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S&P puts American Axle on negative watch
Standard & Poor's said it placed the BBB- corporate credit and senior unsecured debt ratings of American Axle & Manufacturing Holdings Inc. and its operating unit, American Axle & Manufacturing Inc., on CreditWatch with negative implications.
S&P said the CreditWatch placement reflects the growing competitive challenges facing the company's main customer, General Motors Corp. (B/negative watch/B-3), from which the company derives about 78% of total sales. American Axle supplies almost all of the rear axles and front four-wheel drive/all wheel drive axles for GM's light-truck platforms.
In 2005, sales of GM's aging midsize and large SUV product offerings declined as a result of changing consumer tastes and higher gasoline prices. Also, some of GM's SUVs were at the end of their life cycles. Though industry sales for more fuel-efficient crossover vehicles are increasing at double-digit rates, American Axle is just starting to penetrate this market segment.
As a result, 2005 production volumes for the programs that American Axle does serve were down 10%, and these volumes will most likely fall again in 2006, S&P said. The magnitude of the decline will depend partly on the success of GM's new GMT900 SUV models, one of the platforms that American Axle serves.
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