10-K

TABLE OF CONTENTS

Amendment Dated 12/20/00

Stock Purchase Agreement Dated 12/20/00

Supplemental Compensation Agreement Dated 12/20/00

Employment Agreement Dated 9/30/00

Statement of Computation of Ratio of Earnings

Annual Report to Stockholders

Subsidiaries of the Company

________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

  Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2000

  Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from      to      

Commission file number: 1-14303

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

DELAWARE

(State of incorporation)

38-3161171

(I.R.S. Employer Identification No.)

1840 HOLBROOK AVENUE, DETROIT, MICHIGAN 48212

(Address of principal executive offices, including Zip Code)

313-974-2000

(Registrant’s telephone number, including area code)

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

COMMON STOCK, PAR VALUE $0.01 PER SHARE

(Title of each class)

NEW YORK STOCK EXCHANGE

(Name of each exchange on which registered)

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

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

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

     The aggregate market value of the voting stock of the registrant held by stockholders (not including voting stock held by directors and executive officers of the registrant) on March 7, 2001 was approximately $99.3 million. As of March 7, 2001, the registrant had 43,835,711 shares of voting common stock outstanding.

Documents Incorporated By Reference:

     Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31, 2000 and Proxy Statement for use in connection with its Annual Meeting of Stockholders to be held on May 2, 2001, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than April 30, 2001, are incorporated by reference in Part I (Items 1, 2, 3 and 4), Part II (Items 5, 6, 7, 7A, and 8) and Part III (Items 10(a), 11, 12 and 13) of this Report.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

TABLE OF CONTENTS — ANNUAL REPORT ON FORM 10-K

Year Ended December 31, 2000

			Page Number
Cautionary Statements				1
Part I.	Item 1	Business		2
	Item 2	Properties		5
	Item 3	Legal Proceedings		6
	Item 4	Submission of Matters to a Vote of Stockholders		6
		Executive Officers of the Registrant		6
Part II.	Item 5	Market for Registrant’s Common Stock and Related Stockholder Matters		9
	Item 6	Selected Consolidated Financial Data		9
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation		9
	Item  7A	Quantitative and Qualitative Disclosures About Market Risk		9
	Item 8	Financial Statements and Supplementary Data		9
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		9
Part III.	Item  10	Directors and Executive Officers of the Registrant		10
	Item  11	Executive Compensation		10
	Item  12	Common Stock Ownership of Certain Beneficial Owners and Management		10
	Item  13	Certain Relationships and Related Transactions		10
Part IV.	Item  14	Exhibits, Financial Statement Schedules and Reports on Form  8-K		11
Signatures				14
Schedule II		Valuation and Qualifying Accounts		15
Independent Auditors’ Report				16
Exhibit 12		Computation of Ratio of Earnings to Fixed Charges		17
Exhibit 21		Subsidiaries of the Company as of March 7, 2001		18

Cautionary Statements

      Certain statements in this report on Form 10-K are forward-looking in nature and relate to trends and events that may affect our future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “expect”, “anticipate”, “intend”, “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. The statements are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including reduced sales by our customers, changes in economic conditions in the markets served by us, increasing competition, fluctuations in raw materials and energy prices, and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. 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.

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Part I

Item 1. Business

(a)  General Development of Business

General

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

      We are a Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, validation and design of driveline systems for trucks, sport-utility vehicles (“SUVs”) and passenger cars. A driveline system includes all of the components that transfer power from the transmission and deliver it to the drive wheels. Driveline and related products produced by us include axles, driveshafts, chassis components, driving heads, crankshafts, transmission parts and forged products.

      In March 1994, a private investor group led by Richard E. Dauch formed the Company and purchased the Final Drive and Forge Business Unit of the Saginaw Division of General Motors Corporation (“GM”). In connection with this acquisition (the “1994 acquisition”) and under subsequent additional binding agreements we have entered into with GM, we are the sole-source supplier of substantially all of the driveline components and forged products previously supplied to GM by the Business Unit for the life of each of the GM vehicle programs supplied.

      Since the 1994 acquisition, we have dramatically improved product quality and manufacturing efficiency through a combination of management leadership, investments in new equipment and technology, workforce training, and process and systems improvements resulting in increased capacity utilization. From March 1994 through December 2000, we have invested approximately $1.5 billion in capital expenditures and we have received and maintained ISO/ QS 9000 certification for each of our facilities. As a result, (i) the average number of axles produced per day has increased from approximately 10,000 per day in March 1994 to approximately 16,000 per day in year 2000 and (ii) discrepant parts shipped to GM (as measured by GM) decreased from approximately 13,400 parts per million (“PPM”) during the six months ended December 31, 1994 to approximately 89 PPM during the six months ended December 31, 2000.

Initial Public Offering

      Holdings is the survivor of a migratory merger with American Axle & Manufacturing of Michigan, Inc. (“AAMM”) and has no significant assets other than its 100% ownership of American Axle & Manufacturing, Inc. (“AAM Inc.”) and its subsidiaries. Pursuant to this merger, which was effected in January 1999, each share of AAMM’s common stock was converted into 3,945 shares of Holdings’ common stock. Holdings has no other subsidiaries other than AAM Inc. In February 1999, Holdings completed an initial public offering and issued 7.0 million shares of its common stock.

      For information regarding acquisitions, see Exhibit 13 to this report, Annual Report to Stockholders for the year ended December 31, 2000 (the “Annual Report”), page 37, section entitled “Notes to Consolidated Financial Statements, Note 2 — Acquisitions”.

(b)  Financial Information About Industry Segments

      Incorporated by reference from the Annual Report, page 47, section entitled “Notes to Consolidated Financial Statements, Note 11 — Segment and Geographic Information”.

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(c)  Narrative Description of Business

Company Overview

      We are the principal supplier of driveline components to General Motors Corporation (“GM”) for its light trucks, SUVs and rear-wheel-drive (“RWD”) passenger cars. As a result of our Lifetime Program Contracts with GM (“LPCs”), we are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by an LPC. Sales to GM were approximately 84.5%, 85.9% and 93.4% of our total sales in 2000, 1999 and 1998, respectively.

      We sell most of our products under long-term contracts at fixed prices. Some of our contracts require us to reduce our prices in subsequent years and all of our contracts allow us to negotiate price increases for engineering changes. Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs, which typically run 6 to 12 years, and require us to remain competitive with respect to technology, delivery and quality. We will compete for future GM business upon the termination of the LPCs.

      We also supply driveline components to DaimlerChrysler, Ford Motor Company, Nissan, Renault, Visteon Automotive, Delphi Automotive, PACCAR and other original equipment manufacturers (“OEMs”) and Tier I supplier companies. Our sales to customers other than GM increased 14% to $475.4 million in 2000 as compared to $416.6 million in 1999. In addition, our sales to customers other than GM have more than tripled in comparison to 1998, when such sales were only $134.1 million, partly as a result of our acquisitions and also due to demand for our newer technology-based products. We expect our sales to customers other than GM to lead our growth over the next several years as we launch additional new driveline system product programs with DaimlerChrysler and other OEM customers.

      The following chart sets forth the percentage of total revenues attributable to our products for the periods indicated:

		Year ended December 31,
		2000			1999			1998
Rear axles			53.8	%		52.5	%		53.5	%
Front axles			14.7			16.0			16.3
Driveshafts			7.3			7.9			8.6
Chassis components			7.4			7.9			8.8
Forged products			11.2			11.1			8.9
Other			5.6			4.6			3.9
	Total		100.0	%		100.0	%		100.0	%

Industry and Competition

      Incorporated by reference from the Annual Report, pages 22-23, section entitled “Management’s Discussion and Analysis — Industry and Competition”.

Productive Materials

      We believe that we have adequate sources of supply of productive materials and components for our manufacturing needs. Most raw materials (such as steel) and semi-processed or finished items (such as castings) are available within the geographical regions of our operating facilities from numerous qualified sources in quantities sufficient for our needs.

      Through December 31, 1999, we acquired certain materials for use in the manufacture of our products through GM’s purchasing network. Effective January 1, 2000, we assumed full responsibility for our entire purchasing function. For further information regarding this purchasing transition, see the Annual Report, page 30, section entitled “Management’s Discussion and Analysis — Direct Material Purchasing Transition”.

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Research and Development (“R&D”)

      We continue to aggressively pursue development of new product, process and systems technologies in our R&D activities, especially those that improve the performance and packaging of our customers’ products or that improve the productivity of our operations. Areas of specific focus in our R&D include mass reduction; noise, vibration and harshness improvements; durability; and new product offerings such as integrated driveline systems and modules. Our new Smart-Bar^TM stabilizer bar-based active roll-control system and the Integrated Oil Pan (IOP) Front Axle with Electronic Disconnect are two current examples of high value-added technology products that have resulted from our commitment to R&D. In addition, our increased commitment to R&D has also resulted in our development of the PowerLite^TM aluminum rear-axle system, TracRite™ traction-enhancing locking differentials (including a brand-new electronically controlled TracRite™ EL model) and our Gen II and Gen III universal joints, all of which have been instrumental in new product program wins for AAM.

      R&D spending was $46.4 million in 2000, $39.1 million in 1999 and $29.5 million in 1998.

Patents and Trademarks

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

Seasonality

      Incorporated by reference from the Annual Report, page 31, section entitled “Management’s Discussion and Analysis — Seasonality”.

Associates

      We believe our relationships with our associates and their unions are positive. As of December 31, 2000, we employed approximately 11,654 associates, approximately 9,629 of which are employed in the United States. Approximately 7,741 associates are represented by the United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”). Approximately 6,913 associates represented by the UAW are subject to a collective bargaining agreement that expires February 25, 2004; another 828 associates at Colfor and MSP are also represented by the UAW under collective bargaining agreements that expire in 2005. Approximately 250 associates are represented by the International Association of Machinists (“IAM”) under a collective bargaining agreement which runs through May 5, 2004. In addition, approximately 1,111 associates at Albion, 581 associates at our Guanajuato, Mexico facility (“Guanajuato Gear & Axle”) and 139 associates at our joint venture in Brazil are represented by labor unions that are subject to collective bargaining agreements. The collective bargaining agreements at Albion expire in 2004 and the agreements at Guanajuato Gear & Axle and Brazil expire annually.

Credit and Working Capital Practices

      Incorporated by reference from the Annual Report, pages 27-29, section entitled “Management’s Discussion and Analysis — Liquidity and Capital Resources”.

(d)  Financial Information About Foreign and Domestic Operations and Export Sales

      International operations are subject to certain additional risks inherent in conducting business outside the United States, such as changes in currency exchange rates, price and currency exchange controls, import restrictions, nationalization, expropriation and other governmental action.

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      For further financial information regarding foreign and domestic sales and export sales, see the Annual Report, page 47, section entitled “Notes to Consolidated Financial Statements, Note 11 — Segment and Geographic Information”.

Item 2.  Properties

      The following is a summary of our principal facilities:

		Approx.		Type
Name		Sq. Feet		of Interest		Function
Detroit Gear & Axle Detroit, MI			1,764,000		Owned	Rear and front axles, front suspensions and rear brake drums
Buffalo Gear, Axle & Linkage Buffalo, NY			1,199,000		Owned	Rear axles and steering linkages
Three Rivers Driveline Three Rivers, MI			750,000		Owned	Rear driveshafts, front auxiliary driveshafts and universal joints
Guanajuato Gear & Axle Guanajuato, Mexico			855,000		Owned	Rear axles
Scotstoun Plant Glasgow, Scotland			453,000		Leased	Front and rear axles for medium-duty trucks and vans
Farington Plant Lancashire, England			328,000		Leased	Front and rear axles for buses and chassis components
Spurrier Plant Lancashire, England			303,000		Leased	Crankshafts and fabricated parts
AAM do Brasil			130,600		Owned	Machining of forged products
	Curitiba, Brazil
Detroit Forge			710,000		Owned	Forged products
	Detroit, MI
Tonawanda Forge			470,000		Owned	Forged products
	Tonawanda, NY
Colfor — Malvern			234,000		Owned	Forged products
	Malvern, Ohio
Colfor — Salem			189,000		Owned	Forged products
	Salem, Ohio
Colfor — Minerva			125,000		Owned	Machining of forged products
	Minerva, Ohio
Cheektowaga Plant			116,000		Owned	Machining of forged products
	Cheektowaga, NY
MSP — Oxford			125,000		Leased	Forged products
	Oxford, MI
MSP — Centerline			14,000		Leased	Forged products
	Centerline, MI
Technical Center Rochester Hills, MI			66,000		Leased	R&D, design engineering, metallurgy, testing, validation and sales
Corporate Headquarters Detroit, MI			31,000		Owned	Executive and administrative offices located at the Detroit Gear & Axle
Global Procurement Center			16,000		Leased	Executive and administrative offices
	Rochester Hills, MI

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      Detroit Gear & Axle, Detroit Forge, Three Rivers Driveline and Corporate Headquarters facilities are each subject to a mortgage in favor of several lenders party to our Bank Credit Facilities. Such mortgages expire upon satisfaction of all borrowings under the Bank Credit Facilities. See the Annual Report, pages 27-29, section entitled “Management’s Discussion and Analysis — Liquidity and Capital Resources” for further information regarding the Bank Credit Facilities.

Item 3.  Legal Proceedings

      Incorporated by reference from the Annual Report, page 31, section entitled “Management’s Discussion and Analysis — Litigation and Environmental Regulations”.

Item 4.  Submission of Matters to a Vote of Stockholders

      No Matters were submitted to a vote of stockholders during the fourth quarter of fiscal year 2000. Incorporated by reference from the Board of Directors Proxy Statement for use in connection with AAM’s Annual Meeting to be held on May 2, 2001 (the “Proxy Statement”), page 6, section entitled Proposals You May Vote On”.

Executive Officers of the Registrant

      Richard E. Dauch, age 58, is Co-Founder, Chairman of the Board & Chief Executive Officer. He has been Chief Executive Officer and a member of the Board of Directors since co-founding the Company in 1994. In October 1997, he was named Chairman of the Board of Directors. He was also President of the Company from 1994 through December 2000. Before March 1994, he spent 12 years with Chrysler. He left Chrysler in 1991 as Executive Vice President of Worldwide Manufacturing. Prior to joining Chrysler, Dauch served as Group Vice President of Volkswagen of America, where he established the manufacturing facilities for the first major automotive transplant facility in the United States. Dauch began his career with General Motors Corporation in 1964, where he progressed over the course of 12 years from a college-graduate-in-training to the youngest plant manager in Chevrolet’s history. He has received numerous honors, nationally and internationally; is on the board of directors of several manufacturing and civic organizations; and has lectured extensively on the subjects of manufacturing and management. Mr. Dauch has authored a book, Passion for Manufacturing, which is distributed in 80 countries in several languages.

      Joel D. Robinson, age 57, was appointed President & Chief Operating Officer in January 2001. Prior to that, Robinson served as Executive Vice President — Chief Operating Officer (since August 1998), Executive Vice President, Operations and Vice President, Manufacturing. Mr. Robinson joined the Company in March 1994 and has held various other positions including Executive Director of the GMT800 Program and Executive Director, Manufacturing Services. He began his career in the automotive industry at Ford Motor Company in 1963, where he held a series of technical and manufacturing management positions. Robinson also worked for American Motors Corporation, serving as Director of Vehicle Assembly, and later, at Chrysler, where he was responsible for all car body programs.

      Robin J. Adams, age 47, has been Executive Vice President — Finance & Chief Financial Officer since he joined the Company in July 1999. Prior to joining the Company, he spent 13 years with Borg-Warner in various financial positions, including Vice President & Treasurer (Principal Financial Officer) from 1993 and Assistant Treasurer from 1991 to 1993. He began his career in 1976 with Illinois Central Railroad Company, where he served in a variety of positions in accounting, finance and corporate planning, including Assistant Director of Corporate & Financial Planning.

      Patrick S. Lancaster, age 53, has been Group Vice President, Chief Administrative Officer & Secretary since January 2001. Prior to that, he was Vice President & Secretary (since March 2000), Vice President, General Counsel & Secretary (since November 1997) and General Counsel & Secretary (since June 1994). Prior to joining the Company, Lancaster worked at Fruehauf Trailer Corporation and its predecessor Company (from 1981 to 1994) where he last served as General Counsel and Assistant Secretary from March 1990.

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      Yogendra (Yogen) N. Rahangdale, age 53, has been Group Vice President & Chief Technical Officer since January 2001. Prior to that, he served as Vice President, Manufacturing & Procurement Services (since March 2000); Vice President, Manufacturing Services (since April 1999); Executive Director, Manufacturing Services (since March 1998); and Director, Corporate Manufacturing Planning (since August 1995). Prior to joining the Company, Rahangdale spent 12 years with Chrysler in a variety of positions including Manager, Paint & Energy Management.

      Ronald J. Allman, age 60, was appointed Vice President, Manufacturing — Forging Division in January 2001. Prior to that, he was General Manager, Manufacturing — Forging Division since April 1999 and Plant Manager of Detroit Forge since December 1998. Allman served as Plant Manager for the Tonawanda Forge Plant since the formation of the Company in March 1994 through December 1998. Before joining the Company, he held various positions in the industry including engineering, manufacturing, materials, operations and management with Delco Products in Rochester, NY; Delredo S.A. de C.V. in Nuevo Laredo, Mexico; Delco Chassis in Kettering, OH and General Motors Corporation.

      Marion A. Cumo, Sr., age 58, has been Vice President, Materials Management & Logistics since January 2001. Prior to that, he was Vice President, Materials Management since May 1996 and Vice President, Quality Assurance & Customer Satisfaction from March 1994 to May 1996. Prior to joining the Company, Cumo spent 11 years working as a manufacturing executive at Chrysler. His most recent title at Chrysler was General Plants Manager of Assembly Operations. After leaving Chrysler, Cumo became president of Tri-County Chrysler Products in Peebles/ West Union, Ohio, and also worked as an automotive manufacturing consultant. Cumo began his career at GM and has over 34 years experience in the automotive industry.

      David C. Dauch, age 36, has been Vice President, Manufacturing — Driveline Division since January 2001. Prior to that, he was Vice President, Sales & Marketing (since 1998) and Director of Sales, GM Full-Size Truck Programs (since May 1996). Dauch joined the Company in July 1995 as Manager, Sales Administration. Prior to joining the Company, Dauch held various positions at Collins & Aikman Products Company, including Sales Manager. David C. Dauch is a son of Richard E. Dauch.

      Richard F. Dauch, age 40, has been Vice President, Sales since January 2001. Prior to that, he served as Vice President, Manufacturing — Driveline Division (since July 1999); Vice President, Manufacturing (since August 1998); Director, Strategic & Capacity Planning (since February 1998) and Plant Manager, Detroit Gear & Axle Plant (since May 1996). Dauch joined the Company in May 1995 as Corporate Manager, Labor Relations, and served in that position until May 1996. Prior to joining the Company, Dauch served as a Senior Business Manager and Business Unit Manager with United Technologies Corporation from February 1992. Prior to his automotive career, Dauch served in the U.S. Army for nine years, with assignments including Platoon Leader and Company Commander. Richard F. Dauch is a son of Richard E. Dauch.

      George J. Dellas, age 58, has been Vice President, Quality Assurance & Customer Satisfaction since May 1996. Prior to that, he was Vice President, Procurement & Material Management (since the 1994 acquisition). Prior to joining the Company, Dellas spent 11 years in executive positions of increasing responsibility at Chrysler from Production Foreman to Vice President. Before leaving Chrysler in 1991, he served as the Director of Advanced Planning for the Assembly Division. Dellas has over 35 years experience in the global automotive industry.

      David J. Demos, age 50, has been Vice President, Strategic Planning & Business Development, since March 1, 2000. Prior to that, he was Vice President, Procurement (since August 1998); Vice President, Sales & Business Development (since November 1997); and Vice President, Sales (since May 1996). He also served as Executive Director, Sales & Marketing; and Director, Sales, Marketing & Planning. Prior to joining the company in March 1994, Demos worked for GM for 21 years in various engineering, quality and sales positions in the United States and overseas. In his most recent position with GM, he was Chief Engineer of the Final Drive and Forge Business Unit of the Saginaw Division.

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      Robert A. Krause, age 44, has been Vice President & Treasurer of the company since July 1999. In addition to his treasury duties, Krause is also responsible for investor relations. Prior to that, he was Treasurer and acting interim Chief Financial Officer (since May 1999) and Treasurer (since January 1998). Krause has more than twenty years of experience in treasury and corporate controller functions. Prior to joining the Company, he worked for Baxter International Inc. (from 1985 to 1997) where he served in various positions in treasury and corporate controller functions including Director, International Treasury, and Director, Corporate Reporting. In addition, Krause spent several years in public accounting and is a certified public accountant.

      Roy H. Langenbach, age 61, has been Vice President, Procurement since April 2000, and previously was Director, Materials Management since the formation of the Company in March 1994. Langenbach has over 36 years experience in the automotive industry. Prior to joining the Company, Langenbach served in a progression of manufacturing management positions at GM, Volkswagen of America, Ford Motor Company and Benteler Industries.

      Allan R. Monich, age 47, has been Vice President, Human Resources since 1998, and previously was Vice President, Personnel, since November 1997. Prior to that, Monich served as Plant Manager for the Buffalo Gear & Axle Plant in Buffalo, NY since the formation of the Company in March 1994. Prior to joining the Company in March 1994, he worked for GM for 22 years in the areas of manufacturing, quality assurance, sales and engineering, including four years as a GM Plant Manager.

      Daniel V. Sagady, P.E., age 51, has been Vice President, Engineering & Product Development, since November 1997. Prior to that, he was Executive Director of Product Engineering since May 1996 and Director of Product Engineering since March 1994. He began his career at GM in 1967 and has spent over 30 years in the automotive industry with both Ford and GM where he has held various positions in manufacturing, quality, testing and developmental engineering. Sagady is a licensed Professional Engineer.

      Alan L. Shaffer, age 50, has been Vice President, Manufacturing Services since joining the Company in October, 2000. Prior to joining the Company, Shaffer was Executive Vice President of Eventory, Inc. in Bedford, Massachusetts. Prior to that, Shaffer served as Group Vice President, Metalworking Technologies at Milacron, Inc. since 1986.

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PART II

Item 5.  Market for Registrant’s Common Stock and Related Stockholder Matters

      Incorporated by reference from the Annual Report, page 48, section entitled “Notes to Consolidated Financial Statements, Note 12 -Unaudited Quarterly Financial Data and Market for the Company’s Common Stock”.

Item 6.  Selected Consolidated Financial Data

      Incorporated by reference from the Annual Report, inside back cover, section entitled “Six Year Financial Summary”.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation

      Incorporated by reference from the Annual Report, pages 22-31, section entitled “Management’s Discussion and Analysis”.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

      Incorporated by reference from the Annual Report, pages 29-30, section entitled “Management’s Discussion and Analysis — Market Risk”.

Item 8.  Financial Statements and Supplementary Data

      Incorporated by reference from the Annual Report, pages 21, 32-48, section entitled “Financial Statements”.

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

      None

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PART III

Item 10.  Directors and Executive Officers of the Registrant

(a)  Identification of Directors

      Incorporated by reference from the Proxy Statement, pages 11-14, sections entitled “Nominees for Class II Directors”, “Nominee for Class III Director”, and “Returning Members of the Board of Directors”.

(b)  Identification of Executive Officers

      Refer to pages 6-8 of this Form 10-K Section entitled “Executive Officers of the Registrant”.

Item 11.  Executive Compensation

      Incorporated by reference from the Proxy Statement, page 17, section entitled “Directors’ Compensation” and pages 25 — 30, section entitled “Executive Compensation, Retirement Program and Employment Agreements”.

Item 12.  Common Stock Ownership of Certain Beneficial Owners and Management

      Incorporated by reference from the Proxy Statement, page 18, section entitled “Directors’ & Officers’ Ownership of AAM Stock”.

Item 13.  Certain Relationships and Related Transactions

      Information regarding transactions with Richard E. Dauch and Blackstone is incorporated by reference from the Annual Report, page 47, section entitled “Notes to Consolidated Financial Statements, Note 10 — Related Party Transactions”.

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PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

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

           1.  Exhibits

See Item (c) below.

2.  Schedule II — Valuation and Qualifying Accounts

The report of Deloitte & Touche LLP, independent auditors, on our consolidated financial statements and schedule (Schedule II) for the years ended December 31, 2000, December 31, 1999 and December 31, 1998

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

      (b)  Report on Form 8-K

None

      (c)  Exhibits

The following exhibits were previously filed unless otherwise indicated:

Number	Description of Exhibit
3.01	Amended and Restated Certificate of Incorporation
		(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
3.02	Bylaws
		(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
4.01(a)	Specimen Stock Certificate
		(Incorporated by reference to Exhibit 4.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
4.01(b)	Indenture, dated as of March 5, 1999, among American Axle & Manufacturing, Inc., as issuer, American Axle & Manufacturing Holdings, Inc., as guarantor, and IBJ Whitehall Bank & Trust Company, as trustee
		(Incorporated by reference to Exhibit 4.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-4 (Registration No. 333-76605))
4.02	Form of 9.75% Senior Subordinated Note due 2009 (the “Exchange Note”)
		(Incorporated by reference to Exhibit 4.02 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-4 (Registration No. 333-76605))
4.03	Exchange and Registration Rights Agreement, dated March 5, 1999, among AAM Inc., Chase Securities, Inc., Donaldson Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated
		(Incorporated by reference to Exhibit 4.03 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-4 (Registration No. 333-76605))

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Number	Description of Exhibit
10.01	Letter Agreement, dated as of December 15, 1998, as amended January 11, 2000, between B.G. Mathis and the Company
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2000)
10.02	Amendment No. 3 to AAM/ GMCL Supply Agreement between American Axle & Manufacturing, Inc. (“AAM”) and General Motors of Canada Limited (“GMCL”) dated February 17, 1994, as amended (the “Supply Agreement”)
		(Incorporated by reference to Exhibit 10.02 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2000)
10.03	Agreement dated as of February 24, 2000, by and between American Axle & Manufacturing, Inc. and General Motors Corporation
		(Incorporated by reference to Exhibit 10.03 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2000)
10.04	Settlement Agreement dated as of July 28, 2000 by and between American Axle & Manufacturing, Inc. and General Motors Corporation
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2000)
10.05	Amendment No. 4 and Agreement dated as of July 27, 2000, to the Credit Agreement dated as of October 27, 1997, as amended by Amendment No. 1, Waiver and Agreement, dated as of September 30, 1998, by Amendment No. 2, and Agreement, dated as of January 11, 1999, and by Amendment No. 3 and Agreement, dated as of October 26, 1999 among AAM, the lenders party thereto, The Chase Manhattan Bank, a New York banking corporation, as administrative agent and Chase Manhattan Bank Delaware, as fronting bank
		(Incorporated by reference to Exhibit 10.02 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2000)
10.06	Amendment No. 5 and Agreement dated as of August 15, 2000, to the Credit Agreement dated as of October 27, 1997, as amended by Amendment No. 1, Waiver and Agreement, dated as of September 30, 1998, by Amendment No. 2, and Agreement, dated as of January 11, 1999, by Amendment No. 3 and Agreement, dated as of October 26, 1999 and by Amendment No. 4 and Agreement, dated as of July 27, 2000, among AAM, the lenders party thereto, The Chase Manhattan Bank, a New York banking corporation, as administrative agent and Chase Manhattan Bank Delaware, as fronting bank
		(Incorporated by reference to Exhibit 10.03 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2000)
†*10.07	Amendment dated December 20, 2000 to Employment Agreement dated as of November 6, 1997 by and between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch**
†*10.08	Stock Purchase Agreement dated December 20, 2000 by and between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch**

12

Number	Description of Exhibit
†*10.09	Supplemental Compensation Agreement dated December 20, 2000 by and between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch**
†*10.10	Employment Agreement dated September 30, 2000 by and between American Axle & Manufacturing Holdings, Inc. and Alan Shaffer**
*12	Statement of Computation of Ratio of Earnings to Fixed Charges
*13	Annual Report to Stockholders for the year ended December  31, 2000**
*21	Subsidiaries of the Company

      (All other exhibits are not applicable.)

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

 †  Reflects management contract or other compensatory arrangement

13

SIGNATURES

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

By: /s/ ROBIN J. ADAMS

Name: Robin J. Adams

Title: Executive Vice President — Finance &

Chief Financial Officer

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

Signature	Title	Date
/s/ RICHARD E. DAUCH Richard E. Dauch	Chairman of the Board of Directors & Chief Executive Officer	March 15, 2001
/s/ ROBIN J. ADAMS Robin J. Adams	Executive Vice President — Finance & Chief Financial Officer	March 15, 2001
/s/ FOREST J. FARMER, SR. Forest J. Farmer, Sr.	Director	March 15, 2001
/s/ ROBERT L. FRIEDMAN Robert L. Friedman	Director	March 15, 2001
/s/ RICHARD C. LAPPIN Richard C. Lappin	Director	March 15, 2001
/s/ B.G. MATHIS B.G. Mathis	Director	March 15, 2001
/s/ LARRY W. MCCURDY Larry W. McCurdy	Director	March 15, 2001
/s/ BRET D. PEARLMAN Bret D. Pearlman	Director	March 15, 2001
/s/ JOHN P. REILLY John P. Reilly	Director	March 15, 2001
/s/ THOMAS K. WALKER Thomas K. Walker	Director	March 15, 2001

14

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

			Additions –
	Balance at		Charged to			Deductions –			Balance
	Beginning of		Costs and			See Notes			At End of
	Period		Expenses			Below			Period
	(In millions)
Year Ended December 31, 1998:
Allowance for doubtful accounts		4.2		4.8			3.7	(1)		5.3
Valuation allowance for deferred taxes		—		45.5	(5)		—			45.5
Inventory valuation allowance		31.3		7.0			4.2	(3)		34.1
LIFO reserve		7.6		—			0.6	(4)		7.0
Year Ended December 31, 1999:
Allowance for doubtful accounts		5.3		3.1			0.4	(1)		8.0
Valuation allowance for deferred taxes		45.5		1.2			13.3	(2)		33.4
Inventory valuation allowance		34.1		4.0			3.4	(3)		34.7
LIFO reserve		7.0		0.8			—			7.8
Year Ended December 31, 2000:
Allowance for doubtful accounts		8.0		0.8			0.2	(1)		8.6
Valuation allowance for deferred taxes		33.4		1.5			6.2	(2)		28.7
Inventory valuation allowance		34.7		6.8			14.2	(3)		27.3
LIFO reserve		7.8		1.3			—			9.1

(1)	Uncollectible accounts charged off net of recoveries.
(2)	Adjustments associated with our assessment of the uncertainty of realizing the full benefit of deferred tax assets (principally related to acquired foreign NOLs and capital allowance carryforwards).
(3)	Inventory adjustments for physical quantity discrepancies and write-offs of excess and obsolete inventories.
(4)	Reductions in the calculated LIFO reserve.
(5)	Valuation allowance established in purchase accounting for acquired foreign net operating losses and capital allowance carryforwards.

