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What changed in AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+295 added−292 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 2023 10-K

295 paragraphs added · 292 removed · 233 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

49 edited+18 added−22 removed36 unchanged
Biggest changeOur e-drive technology is designed to be segment agnostic, enabling our products to have applications to a variety of markets and vehicle types. 4 • In 2022, we enhanced our electrification product portfolio through our acquisition of Tekfor Group (Tekfor), which is a leading provider of driveline and powertrain components for both ICE and hybrid vehicles, as well as e-mobility applications. • Also in 2022, AAM's electric drive innovations were recognized by Automotive News with three PACE awards, which are among the industry's most prestigious awards regarding innovation.
Biggest changeThese awards include a PACE award as well as a PACE Innovation Partnership award related to AAM's electric drive technology on the Mercedes-AMG GT 63 S E Performance and a PACEpilot Innovation to Watch award for our highly integrated three-in-one wheel-end electric drive unit in 2022, and a PACE Innovation Award and a PACE Partnership Award for the front and rear electric drive units featured on the Jaguar all-electric AWD crossover vehicle in 2020. • In 2022, we enhanced our electrification product portfolio through our acquisition of Tekfor Group (Tekfor), which is a leading provider of driveline and powertrain components for both ICE and hybrid vehicles, as well as e-mobility applications.
(since April 2005); Manager - Finance (since June 2003); Manager - Finance, Forging 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 AAM, Mr.
(since April 2005); Manager - Finance, Detroit Manufacturing Facility (since June 2003); Manager - Finance, Forging 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 AAM, Mr.
We are focused on securing and enhancing our core business of internal combustion engine (ICE) programs by delivering operational excellence and quality products to our customers, while growing our electrification business, as vehicle electrification is expected to be the foundation of the future of the automotive industry. 2 Competitive Strengths We achieve our strategic objectives by emphasizing a commitment to: Sustaining our operational excellence and focus on cost management. • In 2022, AAM received the 2021 GM Overdrive Award, which is awarded to suppliers who display outstanding achievement within GM's Global Purchasing and Supply Chain organization's key priorities, including sustainability, innovation, relationships, total enterprise cost, launch excellence and safety.
We are focused on securing and enhancing our core business of internal combustion engine (ICE) programs by delivering operational excellence and quality products to our customers, while growing our electrification business, as vehicle electrification is expected to be the foundation of the future of the automotive industry. 2 Competitive Strengths We achieve our strategic objectives by emphasizing a commitment to: Sustaining our operational excellence and focus on cost management. • In 2023, AAM received the 2022 GM Overdrive Award, which is awarded to suppliers who display outstanding achievement within GM's Global Purchasing and Supply Chain organization's key priorities, including sustainability, innovation, relationships, total enterprise cost, launch excellence and safety.
The AAM Operating System includes our E 4 (E-to-the-fourth) system, which is AAM’s energy and environmental sustainability program designed to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water usage, while minimizing waste and lessening the environmental impact of our production operations.
The AAM Operating System includes our E 4 system, which is AAM’s energy and environmental sustainability program designed to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water usage, while minimizing waste and lessening the environmental impact of our production operations.
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. 11
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. 10
We are focused on securing our core business, as the cash flows generated from our existing programs and products contribute to our research and development (R&D) investments in electrification technology that are expected to bring the future of the automotive industry faster.
We are focused on securing and enhancing our core business, as the cash flows generated from our existing programs and products contribute to our research and development (R&D) investments in electrification technology that are expected to bring the future of the automotive industry faster.
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in 2022, 2021 and 2020.
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in 2023, 2022 and 2021.
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 at our current and former facilities. Such expenditures were not significant in 2022, 2021 and 2020.
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 at our current and former facilities. Such expenditures were not significant in 2023, 2022 and 2021.
Prior to joining AAM, Mr. May served as a Senior Accountant for Ernst & Young. Mr. May is a certified public accountant. Tolga I. Oal , age 51, has been President - Driveline, since December 2022 when he rejoined AAM after serving as Co-Chief Executive Officer of Howmet Aerospace until October 2021.
Prior to joining AAM, Mr. May served as a Senior Accountant for Ernst & Young. Mr. May is a certified public accountant. Tolga I. Oal , age 52, has been President - Driveline, since December 2022 when he rejoined AAM after serving as Co-Chief Executive Officer of Howmet Aerospace until October 2021.
This was the second consecutive year we received this award. • We deliver operational excellence by leveraging our global standards, policies and best practices across all disciplines through the use of the AAM Operating System, which includes our S 4 (S-to-the-fourth) safety system, Q 4 (Q-to-the-fourth) quality system and E 4 (E-to-the-fourth) energy and environmental sustainability system.
This was the third consecutive year we received this award. • We deliver operational excellence by leveraging our global standards, policies and best practices across all disciplines through the use of the AAM Operating System, which includes our S 4 (S-to-the-fourth) safety system, Q 4 (Q-to-the-fourth) quality system and E 4 (E-to-the-fourth) energy and environmental sustainability system.
Of the 14,000 hourly associates, approximately 69% are represented under collective bargaining agreements with various labor unions. Creating a Diverse, Equitable and Inclusive Culture At AAM, we believe diversity drives creativity. We believe an equitable and inclusive culture encourages, supports and celebrates the unique voices of our global workforce.
Of the 14,000 hourly associates, approximately 72% are represented under collective bargaining agreements with various labor unions. Creating a Diverse, Equitable and Inclusive Culture At AAM, we believe diversity drives creativity. We believe an equitable and inclusive culture encourages, supports and celebrates the unique voices of our global workforce.
We are subject to risks of environmental issues, including impacts of climate-related events, that could result in unforeseen disruptions or costs to our operations. We did not experience any climate-related events in 2022, 2021 or 2020 that we believe could have a material adverse impact on our results of operations, financial condition and cash flows.
We are subject to risks of environmental issues, including impacts of climate-related events, that could result in unforeseen disruptions or costs to our operations. We did not experience any climate-related events in 2023, 2022 or 2021 that we believe had, or could have, a material adverse impact on our results of operations, financial condition and cash flows.
Lynch served at Stellar Engineering for nine years in various capacities. Christopher J. May , age 53, has been Executive Vice President & Chief Financial Officer since January 2023.
Lynch served at Stellar Engineering for nine years in various capacities. Christopher J. May , age 54, has been Executive Vice President & Chief Financial Officer since January 2023.
Prior to that, she served as Vice President - Human Resources (since September 2012), 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 AAM in July 1996.
Prior to that, she served as Senior Vice President - Human Resources (since January 2023), Vice President - Human Resources (since September 2012), 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 AAM in July 1996.
Presently, he serves on the boards of Business Leaders for Michigan, the Detroit Regional CEO Council, the Detroit Economic Club, the Detroit Regional Chamber, the Detroit Regional Partnership, the Detroit Mayor's Workforce Development Board, the Great Lakes Council Boy Scouts of America, the Boys & Girls Club of Southeast Michigan, the National Association of Manufacturers (NAM), Amerisure Mutual Holdings, Inc. and the Amerisure Companies (since December 2014).
Presently, he serves on the boards of Business Leaders for Michigan, the Detroit Regional CEO Council, the Detroit Economic Club, the Detroit Regional Chamber, the Detroit Regional Partnership, the Detroit Mayor's Workforce Development Board, the Great Lakes Council Boy Scouts of America, the Boys & Girls Clubs of Southeast Michigan, the National Association of Manufacturers (NAM), Amerisure Mutual Holdings, Inc. and the Amerisure Companies.
We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 40% of our consolidated net sales in 2022, 37% in 2021, and 39% in 2020. We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives and the AWD Chrysler Pacifica.
We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 39% of our consolidated net sales in 2023, 40% in 2022, and 37% in 2021. We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives.
Additionally, during 2022, we committed to reaching net-zero carbon emissions by 2040, and achieved the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative. We also established a goal to purchase 100% of energy for our operations in the U.S. from renewable sources by 2025.
Additionally, we have committed to reaching net-zero carbon emissions by 2040, and have received the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative. We also have established a goal to purchase 100% of energy for our operations in the U.S. from renewable sources by 2025.
Prior to that, he served as President - Driveline (since November 2021), Vice President - Finance & Controller (since February 2017), 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.
Prior to that, he served as Chief Operating Officer (since December 2022), President - Driveline (since November 2021), Vice President - Finance & Controller (since February 2017), 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.
We continuously monitor our facilities progress in the S 4 Safety System. In 2022, our TRIR was 0.95 – a reduction of approximately 55% in recordable injuries since the S 4 program began in 2015. Partnering with our Global Communities AAM believes that we have a responsibility to give back to the communities in which we live and work.
We continuously monitor our facilities progress in the S 4 Safety System. In 2023, our TRIR was 0.85 – a reduction of approximately 60% in recordable injuries since the S 4 program began in 2015. Partnering with our Global Communities AAM believes that we have a responsibility to give back to the communities in which we live and work.
During 2022, the automotive industry experienced, and continues to experience, significant disruptions in the supply chain, including labor shortages in a variety of positions and experience levels.
The automotive industry continues to experience significant disruptions in the supply chain, including labor shortages in a variety of positions and experience levels.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 18% of our consolidated net sales in 2022, and 19% in both 2021 and 2020.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 16% of our consolidated net sales in 2023, 18% in 2022 and 19% in 2021.
Prior to joining AAM, 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 58, has been AAM's Chief Operating Officer since December 2022.
Prior to joining AAM, 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. 9 Michael J. Lynch , age 59, has been AAM's President & Chief Operating Officer since March 2023.
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.
Prior to that, Mr. Dauch served as President & Chief Operating Officer (2009 - 2012) and held several other positions of increasing responsibility from the time he joined AAM in 1995.
Our Metal Forming segment, in addition to supplying component parts to many external customers, is a key supplier to our Driveline segment, helping to ensure continuity of supply for certain parts to our largest manufacturing facilities. • During 2022, we launched 17 programs across our business units for our customers including GM, Stellantis, Ford, Mercedes-AMG and NIO Inc.
Our Metal Forming segment, in addition to supplying component parts to many external customers, is a key supplier to our Driveline segment, helping to ensure continuity of supply for certain parts to our largest manufacturing facilities. • During 2023, we launched 14 programs across our business units for our customers including GM, Mercedes-AMG, BMW and Chery Automobile Co., Ltd.
We have developed advanced forging and machining process technologies to manufacture lightweight, highly precise and power-dense products. Our forged axle tubes deliver significant weight and cost reductions as compared to the traditional welded axle tubes. • AAM's Advanced Technology Development Center (ATDC) at our Detroit campus, allows us to accelerate technological advancements.
We have developed advanced forging and machining process technologies to manufacture lightweight, highly precise and power-dense products. • AAM's Advanced Technology Development Center (ATDC) at our Detroit campus, allows us to accelerate technological advancements.
