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AMERICAN AXLE'S NEW OWNERS UPBEAT ON PROSPECTS

The new majority owners of American Axle & Manufacturing Inc. say they plan to keep the company's current management in charge and grow the axle maker, not cut plants and employment.

New York-based Blackstone Group Friday said it paid $650 million for a majority stake in the Detroit-based company, acquiring most of owner Raymond Park's holdings.

Park, a Cleveland-based investor, was one of three who bought the operations of GM's former Saginaw Division in 1994 and formed American Axle. The company reported sales of $2.2 billion last year, putting it among the nation's largest auto components manufacturers.

Union officials say they see signs the new owner is interested in expanding the maker of gears, axles and steering linkages. Sign No. 1 is continuing to have things run by Richard E. Dauch, the Iacocca protege who is credited with bringing the former GM plants back from the brink.

"There's been great investment in the plants," said Thomas J. Monaghan, Buffalo area director for the United Auto Workers. "Keeping Dauch in place gives us the right signal."

In fact, the deal increases Dauch's undisclosed stake in American Axle, Blackstone said.

But industry experts expect that Blackstone eventually will cut American Axle's GM-style labor costs in order to match other components manufacturers.

"They've got to get a different kind of labor contract in the long run," said David Cole, director of the Office of Automotive Transportation Studies at the University of Michigan. The company will have to compete more heatedly for GM business in the future, he said.

American Axle employs a total of 2,700 at its Buffalo plant and its forging operation in the Town of Tonawanda. The Buffalo factory is the city's largest private employer. The Detroit-based company supplies gear and axle assemblies for almost all of GM's light trucks and sport utility vehicles.

The company signed its first contract with the UAW in February, agreeing to pay wages and benefits similar to the scale under General Motors' ownership.

The announcement Friday ended speculation that began in June, when Blackstone managing director David Stockman was reported to be negotiating to buy the axle company.

But among the questions not answered in the deal is the fate of a quiet General Motors stake in its former parts division. A source close to the automaker said it maintains some form of non-voting financial stake in American Axle. GM spokesmen in Detroit and New York wouldn't comment.

Cole said he expects GM to eventually withdraw from American Axle entirely, putting the former division on an equal footing with tough competitors in the components business like Dana Corp. and Meritor Automotive, formerly Rockwell.

Blackstone was upbeat on American' Axle's prospects, citing the popularity of GM's light trucks like the S-10 pickup, Blazer, Bravada and Jimmy, as well as full-size Chevrolet and GM trucks like Suburban, Tahoe and Yukon.

American Axle is building new production lines for GM's new light truck models, to be unveiled over the next five years, Blackstone said.

Blackstone also is the majority owner of Bar Technologies, which operates a former Bethlehem Steel bar mill in the Town of Hamburg. Monaghan said the company's record there bodes well for American Axle.

Cole, who knows Blackstone chairman Peter G. Peterson from work on a trade panel, predicted that the new owners will bring the company to a public stock offering in the future.

"These are smart guys," he said. "The idea is to get something at a reasonable price and take it public at some point."

Success of the plan rests on gas prices remaining stable, supporting demand for relatively large, rear-wheel-drive and four-wheel-drive vehicles for which the company makes axles.

The surge in popularity for sport utility vehicles shows no signs of collapsing, but has probably leveled off, he said. U.S. sales of light trucks have nearly doubled in 10 years, to 6.1 million units in 1996.

The change in ownership probably will spur only a few more workers to transfer from American Axle to GM, a right that expires this year, UAW regional director Thomas Fricano said.

Transfers already have replaced 75 percent of the axle company's work force.

American Axle's six manufacturing plants in Michigan and New York employ 8,600 people.

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