AMERICAN AXLE & MANUFACTURING HOLDINGS INC (Form: 10-K, Received: 02/15/2019 14:55:18)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-14303

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



DELAWARE		38-3161171
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

ONE DAUCH DRIVE, DETROIT, MICHIGAN		48211-1198
(Address of principal executive offices)		(Zip Code)

313-758-2000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
COMMON STOCK, PAR VALUE $0.01 PER SHARE		NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS, PAR VALUE $0.01 PER SHARE		NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “ large accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging growth company” in Rule 12b-2 of the Exchange Act).

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The closing price of the Common Stock on June 30, 2018 as reported on the New York Stock Exchange was $ 15.56 per share and the aggregate market value of the registrant's Common Stock held by non-affiliates was approximately $ 1,727.8 million . As of February 12, 2019 , the number of shares of the registrant's Common Stock, $0.01 par value, outstanding was 111,732,271 shares.

Documents Incorporated by Reference

Portions of the registrant's Annual Report to Stockholders for the year ended December 31, 2018 and Proxy Statement for use in connection with its Annual Meeting of Stockholders to be held on May 2, 2019 , to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after December 31, 2018 , are incorporated by reference in Part I (Items 1, 1A, 1B, 2, 3 and 4), Part II (Items 5, 6, 7, 7A, 8, 9, 9A and 9B), Part III (Items 10, 11, 12, 13 and 14) and Part IV (Item 15) of this Report.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

TABLE OF CONTENTS - ANNUAL REPORT ON FORM 10-K

Year Ended December 31, 2018



			Page Number

Part I	Item 1	Business	2
	Item 1A	Risk Factors	12
	Item 1B	Unresolved Staff Comments	18
	Item 2	Properties	19
	Item 3	Legal Proceedings	20
	Item 4	Mine Safety Disclosures	20

Part II	Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
	Item 6	Selected Financial Data	22
	Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 8	Financial Statements and Supplementary Data	43
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	97
	Item 9A	Controls and Procedures	97
	Item 9B	Other Information	97

Part III	Item 10	Directors, Executive Officers and Corporate Governance	98
	Item 11	Executive Compensation	98
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	98
	Item 13	Certain Relationships and Related Transactions, and Director Independence	98
	Item 14	Principal Accounting Fees and Services	98

Part IV	Item 15	Exhibits and Financial Statement Schedules	99

Part I


Item 1.	Business

As used in this report, except as otherwise indicated in information incorporated by reference, references to “our Company,” "we," "our," "us" or “AAM” mean American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries and predecessors, collectively.

General Development of Business

Holdings, a Delaware corporation, is a successor to American Axle & Manufacturing of Michigan, Inc., a Michigan corporation, pursuant to a migratory merger between these entities in 1999.

In 2017, Alpha SPV I, Inc., a wholly-owned subsidiary of Holdings, merged with and into Metaldyne Performance Group, Inc. (MPG), with MPG as the surviving corporation in the merger. Upon completion of the merger, MPG became a wholly-owned subsidiary of Holdings.

Narrative Description of Business

Company Overview

We are a global Tier I supplier to the automotive, commercial and industrial markets. We design, engineer, validate and manufacture driveline, metal forming, powertrain and casting products, employing over 25,000 associates, operating at nearly 90 facilities in 17 countries, to support our customers on global and regional platforms with a continued focus on delivering operational excellence, technology leadership and quality.

We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks and sport utility vehicles (SUV) manufactured in North America, supplying a significant portion of GM's rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from each of our Metal Forming, Powertrain and Casting segments. Sales to GM were approximately 41% of our consolidated net sales in 2018 , 47% in 2017 , and 67% in 2016 .

We also supply driveline system products to FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Jeep Cherokee, and a passenger car driveshaft program. In addition we sell various products to FCA from each of our Metal Forming, Powertrain and Casting segments. Sales to FCA were approximately 13% of our consolidated net sales in 2018 , 14% in 2017 and 18% in 2016 .

Business Strategy

We have aligned our business strategy to build value for our key stakeholders. We accomplish our strategic objectives by capitalizing on our competitive strengths and continuing to diversify our customer, product and geographic sales mix, while providing exceptional value to our customers.

Competitive Strengths

We achieve our strategic objectives by emphasizing a commitment to:

Sustaining our operational excellence and focus on cost management.


•	AAM received the 2017 and 2016 GM Supplier of the Year Award, which is awarded to suppliers that consistently exceed GM's expectations, create outstanding value or bring new innovations to GM.


•	We also received Jaguar Land Rover's (JLR) Supplier Excellence award for AAM's contribution to their business, cost transformation and operational delivery during 2017.


•	During 2018, we launched more than 50 programs across our four business units, supporting a variety of customers including Ford, JLR and Mercedes-AMG. In 2019, we expect to launch approximately 50 new and replacement programs across our business units.


•	We continue to focus on cost management through the implementation of the AAM Operating System to improve quality, eliminate waste and reduce lead time and total costs globally.


•	We have established a cost competitive, operationally flexible global manufacturing, engineering and sourcing footprint to increase our presence in global growth markets, support global product development initiatives and establish regional cost competitiveness.


•	Our business is vertically integrated to reduce cost and mitigate risk in the supply chain. Our acquisitions of MPG and USM Mexico Manufacturing LLC (USM Mexico) in 2017 furthered our efforts to vertically integrate the supply chain and helped ensure continuity of supply for certain parts to our largest manufacturing facility.

Maintaining our high quality standards, which are the foundation of our product durability and reliability.


•	In 2018, we had five facilities in the United States, one facility in China and one facility in South Korea awarded the GM Supplier Quality Excellence Award for outstanding quality performance during the 2017 performance year. For our Changshu Manufacturing Facility in China, it was the fourth consecutive year that they earned this award.


•	Our Fraser and Royal Oak, Michigan facilities were awarded the FCA Outstanding Quality Award in 2018 for the 2017 performance year.


•	Also in 2018, our Suzhou Manufacturing Facility in China was recognized with Ford's Q1 Award, which recognizes suppliers who consistently deliver exceptional quality and Chery International's 2017 Excellent Quality Performance Supplier Award.


•	Several other facilities were recognized for outstanding quality performance by OEMs such as Daimler, Honda and JLR.


•	AAM has an enhanced internal quality assurance system that drives continuous improvement to meet and exceed the growing expectations of our OEM customers.

Achieving technology leadership by delivering innovative products which improve the diversification of our product portfolio while increasing our total global served market.

•

In our Driveline segment, AAM's significant investment in research and development (R&D) has resulted in the development of advanced technology products designed to assist our customers in meeting the market demands for improved fuel efficiency; lower emissions; enhanced power density; advanced, sophisticated electronic controls; improved safety, ride and handling performance; and enhanced reliability and durability.


•	e-AAM was created to design and commercialize battery electric and hybrid driveline systems designed to improve fuel efficiency, reduce CO ₂ emissions and provide AWD capability. To date, e-AAM has

secured two driveline systems contracts featuring patented e-AAM ^™ hybrid and electric driveline systems technology. One of these programs launched in 2018, and the other is expected to launch in 2020.

•

AAM's EcoTrac ^® Disconnecting AWD system is a fuel-efficient driveline system that provides OEMs the option of an all-wheel-drive system that disconnects when not needed to improve fuel efficiency and reduce CO ₂ emissions compared to conventional AWD systems. In 2018, AAM launched the next generation of our EcoTrac ^® Disconnecting AWD system (EcoTrac ^® Gen II), which is smaller, lighter in weight and more efficient. This technology is featured on several significant global crossover platforms, including GM's Chevrolet Equinox and GMC Terrain, FCA's AWD Jeep Cherokee and its derivatives, as well as the Cadillac XT4 and the Ford Edge.

•

AAM has established a high-efficiency product portfolio that is designed to improve axle efficiency and fuel economy through innovative product design technologies. Our high-efficiency axles are featured on several premium OEM vehicles, including Mercedes-Benz and Jaguar Land Rover. As our customers focus on reducing weight through the use of aluminum and other lightweighting alternatives, AAM is well positioned to offer innovative, industry leading solutions. Our portfolio includes high-efficiency axles, aluminum axles and AWD applications for hybrid electric vehicles to full-electric vehicles. AAM's Quantum ^TM lightweight axle technology features a revolutionary design, which offers significant mass reduction and increased fuel economy and efficiency that is scalable across multiple applications without loss of performance or power. During 2018, AAM's Quantum ^TM lightweight axle technology received multiple awards, including the inaugural Future of Lightweighting Altair Enlighten Award and the inaugural Society of Automotive Analysts' Lightweighting Innovation Award.

•

In our Powertrain segment, we have identified opportunities to apply our high strength connecting rod technology and refined vibration control systems to support hybrid powertrain systems and power dense four cylinder and three cylinder engines that are smaller in size. Also in our Powertrain segment, our Subiaco Manufacturing Facility has been recognized by the Metal Powder Industries Federation with a 2018 Powder Metallurgy Design Award of Distinction.


•	In our Metal Forming segment, we have developed forged axle tubes, which deliver significant weight and cost reductions as compared to the traditional welded axle tubes. These forged axle tubes are expected to enter production on a program for a major OEM customer in 2019.

•

Our Casting segment has developed patented high strength ductile iron called Ductile - ITE ^™ , which provides the potential to reduce mass by up to 20% while providing greater overall strength. Also in our Casting segment, we have identified an opportunity to begin utilizing three-dimensional printed sand cores in our production process, which has the potential to reduce costs and floor space requirements.


•	AAM's Advanced Technology Development Center (ATDC) at our Detroit campus, allows us to accelerate technological advancements. This state-of-the-art facility is our center for technology benchmarking, prototype development, advanced technology development, supplier collaboration, customer showcasing and associate training on our future products, processes, and systems.

Diversification of Customer, Product and Geographic Sales Mix

Another element of building value for our key stakeholders is the diversification of our business through the growth of new and existing customer relationships and expansion of our product portfolio.


•	In addition to maintaining and building upon our longstanding relationships with GM and FCA, we are focused on generating profitable growth with new and existing global customers. New business launches in 2018 included key customers such as Ford, JLR and Mercedes-AMG.


•	We are working on approximately $1.5 billion in quoted and emerging new business opportunities. These opportunities would allow us to continue the diversification and expansion of our customer base, product portfolio and global footprint.


•	We continue to evaluate and consider strategic opportunities that will complement our core strengths and supplement our diversification strategies while providing future, profitable growth prospects. Our

acquisition of MPG in 2017 was a key step in achieving our goals of customer, product and geographic diversification.

We are focused on increasing our presence in global markets to support our customers ' platforms.


•	As our customers design their products for global markets, they will continue to require global support from their suppliers. For this reason, it is critical that we maintain a global presence in these markets in order to remain competitive for new contracts. As a result of our acquisition of MPG, we have expanded our global presence, primarily in Asia and Europe.

•

In 2018, we entered into a new joint venture (JV) with Liuzhou Wuling Automobile Industry Co., Ltd. (Liuzhou Wuling), a subsidiary of Guangxi Automotive Group Co., Ltd. This is in addition to our existing JV with Hefei Automobile Axle Co., Ltd. (HAAC), a subsidiary of the JAC Group (Anhui Jianghuai Automotive Group Co., Ltd.), which includes 100% of HAAC's light commercial axle business. Liuzhou Wuling manufactures independent rear axles and driveheads to be used on crossovers, including SUVs, minivans and multi-purposes vehicles and HAAC supplies front and rear beam axles to several leading Chinese light truck manufacturers, including JAC and Foton (Beiqi Foton Motor Co., Ltd.). These joint ventures continue to be a strong advantage for building relationships with leading Chinese manufacturers.

Competition

We compete with a variety of independent suppliers and distributors, as well as with the in-house operations of certain vertically integrated OEMs. Technology, design, quality and cost are the primary elements of competition in our industry segments. In addition to traditional competitors in the automotive sector, the trend towards advanced electronic integration has increased the level of new market entrants, including technology companies.

Industry Trends

See Item 7, “Management's Discussion and Analysis - Industry Trends.”

Productive Materials

We believe that we have adequate sources of supply of productive materials and components for our manufacturing needs. Most raw materials (such as steel) and semi-processed or finished items are available within the geographical regions of our operating facilities from qualified sources in quantities sufficient for our needs. We currently have contracts with our steel suppliers that ensure continuity of supply to our principal operating facilities. We also have validation and testing capabilities that enable us to strategically qualify steel sources on a global basis. As we continue to expand our global manufacturing footprint, we may need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements.

Backlog

We typically enter into agreements to provide our products for the life of our customers' vehicle programs. Our new and incremental business includes awarded programs and incremental content and volume including customer requested engineering changes. Our backlog may be impacted by various assumptions, many of which are provided by our customers based on their long range production plans. These assumptions include future production volume estimates, changes in program launch timing and fluctuation in foreign currency exchange rates.

Our gross new and incremental business backlog is approximately $1.25 billion for programs launching from 2019 to 2021 . In 2017 , our gross new and incremental business backlog was approximately $1.5 billion for programs launching from 2018 to 2020 .

Of this $1.25 billion gross new and incremental business backlog, approximately 45% is for end-use markets outside of North America, approximately 70% relates to light trucks, including crossover vehicles and SUVs, and approximately 10% relates to our e-AAM ^™ hybrid and electric driveline systems technology.

Patents and Trademarks

We maintain and have pending various U.S. and foreign patents, trademarks and other rights to intellectual property relating to our business, which we believe are appropriate to protect our interest in existing products, new inventions, manufacturing processes and product developments. We do not believe that any single patent or trademark is material to our business, nor would expiration or invalidity of any patent or trademark have a material adverse effect on our business or our ability to compete .

Cyclicality and Seasonality

Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Our business is moderately seasonal as our major OEM customers historically have an extended shutdown of operations (typically 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in December. Our major OEM customers also occasionally have longer shutdowns of operations (up to 6 weeks) for program changeovers. Accordingly, our quarterly results may reflect these trends.

Litigation and Environmental Matters

We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements. Such expenditures were not significant in 2018 , 2017 and 2016 .

Associates

We employ over 25,000 associates on a global basis (including our joint venture affiliates) of which approximately 11,500 are employed in the U.S. and approximately 13,500 are employed at our foreign locations. Approximately 5,000 are salaried associates and approximately 20,000 are hourly associates. Of the 20,000 hourly associates, approximately 60% are covered under collective bargaining agreements with various labor unions.

Executive Officers of the Registrant



Name	Age	Position
David C. Dauch	54	Chairman of the Board & Chief Executive Officer
Michael K. Simonte	55	President
David E. Barnes	60	Vice President & General Counsel
Timothy E. Bowes	55	President - Casting
David M. Buckley	54	President - Europe
Gregory Deveson	57	President - Driveline
Terri M. Kemp	53	Vice President - Human Resources
Michael J. Lynch	54	Vice President - Finance & Controller
Christopher J. May	49	Vice President & Chief Financial Officer
Tolga Oal	47	Senior Vice President - Global Procurement & Supplier Quality Engineering
Alberto L. Satine	62	Senior Vice President - Special Projects
James Voeffray	53	Senior Vice President - Global Sales & Product Management
Norman Willemse	62	President - Metal Forming

David C. Dauch , age 54 , has been AAM's Chief Executive Officer since September 2012. Mr. Dauch has served on AAM's Board of Directors since April 2009 and was appointed Chairman of the Board in August 2013. From September 2012 through August 2015, Mr. Dauch served as AAM’s President & CEO. Prior to that, Mr. Dauch served as President & Chief Operating Officer (2008 - 2012) and held several other positions of increasing responsibility from the time he joined AAM in 1995. Presently, he serves on the boards of Business Leaders for Michigan, the Detroit Economic Club, the Detroit Regional Chamber, the Great Lakes Council Boy Scouts of America, the Boys & Girls Club of Southeast Michigan, the National Association of Manufacturers (NAM), the Original Equipment Suppliers Association (OESA), Amerisure Mutual Holdings, Inc. and the Amerisure Companies (since December 2014). Mr. Dauch also serves on the Miami University Business Advisory Council, the General Motors Supplier Council and the FCA NAFTA Supplier Advisory Council.

Michael K. Simonte, age 55 , has been President since August 2015. Mr. Simonte previously served as Executive Vice President & Chief Financial Officer (since December 2011); Executive Vice President - Finance & Chief Financial Officer (since February 2009); Group Vice President - Finance & Chief Financial Officer (since December 2007); Vice President - Finance & Chief Financial Officer (since January 2006); Vice President & Treasurer (since May 2004); and Treasurer (since September 2002). Mr. Simonte joined AAM in December 1998 as Director, Corporate Finance. Prior to joining our Company, Mr. Simonte served as Senior Manager at the Detroit office of Ernst & Young LLP. Mr. Simonte is a certified public accountant.

David E. Barnes , age 60 , has been General Counsel and Corporate Secretary since joining AAM in 2012, and became a Vice President in 2017. In addition to his responsibilities as General Counsel and Corporate Secretary, he also serves as the Chief Compliance Officer of the Company. Prior to joining AAM, Mr. Barnes served as Executive Vice President, General Counsel and Secretary for Atlas Oil Company. He has held various positions during his career at Ford Motor Company, Dykema Gossett and Venture Holdings LLC, after beginning his career at Honigman, Miller, Schwartz and Cohn. Mr. Barnes holds a juris doctor degree.

Timothy E. Bowes , age 55 , has been President - Casting since August 2017. Mr. Bowes previously served as Senior Vice President - Strategic & Business Development (since April 2016) and Senior Vice President - Corporate Planning (since December 2015). Prior to joining AAM, Mr. Bowes served as Chief Executive Officer & President of Transtar Corporation, since 2013. Prior to Transtar, Mr. Bowes served as Executive Officer & President - Commercial Truck at Meritor Inc., which he joined in 2005. He has held various leadership positions during his 25-year automotive and industrial career, managing business operations, strategic opportunities and sales & marketing for multiple organizations. In addition to Transtar and Meritor, Mr. Bowes' career also includes working at Hilite International, Wescast Industries, Intermet Corporation and ITT Automotive.

David Buckley , age 54 , has been President - Europe since January 2019. He joined AAM in November 2017 as Vice President - Strategic and Business Development. Prior to joining AAM, Mr. Buckley served as President and Chief Executive Officer for Vexos, Inc from 2014 to 2017. Before joining Vexos, Mr. Buckley gained extensive global leadership experience as Chief Executive Officer of Cross Match Technologies, Vectronix and Modtech. Earlier in his career, Mr. Buckley led successful business units at General Electric and PricewaterhouseCoopers consulting. Mr. Buckley is a certified LEAN expert. Mr. Buckley is also a veteran of the U.S. Navy, and serves on the U.S. Naval Academy admissions board, and as a member of the U.S. Naval Academy Foundation Board.

Gregory Deveson , age 57 , has been President - Driveline since January 2019. Prior to that, he served as President - Powertrain since joining AAM in April 2017. Prior to joining AAM, Mr. Deveson served as Senior Vice President of the Driveline Systems Group at Magna Powertrain from 2008 to 2016. Over his 25-year automotive and manufacturing career, Mr. Deveson has managed business operations, strategic opportunities, product engineering, purchasing and quality for multiple organizations.

Terri M. Kemp, age 53 , has been Vice President - Human Resources since September 2012. Prior to that, she served as Executive Director - Human Resources & Labor Relations (since November 2010), Executive Director - Human Resources (since September 2009), Director - Human Resources Operations (since October 2008), and served in various plant and program management roles since joining the Company in July 1996. Prior to joining our Company, Mrs. Kemp served for nine years at Corning Incorporated, where she progressed through a series of manufacturing positions with increasing responsibility, including Industrial Engineer, Department Head and Operations Manager.

Michael J. Lynch , age 54 , has been Vice President and Controller since February 2017. Prior to that, he served as Vice President - Driveline Business Performance & Cost Management (since May 2015); Vice President - Finance & Controller (since September 2012); Executive Director & Controller (since October 2008); Director - Commercial Analysis (since July 2006); Director - Finance, Driveline Americas (since March 2006); Director - Investment & Commercial Analysis (since November 2005); Director - Finance, Driveline (since October 2005); Director - Finance Operations, U.S. (since April 2005); Manager - Finance (since June 2003); Manager - Finance, Forge Division (since September 2001); Finance Manager - Albion Automotive (since October 1998); Supervisor - Cost Estimating (since February 1998) and Financial Analyst at the Detroit Manufacturing Facility since joining AAM in September 1996. Prior to joining our Company, Mr. Lynch served at Stellar Engineering for nine years in various capacities.

Christopher J. May , age 49 , has been Vice President & Chief Financial Officer since August 2015. Prior to that, he served as Treasurer (since December 2011); Assistant Treasurer (since September 2008); Director of Internal Audit (since September 2005); Divisional Finance Manager - Metal Formed Products (since June 2003); Finance Manager - Three Rivers Manufacturing Facility (since August 2000); Manager, Financial Reporting (since November 1998) and Financial Analyst since joining AAM in 1994. Prior to joining AAM, Mr. May served as a Senior Accountant for Ernst & Young. Mr. May is a certified public accountant.

Tolga Oal , age 47 , has been Senior Vice President - Global Procurement and Supplier Quality Engineering since January 2019. Prior to that he was President - Driveline (since September 2018), and Senior Vice President - AAM and President - AAM North America since joining our Company in September 2015. Prior to joining AAM, Mr. Oal served as Vice President of Global Electronics for TRW Automotive, since 2012. Before that, Mr. Oal served in various manufacturing and management positions of increasing responsibility within TRW for Global Electronics, including Director of Operations and as Director of Finance. Prior to joining TRW, Mr. Oal held various leadership positions in engineering, sales, purchasing, and finance at Siemens VDO Automotive/Continental.

Alberto L. Satine, age 62 , has been Senior Vice President - Special Projects since January 2019. Prior to that, he served as President - Electrification (since September 2018); President - AAM Driveline (since August 2015); Senior Vice President - Global Driveline Operations (since January 2014); Group Vice President - Global Sales & Business Development (since December 2011); Vice President - Strategic & Business Development (since November 2005); Vice President - Procurement (since January 2005); Executive Director, Global Procurement Direct Materials (since January 2004); General Manager, Latin American Driveline Sales and Operations (since August 2003) and General Manager of International Operations (since joining our Company in May 2001). Prior to joining our Company, Mr. Satine held several management positions at Dana Corporation, including the position of Regional President of Dana's Andean Operations in South America from 1997 to 2000 and General Manager of the Spicer Transmission Division in Toledo, Ohio from 1994 to 1997.

James Voeffray , age 53 , has been Senior Vice President - Global Sales since joining AAM in September 2018. Prior to joining AAM, Mr. Voeffray served as Senior Vice President - Sales, Marketing & Program Management for GKN's Automotive Driveline Division from 2016 to 2018. During his 20 year career with GKN, Mr. Voeffray held a number of global leadership roles in the United States and United Kingdom, including the role of Senior Vice President - eDrive Systems. Mr. Voeffray also held various roles at Magna Powertrain Division and Ford Motor Company.

Norman Willemse, age 62 , has been President - Metal Forming since August 2015. Prior to that, he served as Vice President - Metal Formed Product Business Unit (since December 2011); Vice President - Global Metal Formed Product Business Unit (since October 2008); Vice President - Global Metal Formed Product Operations (since December 2007); General Manager - Metal Formed Products Division (since July 2006) and Managing Director - Albion Automotive (since joining our Company in August 2001). Prior to joining our Company, Mr. Willemse served at AS Transmissions & Steering (ASTAS) for seven years as Executive Director Engineering Group Manager Projects and Engineering and John Deere for over 17 years in various engineering positions of increasing responsibility. Mr. Willemse is a professional certified mechanical engineer.

Internet Website Access to Reports

The website for American Axle & Manufacturing Holdings, Inc. is www.aam.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The information contained in the Company's website is not included, or incorporated by reference, in this Annual Report on Form 10-K.


Item 1A.	Risk Factors

The following risk factors and other information included in this Annual Report on Form 10-K should be considered as our business, financial condition, operating results and cash flows could be materially adversely affected if any of the following risks occur.

Our business is significantly dependent on sales to GM and FCA.

We are a primary supplier of driveline components to GM for its full-size RWD light trucks and SUVs manufactured in North America, supplying a significant portion of GM's rear axle and 4WD/AWD axle requirements for these vehicle platforms. We also supply GM with various products from each of our Metal Forming, Powertrain and Casting segments. Sales to GM were approximately 41% of our consolidated net sales in 2018 , 47% in 2017 , and 67% in 2016 . A reduction in our sales to GM or a reduction by GM of its production of RWD light trucks or SUVs, as a result of market share losses of GM or otherwise, could have a material adverse effect on our results of operations and financial condition.

We also supply driveline system products for FCA's heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Jeep Cherokee and a passenger car driveshaft program. In addition, we sell various products to FCA from each of our Metal Forming, Powertrain and Casting segments. Sales to FCA accounted for approximately 13% of our consolidated net sales in 2018 , 14% in 2017 and 18% in 2016 . A reduction in our sales to FCA or a reduction by FCA of its production of the programs we support, as a result of market share losses of FCA or otherwise, could have a material adverse effect on our results of operations and financial condition.

Our business may also be adversely affected by reduced demand for the product programs we currently support, or anticipate supporting in the future, or if we do not obtain sales orders for successor programs that replace our current product programs.

We are under continuing pressure from our customers to reduce our prices.

Annual price reductions are a common practice in the automotive industry. Many of our contracts require us to reduce our prices in subsequent years and most of our contracts allow us to adjust prices for engineering changes requested by our customers. If we accommodate a customer's demand for higher annual price reductions and are unable to offset the impact of any such price reductions through continued technology improvements, cost reductions or other productivity initiatives, our results of operations and financial condition could be adversely affected.

Our business faces substantial competition.

The markets in which we compete are highly competitive. Our competitors include manufacturing facilities controlled by OEMs, as well as many other domestic and foreign companies possessing the capability to produce some or all of the products we supply. In addition to traditional competitors in the automotive sector, the trend towards advanced electronic integration has increased the level of new market entrants, including technology companies. Some of our competitors are affiliated with OEMs and others could have economic advantages as compared to our business, such as patents, existing underutilized capacity and lower wage and benefit costs. Technology, design, quality and cost are the primary elements of competition in our markets. As a result of these competitive pressures and other industry trends, OEMs and suppliers are developing strategies to reduce costs. These strategies include supply base consolidation, OEM in-sourcing and global sourcing. Our business may be adversely affected by increased competition from suppliers benefiting from OEM affiliate relationships or financial and other resources that we do not possess. Our business may also be adversely affected if we do not sustain our ability to meet customer requirements relative to technology, design, quality, delivery and cost.

Our company or our customers may not be able to successfully and efficiently manage the timing and costs of new product program launches.

Certain of our customers are preparing to launch new product programs for which we will supply newly developed products and related components. There can be no assurance that we will successfully complete the transition of our manufacturing facilities and resources to support these new product programs or other future product programs on a timely and cost efficient basis. Accordingly, the launch of new product programs may adversely affect production rates or other operational efficiency and profitability measures at our facilities. We may

also experience difficulties with the performance of our supply chain on program launches, which could result in our inability to meet our contractual obligations to key customers. Production shortfalls or production delays, if any, could result in our failure to effectively manage our material and freight costs relating to these program launches. In addition, our customers may delay the launch or fail to successfully execute the launch of these new product programs, or any additional future product program for which we will supply products. Our revenues, operating results and financial condition could be adversely impacted if our customers fail to timely launch such programs or if we are unable to manage the timing requirements and costs of new product program launches.

If we are unable to respond timely to changes in regulation, technology, and market innovation, we risk not being able to develop our intellectual property into commercially viable products.

Our results of operations and financial condition are impacted, in part, by our competitive advantage in developing, engineering, and manufacturing innovative products. In the future, our ability to anticipate changes in technology, successfully develop, engineer, and bring to market new and innovative proprietary products, or successfully respond to evolving business models, in particular, autonomous and electric vehicle advances, may have a significant impact on our market competitiveness. If we are unable to maintain our competitive advantage through innovation, there could be a material adverse effect on our results of operations and financial condition.

Our company's global operations are subject to risks and uncertainties.

We have business and technical offices and manufacturing facilities in multiple countries outside the United States. International operations are subject to certain risks inherent in conducting business outside the U.S., such as changes in currency exchange rates, tax laws, price and currency exchange controls, tariffs or import restrictions, nationalization, immigration policies, expropriation and other governmental action. Our global operations also may be adversely affected by political events, domestic or international terrorist events and hostilities, natural disasters and significant weather events, or disruptions in the global financial markets.

Certain events, such as the United Kingdom's continued efforts to exit the European Union and tax reform, create a level of uncertainty for multi-national companies. As U.S. companies continue to expand globally, increased complexity exists due to recent changes to the U.S. corporate tax code, potential revisions to international tax law treaties, and renegotiated trade agreements, including the potential ratification of the United States-Mexico-Canada trade agreement (USMCA) or other potential changes to the North American Free Trade Agreement (NAFTA). These uncertainties could have a material adverse effect on our business and our results of operations and financial condition. As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks.

Our business is dependent on the rear-wheel drive light truck and SUV market segments in North America.

A substantial portion of our revenue is derived from products supporting RWD light truck and SUV platforms in North America. Sales and production levels of light trucks and SUVs can be affected by many factors, including changes in consumer demand; product mix shifts favoring other types of light vehicles, such as front-wheel drive based crossover vehicles and passenger cars; fuel prices; and government regulations. A reduction in the market segments we currently supply could have a material adverse impact on our results of operations and financial condition.

Our goodwill, other intangible assets, and long-lived assets are at risk of impairment if our business or market conditions indicate that the carrying value of those assets exceeds their fair value.

Accounting principles generally accepted in the United States of America (GAAP) require that companies evaluate the carrying value of goodwill, other intangible assets, and long-lived assets routinely in order to assess whether any indication of asset impairment exists. Goodwill and other indefinite-lived intangible assets are required to be evaluated on an annual basis, while finite-lived intangible assets and long-lived assets should be evaluated only when events and circumstances exist that indicate an asset or group of assets may be impaired.

Our acquisitions of MPG and USM Mexico in 2017 significantly increased the value of our goodwill and other intangible assets, and resulted in a change to our organizational structure from one reporting unit to multiple reporting units. As such, the threshold for analyzing impairment of goodwill has been reduced from an evaluation of the carrying value of our consolidated operations and its related fair value, to an analysis performed across multiple

reporting units. This could potentially provide greater risk that goodwill becomes impaired in future operating periods. Further, the increase to goodwill and other intangible asset balances in connection with these acquisitions provides a greater chance that an impairment of these assets would have a material adverse effect on our results of operations and financial condition.

Our business is dependent on our Guanajuato Manufacturing Complex.

A high concentration of our global business is supported by our Guanajuato Manufacturing Complex (GMC) in Mexico. In 2018, GMC represented a significant portion of our net sales, profitability and cash flow from operations. We expect GMC to continue to represent a substantial portion of these metrics for the foreseeable future. A significant disruption to our GMC operations as a result of changes in trade agreements between Mexico and the U.S. (including USMCA or NAFTA), tariffs, natural disaster or otherwise could have a material adverse impact on our results of operations and financial condition.

We may incur material losses and costs as a result of product recall or field action, product liability and warranty claims, litigation and other disputes and claims.

We are exposed to warranty, product recall or field action and product liability claims in the event that our products fail to perform as expected, and we may be required to participate in a recall of such products. We are not responsible for certain warranty claims that may be incurred by our customers, which include returned components for which no defect was found upon inspection, discretionary acts of dealer goodwill, defects related to certain directed buy components, and build-to-print design issues. We review warranty claim activity in detail, and we may have disagreements with our customers as to responsibility for these types of costs incurred by our customers. In addition, as we continue to diversify our customer base, we expect our obligation to share in the cost of providing warranties as part of our agreements with new customers will increase. Costs and expenses associated with warranties, field actions, product recalls and product liability claims could have a material adverse impact on our results of operations and financial condition and may differ materially from the estimated liabilities that we have recorded in our consolidated financial statements.

In addition to warranty claims relating directly to products we produce, potential product recalls for our customers and their other suppliers, and the potential reputational harm that may result from such product recalls, could have a material adverse impact on our results of operations and financial condition.

We are also involved in various legal proceedings incidental to our business. Although we believe that none of these matters are likely to have a material adverse effect on our results of operations or financial condition, there can be no assurance as to the ultimate outcome of any such legal proceeding or any future legal proceedings.

A failure of our information technology (IT) networks and systems, or a failure to successfully integrate the IT systems of acquired companies, could adversely impact our business and operations.

We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes or activities. Additionally, we and certain of our third-party vendors collect and store personal information in connection with human resources operations and other aspects of our business. The secure operation of these information technology networks and systems and the proper processing and maintenance of this information are critical to our business operations. We cannot be certain that the security measures we have in place to protect these systems and data will be successful or sufficient to protect our IT systems from current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attack and other similar disruptions. The occurrence of any of these events could compromise our networks, and the information stored there could be accessed, publicly disclosed or lost. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, the disruption of our operations or damage to our reputation. We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

In connection with our acquisition of MPG, we are integrating our IT systems and infrastructure, however, there is no assurance we will be able to successfully complete this integration on a timely basis, which could have a material adverse effect on our results of operations and financial condition.

Our business could be adversely affected by the cyclical nature of the automotive industry.

Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors, such as credit availability, interest rates, fuel prices and consumer confidence. Our business may be adversely affected by an economic decline or fiscal crisis that results in a reduction of automotive production and sales by our largest customers.

Negative or unexpected tax consequences, as well as possible changes in foreign and domestic tax laws could adversely affect our results of operations and financial condition.

In 2017, the Tax Cuts and Jobs Act (the 2017 Act) was signed into law in the United States and has resulted in significant changes to tax regulations in the U.S. In addition, there have been recent global proposals brought forward by the Organisation for Economic Co-operation and Development (OECD) alongside the Group of Twenty (G-20), for tax jurisdictions to evaluate the potential reform of longstanding corporate tax law principles and treaties that could adversely affect multi-national companies. Although the OECD does not enact tax law, proposals like this or others that lead to substantial changes in enacted tax laws and treaties could have a material adverse impact on our results of operations and financial condition.

We file income tax returns in the U.S. federal jurisdiction, as well as various states and foreign jurisdictions. We are also subject to examinations of these income tax returns by the relevant tax authorities. Based on the status of these audits and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. Any negative or unexpected outcomes of these examinations and audits could have a material adverse impact on our results of operations and financial condition.

Our business could be adversely affected by disruptions in our supply chain and our customers' supply chain.

We depend on a limited number of suppliers for certain key components and materials needed for our products. We rely upon, and expect to continue to rely upon, certain suppliers for critical components and materials that are not readily available in sufficient volume from other sources. As we continue to expand our global manufacturing footprint, we may need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements. These supply chain characteristics make us susceptible to supply shortages and price increases. If production volumes increase rapidly, there can be no assurance that the suppliers of critical components and materials will be able or willing to meet our future needs on a timely basis.

Our supply chain, as well as our customers' supply chain, is also at risk of unanticipated events such as natural disasters or changes in governmental regulations and trade agreements (including USMCA or NAFTA), that could cause a disruption in the supply of critical components to us and our customers. A significant disruption in the supply of these materials could have a material adverse effect on our results of operations and financial condition.

Our restructuring initiatives may not achieve their intended outcomes.

We have initiated restructuring actions in recent years to reduce cost and realign certain areas of our business and plan to initiate further restructuring actions in future periods. There can be no assurance that such restructuring initiatives will successfully achieve the intended outcomes, or that the charges related to such initiatives will not have a material adverse effect on our results of operations and financial condition.

As part of our strategic initiatives, we are actively assessing our product portfolio and may pursue plans to divest certain operations in future periods. Our results of operations or financial condition could be adversely affected if we initiate a divestiture and it is not completed in accordance with our expected timeline, or at all, or if we do not realize the expected benefits of the divestiture.

Our company may not realize all of the revenue expected from our new and incremental business backlog.

The realization of incremental revenues from awarded business is inherently subject to a number of risks and uncertainties, including the accuracy of customer estimates relating to the number of vehicles to be produced in new and existing product programs and the timing of such production, as well as the fluctuation in exchange rates for programs sourced in currencies other than our reporting currency. It is also possible that our customers may delay or cancel a product program that has been awarded to us. Our revenues, operating results and financial condition could be adversely affected relative to our current financial plans if we do not realize substantially all the revenue from our new and incremental business backlog.

Exchange rate fluctuations could adversely affect our company's global results of operations and financial condition.

As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks associated with transactions that are denominated in currencies other than our local functional currencies. Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of our foreign subsidiaries are reported in current period income. In the future, unfavorable changes in exchange rate relationships between the functional currencies of our subsidiaries and their non-functional currency denominated assets and liabilities could have an adverse impact on our results of operations and financial condition. While we use, from time to time, foreign currency forward contracts to help mitigate certain of these risks and reduce the effects of fluctuations in exchange rates, our efforts to manage these risks may not be successful.

We are also subject to currency translation risk as we are required to translate the financial statements of our foreign subsidiaries to U.S. dollars. We report the effect of translation for our foreign subsidiaries with a functional currency other than the U.S. dollar as a separate component of stockholders' equity. Unfavorable changes in the exchange rate relationship between the U.S. dollar and the functional currencies of our foreign subsidiaries could have an adverse impact on our results of operations and financial condition.

Our business could be adversely affected by volatility in the price of raw materials.

Worldwide commodity market conditions in recent years have resulted in volatility in the cost of steel and other metallic materials we use in production. During periods of general economic improvement and increases in customer demands, we have seen the cost of steel and metallic materials needed for our products increase. If we are unable to pass such cost increases on to our customers, this could have a material adverse effect on our results of operations and financial condition.

Our business could be adversely affected if we fail to maintain satisfactory labor relations.

A significant portion of our hourly associates worldwide are members of industrial trade unions employed under the terms of collective bargaining agreements. There can be no assurance that future negotiations with our labor unions will be resolved favorably or that we will not experience a work stoppage or disruption that could have a material adverse impact on our results of operations and financial condition. In addition, there can be no assurance that such future negotiations will not result in labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition or our ability to compete for future business.

We may be unable to consummate and successfully integrate acquisitions and joint ventures.

Engaging in acquisitions and joint ventures involves potential risks, including financial risks and failure to successfully integrate and fully realize the expected benefits of such acquisitions and joint ventures. In 2017, AAM completed our acquisition of 100% of the equity interests of MPG. Failure to successfully integrate our acquisition of MPG, or to fully realize the expected benefits and efficiencies of the acquisition, may have a material adverse impact on our results of operations and financial condition. Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage the integrations successfully.

As we continue to expand globally and accelerate our diversification efforts, we may pursue strategic growth initiatives with greater frequency. An inability to successfully achieve the levels of organic and inorganic growth from our strategic initiatives could adversely impact our results of operations and financial condition.

We use important intellectual property in our business. If we are unable to protect our intellectual property, or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected.

We own important intellectual property, including patents, trademarks, copyrights and trade secrets. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve. Our competitors may develop technologies that are similar to our proprietary technologies or design around the patents we own or license. Further, as we expand our operations in jurisdictions where the protection of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite efforts we undertake to protect them. Developments or assertions by or against us relating to intellectual property rights, and any inability to protect these rights, could materially adversely affect our business and our competitive position.

Our company's ability to operate effectively could be impaired if we lose key personnel.

Our success depends, in part, on the efforts of our executive officers and other key associates, such as engineers and global operational leadership. In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel, particularly engineers and other employees with critical expertise and skills that support key customers and products. The loss of the services of our executive officers or other key associates, unexpected turnover, or the failure to attract or retain associates, could have a material adverse effect on our results of operations and financial condition.

We have incurred substantial indebtedness.

We have incurred substantial indebtedness and related debt service obligations, which could have important consequences, including:


•	reduced flexibility in planning for, or reacting to, changes in our business, the competitive environment and the markets in which we operate, and to technological and other changes;


•	reduced access to capital and increasing borrowing costs generally or for any additional indebtedness to finance future operating and capital expenses and for general corporate purposes;


•	lowered credit ratings;


•	reduced funds available for operations, capital expenditures and other activities; and


•	competitive disadvantages relative to other companies with lower debt levels.

Our Senior Secured Credit Facilities, comprised of our Revolving Credit Facility, as well as our Term Loan A Facility and Term Loan B Facility (secured on a first priority basis by all or substantially all of the assets of AAM, Inc., the assets of Holdings and each guarantor's assets), and our senior unsecured notes, contain customary affirmative and negative covenants. Some, or with respect to certain covenants, all of these agreements include financial covenants based on total net leverage and cash interest expense coverage ratios and limitations on Holdings, AAM Inc, and their restricted subsidiaries to make certain investments, declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, or merge, make certain acquisitions or sales of assets. A violation of any of these covenants or agreements could result in a default under these contracts, which could permit the lenders or note holders, as applicable, to accelerate repayment of any borrowings or notes outstanding at that time and levy on the collateral granted in connection with the senior secured credit facilities. A default or acceleration under the senior secured credit facilities or the indentures governing the senior unsecured notes may result in increased capital costs and defaults under our other debt agreements and may adversely affect our ability to operate our business, our subsidiaries' and guarantors' ability to operate their respective businesses and our results of operations and financial condition.

The available capacity under our Revolving Credit Facility could be limited by our total net leverage ratio under certain conditions. An increase in net leverage ratio, as a result of decreased earnings or otherwise, could result in reduced access to capital under our Revolving Credit Facility.

The interest rates included in the agreements that govern our Senior Secured Credit Facilities are based primarily on the London Interbank Offered Rate (LIBOR). In the future, use of LIBOR may be discontinued and we cannot be certain how long LIBOR will continue to be a viable benchmark interest rate. Use of alternative interest rates could result in increased borrowing costs associated with our Senior Secured Credit Facilities.

Our company faces substantial pension and other postretirement benefit obligations.

We have significant pension and other postretirement benefit obligations to certain of our associates and retirees. Our ability to satisfy the funding requirements associated with these obligations will depend on our cash flow from operations and our ability to access credit and the capital markets. The funding requirements of these benefit plans, and the related expense reflected in our financial statements, are affected by several factors that are subject to an inherent degree of uncertainty and volatility, including governmental regulation. Key assumptions used to value these benefit obligations and the cost of providing such benefits, funding requirements and expense recognition include the discount rate, the expected long-term rate of return on pension assets, mortality rates and the health care cost trend rate. If the actual trends in these factors are less favorable than our assumptions, this could have an adverse effect on our results of operations and financial condition.

Our business is subject to costs associated with environmental, health and safety regulations.