15

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of

American Axle & Manufacturing Holdings, Inc.

      We have audited the accompanying consolidated balance sheets of American Axle & Manufacturing Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/  DELOITTE & TOUCHE LLP

Detroit, Michigan

January 30, 2001

16 EX-10.07 2 k60495ex10-07.txt AMENDMENT DATED 12/20/00 1 EXHIBIT 10.07 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of December 20, 2000, to the Employment Agreement (the "AGREEMENT"), dated as of November 6, 1997, by and between AMERICAN AXLE & MANUFACTURING HOLDINGS, INC., a Delaware corporation (the "COMPANY"), and Richard E. Dauch (the "EXECUTIVE"): 1. The first sentence of Section 6 of the Agreement is hereby amended to read in its entirety as follows: "The term of this Agreement shall commence October 29, 1997 and end on December 31, 2006." 2. As amended hereby, the Agreement shall continue in full force and effect in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have here unto set in their hands and seal as of the day and year first above written. AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. By: /s/ Patrick S. Lancaster -------------------------------- Patrick S. Lancaster Title: Vice President & Secretary /s/ Richard E. Dauch -------------------------------- Richard E. Dauch EX-10.08 3 k60495ex10-08.txt STOCK PURCHASE AGREEMENT DATED 12/20/00 1 EXHIBIT 10.08 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of December 20, 2000, (this "AGREEMENT"), is entered into between American Axle & Manufacturing Holdings, Inc., a Delaware corporation (the "COMPANY"), and Richard E. Dauch (the "SELLER"). BACKGROUND 1. Seller previously incurred indebtedness in connection with his earlier investment in the Company, and Seller intends to sell shares of Common Stock, par value $0.01 per share, of the Company ("COMMON STOCK") in order to generate $21,341,352.49 of sale proceeds in order that he might have the funds to repay such indebtedness, the accrued and unpaid interest thereon, and the amount of estimated tax liability of Seller in connection with such sale (the number of shares of Common Stock being sold in accordance with this Agreement to generate such proceeds, the "REPURCHASED SHARES"); 2. Seller has requested that the Company agree to purchase from Seller the Repurchased Shares upon the terms and conditions set forth herein; 3. The Company is willing to purchase the Repurchased Shares from Seller on the terms of this Agreement and in consideration of Seller extending the terms of his employment agreement with the Company through the Amendment to Employment Agreement being entered into at the same time this Agreement is entered into; and 4. In consideration of the foregoing premises and mutual covenants contained herein, the parties hereto agree as follows: ARTICLE I SALE AND PURCHASE 1.1 AGREEMENT TO SELL AND PURCHASE On the Closing Date (as defined in Section 1.2), subject to the terms and conditions of this Agreement, the Seller will sell, assign, transfer and deliver to the Company, and the Company will purchase from Seller, all of the Seller's right, title and interest in and to the Repurchased Shares owned by the Seller for an aggregate purchase price of $21,341,352.49 The number of Repurchased Shares will be calculated by dividing $21,341,352.49 by the Current Market Price (as defined in Section 1.3) as the Closing Date. 1.2 THE CLOSING Unless this Agreement shall have been terminated and the contemplated transactions shall have been abandoned in accordance with Section 5.1 hereof, and subject to the terms and conditions of this Agreement, the sale and purchase of the Repurchased Shares shall take place at a closing (the "Closing") at the offices of American Axle & Manufacturing Holdings, Inc., 1840 Holbrook Avenue, Detroit, MI 48212-3488 as soon as practicable but no later than January 31, 2001 (the "CLOSING DATE"). 1 2 (a) DELIVERIES BY THE SELLER. At or prior to the Closing Date, the Seller will deliver to the Company, against delivery by the Company of the purchase price in accordance with Section 1.1, stock certificates representing the Repurchased Shares, duly endorsed for transfer to the Company by the Seller or accompanied by stock powers duly executed in favor of the Company, and, in either case, accompanied by such other documents as may be necessary to transfer record ownership of such Common Stock on the stock transfer books of the Company together with evidence of payment of any applicable transfer and documentary stamp taxes and other fees; and (b) DELIVERIES BY THE COMPANY. The Company will wire transfer to the bank account specified in writing by the Seller immediately available funds in the amount of the purchase price in accordance with Section 1.1, against delivery by the Seller of certificates representing the Repurchased Shares. 1.3 CURRENT MARKET PRICE The "Current Market Price" for purposes of this Agreement is the average closing price of the Common Stock during the last five trading days ending prior to the Closing Date, as reported on the New York Stock Exchange. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 REPRESENTATIONS OF THE SELLER The Seller represents and warrants to the Company that: (a) on the date hereof the Seller has, and on the Closing Date the Seller will have, good, valid and marketable title to the Repurchased Shares, free and clear of all adverse claims; (b) the Seller has sole voting power and sole power of disposition with respect to all of the Repurchased Shares, with no restrictions on the Seller's rights of disposition pertaining thereto; (c) neither the execution, delivery and performance of this Agreement by the Seller nor the consummation by the Seller of the transactions contemplated hereby will require any consent, approval or notice under, constitute a violation of, or default under, or conflict with, any contract, commitment, agreement, understanding, arrangement or restriction of any kind by which the Seller is bound; (d) except as required under the Securities Exchange Act of 1934, as amended, no consent, approval or authorization of, or exemption by, or filing with, or notice to, any governmental or regulatory authority is required in connection with the execution and delivery of this Agreement by the Seller or the consummation by it of the transactions contemplated hereby; 2 3 (e) this Agreement has been duly executed and delivered by the Seller and constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms; and (f) the foregoing representations of the Seller will survive the Closing. 2.2 REPRESENTATIONS OF THE COMPANY The Company represents and warrants to the Seller that: (a) the Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware; (b) the Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; (c) neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will violate any applicable state law or require any consent, approval or notice under, constitute a violation of, or default under, or conflict with, any contract, commitment, agreement, understanding, arrangement or restriction of any kind by which the Company is bound; (d) the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by its Board of Directors, and no other corporate action on the part of the Company is required therefor; (e) this Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms; (f) except as required under the Securities Exchange Act of 1934, as amended, no consent, approval or authorization of, or exemption by, or filing with, or notice to, any governmental or regulatory authority is required in connection with the execution and delivery of this Agreement by the Company or the consummation by it of the transactions contemplated hereby; and (g) the foregoing representations of the Company will survive the Closing. ARTICLE III COVENANTS 3.1 FURTHER ASSURANCES. Subject to the terms and conditions hereof, the Company and the Seller agree to use their reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby. Neither the Company nor the Seller shall take any action inconsistent with their respective obligations under this Agreement or which could materially hinder or delay the consummation of the transactions contemplated hereby. 3 4 ARTICLE IV CONDITIONS 4.1 CONDITIONS The respective obligations of each party to effect the Closing under this Agreement is subject to the satisfaction (or, where permissible, waiver by the party entitled to the benefits thereof), at or prior to the Closing, of each of the following conditions: (a) each of the representations and warranties of the parties contained herein shall be true in all respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall be true in all respects as of such specified date; (b) no preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States or by any United States federal or state governmental or regulatory body nor any statute, rule, regulation or order of any United States, federal or state governmental authority shall be in effect which restrains, enjoins or otherwise prohibits the Company or the Seller from purchasing and selling, the Repurchased Shares. ARTICLE V TERMINATION 5.1 TERMINATION This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by the mutual written consent of the Company and the Seller; or (b) by the Company or the Seller in writing, if any federal or state court of competent jurisdiction in the United States or any United States governmental or regulatory body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby. 5.2 EFFECT OF TERMINATION In the event of the termination of this Agreement pursuant to Section 5.1, this Agreement shall be of no further force and effect and there shall be no liability on the part of the Company or the Seller hereunder. 4 5 ARTICLE VI MISCELLANEOUS 6.1 SUCCESSORS AND ASSIGNS This Agreement shall not be assignable by the Seller without the prior written consent of the Company or by the Company without the prior written consent of the Seller, except that the Company in its sole discretion may assign any of its rights under this Agreement to any of its affiliates. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement. 6.2 AMENDMENTS No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in a writing and signed by or on behalf of the Company and by or on behalf of the Seller. 6.3 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. 6.4 NOTICES Any notices, requests, demands, waivers and other communications required or permitted to be given hereunder to the Company shall be addressed to the Company in care of its Secretary at the principal executive office of the Company, and any notice required to be given hereunder to the Seller shall be sent to the Seller's address as shown on the records of the Company. 6.5 ENTIRE AGREEMENT This Agreement constitutes the entire agreement among the parties hereto and supersedes any prior agreements and understandings, oral and written, among the parties hereto with respect to the subject matter hereof. 6.6 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 5 6 6.7 STATUS OF TRANSACTION The terms of the Recapitalization and Stock Purchase Agreement, dated as of September 19, 1997, among the Company (as successor to American Axle & Manufacturing of Michigan, Inc.), the Seller and the other parties thereto are hereby amended to provide that the purchase of the Repurchased Shares shall also be deemed to occur under the terms of and in accordance with such Recapitalization and Stock Purchase Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. By: /s/ Patrick S. Lancaster ---------------------------------- Name: Patrick S. Lancaster Title: Vice President & Secretary Agreed and acknowledged as of the date first above written: /s/ Richard E. Dauch - ---------------------------------- Richard E. Dauch 6 EX-10.09 4 k60495ex10-09.txt SUPPLEMENTAL COMPENSATION AGREEMENT DATED 12/20/00 1 EXHIBIT 10.09 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. SUPPLEMENTAL COMPENSATION AGREEMENT AGREEMENT (the "AGREEMENT"), dated as of December 20, 2000, between American Axle & Manufacturing Holdings, Inc., a Delaware corporation (the "COMPANY"), and Richard E. Dauch (the "PARTICIPANT"): In consideration of the Participant's agreement to amend the term of his Employment Agreement dated November 6, 1997 with the Company (the "EMPLOYMENT AGREEMENT") to extend the term of such agreement by two years and in further consideration of the services that the Participant will provide to the Company from the date hereof through to December 31, 2006, the Company hereby agrees to provide supplemental compensation to the Participant beyond that provided for in the Employment Agreement as set forth below. 1. SUPPLEMENTAL COMPENSATION Subject to the provisions of Section 3 below, the Company shall provide supplemental compensation totaling $11,804,365.00 to the Participant beyond that provided in the Employment Agreement in five substantially equal annual installments on or before December 31 of each consecutive year, beginning on or before December 31, 2001 (each such installment being the "ANNUAL SUPPLEMENTAL COMPENSATION PAYMENT"). 2. PAYMENT OF ANNUAL SUPPLEMENTAL COMPENSATION Each Annual Supplemental Compensation Payment shall be made by the Company to the Participant, at the Company's option, in cash or in a grant of such amount of shares of Common Stock pursuant to the 1999 American Axle & Manufacturing Holdings, Inc. Stock Incentive Plan or otherwise at the then Current Market Price sufficient to equal the amount of Annual Supplemental Compensation Payment. The "Current Market Price" for purposes of this Agreement is the average of the Company's common stock during the last five trading days ending prior to the date of payment, as reported on The New York Stock Exchange. 3. TERMINATION OF EMPLOYMENT The Participant shall continue to receive the unpaid Annual Supplemental Compensation Payments following the Participant's termination (A) due to the Participant's death or "Disability", as defined in the Employment Agreement, (B) by the Company without "Cause", as defined in the Employment Agreement, or (C) by the Participant for "Good Reason", as defined in the Employment Agreement. In the event of the Participant's termination of employment by the Company for Cause or by the Participant without Good Reason, all unpaid Annual Supplemental Compensation Payments shall be forfeited without consideration. 1 2 4. NO RIGHT TO EMPLOYMENT The terms of Participant's employment with the Company are governed by the Employment Agreement. The execution and delivery of this Agreement shall impose no obligation on the Company to continue the employment of the Participant and shall not lessen or affect the Company or its affiliates' right to terminate the Participant's employment under the terms of the Employment Agreement. 5. APPLICATION OF LAWS Any payment in Shares hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required. 6. TAXES Any taxes required by federal, state or local laws to be withheld by the Company shall be withheld or shall be paid to the Company by the Participant by the time such taxes are required to be paid or deposited by the Company. 7. NOTICES Any notices required to be given hereunder to the Company shall be addressed to the Company in care of its Secretary at the principal executive office of the Company, and any notice required to be given hereunder to the Participant shall be sent to the Participant's address as shown on the records of the Company. 2 3 8. CHOICE OF LAW This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of law provisions thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. By: /s/ Patrick S. Lancaster ----------------------------------- Name: Patrick S. Lancaster Title: Vice President & Secretary Agreed and acknowledged as of the date first above written: /s/ Richard E. Dauch - ------------------------------- Richard E. Dauch 3 EX-10.10 5 k60495ex10-10.txt EMPLOYMENT AGREEMENT DATED 9/30/00 1 EXHIBIT 10.10 EMPLOYMENT AGREEMENT This Employment Agreement (hereinafter the "Agreement") is entered into as of the 30th day of September, 2000 ("Effective Date"), by and between American Axle & Manufacturing Holdings, Inc. ("Company") and Alan Shaffer (hereinafter the "Executive"). BACKGROUND WHEREAS, the Company desires to continue to employ Executive, and Executive is willing to accept employment with the Company, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and with the intention of being legally bound hereby, the parties hereby agree as follows: 1. EMPLOYMENT. The Company hereby employs Executive, and Executive hereby accepts such employment during the Employment Term as defined below and on the terms and subject to the conditions hereinafter set forth. 2. MANAGEMENT DUTIES. During the Employment Term, Executive shall serve initially as the Company's Vice President Manufacturing Services, reporting to the Company's Vice President Manufacturing & Procurement Services. 3. EXTENT OF SERVICES. During the Employment Term, Executive shall devote substantially his full time and attention and give his best efforts, skills, and professional abilities to the management and operations of the Company and its business and in carrying out the duties prescribed in the previous section. 4. COMPENSATION AND BENEFITS. (a) During the Employment Term, Executive shall receive as compensation for his services such salary, benefits, and other compensation as are set forth in Exhibit A hereto, which cash compensation shall be payable in regular installments in accordance with Company's usual payroll practices. (b) During the Employment Term, Executive shall be entitled to participate in all employee benefit plans made available by the Company in its discretion generally to all other employees of the Company from time to time. (c) Executive shall be entitled to vacation during each year of the Agreement, and such holidays established by the Company from time to time. (d) All payments made to Executive or his estate which are made pursuant to this Agreement shall be subject to such withholding as may be required by any applicable laws, including without limitation any federal, state, and local taxes as may be required to be withheld pursuant to any applicable law or regulation. 5. EXPENSE REIMBURSEMENTS. During the Employment Term, the Company shall promptly reimburse Executive for all reasonable and itemized out-of-pocket expenses incurred by Executive in the ordinary course of the Company's business, provided such expenses are incurred, reported, and approved in accordance with the Company's established written policies and procedures for Company employees generally or such written policies and procedures applicable to senior executives of the Company, if the same shall exist. 6. TERM. 1 2 The period of Executive's employment under this Agreement (the "Employment Term") shall commence on the Effective Date and, unless sooner terminated pursuant to Section 10 of this Agreement, shall continue until the close of business on the day immediately preceding the third anniversary of the Effective Date. 7. REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS OF EXECUTIVE. (a) Executive represents and warrants that he is not a party to or otherwise subject to or bound by the terms of any contract, agreement, or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder, including without limitation any contract, agreement, or understanding containing terms and provisions similar in any manner to those contained herein, and that the execution and delivery of this Agreement and the performance by Executive of his duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or policy to which Executive is a party or otherwise bound. (b) Executive recognizes and acknowledges that (i) in the course of Executive's employment by the Company it will be necessary for Executive to acquire information which could include, in whole or in part, information concerning the Company's or any parent's, subsidiary's, or affiliate's experimental and development plans, trade secrets, secret procedures, information relating to ideas, improvements, inventions, manufacturing processes, customers, software, computer programs, disclosures, processes, systems, formulas, composition, patents, patent applications, machinery, materials research activities and plans, customers or vendors and prospective customers, the Company's or any parent's, subsidiary's, or affiliate's product costs, the Company's or any parent's, subsidiary's, or affiliate's prices, profits, and volume of sales, and future business plans, and other confidential or proprietary information belonging to the Company or any parent, subsidiary, or affiliate or relating to the Company's or any parent's, subsidiary's, or affiliate's affairs, even if such information has been disclosed to one or more third parties pursuant to licensing or customer agreements or other agreements entered into by the Company or any of its affiliates (collectively, such information is referred to herein as the "Confidential Information"); (ii) the Confidential Information is the property of the Company and/or any parent, subsidiary, or affiliate, as the case may be; (iii) the use, misappropriation or disclosure of the Confidential Information would cause irreparable injury to the Company; and (iv) it is essential to the protection of the Company's good will and to the maintenance of the Company's competitive position that the Confidential Information be kept secret and that Executive not disclose the Confidential Information to others or use the Confidential Information to Executive's own advantage or the advantage of others (except as may be necessary for the performance of Executive's duties hereunder or as may otherwise be provided for herein). The term "Confidential Information" shall not include information which is or becomes generally available to the public other than as a result of a disclosure by Executive in violation of this Agreement. (c) Executive further recognizes and acknowledges that his duties at the Company may include the preparation of materials, including written or graphic materials, and that any such materials conceived or written by him shall be done as "works made for hire" as defined and used in the Copyright Act of 1976, 17 U.S.C. ss. 1 et seq. In the event of publication of such materials, Executive acknowledges that since the work is "work made for hire," the Company will solely retain and own all rights in such materials, including right of copyright and any associated goodwill. 8. EXECUTIVE'S COVENANTS AND AGREEMENTS. (a) During the Employment Term, Executive shall not engage in any other business, profession, or occupation for compensation or otherwise which would conflict with the rendition of such services, either directly or indirectly, without the prior written consent of the Company. (b) Executive agrees to hold and safeguard the Confidential Information in trust for the Company and any parent, subsidiary, or affiliate, and its and their successors and assigns and agrees that he shall not, without the prior written consent of the Company, disclose or make available to anyone for use outside the Company's organization at any time, either during his employment with the Company or thereafter, any of the Confidential Information, whether or not developed by Executive, except as required in the performance of Executive's duties to the Company. The foregoing notwithstanding, the Company acknowledges that Executive may be required by applicable law or regulation or requested in connection with any judicial, administrative, or governmental proceeding to disclose or otherwise make available some or all of the Confidential Information. In any such event, Executive shall treat such requirement or request consistent with his position as Vice President Manufacturing Services or, if such requirement or request is learned by Executive following the Employment Term, Executive shall provide the Company with 2 3 written notice of such requirement or request as soon as practicable after learning of same, shall furnish only that portion of the Confidential Information which Executive is advised by his counsel is legally required, and shall reasonably cooperate with the Company in the event the Company seeks a protective order for such disclosure. (c) Executive shall disclose promptly to the Company any and all Company Inventions (as defined below) authorized, conceived, or made by Executive during the period of Executive's employment by the Company and related to the business or activities of the Company, and hereby assigns and agrees to assign all of his right, title, and interest, together with any and all associated goodwill, world-wide in all Company Inventions and in all intellectual property rights based upon Company Inventions to the Company. Whenever requested to do so by the Company, Executive shall execute any and all applications, assignments, or other instruments which the Company shall deem reasonably necessary to apply for and obtain letters patent, mask works, trademarks, service marks, or copyrights of the United States or any foreign country or to otherwise protect the Company's interest therein or to evidence the assignments thereof to the Company. Such obligations shall continue beyond the termination of Executive's employment with the Company, regardless of the reason for such termination, with respect to Company Inventions authored, conceived, or made by Executive during the period of Executive's employment by the Company, and shall be binding upon Executive's assigns, executors, administrators, and other legal representatives. The Company shall be responsible for the preparation of any such instruments, documents, papers, and the like and for the prosecution of any proceedings and shall promptly reimburse Executive for all reasonable expenses incurred by him in compliance with this Section. In the event that the Company is unable for any reason to secure Executive's signature to any lawful and necessary document required to apply for or execute any patent, mask work, trademark, service mark, copyright, or other applications with respect to any Company Inventions (including but not limited to any renewals, extensions, continuations, divisions, or continuations in part thereof), Executive hereby irrevocably appoints the Company and its duly authorized officers and agents as his agents and attorneys in fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, mask works, trademarks, service marks, copyrights, or other rights relating to such Company Inventions with the same legal force and effect as if executed by Executive. (d) As used in this Agreement: (i) "Inventions" means any new or useful art, discovery, contribution, finding, and improvement thereof or know-how related thereto, whether patentable or not, including but not limited to contributions, concepts, ideas, developments, discoveries, processes, formulas, methods, composition, techniques, articles, machines, designs, programs or software, and mask works; and (ii) "Company Inventions" means all Inventions conceived or made by Executive, alone or with others, which (1) relate or may relate in any manner to the Business or its research and development, (2) were conceived or made, in whole or in part, on the Company's time or with any of the Company's or any parent's, subsidiary's, or affiliate's equipment, supplies, facilities or Confidential Information of the Company or any parent, subsidiary, or affiliate, or (3) result from tasks assigned to Executive by the Company. (e) Upon the termination of Executive's employment with the Company for any reason, Executive shall promptly deliver to the Company all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals, price lists, customer lists, potential customer contact lists, Company vehicles, access cards, confidential directories, documents containing, summarizing, or otherwise reflecting non-public financial or other information, and any documents concerning the Company's customers or concerning products or processes used by the Company and, without limiting the foregoing, will promptly deliver to the Company any and all other documents or materials containing or constituting Company Inventions or Confidential Information. (f) Executive acknowledges and agrees that the remedies of Company and/or any parent, subsidiary, or affiliate at law for a breach or threatened breach of any of the provisions of sections 7, 8, and 11 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, and any parent, subsidiary, or affiliate, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy which may then be available. 9. WAIVER OF BREACH. 3 4 The waiver by the Company of a breach of any provision of this Agreement by Executive shall not operate or be construed as a waiver of any other or subsequent breach by Executive of such or any other provision. No delay or omission by the Company or Executive in exercising any right, remedy, or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy, or power may be exercised by the Company or Executive from time to time and as often as may be deemed expedient or necessary by the Company or Executive in its or his sole discretion. 10. TERMINATION. (a) Notwithstanding the Employment Term set forth in Section 6 hereof, this Agreement shall terminate upon the earliest to occur of the following: (i) the close of business on the last day of the Employment Term; (ii) the Executive's death; (iii) delivery of a written notice by either party to terminate Executive's employment hereunder because of Executive's Disability (as defined below); (iv) delivery by the Company to Executive of a written notice of the Company's election to terminate Executive's employment hereunder for Cause (as defined below); (b) For purposes of this Agreement: (i) "Executive's Disability" shall have the same meaning as such term is used in such Company provided benefit plan(s) in which Executive is a plan participant at the time of such claimed Executive Disability, provided such plan(s) is/are designed to provide benefits to Executive in the event of a disability as defined therein. In the absence of such plan(s) or in the event of any ambiguity of definition, "Disability" shall mean that Executive is unable for a period of six (6) consecutive months or for an aggregate of nine (9) months in any twelve (12) month period to substantially perform Executive's duties as defined herein. Any question as to the existence of the Disability of Executive as to which Executive and Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and Company. If Executive and Company cannot agree upon a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive by such three physicians shall be final and conclusive for all purposes of this Agreement. (ii) "Cause" shall mean any of the following: (1) any breach by Executive of the terms of this Agreement, including violation of any Company policy(ies), as the same may be altered, amended, instituted, or adopted from time to time, which shall not have been cured within ten (10) business days following a written demand for performance from the Company's board of directors or its designee which identifies the manner in which the Executive is alleged to have breached this Agreement; (2) Executive's commission of any act of dishonesty in rendering services hereunder, including without limitation falsification of records, expense accounts, and other reports; (3) Executive's willful malfeasance, nonfeasance, or willful misconduct in connection with his duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its parent corporations, affiliates, or subsidiaries; (4) Executive's conviction of a felony or other crime involving moral turpitude, fraud, embezzlement, or theft, including without limitation any felony under the laws of the United States of America, Canada, or Mexico, or any state or province thereof; or 4 5 (5) drunkenness or other substance abuse while rendering services hereunder or that impairs Executive's ability to perform his duties hereunder or renders Executive unfit to serve as an Executive of the Company in the capacity contemplated hereby. (iii) Any termination of employment by the Company or by Executive which is required by written notice shall be communicated in accordance with section 12 hereof. (c) Following any termination of Executive's employment hereunder, all obligations of the Company under this Agreement (other than any obligations with respect to the payment of accrued and unpaid salary, accrued and unpaid vacation, and expense reimbursement under Section 5 hereof through the date of Executive's termination of Employment hereunder) shall terminate. 11. NON-COMPETE; NON-SOLICITATION. (a) Executive agrees that during the Employment Term and for eighteen (18) months thereafter, Executive will not directly or indirectly do any of the following: (i) engage (whether as principal, agent, officer, director, employee, consultant, partner, shareholder, individual proprietor, or otherwise, whether alone or in association with any other person or entity) in any business, enterprise, endeavor, or activity (other than the Company) which (i) manufactures or markets products or services which are similar to or compete with those produced or sold by Company or any parent, subsidiary, or affiliate of Company, including without limitation any businesses or endeavor which the Company or any parent, subsidiary, or affiliate have specific plans to conduct in the future and as to which Executive is aware of such planning, or (ii) is in competition with or substantially similar to the business conducted by Company or any parent, subsidiary, or affiliate of Company prior to the date hereof. (ii) solicit, divert, or take away, or attempt to solicit, divert or take away the trade of, or trade with, any customer, client, account, or supplier, or prospective customer, client, account or supplier of Company or any parent, subsidiary, or affiliate thereof, for any purpose other than for the benefit of the Company; (iii) recruit, solicit, or induce or attempt to recruit, solicit, or induce, any employee of the Company or any parent, subsidiary, or affiliate thereof, to leave his employment for any reason whatsoever, nor offer or provide employment, either on a full time or part time or consulting basis, to any person who then currently is, or who within one year prior thereto had been, employed by the Company or any parent, subsidiary, or affiliate thereof; (iv) interfere with business relationships (whether formed before or after the date of this Agreement) between the Company or any parent, subsidiary, or affiliate and its/their customers, suppliers, and/or joint venture partners; (v) interfere with employment relationships between Company or any parent, subsidiary, or affiliate and its/their employees, agents, or consultants. Should any provision of this Section be adjudged to any extent invalid by any competent tribunal or court, such provision shall be deemed modified to the extent necessary to make it enforceable. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this section 11 to be fair and reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. (b) The provisions of this section 11 shall not be construed to prohibit the ownership by Executive of up to 3% of any class of securities of any corporation that has a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. 5 6 12. NOTICES. All notices required or permitted hereunder shall be made in writing by hand-delivery, certified or registered first class mail, or air courier guaranteeing overnight delivery to the other party at the following addresses: To the Executive: Alan Shaffer 6441 Taylor Road Cincinnati, Ohio 45248 To Company: Vice President - Human Resources American Axle & Manufacturing, Inc. 1840 Holbrook Avenue Detroit, Michigan 48212-3488 copy to: General Counsel American Axle & Manufacturing, Inc. 1840 Holbrook Avenue Detroit, Michigan 48212-3488 or to such other address as either of such parties may designate in a written notice served upon the other party in the manner provided herein. All notices required or permitted hereunder shall be deemed duly given and received when delivered by hand, if personally delivered; on the third business day after the date of mailing if sent by certified or registered first-class mail; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 13. SEVERABILITY. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Agreement or the application of any such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. If any of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, scope, activity or subject, it shall be construed by limiting and reducing it so as to be valid and enforceable to the extent compatible with the applicable law or the determination by a court of competent jurisdiction. 14. GOVERNING LAW. The implementation and interpretation of this Agreement shall be governed by and enforced in accordance with the laws of the State of Michigan, U.S.A., without giving effect to the conflicts of laws provisions thereof. 15. BINDING EFFECT AND ASSIGNABILITY. The rights and obligations of the parties under this Agreement shall inure to the benefit of, shall be binding upon, and shall be enforceable by, their respective heirs, successors, assigns, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. Executive's rights under this Agreement shall not, in any voluntary or involuntary manner, be assigned or assignable and may not be pledged or hypothecated without the prior written consent of the Company. 16. COUNTERPARTS; SECTION HEADINGS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. The section headings of this Agreement are for convenience of reference only. 6 7 17. SURVIVAL. Except as expressly provided herein, notwithstanding the termination or expiration of this Agreement or Executive's employment hereunder for any reason, Sections 7(b), 7(c), 8, 11, 14, 15, and 17 hereof shall survive any such expiration or termination. 18. ENTIRE AGREEMENT. This instrument constitutes the entire agreement with respect to the subject matter hereof between the parties hereto and replaces and supersedes as of the date hereof any and all prior oral or written agreements and understandings between the parties hereto. This Agreement may only be modified or amended by a written agreement executed by the both the Executive and the Company. 19. AGREEMENT TO CONTROL. In the event of any conflict or inconsistency between the terms of this Agreement and the terms of any other agreement, plan, or arrangement to which Executive is a party, or which apply to or benefit the Executive, the terms of this Agreement shall control. IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the date first written above. EXECUTIVE: COMPANY: AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. /s/ Alan Shaffer - ------------------------ By: /s/ Allan R. Monich Alan Shaffer ------------------------------------ Name: Allan R. Monich ------------------------------------ Title: Vice-President Human Resources ------------------------------------ 7 8 EXHIBIT A Compensation Package for Alan Shaffer Position: Vice President Manufacturing Services of American Axle & Manufacturing Holdings, Inc. Base Monthly Salary: $16,667.00(1) Incentive Compensation (Bonus): Eligibility for annual bonus up to 100% of base salary bonus program consistent with American Axle & Manufacturing, Inc., Incentive Compensation (Bonus) Plan, as the same is adopted or amended from time to time(2) Stock Option Plan: Inclusion in the American Axle & Manufacturing, Inc. 1999 Stock Incentive Plan to purchase 100,000 shares at market price on date of grant to be earned out over three years - 1/3 each year. Company Vehicle: In accordance with the corporate vehicle program for American Axle & Manufacturing, Inc., as the same may be amended from time to time Vacation Eligibility: Four (4) weeks effective 2001 Other: Relocation package - ------------------------------------------------------------------------------- (1) Eligible for annual merit increase in accordance with corporate policies and practice (2) Based on overall performance of American Axle & Manufacturing, Inc. 8 EX-12 6 k60495ex12.htm STATEMENT OF COMPUTATION OF RATIO OF EARNINGS

