Shares of American Axle & Manufacturing Holdings Inc. rose Wednesday, reversing eight straight days of losses that came on worries about the health of the U.S.-based automakers and cuts in light truck production.
In heavy afternoon trading, American Axle shares rose 75 cents, or 7.8 percent, to $10.41, after peaking at $10.76 earlier in the day. Over the past 52 weeks, the company's shares have traded between $9.49 and $31.
On Wednesday, American Axle shares dipped to $9.49, marking their lowest point since the weeks after the Sept. 11 terrorist attacks.
That drop came a day after General Motors Corp. announced plans to further cut production of trucks and SUVs through the end of the year.
And on Friday, Ford Motor Co. cut third-quarter production by an additional 50,000 vehicles to 475,000, 25 percent fewer than the year-ago quarter.
Despite the drop in consumer demand for light trucks, and in automaker demand for the parts that go into them, Deutsche Bank's Rod Lache said American Axle appears confident that it will be able to post a significant profit by 2009.
"Axle believes that their new labor contract, which will save at least $300 million (90 percent cash savings), will also provide the company with unprecedented flexibility to adjust headcount," Lache wrote in a note to investors.
"In other words, given lower volume, hourly labor cost savings are likely to exceed the $300 million we've been expecting."
Lache said he doesn't think Axle's shares reflect the company's intermediate-term earnings potential.
Lache said the company has annual earnings-per-share potential in the $2 to $3 range even if large pickups and SUVs fall as low as 11 percent of the U.S. market.
In 2007, those vehicles accounted for 17.6 percent of the market, but for May of this year that percentage fell to 11.7 percent, Lache said.
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