More Color on Deutsche Bank's Downgrade of American Axle & Manufacturing (AXL) to Hold

July 23, 2008 9:42 AM EDT

Deutsche Bank downgrades American Axle & Manufacturing (NYSE: AXL) from Buy to Hold and lowers their price target from $11.00 to $7.50.

The firm now values AXL 8x their FY2009 EPS estimate rather than 8x their 2010 EPS. Deutsche Bank believes that AXL’s exposure to GM and Chrysler, which account for 80% of sales, will prevent the market from valuing the company on earnings that far
ahead.

The firm said, "Our recommendation of American Axle had been based on our belief that the company’s new UAW labor contract was transformational in nature, and that the $300 MM cost savings associated with changes to its hourly headcount (55% reduction in UAW headcount, 50% reduction in cost for the 45% that remain), and $40 MM savings from changes to its salaried headcount would be more than sufficient to offset lower volume. While we continue to believe that our underlying volume assumptions are conservative, we also believe that going concern questions are likely to remain for AXL’s key customers (General Motors and Chrysler), and we are not comfortable recommending suppliers that are dependent on these automakers until these questions are resolved."

American Axle & Manufacturing Holdings, Inc., together with its subsidiaries, engages in the manufacture, engineering, design, and validation of driveline and drivetrain systems, and related components and chassis modules for automotive industry.

Related Categories

Downgrades

Stocks Mentioned

Related Entities

• Deutsche Bank
• Chrysler LLC

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?