Richard E. DauchCo-Founder, Chairman & CEO

American Axle & Manufacturing

Life in the Fast Lane

Global Car and Truck Production: 2005-2012

Source: CSM Worldwide

+ 69.0% + 2.746.713.97Southern Asia

77.6662.27Total

+ 106.3%+ 5.039.764.73Greater China

+ 68.4% + 2.836.974.14Central / Eastern Europe

+ 61.2%+ 0.852.241.39Middle East/Africa

+ 33.1%+ 0.933.742.81South America

+ 5.5%+ 0.8716.6515.78North America

+ 4.9%+ 0.7716.5615.79Western Europe

+ 10.0%+ 1.3715.0313.66Japan/Korea

% ChangeNet Change (M)2012 (M)2005 (M)Region

The Auto Industry is The Auto Industry is Disproportionately Growing Disproportionately Growing

Outside of North AmericaOutside of North America

Automotive Transplants

Legend:Original Equipment ManufacturersSuppliers

Detroit Economic ClubMay 10, 2004

Automotive Industry Supply Base

Continued price pressureRapid volume reductionsHigh legacy costs Excess capacityUnder-utilized workforcesRestricted operational flexibilityClosing / selling domestic plantsAttrition programs

North American Auto Suppliers

Idling operationsLiquidatingRestructuringSelling of assets

85% of the Auto Suppliers in the 1995 Phone Book No Longer Exist

Worldwide Automotive Supplier Consolidation

1990

30,000

2000

10,000

2010

4,000

Economic Climate will Accelerate Supply Base

Consolidation or Elimination

Economic Climate will Accelerate Supply Base

Consolidation or Elimination

““A A RECESSIONRECESSIONis when you tighten your belt; is when you tighten your belt;

A A DEPRESSIONDEPRESSIONis when you have no belt to tighten; is when you have no belt to tighten;

And, when you have no pants And, when you have no pants to hold up, it is a to hold up, it is a PANICPANIC!!””

Sweeping Resizing of Sweeping Resizing of DetroitDetroit’’s Automakers s Automakers

and Supply Baseand Supply Base

Structural Change of the Structural Change of the American Automotive American Automotive

MarketplaceMarketplace

Resizing to create new business modelsRedefining of labor relationshipsRationalizing and deploying of installed capacityStreamlining of brand portfolios, dealer networks and distribution networks

Structural Change

Finding the Right BalanceFinding the Right Balance

Mindset:Mindset:

Doing Things Twice as Good,Doing Things Twice as Good,

Twice as Fast,Twice as Fast,

With Half the ResourcesWith Half the Resources

Welcome toWelcome toGlobal Competition!Global Competition!

The Keys to Survival and Growth

Meeting the demands of:Intense global competitionCustomer demands for “world pricing”Dealing with rapidly escalating production costs

It is Essential that U.S.It is Essential that U.S.OEMs and Key Suppliers OEMs and Key Suppliers

FlourishFlourish

Manufacturing is HowManufacturing is HowWe Pay Our WayWe Pay Our Way

In the WorldIn the World

Life in the Fast Lane

TechnologyTechnologyProduct, Process & SystemsProduct, Process & Systems

““CAFECAFE””Corporate AverageCorporate Average

Fuel EconomyFuel Economy

Electric All-Wheel Drive (EAWD)

Chevrolet Cobalt

Electronics Integration

Electronic Stabilizer System

Jeep Wrangler RubiconJeep Wrangler Rubicon

Dodge Power WagonDodge Power Wagon

GlobalGlobalLeveraging Global AssetsLeveraging Global Assets

Leveraging Global Assets

DesignEngineering & Product Development ResourcesSalesIT SystemsProcurementManufacturing OperationsGlobal Capability & CapacityCommon Parts & Manufacturing ProcessesGlobal Business Plan

Global Technical Capabilities

USA - Technical Center• Test & Validation Engineering• NVH Engineering• Materials Engineering • Advanced Engineering• Electronics & Software EngineeringAccreditations:

