American Axle Plunges After Reports Of Deep GM Production Cuts

Shares of drivetrain maker American Axle (AXL) are plunging after reports of potentially significant production cuts at General Motors (GM).

GM PRODUCTION CUTS: According to an earlier report from Reuters, the auto giant is weighing “whether to cancel at least six passenger cars in the U.S. market after 2020, including the Chevrolet Volt hybrid, which could be replaced in 2022 with a new gasoline-electric crossover model.” Other GM production cuts may be aimed at the Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala and Chevrolet Sonic, Reuters sources added.

DEPENDENCY ON GM: In its 2016 annual report the company noted that it is the “principal supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive light trucks and SUVs manufactured in North America, supplying substantially all of GM’s rear axle and four-wheel drive and all-wheel drive axle requirements for these vehicle platforms. Sales to GM were approximately 67% of our consolidated net sales in 2016, 66% in 2015, and 68% in 2014. We are the sole-source supplier to GM for certain axles and other driveline products.” The company reduced its GM exposure with its acquisition of Metaldyne last year. Metaldyne specializes in iron castings for steering knuckles, control arms and differential cases. It also produces forgings, powdered metal parts, and machined components. At the time of the merger, the companies said the union brings together “highly complementary businesses and forms a premier, global Tier 1 supplier with broad capabilities across powertrain, drivetrain, and driveline product lines, as well as diversified customer base and end-markets.” Recently, at an industry presentation a company spokesperson referred to diversification away from GM, say that American Axle is benefiting from strong SUV sales, “not just traditional rear-wheel drive SUV programs like the K2XX program we support for General Motors but also the “front-wheel drive based” all-wheel drive programs that we support now for a range of different customers around the world.” At the conference, the company expressed its pleasure over the diversification that the Metaldyne transaction brings. American Axle referred to its new found relevancy to front-wheel drive architectures, passenger car programs, global capabilities around engine and transmission components beyond what we’ve traditionally been able to do in the driveline area.