EXHIBIT 12 — COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

	Year Ended December 31,
	2000			1999			1998			1997			1996
	(Unaudited)
	(In millions, except for ratios)
Fixed Charges:
Interest expense, including amortization of debt issuance costs	$	65.7		$	61.7		$	44.8		$	9.0		$	0.3
Estimated interest portion of rents		15.0			12.0			4.7			3.2			1.5
Capitalized interest		11.9			8.5			3.8			0.2			—
Preferred stock dividend		—			—			—			12.0			17.9
Gross-up of preferred stock dividend as if it were pre-tax		—			—			—			6.8			10.1
Total fixed charges as defined		92.6			82.2			53.3			31.2			29.8
Earnings:
Income from continuing operations before income tax expense		203.4			183.4			5.6			94.2			98.3
Total fixed charges as defined		92.6			82.2			53.2			31.2			29.8
Fixed charges not deducted in the determination of income from continuing operations before income tax expense		(11.9	)		(8.5	)		(3.8	)		(19.0	)		(28.0	)
Total earnings as defined	$	284.1		$	257.1		$	55.0		$	106.4		$	100.1
Ratio of earnings to fixed charges		3.07			3.13			1.03			3.41			3.36

17 EX-13 7 k60495ex13.txt ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS We are responsible for the preparation of the accompanying consolidated financial statements of American Axle & Manufacturing Holdings, Inc. ("AAM"), as well as their integrity and objectivity. The accompanying financial statements were prepared in conformity with generally accepted accounting principles and include amounts based on our best estimates and judgments. We are also responsible for maintaining a comprehensive system of internal control. Our system of internal control is designed to provide reasonable assurance that we can rely upon our accounting systems and the underlying books and records to prepare financial information presented in accordance with generally accepted accounting principles and that our associates follow established policies and procedures. We continually review our system of internal control for effectiveness. We consider the recommendations of our internal auditors and independent auditors concerning internal control and take the necessary actions that are cost-effective in the circumstances. The Audit Committee of our Board of Directors is composed entirely of directors who are not AAM associates and is responsible for assuring that we fulfilled our responsibilities in the preparation of the accompanying financial statements. The Audit Committee meets regularly with our internal auditors, the independent auditors, and AAM management to review their activities and ensure that each is properly discharging its responsibilities and to assess the effectiveness of internal control. The Audit Committee reviews the scope of audits and the accounting principles applied in our financial reporting. The Audit Committee selects the independent auditors annually in advance of the Annual Meeting of Shareholders and submits its selection for ratification at the meeting. Deloitte & Touche LLP has been engaged as independent auditors to audit the accompanying financial statements and to issue their report thereon, which appears on this page. To ensure complete independence, our internal auditors and Deloitte & Touche LLP, have full and free access to meet with the Audit Committee, without AAM management present, to discuss the results of their audits, the adequacy of internal control, and the quality of our financial reporting. /s/ Richard E. Dauch /s/ Robin J. Adams Richard E. Dauch Robin J. Adams Co-Founder, Chairman Executive Vice President - Finance & Chief Executive Officer & Chief Financial Officer January 30, 2001 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of American Axle & Manufacturing Holdings, Inc.: We have audited the accompanying consolidated balance sheets of American Axle & Manufacturing Holdings, Inc. and its subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Detroit, Michigan January 30, 2001 21 2 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW We are a Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, validation and design of driveline systems for trucks, sport utility vehicles ("SUVs") and passenger cars. A driveline system includes all of the components that transfer power from the transmission and deliver it to the drive wheels. Driveline and related products produced by us include axles, driveshafts, chassis components, driving heads, crankshafts, transmission parts and forged products. We are the principal supplier of driveline components to General Motors Corporation ("GM") for its light trucks, SUVs and rear-wheel drive ("RWD") passenger cars. As a result of our Lifetime Program Contracts with GM ("LPCs"), we are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by an LPC. Sales to GM were approximately 84.5%, 85.9% and 93.4% of our total sales in 2000, 1999 and 1998, respectively. We sell most of our products under long-term contracts at fixed prices. Some of our contracts require us to reduce our prices in subsequent years and all of our contracts allow us to negotiate price increases for engineering changes. Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs, which typically run 6 to 12 years, and require us to remain competitive with respect to technology, delivery and quality. We will compete for future GM business upon the termination of the LPCs. We also supply driveline components to DaimlerChrysler, Ford Motor Company, Nissan, Renault, Visteon Automotive, Delphi Automotive, PACCAR and other original equipment manufacturers ("OEMs") and Tier I supplier companies. Our sales to customers other than GM increased 14% to $475.4 million in 2000 as compared to $416.6 million in 1999. In addition, our sales to customers other than GM have more than tripled in comparison to 1998, when such sales were only $134.1 million, partly as a result of our acquisitions and also due to demand for our newer technology-based products. We expect our sales to customers other than GM to lead our growth over the next several years as we launch additional new driveline system product programs with DaimlerChrysler and other OEM customers. INDUSTRY AND COMPETITION The worldwide automotive industry is highly competitive. Customers are constantly pressuring suppliers to optimize and improve product cost, tech- nology, quality, and delivery. The driveline systems segment of the industry in which we compete reflects these pressures. A prevailing trend in the industry is that OEMs are shifting research and development ("R&D"), design and validation responsibility to their suppliers. The OEMs have also been reducing the number of their suppliers, preferring stronger relationships with fewer suppliers capable of providing complete systems and modules to their increasingly global operations. As a result, the number of Tier I suppliers is being reduced. We expect these trends to continue, eventually resulting in a smaller number of dominant, worldwide suppliers. We believe AAM is well positioned to compete in the worldwide automotive industry as these trends further impact our business. We will continue to leverage our excellence in manufacturing, product engineering and design to further diversify, strengthen and globalize our OEM customer base. We will also continue to invest in the development of new product, process and systems technologies to improve productive efficiency and flexibility in our operations and continue to deliver innovative new products, modules and integrated driveline systems to our customers. Our new Smart-Bar(TM) stabilizer bar-based 22 3 active roll-control system and the Integrated Oil Pan (IOP) Front Axle with Electronic Disconnect are two current examples of high value-added technology products that have resulted from our commitment to R&D and seek to improve the performance and packaging of our customers' products. In the year 2000, we generated nearly $1.5 billion, or approximately 47% of our total sales, from new axle and related driveline system components intro- duced by us in the North American light vehicle market in the last two and half years. Our strong performance in major new product introductions will continue in 2001 as we launch high-volume four-wheel drive axle programs to support GM's new mid-sized SUVs (such as the Chevrolet Trailblazer and GMC Envoy) and again in 2002 when we launch the new driveline system for the Dodge Ram 2500 and 3500 series full-size pick-up trucks and GM's new mid-sized pick-up trucks (such as the Chevrolet S-10). We believe that this performance is strong evidence of our ability to bring the right products, systems and technologies to market at a competitive cost for our customers. Just as importantly, we improved gross profit and operating income margins by nearly 10% in the year 2000 as compared to 1999 at the same time we launched such a large number of new products. We believe this is an indication of our ability to make sound investment and operating decisions that should help us toward our goal of steadily improving our financial performance over the long term. SALES FROM MAJOR NEW SALES TO CUSTOMERS GROSS PROFIT PRODUCT PROGRAMS [BAR GRAPH] OTHER THAN GM [BAR GRAPH] [BAR GRAPH]

Sales (In Millions) % of Sales -------------- ---------- 1998 $ 193.9 8.5% 1999 $ 899.0 30.4% 2000 $1,455.6 47.4%

These charts illustrate the results of three of our key operating initiatives. Sales to new customers have nearly tripled in 2000 as compared to 1998. Sales generated from major new axle and related driveline system programs introduced in the North American light vehicle market after July 1, 1998 now represent approximately 47% of our total sales. As a result of contributions from these new customer relationships and our new technology-based products, together with a continued focus on productivity improvements in manufacturing facilities, gross profit has increased to $426.2 million in year 2000, or 13.9% of sales, as compared to $279.1 million in 1998, or 12.2% of sales. 23 4 MANAGEMENTS DISCUSSION AND ANALYSIS THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT RESULTS OF OPERATIONS Net Sales [BAR GRAPH] Net sales increased approximately 4% in 2000 to $3.069 billion as compared to $2.953 billion in 1999. This is in comparison to an increase in North American light vehicle production of just under 1%. Our sales increase was primarily due to strong demand for our products and increased sales related to GM's new full-size truck and SUV programs (GMT-800 series), on which we receive a higher average dollar content per vehicle than their predecessors (GMT-400 series). For the year 2000, our average content per vehicle (as measured for our products supporting GM's North American light truck platforms) increased approximately 5% to $979 per unit as compared to $930 in 1999 and $870 in 1998. Year 2000 sales increased because we had a full year of shipments from Colfor Manufacturing, Inc. ("Colfor") and MSP Industries Corporation ("MSP"), both of which we acquired on April 1, 1999, and our joint venture in Brazil, which we acquired in the fourth quarter of 1999. Excluding the impact of businesses acquired in 1999, year 2000 sales increased approximately 2.4% as compared to 1999. Year 2000 sales also benefited from the launch of our new 11.5" rear axle produced in our new Silao, Mexico manufacturing facility ("Guanajuato Gear & Axle"). In addition to the impact of adding Colfor, MSP and our October 1998 acquisition, Albion Automotive (Holdings) Limited ("Albion"), a significant factor underlying the increase in 1999 sales as compared to 1998 was the impact of the GM work stoppage that occurred in June and July of 1998 and resulted in the shutdown of nearly all of GM's North American production facilities. This work stoppage impacted our operations in June and July 1998 and also resulted in related start-up inefficiencies in our operations in August 1998. We estimate that sales lost in 1998 as a result of the GM work stoppage were approximately $188 million and that operating income was adversely impacted by approximately $71.2 million. Sales were also adversely affected in 1998 due to the temporary reduction of certain payments made by GM to us as part of our commercial arrangements from October 1, 1997 through December 31, 1998 ("temporary payment reductions"). The temporary payment reductions were approximately $51.5 million in 1998. 24 5 Gross Profit [BAR GRAPH] Gross profit increased approximately 10% in 2000 to $426.2 million as compared to $388.8 million in 1999 and $156.4 million in 1998. Gross margin increased to 13.9% in 2000 as compared to 13.2% in 1999 and 7.7% in 1998. The increases in gross profit and gross margin in 2000 were primarily due to the increased sales of higher value-added technology products and the successful start-up of production in our new Guanajuato Gear & Axle and Cheektowaga, New York ("Cheektowaga") manufacturing facilities. The increases in gross profit and gross margin in 1999 were primarily due to the impact of higher production volumes, productivity improvements and increased sales of next generation products that carry higher average selling prices. Gross profit and gross margin in 1999 also increased as a result of the impact of the 1998 GM work stoppage and the temporary payment reductions discussed above. We estimate that gross profit was adversely affected in 1998 due to the impact of the 1998 GM work stoppage and the temporary payment reductions by approximately $71.2 million and $51.5 million, respectively. Selling, General and Administrative Expenses ("SG&A") SG&A (including research and development) increased 10% in 2000 to $162.6 million as compared to $147.6 million in 1999 and $106.4 million in 1998. The increase in SG&A spending in 2000 as compared to 1999 was primarily due to our investment in R&D, the addition of Colfor, MSP and our joint venture in Brazil, and increased profit-sharing accruals resulting from increased profitability. The increase in SG&A spending in 1999 as compared to 1998 was primarily due to increased R&D spending and the addition of Albion, Colfor, MSP and our joint venture in Brazil. SG&A also increased in 1999 due to the adverse impact of the 1998 GM work stoppage on our profit-sharing program in 1998. Research and development expenses increased $7.3 million in 2000 to $46.4 million as compared to $39.1 million in 1999 and $29.5 million in 1998. The significant increase in our R&D spending in 2000 and 1999 as compared to 1998 was primarily due to the increased costs of supporting our new customers and several high-volume new product programs under development during these periods. R&D expenses in 1999 also increased as a result of the addition of Albion, Colfor and MSP. 25 6 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT We continue to aggressively pursue development of new product, process and systems technologies in our R&D activities, particularly in the areas of mass reduction; noise, vibration and harshness improvements; durability; and new product offerings such as integrated driveline systems and modules. In addition to the Smart-Bar(TM) active roll-control system and IOP front axle discussed above, our increased commitment to R&D has resulted in our development of the PowerLite(TM) aluminum rear-axle system, TracRite(TM) traction-enhancing locking differentials (including a brand-new electronically controlled TracRite(TM) EL model) and our Gen II and Gen III universal joints, all of which have been instrumental in new product program wins for AAM. Operating Income [BAR GRAPH] Operating income increased 9% in 2000 to $259.4 million as compared to $237.8 million in 1999 and $49.9 million in 1998. Operating margin increased to 8.5% in 2000 as compared to 8.1% in 1999 and 2.5% in 1998. The increases in operating income and operating margin in 2000 and 1999 were primarily due to the factors discussed above relating to gross profit, partially offset by increased R&D and other SG&A costs and higher goodwill amortization related to the Albion, Colfor and MSP acquisitions. EBITDA(1) [BAR GRAPH] (1) EBITDA represents income from continuing operations before interest expense, income taxes, depreciation and amortization. EBITDA should not be construed as income from operations, net income or cash flow from operating activities as determined by generally accepted accounting principles. Other companies may calculate EBITDA differently. EBITDA increased 13% in 2000 to $377.0 million as compared to $334.6 million in 1999 and $119.2 million in 1998. EBITDA margins increased in 2000 to 12.3% of sales as compared to 11.3% in 1999 and 5.8% in 1998. The increases in EBITDA and EBITDA margins were primarily due to the factors discussed above relating to operating income. EBITDA also increased in 2000 and 1999 due to increases in depreciation and amortization, principally related to higher levels of capital expenditures necessary to support our new customers and new product programs. 26 7 NET INTEREST EXPENSE. Net interest expense was $58.8 million in 2000, $54.6 million in 1999 and $44.3 million in 1998. The increase in net interest expense was primarily due to higher average amounts of net debt outstanding and higher average interest rates, offset by a higher amount of interest capitalized on construction in progress. OTHER INCOME. Other income was $2.8 million in 2000 and $0.2 million in 1999 and related principally to foreign-exchange gains. Other income in 2000 also included a one-time benefit associated with stock sold in connection with the demutualization of our life-insurance provider. INCOME TAX EXPENSE. Income tax expense was $74.2 million in 2000, $67.8 million in 1999, and $2.1 million in 1998. Our effective tax rate was 36.5% in 2000 as compared to 37.0% in 1999 and 1998. The decrease in our effective income tax rate in 2000 reflects a reduction of state taxes related to investment tax credits and the net favorable resolution of various other federal and state tax audit issues. NET INCOME AND EARNINGS PER SHARE. Diluted earnings per share increased to $2.60 per share in 2000 as compared to $2.34 in 1999 and $0.08 in 1998. After adjusting for the impact of the GM work stoppage and temporary payment reductions in 1998, year-over-year earnings growth was 11% in 2000 and 43% in 1999 as compared to year-over-year sales growth of 4% in 2000 and 30% in 1999. LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs are to fund capital expenditures and debt service and to support working capital requirements in our expanding operations. We rely primarily upon operating cash flow and borrowings under our primary credit facilities to meet these needs. We believe that cash flow available from these sources will be sufficient to meet our projected capital expenditures, debt service obligations and working capital requirements in 2001. OPERATING ACTIVITIES. Net cash provided by operating activities was $252.2 million in 2000 as compared to $310.3 million in 1999. A change in payment terms with GM on March 1, 2000 from net 10 days to net 20 days adversely impacted our 2000 operating cash flow by approximately $80 million in the first quarter of 2000. A final increase in payment terms with GM to net 25(th) proximo will be effective for products shipped to GM beginning on March 1, 2001 and will complete a three-year transition from the next-day payment terms in effect prior to March 1, 1999. Operating cash flow in 2000 was also adversely impacted as compared to 1999 by our increased working capital requirements due to the start-up of production in Guanajuato Gear & Axle and Cheektowaga. In addition to the impact of Guanajuato Gear & Axle and Cheektowaga, inventories on hand at year-end 2000 reflect increases as compared to year-end 1999 necessary to support customer banking requirements. Repair parts inventories also increased in 2000 as we took delivery of a significant amount of new machinery and equipment. Operating cash flow in 2000 was also impacted in comparison to prior years by the one-time lump-sum payments we made to certain associates in connection with several new long-term collective bargaining agreements we negotiated with our unions. We also funded contributions to our various hourly and salaried pension plans of $30.5 million in 2000, well in excess of similar contributions made in 1999 and 1998. Offsetting the above described uses of cash, accounts payable at year-end 2000 were much higher than at year-end 1999. This increase in accounts payable was due primarily to our heavy capital spending in the fourth quarter of 2000. INVESTING ACTIVITIES. Capital expenditures were $381.0 million in 2000 as compared to $301.7 in 1999. We expect capital expenditures to increase further in 2001 to nearly $400 million before a substantial reduction in spending in 2002 as we complete our launch of several significant new long-term product programs and increase our productive capacity to support these new programs, while at the same time continuing to aggressively pursue cost reductions in existing operations. 27 8 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT Our largest capital projects in 2000 were related to the construction and subsequent expansion of Guanajuato Gear & Axle, which started operations in the first quarter of 2000, and the launch of several new long-term product programs in 2000 and early 2001, including GM's mid-sized SUVs and GM's heavy-duty pick-up trucks and full-size luxury sport-utility vehicles (the GMC Yukon Denali and the Cadillac Escalade). Our largest capital projects in 2001 will include additional investment to support the 2001 launch of GM's mid-sized SUVs as well as expenditures required to support the 2003 model year launch of the GM MST Program (mid-sized pick-up trucks, including the Chevrolet S-10 and GMC Sonoma) and the Dodge Ram 2500 and 3500 series of full-size pick-up trucks. Capital spending in 2001 will also include the construction of a forging facility adjacent to Guanajuato Gear & Axle. Our investing activities in 1999 and 1998 included approximately $281 million of outlays related to the Albion, Colfor and MSP acquisitions and our investment in the joint venture in Brazil. We have invested a significant amount of capital for major new product programs over the past few years and we believe these investments provide an adequate financial return. After adjusting for the impact of the GM work stoppage and temporary payment reductions in 1998, our after-tax return on invested capital ("ROIC") has been in excess of 16% for each of the most recent three years, which we believe puts us at the top end of the range for our industry.

YEAR ENDED DECEMBER 31, 2000 1999 1998PF(1) 1998 (In millions) Net income $ 129.2 $ 115.6 $ 80.8 $ 3.5 Add: After-tax net interest expense 37.3 34.4 27.9 27.9 - ---------------------------------------------------------------------------------------- After-tax return 166.5 150.0 108.7 31.4 Net debt at year-end(2) 781.9 634.7 688.9 688.9 Stockholders' equity at year-end 372.0 263.7 117.7 40.4 - ---------------------------------------------------------------------------------------- Invested capital at year-end 1,153.9 898.4 806.6 729.3 Invested capital at beginning of year 898.4 729.3 526.9 526.9 Average invested capital 1,026.2 813.9 666.8 628.1 - ---------------------------------------------------------------------------------------- ROIC(3) 16.2% 18.4% 16.3% 5.0% ========================================================================================

(1) adjusted to add back net income estimated to have been lost as a result of the 1998 GM work stoppage and temporary payment reductions (2) net debt is equal to total debt less cash and equivalents (3) other companies may calculate ROIC differently FINANCING ACTIVITIES. Net cash provided by financing activities was $24.1 million in 2000 as compared to $179.5 million in 1999. Total long-term debt increased by approximately $42.2 million to $817.1 million at December 31, 2000 as compared to December 31, 1999, principally as a result of increasing our borrowings under the Receivables Facility by $50.0 million and making our scheduled debt repayments. In addition, we raised approximately $1.1 million through the exercise of employee stock options in 2000. In December 2000, AAM's Co-Founder, Chairman & CEO Richard E. Dauch agreed to extend his employment relationship with AAM by two years until December 31, 2006. In connection with this extension, we repurchased approximately 3.1 million shares of common stock from Dauch, at current market prices, at a total cost of approximately $21.3 million. Dauch used the proceeds from the sale to pay off a personal loan incurred to pay taxes in connection with an earlier investment in AAM. We agreed to repurchase these shares because of 28 9 the favorable economic impact of this transaction and in consideration of the extension of Dauch's employment agreement. These shares will be held in Treasury and will be available to be reissued as our associates exercise stock options, or for other purposes. In 1999, our financing activities included several significant nonrecurring events. In February 1999, we raised approximately $107.7 million of net proceeds in our initial public offering ("IPO") and issued 7 million shares of common stock. The IPO was followed in March 1999 by our issuance of $300 million of 9.75% Senior Subordinated Notes Due 2009 (the "9.75% Notes"), a transaction in which we raised net proceeds of approximately $288.7 million. Also in 1999, we closed sale-leaseback transactions involving $187 million of existing machinery and equipment. DEBT CAPITALIZATION AND AVAILABILITY. Our primary credit facilities consist of our Senior Secured Bank Credit Facilities (the "Bank Credit Facilities"), which are described in further detail below, and our receivables financing facility (the "Receivables Facility"), which provides up to $153.0 million of revolving financing commitments through October 2003. Other significant sources of our debt capitalization include the 9.75% Notes and capital lease obligations. The Bank Credit Facilities, as amended in August 2000, consist of the following: - a Senior Secured Revolving Credit Facility (the "Revolver") providing for revolving loans and the issuance of letters of credit in an aggregate principal and stated amount not to exceed $378.8 million available through October 2004; and - a Senior Secured Term Loan Facility (the "Term Loan") providing for term loans in an aggregate principal amount of $374.0 million. We will make semi-annual principal payments in varying amounts on the Term Loan through April 2006, at which time the remaining balance of $175 million will be due. Pursuant to the August 2000 amendment of the Bank Credit Facilities, $106.7 million of availability under a preexisting delayed-draw term loan facility (the "Tranche A Term Loan") was either rolled over to the Revolving Credit Facility or extinguished. In addition to the rollover, participants in the Bank Credit Facilities were also permitted to increase their commitment to the Revolver. Additionally, certain financial covenants and other key terms were amended to reflect our improved corporate credit ratings and to increase our flexibility to support new business growth initiatives and our ongoing operations and customer relationships outside the United States. With respect to the Bank Credit Facilities, $374.0 million of borrowings was outstanding under the Term Loan and $378.8 million was available for future borrowings under the Revolver at year-end 2000. Additionally at year-end 2000, $120.0 million was outstanding and an additional $6.6 million was available to us under the Receivables Facility. The weighted-average interest rate of our long-term debt outstanding as of year-end 2000 was approximately 9.0% as compared to approximately 8.6% at December 31, 1999. CREDIT RATINGS UPGRADE. On May 22, 2000, Standard & Poor's raised our corporate credit and bank loan ratings to double `B' ("BB") from double `B'-minus ("BB-"). Our subordinated debt rating was raised to single `B'-plus ("B+") from single `B' ("B"). On August 7, 2000, Moody's Investors Service upgraded the ratings of our senior debt to Ba2 from Ba3. Moody's also upgraded our subordinated debt rating to B1 from B2. MARKET RISK In the normal course of business, we are exposed to market risk, principally associated with changes in foreign currency exchange rates and interest rates. To manage a portion of these inherent risks, we purchase certain types of derivative financial instruments from time to time, based on management's judgment of the trade-off between risk, opportunity and cost. We do not hold or issue derivative financial instruments for trading or speculative purposes. 29 10 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CURRENCY EXCHANGE RISK. Because most of our business is denominated in U.S. dollars, we do not currently have significant exposures relating to currency exchange risks and have only a nominal amount of currency hedges in place on the purchase of machinery and equipment at year-end 2000. Future business operations and opportunities, including the expansion of our business outside North America, may expose us to the risk that cash flows resulting from these activities may be adversely affected by changes in currency exchange rates. If and when appropriate, we intend to manage these risks by utilizing local currency funding of these expansions and various types of foreign exchange forward contracts. INTEREST RATE RISK. We are exposed to variable interest rates on the Bank Credit Facilities, the Receivables Facility and a portion of our sale-leaseback financing. The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 11% of our weighted average interest rate at December 31, 2000) on our long-term debt outstanding at year-end 2000 would be approximately $4.6 million. At year-end 2000, we have hedged a portion of our interest rate risk by entering into interest rate swaps with a notional amount of approximately $54.3 million. These interest rate swaps convert variable financing based on 3-month LIBOR rates into fixed U.S. dollar rates varying from 6.88% to 6.96%. ADOPTION OF FASB STATEMENT NO. 133. FASB Statement No. 133, is effective for us on January 1, 2001. FASB Statement No. 133 establishes standards for the recognition and measurement of derivatives and hedging activities. We do not presently expect the adoption of these new accounting standards to have a material impact on our operating results or financial condition because of the limited extent to which we engage in the types of activities affected by the standard. However, we have established procedures under which we will monitor our future Treasury, Procurement and other various operating activities for transactions and agreements covered by this standard and we are prepared to account for the impact of any such transactions and agreements in conformity with the new standards in future periods if and when applicable. With respect to the derivative instruments executed as of the adoption date of January 1, 2001, we expect to record an initial unrealized mark-to-market loss on the interest rate swaps described above of approximately $1.3 million. The fair value of our currency forward contracts outstanding at January 1, 2001 approximates break-even. DIRECT MATERIAL PURCHASING TRANSITION Through December 31, 1999, we acquired certain materials for use in the manufacture of our products through GM's purchasing network. As a result of our commercial arrangements with GM, we were precluded from directly negotiating lower purchase costs for such materials from suppliers. However, we were also protected from increases in the costs of such materials while this purchasing arrangement was in effect. If the prices of such materials exceeded prices jointly established with GM, GM increased the aggregate amount paid to us for our products. If the prices of such materials were less than prices jointly established with GM, GM reduced the aggregate amount paid to us for our products. Effective January 1, 2000, we assumed full responsibility for our entire purchasing function. As a result, while the prices at which we sell our products to GM continue to be effective as established in the LPCs, we no longer have a contractual right to pass on future increases or decreases in the material cost component of our products sold to GM, except for certain ferrous metals and certain foreign exchange exposures relating to sourcing decisions directed by GM. We believe that we can better control our material costs by establishing direct relationships with our key suppliers and by focusing on our unique requirements. In fact, we accelerated the transition to our fully independent purchasing function by approximately two years because of our confidence in our ability to achieve positive results by controlling the direct material purchasing function ourselves. 30 11 SEASONALITY Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Our business is also moderately seasonal as our major OEM customers historically have a two-week shutdown of operations in July and an approximate one-week shutdown in December. In addition, our OEM customers have historically incurred lower production rates in the third quarter as model changes enter production. Accordingly, our third quarter and fourth quarter results may reflect these trends. EFFECTS OF INFLATION Inflation generally affects us by increasing the cost of labor, equipment, utilities and raw materials. We believe that the relatively moderate rate of inflation over the past few years has not had a significant impact on our operations because we have offset the increases by realizing improvements in operating efficiency. In order to protect against the future impact of inflation, we will continue to aggressively pursue productivity improvements in our operations, principally through the increased use of the AAM Manufacturing System, a lean manufacturing system designed to reduce waste. We also plan to continue to emphasize favorable supply agreements in our direct material purchasing function, including joint efforts with key suppliers to identify and share in cost reductions, the use of long-term supply agreements when appropriate, and the further development of AAM's e-commerce initiatives. LITIGATION AND ENVIRONMENTAL REGULATIONS We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material effect on our consolidated financial condition, operating results or cash flows. GM has agreed to indemnify and hold AAM harmless from certain environmental issues identified as potential areas of environmental concern at March 1, 1994. GM has also agreed to indemnify AAM, under certain circumstances, for up to 10 years from such date with respect to certain pre-closing environmental conditions. Based on our assessment of costs associated with our environmental responsibilities, including recurring administrative costs, capital expen- ditures and other compliance costs, we do not expect such costs to have a material effect on our financial condition, results of operations, cash flows or competitive position in the foreseeable future. FORWARD-LOOKING INFORMATION Certain statements in this Management's Discussion and Analysis and elsewhere in this Annual Report are forward-looking in nature and relate to trends and events that may affect the Company's future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms "will," "expect," "anticipate," "intend," "project" and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this Annual Report. The statements are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including reduced sales by our customers, changes in economic conditions in the markets served by us, increasing competition, fluctuations in raw materials and energy prices, and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. The Company makes 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. 31 12 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 2000 1999 1998 (In millions, except per share data) Net sales $ 3,069.5 $2,953.1 $2,040.6 Cost of goods sold 2,643.3 2,564.3 1,884.2 - ----------------------------------------------------------------------------------------------- Gross profit 426.2 388.8 156.4 Selling, general and administrative expenses 162.6 147.6 106.4 Goodwill amortization 4.2 3.4 0.1 - ----------------------------------------------------------------------------------------------- Operating income 259.4 237.8 49.9 Net interest expense (58.8) (54.6) (44.3) Other income, net 2.8 0.2 - - ----------------------------------------------------------------------------------------------- Income before income taxes 203.4 183.4 5.6 Income taxes 74.2 67.8 2.1 - ----------------------------------------------------------------------------------------------- Net income $ 129.2 $ 115.6 $ 3.5 =============================================================================================== Basic earnings per share $ 2.79 $ 2.87 $ 0.11 =============================================================================================== Diluted earnings per share $ 2.60 $ 2.34 $ 0.08 ===============================================================================================