Our operations are subject to various federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. We believe that our current and former operations and facilities have been, and are being, operated in compliance, in all material respects, with such laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. The operation of our manufacturing facilities entails risks in these areas, however, and there can be no assurance that we will not incur material costs or liabilities. In addition, potentially significant expenditures could be required in order to comply with evolving environmental, health and safety laws, regulations or other pertinent requirements that may be adopted or imposed in the future by governmental authorities.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

The table below summarizes our global manufacturing locations and key administrative locations:



North America		Europe	Asia	South America
United States		Czech Republic	China	Brazil
Brewton, AL (d)	Oxford, MI (b)	Oslavany (b)	Changshu (a)	Araucária (a)
Columbiana, AL (d)	Rochester Hills, MI (e)	Zbysov (b)	Hefei (JV) (a)	Indaiatuba (c)
Paris, AR (c)	Royal Oak, MI (b)	England	Huzhou City (JV) (b)
Subiaco, AR (c)	Southfield, MI (e)	Halifax (c)	Shanghai (e)
Bolingbrook, IL (b)	Three Rivers, MI (a)	France	Suzhou (c)
Chicago, IL (b)	Troy, MI (b)	Decines (c)	India
Bluffton, IN (c)	Warren, MI (c)	Lyon (c)	Chennai (a)
Columbus, IN (b)	St. Cloud, MN (d)	Germany	Jamshedpur (JV) (c)
Fort Wayne, IN (b)	Biscoe, NC (d)	Bad Homburg (e)	Pune (a), (e)
Fremont, IN (c)	Malvern, OH (b)	Nurnberg (b)	Japan
New Castle, IN (d)	Minerva, OH (b)	Zell (b)	Tokyo (e)
North Vernon, IN (c)	Twinsburg, OH (c)	Luxembourg	South Korea
Remington, IN (b)	Ridgway, PA (c)	Steinfort (e)	Pyeongtaek (c)
Rochester, IN (a)	St. Mary's, PA (c)	Poland	Thailand
Auburn Hills, MI (b)	Charleston, SC (a)	Swidnica (a)	Rayong (a)
Detroit, MI (e)	Browntown, WI (d)	Scotland
Fraser, MI (b)	Menomonee Falls, WI (d)	Glasgow (a)
Kingsford, MI (d)	Reedsburg, WI (d)	Spain
Litchfield, MI (c)	Wauwatosa, WI (d)	Barcelona (c)
Mexico		Valencia (c)
El Carmen (d)	Silao (a), (b)	Sweden
Ramos Arizpe (c)		Arjeplog (e)
		Trollhättan (a), (e)

(a) Location supports the Driveline segment. (b) Location supports the Metal Forming segment. (c) Location supports the Powertrain segment. (d) Location supports the Casting segment. (e) Administrative, engineering or technical location.

We believe that our property and equipment is properly maintained and in good operating condition. We will continue to evaluate capacity requirements in light of current and projected market conditions. We also intend to continue redeploying assets in order to increase our capacity utilization and reduce future capital expenditures to support program launches.


Item 3.	Legal Proceedings

We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material effect on our financial condition, results of operations or cash flows.

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We closely monitor our environmental conditions to ensure that we are in compliance with applicable laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures to comply with environmental requirements, including recurring administrative costs. Such expenditures were not significant in 2018 , 2017 and 2016 .


Item 4.	Mine Safety Disclosures

Not applicable.

Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock, par value $0.01 per share, is listed for trading on the New York Stock Exchange (NYSE) under the symbol “AXL.” We had approximately 202 stockholders of record as of February 12, 2019 .

Dividends

We did not declare or pay any cash dividends on our common stock in 2018 . Our Credit Agreement associated with our Senior Secured Credit Facilities that was entered into in connection with our acquisition of MPG, limits our ability to declare or pay dividends or distributions on capital stock.

Issuer Purchases of Equity Securities

In 2016 , AAM's Board of Directors authorized a share repurchase program of up to $100 million of AAM's common shares as part of AAM's overall capital allocation strategy. The program expired on December 31, 2018. We repurchased a total of $1.5 million of shares under the share repurchase program and there were no share repurchases under the program during 2018 .

Securities Authorized for Issuance under Equity Compensation Plans

The information regarding our securities authorized for issuance under equity compensation plans is incorporated by reference from our Proxy Statement.

Item 6. Selected Financial Data

FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY

Year Ended December 31,



	2018				2017				2016				2015				2014
	(in millions, except per share data)
Statement of operations data
Net sales	$	7,270.4			$	6,266.0			$	3,948.0			$	3,903.1			$	3,696.0
Gross profit	1,140.4				1,119.1				726.1				635.4				522.8
Selling, general and
administrative expenses	385.7				390.1				314.2				274.1				255.2
Amortization of intangibles	99.4				75.3				5.0				3.2				0.4
Goodwill impairment	485.5			(a)	—				—				—				—
Restructuring and acquisition-related costs	78.9				110.7				26.2				—				—
Gain on sale of business	15.5			(b)	—				—				—				—
Operating income	106.4				543.0				380.7				358.1				267.6
Net interest expense	214.3				192.7				90.5				96.6				97.8
Gain on settlement of capital lease	15.6			(c)	—				—				—				—
Net income (loss)	(56.8		)	(d)(e)	337.5			(d)(e)	240.7			(d)	235.6			(e)	143.0			(f)
Net income (loss) attributable to AAM	(57.5		)	(d)(e)	337.1			(d)(e)	240.7			(d)	235.6			(e)	143.0			(f)
Diluted earnings (loss) per share	$	(0.51	)		$	3.21			$	3.06			$	3.02			$	1.85

Balance sheet data
Cash and cash equivalents	$	476.4			$	376.8			$	481.2			$	282.5			$	249.2
Total assets	7,510.7				7,882.8				3,422.3			(g)	3,176.9			(g)	3,214.6			(g)
Total long-term debt, net	3,686.8				3,969.3				1,400.9				1,375.7				1,504.6
Total AAM stockholders' equity	1,483.9				1,536.0				504.2			(g)	275.7			(g)	87.6			(g)
Dividends declared per share	—				—				—				—				—

Statement of cash flows data
Cash provided by operating activities	$	771.5			$	647.0			$	407.6			$	377.6			$	318.4
Cash used in investing activities	(478.2		)		(1,378.1		)		(227.7		)		(188.1		)		(195.3		)
Cash provided by (used in) financing activities	(184.5		)		615.6				18.4				(143.6		)		(21.4		)

Other data
Depreciation and amortization	$	528.8			$	428.5			$	201.8			$	198.4			$	199.9
Capital expenditures	524.7				477.7				223.0				193.5				206.5
Proceeds from sale of business, net	47.1			(b)	5.9				—				—				—
Acquisition of business, net of cash acquired	1.3				895.5				5.6				—				—
Purchase buyouts of leased equipment	0.5				13.3				4.6				—				—


(a)	We recorded a goodwill impairment charge in 2018 associated with the annual goodwill impairment test for our Powertrain and Casting segments.


(b)	In 2018, we completed the sale of the aftermarket business associated with our Powertrain segment for approximately $50 million, of which we received net proceeds of $47.1 million. As a result of the sale, we recorded a $15.5 million pre-tax gain.


(c)	In 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as a result of the acquisition of MPG. This settlement resulted in a pre-tax gain of $15.6 million, including accrued interest.

(d)

For 2018, these amounts include goodwill impairment charges of $400.3 million, net of tax, acquisition and integration related charges of $27.5 million, net of tax, asset impairment and plant closure costs of $25.7 million, net of tax, and implementation costs, including professional expenses, relating to restructuring of $9.2 million, net of tax. For 2017, these amounts include acquisition and integration related charges of $56.0 million, net of tax, asset impairment and plant closure costs of $2.3 million, net of tax, and implementation costs, including professional expenses, relating to restructuring of $9.0 million, net of tax. For 2016, these amounts include acquisition and integration related charges of $7.1 million, net of tax, asset impairment and plant closure costs of $4.7 million and implementation costs, including professional expenses, relating to restructuring of $6.6 million, net of tax.


(e)	Includes charges of $15.3 million, net of tax, in 2018, $2.3 million, net of tax, in 2017 and $0.5 million, net of tax, in 2015 related to debt refinancing and redemption costs.


(f)	Includes a settlement charge of $23.1 million, net of tax, related to our terminated vested lump-sum pension payout in the U.S.

(g)

Each of these amounts have been adjusted by $25.8 million, net of tax, related to the retrospective application of our change in accounting principle for indirect inventory, in which we changed our method of accounting from capitalizing indirect inventory and recording as expense when the inventory was consumed, to expensing indirect inventory at the time of purchase. This change in accounting principle was effective in the second quarter of 2017.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

COMPANY OVERVIEW

We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying a significant portion of GM's rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from each of our Metal Forming, Powertrain and Casting segments. Sales to GM were approximately 41% of our consolidated net sales in 2018 , 47% in 2017 , and 67% in 2016 .

We also supply driveline system products for FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Jeep Cherokee, and a passenger car driveshaft program. In addition, we sell various products to FCA from each of our Metal Forming, Powertrain and Casting segments. Sales to FCA were approximately 13% of our consolidated net sales in 2018 , 14% in 2017 and 18% in 2016 .

Our acquisition of MPG in 2017 has significantly increased the diversification in our product portfolio, and accelerated customer diversification initiatives. As a result of our acquisition of MPG, sales to GM and FCA as a percentage of consolidated net sales has been reduced.

INDUSTRY TRENDS

There are a number of significant trends affecting the markets in which we compete. Intense competition, volatility in fuel, steel, metallic and other commodity prices and significant pricing pressures remain. At the same time, there is a focus on investing in future products that will incorporate the latest technology and meet changing customer demands. The continued advancement of technology and product innovation, as well as the capability to source programs on a global basis, are critical to attracting and retaining business in our global markets.

INCREASE IN DEMAND FOR ELECTRIFICATION AND ELECTRONIC INTEGRATION The electrification of vehicles continues to expand, largely driven by government regulations related to emissions, such as the Corporate Average Fuel Economy standards, as well as consumer demand for greater vehicle performance, enhanced functionality, increased electronic content and vehicle connectivity, and affordable convenience options. As electronic components become an increasingly larger focus for OEMs and suppliers, the industry will likely continue to see the addition of new market entrants from non-traditional automotive companies, including increased competition from technology companies. An area of focus will be the product development cycle and bridging the gap between the shorter development cycles of IT hardware and software and the longer development cycles of traditional powertrain components. Our e-AAM ^™ hybrid and electric driveline systems, VecTrac ^™ Torque Vectoring Technology and TracRite ^® Differential Technology, are examples of AAM's enhanced capabilities in electronic integration.

EVOLUTION OF THE AUTOMOTIVE INDUSTRY AS DEMAND FOR CAR-SHARING, RIDE-SHARING AND AUTONOMOUS VEHICLES INCREASES OEMs are increasingly focused on offering their own car-sharing rental businesses and ride-sharing services, in addition to selling vehicles. Car-sharing typically allows consumers to rent a car for a short period of time, while ride-sharing matches people to available carpools or other services that provide on-demand rides with the use of an online application. With continued urbanization, population growth and increased government regulations to ease congestion, it is expected that the markets for these services will continue to grow, which could cause a shift in the type of vehicles utilized. As such, many OEMs are exploring and expanding their own car-sharing and ride-sharing efforts.

Another trend developing is the expectation that autonomous, self-driving cars will become more common with continued advancements in technology. Autonomous vehicles present many possible benefits, such as a reduction in deadly traffic collisions caused by human error and reduced traffic congestion, but there are also foreseeable challenges such as liability for damage and software reliability. The increased integration of electronics and vehicle

connectivity that will likely be required in autonomous vehicle developments will provide an opportunity for suppliers, such as AAM, with advanced capabilities in this area to be competitive in this expanding market.

GLOBAL AUTOMOTIVE PRODUCTION AND INDUSTRY CONSOLIDATION As our customers design their products for global markets, they will continue to require global support from their suppliers. For this reason, it is critical that suppliers maintain a global presence in these markets in order to compete for new contracts. As a result of our acquisition of MPG, we have expanded our global presence, primarily in Asia and Europe. We also have engineering offices around the world to support our global locations and provide technical solutions to our customers on a regional basis.

The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers will be the ability to meet these global demands while effectively managing costs. OEMs and suppliers are preparing for these challenges through merger and acquisition activity, development of strategic partnerships and reduction of vehicle platform complexity. In order to effectively drive technology development, recognize cost synergies, and increase global footprint, the industry may continue to see consolidation in the supply base as companies recognize and respond to the need for scalability. Our acquisition of MPG is a critical step in achieving the aforementioned objectives.

INCREASED DEMAND FOR FUEL EFFICIENCY AND EMISSIONS REDUCTIONS There has been an increased demand for technologies designed to help reduce emissions, increase fuel economy and minimize the environmental impact of vehicles. As a result, OEMs and suppliers are competing to develop and market new and alternative technologies, such as electric vehicles, hybrid vehicles, fuel cells, and fuel-efficient engines. At the same time, OEMs and suppliers are improving products to increase fuel economy and reduce emissions through lightweighting and efficiency initiatives.

We are responding with ongoing research and development (R&D) efforts that focus on fuel economy, emissions reductions and environmental improvements by integrating electronics and technology. Through the development of our EcoTrac ^® Disconnecting AWD system, e-AAM ^™ hybrid and electric driveline systems, Quantum ^TM lightweight axle technology, high-efficiency axles, PowerLite ^® axles and PowerDense ^® gears, high strength connecting rod technology and refined vibration control systems, forged axle tubes, and high strength ductile iron Ductile - ITE ^™ , we have significantly advanced our efforts to improve fuel efficiency, safety, and ride and handling performance while reducing emissions and mass. These efforts have led to new business awards and further position us to compete in the global marketplace.

In addition to AAM's organic growth in technology and processes, our acquisition of MPG has provided us with complementary technologies, expanded our product portfolio, significantly diversified our global customer base, and strengthened our long-term financial profile through greater scale. The anticipated synergies of this acquisition are expected to enhance AAM's ability to compete in today's technological and regulatory environment, while remaining cost competitive through increased scale and integration.

RESULTS OF OPERATIONS

NET SALES Net sales increased to $7,270.4 million in 2018 as compared to $6,266.0 million in 2017 and $3,948.0 million in 2016 . The increase in sales in 2018 , as compared to 2017 , reflects an increase of approximately $738 million related to the inclusion of twelve months of MPG sales in 2018, as compared to nine months of MPG sales in 2017, as the acquisition was completed in April 2017. The increase in sales also reflects higher production volumes related to crossover vehicles and increased production volumes from program launches associated with our new business backlog. This was partially offset by the impact of lower full-size truck sales as a result of a decision by our largest customer to in-source a portion of a replacement program that launched in 2018, and a reduction in production volumes for certain North American light truck programs we support as we prepared for program changeovers in 2018. Net sales were also impacted by an increase in metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments totaling approximately $67 million.

The impact of our acquisition of MPG on net sales in 2017 was approximately $2,022 million. Excluding the impact of our acquisition of MPG, our sales in 2017 , as compared to 2016 , reflect an increase in production volumes for the light truck and SUV programs we support, as well as the impact of program launches from our new business backlog and an increase in metal market pass-throughs to our customers, partially offset by the impact of annual productivity price-downs for certain programs.

COST OF GOODS SOLD Cost of goods sold was $6,130.0 million in 2018 as compared to $5,146.9 million in 2017 and $3,221.9 million in 2016 . The change in cost of goods sold in 2018 , as compared to 2017 , reflects an increase of approximately $639 million attributable to the inclusion of twelve months of MPG cost of goods sold in 2018, as compared to nine months of MPG cost of goods sold in 2017. The change in cost of goods sold in 2018, as compared to 2017, also reflects higher material and freight costs, as well as an increase in project expense and costs associated with increased levels of global launch activity in 2018. Cost of goods sold was also impacted by an increase of approximately $67 million related to metal market pass-through costs and the impact of foreign exchange.

The impact on cost of goods sold of our acquisition of MPG was approximately $1,739 million in 2017 , which included $24.9 million for the step-up of inventory to fair value as a result of purchase accounting. Excluding the impact of our acquisition of MPG, the change in cost of goods sold in 2017 , as compared to 2016 , principally reflected approximately $120 million related to increased production volumes and an increase of approximately $75 million related to metal market pass-through costs, partially offset by approximately $12 million associated with lower net manufacturing costs, including the impact of foreign exchange, and productivity initiatives. The change in cost of goods sold also reflected approximately $22 million related to the positive impact of vertically integrating our supply chain realized as a result of our acquisition of USM Mexico Manufacturing LLC (USM Mexico) in 2017.

Materials costs as a percentage of total cost of goods sold were approximately 59% in 2018 , 62% in 2017 and 68% in 2016 .

GROSS PROFIT Gross profit increased to $1,140.4 million in 2018 as compared to $1,119.1 million in 2017 and $726.1 million in 2016 . Gross margin was 15.7% in 2018 as compared to 17.9% in 2017 and 18.4% in 2016 . Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) SG&A (including R&D) was $385.7 million in 2018 as compared to $390.1 million in 2017 and $314.2 million in 2016 . SG&A as a percentage of net sales was 5.3% in 2018 , 6.2% in 2017 and 8.0% in 2016 . R&D spending was $146.2 million in 2018 as compared to $161.5 million in 2017 and $139.8 million in 2016 . The change in SG&A in 2018 , as compared to 2017 , reflects approximately $25 million associated with the inclusion of twelve months of MPG SG&A in 2018 , as compared to nine months of MPG SG&A in 2017 , which was offset by lower R&D spending and the achievement of synergies as a result of the acquisition of MPG.

The change in SG&A in 2017 , as compared to 2016 , was primarily due to an increase of approximately $90 million associated with our acquisition of MPG. SG&A expense also reflected the increase in R&D spending in 2017 as compared to 2016 , which was partially offset by the achievement of synergies associated with our restructuring actions initiated in 2016 and as a result of our acquisition of MPG.

AMORTIZATION OF INTANGIBLE ASSETS As a result of our acquisitions of MPG and USM Mexico in 2017, we recognized $1,254.8 million of intangible assets. Amortization expense for the year ended December 31, 2018 was $99.4 million as compared to $75.3 million and $5.0 million for the years ended December 31, 2017 and December 31, 2016, respectively. The increase in amortization expense was primarily attributable to the impact of twelve months of amortization on the MPG intangibles in 2018 as compared to nine months of amortization in 2017 . The increase in amortization expense in 2017 , as compared to 2016 , was attributable to the increase in intangible assets as a result of the MPG and USM Mexico acquisitions in 2017 .

GOODWILL IMPAIRMENT As a result of our annual goodwill impairment test in the fourth quarter of 2018, we determined that the carrying values of our Powertrain and Casting segments were greater than their respective fair values. As such, we recorded a total goodwill impairment charge of $485.5 million in 2018 associated with these segments. See Note 5 - Goodwill and Other Intangible Assets for further detail.

RESTRUCTURING AND ACQUISITION-RELATED COSTS Restructuring and acquisition-related costs were $78.9 million in 2018 , $110.7 million in 2017 , and $26.2 million in 2016 . As part of our restructuring actions, we incurred severance charges of approximately $2.5 million , as well as implementation costs, including professional expenses, of approximately $ 11.7 million during 2018 .

Also during 2018, we initiated actions to exit operations at manufacturing facilities in our Driveline, Metal Forming and Powertrain segments. As a result of these actions, we were required to assess the associated long-lived assets for impairment. Based on our analysis, assets that were not to be redeployed to other AAM facilities were determined to be fully impaired resulting in total charges of $30.0 million in 2018.

In 2017 , we incurred severance charges of approximately $2.0 million , as well as other implementation costs, including professional fees, of approximately $13.9 million , and asset impairment charges of $1.5 million . In 2016 , severance charges were approximately $0.6 million , while implementation costs were $10.2 million and asset impairment charges were $4.5 million .

In 2017, we completed our acquisitions of MPG and USM Mexico. During 2018 we incurred $1.2 million of acquisition-related costs, acquisition-related severance costs of $0.5 million , and $33.0 million of integration expenses associated with these acquisitions. This compares to $40.7 million of acquisition-related costs, $7.2 million of acquisition-related severance charges, and $45.4 million of integration expenses associated with these acquisitions for the year ended December 31, 2017.

Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred. Also included in acquisition-related costs in 2017 was a one-time charge of approximately $20 million for MPG stock-based compensation that was accelerated and settled as a result of the acquisition. Integration expenses reflect costs incurred for information technology systems, ongoing operational activities, and consulting fees incurred in conjunction with the acquisitions. We expect to incur additional integration charges of approximately $15 million to $25 million in 2019 , as we further the integration of MPG.

In 2019, we plan to initiate a new global restructuring program (the 2019 Program) to further streamline our business by consolidating our four existing business units into three business units. This will occur through the disaggregation of our Powertrain business unit, with a portion moving into our Driveline business unit and a portion moving into our Metal Forming business unit. The primary objectives of this consolidation are to finalize the integration of MPG in a timely manner, align AAM's product and process technologies, and to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business. We did not incur any charges under the 2019 Program during 2018. We expect to incur approximately $25 million to $35 million of total restructuring charges in 2019, including costs incurred under the 2019 Program.

GAIN ON SALE OF BUSINESS In April 2018, we completed the sale of the aftermarket business associated with our Powertrain segment for approximately $50 million. As a result, we recorded a $15.5 million pre-tax gain, which is disclosed in the Gain on sale of business line item of our Consolidated Statement of Operations for the year ended December 31, 2018.

OPERATING INCOME Operating income was $106.4 million in 2018 as compared to $543.0 million in 2017 and $380.7 million in 2016 . Operating margin was 1.5% in 2018 as compared to 8.7% in 2017 and 9.6% in 2016 . The changes in operating income and operating margin in 2018 , 2017 and 2016 were due to the factors discussed

in Net Sales, Cost of Goods Sold, SG&A, Amortization of Intangible Assets, Goodwill Impairment, Restructuring and Acquisition-Related Costs and Gain on Sale of Business above.

INTEREST EXPENSE Interest expense was $216.3 million in 2018 , $195.6 million in 2017 and $93.4 million in 2016 . The change in interest expense in 2018 , as compared to 2017 , is primarily attributable to additional interest expense incurred on borrowings outstanding under our Senior Secured Credit Facilities entered into in April 2017, as well as on $700.0 million aggregate principal amount of 6.25% senior notes due 2025 and $500.0 million in aggregate principal amount of 6.50% senior notes due 2027, which were issued in March 2017. The change in interest expense in 2017, as compared to 2016, primarily reflects the interest incurred on these additional borrowings in 2017.

The weighted-average interest rate of our total debt outstanding was 5.8% in 2018 and 2017, and 6.6% in 2016 . We expect our interest expense in 2019 to be approximately $215 million to $225 million.

INVESTMENT INCOME Investment income was $2.0 million in 2018 and $2.9 million in 2017 and 2016 . Investment income includes interest earned on cash and cash equivalents during the period.

OTHER INCOME (EXPENSE) Following are the components of Other Income (Expense) for 2018 , 2017 and 2016 :

Debt refinancing and redemption costs In March 2018, we made a tender offer for our 6.25% Notes due 2021. Under this tender offer, we retired $383.1 million of the 6.25% Notes due 2021. We redeemed the remaining $16.9 million of the 6.25% Notes due 2021 during the second quarter of 2018. As a result of the tender and subsequent redemption, we expensed $2.5 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $8.0 million in tender premiums.

In May 2018, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100 million, and a payment of $0.8 million in accrued interest. As a result of the redemption, we expensed $0.8 million for the write-off of a portion of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $3.3 million for an early redemption premium.

In November 2018, we voluntarily redeemed a portion of our 7.75% Notes due 2019. This resulted in a principal payment of $100 million, and a payment of $3.9 million in accrued interest. As a result of the redemption, we expensed approximately $0.3 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the life of the borrowing, and approximately $4.5 million for an early redemption premium.

In 2017 , we expensed $2.7 million of prepayment premiums related to the extinguishment of MPG's existing debt at the date of the acquisition and $0.8 million for the write-off of the remaining unamortized debt issuance costs related to our 5.125% Notes that were redeemed in the fourth quarter of 2017. There were no such costs incurred in 2016 .

Gain on settlement of capital lease In the second quarter of 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as a result of the acquisition of MPG. This settlement resulted in a gain of $15.6 million, including accrued interest.

Other, net Other, net, which includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service costs, was expense of $2.2 million in 2018 , compared to expense of $6.8 million in 2017 , and income of $8.8 million in 2016 . The change in Other, net in 2017, as compared to 2016, primarily related to foreign exchange remeasurement losses as a result of the U.S. dollar weakening against the Mexican Peso and Euro.

INCOME TAX EXPENSE (BENEFIT) Income tax was a benefit of $57.1 million in 2018 , as compared to expense of $2.5 million in 2017 , and expense of $58.3 million in 2016 . Our effective income tax rate was 50.1% in 2018 as compared to 0.7% in 2017 and 19.5% in 2016 .

In 2018, our income tax benefit is higher than the tax benefit computed at the U.S. federal statutory rate, and in 2017 and 2016 our income tax expense was lower than tax expense computed at the U.S. federal statutory rate, primarily due to the impact of favorable foreign tax rates, and the impact of income tax credits, partially offset by our

inability to realize an income tax benefit for losses incurred in certain foreign and state jurisdictions. In addition, during 2018, we finalized an advance pricing agreement in a foreign jurisdiction and settled various other matters, which resulted in an income tax benefit and a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20 million. We also recorded an income tax benefit of approximately $85 million in 2018 as a result of the goodwill impairment charge, partially offset by a discrete tax expense related to the sale of the aftermarket business associated with our Powertrain segment.

Our income tax expense and effective income tax rate for 2017 were lower than our income tax expense and effective income tax rate for 2016 as a result of an increase in the proportionate share of earnings attributable to lower tax rate jurisdictions. In addition, subsequent to the acquisition of MPG, we re-evaluated our valuation allowance position with regard to jurisdictions in which consolidated state tax returns are filed and recorded an income tax benefit for the year ended December 31, 2017. This was partially offset by a discrete tax adjustment related to certain non-deductible transaction and acquisition-related costs. Further, we recognized a net tax benefit of approximately $20 million in 2017 related to accounting for the provisions of the Tax Cuts and Jobs Act under U.S. tax reform.

NET INCOME (LOSS) ATTRIBUTABLE TO AAM AND EARNINGS (LOSS) PER SHARE (EPS) Net income (loss) attributable to AAM was a loss of $57.5 million in 2018 as compared to income of $337.1 million in 2017 and $240.7 million in 2016 . Diluted loss per share was $0.51 in 2018 as compared to diluted earnings of $3.21 per share in 2017 and $3.06 per share in 2016 . Primarily as a result of the issuance of AAM common shares in conjunction with our acquisition of MPG, our EPS denominator increased by approximately 9 million shares for 2018 , as compared to 2017 , and increased by approximately 26 million shares for 2017, as compared to 2016. Net Income (Loss) and EPS were primarily impacted by the factors discussed above, as well as the issuance of the additional shares as a result of the acquisition of MPG.

SEGMENT REPORTING

Our business is organized into four operating segments, each representing a reportable segment under ASC 280 Segment Reporting . The four segments are Driveline, Metal Forming, Powertrain and Casting. The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources.

Our product offerings by segment are as follows:


•	Driveline products consist primarily of axles, driveshafts, power transfer units, rear drive modules, transfer cases, and electric and hybrid driveline products and systems for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles;


•	Metal Forming products consist primarily of axle and transmission shafts, ring and pinion gears, differential gears, transmission gears, and suspension components for Original Equipment Manufacturers and Tier 1 automotive suppliers;


•	The Powertrain segment products consist primarily of transmission module and differential assemblies, transmission valve bodies, connecting rod forging and assemblies, torsional vibration dampers, and variable valve timing products for Original Equipment Manufacturers and Tier 1 automotive suppliers; and


•	The Casting segment produces both thin wall castings and high strength ductile iron casting, as well as differential cases, steering knuckles, control arms, brackets, and turbo charger housings for the global light vehicle, commercial and industrial markets.

The following tables outline our sales and Segment Adjusted EBITDA for each of our reportable segments for the years ended December 31, 2018 , 2017 and 2016 (in millions) :



	Year Ended December 31, 2018

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	4,254.8	$	1,515.4	$	1,128.5	$	919.8	$	—	$	7,818.5
Less: Intersegment sales	0.8		418.0		13.8		115.5		—		548.1
Net external sales	$	4,254.0	$	1,097.4	$	1,114.7	$	804.3	$	—	$	7,270.4

Segment adjusted EBITDA	$	660.7	$	285.9	$	163.7	$	73.6	$	—	$	1,183.9



	Year Ended December 31, 2017

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	4,040.8	$	1,242.6	$	816.5	$	676.4	$	—	$	6,776.3
Less: Intersegment sales	1.1		412.6		9.9		86.7		—		510.3
Net external sales	$	4,039.7	$	830.0	$	806.6	$	589.7	$	—	$	6,266.0

Segment adjusted EBITDA	$	692.3	$	232.3	$	131.1	$	47.0	$	—	$	1,102.7



	Year Ended December 31, 2016

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	3,735.6	$	552.2	$	—	$	—	$	—	$	4,287.8
Less: Intersegment sales	4.9		334.9		—		—		—		339.8
Net external sales	$	3,730.7	$	217.3	$	—	$	—	$	—	$	3,948.0

Segment adjusted EBITDA	$	515.8	$	103.6	$	—	$	—	$	—	$	619.4

The increase in Driveline sales for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , primarily reflects higher production volumes related to crossover vehicles and increased production volumes from program launches associated with our new business backlog. This was partially offset by the impact of lower full-size truck sales as a result of a decision by our largest customer to in-source a portion of a replacement program that launched in 2018, and a reduction in production volumes for certain North American light truck programs we support as we prepared for program changeovers in 2018. Driveline sales for the year ended December 31, 2018, as compared to the year ended December 31, 2017, were also impacted by an increase related to metal market pass-throughs to our customers of approximately $31 million.

The increase in Driveline sales for the year ended December 31, 2017 , as compared to the year ended December 31, 2016, primarily reflects the impact of program launches from our new business backlog, as well as an increase in metal market pass-throughs to our customers, which was partially offset by the impact of annual productivity price-downs for certain programs. Driveline sales for the year ended December 31, 2017 were also positively impacted by increased production volumes on the light truck and SUV programs we support.

The increase in sales in our Metal Forming segment for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , primarily reflects the inclusion of twelve months of MPG sales in 2018, as

compared to nine months of MPG sales in 2017, as the acquisition was completed in April 2017. The increase in sales in 2018, as compared to 2017, also reflects an increase in metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments totaling approximately $43 million. The increase in net sales in our Metal Forming segment for the year ended December 31, 2017 , as compared to the year ended December 31, 2016, was primarily attributable to the purchase of MPG.

The increase in sales in our Powertrain segment for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , was primarily attributable to the inclusion of twelve months of MPG sales in 2018, as compared to nine months of MPG sales in 2017. The increase was also attributable to higher production volumes from program launches associated with our new business backlog. For the year ended December 31, 2017 , as compared to the year ended December 31, 2016, the increase in sales was entirely attributable to our acquisition of MPG, as AAM did not operate in this segment prior to the acquisition.

The increase in sales in our Casting segment for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , reflects the inclusion of twelve months of MPG sales in 2018, as compared to nine months of MPG sales in 2017, and an increase of approximately $13 million in metal market pass throughs to our customers. For the year ended December 31, 2017 , as compared to the year ended December 31, 2016, the increase in sales was entirely attributable to our acquisition of MPG, as AAM did not operate in this segment prior to the acquisition.

We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on the sale of a business, goodwill impairments and non-recurring items.

For the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , the change in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to increased material and freight costs, as well as an increase in project expense of approximately $15 million, and costs associated with increased levels of global launch activity in 2018. For the year ended December 31, 2017 , as compared to the year ended December 31, 2016, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to contribution margin on increased volumes for light truck and SUV programs we currently support, as well as the impact of productivity initiatives and the reorganization to four reportable segments subsequent to our acquisition of MPG. The positive impact of these factors was partially offset by an increase in metal market pass-through costs.

The increase in Metal Forming Segment Adjusted EBITDA for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , was primarily due to the acquisition of MPG, partially offset by increased material and freight costs. Metal Forming also experienced an increase in Segment Adjusted EBITDA for the year ended December 31, 2017 , as compared to the year ended December 31, 2016, primarily attributable to our acquisition of MPG.

The increase in Powertrain Segment Adjusted EBITDA for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , was primarily due to the acquisition of MPG, partially offset by an increase in costs associated with increased levels of global launch activity. For the year ended December 31, 2017 , the increase in Segment Adjusted EBITDA, as compared to the year ended December 31, 2016, was entirely attributable to our acquisition of MPG as AAM did not operate in this segment prior to our acquisition.

The increase in Casting Segment Adjusted EBITDA for the year ended December 31, 2018 , as compared to the year ended December 31, 2017 , was primarily due to the acquisition of MPG, which was partially offset by increased labor costs in an effort to address workforce shortages at certain locations. For the year ended December 31, 2017 , the increase in Segment Adjusted EBITDA, as compared to the year ended December 31, 2016, was entirely attributable to our acquisition of MPG as AAM did not operate in this segment prior to our acquisition.

Reconciliation of Non-GAAP and GAAP Information

In addition to results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) in this MD&A, we have provided certain non-GAAP financial measures such as EBITDA and Total Segment Adjusted EBITDA. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules below.

We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Total Segment Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on the sale of a business, goodwill impairments and non-recurring items. We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation. Our management, the investment community and the banking institutions routinely use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers and to assess the relative mix of Adjusted EBITDA by segment. We also believe that Total Segment Adjusted EBITDA is a meaningful measure as it is used for operational planning and decision-making purposes. These non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by AAM may not be comparable to similarly titled measures reported by other companies.



	Year Ended December 31,
	2018			2017			2016
Net income (loss)	$	(56.8	)	$	337.5		$	240.7
Interest expense	216.3			195.6			93.4
Income tax expense (benefit)	(57.1		)	2.5			58.3
Depreciation and amortization	528.8			428.5			201.8
EBITDA	$	631.2		$	964.1		$	594.2
Restructuring and acquisition-related costs	78.9			110.7			26.2
Debt refinancing and redemption costs	19.4			3.5			—
Gain on sale of business	(15.5		)	—			—
Goodwill impairment	485.5			—			—
Non-recurring items:
Gain on settlement of capital lease	(15.6		)	—			—
Pension settlement	—			3.2			—
Acquisition-related fair value inventory adjustment	—			24.9			—
Impact of change in accounting principle	—			(3.7		)	—
Other non-recurring items	—			—			(1.0		)
Total Segment Adjusted EBITDA	$	1,183.9		$	1,102.7		$	619.4

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund debt service obligations, capital expenditures and working capital requirements, in addition to advancing our strategic initiatives. We believe that operating cash flow, available cash and cash equivalent balances and available committed borrowing capacity under our Senior Secured Credit Facilities will be sufficient to meet these needs.

OPERATING ACTIVITIES Net cash provided by operating activities increased to $771.5 million in 2018 as compared to $647.0 million in 2017 and $407.6 million in 2016 . The following factors impacted cash provided by operating activities:

Accounts receivable We experienced an increase in cash flow from operating activities of approximately $56 million related to the change in our accounts receivable balance from December 31, 2017 to December 31, 2018, as compared to the change in accounts receivable from December 31, 2016 to December 31, 2017. This change was primarily attributable to the timing of payments from customers.

Inventories The change in inventory at December 31, 2018, as compared to December 31, 2017, is primarily the result of increased material and freight costs, as well as carrying additional inventory to support program changeover activities that occurred throughout 2018. We experienced a decrease in inventory at December 31,

2017 , as compared to December 31, 2016 , primarily resulting from the impact of inventory reduction initiatives, as well as the reduction of inventory at certain facilities as a result of expiring programs.

Accounts payable We experienced an increase in cash flow from operating activities as a result of an increase in our accounts payable balance at December 31, 2018 as compared to our accounts payable balance at December 31, 2017. This increase in accounts payable was primarily attributable to increased inventory levels and the timing of payments made to suppliers.

We experienced a decrease in our year-end 2017 accounts payable balance, as compared to our year-end 2016 accounts payable balance, which was primarily due to a reduction in inventory levels and the timing of payments made to suppliers. Also, as a result of our acquisitions in 2017, we settled accounts payable balances with USM Mexico and MPG totaling approximately $35 million, which was reflected as a reduction of cash flow from operating activities in our Consolidated Statement of Cash Flows for 2017. See Note 4 - Business Combinations for further detail.

Deferred revenue At December 31, 2018 and 2017 , we had deferred revenue of $44.3 million and $34.1 million , respectively, classified as a current liability and $77.6 million and $78.8 million , respectively, classified as a noncurrent liability in our Consolidated Balance Sheets. These amounts were primarily related to cash receipts from customers for various settlements and commercial agreements that are associated with a future benefit to these customers. In 2016, we reached an agreement with a customer to increase installed capacity for a program we support. We received $10.0 million in 2018, $5.0 million in 2017 and $20.0 million in 2016 related to this agreement.

Interest paid Interest paid in 2018 was $199.7 million as compared to $182.7 million in 2017 and $87.2 million in 2016 . The increase in interest paid in 2018 and 2017, as compared to 2016, primarily relates to the additional indebtedness incurred in connection with our acquisition of MPG.

Restructuring and acquisition-related costs We incurred $78.9 million, $110.7 million and $26.2 million of charges related to restructuring and acquisition-related costs in 2018, 2017 and 2016, respectively, and a significant portion of these charges were cash charges. In 2019 , we expect restructuring and acquisition-related payments to be between $50 million and $60 million for the full year.

Pension and other postretirement benefits (OPEB) Our cash payments for OPEB, net of GM cost sharing, were $9.9 million in 2018 , $12.5 million in 2017 , and $17.0 million in 2016 . This compares to our annual postretirement cost of $10.3 million in 2018 , $11.5 million in 2017 , and $12.1 million in 2016 . We expect our cash payments for other postretirement benefit obligations in 2019 , net of GM cost sharing, to be approximately $18 million .

Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in 2019 to be approximately $2 million.

Income taxes Based on the status of audits, and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the timing or impact of changes, if any, to previously recorded uncertain tax positions. As of December 31, 2018 and December 31, 2017 , we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $ 45.6 million and $55.2 million , respectively.

In January 2016, we completed negotiations with the Mexican tax authorities to settle 2007 through 2009 transfer pricing audits. We made a payment of $22.9 million in January 2016 that fully satisfied our obligations for transfer pricing issues for tax years 2007 through 2013. Including these settlements, we made payments of approximately $28 million in 2016 to the Mexican tax authorities related to transfer pricing matters.

Although it is difficult to estimate with certainty the amount of our tax liabilities for the years that remain subject to audit, we do not expect the settlements will be materially different from what we have recorded in unrecognized tax benefits. We will continue to monitor the progress and conclusions of current and future audits and will adjust our estimated liability as necessary.

INVESTING ACTIVITIES Capital expenditures were $524.7 million in 2018 , $477.7 million in 2017 and $223.0 million in 2016 . The increase in our capital spending in 2018, as compared to 2017, primarily supported our significant global program launches within our new and incremental business backlog, as well as launches of

replacement programs. The increase in capital spending in 2017, as compared to 2016, was primarily attributable to the acquisition of MPG. We expect our capital spending in 2019 to be approximately 7% of sales, which includes support for our global program launches in 2019 and 2020 within our new and incremental business backlog, as well as program capacity increases and future launches of replacement programs.

In 2018, we completed the sale of the aftermarket business associated with our Powertrain segment. As a result of this sale, we received net proceeds of approximately $47 million.

In 2017, we completed our acquisitions of MPG and USM Mexico. The purchase price for MPG was approximately $1.5 billion, which included a cash portion of approximately $750 million, net of cash acquired. For the acquisition of USM Mexico, we paid $144.1 million, net of cash acquired.

During 2017, we executed early buyout options to purchase certain leased equipment in the amount of $13.3 million.

In 2019, we expect to make a payment of approximately $10 million as part of our investment in the Liuzhou Wuling joint venture that was formed in 2018.

FINANCING ACTIVITIES Net cash used in financing activities was $184.5 million in 2018 , compared to net cash provided by financing activities of $615.6 million in 2017 , and net cash provided by financing activities of $18.4 million in 2016 . Total debt outstanding, net of debt issuance costs, was $3,808.4 million at year-end 2018 , $3,975.2 million at year-end 2017 and $1,404.2 million at year-end 2016 . The change in total debt outstanding, net of issuance costs, at year-end 2018 , as compared to year-end 2017 was primarily due to the factors noted below.

Senior Secured Credit Facilities In 2017, Holdings and American Axle & Manufacturing, Inc. (AAM Inc.) entered into a credit agreement (the Credit Agreement). In connection with the Credit Agreement, Holdings, AAM, Inc. and certain of their restricted subsidiaries entered into a Collateral Agreement and Guarantee Agreement with the financial institutions party thereto as collateral agent and administrative agent. The Credit Agreement includes a $100.0 million term loan A facility (the Term Loan A Facility), a $1.55 billion term loan B facility (the Term Loan B Facility) and a $932 million multi-currency revolving credit facility (the Revolving Credit Facility, and together with the Term Loan A Facility and the Term Loan B Facility, the Senior Secured Credit Facilities). The proceeds of the Revolving Credit Facility are used for general corporate purposes. We incurred debt issuance costs of $54.0 million in 2017 related to the Senior Secured Credit Facilities.

As of December 31, 2018 , we have prepaid $8.8 million of the outstanding principal on our Term Loan A Facility and $15.5 million of the outstanding principal on our Term Loan B Facility. These payments satisfy our obligation for principal payments under the Term Loan A Facility and Term Loan B Facility for the next four quarters. As a result, there are no amounts related to the Term Loan A Facility or Term Loan B Facility in the Current portion of long-term debt line item in our Consolidated Balance Sheet as of December 31, 2018 .

At December 31, 2018 , $894.7 million was available under the Revolving Credit Facility. This availability reflects a reduction of $37.3 million for standby letters of credit issued against the facility.

The Senior Secured Credit Facilities provide back-up liquidity for our foreign credit facilities. We intend to use the availability of long-term financing under the Senior Secured Credit Facilities to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their local markets, except where otherwise reclassified to Current portion of long-term debt on our Consolidated Balance Sheet.

6.25% Notes Due 2026 In the first quarter of 2018, we issued $400.0 million in aggregate principal amount of 6.25% senior notes due 2026 (the 6.25% Notes due 2026). Proceeds from the 6.25% Notes due 2026 were used primarily to fund the tender offer for the 6.25% senior notes due 2021 (the 6.25% Notes due 2021) described below. We paid debt issuance costs of $6.6 million during 2018 related to the 6.25% Notes due 2026.

Tender Offer of 6.25% Notes Due 2021 Also during the first quarter of 2018, we made a tender offer for our 6.25% Notes due 2021. Under this tender offer, we retired the $400.0 million of the 6.25% Notes due 2021 and expensed $2.5 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $8.0 million in tender premiums.

Redemption of 6.625% Notes Due 2022 In the second quarter of 2018, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million , and a payment of $0.8 million in accrued interest. During 2018, we expensed $0.8 million for the write-off of a portion of the the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $3.3 million for an early redemption premium.

Settlement of Capital Lease Obligation In the second quarter of 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as a result of the acquisition of MPG. In the third quarter of 2018, we paid $6.6 million related to this settlement agreement. During the fourth quarter of 2018, we paid the remaining $4.8 million related to this settlement agreement.

Redemption of 7.75% Notes Due 2019 In the fourth quarter of 2018, we voluntarily redeemed a portion of our 7.75% Notes due 2019. This resulted in a principal payment of $100.0 million and $3.9 million in accrued interest. We also expensed approximately $0.3 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $4.5 million for an early redemption premium.

6.50% Notes Due 2027 and 6.25% Notes Due 2025 During the first quarter of 2017, we issued $700.0 million in aggregate principal amount of 6.25% senior notes due 2025 and $500.0 million in aggregate principal amount of 6.50% senior notes due 2027 (the Notes). Proceeds from the Notes were used primarily to fund the cash consideration related to our acquisition of MPG, related fees and expenses, refinance certain existing indebtedness of MPG and borrowings under our previous revolving credit facility, which has been replaced by our new Revolving Credit Facility, together with borrowings under the Senior Secured Credit Facilities. We incurred debt issuance costs of $37.2 million in 2017 related to the Notes.

Foreign Credit Facilities We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At December 31, 2018 , $127.1 million was outstanding under our foreign credit facilities and an additional $78.2 million was available, as compared to December 31, 2017 , when $53.2 million was outstanding under our foreign credit facilities and an additional $159.7 million was available. The increase in outstanding borrowings under our foreign credit facilities primarily relate to our operations in China and Poland as we prepare for program launch activity.

