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What changed in AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 2023 and 2024 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 2024 report.

+380 added−334 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-16)

Top changes in AMERICAN AXLE & MANUFACTURING HOLDINGS INC's 2024 10-K

380 paragraphs added · 334 removed · 255 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

53 edited+8 added−18 removed32 unchanged
Biggest changeMaintaining 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.
Biggest changeMaintaining 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 2024, five of our global facilities received the GM Supplier Quality Excellence Award for outstanding quality performance during the 2023 performance year. • AAM was also recognized in 2024 for quality by several other customers including the Paccar 10 PPM Quality Award at our Hausach, Germany facility, the Ashok Leyland Certificate of Appreciation for Consistent Quality Performance at our Chennai, India facility and Pune, India facility, the Chery Excellent Supplier Award at our Changshu, China facility and the Jaguar Land Rover Quality Award at our Eisenach, Germany facility. • For the 2024 performance year, AAM was recognized by Ford with the Q1 Quality Award at our Bluffton, Indiana facility and our Pyeongtaek, South Korea facility. 3 Achieving technology leadership by delivering innovative products that enhance our product portfolio while increasing our total global served market.
He has more than 30 years of experience in private law practice and in-house executive and legal positions at both public and private companies, including 20 years of experience in the automotive industry. Mr. Paroly holds a juris doctor degree. Internet Website Access to Reports The website for American Axle & Manufacturing Holdings, Inc. is www.aam.com.
He has more than 30 years of experience in private law practice and in-house executive and legal positions at both public and private companies, including over 20 years of experience in the automotive industry. Mr. Paroly holds a juris doctor degree. Internet Website Access to Reports The website for American Axle & Manufacturing Holdings, Inc. is www.aam.com.
Our AAM360 program assists management in developing and implementing standards for recruitment and selection of a knowledgeable and diverse workforce, promoting learning and growth and driving effective performance while fostering an environment of open communication with AAM leadership in a variety of formats, including townhall-style meetings.
Our AAM360 program also assists management in developing and implementing standards for recruitment and selection of a knowledgeable and diverse workforce, promoting learning and growth and driving effective performance while fostering an environment of open communication with AAM leadership in a variety of formats, including townhall-style meetings.
Industry Trends See Item 7, “Management's Discussion and Analysis - Industry Trends.” Productive Materials We believe that we have adequate sources of supply of productive materials and components for our manufacturing needs, including steel, aluminum and other metallic materials, and resources used for vehicle electrification and electronic integration.
Industry Trends See Item 7, “Management's Discussion and Analysis - Industry Trends.” 5 Productive Materials We believe that we have adequate sources of supply of productive materials and components for our manufacturing needs, including steel, aluminum and other metallic materials, and resources used for vehicle electrification and electronic integration.
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.
Oal held various leadership positions in engineering, sales, purchasing, and finance at Siemens VDO Automotive/Continental. Matthew K. Paroly, age 59, 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.
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.
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 2024, 2023 or 2022 that we believe had, or could have, a material adverse impact on our results of operations, financial condition and cash flows.
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.
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 53, has been President - Driveline, since December 2022 when he rejoined AAM after serving as Co-Chief Executive Officer of Howmet Aerospace until October 2021.
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.
Paroly 59 Vice President & General Counsel David C. Dauch , age 60, 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.
AAM is committed to listening, learning and taking action that will move our company and our communities forward, together. Embracing diversity promotes innovation and helps AAM to attract and retain the best talent everywhere we do business. AAM’s commitment to Diversity, Equity and Inclusion (DEI) begins with our Board of Directors (Board).
AAM is committed to listening, learning and taking action that will move our company and our communities forward, together. Embracing diversity promotes innovation and helps AAM to attract and retain the best talent everywhere we do business. AAM’s commitment to inclusion begins with our Board of Directors (Board).
We also have validation and testing capabilities that enable us to strategically qualify steel sources on a global basis. As we continue to expand our global manufacturing footprint, we may need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements.
We also have validation and testing capabilities that enable us to strategically qualify steel sources on a global basis. If 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.
Patents and Trademarks We maintain and have pending various United States (U.S.) and foreign patents, trademarks and other rights to intellectual property relating to our business, which we believe are appropriate to protect our interest in existing products, new inventions, manufacturing processes and product developments.
Patents and Trademarks We maintain and have pending various United States (U.S.) and non-U.S. patents, trademarks and other rights to intellectual property relating to our business, which we believe are appropriate to protect our interest in existing products, new inventions, manufacturing processes and product developments.
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.
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, sport utility vehicle programs and crossover vehicle 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.
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.
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 60, has been AAM's President & Chief Operating Officer since March 2023.
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 Rochester Hills Technical Center (RHTC) in Michigan 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.
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 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 13% of our consolidated net sales in 2024, and 12% in 2023 and 2022.
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.
Of the 14,000 hourly associates, approximately 73% are represented under collective bargaining agreements with various labor unions. Creating an Inclusive, Equitable and Diverse Culture At AAM, we believe diversity drives creativity. We believe an inclusive culture encourages, supports and celebrates the unique voices of our global workforce.
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 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 that are expected to bring the future of the automotive industry faster.
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 also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 42% of our consolidated net sales in 2024, 39% in 2023, and 40% in 2022. 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.
Typically, our business is moderately seasonal as our major OEM customers historically have an extended shutdown of operations (typically 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in the month of December. Our major OEM customers also occasionally have longer shutdowns of operations (up to 6 weeks) for program changeovers.
Typically, our business is also moderately seasonal as our major OEM customers historically have an extended shutdown of operations (normally 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in the month of December. Our major OEM customers also occasionally have longer shutdowns of operations for program changeovers.
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.
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 from renewable sources for our U.S. operations by the end of 2025 and globally by 2035.
Narrative Description of Business Company Overview As a leading global tier 1 automotive and mobility supplier, AAM designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit with over 80 facilities in 18 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
Narrative Description of Business Company Overview As a leading global tier 1 automotive and mobility supplier, AAM designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit, Michigan, with over 75 facilities in 16 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
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.
Lynch served at Stellar Engineering for nine years in various capacities. 9 Christopher J. May , age 55, has been Executive Vice President & Chief Financial Officer since January 2023.
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.
The automotive industry continues to experience 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.
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.
Executive Officers of AAM Name Age Position David C. Dauch 60 Chairman of the Board & Chief Executive Officer Terri M. Kemp 59 Senior Vice President - Human Resources & Sustainability Michael J. Lynch 60 President & Chief Operating Officer Christopher J. May 55 Executive Vice President & Chief Financial Officer Tolga I. Oal 53 President - Driveline Matthew K.
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.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales in 2024, 16% in 2023, and 18% in 2022.
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.
Presently, he serves on the boards of REV Group, Inc., Business Leaders for Michigan, the Detroit Regional CEO Council, the Detroit Economic Club, the Detroit Regional Chamber, the Detroit Regional Partnership, the Great Lakes Council Boy Scouts of America, the Boys & Girls Clubs of Southeast Michigan, the National Association of Manufacturers (NAM), the Stellantis Supplier Advisory Council, Amerisure Mutual Holdings, Inc. and the Amerisure Companies.
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.
The Board’s active oversight reflects the importance of an inclusive culture to our business and demonstrates the power of accountability to this critical area of focus. With oversight from our Board and direction from senior leadership, our DEI Steering Committee (DEI Committee) helps to ensure that our actions are guided by the experiences and recommendations of our associates.
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.
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 2024, we launched 11 programs across our business units for our customers including GM, Stellantis, Mercedes-AMG and Audi.
Bringing the Future Faster • AAM's investment in R&D has resulted in the development of advanced technology products designed to assist our customers in meeting the market demands for vehicle electrification; advanced and sophisticated electronic controls; lower emissions; enhanced power density; improved ride and handling performance; and enhanced reliability and durability. • AAM's electric drive technology is designed, engineered and manufactured to provide a diverse and scalable product portfolio of hybrid and electric driveline systems to our customers that range from low-cost value-oriented offerings to high-performance solutions.
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. • AAM's investment in R&D has resulted in the development of advanced technology products designed to assist our customers in meeting the market demands for vehicle electrification; advanced and sophisticated electronic controls; lower emissions; enhanced power density; improved ride and handling performance; and enhanced reliability and durability. 4 • AAM's electric drive technology is designed, engineered and manufactured to provide a diverse and scalable product portfolio of hybrid and electric driveline systems to our customers that range from low-cost value-oriented offerings to high-performance solutions.
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.