See accompanying notes to consolidated financial statements. 32 13 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2000 1999 (In millions, except per share data) ASSETS Current assets: Cash and equivalents $ 35.2 $ 140.2 Accounts receivable, net of allowance of $8.6 in 2000 and $8.0 in 1999 247.3 190.1 Inventories 160.4 133.3 Prepaid expenses and other 43.1 22.3 Deferred income taxes 14.6 19.7 - ---------------------------------------------------------------------------------------------------------- Total current assets 500.6 505.6 Property, plant and equipment, net 1,200.1 929.0 Deferred income taxes 16.1 50.5 Goodwill and other assets 185.7 188.1 - ---------------------------------------------------------------------------------------------------------- Total assets $1,902.5 $1,673.2 ========================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 341.3 $ 269.1 Accrued compensation and benefits 120.2 129.7 Other accrued expenses 48.8 44.0 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 510.3 442.8 Long-term debt 817.1 774.9 Postretirement benefits and other long-term liabilities 203.1 191.8 - ---------------------------------------------------------------------------------------------------------- Total liabilities 1,530.5 1,409.5 Stockholders' equity: Preferred stock, par value $0.01 per share; 10.0 million shares authorized; no shares outstanding in 2000 or 1999 - - Common stock, par value $0.01 per share; 150.0 million shares authorized; 46.8 million and 46.4 million shares issued in 2000 and 1999, respectively 0.5 0.5 Series common stock, par value $0.01 per share; 40.0 million shares authorized; no shares outstanding in 2000 or 1999 - - Paid-in capital 202.1 199.8 Retained earnings 193.3 64.1 Treasury stock at cost; 3.1 million shares in 2000 (21.3) - Cumulative translation adjustment (2.6) (0.7) - --------------------------------------------------------------------------------------------------------- Total stockholders' equity 372.0 263.7 - --------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $1,902.5 $1,673.2 =========================================================================================================

See accompanying notes to consolidated financial statements. 33 14 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2000 1999 1998 (In millions) OPERATING ACTIVITIES: Net income $ 129.2 $ 115.6 $ 3.5 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 107.9 89.5 68.8 Deferred income taxes 30.5 9.8 2.6 Pensions and other postretirement benefits, net of contributions 16.7 43.6 20.1 Loss on disposal of equipment 4.8 4.3 0.3 Changes in operating assets and liabilities: Accounts receivable (59.5) (46.6) 60.5 Inventories (28.8) 12.7 (27.0) Accounts payable and accrued expenses 92.3 73.7 (36.1) Other assets and liabilities (40.9) 7.7 (11.3) ----------------------------------------------------------------------------------------------------- Net cash provided by operating activities 252.2 310.3 81.4 - --------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Purchases of property, plant and equipment, net (381.0) (301.7) (210.0) Acquisitions, net of cash acquired - (239.4) (41.5) Proceeds from sale-leaseback of equipment - 187.0 - - --------------------------------------------------------------------------------------------------------- Net cash used in investing activities (381.0) (354.1) (251.5) - --------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Issuance of 9.75% Senior Subordinated Notes Due 2009 - 288.7 - Net borrowings (payments) of long-term debt 45.7 (206.7) 157.1 Debt issuance costs (1.4) (10.3) (0.1) Issuance of common stock, net - 107.7 - Employee stock option exercises 1.1 0.1 0.3 Purchase of treasury stock (21.3) - - - --------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 24.1 179.5 157.3 - --------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (0.3) - - - --------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and equivalents (105.0) 135.7 (12.8) Cash and equivalents at beginning of year 140.2 4.5 17.3 - --------------------------------------------------------------------------------------------------------- Cash and equivalents at end of year $ 35.2 $ 140.2 $ 4.5 =========================================================================================================

See accompanying notes to consolidated financial statements. 34 15 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Retained Earnings Cumulative Common Paid-in (Accumulated Treasury Translation Comprehensive Stock Capital Deficit) Stock Adjustment Income (In millions) Balance at January 1, 1998 $ - $ 92.2 $(55.0) $ - $ - Net income 3.5 $ 3.5 Foreign currency translation (0.6) (0.6) -------- Comprehensive income $ 2.9 ======== Exercise of stock options - 0.3 - --------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 - 92.5 (51.5) - (0.6) Net income 115.6 $ 115.6 Foreign currency translation (0.1) (0.1) -------- Comprehensive income $ 115.5 ======== Issuance of common stock 0.4 107.3 Exercise of stock options 0.1 - --------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 0.5 199.8 64.1 - (0.7) Net income 129.2 $ 129.2 Foreign currency translation (1.9) (1.9) -------- Comprehensive income $ 127.3 ======== Exercise of stock options, including tax benefit - 2.3 Purchase of treasury stock (21.3) - --------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $ 0.5 $202.1 $193.3 $(21.3) $(2.6) =========================================================================================================

See accompanying notes to financial statements. 35 16 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION. American Axle & Manufacturing Holdings, Inc. ("Holdings") and its subsidiaries (collectively, "we," "us," "AAM" or "the Company"), is a Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, validation and design of driveline systems for trucks, sport utility vehicles ("SUVs") and passenger cars. The driveline system includes all the components that transfer power from the transmission and deliver it to the drive wheels. Driveline and related products produced by us include axles, driveshafts, chassis components, driving heads, crankshafts, transmission parts and forged products. In addition to our 14 locations in the United States (in Michigan, New York and Ohio), the Company also has offices and facilities in Brazil, England, Germany, Japan, Mexico and Scotland. Holdings is the survivor of a migratory merger with American Axle & Manufacturing of Michigan, Inc. ("AAMM") and has no significant assets other than its 100% ownership of American Axle & Manufacturing, Inc. ("AAM Inc.") and its subsidiaries. Pursuant to this merger, which was effected in January 1999, each share of AAMM's common stock was converted into 3,945 shares of Holdings' common stock. All share and per share amounts have been adjusted to reflect this conversion. Holdings has no other subsidiaries other than AAM Inc. PRINCIPLES OF CONSOLIDATION. We include the accounts of Holdings and its subsidiaries in our consolidated financial statements. We eliminate all intercompany transactions, balances and profits in our consolidation. REVENUE RECOGNITION. We recognize revenue when products are shipped to our customers. RESEARCH AND DEVELOPMENT COSTS. We expense research and development costs ("R&D") as incurred. R&D costs were $46.4 million, $39.1 million and $29.5 million in 2000, 1999 and 1998, respectively. CASH AND EQUIVALENTS. Cash and equivalents include all of our cash balances and highly liquid investments with a maturity of 90 days or less at time of purchase. TOOLING. Costs we incur for customer tooling for which we will be reimbursed are classified as accounts receivable. When we estimate the cost of these projects to exceed customer reimbursement, we record a provision for such loss as a component of our allowance for doubtful accounts. INVENTORIES. We state inventories at the lower of cost or market. Cost is determined principally using the last-in, first-out method (LIFO). We classify perishable tooling, repair parts and other materials consumed in the manufacturing process but not incorporated into our finished products as raw materials. Inventories consist of the following:

DECEMBER 31, 2000 1999 (In millions) Raw materials, work-in- process and repair parts $138.2 $118.5 Finished goods 31.3 22.6 ------------------ Gross inventories 169.5 141.1 LIFO reserve (9.1) (7.8) ------------------ Total inventories $160.4 $133.3 ==================

36 17 PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment consists of the following:

DECEMBER 31, 2000 1999 (In millions) Land and land improvements $ 23.9 $ 23.1 Buildings and building improvements 201.1 125.7 Machinery and equipment 1,101.9 833.7 Construction in progress 236.9 227.1 - ------------------------------------------------- 1,563.8 1,209.6 Accumulated depreciation (363.7) (280.6) - ------------------------------------------------- Property, plant and equipment, net $1,200.1 $ 929.0 =================================================

We state property, plant and equipment at cost. Construction in progress includes costs incurred for the construction of buildings and building improvements, and machinery and equipment in process. We record depreciation on the straight-line method over the estimated useful lives of depreciable assets, which range from 3 to 40 years and averaged approximately 13 years in 2000. Depreciation amounted to $100.6 million, $85.5 million and $67.3 million in 2000, 1999 and 1998, respectively. GOODWILL. We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We amortize goodwill on the straight-line method over periods up to 40 years. Accumulated amortization was $7.7 million at December 31, 2000 and $3.5 million at December 31, 1999. IMPAIRMENT OF LONG-LIVED ASSETS. We periodically review the realization of our long-lived assets, including goodwill, based on an evaluation of remaining useful lives and the current and expected future profitability and cash flows related to such assets. STOCK-BASED COMPENSATION. We account for employee stock options in accordance with APB No. 25 and related interpretations. We measure compensation cost as the excess, if any, of the market price of our common stock at the date of grant over the amount our associates must pay to acquire the stock. CURRENCY TRANSLATION. We translate the assets and liabilities of our foreign subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the income statement elements of our foreign subsidiaries to U.S. dollars at average-period exchange rates. We report the effect of translation for our foreign subsidiaries that use the local currency as their functional currency as a separate component of stockholders' equity. Gains and losses resulting from the remeasurement of assets and liabilities of our foreign subsidiary that uses the U.S. dollar as its functional currency are reported in current period income. We also report any gains and losses arising from transactions denominated in a currency other than our functional currency in current period income. USE OF ESTIMATES. In order to prepare financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts and disclosures in our financial statements. Actual results could differ from those estimates. RECLASSIFICATIONS. We have reclassified certain 1998 and 1999 amounts to conform to the presentation of our 2000 financial statements. 2. ACQUISITIONS In 1999, we purchased two domestic automotive forging companies, Colfor Manufacturing Inc. ("Colfor") and MSP Industries Corporation ("MSP"), and a majority interest in a joint venture in Brazil which machines forging and driveline components for automotive OEMs for aggregate cash purchase consideration of approximately $239 million. In 1998, we acquired Albion Automotive (Holdings) Limited ("Albion") for a cash purchase price of approximately $42 million plus $30 million of assumed debt and capital lease obligations. 37 18 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT 3. LONG-TERM DEBT AND LEASE OBLIGATIONS Long-term debt consists of the following:

DECEMBER 31, 2000 1999 (In millions) Bank Credit Facilities: Revolver $ - $ - Term Loan 374.0 375.0 - -------------------------------------------------------------- Total Bank Credit Facilities 374.0 375.0 Receivables Facility 120.0 70.0 9.75% Notes, net of discount 298.1 297.9 Capital lease obligations 17.4 25.7 Other 7.6 6.3 - -------------------------------------------------------------- Long-term debt $817.1 $ 774.9 ==============================================================

BANK CREDIT FACILITIES. At December 31, 2000, the Senior Secured Bank Credit Facilities ("Bank Credit Facilities") consist of a $378.8 million Revolving Credit Facility due October 2004 ("Revolver") and a $374.0 million Senior Secured Term Loan Facility ("Term Loan") due in semi-annual installments of varying amounts through April 2006. Borrowings under the Bank Credit Facilities are secured by the capital stock of our significant subsidiaries and all of our assets except for those securing the Receivables Facility and other permitted bank, equipment and lease financings. Borrowings under the Bank Credit Facilities bear interest at rates based on LIBOR or an alternate base rate, plus an applicable margin. At December 31, 2000, $378.8 million was available for future borrowings under the Revolver. At December 31, 2000, the weighted average rate of interest on the balances outstanding under the Bank Credit Facilities was 8.6%. RECEIVABLES FACILITY. We have established a receivables financing facility (the "Receivables Facility") through AAM Receivables Corp. ("Receivables Corp."), a wholly-owned, bankruptcy-remote subsidiary of AAM Inc. Pursuant to the Receivables Facility, AAM Inc. agreed to sell certain trade receivables from time to time to Receivables Corp., which, in turn, transferred all of such receivables to a trust that issued variable funding certificates representing undivided interests in the receivables pool. Under the variable funding certificates, a bank group provided us a revolving financing commitment of up to $153.0 million through October 2003, subject to the terms and conditions of the Receivables Facility. The receivables held by the trust are not available to our general creditors. In accordance with FASB Statement No. 125, we have accounted for the Receivables Facility as if it were a secured borrowing. The Receivables Facility bears interest at rates based on LIBOR or an alternate base rate, plus an applicable margin. Availability under the Receivables Facility depends on the amount of receivables generated by AAM Inc., the rate of collection on those receivables and certain other characteristics of those receivables that affect their eligibility. At December 31, 2000, $120.0 million was outstanding and an additional $6.6 million was available to us under the Receivables Facility. The weighted-average interest rate on our borrowings under the Receivables Facility at December 31, 2000 was 8.1%. 9.75% NOTES. In March 1999, AAM Inc. issued $300 million of 9.75% Senior Subordinated Notes Due 2009 (the "9.75% Notes"). Our net proceeds from the issuance of the 9.75% Notes was approximately $288.7 million after deduction of discounts to the initial purchasers, and other fees and expenses. The 9.75% Notes are unsecured senior subordinated obligations of AAM Inc. and are fully and unconditionally guaranteed by Holdings. Prior to the maturity date of March 1, 2009, we may redeem the 9.75% Notes beginning on March 1, 2004 at stated redemption prices beginning at 104.875% at March 1, 2004 and decreasing to 100% on March 1, 2007 and thereafter. In addition, we may also redeem up to $105 million of the 9.75% Notes using the proceeds of certain equity offerings through March 1, 2002 at a redemption price of 109.75%. Including amortization of the original issue discount, the 9.75% Notes bear interest at 9.875%. 38 19 DEBT COVENANTS. The Bank Credit Facilities and the 9.75% Notes contain various operating covenants which, among other things, impose limitations on our ability to declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock, incur liens, incur indebtedness, or merge, make acquisitions or sell assets. We are also required to comply with financial covenants relating to interest coverage, leverage, retained earnings and capital expenditures. At our option, we may prepay borrowings under the Bank Credit Facilities at any time without penalty, other than breakage costs. We are also subject to mandatory prepayment terms under the Bank Credit Facilities under certain conditions. LEASES. We lease certain facilities, machinery and equipment under capital leases expiring at various dates. Approximately $34.9 million and $37.7 million of such gross asset cost is included in property, plant and equipment at December 31, 2000 and 1999, respectively. The weighted-average interest rate on these capital lease obligations was 7.0% at December 31, 2000. In 1999, we closed two sale-leaseback transactions involving approximately $187 million of existing machinery and equipment. These transactions were financed under operating leases with terms between 10 and 12 years. We are amortizing a gain on the sale of machinery and equipment of approximately $4 million over the respective lease terms. We also lease certain other facilities, machinery and equipment under operating leases expiring at various dates. All of the leases contain renewal and/or purchase options. Our expense for operating leases was $45.1 million, $32.6 million and $14.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. Future minimum payments under noncancelable operating leases are as follows: $42.6 million in 2001, $64.8 million in 2002, $26.9 million in 2003, $26.3 million in 2004, $28.5 million in 2005 and $120.6 million thereafter. DEBT MATURITIES. Aggregate maturities of long-term debt are as follows (in millions): 2001 $ 14.0 2002 6.4 2003 124.2 2004 21.2 2005 175.0 Thereafter 476.3 --------------------- Total $ 817.1 ===================== We have sufficient availability to refinance current maturities of long-term debt through the Bank Credit Facilities and the Receivables Facility and have, therefore, classified such obligations as long-term debt at December 31, 2000. Gross interest expense was $77.6 million, $70.2 million and $48.6 million in 2000, 1999 and 1998, respectively. We paid interest of $71.6 million, $55.8 million and $50.2 million in 2000, 1999 and 1998, respectively. We capitalized interest of $11.9 million, $8.5 million and $3.8 million in 2000, 1999 and 1998, respectively. Interest income was $6.8 million, $7.1 million and $0.5 million in 2000, 1999 and 1998, respectively. 4. DERIVATIVES AND RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS. In the normal course of business, we are exposed to market risk, principally associated with changes in foreign currency exchange rates and interest rates. To manage a portion of these inherent risks, we purchase certain types of derivative financial instruments, from time to time, based on management's judgment of the trade-off between risk, opportunity and cost. We do not hold or issue derivative financial instruments for trading or speculative purposes. 39 20 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT CURRENCY FORWARD CONTRACTS. Because most of our business is denominated in U.S. dollars, we do not currently have significant exposures relating to currency exchange risks. At December 31, 2000, we have currency hedges in place on the purchase of machinery and equipment with a notional amount of $5.4 million. INTEREST RATE SWAPS. We are exposed to variable interest rates on the Bank Credit Facilities, the Receivables Facility and a portion of our sale-leaseback financing. At December 31, 2000, we have hedged a portion of our interest rate risk by entering into interest rate swaps with a notional amount of approximately $54.3 million. These interest rate swaps convert variable financing based on 3-month LIBOR rates into fixed U.S. dollar rates varying from 6.88% to 6.96%. In connection with the Term Loan, we entered into a $112.5 million rate collar transaction in 1997 to pay a floating rate of interest based on 3-month LIBOR with a cap rate of 6.5% and a floor rate of 5.5%. The rate collar transaction terminated at December 31, 2000. We have designated the rate collar transaction and the interest rate swap agreements as effective hedges of the related debt and lease obligations and, accordingly, we have reflected the net cost of such agreements as an adjustment to interest expense over the lives of the debt and lease agreements. ADOPTION OF FASB STATEMENT NO. 133. FASB Statement No. 133 is effective for us on January 1, 2001. FASB Statement No. 133 establishes standards for the recognition and measurement of derivatives and hedging activities. We do not presently expect the adoption of these new accounting standards to have a material impact on our operating results or financial condition because of the limited extent to which we engage in the types of activities affected by the standard. With respect to the derivative instruments executed as of the adoption date of January 1, 2001, we expect to record an initial unrealized mark-to-market loss on the interest rate swaps described above of approximately $1.3 million. The fair value of our currency forward contracts outstanding at January 1, 2001 approximates break-even. At December 31, 1999, the interest rate swaps and collars had notional values of $175 million and unrealized losses of approximately $0.1 million. FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of our cash and equivalents, accounts receivable, accounts payable and accrued liabilities approximates their fair values due to the short-term maturities of these assets and liabilities. The carrying value of our borrowings under the Bank Credit Facilities and the Receivables Facility approximate their fair value due to the frequent resetting of the interest rate. We have estimated the fair value of the 9.75% Notes at December 31, 2000, using available market information, to be approximately $253.5 million. CONCENTRATIONS OF CREDIT RISK. In the normal course of business, we provide credit to customers in the automotive industry. We periodically evaluate the credit worthiness of our customers and we maintain reserves for potential credit losses, which, when realized, have been within the range of our allowance for doubtful accounts. When appropriate, we also diversify the concentration of invested cash among different financial institutions and we monitor the selection of counterparties to other financial instruments to avoid unnecessary concentrations of credit risk. 5. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFITS. We sponsor various qualified and non-qualified defined benefit pension plans for our eligible associates. We also maintain hourly and salaried benefit plans that provide postretirement medical, dental, vision and life benefits to our eligible retirees and their dependents in the United States. We provide benefits under collective bargaining agreements to a majority of our hourly associates. 40 21 Actuarial valuations of the U.S. benefit plans were made at September 30, 2000 and 1999, respectively. Actuarial valuations of the foreign benefit plan were made at September 30, 2000 and December 31, 1999, respectively. The following table summarizes the changes in benefit obligations and plan assets and reconciles the funded status of the benefit plans to the net benefit plan liability:

PENSION BENEFITS OTHER BENEFITS ----------------------------------------------------------- 2000 1999 2000 1999 ----------------------------------------------------------- (In millions) CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 156.8 $ 148.6 $ 90.1 $ 79.5 Service costs 20.2 21.7 18.4 21.7 Interest cost 14.0 10.9 8.5 7.2 Plan amendments 17.3 - - - Actuarial gain (6.6) (22.7) (0.6) (17.2) Participant contributions 1.7 1.7 - - Adjustment due to measurement date change (1.1) - - - Benefit payments (3.1) (2.4) (0.9) (1.1) Currency fluctuations (2.8) (1.0) - - - ---------------------------------------------------------------------------------------------------------------- Net change 39.6 8.2 25.4 10.6 - ---------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year 196.4 156.8 115.5 90.1 - ---------------------------------------------------------------------------------------------------------------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year 161.8 143.6 - - Actual return on plan assets 13.5 18.4 - - Employer contributions 30.5 1.5 0.9 1.1 Participant contributions 1.6 1.7 - - Adjustment due to measurement date change (0.8) - - - Benefit payments (3.1) (2.4) (0.9) (1.1) Currency fluctuations (3.0) (1.0) - - - ---------------------------------------------------------------------------------------------------------------- Net change 38.7 18.2 - - - ---------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 200.5 161.8 - - - ---------------------------------------------------------------------------------------------------------------- Funded status -- U. S. plans at September 30 - 1.7 (115.5) (90.1) Funded status -- foreign plan at September 30, 2000 and December 31, 1999 4.1 3.3 - - Unrecognized actuarial gain (47.3) (42.6) (31.5) (31.3) Unrecognized prior service cost 20.3 4.6 0.1 0.1 Fourth quarter contribution 0.3 3.0 0.2 0.3 - ---------------------------------------------------------------------------------------------------------------- Net liability at December 31 $(22.6) $ (30.0) $(146.7) $(121.0) ================================================================================================================

41 22 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT The principal weighted average assumptions used in the valuation of the U.S. and foreign plans were as follows:

PENSION BENEFITS OTHER BENEFITS --------------------------------------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 --------------------------------------------------------------------------------------------- U.S. Foreign U.S. Foreign U.S. Foreign --------------------------------------------------------------------------------------------- Discount rate 8.00% 6.00% 7.75% 6.00% 6.75% 5.50% 8.00% 7.85% 7.15% Expected return on plan assets 9.25% 8.00% 9.25% 8.00% 9.25% 8.00% N/A N/A N/A Rate of compensation increase 4.25% 4.00% 4.25% 4.00% 4.00% 3.50% 4.25% 4.25% 4.00%

PENSION BENEFITS OTHER BENEFITS ----------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 ----------------------------------------------------------------- (In millions) COMPONENTS OF NET PERIODIC BENEFIT COSTS: Service cost $ 20.2 $ 21.7 $ 17.2 $ 18.4 $ 21.7 $ 18.9 Interest cost 14.0 10.9 7.6 8.5 7.2 5.4 Expected asset return (13.8) (12.4) (9.0) N/A N/A N/A Amortized gain (1.5) (0.2) (1.6) (1.4) (0.4) (1.3) Amortized prior service cost 1.6 0.5 0.5 -- -- -- - ---------------------------------------------------------------------------------------------------------------- Net benefit cost $ 20.5 $ 20.5 $ 14.7 $ 25.5 $ 28.5 $ 23.0 ================================================================================================================

For measurement purposes, a 6.1% annual increase in the per-capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually to 5% for 2002 and remain at that level thereafter. Health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percent-age-point increase in the assumed health care cost trend rate would have increased total service and interest cost and the postretirement obligation by $6.4 million and $25.4 million, respectively. A one-percentage-point decrease in the assumed health care cost trend rate would have decreased total service and interest cost and the postretirement obli- gation by $4.8 million and $19.3 million, respectively. VOLUNTARY SAVINGS PLANS. Most of our U.S. associates are eligible to participate in a voluntary savings plan. Our maximum match under these plans is 50% of the first 6% of salaried associate contributions. Matching contributions amounted to $2.6 million, $1.6 million and $1.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. DEFERRED COMPENSATION PLAN. Certain U.S. associates are eligible to participate in a non-qualified deferred compensation plan. We fund a portion of the amounts elected to be deferred by the participants in this plan. Our funded portion of the plan amounted to approximately $1.4 million of the $2.6 million liability at December 31, 2000. 6. STOCK OPTIONS In 1997 and in 1999, we established two stock option plans and an incentive stock plan (the "stock compensation plans") under which a total of 9.5 million shares of common stock are authorized for issuance to our directors, officers and certain other associates in the form of options, stock appreciation rights or other awards that are based on the value of our common stock. Under these stock compensation 42 23 plans, the exercise price of the options, rights or other awards will not be less than the fair market value of our common stock on the date of grant. We have granted a total of 7.5 million options under these stock compensation plans at December 31, 2000, which become exercisable based upon duration of employment. The vesting of some of these options can be accelerated subject to the satisfaction of certain performance criteria each year. At December 31, 2000, 0.4 million of these options have been exercised. At December 31, 2000, there are also 1.7 million options held by several of our officers that were granted in 1997 as a replacement for an incentive compensation plan established in 1994. These options were immediately vested and are exercisable at a weighted-average exercise price per share of approximately $0.18. A total of 0.1 million options granted under this plan have been exercised prior to December 31, 2000. The following table summarizes activity relating to our stock options:

NUMBER OF WEIGHTED-AVERAGE SHARES EXERCISE PRICE ---------- ---------------- (In millions, except per share data) Outstanding at January 1, 1998 14.5 $ 1.71 Options granted -- -- Options exercised (0.1) 4.26 Options lapsed or canceled (0.1) 4.26 - ------------------------------------------------------------------ Outstanding at December 31, 1998 14.3 $ 1.68 Options granted 0.6 15.38 Options exercised (6.9) 0.02 Options lapsed or canceled (0.2) 6.34 - ------------------------------------------------------------------ Outstanding at December 31, 1999 7.8 $ 4.07 Options granted 1.5 14.85 Options exercised (0.4) 2.93 Options lapsed or canceled (0.1) 7.66 - ------------------------------------------------------------------ Outstanding at December 31, 2000 8.8 $ 5.90 ================================================================== Options exercisable at December 31, 1998 9.4 $ 0.31 ================================================================== Options exercisable at December 31, 1999 3.9 $ 2.42 ================================================================== Options exercisable at December 31, 2000 4.7 $ 3.29 ==================================================================

Options outstanding at December 31, 2000 have a weighted-average remaining contractual life of approximately 9 years. Of the options outstanding at December 31, 2000, 1.7 million options have exercise prices of $0.25 per share or less. The remaining 7.1 million shares have a weighted average exercise price of $7.29 per share, with a range of $4.26 to $15.56. 43 24 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT Had we determined compensation cost based upon the fair value of the options at the grant date consistent with the method specified by FASB Statement No. 123, our net income and earnings per share would have been adjusted to the pro forma amounts indicated below:

2000 1999 1998 ---- ---- ---- (In millions, except per share data) Net income as reported $ 129.2 $ 115.6 $ 3.5 ========= ========== ======== Pro forma $ 126.2 $ 114.5 $ 2.8 ========= ========== ======== Basic earnings per share as reported $ 2.79 $ 2.87 $ 0.11 ========= ========== ======== Pro forma $ 2.73 $ 2.84 $ 0.09 ========= ========== ======== Diluted earnings per share as reported $ 2.60 $ 2.34 $ 0.08 ========= ========== ======== Pro forma $ 2.57 $ 2.30 $ 0.06 ========= ========== ========

For options granted prior to our IPO in January 1999, we determined the fair value of each option using the minimum value method and an assumed interest rate of 6.13%. For options granted after the IPO, the fair value of each option was estimated on the date of grant using an option-pricing model with the following assumptions:

2000 1999 ---- ---- ASSUMPTIONS: Expected volatility 39.7% 38.6% Risk-free interest rate 5.64% 4.74% Dividend yield none none Expected life of option 7 years 7 years Weighted average grant-date fair value $ 7.89 $ 6.95

7. INCOME TAXES The following is a summary of the components of the provision for income taxes:

2000 1999 1998 ---- ---- ---- (In millions) CURRENT: Federal $ 29.6 $ 47.7 $ -- Michigan single business tax 5.5 7.2 0.4 Other state and local (3.2) (0.5) (0.9) Foreign 0.7 -- -- ------- ------- ------ Total current 32.6 54.4 (0.5) DEFERRED: Federal 34.5 11.1 3.6 Michigan single business tax 1.5 2.9 1.2 Other state and local 1.1 1.8 (0.4) Foreign 4.5 (2.4) (1.8) ------- ------- ------ Total deferred 41.6 13.4 2.6 ------- ------- ------ Total income taxes $ 74.2 $ 67.8 $ 2.1 ======= ======= ======

44 25 The following is a reconciliation of the provision for income taxes to the expected amounts using the statutory rate:

2000 1999 1998 ---- ---- ---- Federal statutory 35.0% 35.0% 35.0% State and local 1.6 4.5 5.7 Federal credits and other -- (2.5) (7.3) Foreign rate difference (0.1) -- 3.6 ---- ---- ---- Effective income tax rate 36.5% 37.0% 37.0% ==== ==== ====

The following is a summary of the significant components of our deferred tax assets and liabilities:

2000 1999 ---- ---- (In millions) CURRENT DEFERRED TAX ASSETS: Employee benefits $ 8.5 $ 11.0 Inventory 0.6 2.6 Other 5.5 6.1 ------- -------- Total current deferred tax assets $ 14.6 $ 19.7 ======= ======== NONCURRENT DEFERRED TAX ASSETS: Employee benefits $ 53.9 $ 53.6 NOL carryforwards 21.2 26.4 Fixed assets 17.8 18.3 Prepaid taxes 14.2 24.1 Tax credit carryforwards 3.7 6.4 Goodwill 1.7 1.8 Other 4.7 6.3 Valuation allowance (28.7) (33.4) ------- -------- Total noncurrent deferred tax assets 88.5 103.5 DEFERRED TAX LIABILITIES -- NONCURRENT: Fixed assets 72.4 53.0 ------- -------- Net noncurrent deferred tax assets $ 16.1 $ 50.5 ======= ========

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes and the impact of available net operating loss ("NOL") and tax credit carryforwards. 45 26 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT At December 31, 2000, we had unused NOLs for foreign tax purposes of approximately $129.9 million, including capital allowance carryforwards. None of these carryforwards expire. We also have $3.7 million of federal R&D tax credits. These tax credit carryforwards expire between 2018 and 2019. We established a valuation allowance of $45.5 million in 1998, which was subsequently reduced to $33.4 million in 1999 and $28.7 million in 2000. We reduced the valuation allowance due to changes in our assessment of the uncertainty of realizing the full benefit of the foreign NOL and capital allowance carryforwards. We considered prior operating results and future plans, as well as the utilization period of other temporary differences, in determining the amount of the valuation allowance. Income tax payments, including federal, state, local and foreign were $43.9 million, $48.8 million and $9.3 million in 2000, 1999 and 1998, respectively. 8. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:

2000 1999 1998 ---- ---- ---- (In millions, except per share data) NUMERATOR: Net income $ 129.2 $ 115.6 $ 3.5 ========= ========= ======== DENOMINATORS: Basic shares outstanding-- weighted-average shares outstanding 46.3 40.3 32.4 Effect of dilutive securities: Dilutive stock options 3.4 9.2 10.8 --------- --------- -------- Diluted shares outstanding-- adjusted weighted-average shares after assumed conversions 49.7 49.5 43.2 ========= ========= ======== Basic earnings per share $ 2.79 $ 2.87 $ 0.11 ========= ========= ======== Diluted earnings per share $ 2.60 $ 2.34 $ 0.08 ========= ========= ========

9. COMMITMENTS AND CONTINGENCIES At December 31, 2000, obligated purchase commitments for capital expenditures were approximately $210.2 million. We are involved in various legal proceedings incidental to our business. Although the outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will have a material effect on our consolidated financial condition, operating results or cash flows. 46 27 10. RELATED PARTY TRANSACTIONS In December 2000, AAM's Co-Founder, Chairman & CEO Richard E. Dauch agreed to extend his employment relationship with AAM by two years until December 31, 2006. In connection with this extension, we repurchased approximately 3.1 million shares of common stock from Dauch, at current market prices, at a total cost of approximately $21.3 million. Dauch used the proceeds from the sale to pay off a personal loan incurred to pay taxes in connection with an earlier investment in AAM. In connection with a leveraged recapitalization transaction in 1997 through which Blackstone Capital Partners II Merchant Banking Fund L.P. and certain of its affiliates (collectively "Blackstone") acquired a majority ownership interest, we entered into an agreement pursuant to which Blackstone provides certain advisory and consulting services to us. We incurred costs of $4.6 million, $4.0 million and $2.4 million for such services provided by Blackstone in 2000, 1999 and 1998, respectively. 11. SEGMENT AND GEOGRAPHIC INFORMATION We operate in one reportable segment: the manufacture, engineering, validation and design of driveline systems for trucks, sport utility vehicles ("SUVs") and passenger cars. Financial information relating to our operations by geographic area is presented in the following table. Net sales are attributed to countries based upon location of customer. Long-lived assets exclude deferred income taxes.