Although the outcome of these matters cannot be predicted with certainty, at this time 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.
Although the outcome of these matters cannot be predicted with certainty, at this time 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. 6 We file U.S. federal, state and local income tax returns, as well as foreign income tax returns in jurisdictions throughout the world.
Additionally, during 2022, we launched our Innovation Center at the Richard E. Dauch Institute in Mexico, which is focused on identifying ways to improve productivity while implementing manufacturing solutions, as well as educating our associates on process optimization and technology advances.
Dauch Institute in Mexico is focused on identifying ways to improve productivity while implementing manufacturing solutions, as well as educating our associates on process optimization and technology advances.
We are taking measures to address these labor issues across our global operations to mitigate the impact to AAM, including actively managing production schedules and reviewing our compensation and benefit programs to ensure that they are competitive with local markets, and working with union organizations that represent certain associates.
We are taking measures to address these labor issues across our global operations to mitigate the impact to AAM, including actively managing production schedules and reviewing our compensation and benefit programs to ensure that they are competitive with local markets. Developing Associates We have established sustainable and adaptable talent management programs focused on the training and development of our associates.
Empowerment of our associates is essential to continuously improving our quality performance, technology leadership and operational excellence and enabling our associates to grow professionally into the leaders that will guide AAM into the future.
These programs offer resources, tools and events that are designed to empower associates in their work and personal lives. Empowerment of our associates is essential to continuously improving our quality performance, technology leadership and operational excellence and enabling our associates to grow professionally into the leaders that will guide AAM into the future.
Executive Officers of AAM Name Age Position David C. Dauch 58 Chairman of the Board & Chief Executive Officer Michael K. Simonte 59 President David E. Barnes 64 Vice President & General Counsel Terri M. Kemp 57 Senior Vice President - Human Resources Michael J. Lynch 58 Chief Operating Officer Christopher J.
Executive Officers of AAM Name Age Position David C. Dauch 59 Chairman of the Board & Chief Executive Officer Terri M. Kemp 58 Senior Vice President - Human Resources & Sustainability Michael J. Lynch 59 President & Chief Operating Officer Christopher J. May 54 Executive Vice President & Chief Financial Officer Tolga I. Oal 52 President - Driveline Matthew K.
Maintaining our high quality standards, which are the foundation of our product durability and reliability. • AAM has a robust internal quality assurance system that drives continuous improvement to meet and exceed the growing expectations of our OEM customers. • In 2022, four of our global facilities received the GM Supplier Quality Excellence Award for outstanding quality performance during the 2021 performance year. • AAM was also recognized in 2022 for quality in the 2021 performance year by several other customers including the Paccar 10 PPM Quality Award at our Glasgow, United Kingdom facility, the Daimler Zero Defect Award at our Chennai, India facility and the Daimler Master of Quality Award at our El Carmen, Mexico facility.
Maintaining our high quality standards, which are the foundation of our product durability and reliability. • AAM's Q 4 internal quality assurance system drives continuous improvement to meet and exceed the growing expectations of our OEM customers. • In 2023, four of our global facilities received the GM Supplier Quality Excellence Award for outstanding quality performance during the 2022 performance year. • AAM was also recognized in 2023 for quality in the 2022 performance year by several other customers including the Paccar 10 PPM Quality Award at our Hausach, Germany facility, the Aisin Special Performance Achievement at our Royal Oak, Michigan facility and the ACMA of India Quality Circle Award at our Chakan, India facility.
Our Rochester Hills Technical Center (RHTC) works closely with the ATDC to test and validate new and advanced technologies focused on lightweighting, efficiency and vehicle performance using enhanced diagnostic and hardware assessment capabilities. Our European Headquarters and Engineering Center (EHEC) in Langen, Germany, serves as our center of excellence for research and development, product testing and prototype development in Europe.
Our Rochester Hills Technical Center (RHTC) works closely with the ATDC to test and validate new and advanced technologies focused on lightweighting, efficiency and vehicle performance using enhanced diagnostic and hardware assessment capabilities.
Developing Associates We have established sustainable and adaptable talent management programs focused on the training and development of our associates. These programs are designed to help associates realize their full potential by understanding the expectations of their current role and setting goals for future growth and learning, which contributes to the overall success of AAM.
This development starts with early career programs and progresses through leadership development. These programs are designed to help associates realize their full potential by understanding the expectations of their current role and setting goals for future growth and learning, which contributes to the overall success of AAM.
Additionally, throughout 2022, we have continued our emphasis on cost management in order to mitigate the financial impact of the significant disruptions in the supply chain that the automotive industry experienced, and continues to experience, including a shortage of semiconductor chips used by our customers, increased metal and commodity costs, higher utility costs, increased transportation costs and labor shortages which have led to volatility in our production schedules, higher inventory levels and increased labor costs. • We maintain a cost competitive, operationally flexible global manufacturing, engineering and sourcing footprint to compete in global growth markets, support global product development initiatives and maintain regional cost competitiveness. • Our business is vertically integrated to reduce cost and mitigate risk.
These disruptions include volatility in metal, commodity and utility costs, increased transportation costs and labor shortages which have led to volatility in our production schedules, including manufacturing downtime, often with limited notice from customers, higher inventory levels and increased labor costs. • We maintain a cost competitive, operationally flexible global manufacturing, engineering and sourcing footprint to compete in global growth markets, support global product development initiatives and maintain regional cost competitiveness. • Our business is vertically integrated to reduce cost and mitigate risk.
May 53 Executive Vice President & Chief Financial Officer Tolga I. Oal 51 President - Driveline Norman Willemse 66 President - Forging David C. Dauch , age 58, 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.
Paroly 58 Vice President & General Counsel David C. Dauch , age 59, 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.
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.
Securing and Enhancing Our Core Business • AAM has established a high-efficiency product portfolio that is designed to improve axle efficiency and fuel economy through innovative product design technologies. 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.
These joint ventures have served as a strong advantage in building relationships with leading Chinese manufacturers. 5 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, delivery and cost are the primary elements of competition in our industry segments.
Our acquisition of Tekfor in 2022 is an example of our tactical approach to strategic transactions. 5 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, delivery and cost are the primary elements of competition in our industry segments.
In 2023, we expect to launch approximately 17 new and replacement programs for a variety of customers across our business units, including GM, Mercedes-AMG, BMW and Chery, as well as e-Beam axles for a battery electric commercial vehicle produced by EKA Mobility, a subsidiary of Pinnacle Industries Limited.
In 2024, we expect to launch approximately 19 new and replacement programs, as well as additional variants of existing programs, for a variety of customers across our business units, including GM, Stellantis, Mercedes-AMG and Volkswagen, as well as electric beam (e-Beam) axles for several OEMs.
Our acquisition of Tekfor in 2022 is an example of our tactical approach to strategic transactions. 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.
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.
AAM has established five pillars for our DEI program: enhancing DEI skills, maintaining a safe and inclusive environment, providing equitable talent management and inclusive benefits and policies, supporting stakeholder engagement and reinforcing leadership ownership and accountability. 7 In 2022, we continued our commitment to initiatives that foster a culture of inclusion and develop a more diverse workforce.
AAM has established five pillars for our DEI program: 1) enhancing DEI skills, 2) maintaining a safe and inclusive environment, 3) providing equitable talent management and inclusive benefits and policies, 4) supporting stakeholder engagement and 5) reinforcing leadership ownership and accountability. 7 Our Global DEI 2+1 Program, which launched in 2022, focuses on our two global DEI topics of valuing differences and improving the representation of women in our global workforce.
Mr. Dauch also serves on the Miami University Business Advisory Council, the Michigan ESG Leadership Council and the General Motors Supplier Council. Michael K. Simonte, age 59, has been President since August 2015. Mr.
Mr. Dauch also serves on the General Motors Supplier Council, Stellantis Supplier Advisory Council, the Sustainability Leadership Council of Michigan and the Miami University Business Advisory Council. Terri M. Kemp, age 58, has been Senior Vice President - Human Resources & Sustainability since March 2023.
Its four components are designed to enhance our associates’ experience at AAM and includes associate health and safety, professional development, competitive compensation and benefits and the global community. These programs offer resources, tools and events that are designed to empower associates in their work and personal lives.
Attracting and Retaining Associates Our AAM360 program serves as the foundation for our recruitment and retention strategy. Its four components are designed to enhance our associates’ experience at AAM and includes associate health and safety, professional development, competitive compensation and benefits and the global community.
Negative or unexpected outcomes of these examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows. 6 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 are also subject to examinations of these tax returns by the relevant tax authorities. Negative or unexpected outcomes of these examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows.
During 2022, the automotive industry experienced, and continues to experience, significant disruptions in the supply chain, including a shortage of semiconductor chips used by our customers and increased metal and commodity costs. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2023.
We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2024.
Ltd., NIO Inc. and EKA Mobility. • Electrification is a growing portion of our new and incremental business backlog, as well as our quoted and emerging new business opportunities, and is a significant element of our future growth strategy. • 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.
Recent new business awards and program launches include customers such as Jupiter Electric Mobility, Mahindra and Skywell. • Electrification is a growing portion of our new and incremental business backlog, as well as our quoted and emerging new business opportunities, and is a significant element of our future growth strategy.
It was the second consecutive year that each facility earned their respective quality award. 3 Achieving technology leadership by delivering innovative products that enhance our product portfolio while increasing our total global served market.
Additionally, during 2023 our El Carmen, Mexico facility earned the Daimler Master of Quality Award for the third consecutive year, as well as the Continuous Improvement Management Award from CNH Industrial. • For the 2023 performance year, AAM was also recognized by Ford with the Q1 Quality Award at our Changshu, China Manufacturing Complex, our Auburn Hills, Michigan Manufacturing Complex and our Guanajuato Manufacturing Complex in Silao, Mexico. 3 Achieving technology leadership by delivering innovative products that enhance our product portfolio while increasing our total global served market.
AAM's lightweight axle technology features an innovative design, which offers significant mass reduction and increased fuel economy and efficiency that is scalable across multiple applications without the loss of performance or power. • Our Metal Forming segment represents the largest automotive forging operation in the world, and provides engine, transmission, driveline and safety-critical components for light, commercial and industrial vehicles.
AAM's lightweight axle technology features an innovative design, which offers significant mass reduction and increased fuel economy and efficiency that is scalable across multiple applications without the loss of performance or power. • We have secured our core business as we have been awarded multiple next-generation full-size pickup truck front and rear axle programs with OEM customers and by also being named as the axle supplier for GM's Chevrolet Colorado and GMC Canyon mid-size pickup trucks.
These awards are expected to generate revenues from mid-decade to beyond 2030. • AAM has established a high-efficiency product portfolio that is designed to improve axle efficiency and fuel economy through innovative product design technologies.