Repayment of MPG Indebtedness Upon our acquisition of MPG in 2017, we assumed approximately $1.9 billion of existing MPG indebtedness, which we repaid in its entirety on the date of acquisition. This indebtedness was comprised of approximately $0.2 billion of a Euro denominated term loan, approximately $1.0 billion of a U.S. dollar denominated term loan and approximately $0.7 billion of outstanding MPG bonds. Upon settlement of the debt, we paid approximately $24.6 million of accrued interest. In addition, we expensed $2.7 million of prepayment premiums related to the extinguishment of MPG's debt, which has been presented in the Debt refinancing and redemption costs line item within our Consolidated Statements of Operations for the year ended December 31, 2017 .

Treasury stock Treasury stock increased by $3.7 million in 2018 to $201.8 million as compared to $198.1 million at year-end 2017 , due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of performance shares and restricted stock units.

Credit ratings To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to our securities as an indicator of credit quality for fixed income investors. A credit rating agency may change or withdraw its ratings based on its assessment of our current and future ability to meet interest and principal repayment obligations. Credit ratings affect our cost of borrowing under our Revolving Credit Facility and may affect our access to debt capital markets and other costs to fund our business. The credit ratings and outlook currently assigned to our securities by the rating agencies are as follows:



	Corporate Family Rating	Senior Unsecured Notes Rating	Senior Secured Notes Rating	Outlook
Standard & Poor's	BB-	B	BB	Stable
Moody's Investors Services	B1	B2	Ba2	Stable

Dividend program We have not declared or paid any cash dividends on our common stock in 2018 , 2017 or 2016 .

Off-balance sheet arrangements Our off-balance sheet financing relates principally to operating leases for machinery and equipment, commercial office and production facilities, vehicles and other assets with various expiration dates.

Contractual obligations The following table summarizes payments due on our contractual obligations as of December 31, 2018 :



	Payments due by period
	Total		<1yr		1-3 yrs		3-5 yrs		>5 yrs
	(in millions)
Current and long-term debt	$	3,872.1	$	151.3	$	126.8	$	544.7	$	3,049.3
Interest obligations	1,201.3		224.9		435.5		315.7		225.2
Capital lease obligations	3.4		0.9		1.7		0.8		—
Operating leases (1)	112.0		32.6		40.5		20.1		18.8
Purchase obligations (2)	287.2		258.5		28.7		—		—
Other long-term liabilities (3)	602.7		60.7		119.1		117.3		305.6
Total	$	6,078.7	$	728.9	$	752.3	$	998.6	$	3,598.9


(1)	Operating leases include all lease payments through the end of the contractual lease terms, which includes elections for repurchase options. These commitments include machinery and equipment, commercial office and production facilities, vehicles and other assets.


(2)	Purchase obligations represent our obligated purchase commitments for capital expenditures and related project expense.


(3)	Other long-term liabilities primarily represent our estimated pension and other postretirement benefit obligations, net of GM cost sharing, that were actuarially determined through 2028.

CYCLICALITY AND SEASONALITY

LEGAL PROCEEDINGS

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We closely monitor our environmental conditions to ensure that we are in compliance with applicable laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures, including recurring administrative costs, to comply with environmental requirements. Such expenditures were not significant in 2018 , 2017 and 2016 .

EFFECT OF NEW ACCOUNTING STANDARDS

See Note 1 - Organization and Summary of Significant Accounting Policies in Item 8, "Financial Statements and Supplementary Data" for discussion of new accounting standards and the effect on AAM.

CRITICAL ACCOUNTING ESTIMATES

In order to prepare consolidated financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts and disclosures in our consolidated financial statements. These estimates are subject to an inherent degree of uncertainty and actual results could differ from our estimates.

Other items in our consolidated financial statements require estimation. In our judgment, they are not as critical as those disclosed below. We have discussed and reviewed our critical accounting estimates disclosure with the Audit Committee of our Board of Directors.

GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We periodically evaluate goodwill for impairment in accordance with the accounting guidance for goodwill and other indefinite-lived intangibles that are not amortized. We review our goodwill for impairment annually during the fourth quarter. In addition, we review goodwill for impairment whenever adverse events or changes in circumstances indicate a possible impairment.

This review is performed at the reporting unit level, and involves a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess carrying value over fair value.

In performing goodwill impairment testing, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. Fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates.

Subsequent to our acquisition of MPG in 2017, our business was organized into four business units: Driveline, Metal Forming, Powertrain, and Casting. Under the goodwill guidance, we determined that each of our business

units represents a reporting unit. The determination of our reporting units and impairment indicators also require us to make significant judgments.

As a result of our test in the fourth quarter of 2018, we determined that the carrying values of our Powertrain and Casting reporting units were greater than their respective fair values. As such, we recorded non-cash goodwill impairment charges of $80.0 million associated with Powertrain and $405.5 million associated with Casting in 2018. As of December 31, 2018, the remaining carrying value of goodwill allocated to Powertrain was $377.3 million and there was no remaining goodwill associated with the Casting reporting unit. See Note 5 - Goodwill and Other Intangible Assets for further detail.

In 2019, we plan to initiate a new global restructuring program to further streamline our business by consolidating our four existing business units into three business units. This activity will occur through the disaggregation of our Powertrain business unit, with a portion moving into our Driveline business unit and a portion moving into our Metal Forming business unit. As a result of this activity, we expect to evaluate goodwill for impairment in the first quarter of 2019.

IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, excluding goodwill and other indefinite-lived intangible assets, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. Recoverability of each “held for use” asset group affected by impairment indicators is determined by comparing the forecasted undiscounted cash flows of the operations to which the assets relate to their carrying amount. If the carrying amount of an asset group exceeds the undiscounted cash flows and is therefore nonrecoverable, the assets in this group are written down to their estimated fair value. We estimate fair value based on market prices, when available, or on a discounted cash flow analysis. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. Significant judgments and estimates used by management when evaluating long-lived assets for impairment include:


•	An assessment as to whether an adverse event or circumstance has triggered the need for an impairment review;


•	Determination of asset groups, the primary asset within each group, and the primary asset's average estimated useful life;


•	Undiscounted future cash flows generated by the assets; and


•	Determination of fair value when an impairment is deemed to exist, which may require assumptions related to future general economic conditions, future expected production volumes, product pricing and cost estimates, working capital and capital investment requirements, discount rates and estimated liquidation values.

PENSION AND OTHER POSTRETIREMENT BENEFITS In calculating our assets, liabilities and expenses related to pension and OPEB, key assumptions include the discount rate, expected long-term rates of return on plan assets, mortality projections and rates of increase in health care costs.

The discount rates used in the valuation of our U.S. pension and OPEB obligations were based on an actuarial review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment stream for each of our plans. In 2018 , the weighted-average discount rates determined on that basis were 4.30% for the valuation of our pension benefit obligations and 4.35% for the valuation of our OPEB obligations. The discount rate used in the valuation of our United Kingdom (U.K.) pension obligations were based on hypothetical yield curves developed from corporate bond yield information within each regional market. In 2018 , the weighted-average discount rates determined on that basis were 2.95% for our U.K. plans. The expected weighted-average long-term rates of return on our plan assets were 7.50% for our U.S. plans, and 5.10% for our U.K. plans in 2018 .

We developed these rates of return assumptions based on future capital market expectations for the asset classes represented within our portfolio and a review of long-term historical returns. The asset allocation for our plans was developed in consideration of the demographics of the plan participants and expected payment stream of the liability. Our investment policy allocates approximately 30-55% of the U.S. plans' assets to equity securities, depending on the plan, with the remainder invested in fixed income securities, hedge fund investments and cash. The rates of increase in health care costs are based on current market conditions, inflationary expectations and historical information.

All of our assumptions were developed in consultation with our actuarial service providers. While we believe that we have selected reasonable assumptions for the valuation of our pension and OPEB obligations at year-end 2018 , actual trends could result in materially different valuations.

The effect on our pension plans of a 0.5% decrease in both the discount rate and expected return on assets is shown below as of December 31, 2018 , our valuation date.



			Expected
	Discount		Return on
	Rate		Assets
	(in millions)
Decline in funded status	$	48.2	N/A
Increase in 2018 expense	$	—	$	3.3

No changes in benefit levels or in the amortization of gains or losses have been assumed.

For 2019 , we assumed a weighted-average annual increase in the per-capita cost of covered health care benefits of 6.75% for OPEB. The rate is assumed to decrease gradually to 5.0% by 2026 and remain at that level thereafter. A 0.5% decrease in the discount rate for our OPEB would have decreased total expense in 2018 and increased the postretirement obligation, net of GM cost sharing, at December 31, 2018 by $0.7 million and $18.0 million, respectively. A 1.0% increase in the assumed health care trend rate would have increased total service and interest cost in 2018 and the postretirement obligation, net of GM cost sharing, at December 31, 2018 by $1.4 million and $31.0 million , respectively.

AAM and GM share in the cost of OPEB for eligible retirees proportionally based on the length of service an employee had with AAM and GM. We estimate the future cost sharing payments and present it as an asset on our Consolidated Balance Sheet. As of December 31, 2018 , we estimated $232.9 million in future GM cost sharing. If, in the future, GM were unable to fulfill this financial obligation, our OPEB obligations could be different than our current estimates.

PRODUCT WARRANTY We record a liability and related charge to cost of goods sold for estimated warranty obligations at the dates our products are sold or when specific warranty issues are identified. Product warranties not expected to be paid within one year are recorded as a noncurrent liability on our Consolidated Balance Sheet. Our estimated warranty obligations for products sold are based on significant management estimates, with input from our warranty, sales, engineering, quality and legal departments. For products and customers with actual warranty payment experience, we estimate warranty costs principally based on past claims history. For certain products and customers, actual warranty payment experience does not exist or is not mature. In these cases, we estimate our costs based on the contractual arrangements with our customers, existing customers' warranty program terms and internal and external warranty data, which includes a determination of our responsibility for potential warranty issues or claims and estimates of repair costs. We actively study trends of our warranty claims and take action to improve product quality and minimize warranty claims. We continuously evaluate these estimates and our customers' administration of their warranty programs. We closely monitor actual warranty claim data and adjust the liability, as necessary, on a quarterly basis.

In addition to our ordinary warranty provisions with our customers, we may be responsible for certain costs associated with product recalls and field actions, which are recorded at the time our obligation is probable and can be reasonably estimated.

Our warranty accrual was $57.7 million as of December 31, 2018 and $49.5 million as of December 31, 2017 . During 2018 and 2017 , we made adjustments to our warranty accrual to reflect revised estimates regarding our projected future warranty obligations. Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. It is possible that changes in our assumptions or future warranty issues could materially affect our financial position and results of operations.

VALUATION OF DEFERRED TAX ASSETS AND OTHER TAX LIABILITIES Because we operate in many different geographic locations, including several foreign, state and local tax jurisdictions, the evaluation of our ability to use all recognized deferred tax assets is complex. In accordance with the accounting guidance for income taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In determining the requirement for a valuation allowance, the historical results, projected future operating results based upon approved business plans, eligible carry forward periods, and tax planning opportunities are considered, along with other relevant positive and negative evidence. If, based upon available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded.

As of December 31, 2018 , we have a valuation allowance of approximately $183.3 million related to net deferred tax assets in several foreign jurisdictions and U.S. state and local jurisdictions. As of December 31, 2017 and 2016 , our valuation allowance was $180.4 million and $164.8 million , respectively.

If, in the future, we generate taxable income on a sustained basis in foreign and U.S. state and local jurisdictions for which we have recorded valuation allowances, our current estimate of the recoverability of our deferred tax assets could change and result in the future reversal of some or all of the valuation allowance. While we believe we have made appropriate valuations of our deferred tax assets, unforeseen changes in tax legislation, regulatory activities, audit results, operating results, financing strategies, organization structure and other related matters may result in material changes in our deferred tax asset valuation allowances or our tax liabilities.

We record uncertain tax positions on the basis of a two-step process whereby: (1) we determine whether it is "more likely than not" that the tax positions will be sustained based on the technical merits of the position: and (2) for those positions that meet the "more likely than not" recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We record interest and penalties on uncertain tax positions in income tax expense (benefit).

As of December 31, 2018 and 2017 , we had a liability for unrecognized income tax benefits and related interest and penalties of $45.6 million and $55.2 million , respectively. In 2018, we finalized an advance pricing agreement in a foreign jurisdiction, which resulted in a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20.0 million .

In January 2016, we completed negotiations with the Mexican tax authorities to settle 2007 through 2009 transfer pricing audits. We made a payment of $22.9 million in January 2016 that fully satisfied our obligations for transfer pricing issues for tax years 2007 through 2013. Including these settlements, we made payments of $28 million in 2016 to the Mexican tax authorities related to transfer pricing matters.

During the next 12 months, we may finalize another advance pricing agreement in a foreign jurisdiction, which could result in a cash payment to the relevant tax authorities and a reduction of our liability for unrecognized tax benefits and related interest and penalties. Although it is difficult to estimate with certainty the amount of any audit settlement, we do not expect any potential settlement to be materially different from what we have recorded in unrecognized tax benefits. Based on the status of ongoing tax audits, and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. We will continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and will adjust our estimated liability as necessary.

ACCOUNTING FOR ACQUISITIONS In 2017, we completed our acquisitions of MPG and USM Mexico. Upon successful consummation of these acquisitions, we were subject to the accounting guidance as prescribed by ASC 805 - Business Combinations . We were required to allocate the purchase price of the acquired businesses to the identifiable assets and liabilities based on fair value. The excess purchase price over the fair value of identifiable assets and liabilities was recorded as goodwill. Determining the fair values of assets acquired and liabilities assumed, especially with regard to intangible assets, requires significant levels of estimates and assumptions made by management. In order to assist management, we utilized third party valuation experts in determining the fair values.

Forward-Looking Statements

In this MD&A and elsewhere in this Form 10-K (Annual Report), we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and relate to trends and events that may affect our future financial position and operating results. The terms such as “will,” “may,” “could,” “would,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “project,” "target," and similar words or expressions, as well as statements in future tense, are intended to identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and may differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:


•	reduced purchases of our products by General Motors Company (GM), FCA US LLC (FCA), or other customers;


•	our ability to respond to changes in technology, increased competition or pricing pressures;


•	our ability to develop and produce new products that reflect market demand;


•	our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis;


•	lower-than-anticipated market acceptance of new or existing products;


•	our ability to attract new customers and programs for new products;


•	an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values;


•	reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM and FCA);


•	risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as NAFTA or USMCA, immigration policies, political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);


•	a significant disruption in operations at one or more of our key manufacturing facilities;


•	global economic conditions;


•	liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers;


•	risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attack and other similar disruptions;


•	supply shortages or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of natural disasters or otherwise;


•	our ability to successfully integrate the business and information systems of MPG and to realize the anticipated benefits of the merger;


•	negative or unexpected tax consequences;


•	our ability to achieve the level of cost reductions required to sustain global cost competitiveness;


•	our ability to realize the expected revenues from our new and incremental business backlog;


•	our ability to maintain satisfactory labor relations and avoid work stoppages;


•	our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages;


•	price volatility in, or reduced availability of, fuel;


•	potential liabilities or litigation relating to, or assumed in, the MPG merger;


•	potential adverse reactions or changes to business relationships resulting from the completion of the merger with MPG;


•	our ability to protect our intellectual property and successfully defend against assertions made against us;


•	our ability to attract and retain key associates;


•	availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as our ability to comply with financial covenants;


•	our customers' and suppliers' availability of financing for working capital, capital expenditures, R&D or other general corporate purposes;


•	changes in liabilities arising from pension and other postretirement benefit obligations;


•	risks of noncompliance with environmental laws and regulations or risks of environmental issues that could result in unforeseen costs at our facilities or reputational damage;


•	adverse changes in laws, government regulations or market conditions affecting our products or our customers' products;


•	our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance; and


•	other unanticipated events and conditions that may hinder our ability to compete.

It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

MARKET RISK

Our business and financial results are affected by fluctuations in world financial markets, including currency exchange rates and interest rates. Our hedging policy has been developed to manage these risks to an acceptable level based on management's judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.

CURRENCY EXCHANGE RISK From time to time, we use foreign currency forward and option contracts to reduce the effects of fluctuations in exchange rates relating to the Mexican Peso, Euro, Brazilian Real, British Pound Sterling, Thai Baht, Swedish Krona, Chinese Yuan, Polish Zloty and Indian Rupee. At December 31, 2018 and December 31, 2017 , we had currency forward and option contracts with a notional amount of $185.8 million and $162.2 million outstanding, respectively. The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $17.1 million at December 31, 2018 and was approximately $14.7 million at December 31, 2017 .

Future business operations and opportunities, including the expansion of our business outside North America, may further increase the risk that cash flows resulting from these global operations may be adversely affected by changes in currency exchange rates. If and when appropriate, we intend to manage these risks by creating natural hedges in the structure of our global operations, utilizing local currency funding of these expansions and various types of foreign exchange contracts.

INTEREST RATE RISK In 2017, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. In the second quarter of 2018, we discontinued this variable-to-fixed interest rate swap, which was in an asset position of $5.6 million on the date that it was discontinued.

Also in the second quarter of 2018, we entered into a new variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. As of December 31, 2018 , we have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $900.0 million through May 2019, $750.0 million through May 2020, $500.0 million through May 2021, $400.0 million through May 2022 and $400.0 million through May 2023.

The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 17% of our weighted-average interest rate at December 31, 2018 ) on our long-term debt outstanding at December 31, 2018 would be approximately $8.2 million and was approximately $9.2 million at December 31, 2017 , on an annualized basis.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.


Item 8.	Financial Statements and Supplementary Data

Consolidated Statements of Operations

Year Ended December 31,



	2018			2017			2016
	(in millions, except per share data)

Net sales	$	7,270.4		$	6,266.0		$	3,948.0

Cost of goods sold	6,130.0			5,146.9			3,221.9

Gross profit	1,140.4			1,119.1			726.1

Selling, general and administrative expenses	385.7			390.1			314.2

Amortization of intangible assets	99.4			75.3			5.0

Goodwill impairment	485.5			—			—

Restructuring and acquisition-related costs	78.9			110.7			26.2

Gain on sale of business	(15.5		)	—			—

Operating income	106.4			543.0			380.7

Interest expense	(216.3		)	(195.6		)	(93.4		)

Investment income	2.0			2.9			2.9

Other income (expense)
Debt refinancing and redemption costs	(19.4		)	(3.5		)	—
Gain on settlement of capital lease	15.6			—			—
Other, net	(2.2		)	(6.8		)	8.8

Income (loss) before income taxes	(113.9		)	340.0			299.0

Income tax expense (benefit)	(57.1		)	2.5			58.3

Net income (loss)	$	(56.8	)	$	337.5		$	240.7

Net income attributable to noncontrolling interests	(0.7		)	(0.4		)	—

Net income (loss) attributable to AAM	$	(57.5	)	$	337.1		$	240.7

Basic earnings (loss) per share	$	(0.51	)	$	3.22		$	3.08

Diluted earnings (loss) per share	$	(0.51	)	$	3.21		$	3.06

See accompanying notes to consolidated financial statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,



	2018			2017			2016
	(in millions)
Net income (loss)	$	(56.8	)	$	337.5		$	240.7

Other comprehensive income (loss)
Defined benefit plans, net of $(9.8) million, $3.4 million and $4.7 million of tax in 2018, 2017 and 2016, respectively	38.1			(8.5		)	(19.6		)
Foreign currency translation adjustments	(62.5		)	88.3			(3.2		)
Changes in cash flow hedges, net of tax of $0.5 and $(0.2) million in 2018 and 2017, respectively	5.5			17.1			(10.3		)
Other comprehensive income (loss)	(18.9		)	96.9			(33.1		)

Comprehensive income (loss)	$	(75.7	)	$	434.4		$	207.6

Net income attributable to noncontrolling interests	(0.7		)	(0.4		)	—

Comprehensive income (loss) attributable to AAM	$	(76.4	)	$	434.0		$	207.6

See accompanying notes to consolidated financial statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Consolidated Balance Sheets

December 31,



	2018			2017
Assets	(in millions, except per share data)
Current assets
Cash and cash equivalents	$	476.4		$	376.8
Accounts receivable, net	966.5			1,035.9
Inventories, net	459.7			392.0
Prepaid expenses and other	127.2			140.3
Total current assets	2,029.8			1,945.0

Property, plant and equipment, net	2,514.4			2,402.9
Deferred income taxes	45.5			37.1
Goodwill	1,141.8			1,654.3
Other intangible assets, net	1,111.1			1,212.5
GM postretirement cost sharing asset	219.4			252.2
Other assets and deferred charges	448.7			378.8
Total assets	$	7,510.7		$	7,882.8

Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt	$	121.6		$	5.9
Accounts payable	840.2			799.0
Accrued compensation and benefits	179.0			200.0
Deferred revenue	44.3			34.1
Accrued expenses and other	171.7			177.4
Total current liabilities	1,356.8			1,216.4

Long-term debt, net	3,686.8			3,969.3
Deferred revenue	77.6			78.8
Deferred income taxes	92.6			101.7
Postretirement benefits and other long-term liabilities	810.6			976.6
Total liabilities	6,024.4			6,342.8

Stockholders' equity
Series A junior participating preferred stock, par value $0.01 per share;
0.1 million shares authorized; no shares outstanding in 2018 or 2017	—			—
Preferred stock, par value $0.01 per share; 10.0 million shares
authorized; no shares outstanding in 2018 or 2017	—			—
Series common stock, par value $0.01 per share; 40.0 million
shares authorized; no shares outstanding in 2018 or 2017	—			—
Common stock, par value $0.01 per share; 150.0 million shares authorized;
118.9 million and 118.2 million shares issued as of December 31, 2018 and December 31, 2017, respectively	1.2			1.2
Paid-in capital	1,292.6			1,264.6
Retained earnings	703.5			761.0
Treasury stock at cost, 7.2 million shares in 2018 and 6.9 million shares in 2017	(201.8		)	(198.1		)
Accumulated other comprehensive loss
Defined benefit plans, net of tax	(213.9		)	(252.0		)
Foreign currency translation adjustments	(96.6		)	(34.1		)
Unrecognized loss on cash flow hedges, net of tax	(1.1		)	(6.6		)
Total AAM stockholders' equity	1,483.9			1,536.0
Noncontrolling interests in subsidiaries	2.4			4.0
Total stockholders' equity	1,486.3			1,540.0
Total liabilities and stockholders' equity	$	7,510.7		$	7,882.8

See accompanying notes to consolidated financial statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Consolidated Statements of Cash Flows

Year Ended December 31,



	2018			2017			2016
	(in millions)
Operating activities
Net income (loss)	$	(56.8	)	$	337.5		$	240.7
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	528.8			428.5			201.8
Impairment of property, plant and equipment	30.0			1.5			3.4
Impairment of goodwill	485.5			—			—
Deferred income taxes	(35.0		)	(154.2		)	33.2
Stock-based compensation	27.9			43.4			21.0
Pensions and other postretirement benefits, net of contributions	(9.9		)	(6.0		)	(12.6		)
Gain on sale of business	(15.5		)	—			—
(Gain) loss on disposal of property, plant and equipment, net	(3.2		)	1.6			4.3
Debt refinancing and redemption costs and (gain) on settlement of capital lease	4.0			3.5			—
Changes in operating assets and liabilities, net of amounts acquired or disposed
Accounts receivable	56.1			(44.9		)	(19.3		)
Inventories	(83.1		)	2.5			12.2
Accounts payable and accrued expenses	7.5			(12.6		)	(14.2		)
Deferred revenue	10.7			14.8			7.2
Other assets and liabilities	(175.5		)	31.4			(70.1		)
Net cash provided by operating activities	771.5			647.0			407.6

Investing activities
Purchases of property, plant and equipment	(524.7		)	(477.7		)	(223.0		)
Proceeds from sale of property, plant and equipment	4.9			2.5			1.7
Purchase buyouts of leased equipment	(0.5		)	(13.3		)	(4.6		)
Proceeds from sale of business, net	47.1			5.9			—
Acquisition of business, net of cash acquired	(1.3		)	(895.5		)	(5.6		)
Investment in affiliates	(3.7		)	—			—
Other, net	—			—			3.8
Net cash used in investing activities	(478.2		)	(1,378.1		)	(227.7		)

Financing activities
Net short-term proceeds from credit facilities	—			4.4			—
Proceeds from issuance of long-term debt	509.6			2,862.7			30.3
Payments of long-term debt, capital lease obligations and other	(681.2		)	(2,154.4		)	(7.0		)
Debt issuance costs	(6.9		)	(91.0		)	—
Purchase of noncontrolling interest	(2.3		)	—			—
Employee stock option exercises	—			0.9			0.3
Purchase of treasury stock	(3.7		)	(7.0		)	(5.2		)
Net cash provided by (used in) financing activities	(184.5		)	615.6			18.4

Effect of exchange rate changes on cash	(6.7		)	11.1			0.4

Net increase (decrease) in cash, cash equivalents and restricted cash	102.1			(104.4		)	198.7

Cash, cash equivalents and restricted cash at beginning of year	376.8			481.2			282.5

Cash, cash equivalents and restricted cash at end of year	$	478.9		$	376.8		$	481.2

Supplemental cash flow information
Interest paid	$	199.7		$	182.7		$	87.2
Income taxes paid, net	$	46.0		$	31.9		$	48.6
Non-cash investing activities: AAM common shares issued for acquisition of MPG	$	—		$	576.7		$	—

See accompanying notes to consolidated financial statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Consolidated Statements of Stockholders' Equity





	Common Stock												Accumulated Other			Noncontrolling
	Shares		Par		Paid-in		Retained			Treasury			Comprehensive			Interest
	Outstanding		Value		Capital		Earnings			Stock			Loss			in Subsidiaries
	(in millions)

Balance at January 1, 2016	76.1		$	0.8	$	638.9	$	178.4		$	(185.9	)	$	(356.5	)	$	—

Net income							240.7
Changes in cash flow hedges													(10.3		)
Foreign currency translation adjustments													(3.2		)
Defined benefit plans, net													(19.6		)
Exercise of stock options and vesting of restricted stock units and performance shares	0.7		0.1		0.2
Stock-based compensation					21.0
Modified-retrospective application of ASU 2016-09							4.8
Purchase of treasury stock	(0.3	)								(5.2		)
Balance at December 31, 2016	76.5		$	0.9	$	660.1	$	423.9		$	(191.1	)	$	(389.6	)	$	—

Net income							337.1									0.4
Changes in cash flow hedges													17.1
Foreign currency translation adjustments													88.3
Defined benefit plans, net													(8.5		)
Acquisition of MPG	34.3		0.3		579.6					(1.7		)				3.6
Exercise of stock options and vesting of restricted stock units and performance shares	0.8				0.9
Stock-based compensation					24.0
Purchase of treasury stock	(0.3	)								(5.3		)
Balance at December 31, 2017	111.3		$	1.2	$	1,264.6	$	761.0		$	(198.1	)	$	(292.7	)	$	4.0

Net income (loss)							(57.5		)							0.7
Changes in cash flow hedges													5.5
Foreign currency translation adjustments													(62.5		)
Defined benefit plans, net													38.1
Purchase of noncontrolling interest																(2.3		)
Exercise of stock options and vesting of restricted stock units and performance shares	0.7				0.1
Stock-based compensation					27.9
Purchase of treasury stock	(0.3	)								(3.7		)
Balance at December 31, 2018	111.7		$	1.2	$	1,292.6	$	703.5		$	(201.8	)	$	(311.6	)	$	2.4

See accompanying notes to consolidated financial statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 . ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION On April 6, 2017, Alpha SPV I, Inc., a wholly-owned subsidiary of American Axle & Manufacturing Holdings, Inc. (Holdings), merged with and into Metaldyne Performance Group, Inc. (MPG) with MPG as the surviving corporation in the merger. Upon consummation of the merger, MPG became a wholly-owned subsidiary of Holdings.

PRINCIPLES OF CONSOLIDATION We include the accounts of Holdings and its subsidiaries in our consolidated financial statements. We eliminate the effects of all intercompany transactions, balances and profits in our consolidation.

REVENUE RECOGNITION We are obligated under our contracts with customers to manufacture and supply products for use in our customers’ operations. We satisfy these performance obligations at the point in time that the customer obtains control of the products, which is the point in time that the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the products. This typically occurs upon shipment to the customer in accordance with purchase orders and delivery releases issued by our customers. There is judgment involved in determining when the customer obtains control of the products and we have utilized the following indicators of control in our assessment:

• We have the present right to payment for the asset;

• The customer has legal title to the asset;

• We have transferred physical possession of the asset;

• The customer has the significant risks and rewards of ownership of the asset; and

• The customer has accepted the asset.

See Note 2 - Revenue from Contracts with Customers for more detail on our revenue.

RESEARCH AND DEVELOPMENT (R&D) COSTS We expense R&D, as incurred, in selling, general and administrative expenses on our Consolidated Statements of Operations. R&D spending was $146.2 million , $161.5 million and $139.8 million in 2018 , 2017 and 2016 , respectively.

CASH AND CASH EQUIVALENTS Cash and cash equivalents include all cash balances, savings accounts, sweep accounts, and highly liquid investments in money market funds and certificates of deposit with maturities of 90 days or less at the time of purchase.

ACCOUNTS RECEIVABLE The majority of our accounts receivable are due from original equipment manufacturers (OEMs) in the automotive industry and are past due when payment is not received within the terms stated within the contract. Trade accounts receivable for our customers are generally due within approximately 50 days from the date our customers receive our product.

Amounts due from customers are stated net of allowances for doubtful accounts. We determine our allowances by considering factors such as the length of time accounts are past due, our previous loss history, the customer's ability to pay its obligation to us, and the condition of the general economy and the industry as a whole. The allowance for doubtful accounts was $8.4 million and $7.0 million as of December 31, 2018 and 2017 , respectively. We write-off accounts receivable when they become uncollectible.

CUSTOMER TOOLING AND PRE-PRODUCTION COSTS RELATED TO LONG-TERM SUPPLY AGREEMENTS Engineering, R&D, and other pre-production design and development costs for products sold on long-term supply arrangements are expensed as incurred unless we have a contractual guarantee for reimbursement from the customer. Reimbursements received for pre-production costs relating to awarded programs are deferred and recognized into revenue over the life of the associated program. Reimbursements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

received for pre-production costs relating to future programs that have not been awarded, or amounts received for programs that become discontinued prior to production, are recorded as a reduction of expense.

Costs for tooling used to make products sold on long-term supply arrangements for which we have either title to the assets or the noncancelable right to use the assets during the term of the supply arrangement are capitalized in property, plant and equipment. Reimbursable costs for tooling assets for which our customer has title and we do not have a noncancelable right to use during the term of the supply arrangement, are recorded in accounts receivable in our consolidated balance sheets. The reimbursement for the customer-owned tooling is recorded as a reduction of accounts receivable upon collection. Capitalized items and customer receipts in excess of tooling costs specifically related to a supply arrangement are amortized over the shorter of the term of the arrangement or over the estimated useful lives of the related assets.

INVENTORIES We state our inventories at the lower of cost or net realizable value. The cost of our inventories is determined using the FIFO method. When we determine that our gross inventories exceed usage requirements, or if inventories become obsolete or otherwise not saleable, we record a provision for such loss as a component of our inventory accounts.

Inventories consist of the following:



	December 31,
	2018			2017
	(in millions)
Raw materials and work-in-progress	$	375.1		$	319.7
Finished goods	99.0			89.6
Gross inventories	474.1			409.3
Inventory valuation reserves	(14.4		)	(17.3		)
Inventories, net	$	459.7		$	392.0

PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment, including amortizable tooling, at historical cost, as adjusted for impairments. Construction in progress includes costs incurred for the construction of buildings and building improvements, and machinery and equipment in process. Repair and maintenance costs that do not extend the useful life or otherwise improve the utility of the asset beyond its existing useful state are expensed in the period incurred.

We record depreciation and tooling amortization using the straight-line method over the estimated useful lives of the depreciable assets. Depreciation and tooling amortization amounted to $367.0 million , $301.6 million and $160.4 million in 2018 , 2017 and 2016 , respectively.

Property, plant and equipment consists of the following:



	Estimated	December 31,
	Useful Lives	2018			2017
	(years)	(in millions)
Land	Indefinite	$	53.6		$	58.0
Land improvements	10-15	22.0			20.8
Buildings and building improvements	15-40	501.5			465.8
Machinery and equipment	3-12	3,342.8			2,962.8
Construction in progress		511.1			567.7
		4,431.0			4,075.1
Accumulated depreciation and amortization		(1,916.6		)	(1,672.2		)
Property, plant and equipment, net		$	2,514.4		$	2,402.9

As of December 31, 2018 , 2017 and 2016 , we had unpaid purchases of plant and equipment in our accounts payable of $84.1 million , $103.0 million and $19.0 million , respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS When impairment indicators exist, we evaluate the carrying value of long-lived assets for potential impairment. We consider projected future undiscounted cash flows, trends and other circumstances in making such estimates and evaluations. If impairment is deemed to exist, the carrying amount of the asset is adjusted based on its fair value. Recoverability of assets “held for use” is determined by comparing the forecasted undiscounted cash flows of the operations to which the assets relate to their carrying amount. When the carrying value of an asset group exceeds its fair value and is therefore nonrecoverable, those assets are written down to fair value. Fair value is determined based on market prices, when available, or a discounted cash flow analysis is performed using management estimates.

GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We test our goodwill annually as of October 1, or more frequently if necessary, for impairment in accordance with the accounting guidance for goodwill and other indefinite-lived intangibles. See Note 5 - Goodwill and Other Intangible Assets , for more detail on our goodwill.

OTHER INTANGIBLE ASSETS In connection with our acquisitions of USM Mexico Manufacturing LLC (USM Mexico) and MPG, we recognized $1,254.8 million of amortizable intangible assets for customer platforms, customer relationships, developed technology and licensing agreements. These intangible assets were assigned useful lives ranging from five to 17 years from the dates of the acquisitions. The intangible assets were valued using primarily the relief from royalty method or the multi-period excess earnings method, both of which utilize significant unobservable inputs. These inputs are defined in the fair value hierarchy as Level 3 inputs, which require management to make estimates and assumptions regarding certain financial measures using forecasted or projected information. See Note 5 - Goodwill and Other Intangible Assets , for more detail on our intangible assets.

DEBT ISSUANCE COSTS The costs related to the issuance or modification of long-term debt are deferred and amortized into interest expense over the expected life of the borrowings. As of December 31, 2018 and December 31, 2017 , our unamortized debt issuance costs were $80.7 million and $93.1 million , respectively. Debt issuance costs associated with our senior unsecured notes, as well as our Term Loan A Facility and Term Loan B Facility (as defined in Note 6 - Long-Term Debt and Lease Obligations ), are recorded as a reduction to the related debt liability. Debt issuance costs of $13.6 million and $17.5 million related to our Revolving Credit Facility (also as defined in Note 6 - Long-Term Debt and Lease Obligations ), are classified as Other assets and deferred charges on our Consolidated Balance Sheets as of December 31, 2018 and December 31, 2017 , respectively. Unamortized debt issuance costs that exist upon the extinguishment of debt are expensed and classified as Debt refinancing and redemption costs on our Consolidated Statements of Operations.

DERIVATIVES We recognize all derivatives on the balance sheet at fair value and we are not subject to master netting agreements. If a derivative qualifies under the accounting guidance as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged asset, liability or firm commitment through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of derivatives that do not qualify as hedges, are immediately recognized in earnings. See Note 7 - Derivatives and Risk Management , for more detail on our derivatives.

CURRENCY TRANSLATION AND REMEASUREMENT We translate the assets and liabilities of our foreign subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the income statement elements of our foreign subsidiaries to U.S. dollars at average-period exchange rates. We report the effect of translation for our foreign subsidiaries that use the local currency as their functional currency as a separate component of stockholders' equity. Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of a subsidiary are reported in current period income. We also report any gains and losses arising from transactions denominated in a currency other than the functional currency of a subsidiary in current period income. These foreign currency gains and losses resulted in net losses of $0.2 million and $7.3 million for the years 2018 and 2017, respectively, and a net gain of $5.8 million for 2016 , in Other income (expense).

PENSION AND OTHER POSTRETIREMENT DEFINED BENEFIT PLANS Net pension and postretirement benefit expenses and the related liabilities are determined on an actuarial basis. These plan expenses and obligations are dependent on management's assumptions developed in consultation with our actuaries. We review

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

these actuarial assumptions at least annually and make modifications when appropriate. See Note 9 - Employee Benefit Plans , for more detail on our pension and other postretirement defined benefit plans.

STOCK-BASED COMPENSATION We have stock-based compensation in the form of restricted stock units (RSUs) and performance shares. For non-performance based awards, the grant date fair value is measured as the stock price at the date of grant. For performance based awards, fair value is estimated using valuation techniques that require management to use estimates and assumptions. Certain awards require that management's estimates and assumptions be evaluated at each reporting date to determine if compensation expense related to the award should be adjusted, both on a catch-up and go-forward basis. Compensation expense is recognized over the period during which the requisite service is provided, referred to as the vesting period. See Note 10 - Stock-Based Compensation , for more detail on our accounting for stock-based compensation.

DEFERRED INCOME TAX ASSETS AND LIABILITIES AND VALUATION ALLOWANCES Our deferred income tax assets and liabilities reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws.

In accordance with the accounting guidance for income taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In determining the requirement for a valuation allowance, the historical results, projected future operating results based upon approved business plans, eligible carry forward periods, and tax planning opportunities are considered, along with other relevant positive and negative evidence. If, based upon available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded.

See Note 11 - Income Taxes , for more detail on our accounting for income taxes.

EARNINGS (LOSS) PER SHARE (EPS) We present EPS using the two-class method. This method allocates undistributed earnings between common shares and non-vested share based payment awards that entitle the holder to non-forfeitable dividend rights. Our participating securities include non-vested restricted stock units. See Note 12 - Earnings (Loss) Per Share (EPS) , for more detail on our accounting for EPS.

SHARE REPURCHASE PROGRAM In 2016, AAM's Board of Directors authorized a share repurchase program of up to $100 million of AAM's common shares as part of AAM's overall capital allocation strategy. The program expired on December 31, 2018. We repurchased a total of $1.5 million of shares under the share repurchase program and there were no share repurchases under the program during 2018 .

PRODUCT WARRANTY See Note 13 - Commitments and Contingencies , for detail on our accounting for product warranties.

USE OF ESTIMATES In order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect the reported amounts and disclosures in our consolidated financial statements. Actual results could differ from those estimates.

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EFFECT OF NEW ACCOUNTING STANDARDS

Accounting Standards Update 2018-15

On August 15, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15 - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (Topic 350-40). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing or hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance becomes effective at the beginning of our 2020 fiscal year, and early adoption is permitted for financial statements which have not yet been issued. This guidance may be applied either retrospectively or prospectively and we are currently assessing the impact that this standard will have on our consolidated financial statements.

Accounting Standards Update 2018-02

On February 14, 2018, the FASB issued ASU 2018-02 - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). ASU 2018-02 allows companies the option to reclassify disproportionate tax effects in accumulated other comprehensive income (AOCI) caused by the 2017 Tax Cuts and Jobs Act, also known as stranded tax effects, to retained earnings. ASU 2018-02 also requires expanded disclosures related to disproportionate income tax effects from AOCI, some of which are applicable to all companies regardless of whether the option to reclassify the stranded tax effects is exercised. The guidance becomes effective at the beginning of our 2019 fiscal year, and we expect to record an adjustment to AOCI and Retained earnings of approximately $28 million associated with the adoption of this guidance.

Accounting Standards Update 2017-12

On August 28, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12 - Targeted Improvements to Accounting for Hedging Activities (Topic 815) . ASU 2017-12 is intended to better align the risk management activities of a company with the company's financial reporting for hedging relationships. This guidance expands and refines several aspects of hedge accounting. The most applicable changes to AAM as a result of the new guidance are as follows: 1) the concept of risk component hedging is introduced in ASU 2017-12, which could allow us to hedge contractually specified components in a contract; 2) the guidance now allows entities to utilize a 31-day period in assessing whether the critical terms of a forecasted transaction match the maturity of the hedging derivative, which could allow for expanded use of hedging instruments for certain sales and purchases; and 3) we may now qualitatively assess hedge effectiveness on a quarterly basis when the facts and circumstances related to the hedging relationship have not changed significantly. This guidance becomes effective at the beginning of our 2019 fiscal year, however early adoption is permitted, and we have adopted this guidance effective January 1, 2018. The adoption of this guidance did not have any impact on the measurement or presentation of our existing hedging relationships. See Note 7 - Derivatives and Risk Management for additional detail on our hedging instruments.

Accounting Standards Update 2017-07

On March 10, 2017, the FASB issued ASU 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The amendments in this update require that an employer disaggregate the service cost component from the other components of defined benefit pension cost and postretirement benefit cost (net benefit cost). Subsequent to the adoption of this guidance, only the service cost component of net benefit cost is included in the subtotal Operating income in our Consolidated Statements of Operations and only the service cost component is eligible for capitalization. This guidance became effective at the beginning of our 2018 fiscal year and required a retrospective transition method for the income statement classification of the net benefit cost components and a prospective transition method for the capitalization of the service cost component in assets. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2017-04

On January 26, 2017, the FASB issued ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . The amendments in this update modify the concept of impairment from the

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condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, or what is referred to under existing guidance as "Step 2." Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance becomes effective at the beginning of our 2020 fiscal year, however early adoption is permitted and we elected to early adopt this guidance in conjunction with our annual goodwill impairment test that was conducted in the fourth quarter of 2018. See Note 5 - Goodwill and Other Intangible Assets for further discussion regarding the results of our annual goodwill impairment test for 2018.

Accounting Standards Update 2016-16

On October 24, 2016, the FASB issued Accounting Standards Update (ASU) 2016-16 - Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Existing income tax guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This existing guidance is deemed an exception to the principle of comprehensive recognition of current and deferred income taxes under accounting principles generally accepted in the United States of America (GAAP). Due to the limited authoritative guidance about this exception, diversity in practice exists. ASU 2016-16 eliminates this exception for intra-entity transfers of assets other than inventory and requires that entities recognize the income tax consequences when the transfers occur. This guidance was effective January 1, 2018 and required a modified retrospective transition method. The adoption of this guidance did not have a significant impact on our consolidated financial statements.

Accounting Standards Update 2016-02

On February 25, 2016, the FASB issued ASU 2016-02 - Leases (Topic 842) , and has subsequently issued ASU 2017-13 - Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842) (collectively the Lease ASUs) which supersede the existing lease accounting guidance and establish new criteria for recognizing lease assets and liabilities. The most significant impact of these updates, to AAM, is that a lessee will be required to recognize a "right-of-use" asset and lease liability for operating lease agreements that were not previously included on the balance sheet under the existing lease guidance. Expense recognition in the statement of income along with cash flow statement classification for both financing (capital) and operating leases under the new standard will not be significantly changed from existing lease guidance. This guidance becomes effective for AAM at the beginning of our 2019 fiscal year.

We are finalizing the inputs to our calculations and expect to record right-of-use assets and lease liabilities in the range of $85 million to $95 million as a result of implementing this guidance. We plan to elect the package of practical expedients that will allow us to 1) not reassess whether existing or expired contracts contain or contained a lease; 2) not reassess the classification (operating or financing) of our existing leases; and 3) not reassess initial direct costs for existing leases. We also plan to elect the optional transition method that will allow us to not retrospectively revise prior period balance sheets to include operating leases. We plan to also elect the practical expedient that will allow us to exclude recognition of a right-of-use asset and associated liability for lease terms of 12 months or less. Finally, we plan to elect the practical expedient to not separate lease and non-lease components in contracts that contain both, and will account for these types of contracts entirely as a single lease component.

