American Axle; former Chrysler VP takes old operations to new heights

What do you get when you cross a string of well-worn General Motors Corp. parts plants scattered throughout the "rust belt" with a zealot who wrote a book on manufacturing? At least in one case the result is an efficient, profitable private company called American Axle & Mfg. Corp. (AAM).

Last year a small group of investors, spearheaded by former Chrysler Corp. executive Richard E. Dauch, bought a big chunk of GM's former Saginaw Div. and turned it into the automotive industry's leading supplier of driveline systems and chassis components in just over a year.

Mr. Dauch, AAM's president and CEO, is Chrysler's former executive vice president of worldwide manufacturing whose 30-year career includes service at GM and Volkswagen of America. His book, by the way, is titled A Passion for Manufacturing.

How did a business that GM was willing to unload become the world's leading driveline supplier? Since the March 1, 1994, purchase, AAM has attracted new global business, increased annual sales from $1.5 billion to more than $2 billion, has been renovating its ancient plants, is adding two new facilities and has recruited a younger, more highly skilled workforce.

Although AAM inherited GM, Ford Motor Co., Chrysler, Toyota Motor Manufacturing U.S.A. Inc., Honda of America Manufacturing, Subaru-Isuzu Automotive Inc. and New Venture Gear as customers, AAM "grew" some additional GM and Ford business and attracted three all-new customers. Last fall it began a long-term agreement to supply differential gear sets to ZF Industries for a new Mercedes-Benz sport/utility vehicle. In June AAM announced contracts to supply steering linkage for future Nissan Motor Mfg. Corp. U.S.A. pickups and propeller shafts for Subaru.

The GM business spans all of AAM's capabilities: rear axles; front four-wheel-drive axles; all-wheel-drive systems; stabilizer bars; steering linkages; propeller shafts and forged products. The components are for a wide range of GM vehicles.

Ford business includes axle shafts for large cars and sports cars, sport/utilities, minivans and F-series pickups. For Chrysler and Toyota, wheel spindles; New Venture Gear, gear sets; Honda, preformed tie rods, and for Isuzu, rear axles, ring gears, pinions, sleeves, and side gears.

In the 15 months since taking over, Mr. Dauch says the company has had two capacity increases in driveline production (from 9,500 to 14,000 units per day). "With overtime, we can increase that 10% to 25%," he projects. "We plan two more increases by Christmas. And we're looking at producing from 18,000 to 20,000 by the year 2000."

Among its other first-year achievements, AAM organized a Forging Strategic Business Unit to plan future growth; launched 50 new product programs; targeted $97 million for a capacity-increase program scheduled for November and has been meeting problem-solving and on-time-delivery goals as well as quality-improvement targets. AAM is targeting ISO/QS9000 certification by Jan. 1, 1997 -- another critical hurdle to clear to be a tier-one global supplier.

AAM facilities include the Detroit Gear & Axle Plant, which straddles the Detroit-Hamtramck border; Detroit Forge Plant; Three Rivers (MI) plant; and the Buffalo Gear & Axle and Tonawanda Forge plants in New York and St. Catharines, Ont. A 60,000-sq.-ft. (5,570-sq.-m) paint facility has opened in Buffalo and a new 70,000-sq.-ft. (6,500-sq.-m) Rochester Hills, MI, technical center will open in September. Headquarters will remain in Detroit, Mr. Dauch maintains.

AAM has devoted much time and energy to clean-up, renovation and repainting all the plants (some of which were built during World War I) where modernization had been neglected by their previous owners. It has been a huge, ongoing task, but AAM is beginning to see some daylight. At the Detroit axle plant, for example, they've removed acres of industrial grime and installed new skylights and lighting. Employee dining areas, meeting rooms and hallways are remodeled.

On the operating level, inventory is better controlled. Use of returnable containers has eliminated messy cardboard packaging. Renovation is evident in the removal of old, oily conveyor systems, and most important is the installation of more advanced computer-numerical-controlled tooling. AAM has begun a gradual conversion from five-cut gear-cutting to new two-cut machines, which requires new approaches to product design, development and validation. The new CNC equipment means improved production flexibility and quality.

Under terms of the GM-UAW contract AAM inherited, many former employees had the option of retiring or moving when the new management came on board. The majority stayed and work under a version of the GM contract, which expires in September 1996. Some critics believe that could be a difficult time for AAM, especially if there's an auto sales or economic downturn in the coming year.

"We added 1,300 people to replace those who left," Mr. Dauch says. "The average age dropped from 50-51 to 41-42 and the educational base has improved. Most technicians have 1 to 1 1/2 years of college."

AAM had little problem finding talent. "As the government has cut back on defense contracts, we've been able to hire people with computer skills, engineers and metallurgists. We have a man with a doctorate operating a CNC machine. Another is a former dentist," he says

AAM "started training the day we signed the contract," he continues. It has 13 skills-training areas located near respective lines in the plants and in classrooms. AAM invests about $1.2 million of its own money each month on training. State governments of Michigan ($2.3 million annually) and New York ($500,000) provide additional funding. All this pays for 400,000 training hours a year -- a minimum of 40 hours per associate.