2000 1999 1998 ---- ---- ---- (In millions) NET SALES: United States $ 2,296.2 $ 2,285.2 $ 1,619.1 Canada 372.6 405.9 264.2 Mexico and South America 283.6 140.4 127.5 Europe and Other 139.5 126.5 29.8 Inter-geographic revenues (22.4) (4.9) -- ---------- ---------- ---------- Total net sales $ 3,069.5 $ 2,953.1 $ 2,040.6 ========== ========== ========== LONG-LIVED ASSETS: United States $ 1,156.5 $ 947.0 $ 787.0 Other 229.3 170.1 83.0 ---------- ---------- ---------- Total long-lived assets $ 1,385.8 $ 1,117.1 $ 870.0 ========== ========== ==========

With the exception of sales to General Motors Corporation ("GM"), no single customer accounted for more than 10% of our consolidated net sales in any year presented. Sales to GM were approximately 84.5%, 85.9% and 93.4% of our total net sales in 2000, 1999 and 1998, respectively. 47 28 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT 12. UNAUDITED QUARTERLY FINANCIAL DATA AND MARKET FOR THE COMPANY'S COMMON STOCK

QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 FULL YEAR - ------------- -------- ------- ------------ ----------- --------- (In millions, except per share data) 2000 Net sales $ 835.9 $ 819.7 $ 675.5 $ 738.4 $ 3,069.5 Gross profit 119.7 120.1 89.1 97.3 426.2 Net income 40.1 40.0 24.2 24.9 129.2 Diluted earnings per share(1) 0.80 0.80 0.48 0.51 2.60 Market price(2) High $ 17.13 $ 16.94 $ 16.13 $ 12.63 $ 17.13 Low $ 11.50 $ 14.13 $ 10.25 $ 5.75 $ 5.75 1999 Net sales $ 697.7 $ 800.8 $ 718.8 $ 735.8 $ 2,953.1 Gross profit 92.1 108.4 89.4 98.9 388.8 Net income 29.0 33.7 25.4 27.5 115.6 Diluted earnings per share(1) 0.61 0.67 0.50 0.56 2.34 Market price(2) High $ 16.69 $ 16.31 $ 16.94 $ 15.00 $ 16.94 Low $ 11.69 $ 12.00 $ 14.00 $ 11.94 $ 11.69

(1) Full year diluted earnings per share will not necessarily agree to the sum of the four quarters because each quarter is a separate calculation. (2) Prices are based on the composite tape of the New York Stock Exchange. We had approximately 475 stockholders of record at February 7, 2001. 48 29 THE AAM ADVANTAGE [AAM LOGO] 2000 ANNUAL REPORT Six-Year Financial Summary

YEAR ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 1998(a) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ (In millions, except per share data) STATEMENT OF INCOME DATA: Net sales $ 3,069.5 $ 2,953.1 $ 2,040.6 $ 2,147.5 $ 2,022.3 $ 1,968.1 Gross profit 426.2 388.8 156.4 216.0 172.0 179.5 Selling, general and administrative expenses 162.6 147.6 106.4 104.0 83.1 70.6 Operating income 259.4 237.8 49.9 112.0 88.9 108.9 Net interest (expense) income (58.8) (54.6) (44.3) (1.8) 9.4 9.1 Net income 129.2 115.6 3.5 55.3 61.7 70.6 Diluted earnings per share $ 2.60 $ 2.34 $ 0.08 $ 0.43 $ 0.43 $ 0.50 Diluted shares outstanding(b) 49.7 49.5 43.2 126.5 142.5 142.5 BALANCE SHEET DATA: Cash and equivalents $ 35.2 $ 140.2 $ 4.5 $ 17.3 $ 126.0 $ 170.3 Total assets 1,902.5 1,673.2 1,223.9 1,016.7 771.2 737.0 Total long-term debt 817.1 774.9 693.4 507.0 2.4 1.0 Preferred stock -- -- -- -- 200.0 200.0 Stockholders' equity 372.0 263.7 40.4 37.2 250.2 168.6 Invested capital(c) 1,153.9 898.4 729.3 526.9 326.6 199.3 OTHER DATA: Net cash provided by operating activities $ 252.2 $ 310.3 $ 81.4 $ 200.8 $ 65.7 $ 196.9 EBITDA(d) 377.0 334.6 119.2 152.8 134.7 144.8 Depreciation and amortization 107.9 89.5 68.8 50.2 36.1 25.2 Capital expenditures 381.0 301.7 210.0 282.6 162.3 147.1 - ------------------------------------------------------------------------------------------------------------------------------

(a) The following table sets forth the estimated adverse impact on our 1998 operating results related to the GM work stoppage which occurred in June and July of 1998 and the temporary reduction of certain payments made by GM to us as part of the commercial arrangements between us.

As Temporary As Reported GM Work Payment Adjusted 1998 Stoppage Reductions 1998 ----------------------------------------------- Net sales $ 2,040.6 $ 187.6 $ 51.5 $ 2,279.7 Gross profit 156.4 71.2 51.5 279.1 Operating income 49.9 71.2 51.5 172.6 EBITDA (d) 119.2 71.2 51.5 241.9

(b) Pursuant to a migratory merger effected in January 1999 and undertaken in connection with the IPO, each share of American Axle & Manufacturing of Michigan, Inc.'s common stock was converted into 3,945 shares of American Axle & Manufacturing Holdings, Inc. common stock. All share and per share amounts have been adjusted to reflect this conversion. (c) Invested capital represents the sum of total debt and stockholders' equity (including preferred stock) less cash and equivalents. (d) EBITDA represents income from continuing operations before interest expense, income taxes, depreciation and amortization. EBITDA should not be construed as income from operations, net income or cash flow from operating activities as determined by generally accepted accounting principles. Other companies may calculate EBITDA differently. 49 EX-21 8 k60495ex21.htm SUBSIDIARIES OF THE COMPANY

EXHIBIT 21 — SUBSIDIARIES OF THE COMPANY AS OF MARCH 7, 2001

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

								% Owned by
						Organized		Immediate
Subsidiary						Under Laws of		Parent(1)
American Axle & Manufacturing Holdings, Inc.							Delaware
	American Axle & Manufacturing, Inc.						Delaware		100%
		AAM Receivables Corp.					Delaware		100%
		American Axle International Sales, LTD.					U.S. V.I.		100%
		Colfor Manufacturing Inc.					Delaware		100%
		MSP Industries Corporation					Michigan		100%
			MSP Team, LLC				Michigan		99%	(2)
			MSP Holdings BV				Netherlands		100%
				MSP Investments Limited			England		100%
					Precision Forming Limited		England		50%
		American Axle & Manufacturing de Mexico Holdings S. de R.L. de C.V.					Mexico		99.99%	(2)
			Guanajuato Gear & Axle de Mexico S. de R.L. de C.V.				Mexico		99.99%	(2)
			American Axle & Manufacturing de Mexico S.A. de C.V.				Mexico		99.99%	(2)
		AAM International Holdings, Inc.					Delaware		100%
			Albion Automotive (Holdings) Limited				Scotland		100%
				Albion Automotive Limited			Scotland		100%
				Farington Components Limited			England		100%
			AAM Comércio e Participações Ltda.				Brazil		99.99%	(2)
				AAM do Brasil Ltda.			Brazil		90%

(1)	All subsidiaries set forth herein are reported in our financial statements through consolidations or under the equity method of accounting; there are no subsidiaries omitted from this list.
(2)	Remaining shares owned by the Company or its subsidiaries.

18 GRAPHIC 9 k60495pi5-178.gif begin 775 pi5-178.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 10 k60495pi5-110.gif begin 775 pi5-110.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.07

   1

                                                                   EXHIBIT 10.07


                        AMENDMENT TO EMPLOYMENT AGREEMENT


         AMENDMENT, dated as of December 20, 2000, to the Employment Agreement
(the "AGREEMENT"), dated as of November 6, 1997, by and between AMERICAN AXLE &
MANUFACTURING HOLDINGS, INC., a Delaware corporation (the "COMPANY"), and
Richard E. Dauch (the "EXECUTIVE"):

         1.   The first sentence of Section 6 of the Agreement is hereby amended
to read in its entirety as follows:

              "The term of this Agreement shall commence October 29, 1997 and
              end on December 31, 2006."

         2.   As amended hereby, the Agreement shall continue in full force and
effect in accordance with its terms.

         IN WITNESS WHEREOF, the parties hereto have here unto set in their
hands and seal as of the day and year first above written.




                                  AMERICAN AXLE & MANUFACTURING
                                  HOLDINGS, INC.



                                  By:     /s/ Patrick S. Lancaster
                                          --------------------------------
                                          Patrick S. Lancaster
                                  Title:  Vice President & Secretary


                                          /s/ Richard E. Dauch
                                          --------------------------------
                                          Richard E. Dauch

EX-10.08

   1

                                                                   EXHIBIT 10.08




                  AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
                            STOCK PURCHASE AGREEMENT


         STOCK PURCHASE AGREEMENT, dated as of December 20, 2000, (this
"AGREEMENT"), is entered into between American Axle & Manufacturing Holdings,
Inc., a Delaware corporation (the "COMPANY"), and Richard E. Dauch (the
"SELLER").

                                   BACKGROUND

         1.   Seller previously incurred indebtedness in connection with his
earlier investment in the Company, and Seller intends to sell shares of Common
Stock, par value $0.01 per share, of the Company ("COMMON STOCK") in order to
generate $21,341,352.49 of sale proceeds in order that he might have the funds
to repay such indebtedness, the accrued and unpaid interest thereon, and the
amount of estimated tax liability of Seller in connection with such sale (the
number of shares of Common Stock being sold in accordance with this Agreement to
generate such proceeds, the "REPURCHASED SHARES");

         2.   Seller has requested that the Company agree to purchase from
Seller the Repurchased Shares upon the terms and conditions set forth herein;

         3.   The Company is willing to purchase the Repurchased Shares from
Seller on the terms of this Agreement and in consideration of Seller extending
the terms of his employment agreement with the Company through the Amendment to
Employment Agreement being entered into at the same time this Agreement is
entered into; and

         4.   In consideration of the foregoing premises and mutual covenants
contained herein, the parties hereto agree as follows:


                                    ARTICLE I
                                SALE AND PURCHASE


         1.1      AGREEMENT TO SELL AND PURCHASE

         On the Closing Date (as defined in Section 1.2), subject to the terms
and conditions of this Agreement, the Seller will sell, assign, transfer and
deliver to the Company, and the Company will purchase from Seller, all of the
Seller's right, title and interest in and to the Repurchased Shares owned by the
Seller for an aggregate purchase price of $21,341,352.49 The number of
Repurchased Shares will be calculated by dividing $21,341,352.49 by the Current
Market Price (as defined in Section 1.3) as the Closing Date.

         1.2   THE CLOSING

         Unless this Agreement shall have been terminated and the contemplated
transactions shall have been abandoned in accordance with Section 5.1 hereof,
and subject to the terms and conditions of this Agreement, the sale and purchase
of the Repurchased Shares shall take place at a closing (the "Closing") at the
offices of American Axle & Manufacturing Holdings, Inc., 1840 Holbrook Avenue,
Detroit, MI 48212-3488 as soon as practicable but no later than January 31, 2001
(the "CLOSING DATE").





1

   2



         (a)    DELIVERIES BY THE SELLER. At or prior to the Closing Date, the
Seller will deliver to the Company, against delivery by the Company of the
purchase price in accordance with Section 1.1, stock certificates representing
the Repurchased Shares, duly endorsed for transfer to the Company by the Seller
or accompanied by stock powers duly executed in favor of the Company, and, in
either case, accompanied by such other documents as may be necessary to transfer
record ownership of such Common Stock on the stock transfer books of the Company
together with evidence of payment of any applicable transfer and documentary
stamp taxes and other fees; and

         (b)    DELIVERIES BY THE COMPANY. The Company will wire transfer to the
bank account specified in writing by the Seller immediately available funds in
the amount of the purchase price in accordance with Section 1.1, against
delivery by the Seller of certificates representing the Repurchased Shares.

         1.3   CURRENT MARKET PRICE

         The "Current Market Price" for purposes of this Agreement is the
average closing price of the Common Stock during the last five trading days
ending prior to the Closing Date, as reported on the New York Stock Exchange.


                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

         2.1      REPRESENTATIONS OF THE SELLER

         The Seller represents and warrants to the Company that:

         (a)   on the date hereof the Seller has, and on the Closing Date the
Seller will have, good, valid and marketable title to the Repurchased Shares,
free and clear of all adverse claims;

         (b)   the Seller has sole voting power and sole power of disposition
with respect to all of the Repurchased Shares, with no restrictions on the
Seller's rights of disposition pertaining thereto;

         (c)   neither the execution, delivery and performance of this Agreement
by the Seller nor the consummation by the Seller of the transactions
contemplated hereby will require any consent, approval or notice under,
constitute a violation of, or default under, or conflict with, any contract,
commitment, agreement, understanding, arrangement or restriction of any kind by
which the Seller is bound;

         (d)   except as required under the Securities Exchange Act of 1934, as
amended, no consent, approval or authorization of, or exemption by, or filing
with, or notice to, any governmental or regulatory authority is required in
connection with the execution and delivery of this Agreement by the Seller or
the consummation by it of the transactions contemplated hereby;



2

   3

         (e)   this Agreement has been duly executed and delivered by the Seller
and constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms; and

         (f)   the foregoing representations of the Seller will survive the
Closing.

         2.2   REPRESENTATIONS OF THE COMPANY

         The Company represents and warrants to the Seller that:

         (a)   the Company is a corporation duly organized, validly existing and
in good standing under the laws of Delaware;

         (b)   the Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby;

         (c)   neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will violate any applicable state law or require any consent, approval or
notice under, constitute a violation of, or default under, or conflict with, any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind by which the Company is bound;

         (d)   the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by its Board of Directors, and no other corporate action on the part
of the Company is required therefor;

         (e)   this Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms;


         (f) except as required under the Securities Exchange Act of 1934, as
amended, no consent, approval or authorization of, or exemption by, or filing
with, or notice to, any governmental or regulatory authority is required in
connection with the execution and delivery of this Agreement by the Company or
the consummation by it of the transactions contemplated hereby; and

         (g) the foregoing representations of the Company will survive the
Closing.

                                   ARTICLE III
                                    COVENANTS


         3.1      FURTHER ASSURANCES.

         Subject to the terms and conditions hereof, the Company and the Seller
agree to use their reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated hereby. Neither the
Company nor the Seller shall take any action inconsistent with their respective
obligations under this Agreement or which could materially hinder or delay the
consummation of the transactions contemplated hereby.


3


   4

                                   ARTICLE IV
                                   CONDITIONS


         4.1      CONDITIONS

         The respective obligations of each party to effect the Closing under
this Agreement is subject to the satisfaction (or, where permissible, waiver by
the party entitled to the benefits thereof), at or prior to the Closing, of each
of the following conditions:

         (a)   each of the representations and warranties of the parties
contained herein shall be true in all respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall be true in all respects as
of such specified date;

         (b)   no preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States or by
any United States federal or state governmental or regulatory body nor any
statute, rule, regulation or order of any United States, federal or state
governmental authority shall be in effect which restrains, enjoins or otherwise
prohibits the Company or the Seller from purchasing and selling, the Repurchased
Shares.

                                    ARTICLE V
                                   TERMINATION


         5.1   TERMINATION

         This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:

         (a)   by the mutual written consent of the Company and the Seller; or

         (b)   by the Company or the Seller in writing, if any federal or state
court of competent jurisdiction in the United States or any United States
governmental or regulatory body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby.

         5.2   EFFECT OF TERMINATION

         In the event of the termination of this Agreement pursuant to Section
5.1, this Agreement shall be of no further force and effect and there shall be
no liability on the part of the Company or the Seller hereunder.







4


   5


                                   ARTICLE VI
                                  MISCELLANEOUS


         6.1   SUCCESSORS AND ASSIGNS

         This Agreement shall not be assignable by the Seller without the prior
written consent of the Company or by the Company without the prior written
consent of the Seller, except that the Company in its sole discretion may assign
any of its rights under this Agreement to any of its affiliates. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.

         6.2   AMENDMENTS

         No amendment or waiver of any provision of this Agreement shall be
effective unless the same shall be in a writing and signed by or on behalf of
the Company and by or on behalf of the Seller.

         6.3   GOVERNING LAW

         This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to the conflicts of law
principles thereof.

         6.4   NOTICES

         Any notices, requests, demands, waivers and other communications
required or permitted to be given hereunder to the Company shall be addressed to
the Company in care of its Secretary at the principal executive office of the
Company, and any notice required to be given hereunder to the Seller shall be
sent to the Seller's address as shown on the records of the Company.

         6.5   ENTIRE AGREEMENT

         This Agreement constitutes the entire agreement among the parties
hereto and supersedes any prior agreements and understandings, oral and written,
among the parties hereto with respect to the subject matter hereof.

         6.6   COUNTERPARTS

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.




5

   6

         6.7   STATUS OF TRANSACTION

         The terms of the Recapitalization and Stock Purchase Agreement, dated
as of September 19, 1997, among the Company (as successor to American Axle &
Manufacturing of Michigan, Inc.), the Seller and the other parties thereto are
hereby amended to provide that the purchase of the Repurchased Shares shall also
be deemed to occur under the terms of and in accordance with such
Recapitalization and Stock Purchase Agreement.

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

                          AMERICAN AXLE & MANUFACTURING
                          HOLDINGS, INC.



                          By:   /s/ Patrick S. Lancaster
                                ----------------------------------
                                Name:    Patrick S. Lancaster
                                Title:   Vice President & Secretary


Agreed and acknowledged as
of the date first above written:

/s/ Richard E. Dauch
- ----------------------------------
Richard E. Dauch




6

EX-10.09

   1


                                                                   EXHIBIT 10.09




                  AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
                       SUPPLEMENTAL COMPENSATION AGREEMENT


         AGREEMENT (the "AGREEMENT"), dated as of December 20, 2000, between
American Axle & Manufacturing Holdings, Inc., a Delaware corporation (the
"COMPANY"), and Richard E. Dauch (the "PARTICIPANT"):

         In consideration of the Participant's agreement to amend the term of
his Employment Agreement dated November 6, 1997 with the Company (the
"EMPLOYMENT AGREEMENT") to extend the term of such agreement by two years and in
further consideration of the services that the Participant will provide to the
Company from the date hereof through to December 31, 2006, the Company hereby
agrees to provide supplemental compensation to the Participant beyond that
provided for in the Employment Agreement as set forth below.

         1.    SUPPLEMENTAL COMPENSATION

Subject to the provisions of Section 3 below, the Company shall provide
supplemental compensation totaling $11,804,365.00 to the Participant beyond that
provided in the Employment Agreement in five substantially equal annual
installments on or before December 31 of each consecutive year, beginning on or
before December 31, 2001 (each such installment being the "ANNUAL SUPPLEMENTAL
COMPENSATION PAYMENT").

         2.    PAYMENT OF ANNUAL SUPPLEMENTAL COMPENSATION

Each Annual Supplemental Compensation Payment shall be made by the Company to
the Participant, at the Company's option, in cash or in a grant of such amount
of shares of Common Stock pursuant to the 1999 American Axle & Manufacturing
Holdings, Inc. Stock Incentive Plan or otherwise at the then Current Market
Price sufficient to equal the amount of Annual Supplemental Compensation
Payment. The "Current Market Price" for purposes of this Agreement is the
average of the Company's common stock during the last five trading days ending
prior to the date of payment, as reported on The New York Stock Exchange.

         3.    TERMINATION OF EMPLOYMENT

The Participant shall continue to receive the unpaid Annual Supplemental
Compensation Payments following the Participant's termination (A) due to the
Participant's death or "Disability", as defined in the Employment Agreement, (B)
by the Company without "Cause", as defined in the Employment Agreement, or (C)
by the Participant for "Good Reason", as defined in the Employment Agreement. In
the event of the Participant's termination of employment by the Company for
Cause or by the Participant without Good Reason, all unpaid Annual Supplemental
Compensation Payments shall be forfeited without consideration.







1


   2

         4.    NO RIGHT TO EMPLOYMENT

The terms of Participant's employment with the Company are governed by the
Employment Agreement. The execution and delivery of this Agreement shall impose
no obligation on the Company to continue the employment of the Participant and
shall not lessen or affect the Company or its affiliates' right to terminate the
Participant's employment under the terms of the Employment Agreement.

         5.    APPLICATION OF LAWS

Any payment in Shares hereunder shall be subject to all applicable laws, rules
and regulations and to such approvals of any governmental agencies as may be
required.

         6.    TAXES

Any taxes required by federal, state or local laws to be withheld by the Company
shall be withheld or shall be paid to the Company by the Participant by the time
such taxes are required to be paid or deposited by the Company.

         7.    NOTICES

Any notices required to be given hereunder to the Company shall be addressed to
the Company in care of its Secretary at the principal executive office of the
Company, and any notice required to be given hereunder to the Participant shall
be sent to the Participant's address as shown on the records of the Company.




































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   3


         8.    CHOICE OF LAW

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflict of law provisions thereof.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

                          AMERICAN AXLE & MANUFACTURING
                          HOLDINGS, INC.

                          By:   /s/ Patrick S. Lancaster
                                -----------------------------------
                                Name:    Patrick S. Lancaster
                                Title:   Vice President & Secretary

Agreed and acknowledged as
of the date first above written:


/s/ Richard E. Dauch
- -------------------------------
Richard E. Dauch





























3

EX-10.10

   1

                                                                   EXHIBIT 10.10



                              EMPLOYMENT AGREEMENT

         This Employment Agreement (hereinafter the "Agreement") is entered into
as of the 30th day of September, 2000 ("Effective Date"), by and between
American Axle & Manufacturing Holdings, Inc. ("Company") and Alan Shaffer
(hereinafter the "Executive").

                                   BACKGROUND

         WHEREAS, the Company desires to continue to employ Executive, and
Executive is willing to accept employment with the Company, upon the terms and
subject to the conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and with the intention of being legally bound hereby, the parties hereby
agree as follows:

1.       EMPLOYMENT.

The Company hereby employs Executive, and Executive hereby accepts such
employment during the Employment Term as defined below and on the terms and
subject to the conditions hereinafter set forth.

2.       MANAGEMENT DUTIES.

During the Employment Term, Executive shall serve initially as the Company's
Vice President Manufacturing Services, reporting to the Company's Vice President
Manufacturing & Procurement Services.

3.       EXTENT OF SERVICES.

During the Employment Term, Executive shall devote substantially his full time
and attention and give his best efforts, skills, and professional abilities to
the management and operations of the Company and its business and in carrying
out the duties prescribed in the previous section.

4.       COMPENSATION AND BENEFITS.

(a)      During the Employment Term, Executive shall receive as compensation
for his services such salary, benefits, and other compensation as are set forth
in Exhibit A hereto, which cash compensation shall be payable in regular
installments in accordance with Company's usual payroll practices.

(b)      During the Employment Term, Executive shall be entitled to
participate in all employee benefit plans made available by the Company in its
discretion generally to all other employees of the Company from time to time.

(c)      Executive shall be entitled to vacation during each year of the
Agreement, and such holidays established by the Company from time to time.

(d)      All payments made to Executive or his estate which are made
pursuant to this Agreement shall be subject to such withholding as may be
required by any applicable laws, including without limitation any federal,
state, and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.

5.       EXPENSE REIMBURSEMENTS.

During the Employment Term, the Company shall promptly reimburse Executive for
all reasonable and itemized out-of-pocket expenses incurred by Executive in the
ordinary course of the Company's business, provided such expenses are incurred,
reported, and approved in accordance with the Company's established written
policies and procedures for Company employees generally or such written policies
and procedures applicable to senior executives of the Company, if the same shall
exist.

6.       TERM.



1



   2


The period of Executive's employment under this Agreement (the "Employment
Term") shall commence on the Effective Date and, unless sooner terminated
pursuant to Section 10 of this Agreement, shall continue until the close of
business on the day immediately preceding the third anniversary of the Effective
Date.

7.       REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS OF EXECUTIVE.

(a)      Executive represents and warrants that he is not a party to or
otherwise subject to or bound by the terms of any contract, agreement, or
understanding which in any manner would limit or otherwise affect his ability to
perform his obligations hereunder, including without limitation any contract,
agreement, or understanding containing terms and provisions similar in any
manner to those contained herein, and that the execution and delivery of this
Agreement and the performance by Executive of his duties hereunder shall not
constitute a breach of, or otherwise contravene, the terms of any employment
agreement or policy to which Executive is a party or otherwise bound.

(b)      Executive recognizes and acknowledges that (i) in the course of
Executive's employment by the Company it will be necessary for Executive to
acquire information which could include, in whole or in part, information
concerning the Company's or any parent's, subsidiary's, or affiliate's
experimental and development plans, trade secrets, secret procedures,
information relating to ideas, improvements, inventions, manufacturing
processes, customers, software, computer programs, disclosures, processes,
systems, formulas, composition, patents, patent applications, machinery,
materials research activities and plans, customers or vendors and prospective
customers, the Company's or any parent's, subsidiary's, or affiliate's product
costs, the Company's or any parent's, subsidiary's, or affiliate's prices,
profits, and volume of sales, and future business plans, and other confidential
or proprietary information belonging to the Company or any parent, subsidiary,
or affiliate or relating to the Company's or any parent's, subsidiary's, or
affiliate's affairs, even if such information has been disclosed to one or more
third parties pursuant to licensing or customer agreements or other agreements
entered into by the Company or any of its affiliates (collectively, such
information is referred to herein as the "Confidential Information"); (ii) the
Confidential Information is the property of the Company and/or any parent,
subsidiary, or affiliate, as the case may be; (iii) the use, misappropriation or
disclosure of the Confidential Information would cause irreparable injury to the
Company; and (iv) it is essential to the protection of the Company's good will
and to the maintenance of the Company's competitive position that the
Confidential Information be kept secret and that Executive not disclose the
Confidential Information to others or use the Confidential Information to
Executive's own advantage or the advantage of others (except as may be necessary
for the performance of Executive's duties hereunder or as may otherwise be
provided for herein). The term "Confidential Information" shall not include
information which is or becomes generally available to the public other than as
a result of a disclosure by Executive in violation of this Agreement.