Accounting Standards Update 2014-09

In 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606) , and has subsequently issued ASUs 2015-14 - Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , 2016-08 - Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross Versus Net) , 2016-10 - Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , 2016-12 - Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , 2016-20 - Revenue from Contracts with Customers (Topic 606):

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Technical Corrections and Improvements to Topic 606 and 2017-13 - Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842) (collectively, the Revenue Recognition ASUs).

The Revenue Recognition ASUs outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersede most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. This guidance became effective for AAM on January 1, 2018 and we have adopted this guidance using the modified retrospective approach. See Note 2 - Revenue from Contracts with Customers for more detail.

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2 . REVENUE FROM CONTRACTS WITH CUSTOMERS

On January 1, 2018, we adopted new accounting guidance under Accounting Standards Codification Topic 606 (ASC 606) Revenue from Contracts with Customers . ASC 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most prior revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We elected to adopt this guidance utilizing the modified retrospective transition method. No adjustment to retained earnings was required as of January 1, 2018 as there was no impact to previously reported revenue or expenses associated with adopting ASC 606.

We are obligated under our contracts with customers to manufacture and supply products for use in our customers’ operations. We satisfy these performance obligations at the point in time that the customer obtains control of the products, which is the point in time that the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the products. This typically occurs upon shipment to the customer in accordance with purchase orders and delivery releases issued by our customers. There is judgment involved in determining when the customer obtains control of the products and we have utilized the following indicators of control in our assessment:

• We have the present right to payment for the asset;

• The customer has legal title to the asset;

• We have transferred physical possession of the asset;

• The customer has the significant risks and rewards of ownership of the asset; and

• The customer has accepted the asset.

Our product offerings by segment are as follows:


•	Driveline products consist primarily of axles, driveshafts, power transfer units, rear drive modules, transfer cases, and electric and hybrid driveline products and systems for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles;


•	Metal Forming products consist primarily of axle and transmission shafts, ring and pinion gears, differential gears, transmission gears, and suspension components for Original Equipment Manufacturers and Tier 1 automotive suppliers;


•	The Powertrain segment products consist primarily of transmission module and differential assemblies, transmission valve bodies, connecting rod forging and assemblies, torsional vibration dampers, and variable valve timing products for Original Equipment Manufacturers and Tier 1 automotive suppliers; and


•	The Casting segment produces both thin wall castings and high strength ductile iron casting, as well as differential cases, steering knuckles, control arms, brackets, and turbo charger housings for the global light vehicle, commercial and industrial markets.

Our contracts with customers generally state the terms of the sale, including the quantity and price of each product purchased. Trade accounts receivable from our customers are generally due approximately 50 days from the date our customers receive our product. Our contracts typically do not contain variable consideration as the contracts include stated prices. We provide our customers with assurance type warranties, which are not separate performance obligations and are outside the scope of ASC 606. Refer to Note 13 - Commitments and Contingencies for further information on our product warranties.

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Disaggregation of Net Sales

Net sales recognized from contracts with customers, disaggregated by segment and geographical location, are presented in the following table for the years ended December 31, 2018 , December 31, 2017 and December 31, 2016. Net sales are attributed to regions based on the location of production. Intersegment sales have been excluded from the table.



	Twelve Months Ended December 31, 2018
	Driveline		Metal Forming		Powertrain		Casting		Total
North America	$	3,435.4	$	824.9	$	775.7	$	804.3	$	5,840.3
Asia	557.8		6.0		114.5		—		678.3
Europe	135.9		266.5		219.7		—		622.1
South America	124.9		—		4.8		—		129.7
Total	$	4,254.0	$	1,097.4	$	1,114.7	$	804.3	$	7,270.4

	Twelve Months Ended December 31, 2017
	Driveline		Metal Forming		Powertrain		Casting		Total
North America	$	3,400.2	$	644.2	$	564.7	$	589.7	$	5,198.8
Asia	409.4		3.3		99.8		—		512.5
Europe	97.4		182.5		141.6		—		421.5
South America	132.7		—		0.5		—		133.2
Total	$	4,039.7	$	830.0	$	806.6	$	589.7	$	6,266.0

	Twelve Months Ended December 31, 2016
	Driveline		Metal Forming		Powertrain		Casting		Total
North America	$	3,283.1	$	217.3	$	—	$	—	$	3,500.4
Asia	265.9		—		—		—		265.9
Europe	83.5		—		—		—		83.5
South America	98.2		—		—		—		98.2
Total	$	3,730.7	$	217.3	$	—	$	—	$	3,948.0

Contract Assets and Liabilities

The following table summarizes our beginning and ending balances for accounts receivable and contract liabilities associated with our contracts with customers:




	Accounts Receivable, Net			Contract Liabilities (Current)		Contract Liabilities (Long-term)
December 31, 2017	$	1,035.9		$	34.1	$	78.8
December 31, 2018	966.5			44.3		77.6
Increase/(decrease)	$	(69.4	)	$	10.2	$	(1.2	)

Contract liabilities relate to deferred revenue associated with various settlements and commercial agreements for which we have future performance obligations to the customer. We recognize this deferred revenue into revenue over the life of the associated program as we satisfy our performance obligations to the customer. We do not have contract assets as defined in ASC 606.

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For the twelve months ended December 31, 2018 , we recognized contract liabilities of $56.9 million . During the twelve months ended December 31, 2018 , we also amortized $47.9 million of previously recorded contract liabilities into revenue as we satisfied performance obligations with our customers.

Sales and Other Taxes

ASC 606 provides a practical expedient that allows companies to exclude from the transaction price any amounts collected from customers for all sales (and other similar) taxes. We do not include sales and other taxes in our transaction price and thus do not recognize these amounts as revenue.

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3 . RESTRUCTURING AND ACQUISITION-RELATED COSTS

In 2016, AAM initiated actions under a global restructuring program (the 2016 Program) focused on creating a more streamlined organization in addition to reducing our cost structure and preparing for acquisition and integration activities. Since the inception of the 2016 Program, we have incurred severance charges totaling $2.8 million and implementation costs totaling $29.6 million . We do not expect to incur any additional restructuring charges in future periods related to the 2016 Program.

A summary of our restructuring activity for the years 2018 , 2017 and 2016 is shown below:



	Severance Charges			Implementation Costs			Asset Impairment Charges			Total
	(in millions)
Accrual at January 1, 2016	$	—		$	—		$	—		$	—
Charges	0.6			10.2			4.5			15.3
Cash utilization	—			(1.0		)	—			(1.0		)
Non-cash utilization	—			—			(4.5		)	(4.5		)
Accrual at December 31, 2016	0.6			9.2			—			9.8
Charges	2.0			13.9			1.5			17.4
Cash utilization	(2.3		)	(23.1		)	—			(25.4		)
Non-cash utilization	—			—			(1.5		)	(1.5		)
Accrual at December 31, 2017	0.3			—			—			0.3
Charges	2.5			11.7			30.0			44.2
Cash utilization	(0.4		)	(10.1		)	—			(10.5		)
Non-cash utilization	—			—			(30.0		)	(30.0		)
Accrual at December 31, 2018	$	2.4		$	1.6		$	—		$	4.0

In addition to costs incurred under the 2016 program, we initiated actions in 2018 to exit operations at manufacturing facilities in our Driveline, Metal Forming and Powertrain segments. As part of our total restructuring actions, we incurred severance charges of approximately $2.5 million , as well as implementation costs, including professional expenses, of approximately $11.7 million , and asset impairment charges of $30.0 million to impair long-lived assets that were not to be redeployed to other AAM facilities.

In 2019, we plan to initiate a new global restructuring program (the 2019 Program) to further streamline our business by consolidating our four existing business units into three business units. This activity will occur through the disaggregation of our Powertrain business unit, with a portion moving into our Driveline business unit and a portion moving into our Metal Forming business unit. The primary objectives of this consolidation are to finalize the integration of MPG in a timely manner, align AAM's product and process technologies, and to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business. We did not incur any charges under the 2019 Program during 2018. We expect to incur approximately $25 million to $35 million of total restructuring charges in 2019, including costs incurred under the 2019 Program.

Also in 2017, we completed our acquisitions of MPG and USM Mexico. The following table represents a summary of charges incurred in 2018 related to these acquisitions:



	Acquisition-Related Costs		Severance Charges		Integration Expenses		Total
	(in millions)
Charges	$	1.2	$	0.5	$	33.0	$	34.7

Total restructuring and acquisition-related charges in 2018							$	78.9

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Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred. Integration expenses reflect costs incurred for information technology systems, ongoing operational activities, and consulting fees incurred in conjunction with the acquisitions. In 2017, there were $40.7 million of acquisition-related costs, $7.2 million of severance charges and $45.4 million of integration expenses, as compared to $9.5 million of acquisition-related costs and $1.4 million of integration expenses in 2016, related to the acquisitions of MPG and USM Mexico.

Total restructuring charges and acquisition-related charges of $78.9 million , $110.7 million and $26.2 million are shown on a separate line item titled "Restructuring and Acquisition-Related Costs" in our Consolidated Statements of Operations for 2018, 2017 and 2016, respectively.

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4 . BUSINESS COMBINATIONS

Acquisition of MPG

On April 6, 2017, AAM completed our acquisition of 100% of the equity interests of MPG for a total purchase price of approximately $1.5 billion plus the assumption of approximately $1.7 billion in net debt (comprised of approximately $1.9 billion in debt less approximately $0.2 billion of MPG cash and cash equivalents). Under the terms of the agreement and plan of merger (Merger Agreement), each share of MPG common stock (other than MPG excluded shares as defined in the Merger Agreement) was converted into the right to receive (a) $13.50 in cash, without interest, and (b) 0.5 of a share of AAM common stock (Merger Consideration). Further, MPG stock options outstanding immediately prior to the effective time of the merger were accelerated and holders of the stock options received in cash the Merger Consideration less the per share exercise price of the MPG stock options. All MPG restricted shares and restricted stock unit awards outstanding under an MPG equity plan were also accelerated and each holder thereof received the Merger Consideration for each restricted share or restricted stock unit award of MPG common stock.

MPG provides highly-engineered components for use in powertrain and safety-critical platforms for the global light, commercial and industrial markets. MPG produces these components using complex metal-forming manufacturing technologies and processes for a global customer base of OEMs and Tier I suppliers, which help their customers meet fuel economy, performance and safety standards. Our acquisition of MPG contributes significantly to diversifying our global customer base and end markets, while also allowing us to expand our presence as a global Tier I supplier to the commercial and industrial markets, in addition to our existing presence as a global Tier I supplier to the automotive industry.

The aggregate cash consideration for our acquisition of MPG was financed using (i) net proceeds from the issuance in March 2017 by AAM of $1.2 billion of new senior notes consisting of $700.0 million aggregate principal amount of 6.25% senior notes due 2025, and $500.0 million aggregate principal amount of 6.50% senior notes due 2027, and on April 6, 2017: (ii) borrowings by AAM of $100.0 million under the Term Loan A that matures in 2022, (iii) borrowings by AAM of $1.55 billion under the Term Loan B that matures in 2024, and (iv) cash on hand.

Our acquisition of MPG was accounted for under the acquisition method under Accounting Standards Codification 805 Business Combinations (ASC 805) with the purchase price allocated to the identifiable assets and liabilities of the acquired company based on the respective fair values of the assets and liabilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following represents the final fair values of the assets acquired and liabilities assumed resulting from the acquisition, as well as the calculation of goodwill:



(in millions)	April 6, 2017
Cash consideration	$	953.5
Share consideration	576.7
Total consideration transferred	$	1,530.2
Fair value of MPG noncontrolling interests	3.6
Total fair value of MPG	$	1,533.8

Cash and cash equivalents	$	202.1
Accounts receivable	403.1
Inventories	199.0
Prepaid expenses and other long-term assets	119.9
Property, plant and equipment	971.8
Intangible assets	1,223.1
Total assets acquired	$	3,119.0
Accounts payable	287.8
Accrued expenses and other	137.7
Deferred income tax liabilities	580.2
Debt	1,918.7
Postretirement benefits and other long-term liabilities	54.1
Net assets acquired	$	140.5
Goodwill	$	1,393.3

Under the guidance in ASC 805, estimated amounts that are designated as provisional may be adjusted during a period referred to as the "measurement period." The measurement period is a period not to exceed one year from the acquisition date during which we may adjust estimated or provisional amounts recorded during purchase accounting if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. Measurement period adjustments are recorded in the period identified with an offsetting entry to goodwill. Any adjustments to amounts recorded in purchase accounting that do not qualify as measurement period adjustments are included in earnings in the period identified.

We finalized the valuation of the assets and liabilities of MPG in the first quarter of 2018. In doing so, we made measurement period adjustments to reflect changes to facts and circumstances that existed as of the acquisition date, which resulted in a net increase in Goodwill of $0.9 million . These adjustments related to Property, plant and equipment, as well as the corresponding impact on Deferred income tax liabilities, as a result of customary post-closing reviews.

Goodwill resulting from the acquisition is primarily attributable to anticipated synergies and economies of scale from which we expect to benefit as a combined entity. None of the goodwill is deductible for tax purposes.

We recognized $1,223.1 million of amortizable intangible assets for customer platforms, customer relationships, developed technology and licensing agreements as a result of our acquisition of MPG. These intangible assets were assigned useful lives ranging from five to 17 years. The intangible assets were valued using primarily the relief from royalty method or the multi-period excess earnings method, both of which utilize significant unobservable inputs. These inputs are defined in the fair value hierarchy as Level 3 inputs, which require management to make estimates and assumptions regarding certain financial measures using forecasted or projected information.

AAM had an existing accounts payable balance of $12.4 million with MPG as of the date of acquisition. As a result of the acquisition, this pre-existing accounts payable balance was settled and AAM accounted for this settlement separately from the acquisition. This resulted in a $12.4 million reduction in the purchase price and this

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portion of the cash paid to acquire MPG has been reflected as an operating cash outflow in our Consolidated Statement of Cash Flows for the year ended December 31, 2017.

Included in Net sales and Net income attributable to AAM for the period from the acquisition date on April 6, 2017 through December 31, 2017 was $2,022 million and approximately $320 million , respectively, attributable to MPG. The $320 million of Net income attributable to MPG in 2017 included a tax benefit of approximately $227 million as a result of remeasuring our net deferred tax liabilities in the U.S. subsequent to the enactment of the Tax Cuts and Jobs Act. For the year ended December 31, 2017, AAM's consolidated income before income taxes was $340.0 million , of which $93.5 million related to MPG.

Unaudited Pro Forma Financial Information

Pro forma net sales for AAM, on a combined basis with MPG for the years ended December 31, 2017 and December 31, 2016, were $7.0 billion and $6.6 billion , respectively, excluding MPG sales to AAM during those periods. Pro forma net income amounts for the years ended December 31, 2017 and December 31, 2016 were approximately $400 million and $220 million , respectively. Pro forma earnings per share amounts for the years ended December 31, 2017 and December 31, 2016 were $3.51 per share and $1.95 per share, respectively.

The pro forma net income amounts for the years ended December 31, 2017 and December 31, 2016 have been adjusted by approximately $20 million for a one-time charge for MPG stock-based compensation that was accelerated and settled on the date of acquisition, approximately $25 million related to the step-up of inventory to fair value as a result of the acquisition, and approximately $55 million in acquisition-related costs. This adjustment resulted in a reclassification of approximately $65 million , net of tax, from pro forma net income for 2017 into pro forma net income for 2016, as we are required to disclose the pro forma amounts as if our acquisition of MPG had been completed on January 1, 2016.

The disclosure of pro forma net sales and earnings is for informational purposes only and does not purport to indicate the results that would actually have been obtained had the merger been completed on the assumed date for the periods presented, or which may be realized in the future.

Acquisition of USM Mexico

On March 1, 2017, AAM completed our acquisition of 100% of USM Mexico, a former subsidiary of U.S. Manufacturing Corporation (USM). The purchase price was funded with available cash and the acquisition was accounted for under the acquisition method.

USM Mexico includes USM's operations in Guanajuato, Mexico, which has historically been one of the largest suppliers to AAM's Guanajuato Manufacturing Complex. This acquisition allows AAM to vertically integrate the supply chain and helps ensure continuity of supply for certain parts to our largest manufacturing facility.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following represents the final fair value of the assets acquired and liabilities assumed resulting from the acquisition, as well as the calculation of goodwill:



(in millions)	March 1, 2017
Contractual purchase price	$	162.5
Adjustment to contractual purchase price for working capital settlement	2.5
Adjustments to contractual purchase price for capital equipment	4.9
Adjustment to contractual purchase price for settlement of existing accounts payable balance	(22.8		)
Cash acquired	(0.5		)
Adjusted purchase price, net of cash acquired	$	146.6
Accounts receivable	1.1
Inventories	4.8
Prepaid expenses and other	3.6
Property, plant and equipment	38.4
Intangible assets	31.7
Total assets acquired	$	79.6
Accounts payable	10.8
Accrued expenses and other	2.7
Deferred income tax liabilities	1.2
Net assets acquired	$	64.9
Goodwill	$	81.7

The purchase agreement specified a period of time subsequent to the acquisition date for calculating the final working capital amount of USM Mexico as of the acquisition date, which was finalized in the first quarter of 2018. None of the goodwill is deductible for tax purposes.

AAM had an existing accounts payable balance of $22.8 million with USM Mexico as of the date of acquisition. As a result of our acquisition, this pre-existing accounts payable balance was settled and AAM accounted for this settlement separately from our acquisition. This resulted in a $22.8 million reduction in the purchase price and this portion of the cash paid to acquire USM Mexico has been reflected as an operating cash outflow in our Consolidated Statement of Cash Flows for the year ended December 31, 2017.

The operating results of USM Mexico for the period from our acquisition date through December 31, 2017, were insignificant to AAM's Consolidated Statement of Income for this period. Further, we have not disclosed pro forma revenue and earnings for the years ended December 31, 2017 and December 31, 2016, as the operating results of USM Mexico would be insignificant to AAM's consolidated results for these periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5 . GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the year ended December 31, 2018 and the year ended December 31, 2017 :



	Driveline			Metal Forming			Powertrain			Casting			Consolidated
	(in millions)
Balance as of January 1, 2017	$	130.1		$	23.9		$	—		$	—		$	154.0
Acquisition of MPG	—			515.3			471.6			405.5			1,392.4
Acquisition of USM Mexico	80.4			—			—			—			80.4
Foreign currency translation	0.6			19.7			7.2			—			27.5
Balance as of December 31, 2017	$	211.1		$	558.9		$	478.8		$	405.5		$	1,654.3
Acquisition of MPG	—			0.9			—			—			0.9
Acquisition of USM Mexico	1.3			—			—			—			1.3
Impairment charge	—			—			(80.0		)	(405.5		)	(485.5		)
Sale of business	—			—			(15.1		)	—			(15.1		)
Foreign currency translation	(0.3		)	(7.4		)	(6.4		)	—			(14.1		)
Balance as of December 31, 2018	$	212.1		$	552.4		$	377.3		$	—		$	1,141.8

We conduct our annual goodwill impairment test in the fourth quarter of each year. In performing this test, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. Fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates. This fair value determination is categorized as Level 3 within the fair value hierarchy.

As a result of our test in the fourth quarter of 2018, we determined that the carrying values of our Powertrain and Casting reporting units were greater than their respective fair values. As such, we recorded non-cash goodwill impairment charges of $80.0 million associated with Powertrain and $405.5 million associated with Casting in 2018. These impairments were primarily the result of a general contraction of pricing multiples associated with capital intensive businesses such as the business conducted by our Powertrain and Casting reporting units, as well as a decline in the projected cash flows of these reporting units under our long-range plan completed in the fourth quarter of 2018, as compared to the long-range plan completed in the fourth quarter of 2017.

The decline in projected cash flows for the Powertrain reporting unit was primarily the result of decreased contribution margin on lower production volumes for certain passenger car programs that we support. The decline in projected cash flows for the Casting reporting unit was primarily the result of a projected increase in labor costs in an effort to address workforce shortages at certain locations, as well as an increase in other maintenance and capital requirements. At December 31, 2018, accumulated goodwill impairment losses were $485.5 million and there were no such accumulated goodwill impairment losses as of December 31, 2017.

These goodwill impairment charges represented a triggering event for testing the recoverability of other long-lived assets, including property, plant and equipment and amortizable intangible assets associated with our Powertrain and Casting segments. No further impairments were identified.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In the second quarter of 2018, we completed the sale of the aftermarket business associated with our Powertrain segment. We allocated $15.1 million of goodwill to the sold business, which represents the fair value of the business sold relative to the fair value of the associated reporting unit.

Other Intangible Assets As a result of our acquisitions of MPG and USM Mexico, AAM identified and recognized $1,254.8 million of intangible assets that are subject to amortization. These intangible assets were assigned useful lives ranging from five to 17 years and the weighted-average amortization period for all intangible assets recognized as a result of these acquisitions is 13.6 years from the dates of the acquisitions. The intangible assets were valued using primarily the relief from royalty method or the multi-period excess earnings method, both of which utilize significant unobservable inputs. These inputs are defined in the fair value hierarchy as Level 3 inputs, which require management to make estimates and assumptions regarding certain financial measures using forecasted or projected information.

The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's total intangible assets, which are all subject to amortization, as of December 31, 2018 and December 31, 2017 :



	December 31,							December 31,
	2018							2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in millions)
Capitalized computer software	$	38.0	$	(20.1	)	$	17.9	$	35.6	$	(14.3	)	$	21.3
Customer platforms	952.2		(123.5		)	828.7		952.2		(52.9		)	899.3
Customer relationships	147.0		(16.5		)	130.5		151.8		(7.3		)	144.5
Technology and other	156.2		(22.2		)	134.0		150.8		(9.3		)	141.5
Total	$	1,293.4	$	(182.3	)	$	1,111.1	$	1,290.4	$	(83.8	)	$	1,206.6

As a result of the acquisition of MPG in 2017, we recorded intangible assets related to aftermarket customer relationships that were associated with the Powertrain aftermarket business that we sold in the second quarter of 2018. As such, during 2018 we reduced the gross carrying amount of our customer relationships by $4.8 million , and reduced the associated accumulated amortization by $0.3 million .

Amortization expense for our intangible assets was $99.4 million for the year ended December 31, 2018 , $75.3 million for the year ended December 31, 2017 , and $5.0 million for the year ended December 31, 2016. The increase in amortization expense in 2018, as compared to 2017, was primarily attributable to the impact of twelve months of amortization on the MPG intangibles in 2018 , as compared to nine months of amortization in 2017 . The increase in amortization expense in 2017 , as compared to 2016 , was attributable to the increase in intangible assets as a result of the MPG and USM Mexico acquisitions in 2017 . Estimated amortization expense is approximately $100 million per year for each of the years 2019 through 2023 .

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6 . LONG-TERM DEBT AND LEASE OBLIGATIONS

Long-term debt, net consists of the following:



	December 31,
	2018		2017
	(in millions)
Revolving credit facility	$	—	$	—
Term Loan A Facility	83.8		92.5
Term Loan B Facility	1,511.2		1,526.8
7.75% Notes due 2019	100.0		200.0
6.625% Notes due 2022	450.0		550.0
6.50% Notes due 2027	500.0		500.0
6.25% Notes due 2026	400.0		—
6.25% Notes due 2025	700.0		700.0
6.25% Notes due 2021	—		400.0
Foreign credit facilities	127.1		53.2
Capital lease obligations	3.4		28.3
Debt	3,875.5		4,050.8
Less: Current portion of long-term debt	121.6		5.9
Long-term debt	3,753.9		4,044.9
Less: Debt issuance costs	67.1		75.6
Long-term debt, net	$	3,686.8	$	3,969.3

SENIOR SECURED CREDIT FACILITIES In 2017, Holdings and American Axle & Manufacturing, Inc. (AAM Inc.) entered into a credit agreement (the Credit Agreement). In connection with the Credit Agreement, Holdings, AAM, Inc. and certain of their restricted subsidiaries entered into a Collateral Agreement and Guarantee Agreement with the financial institutions party thereto as collateral agent and administrative agent. The Credit Agreement includes a $100.0 million term loan A facility (the Term Loan A Facility), a $1.55 billion term loan B facility (the Term Loan B Facility) and a $932 million multi-currency revolving credit facility (the Revolving Credit Facility, and together with the Term Loan A Facility and the Term Loan B Facility, the Senior Secured Credit Facilities). The proceeds of the Revolving Credit Facility are used for general corporate purposes. We incurred debt issuance costs of $54.0 million in 2017 related to the Senior Secured Credit Facilities.

6.25% NOTES DUE 2026 In the first quarter of 2018, we issued $400.0 million in aggregate principal amount of 6.25% senior notes due 2026 (the 6.25% Notes due 2026). Proceeds from the 6.25% Notes due 2026 were used primarily to fund the tender offer for the 6.25% senior notes due 2021 (the 6.25% Notes due 2021) described below. We paid debt issuance costs of $6.6 million during 2018 related to the 6.25% Notes due 2026.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

TENDER OFFER OF 6.25% NOTES DUE 2021 Also during the first quarter of 2018, we made a tender offer for our 6.25% Notes due 2021. Under this tender offer, we retired the $400.0 million of the 6.25% Notes due 2021 and expensed $2.5 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $8.0 million in tender premiums.

REDEMPTION OF 6.625% NOTES DUE 2022 In the second quarter of 2018, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million , and a payment of $0.8 million in accrued interest. During 2018, we expensed $0.8 million for the write-off of a portion of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $3.3 million for an early redemption premium.

REDEMPTION OF 7.75% NOTES DUE 2019 In the fourth quarter of 2018, we voluntarily redeemed a portion of our 7.75% Notes due 2019. This resulted in a principal payment of $100.0 million and $3.9 million in accrued interest. We also expensed approximately $0.3 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $4.5 million for an early redemption premium.

6.50% NOTES DUE 2027 AND 6.25% NOTES DUE 2025 During the first quarter of 2017, we issued $700.0 million in aggregate principal amount of 6.25% senior notes due 2025 and $500.0 million in aggregate principal amount of 6.50% senior notes due 2027 (the Notes). Proceeds from the Notes were used primarily to fund the cash consideration related to our acquisition of MPG, related fees and expenses, refinance certain existing indebtedness of MPG and borrowings under our previous revolving credit facility, which has been replaced by our new Revolving Credit Facility, together with borrowings under the Senior Secured Credit Facilities. We incurred debt issuance costs of $37.2 million in 2017 related to the Notes.

REPAYMENT OF MPG INDEBTEDNESS Upon our acquisition of MPG in 2017, we assumed approximately $1.9 billion of existing MPG indebtedness, which we repaid in its entirety on the date of acquisition. This indebtedness was comprised of approximately $0.2 billion of a Euro denominated term loan, approximately $1.0 billion of a U.S. dollar denominated term loan and approximately $0.7 billion of outstanding MPG bonds. Upon settlement of the debt, we paid approximately $24.6 million of accrued interest. In addition, we expensed $2.7 million of prepayment premiums related to the extinguishment of MPG's debt, which has been presented in the Debt refinancing and redemption costs line item within our Consolidated Statements of Operations for the year ended December 31, 2017 .

LEASES We lease certain facilities and furniture under capital leases expiring at various dates. The gross asset cost of our capital leases was $10.5 million and $10.1 million at December 31, 2018 and 2017 , respectively. The net book value included in property, plant and equipment, net on the balance sheet was $3.4 million and $5.3 million at December 31, 2018 and 2017 , respectively. The weighted-average interest rate on these capital lease obligations at December 31, 2018 was 7.9% .

In the second quarter of 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as part of the acquisition of MPG, and as a result we recorded a gain of $15.6 million , which is recorded in the Gain on settlement of capital lease line item of the Consolidated Statements of Operations. During 2018, we paid $11.4 million related to this settlement agreement.

We also lease certain manufacturing machinery and equipment, commercial office and production facilities, vehicles and other assets under operating leases expiring at various dates. Future minimum payments under non-cancelable operating leases are as follows: $32.6 million in 2019 , $24.3 million in 2020 , $16.2 million in 2021 , $12.6 million in 2022 , and $7.5 million in 2023 . Our total expense relating to operating leases was $36.9 million , $28.6 million and $26.9 million in 2018 , 2017 and 2016 , respectively.

FOREIGN CREDIT FACILITIES We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. These credit facilities, some of which are guaranteed by Holdings and/or AAM, Inc., expire at various dates through January 2021. At December 31, 2018 , $127.1 million was outstanding under these facilities and an additional $78.2 million was available. At December 31, 2017 , $53.2 million was outstanding under these facilities and an additional $159.7 million was available.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DEBT MATURITIES Aggregate maturities of long-term debt are as follows (in millions) :



2019	$	152.2
2020	37.0
2021	91.5
2022	530.0
2023	15.5
Thereafter	3,049.3
Total	$	3,875.5

INTEREST EXPENSE AND INVESTMENT INCOME Interest expense was $216.3 million in 2018 , $195.6 million in 2017 and $93.4 million in 2016 . The change in interest expense in 2018 , as compared to 2017 , is primarily attributable to additional interest expense incurred on borrowings outstanding under our Senior Secured Credit Facilities entered into in April 2017, as well as on $700.0 million aggregate principal amount of 6.25% senior notes due 2025 and $500.0 million in aggregate principal amount of 6.50% senior notes due 2027, which were issued in March 2017. The change in interest expense in 2017, as compared to 2016, primarily reflects the interest incurred on these additional borrowings in 2017.

We capitalized interest of $28.4 million in 2018 , $18.3 million in 2017 and $6.5 million in 2016 . The weighted-average interest rate of our long-term debt outstanding at December 31, 2018 was 5.9% as compared to 5.7% and 6.6% at December 31, 2017 and 2016 , respectively.

Investment income was $2.0 million in 2018 and $2.9 million in 2017 and 2016 . Investment income includes interest earned on cash and cash equivalents and realized and unrealized gains and losses on our short-term investments during the period.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7 . DERIVATIVES AND RISK MANAGEMENT

DERIVATIVE FINANCIAL INSTRUMENTS In the normal course of business, we are exposed to market risk associated with changes in foreign currency exchange rates and interest rates. To manage a portion of these inherent risks, we may purchase certain types of derivative financial instruments based on management's judgment of the trade-off between risk, opportunity and cost. We do not hold or issue derivative financial instruments for trading or speculative purposes. The impact of hedge ineffectiveness was not significant in any of the periods presented.

CURRENCY DERIVATIVE CONTRACTS From time to time, we use foreign currency forward and option contracts to reduce the effects of fluctuations in exchange rates relating to the Mexican Peso, Euro, Brazilian Real, British Pound Sterling, Thai Baht, Swedish Krona, Chinese Yuan, Polish Zloty and Indian Rupee. We had currency forward and option contracts outstanding with a notional amount of $185.8 million and $162.2 million at December 31, 2018 and 2017 , respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the third quarter of 2021 and the purchase of certain direct and indirect inventory and other working capital items into the fourth quarter of 2019.

VARIABLE-TO-FIXED INTEREST RATE SWAP In 2017, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. In the second quarter of 2018, we discontinued this variable-to-fixed interest rate swap, which was in an asset position of $5.6 million on the date that it was discontinued.

The following table summarizes the reclassification of pre-tax derivative gains (losses) into net income (loss) from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow hedges under Accounting Standards Codification 815 - Derivatives and Hedging (ASC 815):



	Location of Gain (Loss) Reclassified into Net Income (Loss)	Gain (Loss) Reclassified During the Twelve Months Ended December 31,									Total of Financial Statement Line Item			Gain Expected to be Reclassified During the Next 12 Months
	Location of Gain (Loss) Reclassified into Net Income (Loss)	2018			2017			2016			2018			Gain Expected to be Reclassified During the Next 12 Months
		(in millions)
Currency forward contracts	Cost of Goods Sold	$	(2.8	)	$	(5.3	)	$	(10.5	)	$	6,130.0		$	0.4
Variable-to-fixed interest rate swap	Interest Expense	3.2			—			—			(216.3		)	2.6

See Note 14 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) for amounts recognized in other comprehensive income (loss) during the years ended December 31, 2018 , December 31, 2017 and December 31, 2016 .

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the amount and location of gains (losses) recognized in the Consolidated Statements of Operations for those derivative instruments not designated as hedging instruments under ASC 815:



	Location of Gain/(Loss) Recognized in Net Income (Loss)	Gain/(Loss) Recognized During the Twelve Months Ended December 31,								Total of Financial Statement Line Item
	Location of Gain/(Loss) Recognized in Net Income (Loss)	2018		2017			2016			2018
		(in millions)
Currency forward contracts	Cost of Goods Sold	$	1.6	$	2.7		$	(5.8	)	6,130.0
Currency forward contracts	Other Income (Expense), Net	1.4		(0.1		)	(0.7		)	(2.2	)
Currency option contracts	Cost of Goods Sold	—		0.8			—			6,130.0

CONCENTRATIONS OF CREDIT RISK In the normal course of business, we provide credit to customers. We periodically evaluate the creditworthiness of our customers and we maintain reserves for potential credit losses.

Sales to GM were approximately 41% of our consolidated net sales in 2018 , 47% in 2017 , and 67% in 2016 . Accounts and other receivables due from GM were $353.7 million at year-end 2018 and $466.8 million at year-end 2017 . Sales to FCA US LLC (FCA), were approximately 13% of our consolidated net sales in 2018 , 14% in 2017 and 18% in 2016 . Accounts and other receivables due from FCA were $176.0 million at year-end 2018 and $129.0 million at year-end 2017 . No other single customer accounted for more than 10% of our consolidated net sales in any year presented.

In addition, our total GM postretirement cost sharing asset was $232.9 million as of December 31, 2018 and $265.5 million as of December 31, 2017 . See Note 9 - Employee Benefit Plans for more detail on this cost sharing asset.

We diversify the concentration of invested cash and cash equivalents among different financial institutions and we monitor the selection of counterparties to other financial instruments to avoid unnecessary concentrations of credit risk.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8 . FAIR VALUE

The fair value accounting guidance defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:


•	Level 1: Observable inputs such as quoted prices in active markets;


•	Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


•	Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

FINANCIAL INSTRUMENTS The estimated fair values of our financial assets and liabilities that are recognized at fair value on a recurring basis, using available market information and other observable data are as follows:



	December 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)
Balance Sheet Classification
Cash equivalents	$	44.0	$	44.0	$	72.8	$	72.8	Level 1
Prepaid expenses and other
Cash flow hedges - currency forward contracts	1.3		1.3		0.1		0.1		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	0.9		0.9		1.3		1.3		Level 2
Nondesignated - currency forward contracts	0.6		0.6		—		—		Level 2
Other assets and deferred charges
Cash flow hedges - currency forward contracts	0.4		0.4		0.2		0.2		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	1.6		1.6		0.9		0.9		Level 2
Accrued expenses and other
Cash flow hedges - currency forward contracts	0.8		0.8		6.0		6.0		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	0.7		0.7		—		—		Level 2
Nondesignated - currency forward contracts	0.4		0.4		2.8		2.8		Level 2
Postretirement benefits and other long-term liabilities
Cash flow hedges - currency forward contracts	0.9		0.9		2.6		2.6		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	6.9		6.9		0.3		0.3		Level 2

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The carrying values of our cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these instruments. The carrying values of our borrowings under the foreign credit facilities approximate their fair values due to the frequent resetting of the interest rates. We estimated the fair value of our outstanding debt using available market information and other observable data to be as follows:



	December 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)

Revolving Credit Facility	$	—	$	—	$	—	$	—	Level 2
Term Loan A Facility	83.8		79.5		92.5		92.5		Level 2
Term Loan B Facility	1,511.2		1,420.6		1,526.8		1,528.7		Level 2
7.75% Notes due 2019	100.0		102.1		200.0		217.5		Level 2
6.625% Notes due 2022	450.0		444.4		550.0		570.2		Level 2
6.50% Notes due 2027	500.0		446.3		500.0		527.5		Level 2
6.25% Notes due 2026	400.0		358.0		—		—		Level 2
6.25% Notes due 2025	700.0		636.7		700.0		736.8		Level 2
6.25% Notes due 2021	—		—		400.0		410.0		Level 2

Investments in our defined benefit pension plans are stated at fair value. See Note 9 - Employee Benefit Plans for additional fair value disclosures of our pension plan assets.

LONG-LIVED ASSETS During the years ended December 31, 2018 and December 31, 2017 , we recorded asset impairment charges as a result of restructuring actions initiated during these periods. See Note 3 - Restructuring and Acquisition-Related Costs for further detail.

The following table summarizes the impairments of long-lived assets measured at fair value on a nonrecurring basis subsequent to initial recognition:



	December 31, 2018				December 31, 2017
Balance Sheet Classification	Fair Value		Asset Impairment		Fair Value		Asset Impairment
	(in millions)

Property, plant and equipment, net	$	—	$	28.8	$	—	$	1.5
Other assets and deferred charges	—		1.2		—		—

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9 . EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT DEFINED BENEFIT PLANS We sponsor various qualified and non-qualified defined benefit pension plans for our eligible associates. We also maintain hourly and salaried benefit plans that provide postretirement medical, dental, vision and life insurance benefits (OPEB) to our eligible retirees and their dependents in the U.S.

Actuarial valuations of our benefit plans were made as of December 31, 2018 and 2017 . The primary weighted-average assumptions used in the year-end valuation of our principal plans appear in the following table. The U.S. discount rates are based on an actuarial review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment stream for each of our plans. The U.K. discount rates are based on hypothetical yield curves developed from corporate bond yield information within each regional market. The assumptions for expected return on plan assets are based on future capital market expectations for the asset classes represented within our portfolios and a review of long-term historical returns. The rates of increase in compensation and health care costs are based on current market conditions, inflationary expectations and historical information.



	Pension Benefits												OPEB
	2018				2017				2016				2018		2017		2016
	U.S.		U.K.		U.S.		U.K.		U.S.		U.K.
Discount rate	4.30	%	2.95	%	3.65	%	2.75	%	4.15	%	2.70	%	4.35	%	3.65	%	4.20	%
Expected return on plan assets	7.50	%	5.10	%	7.45	%	5.10	%	7.50	%	5.00	%	N/A		N/A		N/A
Rate of compensation increase	4.00	%	3.40	%	4.00	%	3.40	%	4.00	%	3.45	%	4.00	%	4.00	%	4.00	%

The accumulated benefit obligation for all defined benefit pension plans was $732.5 million and $807.9 million at December 31, 2018 and December 31, 2017 , respectively. As of December 31, 2018 , the accumulated benefit obligation for our underfunded defined benefit pension plans was $623.2 million , the projected benefit obligation was $623.2 million and the fair value of assets for these plans was $488.1 million .

AAM and GM share proportionally in the cost of OPEB for eligible retirees based on the length of service an employee had with AAM and GM. We have included in our OPEB obligation the amounts expected to be received pursuant to this agreement of $232.9 million and $265.5 million at December 31, 2018 and December 31, 2017 , respectively. We have also recorded a corresponding asset for these amounts on our Consolidated Balance Sheet, $13.5 million that is classified as a current asset and $219.4 million that is classified as a noncurrent asset as of December 31, 2018 .

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the changes in projected benefit obligations and plan assets and reconciles the funded status of the benefit plans, which is the net benefit plan liability:



	Pension Benefits						OPEB
	December 31,						December 31,
	2018			2017			2018			2017
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	824.0		$	717.6		$	613.3		$	571.7
Service cost	2.6			3.6			0.4			0.3
Interest cost	27.3			28.9			12.4			13.3
Plan amendments	4.3			0.5			(2.3		)	—
Actuarial loss (gain)	(63.2		)	28.1			(43.8		)	22.6
Change in GM portion of OPEB obligation	—			—			(32.6		)	16.5
Participant contributions	0.3			0.3			—			—
Curtailments	(11.6		)	—			(0.2		)	—
Settlements	(0.6		)	(14.3		)	—			—
Benefit payments	(39.7		)	(40.8		)	(9.9		)	(12.5		)
MPG acquisition / business combination	—			82.3			—			1.4
Currency fluctuations	(9.4		)	17.8			—			—
Other	0.5			—			—			—
Net change	(89.5		)	106.4			(76.0		)	41.6
Benefit obligation at end of year	$	734.5		$	824.0		$	537.3		$	613.3

Change in plan assets
Fair value of plan assets at beginning of year	$	702.2		$	611.3		$	—		$	—
Actual return on plan assets	(31.0		)	74.9			—			—
Employer contributions	4.4			4.4			9.9			12.5
Participant contributions	0.3			0.3			—			—
Benefit payments	(39.8		)	(40.8		)	(9.9		)	(12.5		)
Settlements	(0.6		)	(14.3		)	—			—
MPG acquisition / business combination	—			49.9			—			—
Currency fluctuations	(9.7		)	16.5			—			—
Net change	(76.4		)	90.9			—			—
Fair value of plan assets at end of year	$	625.8		$	702.2		$	—		$	—

Amounts recognized in our Consolidated Balance Sheets are as follows:



	Pension Benefits						OPEB
	December 31,						December 31,
	2018			2017			2018			2017
	(in millions)
Noncurrent assets	$	26.4		$	18.9		$	—		$	—
Current liabilities	(6.5		)	(6.0		)	(30.8		)	(30.3		)
Noncurrent liabilities	(128.6		)	(134.7		)	(506.5		)	(583.0		)
Net liability	$	(108.7	)	$	(121.8	)	$	(537.3	)	$	(613.3	)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pre-tax amounts recorded in accumulated other comprehensive income (loss) (AOCI), not yet recognized in net periodic benefit cost (credit) as of December 31, 2018 and 2017 , consists of:



	Pension Benefits						OPEB
	December 31,						December 31,
	2018			2017			2018		2017
	(in millions)
Net actuarial gain (loss)	$	(230.6	)	$	(237.4	)	$	31.3	$	(13.5	)
Net prior service credit (cost)	(1.2		)	(0.1		)	6.2		7.2
Total amounts recorded	$	(231.8	)	$	(237.5	)	$	37.5	$	(6.3	)

The components of net periodic benefit cost (credit) are as follows:



	Pension Benefits									OPEB
	2018			2017			2016			2018			2017			2016
	(in millions)
Service cost	$	2.6		$	3.6		$	2.9		$	0.4		$	0.3		$	0.3
Interest cost	27.3			28.9			28.8			12.4			13.3			14.0
Expected asset return	(45.8		)	(44.0		)	(42.1		)	—			—			—
Amortized actuarial loss	7.8			7.1			5.5			0.8			0.6			0.5
Amortized prior service credit	0.1			(0.1		)	(0.1		)	(2.7		)	(2.7		)	(2.7		)
Curtailment loss (gain)	3.2			—			—			(0.6		)	—			—
Settlement charge	0.4			3.2			—			—			—			—
Net periodic benefit cost (credit)	$	(4.4	)	$	(1.3	)	$	(5.0	)	$	10.3		$	11.5		$	12.1

Our postretirement cost sharing asset from GM is measured on the same basis as the portion of the obligation to which it relates. The actuarial gains and losses related to the GM portion of the OPEB obligation are recognized immediately in the Consolidated Statements of Operations as an offset against the gains and losses related to the change in the corresponding GM postretirement cost sharing asset. These items are presented net in the change in benefit obligation and net periodic benefit cost components disclosed above. Remaining actuarial gains and losses are deferred and amortized over the expected future service periods of the active participants or the remaining life expectancy of the inactive participants.

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that is expected to be amortized from AOCI into net periodic benefit credit in 2019 are $6.3 million and $0.1 million , respectively. The estimated net actuarial loss and prior service credit for the other defined benefit postretirement plans that is expected to be amortized from AOCI into net periodic benefit cost in 2019 are $0.1 million and $1.5 million , respectively.