These awards are expected to generate revenues from mid-decade to beyond 2030.
Oal held various leadership positions in engineering, sales, purchasing, and finance at Siemens VDO Automotive/Continental. Norman Willemse, age 66, has been President - Forging, since December 2022.
Oal held various leadership positions in engineering, sales, purchasing, and finance at Siemens VDO Automotive/Continental. Matthew K. Paroly, age 58, has been Vice President and General Counsel since joining AAM in May 2023. Prior to joining AAM, Mr. Paroly served as Vice President, Chief Legal Officer, Global ESG Director and Company Secretary for TI Fluid Systems plc.
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Securing and Enhancing Our Core Business • During 2022, AAM announced that we were named as new axle supplier for GM's next generation of the Chevrolet Colorado and GMC Canyon mid-size pickup trucks.
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Additionally, throughout 2023, we have continued our emphasis on cost management in order to mitigate the financial impact of the significant disruptions in the supply chain that the automotive industry has experienced, and continues to experience.
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Additionally, in the prior year, AAM was named the sole supplier of front and rear pickup axles for production at GM's Oshawa, Canada facility and also secured multiple next-generation full-size truck front and rear axle programs with multiple OEM customers.
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Our portfolio includes high-efficiency axles, aluminum axles and AWD applications.
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Additionally, AAM's next generation of scalable and modular e-drive systems, have exceeded widely recognized industry benchmarks for efficiency, mass and power density.
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During 2023, we also secured business to provide power transfer units and rear drive modules for multiple AWD SUV programs for Jetour Global, a division of Chery Automobile Co., Ltd. • Our Metal Forming segment represents the largest automotive forging operation in the world, and provides engine, transmission, driveline and safety-critical components for light, commercial and industrial vehicles.
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AAM's electric drive technology on the Mercedes-AMG GT 63 S E Performance was awarded a PACE award, as well as a PACE Innovation Partnership award for our high level of collaboration with Mercedes-AMG on the program.
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Our European Headquarters and Engineering Center (EHEC) in Langen, Germany, serves as our center of excellence for research and development, product testing and prototype development in Europe, and our Innovation Center at the Richard E.
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Additionally, AAM's highly integrated three-in-one wheel-end electric drive unit was awarded a PACEpilot Innovation to Watch award, which recognizes post-pilot, pre-commercial innovation in the automotive and future mobility industry. • To date, our hybrid and electric driveline systems have been awarded multiple contracts, including a high-performance hybrid-electric system with Mercedes-AMG and electric vehicle components with NIO to support a next-generation e-powertrain program.
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Our e-drive technology is designed to be segment agnostic, enabling our products to support a variety of markets and vehicle types. 4 • During 2023, AAM announced that we were named as the new supplier of front and rear e-Beam axles for a future electric vehicle program with Stellantis.
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We also expect to launch several additional programs for hybrid and electric vehicles, including e-Beam axles for EKA Mobility's battery electric commercial vehicle and components for the full-hybrid Ford Maverick pickup truck.
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This award is expected to generate revenues in the latter part of the decade.
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Recent new business awards and program launches include customers such as Mercedes-AMG, Chery Automobile Co.
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We also expect to launch e-Beam programs for several other OEMs in 2024 and 2025. • Additionally, during 2023 AAM announced new business awards in North America and Europe to supply differentials and other electric vehicle components to multiple global OEMs. • In 2023, AAM was named as a finalist for the Automotive News PACEpilot Award for our innovative e-Beam axles with high-speed motor and integrated inverter driveline technology.
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For this reason, it is critical that we maintain a global presence in these markets in order to remain competitive for new contracts. To expand our global capabilities, in 2021 we launched our EHEC, AAM's European center for excellence in research and development, product testing and prototype development.
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The Automotive News PACE awards are among the industry's most prestigious awards regarding innovation. Since 2020, AAM has been awarded five PACE Awards demonstrating our innovation leadership in electrification.
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Establishing our EHEC is a critical step in furthering our relationships with European OEM customers. • We are a partner in a joint venture (JV) with Liuzhou Wuling Automobile Industry Co., Ltd. (Liuzhou AAM), a subsidiary of Guangxi Automotive Group Co., Ltd, which manufactures independent rear axles and driveheads to be used on crossovers, including SUVs, minivans and multi-purpose vehicles.
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Throughout 2023, we continued the integration of Tekfor into our business and operations.
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An electric drive unit developed by our Liuzhou AAM JV has been featured on the all-electric Baojun E300 Plus vehicle from SAIC-GM-Wuling. We are also a partner in a 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.
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To expand our global capabilities, we have established business offices and engineering centers of excellence in research and development, product testing and prototype development in North America, Europe and Asia. • We continue to evaluate and consider strategic opportunities that will complement our core strengths, supplement our diversification strategies and increase our presence in global markets, while providing future, profitable growth prospects.
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HAAC supplies front and rear beam axles to several leading Chinese light truck manufacturers, including JAC and Foton (Beiqi Foton Motor Co., Ltd.).
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The automotive industry continues to experience significant disruptions in the supply chain, including volatility in metal and commodity costs. In addition, labor shortages in certain regions in which our suppliers operate could cause production delays, a shortage of materials that we use in our manufacturing operations or increased cost of productive materials.
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We file U.S. federal, state and local income tax returns, as well as foreign income tax returns in jurisdictions throughout the world. We are also subject to examinations of these tax returns by the relevant tax authorities.
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See Note 9 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending tax litigation. 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.
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Key initiatives included: • We launched our DEI Global 2+1 Program, which was designed to enable global participation in our DEI journey. Our two global DEI topics this year were understanding and valuing differences and improving the representation of women in our global workforce.
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In addition, each AAM facility selected one additional (+1) topic based on their local DEI initiatives, and to support our 2030 demographic goals around the world. In 2023, we continued our commitment to initiatives that foster a culture of inclusion and develop a more diverse workforce.
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AAM facilities in each country also chose one additional topic (+1) that will drive their DEI journey. • We set 2030 demographic goals around these global 2+1 DEI topics. • We dedicated additional resources by hiring a DEI executive who serves as the chairperson of the DEI Committee and directs global DEI initiatives. • We facilitated additional Associate Resource Groups (ARGs), which provide a forum for associates with shared experiences, characteristics or backgrounds to connect and enhance career and personal development.
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Key DEI initiatives included: • Continued focus on our Associate Resource Groups (ARGs) which provide a forum for associates with shared experiences, characteristics or backgrounds to connect and enhance career and personal development. Our ARGs include: POWhER, Young Professionals, U.S.
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Our ARGs include: POWhER, Young Professionals, U.S. Veterans, Black Associate Network and Latin America Talent Inclusion Network. Attracting and Retaining Associates Our AAM360 program serves as the foundation for our recruitment and retention strategy.
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Veterans, Black Associate Network and Latin America Talent Inclusion Network. • Sponsoring multiple ARG events focused on company, culture, community and career, as well various learning opportunities. • Optimizing the structure of our DEI Committee to emphasize associate engagement and talent management. • Establishing our first Regional DEI Steering Committee in Mexico and our first regional ARG in Europe to provide more support for local DEI initiatives in these regions.
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Simonte previously served as Executive Vice President & 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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 use important intellectual property in our business.
Biggest changeThere can be no assurance that such future negotiations, whether between AAM and the labor unions representing certain of our hourly associates or between our customers or suppliers and the labor unions representing certain of their hourly associates, will not result in additional labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition, our ability to compete for future business or our ability to attract and retain qualified associates.
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. 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.
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. 13 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.
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 interest rates or currency exchange rates. 17 Our company faces substantial pension and other postretirement benefit obligations.
Future business operations and opportunities, including potential 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 interest rates or currency exchange rates. 17 Our company faces substantial pension and other postretirement benefit obligations.
Further, a change in market comparables, discount rate or long-term growth rate, as a result of a change in economic conditions or otherwise, could result in the carrying values of the reporting units exceeding their respective fair values. 15 Risks Related to Our Industry We are under continuing pressure from our customers to reduce our prices.
Further, a change in market comparables, discount rate or long-term growth rate, as a result of a change in economic conditions or otherwise, could result in the carrying values of the reporting units exceeding their respective fair values. Risks Related to Our Industry We are under continuing pressure from our customers to reduce our prices.
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 cannot attract and retain qualified personnel in key positions and functions.
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. 14 Our company's ability to operate effectively could be impaired if we cannot attract and retain qualified personnel in key positions and functions.
If we are unable to pass such cost increases on to our customers, or are otherwise unable to mitigate these cost increases, or if we are unable to obtain adequate supply of raw materials, utilities and natural resources, this could have a material adverse effect on our results of operations and financial condition. 12 Our business is significantly dependent on sales to GM, Stellantis and Ford.
If we are unable to pass such cost increases on to our customers, or are otherwise unable to mitigate these cost increases, or if we are unable to obtain adequate supply of raw materials, utilities and natural resources, this could have a material adverse effect on our results of operations and financial condition. 11 Our business is significantly dependent on sales to GM, Stellantis and Ford.
Our global operations also may be adversely affected by political events, violations of anti-bribery or corruption laws, government sanctions, domestic or international terrorist events and hostilities, natural disasters and significant weather events, disruptions in the global financial markets, or public health crises, such as pandemic or epidemic illness.
Our global operations also may be adversely affected by political events, violations of anti-bribery or corruption laws, government sanctions, domestic or international terrorist events and hostilities, geopolitical conflicts, natural disasters and significant weather events, disruptions in the global financial markets, or public health crises, such as pandemic or epidemic illness.
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.
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.
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.
Although we have implemented robust security measures, 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.
As we continue to expand globally and accelerate our diversification efforts, we may pursue strategic growth initiatives, including through acquisitions and joint ventures. 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.
As we continue our diversification efforts, we may pursue strategic growth initiatives, including through acquisitions and joint ventures. 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 have business and technical offices and manufacturing facilities in multiple countries outside the U.S. 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.
We have business and technical offices and manufacturing facilities in multiple countries outside the U.S. 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, compliance with customs regulations, nationalization, immigration policies, expropriation and other governmental action.
We have initiated restructuring actions in recent years to reduce cost and realign certain areas of our business and could initiate further restructuring actions in future periods.
We have initiated restructuring actions in recent years to reduce cost and realign certain areas of our business and expect to initiate further restructuring actions in future periods.
A substantial portion of our revenue is derived from products supporting RWD light truck and SUV platforms and AWD crossover vehicle platforms in North America, Europe and Asia.
A substantial portion of our revenue is derived from products supporting internal combustion engine RWD light truck and SUV platforms and AWD crossover vehicle platforms in North America, Europe and Asia.
Sales to GM were approximately 40% of our consolidated net sales in 2022, 37% in 2021, and 39% in 2020.
Sales to GM were approximately 39% of our consolidated net sales in 2023, 40% in 2022, and 37% in 2021.
