
	STOCK-BASED COMPENSATION

At December 31, 2011, we have grants outstanding under stock incentive compensation plans approved by our stockholders. Under these plans, a total of 19.1 million shares have been authorized for issuance to our directors, officers and certain other associates in the form of options, unvested restricted stock or other awards that are based on the value of our common stock. The 1999 stock incentive compensation plan expired in January 2009. The Company has no shares available for future grants at December 31, 2011.

STOCK OPTIONS Under the terms of the plans, stock options are granted at the market price of the stock on the grant date. The contractual term of outstanding stock options is 10 years. We issue new shares to satisfy stock-based awards.

Stock option awards become exercisable in three approximately equal annual installments beginning one year from the date of grant.

The following table summarizes activity relating to our stock options:



			Weighted-
	Number of		Average Exercise
	Shares		Price Per Share
	(in millions, except per share data)
Outstanding at January 1, 2009	6.0		$	23.57
Options granted	0.1		2.81
Options exercised	(0.2	)	4.26
Options canceled	(0.3	)	22.84
Outstanding at December 31, 2009	5.6		$	23.96
Options granted	—		—
Options exercised	(0.2	)	6.94
Options canceled	(0.4	)	17.37
Outstanding at December 31, 2010	5.0		$	25.01
Options granted	—		—
Options exercised	(0.5	)	8.69
Options canceled	(0.6	)	26.96
Outstanding at December 31, 2011	3.9		$	26.95

Exercisable at December 31, 2009	5.1		$	25.05
Exercisable at December 31, 2010	4.8		$	25.75
Exercisable at December 31, 2011	3.8		$	27.25

As of December 31, 2011, there is no unrecognized compensation cost related to unvested stock options. The total intrinsic value of options outstanding as of December 31, 2011 was $0.4 million. There was no intrinsic value of options exercisable as of December 31, 2011. The total intrinsic value of stock options exercised was $3.0 million in 2011 and $0.8 million in 2010.

The following is a summary of the range of exercise prices for stock options that are outstanding and exercisable at December 31, 2011:



		Weighted-				Weighted-
Range of	Stock Options	Average Exercise		Weighted-Average	Stock Options	Average Exercise
Exercise Prices	Outstanding	Price Per Share		Contractual Life	Exercisable	Price Per Share
	(in millions, except per share data)			(in years)	(in millions, except per share data)
$2.81	0.1	$	2.81	7.0	—	$	—
$10.08 - $15.58	0.4	14.22		4.8	0.4	14.22
$19.54 - $23.73	0.9	23.64		1.1	0.9	23.64
$24.15 - $27.00	1.4	25.03		1.8	1.4	25.03
$32.13 - $40.83	1.1	38.54		2.1	1.1	38.54
	3.9	$	26.95	2.1	3.8	$	27.25

We estimated the fair value of our employee stock options on the date of grant using the Black-Scholes option-pricing model with the following assumptions:



	2009
Expected volatility	64.32		%
Risk-free interest rate	2.07		%
Dividend yield	2.85		%
Expected life of options	8		years
Weighted-average grant-date fair value	$	1.40

Expected volatility was based on the daily changes in our historical common stock prices over a period equal to the expected life of the award. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant corresponding to the expected life of the options. Our dividend yield is based on the dividend at the time of grant. The expected life of options is based on historical stock option exercise patterns and the terms of the options.

OTHER STOCK-BASED COMPENSATION We awarded performance accelerated restricted stock, restricted stock and restricted stock units (PARS, RS and RSUs, respectively). The total amount of compensation expense associated with the RSUs is recorded as an accrued liability when incurred while the total amount of compensation expense associated with PARS and RS is recorded to paid-in-capital. The PARS and RSUs vest over three to five years contingent upon the satisfaction of future financial performance targets specified by the plan and the RS vests over three years. The unearned compensation is expensed over the expected vesting period.

The following table summarizes activity relating to our PARS, RS and RSUs:



			Weighted Average
	Number of		Grant Date Fair
	Shares/Units		Value per Share/Unit
	(in millions, except per share data)
Outstanding at January 1, 2009	2.9		$	21.17
Granted	1.3		2.81
Vested	(0.7	)	18.36
Canceled	(0.2	)	19.78
Outstanding at December 31, 2009	3.3		$	14.77
Granted	—		—
Vested	(0.4	)	23.42
Canceled	(0.1	)	14.54
Outstanding at December 31, 2010	2.8		$	13.48
Granted	—		—
Vested	(1.1	)	17.41
Canceled	(0.1	)	10.68
Outstanding at December 31, 2011	1.6		$	10.74

As of December 31, 2011, unrecognized compensation cost related to unvested PARS, RS and RSUs totaled $0.4 million. The weighted average period over which this cost is expected to be recognized is less than one year. In 2011 and 2010, the total fair market value of PARS, RS and RSUs vested was $15.5 million and $4.2 million, respectively.

We made cash payments of $0.4 million, $1.2 million and $0.1 million related to vested RSUs in 2011, 2010 and 2009, respectively.

PERFORMANCE AWARDS As of December 31, 2011, we have performance awards outstanding under our AAM 2009 long-term incentive plan. We granted performance awards payable in cash to our officers and executives which vest in full over a three year performance period. The payout of these awards is based on a total shareholder return (TSR) measure that compares our TSR over the three-year performance period relative to the TSR of our pre-defined competitor peer group. Share price appreciation and dividends paid is measured over the performance period to determine TSR.

According to the applicable accounting guidance, these awards are considered to be stock-based compensation because the final payout amount is based “at least in part” on the price of our shares. As these awards are settled in cash, they are determined to be liability awards and will be remeasured at the end of each reporting period until settlement. The fair value of the performance awards is calculated on a quarterly basis using the Monte Carlo simulation approach and the liability is adjusted accordingly based on changes to the fair value and the percentage of time vested. The Monte Carlo simulation approach utilizes inputs on volatility assumptions, risk free rates, the price of the Company’s and our peer group's common stock and their correlation as of each valuation date. Volatility assumptions are based on historical and implied volatility measurements.

We recognized compensation expense associated with the performance awards of approximately $3.5 million in 2011, $1.6 million in 2010 and $1.1 million in 2009. We have a liability of $5.8 million recorded as of December 31, 2011. Based on the current fair value, the estimated unrecognized compensation cost related to the performance awards totaled $2.5 million, as of December 31, 2011. The weighted average period over which this cost is expected to be recognized is approximately eighteen months.