For measurement purposes, a weighted average annual increase in the per-capita cost of covered health care benefits of 6.75% was assumed for 2019 . The rate was assumed to decrease gradually to 5.00% by 2026 and to remain at that level thereafter. Health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A 1.0% increase in the assumed health care cost trend rate would have increased total service and interest cost in 2018 and the postretirement obligation, net of GM cost sharing, at December 31, 2018 by $1.4 million and $31.0 million , respectively. A 1.0% decrease in the assumed health care cost trend rate would have decreased total service and interest cost in 2018 and the postretirement obligation, net of GM cost sharing, at December 31, 2018 by $1.2 million and $26.1 million , respectively.

The expected future pension and other postretirement benefits to be paid, net of GM cost sharing, for each of the next five years and in the aggregate for the succeeding five years thereafter are as follows: $60.7 million in 2019 ; $59.0 million in 2020 ; $60.1 million in 2021 ; $58.4 million in 2022 ; $58.9 million in 2023 and $305.6 million for

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2024 through 2028 . These amounts were estimated using the same assumptions that were used to measure our 2018 year-end pension and OPEB obligations and include an estimate of future employee service.

Contributions We contributed $2.2 million to our pension trusts in 2018. Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in 2019 to be approximately $2.2 million . We expect our cash payments, net of GM cost sharing, for OPEB to be approximately $17.7 million in 2019 .

Pension plan assets The weighted-average asset allocations of our pension plan assets at December 31, 2018 and 2017 appear in the following table. The asset allocation for our plans is developed in consideration of the demographics of the plan participants and expected payment stream of the benefit obligation.



	U.S.					U.K.
					Target					Target
	2018		2017		Allocation	2018		2017		Allocation
Equity securities	31.9	%	42.7	%	30% - 55%	19.0	%	28.6	%	25% - 35%
Fixed income securities	57.5		47.5		40% - 60%	68.3		57.9		55% - 65%
Alternative assets	10.0		8.2		5% - 10%	10.5		11.2		5% - 15%
Cash	0.6		1.6		0% - 5%	2.2		2.3		0% - 5%
Total	100.0	%	100.0	%		100.0	%	100.0	%

The primary objective of our pension plan assets is to provide a source of retirement income for participants and beneficiaries. Our primary financial objectives for the pension plan assets have been established in conjunction with a comprehensive review of our current and projected financial requirements. These objectives include having the ability to pay all future benefits and expenses when due, maintaining flexibility and minimizing volatility. These objectives are based on a long-term investment horizon.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Defined Benefit Pension Plan Assets Investments in our defined benefit plans are stated at fair value. Level 1 assets are valued using quoted market prices that represent the asset value of the shares held by the trusts. The level 2 assets are investments in pooled funds, which are valued using a model to reflect the valuation of their underlying assets that are publicly traded with observable values. The fair values of our pension plan assets are as follows:



December 31, 2018
Asset Categories	Level 1		Level 2		Level 3		Total
	(in millions)
Cash and Cash Equivalents	$	3.5	$	3.2	$	—	$	6.7
Equity
U.S. Large Cap	72.5		3.4		—		75.9
U.S. Small/Mid Cap	17.4		0.1		—		17.5
World Equity	79.5		5.3		—		84.8
Fixed Income Securities
Government & Agencies	86.5		54.3		—		140.8
Corporate Bonds - Investment Grade	177.2		2.7		—		179.9
Corporate Bonds - Non-investment Grade	19.8		1.5		—		21.3
Emerging Market Debt	18.0		0.9		—		18.9
Other	6.9		8.9		—		15.8
Other
Property Funds ^(a)	—		—		—		56.0
Liquid Alternatives Fund ^(a)	—		—		—		2.5
Structured Credit Fund ^(a)	—		—		—		5.7
Multi Strategy Hedge Fund ^(a)	—		—		—		—
Total Plan Assets	$	481.3	$	80.3	$	—	$	625.8

December 31, 2017
Asset Categories	Level 1		Level 2		Level 3		Total
	(in millions)
Cash and Cash Equivalents	$	10.1	$	2.8	$	—	$	12.9
Equity
U.S. Large Cap	92.0		6.3		—		98.3
U.S. Small/Mid Cap	44.0		1.2		—		45.2
World Equity	123.5		6.2		—		129.7
Fixed Income Securities
Government & Agencies	81.3		46.4		—		127.7
Corporate Bonds - Investment Grade	150.5		4.2		—		154.7
Corporate Bonds - Non-investment Grade	24.8		1.8		—		26.6
Emerging Market Debt	25.2		1.2		—		26.4
Other	8.7		8.1		—		16.8
Other
Property Funds ^(a)	—		—		—		52.4
Liquid Alternatives Fund ^(a)	—		—		—		4.6
Structured Credit Fund ^(a)	—		—		—		6.0
Multi Strategy Hedge Fund ^(a)	—		—		—		0.9
Total Plan Assets	$	560.1	$	78.2	$	—	$	702.2

(a) In accordance with ASC 810-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DEFINED CONTRIBUTION PLANS Most of our salaried and hourly U.S. associates, including certain UAW represented associates at our legacy U.S. locations, are eligible to participate in voluntary savings plans. Our maximum match is 50% of eligible associates' contribution up to 10% of their eligible salary. Matching contributions amounted to $12.4 million in 2018 , $10.0 million in 2017 and $5.6 million in 2016 . Certain U.S. associates are eligible annually to receive an additional AAM Retirement Contribution (ARC) benefit between 3% to 5% of eligible salary, depending on years of service. We made ARC contributions of $7.3 million , $7.1 million and $7.7 million in 2018 , 2017 and 2016 , respectively.

DEFERRED COMPENSATION PLAN Certain U.S. associates are eligible to participate in a non-qualified deferred compensation plan. Payments of $0.7 million , $0.6 million and $0.5 million have been made in 2018 , 2017 and 2016 , respectively, to eligible associates that have elected distributions. At December 31, 2018 and 2017 , our deferred compensation liability was $5.8 million and $6.0 million , respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10 . STOCK-BASED COMPENSATION

At December 31, 2018 , we had stock-based awards outstanding under stock incentive compensation plans approved by our stockholders. Under these plans, shares have been authorized for issuance to our directors, officers and certain other associates in the form of unvested restricted stock units, performance shares or other awards that are based on the value of our common stock. Shares available for future grants at December 31, 2018 were 5.3 million . The current stock plan will expire in May 2028.

RESTRICTED STOCK UNITS We have awarded restricted stock units (RSUs). Compensation expense associated with RSUs settled in stock is recorded to paid-in-capital ratably over the three-year vesting period.

The following table summarizes activity relating to our RSUs:



			Weighted-Average
	Number of		Grant Date Fair
	Shares/Units		Value per Share/Unit
	(in millions, except per share data)
Outstanding at January 1, 2016	1.7		$	18.19
Granted	0.9		15.41
Vested	(0.7	)	13.23
Canceled	(0.1	)	18.75
Outstanding at December 31, 2016	1.8		$	18.70
Granted	1.3		18.09
Vested	(0.4	)	19.70
Canceled	(0.2	)	16.79
Outstanding at December 31, 2017	2.5		$	18.35
Granted	1.7		14.57
Vested	(0.4	)	24.16
Canceled	(0.3	)	15.84
Outstanding at December 31, 2018	3.5		$	16.00

As of December 31, 2018 , unrecognized compensation cost related to unvested RSUs totaled $22.9 million . The weighted average period over which this cost is expected to be recognized is approximately two years . In 2018 and 2017 , the total fair market value of RSUs vested was $6.1 million and $8.8 million , respectively.

PERFORMANCE SHARES As of December 31, 2018 , we have performance shares (PS) outstanding under our 2012 Omnibus Incentive Plan. We grant performance shares payable in stock to officers which vest in full over a three-year performance period. In 2018, these grants were based equally on a total shareholder return (TSR) measure, and AAM's three-year cumulative free cash flow. In 2017 and 2016, these grants were based equally on a TSR measure and AAM's three-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin. The TSR metric compares our TSR over the three-year performance period relative to the TSR of our pre-defined competitor peer group. Based on these EBITDA, free cash flow and relative TSR performance metrics, the number of performance shares that will vest will be between 0% and 200% of the grant date amount. Share price appreciation and dividends paid are measured over the performance period to determine TSR. As these awards are settled in stock, the compensation expense is recorded ratably over the vesting period to paid-in-capital.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes activity relating to our performance shares:



			Weighted Average
	Number of		Grant Date Fair
	Shares		Value per Share
EBITDA Awards	(in millions, except per share data)
Outstanding at January 1, 2016	0.3		$	32.27
Granted	0.2		28.04
Vested	—		—
Canceled	—		—
Outstanding at December 31, 2016	0.5		$	30.19
Granted	0.2		39.01
Vested	(0.1	)	27.73
Canceled	—		—
Outstanding at December 31, 2017	0.6		$	33.91
Granted	—		—
Vested	(0.1	)	37.67
Canceled	—		—
Outstanding at December 31, 2018	0.5		$	34.49

TSR Awards
Outstanding at January 1, 2016	0.3		$	25.77
Granted	0.2		13.16
Vested	—		—
Canceled	—		—
Outstanding at December 31, 2016	0.5		$	19.55
Granted	0.2		24.58
Vested	(0.1	)	22.78
Canceled	—		—
Outstanding at December 31, 2017	0.6		$	20.93
Granted	0.3		13.91
Vested	(0.1	)	31.21
Canceled	—		—
Outstanding at December 31, 2018	0.8		$	16.25

Free Cash Flow Awards
Outstanding at January 1, 2018	—		$	—
Granted	0.3		14.28
Vested	—		—
Canceled	—		—
Outstanding at December 31, 2018	0.3		$	14.28

We estimate the fair value of our EBITDA performance shares on the date of grant using our estimated three-year adjusted EBITDA margin, based on AAM's budget and long-range plan assumptions at that time, and adjust quarterly as necessary. We estimate the fair value of our TSR performance shares on the date of grant using the Monte Carlo simulation approach. The Monte Carlo simulation approach utilizes inputs on volatility assumptions, risk free rates, the price of the Company’s and our competitor peer group's common stock and their correlation as of each valuation date. Volatility assumptions are based on historical and implied volatility measurements. We

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

estimate the fair value of our free cash flow performance shares on the date of grant using our estimated three-year cumulative free cash flow, based on AAM's budget and long-range plan assumptions at the time, and adjust quarterly as necessary.

Based on the current fair value, the estimated unrecognized compensation cost related to unvested PS totaled $10.8 million , as of December 31, 2018 . The weighted-average period over which this cost is expected to be recognized is approximately two years .

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11 . INCOME TAXES

The components of income (loss) before income taxes are as follows:



	2018			2017			2016
	(in millions)
U.S. income (loss)	$	(549.4	)	$	(37.1	)	$	90.0
Non - U.S. income	435.5			377.1			209.0
Total income (loss) before income taxes	$	(113.9	)	$	340.0		$	299.0

The following is a summary of the components of our provision for income taxes:



	2018			2017			2016
	(in millions)
Current
Federal	$	(81.5	)	$	87.1		$	0.4
State and local	3.2			(0.7		)	—
Foreign	46.5			62.4			27.5
Total current	$	(31.8	)	$	148.8		$	27.9

Deferred
Federal	$	(5.1	)	$	(122.3	)	$	31.2
State and local	(6.7		)	(17.0		)	—
Foreign	(13.5		)	(7.0		)	(0.8		)
Total deferred	(25.3		)	(146.3		)	30.4
Total income tax expense (benefit)	$	(57.1	)	$	2.5		$	58.3

The following is a reconciliation of income taxes calculated at the U.S. federal statutory income tax rate of 21% in 2018 and 35% in 2017 and 2016 to our provision for income taxes:



	2018			2017			2016
Federal statutory	$	(23.9	)	$	119.0		$	104.7
Foreign income taxes	(39.7		)	(96.3		)	(61.3		)
Change in enacted tax rate	(8.3		)	(107.6		)	(0.7		)
Transition tax	5.8			108.3			—
State and local	(12.8		)	(6.3		)	—
Tax credits	(20.1		)	(8.8		)	(3.3		)
Valuation allowance	12.9			(6.1		)	1.1
Goodwill impairment	21.6			—			—
Withholding taxes	6.6			4.7			1.2
U.S. tax on unremitted foreign earnings	4.1			(18.6		)	0.6
Global intangible low-taxed income	8.0			—			—
Uncertain tax positions	(9.8		)	13.5			1.6
Other	(1.5		)	0.7			14.4
Effective income tax expense (benefit)	$	(57.1	)	$	2.5		$	58.3

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

during 2018, we finalized an advance pricing agreement in a foreign jurisdiction and settled various other matters, which resulted in an income tax benefit and a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20 million . We also recorded an income tax benefit of approximately $85 million in 2018 as a result of the goodwill impairment charge, partially offset by a discrete tax expense related to the sale of the aftermarket business associated with our Powertrain segment.

Our income tax expense and effective income tax rate for 2017 were lower than our income tax expense and effective income tax rate for 2016 primarily as a result of an increase in the proportionate share of earnings attributable to lower tax rate jurisdictions. In addition, subsequent to the acquisition of MPG, we re-evaluated our valuation allowance position with regard to jurisdictions in which consolidated state tax returns are filed and recorded an income tax benefit for the year ended December 31, 2017. This was partially offset by a discrete tax adjustment related to certain non-deductible transaction and acquisition-related costs. Additionally, we recognized a net tax benefit of approximately $20 million in 2017 related to accounting for the various provisions of the Tax Cuts and Jobs Act (the 2017 Act) under U.S. tax reform.

The 2017 Act was enacted on December 22, 2017 in the United States. The following is a summary of the key provisions of the 2017 Act:

• Reduces the U.S. federal statutory income tax rate for corporations from 35% to 21%


•	Requires companies to pay a one-time transition tax (Transition Tax) on certain foreign earnings for which U.S. income tax was previously deferred


•	Generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries


•	Requires a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations referred to as global intangible low-taxed income (GILTI)


•	Eliminates the corporate alternative minimum tax (AMT) and changes how existing AMT credits can be realized


•	Creates a new limitation on deductible net interest expense incurred by U.S. corporations


•	Allows for immediate expensing of certain capital investments in the U.S. for the period September 27, 2017 through December 31, 2022


•	Creates a new base erosion anti-abuse minimum tax (BEAT)


•	Allows for a current deduction for a portion of foreign derived intangible income (FDII)

Following the enactment of the 2017 Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 118 to provide guidance on the accounting and reporting impacts of the 2017 Act. SAB 118 stated that companies should have accounted for changes related to the 2017 Act in the period of enactment if all information was available and the accounting could have been completed. In situations where companies did not have enough information to complete the accounting in the period of enactment, the company either 1) recorded an estimated provisional amount if the impact of the change was reasonably estimable; or 2) continued to apply the accounting guidance that was in effect immediately prior to the 2017 Act if the impact of the change could not be reasonably estimated. If estimated provisional amounts were recorded, SAB 118 provided a measurement period of no longer than one year during which companies should adjust those amounts as additional information became available.

In connection with our analysis of the impacts of the 2017 Act, we recorded estimated provisional amounts under SAB 118, resulting in a discrete net tax benefit of approximately $20 million for the year ended December 31, 2017. This net benefit primarily consisted of a benefit of approximately $110 million for the remeasurement of our net deferred tax liabilities as a result of the change in tax rate and a benefit of $18 million related to the reduction of a previously recorded deferred tax liability on certain foreign earnings, partially offset by expense of approximately $108 million related to the Transition Tax. These were provisional amounts at December 31, 2017 under SAB 118 because we had not yet completed our accounting for all of the enactment-date income tax effects of the 2017 Act. As of December 31, 2018, we have now completed our accounting for all of the enactment-date income tax effects of the 2017 Act.

Upon further analysis of the 2017 Act, and based on notices and regulations issued and proposed by the U.S. Department of Treasury and the Internal Revenue Service, we finalized our calculations of the Transition Tax liability during 2018 and adjusted our December 31, 2017 provisional amount by an additional tax expense of $5.8 million . Also, based on finalizing our calculations during 2018 related to the remeasurement of certain deferred tax assets and liabilities, we adjusted our December 31, 2017 provisional amount by an additional tax benefit of $8.3 million .

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

These adjustments to our provisional amounts resulted in a net income tax benefit of $2.5 million , which is included as a component of Income tax expense (benefit) in our Consolidated Statement of Operations for the year ended December 31, 2018. Also as part of the completion of our SAB 118 analysis, the balance of the 2018 Transition Tax liability was determined to be satisfied with existing U.S. tax attributes resulting in no current income tax payable.

Finally, the 2017 Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. Under GAAP, we must make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as period expense. As we were evaluating the provisions of GILTI at December 31, 2017, we recorded no deferred amounts related to GILTI in 2017. We have elected to account for GILTI in the year the tax is incurred.

As of December 31, 2018 , we have refundable income taxes of $9.8 million classified as Prepaid expenses and other on our Consolidated Balance Sheet. At December 31, 2017 , we had refundable income taxes of $30.0 million , of which $9.6 million was classified as Prepaid expenses and other, and $20.4 million was classified as Other assets and deferred charges on our Consolidated Balance Sheet. We also have income taxes payable of $10.0 million and $11.6 million classified as Accrued expenses and other on our Consolidated Balance Sheets as of December 31, 2018 and 2017 , respectively.

The approximate tax effect of each significant type of temporary difference and carryforward that results in a deferred tax asset or liability is as follows:



	December 31,
	2018			2017
	(in millions)
Deferred tax assets
Employee benefits	$	152.9		$	155.9
Inventory	22.9			20.8
Net operating loss (NOL) carryforwards	166.0			172.4
Tax credit carryforwards	44.3			96.4
Capital allowance carryforwards	10.0			11.2
Fixed assets	4.7			5.1
Deferred revenue	7.4			14.7
Capitalized expenditures	25.9			35.4
Other	35.2			26.9
Valuation allowances	(183.3		)	(180.4		)
Deferred tax assets	$	286.0		$	358.4

Deferred tax liabilities
U.S. tax on unremitted foreign earnings	(6.5		)	(2.4		)
Other intangible assets	(176.0		)	(281.6		)
Fixed assets	(141.9		)	(120.3		)
Other	(8.7		)	(18.7		)
Deferred tax liabilities	$	(333.1	)	$	(423.0	)

Deferred tax asset (liability), net	$	(47.1	)	$	(64.6	)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred tax assets and liabilities recognized in our Consolidated Balance Sheets are as follows:



	December 31,
	2018			2017
	(in millions)
U.S. federal and state deferred tax liability, net	$	(76.6	)	$	(79.4	)
Other foreign deferred tax asset, net	29.5			14.8
Deferred tax liability, net	$	(47.1	)	$	(64.6	)

DEFERRED INCOME TAX ASSETS AND LIABILITIES AND VALUATION ALLOWANCES The deferred income tax assets and liabilities summarized above reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. ASC 740 - Income Taxes states that companies must measure deferred tax amounts at the rate at which they are expected to be realized.

As of December 31, 2018 and December 31, 2017 , we had deferred tax assets from domestic and foreign net operating loss and tax credit carryforwards of $220.3 million and $280.0 million , respectively. Approximately $106.0 million of the deferred tax assets at December 31, 2018 relate to NOL and tax credits that can be carried forward indefinitely with the remainder expiring between 2019 and 2038.

Accounting guidance for income taxes requires a deferred tax liability to be established for the U.S. tax impact of undistributed earnings of foreign subsidiaries unless it can be shown that these earnings will be permanently reinvested outside the U.S. We have provided deferred income taxes for the estimated U.S. federal income tax, foreign income tax, and applicable withholding taxes on earnings of subsidiaries expected to be distributed. As a result of the enactment of the 2017 Act in the fourth quarter of 2017, we recognized a one-time transition tax expense related to certain foreign earnings for which U.S. tax had been previously deferred, and remeasured our deferred tax liability related to foreign earnings. In general, the 2017 Act allows for a dividends received deduction for the repatriation of foreign earnings to the U.S. and, as such, no additional U.S. federal income tax is expected.

During 2018, we recorded a net tax expense of $16.0 million resulting from net losses in certain foreign and U.S. state and local jurisdictions with no corresponding tax benefit due to increases in our valuation allowance. This was partially offset by a net tax benefit of $3.1 million resulting from changes in determinations relating to the potential realization of deferred tax assets and the resulting reversal of a valuation allowance in a foreign jurisdiction. In 2016, we released a valuation allowance in China resulting in a $5.4 million tax benefit in our provision for income taxes.

As of December 31, 2018 and December 31, 2017 , we have a valuation allowance of $183.3 million and $180.4 million , respectively, related to net deferred tax assets in several foreign jurisdictions and U.S. state and local jurisdictions.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNRECOGNIZED INCOME TAX BENEFITS To the extent that we have uncertain tax positions, a determination is made as to whether such positions meet the “more likely than not” threshold. This threshold must be met in order to record any tax benefit and, to the extent that an uncertain tax position meets the "more likely than not" threshold, we have measured and recorded the highest probable benefit, and have established appropriate reserves for benefits that exceed the amount likely to be sustained upon examination.

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits is as follows:



	Unrecognized Income Tax			Interest and
	Benefits			Penalties
	(in millions)
Balance at January 1, 2016	$	41.6		$	6.9
Increase in prior year tax positions	0.4			2.0
Decrease in prior year tax positions	(2.5		)	(0.5		)
Increase in current year tax positions	9.3			—
Settlement	(17.3		)	(5.6		)
Foreign currency remeasurement adjustment	(3.3		)	(0.3		)
Balance at December 31, 2016	$	28.2		$	2.5
Increase in prior year tax positions	1.5			3.1
Decrease in prior year tax positions	(0.4		)	—
Increase in current year tax positions	10.5			—
Increase from acquisitions	8.3			1.9
Settlement	(1.2		)	(0.1		)
Foreign currency remeasurement adjustment	0.8			0.1
Balance at December 31, 2017	$	47.7		$	7.5
Increase in prior year tax positions	5.6			3.5
Decrease in prior year tax positions	(16.9		)	(2.5		)
Increase in current year tax positions	6.0			—
Settlement	(3.7		)	(1.6		)
Balance at December 31, 2018	$	38.7		$	6.9

At December 31, 2018 and December 31, 2017 , we had $38.7 million and $47.7 million of gross unrecognized income tax benefits, respectively. The decrease in unrecognized income tax benefits at December 31, 2018 , as compared to December 31, 2017 , is primarily attributable to finalizing an advance pricing agreement in a foreign jurisdiction, which resulted in a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20.0 million .

In 2018 , 2017 , and 2016 , we recognized expense of $1.0 million , $3.1 million and $1.5 million , respectively, related to interest and penalties in Income tax expense (benefit) on our Consolidated Statements of Operations. We have a liability of $6.9 million and $7.5 million related to the estimated future payment of interest and penalties at December 31, 2018 and 2017 , respectively. The amount of the unrecognized income tax benefits, including interest and penalties, as of December 31, 2018 that, if recognized, would affect the effective tax rate is $42.4 million .

We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination. We are currently under a U.S. federal income tax examination for our legacy AAM business for the years 2014 and 2015, and are under a U.S. federal income tax examination for our legacy MPG business for 2015. U.S. federal income tax examinations for the years 2012 and 2013 were settled in January 2017, resulting in no cash payment or reduction in our liability for unrecognized

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

income tax benefits. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2012.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12 . EARNINGS (LOSS) PER SHARE (EPS)

We present EPS using the two-class method. This method allocates undistributed earnings between common shares and non-vested share based payment awards that entitle the holder to nonforfeitable dividend rights. Our participating securities include non-vested restricted stock units.

The following table sets forth the computation of our basic and diluted EPS available to shareholders of common stock (excluding participating securities):



	2018			2017			2016
	(in millions, except per share data)
Numerator
Net income (loss) attributable to AAM	$	(57.5	)	$	337.1		$	240.7
Less: Net income allocated to participating securities	—			(7.5		)	(5.5		)
Net income (loss) attributable to common shareholders - Basic and Dilutive	$	(57.5	)	$	329.6		$	235.2

Denominators
Basic common shares outstanding -
Weighted-average shares outstanding	115.0			104.6			78.2
Less: Participating securities	(3.4		)	(2.3		)	(1.8		)
Weighted-average common shares outstanding	111.6			102.3			76.4

Effect of dilutive securities -
Dilutive stock-based compensation	—			0.5			0.5

Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions	111.6			102.8			76.9

Basic EPS	$	(0.51	)	$	3.22		$	3.08

Diluted EPS	$	(0.51	)	$	3.21		$	3.06

Basic and diluted loss per share are the same in 2018 because the effect of 0.8 million dilutive stock options and performance shares would have been antidilutive.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13 . COMMITMENTS AND CONTINGENCIES

PURCHASE COMMITMENTS Obligated purchase commitments for capital expenditures and related project expenses were approximately $287.2 million at December 31, 2018 and $356.4 million at December 31, 2017 .

LEGAL PROCEEDINGS We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material effect on our financial condition, results of operations or cash flows.

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures to comply with environmental requirements, including recurring administrative costs. Such expenditures were not significant during 2018 , 2017 and 2016 .

ENVIRONMENTAL OBLIGATIONS Due to the nature of our manufacturing operations, we have legal obligations to perform asset retirement activities pursuant to federal, state, and local requirements. The process of estimating environmental liabilities is complex. Significant uncertainty may exist related to the timing and method of the settlement of these obligations. Therefore, these liabilities are not reasonably estimable until a triggering event occurs that allows us to estimate a range and assess the probabilities of potential settlement dates and the potential methods of settlement.

In the future, we will update our estimated costs and potential settlement dates and methods and their associated probabilities based on available information. Any update may change our estimate and could result in a material adjustment to this liability.

PRODUCT WARRANTIES We record a liability for estimated warranty obligations at the dates our products are sold. These estimates are established using sales volumes and internal and external warranty data where there is no payment history and historical information about the average cost of warranty claims for customers with prior claims. We estimate our costs based on the contractual arrangements with our customers, existing customer warranty terms and internal and external warranty data, which includes a determination of our warranty claims and actions taken to improve product quality and minimize warranty claims. We continuously evaluate these estimates and our customers' administration of their warranty programs. We closely monitor actual warranty claim data and adjust the liability, as necessary, on a quarterly basis.

During 2018 and 2017 , we also made adjustments to our warranty accrual to reflect revised estimates regarding our projected future warranty obligations. The following table provides a reconciliation of changes in the product warranty liability:



	December 31,
	2018			2017
	(in millions)
Beginning balance	$	49.5		$	42.9
Accruals	19.1			20.6
Settlements	(10.7		)	(5.6		)
Adjustments to prior period accruals	0.4			(9.2		)
Foreign currency translation	(0.6		)	0.8
Ending balance	$	57.7		$	49.5

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14 . RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) (AOCI) during the year ended December 31, 2018 , December 31, 2017 and December 31, 2016 are as follows (in millions) :



	Defined Benefit Plans				Foreign Currency Translation Adjustments			Unrecognized Loss on Cash Flow Hedges				Total
Balance at January 1, 2016	$	(223.9	)		$	(119.2	)	$	(13.4	)		$	(356.5	)

Other comprehensive loss before reclassifications	(27.5		)		(3.2		)	(20.8		)		(51.5		)
Income tax effect of other comprehensive loss before reclassifications	5.8				—			—				5.8
Amounts reclassified from accumulated other comprehensive loss into net income	3.2			(a)	—			10.5			(b)	13.7
Income taxes reclassified into net income	(1.1		)		—			—				(1.1		)

Net current period other comprehensive loss	(19.6		)		(3.2		)	(10.3		)		(33.1		)

Balance at December 31, 2016	$	(243.5	)		$	(122.4	)	$	(23.7	)		$	(389.6	)

Other comprehensive income (loss) before reclassifications	(20.1		)		88.3			12.0				80.2
Income tax effect of other comprehensive income (loss) before reclassifications	5.5				—			(0.2		)		5.3
Amounts reclassified from accumulated other comprehensive loss into net income	8.2			(a)	—			5.3			(b)	13.5
Income taxes reclassified into net income	(2.1		)		—			—				(2.1		)

Net current period other comprehensive income (loss)	(8.5		)		88.3			17.1				96.9

Balance at December 31, 2017	$	(252.0	)		$	(34.1	)	$	(6.6	)		$	(292.7	)

Other comprehensive income (loss) before reclassifications	41.9				(62.7		)	5.4				(15.4		)
Income tax effect of other comprehensive income (loss) before reclassifications	(8.4		)		—			(0.2		)		(8.6		)
Amounts reclassified from accumulated other comprehensive loss into net income	6.0			(a)	0.2			(0.4		)	(b)	5.8
Income taxes reclassified into net income	(1.4		)		—			0.7				(0.7		)

Net current period other comprehensive income (loss)	38.1				(62.5		)	5.5				(18.9		)

Balance at December 31, 2018	$	(213.9	)		$	(96.6	)	$	(1.1	)		$	(311.6	)

(a) The amount reclassified from AOCI included $6.0 million in cost of goods sold (COGS) for the year ended December 31, 2018, $8.7 million in COGS and $(0.5) million in SG&A for the year ended December 31, 2017 and $4.4 million in COGS and $(1.2) million in SG&A for the year ended December 31, 2016.

(b) The amounts reclassified from AOCI included $2.8 million in COGS and $(3.2) million in interest expense for the year ended December 31, 2018, $5.3 million in COGS for the year ended December 31, 2017, and $10.5 million in COGS for the year ended December 31, 2016.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15 . SEGMENT AND GEOGRAPHIC INFORMATION

Our business is organized into four business units, each representing a reportable segment under ASC 280 Segment Reporting . The four segments are Driveline, Metal Forming, Powertrain, and Casting. The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.

Our product offerings by segment are as follows:


•	Driveline products consist primarily of axles, driveshafts, power transfer units, rear drive modules, transfer cases, and electric and hybrid driveline products and systems for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles;


•	Metal Forming products consist primarily of axle and transmission shafts, ring and pinion gears, differential gears, transmission gears, and suspension components for Original Equipment Manufacturers and Tier 1 automotive suppliers;


•	The Powertrain segment products consist primarily of transmission module and differential assemblies, transmission valve bodies, connecting rod forging and assemblies, torsional vibration dampers, and variable valve timing products for Original Equipment Manufacturers and Tier 1 automotive suppliers; and


•	The Casting segment produces both thin wall castings and high strength ductile iron casting, as well as differential cases, steering knuckles, control arms, brackets, and turbo charger housings for the global light vehicle, commercial and industrial markets.

We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. Segment Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization for our reportable segments, excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on the sale of a business, goodwill impairments and non-recurring items.



	Year Ended December 31, 2018

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	4,254.8	$	1,515.4	$	1,128.5	$	919.8	$	—	$	7,818.5
Less: Intersegment sales	0.8		418.0		13.8		115.5		—		548.1
Net external sales	$	4,254.0	$	1,097.4	$	1,114.7	$	804.3	$	—	$	7,270.4

Segment adjusted EBITDA	$	660.7	$	285.9	$	163.7	$	73.6	$	—	$	1,183.9

Depreciation and amortization	$	211.7	$	118.6	$	120.9	$	77.6	$	—	$	528.8

Capital Expenditures	$	283.3	$	102.2	$	97.6	$	41.6	$	—	$	524.7

Total Assets	$	2,463.5	$	2,143.1	$	1,679.6	$	664.7	$	559.8	$	7,510.7

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



	Year Ended December 31, 2017

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	4,040.8	$	1,242.6	$	816.5	$	676.4	$	—	$	6,776.3
Less: Intersegment sales	1.1		412.6		9.9		86.7		—		510.3
Net external sales	$	4,039.7	$	830.0	$	806.6	$	589.7	$	—	$	6,266.0

Segment adjusted EBITDA	$	692.3	$	232.3	$	131.1	$	47.0	$	—	$	1,102.7

Depreciation and amortization	$	189.4	$	95.1	$	81.7	$	50.8	$	11.5	$	428.5

Capital Expenditures	$	296.9	$	65.2	$	84.7	$	30.9	$	—	$	477.7

Total Assets	$	2,303.0	$	2,175.3	$	1,824.0	$	984.3	$	596.2	$	7,882.8



	Year Ended December 31, 2016

	Driveline		Metal Forming		Powertrain		Casting		Corporate and Eliminations		Total
Sales	$	3,735.6	$	552.2	$	—	$	—	$	—	$	4,287.8
Less: Intersegment sales	4.9		334.9		—		—		—		339.8
Net external sales	$	3,730.7	$	217.3	$	—	$	—	$	—	$	3,948.0

Segment adjusted EBITDA	$	515.8	$	103.6	$	—	$	—	$	—	$	619.4

Depreciation and amortization	$	160.8	$	24.1	$	—	$	—	$	16.9	$	201.8

Capital Expenditures	$	159.0	$	22.9	$	—	$	—	$	41.1	$	223.0

Total Assets	$	2,183.9	$	410.3	$	—	$	—	$	828.1	$	3,422.3

Assets included in the Corporate and Eliminations column of the tables above represent AAM corporate assets, as well as eliminations of intercompany assets.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table represents a reconciliation of Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the years ended December 31, 2018 , 2017 and 2016 :



	Year Ended December 31,
	2018			2017			2016
Segment adjusted EBITDA	$	1,183.9		$	1,102.7		$	619.4
Interest expense	(216.3		)	(195.6		)	(93.4		)
Depreciation and amortization	(528.8		)	(428.5		)	(201.8		)
Goodwill impairment	(485.5		)	—			—
Restructuring and acquisition-related costs	(78.9		)	(110.7		)	(26.2		)
Pension settlement	—			(3.2		)	—
Gain on sale of business	15.5			—			—
Gain on settlement of capital lease	15.6			—			—
Acquisition-related fair value inventory adjustment	—			(24.9		)	—
Impact of change in accounting principle	—			3.7			—
Debt refinancing and redemption costs	(19.4		)	(3.5		)	—
Other	—			—			1.0
Income (loss) before income taxes	$	(113.9	)	$	340.0		$	299.0

Financial information relating to our operations by geographic area is presented in the following table. Net sales are attributed to countries based upon location of production. We have retrospectively reclassified 2017 and 2016 to present net sales based upon location of production as these amounts were previously presented based upon location of customer. Long-lived assets exclude deferred income taxes.



	December 31,
	2018		2017		2016
	(in millions)
Net sales
United States	$	3,293.2	$	2,742.7	$	1,321.7
Mexico	2,547.1		2,456.1		2,178.7
South America	129.7		133.2		98.2
China	373.4		318.6		137.3
All other Asia	304.9		193.9		128.6
Europe	622.1		421.5		83.5
Total net sales	$	7,270.4	$	6,266.0	$	3,948.0

Long-lived assets
United States	$	3,612.3	$	4,253.8	$	831.0
Mexico	1,117.9		993.8		529.2
South America	70.6		61.4		61.5
China	177.6		180.9		129.8
All other Asia	101.0		103.4		92.0
Europe	356.0		307.4		111.7
Total long-lived assets	$	5,435.4	$	5,900.7	$	1,755.2

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16 . UNAUDITED QUARTERLY FINANCIAL DATA



	Three Months Ended,
	March 31		June 30		September 30		December 31
	(in millions, except per share data)
2018
Net sales	$	1,858.4	$	1,900.9	$	1,817.0	$	1,694.1
Gross profit	316.3		331.4		267.4		225.3
Net income (loss)	89.5		151.3		64.0		(361.6		)	(2)
Net income (loss) attributable to AAM	89.4		151.1		63.8		(361.8		)	(2)
Basic EPS ⁽¹⁾	$	0.78	$	1.31	$	0.55	$	(3.24	)	(2)
Diluted EPS ⁽¹⁾	$	0.78	$	1.30	$	0.55	$	(3.24	)	(2)

2017
Net sales	$	1,049.9	$	1,757.8	$	1,724.4	$	1,733.9
Gross profit	210.7		316.4		297.7		294.3
Net income	78.4		66.3		86.3		106.5
Net income attributable to AAM	78.4		66.2		86.2		106.3
Basic EPS ⁽¹⁾	$	1.00	$	0.59	$	0.76	$	0.93
Diluted EPS ⁽¹⁾	$	0.99	$	0.59	$	0.75	$	0.93

(1) Full year basic and diluted EPS will not necessarily agree to the sum of the four quarters because each quarter is a separate calculation.


(2)	In the fourth quarter of 2018, we recorded a goodwill impairment charge of approximately $400 million , net of tax, associated with the annual goodwill impairment test for our Powertrain and Casting segments. See Note 5 - Goodwill and Other Intangible Assets for further detail.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17 . SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Holdings has no significant assets other than its 100% ownership in AAM, Inc. and Metaldyne Performance Group, Inc. (MPG Inc.), and no direct subsidiaries other than AAM, Inc. and MPG Inc. The 7.75% Notes, 6.625% Notes, 6.50% Notes, 6.25% Notes (due 2026) and 6.25% Notes (due 2025) are senior unsecured obligations of AAM Inc.; all of which are fully and unconditionally guaranteed, on a joint and several basis, by Holdings, MPG Inc., and substantially all domestic subsidiaries of AAM, Inc. and MPG Inc.

These Condensed Consolidating Financial Statements are prepared under the equity method of accounting whereby the investments in subsidiaries are recorded at cost and adjusted for the parent's share of the subsidiaries' cumulative results of operations, capital contributions and distributions, and other equity changes.