In 2024, our TRIR was 0.7 – a reduction of approximately 67% in recordable injuries since the S 4 program began in 2015. 8 Partnering with our Global Communities AAM believes that we have a responsibility to give back to the communities in which we live and work.
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.
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.
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.
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.
Environmental, Social and Governance Environmental Sustainability We are committed throughout our operations to the conservation and protection of our natural resources and the environment.
Such expenditures were not significant in 2024, 2023 and 2022. 6 Environmental, Social and Governance Environmental Sustainability We are committed throughout our operations to the conservation and protection of our natural resources and the environment.
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.
Another area of continued focus to foster a culture of inclusion and develop a more diverse workforce is the sponsorship of 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.
We maintain a comprehensive, interactive and personalized wellness program to make it easy for our associates and their families to live a healthier lifestyle and help achieve personal wellness goals. 8 S 4 (S-to-the-Fourth) Safety System At AAM, our first responsibility every day, in every facility, is the safety of our global associates.
Health and Wellness Programs At AAM, the health of our associates is very important to us. We maintain a comprehensive, interactive and personalized wellness program to make it easy for our associates and their families to live a healthier lifestyle and help achieve personal wellness goals.
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.
Our pending combination with Dowlais is a key step in achieving our goals of customer, product and geographic diversification. 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.
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.
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. See Note 13 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending tax litigation.
Diversification of Customer, Product and Geographic Sales Mix Another element of building value for our key stakeholders is the diversification of our business through the growth of new and existing customer relationships and expansion of our product portfolio. • In addition to maintaining and building upon our longstanding relationships with GM, Stellantis and Ford, we are focused on generating profitable growth with new and existing global customers.
Diversification of Customer, Product and Geographic Sales Mix Another element of building value for our key stakeholders is the diversification of our business through the growth of new and existing customer relationships and expansion of our product portfolio.
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.
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.
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.
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.
We use this system to focus on customer satisfaction, lean production and efficient cost management, which allows us to improve quality, eliminate waste, and reduce lead time and total costs globally.
We use this system to focus on customer satisfaction, lean production and efficient cost management, which allows us to improve quality, eliminate waste, and reduce lead time and total costs globally. • 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.
At AAM, we believe safety performance is a journey where each facility strives to achieve S 4 by moving from a reactive safety environment to an interdependent safety environment. We are focused on continuous improvement of the S 4 system and in our total recordable incident rate (TRIR) in every facility.
We are focused on continuous improvement of the S 4 system and in our total recordable incident rate (TRIR) in every facility. We continuously monitor our facilities' progress in the S 4 Safety System.
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.
We continue to monitor our progress on our Global DEI 2+1 Program, which focuses on two global topics of valuing differences and improving the representation of women in our global workforce. In addition, each AAM facility continues to focus on their selected (+1) topic based on their local initiatives to support our 2030 demographic goals around the world.
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.
We are subject to various federal, state, local and non-U.S. environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances.
AAM’s S 4 safety system is focused on developing, engaging, monitoring, and continuously educating our associates on standardized procedures that are the basis of our safety culture and safety policy. The primary goal of S 4 is to achieve compliance with all internal and external requirements and regulations while driving behavioral changes to maintain a safe and environmentally friendly workplace.
S 4 (S-to-the-Fourth) Safety System At AAM, our first responsibility every day, in every facility, is the safety of our global associates. AAM’s S 4 safety system is focused on developing, engaging, monitoring, and continuously educating our associates on standardized procedures that are the basis of our safety culture and safety policy.
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.
We are focused on securing and enhancing our core business of manufacturing products that support internal combustion engine (ICE) vehicle programs by delivering operational excellence and quality products to our customers, while growing our hybrid and electric vehicle business, as end-user acceptance of these vehicle types is expected to grow in the future. 2 Competitive Strengths We achieve our strategic objectives by emphasizing a commitment to: Sustaining our operational excellence and focus on cost management. • 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, among other elements, 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.
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.
In 2025, we expect to launch new and replacement programs for a variety of customers across our business units with Stellantis, Audi and Skywell, among others.
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.
In 2024, we continued to focus on supporting an inclusive culture though our five strategic pillars: 1) enhancing inclusion 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, as our focus moved from awareness of this area to inclusive actions to support organic growth across our organization.
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.
Terri M. Kemp, age 59, has been Senior Vice President - Human Resources & Sustainability since March 2023.
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.
Our e-drive technology is designed to be segment agnostic, enabling our products to support a variety of markets and vehicle types. • During 2024, AAM announced new business awards in the Chinese market to supply Xpeng DiDi with 3-in-1 electric drive units, and to supply e-Beam axles to Skywell which is expected to launch in 2025. • Also during 2024, AAM announced a new business award to supply components to a global OEM for its new modular platform that will support multiple propulsion systems, as well as new business awards to supply various electric vehicle components for multiple OEM customers, including electric drive gears for a European OEM.
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.
Veterans, Black Associate Network and Latin America Talent Inclusion Network. Our ARG events focus on company, culture, community and career, as well as various learning opportunities. 7 Attracting and Retaining Associates Our AAM360 program serves as the foundation for our recruitment and retention strategy.
Comprised of talented and diverse associates, the DEI Committee helps develop new company initiatives designed to advance a respectful and inclusive company culture and to reinforce the importance of inclusion at AAM.
Comprised of talented and diverse associates, the DEI Committee helps provide direction to advance a respectful and inclusive company culture. We have also established Regional DEI Steering Committees in Asia, Brazil and Mexico to provide additional support locally for these regions.
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.
These awards are expected to generate revenues from mid-decade to beyond 2030. • 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. We have developed advanced forging and machining process technologies to manufacture lightweight, highly precise and power-dense products.
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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.
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During 2024, our Metal Forming segment was awarded multiple internal combustion engine vehicle component programs by global OEMs. • We continue to evaluate our existing product portfolio for areas that are not core to our business in order to enhance AAM's ability to compete globally while remaining cost competitive.
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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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During 2024, we entered into a definitive agreement to sell our commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd.) for a sales price of $65 million, subject to certain customary adjustments at closing.
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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.
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The sale is expected to close in the first half of 2025, subject to customary closing conditions, including the receipt of regulatory approvals. Bringing the Future Faster • AAM's Advanced Technology Development Center (ATDC) at our Detroit campus, allows us to accelerate technological advancements.
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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.
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In addition to maintaining and building upon our long-standing relationships with GM, Stellantis and Ford, we are focused on generating profitable growth with new and existing global customers. Recent new business awards and program launches include customers such as Xpeng DiDi, Dongfeng and Skywell.
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These awards are expected to generate revenues from mid-decade to beyond 2030.
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On January 29, 2025, we announced that we had reached an agreement with the Board of Directors of Dowlais Group plc (Dowlais) on the terms of a recommended cash and share offer to be made by AAM to acquire the entire issued and to be issued ordinary share capital of Dowlais for approximately $1.44 billion in cash and AAM shares.
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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.
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We file U.S. federal, state and local income tax returns, as well as non-U.S. 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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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.
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A significant portion of our hourly associates worldwide are members of industrial trade unions employed under the terms of collective bargaining agreements. We partner with local union representatives to continue to improve upon our associate's safety conditions and personal development. Developing Associates We have established sustainable and adaptable talent management programs focused on the training and development of our associates.
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This award is expected to generate revenues in the latter part of the decade.
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The primary goal of S 4 is to achieve compliance with all internal and external requirements and regulations while driving behavioral changes to maintain a safe and environmentally friendly workplace. At AAM, we believe safety performance is a journey where each facility strives to achieve S 4 by moving from a reactive safety environment to an interdependent safety environment.
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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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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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These 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.
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Throughout 2023, we continued the integration of Tekfor into our business and operations.
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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.
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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.
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The automotive industry continues to experience significant disruptions in the supply chain, including labor shortages in a variety of positions and experience levels.
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Additionally, the industry has experienced work stoppages, such as the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) work stoppages at certain of the manufacturing facilities of our three largest customers in the third and fourth quarter of 2023.
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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.
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Health and Wellness Programs At AAM, the health of our associates is very important to us.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Regulations and Taxes Negative or unexpected tax consequences, as well as possible changes in foreign and domestic tax laws, could adversely affect our results of operations and financial condition.
Biggest changeSee “Risks Relating to the Pending Business Combination with Dowlais – Stockholders in the combined company will be exposed to additional currency exchange rate fluctuations as, following completion of the Business Combination, there will be an increased proportion of assets, liabilities and earnings denominated in foreign currencies” for further discussion of risks related to exchange rates in connection with the pending combination with Dowlais. 18 Risks Related to Regulations and Taxes Negative or unexpected tax consequences, as well as possible changes in U.S. and non-U.S. tax laws, could adversely affect our results of operations and financial condition.