(c)      Executive further recognizes and acknowledges that his duties at
the Company may include the preparation of materials, including written or
graphic materials, and that any such materials conceived or written by him shall
be done as "works made for hire" as defined and used in the Copyright Act of
1976, 17 U.S.C. ss. 1 et seq. In the event of publication of such materials,
Executive acknowledges that since the work is "work made for hire," the Company
will solely retain and own all rights in such materials, including right of
copyright and any associated goodwill.

8.       EXECUTIVE'S COVENANTS AND AGREEMENTS.

(a)      During the Employment Term, Executive shall not engage in any other
business, profession, or occupation for compensation or otherwise which would
conflict with the rendition of such services, either directly or indirectly,
without the prior written consent of the Company.

(b)      Executive agrees to hold and safeguard the Confidential Information
in trust for the Company and any parent, subsidiary, or affiliate, and its and
their successors and assigns and agrees that he shall not, without the prior
written consent of the Company, disclose or make available to anyone for use
outside the Company's organization at any time, either during his employment
with the Company or thereafter, any of the Confidential Information, whether or
not developed by Executive, except as required in the performance of Executive's
duties to the Company. The foregoing notwithstanding, the Company acknowledges
that Executive may be required by applicable law or regulation or requested in
connection with any judicial, administrative, or governmental proceeding to
disclose or otherwise make available some or all of the Confidential
Information. In any such event, Executive shall treat such requirement or
request consistent with his position as Vice President Manufacturing Services
or, if such requirement or request is learned by Executive following the
Employment Term, Executive shall provide the Company with





2

   3


written notice of such requirement or request as soon as practicable after
learning of same, shall furnish only that portion of the Confidential
Information which Executive is advised by his counsel is legally required, and
shall reasonably cooperate with the Company in the event the Company seeks a
protective order for such disclosure.

(c)      Executive shall disclose promptly to the Company any and all
Company Inventions (as defined below) authorized, conceived, or made by
Executive during the period of Executive's employment by the Company and related
to the business or activities of the Company, and hereby assigns and agrees to
assign all of his right, title, and interest, together with any and all
associated goodwill, world-wide in all Company Inventions and in all
intellectual property rights based upon Company Inventions to the Company.
Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, or other instruments which the Company shall deem
reasonably necessary to apply for and obtain letters patent, mask works,
trademarks, service marks, or copyrights of the United States or any foreign
country or to otherwise protect the Company's interest therein or to evidence
the assignments thereof to the Company. Such obligations shall continue beyond
the termination of Executive's employment with the Company, regardless of the
reason for such termination, with respect to Company Inventions authored,
conceived, or made by Executive during the period of Executive's employment by
the Company, and shall be binding upon Executive's assigns, executors,
administrators, and other legal representatives. The Company shall be
responsible for the preparation of any such instruments, documents, papers, and
the like and for the prosecution of any proceedings and shall promptly reimburse
Executive for all reasonable expenses incurred by him in compliance with this
Section. In the event that the Company is unable for any reason to secure
Executive's signature to any lawful and necessary document required to apply for
or execute any patent, mask work, trademark, service mark, copyright, or other
applications with respect to any Company Inventions (including but not limited
to any renewals, extensions, continuations, divisions, or continuations in part
thereof), Executive hereby irrevocably appoints the Company and its duly
authorized officers and agents as his agents and attorneys in fact to execute
and file any such application and to do all other lawfully permitted acts to
further the prosecution and issuance of patents, mask works, trademarks, service
marks, copyrights, or other rights relating to such Company Inventions with the
same legal force and effect as if executed by Executive.

(d)      As used in this Agreement: (i) "Inventions" means any new or useful
art, discovery, contribution, finding, and improvement thereof or know-how
related thereto, whether patentable or not, including but not limited to
contributions, concepts, ideas, developments, discoveries, processes, formulas,
methods, composition, techniques, articles, machines, designs, programs or
software, and mask works; and (ii) "Company Inventions" means all Inventions
conceived or made by Executive, alone or with others, which (1) relate or may
relate in any manner to the Business or its research and development, (2) were
conceived or made, in whole or in part, on the Company's time or with any of the
Company's or any parent's, subsidiary's, or affiliate's equipment, supplies,
facilities or Confidential Information of the Company or any parent, subsidiary,
or affiliate, or (3) result from tasks assigned to Executive by the Company.

(e)      Upon the termination of Executive's employment with the Company for
any reason, Executive shall promptly deliver to the Company all correspondence,
drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts,
programs, proposals, price lists, customer lists, potential customer contact
lists, Company vehicles, access cards, confidential directories, documents
containing, summarizing, or otherwise reflecting non-public financial or other
information, and any documents concerning the Company's customers or concerning
products or processes used by the Company and, without limiting the foregoing,
will promptly deliver to the Company any and all other documents or materials
containing or constituting Company Inventions or Confidential Information.

(f)      Executive acknowledges and agrees that the remedies of Company
and/or any parent, subsidiary, or affiliate at law for a breach or threatened
breach of any of the provisions of sections 7, 8, and 11 would be inadequate
and, in recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company,
and any parent, subsidiary, or affiliate, without posting any bond, shall be
entitled to cease making any payments or providing any benefit otherwise
required by this Agreement and obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction, or
any other equitable remedy which may then be available.

9.       WAIVER OF BREACH.





3



   4


The waiver by the Company of a breach of any provision of this Agreement by
Executive shall not operate or be construed as a waiver of any other or
subsequent breach by Executive of such or any other provision. No delay or
omission by the Company or Executive in exercising any right, remedy, or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy, or power may be exercised by the Company or
Executive from time to time and as often as may be deemed expedient or necessary
by the Company or Executive in its or his sole discretion.

10.      TERMINATION.

(a)      Notwithstanding the Employment Term set forth in Section 6 hereof,
this Agreement shall terminate upon the earliest to occur of the following:

         (i)    the close of business on the last day of the Employment Term;

         (ii)   the Executive's death;

         (iii)  delivery of a written notice by either party to terminate
         Executive's employment hereunder because of Executive's Disability (as
         defined below);

         (iv)   delivery by the Company to Executive of a written  notice of the
         Company's  election to terminate Executive's employment hereunder for
         Cause (as defined below);

(b)      For purposes of this Agreement:

         (i)    "Executive's Disability" shall have the same meaning as such
         term is used in such Company provided benefit plan(s) in which
         Executive is a plan participant at the time of such claimed Executive
         Disability, provided such plan(s) is/are designed to provide benefits
         to Executive in the event of a disability as defined therein. In the
         absence of such plan(s) or in the event of any ambiguity of definition,
         "Disability" shall mean that Executive is unable for a period of six
         (6) consecutive months or for an aggregate of nine (9) months in any
         twelve (12) month period to substantially perform Executive's duties as
         defined herein. Any question as to the existence of the Disability of
         Executive as to which Executive and Company cannot agree shall be
         determined in writing by a qualified independent physician mutually
         acceptable to Executive and Company. If Executive and Company cannot
         agree upon a qualified independent physician, each shall appoint such a
         physician and those two physicians shall select a third who shall make
         such determination in writing. The determination of Disability made in
         writing to the Company and Executive by such three physicians shall be
         final and conclusive for all purposes of this Agreement.

         (ii)     "Cause" shall mean any of the following:

                  (1)   any breach by Executive of the terms of this Agreement,
                  including violation of any Company policy(ies), as the same
                  may be altered, amended, instituted, or adopted from time to
                  time, which shall not have been cured within ten (10) business
                  days following a written demand for performance from the
                  Company's board of directors or its designee which identifies
                  the manner in which the Executive is alleged to have breached
                  this Agreement;

                  (2)   Executive's  commission  of any  act of  dishonesty  in
                  rendering  services  hereunder, including without limitation
                  falsification of records, expense accounts, and other reports;

                  (3)   Executive's willful malfeasance, nonfeasance, or willful
                  misconduct in connection with his duties hereunder or any act
                  or omission which is materially injurious to the financial
                  condition or business reputation of the Company or any of its
                  parent corporations, affiliates, or subsidiaries;

                  (4)   Executive's conviction of a felony or other crime
                  involving moral turpitude, fraud, embezzlement, or theft,
                  including without limitation any felony under the laws of the
                  United States of America, Canada, or Mexico, or any state or
                  province thereof; or



4


   5


                  (5)   drunkenness or other substance abuse while rendering
                  services hereunder or that impairs Executive's ability to
                  perform his duties hereunder or renders Executive unfit to
                  serve as an Executive of the Company in the capacity
                  contemplated hereby.

         (iii) Any termination of employment by the Company or by Executive
         which is required by written notice shall be communicated in accordance
         with section 12 hereof.

(c)      Following any termination of Executive's employment hereunder, all
obligations of the Company under this Agreement (other than any obligations with
respect to the payment of accrued and unpaid salary, accrued and unpaid
vacation, and expense reimbursement under Section 5 hereof through the date of
Executive's termination of Employment hereunder) shall terminate.

11.      NON-COMPETE;  NON-SOLICITATION.

(a)      Executive agrees that during the Employment Term and for eighteen (18)
months thereafter, Executive will not directly or indirectly do any of the
following:

         (i)   engage (whether as principal, agent, officer, director, employee,
         consultant, partner, shareholder, individual proprietor, or otherwise,
         whether alone or in association with any other person or entity) in any
         business, enterprise, endeavor, or activity (other than the Company)
         which (i) manufactures or markets products or services which are
         similar to or compete with those produced or sold by Company or any
         parent, subsidiary, or affiliate of Company, including without
         limitation any businesses or endeavor which the Company or any parent,
         subsidiary, or affiliate have specific plans to conduct in the future
         and as to which Executive is aware of such planning, or (ii) is in
         competition with or substantially similar to the business conducted by
         Company or any parent, subsidiary, or affiliate of Company prior to the
         date hereof.

         (ii)   solicit, divert, or take away, or attempt to solicit, divert or
         take away the trade of, or trade with, any customer, client, account,
         or supplier, or prospective customer, client, account or supplier of
         Company or any parent, subsidiary, or affiliate thereof, for any
         purpose other than for the benefit of the Company;

         (iii)   recruit, solicit, or induce or attempt to recruit, solicit, or
         induce, any employee of the Company or any parent, subsidiary, or
         affiliate thereof, to leave his employment for any reason whatsoever,
         nor offer or provide employment, either on a full time or part time or
         consulting basis, to any person who then currently is, or who within
         one year prior thereto had been, employed by the Company or any parent,
         subsidiary, or affiliate thereof;

         (iv)   interfere with business relationships (whether formed before or
         after the date of this Agreement) between the Company or any parent,
         subsidiary, or affiliate and its/their customers, suppliers, and/or
         joint venture partners;

         (v)   interfere with employment relationships between Company or any
         parent, subsidiary, or affiliate and its/their employees, agents, or
         consultants.

Should any provision of this Section be adjudged to any extent invalid by any
competent tribunal or court, such provision shall be deemed modified to the
extent necessary to make it enforceable. It is expressly understood and agreed
that although Executive and the Company consider the restrictions contained in
this section 11 to be fair and reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is an unenforceable restriction
against Executive, the provisions of this Agreement shall not be rendered void
but shall be deemed amended to apply as to such maximum time and territory and
to such maximum extent as such court may judicially determine or indicate to be
enforceable.

(b)      The provisions of this section 11 shall not be construed to prohibit
the ownership by Executive of up to 3% of any class of securities of any
corporation that has a class of securities registered pursuant to the Securities
Exchange Act of 1934, as amended.





5

   6
12.      NOTICES.

All notices required or permitted hereunder shall be made in writing by
hand-delivery, certified or registered first class mail, or air courier
guaranteeing overnight delivery to the other party at the following addresses:

         To the Executive:       Alan Shaffer
                                 6441 Taylor Road
                                 Cincinnati, Ohio  45248

               To Company:       Vice President - Human Resources
                                 American Axle & Manufacturing, Inc.
                                 1840 Holbrook Avenue
                                 Detroit, Michigan  48212-3488

                  copy to:       General Counsel
                                 American Axle & Manufacturing, Inc.
                                 1840 Holbrook Avenue
                                 Detroit, Michigan  48212-3488

or to such other address as either of such parties may designate in a written
notice served upon the other party in the manner provided herein. All notices
required or permitted hereunder shall be deemed duly given and received when
delivered by hand, if personally delivered; on the third business day after the
date of mailing if sent by certified or registered first-class mail; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.

13.      SEVERABILITY.

If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be held invalid or unenforceable by
a court of competent jurisdiction, the remainder of this Agreement or the
application of any such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. If any of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, scope, activity or subject, it shall be construed by limiting
and reducing it so as to be valid and enforceable to the extent compatible with
the applicable law or the determination by a court of competent jurisdiction.

14.      GOVERNING LAW.

The implementation and interpretation of this Agreement shall be governed by and
enforced in accordance with the laws of the State of Michigan, U.S.A., without
giving effect to the conflicts of laws provisions thereof.


15.      BINDING EFFECT AND ASSIGNABILITY.

The rights and obligations of the parties under this Agreement shall inure to
the benefit of, shall be binding upon, and shall be enforceable by, their
respective heirs, successors, assigns, personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. Executive's rights under this Agreement shall not, in any voluntary or
involuntary manner, be assigned or assignable and may not be pledged or
hypothecated without the prior written consent of the Company.

16.      COUNTERPARTS;  SECTION HEADINGS.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument. The section headings of this Agreement are for
convenience of reference only.






6



   7
17.      SURVIVAL.

Except as expressly provided herein, notwithstanding the termination or
expiration of this Agreement or Executive's employment hereunder for any reason,
Sections 7(b), 7(c), 8, 11, 14, 15, and 17 hereof shall survive any such
expiration or termination.

18.      ENTIRE AGREEMENT.

This instrument constitutes the entire agreement with respect to the subject
matter hereof between the parties hereto and replaces and supersedes as of the
date hereof any and all prior oral or written agreements and understandings
between the parties hereto. This Agreement may only be modified or amended by a
written agreement executed by the both the Executive and the Company.

19.      AGREEMENT TO CONTROL.

In the event of any conflict or inconsistency between the terms of this
Agreement and the terms of any other agreement, plan, or arrangement to which
Executive is a party, or which apply to or benefit the Executive, the terms of
this Agreement shall control.

         IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the date first written above.

EXECUTIVE:                         COMPANY:

                                   AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

/s/ Alan Shaffer
- ------------------------           By:   /s/ Allan R. Monich
Alan Shaffer                             ------------------------------------
                                   Name:     Allan R. Monich
                                         ------------------------------------
                                   Title:    Vice-President Human Resources
                                         ------------------------------------





















7


   8


                                   EXHIBIT A

                      Compensation Package for Alan Shaffer


Position:                          Vice President Manufacturing Services of
                                   American Axle & Manufacturing Holdings, Inc.

Base Monthly Salary:               $16,667.00(1)

Incentive Compensation (Bonus):    Eligibility for annual bonus up to 100% of
                                   base salary bonus program consistent with
                                   American Axle & Manufacturing, Inc.,
                                   Incentive Compensation (Bonus) Plan, as the
                                   same is adopted or amended from time
                                   to time(2)

Stock Option Plan:                 Inclusion in the American Axle &
                                   Manufacturing, Inc. 1999 Stock Incentive Plan
                                   to purchase 100,000 shares at market price on
                                   date of grant to be earned out over three
                                   years - 1/3 each year.

Company Vehicle:                   In accordance with the corporate vehicle
                                   program for American Axle & Manufacturing,
                                   Inc., as the same may be amended from time to
                                   time

Vacation Eligibility:              Four (4) weeks effective 2001

Other:                             Relocation package

- -------------------------------------------------------------------------------

(1)   Eligible for annual merit increase in accordance with corporate policies
      and practice
(2)   Based on overall performance of American Axle & Manufacturing, Inc.





8

EX-12

ex12

EX-13

   1
                                                                      EXHIBIT 13

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

       MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

   We are responsible for the preparation of the accompanying consolidated
financial statements of American Axle & Manufacturing Holdings, Inc. ("AAM"), as
well as their integrity and objectivity. The accompanying financial statements
were prepared in conformity with generally accepted accounting principles and
include amounts based on our best estimates and judgments.
   We are also responsible for maintaining a comprehensive system of internal
control. Our system of internal control is designed to provide reasonable
assurance that we can rely upon our accounting systems and the underlying books
and records to prepare financial information presented in accordance with
generally accepted accounting principles and that our associates follow
established policies and procedures. We continually review our system of
internal control for effectiveness. We consider the recommendations of our
internal auditors and independent auditors concerning internal control and take
the necessary actions that are cost-effective in the circumstances.
   The Audit Committee of our Board of Directors is composed entirely of
directors who are not AAM associates and is responsible for assuring that we
fulfilled our responsibilities in the preparation of the accompanying financial
statements. The Audit Committee meets regularly with our internal auditors, the
independent auditors, and AAM management to review their activities and ensure
that each is properly discharging its responsibilities and to assess the
effectiveness of internal control. The Audit Committee reviews the scope of
audits and the accounting principles applied in our financial reporting. The
Audit Committee selects the independent auditors annually in advance of the
Annual Meeting of Shareholders and submits its selection for ratification at the
meeting. Deloitte & Touche LLP has been engaged as independent auditors to audit
the accompanying financial statements and to issue their report thereon, which
appears on this page.
   To ensure complete independence, our internal auditors and Deloitte & Touche
LLP, have full and free access to meet with the Audit Committee, without AAM
management present, to discuss the results of their audits, the adequacy of
internal control, and the quality of our financial reporting.

/s/ Richard E. Dauch                       /s/ Robin J. Adams

Richard E. Dauch                           Robin J. Adams
Co-Founder, Chairman                       Executive Vice President - Finance
& Chief Executive Officer                  & Chief Financial Officer

January 30, 2001

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of American Axle & Manufacturing
Holdings, Inc.:
   We have audited the accompanying consolidated balance sheets of American Axle
& Manufacturing Holdings, Inc. and its subsidiaries (the "Company") as of
December 31, 2000 and 1999, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
   In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
Detroit, Michigan
January 30, 2001



                                       21
   2

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

                             MANAGEMENT'S DISCUSSION
                                  AND ANALYSIS


                                    OVERVIEW

   We are a Tier I supplier to the automotive industry and a worldwide leader in
the manufacture, engineering, validation and design of driveline systems for
trucks, sport utility vehicles ("SUVs") and passenger cars. A driveline system
includes all of the components that transfer power from the transmission and
deliver it to the drive wheels. Driveline and related products produced by us
include axles, driveshafts, chassis components, driving heads, crankshafts,
transmission parts and forged products.
   We are the principal supplier of driveline components to General Motors
Corporation ("GM") for its light trucks, SUVs and rear-wheel drive ("RWD")
passenger cars. As a result of our Lifetime Program Contracts with GM ("LPCs"),
we are the sole-source supplier to GM for certain axles and other driveline
products for the life of each GM vehicle program covered by an LPC. Sales to GM
were approximately 84.5%, 85.9% and 93.4% of our total sales in 2000, 1999 and
1998, respectively.
   We sell most of our products under long-term contracts at fixed prices. Some
of our contracts require us to reduce our prices in subsequent years and all of
our contracts allow us to negotiate price increases for engineering changes.
Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs
have terms equal to the lives of the relevant vehicle programs, which typically
run 6 to 12 years, and require us to remain competitive with respect to
technology, delivery and quality. We will compete for future GM business upon
the termination of the LPCs.
   We also supply driveline components to DaimlerChrysler, Ford Motor Company,
Nissan, Renault, Visteon Automotive, Delphi Automotive, PACCAR and other
original equipment manufacturers ("OEMs") and Tier I supplier companies. Our
sales to customers other than GM increased 14% to $475.4 million in 2000 as
compared to $416.6 million in 1999. In addition, our sales to customers other
than GM have more than tripled in comparison to 1998, when such sales were only
$134.1 million, partly as a result of our acquisitions and also due to demand
for our newer technology-based products. We expect our sales to customers other
than GM to lead our growth over the next several years as we launch additional
new driveline system product programs with DaimlerChrysler and other OEM
customers.

                            INDUSTRY AND COMPETITION

   The worldwide automotive industry is highly competitive. Customers are
constantly pressuring suppliers to optimize and improve product cost, tech-
nology, quality, and delivery. The driveline systems segment of the industry in
which we compete reflects these pressures. A prevailing trend in the industry is
that OEMs are shifting research and development ("R&D"), design and validation
responsibility to their suppliers. The OEMs have also been reducing the number
of their suppliers, preferring stronger relationships with fewer suppliers
capable of providing complete systems and modules to their increasingly global
operations. As a result, the number of Tier I suppliers is being reduced. We
expect these trends to continue, eventually resulting in a smaller number of
dominant, worldwide suppliers.
   We believe AAM is well positioned to compete in the worldwide automotive
industry as these trends further impact our business. We will continue to
leverage our excellence in manufacturing, product engineering and design to
further diversify, strengthen and globalize our OEM customer base. We will also
continue to invest in the development of new product, process and systems
technologies to improve productive efficiency and flexibility in our operations
and continue to deliver innovative new products, modules and integrated
driveline systems to our customers. Our new Smart-Bar(TM) stabilizer bar-based



                                       22
   3


active roll-control system and the Integrated Oil Pan (IOP) Front Axle with
Electronic Disconnect are two current examples of high value-added technology
products that have resulted from our commitment to R&D and seek to improve the
performance and packaging of our customers' products.
   In the year 2000, we generated nearly $1.5 billion, or approximately 47% of
our total sales, from new axle and related driveline system components intro-
duced by us in the North American light vehicle market in the last two and half
years. Our strong performance in major new product introductions will continue
in 2001 as we launch high-volume four-wheel drive axle programs to support GM's
new mid-sized SUVs (such as the Chevrolet Trailblazer and GMC Envoy) and again
in 2002 when we launch the new driveline system for the Dodge Ram 2500 and 3500
series full-size pick-up trucks and GM's new mid-sized pick-up trucks (such as
the Chevrolet S-10). We believe that this performance is strong evidence of our
ability to bring the right products, systems and technologies to market at a
competitive cost for our customers. Just as importantly, we improved gross
profit and operating income margins by nearly 10% in the year 2000 as compared
to 1999 at the same time we launched such a large number of new products. We
believe this is an indication of our ability to make sound investment and
operating decisions that should help us toward our goal of steadily improving
our financial performance over the long term.

SALES FROM MAJOR NEW          SALES TO CUSTOMERS          GROSS PROFIT
PRODUCT PROGRAMS [BAR GRAPH]  OTHER THAN GM [BAR GRAPH]   [BAR GRAPH]



                               Sales
                           (In Millions)            % of Sales
                           --------------           ----------
                                              
1998                       $  193.9                  8.5%
1999                       $  899.0                 30.4%
2000                       $1,455.6                 47.4%


These charts illustrate the results of three of our key operating initiatives.
Sales to new customers have nearly tripled in 2000 as compared to 1998. Sales
generated from major new axle and related driveline system programs introduced
in the North American light vehicle market after July 1, 1998 now represent
approximately 47% of our total sales. As a result of contributions from these
new customer relationships and our new technology-based products, together with
a continued focus on productivity improvements in manufacturing facilities,
gross profit has increased to $426.2 million in year 2000, or 13.9% of sales, as
compared to $279.1 million in 1998, or 12.2% of sales.





                                       23
   4
                      MANAGEMENTS DISCUSSION AND ANALYSIS


                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

                              RESULTS OF OPERATIONS

Net Sales

[BAR GRAPH]

   Net sales increased approximately 4% in 2000 to $3.069 billion as compared to
$2.953 billion in 1999. This is in comparison to an increase in North American
light vehicle production of just under 1%. Our sales increase was primarily due
to strong demand for our products and increased sales related to GM's new
full-size truck and SUV programs (GMT-800 series), on which we receive a higher
average dollar content per vehicle than their predecessors (GMT-400 series).
For the year 2000, our average content per vehicle (as measured for our products
supporting GM's North American light truck platforms) increased approximately 5%
to $979 per unit as compared to $930 in 1999 and $870 in 1998.
   Year 2000 sales increased because we had a full year of shipments from Colfor
Manufacturing, Inc. ("Colfor") and MSP Industries Corporation ("MSP"), both of
which we acquired on April 1, 1999, and our joint venture in Brazil, which we
acquired in the fourth quarter of 1999. Excluding the impact of businesses
acquired in 1999, year 2000 sales increased approximately 2.4% as compared to
1999. Year 2000 sales also benefited from the launch of our new 11.5" rear axle
produced in our new Silao, Mexico manufacturing facility ("Guanajuato Gear &
Axle").
   In addition to the impact of adding Colfor, MSP and our October 1998
acquisition, Albion Automotive (Holdings) Limited ("Albion"), a significant
factor underlying the increase in 1999 sales as compared to 1998 was the impact
of the GM work stoppage that occurred in June and July of 1998 and resulted in
the shutdown of nearly all of GM's North American production facilities. This
work stoppage impacted our operations in June and July 1998 and also resulted in
related start-up inefficiencies in our operations in August 1998. We estimate
that sales lost in 1998 as a result of the GM work stoppage were approximately
$188 million and that operating income was adversely impacted by approximately
$71.2 million.
   Sales were also adversely affected in 1998 due to the temporary reduction of
certain payments made by GM to us as part of our commercial arrangements from
October 1, 1997 through December 31, 1998 ("temporary payment reductions"). The
temporary payment reductions were approximately $51.5 million in 1998.






                                       24
   5

Gross Profit

[BAR GRAPH]

   Gross profit increased approximately 10% in 2000 to $426.2 million as
compared to $388.8 million in 1999 and $156.4 million in 1998. Gross margin
increased to 13.9% in 2000 as compared to 13.2% in 1999 and 7.7% in 1998.
   The increases in gross profit and gross margin in 2000 were primarily due to
the increased sales of higher value-added technology products and the successful
start-up of production in our new Guanajuato Gear & Axle and Cheektowaga, New
York ("Cheektowaga") manufacturing facilities. The increases in gross profit and
gross margin in 1999 were primarily due to the impact of higher production
volumes, productivity improvements and increased sales of next generation
products that carry higher average selling prices. Gross profit and gross margin
in 1999 also increased as a result of the impact of the 1998 GM work stoppage
and the temporary payment reductions discussed above. We estimate that gross
profit was adversely affected in 1998 due to the impact of the 1998 GM work
stoppage and the temporary payment reductions by approximately $71.2 million and
$51.5 million, respectively.

Selling, General and Administrative Expenses ("SG&A")

   SG&A (including research and development) increased 10% in 2000 to $162.6
million as compared to $147.6 million in 1999 and $106.4 million in 1998. The
increase in SG&A spending in 2000 as compared to 1999 was primarily due to our
investment in R&D, the addition of Colfor, MSP and our joint venture in Brazil,
and increased profit-sharing accruals resulting from increased profitability.
The increase in SG&A spending in 1999 as compared to 1998 was primarily due to
increased R&D spending and the addition of Albion, Colfor, MSP and our joint
venture in Brazil. SG&A also increased in 1999 due to the adverse impact of the
1998 GM work stoppage on our profit-sharing program in 1998.
   Research and development expenses increased $7.3 million in 2000 to $46.4
million as compared to $39.1 million in 1999 and $29.5 million in 1998. The
significant increase in our R&D spending in 2000 and 1999 as compared to 1998
was primarily due to the increased costs of supporting our new customers and
several high-volume new product programs under development during these periods.
R&D expenses in 1999 also increased as a result of the addition of Albion,
Colfor and MSP.




                                       25
   6

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT


   We continue to aggressively pursue development of new product, process and
systems technologies in our R&D activities, particularly in the areas of mass
reduction; noise, vibration and harshness improvements; durability; and new
product offerings such as integrated driveline systems and modules. In addition
to the Smart-Bar(TM) active roll-control system and IOP front axle discussed
above, our increased commitment to R&D has resulted in our development of the
PowerLite(TM) aluminum rear-axle system, TracRite(TM) traction-enhancing locking
differentials (including a brand-new electronically controlled TracRite(TM) EL
model) and our Gen II and Gen III universal joints, all of which have been
instrumental in new product program wins for AAM.

Operating Income

[BAR GRAPH]

   Operating income increased 9% in 2000 to $259.4 million as compared to $237.8
million in 1999 and $49.9 million in 1998. Operating margin increased to 8.5% in
2000 as compared to 8.1% in 1999 and 2.5% in 1998. The increases in operating
income and operating margin in 2000 and 1999 were primarily due to the factors
discussed above relating to gross profit, partially offset by increased R&D and
other SG&A costs and higher goodwill amortization related to the Albion, Colfor
and MSP acquisitions.

EBITDA(1)

[BAR GRAPH]

(1)  EBITDA represents income from continuing operations before interest
     expense, income taxes, depreciation and amortization. EBITDA should not be
     construed as income from operations, net income or cash flow from operating
     activities as determined by generally accepted accounting principles. Other
     companies may calculate EBITDA differently.

   EBITDA increased 13% in 2000 to $377.0 million as compared to $334.6 million
in 1999 and $119.2 million in 1998. EBITDA margins increased in 2000 to 12.3% of
sales as compared to 11.3% in 1999 and 5.8% in 1998. The increases in EBITDA and
EBITDA margins were primarily due to the factors discussed above relating to
operating income. EBITDA also increased in 2000 and 1999 due to increases in
depreciation and amortization, principally related to higher levels of capital
expenditures necessary to support our new customers and new product programs.






                                       26
   7

   NET INTEREST EXPENSE. Net interest expense was $58.8 million in 2000, $54.6
million in 1999 and $44.3 million in 1998. The increase in net interest expense
was primarily due to higher average amounts of net debt outstanding and higher
average interest rates, offset by a higher amount of interest capitalized on
construction in progress.
   OTHER INCOME. Other income was $2.8 million in 2000 and $0.2 million in 1999
and related principally to foreign-exchange gains. Other income in 2000 also
included a one-time benefit associated with stock sold in connection with the
demutualization of our life-insurance provider.
   INCOME TAX EXPENSE. Income tax expense was $74.2 million in 2000, $67.8
million in 1999, and $2.1 million in 1998. Our effective tax rate was 36.5% in
2000 as compared to 37.0% in 1999 and 1998. The decrease in our effective income
tax rate in 2000 reflects a reduction of state taxes related to investment tax
credits and the net favorable resolution of various other federal and state tax
audit issues.
   NET INCOME AND EARNINGS PER SHARE. Diluted earnings per share increased to
$2.60 per share in 2000 as compared to $2.34 in 1999 and $0.08 in 1998. After
adjusting for the impact of the GM work stoppage and temporary payment
reductions in 1998, year-over-year earnings growth was 11% in 2000 and 43% in
1999 as compared to year-over-year sales growth of 4% in 2000 and 30% in 1999.