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.
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. We may need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements.
These uncertainties, as well as the potential impacts of these agreements, 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.
These uncertainties, as well as the potential impacts of these agreements, could have a material adverse effect on our business and our results of operations and financial condition. Our future success will depend, in part, on our ability to anticipate and effectively manage these and other risks.
A significant disruption to our GMC operations, as a result of changes in trade agreements between Mexico and other jurisdictions, including the U.S., tariffs, tax law changes, labor disputes or shortages, natural disasters, availability of natural resources or utilities, pandemic or epidemic illness, or otherwise, could have a material adverse impact on our results of operations and financial condition.
A significant disruption to our GMC operations, as a result of changes in trade agreements between Mexico and other jurisdictions, including the U.S., tariffs, compliance with customs regulations, tax law changes, changes to our operating structure in Mexico, labor disputes or shortages, logistical constraints, natural disasters, availability of natural resources or utilities, pandemic or epidemic illness, or otherwise, could have a material adverse impact on our results of operations and financial condition.
Under pillar two, the Framework provides for a global minimum corporate tax rate of 15% for companies with revenue above €750 million, calculated on a country-by-country basis. The Framework agreement must now be implemented by the OECD members who have agreed to the plan, effective in 2024.
Under pillar two, the Framework provides for a global minimum corporate tax rate of 15%, calculated on a country-by-country basis. The Framework agreement must now be implemented by the OECD members who have agreed to the plan, effective in 2024.
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, as well as in-sourcing, vertical integration and global sourcing by OEMs.
As a result of these competitive pressures and other industry trends, OEMs and suppliers are developing strategies to reduce costs. 15 These strategies include supply base consolidation, as well as in-sourcing, vertical integration, global sourcing by OEMs and use of artificial intelligence and machine learning.
Further, GILTI and FDII may not be compliant with the OECD guidelines as drafted and it is uncertain whether the U.S. will amend these existing rules.
Further, GILTI and FDII may not be compliant with the OECD guidelines as drafted in the Framework under pillar two and it is uncertain whether the U.S. will amend these existing rules.
Sales to Stellantis accounted for approximately 18% of our consolidated net sales in 2022, and 19% in both 2021 and 2020, and sales to Ford accounted for approximately 12% of our consolidated net sales in 2022, 2021 and 2020.
Sales to Stellantis accounted for approximately 16% of our consolidated net sales in 2023, 18% in 2022 and 19% in 2021, and sales to Ford accounted for approximately 12% of our consolidated net sales in 2023, 2022 and 2021.
Our supply chain, as well as our customers' supply chain, is also at risk of unanticipated events such as pandemic or epidemic illness, including the ongoing impact of COVID-19 in certain regions in which we operate, natural disasters, industrial incidents, changes in governmental regulations and trade agreements, or financial or operational instability of suppliers that could cause a disruption in the supply of critical components to us and our customers.
Our supply chain, as well as our customers' supply chain, is also at risk of unanticipated events such as pandemic or epidemic illness, natural disasters, industrial incidents, changes in governmental regulations and trade agreements, or financial or operational instability of suppliers that could cause a disruption in the supply of critical components to us and our customers.
We are also subject to examinations of these income tax returns by the relevant tax authorities. Any negative or unexpected outcomes of these examinations and audits, or any resulting litigation, could have a material adverse impact on our results of operations and financial condition. 19 Our business is subject to costs associated with environmental, health and safety regulations.
We are also subject to examinations of these income tax returns by the relevant tax authorities. Any negative or unexpected outcomes of these examinations and audits, or any resulting litigation, could have a material adverse impact on our results of operations and financial condition.
As a result, we have experienced increased volatility in our sales and production schedules, including manufacturing downtime, often with little notice from customers, and increased inventory levels, which have negatively impacted our production efficiency and financial condition. In addition, we are also experiencing a significant shortage of hourly labor availability in certain regions in which we operate.
As a result, we have continued to experience volatility in our sales and production schedules, including manufacturing downtime, often with limited notice from customers and increased inventory levels, which have negatively impacted our production efficiency and financial condition. In addition, we continue to experience a significant shortage of qualified hourly labor availability in certain regions in which we operate.
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. Our company may not realize all of the revenue expected from our new and incremental business backlog.
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.
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. 14 Our business could be adversely affected if we, our customers, or our suppliers fail to maintain satisfactory labor relations.
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.
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.
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.
A failure to respond to the expectations and initiatives of our stakeholders or achieve the commitments we have made, could result in damage to our reputation and relationships with various stakeholders, as well as adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficultly obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, or difficulty attracting and retaining a skilled workforce. 18 Exchange rate fluctuations could adversely affect our company's global results of operations and financial condition.
We could also experience adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficultly obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, fines and penalties or difficulty attracting and retaining a skilled workforce. 18 Exchange rate fluctuations could adversely affect our company's global results of operations and financial condition.
A failure of our information technology (IT) networks and systems, or the impact of a cyber attack, 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 critical manufacturing and business processes or activities.
We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of critical manufacturing and business processes or activities.
Our success depends, in part, on the efforts of our executive officers and other key associates, such as engineers and global operational leadership.
Our success depends, in part, on the efforts of our executive officers and other key salaried and hourly associates, such as global operational leadership, engineers, information technology professionals and associates with experience in skilled trades.
For example, the automotive industry has experienced, and continues to experience, significant disruptions in the supply chain, including a shortage of semiconductor chips used by our customers, increased metal and commodity costs, global logistical constraints, and increased transportation costs.
For example, the automotive industry has experienced, and continues to experience, significant disruptions in the supply chain, including volatility in metal, commodity and utility costs, global logistical constraints and increased transportation costs.
There can be no assurance that future negotiations with labor unions, including those related to the collective bargaining agreements between our largest customers and the labor unions representing certain of their employees that expire in 2023, will be resolved favorably or that we, our customers or suppliers will not experience a work stoppage or disruption that could have a material adverse impact on our results of operations and financial condition.
There can be no assurance that future negotiations with labor unions will be resolved favorably or that we, our customers or suppliers will not experience a work stoppage or disruption that could have a material adverse impact on our results of operations and financial condition.
A significant portion of our hourly associates worldwide, as well as the workforces of our customers and suppliers, are members of industrial trade unions employed under the terms of collective bargaining agreements.
Our business could be adversely affected if we, our customers, or our suppliers fail to maintain satisfactory labor relations. A significant portion of our hourly associates worldwide, as well as the workforces of our customers and suppliers, are members of industrial trade unions employed under the terms of collective bargaining agreements.
As an example, in October 2021, the OECD announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the Framework) which agreed to a two-pillar solution to address tax challenges arising from digitalization of the global economy.
The Organisation for Economic Co-operation and Development (OECD) alongside the Group of Twenty (G-20), announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the Framework) which agreed to a two-pillar solution to address tax challenges arising from digitalization of the global economy.
This labor shortage has contributed to production volatility and inefficiencies in the manufacturing process, as well as increased labor costs. If we cannot secure sufficient hourly labor resources, we may be unable to protect continuity of supply and meet customer demand, which could have a material adverse effect on our results of operations and financial condition.
If we cannot secure sufficient hourly labor resources, we may be unable to protect continuity of supply and meet customer demand, which could have a material adverse effect on our results of operations and financial condition. Our business could be adversely affected by volatility in the price or availability of raw materials, utilities, natural resources and transportation.
We have made public commitments to reduce emissions, conserve resources at our various facilities and further develop a diverse, equitable and inclusive culture.
We have made public commitments to reduce emissions, conserve resources at our various facilities and further develop a diverse, equitable and inclusive culture. A failure to respond to the expectations and initiatives of our stakeholders or achieve the commitments we have made, could result in damage to our reputation and relationships with various stakeholders.
In the future, we may be required to incur significant costs to protect against or repair damage caused by these disruptions or security breaches, or as a result of implementing business continuity processes in response to disruptions or security breaches. 13 Our company, our suppliers or our customers and their suppliers may not be able to successfully and efficiently manage the timing and costs of new product program launches.
In the future, we may be required to incur significant costs to protect against or repair damage caused by these disruptions or security breaches, or as a result of implementing business continuity processes in response to disruptions or security breaches. See Item 1C. Cybersecurity for additional detail regarding our cybersecurity risk management, strategy and governance.
The occurrence of any of these events could compromise our networks, and the information stored there could be accessed, publicly disclosed or lost.
In addition, we are exposed to similar risks resulting from cyber attacks experienced by our customers, suppliers and third-party service providers. The occurrence of any of these events could compromise our networks, or the networks of our suppliers and third-party service providers, and the information stored there could be accessed, publicly disclosed or lost.
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Our business could be adversely affected by volatility in the price or availability of raw materials, utilities, natural resources and transportation.
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This labor shortage has contributed to production volatility and inefficiencies in the manufacturing process, as well as increased labor costs, resulting in lower gross margins at certain of our manufacturing facilities.
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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.
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Our business could be adversely affected by risks inherent in transitioning our business from internal combustion engine vehicle products to electric vehicle products. As the electrification of vehicles continues to expand, we have increased our product portfolio of electric vehicle systems and components.
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Some further guidance on the plan and the related rules has been published, with additional guidance expected to be published in 2023. We will continue to monitor the implementation of the Framework by the countries in which we operate.
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There are significant risks inherent in the industry shift to electric vehicles and expansion of vehicle electrification, as well as the resulting change in our product mix toward systems and components that will support this shift.
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These risks include significant capital investment, often with long lead times prior to start of production for these programs, accelerated product development cycles, and material and labor requirements and sources which differ from our internal combustion engine vehicle business.
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In addition, barriers to the adoption of electric vehicles by end-users, such as safety concerns, infrastructure limitations, and cost, create difficulty for our customers to predict the rate at which consumers will accept electric vehicles.
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This creates significant uncertainty in estimating production volumes and associated profitability for electric vehicle programs and relating to the timing of start of production for these programs.
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This uncertainty could result in AAM’s actual revenues differing materially from those previously estimated and included in our new and incremental business backlog or could result in a change in the timing of recognizing revenues as production start dates are subject to change.
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Alternatively, if consumer acceptance of electric vehicles occurs more rapidly than predicted, the demand for our internal combustion engine vehicle products could be reduced, potentially limiting the amount we would be able to invest in developing new technologies and enhancing our electric vehicle product portfolio.
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Our revenue, operating results and financial condition could be adversely impacted if we fail to effectively manage any of these risks. 12 A failure of our information technology (IT) networks and systems, or the impact of a cyber attack, could adversely impact our business and operations.
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Our company, our suppliers or our customers and their suppliers 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.
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Our company may not realize all of the revenue expected, or we may experience delays in realizing the expected revenue, from our new and incremental business backlog.