There 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.
There can be no assurance that 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. 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.
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.
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.
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. 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. 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. 14 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. 14 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. Our company's ability to operate effectively could be impaired if we cannot attract and retain qualified personnel in key positions and functions.
Our results of operations or financial condition could be adversely affected if we initiate a divestiture and it is not completed in accordance with our expected timeline, or at all, or if we do not realize the expected benefits of the divestiture. We may be unable to consummate and successfully integrate acquisitions and joint ventures.
Our results of operations or financial condition could be adversely affected if we initiate a divestiture and it is not completed in accordance with our expected timeline, or at all, or if we do not realize the expected benefits of the divestiture. 19 We may be unable to consummate and successfully integrate acquisitions and joint ventures.
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.
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, including tariffs, or financial or operational instability of suppliers that could cause a disruption in the supply of critical components to us and our customers.
We may also experience volatility in the cost or availability of freight and logistics carriers as a result of supply chain constraints.
We may also experience volatility in the cost or availability of freight and logistics carriers as a result of supply chain constraints, or otherwise.
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.
The Organisation for Economic Co-operation and Development (OECD), alongside the Group of Twenty (G-20), established 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.
Accordingly, the launch of new product programs, or a shift in product mix from traditional ICE programs to hybrid and electric vehicle programs, may adversely affect production rates or other operational efficiency and profitability measures at our facilities.
Accordingly, the launch of new product programs, or a shift in product mix from traditional ICE programs to hybrid and electric vehicle programs, may adversely affect production rates, capacity utilization or other operational efficiency and profitability measures at our facilities.
We are also subject to currency translation risk as we are required to translate the financial statements of our foreign subsidiaries to U.S. dollars. We report the effect of translation for our foreign subsidiaries with a functional currency other than the U.S. dollar as a separate component of stockholders' equity.
We are also subject to currency translation risk as we are required to translate the financial statements of our non-U.S. subsidiaries to U.S. dollars. We report the effect of translation for our non-U.S. subsidiaries with a functional currency other than the U.S. dollar as a separate component of stockholders' equity.
Unfavorable changes in the exchange rate relationship between the U.S. dollar and the functional currencies of our foreign subsidiaries could have an adverse impact on our results of operations and financial condition.
Unfavorable changes in the exchange rate relationship between the U.S. dollar and the functional currencies of our non-U.S. subsidiaries could have an adverse impact on our results of operations and financial condition.
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.
A substantial portion of our revenue is derived from products supporting internal combustion engine light truck and SUV platforms and crossover vehicle platforms in North America, Europe and Asia.
In addition, the Senior Secured Credit Facilities are secured on a first priority basis by all or substantially all of the assets of AAM Inc., the assets of Holdings and each guarantor's assets, including a pledge of capital stock of our U.S. subsidiaries that hold domestic assets, including each guarantor, and a portion of the capital stock of the first tier foreign subsidiaries of AAM Inc. and MPG.
In addition, the Senior Secured Credit Facilities are secured on a first priority basis by all or substantially all of the assets of AAM, Inc., the assets of Holdings and each guarantor's assets, including a pledge of capital stock of our U.S. subsidiaries that hold domestic assets, including each guarantor, and a portion of the capital stock of the first tier non-U.S. subsidiaries.
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.
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 insourcing, vertical integration, global sourcing by OEMs and use of artificial intelligence and machine learning.
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.
In addition, barriers to the adoption of electric vehicles by end-users, such as safety concerns, infrastructure limitations, range and performance anxiety and cost, create difficulty for our customers to predict the rate at which consumers will accept electric vehicles.
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.
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, exchange rate fluctuations between the U.S. dollar and the Mexican peso, 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.
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.
See Note 13 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending litigation. Our business is subject to costs associated with environmental, health and safety regulations.
Sales and production levels of these vehicle platforms can be affected by many factors, including changes in consumer demand and preference; adverse economic conditions, such as recession or recessionary concerns; product mix shifts favoring other types of light vehicles, such as front-wheel drive based crossover vehicles and passenger cars; fuel prices; vehicle electrification; and government regulations.
Sales and production levels of these vehicle platforms can be affected by many factors, including changes in consumer demand and preference; adverse economic conditions, such as recession or recessionary concerns; product mix shifts favoring other types of light vehicles, such as passenger cars; fuel prices; vehicle electrification; and government regulations.
Our operations are subject to various federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials.
Our operations are subject to various federal, state, local and non-U.S. laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials.
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.
Additionally, in 2023, new labor agreements between the UAW and our three largest customers were ratified and resulted in significant compensation increases for the UAW associates.
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.
This creates significant uncertainty in estimating production volumes and associated profitability for electric vehicle programs and the timing of production for these programs.
Further, as the percentage of our backlog associated with electric vehicle programs increases, these risks could be exacerbated due to uncertainty related to electric vehicles, including end-user acceptance rates and the availability of critical electric vehicle infrastructure. It is also possible that our customers may delay or cancel a product program that has been awarded to us.
Further, as a portion of our backlog is associated with electric vehicles, these risks could be exacerbated due to uncertainty related to end-user acceptance rates and the availability of critical charging infrastructure. It is also possible that our customers may delay or cancel a product program that has been awarded to us.
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.
If we are unable to pass such cost increases on to our customers, or are otherwise unable to mitigate these cost increases through continued technology improvements, cost reductions or other productivity initiatives, 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.
Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of our foreign subsidiaries are reported in current period income.
Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of our non-U.S. subsidiaries are reported in current period income.
Reduced demand in the market segments we currently supply could have a material adverse impact on our results of operations and financial condition, or our ability to invest in the necessary research and development activities to grow our electrification business. Our business could be adversely affected by the cyclical nature of the automotive industry.
Reduced demand in the market segments we currently supply could have a material adverse impact on our results of operations and financial condition, or our ability to invest in the necessary research and development activities to continue developing new and innovative products. Our business could be adversely affected by the cyclical nature of the automotive industry.
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.
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 those used in internal combustion engine vehicle components.
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.
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, including increasingly sophisticated cyber attacks that incorporate the use of artificial intelligence, and other similar disruptions.
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.
Sales to Stellantis accounted for approximately 13% of our consolidated net sales in 2024, 16% in 2023, and 18% in 2022, and sales to Ford accounted for approximately 13% of our consolidated net sales in 2024, and 12% in 2023 and 2022.
If we are unable to maintain our competitive advantage through innovation, or if we do not sustain our ability to meet customer requirements relative to technology, there could be a material adverse effect on our results of operations and financial condition. Our business is dependent on certain global automotive market segments.
If we are unable to maintain our competitive advantage through innovation, or if we do not sustain our ability to meet customer requirements relative to technology, there could be a material adverse effect on our results of operations and financial condition.
The available capacity under our Revolving Credit Facility could be limited by our covenant ratios under certain conditions. An increase in the applicable leverage ratio, as a result of decreased earnings or otherwise, could result in reduced access to capital under our Revolving Credit Facility, which is a significant component of our total available liquidity.
An increase in the applicable leverage ratio, as a result of decreased earnings or otherwise, could result in reduced access to capital under our Revolving Credit Facility, which is a significant component of our total available liquidity.
Sales to GM were approximately 39% of our consolidated net sales in 2023, 40% in 2022, and 37% in 2021.
Sales to GM were approximately 42% of our consolidated net sales in 2024, 39% in 2023, and 40% in 2022.
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.
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 dates are subject to change. 15 Our business is dependent on certain global automotive market segments.
In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel, particularly engineers and other associates with critical expertise and skills that support key customers and products, including those supporting the expansion of our product portfolio into electrification.
In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel, particularly engineers and other associates with critical expertise and skills that support key customers and products.
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.
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.
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.
Certain of our customers are preparing to launch new product programs for which we will supply 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.
A default or acceleration under the Senior Secured Credit Facilities or the indentures governing the senior unsecured notes may result in defaults under our other debt agreements and may adversely affect our ability to operate our business, our subsidiaries' and guarantors' ability to operate their respective businesses and our results of operations and financial condition.
A default or acceleration under the Senior Secured Credit Facilities or the indentures governing the senior unsecured notes may result in defaults under our other debt agreements and may adversely affect our ability to operate our business, our subsidiaries' and guarantors' ability to operate their respective businesses and our results of operations and financial condition. 16 The available capacity under our Revolving Credit Facility could be limited by our covenant ratios under certain conditions.
