American Axle & Manufacturing Holdings Inc., the largest supplier of axles to General Motors Corp., said first-quarter profit rose 79 percent after job cuts last year boosted productivity.
Net income rose to $15.4 million, or 30 cents a share, from $8.6 million, or 17 cents, a year earlier, the Detroit-based firm said Friday in a statement. Sales fell 3.9 percent to $802.2 million.
The profit was the first for American Axle since the second quarter of 2006, as it shed capacity to keep pace with production cuts at GM, which accounted for three-fourths of sales. American Axle had two consecutive quarterly losses on the cost of buyouts and early retirements as GM bought fewer parts.
"We are expecting this pattern to continue," Brian Johnson, a Lehman Brothers analyst based in Chicago, said in an interview Friday. "There will be some more margin expansion as they negotiate and move work to Mexico and renegotiate better labor" agreements. Johnson rates the stock "overweight" and his firm owns shares.
Shares of American Axle fell 62 cents, or 2.2 percent, to $27.95 at 4 p.m. in New York Stock Exchange composite trading, after touching $30.68 earlier. The shares gained 50 percent this year before Friday.
The company's profit exceeded analysts' expectations of 23 cents a share, the average of 11 estimates compiled by Bloomberg.
American Axle "benefited from structural cost reductions relating to the special attrition program and other restructuring actions we initiated in 2006," Chief Executive Officer Richard Dauch said in the statement.
About 1,500 factory workers took early retirement in 2006, reducing costs about $100 million this year, Chief Financial Officer Michael Simonte said.
The firm also reached an accord with the United Auto Workers union last year for new hires to get wages and benefits totaling $27 an hour, a drop from about $66 for current UAW employees.
American Axle plans to cut 300 office jobs and will move machinery to Mexico from the U.S. to "rationalize capacity," Simonte said.
The company boosted its earnings forecast for the year to $1.30 to $1.55 a share, from $1.25 to $1.50. Analysts expected $1.55, the average of 11 estimates compiled by Bloomberg.
Production volume fell 9 percent in the first quarter from the same period a year ago, while operating income more than doubled to $35.9 million.
Automakers used more American Axle products per vehicle, increasing 3.9 percent to $1,252, primarily on GM full-size pickup trucks, the company said.