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In the third quarter of 2023, the collective bargaining agreements between the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and our three largest customers expired and the UAW initiated work stoppages at certain of the manufacturing locations of these customers, which continued into the fourth quarter.
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New labor agreements between the UAW and our three largest customers were ratified in November 2023 and resulted in compensation increases for the UAW associates.
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The introduction of new laws or regulations, or changes in existing laws or regulations, or the interpretation thereof, could increase the costs of doing business for us, our customers or suppliers and adversely affect our results of operations and financial condition.
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See Note 9 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending litigation. 19 Our business is subject to costs associated with environmental, health and safety regulations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The table below summarizes our global manufacturing locations and administrative, engineering or technical locations: Manufacturing Corporate, Business Offices, Engineering and Technical Centers Country Driveline Metal Forming Brazil 1 4 — China 4 1 2 Czech Republic — 3 — England 1 — — France 2 — — Germany 1 6 1 India 3 — 2 Japan — — 1 Luxembourg — — 1 Mexico 8 (a) 5 — Poland 1 — — Romania — 1 — Scotland 1 — — South Korea 1 — — Spain 1 1 — Sweden — — 1 Thailand 1 — — United States of America 3 23 5 Total 28 44 13 (a) The eight Driveline locations in Mexico include our Guanajuato Manufacturing Complex, which is comprised of six plants.
Biggest changeProperties The table below summarizes our global manufacturing locations and administrative, engineering or technical locations: Manufacturing Corporate, Business Offices, Engineering and Technical Centers Country Driveline Metal Forming Brazil 1 4 — China 4 1 2 Czech Republic — 3 — England 1 — — France 2 — — Germany 1 5 1 India 3 — 2 Japan — — 1 Luxembourg — — 1 Mexico 7 (a) 6 — Poland 1 — — Romania — 1 — Scotland 1 — — South Korea 1 — — Spain 1 1 — Sweden — — 1 Thailand 1 — — United States of America 2 21 5 Total 26 42 13 (a) The seven Driveline locations in Mexico include our Guanajuato Manufacturing Complex, which is comprised of six plants.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 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 162 stockholders of record as of February 14, 2023.
Biggest changeItem 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 151 stockholders of record as of February 13, 2024.
Dividends We did not declare or pay any cash dividends on our common stock in 2022. Our Amended and Restated Credit Agreement associated with our Senior Secured Credit Facilities limits our ability to declare or pay dividends or distributions on capital stock.
Dividends We did not declare or pay any cash dividends on our common stock in 2023. Our Amended and Restated Credit Agreement associated with our Senior Secured Credit Facilities limits our ability to declare or pay dividends or distributions on capital stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInterest income primarily includes interest earned on cash and cash equivalents, realized and unrealized gains and losses on our short-term investments during the period, and the deferred payment obligation associated with the sale of our former Casting segment, as well as the impact of the interest rate differential on our fixed-to-fixed cross-currency swap. 28 OTHER INCOME (EXPENSE) Following are the components of Other Income (Expense) for 2022 and 2021: Debt refinancing and redemption costs In March 2022, we entered into the Amended and Restated Credit Agreement (Amended and Restated Credit Agreement), which, among other things, increased the principal amount of the Term Loan A Facility (Term Loan A Facility) to $520.0 million, extended the maturity date of the Term Loan A Facility and the Revolving Credit Facility (Revolving Credit Facility) and established the use of updated reference rates.
Biggest changeINTEREST INCOME Interest income was $26.2 million in 2023 and $17.0 million in 2022. Interest income primarily includes interest earned on cash and cash equivalents, the deferred payment obligation associated with the sale of our former Casting segment, as well as the impact of the interest rate differential on our fixed-to-fixed cross-currency swap.
Senior Secured Credit Facilities Our Senior Secured Credit Facilities, which are comprised of our Revolving Credit Facility, our Term Loan A Facility, and our Term Loan B Facility, provide back-up liquidity for our foreign credit facilities.
Our Senior Secured Credit Facilities, which are comprised of our Revolving Credit Facility, our Term Loan A Facility, and our Term Loan B Facility, provide back-up liquidity for our foreign credit facilities.
The proceeds from the Refinancing Facility Agreement, together with $50.0 million cash on hand and the proceeds of a $25.0 million borrowing under the Revolving Credit Facility, were used to (a) prepay the entire principal amount of the then outstanding Term Loan B Facility, (b) pay all accrued and unpaid interest due under the Term Loan B Facility and (c) pay fees, costs and expenses payable in connection with the refinancing of the Term Loan B Facility.
The proceeds from the Refinancing Facility Agreement, together with $50.0 million cash on hand and the proceeds of a $25.0 million borrowing under the Revolving Credit Facility, were used to (a) prepay the entire principal amount of the then outstanding term loan B facility, (b) pay all accrued and unpaid interest due under the then outstanding term loan B facility and (c) pay fees, costs and expenses payable in connection with the refinancing of the Term Loan B Facility.
With population growth, increased government regulations to ease congestion and generational shifts in preferences, it is expected that the markets for ride-sharing services will continue to grow, which could cause a change in the type of vehicles utilized.
With population growth, increased government regulations to ease congestion and generational shifts in preferences, it is expected that the markets for autonomous vehicles and ride-sharing services will continue to grow, which could cause a change in the type of vehicles utilized.
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. 41 In performing goodwill impairment testing, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units.
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.
Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules below. 32 We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization.
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.
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 Ba1 Stable Dividend program We have not declared or paid any cash dividends on our common stock in 2022 or 2021.
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 Ba1 Stable Dividend program We have not declared or paid any cash dividends on our common stock in 2023 or 2022.
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in 2022, 2021 and 2020.
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in 2023, 2022 and 2021.
As a result, we expensed $0.2 million of debt refinancing costs, paid accrued interest of $1.0 million, and paid debt issuance costs of $4.5 million in 2022 related to the Amended and Restated Credit Agreement. 35 In December 2022, Holdings and AAM, Inc. entered into the Refinancing Facility Agreement, under the Amended and Restated Credit Agreement and established a new Term Loan B Facility of $675.0 million.
As a result, we expensed $0.2 million of debt refinancing costs, paid accrued interest of $1.0 million, and paid debt issuance costs of $4.5 million in 2022 related to the Amended and Restated Credit Agreement. 36 In December 2022, Holdings and AAM, Inc. entered into the Refinancing Facility Agreement, under the Amended and Restated Credit Agreement and established a new Term Loan B Facility of $675.0 million.
We continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and adjust our estimated liability as necessary. Other Income Tax Matters 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 continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and adjust our estimated liability as necessary. Other Income Tax Matters - Pending Tax Litigation We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination.
As vehicle electrification and electronic components become an increasingly larger focus for OEMs and suppliers, the industry has seen, and will likely continue to see, competition to develop and market new and alternative technologies, including from new market entrants such as non-traditional automotive companies and technology companies.
As vehicle electrification and electronic components become an increasingly larger focus for OEMs and suppliers, the industry has seen, and will likely continue to see, competition to develop and market new and alternative technologies and fuel types, including from new market entrants such as non-traditional automotive companies and technology companies.
Through our e-drive systems, e-beam axle technology, lightweight axles, high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology, refined vibration control systems and forged axle tubes, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass.
Through our e-drive systems, e-Beam axle technology, lightweight axles, high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology and refined vibration control systems, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass.
Under the goodwill guidance, we determined that each of our segments represents a reporting unit. The determination of our reporting units and impairment indicators also require us to make significant judgments. At December 31, 2022 all goodwill was associated with our Driveline reporting unit.
Under the goodwill guidance, we determined that each of our segments represents a reporting unit. The determination of our reporting units and impairment indicators also require us to make significant judgments. At December 31, 2023 all goodwill was associated with our Driveline reporting unit.
While we believe that we have selected reasonable assumptions for the valuation of our pension and OPEB obligations at year-end 2022, 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, 2022, our valuation date.
While we believe that we have selected reasonable assumptions for the valuation of our pension and OPEB obligations at year-end 2023, actual trends could result in materially different valuations. 41 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, 2023, our valuation date.
(Stellantis), Ford Motor Company (Ford) 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; • lower-than-anticipated market acceptance of new or existing products; • our ability to attract new customers and programs for new products; • reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford); • 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 the United States-Mexico-Canada Agreement (USMCA), immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations); • supply shortages, such as the semiconductor shortage that the automotive industry is currently experiencing and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise; • a significant disruption in operations at one or more of our key manufacturing facilities; • negative or unexpected tax consequences; • 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 attacks and other similar disruptions; • our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages; • cost or 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; • 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; • 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; • our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis; • risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage; • our ability to maintain satisfactory labor relations and avoid work stoppages; • our ability to consummate and successfully integrate acquisitions and joint ventures; • our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers; • our ability to realize the expected revenues from our new and incremental business backlog; • price volatility in, or reduced availability of, fuel; • our ability to protect our intellectual property and successfully defend against assertions made against us; • 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; • changes in liabilities arising from pension and other postretirement benefit obligations; • our ability to attract and retain qualified personnel in key positions and functions; and • other unanticipated events and conditions that may hinder our ability to compete.
(Stellantis), Ford Motor Company (Ford) 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; • lower-than-anticipated market acceptance of new or existing products; • our ability to attract new customers and programs for new products; • reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford); • 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 the United States-Mexico-Canada Agreement (USMCA), compliance with customs and trade regulations, immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations); • supply shortages and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise; • a significant disruption in operations at one or more of our key manufacturing facilities; • risks inherent in transitioning our business from internal combustion engine vehicle products to electric vehicle products; • negative or unexpected tax consequences, including those resulting from tax litigation; • risks related to a failure of our information technology systems and networks, including cloud-based applications, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attacks and other similar disruptions; • our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid or minimize work stoppages; • cost or 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; • 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; • 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; • our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis; • risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage; • our ability to maintain satisfactory labor relations and avoid work stoppages; • our ability to consummate and successfully integrate acquisitions and joint ventures; • our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers; • our ability to realize the expected revenues from our new and incremental business backlog; • price volatility in, or reduced availability of, fuel; • our ability to protect our intellectual property and successfully defend against assertions made against us; • 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; • changes in liabilities arising from pension and other postretirement benefit obligations; • our ability to attract and retain qualified personnel in key positions and functions; and • other unanticipated events and conditions that may hinder our ability to compete.
Net income and EPS were primarily impacted by the factors discussed above. 30 SEGMENT REPORTING Our business is organized into Driveline and Metal Forming segments, with each representing a reportable segment under Accounting Standards Codification (ASC) 280 - Segment Reporting .
Net income (loss) and EPS were primarily impacted by the factors discussed above. 31 SEGMENT REPORTING Our business is organized into Driveline and Metal Forming segments, with each representing a reportable segment under Accounting Standards Codification (ASC) 280 - Segment Reporting .