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.
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. 13 Our business could be adversely affected if we, our customers, or our suppliers fail to maintain satisfactory labor relations.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks associated with transactions that are denominated in currencies other than our local functional currencies.
Exchange rate fluctuations could adversely affect our company's global results of operations and financial condition. As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks associated with transactions that are denominated in currencies other than our local functional currencies.
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.
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.
Failure to respond timely to these fluctuations, or failure to effectively hedge these risks when possible, could lead to a material adverse impact on our results of operations and financial condition.
Our business and financial results are affected by fluctuations in the global financial markets, including interest rates and currency exchange rates. Failure to respond timely to these fluctuations, or failure to effectively hedge these risks when possible, could lead to a material adverse impact on our results of operations and financial condition.
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.
Our business could be adversely affected by global industry uncertainty associated with transitioning from internal combustion engine vehicle products to electric vehicle products. There are significant risks inherent in the industry shift to electric vehicles and expansion of vehicle electrification, as well as the resulting change in product mix toward systems and components that will support this shift.
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.
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, increased cost of complying with new and expanding regulatory requirements, such as the Corporate Sustainability Reporting Directive (CSRD), or difficulty attracting and retaining a skilled workforce.
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.
Additionally, 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. We file income tax returns in the U.S. federal jurisdiction, as well as various states and non-U.S. jurisdictions.
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.
A significant portion of our hourly associates worldwide, as well as the workforces of our customers and suppliers, are, or may become, members of industrial trade unions employed under the terms of collective bargaining agreements.
Our business could be adversely impacted by global climate change or an inability to meet the expectations of our stakeholders related to environmental, social and governance (ESG) objectives.
Our future success will depend, in part, on our ability to anticipate and effectively manage these and other risks. 17 Our business could be adversely impacted by global climate change or an inability to meet the expectations of our stakeholders related to environmental, social and governance (ESG) objectives.
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.
In addition, we may experience a shortage of qualified hourly labor availability in certain regions in which we operate, contributing 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.
Our business may be adversely affected by an economic decline or fiscal crisis, including prolonged recessionary periods, that result in a reduction of automotive production and sales by our customers. 16 Risks Related to Liquidity, Indebtedness and the Capital Markets We have incurred substantial indebtedness and our financial condition and operations may be adversely affected by a violation of financial and other covenants.
Our business may be adversely affected by an economic decline or fiscal crisis, including prolonged recessionary periods, that result in a reduction of automotive production and sales by our customers.
Our competitors include the in-house operations of many vertically integrated OEMs, as well as many other domestic and foreign companies possessing the capability to produce some or all of the products we supply.
Our competitors include the in-house operations of many vertically integrated OEMs, as well as many other global companies possessing the capability to produce some or all of the products we supply. In addition to traditional competitors in the automotive sector, the growth of advanced electronic integration and electrification has increased the level of new market entrants, including technology companies.
Changes to these and other areas of domestic or international tax reform, including future actions taken by governmental authorities, could increase uncertainty and may adversely affect our tax rate, results of operations and cash flows in future years. We file income tax returns in the U.S. federal jurisdiction, as well as various states and foreign jurisdictions.
Future legislative actions taken by governmental authorities resulting in domestic or international tax reform could increase uncertainty and may adversely affect our tax rate, results of operations and cash flows in future years.
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.
Cybersecurity for additional detail regarding our cybersecurity risk management, strategy and governance. 12 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.
As U.S. companies continue to expand globally, increased complexity exists due to recent changes to corporate tax codes, potential revisions to international tax law treaties and renegotiated trade agreements, including the United States-Mexico-Canada trade agreement.
Increased complexity exists for global companies due to proposed changes to corporate tax codes, potential revisions to international tax law treaties and renegotiated trade agreements, including the United States-Mexico-Canada trade agreement. 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 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.
As a result, we may experience volatility in our sales and production schedules, including manufacturing downtime and increased inventory levels, which could negatively impact our production efficiency and financial condition.
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.
Under OECD Pillar Two, the Framework provides for a global minimum corporate tax rate of 15%, calculated on a country-by-country basis. Countries may implement the OECD Pillar Two model rules as issued, in a modified form or not at all. Many countries have passed legislation enacting certain parts of the Framework effective in 2024.
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.
The occurrence of any of these events individually or in combination could have a material adverse effect on our business, results of operations and financial condition. The Business Combination will result in significant integration costs and we may not be able to integrate Dowlais into the combined company successfully.
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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.
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In addition, if production levels for new product programs are lower than expected, due to end-user acceptance of the products or otherwise, we may not recover the capital investment required to launch such new product programs, which may be significant.
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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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Risks Related to Liquidity, Indebtedness and the Capital Markets We have incurred substantial indebtedness and our financial condition and operations may be adversely affected by a violation of financial and other covenants.
Removed
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.
Added
See “Risks Relating to the Pending Business Combination with Dowlais – We will incur a substantial amount of debt to complete the acquisition of Dowlais” for further discussion of risks related to the expected incurrence of debt in connection with the pending combination with Dowlais. Our business could be adversely affected by fluctuations in the global capital markets.
Removed
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.
Added
As a result of the uncertainty, OECD Pillar Two could have a material impact on our effective tax rate and result in higher cash tax liabilities depending on which countries enact minimum tax legislation and in what manner.
Removed
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.
Added
Risks Related to the Pending Business Combination with Dowlais (Business Combination) The pending Business Combination with Dowlais may be delayed or not occur at all for a variety of reasons, including that the Business Combination is subject to various closing conditions, including governmental, regulatory and shareholder approvals, as well as other uncertainties, and there can be no assurances as to whether or when it may be completed.
Removed
In addition to traditional competitors in the automotive sector, the trend towards advanced electronic integration and electrification has increased the level of new market entrants, including technology companies.
Added
On January 29, 2025, the Company announced the pending Business Combination with Dowlais. In connection with the Business Combination, on January 29, 2025, the Company and Dowlais entered into a Co-operation Agreement. The consummation of the Business Combination is subject to the satisfaction or waiver of certain conditions.
Removed
Our business could be adversely affected by fluctuations in the global capital markets. Our business and financial results are affected by fluctuations in the global financial markets, including interest rates and currency exchange rates.
Added
A number of the conditions are not within our control, and it is possible that such conditions may prevent, delay or otherwise materially adversely affect the completion of the Business Combination.
Removed
Although the OECD does not enact tax law, proposals like this or others may lead to substantial changes in enacted tax laws and treaties in the various countries in which we do business and could have a material adverse impact on our results of operations and financial condition.
Added
These conditions include, among others: (i) the approval of the Court-sanctioned scheme of arrangement (the Scheme) between Dowlais and its shareholders under Part 26 of the Companies Act 2006 by a majority in number of Dowlais shareholders who are present and voting (either in person or by proxy) and who represent not less than 75% in value of the Dowlais shares voted by those Dowlais shareholders; (ii) the sanction of the Scheme by the High Court of Justice in England and Wales (the Court); (iii) the Scheme becoming unconditional and becoming effective, subject to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers (the Takeover Code), by no later than 11:59 p.m. on June 29, 2026 (or such later date (if any) as the Company and Dowlais may agree, with the consent of the UK Panel on Takeovers and Mergers (the Panel), and the Court may allow); (iv) the receipt of certain required antitrust and other regulatory approvals; (v) the amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock of the Company, par value $0.01 per share (the Company Common Stock) (the Charter Amendment), being duly approved by the affirmative vote of the holders of a majority in voting power of the Company Common Stock entitled to vote thereon at the Company stockholders meeting (the Company Special Meeting); (vi) the issuance of the Company Common Stock in connection with the Business Combination (the Share Issuance) being duly approved by the affirmative vote of the holders of a majority in voting power present in person or by proxy at the Company Special Meeting; and (vii) confirmation having been received by the Company that the Company Common Stock has been approved for listing, subject to official notice of issuance, on the New York Stock Exchange.
Removed
In addition, there have been changes to tax laws in the U.S., including the introduction of provisions such as the Global Intangible Low-Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII) provisions, that have increased the complexity of U.S. tax laws and have also increased volatility in our income tax expense and applicable tax rates.
Added
We cannot predict with certainty whether and when any of the remaining required conditions will be satisfied or if another uncertainty may arise.
Removed
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.