• ISO 9001 Certified• TS 16949• Materials Lab: A2LA

Japan OfficeEngineering Staff

Korea OfficeEngineering Center &

Engineering Staff

China OfficeEngineering Center & Engineering Staff

South American OfficeEngineering Center &

Engineering Staff

India OfficeDesign Services &Technical Analysis

Australia OfficeEngineering Staff

World HeadquartersEngineering Staff

European OfficeEngineering Center &

Engineering Staff

GlobalManufacturing Sites

Engineering Staff

Global Engineering Benefits

1. Better proximity to customers and new markets

2. Ability to engineer around the clock, 24 hours a day

3. Allows us to get our products from concept to market faster

Total LandedTotal LandedCost ApproachCost Approach

Materials & Procurement

Supplier DevelopmentFreight CostsModes of TransportationEnergyInventoryCustomsWarehousingCarrying CostsPiece PriceSelecting the Right Supplier

Supplier DevelopmentFreight CostsModes of TransportationEnergyInventoryCustomsWarehousingCarrying CostsPiece PriceSelecting the Right Supplier

Total Landed Cost Approach

+

Emerging Automotive Markets

Satellite Image Courtesy Google Maps

Emerging Automotive Markets

China

Emerging Automotive Markets

China

India

Emerging Automotive Markets

Globalization isGlobalization isHere to Stay!Here to Stay!

Competitive Cost Structures

2007 and 20082007 and 2008Union NegotiationsUnion Negotiations

AAM’s Colfor ManufacturingMinerva, Ohio

FlexibilityFlexibility

Workforces – Human Resources

Operations – Machinery, Equipment & Tooling

Make / Buy Decisions – Sourcing

Business Financial Performance

Business Thinking & Mentality

Workforces – Human Resources

Operations – Machinery, Equipment & Tooling

Make / Buy Decisions – Sourcing

Business Financial Performance

Business Thinking & Mentality

Flexibility

Restructuring Demands Change

Negotiations

Re-engineeringBuy-outs

Right-sizing

Quality EffortsAcquisitions

Downsizing

Re-strategizing

Attrition ProgramsMergers

Alliances

Real TransformationReal TransformationTakes TimeTakes Time

Successful Suppliers

Workforce / Team harmonyBullet-proof qualityTechnological advancementProduct innovationProduct expansionCustomer diversityGlobal footprintSteady profitable growth

Rejection of get-big-quick acquisitionsOutstanding warranty performanceOn-time deliveryPackagingReliability DurabilityContinuous improvement

Change!Change!

Buffalo Gear, Axle & LinkageTonawanda Forge

AAM Original Five FacilitiesAAM Original Five Facilities

Detroit Gear & AxleDetroit ForgeThree Rivers

Guanajuato Gear & AxleGuanajuato Forge

Silao, Mexico

Japan Business Office

Tokyo, Japan

European HQ & Engineering Center

Bad Homburg, Germany

World H.Q.Detroit Gear & AxleBuffalo Gear, Axle & LinkageThree RiversTonawanda ForgeCheektowaga Machining

Technical CenterRochester Hills, MI

Albion AutomotiveEngland / Scotland

Colfor Manufacturing

MSP Industries

AAM do Brasil, Araucária, BrazilSouth American Business Office,

Sáo Paulo, Brazil China Business OfficeShanghai, China

Korea Business Office Seoul, South Korea

India Business OfficePuné, India

Olawa Manufacturing FacilityOlawa, PolandChangshu

Manufacturing FacilityChangshu, China

AAM Global PresenceAAM Global Presence

Manufacturing:Manufacturing:

A Noble Profession!A Noble Profession!

“I have never seen so much change in a relatively short period of time. And the chances are good that the change will be even greater in the future.”

– Keith CrainOctober 2006

Life in the Fast Lane

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J a n u a r y 1 5 - 1 8 , 2 0 0 7 J a n u a r y 1 5 - 1 8 , 2 0 0 7