Some OEMs and suppliers may be preparing for these challenges through merger and acquisition (M&A) activity, development of strategic partnerships and reduction of vehicle platform complexity.
Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, development of strategic partnerships and reduction of vehicle platform complexity.
As a result, we expensed $0.2 million of debt refinancing costs related to the Amended and Restated Credit Agreement in 2022. See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement.
In March 2022, we entered into the Amended and Restated Credit Agreement (Amended and Restated Credit Agreement). As a result, we expensed $0.2 million of debt refinancing costs related to the Amended and Restated Credit Agreement in 2022. See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement.
While evolving expectations and reporting standards are driving increased ESG reporting, this trend aligns with our cultural values and commitment to profitably grow our business in a way that is sustainable and socially responsible.
While evolving expectations, expanding regulatory requirements and reporting standards are driving increased ESG reporting, this trend aligns with our cultural values and commitment to profitably grow our business in a way that is sustainable and socially responsible.
Accordingly, our quarterly results may reflect these trends. LEGAL PROCEEDINGS See Note 11 - Commitments and Contingencies in Item 8, "Financial Statements and Supplementary Data" for discussion of legal proceedings and the effect on AAM.
Accordingly, our quarterly results may reflect these trends. LEGAL PROCEEDINGS See Note 9 - Income Taxes and Note 11 - Commitments and Contingencies in Item 8, "Financial Statements and Supplementary Data" for discussion of legal proceedings and the effect on AAM.
In 2022, the weighted-average discount rates determined on that basis were 5.50% for the valuation of both our pension benefit obligations and the valuation of our OPEB obligations. The discount rates used in the valuations of our non-U.S. pension obligations were based on hypothetical yield curves developed from corporate bond yield information within each regional market.
In 2023, the weighted-average discount rates determined on that basis were 5.15% for the valuation of both our pension benefit obligations and the valuation of our OPEB obligations. The discount rates used in the valuations of our non-U.S. pension obligations were based on hypothetical yield curves developed from corporate bond yield information within each regional market.
Total 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, loss on the sale of a business, impairment charges, pension settlements, unrealized gains or losses on equity securities, and non-recurring items.
Total 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, loss on the sale of a business, unrealized gains or losses on equity securities, pension curtailment and settlement charges and non-recurring items.
On June 1, 2022, our acquisition of Tekfor became effective and we began consolidating the results of Tekfor on that date, which are reported in our Metal Forming segment for the year ended December 31, 2022.
On June 1, 2022, our acquisition of Tekfor became effective and we began consolidating the results of Tekfor on that date, which are reported in our Metal Forming segment for the years ended December 31, 2023 and December 31, 2022.
Expected Discount Return on Rate Assets (in millions) Decline in funded status $ (26.3) N/A Increase in 2022 expense $ 0.1 $ 2.7 No changes in benefit levels or in the amortization of gains or losses have been assumed. For 2023, we assumed a weighted-average annual increase in the per-capita cost of covered health care benefits of 6.4% for OPEB.
Expected Discount Return on Rate Assets (in millions) Decline in funded status $ (23.1) N/A Increase in 2023 expense $ 0.3 $ 2.4 No changes in benefit levels or in the amortization of gains or losses have been assumed. For 2024, we assumed a weighted-average annual increase in the per-capita cost of covered health care benefits of 7.0% for OPEB.
We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 40% of our consolidated net sales in 2022, 37% in 2021, and 39% in 2020. We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives and the AWD Chrysler Pacifica.
We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 39% of our consolidated net sales in 2023, 40% in 2022, and 37% in 2021. We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives.
We expect our capital spending in 2023 to be 3.5% to 4% of sales, which includes support for our global program launches in 2023 and 2024 within our new and incremental business backlog, as well as program capacity increases and future launches of replacement programs.
We expect our capital spending in 2024 to be 4.0% to 4.5% of sales, which includes support for our global program launches in 2024 and 2025 within our new and incremental business backlog, as well as program capacity increases and future launches of replacement programs.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 11, 2022, which discussion is incorporated herein by reference.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 17, 2023, which discussion is incorporated herein by reference.
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, 2022, we have a valuation allowance of approximately $217.5 million related to net deferred tax assets in several foreign jurisdictions and U.S. federal, state and local jurisdictions.
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, 2023, we have a valuation allowance of approximately $267.1 million related to net deferred tax assets in several foreign jurisdictions and U.S. federal, state and local jurisdictions.
Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon: • any sale, exchange or transfer (by merger or otherwise) of the capital stock of such Subsidiary Guarantor, or the sale or disposition of all the assets of such Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in compliance with the applicable provisions of the indentures; • the exercise by the issuer of its legal defeasance option or covenant defeasance option or the discharge of the issuer’s obligations under the indentures in accordance with the terms of the indentures; or • the election of the issuer to affect such a release following the date that such guaranteed Notes have an investment grade rating from both Standard & Poor's Ratings Group, Inc, and Moody's Investors Service, Inc. 37 The following represents summarized financial information of Holdings, AAM Inc. and the Subsidiary Guarantors (collectively, the Combined Entities).
Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon: • any sale, exchange or transfer (by merger or otherwise) of the capital stock of such Subsidiary Guarantor, or the sale or disposition of all the assets of such Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in compliance with the applicable provisions of the indentures; • the exercise by the issuer of its legal defeasance option or covenant defeasance option or the discharge of the issuer’s obligations under the indentures in accordance with the terms of the indentures; or • the election of the issuer to affect such a release following the date that such guaranteed Notes have an investment grade rating from both Standard & Poor's Ratings Group, Inc, and Moody's Investors Service, Inc.
We believe that operating cash flow, available cash and cash equivalent balances and available committed borrowing capacity under our Senior Secured Credit Facilities and foreign credit facilities will be sufficient to meet these needs. OPERATING ACTIVITIES Net cash provided by operating activities was $448.9 million in 2022 as compared to $538.4 million in 2021.
We believe that operating cash flow, available cash and cash equivalent balances and available committed borrowing capacity under our Senior Secured Credit Facilities and foreign credit facilities will be sufficient to meet these needs. OPERATING ACTIVITIES Net cash provided by operating activities was $396.1 million in 2023 as compared to $448.9 million in 2022.
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, 2022, we estimated $138.2 million in future GM cost sharing.
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, 2023, we estimated $120.0 million in future GM cost sharing.
Also, as part of our continued focus on reducing GHG emissions, during 2022 we committed to reaching net-zero carbon emissions by 2040, and achieved the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative (SBTi).
Also, as part of our continued focus on reducing GHG emissions, we have committed to reaching net-zero carbon emissions by 2040, and have received the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative (SBTi).
The information has been prepared on a combined basis and excludes any investments of AAM Holdings, AAM Inc., or the Subsidiary Guarantors in non-guarantor subsidiaries. Intercompany transactions and amounts between Combined Entities have been eliminated.
The following represents summarized financial information of Holdings, AAM Inc. and the Subsidiary Guarantors (collectively, the Combined Entities). The information has been prepared on a combined basis and excludes any investments of AAM Holdings, AAM Inc., or the Subsidiary Guarantors in non-guarantor subsidiaries. Intercompany transactions and amounts between Combined Entities have been eliminated.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 18% of our consolidated net sales in 2022, and 19% in both 2021 and 2020.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 16% of our consolidated net sales in 2023, 18% in 2022 and 19% in 2021.
Treasury stock Treasury stock increased by $1.9 million in 2022 to $218.2 million as compared to $216.3 million at year-end 2021, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of stock-based compensation. 36 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.
Treasury stock Treasury stock increased by $14.7 million in 2023 to $232.9 million, as compared to $218.2 million at year-end 2022, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of stock-based compensation. 37 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.
As of December 31, 2022, in the event AAM is not successful in defending its position, the potential additional income tax expense, including estimated interest charges, related to tax years 2015 through 2022, is estimated to be in the range of approximately $285 million to $335 million.
As of December 31, 2023, in the event AAM is not successful in defending its position, the potential additional income tax expense, including estimated interest charges, related to tax years 2015 through 2023, is estimated to be in the range of approximately $300 million to $350 million.
A 1.0% increase in the assumed health care trend rate would have increased total service and interest cost in 2022 and the postretirement obligation, net of GM cost sharing, at December 31, 2022 by $0.8 million and $14.6 million, respectively.
A 1.0% increase in the assumed health care trend rate would have increased total service and interest cost in 2023 and the postretirement obligation, net of GM cost sharing, at December 31, 2023 by $0.8 million and $12.2 million, respectively.
We record interest and penalties on uncertain tax positions in income tax expense (benefit). As of December 31, 2022 and 2021, we had a liability for unrecognized income tax benefits and related interest and penalties of $40.5 million and $23.4 million, respectively.
We record interest and penalties on uncertain tax positions in income tax expense (benefit). As of December 31, 2023 and 2022, we had a liability for unrecognized income tax benefits and related interest and penalties of $38.1 million and $40.5 million, respectively.
As a result, we expensed $0.4 million of debt refinancing costs related to the Refinancing Facility Agreement. See Note 4 - Long-Term Debt for further detail on the Refinancing Facility Agreement. In 2022, prior to entering into the Refinancing Facility Agreement, we made voluntary prepayments totaling $100.0 million on our then outstanding term loan B facility.
See Note 4 - Long-Term Debt for further detail on the Refinancing Facility Agreement. In 2022, prior to entering into the Refinancing Facility Agreement, we made voluntary prepayments totaling $100.0 million on our then outstanding term loan B facility.
Gross profit and gross margin were impacted by the factors discussed in Net sales and Cost of goods sold above. 27 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) Year Ended December 31, (in millions) 2022 2021 Change Percent Change Selling, general and administrative expenses $ 345.1 $ 344.2 $ 0.9 0.3 % SG&A as a percentage of net sales was 5.9% in 2022 as compared to 6.7% in 2021.
Gross profit and gross margin were impacted by the factors discussed in Net sales and Cost of goods sold above. 28 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) Year Ended December 31, (in millions) 2023 2022 Change Percent Change Selling, general and administrative expenses $ 366.9 $ 345.1 $ 21.8 6.3 % SG&A as a percentage of net sales was 6.0% in 2023 as compared to 5.9% in 2022.
The SBTi is a partnership between CDP (formerly known as the Climate Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that drives ambitious climate action in the private sector by enabling companies to set greenhouse gas emissions reduction targets that are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement. 24 AAM’s commitment to DEI begins with our Board of Directors (Board).
The SBTi is a partnership between CDP (formerly known as the Climate Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that drives ambitious climate action in the private sector by enabling companies to set greenhouse gas emissions reduction targets that are in line with what the latest climate science deems necessary to meet the goals of international agreements on climate change, such as the Paris Agreement.