                        LIQUIDITY AND CAPITAL RESOURCES

   Our primary liquidity needs are to fund capital expenditures and debt
service and to support working capital requirements in our expanding operations.
We rely primarily upon operating cash flow and borrowings under our primary
credit facilities to meet these needs. We believe that cash flow available from
these sources will be sufficient to meet our projected capital expenditures,
debt service obligations and working capital requirements in 2001.
   OPERATING ACTIVITIES. Net cash provided by operating activities was $252.2
million in 2000 as compared to $310.3 million in 1999. A change in payment terms
with GM on March 1, 2000 from net 10 days to net 20 days adversely impacted our
2000 operating cash flow by approximately $80 million in the first quarter of
2000. A final increase in payment terms with GM to net 25(th) proximo will be
effective for products shipped to GM beginning on March 1, 2001 and will
complete a three-year transition from the next-day payment terms in effect prior
to March 1, 1999.
   Operating cash flow in 2000 was also adversely impacted as compared to 1999
by our increased working capital requirements due to the start-up of production
in Guanajuato Gear & Axle and Cheektowaga. In addition to the impact of
Guanajuato Gear & Axle and Cheektowaga, inventories on hand at year-end 2000
reflect increases as compared to year-end 1999 necessary to support customer
banking requirements. Repair parts inventories also increased in 2000 as we
took delivery of a significant amount of new machinery and equipment.
   Operating cash flow in 2000 was also impacted in comparison to prior years by
the one-time lump-sum payments we made to certain associates in connection with
several new long-term collective bargaining agreements we negotiated with our
unions. We also funded contributions to our various hourly and salaried pension
plans of $30.5 million in 2000, well in excess of similar contributions made in
1999 and 1998.
   Offsetting the above described uses of cash, accounts payable at year-end
2000 were much higher than at year-end 1999. This increase in accounts payable
was due primarily to our heavy capital spending in the fourth quarter of 2000.
   INVESTING ACTIVITIES. Capital expenditures were $381.0 million in 2000 as
compared to $301.7 in 1999. We expect capital expenditures to increase further
in 2001 to nearly $400 million before a substantial reduction in spending in
2002 as we complete our launch of several significant new long-term product
programs and increase our productive capacity to support these new programs,
while at the same time continuing to aggressively pursue cost reductions in
existing operations.




                                       27
   8

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT



   Our largest capital projects in 2000 were related to the construction and
subsequent expansion of Guanajuato Gear & Axle, which started operations in the
first quarter of 2000, and the launch of several new long-term product programs
in 2000 and early 2001, including GM's mid-sized SUVs and GM's heavy-duty
pick-up trucks and full-size luxury sport-utility vehicles (the GMC Yukon Denali
and the Cadillac Escalade).
   Our largest capital projects in 2001 will include additional investment to
support the 2001 launch of GM's mid-sized SUVs as well as expenditures required
to support the 2003 model year launch of the GM MST Program (mid-sized pick-up
trucks, including the Chevrolet S-10 and GMC Sonoma) and the Dodge Ram 2500 and
3500 series of full-size pick-up trucks. Capital spending in 2001 will also
include the construction of a forging facility adjacent to Guanajuato Gear &
Axle.
   Our investing activities in 1999 and 1998 included approximately $281 million
of outlays related to the Albion, Colfor and MSP acquisitions and our investment
in the joint venture in Brazil.
   We have invested a significant amount of capital for major new product
programs over the past few years and we believe these investments provide an
adequate financial return. After adjusting for the impact of the GM work
stoppage and temporary payment reductions in 1998, our after-tax return on
invested capital ("ROIC") has been in excess of 16% for each of the most recent
three years, which we believe puts us at the top end of the range for our
industry.



                                                   YEAR ENDED DECEMBER 31,
                                          2000       1999       1998PF(1)    1998
                                                       (In millions)
                                                               
Net income                              $ 129.2    $ 115.6    $   80.8     $   3.5
Add: After-tax net interest expense        37.3       34.4        27.9        27.9
- ----------------------------------------------------------------------------------------
After-tax return                          166.5      150.0       108.7        31.4

Net debt at year-end(2)                   781.9      634.7       688.9       688.9
Stockholders' equity at year-end          372.0      263.7       117.7        40.4
- ----------------------------------------------------------------------------------------
Invested capital at year-end            1,153.9      898.4       806.6       729.3

Invested capital at beginning of year     898.4      729.3       526.9       526.9

Average invested capital                1,026.2      813.9       666.8       628.1
- ----------------------------------------------------------------------------------------

ROIC(3)                                    16.2%      18.4%       16.3%        5.0%
========================================================================================

(1)  adjusted to add back net income estimated to have been lost as a result of
     the 1998 GM work stoppage and temporary payment reductions
(2)  net debt is equal to total debt less cash and equivalents
(3)  other companies may calculate ROIC differently

   FINANCING ACTIVITIES. Net cash provided by financing activities was $24.1
million in 2000 as compared to $179.5 million in 1999. Total long-term debt
increased by approximately $42.2 million to $817.1 million at December 31, 2000
as compared to December 31, 1999, principally as a result of increasing our
borrowings under the Receivables Facility by $50.0 million and making our
scheduled debt repayments. In addition, we raised approximately $1.1 million
through the exercise of employee stock options in 2000.
   In December 2000, AAM's Co-Founder, Chairman & CEO Richard E. Dauch agreed to
extend his employment relationship with AAM by two years until December 31,
2006. In connection with this extension, we repurchased approximately 3.1
million shares of common stock from Dauch, at current market prices, at a total
cost of approximately $21.3 million. Dauch used the proceeds from the sale to
pay off a personal loan incurred to pay taxes in connection with an earlier
investment in AAM. We agreed to repurchase these shares because of





                                       28
   9

the favorable economic impact of this transaction and in consideration of the
extension of Dauch's employment agreement. These shares will be held in Treasury
and will be available to be reissued as our associates exercise stock options,
or for other purposes.
   In 1999, our financing activities included several significant nonrecurring
events. In February 1999, we raised approximately $107.7 million of net proceeds
in our initial public offering ("IPO") and issued 7 million shares of common
stock. The IPO was followed in March 1999 by our issuance of $300 million of
9.75% Senior Subordinated Notes Due 2009 (the "9.75% Notes"), a transaction in
which we raised net proceeds of approximately $288.7 million. Also in 1999, we
closed sale-leaseback transactions involving $187 million of existing machinery
and equipment.
   DEBT CAPITALIZATION AND AVAILABILITY. Our primary credit facilities consist
of our Senior Secured Bank Credit Facilities (the "Bank Credit Facilities"),
which are described in further detail below, and our receivables financing
facility (the "Receivables Facility"), which provides up to $153.0 million of
revolving financing commitments through October 2003. Other significant sources
of our debt capitalization include the 9.75% Notes and capital lease
obligations.
   The Bank Credit Facilities, as amended in August 2000, consist of the
following:
   - a Senior Secured Revolving Credit Facility (the "Revolver") providing for
     revolving loans and the issuance of letters of credit in an aggregate
     principal and stated amount not to exceed $378.8 million available through
     October 2004; and
   - a Senior Secured Term Loan Facility (the "Term Loan") providing for term
     loans in an aggregate principal amount of $374.0 million. We will make
     semi-annual principal payments in varying amounts on the Term Loan through
     April 2006, at which time the remaining balance of $175 million will be
     due.
   Pursuant to the August 2000 amendment of the Bank Credit Facilities, $106.7
million of availability under a preexisting delayed-draw term loan facility (the
"Tranche A Term Loan") was either rolled over to the Revolving Credit Facility
or extinguished. In addition to the rollover, participants in the Bank Credit
Facilities were also permitted to increase their commitment to the Revolver.
Additionally, certain financial covenants and other key terms were amended to
reflect our improved corporate credit ratings and to increase our flexibility to
support new business growth initiatives and our ongoing operations and
customer relationships outside the United States.
   With respect to the Bank Credit Facilities, $374.0 million of borrowings was
outstanding under the Term Loan and $378.8 million was available for future
borrowings under the Revolver at year-end 2000. Additionally at year-end 2000,
$120.0 million was outstanding and an additional $6.6 million was available to
us under the Receivables Facility.
   The weighted-average interest rate of our long-term debt outstanding as of
year-end 2000 was approximately 9.0% as compared to approximately 8.6% at
December 31, 1999.
   CREDIT RATINGS UPGRADE. On May 22, 2000, Standard & Poor's raised our
corporate credit and bank loan ratings to double `B' ("BB") from double
`B'-minus ("BB-"). Our subordinated debt rating was raised to single `B'-plus
("B+") from single `B' ("B"). On August 7, 2000, Moody's Investors Service
upgraded the ratings of our senior debt to Ba2 from Ba3. Moody's also upgraded
our subordinated debt rating to B1 from B2.

                                   MARKET RISK

   In the normal course of business, we are exposed to market risk, principally
associated with changes in foreign currency exchange rates and interest rates.
To manage a portion of these inherent risks, we purchase certain types of
derivative financial instruments from time to time, based on management's
judgment of the trade-off between risk, opportunity and cost. We do not hold or
issue derivative financial instruments for trading or speculative purposes.





                                       29
   10

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT


   CURRENCY EXCHANGE RISK. Because most of our business is denominated in U.S.
dollars, we do not currently have significant exposures relating to currency
exchange risks and have only a nominal amount of currency hedges in place on the
purchase of machinery and equipment at year-end 2000. Future business
operations and opportunities, including the expansion of our business outside
North America, may expose us to the risk that cash flows resulting from these
activities may be adversely affected by changes in currency exchange rates. If
and when appropriate, we intend to manage these risks by utilizing local
currency funding of these expansions and various types of foreign exchange
forward contracts.
   INTEREST RATE RISK. We are exposed to variable interest rates on the Bank
Credit Facilities, the Receivables Facility and a portion of our sale-leaseback
financing. The pre-tax earnings and cash flow impact of a one-percentage-point
increase in interest rates (approximately 11% of our weighted average interest
rate at December 31, 2000) on our long-term debt outstanding at year-end 2000
would be approximately $4.6 million. At year-end 2000, we have hedged a portion
of our interest rate risk by entering into interest rate swaps with a notional
amount of approximately $54.3 million. These interest rate swaps convert
variable financing based on 3-month LIBOR rates into fixed U.S. dollar rates
varying from 6.88% to 6.96%.
   ADOPTION OF FASB STATEMENT NO. 133. FASB Statement No. 133, is effective for
us on January 1, 2001. FASB Statement No. 133 establishes standards for the
recognition and measurement of derivatives and hedging activities. We do not
presently expect the adoption of these new accounting standards to have a
material impact on our operating results or financial condition because of the
limited extent to which we engage in the types of activities affected by the
standard. However, we have established procedures under which we will monitor
our future Treasury, Procurement and other various operating activities for
transactions and agreements covered by this standard and we are prepared to
account for the impact of any such transactions and agreements in conformity
with the new standards in future periods if and when applicable.
   With respect to the derivative instruments executed as of the adoption date
of January 1, 2001, we expect to record an initial unrealized mark-to-market
loss on the interest rate swaps described above of approximately $1.3 million.
The fair value of our currency forward contracts outstanding at January 1, 2001
approximates break-even.

                                 DIRECT MATERIAL
                              PURCHASING TRANSITION

   Through December 31, 1999, we acquired certain materials for use in the
manufacture of our products through GM's purchasing network. As a result of our
commercial arrangements with GM, we were precluded from directly negotiating
lower purchase costs for such materials from suppliers. However, we were also
protected from increases in the costs of such materials while this purchasing
arrangement was in effect. If the prices of such materials exceeded prices
jointly established with GM, GM increased the aggregate amount paid to us for
our products. If the prices of such materials were less than prices jointly
established with GM, GM reduced the aggregate amount paid to us for our
products.
   Effective January 1, 2000, we assumed full responsibility for our entire
purchasing function. As a result, while the prices at which we sell our products
to GM continue to be effective as established in the LPCs, we no longer have a
contractual right to pass on future increases or decreases in the material cost
component of our products sold to GM, except for certain ferrous metals and
certain foreign exchange exposures relating to sourcing decisions directed by
GM. We believe that we can better control our material costs by establishing
direct relationships with our key suppliers and by focusing on our unique
requirements. In fact, we accelerated the transition to our fully independent
purchasing function by approximately two years because of our confidence in our
ability to achieve positive results by controlling the direct material
purchasing function ourselves.




                                       30
   11

                                   SEASONALITY

   Our operations are cyclical because they are directly related to worldwide
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. Our business is also moderately seasonal
as our major OEM customers historically have a two-week shutdown of operations
in July and an approximate one-week shutdown in December. In addition, our OEM
customers have historically incurred lower production rates in the third
quarter as model changes enter production. Accordingly, our third quarter and
fourth quarter results may reflect these trends.

                              EFFECTS OF INFLATION

   Inflation generally affects us by increasing the cost of labor, equipment,
utilities and raw materials. We believe that the relatively moderate rate of
inflation over the past few years has not had a significant impact on our
operations because we have offset the increases by realizing improvements in
operating efficiency. In order to protect against the future impact of
inflation, we will continue to aggressively pursue productivity improvements in
our operations, principally through the increased use of the AAM Manufacturing
System, a lean manufacturing system designed to reduce waste. We also plan to
continue to emphasize favorable supply agreements in our direct material
purchasing function, including joint efforts with key suppliers to identify and
share in cost reductions, the use of long-term supply agreements when
appropriate, and the further development of AAM's e-commerce initiatives.

                          LITIGATION AND ENVIRONMENTAL
                                   REGULATIONS

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

   GM has agreed to indemnify and hold AAM harmless from certain environmental
issues identified as potential areas of environmental concern at March 1, 1994.
GM has also agreed to indemnify AAM, under certain circumstances, for up to 10
years from such date with respect to certain pre-closing environmental
conditions. Based on our assessment of costs associated with our environmental
responsibilities, including recurring administrative costs, capital expen-
ditures and other compliance costs, we do not expect such costs to have a
material effect on our financial condition, results of operations, cash flows or
competitive position in the foreseeable future.

                           FORWARD-LOOKING INFORMATION

   Certain statements in this Management's Discussion and Analysis and elsewhere
in this Annual Report are forward-looking in nature and relate to trends and
events that may affect the Company's future financial position and operating
results. Such statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The terms "will," "expect,"
"anticipate," "intend," "project" and similar words or expressions are intended
to identify forward-looking statements. These statements speak only as of the
date of this Annual Report. The statements are based on current expectations,
are inherently uncertain, are subject to risks, and should be viewed with
caution. Actual results and experience may differ materially from the
forward-looking statements as a result of many factors, including reduced sales
by our customers, changes in economic conditions in the markets served by us,
increasing competition, fluctuations in raw materials and energy prices, and
other unanticipated events and conditions. It is not possible to foresee or
identify all such factors. The Company makes 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.






                                       31
   12


                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT


                             CONSOLIDATED STATEMENTS
                                    OF INCOME



                                                          YEAR ENDED DECEMBER 31,
                                                 2000              1999             1998
                                                   (In millions, except per share data)

                                                                          
Net sales                                      $ 3,069.5          $2,953.1         $2,040.6

Cost of goods sold                               2,643.3           2,564.3          1,884.2
- -----------------------------------------------------------------------------------------------

Gross profit                                       426.2             388.8            156.4

Selling, general and administrative expenses       162.6             147.6            106.4

Goodwill amortization                                4.2               3.4              0.1
- -----------------------------------------------------------------------------------------------

Operating income                                   259.4             237.8             49.9

Net interest expense                               (58.8)            (54.6)           (44.3)

Other income, net                                    2.8               0.2                -
- -----------------------------------------------------------------------------------------------

Income before income taxes                         203.4             183.4              5.6

Income taxes                                        74.2              67.8              2.1
- -----------------------------------------------------------------------------------------------

Net income                                     $   129.2          $  115.6         $    3.5
===============================================================================================

Basic earnings per share                       $    2.79          $   2.87         $   0.11
===============================================================================================

Diluted earnings per share                     $    2.60          $   2.34         $   0.08
===============================================================================================


See accompanying notes to consolidated financial statements.


                                       32
   13


                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT


                           CONSOLIDATED BALANCE SHEETS



                                                                                    DECEMBER 31,
                                                                               2000             1999
                                                                      (In millions, except per share data)
                                                                                       
ASSETS
Current assets:
   Cash and equivalents                                                      $   35.2        $  140.2
   Accounts receivable, net of allowance of
     $8.6 in 2000 and $8.0 in 1999                                              247.3           190.1
   Inventories                                                                  160.4           133.3
   Prepaid expenses and other                                                    43.1            22.3
   Deferred income taxes                                                         14.6            19.7
- ----------------------------------------------------------------------------------------------------------
Total current assets                                                            500.6           505.6

Property, plant and equipment, net                                            1,200.1           929.0
Deferred income taxes                                                            16.1            50.5
Goodwill and other assets                                                       185.7           188.1
- ----------------------------------------------------------------------------------------------------------
Total assets                                                                 $1,902.5        $1,673.2
==========================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                          $  341.3        $  269.1
   Accrued compensation and benefits                                            120.2           129.7
   Other accrued expenses                                                        48.8            44.0
- ----------------------------------------------------------------------------------------------------------
Total current liabilities                                                       510.3           442.8

Long-term debt                                                                  817.1           774.9
Postretirement benefits and other long-term liabilities                         203.1           191.8
- ----------------------------------------------------------------------------------------------------------
Total liabilities                                                             1,530.5         1,409.5

Stockholders' equity:
   Preferred stock, par value $0.01 per share; 10.0 million shares
     authorized; no shares outstanding in 2000 or 1999                             -                -
   Common stock, par value $0.01 per share; 150.0 million shares
     authorized; 46.8 million and 46.4 million shares issued in 2000
     and 1999, respectively                                                       0.5             0.5
   Series common stock, par value $0.01 per share; 40.0 million
     shares authorized; no shares outstanding in 2000 or 1999                      -                -
   Paid-in capital                                                              202.1           199.8
   Retained earnings                                                            193.3            64.1
   Treasury stock at cost; 3.1 million shares in 2000                           (21.3)              -
   Cumulative translation adjustment                                             (2.6)           (0.7)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                      372.0           263.7
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                                   $1,902.5        $1,673.2
=========================================================================================================


See accompanying notes to consolidated financial statements.





                                       33
   14

                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT

                             CONSOLIDATED STATEMENTS
                                  OF CASH FLOWS


                                                                         YEAR ENDED DECEMBER 31,
                                                                     2000         1999           1998
                                                                            (In millions)
                                                                                     
  OPERATING ACTIVITIES:
  Net income                                                       $ 129.2      $ 115.6       $    3.5
  Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization                                 107.9         89.5           68.8
       Deferred income taxes                                          30.5          9.8            2.6
       Pensions and other postretirement benefits,
        net of contributions                                          16.7         43.6           20.1
       Loss on disposal of equipment                                   4.8          4.3            0.3
       Changes in operating assets and liabilities:
         Accounts receivable                                         (59.5)       (46.6)          60.5
         Inventories                                                 (28.8)        12.7          (27.0)
         Accounts payable and accrued expenses                        92.3         73.7          (36.1)
         Other assets and liabilities                                (40.9)         7.7          (11.3)
    -----------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                          252.2        310.3           81.4
- ---------------------------------------------------------------------------------------------------------

  INVESTING ACTIVITIES:
  Purchases of property, plant and equipment, net                   (381.0)      (301.7)        (210.0)
  Acquisitions, net of cash acquired                                    -        (239.4)         (41.5)
  Proceeds from sale-leaseback of equipment                             -         187.0            -
- ---------------------------------------------------------------------------------------------------------
  Net cash used in investing activities                             (381.0)      (354.1)        (251.5)
- ---------------------------------------------------------------------------------------------------------

  FINANCING ACTIVITIES:
  Issuance of 9.75% Senior Subordinated Notes Due 2009                  -         288.7            -
  Net borrowings (payments) of long-term debt                         45.7       (206.7)         157.1
  Debt issuance costs                                                 (1.4)       (10.3)          (0.1)
  Issuance of common stock, net                                         -         107.7            -
  Employee stock option exercises                                      1.1          0.1            0.3
  Purchase of treasury stock                                         (21.3)          -              -
- ---------------------------------------------------------------------------------------------------------
  Net cash provided by financing activities                           24.1        179.5          157.3
- ---------------------------------------------------------------------------------------------------------

  Effect of exchange rate changes on cash                             (0.3)          -              -
- ---------------------------------------------------------------------------------------------------------

  Net increase (decrease) in cash and equivalents                   (105.0)       135.7          (12.8)

  Cash and equivalents at beginning of year                          140.2          4.5           17.3
- ---------------------------------------------------------------------------------------------------------

  Cash and equivalents at end of year                              $  35.2      $ 140.2        $   4.5
=========================================================================================================


See accompanying notes to consolidated financial statements.


                                       34

   15


                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT


                             CONSOLIDATED STATEMENTS
                             OF STOCKHOLDERS' EQUITY


                                                                  Retained
                                                                  Earnings                     Cumulative
                                    Common        Paid-in       (Accumulated    Treasury       Translation      Comprehensive
                                     Stock        Capital          Deficit)      Stock         Adjustment           Income
                                                                            (In millions)

                                                                                              
Balance at January 1, 1998         $   -          $ 92.2          $(55.0)        $   -           $   -

Net income                                                           3.5                                           $   3.5
Foreign currency translation                                                                      (0.6)               (0.6)
                                                                                                                   --------
Comprehensive income                                                                                               $   2.9
                                                                                                                   ========

Exercise of stock options              -             0.3
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1998           -            92.5           (51.5)            -            (0.6)

Net income
                                                                   115.6                                           $ 115.6
Foreign currency translation                                                                      (0.1)               (0.1)
                                                                                                                   --------
Comprehensive income                                                                                               $ 115.5
                                                                                                                   ========

Issuance of common stock               0.4         107.3
Exercise of stock options              0.1
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1999           0.5         199.8            64.1             -            (0.7)

Net income                                                         129.2                                           $ 129.2
Foreign currency translation                                                                      (1.9)               (1.9)
                                                                                                                   --------
Comprehensive income                                                                                               $ 127.3
                                                                                                                   ========

Exercise of stock options,
  including tax benefit                -             2.3
Purchase of treasury stock                                                        (21.3)
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 2000       $   0.5        $202.1          $193.3         $(21.3)         $(2.6)
=========================================================================================================



See accompanying notes to financial statements.







                                       35
   16
                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT

                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   ORGANIZATION. American Axle & Manufacturing Holdings, Inc. ("Holdings") and
its subsidiaries (collectively, "we," "us," "AAM" or "the Company"), is a Tier I
supplier to the automotive industry and a worldwide leader in the manufacture,
engineering, validation and design of driveline systems for trucks, sport
utility vehicles ("SUVs") and passenger cars. The driveline system includes all
the components that transfer power from the transmission and deliver it to the
drive wheels. Driveline and related products produced by us include axles,
driveshafts, chassis components, driving heads, crankshafts, transmission parts
and forged products. In addition to our 14 locations in the United States (in
Michigan, New York and Ohio), the Company also has offices and facilities in
Brazil, England, Germany, Japan, Mexico and Scotland.
   Holdings is the survivor of a migratory merger with American Axle &
Manufacturing of Michigan, Inc. ("AAMM") and has no significant assets other
than its 100% ownership of American Axle & Manufacturing, Inc. ("AAM Inc.") and
its subsidiaries. Pursuant to this merger, which was effected in January 1999,
each share of AAMM's common stock was converted into 3,945 shares of Holdings'
common stock. All share and per share amounts have been adjusted to reflect this
conversion. Holdings has no other subsidiaries other than AAM Inc.
   PRINCIPLES OF CONSOLIDATION. We include the accounts of Holdings and its
subsidiaries in our consolidated financial statements. We eliminate all
intercompany transactions, balances and profits in our consolidation.
   REVENUE RECOGNITION. We recognize revenue when products are shipped to our
customers.
   RESEARCH AND DEVELOPMENT COSTS. We expense research and development costs
("R&D") as incurred. R&D costs were $46.4 million, $39.1 million and $29.5
million in 2000, 1999 and 1998, respectively.
   CASH AND EQUIVALENTS. Cash and equivalents include all of our cash balances
and highly liquid investments with a maturity of 90 days or less at time of
purchase.
   TOOLING. Costs we incur for customer tooling for which we will be reimbursed
are classified as accounts receivable. When we estimate the cost of these
projects to exceed customer reimbursement, we record a provision for such loss
as a component of our allowance for doubtful accounts.
   INVENTORIES. We state inventories at the lower of cost or market. Cost is
determined principally using the last-in, first-out method (LIFO). We classify
perishable tooling, repair parts and other materials consumed in the
manufacturing process but not incorporated into our finished products as raw
materials.

Inventories consist of the following:


DECEMBER 31,                   2000       1999
                                (In millions)
                                    
Raw materials, work-in-
  process and repair parts    $138.2      $118.5
Finished goods                  31.3        22.6
                              ------------------
Gross inventories              169.5       141.1
LIFO reserve                    (9.1)       (7.8)
                              ------------------
Total inventories             $160.4      $133.3
                              ==================


                                       36
   17

   PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment consists of the
following:


DECEMBER 31,                2000         1999
                              (In millions)
                                
Land and land
  improvements            $   23.9    $   23.1
Buildings and building
  improvements               201.1       125.7
Machinery and equipment    1,101.9       833.7
Construction in progress     236.9       227.1
- -------------------------------------------------
                           1,563.8     1,209.6
Accumulated depreciation    (363.7)     (280.6)
- -------------------------------------------------
Property, plant and
  equipment, net          $1,200.1    $  929.0
=================================================


   We state property, plant and equipment at cost. Construction in progress
includes costs incurred for the construction of buildings and building
improvements, and machinery and equipment in process. We record depreciation on
the straight-line method over the estimated useful lives of depreciable assets,
which range from 3 to 40 years and averaged approximately 13 years in 2000.
Depreciation amounted to $100.6 million, $85.5 million and $67.3 million in
2000, 1999 and 1998, respectively.
   GOODWILL. We record goodwill when the purchase price of acquired businesses
exceeds the value of their identifiable net tangible and intangible assets
acquired. We amortize goodwill on the straight-line method over periods up to 40
years. Accumulated amortization was $7.7 million at December 31, 2000 and $3.5
million at December 31, 1999.
   IMPAIRMENT OF LONG-LIVED ASSETS. We periodically review the realization of
our long-lived assets, including goodwill, based on an evaluation of remaining
useful lives and the current and expected future profitability and cash flows
related to such assets.
   STOCK-BASED COMPENSATION. We account for employee stock options in accordance
with APB No. 25 and related interpretations. We measure compensation cost as the
excess, if any, of the market price of our common stock at the date of grant
over the amount our associates must pay to acquire the stock.
   CURRENCY TRANSLATION. We translate the assets and liabilities of our foreign
subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the
income statement elements of our foreign subsidiaries to U.S. dollars at
average-period exchange rates. We report the effect of translation for our
foreign subsidiaries that use the local currency as their functional currency as
a separate component of stockholders' equity. Gains and losses resulting from
the remeasurement of assets and liabilities of our foreign subsidiary that uses
the U.S. dollar as its functional currency are reported in current period
income. We also report any gains and losses arising from transactions
denominated in a currency other than our functional currency in current period
income.
   USE OF ESTIMATES. In order to prepare financial statements in conformity with
generally accepted accounting principles, we are required to make estimates and
assumptions that affect the reported amounts and disclosures in our financial
statements. Actual results could differ from those estimates.
   RECLASSIFICATIONS. We have reclassified certain 1998 and 1999 amounts to
conform to the presentation of our 2000 financial statements.

   2.  ACQUISITIONS

   In 1999, we purchased two domestic automotive forging companies, Colfor
Manufacturing Inc. ("Colfor") and MSP Industries Corporation ("MSP"), and a
majority interest in a joint venture in Brazil which machines forging and
driveline components for automotive OEMs for aggregate cash purchase
consideration of approximately $239 million.
   In 1998, we acquired Albion Automotive (Holdings) Limited ("Albion") for a
cash purchase price of approximately $42 million plus $30 million of assumed
debt and capital lease obligations.


