Narcissism, nepotism and greed at American Axle
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NYBiker
Jul 14, 2008, 9:44:28 AM7/14/08
to American Axle Workers
http://money.cnn.com/2008/07/02/news/companies/taylor_americanaxle.fortune/?postversion=2008070215
If you need another reason why Detroit is in trouble, take a look at
Dick Dauch's American Axle.
By Alex Taylor III, senior editor
Last Updated: July 2, 2008: 3:42 PM EDT
Since then Dauch (pronounced dowck) has gone on to lead the revival of
what is now one of Detroit's leading parts suppliers. In 1994, he took
over some broken-down General Motors plants that made axles and
drivelines for SUVs and pickup trucks, and armed with some lucrative
GM contracts, turned American Axle and Manufacturing (AXL) into a
robust going concern with revenue of $3 billion.
Unfortunately, success brought out Dauch's less appealing side, and he
began treating the company like a personal fiefdom and reaping
industry-leading pay packages. Matters may have reached a tipping
point late last week when the company announced that Dauch's board of
directors had awarded him an $8.5 million bonus for 2007 even though
American Axle's stock has slid from $31 to $8 over the past 12 months.
Dauch got the award in part for his "leadership role" in taking
American Axle through a nasty three-month strike with the United Auto
Workers to make the company cost-competitive. In the process, wages
for many workers were slashed by $10 an hour. The Axle board
apparently ignored the fact that the strike cost General Motors (GM,
Fortune 500), American Axle's biggest customer, $1.8 billion pre-tax,
in part because Dauch couldn't get it settled quickly enough. Or that
GM kicked in $215 million to sweeten the kitty in order to get the
contract settled.
The bonus pushed Dauch's 2007 compensation to $18, 675,194. That's
chickenfeed for a hedge fund manager or investment banker, but huge
money in a town whose number one industry is struggling to survive.
GM's Rick Wagoner, who managed to pull off his own historic agreement
with the UAW last year without incurring a three-month strike,
received total compensation of $15.7 million last year and got no
bonus.
An American Axle spokesperson declined to comment for this column.
But then Dauch has been treating American Axle as his personal
playground for years. An industry trade magazine referred to publicly-
owned American Axle as a "family company." No wonder:
-- Dauch recently named one of his sons, David, president and chief
operating officer of the company.
-- Another son, Richard, worked for the company for 13 years and
served as executive vice president of worldwide manufacturing before
departing earlier this year.
-- The address of the company's world headquarters is One Dauch Drive.
American Axle's "executive compensation objectives" seem skewed toward
providing outsize payouts to Dauch and other executives whether the
company is doing well or not. In addition to the usual boilerplate
about "rewarding company and individual performance," the proxy
statement goes on to say that executive pay should be high even when
the company is doing poorly. "In periods of temporary downturns" it
reads, "our compensation programs should continue to ensure
that...executives remain motivated and committed." Or else, what?
They'd become shiftless and unfocused?
Dauch gets an even sweeter deal. His contract calls for him to be
compensated as co-founder of the company, in addition to being
chairman and CEO. As such, he gets paid "in consideration of...his
experience in the automotive industry and his extraordinary value of
leadership...since he co-founded the company in 1994." Nice work, if
you can get it. It turns compensation into an annuity and makes
current performance almost irrelevant.
There's no question that Dauch has built a successful company, and he
has done good deeds for the city of Detroit by locating his
headquarters within city limits. But he has left American Axle
grievously unprepared for the market shift away from sport utility
vehicles. Now that GM has shut down production in four SUV assembly
plants, there is going to be a lot less demand for the axles and
drivelines that American Axle makes.
Given the auto industry's currently dire condition, Dauch's current
pay package has to be considered unseemly. Asking workers for
sacrifice when your own pot is overflowing is unnecessary and mean-
spirited
Perhaps it is time for Dauch to give some of it back. There is no
shortage of worthy charities in Michigan these days.
If you need another reason why Detroit is in trouble, take a look at
Dick Dauch's American Axle.
By Alex Taylor III, senior editor
Last Updated: July 2, 2008: 3:42 PM EDT
Since then Dauch (pronounced dowck) has gone on to lead the revival of
what is now one of Detroit's leading parts suppliers. In 1994, he took
over some broken-down General Motors plants that made axles and
drivelines for SUVs and pickup trucks, and armed with some lucrative
GM contracts, turned American Axle and Manufacturing (AXL) into a
robust going concern with revenue of $3 billion.
Unfortunately, success brought out Dauch's less appealing side, and he
began treating the company like a personal fiefdom and reaping
industry-leading pay packages. Matters may have reached a tipping
point late last week when the company announced that Dauch's board of
directors had awarded him an $8.5 million bonus for 2007 even though
American Axle's stock has slid from $31 to $8 over the past 12 months.
Dauch got the award in part for his "leadership role" in taking
American Axle through a nasty three-month strike with the United Auto
Workers to make the company cost-competitive. In the process, wages
for many workers were slashed by $10 an hour. The Axle board
apparently ignored the fact that the strike cost General Motors (GM,
Fortune 500), American Axle's biggest customer, $1.8 billion pre-tax,
in part because Dauch couldn't get it settled quickly enough. Or that
GM kicked in $215 million to sweeten the kitty in order to get the
contract settled.
The bonus pushed Dauch's 2007 compensation to $18, 675,194. That's
chickenfeed for a hedge fund manager or investment banker, but huge
money in a town whose number one industry is struggling to survive.
GM's Rick Wagoner, who managed to pull off his own historic agreement
with the UAW last year without incurring a three-month strike,
received total compensation of $15.7 million last year and got no
bonus.
An American Axle spokesperson declined to comment for this column.
But then Dauch has been treating American Axle as his personal
playground for years. An industry trade magazine referred to publicly-
owned American Axle as a "family company." No wonder:
-- Dauch recently named one of his sons, David, president and chief
operating officer of the company.
-- Another son, Richard, worked for the company for 13 years and
served as executive vice president of worldwide manufacturing before
departing earlier this year.
-- The address of the company's world headquarters is One Dauch Drive.
American Axle's "executive compensation objectives" seem skewed toward
providing outsize payouts to Dauch and other executives whether the
company is doing well or not. In addition to the usual boilerplate
about "rewarding company and individual performance," the proxy
statement goes on to say that executive pay should be high even when
the company is doing poorly. "In periods of temporary downturns" it
reads, "our compensation programs should continue to ensure
that...executives remain motivated and committed." Or else, what?
They'd become shiftless and unfocused?
Dauch gets an even sweeter deal. His contract calls for him to be
compensated as co-founder of the company, in addition to being
chairman and CEO. As such, he gets paid "in consideration of...his
experience in the automotive industry and his extraordinary value of
leadership...since he co-founded the company in 1994." Nice work, if
you can get it. It turns compensation into an annuity and makes
current performance almost irrelevant.
There's no question that Dauch has built a successful company, and he
has done good deeds for the city of Detroit by locating his
headquarters within city limits. But he has left American Axle
grievously unprepared for the market shift away from sport utility
vehicles. Now that GM has shut down production in four SUV assembly
plants, there is going to be a lot less demand for the axles and
drivelines that American Axle makes.
Given the auto industry's currently dire condition, Dauch's current
pay package has to be considered unseemly. Asking workers for
sacrifice when your own pot is overflowing is unnecessary and mean-
spirited
Perhaps it is time for Dauch to give some of it back. There is no
shortage of worthy charities in Michigan these days.
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