Dowlais automotive component manufacturer bracing for £29 million financial drain due to tariffs prior to potential US acquisition
In a significant move announced in January, American Axle & Manufacturing (AAM) acquired the Dowlais Group, an automotive parts manufacturer, in a £1.2 billion deal. The merged group, with a workforce of 50,000, has been navigating challenges in the industry, including the impact of US tariffs on car part imports.
Despite the potential implications, American Axle's public 2025 financial disclosures and guidance indicate effective mitigation strategies and no significant adverse financial impact attributed to tariffs on the acquired Dowlais Group.
The group posted a 1.6 per cent decline in adjusted revenues to £2.46 billion, but adjusted operating profits increased by 11 per cent. This cash flow result was primarily driven by the impact of tariffs, higher restructuring outflows, and the timing of dividend receipts from its Chinese joint venture. However, Dowlais expects to offset additional costs from tariffs by passing them on to customers, with cost recovery expected to mainly happen in the second half of the year.
American Axle reported Q2 2025 sales of $1.54 billion, net income of $39.3 million, and an adjusted EBITDA margin improvement to 13.2%. The 2025 guidance update post-Dowlais acquisition projected sales of $5.75 billion to $5.95 billion and adjusted EBITDA between $695 million and $745 million. The guidance noted assumptions including no changes to USMCA trade agreements and the mitigation of a majority of incremental tariff costs, implying the company is successfully managing tariff-related expenses.
The company's commentary emphasizes cost controls and productivity gains as key to margin expansion, with no explicit mention of tariff-related financial strain or material negative impact from car part import tariffs on Dowlais or AAM’s combined operations.
Nine regulatory approvals or clearances have been received for the takeover by American Axle & Manufacturing, and the company will actively engage with regulatory authorities to obtain all remaining approvals. The combination is expected to take effect in the final quarter of 2025, following its approval at a recent shareholder meeting.
The acquisition has led to some changes within the company. Liam Butterworth, Dowlais' chief executive, will step down after gaining a £928,500 payment. The Dowlais London office in Victoria will shut down, and duplicate head office, administrative, senior management positions, research and development jobs in the US and Europe are threatened with redundancy.
Despite these challenges, American Axle & Manufacturing plans to list the enlarged firm on the New York Stock Exchange and seek a secondary listing in London. The merged company aims to capitalise on the choppy electric vehicle demand and increasing competition from Chinese automakers, positioning itself for growth in the future.
In the wake of the acquisition, around 1,250 staff at Dowlais are at risk of redundancy. However, the company's financial performance suggests that, despite the potential impacts of tariffs, the acquisition may prove to be a strategic move for American Axle & Manufacturing.
References:
- American Axle & Manufacturing Q2 2025 Results
- American Axle & Manufacturing 2025 Guidance Update
- American Axle & Manufacturing Q2 2025 Commentary
- American Axle & Manufacturing 2025 Financial Disclosures
- American Axle & Manufacturing 2025 Guidance Details
- American Axle & Manufacturing, with its focus on the aerospace and automotive industries, plans to invest in the financial growth of the enlarged company by capitalizing on the electric vehicle demand and intensifying competition from Chinese automakers, aiming for future success.
- American Axle & Manufacturing, despite expected redundancies due to the acquisition, presents a positive financial outlook, with a planned listing on the New York Stock Exchange and a potential secondary listing in London, indicating confidence in the company's ability to manage challenges such as tariffs and tap into the potential of the growing aerospace and business sectors.
