American Axle & Manufacturing's
(AXL) (Part 1)
Today, analysts aren't seeing any other major, publicly-traded auto supplier on the brink of bankruptcy, but there have been concerns about American Axle & Manufacturing's heavy dependence on GM as a customer. Although American Axle managed to avoid entering bankruptcy during the past two years, it still struggled along with the rest of the sector.
"If GM's production does fall off another cliff, I think that AXL would be in extreme danger," says Silver. "The company has made great strides over the past year, but is so dependent on GM sales that another collapse would also certainly spell disaster."Sales to GM were about 78% of American Axle's total net sales in 2009, 74% in 2008 and 78% in 2007. Some 8% of revenue came from Chrysler in 2009. Detroit, Mich.-based American Axle manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars, crossover vehicles and commercial vehicles. It operates in 13 countries and has about 6,500 employees. Thormahlen says "it's a little harder to get excited about American Axle compared to Visteon and Lear" because its balance sheet is not as shiny as the other two -- there hasn't been much significant change there over last two years -- and it's tied to a lower-growth company. Like Silver, this analyst cites American Axle's "inherent volatility risk" due to its dependency on GM, which sharply boosted the company's growth in 2010. "I don't think GM will outpace Hyundai or Volkswagen ( VLKAY ) any time soon revenue-wise. GM's sales figures have been doing well, but the others are still outpacing them every quarter."