Added
Failure to complete the Business Combination within the expected timeframe or at all could adversely affect our business, results of operations, financial condition, and the market price of our common stock in a number of ways, including: • the market price of our shares may decline to the extent that the current market price reflects an assumption that the Business Combination will be consummated; • we have incurred, and will continue to incur, significant expenses for professional services in connection with the Business Combination for which we will have received little or no benefit if the Business Combination is not consummated; and • we may experience negative publicity and/or reactions from our investors, associates, customers, and other business partners. 20 We may fail to realize the anticipated benefits and operating synergies expected from the Business Combination.
Added
The success of the Business Combination will depend, in significant part, on our ability to successfully integrate the acquired business, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the Business Combination.
Added
We believe that the Business Combination will create a leading global driveline and metal forming supplier with a comprehensive product portfolio and a diversified customer base. We expect that the Business Combination will generate significant synergies, as set out in more detail in our announcement of the combination on January 29, 2025.
Added
Achieving these goals may require growth of the revenue of the combined company and realization of the targeted operating synergies expected from the Business Combination. This growth and the anticipated benefits of the transaction may not be realized fully, or at all, or may take longer to realize than we expect.
Added
Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, the AAM Information Security Council (ISC), comprised of leadership representatives from across the organization, meets periodically to discuss current threats and trends and the resulting information security initiatives and priorities. The ISC members provide support for policy changes and insights into how the information security team can most effectively educate, communicate, and support AAM.
Biggest changeThe ISC members provide support for policy changes and insights into how the information security team can most effectively educate, communicate, and support AAM. The ISC is led by AAM’s Chief Information Officer (CIO) and CISO, our frontline business leaders with regard to cybersecurity risk management.
Item 1C. Cybersecurity Cybersecurity Risk Management, Strategy and Governance We rely upon information technology (IT) 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.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We rely upon information technology (IT) 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.
Although no cybersecurity incidents during the year ended December 31, 2023 had a material impact on our strategy, financial condition or results of operations, the scope and impact of any future incident cannot be predicted. See Item 1A. Risk Factors for additional discussion regarding AAM’s IT and cybersecurity risks. 21
Although no cybersecurity incidents during the year ended December 31, 2024 had a material impact on our strategy, financial condition or results of operations, the scope and impact of any future incident cannot be predicted. See Item 1A. Risk Factors for additional discussion regarding AAM’s IT and cybersecurity risks. 26
Further, in support of our information security program, we utilize certain third-party service providers, primarily in the following capacities: 1) incident response partners that assist with performing incident simulations and who are available to assist in the event of an actual cybersecurity incident; 2) consultants to conduct penetration testing on AAM systems and certain third-party systems, as necessary; and 3) auditors to assist with testing IT controls and performing gap analysis over IT processes and procedures.
Further, in support of our ISMS, we utilize certain third-party service providers, primarily in the following capacities: 1) incident response partners that assist with performing incident simulations and who are available to assist in the event of an actual cybersecurity incident; 2) third-party experts to conduct penetration testing on AAM systems and certain third-party systems, as necessary; and 3) leveraging third-party expertise to assist with testing IT controls and performing gap analysis over IT processes and procedures.
We have developed and implemented robust processes for identifying, assessing and managing risks from cybersecurity threats. Cybersecurity risk is included in AAM’s “Top Risks Assessment” under our enterprise risk management program as identified and monitored by our Risk Management Working Group.
We have developed and implemented our Information Security Management System (ISMS), which includes robust processes for identifying, assessing and managing risks from cybersecurity threats. Cybersecurity risk is included in AAM’s “Top Risks Assessment” under our enterprise risk management program as identified and monitored by our Risk Management Working Group.
The ISC is led by AAM’s Chief Information Security Officer (CISO), our frontline business leader with regard to cybersecurity risk management. AAM’s CISO has been an IT professional in various capacities for over 25 years and maintains the following certifications: Certified CISO, Certified Information Systems Security Professional, Certified Cloud Security Professional, and Certified Information Privacy Technologist.
AAM’s CIO has been an IT professional in various capacities for over 25 years and maintains the following certifications: Certified CISO, Certified Information Systems Security Professional, Certified Cloud Security Professional, and Certified Information Privacy Technologist. Our Board of Directors and its committees play an active role in overseeing our key risks.
AAM’s CISO manages and monitors these third-party service provider relationships and works closely with AAM’s information security, procurement, legal and internal audit departments to ensure proper evaluation and security assessment of critical third-party service providers and data processors. Our Board of Directors and its committees play an active role in overseeing our key risks.
AAM’s Chief Information Security Officer (CISO) manages and monitors these third-party service provider relationships and works closely with AAM’s information security, procurement, legal and internal audit departments to ensure proper evaluation and security assessment of critical third-party service providers and data processors. 25 Cybersecurity Governance The AAM Information Security Council (ISC), comprised of leadership representatives from across the organization, meets periodically to discuss current threats and trends and the resulting information security initiatives and priorities.
Added
Our ISMS leverages comprehensive cybersecurity frameworks and standards such as the National Institute of Standards and Technology (NIST) Cybersecurity Framework, the Center for Internet Security (CIS) Critical Security Controls, the Trusted Information Security Assessment Exchange (TISAX) standard, and the International Organization for Standardization (ISO) 27001 standard for information security.
Added
Our ISMS is built upon a balance of people, processes and technologies comprised of, among other elements: 1) 24/7 security monitoring using internal and third-party resources; 2) security awareness and phishing testing; 3) periodic table-top and live-fire exercises; 4) high system availability and business continuity; and 5) comprehensive incident response and escalation plans.

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 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.
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 2 1 2 Czech Republic — 3 — France 2 — — Germany 1 4 1 India 3 — 2 Japan — — 1 Luxembourg — — 1 Mexico 8 (a) 6 — Poland 1 — — Romania — 1 — South Korea 1 — — Spain 1 1 — Thailand 1 — — United Kingdom 2 United States of America 3 21 5 Total 26 41 12 (a) The eight 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

2 edited+0 added−0 removed1 unchanged
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.
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 140 stockholders of record as of February 11, 2025.
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.
Dividends We did not declare or pay any cash dividends on our common stock in 2024. 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

130 edited+45 added−50 removed55 unchanged
Biggest changeIn connection with the Amended and Restated Credit Agreement, Holdings, AAM, Inc. and certain of their restricted subsidiaries are parties to a collateral agreement and guarantee agreement with the financial institutions party thereto.The Amended and Restated Credit Agreement includes customary covenants, including a total net leverage ratio covenant, a cash interest expense coverage ratio covenant, and certain covenants restricting the ability of Holdings, AAM, Inc. and certain subsidiaries of Holdings to create, incur, assume or permit to exist certain additional indebtedness and liens, to make investments and to make or agree to pay or make certain restricted payments, voluntary payments and distributions.
Biggest changeOn June 28, 2023, Holdings and AAM, Inc. entered into the First Amendment to the Amended and Restated Credit Agreement (the First Amendment), which, among other things, increased the maximum levels of the total net leverage ratio covenant and reduced the minimum levels of cash interest expense coverage ratio covenant for the period from June 28, 2023 through the filing of our second quarter 2024 results, subject to certain conditions (the Amendment Period), modified certain categories of the applicable margin (determined based on the total net leverage ratio of Holdings) for the duration of the Amendment Period with respect to interest rates under the Term Loan A Facility and the Revolving Credit Facility, and modified certain covenants restricting the ability of Holdings, AAM, Inc. and certain subsidiaries of Holdings to create, incur, assume, or permit to exist certain additional indebtedness and liens and to make or agree to pay or make certain restricted payments, voluntary payments and distributions.
This increase in demand for light trucks, CUVs and SUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient.
This increase in demand for light trucks, SUVs and CUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient.
Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, CUV and SUV programs in North America.
Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, SUV and CUV programs in North America.
If, in the future, GM were unable to fulfill this financial obligation, our OPEB obligations could be different than our current estimates. GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired.
If, in the future, GM were unable to fulfill this financial obligation, our OPEB obligations could be different than our current estimates. 48 GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired.
As our business is dependent on certain automotive segments, primarily the light truck, SUV and CUV segments, production volume fluctuations for the light vehicle market as a whole may not necessarily be indicative of the vehicle programs that we support.
As our business is also dependent on certain automotive segments, primarily the light truck, SUV and CUV segments, production volume fluctuations for the light vehicle market as a whole may not necessarily be indicative of the vehicle programs that we support.
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.
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 2024 or 2023.
(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.