The rate is assumed to decrease gradually to 5.0% by 2030 and remain at that level thereafter. A 0.5% decrease in the discount rate for our OPEB would have increased total expense in 2022 and the postretirement obligation, net of GM cost sharing, at December 31, 2022 by $0.2 million and $9.3 million, respectively.
The rate is assumed to decrease gradually to 5.0% by 2034 and remain at that level thereafter. A 0.5% decrease in the discount rate for our OPEB would have increased total expense in 2023 and the postretirement obligation, net of GM cost sharing, at December 31, 2023 by $0.4 million and $8.4 million, respectively.
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense for the year ended December 31, 2022 was $85.7 million as compared to $85.8 million for the year ended December 31, 2021. RESTRUCTURING AND ACQUISITION-RELATED COSTS Restructuring and acquisition-related costs were $30.2 million in 2022 and $49.4 million in 2021.
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense for the year ended December 31, 2023 was $85.6 million as compared to $85.7 million for the year ended December 31, 2022. RESTRUCTURING AND ACQUISITION-RELATED COSTS Restructuring and acquisition-related costs were $25.2 million in 2023 and $30.2 million in 2022.
Further, due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, including COVID-19, the semiconductor shortage and resulting impact on global automotive production volumes, and the conflict between Russia and Ukraine, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements. 39 Unrecognized Income Tax Benefits 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.
Further, due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, as well as the potential impact of geopolitical conflicts or events and macroeconomic factors, including sustained or increased inflation, we may experience lower than projected earnings in certain jurisdictions in future periods and, as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements. 40 Unrecognized Income Tax Benefits 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 also expensed approximately $1.8 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 $3.4 million for the payment of an early redemption premium.
This resulted in a principal payment of $220.0 million and $0.2 million in accrued interest. We also expensed approximately $1.8 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 $3.4 million for the payment of an early redemption premium.
As of December 31, 2022, our investment in REE shares was valued at $1.9 million resulting in an unrealized loss of $25.5 million for the year ended December 31, 2022. This compares to an unrealized gain of $24.4 million associated with our investment in REE shares for the year ended December 31, 2021.
As of December 31, 2023, our investment in REE shares was valued at $0.8 million resulting in an unrealized loss of $1.1 million for the year ended December 31, 2023. This compares to an unrealized loss of $25.5 million associated with our investment in REE shares for the year ended December 31, 2022.
Year Ended December 31, 2022 2021 2020 (in millions) Net income (loss) $ 64.3 $ 5.9 $ (561.1) Interest expense 174.5 195.2 212.3 Income tax expense (benefit) 2.0 (4.7) (49.2) Depreciation and amortization 492.1 544.3 521.9 EBITDA $ 732.9 $ 740.7 $ 123.9 Restructuring and acquisition-related costs 30.2 49.4 67.2 Debt refinancing and redemption costs 6.4 34.0 7.9 Loss on sale of business — 2.7 1.0 Impairment charges — — 510.0 Unrealized loss (gain) on equity securities 25.5 (24.4) — Pension settlements — 42.3 0.5 Non-recurring items: Malvern Fire charges (insurance recoveries), net (39.1) (11.4) 9.3 Gain on bargain purchase of business (13.6) — — Acquisition-related fair value inventory adjustment 5.0 — — Total Segment Adjusted EBITDA $ 747.3 $ 833.3 $ 719.8 33 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.
Year Ended December 31, 2023 2022 2021 (in millions) Net income (loss) $ (33.6) $ 64.3 $ 5.9 Interest expense 201.7 174.5 195.2 Income tax expense (benefit) 9.1 2.0 (4.7) Depreciation and amortization 487.2 492.1 544.3 EBITDA $ 664.4 $ 732.9 $ 740.7 Restructuring and acquisition-related costs 25.2 30.2 49.4 Debt refinancing and redemption costs 1.3 6.4 34.0 Loss on sale of business — — 2.7 Unrealized loss (gain) on equity securities 1.1 25.5 (24.4) Pension curtailment and settlement charges 1.3 — 42.3 Non-recurring items: Malvern Fire insurance recoveries, net of charges — (39.1) (11.4) Gain on bargain purchase of business — (13.6) — Acquisition-related fair value inventory adjustment — 5.0 — Total Segment Adjusted EBITDA $ 693.3 $ 747.3 $ 833.3 34 LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs are to fund debt service obligations, capital expenditures, R&D spending, including further development of our electrification product portfolio, and working capital requirements, in addition to advancing our strategic initiatives.
In 2021, we made voluntary prepayments totaling $21.2 million on our Term Loan A Facility and $238.8 million on our Term Loan B Facility. As a result, we expensed approximately $2.5 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.
Also in 2023, we made voluntary prepayments totaling $26.0 million on our Term Loan A Facility and $20.2 million on our Term Loan B Facility. As a result, we expensed approximately $1.1 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.
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 $1.8 million in 2022, as compared to expense of $3.2 million in 2021. 29 INCOME TAX EXPENSE (BENEFIT) Income tax expense was $2.0 million in 2022, as compared to an income tax benefit of $4.7 million in 2021.
Other income (expense), net We include 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 in Other income (expense), net, which was income of $8.1 million in 2023, as compared to expense of $1.8 million in 2022. 30 INCOME TAX EXPENSE Income tax expense was $9.1 million in 2023, as compared to $2.0 million in 2022.
As a result, we have experienced increased volatility in our production schedules, including manufacturing downtime, often with little notice from customers, higher inventory levels and increased labor costs, which have negatively impacted our results of operations and cash flows during this period.
As a result, we have continued to experience volatility in our production schedules, including manufacturing downtime, often with limited notice from customers, higher inventory levels and increased labor costs, which have negatively impacted our results of operations and cash flows during these periods.
The following factors impacted cash provided by operating activities: Impact of Supply Chain Constraints We experienced an adverse impact on cash flows from operating activities as a result of the significant supply chain constraints that continued to impact the automotive industry during the year ended December 31, 2022, including increased metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages.
The following factors impacted cash provided by operating activities: Impact of Supply Chain Constraints In both 2023 and 2022, we experienced an adverse impact on cash flows from operating activities as a result of the significant supply chain constraints that continued to impact the automotive industry, including volatility in metal, commodity and utility costs, shortages of certain raw materials and components, increased transportation costs, higher labor costs and labor shortages.
Statement of Operations Information (in millions) Year Ended December 31, 2022 Year Ended December 31, 2021 Net sales $ 4,429.5 $ 3,983.0 Gross profit 445.2 410.8 Income (loss) from operations 25.1 (27.4) Net loss (59.7) (158.6) Balance Sheet Information (in millions) December 31, 2022 December 31, 2021 Current assets $ 1,061.9 $ 1,034.6 Noncurrent assets 2,317.9 2,524.2 Current liabilities 1,360.4 1,183.7 Noncurrent liabilities 3,345.3 3,791.1 Redeemable preferred stock — — Noncontrolling interest — — At December 31, 2022 and December 31, 2021, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $945 million and $800 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $620 million and $655 million, respectively. 38 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.
Statement of Operations Information (in millions) Year Ended December 31, 2023 Year Ended December 31, 2022 Net sales $ 4,376.7 $ 4,429.5 Gross profit 339.2 445.2 Income (loss) from operations (91.4) 25.1 Net loss (182.4) (59.7) Balance Sheet Information (in millions) December 31, 2023 December 31, 2022 Current assets $ 1,009.2 $ 1,061.9 Noncurrent assets 2,723.4 2,317.9 Current liabilities 1,512.2 1,360.4 Noncurrent liabilities 3,252.2 3,345.3 Redeemable preferred stock — — Noncontrolling interest — — At December 31, 2023 and December 31, 2022, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $1,090 million and $945 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $580 million and $620 million, respectively. 39 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.
SHIFT IN CONSUMER PREFERENCE AND OEM PRODUCTION TO LIGHT TRUCK, CROSS-OVER VEHICLES (CUVs) AND SPORT-UTILITY VEHICLES (SUVs) There has been a trend toward increased demand for light trucks, CUVs and SUVs in certain markets, while demand for passenger cars has decreased.
CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, CROSS-OVER VEHICLES (CUVs) AND SPORT-UTILITY VEHICLES (SUVs) There continues to be increased demand for light trucks, CUVs and SUVs in certain markets, while demand for passenger cars has decreased.
As part of our restructuring actions, we incurred severance charges of approximately $3.5 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $18.2 million during 2022.
As part of our restructuring actions, we incurred severance charges of approximately $7.2 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $11.1 million during 2023.
Accounts receivable For the year ended December 31, 2022, we experienced a decrease in cash flow from operating activities of $62 million related to the change in our accounts receivable balance from December 31, 2021 to December 31, 2022, as compared to the change in our accounts receivable balance from December 31, 2020 to December 31, 2021.
Accounts receivable For the year ended December 31, 2023, we experienced an increase in cash flow from operating activities of approximately $46 million related to the change in our accounts receivable balance from December 31, 2022 to December 31, 2023, as compared to the change in our accounts receivable balance from December 31, 2021 to December 31, 2022.
Due to the ongoing uncertainty associated with the impact of the COVID-19 pandemic, the conflict between Russia and Ukraine and other factors causing, or exacerbating, these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown. INDUSTRY TRENDS There are a number of significant trends affecting the markets in which we compete.
Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown. 24 INDUSTRY TRENDS There are a number of significant trends affecting the markets in which we compete.
The changes in operating income and operating margin in 2022, as compared to 2021, were due to the factors discussed in Net sales, Cost of goods sold, SG&A and Restructuring and acquisition-related costs above. INTEREST EXPENSE Interest expense was $174.5 million in 2022 and $195.2 million in 2021.
Operating margin was 2.4% in 2023 as compared to 4.2% in 2022. The changes in operating income and operating margin in 2023, as compared to 2022, were primarily due to the factors discussed in Net sales, Cost of goods sold and SG&A above. INTEREST EXPENSE Interest expense was $201.7 million in 2023 and $174.5 million in 2022.
At December 31, 2022 we had over $1.4 billion of liquidity consisting of approximately $512 million of cash and cash equivalents, approximately $866 million of available borrowings under our Revolving Credit Facility and approximately $58 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2026.
At December 31, 2023 we had approximately $1.5 billion of liquidity consisting of approximately $520 million of cash and cash equivalents, approximately $892 million of available borrowings under our Revolving Credit Facility and approximately $85 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2026.
In 2021, we incurred severance charges of approximately $2.9 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $40.3 million. We expect to incur approximately $10 million to $20 million of total restructuring costs in 2023.
In 2022, we incurred severance charges of approximately $3.5 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $18.2 million. We expect to incur approximately $10 million to $20 million of total restructuring costs in 2024. We incurred integration charges of $6.9 million in 2023 as we furthered the integration of Tekfor.
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 $54.1 million as of December 31, 2022 and $59.5 million as of December 31, 2021.
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.
IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment.
