When Marco first gives the Lone Wanderer an auto axe, he explains that he has been making them from industrial materials and scrap metal from the bridge, mostly parts of various cars and vehicles.
The auto axe is a modified steel saw upgraded with car engine parts, with the original tool strongly resembling a concrete saw or industrial grinder. The original blade seems to have been modified or replaced with a blade of a different kind, one with four roughly circular holes at the edges which creates four individual blades resembling axe blades.
The auto axe inflicts large amounts of damage with its sharp rotating blades and functions like the Ripper. It can also be repaired using Rippers, including the unique Ripper, Jack. Damage done by this weapon can be increased with the Auto Axpertperk, which is available within The Pitt, after collecting 10 steel ingots from the steelyard.
This weapon does very high damage if one has any of the damage-enhancing perks like Ghoul Ecology, Superior Defender, etc. These perks' bonuses are added per "tick" of the auto axe's attack.
When Pitt slaves are using this weapon for steel cutting, they can be seen pull-starting it repeatedly, suggesting that the auto axe and its variants are gas-powered. However, the Lone Wanderer never has to do this, nor do non-player characters when it's being used against another person as a weapon.
PCPlaystation 3 Sometimes this weapon will disappear from first person perspective, but still function perfectly. If one then brings up the Pip-Boy while the weapon is equipped, the Pip-Boy will have disappeared from their arm also. This bug can be temporarily remedied by switching weapons or re-equipping the auto axe. One can also fix it by saving and loading the game. Making an attack with V.A.T.S. can also restore the weapon. [verified]
PC Sometimes the blade alone will disappear, but the weapon will still function perfectly. This can be remedied by switching weapons. [verified]
Xbox 360 Sometimes, out of V.A.T.S., the weapon may buckle, and instead of functioning with repeated damage (like the Ripper), it may function like a normal melee weapon and repeatedly hit only once, before pulling back and hitting again. This is easily fixable by simply stopping. [verified]
PC Sometimes the auto axe rotary blade will stop spinning in 1st person and will start spinning again in 3rd person. [verified]
↑The Lone Wanderer: "I guess you're right. What are you working on?" Marco: "Weapons. Lot's of 'em. There's something coming... and soon. So, I take the crap we find out in the yard and some of the tools we use, and I make them into stuff we can fight the bosses with." (DLC01Marco.txt)
↑The Lone Wanderer: "I need a weapon. Can you help me out?" Marco: "Yeah... you're the one Midea told me about. Wernher sent you, right? I can help you out. Take this. It's called an Auto Axe. Nice, huh? I make 'em out of the old car parts the breakers drag in from the city. Do what you can with it, just be careful around the bosses. Make a wrong move and you're done." (DLC01Marco.txt)
↑Fallout 3 Official Game Guide Game of the Year Edition p. 112: "Sharing some basic qualities with the Ripper but more impressive and harmful, the Auto Axe is a Steel Saw fitted with car engine parts to increase its attack damage. Obtain the initial Auto Axe in The Pitt (The Pitt: Zone B) from a Pitt Slave named Marco. The weapon can tear through foes quickly; hold down attack to inflict continuous enemy damage."