(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); • our ability to consummate strategic initiatives and successfully integrate acquisitions and joint ventures; • 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, 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 hybrid and electric vehicle products; • our ability to realize the expected revenues from our new and incremental business backlog; • 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, including increasingly sophisticated cyber attacks incorporating use of artificial intelligence, 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 achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers; • 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.
In the year ended December 31, 2023, we recognized income tax expense of approximately $36.1 million attributable to both increased valuation allowances on disallowed interest expense in the U.S., as well as net income tax expense resulting from various changes in determinations related to the potential realization of deferred tax assets and the resulting establishment of, and release of, valuation allowances in certain foreign jurisdictions.
In the year ended December 31, 2023, we recognized income tax expense of approximately $36.1 million attributable to both increased valuation allowances on disallowed interest expense in the U.S., as well as net income tax expense resulting from various changes in determinations related to the potential realization of deferred tax assets and the resulting establishment of, and release of, valuation allowances in certain non-U.S. jurisdictions.
The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs.
The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs and capital investment.
If, in the future, we generate taxable income on a sustained basis in foreign and U.S. federal, state and local jurisdictions for which we have recorded valuation allowances, our current estimate of the recoverability of our deferred tax assets could change and result in the future reversal of some or all of the valuation allowance.
If, in the future, we generate taxable income on a sustained basis in non-U.S. and U.S. federal, state and local jurisdictions for which we have recorded valuation allowances, our current estimate of the recoverability of our deferred tax assets could change and result in the future reversal of some or all of the valuation allowance.
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 .
Net income (loss) and EPS were primarily impacted by the factors discussed above. 37 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 .
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.
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, 2024 all goodwill was associated with our Driveline reporting unit.
It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement. 44
It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement. 51
For the year ended December 31, 2023, our effective income tax rate varies from the U.S. federal statutory rate primarily as a result of the impact of the discrete items noted above, as well as favorable foreign tax rates and the impact of tax credits.
For the year ended December 31, 2023, our effective income tax rate varies from the U.S. federal statutory rate primarily as a result of the impact of the discrete items noted above, as well as favorable non-U.S. tax rates and the impact of tax credits.
Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of this new technology.
Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of new technologies.
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 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 13% of our consolidated net sales in 2024, and 12% in 2023 and 2022.
Typically, our business is moderately seasonal as our major OEM customers historically have an extended shutdown of operations (normally 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in the month of December. Our major OEM customers also occasionally have longer shutdowns of operations (up to six weeks) for program changeovers.
Typically, our business is also moderately seasonal as our major OEM customers historically have an extended shutdown of operations (normally 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in the month of December. Our major OEM customers also occasionally have longer shutdowns of operations for program changeovers.
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.
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 2024 and the postretirement obligation, net of GM cost sharing, at December 31, 2024 by $0.4 million and $7.8 million, respectively.
As such, we have not recorded any impact of the IRS’s proposed adjustment in our consolidated financial statements as of, and for the year ended, December 31, 2023, with the exception of the cash payment and associated income tax receivable of $10.1 million paid by AAM to the IRS in 2023.
As such, we have not recorded any impact of the IRS’s proposed adjustment in our consolidated financial statements as of, and for the years ended, December 31, 2024 and December 31, 2023, with the exception of the cash payment and associated income tax receivable of $10.1 million paid by AAM to the IRS in 2023.
Information regarding expected payments by period can be found in Item 8, "Financial Statements and Supplementary Data" in this Form 10-K at Note 4 - Long-Term Debt for our current and long-term debt obligations, Note 14 - Leasing for our operating and finance lease obligations, Note 11 - Commitments and Contingencies for purchase commitments related to capital expenditures and project expense, and Note 7 - Employee Benefit Plans for pension and other postretirement benefit obligations.
Information regarding expected payments by period can be found in Item 8, "Financial Statements and Supplementary Data" in this Form 10-K at Note 4 - Long-Term Debt for our current and long-term debt obligations, Note 15 - Leasing for our operating and finance lease obligations, Note 10 - Commitments and Contingencies for purchase commitments related to capital expenditures and project expense, and Note 8 - Employee Benefit Plans for pension and other postretirement benefit obligations.
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. In the fourth quarter of 2023, we voluntarily redeemed a portion of our 6.25% Notes due 2026.
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. Also in 2023, we voluntarily redeemed a portion of our 6.25% Notes due 2026.
In both 2023 and 2022, we received $17.0 million of cash associated with machinery and equipment that was damaged or destroyed as a result of the Malvern Fire. This cash received has been classified as investing cash inflows in both periods based on the nature of the associated loss incurred.
In 2023, we received $17.0 million of cash associated with machinery and equipment that was damaged or destroyed as a result of the Malvern Fire. This cash received has been classified as investing cash inflows based on the nature of the associated loss incurred.
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.
While evolving expectations, expanding regulatory requirements and reporting standards are driving increased ESG reporting and increased costs of compliance, this trend aligns with our cultural values and commitment to profitably grow our business in a way that is sustainable and socially responsible.
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.
Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, restructuring actions, development of strategic partnerships and reduction of vehicle platform complexity.
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 also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 42% of our consolidated net sales in 2024, 39% in 2023, and 40% in 2022. 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.
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.
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, 2024, we estimated $120.4 million in future GM cost sharing.
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.
With population growth, increased government regulations to ease congestion and generational shifts in preferences, it is expected that the markets for autonomous vehicles, ride-sharing, vehicle subscription services and micro-mobility services will continue to grow, which could cause a change in the type of vehicles utilized.
The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs on a global basis, are critical to attracting and retaining business in our global markets.
The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs and maintain a resilient supply chain on a global basis, are critical to attracting and retaining business in our global markets.
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.
This resulted in a principal payment of $50.0 million and we 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.
INCREASED FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES AND REPORTING There has been a growing focus on ESG initiatives and reporting, including those related to Diversity, Equity, and Inclusion (DEI), by industry stakeholders, including customers, suppliers, providers of debt and equity capital, regulators and those in the workforce. These topics are increasingly driving decisions made by our stakeholders.
INCREASED FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES AND REPORTING There has been a growing focus on ESG initiatives and reporting by industry stakeholders, including customers, suppliers, providers of debt and equity capital, regulators and those in the workforce. These topics are increasingly driving decisions made by our stakeholders.
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.
Accordingly, our quarterly results may reflect these trends. LEGAL PROCEEDINGS See Note 13 - Income Taxes and Note 10 - Commitments and Contingencies in Item 8, "Financial Statements and Supplementary Data" for discussion of legal proceedings and the effect on AAM.
VALUATION OF DEFERRED TAX ASSETS AND OTHER TAX LIABILITIES Because we operate in many different geographic locations, including several foreign, state and local tax jurisdictions, the evaluation of our ability to use all recognized deferred tax assets is complex.
VALUATION OF DEFERRED TAX ASSETS AND OTHER TAX LIABILITIES Because we operate in many different geographic locations, including several non-U.S., state and local tax jurisdictions, the evaluation of our ability to use all recognized deferred tax assets is complex.
We believe, after consultation with tax and legal counsel, that it is more likely than not that our structure did not give rise to FBCSI, and it's likely that we will be successful in ultimately defending our position.
Court of Federal Claims. We believe, after consultation with tax and legal counsel, that it is more likely than not that our structure did not give rise to FBCSI, and it's likely that we will be successful in ultimately defending our position.
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.
As of December 31, 2024, 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 $315 million to $365 million.
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.
In 2024, the weighted-average discount rates determined on that basis were 5.65% for the valuation of our pension benefit obligations and 5.70% for 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.
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.
We expect our capital spending in 2025 to be approximately 5% of sales, which includes support for our global program launches in 2025 and 2026 within our new and incremental business backlog, as well as program capacity increases and future launches of replacement programs.
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.
Our warranty accrual was $60.6 million as of December 31, 2024 and $66.3 million as of December 31, 2023. During 2024 and 2023, 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.
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.
In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales in 2024, 16% in 2023, and 18% in 2022.
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.
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 expense of $20.0 million in 2024, as compared to income of $8.1 million in 2023.
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.
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, gains or losses on equity securities, pension curtailment and settlement charges, impairment charges and non-recurring items.
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.
Further, due to the uncertainty associated with the potential impact of geopolitical conflicts or events, as well as macroeconomic factors, including sustained or increased inflation, renegotiated trade agreements, and tariffs or import restrictions, 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. 46 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.
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.
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, 2024, we have a valuation allowance of approximately $288.8 million related to net deferred tax assets in several non-U.S. jurisdictions and U.S. federal, state and local jurisdictions.
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.