Condensed Consolidating Statements of Operations

2018	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims			Consolidated
	(in millions)
Net sales
External	$	—		$	1,088.4		$	2,204.8		$	3,977.2		$	—		$	7,270.4
Intercompany	—			4.2			294.8			41.9			(340.9		)	—
Total net sales	—			1,092.6			2,499.6			4,019.1			(340.9		)	7,270.4
Cost of goods sold	—			1,033.8			2,249.0			3,188.1			(340.9		)	6,130.0
Gross profit	—			58.8			250.6			831.0			—			1,140.4
Selling, general and administrative expenses	—			210.3			81.4			94.0			—			385.7
Amortization of intangible assets	—			5.1			90.8			3.5			—			99.4
Goodwill impairment	—			—			485.5			—			—			485.5
Restructuring and acquisition-related costs	—			34.2			40.4			4.3			—			78.9
Gain on sale of business	—			—			(15.5		)	—			—			(15.5		)
Operating income (loss)	—			(190.8		)	(432.0		)	729.2			—			106.4
Non-operating income (expense), net	—			(260.6		)	15.6			24.7			—			(220.3		)
Income (loss) before income taxes	—			(451.4		)	(416.4		)	753.9			—			(113.9		)
Income tax expense (benefit)	—			(34.2		)	(55.4		)	32.5			—			(57.1		)
Earnings (loss) from equity in subsidiaries	(57.5		)	(168.3		)	168.0			—			57.8			—
Net income (loss) before royalties	(57.5		)	(585.5		)	(193.0		)	721.4			57.8			(56.8		)
Royalties	—			276.6			3.4			(280.0		)	—			—
Net income (loss) after royalties	(57.5		)	(308.9		)	(189.6		)	441.4			57.8			(56.8		)
Net income attributable to noncontrolling interests	—			—			—			(0.7		)	—			(0.7		)
Net income (loss) attributable to AAM	$	(57.5	)	$	(308.9	)	$	(189.6	)	$	440.7		$	57.8		$	(57.5	)
Other comprehensive income (loss), net of tax	(18.9		)	9.4			(51.6		)	(44.2		)	86.4			(18.9		)
Comprehensive income (loss)	$	(76.4	)	$	(299.5	)	$	(241.2	)	$	396.5		$	144.2		$	(76.4	)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



2017	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims			Consolidated
Net sales
External	$	—		$	1,074.6		$	1,668.2		$	3,523.2		$	—		$	6,266.0
Intercompany	—			2.4			285.2			27.5			(315.1		)	—
Total net sales	—			1,077.0			1,953.4			3,550.7			(315.1		)	6,266.0
Cost of goods sold	—			996.6			1,730.9			2,734.5			(315.1		)	5,146.9
Gross profit	—			80.4			222.5			816.2			—			1,119.1
Selling, general and administrative expenses	—			223.2			63.9			103.0			—			390.1
Amortization of intangible assets	—			5.6			67.5			2.2			—			75.3
Restructuring and acquisition-related costs	—			105.2			1.9			3.6			—			110.7
Operating income (loss)	—			(253.6		)	89.2			707.4			—			543.0
Non-operating income (expense), net	—			(210.0		)	18.6			(11.6		)	—			(203.0		)
Income (loss) before income taxes	—			(463.6		)	107.8			695.8			—			340.0
Income tax expense (benefit)	—			194.1			(247.0		)	55.4			—			2.5
Earnings (loss) from equity in subsidiaries	337.1			289.5			76.1			—			(702.7		)	—
Net income (loss) before royalties	337.1			(368.2		)	430.9			640.4			(702.7		)	337.5
Royalties	—			317.3			3.6			(320.9		)	—			—
Net income (loss) after royalties	337.1			(50.9		)	434.5			319.5			(702.7		)	337.5
Net income attributable to noncontrolling interests	—			—			—			(0.4		)	—			(0.4		)
Net income (loss) attributable to AAM	$	337.1		$	(50.9	)	$	434.5		$	319.1		$	(702.7	)	$	337.1
Other comprehensive income (loss), net of tax	96.9			40.1			87.3			102.6			(230.0		)	96.9
Comprehensive income (loss)	$	434.0		$	(10.8	)	$	521.8		$	421.7		$	(932.7	)	$	434.0

2016	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims			Consolidated
Net sales
External	$	—		$	1,109.6		$	212.2		$	2,626.2		$	—		$	3,948.0
Intercompany	—			8.3			241.6			16.1			(266.0		)	—
Total net sales	—			1,117.9			453.8			2,642.3			(266.0		)	3,948.0
Cost of goods sold	—			1,063.8			375.4			2,048.7			(266.0		)	3,221.9
Gross profit	—			54.1			78.4			593.6			—			726.1
Selling, general and administrative expenses	—			243.6			—			70.6			—			314.2
Amortization of intangible assets	—			5.0			—			—			—			5.0
Restructuring and acquisition-related costs	—			21.1			—			5.1			—			26.2
Operating income (loss)	—			(215.6		)	78.4			517.9			—			380.7
Non-operating income (expense), net	—			(96.6		)	10.9			4.0			—			(81.7		)
Income (loss) before income taxes	—			(312.2		)	89.3			521.9			—			299.0
Income tax expense	—			27.4			4.2			26.7			—			58.3
Earnings (loss) from equity in subsidiaries	240.7			267.4			(16.7		)	—			(491.4		)	—
Net income (loss) before royalties	240.7			(72.2		)	68.4			495.2			(491.4		)	240.7
Royalties	—			312.9			—			(312.9		)	—			—
Net income after royalties	240.7			240.7			68.4			182.3			(491.4		)	240.7
Net income attributable to noncontrolling interests	—			—			—			—			—			—
Net income attributable to AAM	$	240.7		$	240.7		$	68.4		$	182.3		$	(491.4	)	$	240.7
Other comprehensive loss, net of tax	(33.1		)	(33.1		)	(1.2		)	(12.1		)	46.4			(33.1		)
Comprehensive income	$	207.6		$	207.6		$	67.2		$	170.2		$	(445.0	)	$	207.6

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Condensed Consolidating Balance Sheets
2018	Holdings		AAM Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elims			Consolidated
Assets	(in millions)
Current assets
Cash and cash equivalents	$	—	$	36.7	$	0.2	$	439.5	$	—		$	476.4
Accounts receivable, net	—		122.7		287.7		556.1		—			966.5
Intercompany receivables	—		3,337.2		2,356.3		93.5		(5,787.0		)	—
Inventories, net	—		42.5		157.7		259.5		—			459.7
Other current assets	—		34.4		6.0		86.8		—			127.2
Total current assets	—		3,573.5		2,807.9		1,435.4		(5,787.0		)	2,029.8
Property, plant and equipment, net	—		275.8		758.6		1,480.0		—			2,514.4
Goodwill	—		—		719.0		422.8		—			1,141.8
Other intangible assets, net	—		18.6		1,059.6		32.9		—			1,111.1
Intercompany notes and accounts receivable	—		1,316.8		144.5		—		(1,461.3		)	—
Other assets and deferred charges	—		319.8		126.4		267.4		—			713.6
Investment in subsidiaries	2,790.5		2,241.5		1,748.7		—		(6,780.7		)	—
Total assets	$	2,790.5	$	7,746.0	$	7,364.7	$	3,638.5	$	(14,029.0	)	$	7,510.7
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt	$	—	$	100.0	$	—	$	21.6	$	—		$	121.6
Accounts payable	—		94.2		246.5		499.5		—			840.2
Intercompany payables	—		2,050.0		3,615.7		121.3		(5,787.0		)	—
Other current liabilities	—		169.0		35.8		190.2		—			395.0
Total current liabilities	—		2,413.2		3,898.0		832.6		(5,787.0		)	1,356.8
Intercompany notes and accounts payable	1,304.2		12.5		—		144.6		(1,461.3		)	—
Long-term debt, net	—		3,578.3		3.0		105.5		—			3,686.8
Other long-term liabilities	—		508.9		271.7		200.2		—			980.8
Total liabilities	1,304.2		6,512.9		4,172.7		1,282.9		(7,248.3		)	6,024.4
Total AAM stockholders' equity	1,483.9		1,233.1		3,192.0		2,353.2		(6,778.3		)	1,483.9
Noncontrolling interests in subsidiaries	2.4		—		—		2.4		(2.4		)	2.4
Total stockholders' equity	1,486.3		1,233.1		3,192.0		2,355.6		(6,780.7		)	1,486.3
Total liabilities and stockholders' equity	$	2,790.5	$	7,746.0	$	7,364.7	$	3,638.5	$	(14,029.0	)	$	7,510.7

2017	Holdings		AAM Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elims			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	91.9	$	0.1	$	284.8	$	—		$	376.8
Accounts receivable, net	—		138.9		287.9		609.1		—			1,035.9
Intercompany receivables	—		3,475.2		479.9		7.5		(3,962.6		)	—
Inventories, net	—		37.2		147.4		207.4		—			392.0
Other current assets	—		40.4		9.9		90.0		—			140.3
Total current assets	—		3,783.6		925.2		1,198.8		(3,962.6		)	1,945.0
Property, plant and equipment, net	—		250.9		786.8		1,365.2		—			2,402.9
Goodwill	—		—		1,218.4		435.9		—			1,654.3
Other intangible assets, net	—		21.0		1,155.6		35.9		—			1,212.5
Intercompany notes and accounts receivable	11.7		—		243.5		—		(255.2		)	—
Other assets and deferred charges	—		349.1		122.8		196.2		—			668.1
Investment in subsidiaries	2,841.3		1,955.2		1,280.1		—		(6,076.6		)	—
Total assets	$	2,853.0	$	6,359.8	$	5,732.4	$	3,232.0	$	(10,294.4	)	$	7,882.8
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt	$	—	$	—	$	—	$	5.9	$	—		$	5.9
Accounts payable	—		139.0		204.6		455.4		—			799.0
Intercompany payables	1,313.0		563.7		2,017.7		68.2		(3,962.6		)	—
Other current liabilities	—		181.6		52.4		177.5		—			411.5
Total current liabilities	1,313.0		884.3		2,274.7		707.0		(3,962.6		)	1,216.4
Intercompany notes and accounts payable	—		11.7		—		243.5		(255.2		)	—
Long-term debt, net	—		3,894.6		4.4		70.3		—			3,969.3
Other long-term liabilities	—		639.1		333.2		184.8		—			1,157.1
Total liabilities	1,313.0		5,429.7		2,612.3		1,205.6		(4,217.8		)	6,342.8
Total AAM stockholders' equity	1,536.0		930.1		3,120.1		2,022.4		(6,072.6		)	1,536.0
Noncontrolling interests in subsidiaries	4.0		—		—		4.0		(4.0		)	4.0
Total stockholders' equity	$	1,540.0	$	930.1	$	3,120.1	$	2,026.4	$	(6,076.6	)	$	1,540.0
Total liabilities and stockholders' equity	$	2,853.0	$	6,359.8	$	5,732.4	$	3,232.0	$	(10,294.4	)	$	7,882.8

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Condensed Consolidating Statements of Cash Flows

2018	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims		Consolidated
	(in millions)
Net cash provided by operating activities	$	—		$	262.0		$	145.5		$	364.0		$	—	$	771.5
Investing activities
Purchases of property, plant and equipment	—			(63.2		)	(163.8		)	(297.7		)	—		(524.7		)
Proceeds from sale of property, plant and equipment	—			—			4.3			0.6			—		4.9
Purchase buyouts of leased equipment	—			—			(0.5		)	—			—		(0.5		)
Proceeds from sale of business	—			—			42.7			4.4			—		47.1
Acquisition of business, net of cash acquired	—			—			—			(1.3		)	—		(1.3		)
Investment in affiliates	—			(3.0		)	—			(0.7		)	—		(3.7		)
Intercompany activity	—			—			(44.1		)	44.1			—		—
Net cash used in investing activities	—			(66.2		)	(161.4		)	(250.6		)	—		(478.2		)
Financing activities
Net debt activity	—			(240.4		)	(0.7		)	69.5			—		(171.6		)
Debt issuance costs	—			(6.9		)	—			—			—		(6.9		)
Purchase of treasury stock	(3.7		)	—			—			—			—		(3.7		)
Purchase of noncontrolling interest	—			—			(2.3		)	—			—		(2.3		)
Intercompany activity	3.7			(3.7		)	21.5			(21.5		)	—		—
Net cash provided by (used in) financing activities	—			(251.0		)	18.5			48.0			—		(184.5		)
Effect of exchange rate changes on cash	—			—			—			(6.7		)	—		(6.7		)
Net increase (decrease) in cash, cash equivalents and restricted cash	—			(55.2		)	2.6			154.7			—		102.1
Cash, cash equivalents and restricted cash at beginning of period	—			91.9			0.1			284.8			—		376.8
Cash, cash equivalents and restricted cash at end of period	$	—		$	36.7		$	2.7		$	439.5		$	—	$	478.9

2017	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims		Consolidated
Net cash provided by operating activities	$	—		$	410.4		$	33.1		$	203.5		$	—	$	647.0
Investing activities
Purchases of property, plant and equipment	—			(69.1		)	(100.4		)	(308.2		)	—		(477.7		)
Proceeds from sale of property, plant and equipment	—			0.3			0.3			1.9			—		2.5
Purchase buyouts of leased equipment	—			(13.3		)	—			—			—		(13.3		)
Proceeds from sale of business	—			7.5			(1.6		)	—			—		5.9
Acquisition of business, net of cash acquired	—			(953.5		)	64.6			(6.6		)	—		(895.5		)
Net cash used in investing activities	—			(1,028.1		)	(37.1		)	(312.9		)	—		(1,378.1		)
Financing activities
Net debt activity	—			725.6			(0.7		)	(12.2		)	—		712.7
Debt issuance costs	—			(91.0		)	—			—			—		(91.0		)
Employee stock option exercises	—			0.9			—			—			—		0.9
Purchase of treasury stock	(7.0		)	—			—			—			—		(7.0		)
Intercompany activity	7.0			(10.2		)	3.2			—			—		—
Net cash provided by (used in) financing activities	—			625.3			2.5			(12.2		)	—		615.6
Effect of exchange rate changes on cash	—			—			—			11.1			—		11.1
Net increase (decrease) in cash, cash equivalents and restricted cash	—			7.6			(1.5		)	(110.5		)	—		(104.4		)
Cash, cash equivalents and restricted cash at beginning of period	—			84.3			1.6			395.3			—		481.2
Cash, cash equivalents and restricted cash at end of period	$	—		$	91.9		$	0.1		$	284.8		$	—	$	376.8

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



2016	Holdings			AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims		Consolidated

Net cash provided by operating activities	$	—		$	78.3		$	25.3		$	304.0		$	—	$	407.6
Investing activities
Purchases of property, plant and equipment	—			(36.8		)	(18.0		)	(168.2		)	—		(223.0		)
Proceeds from sale of property, plant and equipment	—			—			0.3			1.4			—		1.7
Purchase buyouts of leased equipment	—			(4.6		)	—			—			—		(4.6		)
Acquisition of business, net of cash acquired	—			—			(5.6		)	—			—		(5.6		)
Other, net	—			1.0			—			2.8			—		3.8
Net cash used in investing activities	—			(40.4		)	(23.3		)	(164.0		)	—		(227.7		)
Financing activities
Net debt activity	—			(0.7		)	(0.4		)	24.4			—		23.3
Employee stock option exercises	—			0.3			—			—			—		0.3
Purchase of treasury stock	(5.2		)	—			—			—			—		(5.2		)
Intercompany activity	5.2			(5.2		)	—			—			—		—
Net cash provided by (used in) financing activities	—			(5.6		)	(0.4		)	24.4			—		18.4
Effect of exchange rate changes on cash	—			—			—			0.4			—		0.4
Net increase in cash, cash equivalents and restricted cash	—			32.3			1.6			164.8			—		198.7
Cash, cash equivalents and restricted cash at beginning of period	—			52.0			—			230.5			—		282.5
Cash, cash equivalents and restricted cash at end of period	$	—		$	84.3		$	1.6		$	395.3		$	—	$	481.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of American Axle and Manufacturing Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of American Axle and Manufacturing Holdings, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), cash flows and stockholders’ equity, for each of the three years in the period ended December 31, 2018, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Detroit, Michigan

February 15, 2019

We have served as the Company's auditor since 1998.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None


Item 9A.	Controls and Procedures

Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures (as defined in Rules 13a - 15(e) or 15d - 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were effective as of December 31, 2018 .

Management Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our consolidated financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018 . In making this assessment, we used criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that, as of December 31, 2018 , our internal control over financial reporting was effective based on those criteria.

The attestation report of our independent registered public accounting firm regarding internal control over financial reporting is included in Item 8, ”Financial Statements and Supplementary Data.”

Change in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	Other Information

None

100

Part III


Item 10.	Directors, Executive Officers and Corporate Governance

The information required by Item 401(b), (d) (e) and (f) of Regulation S-K about our executive officers is furnished in Part I of this Form 10-K, Annual Report under the caption “Executive Officers of the Registrant.” All other information required by Item 10 is incorporated herein by reference from our Proxy Statement which we expect to file on or about March 21, 2019 .

We have adopted a code of ethics that applies to our Chief Executive Officer and Chief Financial Officer and the senior financial executives who report directly to our Chief Financial Officer. This code of ethics is available on our website at www.aam.com. We will post on our website any amendment to or waiver from the provisions of the code of ethics or our code of business conduct that applies to executive officers or directors of the Company.


Item 11.	Executive Compensation

The information required by Item 11 is incorporated by reference from our Proxy Statement.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated by reference from our Proxy Statement.


Item 13.	Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 under Items 404 and 407(a) of Regulation S-K is incorporated by reference from our Proxy Statement.


Item 14.	Principal Accounting Fees and Services

The information required by Item 9(e) of Schedule 14A is incorporated by reference from our Proxy Statement.

101

Part IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as a part of this report:


1.	All Financial Statements

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statement of Stockholders' Equity

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm


2.	Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2018 , 2017 and 2016 is filed as part of this Form 10-K.

All other schedules have been omitted because they are not applicable or not required.


3.	Exhibits

The following exhibits were previously filed unless otherwise indicated:



Number		Description of Exhibit

2.1		Agreement and Plan of Merger by and among American Axle & Manufacturing Holdings, Inc., ALPHA SPV I, Inc. and Metaldyne Performance Group Inc.
		(Incorporated by reference to Exhibit 2.1 of Current Report on Form 8-K dated November 8, 2016.)

3.01		Amended and Restated Certificate of Incorporation of American Axle & Manufacturing Holdings, Inc.
		(Incorporated by reference to Exhibit 3.2 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-8 (Registration No. 333-220300).)

3.02		Third Amended and Restated Bylaws of American Axle & Manufacturing Holdings, Inc.
		(Incorporated by reference to Exhibit 3.04 filed of Current Report on Form 8-K dated February 13, 2018.)

4.01		Specimen Certificate for shares of the Company's Common Stock
		(Incorporated by reference to Exhibit 4.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491).)

4.02		Form of Indenture, among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings, Inc., as guarantor, certain subsidiary guarantors and U.S. Bank National Association, as trustee
		(Incorporated by reference to Exhibit 4.3 of Registration Statement on Form S-3 dated July 12, 2011.)

4.03		Indenture, dated as of November 3, 2011, among American Axle & Manufacturing, Inc., the Guarantors and U.S. Bank National Association, as trustee
		(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated October 31, 2011.)

102



Number		Description of Exhibit

4.04		Form of 7.75% Senior Notes due 2019
		(Incorporated by Reference to Exhibit 4.2 of Current Report on Form 8-K dated October 31, 2011.)

4.05		Form of 6.625% Notes due 2022
		(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated September 17, 2012.)

4.06		Form of 6.25% Notes due 2021
		(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated February 28, 2013.)

4.07		Form of 5.125% Notes due 2019
		(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated November 12, 2013.)

4.08		Form of 6.25% Notes due 2025
		(Incorporated by Reference to Exhibit 4.2 of Current Report on Form 8-K dated March 23, 2017.)

4.09		Form of 6.50% Notes due 2027
		(Incorporated by Reference to Exhibit 4.3 of Current Report on Form 8-K dated March 23, 2017.)

4.10		First Supplemental Indenture, dated March 23, 2017 among American Axle & Manufacturing, Inc., Alpha SPV I, Inc., American Axle & Manufacturing Holdings, Inc., certain subsidiary guarantors and U.S. Bank National Association, as trustee
		(Incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K dated March 23, 2017.)

4.11		Second Supplemental Indenture, dated May 17, 2017 among American Axle & Manufacturing, Inc., Metaldyne Performance Group Inc., American Axle & Manufacturing Holdings, Inc. certain subsidiary guarantors and U.S. Bank National Association, as trustee
		(Incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K dated May 17, 2017.)

4.12		Registration Rights Agreement, dated as of March 23, 2017, among American Axle & Manufacturing, Inc., certain subsidiary guarantors and J.P. Morgan Securities LLC, as representative of the Initial Purchasers, in respect of the 6.25% Senior Notes due 2025
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated March 23, 2017.)

4.13		Registration Rights Agreement, dated as of March 23, 2017, among American Axle & Manufacturing, Inc., certain subsidiary guarantors and J.P. Morgan Securities LLC, as representative of the Initial Purchasers, in respect of the 6.50% Senior Notes due 2027
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated March 23, 2017.)

4.14		Third Supplemental Indenture, dated March 23, 2018 among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings, Inc., certain subsidiary guarantors signatory thereto and U.S. Bank National Association, as trustee
		(Incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K dated March 26, 2018.)

4.15		Form of 6.25% Notes due 2026
		(Incorporated by reference to Exhibit 4.1 of Current Report on Form 8-K dated March 27, 2018.)

103



Number		Description of Exhibit

10.01		Asset Purchase Agreement, dated February 18, 1994, between AAM, Inc. and GM, and all amendments thereto
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491).)

10.02		Lifetime Program Contract for GMT-900 Products, between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.51 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2003.)

++10.03		Letter Agreement dated April 22, 2004 by and between DaimlerChrysler Corporation and AAM, Inc.
		(Incorporated by reference to Exhibit 10.43 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2004.)

++10.04		Letter Agreement between General Motors Corporation and American Axle & Manufacturing, Inc. dated June 29, 2007
		(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated June 29, 2007.)

10.05		Agreement between General Motors Corporation and American Axle & Manufacturing, Inc. dated May 3, 2008, as amended May 16, 2008
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated May 23, 2008.)

++10.06		Settlement and Commercial Agreement, dated as of September 16, 2009, among General Motors Company, American Axle & Manufacturing Holdings, Inc. and American Axle & Manufacturing, Inc.
		(Incorporated by reference to Exhibit 10.62 of Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.)

‡10.07		Form of Nonqualified Stock Option Award Agreement under the 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated May 1, 2012.)

10.08		Amendment and Restatement Agreement dated as of September 13, 2013, among American Axle & Manufacturing Holdings, Inc., JPMorgan Chase Bank, N.A., as Administrative Agent and as Collateral Agent, and each financial institution party thereto as a lender, including as Exhibit A thereto, the Amended and Restated Credit Agreement dated as of January 9, 2004 and amended and restated as of September 13, 2013 among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated September 16, 2013.)

10.09		Guarantee Agreement dated as of January 9, 2004, as amended and restated as of September 13, 2013, among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings, Inc., certain subsidiaries of American Axle & Manufacturing, Inc. identified therein, and JPMorgan Chase Bank, N.A. as Administrative Agent for the lenders referred to therein
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated September 16, 2013.)

‡10.10		Form of Restricted Stock Unit Award Agreement for Board of Directors under the 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 10.1 of Quarterly Report on Form 10-Q dated May 2, 2014.)

‡10.11		Amended and Restated Employment Agreement dated February 19, 2015 by and between the Company and David C. Dauch
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated February 26, 2015.)

104



Number		Description of Exhibit

‡10.12		Amended and Restated American Axle & Manufacturing Holdings, Inc. 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 4.1 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-8 (Registration No. 333-220300).)

‡10.13		Employment Agreement dated as of August 1, 2015 by and between the Company and Michael K. Simonte
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated July 31, 2015.)

‡10.14		Second Amended and Restated American Axle & Manufacturing, Inc. Incentive Compensation Plan for Executive Officers effective as of January 1, 2016
		(Incorporated by reference to Exhibit 10.38 of Annual Report on Form 10-K dated February 12, 2016.)

‡10.15		Voting Agreement
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated November 8, 2016.)

10.16		Credit Agreement dated as of April 6, 2017 among American Axle & Manufacturing Holdings, Inc., American Axle & Manufacturing, Inc., each financial institution party thereto as a lender and JPMorgan Chase Bank, N.A., as Administrative Agent
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated April 12, 2017.)

10.17		Collateral Agreement dated as of April 6, 2017 among American Axle & Manufacturing Holdings, Inc., American Axle & Manufacturing, Inc., certain subsidiaries of American Axle & Manufacturing Holdings, Inc. identified therein and JPMorgan Chase Bank, N.A., as Collateral Agent
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated April 12, 2017.)

10.18		Guarantee Agreement dated as of April 6, 2017 among American Axle & Manufacturing Holdings, Inc., American Axle & Manufacturing, Inc., certain subsidiaries identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent
		(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated April 12, 2017.)

10.19		Stockholders' Agreement, dated as of April 6, 2017, among American Axle & Manufacturing Holdings, Inc., ASP MD Investco L.P. and American Securities LLC
		(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated April 6, 2017).

‡10.20		Amended and Restated American Axle & Manufacturing Holdings, Inc. 2012 Omnibus Incentive Plan - 2018 Incentive Compensation Program for Executive Officers
		(Incorporated by reference to Exhibit 10.39 of Annual Report on Form 10-K dated February 16, 2018.)

‡10.21		Amendment to American Axle & Manufacturing Holdings, Inc. Executive Deferred Compensation Plan (as amended and restated effective January 1, 2005, and as further amended prior to the date hereof)
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated April 16, 2018.)

105



Number		Description of Exhibit

‡10.22		Amendments to the Amended and Restated Employment Agreement dated February 15, 2015 by and between the Company and David C. Dauch
		(Incorporated by reference to Exhibit 10.5 of Current Report on Form 8-K dated April 16, 2018.)

‡10.23		Amendment to the Employment Agreement dated August 1, 2015 by and between the Company and Michael K. Simonte
		(Incorporated by reference to Exhibit 10.6 of Current Report on Form 8-K dated April 16, 2018.)

‡10.24		Form of Performance Share Award (Relative TSR) for Executive Officers under the 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 10.1 of Quarterly Report on Form 10-Q dated May 4, 2018.)

‡10.25		Form of Performance Share Award (Free Cash Flow) for Executive Officers under the 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 10.2 of Quarterly Report on Form 10-Q dated May 4, 2018.)

‡10.26		Form of Restricted Stock Unit Award Agreement (Cliff Vesting) for Executive Officers under the 2012 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 10.3 of Quarterly Report on Form 10-Q dated May 4, 2018.)

‡10.27		American Axle & Manufacturing Holdings, Inc. 2018 Omnibus Incentive Plan
		(Incorporated by reference to Exhibit 4.1 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-8 (Registration No. 333-225468).)

‡10.28		American Axle & Manufacturing Holdings, Inc. Change in Control Plan
		(Incorporated by reference to Exhibit 10.1 of Quarterly Report on Form 10-Q dated August 3, 2018.)

‡*10.29		American Axle & Manufacturing, Inc. Amended and Restated Supplemental Executive Retirement Program Document

‡*10.30		American Axle & Manufacturing Holdings, Inc. Executive Retirement Savings Plan

‡*10.31		American Axle & Manufacturing Holdings, Inc. Executive Officer Severance Plan

*21		Subsidiaries of the Registrant

*23		Consent of Independent Registered Public Accounting Firm

*31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act

*31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act

*32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

106



Number		Description of Exhibit

**101.INS		XBRL Instance Document

**101.SCH		XBRL Taxonomy Extension Schema Document

**101.PRE		XBRL Extension Presentation Linkbase Document

**101.LAB		XBRL Taxonomy Extension Label Linkbase Document

**101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

**101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

		(All other exhibits are not applicable.)

++ Confidential Treatment Request Granted by the SEC

‡ Reflects Management or Compensatory Contract

* Shown only in the original filed with the Securities and Exchange Commission

** Submitted electronically with the original filed with the Securities and Exchange Commission

107

Schedule II - VALUATION AND QUALIFYING ACCOUNTS



			Additions -
	Balance at		Charged to		Acquisitions		Deductions -			Balance
	Beginning of		Costs and		and		See Notes			At End of
	Period		Expenses		Other (a)		Below			Period
	(in millions)
Year Ended December 31, 2016:

Allowance for doubtful accounts	$	4.3	$	0.4	$	—	$	1.6	₍₁₎	$	3.1

Allowance for deferred taxes	167.3		18.4		—		20.9		₍₃₎	164.8

Inventory valuation allowance	17.1		7.5		—		9.8		₍₂₎	14.8

Year Ended December 31, 2017:

Allowance for doubtful accounts	3.1		4.6		2.1		2.8		₍₁₎	7.0

Allowance for deferred taxes	164.8		26.6		13.7		24.7		₍₄₎	180.4

Inventory valuation allowance	14.8		39.1		9.2		45.8		₍₂₎	17.3

Year Ended December 31, 2018:

Allowance for doubtful accounts	7.0		6.6		—		5.2		₍₁₎	8.4

Allowance for deferred taxes	180.4		12.9		—		10.0		₍₅₎	183.3

Inventory valuation allowance	17.3		22.2		—		25.1		₍₂₎	14.4


(a )	Amounts represent reserves recognized in conjunction with our acquisitions in 2017.


(1)	Uncollectible accounts charged off net of recoveries.


(2)	Primarily relates to write-offs of excess and obsolete inventories, as well as adjustments for physical quantity discrepancies.


(3)	Primarily reflects a reduction in deferred tax assets at various foreign locations due to foreign currency translation, as well as the reversal of the valuation allowance of $5.4 million against our deferred tax assets in China.


(4)	Reflects an increase related to valuation allowances of MPG that existed as of the acquisition date and the impact of tax reform resulting from the 2017 Act. This was partially offset by the reversal of certain state valuation allowances as a result of re-evaluating our state valuation allowances subsequent to the acquisition of MPG.


(5)	Primarily reflects a reduction in deferred tax assets at various foreign locations due to foreign currency translation.

108

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

/s/ Christopher J. May

Christopher J. May

Vice President & Chief Financial Officer

(Chief Accounting Officer)

Date: February 15, 2019

109

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.



Signature	Title	Date

/s/ David C. Dauch	Chairman of the Board &	February 15, 2019
David C. Dauch	Chief Executive Officer

/s/ Christopher J. May	Vice President &	February 15, 2019
Christopher J. May	Chief Financial Officer

/s/ Elizabeth A. Chappell	Director	February 15, 2019
Elizabeth A. Chappell

/s/ William L. Kozyra	Director	February 15, 2019
William L. Kozyra

/s/ Peter D. Lyons	Director	February 15, 2019
Peter D. Lyons

/s/ James A. McCaslin	Director	February 15, 2019
James A. McCaslin

/s/ William P. Miller II	Director	February 15, 2019
William P. Miller II

/s/ Herbert K. Parker	Director	February 15, 2019
Herbert K. Parker

/s/ Sandra Pierce	Director	February 15, 2019
Sandra Pierce

/s/ John F. Smith	Director	February 15, 2019
John F. Smith

/s/ Samuel Valenti III	Director	February 15, 2019
Samuel Valenti III

110

AMERICAN AXLE & MANUFACTURING, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM

AMENDED AND RESTATED PLAN DOCUMENT

EFFECTIVE APRIL 1, 2018

TABLE OF CONTENTS



		Page
Article I INTRODUCTION		1
1.1	Purpose of Plan	1
1.2	“Top Hat” Pension Benefit Plan	1
1.3	Funding	1
1.4	Effective Date	1
Article II DEFINITIONS		2
2.1	Actuarial Equivalent Value	2
2.2	Average Monthly Base Salary	2
2.3	Average Monthly Incentive Compensation	2
2.4	Average Total Direct Compensation	2
2.5	Base Salary	3
2.6	Board of Directors	3
2.7	Cash Balance Benefit	3
2.8	Cause	3
2.9	Code	3
2.10	Compensation Committee	3
2.11	Corporation	4
2.12	Credited Service	4
2.13	Disability	4
2.14	Employee	4
2.15	ERISA	5
2.16	Final Average Compensation	5
2.17	Frozen Benefit	5
2.18	Grandfathered Participant	5
2.19	Health Care Program	5
2.20	Joint and Survivor Annuity	6
2.21	Management Benefits Committee	6
2.22	Non-Grandfathered Participant	6
2.23	Participant	6
2.24	Salaried Savings Plan	6
2.25	Salaried Retirement Plan	6
2.26	Specified Employee	6
2.27	Spouse	6
Article III PARTICIPATION AND ELIGIBILITY		7
3.1	Participation	7
3.2	Eligibility for Retirement Benefits	7
3.3	Eligibility for Pre-Retirement Surviving Spouse Benefits	8
Article IV BENEFITS		9
4.1	Current Benefit Formula	9
4.2	Prior Benefit Formula	9
4.3	Time and Form of Payment of Benefits	11
4.4	Pre-Retirement Surviving Spouse Benefit	12
4.5	Terms and Conditions	12



4.6	Freeze of Accruals	12
Article V ADMINISTRATION		13
5.1	Management Benefits Committee	13
5.2	Administrator	13
5.3	Compensation	14
5.4	Agent for Service of Process	14
5.5	Indemnification	14
Article VI CLAIMS PROCEDURE		15
6.1	Filing of Claim	15
6.2	Denial of Claim	15
6.3	Appeal	16
6.4	Review of Appeal	16
6.5	Decision on Appeal	16
Article VII MISCELLANEOUS		17
7.1	No Contract of Employment	17
7.2	Non-Assignability of Benefits	17
7.3	Withholding	17
7.4	Amendment and Termination	17
7.5	No Fiduciary Relationship Created	17
7.6	Unsecured General Creditor Status of Employee	17
7.7	Severability	18
7.8	Offset	18
7.9	Intent to Comply with IRC Section 409A	18
7.10	Governing Laws	18
7.11	Binding Effect	18
7.12	Number and Gender	18
7.13	Headings	18
7.14	Entire Agreement	18

Article I

INTRODUCTION

American Axle & Manufacturing, Inc. (the “Corporation”) previously adopted and maintains the AMERICAN AXLE & MANUFACTURING, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM (the “Plan”) for the purpose of providing supplemental retirement benefits to employees who are eligible under the terms and conditions of this Plan. The Plan has been amended from time to time. The Plan is hereby amended and restated effective April 1, 2018, as follows.


1.1	Purpose of Plan .

The purpose of the Plan is to provide eligible employees of the Corporation a level of retirement benefits that result in total benefits which are competitive with benefits available to retiring executives of other major industrial companies.


1.2	“Top Hat” Pension Benefit Plan .

The Plan is an “employee pension benefit plan” within the meaning of ERISA. However, the Plan is unfunded and maintained for a select group of management or highly compensated employees and, therefore, it is intended that the Plan will be exempt from Parts 2, 3 and 4 of Title I of ERISA. The Plan is not intended to qualify under Code Section 401(a).


1.3	Funding .

The Plan is unfunded. All benefits will be paid from the general assets of the Corporation, although assets may, but are not required to be placed in a grantor trust, of which the Corporation is the grantor, within the meaning of subpart E, Part I, subchapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. Participants have no ownership, either actual or beneficial, in the assets of the trust so the trust shall not affect the unfunded status of the Plan.


1.4	Effective Date .

The original effective date of the Plan was March 1, 1994. The Plan was previously amended and restated on August 1, 2012. The Effective Date of the Plan as now amended and restated is April 1, 2018. The Plan is frozen as of April 30, 2018.

Article II

DEFINITIONS

For purposes of the Plan, the following words and phrases shall have the respective meanings set forth below, unless their context clearly requires a different meaning:


2.1	Actuarial Equivalent Value .

“Actuarial Equivalent Value” for purposes of calculating the actuarial increase for a Participant who remains employed on or after attainment of age 65 means a benefit of equal value when computed on the basis of the discount rate and a unisex version of the mortality table used to calculate the Plan’s obligations as disclosed in the Corporation’s audited financial statements for the year ended immediately prior to the year for which the actuarial increase is being calculated. Notwithstanding anything else to the contrary, this paragraph shall not be in effect for any purpose after April 30, 2018.

“Actuarial Equivalent Value” for all other purposes under the Plan means:


(a)	In the case of a benefit payable pursuant to the Salaried Retirement Plan and, if applicable, the Albion Automotive Pension Plan, a benefit of equal value when computed on the basis of RP 2000 Unisex Mortality Table with white collar adjustments and projected improvements to 2020 using scale AA and interest rate assumption of 6.0% calculated using the date of May 1, 2018 for any Participant that

would, assuming a not for Cause termination on such date, qualify under the Eligibility Criteria in Section 3.2 of this Plan. For any Participant that would fail to qualify under such formula, such hypothetical value to be calculated using the date the Participant would, assuming a not for Cause termination on such date, first qualify under the Eligibility Criteria; and

(b)

In the case of a Cash Balance Benefit, the hypothetical value of the Participant’s Cash Balance Account under the Salaried Retirement Plan. Such hypothetical value to be calculated using the date of May 1, 2018 for any Participant that would, assuming a not for Cause termination on such date, qualify under the Eligibility Criteria in Section 3.2 of this Plan. For any Participant that would fail to qualify under such formula, such hypothetical value to be calculated as of the date the Participant would, assuming a not for Cause termination on such date, first qualify under the Eligibility Criteria.


2.2	Average Monthly Base Salary .

“Average Monthly Base Salary” means the monthly average of the Employee’s Base Salary for the highest 60 of the 120 months immediately preceding the earliest of (i) April 30, 2018, (ii) his or her termination of employment, or (iii) in the case of a Grandfathered Participant, December 31, 2011. For purposes of determining “Average Monthly Base Salary,” the following provisions shall apply:


(a)	For any month for which the Employee received Base Salary at less than his or her full monthly Base Salary rate, his or her full monthly Base Salary rate last received preceding such month shall be used for such month.


(b)	For any month during which an Employee was on the hourly payroll and subsequent to which the Employee commenced service as a salaried Employee, his or her monthly Base Salary rate immediately following the commencement of such service as a salaried Employee shall be used for such month.


2.3	Average Monthly Incentive Compensation .

“Average Monthly Incentive Compensation” means the amount determined by DIVIDING the total of the highest five of the last ten years of annual incentive awards by the Corporation to an Employee immediately preceding the earliest of (i) April 30, 2018, (ii) his or her termination of employment, or (iii) in the case of a Grandfathered Participant, December 31, 2011 by 60. The annual incentive amount is to be based on the total annual incentive amount on the date of the award, irrespective of whether any portion of such award is deferred. Annual incentive awards related to an Employee’s year of retirement are not taken into account. If an Employee does not have five years of awards, then a $0 award will be used for each year necessary to make a total of five years. For purposes of calculating Average Monthly Incentive Compensation, annual incentive awards do not include special or one-time payments intended to compensate Employees for specific purposes.


2.4	Average Total Direct Compensation .

“Average Total Direct Compensation” means the sum of Average Monthly Base Salary plus Average Monthly Incentive Compensation.


2.5	Base Salary .

“Base Salary” means the salary paid by the Corporation for a work week of not more than 40 hours, exclusive of any other compensation.

An Employee’s Base Salary for purposes of determining benefits paid under this Plan shall include elective deferrals of Base Salary pursuant to (i) a cash or deferred arrangement under Code Section 401(k) as provided under the Salaried Savings Plan, (ii) an arrangement under Code Section 125 or 132(f)(4); and (iii) the American Axle & Manufacturing Holdings, Inc. Executive Deferred Compensation Plan.


2.6	Board of Directors .

“Board of Directors” means the Board of Directors of American Axle & Manufacturing, Inc. for all references under the Plan except as specifically stated otherwise.


2.7	Cash Balance Benefit .

“Cash Balance Benefit” means the benefit accrued under the Cash Balance portion of the Salaried Retirement Plan. The American Axle & Manufacturing, Inc. and Affiliated Corporation Salaried Cash Balance Pension Plan was merged into the Salaried Retirement Plan on December 31, 2011.


2.8	Cause .

For purposes of this Agreement, “Cause” shall mean, unless otherwise defined in the employment agreement of the Employee, the termination of the Employee’s employment because of:


(a)	the willful and continued failure or refusal of the Employee to perform the duties reasonably required of him/her by the Corporation;


(b)	the Employee’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) another crime involving dishonesty or moral turpitude or which reflects negatively upon the Corporation or otherwise impairs or impedes its operations;


(c)	the Employee’s engaging in any misconduct, gross negligence, act of dishonesty, violence or threat of violence (including any violation of federal securities laws) that is injurious to the Corporation or any of its subsidiaries or affiliates;


(d)	the Employee’s material breach of any applicable agreement with or policy of the Corporation or any of its subsidiaries or affiliates; or


(e)	any other willful misconduct by the Employee which is injurious to the financial condition or business reputation of the Corporation or any of its subsidiaries or affiliates.


2.9	Code .

“Code” means the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes that section.


2.10	Compensation Committee .

“Compensation Committee” means the Compensation Committee of the Board of Directors of American Axle & Manufacturing Holdings, Inc.


2.11	Corporation .

“Corporation” means American Axle & Manufacturing, Inc.


2.12	Credited Service .

“Credited Service” shall have the same meaning as that term is defined in Section 6.2 of the Salaried Retirement Plan for periods of service through (a) December 31, 2006 for all Non-Grandfathered Participants, and (b) December 31, 2011 for Grandfathered Participants. Credited Service for periods after the December 31, 2006 and December 31, 2011 freeze dates means the period commencing on January 1, 2007 (for Non-Grandfathered Participants) and January 1, 2012 (for Grandfathered Participants) and ending on the earlier of (i) the date of Employee’s death, Disability or termination of employment, or (ii) April 30, 2018. If an Employee incurs a separation from service and is subsequently rehired by the Corporation, Credited Service shall not include periods of service prior to the most recent rehire date. Credited Service shall not include any period of service while on the payroll of a non-domestic entity related to the Corporation, unless otherwise provided by the Management Benefits Committee in its discretion.

Notwithstanding any provision of this Plan or the Salaried Retirement Plan to the contrary, a Transitioned Employee (as defined in the Salaried Retirement Plan) shall receive credit for Credited Service with General Motors Corporation for purposes of determining such Employee’s eligibility for benefits under the Plan, but not for purposes of determining the amount of such Employee’s benefit. For purposes of calculating a benefit under Section 4.1 of this Plan, “Credited Service” shall not include leaves of absence or breaks in service.

Notwithstanding any other provisions of this Section 2.12, Section 2.14(c) or otherwise in this Plan to the contrary, for Participants identified in Exhibit A hereto (“Specified Participant”), for purposes of calculating the applicable benefit under Section 4.1 of the Plan, all service on or before the date listed for each Specified Participant shall be credited as Credited Service with the Corporation only for the number of years shown for that Specified Participant in Exhibit A. For service after the date listed in Exhibit A for a Specified Participant, any additional Credited Service for that Specified Participant shall be determined in accordance with the Plan.


2.13	Disability .

“Disability” shall mean either of the following: (a) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Corporation.


2.14	Employee .

“Employee” means:

(a)

General Definition . “Employee” shall mean a regular employee of the Corporation compensated by salary or by commission who is (i) working in the United States, or (ii) a citizen of or domiciled in the United States and who has been or may hereafter be hired in the United States by the Corporation and who is sent out of the United States by the Corporation to work in foreign operations, and whose services, if discontinued, would be discontinued by recalling said employee to the United States and terminating his or her services in the United States and (iii) a nonresident alien receiving income from the Corporation’s United States payroll.


(b)	Temporary, Part-Time and Flexible Service Employees . The term “Employee” shall not include employees who are classified by the Corporation as (i) Temporary Employees, including per diem employees, (ii) Part-Time Employees, or (iii) Flexible Service Employees.


(c)	Service with Controlled Group Members . An Employee’s service with non-domestic members of the Corporation’s controlled group (as defined in Code Section 414(b) and (c)) shall be counted for eligibility purposes but not for benefit accrual purposes.


(d)	Leased Employees . The term “Employee” shall not include any Leased Employee (within the meaning of Code Section 414(n)) or any individual classified as a Leased Employee by the Corporation. If a Leased Employee later becomes an Employee, service as a Leased Employee shall be counted under this Plan for eligibility purposes.


(e)	Union Employees . The term “Employee” shall not include employees represented by a labor organization who are covered by a collective bargaining agreement so long as retirement benefits are the subject of good-faith bargaining and so long as the collective bargaining agreement does not expressly provide for participation in this Plan.


(f)	Directors . The term “Employee” shall not include members of the Board of Directors of American Axle & Manufacturing Holdings, Inc., or of any committee appointed by such board, who are not regular employees of the Corporation.


(g)	Independent Contractors . The term “Employee” shall not include an independent contractor or any individual classified as an independent contractor by the Corporation regardless of any later classification or reclassification of any such individual as a common law employee of the Corporation.


2.15	ERISA .

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.


2.16	Final Average Compensation .

“Final Average Compensation” means the annual average of the Employee’s Base Salary plus annual incentive awards from the Corporation for the five consecutive calendar years prior to April 30, 2018 that results in the highest such average for the Participant. Provided that such average will include 2018 calendar year annual compensation to the extent the Employee’s Base Salary for 2018 plus annual incentive award paid prior to April 30, 2018 results in a higher Final Average Compensation for the Employee. If the Employee has less than five full calendar years of employment prior to April 30, 2018, only his or her full calendar years of employment shall be used to determine the Employee’s Final Average Compensation, except with respect to the 2018 calendar year, for which the Employee’s Base Salary plus annual incentive award paid prior to April 30, 2018 shall be annualized. Final Average Compensation shall not include certain special payments or one-time payments intended to compensate Employees for specific purposes.


2.17	Frozen Benefit .

“ Frozen Benefit” means, in the case of a Grandfathered Participant, his or her accrued benefit under this Plan determined as of December 31, 2011.


2.18	Grandfathered Participant .

The term “Grandfathered Participant” means an individual who (i) was actively employed by the Corporation on December 31, 2006, (ii) was an active Participant in this Plan and in the Salaried Retirement Plan on December 31, 2006, and (iii) if he or she continued in the employ of the Corporation on a full-time basis, was eligible for Early or Normal Retirement under the Salaried Retirement Plan on or before December 1, 2011.


2.19	Health Care Program .

“Health Care Program” means the American Axle & Manufacturing, Inc. group health and welfare benefits plans for salaried employees as such program is amended from time to time.


2.20	Joint and Survivor Annuity .

“Joint and Survivor Annuity” means an immediate annuity which provides a reduced benefit for the life of the Employee with a survivor annuity for the life of the Employee’s Spouse equal to 65% of the amount of the annuity which is payable during the life of the Employee. The reduced benefit payable for the life of the Employee shall be an amount equal to the benefit otherwise payable to the Employee under Article IV of this Plan multiplied by 95% provided the age of the Employee and his or her Spouse is within five years of each other. If an Employee’s Spouse is five or more years younger than the Employee, the multiplier of 95% is decreased by 1/2% for each full year over five years that the Spouse is younger than the Employee, and, if such Spouse is five or more years older than the Employee, the multiplier of 95% shall be increased by 1/2%, but not to exceed 100%, for each full year over five years that the Spouse is older than the Employee. Grandfathered Participants whose benefits are calculated under Section 4.2 shall have the same joint and survivor annuity options available under this Plan as are available under Sections 8.1 and 8.2 of the Salaried Retirement Plan.


2.21	Management Benefits Committee .

“Management Benefits Committee” means the committee appointed pursuant to Section 5.1.


2.22	Non-Grandfathered Participant .

The term “Non-Grandfathered Participant” means any Participant in the Plan who is not a Grandfathered Participant.


2.23	Participant .

“Participant” means an Employee meeting the requirements of Article III.


2.24	Salaried Savings Plan .

“Salaried Savings Plan” means the American Axle and Manufacturing, Inc. Salaried Savings Plan, as such plan is amended from time to time.


2.25	Salaried Retirement Plan .

“Salaried Retirement Plan” means the American Axle & Manufacturing, Inc. Retirement Program for Salaried Employees, as such plan is amended from time to time.


2.26	Specified Employee .

“Specified Employee” means a key employee as defined in Section 416(i) of the Code without regard to paragraph (5) thereof.


2.27	Spouse .

“Spouse” means the legally married husband or wife of an Employee. The legality of the marriage shall be determined pursuant to the laws of the state in which the Employee is domiciled.

Article III

PARTICIPATION AND ELIGIBILITY


3.1	Participation .

The Corporation shall designate each Employee who is eligible to participate in the Plan. Only Employees who are in a select group of management or highly compensated employees (within the meaning of Title I of ERISA) may be designated as eligible to participate in the Plan. Notwithstanding anything herein to the contrary, no person shall be eligible to become a Participant in the Plan on or after April 1, 2018.


3.2	Eligibility for Retirement Benefits .

The Management Benefits Committee shall determine each Employee’s eligibility for benefits under this Plan.


(a)	Eligibility Criteria . To be eligible for a benefit under Section IV of this Plan, an Employee must:


(1)	Prior to April 1, 2018, be defined as Unclassified, as such term is defined by the Corporation;


(2)	Be an active employee of the Corporation or an affiliated entity on his or her date of death, retirement or commencement of his or her Disability;

(3)

As of the date the employment relationship is terminated, (i) be credited with 10 or more years of Credited Service and have attained age 55 at the time of his or her retirement, death or commencement of his or her Disability, (ii) be credited with five or more years of Credited Service and have attained age 60 at the time of his or her retirement, death, or commencement of his or her Disability, or (iii) have attained age 65 at the time of his or her retirement, death, or commencement of his or her Disability; and


(4)	Not have been terminated by the Corporation for Cause.