                                       37
   18
                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

   3.  LONG-TERM DEBT AND
       LEASE OBLIGATIONS

Long-term debt consists of the following:


DECEMBER 31,                             2000        1999
                                          (In millions)
                                            
Bank Credit Facilities:
Revolver                               $   -       $    -
Term Loan                               374.0        375.0
- --------------------------------------------------------------
Total Bank Credit Facilities            374.0        375.0
Receivables Facility                    120.0         70.0
9.75% Notes, net of discount            298.1        297.9
Capital lease obligations                17.4         25.7
Other                                     7.6          6.3
- --------------------------------------------------------------
Long-term debt                         $817.1     $  774.9
==============================================================


   BANK CREDIT FACILITIES. At December 31, 2000, the Senior Secured Bank Credit
Facilities ("Bank Credit Facilities") consist of a $378.8 million Revolving
Credit Facility due October 2004 ("Revolver") and a $374.0 million Senior
Secured Term Loan Facility ("Term Loan") due in semi-annual installments of
varying amounts through April 2006.
   Borrowings under the Bank Credit Facilities are secured by the capital stock
of our significant subsidiaries and all of our assets except for those securing
the Receivables Facility and other permitted bank, equipment and lease
financings. Borrowings under the Bank Credit Facilities bear interest at rates
based on LIBOR or an alternate base rate, plus an applicable margin. At December
31, 2000, $378.8 million was available for future borrowings under the Revolver.
   At December 31, 2000, the weighted average rate of interest on the balances
outstanding under the Bank Credit Facilities was 8.6%.
   RECEIVABLES FACILITY. We have established a receivables financing facility
(the "Receivables Facility") through AAM Receivables Corp. ("Receivables
Corp."), a wholly-owned, bankruptcy-remote subsidiary of AAM Inc. Pursuant to
the Receivables Facility, AAM Inc. agreed to sell certain trade receivables from
time to time to Receivables Corp., which, in turn, transferred all of such
receivables to a trust that issued variable funding certificates representing
undivided interests in the receivables pool. Under the variable funding
certificates, a bank group provided us a revolving financing commitment of up to
$153.0 million through October 2003, subject to the terms and conditions of the
Receivables Facility. The receivables held by the trust are not available to our
general creditors. In accordance with FASB Statement No. 125, we have accounted
for the Receivables Facility as if it were a secured borrowing.
   The Receivables Facility bears interest at rates based on LIBOR or an
alternate base rate, plus an applicable margin. Availability under the
Receivables Facility depends on the amount of receivables generated by AAM Inc.,
the rate of collection on those receivables and certain other characteristics of
those receivables that affect their eligibility. At December 31, 2000, $120.0
million was outstanding and an additional $6.6 million was available to us under
the Receivables Facility.
   The weighted-average interest rate on our borrowings under the Receivables
Facility at December 31, 2000 was 8.1%.
   9.75% NOTES. In March 1999, AAM Inc. issued $300 million of 9.75% Senior
Subordinated Notes Due 2009 (the "9.75% Notes"). Our net proceeds from the
issuance of the 9.75% Notes was approximately $288.7 million after deduction of
discounts to the initial purchasers, and other fees and expenses.
   The 9.75% Notes are unsecured senior subordinated obligations of AAM Inc. and
are fully and unconditionally guaranteed by Holdings. Prior to the maturity date
of March 1, 2009, we may redeem the 9.75% Notes beginning on March 1, 2004 at
stated redemption prices beginning at 104.875% at March 1, 2004 and decreasing
to 100% on March 1, 2007 and thereafter. In addition, we may also redeem up to
$105 million of the 9.75% Notes using the proceeds of certain equity offerings
through March 1, 2002 at a redemption price of 109.75%.
   Including amortization of the original issue discount, the 9.75% Notes bear
interest at 9.875%.








                                       38
   19





   DEBT COVENANTS. The Bank Credit Facilities and the 9.75% Notes contain
various operating covenants which, among other things, impose limitations on our
ability to declare or pay dividends or distributions on capital stock, redeem or
repurchase capital stock, incur liens, incur indebtedness, or merge, make
acquisitions or sell assets. We are also required to comply with financial
covenants relating to interest coverage, leverage, retained earnings and capital
expenditures. At our option, we may prepay borrowings under the Bank Credit
Facilities at any time without penalty, other than breakage costs. We are also
subject to mandatory prepayment terms under the Bank Credit Facilities under
certain conditions.
   LEASES. We lease certain facilities, machinery and equipment under capital
leases expiring at various dates. Approximately $34.9 million and $37.7 million
of such gross asset cost is included in property, plant and equipment at
December 31, 2000 and 1999, respectively. The weighted-average interest rate on
these capital lease obligations was 7.0% at December 31, 2000.
   In 1999, we closed two sale-leaseback transactions involving approximately
$187 million of existing machinery and equipment. These transactions were
financed under operating leases with terms between 10 and 12 years. We are
amortizing a gain on the sale of machinery and equipment of approximately $4
million over the respective lease terms.
   We also lease certain other facilities, machinery and equipment under
operating leases expiring at various dates. All of the leases contain renewal
and/or purchase options. Our expense for operating leases was $45.1 million,
$32.6 million and $14.0 million for the years ended December 31, 2000, 1999 and
1998, respectively. Future minimum payments under noncancelable operating leases
are as follows: $42.6 million in 2001, $64.8 million in 2002, $26.9 million in
2003, $26.3 million in 2004, $28.5 million in 2005 and $120.6 million
thereafter.
   DEBT MATURITIES. Aggregate maturities of long-term debt are as follows (in
millions):

                        
             2001          $  14.0
             2002              6.4
             2003            124.2
             2004             21.2
             2005            175.0
             Thereafter      476.3
             ---------------------
             Total         $ 817.1
             =====================



   We have sufficient availability to refinance current maturities of long-term
debt through the Bank Credit Facilities and the Receivables Facility and have,
therefore, classified such obligations as long-term debt at December 31, 2000.
   Gross interest expense was $77.6 million, $70.2 million and $48.6 million in
2000, 1999 and 1998, respectively. We paid interest of $71.6 million, $55.8
million and $50.2 million in 2000, 1999 and 1998, respectively. We capitalized
interest of $11.9 million, $8.5 million and $3.8 million in 2000, 1999 and 1998,
respectively.
   Interest income was $6.8 million, $7.1 million and $0.5 million in 2000, 1999
and 1998, respectively.

   4. DERIVATIVES AND RISK MANAGEMENT

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




                                       39
   20
                                THE AAM ADVANTAGE

[AAM LOGO]
                               2000 ANNUAL REPORT


   CURRENCY FORWARD CONTRACTS. Because most of our business is denominated in
U.S. dollars, we do not currently have significant exposures relating to
currency exchange risks. At December 31, 2000, we have currency hedges in place
on the purchase of machinery and equipment with a notional amount of $5.4
million.
   INTEREST RATE SWAPS. We are exposed to variable interest rates on the Bank
Credit Facilities, the Receivables Facility and a portion of our sale-leaseback
financing. At December 31, 2000, we have hedged a portion of our interest rate
risk by entering into interest rate swaps with a notional amount of
approximately $54.3 million. These interest rate swaps convert variable
financing based on 3-month LIBOR rates into fixed U.S. dollar rates varying from
6.88% to 6.96%.
   In connection with the Term Loan, we entered into a $112.5 million rate
collar transaction in 1997 to pay a floating rate of interest based on 3-month
LIBOR with a cap rate of 6.5% and a floor rate of 5.5%. The rate collar
transaction terminated at December 31, 2000.
   We have designated the rate collar transaction and the interest rate swap
agreements as effective hedges of the related debt and lease obligations and,
accordingly, we have reflected the net cost of such agreements as an adjustment
to interest expense over the lives of the debt and lease agreements.
   ADOPTION OF FASB STATEMENT NO. 133. FASB Statement No. 133 is effective for
us on January 1, 2001. FASB Statement No. 133 establishes standards for the
recognition and measurement of derivatives and hedging activities. We do not
presently expect the adoption of these new accounting standards to have a
material impact on our operating results or financial condition because of the
limited extent to which we engage in the types of activities affected by the
standard.
   With respect to the derivative instruments executed as of the adoption date
of January 1, 2001, we expect to record an initial unrealized mark-to-market
loss on the interest rate swaps described above of approximately $1.3 million.
The fair value of our currency forward contracts outstanding at January 1, 2001
approximates break-even.
   At December 31, 1999, the interest rate swaps and collars had notional values
of $175 million and unrealized losses of approximately $0.1 million.
   FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of our cash and
equivalents, accounts receivable, accounts payable and accrued liabilities
approximates their fair values due to the short-term maturities of these assets
and liabilities. The carrying value of our borrowings under the Bank Credit
Facilities and the Receivables Facility approximate their fair value due to
the frequent resetting of the interest rate. We have estimated the fair value of
the 9.75% Notes at December 31, 2000, using available market information, to be
approximately $253.5 million.
   CONCENTRATIONS OF CREDIT RISK. In the normal course of business, we provide
credit to customers in the automotive industry. We periodically evaluate the
credit worthiness of our customers and we maintain reserves for potential credit
losses, which, when realized, have been within the range of our allowance for
doubtful accounts. When appropriate, we also diversify the concentration of
invested cash among different financial institutions and we monitor the
selection of counterparties to other financial instruments to avoid unnecessary
concentrations of credit risk.

   5. EMPLOYEE BENEFIT PLANS

   PENSION AND OTHER POSTRETIREMENT BENEFITS. We sponsor various qualified and
non-qualified defined benefit pension plans for our eligible associates. We also
maintain hourly and salaried benefit plans that provide postretirement medical,
dental, vision and life benefits to our eligible retirees and their dependents
in the United States. We provide benefits under collective bargaining agreements
to a majority of our hourly associates.




                                       40
   21

   Actuarial valuations of the U.S. benefit plans were made at September 30,
2000 and 1999, respectively. Actuarial valuations of the foreign benefit plan
were made at September 30, 2000 and December 31, 1999, respectively.
   The following table summarizes the changes in benefit obligations and plan
assets and reconciles the funded status of the benefit plans to the net benefit
plan liability:



                                                           PENSION BENEFITS                OTHER BENEFITS
                                                     -----------------------------------------------------------
                                                        2000             1999           2000           1999
                                                     -----------------------------------------------------------
                                                                             (In millions)
                                                                                         
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year              $  156.8          $  148.6      $  90.1         $  79.5
Service costs                                            20.2              21.7         18.4            21.7
Interest cost                                            14.0              10.9          8.5             7.2
Plan amendments                                          17.3                -            -               -
Actuarial gain                                           (6.6)            (22.7)        (0.6)          (17.2)
Participant contributions                                 1.7               1.7           -               -
Adjustment due to measurement date change                (1.1)               -            -               -
Benefit payments                                         (3.1)             (2.4)        (0.9)           (1.1)
Currency fluctuations                                    (2.8)             (1.0)          -               -
- ----------------------------------------------------------------------------------------------------------------
Net change                                               39.6               8.2         25.4            10.6
- ----------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                       196.4             156.8        115.5            90.1
- ----------------------------------------------------------------------------------------------------------------

CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year          161.8             143.6           -               -
Actual return on plan assets                             13.5              18.4           -               -
Employer contributions                                   30.5               1.5          0.9             1.1
Participant contributions                                 1.6               1.7           -               -
Adjustment due to measurement date change                (0.8)               -            -               -
Benefit payments                                         (3.1)             (2.4)        (0.9)           (1.1)
Currency fluctuations                                    (3.0)             (1.0)          -               -
- ----------------------------------------------------------------------------------------------------------------
Net change                                               38.7              18.2           -               -
- ----------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                200.5             161.8           -               -
- ----------------------------------------------------------------------------------------------------------------

Funded status -- U. S. plans at September 30                -               1.7       (115.5)          (90.1)
Funded status -- foreign plan at September 30, 2000
   and December 31, 1999                                  4.1               3.3           -               -
Unrecognized actuarial gain                             (47.3)            (42.6)       (31.5)          (31.3)
Unrecognized prior service cost                          20.3               4.6          0.1             0.1
Fourth quarter contribution                               0.3               3.0          0.2             0.3
- ----------------------------------------------------------------------------------------------------------------
Net liability at December 31                           $(22.6)         $  (30.0)     $(146.7)        $(121.0)
================================================================================================================







                                       41
   22

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

The principal weighted average assumptions used in the valuation of the U.S. and
foreign plans were as follows:



                                                   PENSION BENEFITS                                  OTHER BENEFITS
                             ---------------------------------------------------------------------------------------------
                                   2000                 1999                  1998             2000        1999       1998
                             ---------------------------------------------------------------------------------------------
                              U.S.     Foreign     U.S.      Foreign     U.S.      Foreign
                             ---------------------------------------------------------------------------------------------
                                                                                          
Discount rate                8.00%      6.00%      7.75%      6.00%      6.75%      5.50%      8.00%      7.85%      7.15%
Expected return
  on plan assets             9.25%      8.00%      9.25%      8.00%      9.25%      8.00%        N/A        N/A        N/A
Rate of compensation
  increase                   4.25%      4.00%      4.25%      4.00%      4.00%      3.50%      4.25%      4.25%      4.00%




                                                       PENSION BENEFITS                  OTHER BENEFITS
                                               -----------------------------------------------------------------
                                                 2000        1999        1998         2000      1999        1998
                                               -----------------------------------------------------------------
                                                                          (In millions)
                                                                                        
COMPONENTS OF NET PERIODIC BENEFIT COSTS:
Service cost                                   $  20.2     $  21.7     $  17.2     $  18.4     $ 21.7     $ 18.9
Interest cost                                     14.0        10.9         7.6         8.5        7.2        5.4
Expected asset return                            (13.8)      (12.4)       (9.0)        N/A        N/A        N/A
Amortized gain                                    (1.5)       (0.2)       (1.6)       (1.4)      (0.4)      (1.3)
Amortized prior service cost                       1.6         0.5         0.5        --           --         --
- ----------------------------------------------------------------------------------------------------------------
Net benefit cost                               $  20.5     $  20.5     $  14.7     $  25.5     $ 28.5     $ 23.0
================================================================================================================


   For measurement purposes, a 6.1% annual increase in the per-capita cost of
covered health care benefits was assumed for 2000. The rate was assumed to
decrease gradually to 5% for 2002 and remain at that level thereafter. Health
care cost trend rates have a significant effect on the amounts reported for the
health care plans. A one-percent-age-point increase in the assumed health care
cost trend rate would have increased total service and interest cost and the
postretirement obligation by $6.4 million and $25.4 million, respectively. A
one-percentage-point decrease in the assumed health care cost trend rate would
have decreased total service and interest cost and the postretirement obli-
gation by $4.8 million and $19.3 million, respectively.
   VOLUNTARY SAVINGS PLANS. Most of our U.S. associates are eligible to
participate in a voluntary savings plan. Our maximum match under these plans is
50% of the first 6% of salaried associate contributions. Matching contributions
amounted to $2.6 million, $1.6 million and $1.5 million for the years ended
December 31, 2000, 1999 and 1998, respectively.
   DEFERRED COMPENSATION PLAN. Certain U.S. associates are eligible to
participate in a non-qualified deferred compensation plan. We fund a portion of
the amounts elected to be deferred by the participants in this plan. Our funded
portion of the plan amounted to approximately $1.4 million of the $2.6 million
liability at December 31, 2000.

                                6. STOCK OPTIONS

   In 1997 and in 1999, we established two stock option plans and an incentive
stock plan (the "stock compensation plans") under which a total of 9.5 million
shares of common stock are authorized for issuance to our directors, officers
and certain other associates in the form of options, stock appreciation rights
or other awards that are based on the value of our common stock. Under these
stock compensation

                                       42
   23

plans, the exercise price of the options, rights or other awards will not be
less than the fair market value of our common stock on the date of grant. We
have granted a total of 7.5 million options under these stock compensation plans
at December 31, 2000, which become exercisable based upon duration of
employment. The vesting of some of these options can be accelerated subject to
the satisfaction of certain performance criteria each year. At December 31,
2000, 0.4 million of these options have been exercised.
   At December 31, 2000, there are also 1.7 million options held by several of
our officers that were granted in 1997 as a replacement for an incentive
compensation plan established in 1994. These options were immediately vested and
are exercisable at a weighted-average exercise price per share of approximately
$0.18. A total of 0.1 million options granted under this plan have been
exercised prior to December 31, 2000.
   The following table summarizes activity relating to our stock options:



                                            NUMBER OF  WEIGHTED-AVERAGE
                                             SHARES     EXERCISE PRICE
                                           ----------  ----------------
                                      (In millions, except per share data)
                                                 
Outstanding at January 1, 1998                  14.5     $    1.71

Options granted                                 --           --
Options exercised                               (0.1)         4.26
Options lapsed or canceled                      (0.1)         4.26
- ------------------------------------------------------------------
Outstanding at December 31, 1998                14.3     $    1.68

Options granted                                  0.6         15.38
Options exercised                               (6.9)         0.02
Options lapsed or canceled                      (0.2)         6.34
- ------------------------------------------------------------------
Outstanding at December 31, 1999                 7.8     $    4.07

Options granted                                  1.5         14.85
Options exercised                               (0.4)         2.93
Options lapsed or canceled                      (0.1)         7.66
- ------------------------------------------------------------------
Outstanding at December 31, 2000                 8.8     $    5.90
==================================================================

Options exercisable at December 31, 1998         9.4     $    0.31
==================================================================

Options exercisable at December 31, 1999         3.9     $    2.42
==================================================================

Options exercisable at December 31, 2000         4.7     $    3.29
==================================================================


   Options outstanding at December 31, 2000 have a weighted-average remaining
contractual life of approximately 9 years. Of the options outstanding at
December 31, 2000, 1.7 million options have exercise prices of $0.25 per share
or less. The remaining 7.1 million shares have a weighted average exercise price
of $7.29 per share, with a range of $4.26 to $15.56.

                                       43
   24

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

   Had we determined compensation cost based upon the fair value of the options
at the grant date consistent with the method specified by FASB Statement No.
123, our net income and earnings per share would have been adjusted to the pro
forma amounts indicated below:



                                              2000          1999        1998
                                              ----          ----        ----
                                          (In millions, except per share data)
                                                            
Net income as reported                      $   129.2   $    115.6   $    3.5
                                            =========   ==========   ========
Pro forma                                   $   126.2   $    114.5   $    2.8
                                            =========   ==========   ========

Basic earnings per share as reported        $    2.79   $     2.87   $   0.11
                                            =========   ==========   ========
Pro forma                                   $    2.73   $     2.84   $   0.09
                                            =========   ==========   ========

Diluted earnings per share as reported      $    2.60   $     2.34   $   0.08
                                            =========   ==========   ========
Pro forma                                   $    2.57   $     2.30   $   0.06
                                            =========   ==========   ========


   For options granted prior to our IPO in January 1999, we determined the fair
value of each option using the minimum value method and an assumed interest rate
of 6.13%. For options granted after the IPO, the fair value of each option was
estimated on the date of grant using an option-pricing model with the following
assumptions:



                                                2000        1999
                                                ----        ----
                                                   
ASSUMPTIONS:
Expected volatility                              39.7%        38.6%
Risk-free interest rate                          5.64%        4.74%
Dividend yield                                    none         none
Expected life of option                        7 years      7 years
Weighted average grant-date fair value      $     7.89   $     6.95



                                 7. INCOME TAXES

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



                                    2000       1999        1998
                                    ----       ----        ----
                                           (In millions)
                                                 
CURRENT:
Federal                           $  29.6     $  47.7     $ --
Michigan single business tax          5.5         7.2        0.4
Other state and local                (3.2)       (0.5)      (0.9)
Foreign                               0.7        --         --
                                  -------     -------     ------
Total current                        32.6        54.4       (0.5)

DEFERRED:
Federal                              34.5        11.1        3.6
Michigan single business tax          1.5         2.9        1.2
Other state and local                 1.1         1.8       (0.4)
Foreign                               4.5        (2.4)      (1.8)
                                  -------     -------     ------
Total deferred                       41.6        13.4        2.6
                                  -------     -------     ------
Total income taxes                $  74.2     $  67.8     $  2.1
                                  =======     =======     ======




                                       44


   25


The following is a reconciliation of the provision for income taxes to the
expected amounts using the statutory rate:



                                   2000          1999          1998
                                   ----          ----          ----
                                                      
Federal statutory                  35.0%         35.0%         35.0%
State and local                     1.6           4.5           5.7
Federal credits and other          --            (2.5)         (7.3)
Foreign rate difference            (0.1)         --             3.6
                                   ----          ----          ----
Effective income tax rate          36.5%         37.0%         37.0%
                                   ====          ====          ====


The following is a summary of the significant components of our deferred tax
assets and liabilities:



                                               2000        1999
                                               ----        ----
                                                 (In millions)
                                                   
CURRENT DEFERRED TAX ASSETS:
Employee benefits                            $   8.5     $   11.0
Inventory                                        0.6          2.6
Other                                            5.5          6.1
                                             -------     --------
Total current deferred tax assets            $  14.6     $   19.7
                                             =======     ========

NONCURRENT DEFERRED TAX ASSETS:
Employee benefits                            $  53.9     $   53.6
NOL carryforwards                               21.2         26.4
Fixed assets                                    17.8         18.3
Prepaid taxes                                   14.2         24.1
Tax credit carryforwards                         3.7          6.4
Goodwill                                         1.7          1.8
Other                                            4.7          6.3
Valuation allowance                            (28.7)       (33.4)
                                             -------     --------
Total noncurrent deferred tax assets            88.5        103.5

DEFERRED TAX LIABILITIES -- NONCURRENT:
Fixed assets                                    72.4         53.0
                                             -------     --------
Net noncurrent deferred tax assets           $  16.1     $   50.5
                                             =======     ========


   Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes and the impact of available
net operating loss ("NOL") and tax credit carryforwards.


                                       45
   26

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

   At December 31, 2000, we had unused NOLs for foreign tax purposes of
approximately $129.9 million, including capital allowance carryforwards. None of
these carryforwards expire. We also have $3.7 million of federal R&D tax
credits. These tax credit carryforwards expire between 2018 and 2019.
   We established a valuation allowance of $45.5 million in 1998, which was
subsequently reduced to $33.4 million in 1999 and $28.7 million in 2000. We
reduced the valuation allowance due to changes in our assessment of the
uncertainty of realizing the full benefit of the foreign NOL and capital
allowance carryforwards. We considered prior operating results and future
plans, as well as the utilization period of other temporary differences, in
determining the amount of the valuation allowance.
   Income tax payments, including federal, state, local and foreign were $43.9
million, $48.8 million and $9.3 million in 2000, 1999 and 1998, respectively.

                              8. EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
     earnings per share:



                                                 2000          1999        1998
                                                 ----          ----        ----
                                              (In millions, except per share data)
                                                               
NUMERATOR:
Net income                                    $   129.2    $   115.6    $    3.5
                                              =========    =========    ========
DENOMINATORS:
Basic shares outstanding--
  weighted-average shares outstanding              46.3         40.3        32.4
Effect of dilutive securities:
  Dilutive stock options                            3.4          9.2        10.8
                                              ---------    ---------    --------
Diluted shares outstanding--
  adjusted weighted-average shares after
  assumed conversions                              49.7         49.5        43.2
                                              =========    =========    ========
Basic earnings per share                      $    2.79    $    2.87    $   0.11
                                              =========    =========    ========
Diluted earnings per share                    $    2.60    $    2.34    $   0.08
                                              =========    =========    ========


                        9. COMMITMENTS AND CONTINGENCIES

   At December 31, 2000, obligated purchase commitments for capital expenditures
were approximately $210.2 million.
   We are involved in various legal proceedings incidental to our business.
Although the outcome of these matters cannot be predicted with certainty, we do
not believe that any of these matters, individually or in the aggregate, will
have a material effect on our consolidated financial condition, operating
results or cash flows.

                                       46
   27

                         10. RELATED PARTY TRANSACTIONS

   In December 2000, AAM's Co-Founder, Chairman & CEO Richard E. Dauch agreed to
extend his employment relationship with AAM by two years until December 31,
2006. In connection with this extension, we repurchased approximately 3.1
million shares of common stock from Dauch, at current market prices, at a total
cost of approximately $21.3 million. Dauch used the proceeds from the sale to
pay off a personal loan incurred to pay taxes in connection with an earlier
investment in AAM.
   In connection with a leveraged recapitalization transaction in 1997 through
which Blackstone Capital Partners II Merchant Banking Fund L.P. and certain of
its affiliates (collectively "Blackstone") acquired a majority ownership
interest, we entered into an agreement pursuant to which Blackstone provides
certain advisory and consulting services to us. We incurred costs of $4.6
million, $4.0 million and $2.4 million for such services provided by Blackstone
in 2000, 1999 and 1998, respectively.

                     11. SEGMENT AND GEOGRAPHIC INFORMATION

   We operate in one reportable segment: the manufacture, engineering,
validation and design of driveline systems for trucks, sport utility vehicles
("SUVs") and passenger cars. Financial information relating to our operations by
geographic area is presented in the following table. Net sales are attributed to
countries based upon location of customer. Long-lived assets exclude deferred
income taxes.



                                  2000           1999           1998
                                  ----           ----           ----
                                           (In millions)
                                                    
NET SALES:
United States                  $  2,296.2     $  2,285.2     $  1,619.1
Canada                              372.6          405.9          264.2
Mexico and South America            283.6          140.4          127.5
Europe and Other                    139.5          126.5           29.8
Inter-geographic revenues           (22.4)          (4.9)          --
                               ----------     ----------     ----------
Total net sales                $  3,069.5     $  2,953.1     $  2,040.6
                               ==========     ==========     ==========

LONG-LIVED ASSETS:
United States                  $  1,156.5     $    947.0     $    787.0
Other                               229.3          170.1           83.0
                               ----------     ----------     ----------
Total long-lived assets        $  1,385.8     $  1,117.1     $    870.0
                               ==========     ==========     ==========


   With the exception of sales to General Motors Corporation ("GM"), no single
customer accounted for more than 10% of our consolidated net sales in any year
presented. Sales to GM were approximately 84.5%, 85.9% and 93.4% of our total
net sales in 2000, 1999 and 1998, respectively.

                                       47

   28
                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

                12. UNAUDITED QUARTERLY FINANCIAL DATA AND MARKET
                         FOR THE COMPANY'S COMMON STOCK



QUARTER ENDED                         MARCH 31      JUNE 30    SEPTEMBER 30   DECEMBER 31    FULL YEAR
- -------------                         --------      -------    ------------   -----------    ---------
                                                     (In millions, except per share data)
                                                                            
2000
Net sales                          $    835.9    $    819.7    $    675.5    $    738.4    $   3,069.5
Gross profit                            119.7         120.1          89.1          97.3          426.2
Net income                               40.1          40.0          24.2          24.9          129.2
Diluted earnings per share(1)            0.80          0.80          0.48          0.51           2.60
Market price(2)
  High                             $    17.13    $    16.94    $    16.13    $    12.63    $     17.13
  Low                              $    11.50    $    14.13    $    10.25    $     5.75    $      5.75

1999
Net sales                          $    697.7    $    800.8    $    718.8    $    735.8    $   2,953.1
Gross profit                             92.1         108.4          89.4          98.9          388.8
Net income                               29.0          33.7          25.4          27.5          115.6
Diluted earnings per share(1)            0.61          0.67          0.50          0.56           2.34
Market price(2)
  High                             $    16.69    $    16.31    $    16.94    $    15.00    $     16.94
  Low                              $    11.69    $    12.00    $    14.00    $    11.94    $     11.69



(1)  Full year diluted earnings per share will not necessarily agree to the sum
     of the four quarters because each quarter is a separate calculation.
(2)  Prices are based on the composite tape of the New York Stock Exchange. We
     had approximately 475 stockholders of record at February 7, 2001.


                                       48

   29

                                THE AAM ADVANTAGE
[AAM LOGO]
                               2000 ANNUAL REPORT

                           Six-Year Financial Summary



                                                                      YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
                                         2000          1999           1998(a)            1997          1996           1995
- ------------------------------------------------------------------------------------------------------------------------------
                                                              (In millions, except per share data)
                                                                                                
STATEMENT OF INCOME DATA:
Net sales                          $   3,069.5     $   2,953.1     $   2,040.6     $   2,147.5     $   2,022.3    $   1,968.1
Gross profit                             426.2           388.8           156.4           216.0           172.0          179.5
Selling, general and
 administrative expenses                 162.6           147.6           106.4           104.0            83.1           70.6
Operating income                         259.4           237.8            49.9           112.0            88.9          108.9
Net interest (expense) income            (58.8)          (54.6)          (44.3)           (1.8)            9.4            9.1
Net income                               129.2           115.6             3.5            55.3            61.7           70.6
Diluted earnings per share         $      2.60     $      2.34     $      0.08     $      0.43     $      0.43    $      0.50
Diluted shares outstanding(b)             49.7            49.5            43.2           126.5           142.5          142.5

BALANCE SHEET DATA:
Cash and equivalents               $      35.2     $     140.2     $       4.5     $      17.3     $     126.0    $     170.3
Total assets                           1,902.5         1,673.2         1,223.9         1,016.7           771.2          737.0
Total long-term debt                     817.1           774.9           693.4           507.0             2.4            1.0
Preferred stock                           --              --              --              --             200.0          200.0
Stockholders' equity                     372.0           263.7            40.4            37.2           250.2          168.6
Invested capital(c)                    1,153.9           898.4           729.3           526.9           326.6          199.3

OTHER DATA:
Net cash provided by
 operating activities              $     252.2     $     310.3     $      81.4     $     200.8     $      65.7    $     196.9
EBITDA(d)                                377.0           334.6           119.2           152.8           134.7          144.8
Depreciation and amortization            107.9            89.5            68.8            50.2            36.1           25.2
Capital expenditures                     381.0           301.7           210.0           282.6           162.3          147.1
- ------------------------------------------------------------------------------------------------------------------------------


(a)  The following table sets forth the estimated adverse impact on our 1998
     operating results related to the GM work stoppage which occurred in June
     and July of 1998 and the temporary reduction of certain payments made by GM
     to us as part of the commercial arrangements between us.



                           As                   Temporary      As
                       Reported      GM Work    Payment     Adjusted
                         1998       Stoppage   Reductions     1998
                      -----------------------------------------------
                                               
Net sales             $  2,040.6    $  187.6    $  51.5    $  2,279.7
Gross profit               156.4        71.2       51.5         279.1
Operating income            49.9        71.2       51.5         172.6
EBITDA (d)                 119.2        71.2       51.5         241.9


(b)  Pursuant to a migratory merger effected in January 1999 and undertaken in
     connection with the IPO, each share of American Axle & Manufacturing of
     Michigan, Inc.'s common stock was converted into 3,945 shares of American
     Axle & Manufacturing Holdings, Inc. common stock. All share and per share
     amounts have been adjusted to reflect this conversion.

(c)  Invested capital represents the sum of total debt and stockholders' equity
     (including preferred stock) less cash and equivalents.

(d)  EBITDA represents income from continuing operations before interest
     expense, income taxes, depreciation and amortization. EBITDA should not be
     construed as income from operations, net income or cash flow from operating
     activities as determined by generally accepted accounting principles. Other
     companies may calculate EBITDA differently.

                                       49

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