Expected Discount Return on Rate Assets (in millions) Decline in funded status $ (20.0) N/A Increase in 2024 expense $ 0.1 $ 2.2 No changes in benefit levels or in the amortization of gains or losses have been assumed. For 2025, we assumed a weighted-average annual increase in the per-capita cost of covered health care benefits of 6.8% for OPEB.
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.
We record interest and penalties on uncertain tax positions in income tax expense (benefit). As of December 31, 2024 and 2023, we had a liability for unrecognized income tax benefits and related interest and penalties of $34.2 million and $38.1 million, respectively.
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.
The proceeds from the New Term Loan B Facility, together with $2.2 million cash on hand, 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.
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.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 202 3 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 16, 2024, which discussion is incorporated herein by reference.
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.
Gross profit and gross margin were impacted by the factors discussed in Net sales and Cost of goods sold above. 34 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) Year Ended December 31, (in millions) 2024 2023 Change Percent Change Selling, general and administrative expenses $ 387.1 $ 366.9 $ 20.2 5.5 % SG&A as a percentage of net sales was 6.3% in 2024 as compared to 6.0% in 2023.
In 2023, the weighted-average discount rate determined on that basis was 4.50% for our non-U.S. plans. The expected weighted-average long-term rates of return on our plan assets were 6.75% for our U.S. plans, and 4.90% for our non-U.S. plans in 2023.
In 2024, the weighted-average discount rate determined on that basis was 4.95% for our non-U.S. plans. The expected weighted-average long-term rates of return on our plan assets were 6.75% for our U.S. plans, and 5.80% for our non-U.S. plans in 2024.
The change in total debt outstanding, net of issuance costs, at year-end 2023, as compared to year-end 2022, was primarily due to the factors noted below. Senior Secured Credit Facilities Holdings and American Axle & Manufacturing, Inc.
Total debt outstanding, net of debt issuance costs, was $2,624.8 million at year-end 2024 and $2,768.9 million at year-end 2023. The change in total debt outstanding, net of issuance costs, at year-end 2024, as compared to year-end 2023, was primarily due to the factors noted below. Senior Secured Credit Facilities American Axle & Manufacturing Holdings, Inc.
Significant judgments and estimates used by management when evaluating long-lived assets for impairment include: • An assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; • Determination of asset groups, the primary asset within each group, and the primary asset's average estimated useful life; • Undiscounted future cash flows generated by the assets; and • Determination of fair value when an impairment is deemed to exist, which may require assumptions related to future general economic conditions, future expected production volumes, product pricing and cost estimates, working capital and capital investment requirements, discount rates and estimated liquidation values.
Significant judgments and estimates used by management when evaluating long-lived assets for impairment include: • An assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; • Determination of asset groups, the primary asset within each group, and the primary asset's average estimated useful life; • Undiscounted future cash flows generated by the assets; and • Determination of fair value when an impairment is deemed to exist, which may require assumptions related to future general economic conditions, future expected production volumes, product pricing and cost estimates, working capital and capital investment requirements, discount rates and estimated liquidation values. 49 PRODUCT WARRANTY We record a liability and related charge to cost of goods sold for estimated warranty obligations at the dates our products are sold or when specific warranty issues are identified.
Headquartered in Detroit with over 80 facilities in 18 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
Headquartered in Detroit, Michigan, with over 75 facilities in 16 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
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.
Year Ended December 31, 2024 2023 2022 (in millions) Net income (loss) $ 35.0 $ (33.6) $ 64.3 Interest expense 186.0 201.7 174.5 Income tax expense 27.8 9.1 2.0 Depreciation and amortization 469.7 487.2 492.1 EBITDA $ 718.5 $ 664.4 $ 732.9 Restructuring and acquisition-related costs 18.0 25.2 30.2 Debt refinancing and redemption costs 0.6 1.3 6.4 Impairment charge 12.0 — — Loss on equity securities 0.1 1.1 25.5 Pension curtailment and settlement charges — 1.3 — Non-recurring items: Malvern Fire insurance recoveries, net of charges — — (39.1) Gain on bargain purchase of business — — (13.6) Acquisition-related fair value inventory adjustment — — 5.0 Total Segment Adjusted EBITDA $ 749.2 $ 693.3 $ 747.3 40 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.
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.
A 1.0% increase in the assumed health care trend rate would have increased total service and interest cost in 2024 and the postretirement obligation, net of GM cost sharing, at December 31, 2024 by $0.7 million and $11.9 million, respectively.
As of December 31, 2023 and December 31, 2022, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $38.1 million and $40.5 million, respectively.
As of December 31, 2024 and December 31, 2023, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $34.2 million and $38.1 million, respectively.
See Note 15 - Manufacturing Facility Fire and Insurance Recovery for additional detail. INVESTING ACTIVITIES For the year ended December 31, 2023, net cash used in investing activities was $184.5 million as compared to $243.0 million for the year ended December 31, 2022. Capital expenditures were $194.6 million in 2023 and $171.4 million in 2022.
See Note 16 - Manufacturing Facility Fire and Insurance Recovery for additional detail. INVESTING ACTIVITIES For the year ended December 31, 2024, net cash used in investing activities was $254.8 million as compared to $184.5 million for the year ended December 31, 2023. Capital expenditures were $248.0 million in 2024 and $194.6 million in 2023.
Our effective income tax rate was (37.1)% in 2023, as compared to 3.0% in 2022.
Our effective income tax rate was 44.3% in 2024, as compared to (37.1)% in 2023.
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.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE (EPS) Net income was $35.0 million in 2024 as compared to net loss of $33.6 million in 2023. Diluted earnings per share was $0.29 in 2024 as compared to diluted loss per share of $0.29 in 2023.
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.
Due to the uncertainty associated with the potential impact of geopolitical conflicts or events, as well as macroeconomic factors, including sustained or increased inflation, renegotiated trade agreements, and tariffs or import restrictions, 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 following tables outline our sales and Segment Adjusted EBITDA for each of our reportable segments for the years ended December 31, 2023, 2022 and 2021 (in millions) : Year Ended December 31, 2023 Driveline Metal Forming Total Sales $ 4,176.7 $ 2,454.3 $ 6,631.0 Less: Intersegment sales 0.2 551.3 551.5 Net external sales $ 4,176.5 $ 1,903.0 $ 6,079.5 Segment adjusted EBITDA $ 543.6 $ 149.7 $ 693.3 Year Ended December 31, 2022 Driveline Metal Forming Total Sales $ 4,063.5 $ 2,280.7 $ 6,344.2 Less: Intersegment sales — 541.8 541.8 Net external sales $ 4,063.5 $ 1,738.9 $ 5,802.4 Segment adjusted EBITDA $ 510.9 $ 236.4 $ 747.3 Year Ended December 31, 2021 Driveline Metal Forming Total Sales $ 3,695.3 $ 1,912.8 $ 5,608.1 Less: Intersegment sales 0.2 451.3 451.5 Net external sales $ 3,695.1 $ 1,461.5 $ 5,156.6 Segment adjusted EBITDA $ 541.8 $ 291.5 $ 833.3 32 The increase in Driveline sales for the year ended December 31, 2023, as compared to the year ended December 31, 2022, is primarily the result of increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2023 from our new and incremental business backlog.
The following tables outline our sales and Segment Adjusted EBITDA for each of our reportable segments for the years ended December 31, 2024, 2023 and 2022 (in millions) : Year Ended December 31, 2024 Driveline Metal Forming Total Sales $ 4,253.3 $ 2,414.3 $ 6,667.6 Less: Intersegment sales 1.4 541.3 542.7 Net external sales $ 4,251.9 $ 1,873.0 $ 6,124.9 Segment adjusted EBITDA $ 578.2 $ 171.0 $ 749.2 Year Ended December 31, 2023 Driveline Metal Forming Total Sales $ 4,176.7 $ 2,454.3 $ 6,631.0 Less: Intersegment sales 0.2 551.3 551.5 Net external sales $ 4,176.5 $ 1,903.0 $ 6,079.5 Segment adjusted EBITDA $ 543.6 $ 149.7 $ 693.3 Year Ended December 31, 2022 Driveline Metal Forming Total Sales $ 4,063.5 $ 2,280.7 $ 6,344.2 Less: Intersegment sales — 541.8 541.8 Net external sales $ 4,063.5 $ 1,738.9 $ 5,802.4 Segment adjusted EBITDA $ 510.9 $ 236.4 $ 747.3 38 The increase in Driveline sales for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily reflects increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2024 from our new and incremental business backlog.
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.