An individual shall not be deemed to be actively employed if he or she is laid off or on a leave of absence. The term “retirement” means the date an Employee has terminated employment with the Corporation (or a related entity) due to retirement. The term “retirement” is intended to constitute a separation from service under Code Section 409A and regulations issued thereunder.


(b)	Non-Grandfathered Participant . A Non-Grandfathered Participant shall, upon meeting the requirements set forth in Section 3.1(a), be eligible for a benefit determined pursuant to Section 4.1.


(c)	Grandfathered Participant . A Grandfathered Participant who continued in the employ of the Corporation after December 31, 2011 shall, upon meeting the requirements of Section 3.1, be eligible for the greater of:


(1)	his or her benefit determined pursuant to Section 4.1;


(2)	his or her Frozen Benefit under the Basic Benefit formula determined pursuant to Section 4.2 (a); or


(3)	if he or she shall have attained age 62 at the time of his or her retirement , death or commencement of his or her Disability, his or her Frozen Benefit under the Alternative Benefit formula determined pursuant to Section 4.2(c).


3.3	Eligibility for Pre-Retirement Surviving Spouse Benefits .

The Spouse of an Employee who is eligible for a benefit who dies before benefit payments begin will be entitled to receive benefit payments in accordance with Sections 4.3 and 4.4.

Article IV

BENEFITS


4.1	Current Benefit Formula .

In the case of a Non-Grandfathered Participant retiring on or after December 31, 2006, he or she shall receive a benefit equal to the greater of (i) $250,000 or (ii) 12.5% of his or her Final Average Compensation times the Participant’s years of Credited Service, less the sum of:


(a)	The lump sum Actuarial Equivalent Value of his or her benefits payable pursuant to the Salaried Retirement Plan, including the Cash Balance Benefit, and, if applicable, the Albion Automotive Pension Plan (determined for the Albion Plan as of the date benefits are to commence under this Plan, without further indexing in the future and after conversion to U.S. dollars), and


(b)	The Participant’s AAM Retirement Contribution Account established pursuant to Section 3.2(b) of the Salaried Savings Plan, plus the Participant’s Account established to credit any employer contributions made under the Salaried Savings Plan which replaces or supplements the AAM Retirement Contributions.

With respect to both Section 4.1(a) and Section 4.1(b), the market value of a Participant’s Account(s) shall be determined as of February 9, 2018 or as otherwise set forth on Schedule B hereto. Notwithstanding anything else to the contrary, no benefits shall accrue and no actuarial increases shall be made to benefits under this Plan after April 30, 2018.


4.2	Prior Benefit Formula .

In the case of a Grandfathered Participant who retires, dies or becomes disabled after December 31, 2011, such Grandfathered Participant’s benefit shall be the greater of the benefit calculated under Section 4.1 or the Grandfathered Participant’s Frozen Benefit under this Section 4.2. Service completed after December 31, 2011 shall not be included in calculating Credited Service under this Section 4.2. Compensation earned after December 31, 2011 shall not be included in calculating Average Monthly Base Salary or Average Total Direct Compensation under this Section 4.2.


(a)	Amount of Basic Benefit . The Basic Benefit shall, subject to Section 4.2(b), be a monthly benefit equal to 2% of a Participant’s Average Monthly Base Salary (calculated as of December 31, 2011) multiplied by his or her years of Credited Service (calculated as of December 31, 2011), less the sum of:


(1)	All monthly benefits payable to the eligible Employee under the Salaried Retirement Plan, including the Cash Balance Benefit, before reduction for any survivor option, plus


(2)	2% of the eligible Employee’s monthly age 65 primary Social Security benefit multiplied by his or her years of Credited Service.

For purposes of calculating Basic Benefits, the following shall apply:


(i)	The monthly age 65 primary Social Security benefit will be determined and applied to the Basic Benefit formula at death or retirement, regardless of the Employee’s age at death or retirement and regardless of the Employee’s eligibility for Social Security benefits.


(ii)	The monthly age 65 primary Social Security benefit will be determined at death or retirement using the maximum monthly Social Security benefit amount payable at age 65 in the year the Employee retires or dies.


(b)	Rules Applicable to Basic Benefits .


(1)	At age 62 and one month, for those retiring prior to age 62 with a Basic Benefit, the Basic Benefit will not be redetermined when Temporary Benefits or supplements under the Salaried Retirement Plan are reduced or eliminated.


(2)	The “Special” benefit (Part B Medicare reimbursement) paid under the Health Care Plan will not be taken into account in determining any monthly benefit amount payable under Section 4.2(a).


(3)	Post-retirement increases under the Salaried Retirement Plan will not reduce any monthly benefit amount payable under this Section 4.2(a).

(4)

The award or denial of a Social Security disability insurance benefit that affects the monthly amount of benefits payable under the Salaried Retirement Plan will be taken into account in determining any monthly benefit amount payable under Section 4.2(a). However, any subsequent modification of a Social Security disability insurance benefit will not be taken into account in determining the monthly benefit amount payable under Section 4.2(a).


(c)	Amount of Alternative Benefit . The Alternative Benefit shall, subject to Section 4.2(d), be a monthly benefit equal to 1.5% of a Participant’s Average Total Direct Compensation (calculated as of December 31, 2011), multiplied by his or her years of Credited Service (determined as of December 31, 2011), less the sum of:


(1)	All monthly benefits determined under the terms of the Salaried Retirement Plan, including the Cash Balance Benefit, before reduction for any survivor option, plus


(2)	100% of the maximum monthly age 65 primary Social Security benefit.

For purposes of calculating Alternative Benefits, the following shall apply:


(i)	Differing time periods over the last 10 years of employment with the Corporation may be used for the blended calculation of Average Monthly Base Salary and Average Monthly Incentive Compensation, both calculated as of December 31, 2011.


(ii)	The monthly age 65 primary Social Security benefit is the monthly age 65 primary Social Security benefit payable in the year of the Employee’s death or retirement, regardless of the Employee’s age at such time and regardless of the Employee’s eligibility for Social Security benefits.


(iii)	The monthly age 65 primary Social Security benefit will not be redetermined for any subsequent Social Security increase.


(d)	Rules Applicable to Alternative Benefits .


(1)	Post-retirement increases under the Salaried Retirement Plan will not reduce any monthly benefit amount payable under Section 4.2(c).


(2)	The “Special” benefit (Part B Medicare reimbursement) payable under the Health Care Program will not be taken into account in determining any monthly benefit amount payable under Section 4.2(c).


4.3	Time and Form of Payment of Benefits .

(a)

Lump Sum Payment . Payments to (i) Non-Grandfathered Participants pursuant to Section 4.1, and (ii) Grandfathered Participants entitled to benefits pursuant to Section 4.1, will be paid in a lump sum payment. The lump sum payment shall be made six months after the date of the Participant’s separation from service. If the Participant dies prior to the receipt of his or her benefits pursuant to Section 4.1, the Spouse will receive a death benefit equal to the amount payable to the Participant. The death benefit shall be payable in one lump sum as soon as practicable after the death of the Participant. If a Participant is not survived by his Spouse, his or her benefits will be forfeited. No interest shall accrue on the lump sum payment for the six-month period from the separation of service date to the payment distribution date.


(b)	Annuity Payments to Grandfathered Participants . A Grandfathered Participant entitled to benefits pursuant to Section 4.2 shall have his or her benefits paid in an annuity form as follows:

(1)

Commencement of Benefits . Benefit payments shall commence as soon as practicable after an Employee separates from service with the Corporation (or a related entity); provided, however, that the portion of a Specified Employee’s benefit that was not vested within the meaning of Code Section 409A on December 31, 2004, may not be paid to the Employee before the date which is six months after the date of separation from service. A Specified Employee’s annuity for the post-December 31, 2004 benefits shall commence at the beginning of the seventh month following his or her separation from service date and shall include applicable payments for the previous six months. Any portion of the benefit payments which are deferred for six months shall not be adjusted for interest.

(2)

Single Life Annuity . Except as provided in Section 4.3(b)(3), or Section 4.3(c), an Employee entitled to a Basic Benefit or an Alternative Benefit will receive his or her benefit in the form of a single life annuity for the Employee’s lifetime. Notwithstanding the foregoing, benefits are paid in accordance with the Corporation’s payroll cycle for salaried employees and all payments are subject to the restrictions and risk of forfeiture under Section 4.5(a) and (b) and Section 7.6.


(3)	Automatic Survivor Benefit .


(A)	Basic Benefit . An Employee entitled to a Basic Benefit or Alternative Benefit who has a Spouse who is otherwise eligible for survivor benefits under the Salaried Retirement Plan on the commencement date for benefits under this Plan, will receive his or her benefit determined in the form of a Joint and Survivor Annuity.

(B)

Alternative Benefit . An Employee who (i) has attained age 62 or such earlier age specified in a special separation program, (ii) has been credited with 10 or more years of Credited Service, and (iii) on the date Alternative Benefits begin, has a Spouse who is otherwise eligible for survivor benefits under the Salaried Retirement Plan on the commencement date for benefits under this Plan, will receive his or her benefit in the form of a Joint and Survivor Annuity.

(C)

Loss of Spouse Due to Death or Divorce . If an Employee who is receiving a Joint and Survivor Annuity loses his or her Spouse due to death or divorce, the Employee’s Basic or Alternative Benefit, as applicable, will be recalculated on a prospective basis in the form of a single life annuity under Section 4.3(b)(2) assuming the Corporation is notified of such death or divorce within 90 days of such event. If the Employee subsequently remarries, no Joint and Survivor Annuity is permitted for the Employee and his or her new spouse.


(c)	Exception for Small Benefits . Notwithstanding anything in this Section 4.3 to the contrary, if, upon separation from service or at any subsequent date during the annuity payment period, the value of

the Employee’s Plan benefit, when aggregated with the value of the Employee’s benefit under any other nonqualified non-elective defined benefit plan sponsored by the Corporation or its controlled group members, does not exceed the then-annual limit set forth in Code Section 402(g)(1)(B) ($17,000 in 2012), the Employee’s benefits in all such non-elective defined benefit plans shall be terminated and liquidated in their entirety, in the form of a lump sum cash payment within 90 days following the Employee’s separation from service.


4.4	Pre-Retirement Surviving Spouse Benefit .


(a)	Current Benefit Formula . The pre-retirement surviving spouse benefit payable pursuant to Section 4.1 to an eligible Spouse shall be equal to the Participant’s benefit calculated pursuant to Section 4.1 and shall be payable in one lump sum payment as soon as administratively practicable following the Participant’s death.

(b)

Prior Benefit Formula . The pre-retirement surviving spouse benefit payable to the eligible spouse of a Grandfathered Participant pursuant to Section 4.2(a) or (c) shall equal the amount that the Spouse would have been entitled to receive under the Joint and Survivor Annuity if the Employee had retired with an immediate Joint and Survivor Annuity on the day before his death. In the event that an Employee is eligible for both a Basic Benefit and an Alternative Benefit on his date of death, the Pre-Retirement Surviving Spouse Benefit will equal the Pre-Retirement Surviving Spouse Benefit based on the greater of the Employee’s Basic Benefit or the Employee’s Alternative Benefit.


4.5	Terms and Conditions .


(a)	Benefits Not Guaranteed . Benefits payable under Article IV are not guaranteed and may be reduced or eliminated at any time, and from time to time, by the Compensation Committee, the Management Benefits Committee or the Board of Directors. No prior notice is required.


(b)	Forfeiture Upon Termination For Cause . Notwithstanding any provision in the Plan to the contrary, an Employee whose employment is terminated for Cause shall forfeit all rights to benefits under the Plan.


4.6	Freeze of Accruals .

Notwithstanding anything herein to the contrary, Base Salary, bonuses or other incentive compensation, or other amounts earned for or relating to the period after April 30, 2018 shall not be used in determining benefits under the Plan, and service after April 30, 2018 shall not be considered, deemed to be, or otherwise treated as Credited Service or similar benefit accrual service in determining benefits payable under the Plan.

Article V

ADMINISTRATION


5.1	Management Benefits Committee .

The Compensation Committee shall appoint a Management Benefits Committee for the Plan.

(a)

Appointment and Removal of Management Benefits Committee . The Management Benefits Committee shall consist of three or more individuals appointed by, and serving at the discretion of, the Compensation Committee. A member of the Management Benefits Committee may (i) resign upon 30 days written notice to the Compensation Committee, or (ii) be removed from the Management Benefits Committee at any time at the discretion of the Compensation Committee.


(b)	Decisions by Management Benefits Committee . The Management Benefits Committee shall act by majority vote either at a meeting of the Management Benefits Committee or by written consent. Meetings may be attended telephonically.


(c)	Authority . The Management Benefits Committee shall have the following duties and authority under the Plan.


(1)	Compliance . The Management Benefits Committee shall monitor the performance of the Plan to ensure that the Plan is administered in accordance with its terms and in compliance with applicable law or regulation.

(2)

Discretionary Authority . The Management Benefits Committee shall have full and exclusive discretionary authority to determine all questions arising in the administration, application and interpretation of the Plan including the authority to correct any defect or reconcile any inconsistency or ambiguity in the Plan and the authority to determine an Employee’s or other individual’s eligibility to receive a benefit from the Plan and the amount of that benefit. The Management Benefits Committee shall determine all Claims appeals as set forth in Section 6.5 of this Plan and shall have the authority to determine all questions of fact relating to such an appeal. Any determination by the Management Benefits Committee pursuant to this Section 5.1(c)(2) or the Claims Procedure shall be binding and conclusive on all parties.


(3)	Plan Amendments . The Management Benefits Committee shall have the authority to make Plan amendments as long as such amendments do not have a significant cost impact to the Corporation.


(4)	Adoption of Plan . The Management Benefits Committee may provide for the adoption of the Plan by an affiliated employer pursuant to such terms and conditions as the Management Benefits Committee, in its discretion, may determine. The Management Benefits Committee shall have the right to remove an affiliated employer as a Plan sponsor if, in its discretion, it deems such removal to be appropriate.


5.2	Administrator .

The Corporation shall be the Plan Administrator. The American Axle & Manufacturing, Inc. Corporate Benefits Group shall be the Administrator and act on the Plan Administrator’s behalf and perform the duties of the Plan Administrator as set forth herein. The Administrator shall administer the Plan in accordance with all applicable laws and regulations and, except as otherwise expressly provided to the contrary herein, shall have all powers and discretionary authority to carry out that obligation. Specifically, but not by way of limitation, the Administrator shall:


(a)	Procedures and Forms . Establish such administrative procedures and prepare, or cause to be prepared, such forms, as may be necessary or desirable for the proper administration of the Plan;


(b)	Advisors . Retain the services of such consultants and advisors as may be appropriate to the administration of the Plan;


(c)	Claims . Have the discretionary authority to determine all claims filed pursuant to Section 6.2 of this Plan and shall have the authority to determine issues of fact relating to such claim;


(d)	Payment of Benefits . Direct, or establish procedures for, the payment of benefits from the Plan; and


(e)	Plan Records . Maintain, or cause to be maintained, all documents and records necessary or appropriate to the maintenance of the Plan.


5.3	Compensation .

Members of the Management Benefits Committee and the Plan Administrator shall serve without compensation from the Plan for their services as such.


5.4	Agent for Service of Process .

The Administrator shall be the agent for service of process on the Plan. If the Corporation is the Administrator, the agent for service of process on the Corporation shall be the agent for service of process on the Plan.


5.5	Indemnification .

The Corporation shall indemnify each member of the Compensation Committee, the Management Benefits Committee, the Administrator and individuals employed by, and acting on behalf of, the Plan Administrator from and against any and all claims, losses, damages, expenses and liability arising from their acts or failure to act with regard to the Plan and their duties and obligations as set forth herein unless such acts or omissions are judicially determined to be the result of such individual’s gross negligence, willful misconduct or criminal act.

Article VI

CLAIMS PROCEDURE


6.1	Filing of Claim .

The Plan Administrator shall provide written notice to any Participant or beneficiary who submits a claim for benefits within 90 days (45 days in case of a disability benefit) of the receipt of the claim, unless special circumstances (which, in the case of disability benefits, must be beyond the control of the Plan) require an extension. The extension shall not exceed 90 days (30 days in case of a disability benefit) beyond the initial 90-day (or 45-day) period. If an extension is necessary, the claimant shall receive a notice, before the initial 90-day (or 45-day) period expires, which explains why the extension is necessary and when a decision on the claim is expected. In the case of a disability benefit, if, prior to the end of the extended review period, the Plan Administrator determines that, due to matters outside the control of the Plan, a decision cannot be rendered within the extension period, the period for making a determination may be extended for an additional 30 days, provided the Plan Administrator notifies the claimant before the expiration of the first extension period of the circumstances requiring the extension and the date the Plan expects to render a decision. In the case of either the first or second extension of the review period, the notice to the claimant must explain the standards on which entitlement to the benefit is based, the unresolved issues that prevent a decision, and the additional information needed to resolve the issues. The claimant shall have 45 days within which to provide the specified information.


6.2	Denial of Claim .

The Plan Administrator shall provide, in a written or electronic notice to all claimants who are denied a claim for benefits, the following information written in a manner calculated to be understood by the claimant:


(a)	the specific reason or reasons for denial;


(b)	specific reference to pertinent Plan provisions on which the denial is based;


(c)	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;


(d)	an explanation of the Plan’s claim review procedures and the time limits applicable to such procedures including a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits;


(e)	a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review; and, if applicable in the case of a disability benefit;


(f)	the specific rule, guideline, protocol or similar criterion (if any) that was relied on in making the benefit determination, or a statement that the rule, guideline, protocol or other similar criterion was relied on and will be provided to the claimant free of charge upon request; and


(g)	if a disability claim, the identity of the medical or vocational experts whose advice was obtained by the Plan Administrator in the process of deciding the claim, regardless of whether the advice was relied upon.


6.3	Appeal .

A claimant whose claim has been denied may request a review of the denial by the Management Benefits Committee by making written application within 90 days (180 days in case of a disability benefit) after the receipt of written notification of a denial of a claim. The claimant may submit written comments, documents, records and other information relating to the claim for benefits.


6.4	Review of Appeal .

The Management Benefits Committee’s decision on review shall take into account all comments, documents, records and other information submitted as part of the request for review, whether or not submitted as part of the initial benefit determination. In the case of a disability benefit, the review of a denied claim shall be conducted by a reviewer, which is neither the individual who made the adverse benefit determination nor a subordinate of that individual. The reviewer shall not give deference to the original adverse determination, and, if the claim denial was based in whole or in part on a medical judgment, shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment, but who was not consulted in connection with the original adverse claim determination, or a subordinate of that individual.


6.5	Decision on Appeal .

The decision on review shall be made within 60 days (45 days in case of a disability benefit) after the receipt of a request for review, unless special circumstances require an extension period. The extension shall not exceed 120 days (90 days in case of a disability benefit) from the request for review. If circumstances require an extension, the claimant shall receive a notice before the initial 60-day (or 45-day) period expires, which explains why the extension is necessary and when a decision on review is accepted. The decision on review shall be provided in a written or electronic notice, shall be written in a manner calculated to be understood by the claimant, and, in the event of an adverse determination, shall include:


(a)	the specific reason or reasons for the adverse determination;


(b)	specific references to pertinent Plan provisions on which the denial is based;


(c)	a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits;

(d)

for disability benefits, if an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination and that a copy will be provided free of charge to the claimant upon request; and


(e)	a statement of the claimant’s right to bring an action under ERISA Section 502(a) and, for disability claims, the following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.

Article VII

MISCELLANEOUS


7.1	No Contract of Employment .

The adoption and maintenance of the Plan shall not be deemed to be a contract between the Corporation and any person or to be consideration for the employment of any person. Nothing herein contained shall be deemed to give any person the right to be retained in the employ of the Corporation or to restrict the right of the Corporation to discharge any person at any time, nor shall the Plan be deemed to give the Corporation the right to require any person to remain in the employ of the Corporation or to restrict any person’s right to terminate his or her employment at any time.


7.2	Non-Assignability of Benefits .

No Employee or other distributee of benefits under the Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be unassignable and non-transferable. Any such attempted assignment or transfer shall be void. No amount payable hereunder shall, prior to actual payment thereof, be subject to seizure by any creditor of any such Participant or beneficiary for the payment of any debt judgment or other obligation, by a proceeding at law or in equity, nor transferable by operation of law in the event of the bankruptcy, insolvency or death of such Participant or beneficiary hereunder.


7.3	Withholding .

All deferrals and payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required under any applicable local, state or federal law.


7.4	Amendment and Termination .


(a)	Board of Directors . The Board of Directors shall have the right to amend, in whole or in part, any or all of the provisions of the Plan or to terminate the Plan at any time and without the consent of any other party or person.


(b)	Management Benefits Committee . The Management Benefits Committee shall have the right, at any time, without the consent of any other party or person, to modify or amend any or all of the provisions of the Plan, but only to the extent provided in Section 5.1(c).

(c)

Limitations . Except as provided in Section 4.5, no amendment or termination of this Plan shall impair the rights of an Employee to the extent earned as of the date of amendment or termination. For purposes of this Section 7.4, a Participant’s right to Plan benefits shall not be considered earned until such date as the Employee terminates employment and has begun receiving benefits under the Plan.


7.5	No Fiduciary Relationship Created .

Nothing contained in this Plan, and no action taken pursuant to its provisions by any party hereto, shall create, nor be construed to create, a fiduciary relationship between the Corporation, the Board of Directors, any officers of the Corporation, the Compensation Committee, the Management Benefits Committee and the Employee or any other person.


7.6	Unsecured General Creditor Status of Employee .


(a)	The payments to a Participant, his or her Beneficiary or any other distributee hereunder shall be made from assets which shall continue, for all purposes, to be a part of the general, unrestricted assets of the Corporation; no person shall have nor acquire any interest in any such assets by virtue of the provisions of this Plan.


(b)	The Corporation’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that the Employee or other distributee acquires a right to receive payments from the Corporation under the provisions hereof, such right shall be no greater than the right of any

unsecured general creditor of the Corporation; no such person shall have nor require any legal or equitable right, interest or claim in or to any property or assets of the Corporation.


7.7	Severability .

If any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.


7.8	Offset .

The payment of benefits under the Plan will be reduced by the amount (no greater than $5,000 in any calendar year) that a Participant owes the Corporation or any related entity for any reason, including but not limited to benefit or wage overpayments. The Participant will be relieved of liability in the amount of the reduction following the payment to the Corporation.


7.9	Intent to Comply with IRC Section 409A .

This Plan shall be interpreted and administered, to the extent possible, in a manner that does not result in a “plan failure” within the meaning of IRC Section 409A)(a)(1) of this Plan or any other plan or arrangement maintained by the Corporation. If a determination is made by the Internal Revenue Service that the benefit of any Participant provided herein is subject to current income taxation under Section 409A of the IRC, such benefit will be immediately distributed to the Participant (or the Participant’s beneficiary) to the extent of such taxable amount. Notwithstanding any provision of the Plan, no plan modifications or distributions will be allowed or implemented if they would cause a Plan Participant to be subject to tax (including interest and penalties) under IRC Section 409A.


7.10	Governing Laws .

All provisions of the Plan shall be construed in accordance with the laws of Michigan except to the extent preempted by federal law.


7.11	Binding Effect .

This Plan shall be binding on each Participant and his or her heirs and legal representatives and on the Corporation and its successors and assigns.


7.12	Number and Gender .

Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.


7.13	Headings .

The headings of Articles and Sections herein are included solely for convenience, and if there is any conflict between such headings and the text of the Plan, the text shall control.


7.14	Entire Agreement .

This document and any amendments contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect.

IN WITNESS WHEREOF, the Corporation has adopted this amended and restated Plan on the 10 ^th day of April 2018.

AMERICAN AXLE & MANUFACTURING, INC.

By: /s/ Terri M. Kemp

Name: Terri M. Kemp

Title: Vice President - Human Resources

EXHIBIT A



Specified Participant	Effective Date	Credited Service

Norman Willemse	December 31, 2016	15.667 years

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

EXECUTIVE RETIREMENT SAVINGS PLAN

Effective as of January 1, 2019

ARTICLE I - PURPOSE; EFFECTIVE DATE

1.1.

Purpose . The purpose of this Executive Retirement Savings Plan (the “ Plan ”) is to provide a select group of highly compensated employees of American Axle & Manufacturing Holdings, Inc. (the “ Company ,” and together with its subsidiaries, the “ Company Group ”) and its selected subsidiaries the opportunity to defer the receipt of income that would otherwise be payable to them. It is intended that the Plan, by providing these eligible persons with these benefits and the deferral of income tax recognition of these benefits, will assist in retaining and attracting individuals of exceptional ability.


1.2.	Effective Date . It is the intent that all of the amounts contributed under the Plan and benefits provided hereunder will be subject to the terms of Section 409A of the Code, and the Plan shall be effective as of January 1, 2019.


1.3.	Plan Type . For purposes of Section 409A of the Code, the Plan shall be considered a nonelective account balance plan as defined in Treas. Reg. §1.409A-1(c)(2)(i)(B), or as otherwise provided by the Code.

ARTICLE II - DEFINITIONS

For the purpose of the Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise:


2.1.	401(k) Plan . “401(k) Plan” means the Company’s 401(k) Savings Plan.

2.2.

Account . “Account” means the account or accounts maintained on the books of the Company used solely to calculate the amount payable to each Participant under the Plan and shall not constitute a separate fund of assets. An Account shall be deemed to exist from the time amounts are first credited to an Account until such time that the entire Account balance has been distributed in accordance with the Plan.


2.3.	Administrator . “Administrator” means the Management Benefits Committee acting through the Company’s Human Resources Department in the administration of the Plan pursuant to Section 7.2.


2.4.	Beneficiary . “Beneficiary” means the person, persons or entity as designated by the Participant, or who is otherwise entitled under Article VI, to receive any Plan benefits payable after the Participant’s death.


2.5.	Board . “Board” means the Board of Directors of the Company, or any successor thereto.

2.6.

Cause . “Cause” means with respect to a Participant, unless otherwise defined in the employment agreement of the Participant, any of the following: (a) the Participant’s willful and continued failure or refusal to perform the duties reasonably required of him or her to the Company Group; (b) the Participant’s conviction of, or plea of nolo contendere to any felony or another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or its Subsidiaries or affiliates or otherwise impairs or impedes its operations; (c) the Participant’s engagement in any willful misconduct, gross negligence, act of dishonesty, violence or threat of violence (including any violation of federal securities laws) that is injurious to the Company Group; (d) the Participant’s material breach of any applicable agreement with or policy of the Company Group; (e) the Participant’s material failure to comply with any applicable laws and regulations or professional standards relating to the business of the Company Group; or (f) any other misconduct by the Participant that is injurious to the financial condition or business reputation of the Company Group.


2.7.	Code . “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time and as interpreted by regulations and rulings issued pursuant to the Code. Any references to a specific provision shall be deemed to include references to any successor Code provision.


2.8.	Company . “Company” means American Axle & Manufacturing Holdings, Inc. and any successor.


2.9.	Compensation Committee . “Compensation Committee” means the Compensation Committee of the Board.


2.10.	Determination Date . “Determination Date” means any business day on which the New York Stock Exchange is open for trading.

2.11.

Disability . “Disability” shall mean either of the following: (a) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company Group.


2.12.	Distribution Election . “Distribution Election” means the form prescribed by the Management Benefits Committee and completed by the Participant, indicating the chosen form of payment for benefits payable from the Participant’s Account, as elected by the Participant.


2.13.	Eligible Person . “Eligible Person” means (a) US-based executives of the Company Group having the title of Vice President and above and (b) any other US-based employee of the Company Group designated by the Compensation Committee consistent with Section 10.1.


2.14.	ERSP Contribution . “ERSP Contribution” means the Company contribution credited to a Participant’s Account under Section 4.4.


2.15.	Executive Officer . “Executive Officer” means any executive whose compensation must be reviewed and approved by the Compensation Committee.


2.16.	Interest . “Interest” means the amount credited to or debited against a Participant’s Account on a Determination Date, which shall be based on the Valuation Funds chosen by the Participant pursuant to Section 4.3, in order to reflect the increase or decrease in value of the Account in accordance with the provisions of the Plan.


2.17.	Management Benefits Committee . “Management Benefits Committee” means the committee appointed by the Compensation Committee to govern and monitor the administration of the Plan pursuant to Section 7.1.


2.18.	Management Investment Committee . “Management Investment Committee” means the committee appointed by the Compensation Committee to govern and monitor all Plan assets and investments.


2.19.	Participant . “Participant” means (i) any Eligible Person identified in Section 2.13(a) and (ii) any Eligible Person designated by the Compensation Committee in accordance with Section 2.13(b).


2.20.	Plan . “Plan” means this Executive Retirement Savings Plan, as amended from time to time.


2.21.	Plan Year . “Plan Year” shall mean a calendar year (January 1-December 31).


2.22.	Retirement . “Retirement” means a Participant’s voluntary resignation at any time (a) after attaining age 65, (b) after attaining age 55 but prior to age 65 with ten or more years of continuous service with the Company Group, or (c) after attaining age 60 but prior to age 65 with five or more years of continuous service with the Company Group.


2.23.	Termination . “Termination”, “terminates employment” or any other similar such phrase means the Participant’s “separation from service” with the Company Group, for any reason, within the meaning of Section 409A of the Code.

2.24.

Unforeseeable Emergency . “Unforeseeable Emergency” means an event that results in a severe financial hardship to the Participant resulting from (a) an illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary or a dependent of the Participant, (b) loss of the Participant’s property due to casualty or (c) other similar extraordinary and unforeseeable circumstances as a result of events beyond the control of the Participant, in each case in compliance with Section 409A of the Code.

2.25.

Valuation Funds . “Valuation Funds” means one or more of the independently established funds or indices that are approved by the Management Investment Committee. These Valuation Funds are used solely to calculate the Interest that is credited to each Participant’s Account in accordance with Article IV, and the term “Valuation Funds” does not represent, nor should it be interpreted to convey, any beneficial interest on the part of the Participant in any asset or other property of the Company or any member of the Company Group. The determination of the increase or decrease in the performance of each Valuation Fund shall be made by the Management Investment Committee in its reasonable discretion. The Management Investment Committee shall select the various Valuation Funds available to the Participants and may add or remove any Valuation Funds on a prospective basis at any time in its sole discretion.

ARTICLE III - ELIGIBILITY AND PARTICIPATION


3.1.	Eligibility and Participation .


a)	Eligibility . All US-based executives of the Company Group having the title of Vice President and above shall be Eligible Persons. With respect to other employees of the Company, the Compensation Committee shall designate those employees of the Company Group who are Eligible Persons.


b)	Participation . An individual’s participation in the Plan shall be effective upon the date such individual becomes an Eligible Person.

3.2.

Participant Elections . No more than 30 days after a Participant is first designated as a Participant as set forth in Section 3.1(b) (or if such Participant was prior to such designation participating in another nonelective account balance plan of the Company Group, the first date on which such Participant may make such election in compliance with Section 409A of the Code), the Participant may submit the following forms to the Administrator:

Distribution Election . The Participant may submit a Distribution Election, on which the Participant shall elect a form of payment to be made with respect to the Participant’s Account. The Participant may submit a new Distribution Election at any time prior to the end of the 30-day period referenced in this Section 3.2, and the Distribution Election most recently filed at the end of such 30-day period shall be irrevocable. In the event that a Participant does not timely submit a properly completed Distribution Election, the form of payment deemed to be elected will be a lump sum.

Allocation Election . The Participant may submit an allocation form, which shall provide instructions on how the ERSP Contributions credited to the Participant’s Account shall be allocated among the various available Valuation Funds. In the event that a Participant does not submit a timely and properly completed allocation form, the Administrator shall allocate the ERSP Contributions to the default Valuation Fund designated by the Management Benefits Committee until a properly completed allocation form is submitted.

3.3.

Subsequent Distribution Election . Except to the extent otherwise required or permitted under Section 409A of the Code, the Participant shall not be permitted to change or revoke the form of payment with respect to his or her Account on or after the date on which such election would otherwise be irrevocable under Section 3.2(a) unless all of the following requirements are satisfied with respect to such Participant’s subsequent election to change the form of payment: (i) such election shall not take effect until 12 months after the date on which the election is made; (ii) such election shall not apply to any scheduled distribution date that occurs 12 months or less after the date on which the election is made; and (iii) except in the case of a payment due to death, as described in Section 5.2, or Disability, as described in Section 5.3, the

payment with respect to which such election is made must be deferred for a period of five years from the date such payment would otherwise have been paid (or in the case of annual installment payments, five years from the date the first annual installment payment would otherwise have been scheduled to be paid). A Participant may only make one subsequent Distribution Election under this Section 3.3, with respect to his or her Account.

ARTICLE IV - DEFERRED COMPENSATION ACCOUNT


4.1.	Accounts . The ERSP Contributions and Interest thereon shall be credited to the Participant’s Account as otherwise provided in this Article IV. The Participant’s Account shall be used solely to calculate the amount payable to the Participant under the Plan and shall not constitute a separate fund of assets.

4.2.

Timing of Credits; Withholding . Any ERSP Contributions shall be credited to a Participant’s Account as of a time and in a manner provided by the Administrator, but typically as soon as practicable in the first quarter of the calendar year following the Plan Year to which such ERSP Contribution relates. Any withholding of taxes or other amounts with respect to the ERSP Contribution credited to a Participant’s Account that is required by local, state or federal law shall reduce the amount credited to the Participant’s Account in any manner specified by the Management Benefits Committee. Any Participant who suffers a Termination and is vested in his or her Account in accordance with Section 4.6 at the time of Termination shall receive any final contribution within 30 days following such Participant’s Termination date.

4.3.

Valuation Funds . A Participant shall be permitted to designate one or more Valuation Funds for the sole purpose of determining the amount of Interest to be credited or debited to the Participant’s Account. Such election shall designate how each ERSP Contribution shall be allocated among the available Valuation Fund(s). A Participant shall also be permitted to reallocate the balance in the Participant’s Account among the available Valuation Funds. The manner in which such elections shall be made and the frequency with which such elections may be changed and the manner in which such elections shall become effective shall be determined in accordance with the procedures adopted by the Management Investment Committee from time to time.


4.4.	ERSP Contributions . A Participant’s Account shall be credited with an ERSP Contribution in accordance with this Section 4.4.

Contribution Amount . The amount of the ERSP Contribution for any Participant shall be stated as (i) a flat dollar amount, (ii) a percentage of the Participant’s base salary and annual incentive compensation paid in the applicable Plan Year less the maximum eligible Company matching and non-elective contributions to the 401(k) Plan in the Plan Year (irrespective of whether the Participant maximized the Company contributions or not) or (iii) a formula as determined by the Compensation Committee in its sole discretion.

The Compensation Committee, in its sole discretion, shall determine the maximum amount of the ERSP Contribution that may be made for a Participant, and may consider any factors it deems relevant in making such determination. The Management Benefits Committee, in its sole discretion, shall determine the actual amount of the ERSP Contribution to be allocated to a Participant’s Account for each year (or portion thereof), if any, up to the maximum amount approved by the Compensation Committee, except for the Executive Officers, for whom such decision will be made by the Compensation Committee. For a Participant’s initial year of participation, the ERSP Contribution shall be based on the applicable formula for the Plan Year and prorated from the date the Participant becomes an Eligible Person. Once established, the ERSP Contribution formula for any Participant shall remain the same for each succeeding year, unless changed by either the Management Benefits Committee or the Compensation Committee pursuant to their respective authority indicated herein. Any such changes must be made no later than December 31 and shall apply to the ERSP Contribution made with respect to services performed in the following Plan Year.

Special Contributions . By way of further clarity, notwithstanding the provisions of Section 4.4(a), the Compensation Committee may make, in its complete and sole discretion, a special contribution on behalf of a Participant to such Participant’s Account with respect to a particular Plan Year in any amount as determined by the Compensation Committee. Such special contribution may be in addition to or in lieu of any other contribution with respect to the particular Plan Year, as determined by the Compensation Committee in its complete and sole discretion.


c)	No Guarantee of Future Contributions . The designation of any Participant as being eligible to receive an ERSP Contribution in any year shall not be a guarantee of future contributions, and the crediting of any particular level of ERSP Contribution in any year shall not be a guarantee of that level in future years.


4.5.	Determination of Accounts . Each Participant’s Account on a Determination Date shall consist of the balance of the Account as of the immediately preceding Determination Date, adjusted as follows:


a)	ERSP Contributions . Each Account shall be increased by any ERSP Contribution credited since such prior Determination Date as set forth in Section 4.4.

Distributions . Each Account shall be reduced by the amount of each benefit payment made from that Account since the prior Determination Date. Distributions shall be deemed to have been made proportionally from each of the Valuation Funds maintained within such Account based on the proportion that such Valuation Fund bears to the sum of all Valuation Funds maintained within the Account for that Participant as of the Determination Date immediately preceding the date of payment.


c)	Interest . Each Account shall be increased or decreased by the Interest credited or debited to such Account as though the balance of that Account was invested in the applicable Valuation Funds chosen by the Participant.

4.6.

Vesting of Accounts . Unless otherwise specified by the Management Benefits Committee (with respect to non-Executive Officer Participants) or the Compensation Committee (with respect to Executive Officer Participants) in writing, or except as set forth in Section 4.7, each Participant shall be 100% vested in the Participant’s Account, including any Interest thereon, upon the earliest of: (a) death; (b) Disability; or (c) becoming eligible for Retirement.

4.7.

Forfeiture of Accounts . Any Participant who Terminates employment before becoming fully vested in the Participant’s Account shall immediately forfeit the unvested balance of his or her Account. Any Participant whose employment is terminated for Cause, or whose employment is terminated for any reason at a time when such termination could have been for Cause, shall immediately forfeit the balance of his or her Account, including any vested amounts. In addition, if a Participant’s employment is not terminated for Cause, but the Management Benefits Committee (with respect to non-Executive Officer Participants) or the Compensation Committee (with respect to Executive Officer Participants) later determines that such termination could have been for Cause if all the facts had been known at the time of such termination, then any unpaid portion of the Participant’s Account shall be immediately forfeited as of the date of such Committee’s determination.


4.8.	Statement of Accounts . To the extent that the Company does not arrange for a Participant’s Account balance to be accessible online by the Participant, the Administrator shall provide to each Participant a statement showing the balance in the Participant’s Account no less frequently than annually.

ARTICLE V - PLAN BENEFITS


5.1.	A Participant’s Account . The Participant’s vested Account balance shall be distributable to the Participant upon the Participant’s Termination.


a)	Form of Payment . The form of benefit payment shall be that form selected by the Participant in his or her Distribution Election made (or deemed made) pursuant to Section 3.2(a) (as may be amended in accordance with a subsequent Distribution Election under Section 3.3), and as permitted pursuant to Section 5.5.


b)	Timing of Payment . Benefits payable from a Participant’s Account shall be paid (if a lump sum) or commence (if installments) on the first Determination Date that occurs on or immediately following six months following the Participant’s Termination date. If installments, each subsequent payment shall occur in January of the next calendar year following the initial benefit payment.

5.2.

Death Benefit . Upon the death of a Participant prior to the commencement of distributions from the Participant’s Account, the Company shall pay to the Participant’s Beneficiary an amount equal to the Participant’s vested Account balance in the form of a lump sum payment as soon as administratively practicable (but in no event more than 90 days) after the Participant’s death. In the event of the death of the Participant after the commencement of distributions from the Participant’s Account, the remaining unpaid balance of the Participant’s Account shall be paid to the Participant’s Beneficiary in the form of a lump sum as soon as administratively possible (but in no event more than 90 days) after the Participant’s death. If the Participant’s Beneficiary, estate or legal representative fails to notify the Management Benefits Committee of the death of the Participant in the manner specified in Section 10.9, such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of the Plan and shall not be liable to the Beneficiary, estate or legal representative for any losses, damages, or other claims resulting from such late payment.

5.3.

Disability Distributions . Upon a finding by the Management Benefits Committee that a Participant has suffered a Disability, the Company shall make a full distribution of the Participant’s Account. The payment of such distribution shall be made in the form of a lump sum in an amount equal to the Participant’s vested Account balance as soon as administratively practical (but in no event more than 90 days) after the date of such Disability.


5.4.	Permitted Acceleration of Payments . To the extent permitted by Section 409A of the Code, the Management Benefits Committee may, in its sole discretion, accelerate the time or schedule of a distribution under the Plan, such as accelerated distributions to address the payment of employment taxes or early income inclusion that may occur for a Participant’s Account balance.


5.5.	Form of Payment . Unless otherwise specified in this Article V, the benefits payable from a Participant’s Account shall be paid in the form of benefit as provided below, and specified by the Participant in the Distribution Election or as otherwise set forth in Section 3.2(a). The permitted forms of benefit payments are:


a)	A lump sum amount that is equal to the Participant’s vested Account balance; and

Annual installments for a period of up to 10 years where the annual payment shall be equal to the Participant’s vested Account balance immediately prior to the payment, multiplied by a fraction, the numerator of which is one and the denominator of which commences at the number of annual payments initially chosen and is reduced by one in each succeeding year. Interest on the unpaid balance shall be based on the most recent allocation among the available Valuation Funds chosen by the Participant, made in accordance with Section 4.3.


5.6.	Small Account . If the Participant’s vested Account balance as of the time the payments are to commence is less than $50,000, then such Account shall be paid in a lump sum, notwithstanding any election by the Participant to the contrary.


5.7.	Unforeseeable Emergency Distribution . The Management Benefits Committee may at any time, upon written request of a Participant, cause to be paid to such Participant, an amount equal to all or any part of the Participant’s vested Account balance if the Management Benefits Committee determines, based on such

reasonable evidence that it shall require, that such a payment is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency. Payments of amounts because of an Unforeseeable Emergency may not exceed the amount necessary to satisfy the Unforeseeable Emergency plus amounts necessary to pay taxes or penalties reasonably anticipated as a result of the distribution after taking into account the extent to which the Unforeseeable Emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). The amount of a Participant’s Account shall be reduced by the amount of any Unforeseeable Emergency distribution to the Participant.


5.8.	Withholding; Payroll Taxes . The Company shall withhold from any payment made pursuant to the Plan any taxes required to be withheld from such payments under local, state or federal law.


5.9.	Payments in Connection with a Domestic Relations Order . Notwithstanding anything herein to the contrary, the Company may make distributions to someone other than the Participant if such payment is necessary to comply with a domestic relations order, as defined in Section 414(p)(1)(B) of the Code, involving the Participant.

5.10.

Payment to Guardian . If a Plan benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of the property, then the Management Benefits Committee may direct payment to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Management Benefits Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution. Such distribution shall completely discharge the Management Benefits Committee and the Company from all liability with respect to such benefit.


5.11.	Effect of Payment . The full payment of the applicable benefit under this Article V shall completely discharge all obligations on the part of the Company to the Participant (and the Participant’s Beneficiary) with respect to the operation of the Plan, and the Participant’s (and the Participant’s Beneficiary’s) rights under the Plan shall terminate.


5.12.	Amount of Payment . Notwithstanding anything herein to the contrary, the amount payable from a Participant’s vested Account balance may be determined and valued within a period of up to 10 business days preceding the date of actual payment.

ARTICLE VI - BENEFICIARY DESIGNATION

6.1.

Beneficiary Designation . Each Participant shall have the right, at any time, to designate one or more persons or entity as a Beneficiary (both primary as well as secondary) to whom benefits under the Plan shall be paid in the event of the Participant’s death prior to complete distribution of the Participant’s vested Account balance. Each Beneficiary designation shall be in the form prescribed by the Administrator, including through an online designation system, and shall be effective only when filed with the Administrator during the Participant’s lifetime.

6.2.

