sales represented only 3 percent of the company's business when Dauch took control of its factories. By the end of 2003, AAM derived 80 percent of its revenue from products featuring new technology. The influence of Dauch on the company's operations was immense, representing more than a restoration of the facilities formerly owned by GM. Dauch reinvented the business, creating an automotive supplier that ranked as the most profitable enterprise in its industry. As the company plotted its course, its future success rested almost as heavily on the presence of Dauch as it did on the business supplied by GM.
AAM dedicated its new headquarters facility in mid-2004, a seven-story, 250,000-square-foot, $40-million building that promised to be the focal point of the company's future success. The dedication occurred during the company's 10th anniversary, an occasion marked by Dauch in a July 23, 2004 AAM press release. "When this company was formed in 1994," he wrote, "it was a priority for us that we locate our headquarters in the city of Detroit, the motor capital of the world. The new AAM world headquarters tops off more than 10 years of improvements and contributions that we have made in the community. It is a true capstone for our corporation. Now, we have all our functional capabilities under one roof, for the first time in AAM's history."
Principal Subsidiaries: American Axle & Manufacturing, Inc.; AAM Receivables Corp.; American Axle International Sales, Ltd.; Colfer Manufacturing Inc.; MASP Industries Corporation; MSP Team, LLC (99%); American Axle & Manufacturing de Mexico Holdings S. de R.L. de C.V. (99.99%); Guanajuato Gear & Axle de Mexico S. de R.L. de C.V. (99.99%); American Axle & Manufacturing de Mexico S.A. de C.V. (99.99%); AAM International Holdings, Inc.; Albion Automotive (Holdings) Limited (Scotland); Albion Automotive Limited (Scotland); Farington Components Limited (U.K.); AAM Comercio e Participacoes Ltda. (99.99%); AAM do Brasil Ltda. (Brazil).
Principal Competitors: ArvinMeritor, Inc.; Dana Corporation; Metaldyne Corporation.