We believe that operating cash flow, available cash and cash equivalent balances and available borrowing capacity under our Senior Secured Credit Facilities and non-U.S. credit facilities will be sufficient to meet these needs. OPERATING ACTIVITIES Net cash provided by operating activities was $455.4 million in 2024 as compared to $396.1 million in 2023.
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.
The following factors impacted cash provided by operating activities in 2024 as compared to 2023: Accounts receivable For the year ended December 31, 2024, we experienced an increase in cash flow from operating activities of approximately $63 million related to the change in our accounts receivable balance from December 31, 2023 to December 31, 2024, as compared to the change in our accounts receivable balance from December 31, 2022 to December 31, 2023.
In 2023, we recorded $7 million of expense related to a field action with one of our largest customers for a die cast component included in transmission assemblies. We reached agreement on this field action with our customer in the fourth quarter of 2023 and we do not expect to record any additional liabilities associated with this item.
In 2023, we recorded $7 million of expense related to a field action with one of our largest customers for a die cast component included in transmission assemblies. We reached agreement on this field action with our customer in the fourth quarter of 2023 and paid this amount in 2024.
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.
Through lightweight and high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology, refined vibration control systems, and hybrid and electric vehicle components, including our e-drive systems and e-Beam axle technology, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass. Our efforts have positioned us to compete in the evolving global marketplace.
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.
This resulted in expense of approximately $0.4 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing. 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.
These increases were partially offset by a reduction in sales of approximately $107 million associated with the net effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
This was partially offset by a reduction of approximately $35 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
The expected future interest obligations associated with our current and long-term debt and finance lease obligations are approximately as follows: $197 million in 2024, $192 million in 2025, $182 million in 2026, $129 million in 2027, $102 million in 2028, and $89 million in 2029 and thereafter. 38 Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50% Notes, 6.25% Notes and 5.00% Notes (collectively, the Notes) are senior unsecured obligations of AAM, Inc.
The expected future interest obligations associated with our current and long-term debt and finance lease obligations are approximately as follows: $176 million in 2025, $172 million in 2026, $123 million in 2027, $95 million in 2028, $73 million in 2029, and $11 million in 2030 and thereafter. 44 Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50% Notes and 5.00% Notes (collectively, the Notes) are senior unsecured obligations of AAM, Inc.
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 the borrowing.
We also expensed approximately $0.4 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing. In the fourth quarter of 2023, we voluntarily redeemed a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $50.0 million and $0.9 million in accrued interest.
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.
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.
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.
GLOBAL CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, SPORT UTILITY VEHICLES AND CROSSOVER VEHICLES There has been ongoing demand for light trucks, SUVs and CUVs in certain markets, while demand for passenger cars has decreased.
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.
At December 31, 2024 we had over $1.5 billion of liquidity consisting of approximately $553 million of cash and cash equivalents, approximately $892 million of available borrowings under our Revolving Credit Facility and approximately $78 million of available borrowings under non-U.S. credit facilities. We have no significant debt maturities before 2027.
We expect production volumes in North America to be approximately 15.8 million units in 2024 and we expect volumes in all other geographic regions in which we operate to be flat to modest increases as compared to 2023. 27 The discussion of our Results of Operations, Reportable Segments, and Liquidity and Capital Resources for 2022, as compared to 2021, can be found within "Part II - Item 7.
We expect volumes in other major geographic regions in which we operate to be flat to modest decreases in 2025, as compared to 2024. 33 The discussion of our Results of Operations, Reportable Segments, and Liquidity and Capital Resources for 2023, as compared to 2022, can be found within "Part II - Item 7.
As of December 31, 2022 and 2021, our valuation allowance was $217.5 million and $201.7 million, respectively.
As of December 31, 2023 and 2022, our valuation allowance was $267.1 million and $217.5 million, respectively.
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 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. 31 An in-depth review of non-financial metrics and strategies related to our ESG initiatives and programs is included in our annual Sustainability Report, which includes more details on our sustainability programs, initiatives and future objectives.
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.
OPERATING INCOME Operating income was $241.4 million in 2024 as compared to $146.6 million in 2023. Operating margin was 3.9% in 2024 as compared to 2.4% in 2023. The changes in operating income and operating margin in 2024, as compared to 2023, were primarily due to the factors discussed in Net sales, Cost of goods sold and SG&A above.
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.
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.
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.
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. See Note 13 - Income Taxes for additional detail regarding the Notice of Tax Due.
Pension curtailment and settlement charges For the year ended December 31, 2023, we recognized $1.3 million of pension curtailment and settlement charges primarily associated with certain restructuring activities initiated in 2023. Unrealized gain (loss) on equity securities We have an investment in the equity securities of REE Automotive, an e-mobility company.
Pension curtailment and settlement charges For the year ended December 31, 2023, we recognized $1.3 million of pension curtailment and settlement charges primarily associated with certain restructuring activities initiated in 2023.
Restructuring and acquisition-related costs We incurred $25.2 million and $30.2 million of charges related to restructuring and acquisition-related costs in 2023 and 2022, respectively, and a significant portion of these charges were cash charges. In 2024, we expect restructuring and acquisition-related payments to be between $15 million and $25 million for the full year.
Restructuring and acquisition-related costs We incurred $18.0 million and $25.2 million of charges related to restructuring and acquisition-related costs in 2024 and 2023, respectively, and a significant portion of these charges were cash charges.
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.
The anticipated synergies of this acquisition are expected to enhance AAM's ability to compete in today's technological environment, while remaining cost competitive through increased scale and integration.
These income tax expenses were partially offset by a net income tax benefit of approximately $26.1 million resulting from various internal reorganization and restructuring actions during the year, which in turn was partially offset by the associated impact on our foreign derived intangible income and disallowed interest deductions in the U.S.
These income tax expenses were partially offset by a net income tax benefit of approximately $26.1 million resulting from various internal reorganization and restructuring actions during 2023, which in turn was partially offset by the associated impact on our foreign derived intangible income and disallowed interest deductions in the U.S. 36 In 2024, our effective income tax rate varied from the U.S. federal statutory rate primarily due to tax expense related to global intangible low-taxed income, as well as the impact of certain non-U.S. tax rates and non-U.S. withholding tax, partially offset by the impact of tax credits.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+5 added−1 removed7 unchanged
Biggest changeThe 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.
Biggest changeAt December 31, 2023, the potential decrease in fair value of our then-outstanding fixed-to-fixed cross-currency swap, assuming a 10% adverse change in the foreign currency exchange rates was approximately $22.1 million.
If and when appropriate, we intend to manage these risks by creating natural hedges in the structure of our global operations, utilizing local currency funding of these expansions and various types of foreign exchange contracts. INTEREST RATE RISK We are exposed to variable interest rates on certain credit facilities.
If and when appropriate, we intend to manage these risks by creating natural hedges in the structure of our global operations, utilizing local currency funding of these expansions and various types of foreign exchange contracts. 52 INTEREST RATE RISK We are exposed to variable interest rates on certain credit facilities.
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.
As of December 31, 2024, 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.
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 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, 2024) on our long-term debt outstanding at December 31, 2024 would be approximately $4.3 million and was approximately $4.4 million at December 31, 2023, on an annualized basis. 53 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
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 potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $20.7 million at December 31, 2024 and was approximately $18.8 million at December 31, 2023.
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.
At December 31, 2024 and December 31, 2023, we had currency forward contracts outstanding with a total notional amount of $228.1 million and $206.9 million, respectively.
Removed
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.
Added
In January 2025, in connection with the Business Combination, we entered into a foreign currency forward contract with a notional value of £571.0 million to fix the U.S. dollar equivalent associated with the cash consideration that is expected to be payable to the Dowlais shareholders upon closing of the Business Combination.
Added
This foreign currency forward contract is non-designated and will be recognized at fair value each reporting period up to, and including, the closing of the Business Combination with changes in fair value recognized in foreign exchange gains and losses in Other income (expense), net in our Consolidated Statement of Operations.
Added
In the second quarter of 2024, we discontinued our existing €200.0 million fixed-to-fixed cross-currency swap that was designated as a cash flow hedge and entered into a new fixed-to-fixed cross-currency swap that is designated as a fair value hedge.
Added
The fixed-to-fixed cross-currency swap reduces the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At December 31, 2024, we had a notional amount outstanding under the fixed-to-fixed cross-currency swap of €175.0 million, which was equivalent to $181.2 million.
Added
The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans through the second quarter of 2027. 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 $18.1 million at December 31, 2024.

Other AXL 10-K year-over-year comparisons