Changing Beneficiary . Except in instances when the listed Beneficiary is the spouse of the Participant, a Participant may change the Beneficiary designation without the consent of the previously named Beneficiary by filing a new Beneficiary designation with the Administrator during the Participant’s lifetime. If the listed Beneficiary is the spouse of the Participant, the Participant shall obtain such Beneficiary’s consent by the execution of a spousal consent form provided by the Company.

6.3.

No Beneficiary Designation . If any Participant fails to designate a Beneficiary in the manner provided above, if the designation is void, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant’s benefits, and the Beneficiary designation form does not specify to whom payments should be made in such event, then the Participant’s Beneficiary shall be the Participant’s estate.


6.4.	Effect of Payment . Payment to the Beneficiary shall completely discharge the Company’s obligations under the Plan.

ARTICLE VII - ADMINISTRATION


7.1.	Management Benefits Committee . The Compensation Committee shall appoint a Management Benefits Committee for the Plan.

Appointment and Removal of Management Benefits Committee . The Management Benefits Committee shall consist of three or more individuals appointed by, and serving at the discretion of, the Compensation Committee. A member of the Management Benefits Committee may (i) resign upon 30 days’ written notice to the Compensation Committee, or (ii) be removed from the Management Benefits Committee at any time at the discretion of the Compensation Committee.


b)	Decisions by Management Benefits Committee . The Management Benefits Committee shall act by majority vote either at a meeting of the Management Benefits Committee or by written consent. Meetings may be attended telephonically.

Authority . The Management Benefits Committee shall: (i) monitor the performance of the Plan to ensure that the Plan is administered in accordance with its terms and in compliance with applicable law or regulation; (ii) have full and exclusive discretionary authority to determine all questions arising in the administration, application and interpretation of the Plan including the authority to correct any defect or reconcile any inconsistency or ambiguity in the Plan and the authority to determine a Participant’s eligibility to receive a benefit from the Plan and the amount of that benefit; (iii) determine all Claims appeals as set forth in Section 8.1 of the Plan and shall have the authority to determine all questions of fact relating to such an appeal, and any determination by the Management Benefits Committee pursuant to this Section 7.1(c) or Section 8.1 shall be binding and conclusive on all parties; and (iv) have the authority to make Plan amendments as long as such amendments do not have a significant cost impact to the Company. The Management Benefits Committee may also provide for the adoption of the Plan by an affiliated employer pursuant to such terms and conditions as the Management Benefits Committee, in its discretion, may determine. The Management Benefits Committee shall have the right to remove an affiliated employer as a Plan sponsor if, in its discretion, it deems such removal to be appropriate.


d)	Liability . No member of the Management Benefits Committee or any other committee to which Plan administrative authority has been delegated, shall be personally liable by reason of any action taken by him or her in good faith or on his or her behalf as the Management Benefits Committee, nor for any mistake in judgment made in good faith.

7.2.

Administrator . The Company shall be the Plan Administrator. The Administrator shall act on its behalf and perform the duties of the Plan Administrator as set forth herein. The Administrator shall administer the Plan in accordance with all applicable laws and regulations and, except as otherwise expressly provided to the contrary herein, shall have all powers and discretionary authority to carry out that obligation. Specifically, but not by way of limitation, the Administrator shall:


a)	Procedures and Forms . Establish such administrative procedures and prepare, or cause to be prepared, such forms, as may be necessary or desirable for the proper administration of the Plan;


b)	Advisors . Retain the services of such consultants and advisors as may be appropriate to the administration of the Plan;


c)	Payment of Benefits . Direct, or establish procedures for, the payment of benefits from the Plan; and


d)	Plan Records . Maintain, or cause to be maintained, all documents and records necessary or appropriate to the maintenance of the Plan.


7.3.	Binding Effect of Decisions . The decision or action of any member of the Management Benefits Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in the Plan.

7.4.

Indemnity of Members of the Management Benefits Committee . The Company shall indemnify and hold harmless the members of the Management Benefits Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Plan on account of such member’s service for the Management Benefits Committee, except in the case of gross negligence or willful misconduct.

ARTICLE VIII - CLAIMS PROCEDURE

8.1.

Claim . Any person or entity claiming a benefit, or requesting an interpretation, ruling, or information under the Plan, shall present the request in writing to the Management Benefits Committee within one year following the date that such person or entity knew or, exercising reasonable care, should have known of such claim in accordance with Company policy. All decisions on review shall be final and bind all parties concerned.

ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN

9.1.

Amendment . The Board or its appointed delegates may at any time amend the Plan by written instrument, notice of which is given to all the Participants and to each Beneficiary receiving installment payments who are affected by such amendment, except that no amendment shall reduce the amount vested or accrued in any Participant’s Account as of the date the amendment is adopted. In addition, any amendment which adds a distribution event to the Plan shall not be affective with respect to any Participant’s Account that is already established as of the time of such amendment. Notwithstanding anything in the Plan to the contrary, the Board or its appointed delegates shall have the unilateral right to amend the Plan to comply with Section 409A of the Code.


9.2.	Company’s Right to Terminate . The Board may, in its sole discretion, terminate the entire Plan and require distribution of all benefits due under the Plan or portion thereof, provided that:


a)	The termination of the Plan does not occur proximate to a downturn in the financial health, as determined by the Management Benefits Committee, of the Company and all entities considered to be part of the same controlled group under Treas. Reg. §1.409A-1(g) (the “ AAM Controlled Group ”);


b)	The AAM Controlled Group also terminates all other plans or arrangements which are considered to be of a similar type as defined in Treas. Reg. §1.409A-1(c)(2)(i), or as otherwise provided by the Code;


c)	No payments made in connection with the termination of the Plan occur earlier than 12 months following the Plan termination date other than payments the Plan would have made irrespective of Plan termination;


d)	All payments made in connection with the termination of the Plan are completed within 24 months following the Plan termination date;


e)	The AAM Controlled Group does not establish a new plan of a similar type as defined in Treas. Reg. §1.409A-1(c)(2)(i), within three years following the Plan termination date; and


f)	The AAM Controlled Group meets any other requirements deemed necessary to comply with provisions of the Code and applicable regulations which permit the acceleration of the time and form of payment made in connection with plan terminations and liquidations.

ARTICLE X - MISCELLANEOUS


10.1.	Unfunded Plan . The Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly-compensated employees” within the meaning of Sections 201, 301, and 401 of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.

10.2.

Unsecured General Creditor . The Plan constitutes an unsecured promise by the Company to pay benefits in the future. Notwithstanding any other provision of the Plan, all Participants and each Participant’s Beneficiary shall be unsecured general creditors, with no secured or preferential rights to any assets of the Company or any other party for payment of benefits under the Plan. The Plan is unfunded for Federal tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974. Any property held by the Company for the purpose of generating the cash flow for benefit payments shall remain its general, unpledged and unrestricted assets. The Company’s obligation under the Plan shall be an unfunded and unsecured promise to pay money in the future. No other member of the Company Group shall have any obligations or liabilities under the Plan. Any obligations on the Plan are solely those of the Company.

10.3.

Trust Fund . The Company shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Company may establish one or more trusts, with such trustees as the Board may approve, for the purpose of assisting in the payment of such benefits. The assets of any such trust shall be held for payment of all the Company’s general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, the Company shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Company.

10.4.

Compliance with Section 409A of the Code . It is intended that the Plan comply with the provisions of Section 409A of the Code, so as to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise actually be paid or made available to the Participants or Beneficiaries. The Plan shall be construed, administered, and governed in a manner that affects such intent. Neither the Company, any other member of the Company Group nor any Committee guarantees or provides any warranties with respect to the tax treatment of amounts deferred under the Plan. Neither the Company, any other member of the Company Group, the Board, any director, officer, employee and advisor, nor any Committee (nor its designee) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant, Beneficiary or other taxpayer as a result of the Plan. For purposes of the Plan, the phrase “permitted by Section 409A of the Code,” or words or phrases of similar import, shall mean that the event or circumstance shall only be permitted to the extent it would not cause an amount deferred or payable under the Plan to be includible in the gross income of a Participant or Beneficiary under Section 409A(a)(1) of the Code.


10.5.	Nonassignability and Offset .

Nonassignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable, other than (i) to a Participant’s Beneficiary pursuant to Article VI, (ii) pursuant to a domestic relations order deemed legally sufficient by the Management Benefits Committee, or (iii) by will or the laws of descent and distribution. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance

owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

Offset . If, at the time a payment is due hereunder, the Company determines that the Participant is indebted or obligated to the Company or any other member of the Company Group (including, but not limited to, for amounts owed as a result of the Participant’s breach of his or her fiduciary duty owed to, or breach of any restrictive covenant in effect with, the Company Group), then the payment to be made to or with respect to such Participant (including a payment to the Participant’s Beneficiary) may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation; provided , however , that an election by the Company to not reduce any such payment shall not constitute a waiver of its claim for such indebtedness or obligation.


10.6.	Not a Contract of Employment . The Plan shall not constitute a contract of employment between the Company Group and the Participant. Nothing in the Plan shall give a Participant the right to be retained in the service of the Company Group or to interfere with the right of the Company Group to discipline or discharge a Participant at any time.


10.7.	Protective Provisions . A Participant will cooperate with the Company by furnishing any and all information requested by the Company, in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Company may deem necessary and taking such other action as may be requested by the Company.


10.8.	Governing Law . The provisions of the Plan shall be construed and interpreted according to the laws of the State of Michigan, without giving effect to any choice of law or conflict of law provision or rule, except as preempted by federal law.


10.9.	Validity . If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but the Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

10.10.

Notice . Any notice required or permitted under the Plan shall be sufficient if in writing and sent by (i) registered, certified mail, or (ii) electronic mail at benefits@aam.com (with a simultaneous confirmation copy sent by first class mail properly addressed and postage prepaid). Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Mailed notice shall be directed to “Administrator: ERSP, Attention Human Resources Department” at the Company’s headquarters address. Mailed notice to a Participant or Beneficiary shall be directed to the individual’s last known address in the Company’s records.

10.11.

Successors . The provisions of the Plan shall bind and inure to the benefit of the Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Executive Officer Severance Plan

Purpose . The purpose of the American Axle & Manufacturing Holdings, Inc. Executive Officer Severance Plan (the “ Plan ”) is to advance the interests of American Axle & Manufacturing Holdings, Inc. (the “ Company ,” and together with its subsidiaries, the “ Company Group ”) and its shareholders by providing financial protection to selected executive officers and certain other employees as determined by the Administrator in its sole discretion from time to time upon termination of a participant’s employment in specific circumstances and to attract and retain talent.


2.	Definitions . For purposes of the Plan, the following words and phrases have the meanings specified below:


2.1	“ Accountants ” has the meaning set forth in Section 9.2.


2.2	“ Administrator ” has the meaning set forth in Section 3.


2.3	“ Base Salary ” with respect to a Participant means the rate of annual base salary paid to the Participant by the Company Group immediately preceding the Participant’s Date of Separation.


2.4	“ Benefit Continuation ” has the meaning set forth in Section 6.2(d).


2.5	“ Board ” means the Board of Directors of the Company.


2.6	“ Bonus ” with respect to a Participant means the target annual bonus amount for the year in which the Participant’s Date of Separation occurs.

2.7

“ Cause ” means with respect to a Participant, unless otherwise defined in the employment agreement of the Participant, any of the following: (a) the Participant’s willful and continued failure or refusal to perform the duties reasonably required of him or her to the Company Group; (b) the Participant’s conviction of, or plea of nolo contendere to any felony or another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company Group or otherwise impairs or impedes its operations; (c) the Participant’s engagement in any willful misconduct, gross negligence, act of dishonesty, violence or threat of violence (including any violation of federal securities laws) that is injurious to the Company Group; (d) the Participant’s material breach of any applicable agreement with or policy of the Company Group; (e) the Participant’s material failure to comply with any applicable laws and regulations or professional standards relating to the business of the Company Group; or (f) any other misconduct by the Participant that is injurious to the financial condition or business reputation of the Company Group.


2.8	“ Code ” means the Internal Revenue Code of 1986, as it may be amended from time to time and as interpreted by regulations and rulings issued pursuant to the Code. Any references to a specific provision shall be deemed to include references to any successor Code provision.


2.9	“ Committee ” means the Compensation Committee of the Board.


2.10	“ Covered Payments ” has the meaning set forth in Section 9.1.


2.11	“ Date of Separation ” means, with respect to a Participant, the date on which a Participant incurs a termination of employment that is a “separation from service” within the meaning of Section 409A of the Code.


2.12	“ Effective Date ” has the meaning set forth in Section 17.


2.13	“ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.


2.14	“ Excise Tax ” has the meaning set forth in Section 9.1.


2.15	“ Good Reason ” means any one or more of the following actions or omissions:


(a)	any material reduction in a Participant’s annual base salary or bonus opportunity as in effect immediately prior to the reduction; or


(b)	the relocation (other than by mutual agreement) of the office at which the Participant is to perform the majority of his or her duties to a location more than 50 miles from the location at which the Participant performed such duties prior to the relocation;

provided , however , that the Participant must provide the Company with (a) 45 days advance notice of termination in writing and (b) notice of the conduct that is the basis for the potential Good Reason termination in writing within 90 days of its initial existence, and such notice shall describe the conduct the Participant believes to constitute Good Reason. The Company shall have 30 days to cure such conduct upon receipt of the notice of termination from the Participant. If the Company cures the conduct that is the basis for the potential termination for Good Reason within such 30-day period, the Participant’s notice of termination shall be deemed withdrawn. If the Participant does not give notice to the Company as described in this Section 2.15 within 90 days after an event giving rise to Good Reason, the Participant’s right to claim Good Reason termination on the basis of such event shall be deemed waived.


2.16	“ Participant ” has the meaning set forth in Section 4.


2.17	“ Plan ” means this Executive Officer Severance Plan, as described in this document and as amended from time to time.


2.18	“ Release ” has the meaning set forth in Section 7.


2.19	“ Severance Multiple ” means the number applicable to a Participant’s position as set forth on Exhibit A , as amended from time to time.


2.20	“ Severance Period ” has the meaning set forth in Section 6.2.

Administration . The Plan shall be administered by the Committee (the “Administrator”). Subject to the provisions of the Plan, the Administrator shall have exclusive authority to interpret and administer the Plan, to establish, amend and rescind appropriate rules and regulations relating to the Plan, to delegate some or all of its authority under the Plan to the extent permitted by law, and to take all such steps and make all such determinations in connection with the Plan and the benefits granted pursuant to the Plan as it may deem necessary or advisable. Any decision of the Administrator in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. Except to the extent it would violate applicable law or rules, the Administrator may delegate all or a portion of its authority for administering the Plan to an officer or officers of the Company. To the extent so delegated, the term “Administrator” hereunder shall be deemed to refer to such officer or officers. The Administrator shall take such actions it deems necessary or desirable to ensure that such officer or officers have sufficient and appropriate authority for carrying out the intent and purpose of the Plan.

Eligibility . The participants under the Plan shall be limited to (i) executive officers of the Company, other than those executive officers who have an employment agreement or other separate arrangement providing for severance benefits upon a termination of employment (the “Executive Officer Participants” ) and (ii) certain other employees of the Company Group as determined by the Administrator in its sole discretion from time

to time (the “Associate Participants” and, together with the Executive Officer Participants, the “Participants” ). Individuals who qualify under the definition of Executive Officer Participant under this Section 4 shall automatically, without any independent action by the Administrator, become eligible to and shall participate in the Plan as Participants as of such date. In the event that an individual no longer meets the definition of Executive Officer Participant, he or she shall automatically, without any independent action by the Administrator, no longer be eligible to participate in the Plan and such individual’s participation shall automatically, without any independent action by the Administrator, be terminated as of such date, subject to Section 15 of the Plan; provided , that for the avoidance of doubt, the Administrator may in its sole discretion elect to designate such individual as an Associate Participant. The Administrator from time to time in its sole discretion shall select and notify any employees of the Company who will participate as Participants in the Plan. Individuals who are designated by the Administrator as Associate Participants in accordance with this Section 4 and who undergo a change in title or job grade other than for reason of a promotion shall automatically, without any independent action by the Administrator, no longer be eligible to participate in the Plan and such individual’s participation shall automatically, without any independent action by the Administrator, be terminated as of such date, subject to Section 15 of the Plan; provided , that for the avoidance of doubt, the Administrator may in its sole discretion elect to treat any such individual differently in accordance with the terms of the Plan.

No Effect on Equity Awards . The Plan does not alter or amend any vesting or other terms and conditions of any equity-based compensation awards under the Company’s equity incentive compensation plans (including, but not limited to, the Company’s 2012 Omnibus Incentive Plan or 2018 Omnibus Incentive Plan), which shall be governed by the terms and conditions set forth in the equity incentive compensation plans and separate written grant agreements.


6.	Severance Benefits .

6.1

No severance benefits shall be payable under the Plan unless the Participant’s employment with the Company is involuntarily terminated by the Company without Cause or by the Participant’s resignation with Good Reason (a “ Qualifying Event ”). For the avoidance of doubt, if in connection with a transaction or series or combination of transactions (i) a Participant’s employment transfers to an acquiror or its affiliate or (ii) a Participant is offered a comparable position with an acquiror or its affiliate with a level of compensation no less than and benefits comparable to that enjoyed by the Participant immediately prior to the closing of the applicable transaction, then a termination from the Company Group shall not constitute a Qualifying Event for purposes of the Plan. In the event of a Change in Control (as defined in the Company Change in Control Plan), the Company Change in Control Plan or, if applicable, the terms provided under the Participant’s employment agreement, shall apply.


6.2	Upon a Qualifying Event, subject to the provisions of the Plan (including compliance with the Restrictive Covenants) and timely execution and nonrevocation of a Release, the Participant shall receive the following benefits:


(a)	Severance . A cash amount equal to the Participant’s Base Salary plus Bonus multiplied by the applicable Severance Multiple, payable in a lump sum on the 60th day following the Date of Separation;

(b)

Annual Bonus . Any unpaid annual bonus for any completed performance year immediately preceding the year in which the Qualifying Event occurs as determined based on actual performance, payable to the Participant on the date such bonus would have been paid had the Participant remained employed with the Company, but in no event later than March 15th of the year in which the Qualifying Event occurs, notwithstanding anything to the contrary in an applicable plan or award document;

(c)

Pro rata Annual Bonus . A cash amount equal to the annual bonus for the performance year in which the Qualifying Event occurs, determined based on actual performance and then prorated based on the number of days in such performance year elapsed through the date of the Qualifying Event, payable to the Participant on the date such bonus would have been paid had the Participant remained employed with the Company, but in no event later than March 15th of the year following the year in which the Qualifying Event occurs, notwithstanding anything to the contrary in an applicable plan or award document;

(d)

Medical Coverage . Upon a Qualifying Event, the Participant (and his or her eligible dependents) shall be entitled to continued participation in the Company’s medical plans, as in effect from time to time, at then-existing participation and coverage levels for active similarly situated employees (the “ Benefit Continuation ”) for the number of months equal to 12 multiplied by the applicable Severance Multiple (the “ Severance Period”) . In the event that such Benefit Continuation is not permitted or advisable or the Company, in its sole discretion, elects, in lieu of Benefit Continuation, the Company shall pay to the Participant a cash amount (in the Company’s determination) equal to the then-current difference between the Participant’s monthly medical insurance cost immediately prior to the applicable Qualifying Event and the monthly cost for COBRA multiplied by the number of months remaining in the Severance Period, payable in three separate semi-annual installments. Any obligation to provide Benefit Continuation or payment in lieu of such Benefit Continuation shall cease upon the earlier of (i) the Participant becoming eligible to receive group health benefits under a program of a subsequent employer or (ii) the Participant not complying with the provisions of this Plan. For the avoidance of doubt, the Participant (and his or her eligible dependents) shall be responsible for paying all employee contributions, deductibles and other cost-sharing items under such plans. Nothing in this Section 6.2 shall be construed to impair or reduce a Participant’s rights under COBRA or other applicable law.

(e)

Outplacement . The Participant shall be entitled to reimbursement for outplacement service costs incurred (which shall include appropriate itemization and substantiation of expenses incurred) during the period from the Participant’s Date of Separation through the end of the applicable Severance Period, subject to a maximum amount of $20,000; provided , that such claims for reimbursement are submitted to the Company within 90 days following the date of invoice.

All payments under this Section 6.2 are subject to the Participant executing the Release and the Release becoming effective and irrevocable in its entirety. If the Release does not become effective and irrevocable prior to the 60th day following the Date of Separation, the Company shall have no obligation to make any payments or provide benefits pursuant to the Plan.


6.3	General . Nothing in this Section 6 shall be construed to impair or reduce a Participant’s right to any other accrued but unpaid compensation or benefits nor create a right or entitlement to any additional senior executive retirement benefit.


7.	Release and Restrictive Covenant .

7.1

Release . A Participant shall only be entitled to receive the payments and benefits pursuant to Section 6 if he or she shall have executed and delivered (and not revoked) a release of claims against the Company (and its officers, directors, employees, affiliates, stockholders, etc.) substantially in the form attached hereto as Exhibit B (the “Release” ), and such Release is in full force and effect by the 60th day following the Date of Separation. Should the Participant revoke all or any portion of the Release within any allowed revocation period, then the Participant will be treated hereunder as if he or she did not execute the Release.

7.2

Restrictive Covenant . During the Severance Period, the Participant shall not, without the prior written consent of the Company, directly or indirectly, and whether as principal or investor or as an employee, officer, director, manager, partner, consultant, agent or otherwise, alone or in association with any other person, firm, corporation or other business organization, carry on a business competitive with the Company in any geographic area in which the Company Group has engaged in business, or is reasonably expected to engage in business during such Severance Period (including, without limitation, any area in which any customer of the Company Group may be located); provided , however , that nothing herein shall limit the Participant’s right to own not more than 1% of any of the debt or equity securities of any business organization that is then filing reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act (the “Restrictive Covenant” ). For the avoidance of doubt, (i) amounts payable pursuant to Section 6.2 are consideration for the Participant’s compliance with this Restrictive Covenant and (ii) the Restrictive Covenant shall be effective for the full Severance Period irrespective of whether any payments under Section 6.2 are terminated prior to the end of the Severance Period.


7.3	Breach . If a Participant breaches any provision of the Release or the Restrictive Covenant, the Administrator may determine that the Participant (i) will forfeit any unpaid portion of the payments provided pursuant to the Plan and (ii) will repay to the Company any amounts previously paid to him or her pursuant to the Plan.

No Funding . Nothing herein contained shall require or be deemed to require the Company to segregate, earmark or otherwise set aside any funds or other assets to provide for any payments made hereunder. The rights of any Participant under the Plan shall be solely those of a general creditor of the Company. However, in the event the Company foresees payment under the Plan, the Company may deposit cash or property, or both, equal in value to all or a portion of the benefits anticipated to be payable hereunder for any or all Participants into a trust, the assets of which are to be distributed at such times as are otherwise provided for in the Plan and are subject to the rights of the general creditors of the Company.


9.	Section 280G .

9.1

Notwithstanding any other provision of the Plan or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to a Participant or for the Participant’s benefit pursuant to the terms of the Plan or otherwise ( “Covered Payments” ) constitute parachute payments within the meaning of Section 280G of the Code and would, but for this Section 9, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax” ), then the Covered Payments shall be payable either (i) in full or (ii) reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax, whichever of the foregoing (i) or (ii) results in the Participant’s receipt on an after-tax basis of the greatest amount of payments and benefits after taking into account the applicable federal, state, local and foreign income, employment and excise taxes (including the Excise Tax). Any such reduction shall be made by the Company in its sole discretion consistent with the requirements of Section 409A of the Code.

9.2

Any determination required under this Section 9 shall be made in writing in good faith by the accounting firm that was the Company’s independent auditor immediately before the Qualifying Event (the “Accountants” ). The Company and the Participant shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 9. The Company shall be responsible for all fees and expenses of the Accountants.


10.	Section 409A . Notwithstanding anything to the contrary contained in the Plan, the payments and benefits provided under the Plan are intended to comply with or be exempt from Section 409A of the Code, and the provisions of the Plan shall be interpreted or construed consistently with that intent. The Administrator may

modify the payments and benefits under the Plan at any time solely as necessary to avoid adverse tax consequences under Section 409A; provided , however , that this Section 10 shall not create any obligation on the part of the Administrator to make such modifications or take any other action.


10.1	It is intended that the terms “termination” and “termination of employment” as used herein shall constitute a “separation from service” within the meaning of Section 409A.


10.2	Anything in the Plan to the contrary notwithstanding, each payment of compensation made to a Participant shall be treated as a separate and distinct payment from all other such payments for purposes of Section 409A.


10.3	In no event may a Participant be permitted to control the year in which any payment occurs.

10.4

Anything in the Plan to the contrary notwithstanding, if a Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of the Participant’s termination of employment, then any payment or benefit which would be considered “nonqualified deferred compensation” within the meaning of Section 409A that the Participant is entitled to receive upon the Participant’s termination of employment and which otherwise would be payable during the six-month period immediately following the Participant’s termination of employment will instead be paid or made available on the first day of the seventh month following the Participant’s termination of employment (or, if earlier, the date of the Participant’s death).

10.5

With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; and (iii) such payments shall be made on or before the last day of the Participant’s taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.


11.	Clawback . Any amounts payable under the Plan are subject to any policy providing for clawback, recoupment or recovery of amounts that were paid to the Participant as established from time to time by the Committee. The Company shall make any determination for clawback, recoupment or recovery in its sole discretion and in accordance with any such policy and applicable law or regulation.


12.	Withholding . The Company shall be entitled to withhold from payments to or on behalf of the Participant taxes and other authorized deductions.


13.	Governing Law . The Plan shall be construed, interpreted and governed in accordance with the laws of the State of Michigan, without giving effect to the principles of conflicts of law.

14.

Effect on Other Plans . The Plan supersedes in all respects any other severance benefit plans, arrangements or policies of the Company that apply to Participants upon a Qualifying Event, but does not supersede (i) employment agreements between an employee and the Company Group and (ii) to the extent applicable, the Company Executive Officer Change in Control Plan. No Participant shall be eligible to receive severance benefits under more than one severance arrangement of the Company (whether through an employment agreement or a benefit plan) at any time. Notwithstanding the foregoing, the Company and the Board reserve the right to adhere to other policies and practices that may be in effect for other groups of employees.


15.	Amendment, Modification and Termination . The Plan (including Exhibit A) may be modified, amended or terminated at any time by the Administrator without notice to Participants.


16.	No Employment Rights . Neither the Plan nor the benefits hereunder shall be a term of the employment of any employee, and the Company Group shall not be obligated in any way to continue the Plan. The terms of the Plan shall not give any employee the right to be retained in the employment of the Company Group .


17.	Effective Date and Term . The Plan shall become effective as of April 10, 2018 (the “Effective Date” ).

Exhibit A

Severance Multiples



Participants	Applicable Severance Multiple
Business Unit Presidents VP/CFO VP-HR VP- Controller	1.5
Other Executive Officer Participants	1

For any newly appointed Executive Officer Participant or employee designated as an Associate Participant by the Administrator, the Administrator shall determine the applicable Severance Multiple at the time such employee becomes eligible to participate in this Plan.

For the avoidance of doubt, notwithstanding an employee’s title being listed on the chart, such employee is not eligible to participate in this Plan if he or she is subject to an employment agreement providing for severance benefits.

Exhibit B

Form of Release

FORM OF WAIVER AND MUTUAL RELEASE

This Waiver and Mutual Release, dated as of (this “ Release ”), by and between [NAME] (the “ Participant ”) and American Axle & Manufacturing Holdings, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, the Participant participates in the Company’s Executive Officer Severance Plan (the “ Plan ”); and

WHEREAS, pursuant to Section 7 of the Plan, the Participant has agreed to execute and deliver a release and waiver of claims of the type and nature set forth herein as a condition to his or her entitlement to certain payments and benefits upon a Qualifying Event (as defined in the Plan), effective as of (the “ Termination Date ”).

NOW, THEREFORE, in consideration of the premises and mutual promises herein contained and for other good and valuable consideration received or to be received in accordance with the terms of the Plan, the Participant and the Company agree as follows:

1. Return of Property . On or prior to the Termination Date, the Participant represents and warrants that he or she will return all property made available to him in connection with his or her service to the Company, including, without limitation, credit cards, any and all records, manuals, reports, papers and documents kept or made by the Participant in connection with his or her employment as an officer or employee of the Company and its subsidiaries and affiliates, all computer hardware or software, cellular phones, files, memoranda, correspondence, vendor and customer lists, financial data, keys and security access cards.

2. Participant Release.

(a) In consideration of the payments and benefits provided to the Participant under the Plan and after consultation with counsel, the Participant and each of the Participant’s respective heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the “Participant Parties”) hereby irrevocably and unconditionally release and forever discharge the Company and its subsidiaries and affiliates and each of their respective officers, employees, directors, shareholders and agents (“Company Parties”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Participant Parties may have, or in the future may possess, arising out of (i) the Participant’s employment relationship with and service as an employee, officer or director of the Company, and the termination of such relationship or service, and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that the Participant does not release, discharge or waive (w) any rights to payments and benefits provided under the Plan that are contingent upon the execution by the Participant of this Release, (x) any right the Participant may have to enforce this Release or the Plan, (y) the Participant’s eligibility for indemnification in accordance with the Company’s certificate of incorporation, bylaws or other corporate governance document, or any applicable insurance policy, with respect to any liability he or she incurred or might incur as an employee, officer or director of the Company, or (z) any claims for accrued, vested benefits under any long-term incentive, employee benefit or retirement plan of the Company subject to the terms and conditions of such plan and applicable law including, without limitation, any such claims under the Employee Retirement Income Security Act of 1974, as amended. This Section 2(a) does not apply to any Claims that the Participant Parties may have as of the date the Participant signs this Release arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”). Claims arising under ADEA are addressed in Section 2(b) of this Release.

(b) Participant’s Specific Release of ADEA Claims . In further consideration of the payments and benefits provided to the Participant under the Plan, the Participant Parties hereby unconditionally release and forever discharge the Company Parties from any and all Claims that the Participant Parties may have as of the date the Participant signs this Release arising under ADEA. By signing this Release, the Participant hereby acknowledges and confirms the following: (i) the Participant was advised by the Company in connection with his or her termination to consult with an attorney of his or her choice prior to signing this Release and to have such attorney explain to the Participant the terms of this Release, including, without limitation, the terms relating to the Participant’s release of claims arising under ADEA, and the Participant has in fact consulted with an attorney; (ii) the Participant was given a period of not fewer than [21 days][45 days, to the extent required by ADEA,] to consider the terms of this Release and to consult with an attorney of his or her choosing with respect thereto; and (iii) the Participant knowingly and voluntarily accepts the terms of this Release. The Participant also understands that he or she has seven days following the date on which he or she signs this Release (the “Revocation Period”) within which to revoke the release contained in this paragraph, by providing the Company a written notice of his or her revocation of the release and waiver contained in this paragraph. No such revocation by the Participant shall be effective unless it is in writing and signed by the Participant and received by the Company prior to the expiration of the Revocation Period.

3. Company Release . The Company, for itself and on behalf of the Company Parties, hereby irrevocably and unconditionally releases and forever discharges the Participant Parties from any and all Claims, including, without limitation, any Claims under any federal, state, local or foreign law, that the Company Parties may have, or in the future may possess, arising out of (a) the Participant’s employment relationship with and service as an employee, officer or director of the Company, and the termination of such relationship or service, and (b) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof, excepting any Claim which would constitute or result from conduct by the Participant that would constitute a crime under applicable state or federal law; provided , however , notwithstanding the generality of the foregoing, nothing herein shall be deemed to release the Participant Parties from (x) any rights or claims of the Company arising out of or attributable to (A) the Participant’s actions or omissions involving or arising from fraud, deceit, theft or intentional or grossly negligent violations of law, rule or statute while employed by the Company and (B) the Participant’s actions or omissions taken or not taken in bad faith with respect to the Company; and (y) the Participant or any other Participant Party’s obligations under this Release or the Plan.

4. No Assignment . The parties represent and warrant that they have not assigned any of the Claims being released under this Release.

5. Proceedings .

(a) General Agreement Relating to Proceedings . The parties represent and warrant that they have not filed, and they agree not to initiate or cause to be initiated on their behalf, any complaint, charge, or claim against the other party before any local, state or federal agency, court or other body relating to the Participant’s employment or the termination thereof, other than with respect to any claim that is not released hereunder including with respect to the obligations of the Company to the Participant and the Participant to the Company under the Plan (each, individually, a “Proceeding”), and each party agrees not to participate voluntarily in any Proceeding. The parties waive any right they may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding.

(b) Proceedings Under ADEA . Section 5(a) shall not preclude the Participant from filing any complaint, charge or claim challenging the validity of the Participant’s waiver of Claims arising under ADEA (which is set forth in Section 2(b) of this Release). However, both the Participant and the Company confirm their belief that the Participant’s waiver of claims under ADEA is valid and enforceable, and that their intention is that all claims under ADEA will be waived.

(c) Certain Administrative Proceedings . In addition, Section 5(a) shall not preclude the Participant from filing a charge with or participating in any administrative investigation or proceeding by the Equal Employment Opportunity Commission or another Fair Employment Practices agency. The Participant is, however,

waiving his or her right to recover money in connection with any such charge or investigation. The Participant is also waiving his or her right to recover money in connection with any charge filed by any other entity or individual, or by any federal, state or local agency.

6. Remedies .

(a) Each of the parties understands that by entering into this Release such party will be limiting the availability of certain remedies that such party may have against the other party and such party’s ability to pursue certain claims against the other party.

(b) Each of the parties acknowledges and agrees that the remedies at law available to such party for breach of any of the obligations under this Release would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, each of the parties acknowledges, consents and agrees that, in addition to any other rights or remedies that such party may have at law or in equity, such party shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or security, restraining the other party from breaching its obligations under this Release. Such injunctive relief in any court shall be available to the relevant party, in lieu of, or prior to or pending determination in, any arbitration proceeding.

7. Cooperation . From and after the Termination Date, the Participant shall cooperate in all reasonable respects with the Company, its affiliates and subsidiaries and their respective directors, officers, attorneys and experts in connection with the conduct of any action, proceeding, investigation or litigation involving the Company or any of its affiliates or subsidiaries, including any such action, proceeding, investigation or litigation in which the Participant is called to testify.

8. Unfavorable Comments .

(a) Public Comments by the Participant . The Participant agrees to refrain from making, directly or indirectly, now or at any time in the future, whether in writing, orally or electronically: (i) any derogatory comment concerning the Company, its affiliates or subsidiaries or any of their current or former directors, officers, employees or shareholders, or (ii) any other comment that could reasonably be expected to be detrimental to the business or financial prospects or reputation of the Company or any of its affiliates or subsidiaries.

(b) Public Comments by the Company . The Company agrees to instruct its directors and employees to refrain from making, directly or indirectly, now or at any time in the future, whether in writing, orally or electronically: (i) any derogatory comment concerning the Participant, or (ii) any other comment that could reasonably be expected to be detrimental to the Participant’s business or financial prospects or reputation.

9. Severability Clause . In the event any provision or part of this Release is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Release, will be inoperative.

10. Non-admission . Nothing contained in this Release will be deemed or construed as an admission of wrongdoing or liability on the part of the Company or the Participant.

11. Governing Law . All matters affecting this Release, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of Michigan applicable to contracts executed in and to be performed in that State.

THE PARTICIPANT ACKNOWLEDGES THAT HE OR SHE HAS READ THIS RELEASE, THAT HE OR SHE HAS REVIEWED IT WITH AND OBTAINED THE ADVICE OF COUNSEL AND THAT HE OR SHE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT HE OR SHE HEREBY EXECUTES THE SAME AND MAKES THIS RELEASE AND THE RELEASES PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS OR HER OWN FREE WILL.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first set forth above.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

By:

PARTICIPANT

By:

EXHIBIT 21 - SUBSIDIARIES OF OUR COMPANY

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.



Subsidiary (1)	Organized Under Laws of
American Axle & Manufacturing Holdings, Inc.	Delaware
American Axle & Manufacturing, Inc.	Delaware
Colfor Manufacturing, Inc.	Delaware
MSP Industries Corporation	Michigan
AccuGear, Inc.	Delaware
Oxford Forge, Inc.	Delaware
Auburn Hills Manufacturing, Inc.	Delaware
AAM Travel Services, LLC	Michigan
Rochester Manufacturing, LLC	Indiana
AAM International Holdings, Inc.	Delaware
AAM Comércio e Participações Ltda.	Brazil
AAM do Brasil Ltda.	Brazil
Changshu AAM Automotive Driveline High Technology Manufacturing Co., Ltd.	China
American Axle & Manufacturing Korea, Inc.	Korea
AAM India Manufacturing Corporation Private Limited	India
AAM Poland Sp. z o. o.	Poland
Albion Automotive (Holdings) Ltd.	Scotland
Albion Automotive Limited	Scotland
AAM Germany GmbH	Germany
American Axle & Manufacturing (Thailand) Co., Ltd.	Thailand
AAM Luxembourg S.á r.l.	Luxembourg
AAM International S.á r.l.	Luxembourg
e-AAM Driveline Systems AB	Sweden
AAM Investment Management (Shanghai) Co., Ltd.	China
AAM Commercial & Trading (Shanghai) Co., Ltd.	China
USM Mexico Manufacturing, LLC	Delaware
USM Holdings, LLC II	Michigan
AAM Mexico Holdings LLC	Delaware
Mergedco, S. de R.L. de C.V.	Mexico
AAM Maquiladora Mexico S. de R.L. de C.V.	Mexico
American Axle & Manufacturing de Mexico Holdings S. de R.L. de C.V.	Mexico
American Axle & Manufacturing de Mexico S. de R.L. de C.V.	Mexico
Metaldyne Performance Group, Inc.	Delaware
MPG Holdco I Inc.	Delaware
ASP Grede Intermediate Holdings LLC	Delaware
ASP Grede AcquisitionCo LLC	Delaware
GSC RIII - Grede LLC	Delaware
Grede Holdings LLC	Delaware
Grede II LLC	Delaware
Grede Machining LLC	Delaware
Citation Lost Foam Patterns LLC	Delaware
Grede Wisconsin Subsidiaries LLC	Wisconsin
Grede Omaha LLC	Delaware
Grede Radford LLC	Delaware
Citation Camden Casting Center LLC	Tennessee
Skokie Castings LLC	Illinois
Novocast, S. de R. L. de C.V.	Mexico
Transformaciones Especializadas NC, S.A. de C.V.	Mexico
Brillion Iron Works, Inc.	Delaware
Grede LLC	Delaware
AAM Casting Corp.	Delaware
Novogredetek Holdings, S. de. R.L. de C.V.	Mexico
Shop IV Subsidiary Investment (Grede), LLC	Delaware
ASP MD Holdings, Inc.	Delaware
ASP MD Intermediate Holdings, Inc.	Delaware

EXHIBIT 21 - SUBSIDIARIES OF OUR COMPANY

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.




ASP MD Intermediate Holdings II, Inc.	Delaware
MD Investors Corporation	Delaware
Metaldyne, LLC	Delaware
Metaldyne SinterForged Products, LLC	Delaware
Metaldyne BSM, LLC	Delaware
Metaldyne Sintered Ridgway, LLC	Delaware
Metaldyne M&A Bluffton, LLC	Delaware
Metaldyne Powertrain Components, Inc.	Delaware
Gear Design and Manufacturing, LLC	Delaware
Punchcraft Machining and Tooling, LLC	Delaware
Metaldyne Tubular Components, LLC	Delaware
Metaldyne S.à.r.l.	Luxembourg
MetaldyneLux Holding S.à.r.l.	Luxembourg
Metaldyne Europe S.a r.l.	Luxembourg
Metaldyne Engine Holdings, S.L.U.	Spain
Metaldyne International Spain, S.L.U.	Spain
Metaldyne Sintered Components España, S.L.U.	Spain
Metaldyne International France SAS	France
Metaldyne GmbH	Germany
Metaldyne Zell Verwaltungs GmbH	Germany
Metaldyne International (UK) Ltd	United Kingdom
Metaldyne International Deutschland GmbH	Germany
Metaldyne Nürnberg GmbH	Germany
Metaldyne Oslavany spol. s.r.o.	Czech Republic
Metaldyne Grundstrücks GbR	Germany
Metaldyne Componentes Automotivos do Brasil Ltda.	Brazil
Metaldyne Netherlands Sintered Holdings B.V.	Netherlands
Metaldyne Powertrain Mexico, S. de R.L. de C.V.	Mexico
MPG México, S. de R.L. de C.V.	Mexico
Metaldyne Sintered Components Services, S. de R.L. de C.V.	Mexico
Metaldyne Sintered Components Mexico, S. de R.L. de C.V.	Mexico
Metaldyne Drivetrain Mexico, S. de R.L. de C.V.	Mexico
Metaldyne Forged Products, S. de R.L. de C.V.	Mexico
Holzer Limited	United Kingdom
Metaldyne Korea Limited	Korea
Metaldyne Hong Kong Limited	Hong Kong
Metaldyne Mauritius Limited	Mauritius
Metaldyne Industries Limited	India
Metaldyne (Suzhou) Automotive Components Co., Ltd	China
ASP HHI Holdings Inc.	Delaware
ASP HHI Intermediate Holdings, Inc.	Delaware
ASP HHI Intermediate Holdings II, Inc.	Delaware
ASP HHI Acquisition Co., Inc.	Delaware
HHI Holdings, LLC	Delaware
Bearing Holdings, LLC	Delaware
Kyklos Holdings, LLC	Delaware
Kyklos Bearing International, LLC	Delaware
Forging Holdings, LLC	Delaware
Hephaestus Holdings, LLC	Delaware
HHI FormTech Holdings LLC	Delaware
HHI FormTech, LLC	Delaware
HHI Forging, LLC	Delaware
Jernberg Holdings, LLC	Delaware
Jernberg Industries, LLC	Delaware
Impact Forge Holdings, LLC	Delaware
Impact Forge Group, LLC	Delaware
HHI Funding II, LLC	Delaware

EXHIBIT 21 - SUBSIDIARIES OF OUR COMPANY

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.




Gearing Holdings, LLC	Delaware
Cloyes Gear Holdings, LLC	Delaware
AAM Powder Metal Components, Inc.	Ohio
The Mesh Company, LLC.	Arkansas
Cloyes Acquisition Company	Delaware

(1) All subsidiaries set forth herein are reported in our financial statements through consolidations; there are no subsidiaries omitted from this list.

EXHIBIT 23 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-220300, No. 333-225468, No. 333-181163 each on Forms S-8, and Registration Statement No. 333-217033 on Form S-3ASR of our report dated February 15, 2019, relating to the consolidated financial statements and financial statement schedule of American Axle & Manufacturing Holdings, Inc., and the effectiveness of American Axle & Manufacturing Holdings, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc., for the year ended December 31, 2018.

/s/ Deloitte & Touche LLP

Detroit, Michigan

February 15, 2019

EXHIBIT 31.1 – CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT

I, David C. Dauch, certify that:

1. I have reviewed this Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 15, 2019

/s/ David C. Dauch

David C. Dauch

Chairman of the Board & Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2 – CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT

I, Christopher J. May, certify that:

1. I have reviewed this Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 15, 2019

/ s/ Christopher J. May

Christopher J. May

Vice President & Chief Financial Officer

(Principal Financial Officer)

EXHIBIT 32 - CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Axle & Manufacturing Holdings, Inc. (Issuer) on Form 10-K for the period ending December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (Report), I, David C. Dauch, Chairman of the Board & Chief Executive Officer of the Issuer, and I, Christopher J. May, Vice President & Chief Financial Officer of the Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.




/s/ David C. Dauch			/s/ Christopher J. May
David C. Dauch			Christopher J. May
Chairman of the Board &			Vice President &
Chief Executive Officer			Chief Financial Officer
February 15, 2019			February 15, 2019