See Note 3 - Goodwill and Other Intangible Assets for further detail regarding our goodwill. 42 IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment.
During 2022 and 2021, 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.
Our warranty accrual was $66.3 million as of December 31, 2023 and $54.1 million as of December 31, 2022. During 2023 and 2022, 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.
As of December 31, 2021 and 2020, our valuation allowance was $201.7 million and $208.0 million, respectively.
As of December 31, 2022 and 2021, our valuation allowance was $217.5 million and $201.7 million, respectively.
Our effective income tax rate was 3.0% in 2022 as compared to (391.7)% in 2021. For the year ended December 31, 2022, we recognized a net income tax benefit of $7.5 million related to the release of a valuation allowance in a foreign jurisdiction.
In the year ended December 31, 2022, we recognized a net income tax benefit of $7.5 million related to the release of a valuation allowance in a foreign jurisdiction.
This resulted in principal payments totaling $700.0 million and $19.4 million in accrued interest. We also expensed approximately $9.6 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $21.9 million for the payment of an early redemption premium.
This resulted in a principal payment of $50.0 million and $0.9 million in accrued interest. We also expensed approximately $0.2 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.
In addition to AAM's technology development relationships and organic growth in technology and processes, our joint venture partnerships and strategic acquisitions, including the Tekfor acquisition during 2022, have provided us with complementary technologies, expanded our product portfolio, diversified our global customer base, and strengthened our long-term financial profile through greater scale.
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. 26 In addition to AAM's technology development relationships and organic growth in technology and processes, our joint venture partnerships and strategic acquisitions, including the Tekfor acquisition during 2022, have provided us with complementary technologies, expanded our product portfolio, diversified our global customer base, and strengthened our long-term financial profile through greater scale.
The Board’s active oversight reflects the importance of our DEI journey to our business and demonstrates the power of accountability to this critical initiative. With oversight from our Board and direction from senior leadership, our DEI Steering Committee (DEI Committee) helps to ensure that our initiatives are guided by the experiences and recommendations of our associates.
With oversight from our Board and direction from senior leadership, our DEI Steering Committee (DEI Committee) helps to ensure that our initiatives are guided by the experiences and recommendations of our associates.
Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, including COVID-19, the semiconductor shortage and resulting impact on global automotive production volumes, and the conflict between Russia and Ukraine, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements.
Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, as well as the potential impact of geopolitical conflicts or events and macroeconomic factors, including sustained or increased inflation, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements.
The ability to respond timely to 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. 23 INCREASED INVESTMENT IN VEHICLE ELECTRIFICATION AND DEMAND FOR EMISSIONS REDUCTIONS The electrification of vehicles continues to expand, driven by a shift in focus by certain OEMs toward battery and hybrid electric vehicles, government regulations related to emissions, such as the Corporate Average Fuel Economy standards, and consumer demand for greater vehicle performance, enhanced functionality, increased electronic content and vehicle connectivity, reduced environmental impact and affordable convenience options.
INDUSTRY SHIFT TO VEHICLE ELECTRIFICATION AND INCREASED DEMAND FOR EMISSIONS REDUCTIONS The electrification of vehicles continues to expand, driven by a shift in focus by certain OEMs toward battery and hybrid electric vehicles, government regulations related to emissions, such as the Corporate Average Fuel Economy standards, and consumer demand for greater vehicle performance, enhanced functionality, increased electronic content and vehicle connectivity, reduced environmental impact and affordable convenience options.
See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement.
In March 2022, Holdings and AAM, Inc. entered into the Amended and Restated Credit Agreement. See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement.
We have responded to this trend by implementing and launching programs and initiatives addressing each topic under ESG, such as E 4 (E-to-the-fourth), AAM’s energy and environmental sustainability program to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water use while minimizing waste and lessening the environmental impact of our production operations.
The ability of OEMs and suppliers to continually communicate and meet expectations on ESG programs and initiatives, and comply with expanding regulatory requirements, will impact their competitive advantage to attract and retain business, as well as a skilled workforce. 25 We have responded to this trend by implementing and launching programs and initiatives addressing each topic under ESG, such as E 4 (E-to-the-fourth), AAM’s energy and environmental sustainability program to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water use while minimizing waste and lessening the environmental impact of our production operations.
NET INCOME AND EARNINGS PER SHARE (EPS) Net income was $64.3 million in 2022 as compared to $5.9 million in 2021. Diluted earnings per share was $0.53 in 2022 as compared to $0.05 per share in 2021.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE (EPS) Net loss was $33.6 million in 2023 as compared to net income of $64.3 million in 2022. Diluted loss per share was $0.29 in 2023 as compared to diluted income per share of $0.53 in 2022.
Gain on bargain purchase of business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase of $13.6 million. See Note 16 - Acquisitions and Dispositions for additional detail on this acquisition. Unrealized gain (loss) on equity securities We have an investment in the equity securities of REE Automotive, an e-mobility company.
Gain on bargain purchase of business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase of $13.6 million for the year ended December 31, 2022. See Note 16 - Acquisitions and Dispositions for additional detail on this acquisition.
(units in millions, except percentages) 2023 Outlook % change 2022 % change 2021 North America 15.1 5.6 % 14.3 10.0 % 13.0 Source: IHS Markit January 2023 Production volumes in North America increased in 2022 as compared to 2021, as the impact of the semiconductor shortage and other supply chain constraints lessened in 2022 as compared to 2021.
(units in millions, except percentages) 2024 Outlook % change 2023 % change 2022 North America 15.8 1.3 % 15.6 9.1 % 14.3 Source: S&P Global Mobility, January 2024 Production volumes in North America increased in 2023, as compared to 2022, as the impact of supply chain constraints lessened.
Supply Chain Constraints Impacting the Automotive Industry During 2022, the automotive industry has experienced, and continues to experience, significant disruptions in the supply chain, including a shortage of semiconductor chips used by our customers, increased metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages.
Supply Chain Constraints Impacting the Automotive Industry The automotive industry continues to experience significant disruptions in the supply chain, including volatility in metal, commodity and utility costs, increased transportation costs, higher labor costs and labor shortages.
The synergies achieved, or expected to be achieved through our strategic initiatives, enhance AAM's ability to compete in today's technological and regulatory environment, while remaining cost competitive through increased scale and integration. 25 EVOLUTION OF THE AUTOMOTIVE INDUSTRY AS DEMAND FOR AUTONOMOUS VEHICLES AND RIDE-SHARING INCREASES A developing trend is the expectation that autonomous, self-driving cars are expected to become more common with continued advancements in technology, including applications such as last mile delivery.
EVOLUTION OF THE AUTOMOTIVE INDUSTRY AS DEMAND FOR AUTONOMOUS VEHICLES AND RIDE-SHARING INCREASES A developing trend is the expectation that autonomous, self-driving cars are expected to become more common with continued advancements in technology, including applications such as last mile delivery.
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.
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 January 2023, we paid $10.1 million as a result of the Notice of Tax Due that was received from the Internal Revenue Service in December 2022. See Note 9 - Income Taxes for additional detail regarding the Notice of Tax Due.
Income taxes Income taxes paid, net was $54.9 million in 2023, as compared to $40.4 million in 2022. In 2023, we paid $10.1 million as a result of the Notice of Tax Due that was received from the Internal Revenue Service in the fourth quarter of 2022.
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.
The remainder of the change in Segment Adjusted EBITDA for the Metal Forming segment was attributable to increased manufacturing costs, primarily labor costs, as well as the impact of production inefficiencies at certain of our locations due, in part, to labor shortages. 33 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.
The expected weighted-average long-term rates of return on our plan assets were 6.75% for our U.S. plans, and 4.00% for our non-U.S. plans in 2022. 40 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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−1 removed4 unchanged
Biggest changeIn 2020, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. In the second quarter of 2022, we discontinued this fixed-to-fixed cross-currency swap, which was in an asset position of $9.7 million on the date that it was discontinued.
Biggest changeIn 2022, we discontinued an existing fixed-to-fixed cross-currency swap, which was in an asset position of $9.7 million on the date that it was discontinued. Also in 2022, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans.
The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 15% of our weighted-average interest rate at December 31, 2022) on our long-term debt outstanding at December 31, 2022 would be approximately $7.5 million and was approximately $4.2 million at December 31, 2021, on an annualized basis. 45 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 14% of our weighted-average interest rate at December 31, 2023) on our long-term debt outstanding at December 31, 2023 would be approximately $4.4 million and was approximately $7.5 million at December 31, 2022, on an annualized basis. 45 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
The potential decrease in fair value of the fixed-to-fixed cross-currency swap, assuming a 10% adverse change in foreign currency exchange rates, would be approximately $21.4 million at December 31, 2022 and was approximately $22.7 million at December 31, 2021.
The potential decrease in fair value of the fixed-to-fixed cross-currency swap, assuming a 10% adverse change in foreign currency exchange rates, would be approximately $22.1 million at December 31, 2023 and was approximately $21.4 million at December 31, 2022.
The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $16.4 million at December 31, 2022 and was approximately $15.0 million at December 31, 2021.
The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $18.8 million at December 31, 2023 and was approximately $16.4 million at December 31, 2022.
The notional amount of the fixed-to-fixed cross currency swap is €200.0 million, which was equivalent to $213.9 million and $226.9 million at December 31, 2022 and December 31, 2021, respectively.
The notional amount of the fixed-to-fixed cross currency swap is €200.0 million, which was equivalent to $220.7 million and $213.9 million at December 31, 2023 and December 31, 2022, respectively.
At December 31, 2022 and December 31, 2021, we had currency forward contracts outstanding with a total notional amount of $179.9 million and $164.7 million, respectively.
At December 31, 2023 and December 31, 2022, we had currency forward contracts outstanding with a total notional amount of $206.9 million and $179.9 million, respectively.
In the second quarter of 2022, we discontinued this variable-to-fixed interest rate swap, which was in an asset position of $6.1 million on the date that it was discontinued.
From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2022, we discontinued an existing variable-to-fixed interest rate swap, which was in an asset position of $6.1 million on the date that it was discontinued.
Also in the second quarter of 2022, 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, 2022, we have $500.0 million notional amount hedged in relation to our variable-to-fixed interest rate swap into the third quarter of 2027.
In 2022, and in the first quarter of 2023, we entered into new variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt.
From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2019, 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 third quarter of 2023, we discontinued these variable-to-fixed interest rate swaps, which were in an asset position of $27.2 million on the date that they were discontinued. Also in the third quarter of 2023, we entered into new variable-to-fixed interest rate swaps to reduce the variability of cash flows associated with interest payments on our variable rate debt.
Removed
Also in the second quarter of 2022, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans.
Added
As of December 31, 2023, we have $700.0 million notional amount hedged in relation to our variable-to-fixed interest rate swap into the third quarter of 2027, $200.0 million of which continues into the fourth quarter of 2029.

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